U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934:
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934: For the transition period from __________________
to _________________.
Commission File number 0-17773
ATS MONEY SYSTEMS, INC.
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(Name of small business issuer in its charter)
Nevada 13-3442314
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(State of other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
25 Rockwood Place, Englewood, New Jersey 07631
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (201) 894-1700
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Securities registered under Section 12(b) of the Exchange Act: None
----
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.001 par value
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(Title of class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes: X No:
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Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $14,447,077
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State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days:
Approximately $1,772,119 based on the average of the high bid price $
25/32 and low asked price $ 27/32 published by the National Quotation
Bureau Inc. on March 11, 1999.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: As of March 11,
1999 - 5,841,547 shares of Common Stock, $.001 par value.
DOCUMENTS INCORPORATED BY REFERENCE
1999 definitive, annual meeting proxy statement to be filed with the
Commission - incorporated by reference into Part III.
Transitional Small Business Disclosure Format: Yes: No: X
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THIS ANNUAL REPORT ON FORM 10-KSB CONTAINS, IN ADDITION TO HISTORICAL
INFORMATION, CERTAIN FORWARD-LOOKING STATEMENTS THAT MAY INVOLVE
SIGNIFICANT RISKS AND UNCERTAINTIES. SUCH FORWARD-LOOKING STATEMENTS
ARE BASED ON MANAGEMENT'S BELIEF AS WELL AS ASSUMPTIONS MADE BY, AND
INFORMATION CURRENTLY AVAILABLE TO, MANAGEMENT PURSUANT TO THE "SAFE
HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
EXPRESSED IN OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS CONTAINED IN
THIS ANNUAL REPORT. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN ITEM 1
- "DESCRIPTION OF BUSINESS", ITEM 6 "MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS" AND ELSEWHERE IN THIS ANNUAL REPORT, AS
WELL AS GENERAL ECONOMIC CONDITIONS, ECONOMIC CONDITIONS IN THE
INDUSTRIES IN WHICH THE COMPANY'S CUSTOMERS COMPETE, A DETERMINATION BY
THE COMPANY'S CUSTOMERS TO PROLONG THE TEST CYCLES OF THE COMPANY'S
EQUIPMENT, SOFTWARE AND SOFTWARE SUPPORT SERVICES AND A DETERMINATION
BY THE COMPANY'S CUSTOMERS TO MODIFY OR CHANGE THEIR UNDERLYING
COMPUTER AND CASH REPORTING SYSTEMS. THE COMPANY UNDERTAKES NO
OBLIGATION TO RELEASE PUBLICLY THE RESULT OF ANY REVISIONS TO ITS
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE IN THIS ANNUAL REPORT TO
REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE OF THIS ANNUAL
REPORT OR TO REFLECT THE OCCURRENCE OF OTHER UNANTICIPATED EVENTS.
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
GENERAL
ATS Money Systems, Inc. ("ATS"), with Innovative Electronics, Inc.
("IEI"), a wholly-owned subsidiary (collectively, the "Company"), is engaged in
the development, sale and service (i) of currency counting systems and equipment
for department and chain stores' cash offices and bank commercial vaults, and
(ii) of specialized information communications systems primarily used by chain
stores. The Company's customers are businesses that handle a large number of
cash, check and credit transactions on a daily basis, such as banks, department
stores and chain stores. The Company was incorporated in 1987 under the laws of
the State of Nevada and is the successor to a similar business acquired by
merger in 1988.
In August 1994, the Company, through IEI (which was formed for such
purpose), acquired the business and substantially all of the assets of
Innovative Electronics, Inc. Based in Miramar, Florida, IEI is engaged in the
business of marketing hardware and software products designed by IEI or its
predecessor to permit the exchange of pricing, product and other information
among stores within a chain and between such stores and the stores'
headquarters.
PRODUCTS
The Company is in the business of marketing currency counting systems,
proprietary software computer systems, computers and peripherals for automating
chain and department stores' cash offices and bank commercial vaults. In
addition, IEI is engaged in the business of marketing point-of-sale (POS)
systems, communications hardware and software products primarily used by chain
stores to permit the internal exchange of information.
The principal products sold by the Company during 1998 were its newly
developed PowerEncode Check Encoding System, CP-4000 Retail Cash Office
Management System, ATS CP-3000 Retail Cash Office Management System, ATS
PowerVault Cash Management System, and the ATS CP-2000 Deposit/Register
Verification System, which products accounted for approximately 78% of the
Company's 1998 equipment and systems sales and, through IEI, StoreComm ISP and
its related hardware. The Company also sells various types of currency/document
counters and dispensers.
2
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PowerEncode Check Encoding System
- ---------------------------------
The ATS PowerEncode check encoding system was developed to reduce the
cost of handling checks at retail store locations. The system automatically
balances checks to point-of-sale ("POS") supplied data, and pre-encodes the
check amounts prior to deposit. The system provides and maintains continuous
hands free operation that greatly reduces store labor required to complete these
functions versus present procedures. ATS offers the system as part of a new
Value Added Reseller Agreement with Unisys Corporation.
CP-4000 Retail Cash Office Management System
- --------------------------------------------
The CP-4000 System was developed in order to allow the Company to take
advantage of the significant marketing effort being made by Microsoft
Corporation to promote its Windows(R) and Windows NT(R) operating systems. The
CP-4000 System is written in native NT code and incorporates all of the features
of the CP-3000 System with the added advantage of dual processing capability.
The dual processing capability allows two applications to be run at the same
time, with the labor expended being no more than would have been used for a
single application. A good example of this capability is the ATS PowerEncoding
application being run simultaneously with the retail register settlement
application with no additional labor expended.
ATS CP-3000 Retail Cash Office Management System
- ------------------------------------------------
The CP-3000 System was developed for the retail industry in response to
the trend of using a UNIX(R) operating system in store operations. Application
software for the CP-3000 System is loaded into a central in-store processor (an
"ISP"), thereby eliminating the need for stand-alone computers and, in their
place, using low-cost ASCII terminals. The software for the CP-3000 System is
written in C language, which allows it to be used in a stand-alone PC, a PC
emulating a terminal or an ASCII terminal connected to the host ISP, thereby
making the system suitable for retailers using UNIX(R) or other operating
systems. The CP-3000 System utilizes advanced software screen managers. It is
intended to offer the user greater flexibility and to provide the Company with
the ability to offer custom applications without extensive code writing. The
Company believes that this feature enables the CP-3000 System to be more
competitive without eroding profit margins. The selling price of the CP-3000
System varies substantially depending upon the specific requirements of the
customer for hardware, software and peripherals.
ATS PowerVault Cash Vault Management System
- -------------------------------------------
The PowerVault System was developed to provide a more comprehensive
solution for the requirements of larger banks. The PowerVault System utilizes
LAN technology and software such as Microsoft(R) Windows(R) and Microsoft
Access(R). While the PowerVault System retains all of the benefits to users of
the CP-2000 System, it is designed to provide a significant increase in control
over, and accountability for, funds as they move within the cycle of a vault. In
addition, the PowerVault System offers the capability of providing reports, in
hard copy or file, to customers as soon as their deposits have been processed.
The PowerVault System uses a combination of workstations with application
software providing different functions for the various steps in vault
processing. Because the requirements of each vault differ to some degree, the
number of workstations and the price of the total system fluctuate
substantially.
ATS CP-2000 Deposit/Register Verification System
- ------------------------------------------------
The system is an integrated system consisting of a computer, a currency
counter, one or more peripherals and a proprietary software system, which
provides an alternative to performing manual record keeping of cash receipts and
transfers, and is used primarily by banks and retail establishments. The system,
using an IBM-PC or compatible computer, interfaces with the Company's currency
counters to speed up counting, tally various accounts, maintain period-to-date
totals, maintain records and automatically prepare and print various management
reports as a by-product of the counting operation. The system's software is
readily modifiable to fit the particular needs of a user and can be upgraded.
All information is captured on diskette or fixed disk, which assists in
generating historical account analysis for management.
The system is designed for operators with little or no prior computer
experience. Its appeal to management is based on the significant labor savings,
which can be achieved through the automation of the counting and reporting
functions. If the user does not have an IBM-PC or compatible computer and the
associated currency counting equipment to use the system, the Company can
furnish all of the necessary equipment. The system varies in price depending
upon the hardware configuration and the specific application software used.
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StoreComm2000
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The StoreComm2000 product suite, designed for the retail environment,
is a distributed processing system that provides transaction data processing in
the retail stores and at the data center. StoreComm2000 is comprised of three
subsystems: StoreComm/Host and StoreComm/ISP, which are interrelated components,
and StoreComm/POS.
StoreComm/Host - The StoreComm/Host product is a set of software
applications that run on the retail data center host processor, typically IBM
mainframe, AS/400(TM) or Tandem. StoreComm/Host allows retailers to configure,
manage and control their store network, from the central host site. This system
facilitates the transfer of data between corporate headquarters and the retail
stores within the chain, PLU (price look-up) management, credit authorization,
and the ability to make real-time inquiries on store level information.
StoreComm/ISP - The StoreComm/ISP is an in-store processing software
package that resides in each store in the retail chain, to which all POS
terminals are networked. This software (and optional IEI communications
hardware/printed circuit board) runs on an IBM compatible PC with a Pentium(R)
or higher processor. Several operating environments are supported, including
UNIX and Windows NT. StoreComm/ISP is the in-store control point and each
store's information gateway between the POS and the data center host. The
StoreComm/ISP monitors and collects all POS transactions as they occur and
processes this data into useful reports. In addition, StoreComm/ISP can provide
the POS terminals and other networked devices with access to added
functionality, such as credit verification, price look-up, e-mail, layaway and
gift certificate tracking. During 1998, IEI provided a customized version of its
Windows NT based StoreComm/ISP for a major, southeast US based retail chain.
Implementation of the solution enabled the customer to extend the life of their
existing POS terminals, thereby preserving a significant POS investment.
StoreComm/POS - StoreComm/POS is the point-of-sale software transaction
set that runs on the POS terminals. The StoreComm/POS is designed to run on a
variety of terminal types, including all PC-based POS terminals, such as
terminals manufactured by NCR, IBM and Fujitsu-ICL, as well as some older non-PC
based POS terminals. The StoreComm/POS software uses a CRT as its display to
provide the cashier with a full-screen menu driven interface and utilizes a
function key oriented keyboard. An optional feature of the StoreComm/POS is the
application and development test tool, which allows the retailer to customize
the software and automate testing of modifications made.
Other Products
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In addition to the foregoing products, the Company markets several coin
and currency/document counters, all microprocessor controlled for accuracy.
Counters are used by banks, retail establishments, transit authorities,
currency exchanges and other commercial and governmental agencies for accurately
counting large quantities of coins, currency, coupons, transit toll tickets,
checks and other documents. The Company offers three different models of
currency/document counters, each of which can count at least 1000 documents per
minute. Two of the models can be equipped with a counterfeit detection aid. In
addition, the Company offers a coin counter/packager and a coin counter/sorter.
The ATS-601, an electronic scale for weighing currency and coins, does
the work of a friction feed currency counter and a coin counter at the
approximate cost of only one of those units. As a result, the user benefits
through a reduction in capital expenditure, as well as a reduction in annual
maintenance, since the ATS-601 has no mechanical parts to wear or be
re-adjusted.
The ATS-5000 Automated Telephone Cash Ordering System, like the CP-2000
System, is an integrated system which allows coin and currency orders to be
taken automatically over the telephone. With the ATS-5000 System, the caller
placing the order enters all necessary information with the telephone keypad,
thereby eliminating the personnel formerly needed to answer the telephone and
write the order. After an order is placed, the ATS-5000 System prepares all of
the various reports and documents necessary for picking, packing and shipping
the order. The document needed to charge the account placing the order also is
prepared. The ATS-5000 System answers the phone in a friendly, natural voice,
repeats the amount of each item ordered and informs the caller of the total
amount of the order when it is completed. Upon completion, the caller is also
given an order confirmation number. The ATS-5000 System can service multiple
callers simultaneously, process standard orders automatically and prepare a
variety of management reports. As a result, the ATS-5000 System utilizes less
labor and eliminates the possibility of transcribing errors.
4
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MAINTENANCE AND SERVICE CONTRACTS
The Company generally warrants its products for 90 days after the sale.
Warranty and after-warranty service on all hardware products is provided through
a national third-party service company under contract to the Company. As a
result, a customer usually is able to receive a response to a service request
within four business hours and the Company does not incur the overhead expenses
which would normally be associated with maintaining a field service department.
Warranty and after-warranty service on all software products is handled over the
telephone by the Company's help-desk personnel who are trained on the various
systems installed in customers' locations.
Pursuant to its maintenance contracts, customers purchasing complete
systems have access to a toll-free "hot line" which allows them to call the
Company directly if they have a problem. The Company's support department
determines the nature of the problem and arranges for the dispatch of technical
service when necessary. If the problem is operator-oriented, it is usually
correctable without a visit from a field technician. Customers purchasing
stand-alone equipment have access to the Company's third party service company
in the event of a problem. Customers who purchase StoreComm 2000 systems call
IEI directly if they have a problem, where customer support personnel are
available to help resolve the problem.
The Company's maintenance contracts usually are for a maximum of one
year, generally commence at the beginning of the calendar year and are prepaid
in full at such time. The Company retains ownership of all service contracts
with its customers, which are priced to return a profit to the Company.
MARKETING
The Company believes that the immediate market for its products are
those businesses that handle large amounts of cash on a daily basis, such as
retail chain stores, department stores and banks. The Company is an established
supplier of currency counting and control systems and equipment and, since its
acquisition of IEI, has begun to establish itself as a supplier of hardware and
software systems designed to permit the exchange of data among stores within a
chain. In the retail industry, the Company's customers include Bergdorf-Goodman,
T.J. Maxx, Target Stores, Mervyns, The Home Depot, Lowe's Companies, Inc., Ames
Department Stores and Carson Pirie Scott & Company. The Company's users also
include major banks in the United States as well as national and regional
armored car operators.
In general, because of the nature of the Company's products, a large
potential customer will normally place a small order for the Company's products
for testing in one or several locations. If testing meets the customer's
criteria, the customer will generally order a large quantity of product for
installation throughout its locations and, thereafter, will order decreasing
quantities to complete installation at smaller or newly established locations.
During 1998, sales to Target Stores and Mervyns, both divisions of Dayton-Hudson
Corporation and sales directly to Dayton-Hudson, in the aggregate, accounted for
approximately 46% of the Company's total revenues. In addition, Home Depot
accounted for 17% with no other customer accounting for more than 5% of the
Company's total revenues. The Company's bank sales are not seasonal, but its
sales to retailers generally occur during the first three quarters of each year.
The Company markets its products on a national basis, primarily by its
own employees, supervised by the Company's executive officers. Although the
Company expects that a high percentage of its future sales will continue to be
made by its own employees, the Company continues to review potential strategic
alliances and, should any opportunity arise, the Company may take advantage of
the sales potential available through the formation of strategic business
alliances with larger companies engaged in the sale of complementary products
and services.
<PAGE>
The Company's sales staff is organized into a territory sales group, a
national accounts sales group for retail cash office system sales, and a POS and
communications systems solutions sales group. This structure is designed to
assure coverage of the banking industry, which is comprised of local or regional
organizations, and the retail industry, which is essentially controlled by chain
organizations with headquarters having control over systems and purchasing. The
territory sales group is responsible for direct sales to banks and independent
retail operations within a specific geographical area in which the
representative is assigned. This group also would serve to support the sales
efforts of sales representatives of those organizations with which the Company
may form a strategic business alliance. The national accounts sales group is
headquartered at the Company's offices in New Jersey and is responsible for
retail cash office systems sales to chain stores with centralized management and
purchasing. The POS and communications systems solutions sales group is
headquartered at IEI's offices in Miramar, Florida, and is responsible for the
sale of POS and communications products to chain stores. The Company's sales
staff receives a base salary plus commissions.
IEI has established business alliances with several major vendors
within the retail industry, namely IBM, NCR, Fujitsu-ICL and Epson, as well as
non-industry specific vendors, including Microsoft, Oracle, SCO and Tandem.
Through these relationships, IEI has had access to low-cost or free hardware and
software for development purposes, as well as sales and marketing programs to
strengthen market position.
5
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The Company participates in industry conferences such as the National
Retail Federation ("NRF") Annual Conference, the NRF Retail Information Systems
Conference, the Retail Systems Conference and Exhibition, the National
Association of Convenience Stores, Food Service Technology and the Food
Marketing Institute's Marketechnics Conference. In addition, the Company
conducts a small number of private shows in selected cities.
PRODUCT DEVELOPMENT AND ENHANCEMENT
The Company's software systems are proprietary. Since its inception,
the Company has continued to develop and enhance its proprietary software
systems to automate cash processing. During 1998 and 1997, the Company spent
approximately $671,000 and $984,000, respectively, to enhance its proprietary
software systems.
The Company relies on the complexity of its proprietary software
systems and its licensing agreements to protect its computer software coding.
MANUFACTURING, DISTRIBUTION AND PROPRIETARY RIGHTS
The Company does not manufacture any of the equipment it sells,
although some equipment and components are manufactured exclusively for the
Company. Some of the equipment sold by the Company is distributed exclusively by
the Company in the United States. Other equipment is purchased from the
manufacturer with the Company's label and still other equipment is distributed
with the manufacturer's label on a non-exclusive basis by the Company.
Other than the printed circuit boards used in conjunction with the
StoreComm ISP, which circuit boards are proprietary and manufactured to the
Company's specifications, substitute equipment for use in the Company's systems
is obtainable by the Company from other sources.
EMPLOYEES
As of March 1, 1999, the Company had 55 full-time employees, 18 of whom
are at IEI. Eleven of the Company's employees are executive and administrative
personnel, fifteen are systems software development personnel, twelve are
customer software support personnel, six are customer hardware support personnel
and eleven are sales and marketing personnel. The Company's employees are
covered by a comprehensive medical and major medical plan, and receive life
insurance and long term disability benefits. The Company is not a party to any
collective bargaining agreement and considers its employee relations to be
satisfactory.
It is the Company's practice to require its marketing employees to sign
a non-compete agreement which restricts the employee, following the employee's
termination of employment, from competing with the Company for a six-month
period in any territory where the employee represented the Company or with
respect to any of the employee's former accounts. It also is the Company's
practice to require its technical employees to sign a confidentiality agreement.
From time to time, the Company utilizes the services of independent
consultants to provide computer systems analysis and software design and
support. It is the Company's practice to retain all rights to the work product
created for the Company by such consultants.
COMPETITION
The Company's business is highly competitive. There are other
manufacturers and distributors of systems and equipment, similar to the systems
and equipment marketed by the Company, who are larger than the Company and
possess substantially greater resources than the Company. The Company believes
that most of its competitors generally sell products that are rigid in their
application and not suitable for all retail operations. The Company, on the
other hand, generally customizes its products to fit a customer's specific
needs. As a result, the Company believes that its products currently offer a
more flexible and comprehensive solution than its competitors' products.
6
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ITEM 2 - DESCRIPTION OF PROPERTY
The Company leases approximately 10,510 square feet in a four story
brick building in Englewood, New Jersey at a current annual rental, beginning in
February 1999, of $239,102 (subject to increases for real estate taxes and
utility costs), for a term ending February 28, 2004 which, at the option of the
Company, may be extended for an additional five years. Approximately 50 percent
of the space is used for executive and sales offices, approximately 10 percent
is used for storage and approximately 40 percent is used for testing and
development of the Company's products. The Company also leases approximately 900
square feet of space in Englewood, New Jersey, used for storage and depot
service, at a current annual rental of $9,000 for a term ending November 23,
2000.
IEI leases approximately 11,047 square feet in a contemporary office
park in Miramar, Florida at a current annual rental of $129,928 (subject to
increases for real estate taxes and utility costs), for a term ending April 30,
2000.
The Company considers its facilities suitable and adequate for its
present use.
ITEM 3 - LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is
a party or to which any of its property is subject.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders of the Company
during the fourth quarter of its 1998 fiscal year.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The following table sets forth the quarterly
high and low bid prices, as reported in the "pink sheets" published
by the National Quotation Bureau Inc., for the two years ended
December 31, 1998. The quotations reported represent prices between
dealers, do not include retail mark-ups, markdowns or commissions,
and do not necessarily represent actual transactions.
1998 Calendar Year High Bid Low Bid
------------------ -------- -------
1st Quarter 1-1/16 5/8
2nd Quarter 1-5/32 29/32
3rd Quarter 1-5/32 29/32
4th Quarter 1 29/32
1997 Calendar Year High Bid Low Bid
------------------ -------- -------
1st Quarter $ 3/4 $15/32
2nd Quarter 13/16 11/16
3rd Quarter 15/16 3/4
4th Quarter 1-1/8 25/32
(b) Holders. As of March 5, 1999, the Company had 392 holders of record
of Common Stock, including Cede & Company, which held 1,694,177
shares of Common Stock as nominee for a number of securities
brokers. Bulletin Board Market Makers maintaining a market in the
Common Stock on March 6, 1999 consisted of Financial America
Securities, Inc; USCC Trading division of Fleet Securities, Inc.;
Greenwood Partners LP, GVR Co.; Herzog, Heine, Geduld, Inc; Hill
Thompson Magid & Co.; Knight Securities LP; Mayer & Schweitzer,
Inc; M.H. Meyerson & Co., Inc.; Paragon Capital Corp. and Sharpe
Capital Inc.
(c) Dividends. The Company has never paid any cash dividends and does
not plan to pay cash dividends in the foreseeable future. The
payment of dividends will depend upon the Company's outstanding
loan arrangements as well as its short-term and long-term cash
availability, working capital and working capital needs and other
factors, as determined by the Company's Board of Directors.
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ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
IN REVIEWING MANAGEMENT'S DISCUSSION AND ANALYSIS, REFERENCE IS MADE TO THE
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED AS ITEM 7 - "FINANCIAL
STATEMENTS" IN THIS ANNUAL REPORT ON FORM 10-KSB.
WORKING CAPITAL AND LIQUIDITY
Information with respect to levels of working capital and other ratios as of
December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
WORKING CAPITAL $1,705,674 $1,515,609 $1,512,100
(current assets less current liabilities)
WORKING CAPITAL RATIO 1.68 to 1 1.83 to 1 2.78 to 1
(current assets to current liabilities)
PERCENTAGE OF CURRENT LIABILITIES TO 72% 60% 35%
STOCKHOLDERS' EQUITY
PERCENTAGE OF TOTAL LIABILITIES TO 77% 66% 45%
STOCKHOLDERS' EQUITY
</TABLE>
At December 31, 1998, cash (and cash equivalents) amounted to $286,368,
and the Company did not have any outstanding borrowings. In April 1997, First
Union National renewed a $750,000 discretionary line of credit for the Company's
short-term needs, at an interest rate equal to such bank's base rate plus 1/2%.
All advances under this line of credit are required to be secured by a lien on
substantially all of the Company's assets. As of December 31, 1998, the Company
did not have any draw against this line of credit.
Management believes that economic conditions within the two largest
industries from which the Company draws its customers, retail and banking, will
continue to improve in 1999, which may result in increased revenues for the
Company.
The Company believes that its working capital and available cash during
1999 will be adequate to maintain its operations and pay its outstanding
obligations as they become due, and that excess cash will be used primarily to
purchase inventory, to enhance its software and to repurchase its outstanding
common stock. The Company does not believe that it will be necessary to raise
additional funds during 1999, except by temporary bank borrowings in the normal
course of business.
The Company does not believe that inflation will have a material impact
on the Company's sales or income.
In 1998, the Company commenced a program to repurchase up to 500,000
shares of its common stock from time to time in the over-the-counter market.
During 1998, the Company purchased 181,500 shares of its common stock for an
aggregate of $196,070. The Company anticipates continuation of such program
during 1999.
RESULTS OF OPERATIONS
1998 Compared with 1997
- -----------------------
Revenues for 1998 were $14,447,077, which was an increase of $4,701,661
(48.2%) from 1997 revenues of $9,745,416. Equipment and systems sales increased
$4,667,283 (65.6%) to $11,781,789 from $7,114,506 in 1997. This was primarily
due to sales to one major customer.
Equipment maintenance and service revenue for 1998 was $2,665,288, an
increase of $34,378 (1.3%). The increase in revenues was primarily due to
additional systems under contract from one major retailer offset somewhat by the
loss of contracts from other customers.
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Cost of goods sold and service expenses increased from 45.3% of sales
in 1997 to 60.3% in 1998. The increase was due to a change in product mix with
more revenue being generated by lower margin hardware sales.
Selling, general and administrative expenses were $4,750,338 in 1998
compared to $4,277,352 in 1997, an increase of $472,986 (11.1%). This increase
was primarily due to additional commissions of $283,302, resulting from
increased sales, and increased salaries of $209,493 offset by small decreases in
other expenses.
Net interest income in 1998 was $29,695 compared to $57,086 in 1997.
This was a decrease of $27,391 (48%) primarily due to lower interest rates on
investments and less cash available to invest, resulting from different payment
plans for maintenance contracts.
The tax provision of $437,384 was $6,422 less than the 1997 provision
of $443,806, resulting from less taxable income.
As a result of the foregoing, the Company had net income of $572,975
compared to net income of $665,705 in 1997, a decrease of $92,730 (13.9%).
1997 Compared with 1996
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Revenues for 1997 increased $1,658,942 (20.6%) to $9,745,416 from
$8,059,474 for 1996. Equipment and systems sales increased $1,361,788 (23.7%) to
$7,114,506 from $5,752,718 in 1996, primarily due to sales to two customers.
Equipment maintenance and service revenue during 1997 amounted to
$2,630,910, an increase of $324,154 (14.1%) from 1996, primarily due to the
increase in outstanding systems resulting from 1997 system sales.
Cost of goods sold and service expenses increased from 44.4% of sales
in 1996 to 45.3% in 1997. This increase was primarily due to a minor change in
the mix of hardware product sold, resulting in an overall lower margin on total
hardware product sales.
Selling, general and administrative expenses were $4,277,352 in 1997
compared to $4,004,115 in 1996, an increase of $273,237 (6.8%). This increase
was primarily due to additional commissions of $169,777 resulting from increased
product and systems sales, increases of $144,452 in software amortization costs,
and increased salary expense of $255,692 resulting from an increase in
personnel. These increases were offset by a $307,828 decrease in nonrecurring
professional fees which were incurred in 1996 in connection with the
investigation and negotiation of a potential acquisition which did not
materialize.
Net interest income in 1997 was $57,086, an increase of $18,319 (47.3%)
over 1996. This increase resulted from an increase in short-term investments
arising from increased cash flow from maintenance contracts and trade
receivables.
The tax provision of $443,806 was $244,546 (122.7%) greater than the
1996 provision of $199,260, as a result of higher taxable income.
As a result of the foregoing, the Company had net income of $665,705
for 1997 compared to net income of $317,382 in 1996, an increase of $348,323
(109.7%).
Impact of the Year 2000 Issue
- -----------------------------
Background
- ----------
Many currently installed computer systems and software currently record years in
a two-digit format. Such computer systems and software, if not modified, will be
unable to properly recognize dates beyond the year 1999. This inability to
recognize the year 2000 is commonly referred to as the "Year 2000 Issue".
Internal Systems
- ----------------
The Company has reviewed all of its internal systems and has determined that
substantially all of the Company's internal systems are Year 2000 compliant.
Remediation is required for certain systems. The current cost estimate of such
remediation is approximately $50,000.
Current Products
- ----------------
Many of the stand-alone products sold by the Company do not contain a dating
mechanism and such systems, therefore, are deemed to be Year 2000 compliant. The
current versions of the Company's products which contain dating mechanisms,
including the associated software, are Year 2000 compliant.
9
<PAGE>
Previously Sold Hardware
- ------------------------
The Company does not manufacture any of the hardware which it sells to its
customers, certain of which is standard computer hardware supplied to the
Company for resale by third party manufacturers. The Company has identified all
hardware, which it has sold to its customers during the previous five years
which will require modification to ensure Year 2000 compliance. Although the
Company's warranties on this older hardware have expired, the Company is in the
process of verifying from its third-party manufacturers whether the hardware
previously supplied by such manufacturers is Year 2000 compliant and, if not,
whether such manufacturers intend to furnish appropriate modifications to their
hardware in the normal course to ensure timely Year 2000 compliance. Although
the Company anticipates that such verification process will be completed during
the second quarter of 1999, all of the responses which the Company has received
to date confirm Year 2000 compliance or timely availability of appropriate Year
2000 modifications. However, several manufacturers which the Company had dealt
with are no longer in business and there can be no assurance that all other
manufacturers will respond to the Company's inquiries or will furnish
appropriate modifications to their previously sold hardware in the normal course
to ensure timely Year 2000 compliance. To the extent that Year 2000 compliance
requires a hardware remedy which will not be supplied by the third-party
manufacturer, external clock and dating mechanisms to interface with the
Company's previously sold hardware are commercially available at the present
time at minimal cost and can be supplied by the Company, in the event that the
Company is requested to do so by its customers.
Previously Furnished Third-Party Software
- -----------------------------------------
Certain of the software which the Company previously had supplied to its
customers (including software prepackaged by hardware manufacturers with their
hardware) was developed by third-party suppliers, and the remaining software was
developed by the Company. The Company has identified all third-party software
which it has supplied to its customers during the previous five years which will
require modification to ensure Year 2000 compliance, and has completed its
verification that such software either is Year 2000 compliant or, if not,
whether such suppliers intend to furnish appropriate modifications to their
software in the normal course to ensure timely Year 2000 compliance. The Company
has been advised that all of such software either is Year 2000 compliant or is
expected to be timely modified to be Year 2000 compliant, except that Microsoft
Corporation has advised that Microsoft(R) Access(R) version 1.1 and version 2
and Microsoft Basic Compiler(R) version 4.5 (and previous versions), which
software previously had been supplied by the Company with certain of its older
systems, are not Year 2000 compliant and will not be upgraded by Microsoft.
However, the Company believes that those portions of such non-compliant software
which continue to be used is not critical to any of the operations of the
systems sold by the Company in which such software is used, and that continued
use of such software will not affect the operations of, or the results to be
obtained from, such systems.
Previously Furnished Company Developed Software
- -----------------------------------------------
Several of the systems sold by the Company before 1998, such as its CP-2000
Deposit/Register Verification System and older versions of its CP-3000 Retail
Cash Office Management System, contain software developed by the Company which
uses internal dating mechanisms that are not Year 2000 compliant. The Company's
warranties on these older systems do not require the Company to enhance such
systems to resolve the Year 2000 issue, although the Company believes that
certain of its customers who do not desire to replace such systems before the
Year 2000 may request that the Company supply software to make such systems Year
2000 compliant. The Company already has designed generic software enhancements
for all of these older systems at a cost of approximately $15,000, which has
been charged to expense. However, many of these older systems have unique
features, and specific modification of the Company's generic software
enhancements generally would be necessary for application to any specific
customer. The cost to the Company of such specific software modifications will
depend on the number of customers who request that their older Company developed
software be modified to be Year 2000 compliant. The Company believes that it
will be able to fully recoup these software modification costs from its
customers.
Key Suppliers and Customers
- ---------------------------
The Company has commenced a program to assess the possible effects on the
Company's operations of Year 2000 readiness by its key suppliers and customers,
and is in the process of requesting verification of such readiness. The Company
is developing a contingency plan in the event of non-compliance with the Year
2000 issue by its key suppliers and customers and, as a result, does not yet
know whether any possible noncompliance will have a material effect on the
Company and its future results of operations.
10
<PAGE>
ITEM 7 - FINANCIAL STATEMENTS
ATS MONEY SYSTEMS, INC.
<TABLE>
<CAPTION>
Consolidated Financial Statements as of December 31, 1998 and 1997 and for each of
the Three Years in the Period Ended December 31, 1998 and Independent Auditors' Report
-----------------------------------------------
ATS MONEY SYSTEMS, INC.
TABLE OF CONTENTS
--------------------------
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
CONSOLIDATED FINANCIAL STATEMENTS:
Balance Sheets F-2
Statements of Income F-3
Statements of Changes in Stockholders' Equity F-4
Statements of Cash Flows F-5
Notes to Financial Statements F-6 to F-11
</TABLE>
11
<PAGE>
INDEPENDENT AUDITORS' REPORT
ATS Money Systems, Inc.
We have audited the accompanying consolidated balance sheets of ATS Money
Systems, Inc. (the "Company") as of December 31, 1998 and 1997, and the related
consolidated statements of income, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of ATS Money Systems,
Inc. as of December 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles.
Parsippany, New Jersey
March 25, 1999
F-1
<PAGE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
======================================================================================================
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 286,368 $ 424,168
Trade accounts receivable, less allowance for doubtful accounts
of $140,629 in 1998, and $100,118 in 1997 3,251,810 2,281,677
Inventories (Note 4) 598,667 562,681
Prepaid expenses and other current assets 63,513 83,492
----------- -----------
Total current assets 4,200,358 3,352,018
----------- -----------
PROPERTY - At cost
Office furniture 96,659 95,994
Office machinery and equipment 235,158 216,267
----------- -----------
Subtotal 331,817 312,261
Less accumulated depreciation 199,388 148,320
----------- -----------
Property - net 132,429 163,941
----------- -----------
OTHER ASSETS:
Software costs, less accumulated amortization of $1,039,667 in
1998 and $788,531 in 1997 (Note 2) 1,685,381 1,519,991
Deposits 82,562 52,280
----------- -----------
Total other assets 1,767,943 1,572,271
----------- -----------
TOTAL $ 6,100,730 $ 5,088,230
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,629,655 $ 1,459,245
Deferred revenue 677,969 206,799
Deferred income taxes (Note 8) 95,702 43,561
Other liabilities 91,358 126,804
----------- -----------
Total current liabilities 2,494,684 1,836,409
----------- -----------
LONG-TERM - Deferred credit, less accumulated amortization of $124,753
in 1998 and $96,241 in 1997 (Note 3) 160,414 188,926
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY (Note 7):
Common stock, non-cumulative, voting - $.001 par value, 25,000,000
shares authorized, 5,941,547 and 5,922,731 shares
issued at December 31, 1998 and 1997, respectively 5,942 5,923
Additional paid-in capital 2,192,958 2,383,033
Accumulated earnings 1,247,014 674,039
Treasury stock - 281,500 and 100,000 shares, at par value, at
December 31, 1998 and 1997, respectively (282) (100)
----------- -----------
Total stockholders' equity 3,445,632 3,062,895
----------- -----------
TOTAL $ 6,100,730 $ 5,088,230
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
====================================================================================================
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
REVENUE:
Equipment and systems sales $11,781,789 $ 7,114,506 $ 5,752,718
Equipment maintenance and service revenue 2,665,288 2,630,910 2,306,756
----------- ----------- -----------
Total revenue 14,447,077 9,745,416 8,059,474
----------- ----------- -----------
COSTS AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 7,610,955 3,392,435 2,633,655
Equipment maintenance and service 1,105,120 1,023,204 943,829
Selling, general and administrative expenses
(Notes 5 and 12) 4,750,338 4,277,352 4,004,115
----------- ----------- -----------
Total costs and expenses 13,466,413 8,692,991 7,581,599
----------- ----------- -----------
INCOME FROM OPERATIONS 980,664 1,052,425 477,875
NET INTEREST INCOME 29,695 57,086 38,767
----------- ----------- -----------
INCOME BEFORE INCOME TAX EXPENSE 1,010,359 1,109,511 516,642
INCOME TAX EXPENSE (Note 8) 437,384 443,806 199,260
----------- ----------- -----------
NET INCOME $ 572,975 $ 665,705 $ 317,382
=========== =========== ===========
EARNINGS PER COMMON SHARE (Note 2):
Basic and diluted $ 0.10 $ 0.11 $ 0.05
=========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,841,531 5,872,577 5,878,975
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=============================================================================================================
ADDITIONAL ACCUMULATED TOTAL
COMMON PAID-IN (DEFICIT) TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1995 $ 5,836 $ 2,319,920 $ (309,048) $ (100) $ 2,016,608
Issuance of common stock for stock
grants (40,000 shares) and upon the
exercise of stock options (16,117
shares) 56 54,477 -- -- 54,533
Net income - 1996 -- -- 317,382 -- 317,382
----------- ----------- ----------- ----------- -----------
BALANCE
DECEMBER 31, 1996 5,892 2,374,397 8,334 (100) 2,388,523
Issuance of common stock upon the
exercise of stock options (30,820
shares) 31 8,636 -- -- 8,667
Net income - 1997 -- -- 665,705 -- 665,705
----------- ----------- ----------- ----------- -----------
BALANCE
DECEMBER 31, 1997 5,923 2,383,033 674,039 (100) 3,062,895
Issuance of common stock upon the
exercise of stock options (18,816
shares) 19 5,813 -- -- 5,832
Purchase of common stock (181,500
shares) -- (195,888) -- (182) (196,070)
Net income - 1998 -- -- 572,975 -- 572,975
----------- ----------- ----------- ----------- -----------
BALANCE
DECEMBER 31, 1998 $ 5,942 $ 2,192,958 $ 1,247,014 $ (282) $ 3,445,632
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
=================================================================================================================
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 572,975 $ 665,705 $ 317,382
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 528,538 390,094 233,398
Changes in current assets and liabilities:
Compensation expense recorded for common stock
issued under Director Stock Plan -- -- 50,000
Trade accounts receivable - net (970,133) (1,017,156) 296,105
Inventories (35,986) 4,739 (46,424)
Prepaid expenses and other current assets 19,979 136,430 (33,305)
Accounts payable and accrued expenses 170,410 1,100,164 (214,786)
Deferred revenue 471,170 (115,326) 74,523
Deferred income taxes 52,141 38,829 4,732
Other liabilities (35,446) (35,159) 6,136
Deposits (30,282) (1,603) 40,192
----------- ----------- -----------
Net cash provided by operating activities 743,366 1,166,717 727,953
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs (671,372) (984,125) (505,296)
Additions to property (19,556) (75,229) (83,600)
----------- ----------- -----------
Net cash used in investing activities (690,928) (1,059,354) (588,896)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock 5,832 8,667 4,533
Purchase of common stock (196,070) -- --
----------- ----------- -----------
Net cash (used in) provided by financing activities (190,238) 8,667 4,533
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (137,800) 116,030 143,590
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 424,168 308,138 164,548
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 286,368 $ 424,168 $ 308,138
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for income taxes $ 641,341 $ 87,917 $ 210,000
=========== =========== ===========
Interest paid $ 660 -- --
=========== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
ATS MONEY SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
================================================================================
1. DESCRIPTION OF COMPANY OPERATIONS
ATS Money Systems, Inc. ("ATS"), with a wholly-owned subsidiary,
Innovative Electronics, Inc., acquired in August, 1994 (collectively, the
"Company"), is engaged in the development, sale and service of currency
counting systems and equipment for department and chain stores' cash
offices and bank commercial vaults and of communications systems primarily
used by chain stores. In addition, the Company offers maintenance and
service contracts through a national service organization on all machines
and equipment it sells. The Company's customers are businesses that handle
a large number of cash, check and credit transactions on a daily basis,
such as banks, department stores and chain stores. ATS was incorporated in
1987 under the laws of the State of Nevada and is the successor to a
similar business acquired by merger in 1988.
The principal products sold by the Company during 1998 were its newly
developed PowerEncode Check Encoding System, CP-4000 Retail Cash Office
Management System, ATS CP-3000 Retail Cash Office Management System, ATS
PowerVault Cash Management System, and the ATS CP-2000 Deposit/Register
Verification System, which products accounted for approximately 78% of the
Company's 1998 equipment and systems sales and, through IEI, StoreComm ISP
and its related hardware. The Company also sells various types of
currency/document counters and dispensers.
The principal market for the Company's products has been in the United
States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
consist of the accounts of ATS Money Systems, Inc. and its wholly-owned
subsidiary. All significant intercompany transactions and account balances
have been eliminated.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include investments
with original maturities of three months or less.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method for machine parts and
specific identification for equipment held for sale.
PROPERTY AND OTHER ASSETS- Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, which
range from five to ten years. At December 31, 1998, there was no event or
change in circumstance that would indicate that the carrying amount of any
long-lived asset was not recoverable.
CAPITALIZED SOFTWARE COSTS - The Company capitalizes computer software
development costs in accordance with the provisions of Statement of
Financial Accounting Standards No. 86. Costs incurred to establish the
technological feasibility of computer software are expensed as incurred.
Costs incurred for product enhancements, subsequent to establishing
technological feasibility, are capitalized and stated at the lower of cost
or net realizable value and are periodically evaluated for impairment.
Capitalized costs are amortized using the straight-line method over five
years, which approximates the estimated remaining useful life of the
product. It is possible that the estimate of the economic life of the
products and related carrying values could be reduced in the near term due
to competitive pressures. Amortization of computer software costs amounted
to $505,982, $383,470 and $305,975 for the years ended December 31, 1998,
1997 and 1996, respectively. Fully amortized software costs of $254,846,
$106,729 and $77,700 were written off in 1998, 1997 and 1996,
respectively.
REVENUE RECOGNITION - Revenue from equipment and systems sales is
recognized upon shipment to the buyer and satisfaction of related
obligations by the Company. Revenue from software licensing is recognized
on either delivery of the software if collectibility is probable or upon
completion of the majority of the product, which equates to reaching a
milestone in accordance with the contract, and any remaining insignificant
obligations of the Company are accounted for by deferring a pro rata
portion of revenue and recognizing it either ratably as the obligations
are fulfilled or on completion of performance or by recording a current
year expense for the remaining costs associated with completing the
project.
EQUIPMENT MAINTENANCE AND SERVICE REVENUE - Equipment maintenance and
service revenue is recognized as earned over the term of the contract,
which is generally a maximum of one year in length. Deferred revenue
represents the unearned portion of equipment maintenance and service fees.
F-6
<PAGE>
USE OF ESTIMATES - The Company's financial statements include the use of
estimates and assumptions, which have been developed by management, based
on available facts and information. Actual results could differ from those
estimates.
EARNINGS PER COMMON SHARE - Basic earnings per common share is computed by
dividing income available to common stockholders by the weighted average
number of common shares outstanding during the period. The computation of
diluted earnings per share is similar to the computation of basic earnings
per share except that the denominator is increased to include the number
of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. For the years ended
December 31, 1998, 1997 and 1996 the dilutive effect on earnings per
common share was insignificant.
INCOME TAXES - The Company files a consolidated Federal tax return.
Deferred income taxes are provided for temporary differences between the
carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
RECLASSIFICATIONS - Certain prior year amounts have been reclassified in
order to conform with the 1998 presentation.
3. ACQUISITION
In 1994, the Company acquired Innovative Electronics, Inc., which is in
the business of marketing hardware and software products designed to
permit the exchange of pricing, product and other data among stores within
a chain. The acquisition was accounted for by the purchase method of
accounting. The purchase price was allocated to the assets acquired and
liabilities assumed based on the fair values at the date of acquisition.
The excess of the estimated fair values of the assets acquired over the
purchase price ($285,167) was recorded as a deferred credit, and is being
amortized on a straight-line basis over ten (10) years.
4. INVENTORIES
Inventories consist of equipment held for sale and machine parts, as
follows:
1998 1997
--------- ---------
Equipment held for sale $ 582,489 $ 529,658
Parts and raw materials 70,135 73,652
Reserve for obsolescence (53,957) (40,629)
--------- ---------
$ 598,667 $ 562,681
========= =========
5. RELATED PARTY TRANSACTIONS
During 1996, the Company engaged three directors as consultants on a
potential acquisition, which did not materialize. The directors were paid
fees and expenses of $326, $1,013 and $11,879, respectively. Other
expenses for legal, accounting and consulting services (not paid to
related parties) in connection with this potential acquisition aggregated
$294,610.
During 1997, the Company paid a director consulting fees and expenses of
$11,400 and $3,392, respectively.
At December 31, 1998 and 1997, all directors and executive officers, as a
group, collectively owned 40% and 41%, respectively, of the Company's
common stock.
F-7
<PAGE>
6. COMMITMENTS AND CONTINGENCIES
At December 31, 1998, the Company was committed under non-cancellable,
operating leases for office space, automobiles and office equipment,
expiring at various dates through February 2004, requiring minimum annual
rental payments as follows:
1999 $ 371,750
2000 291,660
2001 251,610
2002 249,612
2003 249,612
2004 41,602
----------
$1,445,846
==========
Rental expense under such leases totaled $346,901, $340,827, and $343,434
for the years ended December 31, 1998, 1997 and 1996, respectively.
7. STOCKHOLDERS' EQUITY
COMMON STOCK INCENTIVE PLAN - In 1993, the Company adopted a common stock
incentive plan (the "Plan"), which, as amended, authorizes the issuance,
within ten years, of options covering up to 480,000 shares of common stock
to certain employees and other individuals of importance to the Company.
The Plan is intended to provide incentive to continued employment of
certain employees and other individuals by enabling them to acquire a
proprietary interest in the Company. Options granted under the Plan may be
either "incentive stock options" or "non-qualified stock options."
Incentive stock options, granted only to certain employees of the Company,
expire within ten years (five years for a 10% beneficial owner of the
Company's securities) from the date granted and are exercisable from time
to time in accordance with the terms of such options. The exercise price
of an incentive stock option must be at least equal to the fair market
value of the common stock on the date of grant (110% for a 10% beneficial
owner of the Company's securities). Non-qualified stock options can be
granted to certain employees of the Company and advisors and consultants
to the Company. Such stock options are exercisable on or after the date of
grant and the exercise price is not limited and may be below fair market
value.
DIRECTOR STOCK PLAN - In 1995, the Company adopted the 1995 Director Stock
Plan pursuant to which, as amended, the Company's non-employee directors,
upon first being elected to the Board, are granted 10,000 shares of the
Company's common stock, and thereafter, on each reelection, are granted
non-qualified stock options to purchase 10,000 shares of the Company's
common stock with an exercise price equal to the then fair market value of
such shares. In 1995, the non-employee directors were granted an aggregate
of 40,000 shares of common stock under this plan, all of which were issued
during 1996. In 1997, the non-employee directors were granted
non-qualified options under this plan to purchase 30,000 shares of common
stock at an exercise price of $.8281 per share. In 1998, the non-employee
directors were granted non-qualified options under this plan to purchase
30,000 shares of common stock at an exercise price of $.9531 per share.
The estimated fair value of options granted during 1998, 1997 and 1996 was
$0.27, $0.56 and $0.08 per share, respectively. The Company applies
Accounting Principles Board Opinion No. 25 and related interpretations in
accounting for stock option plans. Accordingly, no compensation cost has
been recognized for its stock option plan. Had compensation cost for the
Company's stock option plan been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of
FASB Statement 123, the Company's net income and earnings per share for
the years ended December 31, 1998, 1997 and 1996 would have been reduced
to the pro forma amounts indicated below:
Net income to common shareholders:
1998 1997 1996
As reported $572,975 $665,705 $317,382
Pro forma $564,697 $629,725 $313,360
F-8
<PAGE>
Net income per common share:
1998 1997 1996
As reported $.10 $0.11 $0.05
Pro forma $.10 $0.11 $0.05
The fair values of options granted under the Company's stock option plan
during 1998, 1997 and 1996 were estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used: No dividend yield for 1998, 1997 and 1996, expected
volatility of 53%, 18% and 20% for 1998, 1997 and 1996, respectively, and
expected lives of 9.5 years for 1998 and 9 years for 1997 and 1996.
A summary of the details of stock options granted and outstanding balances
are presented below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
DECEMBER 31,
-------------------------------
OPTION
GRANT PRICE EXERCISED CANCELED 1998 1997
------- ------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1993
----
140,869 .28125 66,761 4,184 69,924(1) 69,924
18,816 .31 -- 18,816
18,816 -- --
15,315 .28125 15,315(1) 15,315
1994
----
15,000 1.375 -- 15,000
5,000 10,000(1) --
1996
----
37,626 1.03125 7,721 29,905
2,658 27,247(2) --
8,375 1.1344 8,375(2) 8,375
1997
----
34,000 .71 6,000 -- 28,000
2,500 25,500(3) --
30,000 .8281 30,000(3) 30,000
1998
----
30,000 .9531 30,000(4) --
24,700 .92 500 24,200(4) --
--------- ---------- --------- --------
85,577 28,563 240,561 215,335
========= ========== ========= ========
</TABLE>
(1) Fully exercisable as of December 31, 1998.
(2) 19,395 of 27,247 and 5,578 of 8,375 exercisable as of December 31, 1998.
(3) 9,158 of 25,500 and 9,999 of 30,000 exercisable as of December 31, 1998.
(4) Non exercisable as of December 31, 1998.
F-9
<PAGE>
COMMON STOCK WARRANTS - In connection with services to be rendered by an
investment banker, as of April 7, 1997, the Company granted to the
investment banker warrants to purchase 80,000 shares of common stock
exercisable at $.75 per share; granted to the investment banker on April 8
1998, warrants to purchase an additional 80,000 shares of common stock
exercisable at $1.25 per share and, unless the agreement is canceled by
the Company before April 8, 1999, agreed to grant to the investment banker
on such date warrants to purchase an additional 80,000 shares of common
stock exercisable at $1.25 per share. All of the warrants will expire on
April 7, 2001, unless exercised prior thereto. Based upon the fair value
of the warrants at the grant dates, no expense was recognized in 1998 and
1997.
8. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
The significant items comprising the Company's net deferred taxes as of
December 31, 1998 and 1997 are as follows:
1998 1997
--------- ---------
Deferred tax assets:
Provision for bad debts $ 56,252 $ 40,047
Inventory write-downs 21,582 16,252
Deferred credits - acquisition 64,166 75,570
--------- ---------
Total deferred tax assets 142,000 131,869
--------- ---------
Deferred tax liabilities:
Depreciation 22,421 22,055
Software amortization 215,281 153,375
--------- ---------
Total deferred tax liabilities 237,702 175,430
--------- ---------
Net deferred tax liability $ (95,702) $ (43,561)
--------- ---------
The income tax provision for the years ended December 31, 1998, 1997 and
1996 consists of the following components:
1998 1997 1996
-------- -------- --------
Current:
Federal $244,216 $314,976 $123,850
State 141,027 90,001 70,678
-------- -------- --------
Total current 385,243 404,977 194,528
-------- -------- --------
Deferred:
Federal 44,319 33,005 4,022
State 7,822 5,824 710
-------- -------- --------
Total deferred 52,141 38,829 4,732
-------- -------- --------
Income tax expense $437,384 $443,806 $199,260
======== ======== ========
A reconciliation of the Company's statutory rate to the Company's
effective rate is as follows:
1998 1997 1996
------- ----- -----
Expected statutory rate 34.0% 34.0% 34.0%
State income tax (composite rate) 9.7 5.7 4.7
Other (0.4) 0.3 --
------- ----- -----
43.3% 40.0% 38.7%
======= ===== =====
F-10
<PAGE>
9. MAJOR CUSTOMERS
Sales to each of the Company's three major customers, which are subject to
change annually, as a percentage of consolidated revenue, for the years
ended December 31 approximated:
1998 1997 1996
---- ---- ----
Major Customer 1 46% 21% 19%
Major Customer 2 17 15 15
Major Customer 3 5 13 9
During 1998, sales to Target Stores and Mervyns, both divisions of
Dayton-Hudson Corporation, and sales directly to Dayton-Hudson
Corporation, accounted for 46% of total sales.
This was the result of the purchase of an enterprise license for the
CP-4000 Retail Cash Office Management System, a new product, and the
related hardware.
While this customer has a four year maintenance agreement, future revenues
from software and hardware should not be as significant in 1999.
10. RETIREMENT PLAN
The Company has a defined contribution plan covering substantially all of
its employees. Company contributions to the plan, which are discretionary,
are made from its profits. Contributions are based upon a percentage of
eligible employees' salaries ranging from -0-% to a maximum of 15%. The
contribution for 1997 was $27,495. There were no contributions for 1998
and 1996.
Effective January 1, 1998, the Company adopted provisions under the plan
to provide a 401k feature. Eligibility occurs after one year of service
(with 1,000 hours of service) and attainment of age 21. The
characteristics of the 401k plan are that the Company will match 25% of
the participant's contribution up to 6% of compensation. Employee
contributions, which are voluntary, can range up to 20% of compensation.
Vesting of the Company's matching contribution, at the rate of 20% per
annum begins after the second year of service until year six when the
employee becomes fully vested. Forfeitures will reduce the Company
matching contributions. The Company's contribution for 1998 was $24,927.
11. LINE OF CREDIT
The Company has a bank line of credit of $750,000 with interest at the
bank's base rate plus 0.5%. All advances under this line of credit are
required to be secured by a lien on substantially all of the Company's
assets. The Company had no borrowings outstanding at December 31, 1998 and
December 31, 1997.
12. SETTLEMENT AGREEMENT
On October 25, 1996, the Company, Michael M. Smith, and counsel to Mr.
Smith, which law firm also had acted as securities counsel to the Company
until its termination by the Company effective May 31, 1996 ("Counsel"),
entered into an agreement to settle all disputes relating to amounts
claimed by Mr. Smith and Counsel to be owed to them by the Company.
Pursuant to such agreements, the Company paid Counsel $50,000 in
satisfaction of all outstanding legal bills rendered by Counsel to the
Company, and reimbursed Mr. Smith $13,034 for out-of-pocket expenses
incurred by him in connection with his Company duties.
******
F-11
<PAGE>
ITEM 8 - CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Deloitte & Touche LLP, independent accountants, currently is, and for
more than the Company's last two fiscal years has been, the Company's
independent auditors. Since the beginning of such two fiscal year period, (i)
Deloitte & Touche LLP has not expressed reliance, in its audit report, on the
audit services of any other accounting firm, and (ii) there have been no
reported disagreements between the Company and Deloitte & Touche LLP on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
PART III
Except for information required by Item 13 (Exhibits and Reports on
Form 8-K), the information called for by Part III of Form 10-KSB (Items 9, 10,
11 and 12) is incorporated by reference herein from the Company's definitive
proxy statement to be filed with the Securities and Exchange Commission within
120 days after the close of its fiscal year ended December 31, 1998.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following is a listing of Exhibits required by Item 601 of
Regulation S-B. Except for those exhibits indicated by an asterisk * (which
exhibits are filed herewith), the remaining exhibits listed below are
incorporated by the reference to an exhibit previously filed by the
Company.
3. Articles of incorporation and by-laws.
(a) Articles of Incorporation of ATS Money Systems, Inc. (formerly known
as More Creative Mergers, Inc.), as filed with the Secretary of State
of the State of Nevada on August 28, 1987 - incorporated herein by
reference to Exhibit 8 to Registration Statement on Form S-18 (No.
33-19657-NY).
(b) Agreement of Merger of ATS Money Systems, Inc. into More Creative
Mergers, Inc., dated July 25, 1988, as filed with the Secretary of
State of the State of Nevada on September 6, 1988 - incorporated
herein by reference to Exhibit 12 to Post-Effective Amendment No. 1
dated September 26, 1988 to Registration Statement on Form S-18 (No.
33-19657-NY).
(c) By-Laws of ATS Money Systems, Inc. - incorporated herein by reference
to Exhibit 9 to Registration Statement on Form S-18 (No. 33-19657-NY).
(4) Instruments defining the rights of security holders, including
indentures.
(a) Form of Common Stock certificate of ATS Money Systems, Inc. -
incorporated herein by reference to Exhibit 5 to Amendment No. 1 dated
March 11, 1988 to Registration Statement on Form S-18 (No.
33-19657-NY).
(10) Material contracts.
(a) (i) Lease, dated November 30, 1989, between ATS Money Systems, Inc. and
Rockwood Four Limited Partnership incorporated herein by reference to
Exhibit 10(a) to the Annual Report on Form 10-KSB of ATS Money Systems,
Inc. for the fiscal year ended December 31, 1989.
(ii) Amendment of Lease, dated as of December 1, 1992, between ATS
Money Systems, Inc. and Rockwood Limited Partnership incorporated
herein by reference to Exhibit 10(a)(ii) to the Annual Report on
Form 10-KSB of ATS Money Systems, Inc. for the fiscal year ended
December 31, 1992.
(iii) Amendment of Lease, dated as of September 15, 1995, between ATS
Money Systems, Inc. and Rockwood Four Limited Partnership
incorporated herein by reference to Exhibit 10(a)(iii) to the
Annual Report on Form 10-KSB of ATS Money Systems, Inc. for the
fiscal year ended December 31, 1995.
*(iv) Amendment of Lease, dated as of, June 26, 1998 between ATS Money
Systems, Inc. and Rockwood Property Holding, LLC.
26
<PAGE>
(b) (i) Profit Sharing Plan of ATS Money Systems, Inc., dated January
1, 1987 - incorporated herein by reference to Exhibit 19 to Post-Effective
Amendment No. 1 dated September 26, 1988 to Registration Statement on Form S-18
(No. 33-19657-NY).
*(ii) Amendment to Profit Sharing Plan dated January 1, 1998.
(c) Form of Salesman Employment Agreement - incorporated herein by
reference to Exhibit 10(j) to the Annual Report on Form 10-KSB of ATS Money
Systems, Inc. for the fiscal year ended December 31, 1989.
(d) Form of Maintenance Agreement - incorporated herein by reference to
Exhibit 10(k) to the Annual Report on Form 10-KSB of ATS Money Systems, Inc. for
the fiscal year ended December 31, 1989.
(e) Common Stock Incentive Plan - incorporated herein by reference to
Exhibit 10(l) to the Annual Report on Form 10-KSB of ATS Money Systems, Inc. for
the fiscal year ended December 31, 1992.
(f) Purchase Agreement, dated August 24, 1994, between ATS Money
Systems, Inc., IEI Acquisition Corp., Dynatech Corporation and Innovative
Electronics, Inc. - incorporated herein by reference to Exhibit 10(j) to the
Annual Report on Form 10-KSB of ATS Money Systems, Inc. for the fiscal year
ended December 31, 1994.
(g) ATS Money Systems, Inc. 1995 Director Stock Plan - incorporated
herein by reference to Exhibit 10(i) to the Annual Report on Form 10-KSB of ATS
Money Systems, Inc. for the fiscal year ended December 31, 1996.
(h) Employment Agreement, dated May 23, 1996, between Gerard F. Murphy
and ATS Money Systems, Inc. - incorporated herein by reference to Exhibit 10(j)
to the Annual Report on Form 10-KSB of ATS Money Systems, Inc. for the fiscal
year ended December 31, 1996.
(i) Technical Support Agreement, dated January 30, 1996, between
Technology Service Solutions and ATS Money Systems, Inc. - incorporated herein
by reference to Exhibit 10(k) to the Annual Report on Form 10-KSB of ATS Money
Systems, Inc. for the fiscal year ended December 31, 1996.
(j) Agreement for Software License, dated April 15, 1997, between ATS
Money Systems, Inc. and Dayton Hudson Corporation - incorporated herein by
reference to Exhibit 10(a) to the Quarterly Report on Form 10-QSB, of ATS Money
Systems, Inc., for the quarter ended June 30, 1997.
(k) Agreement, dated April 7, 1997, between ATS Money Systems, Inc. and
M.H. Meyerson & Co., Inc - incorporated herein by reference to Exhibit 10(b) to
the Quarterly Report on Form 10-QSB, of ATS Money Systems, Inc., for the quarter
ended June 30, 1997.
(l) Agreement, dated September 1, 1997, between ATS Money Systems, Inc.
and Vanstar Corporation - incorporated herein by reference to Exhibit 10(a) to
the Quarterly Report on Form 10-QSB, of ATS Money Systems, Inc., for the quarter
ended September 30, 1997.
(m) Agreement, dated, February 24, 1998, between ATS Money Systems,
Inc. and Alpha Microsystems - incorporated herein by reference to Exhibit 10(a)
to the Quarterly Report on Form 10-QSB for the quarter ended March 31, 1998.
*(n) Agreement, dated August 5, 1998, between ATS Money Systems, Inc.
and Bollinger, Wells, Lett & Co. Inc.
*(o) Agreement, dated as of December 10, 1998, between ATS Money
Systems, Inc. and Volumatic Ltd.
11. Statement re computation of per share earnings - Not required since
such computation can be clearly determined from the material contained in this
report on Form 10-KSB.
13. Annual report to security holders for the last fiscal year, Form
10-Q or 10-QSB or quarterly report to security holders, if incorporated by
reference in the filing - Not applicable.
21. Subsidiaries of the small business issuer: Innovative Electronics,
Inc. - incorporated under the laws of the State of Florida.
*23. Consent of independent accountants.
27
<PAGE>
*27. Financial Data Schedule.
(b) No reports on Form 8-K were filed with the Commission during the
fourth quarter of the fiscal year ended December 31, 1998.
28
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 30, 1999 ATS Money Systems, Inc.
-----------------------
By: /s/ GERARD F. MURPHY
-------------------------------
Gerard F. Murphy, President and
Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ GERARD F. MURPHY
Dated: March 30, 1999 ---------------------------------------------------
------------------------- GERARD F. MURPHY
Gerard F. Murphy
Director
/s/ FRED DEN
Dated: March 30, 1999 ---------------------------------------------------
------------------------- FRED DEN
Fred Den
Director
/s/ A. PAUL COX
Dated: March 30, 1999 ---------------------------------------------------
------------------------- A. PAUL COX
A. Paul Cox
Director
/s/ THOMAS J. CAREY
Dated: March 30, 1999 ---------------------------------------------------
------------------------- THOMAS J. CAREY
Thomas J. Carey
Director
/s/ JOSEPH M. BURKE
Dated: March 30, 1999 ---------------------------------------------------
------------------------- JOSEPH M. BURKE
Joseph M. Burke
Vice President - Finance
(Principal Accounting and Financial Officer)
29
</TABLE>
Exhibit 2.b(ii)
ADOPTION AGREEMENT #006
STANDARDIZED CODE SS.401(K) PLAN
(PAIRED PROFIT SHARING PLAN)
The undersigned, ATS MONEY SYSTEMS, INC. ("Employer"), by executing this
Adoption Agreement, elects to become a participating Employer in the First Union
National Bank of North Carolina Defined Contribution Master Plan {basic plan
document #01) by adopting the accompanying Plan and Trust in full as if the
Employer were a signatory to that Agreement. The Employer makes the following
elections granted under the provisions of the Master Plan.
ARTICLE I
DEFIMTIONS
1.02 TRUSTEE. The Trustee executing this Adoption Agreement is: (Choose
(a) or (b))
[ ] (a) A discretionary Trustee. See Section 10.03[A] of the Plan.
[X] (b) A nondiscretionary Trustee. See Section 10.03[B] of the Plan.
[NOTE: THE EMPLOYER MAY NOT ELECT OPTION (B) IF A CUSTODIAN EXECUTES
THE ADOPTION AGREEMENT.]
1.03 PLAN. The name of the Plan as adopted by the Employer is ATS MONEY
SYSTEMS. INC. PROFIT SHARING PLAN.
1.07 EMPLOYEE. The following Employees are not eligible to participate
in the Plan: (CHOOSE (A) OR AT LEAST ONE OF (B) OR (C))
[ ] (a) No exclusions.
[X] (b) Collective bargaining employees (as defined in Section 1.07 of the
Plan). [Note: If the Employer excludes union employees from the Plan,
the Employer must be able to provide evidence that retirement benefits
were the subject of good faith bargaining.]
[X] (c) Nonresident aliens who do not receive any earned income (as defined
in Code ss.911(d)(2)) froM the Employer which constitutes United States
source income (as defined in Code ss.861(a)(3)).
RELATED EMPLOYERS/LEASED EMPLOYEES. An Employee of any member of the Employer's
related group (as defined in Section 1.30 of the Plan), and any Leased Employee
treated as an Employee under Section 1.31 of the Plan, is eligible to
participate in the Plan, unless excluded by reason of Options (b) or (c). [Note:
A related group member may not contribute to this Plan unless it executes a
Participation Agreement, even if its Employees are Participants in the Plan.]
1.12 COMPENSATION.
TREATMENT OF ELECTIVE CONTRIBUTIONS. (CHOOSE (A) OR (B))
[X] (a) "Compensation" includes elective contributions made by the Employer
on the Employee's behalf.
<PAGE>
[ ] (b) "Compensation" does not include elective contributions.
MODIFICATIONS TO COMPENSATION DEFINITION. (CHOOSE (C) OR AT LEAST ONE OF (D) AND
(E))
[X] (c) No modifications other than as elected under Options (a) or (b).
[ ] (d) The Plan excludes Compensation in excess of $___________
[ ] (e) In lieu of the definition in Section 1.12 of the Plan, Compensation
means any earnings reportable as W-2 wages for Federal income tax
withholding purposes, subject to any other election under this Adoption
Agreement Section 1.12.
SPECIAL DEFINITION FOR SALARY REDUCTION CONTRIBUTIONS. An Employee's salary
reduction agreement applies to his Compensation determined prior to the
reduction authorized by that salary reduction agreement, with the following
exceptions: (CHOOSE (F) OR ANY COMBINATION OF (G) AND (H), IF APPLICABLE)
[X] (f) No exceptions.
[ ] (g) The dollar limitation described in Option (d) does not apply.
[ ] (h) If the Employee makes elective contributions to another plan
maintained by the Employer, the Advisory Committee will determine the
amount of the Employee's salary reduction contribution for the
withholding period: (CHOOSE (1) OR (2))
[ ] (1) After the reduction for such period of elective contributions
to the other plan(s).
[ ] (2) Prior to the reduction for such period of elective
contributions to the other plan(s).
1.17 PLAN YEAR/LIMITATION YEAR.
PLAN YEAR. Plan Year means: (CHOOSE (A) OR (B))
[X] (a) The 12 consecutive month period ending every DECEMBER 31.
[ ] (b) (SPECIFY)_____________________________________________________
___________.
LIMITATION YEAR. The Limitation Year is: (CHOOSE (C) OR (D))
[X] (c) The Plan Year.
[ ] (d) The 1,2 consecutive month period ending every _____.
1.18 EFFECTIVE DATE.
NEW PLAN. The "Effective Date" of the Plan is _______________.
RESTATED PLAN. The restated Effective Date is NOVEMBER 1, 1997.
This Plan is a substitution and amendment of an existing retirement plan(s)
originally established JANUARY 1, 1989.
[NOTE: SEE THE EFFECTIVE DATE ADDENDUM.]
2
<PAGE>
1.27 HOUR OF SERVICE. The crediting method for Hours of Service is:
(CHOOSE (A) OR (B))
[X] (a) The actual method.
[ ] (b) The equivalency method, except:
[ ] (1) No exceptions.
[ ] (2) The actual method applies for purposes of: (CHOOSE AT LEAST
ONE)
[ ] (i) Participation under Article II.
[ ] (ii) Vesting under Article V.
[ ] (iii) Accrual of benefits under Section 3.06.
[NOTE: ON THE BLANK LINE, INSERT "DAILY, ""WEEKLY, ""SEMI-MONTHLY PAYROLL
PERIODS "OR "MONTHLY. "]
1.29 SERVICE FOR PREDECESSOR EMPLOYER. In addition to the predecessor
service the Plan must credit by reason of Section t.29 of the Plan, the Plan
credits Service with the following predecessor employer(s): N/A . Service with
the designated predecessor employer(s) applies: (CHOOSE AT LEAST ONE OF (A) OR
(B))
[ ] (a) For purposes of participation under Article II.
[ ] (b) For purposes of vesting under Article V.
[NOTE: IF THE PLAN DOES NOT CREDIT ANY PREDECESSOR SERVICE UNDER THIS PROVISION,
INSERT "N/A" IN THE FIRST BLANK LINE. THE EMPLOYER MAY ATTACH A SCHEDULE TO THIS
ADOPTION AGREEMENT, IN THE SAME FORMAT AS THIS SECTION 1.29, DESIGNATING
ADDITIONAL PREDECESSOR EMPLOYERS AND THE APPLICABLE SERVICE CREDITING
ELECTIONS.]
1.31 LEASED EMPLOYEES. If a Leased Employee participates in a safe
harbor money purchase plan (as described in Section 1.31) maintained by the
leasing organization, but the Employer is not eligible for the safe harbor plan
exception: (CHOOSE (A) OR (B))
[ ] (a) The Advisory Committee will determine the Leased Employee's
allocation of Employer contributions under Article III without taking
into account the Leased Employee's allocation under the safe harbor
plan.
[ ] (b) The Advisory Committee will reduce the Leased Employee's allocation
of Employer nonelective contributions (other than designated qualified
nonelective contributions) under this Plan by the Leased Employee's
allocation under the safe harbor plan, but only to the extent that
allocation is attributable to the Leased Employee's service provided to
the Employer. [NOTE: THE EMPLOYER MAY NOT ELECT OPTION (B) IF A PAIRED
PLAN OR ANY OTHER PLAN OF THE EMPLOYER MAKES A SIMILAR REDUCTION FOR
THE SAME PLAN OF THE LEASING ORGANIZATION.]
3
<PAGE>
ARTICLE II
EMPLOYEE PARTICIPANTS
2.01 ELIGIBILITY.
ELIGIBILITY CONDITIONS. To become a Participant in the Plan, an Employee must
satisfy the following eligibility conditions: (CHOOSE (A) OR (B) OR BOTH)
[X] (a) Attainment of age 21 (specify age, not exceeding 2l ).
[X] (b) service requirement. (Choose (1), (2) or (3))
[X] (1) One Year of Service.
[ ] (2) __ months (not exceeding 12) following the Employee's
Employment Commencement Date.
[ ] (3) One Hour of Service.
PLAN ENTRY DATE. "Plan Entry Date" means the Effective Date and: (CHOOSE (C),
(D) OR (E))
[ ] (c) Semi-annual Entry Dates. The first day of the Plan Year and the
first day of the seventh month of the Plan Year.
[ ] (d) The first day of the Plan Year.
[X] (e) (SPECIFY ENTRY DATES) THE 1ST DAY OF THE MONTH COINCIDING WITH OR
FOLLOWING THE DATE THE PARTICIPANT MEETS THE ELIG REQUIREMENT.
TIME OF PARTICIPATION. An Employee will become a Participant, unless excluded
under Adoption Agreement Section 1.07, on the Plan Entry Date (if employed on
that date): (CHOOSE (F), (G) OR (H))
[X] (f) immediately following
[ ] (g) immediately preceding
[ ] (h) nearest
the date the Employee completes the eligibility conditions described in Options
(a) and (b) of this Adoption Agreement Section 2.01. [NOTE: THE EMPLOYER MUST
COORDINATE THE SELECTION OF (F), (G) OR (H) WITH THE "PLAN ENTRY DATE" SELECTION
IN (C), (D) OR (E). UNLESS OTHERWISE EXCLUDED UNDER SECTION 1.07, THE EMPLOYEE
MUST BECOME A PARTICIPANT BY THE EARLIEST OF: (1) THE FIRST DAY OF THE PLAN YEAR
BEGINNING AFTER THE DATE THE EMPLOYEE COMPLETES THE AGE AND SERVICE REQUIREMENTS
OF CODE SS.410(A); OR (2) 6 MONTHS AFTER THE DATE THE EMPLOYEE COMPLETES THOSE
REQUIREMENTS.]
Dual eligibility. The eligibility conditions of this Section 2.01 apply to:
(CHOOSE (I) OR (J))
[ ] (i) All Employees of the Employer, except: (CHOOSE (1) OR (2))
[ ] (1) No exceptions.
[ ] (2) Employees who are Participants in the Plan as of the Effective
Date.
4
<PAGE>
[X] (j) Solely to an Employee employed by the Employer after December 31,
l997. If the Employee was employed by the Employer on or before the
specified date, the Employee will become a Participant: (CHOOSE (1) OR
(2))
[X] (1) On the latest of the Effective Date, his Employment
Commencement Date or the date he attains age N/A (not to exceed
21).
[ ] (2) Under the eligibility conditions in effect under the Plan prior
to the restated Effective Date. If the restated Plan required more
than one Year of Service to participate, the eligibility condition
under this Option (2) for participation in the Code ss.401(k)
arrangement under this Plan is one Year of Service for Plan Years
beginning after December 31, 1988. [FOR RESTATED PLANS ONLY]
2.02 YEARS OF SERVICE - PARTICIPATION
HOURS OF SERVICE. An Employee must complete: (CHOOSE (A) OR (B))
[X] (a) 1,000 Hours of Service
[ ] (b) _____ Hours of Service
during an eligibility computation period to receive credit for a Year of
Service. [NOTE: THE HOURS OF SERVICE REQUIREMENT MAY NOT EXCEED 1,000.]
ELIGIBILITY COMPUTATION PERIOD. After the initial eligibility computation period
described in Section 2.02 of the Plan, the Plan measures the eligibility
computation period as: (CHOOSE (C) OR (D))
[ ] (c) The 12 consecutive month period beginning with each anniversary of
an Employee's Employment Commencement Date.
[X] (d) The Plan Year, beginning with the Plan Year which includes the
first anniversary of the Employee's Employment Commencement Date.
2.03 BREAK IN SERVICE - PARTICIPATION. The Break in Service rule
described in Section 2.03(B) of the Plan: (CHOOSE (A) OR (B))
[X] (a) Does not apply to the Employer's Plan.
[ ] (b) Applies to the Employer's Plan.
ARTICLE III
EMPLOYER CONTRIBUTIONS AND FORFEITURES
3.01 AMOUNT.
PART I. [OPTIONS (A) THROUGH (G)] AMOUNT OF EMPLOYER'S CONTRIBUTION. The
Employer's annual contribution to the Trust will equal the total amount of
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions, as determined under this Section
3.01. (CHOOSE ANY COMBINATIONS OF (A), (B), (C) AND (D), OR CHOOSE (E))
[X] (a) DEFERRAL CONTRIBUTIONS (CODE SS.401(K) ARRANGEMEnt). The Employer
must contribute the amount by which the Participants have reduced their
Compensation for the Plan Year, pursuant to their salary reduction
agreements on file with the Advisory Committee. A reference in the Plan
to salary reduction contributions is a reference to these amounts.
5
<PAGE>
[X] (b) MATCHING CONTRIBUTIONS. The Employer will make matching
contributions in accordance with the formula(s) elected in Part II of
this Adoptive Agreement Section 3.01.
[X] (c) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS. The Employer, in
its sole discretion, may contribute an amount which it designates as a
qualified nonelective contribution.
[X] (d) NONELECTIVE CONTRIBUTIONS.
[X] (1) Discretionary contribution. The amount (or additional amount)
the Employer may from time to time deem advisable.
[ ] (2) _____% of the Compensation of all Participants under the Plan,
determined for the Employer's taxable year for which it makes the
contribution. [Note: The percentage selected may not exceed 15%.]
[ ] (3) _____% of Net Profits but not more than $______________.
[ ] (e) FROZEN PLAN. This Plan is a frozen Plan effective ______. The
Employer will not contribute to the Plan with respect to any period
following the stated date.
NET PROFITS. The Employer: (CHOOSE (F) OR (G))
[X] (f) Need not have Net Profits to make its annual contribution under
this Plan.
[ ] (g) Must have current or accumulated Net Profits exceeding $_______ to
make the following contributions: (CHOOSE AT LEAST ONE OF (1), (2) AND
(3))
[ ] (1) Matching contributions described in Option (b), except:
[ ] (2) Qualified nonelective contributions described in Option (c).
[ ] (3) Nonelective contributions described in Option _____________.
"Net Profits" means the Employer's net income or profits for any taxable year
determined by the Employer upon the basis of its books of account in accordance
with generally accepted accounting practices consistently applied without any
deductions for Federal and state taxes upon income or for contributions made by
the Employer under this Plan or under any other employee benefit plan the
Employer maintains. The term "Net profits" specifically excludes _______________
__________________________. [NOTE: ENTER "N/A "IF NO EXCLUSIONS APPLY.]
If the Employer requires Net Profits for matching contributions and the Employer
does not have sufficient Net Profits under Option (g), it will reduce the
matching contribution under a fixed formula on a prorata basis for all
Participants. A Participant's share of the reduced contribution will bear the
same ratio as the matching contribution the Participant would have received if
Net Profits were sufficient bears to the total matching contribution all
Participants would have received if Net Profits were sufficient. If more than
one member of a related group (as defined in Section 1.30) execute this Adoption
Agreement, each participating member will determine Net Profits separately but
will not apply this reduction unless, after combining the separately determined
Net Profits, the aggregate Net Profits are insufficient to satisfy the matching
contribution liability. "Net Profits" includes both current and accumulated Net
Profits.
6
<PAGE>
PART II. [OPTIONS (H) AND (I)] MATCHING CONTRIBUTION FORMULA. [NOTE: IF THE
EMPLOYER ELECTED OPTION (B), COMPLETE OPTIONS (H) AND (I).]
[X] (h) Amount of matching contributions. Subject to Option (i), for each
Plan Year, the Employer's matching contribution is: (CHOOSE ANY
COMBINATION OF (1). (2), (3) AND (4))
[X] (1) An amount equal to 25% of each Participant's salary reduction
contributions for the Plan Year.
[ ] (2) An amount equal to _____%, of each Participant's first tier of
salary reduction contributions for the Plan Year, plus the
following matching percentage(s) for the following subsequent tiers
of salary reduction contributions for the Plan Year:
[ ] (3) Discretionary formula.
[X] (i) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
the Participant's salary reduction contributions for the Plan
Year.
[ ] (ii) An amount (or additional amount) equal to a matching
percentage the Employer from time to time may deem advisable of
each tier of the Participant's salary reduction contributions
for the Plan Year.
[NOTE: UNDER OPTIONS (2) OR (3)(II), THE MATCHING PERCENTAGE FOR ANY SUBSEQUENT
TIER OF SALARY REDUCTION CONTRIBUTIONS MAY NOT EXCEED THE MATCHING PERCENTAGE
FOR ANY PRIOR TIER.]
[ ] (4) A Participant's matching contributions may not:
[ ] (i) Exceed ___________________________________________
[ ] (ii) Be less than ____________________________________
[X] (i) AMOUNT OF SALARY REDUCTION CONTRIBUTIONS TAKEN INTO ACCOUNT. When
determining a Participant's salary reduction contributions taken into
account under the matching contributions formula(s), the following
rules apply: (CHOOSE ANY COMBINATION OF (1) THROUGH (3))
[ ] (1) The Advisory Committee will take into account all salary
reduction contributions credited for the Plan Year.
[X] (2) The Advisory Committee will disregard salary reduction
contributions exceeding 6 % OF COMPENSATION .
[ ] (3) The Advisory Committee will treat as the first tier of salary
reduction contributions, an amount not exceeding:
_______________________________. The subsequent tiers of salary
reduction contributions are: _____________________________________
___________________________________________________________________
7
<PAGE>
PART III. [OPTION (J).]. SPECIAL RULES FOR CODE SS.401(K) ARRANGEMENT. (CHOOSE
(J), IF APPLICABle)
[X] (j) SALARY REDUCTION AGREEMENTS. The following rules and restrictions
apply to an Employee's salary reduction agreement: (MAKE A SELECTION
UNDER (1), (2), (3) AND (4))
(1) LIMITATION ON AMOUNT. The Employee's salary reduction
contributions: (CHOOSE (I) OR AT LEAST ONE OF (II) OR (III))
[ ] (i) No maximum limitation other than as provided in the Plan.
[X] (ii) May not exceed 20% of Compensation for the Plan Year,
subject to the annual additions limitation described in Part 2
of Article III and the 402(g) limitation described in Section
14.07 of the Plan.
[X] (iii) Based on percentages of Compensation must equal at least
1%.
(2) An Employee may revoke, on a prospective basis, a salary reduction
agreement: (CHOOSE (I), (II), (III) OR (IV))
[ ] (i) Once during any Plan Year but not later than
________________ of the Plan Year.
[ ] (ii) As of any Plan Entry Date.
[ ] (iii) As of the first day of any month.
[X] (iv) (SPECIFY. BUT MUST BE AT LEAST ONCE PER PLAN YEAR) 1ST DAY
OF PAYROLL PERIOD UPON 30 DAYS WRITTEN NOTICE.
(3) An Employee who revokes his salary reduction agreement may file a
new salary reduction agreement with an effective date: (CHOOSE (I),
(II), (III) OR (IV))
[ ] (i) No earlier than the first day of the next Plan Year.
[ ] (ii) As of any subsequent Plan Entry Date.
[ ] (iii) As of the first day of any month subsequent to the month
in which he revoked an Agreement.
[X] (iv) (SPECIFY, BUT MUST BE AT LEAST ONCE PER PLAN YEAR
FOLLOWING THE PLAN YEAR OF REVOCATION) 1ST DAY OF PAYROLL
PERIOD UPON 30 DAYSWRITTEN NOTICE.
(4) A Participant may increase or may decrease, on a prospective basis,
his salary reduction percentage or dollar amount: (CHOOSE (I), (II),
(III) OR (IV))
[ ] (i) As of the beginning of each payroll period.
[ ] (ii) As of the first day of each month.
[ ] (iii) As of any Plan Entry Date.
[X] (iv) (SPECIFY, BUT MUST PERMIT AN INCREASE OR A DECREASE AT
LEAST ONCE PER PLAN YEAR) 1ST DAY OF PAYROLL PERIOD UPON 30
DAYS WRITTEN NOTICE.
8
<PAGE>
3.04 CONTRIBUTION ALLOCATION. The Advisory Committee will allocate
deferral contributions, matching contributions, qualified nonelective
contributions and nonelective contributions in accordance with Section 14.06 of
the Plan and the elections under this Adoption Agreement Section 3.04.
PART I. [OPTIONS (A) THROUGH (D)]. SPECIAL ACCOUNTING ELECTIONS. (CHOOSE
WHICHEVER ELECTIONS ARE APPLICABLE TO THE EMPLOYER'S PLAN)
[X] (a) MATCHING CONTRIBUTIONS ACCOUNT. The Advisory Committee will
allocate matching contributions to a Participant's: (CHOOSE (1) OR (2);
(3) IS AVAILABLE ONLY IN ADDITION TO (1))
[X] (1) Regular Matching Contributions Account.
[ ] (2) Qualified Matching Contributions Account.
[ ] (3) Except, matching contributions under Option(s) _ of Adoption
Agreement Section 3.01 are allocable to the Qualified Matching
Contributions Account.
[X] (b) SPECIAL ALLOCATION DATES FOR SALARY REDUCTION CONTRIBUTIONS. The
Advisory Committee will allocate salary reduction contributions as of
the Accounting Date and as of the following additional allocation
dates: ANY BUSINESS DAY THE FINANCIAL MARKETS ARE OPEN AND AVAILABLE
FUNDS ARE DEPOSITED WITH THE TRUSTEE.
[X] (c) SPECIAL ALLOCATION DATES FOR MATCHING CONTRIBUTIONS. The Advisory
Committee will allocate matching contributions as of the Accounting
Date and as of the following additional allocation dates: ANY BUSINESS
DAY THE FINANCLAL MARKETS ARE OPEN AND AVAILABLE FUNDS ARE DEPOSTTED
WITH THE TRUSTEE.
[X] (d) DESIGNATED QUALIFIED NONELECTIVE CONTRIBUTIONS - DEFINITION OF
PARTICIPANT. For purposes of allocating the designated qualified
nonelective contribution, "Participant" means: (CHOOSE (1) OR (2))
[ ] (l) All Participants.
[X] (2) Participants who are Nonhighly Compensated Employees.
PART II. METHOD OF ALLOCATION - NONELECTIVE CONTRIBUTION. Subject to any
restoration allocation required under Section 5.04, the Advisory Committee will
allocate and credit the annual nonelective contributions (and Participant
forfeitures treated as nonelective contributions) to the Employer Contributions
Account of each Participant who satisfies the conditions of Section 3.06, in
accordance with the method selected under this Part II. (CHOOSE AN ALLOCATION
METHOD UNDER (E), (F), (G) OR (H); (I) IS MANDATORY IF THE EMPLOYER ELECTS (F),
(G) OR (H))
[X] (e) Nonintegrated Allocation Formula, .The Advisory Committee will
allocate the annual nonelective contributions in the same ratio that
each Participant's Compensation for the Plan Year bears to the total
Compensation of all Participants for the Plan Year.
[ ] (f) Two-Tiered Integrated Allocation Formula - Maximum Disparity.
First, the Advisory Committee will allocate the annual nonelective
contributions in the same ratio that each Participant's Compensation
plus Excess Compensation for the Plan Year bears to the total
Compensation plus Excess Compensation of all Participants for the Plan
Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed
the applicable percentage (5.7%, 5.4% or 4.3%) listed under the Maximum
Disparity Table following Option (i).
9
<PAGE>
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation for the
Plan Year bears to the total Compensation of all Participants for the Plan Year.
[ ] (g) THREE-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year. The
allocation under this paragraph, as a percentage of each Participant's
Compensation may not exceed the applicable percentage (5.7%, 5.4% or
4.3%) listed under the Maximum Disparity Table following Option (i).
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's
Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year. The allocation
under this paragraph, as a percentage of each Participant's Excess
Compensation, may not exceed the allocation percentage in the first
paragraph.
Finally, the Advisory Committee will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
[ ] (h) FOUR-TIERED INTEGRATED ALLOCATION FORMULA. First, the Advisory
Committee will allocate the annual nonelective contributions in the
same ratio that each Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for the Plan Year, but
not exceeding 3% of each Participant's Compensation.
As a second tier allocation, the Advisory Committee will allocate the
nonelective contributions in the same ratio that each Participant's
Excess Compensation for the Plan Year bears to the total Excess
Compensation of all Participants for the Plan Year, but not exceeding
3% of each Participant's Excess Compensation.
As a third tier allocation, thc Advisory Committee will allocate the
annual contributions in the same ratio that each Participant's
Compensation plus Excess Compensation for the Plan Year bears to the
total Compensation plus Excess Compensation of all Participants for the
Plan Year. The allocation under this paragraph, as a percentage of each
Participant's Compensation plus Excess Compensation, must not exceed
the applicable percentage (2.7%, 2.4% or 1.3%) listed under the Maximum
Disparity Table following Option (i).
The Advisory Committee then will allocate any remaining nonelective
contributions in the same ratio that each Participant's Compensation
for the Plan Year bears to the total Compensation of all Participants
for the Plan Year.
[ ] (i) EXCESS COMPENSATION. For purposes of Option (f), (g) or (h),
"Excess Compensation" means Compensation in excess of the following
Integration Level: (CHOOSE (1) OR (2))
[ ] (1) ____% (not exceeding 100% ) of the taxable wage base, as
determined under Section 230 of the Social Security Act, in effect
on the first day of the Plan Year: (CHOOSE ANY COMBINATION OF (I)
AND (II) OR CHOOSE (III))
[ ] (i) Rounded to ____________________________(but not exceeding
the taxable wage base).
10
<PAGE>
[ ] (ii) But not greater than $_______.
[ ] (iii) Without any further adjustment or limitation.
[ ] (2) $_________ [NOTE: NOT EXCEEDING THE TAXABLE WAGE BASE FOR THE
PLAN YEAR IN WHICH THIS ADOPTION AGREEMENT FIRST IS EFFECTIVE.]
Maximum Disparity Table. For purposes of Options (f), (g) and (h), the
applicable percentage is:
<TABLE>
<CAPTION>
Integration Level (as Applicable Percentages for Applicable Percentages
percentage of taxable wage base) Option (f) or Option (g) for Option (h)
- -------------------------------- ------------------------ --------------
<S> <C> <C>
100% 5.7% 2.7%
More than 80% but less than 100% 5.4% 2.4%
More than 20% (but not less than $10,001)
and not more than 80% 4.3% 1.3%
20% (or $10.000, if greater) or less 5.7% 2.7%
</TABLE>
TOP HEAVY MINIMUM ALLOCATION - APPLICATION OF REQUIREMENT. The Plan applies the
top heavy minimum allocation requirements of Section 3.04(B)(1): (CHOOSE (J) OR
(K))
[ ] {j) In all Plan Years. A Participant is entitled to the top heavy
minimum allocation if he is employed by the Employer on the last day of
the Plan Year, unless: (CHOOSE (1) OR (2))
[ ] (1) No exceptions.
[ ] (2) The Participant is a Key Employee for the Plan Year. [NOTE: IF
THE EMPLOYER SELECTS THIS OPTION (2), IT WILL HAVE TO DETERMINE FOR
EACH PLAN YEAR WHO ARE THE KEY EMPLOYEES UNDER THE PLAN.]
[X] (k) Only in Plan Years for which the Plan is top heavy. A Participant
is entitled to the top heavy minimum allocation if he is employed by
the Employer on the last day of the Plan Year, unless he is a Key
Employee. [NOTE: OPTION (K) WILL REQUIRE THE ADVISORY COMMITTEE TO
DETERMINE WHETHER THE PLAN IS TOP HEAVY FOR A PLAN YEAR.]
TOP HEAVY MINIMUM ALLOCATION - METHOD OF COMPLIANCE. If a Participant's
allocation under this Section 3.04 is less than the top heavy minimum allocation
to which he is entitled under Section 3.04(B): (CHOOSE (L) OR (M))
[X] (1) The Employer will make any necessary additional contribution to the
Participant's Account, as described in Section 3.04(B)(7)(a) of the
Plan.
[ ] (m) The Employer will satisfy the top heavy minimum allocation under
the Paired Pension Plan the Employer also maintains under this Master
Plan. However, the Employer will make any necessary additional
contribution to satisfy the top heavy minimum allocation for an
Employee covered only under this Plan and not under the Paired Pension
Plan. See Section 3.04(B)(7)(b) of the Plan.
If the Employer maintains another plan which is not a Paired Pension Plan
offered under this Master Plan, the Employer may provide in an addendum to this
Adoption Agreement, numbered Section 3.04, any modifications to the Plan
necessary to satisfy the top heavy requirements under Code ss.416.
11
<PAGE>
Related employers. If two or more related employers (as defined in Section 1.30)
contribute to this Plan. The Advisory Committee must allocate all Employer
contributions and forfeitures to each Participant in the Plan, in accordance
with the elections in this Adoption Agreement Section 3.04, without regard to
which contributing related group member employs the Participant. A Participant's
Compensation includes Compensation from all related employers, irrespective of
which related employers are contributing to the Plan. The signatory Employer and
any Participating Employer(s) will satisfy any fixed matching contribution
formula under Adoption Agreement Section 3.01 as agreed upon by those Employers.
3.05 FORFEITURE ALLOCATION. Subject to any restoration allocation
required under Sections 5.04 or 9.14, the Advisory Committee will allocate a
Participant forfeiture in accordance with Section 3.04: (CHOOSE (A) OR (B); (C)
AND (D) ARE OPTIONAL IN ADDITION TO (A) OR (B))
[ ] (a) As an Employer nonelective contribution for the Plan Year in which
the forfeiture occurs, as if the Participant forfeiture were an
additional nonelective contribution for that Plan Year.
[X] (b) To reduce the Employer matching contributions and nonelective
contributions for the Plan Year: (CHOOSE (1) OR (2))
[ ] ( 1 ) in which the forfeiture occurs.
[X] (2) immediately following the Plan Year in which the forfeiture
occurs.
[X] (c) To the extent attributable to matching contributions: (CHOOSE (1),
(2) OR (3))
[X] (1) in the manner elected under Options (a) or (b).
[ ] (2) First to reduce Employer matching contributions for the Plan
Year: (Choose (i) or (ii))
[ ] (i) in which the forfeiture occurs,
[ ] (ii) immediately following the Plan Year in which the
forfeiture occurs, then as elected in Options (a) or (b).
[ ] (3) As a discretionary matching contribution for the Plan Year in
which the forfeiture occurs, in lieu of the manner elected under
Options (a) or (b).
[ ] (d) First to reduce the Plan's ordinary and necessary administrative
expenses for the Plan Year, and then will allocate any remaining
forfeitures in the manner described in Options (a), (b) or (c),
whichever applies. If the Employer elects Option (c), the forfeitures
used to reduce Plan expenses: (CHOOSE (I) OR (2))
[ ] (1) relate proportionately to forfeitures described in Option (c)
and to forfeitures described in Options (a) or (b).
[ ] (2) relate first to forfeitures described in Option ________.
Allocation of forfeited excess aggregate contributions. The Advisory Committee
will allocate any forfeited excess aggregate contributions (as described in
Section 14.09): (CHOOSE (E), (F) OR (G))
[X] (e) To reduce Employer matching contributions for the Plan Year:
(CHOOSE (1) OR (2))
[ ] (1) in which the forfeiture occurs.
[X] (2) immediately following the Plan Year in which the forfeiture
occurs.
12
<PAGE>
[ ] (f) As Employer discretionary matching contributions for the Plan Year in
which forfeited, except the Advisory Committee will not allocate these
forfeitures to the Highly Compensated Employees who incurred the forfeitures.
[ ] (g) In accordance with Options (a) through (d), whichever applies, except
the Advisory Committee will not allocate these forfeitures under Option (a) or
under Option (c)(3) to the Highly Compensated Employees who incurred the
forfeitures.
3.06 ACCRUAL OF BENEFIT.
COMPENSATION TAKEN INTO ACCOUNT. For the Plan Year in which the
Employee first becomes a Participant, the Advisory Committee will determine the
allocation of any designated qualified nonelective contribution or nonelective
contribution by taking into account: (CHOOSE (A) OR (B))
[ ] (a) The Employee's Compensation for the entire Plan Year.
[X] (b) The Employee's Compensation for the portion of the Plan Year in
which the Employee actually is a Participant in the Plan, except:
(CHOOSE (1) OR (2))
[X] (1) No exceptions.
[ ] (2) For purposes of the first 3% of Compensation allocated under
Option (e), (g) or (h) of Adoption Agreement Section 3.04,
whichever applies, the Advisory Committee will take into account
the Employee's Compensation for the entire Plan Year.
ACCRUAL REQUIREMENTS. To receive an allocation of designated qualified
nonelective contributions, nonelective contributions and Participant forfeitures
treated as nonelective contributions for the Plan Year, a Participant must
satisfy the accrual requirements of this paragraph. If the Participant is
employed by the Employer on the last day of the Plan Year, the Participant must
complete at least one Hour of Service for that Plan Year. If the Participant
terminates employment with the Employer during the Plan Year, the Participant
must complete at least 501 Hours of Service (not exceeding 5O1) during the Plan
Year, except: (Choose (c) or (d))
[ ] (c) No exceptions.
[X] (d) No Hour of Service requirement if the Participant terminates
employment during the Plan Year on account of: (CHOOSE AT LEAST ONE OF
(1), (2) AND (3))
[X] (1} Death.
[X] (2) Disability.
[X] (3) Attainment of Normal Retirement Age in the current Plan Year or
in a prior Plan Year.
SPECIAL ACCRUAL REQUIREMENTS FOR MATCHING CONTRIBUTIONS. To receive an
allocation of matching contributions (and forfeitures applied to reduce matching
contributions) a Participant must satisfy the following condition(s):
(CHOOSE (E) OR ANY COMBINATION OF (F), (G) AND (H))
[X] (e) No conditions other than making salary reduction contributions.
[ ] (f) The accrual requirements prescribed for an allocation of
nonelective contributions.
[ ] (g) The Participant does not revoke his salary reduction agreement
effective during the Plan Year.
13
<PAGE>
[x] (h) The Participant is not a Highly Compensated Employee for the Plan
Year. This Option (h) applies to: (CHOOSE (1) OR (2))
[ ] (1) All matching contributions.
[ ] (2) Matching contributions described in Option(s) _________ of
Adoption Agreement Section 3.O1.
3.15 MORE THAN ONE PLAN LIMITATION. If the provisions of Section 3.15
apply, the Excess Amount attributed co this Plan equals: (CHOOSE (A), (B) OR
(C))
[ ] (a) The product of:
(i) the total Excess Amount allocated as of such date (including any
amount which the Advisory Committee would have allocated but for the
limitations of Code ss.415), times
(ii) the ratio of (1) the amount allocated to the Participant as of
such date under this Plan divided by (2) the total amount allocated as
of such date under all qualified defined contribution plans (determined
without regard to the limitations of Code ss.415).
[ ] (b) The total Excess Amount.
[X] (c) None of the Excess Amount.
[NOTE: IF THE EMPLOYER ADOPTS PAIRED PLANS AVAILABLE UNDER THIS MASTER PLAN, THE
EMPLOYER MUST COORDINATE ITS ELECTIONS UNDER SECTION 3.15 OF EACH ADOPTION
AGREEMENT.]
3.18 DEFINED BENEFIT PLAN LIMITATION.
APPLICATION OF LIMITATION. The limitation under Section 3.18 of the Plan:
(CHOOSE (A) OR (B))
[X] (a) Does not apply to the Employer's Plan because the Employer does not
maintain and never has maintained a defined benefit plan covering any
Participant in this Plan.
[ ] (b) Applies to the Employer's Plan. To the extent necessary to satisfy
the limitation under Section 3.18, the Employer will reduce (CHOOSE (1)
OR (2))
[ ] (1) The Participant's projected annual benefit under the defined
benefit plan under which the Participant participates.
[ ] (2) Its contribution or allocation on behalf of the Participant to
the defined contribution plan under which the Participant
participates and then, if necessary, the Participant's projected
annual benefit under the defined benefit plan under which the
Participant participates.
[NOTE: IF THE EMPLOYER SELECTS (A), THE REMAINING OPTIONS IN THIS SECTION 3.18
DO NOT APPLY TO THE EMPLOYER'S PLAN]
OVERRIDE OF 100% LIMITATION. The Employer elects: (CHOOSE (C) OR (D))
[ ] (c) To apply the 100% limitation described in Section 3.19(1) of the
Plan in all Limitation Years. [Note: This election will avoid having to
calculate the Plan's top heavy ratio for any year, unless the Employer
has elected Adoption Agreement Section 3.04(k).]
14
<PAGE>
[ ] (d) Not to apply the 100% limitation for Limitation Years in which the
Plan's top heavy ratio {as determined under Section 1.33 of the Plan)
does not exceed 90%, but only if the defined benefit plan satisfies the
extra minimum benefit requirements of Code ss.416(h)(2) (and the
applicable Treasury regulations) after taking into account the
Employer's election under Options (e), (f), (g) or (h) of this Section
3.18. To determine the top heavy ratio, the Advisory Committee will use
the following interest rate and mortality assumptions to value accrued
benefits under a defined benefit plan: _____________________________
_________________________________________________________ [Note: This
election will require the Advisory Committee to calculate the Plan's
top heavy ratio.]
COORDINATION WITH TOP HEAVY MINIMUM ALLOCATION. The Advisory Committee will
apply the top heavy minimum allocation provisions of Section 3.04(B) of the Plan
with the following modifications: (Choose (e), (f), (g), or (h)
[ ] (e) No modifications.
[ ] (f) By substituting 4% for 3% in Paragraph (b) of Section 3.04(B)(1) or
of Section 3.04(B)(2) of the Plan, whichever applies, but only for any
Plan Year in which Option (d) applies to override the 100% limitation.
[ ] (g) By increasing the top heavy minimum allocation to 5% for any Plan
Year in which the 100% limitation applies, and to 7 1/2% for any Plan
Year in which Option (d) applies to override the 100% limitation. The
increased percentage under this Option (g) applies irrespective of
whether the highest contribution rate for the Plan Year is less than
that increased percentage.
[ ] (h) By eliminating the top heavy minimum allocation. [Note: The
Employer may not select this option (h) if the defined benefit plan
does not guarantee the top heavy minimum benefit under Code ss.416 for
every Participant in this Plan who is a Non-Key Employee.)
If the elections under this Section 3.18 are not appropriate to satisfy the
limitations of Section 3.18, or the top heavy requirements under Code ss.416,
the Employer must provide the appropriate provisions in an addendum to this
Adoption Agreement.
ARTICILE IV
PARTICIPANT CONTRIBUTIONS
4.01 PARTICIPANT NONDPDUCTIBLE CONTRIBUTIONS. The Plan (Choose (a) or
(b))
[X] (a) Does not permit Participant nondeductible contributions.
[ ] (b) Permits Participant nondeductible contributions, pursuant to
Section 14.04 of the Plan.
ALLOCATION DATES. The Advisory Committee will allocate nondeductible
contributions for each Plan Year as of the Accounting Date and the following
additional allocation dates: (Choose (c) or (d))
[ ] (c) No other allocation dates.
[ ] (d) (Specify) _________________________________________________________
________________
As of an allocation date, the Advisory Committee will credit all nondeductible
contributions made for the relevant allocation period. Unless otherwise
specified in (d), a nondeductible contribution relates to an allocation period
only if actually made to the Trust no later than 30 days after that allocation
period ends.
15
<PAGE>
ARTICLE V
TERMINATION OF SERVICE - PARTICPANT VESTING
5.01 NORMAL RETIREMENT. Normal Retirement Age under the Plan is:
(Choose (a) or (b))
[X] (a) 65 [State age, but may not exceed age 65].
[ ] (b) The later of the date the Participant attainsyears of age or
theanniversary of the first day of the Plan Year in which the
Participant commenced participation in the Plan. [The age selected may
not exceed age 65 and the anniversary selected may not exceed the 5th.]
5.02 PARTIGIPANT DEATH OR DISABILITY. The 100% vesting rule under
Section 5.02 of the Plan: (Choose (a) or choose one or both of (b) and (c)
[ ] (a) Does not apply.
[X] (b) Applies to death.
[X] (c) Applies to disability.
5.03 VESTING SCHEDULE.
DEFERRED CONTRIBUTIONS ACCOUNT/QUALIFIED MATCHING CONTRIBUTIONS
ACCOUNT/QUALIFIED NONELECTIVE CONTRIBUTIONS Account. A Participant has a 100%
nonforfeitable interest at all times in his Deferral Contribution Account, his
Qualified Matching Contributions Account and in his Qualified Nonelective
Contributions Account.
REGULAR MATCHING CONTRIBUTIONS ACCOUNT/EMPLOYER CONTRIBUTIONS ACCOUNT. With
respect to a Participant's Regular Matching Contributions Account and Employer
Contributions Account, the Employer elects the following vesting schedule:
(Choose (a) or (b); (c) and (d) are available only as additional options)
[ ] (a) Immediate vesting. 100% Nonforfeitable at all times.
[X] (b) Graduated Vesting Schedules.
Top Heavy Schedule Non Top Heavy Schedule
(Mandatory) (Optional)
Years of Nonforfeitable Years of Nonforfeitable
Service Percentage Service Percentage
------- ---------- ------- ----------
Less than 1.......... 0% Less than 1................ 0%
1............... 0% 1..................... 0%
2............... 20% 2..................... 20%
3............... 40% 3..................... 40%
4............... 60% 4..................... 60%
5............... 80% 5..................... 80%
6 or more....... 100 6..................... 100%
7 or more............. 100%
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<PAGE>
[ ] (c) Special vesting election for Regular Matching Contributions
Account.In lieu of the election under Options (a) or (b), the Employer
elects the following vesting schedule for a Participant's Regular
Matching Contributions Account: (Choose (1) or (2))
[ ] (1) 100 % Nonforfeitable at all times.
[ ] (2) In accordance with the vesting schedule described in the
addendum to this Adoption Agreement. numbered 5.03(c). [Note: If
the Employer elects this Option (c)(Z), the addendum must designate
the applicable vesting schedule(s) using the same format as used in
Option (b).]
[Note: Under Options (b) and (c)(2), the Employer must complete a Top Heavy
Schedule which satisfies Code ss.416. The Employer, at its option, may complete
a Non Top Heavy Schedule only if the Employer elected Adoption Agreement Section
3.04(k). The Non Top Heavy Schedule must satisfy Code ss.411(a)(2). Also see
Section 7.05 of the Plan.]
[X] (d) The Top Heavy Schedule under Option (b) (and, if applicable. under
Option (c)(2)) applies: (Choose (1) or (2))
[ ] (1) Only in a Plan Year for which the Plan is top heavy.
[ ] (2) In the Plan Year for which the Plan first is top heavy and then
in all subsequent Plan Years. [Note: The Employer may nor elect
Option (d) unless it has completed a Non Top Heavy Schedule.]
MINIMUM VESTING. (Choose (e) or (f)
[X] (e) The Plan does not apply a minimum vesting rule.
[ ] (f) A Participant's Nonforfeitable Accrued Benefit will never be less
than the lesser of $ or his entire Accrued Benefit, even if the
application of a graduated vesting schedule under Options (b) or (c)
would result in a smaller Nonforfeitable Accrued Benefit.
5.04 CASH-OUT DISTRIBUTIONS TO PARTIALLY-VESTED
PARTICIPANTS/RESTORATION OF FORFEITED ACCRUED BENEFIT. The deemed cash-out rule
described in Section 5.04(C) of the Plan: (Choose (a) or (b))
[X] (a) Does not apply.
[ ] (b) Will apply to determine the timing of forfeitures for 0% vested
Participants. A Participant is not a 0 % vested Participant if he has a
Deferral Contributions Account.
5.06 YEAR OF SERVICE - VESTING.
Vesting computation period. The Plan measures a Year of Service on the basis of
the following 12 consecutive month periods: (Choose (a) or (b))
[X] (a) Plan Years.
[ ] (b) Employment Years. An Employment Year is the 12 consecutive month
period measured from the Employee's Employment Commencement Date and
each successive 12 consecutive month period measured from each
anniversary of that Employment Commencement Date.
17
<PAGE>
HOURS OF SERVICE. The minimum number of Hours of Service an Employee must
complete during a vesting computation period to receive credit for a Year of
Service is: (Choose (c) or (d))
[X] (c) 1,000 Hours of Service.
[ ] (d) Hours of Service. [Note: The Hours of Service requirement may not
exceed 1,000.]
5.08 INCLUDED YEARS OF SERVICE - VESTING. The Employer specifically
excludes the following Years of Service: (Choose (a) or at least one of (b), (c)
and (d))
[ ] (a) None other than as specified in Section 5.08(a) of the Plan.
[ ] (b) Any Year of Service before the Participant attained the age of
[Note: The age selected may not exceed age 18.)
[ ] (c) Any Year of Service during the period the Employer did not maintain
this Plan or a predecessor plan.
[X] (d) Any Year of Service before a Break in Service if the number of
consecutive Breaks in Service equals or exceeds the greater of 5 or the
aggregate number of the Years of Service prior to the Break. This
exception applies only if the Participant is 0% vested in his Accrued
Benefit derived from Employer contributions at the time he has a Break
in Service. Furthermore, the aggregate number of Years of Service
before a Break in Service do not include any Years of Service not
required to be taken into account under this exception by reason of any
prior Break in Service.
ARTICI.E VI
TIME AND METHOD OF PAYMENTS OF BENEFITS
CODE SS.411(D)(6) PROTECTED BENEFITS. The elections under this Article VI may
not eliminate Code ss.411(d)(6) protected benefits. To the extent the elections
would eliminate a Code ss.411(d)(6) protected benefit, see Section 13.02 of the
Plan. Furthermore, if the elections liberalize the optional forms of benefit
under the Plan, the more liberal options apply on the later of the adoption date
or the effective date of this Adoption Agreement.
6.01 TIME OF PAYMENT OF ACCRUED BENEFIT.
Distribution date. A distribution date under the Plan means THE FIRST DAY OF
EACH MONTH _________________________________________ [Note: The Employer must
specify the appropriate date(s). The specified distribution dates primarily
establish annuity starting dates and the notice and consent periods prescribed
by the Plan. The Plan allows the Trustee ann administratively practicable period
of time to make the actual distribution relating to a particular distribution
date.)
NONFORFEITABLE ACCRUED BENEFIT NOT EXCEEDING $3,500. Subject to the limitations
of Section 6.01(A)(1), the distribution date for distribution of a
Nonforfeitable Accrued Benefit not exceeding $3,500 is: (Choose (a), (b), (c) or
(d))
[ ] (a) ___________________________________________________________________
of the ___________________ Plan Year beginning after the Participant's
Separation from Service.
[X] (b) AS SOON AS ADMINISTRATIVELY FEASIBLE following the Participant's
Separation from Service.
[ ] (c) ___________________________________________________________________
of the Plan Year after the Participant incurs ___ Break(s) in Service
(as defined in Article V).
18
<PAGE>
[ ] (d) __________________________ following the Participant's attainment
of Normal Retirement Age, but not earlier than ________ days following
his Separation from Service.
NONFORFEITABLE ACCRUED BENEFIT EXCEEDS $3,500. See the elections under Section
6.03.
DISABILITY. The distribution date, subject to the limitations of Section
6.01(A)(3), is: (Choose (e) or (f))
[ ] (e)after the Participant terminates employment because of disability.
[X] (f) The same as if the Participant had terminated employment without
disability.
HARDSHIP. (Choose (g) or (h))
[X] (g) The Plan does not permit a hardship distribution to a Participant
who has separated from Service.
[ ] (h) The Plan permits a hardship distribution to a Participant who has
separated from Service in accordance with the hardship distribution
policy stated in: (Choose (1) or (2))
[ ] (1) Section 6.01(A)(4) of the Plan.
[ ] (2) Section 14.11 of the Plan.
DEFAULT ON A LOAN. If a Participant or Beneficiary defaults on a loan made
pursuant to a loan policy adopted by the Advisory Committee pursuant to Section
9.04, the Plan: (Choose (i) or (j))
[X] (i) Treats the default as a distributable event. The Trustee, at the
time of the default, will reduce the Participant's Nonforfeitable
Accrued Benefit by the lesser of the amount in default (plus accrued
interest) or the Plan's security interest in that Nonforfeitable
Accrued Benefit. To the extent the loan is attributable to the
Participant's Deferral Contributions Account, Qualified Matching
Contributions Account, or Qualified Nonelective Contributions Account,
the Trustee will not reduce the Participant's Nonforfeitable Accrued
Benefit unless thc Participant has separated from Service or unless the
Participant has attained age 59 1/2.
[ ] (j) Does not treat the default as a distributable event. When an
otherwise distributable event first occurs pursuant to Section 6.01 or
Section 6.03 of the Plan, the Trustee will reduce the Participant's
Nonforfeitable Accrued Benefit by the lesser of the amount in default
(plus accrued interest) or the Plan's security interest in that
Nonforfeitable Accrued Benefit.
6.02 METHOD OF PAYMENT OF ACCRUED BENEFIT. The Advisory Committee will
apply Section 6.02 of the Plan with the following modifications: (Choose (a) or
(b))
[X] (a) No modifications.
[ ] (b) The Plan permits the following annuity options: ___________________
_______________________________________________________________________
Any Participant who elects a life annuity option is subject to the
requirements of Sections 6.04(A), (B), (C) and (D) of the Plan. See
Section 6.04(E). [Note: The Employer may specify additional annuity
options in an addendum to this Adoption Agreement, numbered 6.02(b).]
19
<PAGE>
6.03 BENEFIT PAYMENT ELECTIONS.
PARTICIPANT ELECTIONS AFTER SEPARATION FROM SERVICE. A Participant who is
eligible to make distribution elections under Section 6.03 of the Plan may elect
to commence distribution of his Nonforfeitable Accrued Benefit: (Choose (a) or
(b))
[ ] (a) As of any distribution date, but not earlier thanof the Plan Year
beginning after the Participant's Separation from Service.
[X] (b) As of the following date(s): (Choose at least one of Options (1)
through (5))
[ ] (1) As of any distribution date after the close of the Plan Year in
which the Participant attains Normal Retirement Age.
[X] (2) Any distribution date following his Separation from Service.
[ ] (3) Any distribution date in thePlan Year(s) beginning after his
Separation from Service.
[ ] (4) Any distribution date in the Plan Year after the Participant
incurs Break(s) in Service (as defined in Article V).
[ ] (5) Any distribution date following attainment of age and
completion of at leastYears of Service (as defined in Article V).
The distribution: events described in the election(s) made under
Options (a) or (b) apply equally to all Accounts maintained for the Participant.
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - REGULAR MATCHING
CONTRIBUTIONS ACCOUNT AND EMPLOYER CONTRIBUTIONS ACCOUNT. Subject to the
restrictions of Article VI, the following distribution options apply to a
Participant's Regular Matching Contributions Account and Employer Contributions
Account prior to his Separation from Service: (Choose (c) or at least one of (d)
through (f)
[ ] (c) No distribution options prior to Separation from Service.
[X] (d) Attainment of Specified Age. Until he retires, the Participant has
a continuing election to receive all or any portion of his
Nonforfeitable interest in these Accounts after he attains: (Choose (1)
or (2))
[X] (1) Normal Retirement Age.
[ ] (2) years of age and is at least % vested in these Accounts. [Note:
If the percentage is less than 100%, see the special vesting
formula in Section 5.03.]
[ ] (e) After a Participant has participated in the Plan for a period of
not less than years and he is 100 % vested in these Accounts, until he
retires, the Participant has a continuing election to receive all or
any portion of the Accounts. [Note: The number in the blank space may
not be less than 5.]
[X] (f) Hardship. A Participant may elect a hardship distribution prior to
his Separation from Service in accordance with the hardship
distribution policy: (Choose (1) or (2); (3) is available only in
addirion to (1) or (2))
[ ] (1) Under Section 6.01(A)(4) of the Plan.
20
<PAGE>
[X] (2) Under Section 14.11 of the Plan.
[ ] (3) In no event may a Participant receive a hardship distribution
before he is at least % vested in these Accounts. [Note: If the
percentage in the blank is less than 100%, see the special vesting
formula in Section 5.03.]
PARTICIPANT ELECTIONS PRIOR TO SEPARATION FROM SERVICE - DEFERRAL CONTRIBUTIONS
ACCOUNT, QUALIFIED MATCHING CONTRIBUTIONS ACCOUNT AND QUALIFIED NONELECTIVE
CONTRIBUTIONS ACCOUNT. Subject to the restrictions of Article VI, the following
distribution options apply to a Participant's Deferral Contributions Account,
Qualified Matching Contributions Account and Qualified Nonelective Contributions
Account prior to his Separation from Service: (Choose (g) or at least one of (h)
or (i)
[ ] (g) No distribution options prior to Separation from Service.
[X] (h) Until he retires, the participant has a continuing election to
receivc all or any portion of these Accounts after he attains: (Choose
(1) or (2))
[X] (1) The later of Normal Retirement Age or age 59 1/2.
[ ] (2) Age (at least 59 1/2).
[X] (i) Hardship. A Participant, prior to this Separation from Service, may
elect a hardship distribution in accordance with the hardship
distribution policy under Section 14.11 of the Plan.
SALE OF TRADE OR BUSINESS/SUBSIDIARY. If the Employer sells substantially all of
the assets (within the meaning of code ss.409(d)(2) used in a trade or business
or sells a subsidiary (within the meaning of Code ss.409(d)(3)), a Participant
who continues employment with the acquiring corporation is eligible for
distribution from his Deferral Contributions Account, Qualified Matching
Contributions Account and Qualified Nonelective Contributions Account:
(Choose (j) or (k)).
[X] (j) Only as described in this Adoption Agreement Section 6.03 for
distributions prior to Separation from Service.
[ ] (k) As if he has a Separation from Service. After March 31, 1988, a
distribution authorized solely by reason of this option (k) must
constitute a lump sum distribution, determined in a manner consistent
with Code ss.401(k)(10) and the applicable Treasury regulations.
6.04 ANNUITY DISTRIBUTIONS TO PARTICIPANTS AND SURVIVING SPOUSES. The
annuity distribution requirements of Section 6.04: (Choose (a) or (b).
[X] (a) Apply only to a Participant described in Section 6.04(E) of the
Plan (relating to the profit sharing exception to the joint and
survivor requirements).
[ ] (b) Apply to all Participants.
ARTICLE IX
ADVISORY COMMITTEE - DUTIES WITH RESPECT TO PARTICTPANTS' ACCOUNTS
9.10 VALUE OF PARTICIPANT'S ACCRUED BENEFITS. If a distribution (other
than a distribution from a segregated Account and other than a corrective
distribution described in Sections 14.07, 14.08, 14.09 or 14.10 of the Plan)
occurs more than 90 days after the most recent valuation date, the distribution
will include interest at: (Choose (a) or (b))
[X] (a) 0% per annum. (Note: The percentage may equal 0.)
21
<PAGE>
[ ] (b) The 90 day Treasury bill rate in effect at the beginning of the
current valuation period.
9.11 ALLOCATION AND DISTRIBUTRION OF NET INCOME GAIN OR LOSS. Pursuant
to Section 14.12, to determine the allocation of net income, gain or loss:
(Choose only those items, if any_ which are applicable to the Employer's Plan)
[X] (a) For salary reduction contributions, the Advisory Committee will:
(Choose (1), (2), (3) or (4))
[ ] (1) Apply Section 9.11 without modification
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section l4.12,
based on a weighing period.
[X] (4) Treat as part of the relevant Account at the beginning of the
valuation period 100% of the salary reduction contributions:
(Choose (i) or (ii)).
[X] (i) made during that valuation period.
[ ] (ii) made by the Following specified time
[X] (b) For matching contributions, the Advisory Committee will: (Choose
(1). (2) or (3))
[ ] (1) Apply Section 9.11 without modification
[ ] (2) Use the weighted average method described in Section 14.12,
based on a weighting period.
[X] (3) Treat as part of the relevant Account at the beginning of the
valuation period 1OO% of the matching contributions allocated
during the valuation period.
[ ] (c) For Participant nondeductible contributions, the Advisory Committee
will: (Choose (1), (2), (3) or (4))
[ ] (1) Apply Section 9.11 without modification.
[ ] (2) Use the segregated account approach described in Section 14.12.
[ ] (3) Use the weighted average method described in Section 14.12,
based on a weighting period.
[ ] (4) Treat as part of the relevant Account at the beginning of the
valuation period % of the Participant nondeductible contributions:
(Choose (i) or (ii))
[ ] (i) made during that valuation period.
[ ] (ii) made by the following specified time: ____________________
_____.
22
<PAGE>
ARTICLE X
TRUSTEE AND CUSTODIAN, POWERS AND DUTIES
10.14 VALUATION OF TRUST. In addition to each Accounting Date, the Trustee must
value the Trust Fund on the following valuation date(s): (CHOOSE (A) OR (B))
[ ] (a) No other mandatory valuation dates.
[X] (b) (SPECIFY) EVERY BUSINESS DAY THE FINANCIAL MARKETS ARE OPEN AND
AVAILABLE FUNDS ARE DEPOSITEED WITH THE TRUSTEE.
23
<PAGE>
EFFECTIVEDATE ADDENDUM
(RESTATED PLANS ONLY)
The Employer must complete this addendum only if the restated Effective Date
specified in Adoption Agreement Section 1.18 is different than the restated
effective date for at least one of the provisions listed in this addendum. In
lieu of the restated Effective Date in Adoption Agreement Section 1.18, the
following special effective dates apply: (CHOOSE WHICHEVER ELECTIONS APPLY)
[ ] (a) COMPENSATION DEFINITION. The Compensation definition of Section
1.12 (other than the $200,000 limitation) is effective for Plan Years
beginning after _____________. [NOTE: MAY NOT BE EFFECTIVE LATER THAN
THE FIRST DAY OF THE FIRST PLAN YEAR BEGINNING AFTER THE EMPLOYER
EXECUTES THIS ADOPTION AGREEMENT TO RESTATE THE PLAN FOR THE TAX REFORM
ACT OF 1986, IF APPLICABLE.)
[X] (b) ELIGIBILITY CONDITIONS. The eligibility conditions specified in
Adoption Agreement Section 2.01 are effective for Plan Years beginning
after DECEMBER 31, 1997.
[ ] (c) SUSPENSION OF YEARS OF SERVICE. The suspension of Years of Service
rule elected under Adoption Agreement Section 2.03 is effective for
Plan Years beginning after ____________________.
[X] (d) CONTRIBUTION/ALLOCATION FORMULA. The contribution formula elected
under Adoption Agreement Section 3.O1 and the method of allocation
elected under Adoption Agreement Section 3.04 is effective for Plan
Years beginning after DECEMBER 31, 1997.
[ ] (e) ACCRUAL REQUIREMENTS. The accrual requirements of Section 3.06 are
effective for Plan Years beginning after _____________. [NOTE: IF THE
EFFECTIVE DATE IS LATER THAN PLAN YEAR'S BEGINNING AFTER DECEMBER 31,
1989, THE ACCRUAL REQUIREMENTS IN THE PLAN PRIOR TO ITS RESTATEMENT MAY
NOT BE MORE RESTRICTIVE FOR POST-1989 PLAN YEARS THAN THE REQUIREMENTS
PERMITTED UNDER ADOPTION AGREEMENT SECTION 3.06.)
[ ] (f) ELIMINATION OF NET PROFITS. The requirement for the Employer not to
have net profits to contribute to this Plan is effective for Plan Years
beginning after ________________. [NOTE: THE DATE SPECIFIED MAY NOT BE
EARLIER THAN DECEMBER 31, 1985.]
[ ] (g) VESTING SCHEDULE. The vesting schedule elected under Adoption
Agreement Section 5.03 is effective for Plan Years beginning after
_________________.
[X] (h) ALLOCATION OF EARNINGS. The special allocation provisions elected
under Adoption Agreement Section 9.11 are effective for Plan Years
beginning after DECEMBER 31. 1997.
For Plan Years prior to the special Effective Date, the terms of the
Plan prior to its restatement under this Adoption Agreement will control for
purposes of the designated provisions. A special Effective Date may not result
in the delay of a Plan provision beyond the permissible Effective Date under any
applicable law requirements.
24
<PAGE>
EXECUTION PAGE
The Trustee (and Custodian, if applicable), by executing this Adoption
Agreement, accepts position and agrees to all of the obligations,
responsibilities and duties imposed upon the Trustee (or Custodian) under the
Master Plan and Trust. The Employer hereby agrees to the provisions of this Plan
and Trust, and in witness of its agreement, the Employer by its duly authorized
officers, has executed this Adoption Agreement, and the Trustee (and Custodian,
if applicable) signified its acceptance, on this 25 TH day of MARCH , 1998.
Name and EIN of Employer: ATS MONEY SYSTEMS, INC. 13-3442314
Signed: /s/ GERARD F. MURPHY
----------------------------------------------------
Gerard F. Murrphy, President & CEO
Name(s) of Trustee: FIRST UNION NATIONAL BANK
Signed: /s/ ROY E. WILLIAMS, JR.
----------------------------------------------------
Roy E. Williams, Jr., Group Vice President
Name of Custodian:__________________________________________
Signed:_____________________________________________________
[NOTE: A TRUSTEE IS MANDATORY, BUT A CUSTODIAN IS OPTIONAL. SEE SECTION 10.03 OF
THE PLAN.]
Plan Number. The 3-digit plan number the Employer assigns to this Plan for ERISA
reporting purposes (Form 5500 Series) is: 001.
USE OF ADOPTION AGREEMENT. Failure to complete properly the elections in this
Adoption Agreement may result in disqualification of the Employer's Plan. The
3-digit number assigned to this Adoption Agreement (see page 1) is solely for
the Master Plan Sponsor's record keeping purposes and does not necessarily
correspond to the plan number the Employer designated in the prior paragraph.
The Master Plan Sponsor offers the following Paired Pension Plan(s) with this
Paired Profit Sharing Plan, identified by 3-digit adoption agreement number:
___.
MASTER PLAN SPONSOR. The Master Plan Sponsor identified an the first page of the
basic plan document will notify all adopting employers of any amendment of this
Master Plan or of any abandonment or discontinuance by the Master Plan Sponsor
of its maintenance of this Master Plan. For inquiries regarding the adoption of
the Master Plan, the Master Plan Sponsor's intended meaning of any plan
provisions or the effect of the opinion letter issued to the Master Plan
Sponsor, please contact thc Master Plan Sponsor at the following address and
telephone number: 1200 TWO FIRST UNION CENTER, T-2 CHARLOTTE, NC 8288-1156 (704)
374-008.
RELIANCE ON OPINION LETTER. If the Employer does not maintain (and has never
maintained) any other Plan other than this Plan and a Paired Pension Plan, it
may rely on the Master Plan Sponsor's opinion letter covering this Plan for
purposes of plan qualification. For this purpose, the Employer has not
maintained another plan if this Plan, or the Paired Pension Plan, amended and
restated that prior plan and the prior plan was the same type of plan as the
restated plan. If the Employer maintains or has maintained another plan other
than a Paired Pension Plan, including a welfare benefit fund, as defined in Code
ss.419(e), which provides post-retirement medical benefits for key employees (as
defined in Code ss.419A(d)(3)), or an individual medical account (as defined in
Code ss.415(1)(2)), the Employer may not rely on this Plan's qualified status
unless it obtains a determination letter from the applicable IRS Key District
office.
25
<PAGE>
APPENDIX B TO GENERAL INSTRUCTIONS
CHECKLIST OF EMPLOYER ADMINISTRATIVE ELECTIONS
The Prototype Plan permits the adopting employer (or the advisory committee) to
make certain administrative elections not reflected in the adoption agreement.
This form lists those administrative elections and provides a means of recording
your decision.
1. Section 1.09 - Definition of highly compensated employee. The plan
permits the employer to make a calendar year election for purposes of
identifying highly compensated employees.
[X] The plan will use the calendar year election.
[ ] The plan will not use the calendar year election.
2. Section 1.12(B) - Nondiscriminationdefinition of compensation. When
testing discrimination under the plan, the plan permits the employer to
elect to "gross up" an employees compensation by the amount of his
elective contributions for the year.
[X] The plan will "gross up" compensation for elective contributions.
[ ] The plan will exclude elective contributions.
[NOTE: This election solely is for purposes of testing discrimination.
The election does not affect the employer's election under Option (a)
or (b) of Adoption Agreement Section 1.12. The elections under Adoption
Agreement Section 1.12 apply to the definition of compensation for
purposes of making allocations of employer contributions and
participant forfeitures.]
3. Section 4.03. Rollover contributions.
[X] The plan accepts rollover contributions.
[ ] The plan does not accept rollover contributions.
4. Section 7.04. If your plan has a discretionary trustee, Section 7.04
authorizes the employer to enter into a written agreement with the
trustee permitting the employer to direct investments. Legal counsel
should assist you in this arrangement.
5. Section 8.10. If the trustee agrees, the plan authorizes participant
direction of investment. The adopting employer, the advisory committee
and the trustee should agree to the conditions and limitations of
participant direction of investment. Legal counsel should assist you
with this election.
[X] The plan will permit participant direction of investment.
[ ] The plan will not permit participant direction of investment.
6. Section 9.04. The plan authorizes the advisory committee to adopt a
written loan policy to permit participant loans.
[X] The plan will permit participant loans.
[ ] The plan will not permit participant loans.
7. Section 11.01. The plan may invest in life insurance on behalf of a
participant's account, subject to participant consent.
[ ] The plan will invest in life insurance contracts.
[X] The plan will not invest in life insurance contracts.
***************
Exhibit 10.a(iv)
OFFICE OF THE UNDERSIGNED
October 12, 1998
Mr. Eric I. Wekilsky
ATS Money Systems
25 Rockwood Place
Englewood, NJ 07631
Re: Fourth Amendment of Lease
Premises: 25 Rockwood Place
Englewood, New Jersey
Dear Mr. Wekilsky:
Enclosed for your file is one (1) fully executed original Fourth Amendment of
Lease and Letter Agreement dated August 12, 1998 for the above-captioned
premises.
If you have any questions, please feel free to contact me.
Very truly yours,
ROCKWOOD PROPERTY HOLDING, LLC
By: Rockwood Holding Corp.,
Its Managing Member
By:
--------------------------------
Joel Zbar
Chief Financial Officer
JZ:dm
Encs.
72 ESSEX STREET SUITE ONE LODI, NJ 07644 (201) 368-9300 FAX: (201) 368-9069
<PAGE>
FOURTH AMENDMENT OF LEASE
DATE: as of June 26, 1998
LESSOR: Rockwood Property Holding LLC
a New Jersey limited liability company
LESSEE: ATS Money Systems, Inc.
a Nevada corporation
ADDRESS OF LESSEE: 25 Rockwood Place
Englewood, New Jersey
LEASE DATE: November 30, 1989
DATE OF PRIOR
AMENDMENTS: November 30, 1989; December 1, 1992; September 15, 1995
Lessor and Lessee, being bound unto a lease, dated the Lease Date, for
a portion of the Building (as amended, the "Lease"), (all words and terms used
in this Amendment and not otherwise defined shall have the respective meanings
ascribed to them under the Lease), hereby agree to further modify and amend the
Lease in the following manner:
1. Demised Premises or Premises. This Fourth Amendment of Lease shall
become effective on the date stipulated by written notice to Lessee from Lessor
indicating that Lessor's work is substantially completed on the Second Expansion
Space (defined below) (the "Effective Date"). Lessor's Work shall be deemed
substantially completed if any of the completion of Lessor's Work will not
unreasonably interfere with Lessee's business and notwithstanding that minor
punch list items remain to be completed after delivery of the Demised Premises.
Lessor shall have fifteen (15) days to complete the minor punch list items.
Paragraph (7) of the Preamble to the Lease is modified to provide that the
Demised Premises shall be increased by approximately 2,160 gross rentable square
feet of additional space on the third (3rd) floor of the Building (the "Second
Expansion Space"), as shown on Exhibit A annexed hereto and made a part hereof,
and the Demised Premises shall be approximately 10,5 10 gross rentable square
feet on the third (3rd) floor of the Building, which size is stipulated and
agreed to by the parties.
2. Lessor's Work. Lessor agrees, that at Lessor's expense, it will
substantially complete all of the work in accordance with Exhibit B, annexed
hereto and made a part hereof ("Lessor's Work"). Except as set forth in Exhibit
B, Lessor shall have no obligation to perform any other work to the Demised
Premises. As to Lessor's Work in the existing space, if Lessor fails to
substantially complete Lessor's Work within 60 days of the Effective Date
(provided Lessee does not interfere in completion of Lessor's Work, as noted
below), Lessee shall receive a rent credit of $2,261.46 per month until Lessor's
Work in the existing space is substantially completed. Lessee shall give Lessor
full access to the existing space weekdays from 6:00 p.m. to 7:00 a.m. and at
all times on weekends. If Lessee reduces the scope of Lessor's Work, including
overhead profit and architectural fees pursuant to Exhibit "B", Lessee will be
entitled to a rent credit based on the unit cost of such decrease in the scope
of work in an amount not to exceed $25,000.00. If Lessee increases scope of work
all additional expenses shall be at Lessee's expense.
3. Term. The Term of the Lease is hereby extended for an additional
period of five (5) years. The Termination Date shall now be February 28, 2004.
Such extension shall be upon the same terms, conditions and provisions, except
as expressly modified hereby. The Term of the Lease (defined in Paragraph (15)
of the Preamble to the Lease) and the Termination Date of the Lease (defined in
Paragraph (16) of the Preamble to the Lease) shall be deemed to have been
adjusted accordingly.
<PAGE>
4. Option to Renew. All references to options to renew the Lease
wherever provided in the Lease or prior amendments are hereby deleted in its
entirety and the following substituted therefor. Lessee shall have the right to
extend the term of the Lease for one additional five (5) year period on the
following terms and conditions:
(a) On or before nine (9) months prior to the Expiration Date of the
Lease, Lessee shall provide written notice of its intent to extend the Lease for
an additional five-year term "Renewal Period").
(b) Provided Lessee is not in default of the Lease, the Lease shall be
extended for five years ending on the fifth anniversary of the Expiration Date
("Renewal Expiration Date") with all terms and conditions remaining the same
except the Fixed Rent for the entire renewal term shall be the greater of
either:
(i) 110% per year of the then current Fixed Rent for the last
lease year preceding the Expiration Date; or
(ii) Fair Market Rental Value, as defined below ("Renewal Fixed
Rent").
(c) "Fair Market Rental Value" shall deemed to be the fair market value
of the Premises on the Expiration Date. Fair Market Rental Value shall be
determined by the following procedure:
(i) Lessor and Lessee shall attempt to mutually determine Fair
Market Rental Value within thirty (30) days of Lessee's
notice.
(ii) If the parties cannot mutually agree as to Fair Market Rental
Value within said thirty (30) days, then each shall designate
a disinterested appraiser of recognized competence for the
rentals of space similar to the Demised Premises (for similar
uses) in office buildings comparable to the building ("Initial
Appraisers").
The Initial Appraisers shall attempt to agree upon the Fair Market
Rental Value for the Renewal Period and any such agreed Fair Market Rental Value
shall be conclusive for purposes hereof. If either Lessor or Lessee fails to
designate an appraiser, the determination of the Fair Market Rental Value by the
appraiser designated by the other party shall be conclusive for purposes hereof.
If the Initial Appraisers cannot so agree within thirty (30) days after their
appointment, they shall designate another such disinterested appraiser
("Additional Appraiser") and the Additional Appraiser's determination of the
Fair Market Rental Value shall be conclusive on both Lessor and Lessee.
Upon determination of the Fair Market Rental Value, the parties shall
then enter into a modification of this Lease incorporating the terms of the
Renewal. The form and content of such modification of Lease shall be reasonably
acceptable to both parties.
5. RIGHT OF FIRST REFUSAL TO LEASE ADDITIONAL SPACE. Lessor and Lessee
hereby desire to reaffirm Paragraph 55 of the Lease except that the definition
of Vacant Space is hereby modified to be only that space contiguous to the
Demised Premises on the third (3rd) floor. The rights to lease any Vacant Space
remains specifically contingent on any prior rights of any other tenants prior
to the date hereof.
6. LESSEE'S PERCENTAGE. Commencing the Effective Date, Paragraph (10)
of the Preamble to the Lease is modified to provide that the Lessee's Percentage
shall be 11.9%, which percentage is stipulated and agreed to by the parties
hereto, and shall not be subject to adjustment as provided in Paragraph 42 (E)
of the Lease.
7. BASE PERIOD COSTS. Commencing the Effective Date, Paragraph (2) of
the Preamble to the Lease shall be modified to provide that Base Period Costs
shall mean as to the following:
(A) BASE OPERATING COSTS: Those costs incurred during Calendar
Year 1997.
(B) BASE REAL ESTATE TAXES: Those Real Estate Taxes determined by
multiplying the average tax rate in effect for Calendar Year
1997 multiplied by the assessment for the Building Area and
Building.
<PAGE>
(C) BASE UTILITY AND ENERGY COSTS: Those costs determined by
multiplying the usage incurred for the Building and Building
Area during Calendar Year 1997 by the rate in effect
(including surcharges and/or adjustments) during January 1997
(herein "Base Utility Rate").
8. FIXED BASIC RENT. Commencing the Effective Date, Paragraph (9) of
the Preamble to the Lease is hereby modified to provide that the Fixed Basic
Rent shall be payable as follows:
YEARLY RATE MONTHLY RATE PERIOD
----------- ------------ ------
$239,102.50 $19,925.21 Effective Date - 12/31/00
249,612.50 20,801.04 1/1/O1 - 2/28/04
9. SECURITY DEPOSIT. Upon execution of this Fourth Amendment of Lease,
Lessee will pay to Lessor an additional Security Deposit of $24,100.42 for a
total Security Deposit of $39,850.42. The Security Deposit (defined in Paragraph
(14) of the Preamble to the Lease) shall be deemed to have been adjusted
accordingly.
10. RIGHT TO TERMINATE. In the event the Lessor cannot deliver the
Second Expansion Space to Lessee with the Lessor' Work substantially completed
by February 28, 1999, Lessee shall be entitled to give Lessor written notice
that it will not accept the Second Expansion Space. Lessee must give the
required notice to Lessor on or before the close of business on March 5, 1999.
If Lessee timely exercises its right not to accept the Second Expansion Space,
the Lease will automatically renew for a period of five (5) years with all terms
and conditions remaining the same except the rental amounts will be as follows:
YEARLY RATE MONTHLY RATE PERIOD
----------- ------------ ------
$189,962.50 $15,830.21 3/1/99 - 12/31/00
198,312.50 16,526.04 1/1/O1 - 2/28/04
Lessor will complete Lessor's Work pursuant to Exhibit B attached
hereto for the existing space only.
However, if Lessor is unable to deliver the Second Expansion Space by
February 28, 1999, and if Lessee gives written notice to terminate the Lease to
Lessor by March I5, 1999, the Lease Termination Date shall be August 31, 1999
and Lessee shall vacate the Demised Premises pursuant to the terms of the Lease.
In that event, Lessor shall not be obligated to perform any of Lessor's Work
pursuant to Exhibit B attached hereto.
11. PARKING SPACES. Parking spaces shall mean a total of thirty-eight
(42) spaces, assigned and unassigned (paragraph (12) of the Preamble to the
Lease is modified accordingly):
(A) Assigned: Eleven (11)
(B) Unassigned: Twenty-seven (31).
12. BROKERAGE COMMISSION. It is agreed by the parties hereto that all
brokerage commission, due in connection with the Fourth Amendment of Lease,
shall be paid by Lessor.
13. INTERPRETATION. In the event of any inconsistencies between this
Fourth Amendment of Lease and the Lease, this Amendment of Lease shall govern
and be binding. All words and terms used in this Amendment and not otherwise
defined shall have the respective meanings ascribed to them under the Lease.
This Amendment was drafted by Lessor as a matter of convenience and it shall not
be construed for or against either party on that account. To the extent that the
context requires it, the Lease and prior amendments are hereby deemed modified
by the terms of this Amendment.
14. RATIFICATION OF LEASE. Except as expressly modified and amended in
this Fourth Amendment of Lease, all of the terms, provisions and conditions of
the Lease are hereby ratified and confirmed by Lessor and Lessee.
15. BINDING EFFECT. This Fourth Amendment of Lease shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives, successors and permitted assigns.
<PAGE>
IN WITNESS WHEREOF, the parties have set their hands and seals the date above
first written.
WITNESS : ROCKWOOD PROPERTY HOLDING, LLC
By: Rockwood Holding Corp.,
its Managing Member
By:
- --------------------------- --------------------------------
Jeffery E. Cole, President
ATTEST: ATS MONEY SYSTEMS, INC.
By:
- --------------------------- --------------------------------
Name:
Title:
<PAGE>
STERLING MANAGEMENT
72 ESSEX STREET
LODI, NJ 07644
LANDLORDS WORK
EXHIBIT B
PAGE 1 OF 1
Landlord shall:
Landlord shall provide turn-key installation using enclosed space plan.
1) Landlord to construct space according to using building standard
materials and finishes as per Dahn & Krieger sketch dated 3-4-98 SK1*. Landlord
will not prepare construction drawings until it has received written notice from
Tenant to do so.
2) Landlord to paint and carpet using building standard materials in
existing and expansion space.
3) Landlord to install five (5) power poles as per attached sketch.
4) Landlord to install electrical outlets as per a mutually agreeable
space plan in the expansion & existing space.
4) Landlord to replace any damaged ceiling tiles in existing and
expansion space.
5) Landlord to balance building HVAC system after Landlord's work is
complete and following Landlord's repair to existing 3rd floor HVAC system.
* As Modified by the sketch attached to exhibit B
Notwithstanding anything contained herein or in the Lease Agreement to
the contrary, landlord shall have no obligation to perform any work for Tenant
in connection with the preparation of the space for the Tenant's occupancy other
than as is specifically set forth above.
6) 2 cabinets in software development to be relocated to conference
room as stated on sketch 3-4-98 SK1
<PAGE>
OFFICE OF THE UNDERSIGNED
August 12, 1998
Mr. Gerry Murphy
ATS Money Systems, Inc.
Rockwood Four Office Center
25 Rockwood Place Englewood, NJ 07631
Re: Fourth Amendment of Lease between
Rockwood Property Holding, LLC ("Lessor") and
ATS Money Systems, Inc. ("Lessee")
Dear Mr. Murphy:
Pursuant to the Fourth Amendment of Lease dated as of June 26, 1998
("Amendment"), Lessee agrees to pay to Lessor $5,000.00 upon commencement of
work contemplated herein as Lessee's contribution to the cost of Lessor's Work.
The attached Exhibit "B" is made part of the Exhibit "B" attached to the
Amendment. Lessee further agrees if Lessee increases the scope of Lessor's Work
beyond the revised Exhibit "B", all additional expenses shall be at Lessee's
expense.
Very truly yours,
ROCKWOOD PROPERTY HOLDING, LLC
By: Rockwood Holding Corp.,
its Managing Member
By:
--------------------------------
Joel Zbar
Chief Financial Officer
Agreed and Accepted this 25th day of
August, 1998
ATS Money Systems, Inc.
By:
--------------------------------
Name: Gerry Murphy
Title: President/CEO
72 ESSEX STREET SUITE ONE LODI, NJ 07644 (201) 368-9300 FAX: (201) 368-9069
Exhibit 10.n
BOLLINGER/WELLS
230 Park Avenue
New York, New York 10169
(212) 697-7174
Bollinger, Wells, Lett & Co., Inc. Fax: (212) 972-1039
================================================================================
Mr. Gerald F. Murphy, 25 Rockwood Place, Englewood, New Jersey 07631, on behalf
of ATS Money Systems, Inc. ("ATS"), and Alan K. Wells, 230 Park Avenue, New
York, New York 10169, on behalf of Bollinger, Wells, Lett & Co., Inc. ("BWL"),
have agreed as follows:
1. That BWL will begin an active search for a merger, acquisition, or
recapitalization opportunity for ATS, and BWL is authorized to represent ATS and
to make inquiries of strategic targets in its behalf.
2. BWL will bear its own expenses in this connection and will use its best
judgment and effort in selecting and contacting the best strategic targets.
3. BWL will be authorized to actively represent ATS from the date of this
Agreement until it is terminated by either party, at any time via registered
mail, or until a business combination involving ATS has been completed.
4. The transaction ("COMBINATION") may be a merger, acquisition, purchase or
sale of stock, purchase or sale of assets, reorganization, recapitalization or
any form of business combination.
5. Nothing in this Agreement will be construed as prohibiting ATS from refusing
any COMBINATION offered by BWL at any price.
6. Upon the successful completion of a COMBINATION during the term of this
Agreement and the subsequent period as provided for in paragraph 7 below, BWL
will be paid at closing by ATS a cash fee equal to a percentage of the total
consideration received by ATS in the COMBINATION as follows:
4% of the first $5 million of transaction value, plus
3% of the next $5 million of transaction value, plus
2% of all transaction value in excess of $ 10 million.
Total transaction value includes, but is not limited to, contingency pay-outs;
assumption of liabilities; retention of cash, purchase/sale of related real
estate; equity in any new company to be formed as part of the transaction; any
payments made to officers/directors for consultation, non-compete convenants,
services, and/or incentive payments above current levels; and/or any other
economic benefits received by the officers/shareholders of strategic target in
the COMBINATION.
In the event a COMBINATION occurs between ATS and IVI Corporation or Percell
Group PLC, BWL will be paid a cash fee of $50,000 at the Closing of such
transaction.
7. BWL will be ATS's exclusive representative during the term of this Agreement
and will be entitled to a fee, payable in cash as determined above, resulting
from any COMBINATION (whether or not resulting from BWL's efforts) completed
within 18 months after its expiration with an acquirer that was introduced by
BWL or met with ATS during the term of this Agreement and prior to its
termination.
8. This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York as applied to contracts made and fully performed
there.
Accepted and Agreed to:
For ATS MONEY SYSTEMS, INC. BOLLINGER, WELLS, LETT & CO., INC.
By By
----------------------------------------- ----------------------------------
Gerald F. Murphy Date Allen K. Wells Date
Its President & Chief Executive Officer
Exhibit 10.o
AGREEMENT dated as of December 10, 1998 between VOLUMATIC LTD. Taurus
House, Endemere Road, Coventry CV6 5PY, England (hereinafter "Volumatic") and
ATS MONEY SYSTEMS INC., 25 Rockwood Place, Englewood, New Jersey 07631
(hereinafter "ATS").
WHEREAS, ATS and Volumatic entered into a Distributor Agreement dated
as of October 29, 1996, pursuant to which ATS was appointed the exclusive
distributor in the U.S. of Omal Products (as defined in Section 3 below); and
WHEREAS, ATS and Volumatic desire to continue the relationship in
accordance with the terms and conditions set forth in this Agreement.
In consideration of the foregoing, the mutual covenants and obligations
set forth herein and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged, the parties hereto agree as follows:
1. PURPOSE. The purpose of this Agreement is to set forth the
respective obligations and responsibilities of ATS and Volumatic in continuing
their sales and marketing arrangement.
2. TERM. This Agreement, unless sooner terminated as provided for
herein, shall be for a term of five (5) years, commencing as of January 1, 1998.
The Agreement shall automatically renew for successive periods of one (1) year
each, unless either party gives notice of termination to the other at least six
(6) months prior to the expiration of the then current term. Upon termination of
this Agreement, as provided for herein, the Six-Month Restrictive Period
referred to in Section 7.2.F. below shall apply.
3. PRODUCTS. The Volumatic products covered by this Agreement are
as follows ("OMAL Products"):
3.1 All Volumatic electronic scales equipped with a computer
interface that can be utilized for counting coin and currency including, but not
limited to, the OMAL MONEYTRONIC 2600;
3.2 Omal Load Cell with standard PC analog to Digital
conversion card; and
3.3 Any other Volumatic products agreed to in writing between
the parties.
4. APPOINTMENT.
4.1 APPOINTMENT OF ATS. Subject to the provisions of this
Agreement, Volumatic hereby re-appoints ATS, and ATS accepts re-appointment, as
the exclusive U.S. distributor for the OMAL Products.
4.2 END USER AND DEALER SALES. The re-appointment of ATS as a
distributor shall be inclusive of direct sales to end users and sales to dealers
and/or VARs selected by ATS.
5. PRICING, SHIPMENT, DELIVERY AND RISK OF LOSS. The selling
price to ATS for OMAL Products, as set forth on Schedule A, shall be valid
through December 31, 1998. Thereafter, for calendar years subsequent to 1998,
Volumatic shall be entitled to increase the selling price each year by a
percentage equal to the average of (i) the percentage increase in the published
retail inflation in the UK for the prior year; and (ii) the percentage increase
in the Consumer Price Index (U.S. City Average) - All Items for the prior year,
but in no event shall the increase for any year be more than 2% over the selling
price for the prior year. If an index is not available or becomes obsolete, a
comparable index or its generally recognized successor index shall be used. In
no event shall the selling prices of OMAL Products to ATS be higher than the
most favorable selling prices extended to any other Volumatic distributor. In
addition, for larger sales or if special circumstances exist, Volumatic will
consider granting ATS a discount.
6. ATS SALE OF OMAL PRODUCTS AND PAYMENT TERMS.
6.1 ATS SALE OF OMAL PRODUCTS. ATS will use its best efforts
to actively promote the sale of Omal Products pursuant to the
provisions of this Agreement. For purposes of construing Section
8.1.C., ATS' obligation to use its best efforts to actively promote the
sale of Omal Products shall be considered a material provision of this
Agreement.
<PAGE>
6.2 PAYMENT TERMS. Payment terms for OMAL Products shall be
thirty (30) days net from receipt of equipment by ATS or its nominated
freight clearance agent at U.S. port of entry.
7. RESPONSIBILITIES, AUTHORITY AND LIMITATIONS OF THE PARTIES
7.1 ATS RESPONSIBILITIES, AUTHORITY AND LIMITATIONS.
A. ATS shall make reasonable efforts to promote,
market and sell the Omal Products.
B. ATS will cause the appropriate members of its
technical force and sales force to attend product training and
other informational seminars as Volumatic may make available
from time to time to familiarize the ATS technical force and
sales force with the OMAL Products.
7.2 VOLUMATIC RESPONSIBILITIES. AUTHORITY AND
LIMITATIONS.
A. Volumatic shall not sell or ship OMAL Products to
or for the use of other distributors, dealers or end users in
the U.S. without ATS' prior written consent.
B. In the event Volumatic makes changes in the
programming of OMAL Products at the request of ATS, such
changes will be not be incorporated in the OMAL Products
shipped to other distributors, dealers in the U.S.
C. Volumatic will provide product training and
informational materials to familiarize the ATS technical force
and sales force with OMAL Products at no cost to ATS.
D. With the exception of products sold to ATS for the
use of ATS' customers listed in Schedule A annexed hereto,
which products are warranted for sixty (60) months, Volumatic
warrants products sold to ATS for a period of thirty-six (36)
months. During the warranty period, Volumatic will repair or
replace defective parts or components at no cost to ATS.
E. For a period of five (5) years from the
termination of this Agreement or the expiration of the
warranty, whichever occurs last, Volumatic agrees to provide
service for the OMAL Products sold to ATS and ATS' customers
at Volumatic's then prevailing price for said service.
Notwithstanding the foregoing, the price charged to ATS for
said service shall not be higher than the most favorable
service charges extended to any Volumatic distributor.
F. During the term of this Agreement and for a period
of six (6) months after the termination of this Agreement
("Six Month Restrictive Period") neither party shall directly
or indirectly compete with the other. Nothing contained in
this provision shall prevent ATS from doing business with a
customer that elects to purchase a product from a source other
than ATS that is competitive with Omal Products. If this
Agreement is terminated by either party for cause, as defined
in Section 8.1 below, the Six Month Restrictive Period shall
not prevent the party that terminated the Agreement for cause
from selling scales in competition with the party that was
terminated for cause.
8. TERMINATION.
8.1 TERMINATION. Either party may terminate this
Agreement upon notice at any time for cause. Cause shall exist where:
A. A party attempts to assign this Agreement or any
right hereunder without the other party's written consent,
except that either party may assign this Agreement to any
successor in interest of all or substantially all of its
business without the prior consent of the other party; or
B. The other party ceases to function as a going
concern or conduct its operations in the normal course of
business, or a receiver for it is appointed or applied for, or
if it becomes insolvent or if; under the applicable laws of
any state or subdivision thereof, the other party is deemed
insolvent or bankrupt or to be legally obligated to wind-up
its affairs and go into liquidation or it makes an assignment
for the benefit of creditors; or
<PAGE>
C. The other party is in default of a material
provision of this Agreement and said default has not been
cured within ten (10) days after notice of a monetary default
or thirty (30) days after notice of a non-monetary default; or
D. Should sales of OMAL Products pursuant to this
Agreement fall below (pound)250,000 in 1998, (pound)300,000 in
1999, (pound)360,000 in 2000, (pound)500,000 in 2002,
Volumatic may terminate this Agreement, on ninety (90) days
notice to ATS, provided said notice is sent within thirty (30)
days after the close of a calendar year in which the sale of
OMAL Products fall below the prescribed level.
8.2 EFFECT OF TERMINATION AND LIMITATION OF LIABILITY.
Any termination of this Agreement in accordance with the terms hereof,
whether by expiration or otherwise, shall not constitute an unfair or
abusive termination or create any liability on the part of the party
seeking termination to the other party which is not set forth in this
Agreement. Upon the effectiveness of any termination of this Agreement,
whether by expiration or otherwise, each party will return to the other
all Proprietary Information (hereinafter defined) of the other party in
its possession.
9. CONFIDENTIALITY.
9.1 PROPRIETARY INFORMATION. The parties acknowledge that
in order to accomplish the purpose of this Agreement they will have to
make available to one another certain information, which they view, as
proprietary and/or confidential. As used in this Agreement the term
"Proprietary Information" shall mean (1) information of a confidential
or proprietary nature including, but is not limited to, present and
future products, plans and technology, market and customer information,
strategies, financial documents, organizational information and any
information or material marked or noticed "confidential" or
"proprietary, whether constituting a trade secret or not, and whether
proprietary or not which is of value to the party making said
information available or (ii) information in tangible form which is
disclosed orally under the condition that it remain confidential and,
within thirty (30) days following such disclosure, is summarized in a
writing delivered from the disclosing party to the recipient.
Proprietary Information shall not include information which:
A. is or has become generally available to the public other
than through breach of this Agreement;
B. which can be demonstrated to have been known to the
recipient party prior to disclosure by the disclosing party;
C. which is lawfully obtained by the recipient from a source
independent of the disclosing party, or
D. which is disclosed under order of any court or in order to
comply with any applicable law, regulation, rule or ordinance.
Proprietary information, which, as between the parties hereto, is first
known to ATS, shall be referred to as "ATS Proprietary Information",
and "Volumatic Proprietary Information" shall refer to that Proprietary
Information which, as between the parties hereto, is first known to
Volumatic.
9.2. NONDISCLOSURE BY ATS. ATS agrees to keep confidential
and not to use or disclose any Volumatic Proprietary Information to any
person or entity other than the officers and directors of ATS and its
employees and agents requiring such information to either perform the
obligations of ATS pursuant to this Agreement or to exercise any rights
afforded ATS under this Agreement.
9.3. NONDISCLOSURE BY VOLUMATIC. Volumatic agrees to keep
confidential and not to use or disclose any ATS Proprietary Information
to any person or entity other than the officers and directors
Volumatic, and its employees or agents who require such information to
perform Volumatic obligations under this Agreement or to exercise its
rights under this Agreement.
9.4. RETURN OF PROPRIETARY INFORMATION. Upon the
effectiveness of any termination of this Agreement, whether by
expiration or otherwise, each party will return to the other all
Proprietary Information of the other party in its possession.
<PAGE>
10. INDEMNITY. Volumatic agrees to defend, hold harmless and
indemnify ATS of, from and against any charge of infringement
of any patent, copyright or other proprietary, right
("Charge") in connection with OMAL Products including any
liability, damages, expenses and costs (including reasonable
counsel fees). ATS will immediately make Volumatic aware of
any such Charge and will allow Volumatic at its option to take
over the defense of that Charge at Volumatic's expense. ATS
will not make any prejudicial statements in relation to any
such Charge and will at all times respect Volumatic's
intellectual property rights related to the Omal Products.
11. MISCELLANEOUS.
11.1 INDEPENDENT CONTRACTOR. Neither this Agreement nor the
performance contemplated hereby shall serve to create any joint venture
or partnership between the parties and neither party shall make any
representation to the contrary to any third party. Each party shall be
considered an independent contractor to the other.
11.2 INTERPRETATION. The parties are equally responsible for
the preparation of this Agreement and in any judicial proceeding the
terms hereof shall not be more strictly construed against one party
than the other.
11.3 GOVERNING LAW AND DISPUTE RESOLUTION. This Agreement and
all amendments, modifications, alterations or supplements hereto, and
the rights of the parties hereunder, shall be construed under and
governed by the law5 of the State of Ohio. Any dispute or controversy
related to this Agreement shall be submitted to JAMS/Endispute ("JAMS")
for binding arbitration by the complaining party providing written
notice to JAMS and the other party. The arbitration shall take place in
a location mutually agreed upon by the parties and, if they cannot
agree upon a location, the arbitration shall take place in Cincinnati,
Ohio. The parties may agree on a retired judge from the JAMS panel for
the binding arbitration. If they are unable to agree, JAMS will provide
a list of three available judges in close proximity to the location
where the arbitration will take place and each party may strike one.
The remaining judge will serve as the arbitrator. Judgment on the
decision of the arbitrator may be entered in the highest court of any
forum, federal or state, having jurisdiction. The arbitrator shall set
the guidelines for discovery. The cost for JAMS shall initially be
shared equally by the parties, with the prevailing party being entitled
to recover its share of said cost from the other party. The prevailing
party shall also be entitled to recover its costs and reasonable
attorneys' fees. The parties specifically exclude the provisions of the
United Nations Convention on Contracts For the International Sale of
Goods (the "Convention"). Without limiting the generality of the
foregoing, the parties acknowledge that the provisions of the
Convention shall not apply to this Agreement or to the interpretation
or enforcement of this Agreement.
11.4 ASSIGNMENT AND INUREMENT. Except as otherwise permitted
herein, neither ATS nor Volumatic shall transfer, convey, sub license
or otherwise assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of
the other party. This Agreement may be assigned by either party to the
successor, whether by sale, merger or other business combination, to
substantially all of the assets and business operations. No assignment
or delegation of obligations under this Agreement by either patty shall
relieve the assigning or delegating party of any of its obligations.
This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties hereto.
11.5 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and shall not be modified, amended or terminated except as
herein provided or except by another agreement in writing executed by
the parties hereto. Without limiting the generality of the foregoing,
this Agreement is intended to supersede and replace the prior Agreement
between the parties dated as of October 29, 1996.
<PAGE>
11.6 SEVERABILITY. All rights and restrictions contained
herein may be exercised and shall be applicable and binding only to the
extent that they do not violate any applicable laws and are intended to
be limited to the extent necessary so that they will not render this
Agreement illegal, invalid or unenforceable. If any provision or
portion of any provision of this Agreement not essential to the
commercial purpose of this Agreement shall be held to be illegal,
invalid or unenforceable by the binding arbitration, as provided for
herein, or a court of competent jurisdiction, it is the intention of
the parties that the remaining provisions or portions thereof shall
constitute their agreement with respect to the subject matter hereof,
and all such remaining provisions or portions thereof shall remain in
full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision of this Agreement shall be replaced
by valid provision, which will implement the commercial purpose of the
illegal, invalid or unenforceable provision. In the event that any
provision essential to the commercial purpose of this Agreement is held
to be illegal, invalid or unenforceable and cannot be replaced by a
valid provision which will implement the commercial purpose of this
Agreement, this Agreement and the rights granted herein shall
terminate.
11.7 FORCE MAJEURE. Any delays in, or failure of performance
of any party to this Agreement shall not constitute default hereunder,
or give rise to any claim for damages, if and to the extent caused by
occurrences beyond the control of the party affected, including, but
not limited to, acts of God, strikes or other concerted acts of
workmen, civil disturbances, fires, floods, explosions, riots, war,
rebellion, sabotage, acts of governmental authority or failure of
governmental authority to issue licenses or approvals which maybe
required. If a Force Majeure event occurs and said event prevents
Volumatic from supplying ATS with required products for more than sixty
(60) days, ATS shall, at its election, be entitled to terminate this
Agreement. If a Force Majeure event occurs that prevents a party from
performing any material obligation under this Agreement and said
inability to perform continues for a period of sixty (60) days, the
other party, at its election, shall be entitled to terminate this
Agreement upon ten (10) days notice.
11.8 NOTICES. All notices, statements, payments and reports
required or contemplated herein by one party to the other shall be in
writing and delivered in person (obtaining a signed receipt) or sent by
registered or certified mail return receipt requested, postage prepaid,
or by commercial overnight courier service, and addressed as follows:
If to ATS:
ATS Money Systems, Inc.
25 Rockwood Place
Englewood, New Jersey 07 631
Attention: Gerard F. Murphy, President
Telecopier Number: 201-894-0958
If to Volumatic:
Volumatic Ltd.
Taurus House
Endemere Road
Coventry CV6 5PY
England
Attention: Michael Hamilton, Managing Director
Telecopier Number: 44 1203-638295
Either party hereto may change the address to which notices to
such party are to be sent by giving notice to the other party at the
address and in the manner provided above. Any notice herein required or
permitted to be given may he given, in addition to the manner set forth
above, by telex, facsimile or cable, provided that the party giving
such notice obtains acknowledgment by telex, facsimile or cable that
such notice has been received by the party to be notified. Notice made
in this manner shall be deemed to have been given when such
acknowledgment has been transmitted.
<PAGE>
11.9 MULTIPLE COUNTERPARTS. This Agreement may be executed in
several counterparts, all of which taken together shall constitute one
single Agreement between the parties.
11.10 SECTION HEADINGS: EXHIBITS. The section and subsection
headings used herein are for reference and convenience only, and shall
not enter into the interpretation hereof. The schedules/exhibits
referred to herein and attached are incorporated herein.
11.11 REQUIRED APPROVALS. Where agreement, approval,
acceptance, or consent by either party is required by any provision of
this Agreement, such action shall not be unreasonably delayed,
conditioned or withheld.
11.12 NO WAIVER. No delay or omission by either party hereto
to exercise any right or power occurring upon any noncompliance or
default by the other party with respect to any of the terms of this
Agreement shall impair any such right or power or be construed to be a
waiver thereof. A waiver by either of the parties hereto of any of the
covenants, conditions, or agreements to be performed by the other shall
not he construed to be a waiver of any succeeding breach thereof or of
any covenant, condition, or agreement herein contained. Unless stated
otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies
available to either party at law, in equity, or otherwise, including
the right to seek injunctive relief to prevent any breach or threatened
breach of the provisions of this Agreement.
11.13 SURVIVAL. Any termination, cancellation or expiration of
this Agreement notwithstanding, provisions of this Agreement and
obligations of the parties hereunder which are intended to survive and
continue shall so survive and continue.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives, under seal, as of the day and
year first above written.
VOLUMATIC LTD.
Attest: ______________________ By: ___________________________
Name: ________________________ Name: _________________________
Title: _______________________ Title: ________________________
ATS MONEY SYSTEMS, INC.
Attest: ______________________ By: ___________________________
Name: ________________________ Name: _________________________
Title: _______________________ Title: ________________________
The undersigned acknowledges that he has read the provisions of this
Agreement and agrees that: (a) he will comply with Volumatic's obligations with
respect to ATS Proprietary Information; and (b) during the term of this
Agreement and for a period of six (6) months after the termination of this
Agreement, he will not, directly or indirectly, compete with ATS.
- ----------------------------------
Michael James Cowling
<PAGE>
SCHEDULE A
----------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIXTY ( 60 ) MONTH WARRANTY PER 7.2D
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
WENDY'S INTERNATIONAL INC (CORPORATE & FRANCHISEE)
- --------------------------------------------------------------------------------
CONSOLIDATED STORES, COLUMBUS, OHIO
- --------------------------------------------------------------------------------
US BEEF (ARBY'S FRANCHISEE)
- --------------------------------------------------------------------------------
Exhibit 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements No.
33-64460 and No. 333-39331 of ATS Money Systems, Inc. on Forms S-8 of our report
dated March 25, 1999, appearing in this Annual Report on Form 10-KSB of ATS
Money Systems, Inc. for the year ended December 31, 1998.
Deloitte & Touche LLP
Parsippany, New Jersey
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of December 31, 1998 and the Consolidated
Statement of Operations for the twelve months ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000828509
<NAME> ATS MONEY SYSTEMS, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 286,368
<SECURITIES> 0
<RECEIVABLES> 3,392,439
<ALLOWANCES> 140,629
<INVENTORY> 598,667
<CURRENT-ASSETS> 4,200,358
<PP&E> 331,817
<DEPRECIATION> 199,388
<TOTAL-ASSETS> 6,100,730
<CURRENT-LIABILITIES> 2,494,684
<BONDS> 0
0
0
<COMMON> 5,942
<OTHER-SE> 3,439,690
<TOTAL-LIABILITY-AND-EQUITY> 6,100,730
<SALES> 11,781,789
<TOTAL-REVENUES> 14,447,077
<CGS> 7,610,955
<TOTAL-COSTS> 5,855,458
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,010,359
<INCOME-TAX> 437,384
<INCOME-CONTINUING> 572,975
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572,975
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
