FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________.
Commission file Number: 17637
Fronteer Directory Company, Inc.
(Exact Name of Registrant as Specified in its Charter)
Colorado 45-0411501
------------------------------ ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
216 North 23rd Street
Bismarck, North Dakota 58501
--------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (701) 258-4970
Securities registered pursuant to Section 12(g) of the Act:
$0.01 Par Value Common Stock
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and, (2) has been subject to such filing requirements
for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K.
[ ]
As of December 1, 1995, the aggregate market value of the Registrant's
voting stock held by nonaffiliates was $2,696,853.
As of December 1, 1995, Registrant had 12,537,227 shares of its $0.01
par value common stock issued and outstanding.
The information required by Part III is contained herein and will not
be incorporated by reference to Registrant's definitive proxy statement.
Total Pages __
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PART I
ITEM 1. BUSINESS
Business Prior to Transactions in April of 1995. Fronteer Directory
Company, Inc. (the "Company") is a corporation which was organized under the
laws of the state of Colorado on September 14, 1988. The Company was formed for
the purpose of assuming all of the assets and liabilities of a North Dakota
corporation with the same name as the Company, incorporated on April 1, 1977.
The focus of the Company's business changed in April of 1995, following the
Company's acquisition of the assets of the holding company of a Denver, Colorado
based securities broker dealer and the sale of 10 of the Company's 20 telephone
directories to a third party. Before April of 1995, the Company's primary
business was publishing telephone directories covering areas in the states of
North Dakota, South Dakota, Montana, Idaho, Utah, Wyoming and Minnesota. The
Company's primary source of revenue prior to April of 1995, was selling display
advertisements in the yellow pages, selling bold and color listings in the white
pages, selling advertisements on the back cover page, and selling discount
coupons included as part of the telephone directories published by the Company.
Acquisition of RAFCO. On April 26, 1995, the Company signed a Plan of
Reorganization and Exchange Agreement ("RAFCO Agreement") with RAFCO, Ltd., a
Nevada corporation ("RAFCO"), whereby the Company acquired all of the assets of
RAFCO in exchange for which the Company (i) assumed some of RAFCO's liabilities;
(ii) issued 7,223,871 shares of the Company's $.01 par value common stock
("Common Stock") to RAFCO; and (iii) issued 87,500 shares of the Company's $.10
par value Series A Voting Cumulative Preferred Stock ("Preferred Stock") to
RAFCO. RAFCO distributed the shares of the Company's Common Stock and the
Preferred Stock to those persons who had been RAFCO shareholders prior to April
26, 1995, and shortly afterwards, RAFCO dissolved and ceased to exist as a
corporation. Following compliance with Rule 14f-1 of the Securities Exchange Act
of 1934, as amended, ("1934 Act"), all of the officers and directors of the
Company, except the president, Dennis W. Olson, resigned, the size of the
Company's Board of Directors was reduced to three, and Robert A. Fitzner, Jr.
and Robert L. Long were appointed as directors. Dennis W. Olson continued
serving as the president and director of the Company, but no other officers were
appointed.
The transactions which occurred under the terms of the RAFCO Agreement
were accounted for as a "reverse acquisition" of the Company by RAFCO using the
purchase method of accounting. The Company's assets and liabilities were
adjusted to their fair market value at the date of the business combination. The
Company's operations are included in the consolidated financial statements
beginning May 1, 1995, the effective date of the business combination. See
"Financial Statements and Supplementary Data" for more information.
As a result of the transactions which occurred under the terms of the
RAFCO Agreement and because Mr. Fitzner owned a majority of the outstanding
shares of RAFCO before the RAFCO Agreement was signed, Mr. Fitzner owns
4,784,705 shares of the Company's Common Stock and 5,000 shares of the Preferred
Stock or 37.9% of the outstanding voting securities of the Company. Mr.
Fitzner's mother, Earlene E. Fitzner, owns 2,500 shares of the Company's
Preferred Stock. Mr. Fitzner may be deemed to be in control of the Company due
to his position as a director and his ownership of 37.9% of the Company's
outstanding voting securities. The other persons who received shares of the
Company's Common Stock following the signing of the RAFCO Agreement and, because
they were shareholders of RAFCO before it dissolved, are : Kanouff Corporation
(1,558,078 shares); Dorothy K. Englebrecht (220,272 shares); Steven Fishbein
(220,272 shares); Peter O'Leary (220,272 shares); and Arlene Wilson (220,272
shares). Mr. Fitzner has entered into voting agreements with Ms. Englebrecht,
Mr. Fishbein, Mr. O'Leary and Ms. Wilson (collectively "RAFCO Shareholders")
which give Mr. Fitzner an irrevocable proxy to vote all of the shares of Common
Stock owned by the RAFCO Shareholders until July 16, 1997. These voting
agreements also give Mr. Fitzner the right to buy some or all of the shares of
the Common Stock owned by the RAFCO Shareholders during the period from July 16,
1997 to September 15, 1997. Each of the RAFCO Shareholders has agreed not to
sell or pledge any of their shares of Common Stock until after September 15,
1997, the expiration date of the voting agreements. The irrevocable proxies
expire on July 16, 1997.
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Under the RAFCO Agreement, the Company acquired all of the outstanding
stock of RAF Financial Corporation, a Colorado corporation ("RAF"), and
approximately 50% of the outstanding stock of Secutron Corp., a Colorado
corporation ("Secutron"), along with furniture, fixtures and equipment which was
used by RAFCO in its businesses and which the Company has continued to use in
operating the businesses acquired under the RAFCO Agreement. RAF and Secutron
became subsidiaries of the Company when the Company acquired the assets of
RAFCO. See "Business -- Description of Businesses -- RAF Financial Corporation"
and "Description of Businesses -- Secutron Corp." for further information about
the businesses conducted by RAF and Secutron.
Sale of Directories to Telecom. On April 27, 1995, the Company signed a
Sale and Purchase Agreement ("Telecom Agreement) with Telecom *USA Publishing
Company, an Iowa corporation ("Telecom"). Under the terms of the Telecom
Agreement, the Company sold 10 of its telephone directories located in the
states of Idaho, Montana, South Dakota and Wyoming and certain equipment to
Telecom for a total price of $2,189,846, some of which was paid to the Company
in April of 1995, some in August of 1995, and the remainder of which was paid to
the Company in October of 1995. The Telecom Agreement contemplated the sale of
one additional directory for Bridgerland, Utah to Telecom, but the Company was
unable to obtain an assignment to Telecom of the telephone publishing contract
with the owners of the Bridgerland directory, and as a result, this directory
was not sold to Telecom. As part of the Telecom Agreement, the Company agreed
not to compete with Telecom's business in the states of Iowa, Minnesota,
Michigan, Missouri, Nebraska, South Dakota, Colorado, Wyoming, Idaho, Montana,
Illinois, Indiana and Wisconsin. However, if Telecom does not exercise its
option to buy the Company's North Dakota directories, then the Company's
noncompete agreement will be restricted to only those areas in which Telecom is
actually conducting business on the date the option expires. See "Business --
Sale of Option to Telecom" for further information. In addition, nine of the
Company's employees signed agreements not to compete with Telecom and Telecom
agreed to pay these nine employees a total of $800,000 as consideration for
signing these noncompete agreements. Four of the nine employees who signed
noncompete agreements with Telecom were officers. Dennis W. Olson, who signed a
noncompete agreement, is an officer and a director of the Company.
Sale of Option to Telecom. On April 27, 1995, the Company signed an
option agreement with Telecom ("Option") which granted Telecom an option to buy
the Company's nine North Dakota telephone directories. The consideration for
this Option was a $500,000 loan from Telecom to the Company. Telecom agreed not
to charge the Company any interest on the loan. Telecom may exercise its option
between June 1, 1997 and June 1, 1999. If Telecom exercises its option, it has
agreed to pay the Company a purchase price equal to the total net cash revenue
less telephone company commissions for the most recent edition of each of the
nine directories published and distributed before the date of the closing of the
purchase under the Option. This purchase price is subject to adjustment under
certain circumstances as described in the Option. If Telecom exercises its
option, the full amount of the $500,000 loan made by Telecom to the Company will
be deducted from the purchase price of the directories. If Telecom does not
exercise its option, Telecom will forgive repayment of the full amount of the
$500,000 loan made to the Company. Nine of the Company's employees will be
required to sign agreements not to compete with Telecom if Telecom exercises its
option to buy the North Dakota directories. One of these employees, Dennis W.
Olson, is the president and also a director of the Company. In consideration for
agreeing not to compete with Telecom, these nine employees of the Company will
receive approximately 25% of the purchase price paid by Telecom for the nine
North Dakota directories.
DESCRIPTION OF BUSINESSES
DIRECTORY DIVISION.
Formation. Prior to the Company's acquisition of RAFCO and the sale of
certain of the Company's directories to Telecom in April of 1995, the Company's
primary business was the publication of telephone directories covering areas in
the states of North Dakota, South Dakota, Montana, Idaho, Utah, Wyoming and
Minnesota. See "Business -- Business Prior to Transactions in April of 1995."
Currently, the Company publishes 10 telephone directories, nine of which cover
areas located in North Dakota and one of which covers an area in Utah. All nine
of the North Dakota directories are included in an Option granted to Telecom in
April of 1995.
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See "Business -- Acquisition of RAFCO, -- Sale of Directories to Telecom, and --
Sale of Option to Telecom" for further information about these transactions.
Under the terms of the RAFCO Agreement, the Company formed a Directory Division
in which the Company's telephone directory publishing business and the business
of two of its subsidiaries, Fronteer Personnel Services, Inc. ("FPS") and
Fronteer Marketing Group, Inc. ("FMG") are conducted. The Directory Division is
managed by an advisory board consisting of seven members, six of whom are former
members of the Company's board of directors and the seventh member is Dennis W.
Olson, president and a director of the Company.
Directory Business. The Company's directory business currently
publishes and distributes telephone directories covering nine areas in North
Dakota and one directory in Utah. In the areas covered by the Company's
telephone directories, consumers often receive two telephone directories which
contain the same telephone listings, one of which is published by the local
telephone company and one of which is published by the Company's directory
business. The Company's directory business competes directly with the
directories published by local telephone companies and with other independent
directory publishers. In some cases, there may be more than one independent
directory publisher covering the same area. In the areas served by the Company's
10 directories, there are 17 competing directories, of which 15 are published by
local telephone companies and two are published by other independent directory
publishers. The Company's directory business publishes directories under
contract with 13 small independent telephone companies, several of which are
consolidated into larger directories. The Company published a total of 19
directories in fiscal year 1995. The table below shows information regarding the
directories published by the Company during the last three fiscal years.
<TABLE>
<CAPTION>
Advertising Revenue(2)
Approximate -------------------------------------------------
Area Circulation(1) 1993 1994 1995
- ---- -------------- ---- ---- ----
<S> <C> <C> <C> <C>
Central, SD ............................. 27,000 $ 106,022 $ 118,964 $ 135,924*
Jamestown, ND ........................... 18,000 102,070 109,016 120,352
Big Sky Central, MT ..................... 24,000 142,011 156,791 176,896*
Valley City, ND ......................... 12,000 54,938 61,266 61,921
Durum Triangle, ND ...................... 36,000 216,983 230,524 245,169
Williston Basin, ND ..................... 66,000 422,779 455,216 500,956
Bismarck, ND ............................ 140,000 1,118,530 1,229,907 1,336,220
Southeast, ND ........................... 30,000 243,041 256,940 263,993
Souris River
(Minot), ND ............................. 110,000 770,063 1,965,301 2,012,701
Fargo, ND ............................... 175,000 996,886 1,094,488 (3)
Badlands Consolidated
(Dickinson), ND ......................... 37,000 353,449 370,487 (3)
Billings, MT ............................ 118,000 771,711 884,054 1,001,878*
Great Falls, MT ......................... 102,000 485,917 521,722 (4)*
Bullhead City, AZ
Laughlin, NV
Lake Havasu City, AZ .................... 91,000 291,067 (4) (4)
Prescott, AZ ............................ 82,000 334,919 (4) (4)
Yuma, AZ ................................ 60,000 137,382 (4) (4)
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<CAPTION>
Advertising Revenue(2)
Approximate ------------------------------------------------
Area Circulation(1) 1993 1994 1995
- ---- -------------- ---- ---- ----
<S> <C> <C> <C> <C>
Gila County, AZ ................................. 33,000 154,154 160,912 (4)
Flagstaff, AZ ................................... 86,000 388,234 (4) (4)
Blythe, CA ...................................... 23,000 80,882 (4) (4)
Range, MT ....................................... 27,000 71,154 86,593 124,996*
Twin Falls, ID .................................. 93,000 300,709 312,517 (4)*
Mitchell/Huron, SD .............................. 47,000 229,087 (4) (4)
Bridgerland, UT (5) ............................. 42,000 326,203 348,683 396,530
Idaho Falls, ID ................................. 144,000 707,248 816,109 920,712*
University of Montana ........................... 11,000 73,930 68,863 65,756
Ronan, MT ....................................... 23,000 ___ 186,236 231,596*
Bozeman, MT ..................................... 49,000 -- -- 400,283*
Big Horn Basin, WY .............................. 40,000 -- -- 263,671*
<FN>
* Directories sold to Telecom during fiscal year 1995.
(1) Based on the number of directories printed.
(2) Prior to discounts for early payments and national accounts.
(3) Directory was incomplete at year end and no revenue was recognized in fiscal year 1995.
(4) Directory was sold to a third party and not published by the Company during
fiscal year 1995.
(5) Independent directory not owned by the Company, but published by the Company
under a publishing contract.
</FN>
</TABLE>
The Company's directory business derives revenue by selling
advertisements in the yellow pages portion of its directories, selling bold
listings, selling color listings in the white pages, selling advertisements on
the back cover page, and selling discount coupons for goods and services. The
Company's directory business employs 56 persons, including 14 full time
salespersons, who are compensated on a commission basis. The directory business
owns its own typesetting equipment which allows it to produce camera ready
copies of its directories. The camera ready copy is then printed by third party
printers who bid on each printing job. During fiscal year 1995, the directory
business utilized three different printers, with approximately 70% of the
printing work performed by one printer. If this one printer were to go out of
business, this event would not have a material adverse effect on the directory
business. All of the raw materials used by the directory business are generally
available and the directory business is not dependent on any single supplier.
During fiscal year 1995, a worldwide paper shortage caused a 20% to 30% increase
in the cost of the paper used in the directories published by the Company, but
paper prices are not expected to rise significantly in the foreseeable future.
The Company anticipates that its existing directory business will
expand as a result of the sale by U.S. West Communications of 68 of its North
Dakota telephone exchanges to 15 different small telephone companies. The
Company's directory business currently has publishing contracts with 11
telephone companies which are buying a total of 43 exchanges from U.S. West
Communications. The Company anticipates that the sale of exchanges by
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U.S. West Communications will result in five of the Company's existing
directories becoming the official directories for the new local telephone
companies in these areas, leading to decreased competition and increased revenue
for the Company's directory business.
Fronteer Personnel Services, Inc. Since October of 1992, the Company
has performed payroll and benefits administration for small businesses through
its wholly owned subsidiary, Fronteer Personnel Services, Inc., a North Dakota
corporation ("FPS"), which was formed on October 30, 1992. FPS markets its
services to small businesses in and around the Bismarck, North Dakota
metropolitan area. FPS had four employees as of December 1, 1995, and its office
is located at 2208 East Broadway, Bismarck, North Dakota, 58501. FPS had
revenues of $66,374 for the period from May 1, 1995 to September 30, 1995,
compared with net revenues of $72,934 and $24,198 in fiscal years 1994 and 1993,
respectively. Also, FPS had operating losses of $31,249 for the period from May
1, 1995 to September 30, 1995, compared with operating losses of $53,216 and
$149,012 in fiscal years 1994 and 1993, respectively. On December 7, 1994, FPS
acquired 49% of the outstanding stock of Native American Document Conversion
Services, LLC, a North Dakota limited liability company ("NADCOS"). American
Indian Services, Inc., an Illinois corporation ("AISI"), is the majority
shareholder of NADCOS. NADCOS is currently developing its business which it
anticipates will consist primarily of document imaging and conversions. During
fiscal year 1995, the business activities of NADCOS consisted of AISI marketing
its services to the public.
Fronteer Marketing Group, Inc. On April 3, 1995, the Company formed a
new wholly owned subsidiary, Fronteer Marketing Group, Inc., a North Dakota
corporation ("FMG"), which engages in the outbound telemarketing business. In
April of 1995, FMG acquired the assets of a telemarketing business which had
ceased operations due to financial difficulties. FMG conducts outbound
telemarketing which consists of soliciting consumers and businesses by
telephone. FMG has 24 full time and six part time employees. FMG markets its
services nationwide primarily through the services of a telemarketing trade
association. FMG's office is located at Highway 49 South, Beulah, North Dakota,
58523. FMG had revenues of $149,780 and operating losses of $103,244 for the
period from May 1, 1995 to September 30, 1995.
Financial Information. The Directory Division, including the Company's
directory business, FPS and FMG, recognized $3,702,849 in revenue for the period
May 1, 1995 through September 30, 1995, compared with $9,158,922 and $8,522,898
in fiscal years 1994 and 1993, respectively. The Directory Division experienced
operating profits/losses of ($389,559) for the period from May 1, 1995 to
September 30, 1995, as compared with $325,800 and ($205,018) in fiscal years
1994 and 1993, respectively.
RAF FINANCIAL CORPORATION.
General. RAF was incorporated in 1974 to engage in the retail stock
brokerage business in the Rocky Mountain Area of the United States. RAF is
registered as a broker dealer with the Securities and Exchange Commission
("Commission"), is a member of the National Association of Securities Dealers,
Inc. ("NASD") and the Boston Stock Exchange, is an associated member of the
American Stock Exchange, and is registered as a securities broker dealer in all
50 states. RAF is a member of the Securities Investor Protection Corporation
("SIPC") and other regulatory and trade organizations. RAF's securities business
consists of providing securities transaction clearing services for other broker
dealers on a fully disclosed basis, providing retail securities brokerage and
investment services, trading fixed income and equity securities, providing
investment banking services to corporate and municipal clients, managing and
participating in underwriting corporate and municipal securities, and
distributing mutual fund shares. During 1989, RAF registered the mark "RAF
Financial Corporation" with the United States Patent and Trademark Office, and
RAF has registered this name in 32 states. RAF intends to maintain all of its
service mark registrations for the indefinite future in order to protect the
goodwill associated with the mark. RAF conducts its business in five operating
divisions. RAF's principal executive office is located at One Norwest Center,
1700 Lincoln Street, 32nd Floor, Denver, Colorado, 80203. RAF has branch offices
located in Colorado Springs, Colorado; Fort Collins, Colorado; Atlanta, Georgia;
Albany, New York; Reston, Virginia; and Chicago, Illinois.
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Correspondent Clearing Division. The Correspondent Clearing Division
provides clearing services on a fully disclosed basis to other broker dealers
("Correspondents") under the name of RFC Clearing Services. In a fully disclosed
clearing transaction, the Correspondent's customer's identity is known to RAF,
RAF physically maintains the customer's account, and RAF performs a variety of
services for the customer as agent for the Correspondent. RAF receives service
charges and fees from the Correspondent for performing these services.
Electronic data processing is an integral part of RAF's clearing operations. RAF
operates all of the data processing hardware and software necessary to input
trading and back office data. RAF utilizes a proprietary software system which
was developed in a joint effort between Secutron and RAF and uses IBM hardware.
RAF's clearing division business diminished during the first nine months of 1995
as compared with the period January 1, 1994, through December 31, 1994, due to
increased competition.
Retail Securities Brokerage Division. RAF conducts its retail brokerage
business through its Retail Securities Brokerage Division. As of December 31,
1995, RAF had 115 account executives. At December 31, 1995, RAF had
approximately 12,000 customer accounts, not including Correspondent customer
accounts. RAF generates commission revenue when it acts as a broker on an agency
basis, or as a dealer on a principal basis, to effect securities transactions
for individual and institutional investors. RAF executes both listed and over
the counter agency transactions for customers, executes transactions and puts
and calls on options exchanges as agent for its customers, and sells a number of
professionally managed mutual funds.
Corporate Finance Division. The Corporate Finance Division provides
financial advisory and capital raising services to corporate clients. Financial
advisory services involve advising clients in mergers and acquisitions and in
various types of corporate valuations. RAF acts as an underwriter, dealer, and
selling group member in public and private offerings of equity and debt
securities. During the first nine months of 1995, RAF raised approximately
$6,000,000 for four companies through its investment banking activities, which
included two public offerings and two private placements.
Trading Division. Trading securities involves the purchase and sale of
securities by RAF for its own account. Profits and losses are derived from the
spread between bid and ask prices and market increases or decreases for the
individual security during the holding period. RAF makes markets in corporate
equities and trades in municipal and corporate bonds and various government
securities. As of December 31, 1995, RAF made markets in 50 stocks.
Public Finance Division. The Public Finance Division of RAF provides
professional financial advisory services to public entities, participates in
underwriting and selling both negotiated and competitive bid municipal bond
offerings, and structures and participates in municipal bond refinancings.
During the first nine months of 1995, RAF's participation in offerings of
municipal securities was approximately $26,000,000 as manager of seven
offerings.
Financial Information. For the nine months ended September 30, 1995,
RAF's revenues of $9,854,160 accounted for 57.4% of the Company's total
operating revenues of $17,169,754 for the same period. RAF's revenues for the
years ended December 31, 1994 and 1993 were $12,713,456 and $14,044,465
respectively. Also for the nine months ended September 30, 1995, RAF incurred a
net loss of $809,790.
RAF Regulatory Net Capital. As a registered broker dealer in
securities, RAF is subject to the net capital rule ("Rule") of the Commission.
Under this Rule, RAF is required to maintain net capital, as computed under the
Rule, equal to the greater of $100,000 or 2% of aggregate debit items, as
determined under the Rule. The purpose of this Rule is to establish minimum net
capital deemed necessary for a broker dealer to meet its commitments to its
customers and to provide a measurement standard of financial integrity and
liquidity of broker dealers. The Rule also contains provisions which limit the
withdrawal of equity capital from a registered broker dealer such as RAF by
shareholders such as the Company and limits unsecured advances from a registered
broker dealer to its shareholders, employees or affiliates. Equity capital may
not be withdrawn if the resulting net capital would be less than 5% of aggregate
debits. RAF's net capital at September 30, 1995, as computed under the Rule,
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was $1,988,915; RAF's minimum net capital requirement was $250,000 on such date;
and RAF's excess net capital was $1,738,915 on such date. On September 30, 1995,
RAF's ratio of net capital to aggregate debits was 41%. At September 30, 1995,
RAF's stockholders' equity was $7,090,567. There are numerous deductions which
must be made from the net worth of a broker dealer in computing its regulatory
net capital under the Rule. RAF's net capital deductions relate primarily to
equipment, facilities, and advances to affiliates.
Sale of Bank Services Division. During the years 1991 through 1994, RAF
directly invested in excess of $3,000,000 in the development of its Bank
Services Division. These funds were utilized to develop computer software
systems and to develop an organization consisting of data processing and
marketing personnel. As a result, RAF's Bank Services Division operated at a
loss during the development period in the amount of approximately $1,000,000.
The services offered by this division to financial institutions, including
banks, were designed to provide up to date information on the financial
institution's liabilities, assets and business which would permit the client to
make decisions in the areas of interest rate risk, liquidity, investment
planning, annual budgets, strategic plans, and capital plans. During September
of 1993, RAFCO entered into an agreement with Sheshunoff Information Services,
Inc. ("SIS"), Trepp & Company, Inc. ("Trepp") and the Asset Backed Securities
Group, a division of TFS Database Group, Inc., which is affiliated with Thomson
Financial Networks Inc. ("Thomson") to form the STAR Alliance ("Alliance
Agreement") to jointly market, prepare, and deliver specialized data and reports
to the banking industry. Prior to July 1, 1995, RAFCO's primary responsibilities
to the Alliance were the collection of data via modem or tape and the use of its
proprietary software systems to make certain calculations and prepare reports
for clients of the Alliance. From September of 1993, to June of 1994, the Bank
Services Division of RAF performed these services for the Alliance on behalf of
RAFCO. As of June 30, 1994, RAFCO transferred all of the business and ownership
of the software systems to its wholly owned subsidiary, Risk Analytics, Inc.
("RAI"), and on July 1, 1994, RAI began performing services for the Alliance on
behalf of RAFCO. As of January 1, 1995, RAFCO transferred ownership of RAI to
RAF. Effective July 1, 1995, the members of the STAR Alliance signed a
Termination Agreement in which RAI terminated its participation in the STAR
Alliance. Simultaneously, RAI sold SIS all of the rights to its software ("STAR
Software") and related products to enable SIS to assume RAI's former duties to
the STAR Alliance. Under a Bill of Sale and a Services Agreement, both dated
July 1, 1995, SIS purchased the STAR Software and agreed to pay RAF fees to use
some of RAF's office space and related facilities for the transition period from
July 1, 1995 through December 31, 1995, while SIS assumes RAI's former
responsibilities to the STAR Alliance. RAI is bound by a covenant not to compete
in the United States with the services offered by the remaining members of the
STAR Alliance for two years after termination of the Alliance Agreement.
Bank Loan. In March of 1993, RAFCO sold $775,000 of 10% Senior
Subordinated Promissory Notes ("Notes") to two Illinois banks ("Banks"). The
obligations represented by the Notes were assumed by the Company when it
acquired the assets of RAFCO on April 27, 1995. In August of 1995, the Banks
requested that the Company substitute conventional loans for the obligations
represented by the Notes. The Company agreed to retire the Notes held by the
Banks by entering into loan agreements with the Banks. RAI assigned its right to
receive payments from SIS under the Termination Agreement discussed above to the
Company and the Company then pledged this right to the Banks as collateral for
the loans. In December of 1995, the Company executed promissory notes totalling
$775,000, payable to the Banks in installments on each July 15 beginning in 1996
and ending in 1999. Under the Termination Agreement, the Company is entitled to
receive a total of $1,625,150 payable in installments. The first installment of
$475,150 was paid to RAI on July 1, 1995, and subsequent installments are due on
each June 30 beginning in 1996 and ending in 1999.
SECUTRON CORP.
General. Secutron was incorporated under Colorado law on May 11, 1979.
The Company owns 47.5% of the outstanding stock of Secutron and Mr. Anthony R.
Kay owns approximately 47% of the outstanding stock of Secutron. Secutron's
business consists of designing, developing, installing, marketing, and
supporting software systems for the securities brokerage industry. Secutron
markets hardware and software to securities brokerage firms as an IBM business
partner. Secutron's IBM business partner relationship is as an industry
remarketer affiliate
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through Real Applications Ltd., located in Woodland Hills, California.
Secutron's wholly owned subsidiary, MidRange Solutions Corp., is a Colorado
corporation formed on January 1, 1993 ("MSC"). MSC is in the business of selling
IBM hardware and hardware manufactured by competitors of IBM, and MSC acts as a
distributor for software products which are proprietary to third parties. MSC
sells hardware and software to businesses in several different industries,
including manufacturers, distributors and health care providers. MSC also has a
contract with a software company under which it markets sophisticated financial
accounting software to manufacturers and distribution companies located in
specific areas in which MSC is the exclusive distributor of this software.
Products and Services. Secutron offers the following software products
to the securities brokerage industry. The STARS software system is offered to
broker dealers who clear their own transactions, and is a totally integrated
software system which performs all of the functions required by self clearing
broker dealers. The BCATS software system is offered to broker dealers who clear
their securities transactions on a fully disclosed basis through a clearing
broker dealer such as RAF, and is also a fully integrated software system which
performs all of the accounting functions required by a fully disclosed broker
dealer. The BCATS-MF software system is designed for use by broker dealers
engaging in transactions in mutual funds. All of such software systems are
designed to run on IBM computers. Both Secutron and MSC provide consulting,
programming and facilities management services to their respective clients to
support the software and hardware sold by them.
FUTURE BUSINESS PLANS
The Company's general business strategy is to expand the businesses
conducted by RAF and Secutron, while maintaining the business conducted by the
Company's Directory Division at its present size. The Company plans to keep the
number of directories published by its directory business constant, pending the
sale of nine out of its ten directories to Telecom between June 1, 1997 and June
1, 1999, under the terms of Telecom's Option. See "Business -- Sale of Option to
Telecom" for further information. Due to decreased competition in its existing
directory markets, the Company anticipates that revenues from its existing
directories will increase in fiscal year 1996. See "Business -- Competition --
Directory Business." FMG plans to open several new telemarketing centers
throughout North Dakota during 1996. FMG anticipates that a new telemarketing
center with 24 telephone stations will be opened in Bismarck in March of 1996,
and FMG plans to open another center of the same size in different communities
around North Dakota every 60 to 90 days during the next two years. FMG has a
working relationship with a coalition of economic development organizations from
nine small North Dakota communities, whereby the communities will provide office
space at a nominal monthly rental charge as an incentive to bring the
telemarketing centers and jobs to their areas. FMG has contracted with a
consultant to help with FMG's purchase and installation of the technology which
will allow FMG to tie all of its separate sites together to act as one large
center. With the installation of new telemarketing centers, FMG will pursue
large inbound telemarketing contracts. FMG hopes to have five centers
operational with a total of approximately 150 employees by the end of fiscal
year 1996. FPS anticipates revenue and income growth primarily through increased
insurance commissions from its insurance division in fiscal year 1996. The
Company also expects growth in its payroll services business in conjunction with
the anticipated expansion of FMG, which is under contract with FPS for its
payroll services.
The volume of business conducted by RAF's clearing division in the
first nine months of 1995 diminished due to increased competition and the
Company's inability to match lower prices charged by the Company's clearing
division competitors. The Company anticipates that the business conducted by
RAF's clearing division will continue to diminish in fiscal year 1996. See
"Business -- Description of Businesses -- RAF Financial Corporation --
Correspondent Clearing Division" for further information about this division.
Management of the Company believes it is in the best interest of the entire
Company to pursue a reduction in the clearing division business in order to
decrease losses experienced and anticipated to be experienced by the clearing
division. The Company plans to focus its efforts on increasing RAF's regulatory
net capital and increasing the volume of business conducted by RAF's retail
securities brokerage division. Management believes that increasing RAF's capital
will give RAF the potential ability to expand its securities business which
could make RAF more profitable and ultimately benefit all of the Company's
businesses.
- 9 -
<PAGE>
EMPLOYEES AND EMPLOYEE RELATIONS
Employees. As of December 15, 1995, the Company had 287 full time
employees, 84 of whom worked for the Directory Division in the Company's North
Dakota offices and 172 of whom worked for RAF. As of December 15, 1995, Secutron
had 31 employees. RAF's headquarters is located in Denver, Colorado, but 72 of
RAF's employees work in branch offices of RAF located in Colorado Springs,
Colorado; Fort Collins, Colorado; Reston, Virginia; Atlanta, Georgia; Albany,
New York; and Chicago, Illinois. The Company considers its relations with its
employees to be good.
COMPETITION
Directory Business. The Company's directory business competes primarily
with U.S. West Direct, which publishes telephone directories in many of the same
markets in which the directory business publishes directories. U.S. West Direct
has several advantages that the Company's directory business does not possess,
including greater financial resources, name recognition and an affiliation with
U.S. West, a large telephone company. Management believes the Company's
directory business is able to compete effectively with U.S. West Direct in
obtaining contracts with independent telephone companies due to the following
factors: (i) some of the Company's directories are so small they may not be of
interest to U.S. West Direct; (ii) the Company's directory business maintains
good relations with the telephone companies for which it publishes directories;
and (iii) management believes that the Company's directory business publishes
directories which are superior to U.S. West Direct's directories with respect to
including information about the community and offering more types of
advertisements. In addition, management believes the Company's directory
business competes effectively with U.S. West Direct in obtaining advertisements
for its directories for the following reasons: (i) in some markets, the
Company's directories list special telephone numbers for certain advertisers
which consumers can call to obtain community information and a message from the
advertisers; and (ii) the Company's directories usually charge lower advertising
rates than U.S. West Direct. The Company's directory business also competes less
directly with other forms of advertising media such as newspapers, magazines,
television and radio, although it is difficult to assess how the Company's
directory business is affected by other forms of advertising.
RAF. The securities industry has become considerably more concentrated
and more competitive in recent periods as numerous securities firms have either
ceased operation or have been acquired by or merged into other firms. In
addition, companies not engaged primarily in the securities business, but having
substantial financial resources, have acquired securities firms. The securities
industry is now dominated by relatively few very large securities firms offering
a wide variety of investment related services nationally and internationally.
Numerous commercial banks have petitioned and received approval from the Board
of Governors of the Federal Reserve System to enter into a variety of new
securities activities. Various legislative proposals, if enacted, would permit
commercial banks to engage in other types of securities related activities.
These developments or other developments of a similar nature may lead to the
creation of integrated financial service firms that offer a broader range of
financial services than those offered by RAF. These developments have created
large, well capitalized, integrated financial service firms with which RAF must
compete. The securities industry has also experienced substantial commission
discounting by broker dealers competing for institutional and individual
brokerage business. An increasing number of specialized firms now offer
"discount" services to individual customers. These firms generally effect
transactions for their customers on an "execution only" basis without offering
other services such as investment recommendations and research. Such discounting
and an increase in the number of new and existing firms offering such discounts
could adversely affect RAF's retail securities business.
The correspondent clearing business has become considerably more
competitive over the past few years as numerous highly visible, large, well
financed securities firms either have begun offering clearing services or have
attempted to increase their securities clearing business. These developments
have increased competition from firms with capital resources greater than those
of RAF. Partially in response to this increase in competition, RAF has entered
into negotiations with a large investment banking firm to sell its clearing
division. The outcome of these negotiations is uncertain at this time.
- 10 -
<PAGE>
Secutron. Secutron competes with numerous software and hardware
distribution firms, and hardware manufacturers, some of which are larger than
Secutron with greater financial resources than Secutron. Secutron also competes
with firms that specialize in industry specific software and those that offer a
variety of software products to businesses in various industries. MSC competes
with hardware manufacturers and other licensed distributors of IBM hardware and
distributors of hardware manufactured by competitors of IBM. Many of MSC's
competitors are larger than MSC and have greater financial resources.
REGULATION
Directory Business. The Company's directory business is not subject to
regulation by federal, state or local governments. The directory business is a
member of the Yellow Pages Publishers Association ("Association") which has its
own Code of Ethics which regulates the business practices of its members with
respect to solicitation and billing of advertisers. If the directory business
were to violate this Code of Ethics, it could be expelled from membership in the
Association and lose national advertising accounts.
RAF. The securities industry in the United States is subject to
extensive regulation under federal and state laws. The Securities and Exchange
Commission ("Commission") is a federal agency charged with administration of the
federal securities laws. Much of the regulation of brokers and dealers has been
delegated to self regulatory organizations, principally the NASD and the
exchanges. These self regulatory organizations adopt rules (which are subject to
approval by the Commission) for governing the industry and conduct periodic
examinations of member broker dealers. Securities firms are also subject to
regulation by state securities commissions in the states in which they do
business. Broker dealers are subject to regulations that cover all aspects of
the securities business, including sales methods, trading practices among broker
dealers, capital structure of securities firms, record keeping, and the conduct
of directors, officers, and employees. Additional legislation, changes in rules
promulgated by the Commission and by self regulatory organizations, or changes
in the interpretation or enforcement of existing laws and rules often directly
affect the method of operation and profitability of broker dealers. The
Commission, the self regulatory authorities, and the state securities
commissions may conduct proceedings which can result in censure, fine,
suspension, or expulsion of a broker dealer, its officers, or employees.
RAF is required by federal law to belong to SIPC. When the SIPC fund
falls below a certain minimum amount, members are required to pay annual
assessments. The SIPC fund provides protection for securities held in customer
accounts up to $500,000 per customer, with a limitation of $100,000 on claims
for cash balances.
RAF is subject to the Commission's Uniform Net Capital Rule which is
designed to measure the financial integrity and liquidity of a broker dealer and
the minimum net capital deemed necessary to meet its commitments to its
customers. RAF is in compliance with the Rule. Failure to maintain the required
net capital may subject RAF to suspension by the Commission or other regulatory
bodies and may ultimately require its liquidation. The Company is not itself a
registered broker dealer and is not subject to the Net Capital Rule. However,
under the Rule, the Company could be affected by the requirement that a broker
dealer such as RAF under certain circumstances is prohibited, and under other
circumstances may be temporarily restricted, by the Commission from the
withdrawal of equity capital by a stockholder such as the Company.
ITEM 2. PROPERTIES.
Directory Division Properties. The directory business maintains its
administrative offices and production facilities in a 9,400 square foot building
owned by the Company at 216 North 23rd Street, Bismarck, North Dakota 58501. The
Company is acquiring the property on which the building is located for $115,000
pursuant to a contract for deed with a nonaffiliated party. Since entering into
the contract for deed, improvements totaling $122,519 have been made by the
Company to the building. In October 1991, the Company completed renovation of
3,000 square feet of office space in this building. The improvements have been
made with borrowed funds, and have been made part of the original contract for
deed. The directory business also has a branch office at 1323 23rd Street South,
Suite E, Fargo, North Dakota. FPS rents approximately 2,200 square feet of
office space in a
- 11 -
<PAGE>
building located at 2208 East Broadway, Bismarck, North Dakota, 58501. FMG
leases approximately 3,300 square feet of office space in a building located at
Highway 49 South, Beulah, North Dakota.
RAF Properties. RAF's principal offices are located at One Norwest
Center, 1700 Lincoln Street, 32nd Floor, Denver, Colorado, 80203, which consist
of approximately 47,071 square feet of office space leased from Norwest Bank of
Colorado, National Association and Norwest Corporation for the 31st and 32nd
floors, respectively, of One Norwest Center in Denver, Colorado. RAFCO was the
original lessee in two subleases, one with United Bank of Denver National
Association for the 31st floor and one with Norwest Corporation for the 32nd
floor, both of which were effective on January 30, 1992. Both of the subleases
will expire on April 30, 2007. United Bank of Denver, National Association
subsequently assigned its interest in the sublease for the 31st floor to Norwest
Bank of Colorado, National Association, following the acquisition of United Bank
of Colorado by Norwest Bank. RAFCO subsequently assigned its interest in both of
the subleases to the Company, which then signed subleases with RAF under the
same terms and conditions set forth in the original subleases. RAF pays the
Company monthly rent of $27,147 and $26,788 for the 31st and 32nd floors,
respectively.
ITEM 3. Legal Proceedings.
Legal Proceedings Against the Directory Division. There are no pending
material legal proceedings against the Company's directory business, FMG or FPS.
Legal Proceedings Against RAF. During 1994, a lawsuit was filed against
RAF in Case No. 94-2235- CA-B, in the Circuit Court for the Fifth Judicial
Circuit in Marion County, Florida. The complaint alleges damages against RAF and
others in excess of $10,000,000 arising out of the alleged improper handling of
securities by RAF and other defendants. The claims asserted against RAF are
breach of contract, negligent misrepresentation, breach of fiduciary duty, and
joint and several liability of all defendants. RAF is vigorously defending this
lawsuit on the basis that, as clearing agent for a Correspondent, which is one
of the other defendants, RAF owed no duty to the plaintiff and was legally
required to follow the Correspondent's instructions with respect to the
securities at issue. In November of 1995, the court issued an injunction
pursuant to which the securities which are the subject of the lawsuit were
returned to the custody of the plaintiff, an action which, at a minimum,
management believes will greatly mitigate any alleged damages. RAF has and will
continue to vigorously contest this matter. In addition, RAF is currently a
defendant or codefendant in seven arbitrations involving former customers, each
alleging compensatory damages of $25,000 or less; RAF is currently a defendant
or codefendant in seven arbitrations with former customers and one arbitration
in which RAF acted as the clearing agent, each alleging compensatory damages of
$300,000 or less; RAF has brought an arbitration action against former customers
in response to informal customer complaints against RAF for compensatory damages
of approximately $527,000; RAF is a defendant or codefendant in three additional
arbitrations in which former customers are alleging compensatory damages ranging
from $488,000 to $914,000; and RAF is a defendant or codefendant in two civil
lawsuits brought by former customers, one alleging $35,000 in damages, and one
alleging an unspecified amount of damages. RAF is currently appealing a judgment
against RAF entered in a civil lawsuit in November of 1995 for $190,000. RAF has
also been asked by a party in a legal proceeding to turn over approximately
$690,000 allegedly held by RAF on behalf of a debtor in a pending lawsuit, and a
former employee has brought suit against RAF for $11,000 in compensatory
damages. Management believes that while the outcome of these matters may have
some effect on earnings in an interim reporting period, the outcome of these
matters will not have a significant adverse effect on any annual reporting
period or on the overall financial condition of the Company. From time to time,
RAF has claims asserted against it by its customers and customers of its
Correspondents. This is common in the industry and RAF views it as a recurrent
factor. There are no other pending material legal proceedings to which the
Company or any of its subsidiaries are a party, or of which any of their
respective properties is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security holders
during the Company's fiscal quarter ended September 30, 1995.
- 12 -
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Market Information. The Company's Common Stock has been traded on
the Nasdaq Small Cap Market under the symbol FDIR, since March 27, 1989. The
following table shows the range of high and low bid quotations for the Common
Stock, for each quarterly period since October 1, 1993, as reported by the NASD.
These quotations represent prices between dealers and do not include retail
markups, markdowns, or commissions and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
Common Stock
---------------
Fiscal Quarter Ended High Low
- -------------------- ---- ---
<S> <C> <C> <C> <C>
December 31, 1993........................................ .75 .44
March 31, 1994........................................... .81 .44
June 30, 1994............................................ .69 .44
September 30, 1994....................................... .66 .53
December 31, 1994........................................ .53 .41
March 31, 1995........................................... .66 .44
June 30, 1995............................................ 1.56 .56
September 30, 1995....................................... .88 .63
</TABLE>
(b) Holders. As of December 1, 1995, the Company had approximately 174
holders of record of its Common Stock and 19 holders of record of its Preferred
Stock.
(c) Dividends. The Company has not declared cash dividends on its
Common Stock since its inception and the Company does not anticipate paying any
dividends in the foreseeable future. The Company is precluded from paying
dividends on its Common Stock so long as shares of Preferred Stock are
outstanding and if dividends have not been paid in full on the Preferred Stock.
Holders of Preferred Stock are entitled to receive, when, as and if declared by
the Board of Directors out of funds at the time legally available therefor, cash
dividends at an annual rate of 9% (equal to $.90 per share annually), payable
quarterly in arrears. Cumulative dividends accrue and are payable to holders of
record as they appear on the stock books of the Company on record dates which
shall be the last day of the last calendar quarter ending prior to the dividend
payment date. Preferred Stock dividends are payable quarterly at a rate of $0.23
per share ($.90 per share annually). The Preferred Stock was issued in April
1995 and the Company declared and paid two consecutive dividends for the
quarters ended June 30, 1995 and September 30, 1995. Management currently
believes that the Company will be able to pay the next quarterly dividend due in
January 1996. The Preferred Stock has priority as to dividends over the Common
Stock and any other stock of the Company ranking junior to or on a parity with
the Preferred Stock and no dividend may be declared, paid or set aside for
payment or other distribution declared or made upon the Common Stock or any
other stock of the Company ranking junior to or on a parity with the Preferred
Stock, nor shall funds be set aside for the purchase or redemption of any such
stock, through a sinking fund or otherwise, unless all accrued and unpaid
dividends on the Preferred Stock have been paid or declared and set aside for
payment.
ITEM 6. SELECTED FINANCIAL DATA
As a result of the transaction described in the RAFCO Agreement, the
former shareholders of RAFCO acquired a 55% interest in the Company.
Accordingly, the transaction has been accounted for as a "reverse acquisition"
of the Company by RAFCO using the purchase method of accounting and the
Company's assets and liabilities prior to the transaction described in the RAFCO
Agreement have been adjusted to their market value as of the date of the
business combination. The adjustment to market value resulted in an intangible
asset, directory publishing rights, which was recorded at $6,972,468. The
Company's operations are included in the consolidated financial statements
beginning May 1, 1995, the effective date of the business combination. As a
result of the reverse acquisition accounting, historical financial statements
presented for periods prior to the business combination date include the
consolidated assets, liabilities, equity, revenues, and expenses of RAFCO only.
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<PAGE>
The following is selected consolidated financial information for the Company as
of September 30, 1995 and for the nine months ended September 30, 1995, and for
RAFCO as of December 31, 1994, 1993, 1992, 1991 and for each of the years in the
four year period ended December 31, 1994. This information should be read in
conjunction with the consolidated financial statements appearing in Item 8 of
this Annual Report.
<TABLE>
<CAPTION>
Nine
Months
Ended Years Ended December 31,
September ----------------------------------------
30, 1995* 1994 1993 1992 1991
--------- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Revenue ..... $ 17,170 $ 16,259 $ 18,157 $ 17,297 $ 17,085
Net Earnings (1,892) (353) (23) 451 (30)
(Loss)
Loss per Com- (.20) ** ** ** **
mon Share
<CAPTION>
December 31,
September ----------------------------------
30, 1995* 1994 1993 1992 1991
--------- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
Working Capital .............. $ 4,130 $ 2,443 $ 3,292 $ 1,890 $ 1,178
Total Assets ................. 20,720 22,326 95,700 58,249 62,735
Total Long Term Liabilities .. 4,854 3,164 3,530 3,189 1,600
Total Stockholders' Equity .. 5,442 1,188 1,594 805 853
<FN>
*For the period January 1, 1995 through September 30, 1995. See "Business --
Acquisition of RAFCO -- Sale of Option to Telecom, and -- Sale of Directories to
Telecom" for information regarding changes in the Company's business which
occurred in fiscal year 1995.
**Due to the limited number of shares outstanding from 1991 through 1994,
presentation of earnings per share is not meaningful.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
At September 30, 1995, shareholders' equity was $5,441,590 up
$4,253,155 or 358%, over year end December 31, 1994. This increase was due to
the shares issued in connection with the acquisition of RAFCO by the Company in
April of 1995. The ratio of current assets to current liabilities at September
30, 1995, was 1.40 to 1, an increase from 1.14 to 1 at December 31, 1994.
- 14 -
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995 Compared With 12 Months Ended December 31,
1994
The Company's acquisition of RAFCO under the terms of the RAFCO
Agreement described in "Business - - Acquisition of RAFCO," has been accounted
for as a reverse acquisition of Fronteer Directory Company, Inc. ("Fronteer") by
RAFCO using the purchase method of accounting. This resulted in Fronteer
adjusting its assets and liabilities to their fair market value at the effective
date of the acquisition, or May 1, 1995. The enclosed financial statements show
RAFCO and its subsidiaries for the years ended December 31, 1994 and 1993, and
the nine months ended September 30, 1995, while the Company and subsidiaries,
including RAFCO, are consolidated from May 1, 1995 to September 30, 1995, in
accordance with the purchase method of accounting.
On April 27, 1995, the Company entered into the Telecom Agreement
whereby the Company sold 10 of its telephone directories to Telecom. See
"Business -- Sales of Directories to Telecom." The transactions under the
Telecom Agreement were accounted for in May of 1995, subsequent to the effective
date of the business combination. The Company also granted an Option to Telecom
on the same date whereby Telecom made a noninterest bearing and nonrecourse
$500,000 loan to the Company in exchange for the Option to acquire the Company's
nine North Dakota telephone directories. See "Business -- Sale of Option to
Telecom." Because the Company adjusted its directories to their fair market
value at the time of the acquisition of RAFCO, no gain or loss was recognized on
the sale of the directories to Telecom. The book value of the directory
publishing rights after the sale to Telecom was $4,692,769. This amount is being
amortized over 10 years with amortization totalling $161,886 for the nine month
period ended September 30, 1995.
The Company incurred a net loss for the nine months ended September 30,
1995, of $1,891,873 which compares to a net loss of $353,426 for the 12 months
ended December 31, 1994.
Revenues for the nine months ended September 30, 1995 totalled
$17,169,754, an increase of $910,854 over revenues of $16,258,900 for the year
ended December 31, 1994. Directory revenues during the nine months ended
September 30, 1995 totalled $3,625,038, which includes only five months of
revenues for the directory business due to the business combination. Computer
revenues from Secutron for the nine months ended September 30, 1995 were 92% of
total revenues for the year ended December 31, 1994, an increase of 22% on an
annualized basis. Broker dealer revenues for the nine months ended September 30,
1995 totalled $9,729,223 as compared to $12,713,456 for the year ended December
31, 1994. Broker dealer revenues for the nine months ended September 30, 1995
annualized for the year total $12,972,297, which is comparable to 1994.
Broker dealer revenues generated by RAF are made up of several
components, which have changed in their makeup and materiality from 1994. Broker
commissions of $7,051,366 for the nine months ended September 30, 1995 exceeded
last year's annual total of $5,792,268. This amounts to an increase of
$1,259,098, or 62%, over 1995 annualized revenues. This increase resulted in
large part from RAF's new sales offices in Reston, Virginia and Atlanta,
Georgia, which were opened in the summer of 1994, as well as from the addition
of brokers in existing sales offices. RAF plans to increase its sales force and
number of sales offices in 1996 and has already opened a new sales office in
Chicago, Illinois since September 30, 1995, the end of the fiscal year.
Various changes in the way the Company evaluates its business
opportunities took place in fiscal 1995. RAF's bank services division was sold
to Sheshunoff Information Services, Inc. during the year. This completely
eliminated bank services as a revenue source in 1995, while the bank services
division produced revenue of over $1,150,000 during fiscal year 1994. Revenues
from clearing operations also declined significantly during the nine months
ended September 30, 1995 from $1,079,931 in 1994 to $182,215 in the nine months
ended September 30, 1995. Factors specifically related to the clearing business
and its capital requirements made the Company's clearing business uncompetitive
during fiscal year 1995. The Company believes that its clearing operations will
continue to decline in fiscal year 1996 due to its inability to compete in the
clearing industry.
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<PAGE>
The corporate and public finance divisions of RAF had significantly
lower revenues in fiscal 1995 as compared to fiscal 1994 due to a decrease in
activity subsequent to an active fourth quarter in 1994, the continued
unpredictable impact of interest rate fluctuation, and an amendment to the
Colorado State Constitution, which placed many restrictions on public financing
in the State of Colorado. Revenues for 1994 of $3,032,968 decreased to
$1,340,573 for the nine months ended September 30, 1995.
Broker dealer commissions increased during the nine months ended
September 30, 1995 by $785,543 over the year ended December 31, 1994, which
coincides with an increase in commission revenues. However, commission revenues
were up 22% over 1994, while commission expense was up only 18%. Not included in
these percentages is a total of over $244,000 in advances to brokers which was
forgiven and expensed during the nine months ended September 30, 1995. In order
to attract broker dealers to RAF's two new offices in Reston, Virginia and
Atlanta, Georgia, the former RAFCO made loans to its new salespeople. As the
salespeople meet certain length of employment and sales goals, the loans are
forgiven. A total of over $244,000 of these loans was expensed during 1995,
while $180,000 remaining is being amortized over the employment period.
General and administrative expenses (G & A) totalled $6,550,305 for the
nine months ended September 30, 1995. This compares to $8,829,454 for the year
ended December 31, 1994. A total of approximately $75,000 in expenses related to
the Company's acquisition of RAFCO was incurred during the year and is included
in G & A. During 1995, the Company wrote down a note receivable due from a
former RAFCO employee in the amount of $338,000, which has been in G & A. G & A
includes no expenses for the Company's directory business prior to May 1, 1995.
Fixed operating expenses for both RAF and the Company's directory business are
in a state of decline due to the reorganization, and the sale of RAF's bank
services division and the sale of certain of the Company's directories.
Interest income for the nine months ended September 30, 1995 totalled
$496,316, a decline of $586,260 from the year ended December 31, 1994. This
decrease is attributable to a large decline in the Company's margin debit
interest, which is associated with the decline in the Company's clearing
business and revenues during the period.
Other revenues increased from $30,214 during fiscal 1994 to $579,337 in
the nine months ended September 30, 1995. Revenues of $149,780 and $66,374 for
FMG and FPS, respectively, are included for the nine months ended September 30,
1995. In addition, a gain on the sale of a condominium of $96,094 is included in
the nine months ended September 30, 1995.
The minority interest reflected in the financial statements relates to
the approximately 52% of Secutron stock not owned by the Company.
Year Ended December 31, 1994 Compared With Year Ended December 31, 1993
Fiscal 1994 operating revenues decreased by 10% ($1,897,710) compared
with revenues in fiscal 1993. The revenues for RAF declined 9% in fiscal year
1994, while those of Secutron declined 13% from fiscal 1993. RAF commissions,
clearing fees, and transactional charges declined in 1994 and there was no
offset to these declines by corporate or public finance, nor by the bank
services division. In particular, decreasing clearing revenues were of concern,
because these were not anticipated to recover without acquiring greater
financial resources to become "balance sheet competitive" with other broker
dealers offering similar services. Finally, in 1994, Secutron hardware and
software sales declined faster and further on a percentage basis than did the
revenues of RAF. Secutron, however, was undergoing a transition in 1994 of
shifting its own customer base to the sale and service of IBM products as well
as software sales to the brokerage community. Only net interest income showed an
increase in 1994, increasing $69,358, or 16% over fiscal 1993.
1994 operating expenses decreased by $1,581,394, or 8%, a decrease
similar to the decrease in operating revenues. Support personnel and related
- 16 -
<PAGE>
expenses at RAF were reduced and various departments decreased expenses,
including cost of sales in 1994 compared with 1993. Expenses related to
additional administrative costs, or the Correspondent clearing division,
declined materially in 1994 compared with 1993.
Liquidity and Capital Resources
At September 30, 1995, the Company had working capital of $4,130,358,
up from $2,442,283 on December 31, 1994.
The Company currently has a line of credit with its primary lender
whereby the Company may borrow up to 75% of its billed directory accounts
receivable under 60 days old. The Company currently has over $1,300,000
available on this line. The Company also has credit agreements with the Pershing
Division of Donaldson, Lufkin & Jenrette, which includes a broker loan line of
finance securities owned, securities held for correspondent accounts, and
receivables in customer margin accounts. This line may also be used to release
pledged collateral against day loans. Outstanding balances under these credit
arrangements are adequate to meet the short term operating needs of RAF.
Liquidity is expected to be adequate in fiscal 1996.
Inflation
The effects of inflation on the Company's operations is not material
and is not anticipated to have any material effect in the future.
New Accounting Standards
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long Lived Assets to Be Disposed Of (SFAS 121) was issued in
March, 1995, by the Financial Accounting Standards Board. It requires that long
lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. SFAS 121
is required to be adopted for fiscal years beginning after December 15, 1995.
Adopting this statement by the Company is not expected to have a significant
effect on the consolidated financial statements.
Statement of Financial Accounting Standards No. 123, Accounting for
Stock Based Compensation (SFAS 123), was issued by the Financial Accounting
Standards Board in October, 1995. SFAS 123 establishes financial accounting and
reporting standards for stock based employee compensation plans as well as
transactions in which an entity issues its equity instruments to acquire goods
or services from nonemployees. This statement defines a fair value based method
of accounting for employee stock option or similar equity instrument, and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost for those plans using the intrinsic value based
method of accounting prescribed by APB Opinion No. 25, Accounting for Stock
Issued to Employees. Entities electing to remain with the accounting in Opinion
25 must make proforma disclosures of net income and, if presented, earnings per
share, as if the fair value based method of accounting defined by SFAS 123 had
been applied. SFAS 123 is applicable to fiscal years beginning after December
15, 1995. The Company currently accounts for its equity instruments using the
accounting prescribed by Opinion 25. The Company does not currently expect to
adopt the accounting prescribed by SFAS 123; however, the Company will include
the disclosures required by SFAS 123 in future consolidated financial
statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Supplementary Data that
constitute Item 8 are included at the end of this report beginning on page F-1.
- 17 -
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements of the type
required to be reported under this item between the Company and its independent
accountants during the fiscal year ended September 30, 1994.
On September 1, 1995, the Company's former accountant, Eide Helmeke &
Co. ("Eide"), located in Bismarck, North Dakota, resigned as the Company's
principal accountant. Eide's report on the Company's consolidated financial
statements for the fiscal year ended September 30, 1994 did not contain an
adverse opinion or a disclaimer of opinion, nor was it qualified or modified as
to any uncertainty, audit, scope or accounting principles. Following the
Company's acquisition of RAFCO in April 1995, the Board of Directors recommended
and approved a change in accountants from Eide to KPMG Peat Marwick, LLP. During
the Company's fiscal years ended September 30, 1993, and 1994, and during the
interim period from October 1, 1994 through April 30, 1995, there were no
disagreements with Eide on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to Eide's satisfaction, would have caused it to
make a reference to the subject matter of the disagreement in connection with
its report. The Company engaged KPMG Peat Marwick, Denver, Colorado, as its
principal accountant on September 29, 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Identification of Directors
The present term of office of each director will expire at the next
annual meeting of shareholders and when his successor has been elected and
qualified. The name, position with the Company, age of each director and the
period during which each director has served are as follows:
<TABLE>
<CAPTION>
Name and Position in the Company Age Director Since
- -------------------------------- --- --------------
<S> <C> <C>
Dennis W. Olson................................ 55 1977
President and Director
Robert A. Fitzner, Jr.......................... 50 1995
Director
Robert L. Long................................. 62 1995
Director
</TABLE>
Under the terms of the RAFCO Agreement, six of the seven members of the
Board of Directors of the Company agreed to resign within 15 days after the date
the RAFCO Agreement was signed and Dennis W. Olson, the seventh member of the
Board, agreed to accept the resignations of the other six members and to appoint
Robert A. Fitzner, Jr. and Robert L. Long as directors to fill two of the
vacancies created by such resignations. Effective May 23, 1995, the resignations
agreed to in the RAFCO Agreement were accepted, Messrs. Fitzner and Long were
appointed as directors of the Company to fill two of the vacancies, and the size
of the board of directors was set at three members. Other than the foregoing,
there was no arrangement or understanding between any director or any other
person pursuant to which any director was selected as such.
(b) Identification of Executive Officers.
Each executive officer will hold office until his successor duly is
elected and qualified, until his death, resignation or until he shall be removed
in the manner provided by the Company's Bylaws. The Company's executive
officers, their ages, positions with the Company and periods during which they
served are as follows:
- 18 -
<PAGE>
<TABLE>
<CAPTION>
Name of Executive Officer
and Position in Company Age Officer Since
----------------------- --- -------------
<S> <C> <C>
Dennis W. Olson ............ 55 1977
President of the Company
Robert A. Fitzner, Jr ...... 50 1984*
President of RAF
Robert L. Long ............. 62 1990*
Senior Vice President of RAF
<FN>
*Messrs. Fitzner and Long have been officers of RAF for the periods indicated.
</FN>
</TABLE>
There was no arrangement or understanding between any executive officer
and any other person pursuant to which any person was selected as an executive
officer.
(c) Identification of Certain Significant Employees.
Not applicable.
(d) Family Relationships.
Not applicable.
(e) Business Experience.
Background. The following is a brief account of the business experience
during the past five years of each director and executive officer of the
Company:
<TABLE>
<CAPTION>
Name of Director or
Officer Principal Occupation During the Last Five Years
- ------------------- -----------------------------------------------
<S> <C>
Dennis W. Olson President and a Director of the Company since 1977.
Robert A. Fitzner, Jr. President, Chief Executive Officer of RAF since
1984 and Director of RAF since 1986, and a Director
of Secutron since 1986. Mr. Fitzner has been a
Director of the Company since May of 1995, when RAF
became a wholly owned subsidiary of the Company.
Robert L. Long Senior Vice President and Managing Director of the
Corporate Finance Division of RAF since 1990. Mr.
Long became a Director of the Company in May of 1995
after RAF became a wholly owned subsidiary of the
Company.
</TABLE>
Directorships.
No director of the Company is a director of any other entity that has
its securities registered pursuant to Section 12 of the 1934 Act.
(f) Involvement in Certain Legal Proceedings.
No event required to be reported hereunder has occurred during
the past five years.
- 19 -
<PAGE>
(g) Promoters and Control Persons.
Disclosure under this paragraph is not applicable to the
Company.
Compliance With Section 16(a) of the Securities Exchange Act of 1934.
To the Company's knowledge, during the Company's fiscal year ended
September 30, 1995, the only directors, officers or more than 10% shareholders
of the Company that failed to timely file a Form 3, Form 4 or Form 5 were Dennis
W. Olson, Marlow Lindblom, Roland Haux and Larry Scott, each of whom filed late
Forms 5 reporting the following number of transactions involving stock ownership
which was the result of participation in the Company's ESOP and 401(k)
retirement plans: Dennis W. Olson: nine transactions reported on five Forms 5;
Marlow E. Lindblom: nine transactions reported on five Forms 5; Larry Scott:
nine transactions reported on five Forms 5; and Roland Haux: four transactions
reported on three Forms 5.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides certain information pertaining to the
compensation paid by the Company and its subsidiaries for services rendered by
Dennis W. Olson, the President of the Company, Robert A. Fitzner, Jr., the
president of RAF, and Robert L. Long, the senior vice president of RAF. RAF
became a subsidiary of the Company in April of 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
-------------------------------------- ------------
Year Other
Ended Annual Securities All Other
Name and Septem- Compen- Underlying Compensa-
Principal Position ber 30, Salary($) Bonus($) sation($) Options(#) tion($)
- ------------------ ------- -------- ------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Dennis W. Olson ......................... 1995 120,193(a) 10,000 (b) 0 100,000
President of the ....................... 1994 125,960 0 (b) 0 1,543
Company ................................ 1993 94,275 0 (b) 100,000 1,116
Robert A. Fitzner, Jr ................... 1995 132,000 40,000 573 0 0
President of RAF ....................... 1994 137,500 40,000 301 0 0
....................... 1993 132,000 40,000 108 0 0
Robert L. Long, ......................... 1995 320,500(c) 0 (d) 0 0
Senior Vice ............................ 1994 453,551(c) 0 (d) 0 0
President of RAF ....................... 1993 359,596(c) 0 (d) 0 0
- ---------------------
<FN>
(a) See "Employment Contracts and Termination of Employment and Change In
Control Arrangements" below for a description of Mr. Olson's employment
contract with the Company.
(b) The Company provided Mr. Olson with the use of an automobile during
fiscal years 1993, 1994 and 1995, and paid a club membership during
fiscal years 1993 and 1994, however, these benefits did not exceed 10%
of his aggregate cash compensation for the years indicated. Mr. Olson
participates in Company sponsored employee insurance programs on the
same terms as other employees.
(c) Mr. Long is compensated on a commission basis only.
- 20 -
<PAGE>
(d) Mr. Long's compensation for each of the fiscal years shown does not
include warrants received as compensation from RAF. Such warrants do
not have value unless and until they are exercised or sold.
</FN>
</TABLE>
Effective September 30, 1988, the Company adopted an Incentive Stock
Option Plan ("Plan"). The purpose of the Plan is to secure and retain key
employees of the Company. The Plan authorizes the granting of options to
officers, directors, and employees of the Company to purchase 600,000 shares of
the Company's Common Stock subject to adjustment for various forms of
recapitalization that may occur. No options may be granted after September 30,
1998, and fair value of options granted to each optionee cannot exceed $100,000
per year.
An employee must have six months of continuous employment with the
Company before he or she may exercise an option granted under the Plan. Options
under the Plan may not be granted at less than fair market value at the date of
the grant. Options granted under the Plan are nonassignable and terminate three
months after the optionee's employment ceases, except in the case of employment
termination due to disability of the optionee, in which event the option expires
twelve months from the date employment ceases. The Plan is administered by a
committee selected by the Company's Board of Directors.
Effective December 12, 1988, the Company granted options under the Plan
to 37 individuals, which included 32 employees, the Company's three officers,
and two outside directors, for each such individual to purchase 4,000 shares at
$.70 per share through December 12, 1993. Such grants involved an aggregate of
148,000 shares. Employees hired after December 12, 1988, and with the Company
for six consecutive months, were each granted options to purchase 4,000 shares
of the Company's stock at the closing price on the date of the grant, limited to
a floor of $.70 per share. At September 30, 1995, options to purchase 43,000
shares under the Plan had been exercised and other options previously granted to
purchase 342,000 shares had expired. Currently there are no options outstanding
and 557,000 shares remain in the Plan.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted by the Company to Robert A. Fitzner, Jr., Dennis W.
Olson or Robert L. Long during the Company's fiscal year ended September 30,
1995.
AGGREGATED OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR
END OPTION VALUES
The following table sets forth information with respect to Dennis W.
Olson and Robert L. Long concerning the exercise of options and underwriter's
warrants during the Company's last fiscal year ended September 30, 1995, and
unexercised options and warrants held as of September 30, 1995. Robert A.
Fitzner, Jr. does not own any options or warrants to purchase securities of the
Company.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of In-the-Money
Options at Options at
September 30, 1995(#) September 30, 1995($)(1)
Shares Acquired Value -------------------------------- -------------------------------
Name on Exercise(#) Realized($) Exercisable/ Unexercisable Exercisable/ Unexercisable
- ---- --------------- ---------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis W. Olson ............. - 0 - - 0 - 100,000 - 0 - - 0 - - 0 -
Robert L. Long ............. - 0 - - 0 - 8,125 - 0 - - 0 - - 0 -
<FN>
(1) Value of unexercised in-the-money options or warrants is the market
price of the underlying shares of Common Stock at September 30, 1995,
less the exercise price of the options or warrants.
</FN>
</TABLE>
- 21 -
<PAGE>
Compensation of Directors--Standard Arrangement.
Prior to the change in the members of the Board of Directors in May of
1995, directors of the Company who were not employees or officers received
$1,000 per quarter. Since May of 1995, directors receive no compensation.
Directors of Secutron who are not also officers or employees of Secutron receive
$30,000 annually.
Long Term Incentive Plans - Awards in Last Fiscal Year.
During the year ended September 30, 1995, the executive officers of the
Company earned or were awarded shares pursuant to the Company's Employee Stock
Ownership Plan and the Company's 401(k) Plan as follows:
<TABLE>
<CAPTION>
Number of
Shares of
the Company's
Name Common Stock
----- ----------------------
<S> <C> <C>
Dennis W. Olson ...... 1,482(1) 642(2)
Robert A. Fitzner, Jr 0(1) 0(2)
Robert L. Long ....... 0(1) 0(2)
<FN>
(1) Pursuant to Employee Stock Ownership Plan. See discussion below with
respect to vesting of shares of Common Stock pursuant to the ESOP Plan.
(2) Pursuant to 401(k) Plan. See discussion below with respect to vesting
of shares of Common Stock contributed to the 401(k) Plan.
</FN>
</TABLE>
On September 22, 1989, the Company's Board of Directors adopted an
Employee Stock Ownership Plan ("ESOP Plan") which provides in pertinent part
that the Company may annually contribute tax deductible funds to the ESOP Plan,
at its discretion, which are then allocated to the Company's employees based
upon the employees' wages in relation to the total wages of all employees in the
ESOP Plan.
The ESOP Plan provides that more than half of the assets in the ESOP
Plan must consist of the Company's Common Stock. The ESOP Plan is administered
by a board of trustees under the supervision of an advisory committee, both of
which are appointed by the Company's board of directors. At September 30,1995,
the ESOP Plan owned 493,900 shares of the Company's Common Stock and no other
marketable securities. The ESOP Plan also had an outstanding bank loan of
$350,000, which was secured by the stock in the ESOP Plan and was guaranteed by
the Company. Employees become vested in the shares of the Company's Common Stock
after six years in the ESOP Plan. Executive officers participate in the ESOP
Plan in the same manner as other employees. Employees are 20% vested after two
years, vesting an additional 20% each year up to 100% after six years in the
ESOP Plan.
On April 1, 1991, the Company initiated a 401(k) plan, which provides
in pertinent part that the Company's employees may deduct money from their
paychecks on a pretax basis, which is invested into any of six investment
choices provided by the 401(k) Plan. Taxes on funds invested in the 401(k) Plan
are deferred until the money is drawn out, usually at retirement. All employees
as of April 1, 1991, were eligible for the 401(k) Plan and new employees after
that date become eligible for the 401(k) Plan on the April 1 or October 1
immediately following the completion of one year of employment. As an incentive,
the Company provides a matching contribution of shares of the Company's Common
Stock at the end of the year. This matching goes to all employees who are with
the Company on September 30 and is a dollar for dollar matching up to the first
$312.
- 22 -
<PAGE>
Employees become vested in this matching at the rate of 20% per year, commencing
two years after employment begins, and they are 100% vested after six years with
the Company. At September 30, 1995, 254,800 shares of the Company's Common Stock
had been purchased by the 401(k) Plan. Officers participate in the Plan in the
same manner as other employees.
The Company has no other bonus, profit sharing, pension, retirement,
stock purchase, deferred compensation, or other incentive plans.
Employment Contracts and Termination of Employment and Change-In-Control
Arrangements.
There is no employment contract between the Company or RAF and Robert
A. Fitzner, Jr. Robert L. Long and RAF have an oral agreement whereby Mr. Long
receives commissions based on a percentage of the dollar amount of his clients'
transactions and the dollar amount of all RAF corporate finance transactions and
he receives one half of all warrants received by RAF as compensation for
corporate finance transactions.
Legally effective as of January 1, 1995, the Company entered into an
employment agreement with its president, Dennis W. Olson. The employment
agreement is for a term of three years ending January 1, 1998; provides for
annual compensation and benefits, provides that upon full disability, Mr. Olson
will be entitled to full salary for three months, two thirds salary for three
months, and one half salary for six months; provides that the employment
agreement shall be binding upon any successor to the Company; and the agreement
provides that, upon the expiration of the employment agreement, the Company
shall be required, at Mr. Olson's option, to purchase from him up to 500,000
shares of the Company's Common Stock at $1.00 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a)(b) Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of December 1, 1995, the number of
shares of the Company's outstanding Common Stock and Preferred Stock
beneficially owned by each of the Company's current directors and officers, sets
forth the number of shares of the Company's Common Stock and Preferred Stock
beneficially owned by all of the Company's current directors and officers as a
group and sets forth the number of shares of the Company's Common Stock and
Preferred Stock owned by each person who owned of record, or was known to own
beneficially, more than 5% of the Company's outstanding shares of Common Stock
and Preferred Stock respectively:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name and Address of Ownership (1) Class
Beneficial Owner or ------------------------ --------------------
Officer or Director Common Preferred Common Preferred
- ------------------- ------ --------- ------ ---------
<S> <C> <C> <C> <C>
Robert A. Fitzner, Jr .... 5,665,793(2) 7,500(3) 45.2% 8.6%
1700 Lincoln St.
32nd Floor
Denver, CO 80202
Kanouff Corporation ...... 1,558,078 0 12.4% 0
1610 Wynkoop St.
Suite 200
Denver, CO 80202
Dennis W. Olson .......... 683,814(4) 0 5.4% 0
- 23 -
<PAGE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name and Address of Ownership (1) Class
Beneficial Owner or ------------------------ --------------------
Officer or Director Common Preferred Common Preferred
- ------------------- ------ --------- ------ ---------
<S> <C> <C> <C> <C>
Robert L. Long ......... 603,125(5) 0 4.8% 0
All officers and ....... 6,876,555(6) 7,500 54.8% 8.6%
directors as a group
(3 persons)
- ------------------
<FN>
(1) Each person has the sole voting and investment power over the shares indicated.
(2) Includes 881,088 shares over which Mr. Fitzner has voting power
pursuant to four Voting Agreements and Irrevocable Proxies dated June
2, 1995, one each between Mr. Fitzner and Dorothy K. Englebrecht,
Steven Fishbein, Peter O'Leary and Arlene Wilson. The irrevocable
proxies expire on July 16, 1997 and the voting trust agreements expire
on September 15, 1997. See "Business -- Acquisition of RAFCO."
(3) Includes 2,500 shares of Preferred Stock owned by Earlene E. Fitzner, Mr. Fitzner's mother, over which shares Mr.
Fitzner has voting power.
(4) Includes 100,000 shares of Common Stock underlying a stock option, 6,487 shares held in the Company's ESOP Plan
and 2,108 shares held in the Company's 401(k) Plan.
(5) Includes 78,125 underwriter's warrants held by Mr. Long.
(6) Includes shares underlying the stock options held by Mr. Olson.
</FN>
</TABLE>
(c) Changes in Control.
There are presently no arrangements of any kind which may at a
subsequent date result in a change in control of the Company.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a)(b) Transactions With Management and Others and Certain Business
Relationships.
Certain officers and directors of the Company have in the past made
personal loans to the Company when it was in need of short term financing. At
September 30, 1995, such loans from affiliates were as follows:
<TABLE>
<CAPTION>
Interest Maturity
Lender Amount Rate Date
- ------ ------ -------- --------
<S> <C> <C> <C>
Dennis W. Olson ....... $200,000 11.5% On Demand
</TABLE>
This loan is unsecured, at a rate that would generally be available from local
banking institutions for good customers and is subordinated to then outstanding
bank loans to the Company. All loan transactions with related persons have been
on terms no less favorable than those available from third parties. It is
probable that the Company will continue to engage in such borrowing activities
in the future; however, there are currently no specific plans to do so.
Robert A. Fitzner, Jr. became a director of the Company as a result of the
reorganization transaction set forth in the RAFCO Agreement. See "Business --
Acquisition of RAFCO." As a result of such reorganization
- 24 -
<PAGE>
transaction, Mr. Fitzner received 4,784,705 shares of the Company's Common Stock
and 5,000 shares of the Company's Preferred Stock. As a result of such
reorganization transaction, the Company assumed the obligation to Mr. Fitzner on
a 10% senior subordinated note due December 31, 2003 in the amount of $50,000.
As a result of such reorganization transaction, the Company issued 2,500 shares
of Preferred Stock to Earlene E. Fitzner, Mr. Fitzner's mother, and the Company
has assumed the obligation to pay a 10% senior subordinated note due December
31, 2003 in the principal amount of $150,000 to Mr. Fitzner's mother and has
assumed the obligation to pay a 10% senior subordinated note due December 31,
2003 in the principal amount of $50,000 to Mr. Fitzner's father, Robert A.
Fitzner, Sr.
As a result of the reorganization transaction set forth in the RAFCO
Agreement, Kanouff Corporation became the beneficial owner of approximately
12.4% of the Company's outstanding stock. See "Business -- Acquisition of
RAFCO." Patricia M. Kanouff is an officer, director, and sole shareholder of
Kanouff Corporation and John P. Kanouff, the husband of Patricia M. Kanouff, is
an officer of Kanouff Corporation. John P. Kanouff is an officer, director, and
shareholder of Hopper and Kanouff, P.C., a company providing legal services to
clients, including the Company, RAF, and Secutron. During the period from
October 1, 1994, to September 30, 1995, an aggregate of $316,000 was paid by the
Company, RAF, and Secutron to Hopper and Kanouff, P.C. for legal services.
Robert L. Long became a director of the Company as a result of the
reorganization transaction set forth in the RAFCO Agreement. See "Business --
Acquisition of RAFCO." During 1992, the Company entered into an investment
banking agreement with RAF. As of April 26, 1995, RAF became a wholly owned
subsidiary of the Company. One of the terms of Mr. Long's employment by RAF is
that he will receive a percentage of any investment banking fees received by
RAF. Under the investment banking agreement, the Company would be obligated to
pay a fee to RAF as a result of the reorganization transaction between the
Company and RAFCO which is described in "Business -- Acquisition of RAFCO." RAF
has agreed to waive its portion of any such investment banking fee. On April 26,
1995, the Company agreed to pay a merger and acquisition fee to Mr. Long in an
amount to be determined by negotiation within a reasonable time after April 26,
1995. Dennis W. Olson, Robert A. Fitzner, Jr., and Robert L. Long are in the
process of negotiating the amount of such fee.
Dennis W. Olson is currently an officer and a director of the Company.
On April 27, 1995, the Company entered into an agreement to sell certain of its
assets to Telecom as described in "Business -- Sale of Directories to Telecom."
Pursuant to the Telecom Agreement, Mr. Olson and certain other employees of the
Company entered into agreements not to compete with Telecom. As compensation for
this noncompetition agreement, Telecom has paid $100,000 out of the total of
$250,000 to Mr. Olson. On April 27, 1995, the Company granted an option to
Telecom to purchase additional assets of the Company, as described in "Business
- -- Sale of Option to Telecom." This option is exercisable for a period of two
years beginning on June 1, 1997. If Telecom exercises this option, Mr. Olson and
certain other employees of the Company will be obligated to enter into
additional noncompete agreements with Telecom and will be paid additional
amounts in consideration for such noncompete agreements. The amount of such
noncompetition payments will not be determined until after Telecom exercises its
option.
On March 22, 1995, Marlow E. Lindblom exercised a stock option and
purchased 20,000 shares of Common Stock of the Company at $0.54 per share, and
on April 28, 1995, Roland Haux exercised a stock option and purchased 70,000
shares of Common Stock of the Company at $0.58 per share. The Company has repaid
the following loans to the president and former officers and directors: Dennis
W. Olson was repaid $20,000 on April 18, 1995; Marlow E. Lindblom was repaid
$10,000 on March 21, 1995; and Roland Haux was repaid $40,000 on April 27, 1995.
- 25 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements.
Independent Auditor's Report
Consolidated Balance Sheets--September 30, 1995 and 1994
Consolidated Statements of Operations--Nine Months Ended September 30,
1995 and Years Ended December 31, 1994 and 1993
Consolidated Statement of Changes in Stockholders' Equity--Nine Months
Ended September 30, 1995 and Years Ended December 31, 1994 and 1993
Consolidated Statements of Cash Flows--Nine Months Ended September 30,
1995 and Years Ended December 31, 1994 and 1993
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules.
None
(b) Current Reports on Form 8-K:
During the fiscal quarter ended September 30, 1995, one Current Report
on Form 8-K was filed on July 10, 1995, amending a Current Report filed on May
9, 1995. The amended Current Report contained consolidated financial statements
for RAFCO, Ltd. as of December 31, 1994 and 1993 and for the years ended
December 31, 1992, 1993 and 1994, unaudited financial statements for RAFCO for
the three months ended March 31, 1995, unaudited pro forma financial information
for the Company as of March 31, 1995, for the six months ended March 31, 1995
and for the year ended September 30, 1994, and an auditor's report.
(c) Exhibits.
Exhibit 2.1 Plan of Reorganization and Exchange Agreement dated April
26, 1995 with Exhibits A, B, C, F and I (incorporated by
reference to Exhibit 2.1 to Registrant's 8-K dated May 9,
1995).
Exhibit 2.2 Sale and Purchase Agreement dated April 27, 1995, with
Exhibits A and J (incorporated by reference to Exhibit 2.2 to
Registrant's 8-K dated May 9, 1995).
Exhibit 2.3 Option Agreement dated April 27, 1995, with Exhibits A, B,
and D (incorporated by reference to Exhibit 2.3 to
Registrant's 8-K dated May 9, 1995).
Exhibit 3.0 Articles of Incorporation of Registrant.
Exhibit 3.0(i) Articles of Amendment to the Registrant's Articles of
Incorporation dated April 28, 1995 (incorporated by reference
to Exhibit 3.0(i) to Registrant's 8-K dated May 9, 1995).
Exhibit 3.2 Bylaws of Registrant.
Exhibit 9.1 Voting Trust Agreement between Robert A. Fitzner, Jr. and
Dorothy K. Englebrecht dated June 2, 1995.
Exhibit 9.2 Voting Trust Agreement between Robert A. Fitzner, Jr. and
Steven M. Fishbein dated June 2, 1995.
Exhibit 9.3 Voting Trust Agreement between Robert A. Fitzner, Jr. and
Peter K. O'Leary dated June 2, 1995.
- 26 -
<PAGE>
Exhibit 9.4 Voting Trust Agreement between Robert A. Fitzner, Jr. and
Arlene M. Wilson dated June 2, 1995.
Exhibit 10.1 Incentive Stock Option Plan as amended January 15, 1992.
Exhibit 10.2 Employee Stock Ownership Plan.
Exhibit 10.3 401(k) Plan.
Exhibit 10.4 Employment Agreement between Dennis W. Olson and the Regis-
trant dated January 1, 1995.
Exhibit 10.5 Employees/Officers/Directors Form of Non-Competition
Agreement; Covenant Not to Compete and Confidentiality
Agreement (incorporated by reference to Exhibit 2.2 to
Registrant's 8-K dated May 9, 1995).
Exhibit 16 Letter Re Change in Certifying Accountant.
Exhibit 21 Subsidiaries of the Registrant.
Exhibit 27 Financial Data Schedule
- 27 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: January 16, 1996 FRONTEER DIRECTORY COMPANY, INC.
a Colorado corporation
By: /s/ Dennis W. Olson
-----------------------------------
Dennis W. Olson, President and Chief
Executive Officer
By: /s/ Lance Olson
------------------------------------
Lance Olson, Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Date Name and Title Signature
- ---- -------------- ---------
January 16, 1996 Dennis W. Olson, Director /s/ Dennis. W. Olson
------------------------
January 16, 1996 Robert A. Fitzner, Jr. /s/ Robert A. Fitzner, Jr.
Director -------------------------
January 16, 1996 Robert L. Long, Director /s/ Robert L. Long
------------------------
- 28 -
<PAGE>
<TABLE>
FRONTEER DIRECTORY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1995 1994
------------- -----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ...................... $ 2,148,675 2,276,654
Broker dealer customer receivables, net ........ 5,004,686 13,705,027
Receivables from brokers or dealers and
clearing organizations ....................... 340,995 746,260
Trade receivables, net ......................... 3,323,071 465,420
Other receivables .............................. 237,489 426,390
Securities owned, at market value .............. 1,374,725 1,406,214
Current portion of long-term notes receivable .. 731,766 589,598
Deferred directory costs ....................... 438,412 --
Deferred income taxes .......................... 368,374 109,000
Other assets ................................... 412,967 525,185
----------- -----------
Total current assets ...................... 14,381,160 20,249,748
PROPERTY, FURNITURE AND EQUIPMENT, net
of accumulated depreciation .................. 1,698,488 1,424,689
LONG-TERM NOTES RECEIVABLE, net of
current portion .............................. 109,091 --
DEFERRED INCOME TAXES .......................... -- 651,521
INTANGIBLE ASSET:
Directory publishing rights, net of
accumulated amortization of $161,886 ....... 4,530,883 --
----------- -----------
Total assets .............................. $20,719,622 22,325,958
=========== ===========
............................................ (Continued)
<PAGE>
FRONTEER DIRECTORY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, CONTINUED
<CAPTION>
September 30, December 31,
1995 1994
------------- -----------
ASSETS
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable, accrued expenses,
and other liabilities ........................ $ 2,958,180 1,693,286
Broker dealer customer payables .............. 2,181,284 2,767,761
Payables to brokers or dealers and
clearing organizations ....................... 1,999,687 11,698,061
Deposits from clearing correspondent
brokers or dealers, net ...................... 483,319 1,067,338
Current portion of long-term debt .............. 939,706 555,675
Notes payable to related parties ............... 548,900 --
Deferred revenue ............................... 639,184 --
Income taxes payable ........................... 207,643 --
Other current liabilities ...................... 292,899 25,344
----------- -----------
Total current liabilities ................. 10,250,802 17,807,465
LONG-TERM DEBT, NET OF CURRENT PORTION ......... 1,974,226 1,363,156
DEFERRED RENT CONCESSIONS ...................... 1,794,631 1,800,744
DEFERRED INCOME TAXES .......................... 1,085,590 --
----------- -----------
Total liabilities ......................... 15,105,249 20,971,365
----------- -----------
MINORITY INTEREST IN SUBSIDIARY ................ 172,783 166,158
----------- -----------
STOCKHOLDERS' EQUITY:
Series A voting cumulative preferred stock, .
authorized 25,000,000 shares, $0.10
par value, 87,500 shares issued
and outstanding at September
30, 1995 (liquidation preference of $875,000)... 875,000 --
Series A cumulative participating preferred
stock, authorized 600,000 shares, $.03 par
value, 87,500 shares issued and outstanding
at December 31, 1994; cancelled in 1995 .. -- 823,750
Common stock; authorized 100,000,000
shares, $0.01 par value; 12,558,061 shares
issued at September 30, 1995 ......... 125,581 --
Class A common stock, authorized 10,000,000 shares,
$0.01 par value; 13 shares issued and outstanding
at December 31, 1994; cancelled in 1995 -- 1
Class B common stock, authorized 10,000,000 shares,
$0.02 par value; no shares issued -- --
Additional paid-in capital ................... 6,431,343 99
Retained earnings (deficit) .................. (1,560,100) 364,585
Treasury stock, 87,084 shares at cost ........ (80,234) --
Unearned ESOP shares ......................... (350,000) --
----------- -----------
Total stockholders' equity ................ 5,441,590 1,188,435
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 5, 14, and 17)
Total liabilities and ..................... $20,719,622 22,325,958
stockholders' equity .................... =========== ===========
</TABLE>
See accompanying notes to consolidated financial stateme
<PAGE>
<TABLE>
FRONTEER DIRECTORY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
Year Ended
Nine Months Ended December 31,
REVENUE: September 30, 1995 1994 1993
------------------ ---- ----
<S> <C> <C> <C>
Directory .................................... $ 3,625,038 -- --
Brokerage commissions ........................ 7,051,366 5,792,268 6,527,515
Investment banking ........................... 1,340,573 3,032,968 1,955,234
Trading profits, net ......................... 830,551 696,814 2,224,732
Other broker dealer .......................... 506,733 3,191,406 3,336,984
Computer hardware and
software operations ........................ 3,236,156 3,515,230 4,041,575
Other ........................................ 579,337 30,214 70,570
--------- ----------- ----------
17,169,754 16,258,900 18,156,610
----------- ----------- ----------
COST OF SALES AND OPERATING
EXPENSES:
Directory cost of sales ...................... 3,454,454 -- --
Broker dealer commissions .................... 5,049,208 4,263,665 4,696,299
Computer cost of sales ....................... 3,538,652 3,739,649 3,837,293
General and administrative ................... 6,550,305 8,829,454 9,782,370
Depreciation and amortization ................ 564,411 395,572 493,772
----------- ----------- ----------
19,157,030 17,228,340 18,809,734
----------- ----------- ----------
Operating loss .......................... (1,987,276) ( 969,440) ( 653,124)
----------- ----------- ----------
OTHER INCOME (EXPENSE):
Interest income .............................. 496,316 1,082,576 860,492
Interest expense ............................. ( 395,777) ( 567,901) ( 415,175)
----------- ----------- ----------
100,539 514,675 445,317
----------- ----------- ----------
Loss before minority interest,
income taxes and cumulative
effect of change in accounting (1,886,737) ( 454,765) ( 207,807)
Minority interest in loss
(earnings) ................................. ( 5,136) 101,339 (89,883)
----------- ----------- ----------
Loss before income taxes and
cumulative effect of change
in accounting ............................ (1,891,873) ( 353,426) (297,690)
Income tax benefit ........................... -- -- 133,569
---------- ----------- ----------
Loss before cumulative effect
of change in accounting
for income taxes ......................... (1,891,873) (353,426) (164,121)
Cumulative effect of change in
accounting for income taxes ................ -- -- 141,080
----------- ----------- ----------
Net loss ............................. $ (1,891,873) (353,426) (23,041)
========== ============
Preferred stock dividend ..................... (32,812) * *
----------
Net loss per common shareholders $ (1,859,061) * *
==========
Weighted average number of
common shares outstanding .................. 9,408,431 * *
Loss per common share ........................ $ (0.20) * *
<FN>
* Due to the limited number of shares outstanding during 1994 and 1993,
presentation of loss per share is not meaningful.
</FN>
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
FRONTEER DIRECTORY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
Additional Retained
Preferred Common Paid-in Earnings Unearned Treasury
Stock* Stock Capital (Deficit) ESOP Stock Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at January 1, 1993 .......................... $ -- 1 99 804,531 -- -- 804,631
Proceeds from issuance of Series A
preferred stock, net of issuance
costs of $51,250 ................................... 823,750 -- -- -- -- -- 823,750
Series A preferred stock dividend .................... -- -- -- (10,979) -- -- (10,979)
Net loss ............................................. -- -- -- (23,041) -- -- (23,041)
--------- -- --- ---------- --------- -- ----------
Balances at December 31, 1993 ........................ 823,750 1 99 770,511 -- -- 1,594,361
Series A preferred stock dividend .................... -- -- -- (52,500) -- -- (52,500)
Net loss ............................................. -- -- -- (353,426) -- -- (353,426)
--------- -- --- ---------- --------- -- ----------
Balances at December 31, 1994 ........................ 823,750 1 99 364,585 -- -- 1,188,435
Cancellation of RAFCO preferred
and common stock ................................... (823,750) (1) (99) -- -- -- (823,850)
Shares issued in business
combination ........................................ 875,000 125,581 6,431,343 -- (350,000) (80,234) 7,001,690
Series A preferred stock dividend .................... -- -- -- (32,812) -- -- (32,812)
Net loss ............................................. -- -- -- (1,891,873) -- -- (1,891,873)
--------- -- --- ---------- --------- -- ----------
Balances at September 30, 1995 ....................... $ 875,000 125,581 6,431,343 (1,560,100) (350,000) (80,234) 5,441,590
========= == === ========== ========= == ==========
<FN>
*Includes both outstanding preferred shares issued in connection with the
RAFCO, Ltd. business combination discussed in note 1 and the previously issued
RAFCO, Ltd. preferred shares cancelled in connection with the transaction.
</FN>
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
FRONTEER DIRECTORY COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND
YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
Year Ended
Nine Months Ended December 31,
CASH FLOW FROM OPERATING ACTIVITIES: September 30, 1995 1994 1993
------------------ ---- ----
<S> <C> <C> <C>
Net Loss .............................................................................. $(1,891,873) (353,426) (23,041)
Adjustments to reconcile net loss to net cash provided (used) by operating
activities:
-- -- (141,080)
Cumulative effect of change in accounting for income taxes
Depreciation ........................................................................ 402,625 395,572 493,772
Amortization of directory costs ..................................................... 161,886 -- --
Amortization of deferred rent ....................................................... 6,113 112,730 187,078
Provision for bad debts ............................................................. 598,132 3,550 10,982
Deferred income tax benefit ......................................................... -- -- (118,305)
(Gain) Loss on sale of assets ....................................................... (49,965) -- 30,357
Minority interest in loss (earnings) ................................................ 5,136 (101,339) 89,883
Changes in operating assets and liabilities:
8,684,925 (1,914,718) (511,730)
Decrease (increase) in broker dealer customer receivables, net
Decrease (increase) in receivables from brokers or dealers
and clearing organizations ........................................................ 405,265 1,006,131 (1,422,404)
Decrease (increase) in trade receivables ............................................ 635,732 (31,074) (272,808)
Decrease (increase) in other receivables ............................................ 358,369 205,345 (205,345)
Decrease (increase) in securities owned ............................................. 31,489 (430,305) (220,489)
Decrease in deferred directory costs ................................................ 191,850 -- --
Increase in other assets ............................................................ (112,938) (624,434) (47,330)
Increase (decrease) in accounts payable, accrued expenses,
and other liabilities ............................................................. 207,323 (328,432) 392,601
Increase (decrease) in broker dealer customer payables .............................. (586,477) (2,671,095) 2,517,821
Increase (decrease) in payables to brokers or dealers
and clearing organizations ........................................................ (9,698,374) 7,206,342 (2,037,698)
Increase (decrease) in deposits from clearing correspondent
brokers or dealers ................................................................ (584,019) (3,829,190) 1,930,434
Increase in deferred revenue ........................................................ 315,620 -- --
Decrease in income taxes payable .................................................... (85,060) -- --
Increase (decrease) in other current liabilities .................................... (27,110) 1,598 (66,103)
----------- ----------- -----------
Net cash provided (used) by operating activities .................. (1,031,451) (1,352,745) 586,595
----------- ---------- ----------
<PAGE>
<CAPTION>
Year Ended
Nine Months Ended December 31,
September 30, 1995 1994 1993
------------------ ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on notes receivable .............................. 444,500 -- --
Proceeds from sale of assets ......................................... 331,991 -- --
Issuance of notes receivable ......................................... (792,425) -- --
Purchase of property and equipment ................................... (278,977) (387,105) (211,100)
Cash received from sale of directories and other assets .............. 1,619,622 -- --
Net cash received in business combination ............................ 17,741 -- --
---------- ---------- ----------
Net cash provided (used) by investing activities .................. 1,342,452 (387,105) (211,100)
---------- ---------- ----------
CASH FLOW FROM FINANCING ACTIVITIES:
Net payments on short-term borrowings ................................ (675,000) -- --
Borrowings on long-term notes payable ................................ 529,800 243,542 1,325,000
Net borrowings from related parties .................................. 483,000 -- --
Principal payments on long-term borrowings ........................... (564,853) (156,103) (1,138,801)
Proceeds from sale of preferred stock, net ........................... -- -- 823,750
Dividends on preferred stock ......................................... (32,812) (52,500) --
Cash overdrafts ...................................................... (176,215) -- --
Other financing activities ........................................... (2,900) -- --
---------- ---------- ----------
Net cash provided (used) by financing activities .................. (438,980) 34,939 1,009,949
---------- ---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS ............................................................ (127,979) (1,704,911) 1,385,444
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD ................................................................. 2,276,654 3,981,565 2,596,121
---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................... 2,148,675 2,276,654 3,981,565
========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
FRONTEER DIRECTORY COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION, BUSINESS COMBINATION, AND PRINCIPLES OF CONSOLIDATION - On
April 26, 1995, Fronteer Directory Company, Inc. (Fronteer or the
Company) entered into a Plan of Reorganization and Exchange Agreement
(the Agreement) with RAFCO, Ltd. (RAFCO). Under the Agreement,
Fronteer acquired all of the assets of RAFCO in exchange for the
assumption by Fronteer of the liabilities of RAFCO and the issuance by
Fronteer to RAFCO of 7,223,871 shares of $.01 par value common stock
and 87,500 shares of $.10 par value series A voting cumulative
preferred stock ($10.00 per share redemption value). RAFCO has
dissolved as a corporation and has distributed Fronteer's common and
preferred stock to the shareholders of RAFCO. As a result of the
transaction, the former shareholders of RAFCO acquired a 55% interest
in Fronteer. Accordingly, the transaction has been accounted for as a
"reverse acquisition" of Fronteer by RAFCO using the purchase method
of accounting and Fronteer's assets and liabilities have been adjusted
to their market value as of the date of the business combination. The
adjustment to market value resulted in an intangible asset, directory
publishing rights, which was recorded at $6,972,468 (see note 6).
Fronteer's operations have been included in the accompanying
consolidated financial statements beginning May 1, 1995, the effective
date of the transaction. As a result of the reverse acquisition
accounting, historical financial statements presented for periods
prior to the business combination date include the consolidated
assets, liabilities, equity, revenues, and expenses of RAFCO only.
The consolidated financial statements include the Company and the
accounts of Fronteer Directory (Fronteer) and its wholly-owned
subsidiaries, Fronteer Personnel Services, Inc. (FPS), Fronteer
Marketing Group, Inc. (FMG), and RAF Financial Corporation (RAF).
They also include a majority-owned subsidiary, Secutron
Corporation (Secutron). All significant intercompany accounts and
transactions have been eliminated in the preparation of the
consolidated financial statements.
Fronteer is engaged in the publishing and distribution of telephone
directories, while FPS is engaged in employee leasing, and FMG is
engaged in the telemarketing business. RAF operates as a registered
securities broker/dealer. Secutron is engaged in industry specific
software development and provides consulting services.
B. CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.
C. ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS - Fronteer
grants credit to customers throughout the directory market, primarily in
North Dakota. Although Fronteer has a diversified customer base, a
substantial portion of its debtors' ability to honor their contract is
dependent upon the economic conditions in North Dakota. Broker dealer
customer receivables include amounts due on cash transactions and margin
accounts.
Amounts due to or from directors or officers of the Company, related to
normal cash accounts, are not classified as customer related in
accordance with the rules of the Securities and Exchange Commission.
The allowance for doubtful accounts is maintained at a level
adequate to absorb probable losses and credit losses inherent in the
business based upon Fronteer's prior history of credit losses.
Management determines the adequacy of the allowance based upon reviews
of individual accounts, recent loss experience, current economic
conditions, the risk characteristics of the various categories of
accounts and other pertinent factors. Fronteer establishes payment
terms with customers ranging from a single payment due upon
publication of the directory to twelve equal monthly payments
commencing upon publication of the directory. Any accounts remaining
on Fronteer's books fifteen months following publication of the
directory, due to additional payment arrangements made with Fronteer
outside of the original contract, are charged to the allowance for
doubtful accounts.
Securities owned by customers are held as collateral for substantially
all of the broker dealer customer receivables. An allowance for doubtful
accounts has been established for all unsecured broker dealer customer
receivables.
D. SECURITIES - Securities transactions are recorded on a settlement-date
basis, usually the third business day following the trade date. The
effect of using settlement date rather than trade date for the recording
of securities transactions is not significant.
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" requires that trading
securities be recorded at market value. In accordance with financial
reporting requirements for broker/dealers, the Company's financial
instruments, including securities, are all recorded at market value.
Securities without a readily available market value are recorded at
estimated fair value. Securities are valued monthly and the resulting
unrealized appreciation or depreciation is included in operations as
trading profit or loss. Realized gains and losses are determined using
the average cost method.
In October 1994, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (FASB) No. 119, "Disclosure
about Derivative Financial Instruments and Fair Value of Financial
Instruments" which prescribes disclosure requirements for transactions
in certain derivative financial instruments including futures, forward,
swap, and option contracts, and other financial instruments with similar
characteristics. Although RAF is authorized to enter into such
transactions in the ordinary course of business, and may do so in the
future, no such transactions were consummated during the nine months
ended September 30, 1995.
E. REVENUE AND COST RECOGNITION - Revenues from advertising sales
are recognized at the point individual directories are published.
Costs of selling and production are recorded as deferred directory
costs when incurred and charged to cost of sales in the period during
which the related directory is published. Deferred directory costs are
allocated to incomplete directories based upon the relative percentage
of contracts sold as of year-end on incomplete directories to total
current year earned revenues. Printing costs are charged to cost of
sales in the period during which the related directory is published.
Costs of distribution are charged to cost of sales as incurred.
General administrative costs are charged to expenses as incurred.
Revenue from the sale of computer equipment and installation of software
is generally recognized when the equipment and related software is
installed and accepted by the customer.
Costs incurred in researching, designing, and planning for the
development of new software are included in computer hardware and
software operations in the accompanying consolidated financial
statements. All amounts are charged to operations as incurred until such
time as the costs meet the criteria for capitalization. Such costs were
not significant in 1995, 1994, or 1993.
F. PROPERTY, FURNITURE, AND EQUIPMENT - Property and equipment are stated
at cost. Additions, renewals and betterments are capitalized, whereas
expenditures for maintenance and repairs are charged to expense. The
cost and related accumulated depreciation of assets retired or sold are
removed from the appropriate asset and depreciation accounts, and the
resulting gain or loss is reflected in income.
It is the policy of the Company to provide depreciation using the
accelerated and straight-line methods based on the estimated useful
lives of the assets as follows:
Estimated
Description Useful Life
----------- -----------
Building 40 years
Vehicles & Furniture 3-5 years
Equipment 5-10 years
G. AMORTIZATION - Directory publishing rights are amortized over ten years
using the straight-line method.
H. INCOME TAXES - The Company accounts for income taxes under the
provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes", which prescribes the use of
the asset and liability method of accounting for income taxes.
I. DESCRIPTION OF LEASING ARRANGEMENTS - The Company leases office space
under operating leases from which its business is conducted in certain
branches under short-term leasing arrangements. In addition, the Company
leases equipment under leases classified as capital leases. All leases
expire over the next year.
J. LOSS PER COMMON SHARE - Loss per common share has been calculated based
upon the net loss available to common shareholders divided by the
weighted average number of common shares outstanding during the period.
Common stock equivalents, including outstanding options and warrants,
are considered in determining the weighted average number of common
shares outstanding during the period unless antidilutive.
<PAGE>
NOTE 2 - STOCKHOLDERS' EQUITY
In conjunction with the Agreement, the Company issued 87,500 shares of $.10 par
value per share, Series A Voting Cumulative Preferred Stock ("Series A
Preferred"). The stated value of the Series A Preferred is $10 per share and has
a liquidation preference of $10 per share plus accrued and unpaid dividends.
Regular dividends are 9% per annum payable quarterly. If the Company is for any
reason unable to pay cash dividends, such unpaid dividends will accumulate
without interest until the Company can legally pay such dividends. The Company
has the option to redeem all or part of the Series A Preferred on a pro rata
basis upon 90 days prior written notice at December 31, 1995, and at December 31
or each year thereafter at $11 per share plus unpaid dividends.
NOTE 3 - SEGREGATED CASH
Pursuant to Rule 15c3-3 of the Securities and Exchange Commission, RAF is
required to maintain cash or cash equivalents on deposit in special reserve bank
accounts for the exclusive benefit of its customers. At September 30, 1995, RAF
had balances in such accounts of approximately $296,000. All of this amount is
in excess of the reserve requirement.
NOTE 4 - SECURITIES OWNED
Securities owned by the Company as of September 30, 1995 and December 31, 1994,
consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Corporate securities ...... $1,302,025 1,232,718
U.S. government obligations 53,600 116,270
Municipal obligations ..... ___19,100 ___57,226
---------- ----------
$1,374,725 1,406,214
========== ==========
</TABLE>
NOTE 5 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
As a securities broker and dealer, RAF is engaged in various securities trading
and brokerage activities. A portion of RAF's transactions are collaterized and
are executed with and on behalf of institutional investors including other
brokers and dealers.
RAF's exposure to credit risk associated with the nonperformance of these
customers in fulfilling their contractual obligations pursuant to securities
transactions can be directly impacted by volatile trading markets which may
impair the customers' ability to satisfy their obligations to RAF. RAF's
principal activities are also subject to the risk of counterparty
nonperformance.
In the normal course of business, RAF's customer and correspondent clearance
activities involve the execution, settlement, and financing of various customer
securities transactions. These activities may expose RAF to off-balance sheet
credit risk in the event the customer is unable to fulfill its contractual
obligations.
RAF's customer securities activities are transacted on either a cash or margin
basis. In margin transactions, RAF extends credit and monitors cash and
securities collateral in customers' accounts, subject to various regulatory
margin requirements. In connection with these activities, RAF executes and
clears customer transactions involving the sale of securities not yet purchased.
Such transactions may expose RAF to off-balance sheet risk in the event margin
requirements are not sufficient to fully cover losses which customers may incur.
In the event the customer fails to satisfy it obligations, RAF may be required
to purchase or sell financial instruments at prevailing market prices in order
to fulfill the customer's obligations.
NOTE 6 - INTANGIBLE ASSET AND SALE OF DIRECTORIES
In connection with the business combination discussed in note 1, Fronteer 's
assets were adjusted to their fair market value pursuant to the purchase method
of accounting, which resulted in an intangible asset, directory publishing
rights, which was recorded at $6,972,468. Immediately thereafter, Fronteer sold
ten of its directories to Telecom*USA Publishing. As a result of the purchase
price allocation to the sold directories of $2,279,699, no gain or loss was
recorded on the sale.
<PAGE>
NOTE 7 - LONG-TERM NOTES RECEIVABLE
Notes receivable consist of the following:
<TABLE>
<CAPTION>
Maturity Interest
Payor Date Rate 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Telecom* USA Publishing
Company ........... 12/31/95 (1) $ 289,846 --
Phone Directories
Company, Inc. ..... 11/1/96 (2) 10.0% 208,265 --
Affiliate ........... 7/1/99 6.46% 113,242 85,787
Former employee, net demand 0% 160,000 454,411
Other notes receivable various various 69,504 49,400
--------- ---------
840,857 589,598
Less current portion (731,766) (589,598)
--------- ---------
$ 109,091 --
========= =========
<FN>
(1) The promissory note states that the note is interest free. This note
receivable results from the sale of the Company's directories in Idaho,
Montana, South Dakota, and Wyoming. The agreement requires final payment
prior to December 31, 1995. The note was paid in full subsequent to
September 30, 1995.
(2) The note receivable from Phone Directories, Inc. is secured by the
directory and publishing rights to certain Arizona directories sold in
1993.
</FN>
</TABLE>
NOTE 8 - DEFERRED REVENUE
Sales contracts for advertising in directories not published totaled
approximately $2,200,000 as of September 30, 1995. This amount will be recorded
as revenue upon publication of the directories. The deferred revenue balance of
$639,184 as of September 30, 1995, represents advance payments received on these
contracts. These amounts together with the balances of the contracts will be
recognized as revenue when the directories are published.
NOTE 9 - PROPERTY, FURNITURE AND EQUIPMENT
Property, furniture and equipment is comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Cost:
Building ............. $ 239,609 --
Vehicles ............. 173,443 --
Furniture & Equipment 3,458,172 2,808,149
Leasehold improvements 286,572 255,867
Condominium .......... 74,439 133,725
----------- -----------
4,232,235 3,197,741
Accumulated depreciation ..... (2,533,747) (1,773,052)
----------- -----------
$ 1,698,488 1,424,689
=========== ===========
</TABLE>
Depreciation expense totaled $402,525 for the nine months ended September 30,
1995, and $395,572 and $493,772 for the years ended December 31, 1994 and 1993,
respectively.
<PAGE>
NOTE 10 - NOTES PAYABLE TO RELATED PARTIES
The Company has various notes payable to related parties in the amount of
$548,900 at September 30, 1995. Such notes payable are unsecured, payable on
demand, and bear interest at a variable rate not to exceed the interest rate on
the Company's line of credit with BNC National Bank. At September 30, 1995, the
interest rate was 11.5%.
NOTE 11 - LONG-TERM DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
Balance Balance
Maturity Interest September 30, December 31,
Payee Collateral Date Rate 1995 1994
----- ---------- ---- ---- ------------ ------------
<S> <C> <C> <C> <C> <C>
Chesak Properties .................. Building 9-20-96 11.50% $ 28,571 --
Telecom*USA ........................ (1) 6-15-99 (1) 500,000 --
Upper Valley
Phone Book, Inc. ................. Directories 6-30-96 (2) 172,039 --
GMAC ............................... Vehicles 2-28-96 Various 4,333 --
Kirkwood Bank & Trust .............. Vehicle 12-6-97 9.0% 14,984 --
BNC National Bank (3).............. ESOP Stock 4-7-96 11.5% 350,000 --
Stearns County (4)
National Bank .................... Equipment 6-1-96 11.75% 57,172 --
Debentures payable (5).............. Unsecured 12-31-03 10.0% 1,325,000 1,325,000
Guaranty Bank ...................... Unsecured 3-1-96 9.5% 100,000 180,000
IBM ................................ Equipment 7-1-96 12.0% 14,237 --
Key Bank ........................... Vehicle 10-1-00 9.65% 29,800 --
Guaranty Bank ...................... Equipment 10-1-96 8.75% 11,012 20,000
Equipment 7-30-97 8.75% 206,928 290,761
Other Notes ........................ Unsecured -- -- 99,856 103,070
----------- -----------
Total ................. 2,913,932 1,918,831
Less current portion .. (939,706) (555,675)
----------- -----------
$ 1,974,226 $ 1,363,156
=========== ===========
<FN>
(1) This note results from an Option Agreement between the Company and
Telecom*USA Publishing Company. Telecom*USA made a noninterest bearing
and nonrecourse loan to the Company as consideration for the Option
Agreement. Telecom*USA has the right to purchase nine North Dakota
directories between June 1, 1997 and June 1, 1999. The amount of the
loan will be applied against the sales price of the directories. If the
option is not excercised, the full amount of the loan will be forgiven
on June 1, 1999.
(2) The promissory note states that the note is interest free. Interest has
been imputed at 12.75%.
(3) The Company has guaranteed its ESOP's note payable, which is secured by
the shares of Fronteer Directory stock owned by the ESOP.
(4) See note 14 regarding capital leases.
(5) Debentures payable represent $1,325,000 of 10% Senior Subordinated
promissory notes which were assumed by the Company in conjunction with
the business combination. The notes mature on December 31, 2003, are
unsecured general obligations of the Company, and are subordinated to
the prior payment in full of all senior indebtedness.
</FN>
</TABLE>
<PAGE>
A line of credit agreement has been executed with BNC National Bank providing
the Company with loans in the total amount of $1,300,000 on a revolving basis.
The line of credit is due April 7, 1996 at which time all unpaid principal is
due and payable. Interest on unpaid principal is payable monthly at the Wall
Street Journal Prime Rate plus 2.75%. At September 30, 1995, no balances were
outstanding under the line of credit.
The BNC National Bank loan agreement includes various restrictions affecting the
conduct of Fronteer's business while the agreement is in force, including
limited expansion. It also requires maintenance of net income of 2.5% of sales,
equity to total assets of not less than 35%, and cash flow coverage of at least
100% of all debt service, and limiting the outstanding line of credit to 75% of
accounts receivable less than 60 days old. Fronteer was in compliance with all
provisions of the loan agreement as of September 30, 1995.
Minimum principal payments required on long-term debt during the next five years
are as follows: 1996 -$589,706; 1997 - $128,556; 1998 - $7,075; 1999 - $506,501;
2000 - $7,094; thereafter -$1,325,000.
NOTE 12 - BROKER DEALER PAYABLES
Broker dealer payables includes amounts due on customer margin debits
collateralized by customer securities. Such amounts bear interest at a
fluctuating rate that generally corresponds to the broker call money rate (7.5%
at September 30, 1995).
NOTE 13 - INCOME TAXES
Income tax benefit for the year ended December 31, 1993, consisted of the
following:
Current $ 15,264
Deferred 118,305
--------
$ 133,569
========
Income tax benefit in 1993 differs from the amount computed by applying the
federal statutory tax rate to loss before income taxes and cumulative effect of
change in accounting for income taxes primarily due to state income taxes.
Temporary differences between financial statement carrying amounts and the tax
bases of assets and liabilities that result in significant deferred tax assets
and liabilities at September 30, 1995 and December 31, 1994, are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ----------
<S> <C> <C>
Deferred tax assets:
Deferred rent concessions .................. $ 685,000 705,000
Deferred revenue on directory sales ........ 243,000 --
Accrued expenses ........................... 137,000 69,000
Allowance for doubtful accounts ............ 60,000 40,000
Contribution and operating loss carryforwards 122,693 57,794
----------- -----------
Gross deferred tax assets ................ 1,247,693 871,794
Valuation allowance ........................ (91,915) (91,915)
----------- -----------
Deferred tax assets after valuation allowance 1,155,778 779,879
Deferred tax liabilities:
Directory acquisition costs ................ (1,722,000) --
Property and equipment ..................... (80,000) (19,000)
Installment sales on directories ........... (61,000) --
Deferred directory costs and other ......... ( 9,994) ( 358)
----------- -----------
Gross deferred tax liabilities ........... (1,872,994) (19,358)
----------- -----------
Net deferred tax asset (liability) ....... $ (717,216) 760,521
=========== ===========
</TABLE>
<PAGE>
The net deferred tax liability is presented in the accompanying consolidated
balance sheets as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Net current deferred tax asset ............. $ 368,374 109,000
Net long-term deferred tax asset (liability) (1,085,590) 651,521
----------- -------
Net deferred tax asset (liability) .... $ (717,216) 760,521
=========== =======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that the deferred tax asset will be realized.
The ultimate realization of the deferred tax asset is dependent on the
generation of future taxable income in the period in which the temporary
differences become deductible. Management considers the scheduled reversal of
deferred tax liabilities, projected future taxable income and tax planning
strategies in making this assessment. Based on these considerations, management
believes it is more likely than not that the Company will realize the benefits
of these deductible differences, net of the existing valuation allowance at
September 30, 1995. In 1994, the change in the valuation allowance was an
increase of $91,915.
Net operating loss carryforwards for income tax purposes of approximately
$165,000 will be available to offset future taxable income through 2010.
Contribution carryforwards of approximately $158,000 expire in varying amounts
through 2000.
Effective January 1, 1993, the Company adopted the provisions of SFAS No. 109 on
a prospective basis. The cumulative effect of this change in the method of
accounting for income taxes was to decrease the net loss by $141,080. The
adoption of SFAS No. 109 did not have a significant impact on the Company's 1993
provision for income taxes.
NOTE 14 - LEASES
OPERATING LEASES:
Fronteer and RAF lease office space under long-term noncancelable operating
leases. The leases for office space provide for annual escalations for
utilities, taxes, and service costs, as well as escalating rental rates over the
term of the leases. Minimum future rental payments required by such leases are
as follows:
Year ending September 30,
1996 $ 921,442
1997 940,593
1998 1,015,652
1999 990,649
2000 869,803
Thereafter 5,920,044
Rental expense included in the statement of operations totaled $917,963 for the
nine months ended September 30, 1995, and $1,018,131 and $1,140,248 for the
years ended December 31, 1994 and 1993, respectively.
CAPITAL LEASES:
The Company has leased equipment under leases classified as capital leases. The
following is a schedule of future minimum lease payments under the capital
leases, as well as the present value of the net minimum lease payments as of
September 30, 1995:
Year ending September 30, 1996 $ 60,407
Less amount representing interest (3,235)
--------
Present value of net minimum lease payments $ 57,172
=========
NOTE 15 - EMPLOYEE STOCK OWNERSHIP AND EMPLOYEE BENEFIT PLANS
The Company has adopted an employee stock ownership plan (ESOP) for its
employees. Contributions to the plan are at the discretion of the Company. All
employees as of October 1, 1989 are eligible to participate in the plan and new
employees after that date become eligible on April 1 or October 1 which follows
the completion of one year of employment. The plan provides that more than half
of the assets in the plan must consist of the Company's common stock. The plan
has certain debt of $350,000 which has been used to purchase the Company's
common stock. Such debt is guaranteed by the Company and accordingly has been
recorded in the accompanying consolidated financial statements. During the nine
months ended September 30, 1995, the Company contributed $10,000 to the plan.
<PAGE>
The Company has a retirement savings plan covering all employees who are over 21
years of age and have completed one year of eligibility service. Persons
employed as of April 1, 1991, the inception date of the plan, were included. The
plan meets the qualifications of Section 401(k) of the Internal Revenue Code.
Under this plan, eligible employees can contribute through payroll deductions up
to 15% of their base compensation. The Company will make a discretionary
matching contribution equal to a percentage of the employee's contribution. The
Company contributed $44,934 during the nine months ended September 30, 1995.
The Company does not provide any post employment benefits to retired or
terminated employees.
NOTE 16 - STOCK OPTIONS
At September 30, 1995, the Company had 420,000 stock options outstanding, which
were granted to certain officers and an outside public relations firm during
1992 and 1993. The exercise prices range from $.70 to $.95 per share. Of the
total number of options outstanding, 80,000 expire March 6, 1996, and 340,000
expire August 26, 1997.
The Company has 156,250 warrants outstanding at September 30, 1995. Each warrant
allows the holder to purchase one share of common stock at $.96 per share. The
warrants can be exercised between June 26, 1993 and June 26, 1997.
NOTE 17 - MINIMUM NET CAPITAL REQUIREMENTS
The Company, as a registered securities broker/dealer, is subject to the
Securities and Exchange Commission Uniform Net Capital Rule (Rule 15c3-1) (the
Rule). The Company has elected to operate pursuant to the alternative
computation provided by the Rule.
Under the alternative computation, the Company is required to maintain "net
capital" equal to the greater of $250,000 or 2% of "aggregate debit" items
(primarily customer-related receivables) included in the formula for
Determination of Reserve Requirements for Brokers and Dealers, as those terms
are defined in the Rule. In addition, equity capital may not be withdrawn if
resulting "net capital" would be less than 5% of "aggregate debits". At
September 30, 1995, the Company had a ratio of net capital to aggregate debits
of 41%, a "net capital" requirement of $250,000, and actual "net capital" of
$1,988,915.
NOTE 18 - OFFICER LIFE INSURANCE
As of September 30, 1995, the Company is the owner-beneficiary of term life
insurance policies on the lives of two officers:
Name Face Amount of Policy
Dennis Olson $ 1,000,000
Robert A. Fitzner 2,500,000
<PAGE>
NOTE 19 - SUPPLEMENTAL DISCLOSURES RELATED TO STATEMENTS OF
CASH FLOWS
Supplemental disclosures of cash flow
information:
<TABLE>
<CAPTION>
Year ended
Nine months ended December 31,
September 30, 1995 1994 1993
------------------ ---- ----
<S> <C> <C> <C>
Cash payments for:
Interest ....... $398,161 574,827 434,719
Income taxes ... 135,060 -- --
Non-cash investing and financing activities:
The Company acquired all of the assets of RAFCO, Ltd. in
exchange for the assumption by Fronteer of the liabilities
of RAFCO and the issuance of common and preferred stock
outlined as follows:
Cash and cash equivalents ............ $ 17,741
Trade and notes receivable, net ...... 3,711,148
Other assets ............ ............ 1,153,784
Property, furniture, and equipment,
net of accumulated depreciation .... 679,373
Directory publishing rights .......... 7,109,378
Accounts payable, accrued expenses,
and other liabilities .............. (1,153,875)
Other current liabilities ................ (1,181,758)
Notes payable ............ ........... (1,664,462)
Deferred income taxes ................... (2,493,489)
Cancel RAFCO common and preferred
stock ............ ............ ..... 823,850
Issuance of common and preferred
stock ............ ............ ..... (7,001,690)
----------
$ --
==========
</TABLE>
<PAGE>
NOTE 20 - SEGMENT REPORTING
Information regarding business segments is summarized below. Operations for
Fronteer are for the period from the date of the business combination, May 1,
1995, to September 30, 1995. Operations for RAF and Secutron are for the nine
months ended September 30, 1995.
<TABLE>
<CAPTION>
Adj. and
Elimi- Consoli-
Fronteer RAF Secutron Others nations dated
-------- -------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Revenues from
Unaffiliated Customers................................ 3,702,849 9,854,160 3,236,156 376,589 17,169,754
Intersegment Revenues ................................... 6,852 392,208 15,562 (414,622)
---------- --------- --------- --------- --------- ----------
Total revenues ................................. 3,709,701 9,854,160 3,628,364 392,151 (414,622) 17,169,754
========== ========= ========= ========= ========= ==========
Operating profit (loss) ............................... $ (389,559) (575,277) 30,723 26,075 (5,136) (913,174)
========== ========= ========= ========= =========
General corporate expenses .............................. (582,922)
Interest expense ........................................ (395,777)
----------
Income from continuing operations
before income taxes ................................. $(1,891,873)
==========
Identifiable assets
at September 30, 1995.................................. 10,268,418 13,787,104 711,883 190,049 (4,237,832) $20,719,622
========== ========== ========= ======= ========= ==========
</TABLE>
Identifiable assets by industry are those assets that are used in the Company's
operations in each industry.
NOTE 21 - COMMITMENTS AND CONTINGENCIES
The Company has guaranteed a promissory note of the Fronteer Directory Company,
Inc. Employee Stock Ownership Plan. The unpaid balance on this note totalled
$350,000 as of September 30, 1995.
The Company is a defendant in certain arbitration and litigation matters arising
from its activities as a broker/dealer and underwriter. In the opinion of
management, these matters have been adequately provided for in the accompanying
financial statements, and the ultimate resolution of the arbitration and
litigation will not have a significant adverse effect on the financial condition
of the Company.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page No.
- ------- ------------ --------
<S> <C> <C>
Exhibit 2.1 Plan of Reorganization and Exchange Agreement N/A
dated April 26, 1995 with Exhibits A, B, C, F and
I (incorporated by reference to Exhibit 2.1 to Regis-
trant's 8-K dated May 9, 1995)
Exhibit 2.2 Sale and Purchase Agreement dated April 27, N/A
1995, with Exhibits A and J (incorporated by
reference to Exhibit 2.2 to Registrant's 8-K dated
May 9, 1995)
Exhibit 2.3 Option Agreement dated April 27, 1995, with N/A
Exhibits A, B, and D (incorporated by reference to
Exhibit 2.3 to Registrant's 8-K dated May 9, 1995)
Exhibit 3.0 Articles of Incorporation of Registrant
Exhibit 3.0(i) Articles of Amendment to the Registrant's N/A
Articles of Incorporation dated April 28, 1995
(incorporated by reference to Exhibit 3.0(i) to
Registrant's 8-K dated May 9, 1995)
Exhibit 3.2 Bylaws of Registrant
Exhibit 9.1 Voting Trust Agreement between Robert A. Fitzner, Jr.
and Dorothy K. Englebrecht dated June 2, 1995
Exhibit 9.2 Voting Trust Agreement between Robert A. Fitzner, Jr.
and Steven M. Fishbein dated June 2, 1995
Exhibit 9.3 Voting Trust Agreement between Robert A. Fitzner, Jr.
and Peter K. O'Leary dated June 2, 1995
Exhibit 9.4 Voting Trust Agreement between Robert A. Fitzner, Jr.
and Arlene M. Wilson dated June 2, 1995
Exhibit 10.1 Incentive Stock Option Plan as amended January 15,
1992
Exhibit 10.2 Employee Stock Ownership Plan
Exhibit 10.3 401(k) Plan
Exhibit 10.4 Employment Agreement between Dennis W. Olson and the
Registrant dated January 1, 1995.
Exhibit 10.5 Employees/Officers/Directors Form of Non-Competition N/A
Agreement; Covenant Not to Compete and Confiden-
tiality Agreement (incorporated by reference to
Exhibit 2.2 to Registrant's 8-K dated May 9, 1995)
Exhibit 16 Letter Re Change in Certifying Accountant
Exhibit 21 Subsidiaries of the Registrant
Exhibit 27 Financial Data Schedule
</TABLE>
ARTICLES OF INCORPORATION
OF
FRONTEER DIRECTORY COMPANY, INC.
The undersigned, a natural person of the age of eighteen years or more,
acting as Incorporator of this Corporation under the laws of Colorado, adopts
the following Articles of Incorporation for this Corporation.
ARTICLE I
NAME OF CORPORATION
The name of the Corporation is Fronteer Directory Company, Inc.
ARTICLE II
INCORPORATOR
The name and address of the Incorporator is Thomas Boyle, 1520 Denver
Club Building, 518 17th Street, Denver, Colorado 80202.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation is 1520 Denver
Club Building, 518 17th Street, Denver, Colorado 80202. The name of its
registered agent at such address is Thomas Boyle.
ARTICLE IV
DIRECTORS
Section 4.1. The number of directors shall be fixed in accordance with
the Bylaws. So long as the number of directors shall be less than three, no
shares of this Corporation may be issued to and held of record by more
shareholders than there are directors. Any shares issued in violation of this
Article shall be null and void.
Section 4.2. The number of directors constituting the initial Board of
Directors is four and the names and addresses of the directors to serve until
the first annual meeting of shareholders or until their successors are elected
and qualified are:
Name Address
Dennis Olson 515 East Main
Bismarck, North Dakota 58501
Marlow Lindblom 515 East Main
Bismarck, North Dakota 58501
2
<PAGE>
Name Address
James Greff 515 East Main
Bismarck, North Dakota 58501
Roland Haux 515 East Main
Bismarck, North Dakota 58501
Section 4.3. The liability of a director of the Corporation to the
Corporation shall be eliminated to the fullest extent permitted under applicable
Colorado law, as well as by any statutory amendments that expand the elimination
or limitation of such liability. Any repeal or modification of this section
under Article IV by stockholders of the Corporation shall not adversely affect
any right or protection of a director of the Corporation existing at the time of
such repeal or modification.
ARTICLE V
DURATION OF CORPORATION
The Corporation shall exist perpetually unless dissolved according to
law.
ARTICLE VI
PURPOSES AND POWERS
Section 6.1. Purposes. The purpose of the Corporation shall be to transact
all lawful business or businesses for which corporations may be incorporated
pursuant to applicable state law.
Section 6.2. Powers. In addition to the powers specifically provided by
state law, the Corporation shall have and may exercise all powers necessary or
convenient to effect its purpose.
ARTICLE VII
CAPITAL
Section 7.1. The aggregate number of shares which the Corporation shall
have the authority to issue is 125,000,000 shares, of which 25,000,000 shares
shall be Preferred Stock and shall be issued at a par value of $.10 per share,
and 100,000,000 shares shall be Common Stock which shall be issued at $.01 par
value per share. No share shall be issued until it has been paid for, and it
shall thereafter be nonassessable.
Section 7.2. The Board of Directors of the Corporation shall be the
authority to divide the Preferred Stock into series and, within the limitations
provided by statute, to fix by resolution the voting powers, designation,
preferences, and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions of the shares of any series so
established.
Section 7.3. Each outstanding share of Common Stock shall be entitled
to one vote and each fractional share of Common Stock shall be entitled to a
corresponding fractional vote on each matter submitted to a vote of
shareholders. A majority of the shares of Common Stock entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Except as otherwise provided by the Articles of Incorporation or
the Colorado Corporation Code, if a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. When, with respect to any
action to be taken by shareholders of this Corporation, the laws of Colorado
require the vote or concurrence of the holders of two-thirds of the outstanding
shares of the shares entitled to vote thereon, or of any class or series, such
action may be taken by the vote or concurrence of a majority of such shares or
class or series thereof.
ARTICLE VIII
VOTING
No cumulative voting in the election of directors shall be allowed.
ARTICLE IX
PRE-EMPTIVE RIGHTS
The shareholders shall have no pre-emptive or preferential rights to
acquire any unissued or treasury shares of stock of the Corporation, securities
convertible into shares, or securities carrying stock purchase options or
warrants to acquire any unissued or treasury shares of stock of the Corporation.
ARTICLE X
SHARE TRANSFER RESTRICTIONS
The Corporation shall have the right to impose restrictions upon the
transfer of any of its authorized shares or any interest therein. The Board of
Directors is hereby authorized on behalf of the Corporation to exercise the
Corporation's right to so impose such restrictions by agreement or otherwise.
ARTICLE XI
TRANSACTIONS WITH INTERESTED OFFICERS AND DIRECTORS
In the absence of fraud, no contract or other transaction between this
Corporation and one or more of its directors, officers or any other corporation,
partnership, association or entity in which any director or officer of the
Corporation is financially or otherwise interested or is a director, member or
officer of such other corporation, partnership, association, or entity, shall be
affected or invalidated because of such relationship or interest, provided that
the existence and nature of any such interest of such director or officer shall
be disclosed or shall have been known to the directors present at any meeting of
the Board at which action on any such contract or transaction shall have been
taken, and provided further that the fact of such relationship is disclosed or
known to the shareholders entitled to vote and they authorize, approve, or
ratify the contract or transaction by vote or written consent, and the contract
or transaction is fair and reasonable to the Corporation. Any interested
director may be counted in determining the existence of the quorum and may vote
at any meeting of the Board for the purpose of authorizing any such contract or
transaction with like force and effect as if he were not so interested or were
not a director, member or officer of such other corporation, firm, association
or partnership.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES, FIDUCIARIES AND AGENTS
Pursuant to applicable state law, including, but not limited to,
Section 7- 3-101.5 of the Colorado Corporation Code, each director, officer,
employee, fiduciary or agent of the Corporation (and his heirs, executors and
administrators) shall be indemnified by the Corporation against expenses
reasonably incurred by or imposed upon him in connection with or arising out of
any action, suit or proceeding in which he may be involved or to which he may be
made a party by reason of his being or having been a director, officer,
employee, fiduciary or agent of the Corporation, or at its request of any other
corporation of which it is a shareholder or creditor and from which he is not
entitled to be indemnified (whether or not he continues to be a director,
officer, employee, fiduciary or agent at the time of imposing or incurring such
expenses), except in respect of matters as to which he shall be finally adjudged
in such action, suit or proceeding to be liable for negligence or misconduct.
Subject to applicable state law, in the event of a settlement of any such
action, suit or proceeding, indemnification shall be provided only in connection
with such matters covered by the settlement as to which the Corporation is
advised by counsel that the person to be indemnified did not commit a breach of
duty. The foregoing right of indemnification shall not be exclusive of other
rights to which he may be entitled under applicable state law.
Dated at Denver, Colorado this 13th day of September, 1988.
/s/ Thomas Boyle
-------------------------------
Thomas Boyle, Incorporator
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Erminia M. Palm, Notary Public hereby certify that on the 13th day
of September, 1988, personally appeared before me Thomas Boyle who being by me
first duly sworn, declared that he is the person who signed the foregoing
document as Incorporator, and that the statement therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 13th day
of September, 1988.
My commission expires March 24, 1992.
/s/ Erminia M. Palm
( S E A L) ------------------------------
Notary Public
3
<PAGE>
BY-LAWS
OF
FRONTEER DIRECTORY COMPANY, INC.
ARTICLE I
OFFICES
The principal office of Fronteer Directory Company, Inc. (the "Cor-
poration") shall be located in Bismarck, North Dakota. The Corporation may have
such other offices or relocate its principal office either within or without the
state of incorporation as the Board of Directors may require from time to time.
The registered office of the Corporation required by the Articles of
Incorporation to be maintained in the state of incorporation may be, but need
not be, identical with the principal office in the state of incorporation and
the address of the registered office may be changed from time to time by the
Board of Directors.
ARTICLE II
SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall
be held annually on such date and time as set by the Board of Directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the state of incorporation, such meeting shall be held on the
next succeeding business day. If the election of directors shall not be held on
the day herein designated for any annual meeting of the shareholders, or at any
adjournment thereof, the Board of Directors shall cause the election to be held
at a special meeting of the shareholders as soon thereafter as conveniently may
be.
Section 2. Special Meetings. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by statute, may be called
by the president or by the Board of Directors and shall be called by the
president at the request of the holders of not less than one-tenth (1/10) of all
the outstanding shares of the Corporation entitled to vote at the meeting.
Section 3. Place of Meeting. The Board of Directors may designate any
place, either within or without the state of incorporation, as the place of
meeting for any annual or special meeting. A waiver of notice, signed by all
shareholders entitled to vote at a meeting, may designate any place, either
within or without the state of incorporation, as the place for the holding of
such meeting. If no designation is made, the place of meeting shall be the
registered office of the Corporation in the state of incorporation.
Section 4. Notice of Meeting. Written or printed notice, stating the
place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered either
personally or by mail by or at the direction of the president, the secretary, or
the officer or person calling the meeting to each shareholder of record entitled
to vote at such meeting, except that, if the authorized shares are to be
increased, at least thirty (30) days notice shall be given.
Section 5. Closing of Transfer Books or Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors of the
Corporation may fix in advance a date as the record date for any such
determination of shareholders; such date, in case of a meeting of shareholders,
shall be not more than fifty (50) days nor less than ten (10) days prior to the
date on which the particular action requiring such determination of shareholders
entitled to vote at any meeting of shareholders has been made as provided in
this section; such determination shall apply to any adjournment thereof, except
where the determination has been made through the closing of the stock transfer
books and the stated period of closing has expired.
Section 6. Quorum. A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of the
outstanding shares are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without further notice. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 7. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. The attorney-in-fact can only be another shareholder of the
Corporation. Such proxy shall be filed with the secretary of the Corporation
before or at the time of the meeting. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the proxy.
Section 8. Voting of Shares. Each outstanding share entitled to vote
shall be entitled to one (1) vote upon each matter submitted to a vote at a
meeting of shareholders.
Section 9. Cumulative Voting. As set forth in the Articles
of Incorporation, cumulative voting shall not be permitted.
Section 10. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders or any other action which may be taken at
a meeting of the shareholders may be taken without a meeting, if a consent in
writing, setting forth the action so taken, shall be signed by all of the
shareholders entitled to vote with respect to the subject matter thereof.
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors.
The Board of Directors shall have the power from time to time to
provide for the management of the offices of the Corporation at home or abroad
in such manner as they see fit and, in particular, from time to time, to
delegate any of the powers of the Board of Directors in the course of the
current business of the Corporation to any standing or special committee or to
any officer or agent and to appoint any persons as agents of the Corporation
with such powers (including the power to sub-delegate) and upon such terms as
may be deemed fit.
In addition to the powers and authorities by the Articles of
Incorporation and by these By-Laws expressly conferred upon them, the Board of
Directors may exercise all such powers of the Corporation and do all such lawful
acts and things as are not by statute or by the Articles of Incorporation or by
these By- Laws directed or required to be exercised or done by the shareholders.
Section 2. Number, Tenure and Qualifications. The number of directors
of the Corporation shall be no less than three (3) nor no more than nine (9),
the exact number to be established by resolution of the Board of Directors.
Notwithstanding anything herein to the contrary, the number of directors may be
less than three (3) to the extent permitted by the Articles of Incorporation.
Each director shall hold office until the next annual meeting of shareholders
and until his successor has been elected and qualified. Directors need not be
residents of the state of incorporation or shareholders of the Corporation.
Section 3. Regular Meetings. A regular meeting of the Board of
Directors shall be held, without other notice than this By-Law, immediately
after and at the same place as the annual meeting of shareholders. The Board of
Directors may provide, by resolution, the time and place, either within or
without the state of incorporation, for the holding of additional regular
meetings, without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the president or any two (2) directors.
The person or persons authorized to call special meetings of the Board of
Directors may fix any place, either within or without the state of
incorporation, as the place for holding any special meeting of the Board of
Directors called by them.
Section 5. Notice. Notice of any special meeting shall be given at
least three (3) days previously thereto by written notice delivered personally
or mailed to each director at his business address or by telegram. If mailed,
such notice shall be deemed to be delivered when deposited in the United States
Mail so addressed with postage thereon prepaid. If notice be given by telegram,
such notice shall be deemed to be delivered when the telegram is delivered to
the telegraph company. Any director may waive notice of any meeting. The
attendance of a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business, because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the Board of Directors need be
specified in the notice or waiver of notice of such meeting.
Section 6. Quorum. Any majority of the total membership of the Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if a quorum shall not be present at any
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice.
Section 7. Action by Consent of Board of Directors Without Meeting. Any
action required or permitted to be taken by the Board of Directors under any
provision of the laws of the state of incorporation may be taken without a
meeting, if all members of the Board of Directors shall individually or
collectively consent in writing to such action. Such written consent or consents
shall be filed with the minutes of the proceedings of the Board of Directors.
Such action by written consent shall have the same force and effect as a
unanimous vote of such directors. Any certificate or other document filed under
any provision of the laws of the state of incorporation which relates to action
so taken shall state that the action was taken by unanimous written consent of
the Board of Directors without a meeting; that these By-Laws authorize the
directors to so act; and such statement shall be prima facie evidence of such
authority.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present, shall be the act of the Board
of Directors.
The order of business at any regular or special meeting of the Board of
Directors shall be:
1. Calling the roll.
2. Secretary's proof of due notice of meeting, if required.
3. Reading and disposal of unapproved minutes.
4. Reports of officers.
5. Unfinished business.
6. New business.
7. Adjournment.
Section 9. Vacancies. Any vacancy occurring in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office.
Any directorship to be filled by reason of an increase in the number of
directors shall be filled by the affirmative vote of a majority of the directors
then in office or by an election at an annual meeting or at a special meeting of
shareholders called for that purpose. A director chosen to fill a position
resulting from an increase in the number of directors shall hold office until
the next annual meeting of shareholders and until his successor has been elected
and qualified.
Section 10. Compensation. By resolution of the Board of Directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor or from receiving compensation for
any extraordinary or unusual service as a director.
Section 11. Presumption of Assent. A director of the Corporation, who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken, shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the secretary of the Corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
Section 12. Resignation of Officers or Directors. Any director or other
officer may resign his office at any time, such resignation to be made in
writing and to take effect from the time of its receipt by the Corporation
unless a time be fixed in the resignation and then it will take effect from that
date. The acceptance of the resignation shall not be required to make it
effective.
ARTICLE IV
OFFICERS
Section 1. Number. The officers of the Corporation shall be a chief
executive officer, a president, a secretary and a treasurer, and, if the Board
of Directors determines, one or more vice-presidents (the number thereof to be
determined by the Board of Directors), all of whom shall be designated executive
officers and assistant officers, as may be deemed necessary, shall be designated
administrative assistant officers and may be appointed by the president. Any two
or more offices may be held by the same person, except the offices of president
and secretary. The officers of the Corporation shall be natural persons of the
age of eighteen years or older.
Section 2. Election and Term of Office. The executive officers of the
Corporation, to be elected by the Board of Directors, shall be elected annually
by the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of the shareholders. If the election of officers shall
not be held at such meeting, such election shall be held as soon thereafter as
conveniently may be. Each executive officer shall hold office until his
successor shall have been duly elected and shall have qualified or until his
death or until he shall resign or shall have been removed in the manner
hereinafter provided. Administrative assistant officers shall hold office at the
pleasure of the president.
Section 3. Removal. Any officer or agent elected or appointed by the
Board of Directors may be removed by the Board of Directors whenever, in its
judgment, the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed.
Section 4. Vacancies. A vacancy in any executive office, because of
death, resignation, removal, disqualification or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
Section 5. The President. The president of the Corporation, subject to
the control of the chief executive officer and the Board of Directors, shall be
in general charge of the affairs of the Corporation. He may sign, with the
secretary or any other proper officer of the Corporation thereunto authorized by
the Board of Directors, certificates for shares of the Corporation, any deeds,
mortgages, bonds, contracts or other instruments which the Board of Directors
has authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these By-
Laws to some other officer or agent of the Corporation, or shall be required by
law to be otherwise signed or executed; and, in general, shall perform all
duties incident to the office of the president and such other duties as may be
prescribed by the Board of Directors from time to time.
Section 6. The Vice-President(s). In the absence of the president or in
the event of his death or inability or refusal to act, the vice-president (or,
in the event there be more than one vice-president, the vice-presidents in the
order designated at the time of their election or, in the absence of any
designation, then in the order of their election), shall perform the duties of
the president and, when so acting, shall have all the powers of and be subject
to all the restrictions upon the president. Any vice-president may sign, with
the secretary or an assistant secretary, certificates for shares of the
Corporation and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors.
Section 7. The Secretary. The secretary shall: (a) keep the minutes of
the shareholders' meetings and of the Board of Directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given in
accordance with the provisions of these By-Laws as required by law; (c) be
custodian of the corporate records and of the seal of the Corporation and see
that the seal of the Corporation is affixed to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized; (d) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholders; (e) sign with the president, or a vice-
president, certificates for shares of the Corporation, the issuance of which
shall have been authorized by resolution of the Board of Directors; (f) have
general charge of the stock transfer books of the Corporation; (g) in general,
perform all the duties incident to the office of the secretary and such other
duties as from time to time may be assigned to him by the president or by the
Board of Directors.
Section 8. The Treasurer. If required by the Board of Directors, the
treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall: (a) have charge and custody of and be responsible for all funds and
securities of the Corporation; receive and give receipts for monies due and
payable to the Corporation from any source whatsoever, and deposit all such
monies in the name of the corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article V
of these By-Laws; and (b) in general, perform all the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the president or by the Board of Directors.
Section 9. Assistant Secretaries and Assistant Treasurers. The
assistant secretaries, when authorized by the president, may sign with the
president or a vice-president certificates for shares of the Corporation, the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The assistant treasurers shall respectively, if required by the Board
of Directors, give bonds for the faithful discharge of their duties in such sums
and with such sureties as the Board of Directors shall determine. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or the treasurer, respectively, or by
the president or Board of Directors.
Section 10. Salaries. The salaries of the executive officers shall be
fixed from time to time by the Board of Directors and no officer shall be
prevented from receiving such salary by reason of the fact that he is also a
director of the Corporation. The salaries of the administrative assistant
officers shall be fixed by the president.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract, including contracts to
lend and borrow money, or execute and deliver any instrument in the name of and
on behalf of the Corporation and such authority may be general or confined to
specific instances.
Section 2. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness, issued in the
name of the Corporation, shall be signed by such officer or officers, agent or
agents, of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
Section 3. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER AND SALE
Section 1. Certificates for Shares. Certificates representing shares of
the Corporation shall be in such form as shall be determined by the Board of
Directors. Such certificates shall be signed by the president or a vice-
president and by the secretary, or an assistant secretary.
A certificate for shares signed by an officer who ceases by death,
resignation or otherwise to be an officer of the corporation before the
certificate is delivered by the Corporation, is as valid as though signed by a
duly elected, qualified and authorized officer.
All certificates for shares shall be consecutively numbered or
otherwise identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of issue,
shall be entered on the stock transfer books of the Corporation. All
certificates surrendered to the Corporation for transfer shall be cancelled and
no new certificate shall be issued until the former certificate of a like number
of shares has been surrendered and cancelled, except that, in case of a lost,
destroyed or mutilated certificate, a new one may be issued therefor upon such
terms and indemnity to the Corporation as the Board of Directors may prescribe.
The shares of stock of the Corporation shall be issued only in the name
of the legal or beneficial owner.
Section 2. Transfer of Shares. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation and on
surrender for cancellation of the certificate for such shares. The person in
whose name shares stand on the books of the Corporation shall be deemed by the
Corporation to be the owner thereof for all purposes.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by resolution of
the Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay in cash, stock or other property, dividends on its
outstanding shares in the manner and upon the terms and conditions provided by
law and its Articles of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall provide a corporate seal, circular in
form, having inscribed thereon, among other things, the corporate name, the
state of incorporation and the word "Seal".
ARTICLE X
WAIVER OF NOTICE
Whenever any notice is required to be given to any shareholder or
director of the Corporation under the provisions of these By-Laws or under the
provisions of the Articles of Incorporation or under the provisions of the
applicable laws of the state of incorporation, a waiver thereof in writing,
signed by the person or persons entitled to such notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of such
notice.
ARTICLE XI
AMENDMENTS
These By-Laws may be altered, amended or repealed and new By-Laws may
be adopted by the Board of Directors at any regular or special meeting of the
Board of Directors.
ARTICLE XII
UNIFORMITY OF INTERPRETATION AND SEVERABILITY
These By-Laws shall be so interpreted and construed as to conform to
the Articles of Incorporation and the statutes of the state of incorporation or
of any other state in which conformity may become necessary by reason of the
qualification of the Corporation to do business in such foreign state, and where
conflict between these By-Laws and the Articles of Incorporation or the statutes
of the state of incorporation has arisen or shall arise, these By-Laws shall be
considered to be modified to the extent, but only to the extent, conformity
shall require. If any provision hereof or the application thereof shall be
deemed to be invalid by reason of the foregoing sentence, such invalidity shall
not affect the validity of the remainder of the By-Laws without the invalid
provision or the application thereof, and the provisions of these By-Laws are
declared to be severable.
VOTING AGREEMENT
ROBERT A. FITZNER, JR., 18885 East Easter Place, Aurora, Colorado
80016-2136 ("Fitzner") and DOROTHY K. ENGLEBRECHT, 8829 West Fremont Avenue,
Littleton, Colorado 80123 ("Grantor"), for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, mutually agree as
follows:
1. Grantor is the owner of 220,272 shares of the $.01 par value common
stock of Fronteer Directory Company, Inc. ("Company") represented by stock
certificate no. 1627. Such shares of common stock of the Company owned by
Grantor will be referred to herein as the "Shares." This Agreement is being
entered into pursuant to Section 7-107-302 of the Colorado Business Corporation
Act.
2. The term of this Agreement shall be for the period beginning on the
date of this Agreement and ending on September 16, 1997.
3. Attached hereto as Exhibit A and incorporated herein by reference is
a form of Irrevocable Proxy. Upon the execution of this Agreement, Grantor
hereby agrees to execute such Irrevocable Proxy. Upon execution of such
Irrevocable Proxy, Grantor and Fitzner hereby agree to deliver a copy thereof by
certified mail return receipt requested to the secretary of the Company.
4. The parties agrees that this Agreement and the Irrevocable Proxy
shall cover not only the Shares but also all voting securities issued or
issuable during the term of this Agreement as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation all
voting shares issued as dividends or as a result of any reclassification, split
up, or other corporate reorganization. Any such voting securities which become
subject to this Agreement and the Irrevocable Proxy as described in the previous
sentence shall be referred to herein as the "Other Shares." Upon receipt of
stock certificates representing Other Shares, the parties agree that the legend
set forth in paragraph 7 hereof shall be placed upon such stock certificates and
a copy of such stock certificates shall be delivered, within five calendar days
after Grantor's receipt thereof, to Fitzner or to his designee.
5. Grantor agrees that he/she will not sell, transfer, assign, pledge,
hypothecate, or in any way alienate any of the Shares or Other Shares, or any
right or interest therein, whether voluntarily, involuntarily or by operation of
law, or by gift or otherwise, until after September 15, 1997.
6. Grantor hereby irrevocably grants to Fitzner or his designee the
absolute right to purchase all or part of the Shares at any time during the
period from July 16, 1997, to September 15, 1997, at the per share market price
of the Shares or at $1.00 per share for the Shares, whichever is greater; and,
with respect to the Other Shares, at the per share market price thereof or at
the per share price determined by using $1.00 as the value of the Shares for or
with respect to which such Other Shares were issued or issuable as an addition
to, in substitution or exchange for, or with respect to, and then multiplying or
dividing such $1.00 value to reflect each transaction involving such Other
Shares, whichever is greater. The "market price" shall be the closing "bid"
price for the Shares or the Other Shares on the trading medium upon which the
Shares or Other Shares are being traded on the day the purchase right granted
hereunder is exercised by Fitzner or his designee.
7. Grantor hereby agrees that the following legend shall be placed on
each stock certificate representing the Shares and the Other Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A VOTING AGREEMENT AND THE RECORD OWNER OF THE
SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAS
GRANTED AN IRREVOCABLE PROXY WITH RESPECT TO
VOTING AND CERTAIN OTHER ACTIONS WITH RESPECT TO
SUCH SHARES. IN ADDITION, IN THE VOTING AGREEMENT
THE RECORD OWNER OF THIS CERTIFICATE HAS GRANTED
THE ABSOLUTE RIGHT TO ANOTHER PERSON TO PURCHASE
THE SHARES REPRESENTED BY THIS CERTIFICATE DURING
THE PERIOD FROM JULY 16, 1997 TO SEPTEMBER 15,
1997, AND SUCH RECORD OWNER HAS AGREED NOT TO
SELL, TRANSFER, ASSIGN, PLEDGE, OR HYPOTHECATE THE
SHARES REPRESENTED BY THIS CERTIFICATE UNTIL AFTER
SEPTEMBER 15, 1997. THE TERM OF THE VOTING
AGREEMENT EXPIRES ON SEPTEMBER 16, 1997, AND THE
TERM OF THE IRREVOCABLE PROXY EXPIRES ON JULY 16,
1997."
8. Grantor acknowledges that this Agreement and the Irrevocable Proxy
permit Fitzner to designate another person to exercise all of Fitzner's rights
and authority under this Agreement and the Irrevocable Proxy. Within five
calendar days after making any such designation, Fitzner agrees to provide
written notice thereof to Grantor.
9. Grantor and Fitzner hereby agree that this Agreement and the
Irrevocable Proxy may not be terminated or revoked during their respective terms
by Grantor or Fitzner for any reason, including the death or incapacity of
Grantor, Fitzner, or Fitzner's designee. In the event of the death or incapacity
of any such person, this Agreement and the Irrevocable Proxy shall be binding
upon and shall inure to the benefit of such person's personal representative,
executor, or guardian, as the case may be.
10. Grantor hereby waives any right under agency law or under common
law to terminate or revoke this Agreement or the Irrevocable Proxy during their
respective terms.
11. The parties agree that this Agreement and the Irrevocable Proxy
shall be governed by and in accordance with the laws of the State of Colorado.
/s/ Dorothy K. Englebrech
- ----------------------------------------- Date: 06-02-95
Dorothy K. Englebrecht, Grantor
/s/ Robert A. Fitzner
- ----------------------------------------- Date: 06-02-95
Robert A. Fitzner, Jr.
2
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
I, DOROTHY K. ENGLEBRECHT, am the owner of 220,272 shares of the $.01
par value common stock of Fronteer Directory Company, Inc. ("Company")
represented by stock certificate no. 1627. Such shares shall hereinafter be
referred to as the "Shares." I hereby appoint Robert A. Fitzner, Jr., 18885 East
Easter Place, Aurora, Colorado 80016-2136 ("Fitzner") as my agent and proxy to
vote the Shares or to give written consent in lieu of voting the Shares, in
person or by proxy, at any and all meetings of the shareholders of the Company,
for whatsoever purpose called or held, and in any and all proceedings, whether
at meetings of shareholders of the Company or otherwise, or when the vote or
written consent of shareholders of the Company may be required or authorized by
law. The term of such appointment shall be from date of execution of this
Irrevocable Proxy until July 15, 1997. Until the expiration of the term of this
Irrevocable Proxy, Fitzner shall, in his sole and uncontrolled discretion, in
respect of any and all of the Shares, possess and be entitled to exercise the
right to vote the Shares for every purpose, to waive any shareholder's privilege
in respect thereof, and to consent to any lawful corporate act of the Company,
as though absolute owner of the Shares. The appointment contained herein and the
powers conferred hereby are irrevocable during the term of such appointment and
authorization. I hereby grant to Fitzner the power and authority to designate
another person ("Designee") to exercise the rights and authority which I have
granted to Fitzner herein. Thereafter, such Designee shall have all of the
rights and authority which I have conferred herein upon Fitzner. In addition to
the Shares, this Irrevocable Proxy and the rights and powers conferred herein
shall also extend to any voting securities which are issued or issuable during
the term of this Irrevocable Proxy as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation shares
issued as dividends or as a result of any reclassification, split up, or other
corporate reorganization of the Company. I have entered into a voting agreement
with Fitzner. I have made the appointment set forth herein and I am granting the
rights and authorization set forth herein pursuant to the provisions of Sections
7-107-203 and 7-107-302 of the Colorado Business Corporation Act. This is an
irrevocable proxy coupled with an interest and I am waiving any right which may
exist under common law or otherwise to revoke this Proxy during the term hereof.
Dated: 06-02-95
/s/ Dorothy K. Englebrecht
------------------------------
DOROTHY K. ENGLEBRECHT
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Melinda R. O'Connor , a Notary Public, hereby certify that on June 2,
1995, personally appeared before me the above named Dorothy K. Englebrecht, who
being first duly sworn by me declared that she is the person who signed the
foregoing document and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day of
June, 1995.
My Commission Expires: 8/7/96
/s/ Melinda R. O'Connor
-----------------------------------
Notary Public
[S E A L]
2
VOTING AGREEMENT
ROBERT A. FITZNER, JR., 18885 East Easter Place, Aurora, Colorado
80016-2136 ("Fitzner") and STEVEN M. FISHBEIN, 8829 West Fremont Avenue,
Littleton, Colorado 80123 ("Grantor"), for good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, mutually agree as
follows:
1. Grantor is the owner of 220,272 shares of the $.01 par value common
stock of Fronteer Directory Company, Inc. ("Company") represented by stock
certificate no. 1628. Such shares of common stock of the Company owned by
Grantor will be referred to herein as the "Shares." This Agreement is being
entered into pursuant to Section 7-107-302 of the Colorado Business Corporation
Act.
2. The term of this Agreement shall be for the period beginning on the
date of this Agreement and ending on September 16, 1997.
3. Attached hereto as Exhibit A and incorporated herein by reference is
a form of Irrevocable Proxy. Upon the execution of this Agreement, Grantor
hereby agrees to execute such Irrevocable Proxy. Upon execution of such
Irrevocable Proxy, Grantor and Fitzner hereby agree to deliver a copy thereof by
certified mail return receipt requested to the secretary of the Company.
4. The parties agrees that this Agreement and the Irrevocable Proxy
shall cover not only the Shares but also all voting securities issued or
issuable during the term of this Agreement as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation all
voting shares issued as dividends or as a result of any reclassification, split
up, or other corporate reorganization. Any such voting securities which become
subject to this Agreement and the Irrevocable Proxy as described in the previous
sentence shall be referred to herein as the "Other Shares." Upon receipt of
stock certificates representing Other Shares, the parties agree that the legend
set forth in paragraph 7 hereof shall be placed upon such stock certificates and
a copy of such stock certificates shall be delivered, within five calendar days
after Grantor's receipt thereof, to Fitzner or to his designee.
5. Grantor agrees that he/she will not sell, transfer, assign, pledge,
hypothecate, or in any way alienate any of the Shares or Other Shares, or any
right or interest therein, whether voluntarily, involuntarily or by operation of
law, or by gift or otherwise, until after September 15, 1997.
6. Grantor hereby irrevocably grants to Fitzner or his designee the
absolute right to purchase all or part of the Shares at any time during the
period from July 16, 1997, to September 15, 1997, at the per share market price
of the Shares or at $1.00 per share for the Shares, whichever is greater; and,
with respect to the Other Shares, at the per share market price thereof or at
the per share price determined by using $1.00 as the value of the Shares for or
with respect to which such Other Shares were issued or issuable as an addition
to, in substitution or exchange for, or with respect to, and then multiplying or
dividing such $1.00 value to reflect each transaction involving such Other
Shares, whichever is greater. The "market price" shall be the closing "bid"
price for the Shares or the Other Shares on the trading medium upon which the
Shares or Other Shares are being traded on the day the purchase right granted
hereunder is exercised by Fitzner or his designee.
7. Grantor hereby agrees that the following legend shall be placed on
each stock certificate representing the Shares and the Other Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A VOTING AGREEMENT AND THE RECORD
OWNER OF THE SHARES REPRESENTED BY THIS STOCK
CERTIFICATE HAS GRANTED AN IRREVOCABLE PROXY
WITH RESPECT TO VOTING AND CERTAIN OTHER
ACTIONS WITH RESPECT TO SUCH SHARES. IN
ADDITION, IN THE VOTING AGREEMENT THE RECORD
OWNER OF THIS CERTIFICATE HAS GRANTED THE
ABSOLUTE RIGHT TO ANOTHER PERSON TO PURCHASE
THE SHARES REPRESENTED BY THIS CERTIFICATE
DURING THE PERIOD FROM JULY 16, 1997 TO
SEPTEMBER 15, 1997, AND SUCH RECORD OWNER HAS
AGREED NOT TO SELL, TRANSFER, ASSIGN, PLEDGE,
OR HYPOTHECATE THE SHARES REPRESENTED BY THIS
CERTIFICATE UNTIL AFTER SEPTEMBER 15, 1997.
THE TERM OF THE VOTING AGREEMENT EXPIRES ON
SEPTEMBER 16, 1997, AND THE TERM OF THE
IRREVOCABLE PROXY EXPIRES ON JULY 16, 1997."
8. Grantor acknowledges that this Agreement and the Irrevocable Proxy
permit Fitzner to designate another person to exercise all of Fitzner's rights
and authority under this Agreement and the Irrevocable Proxy. Within five
calendar days after making any such designation, Fitzner agrees to provide
written notice thereof to Grantor.
9. Grantor and Fitzner hereby agree that this Agreement and the
Irrevocable Proxy may not be terminated or revoked during their respective terms
by Grantor or Fitzner for any reason, including the death or incapacity of
Grantor, Fitzner, or Fitzner's designee. In the event of the death or incapacity
of any such person, this Agreement and the Irrevocable Proxy shall be binding
upon and shall inure to the benefit of such person's personal representative,
executor, or guardian, as the case may be.
10. Grantor hereby waives any right under agency law or under common
law to terminate or revoke this Agreement or the Irrevocable Proxy during their
respective terms.
11. The parties agree that this Agreement and the Irrevocable Proxy
shall be governed by and in accordance with the laws of the State of Colorado.
/s/ Steven M. Fishbein
------------------------------------ Date: 06-02-95
Steven M. Fishbein, Grantor
/s/ Robert A. Fitzner
----------------------------------- Date: 06-02-95
Robert A. Fitzner, Jr.
2
EXHIBIT A
IRREVOCABLE PROXY
I, STEVEN M. FISHBEIN, am the owner of 220,272 shares of the $.01 par
value common stock of Fronteer Directory Company, Inc. ("Company") represented
by stock certificate no. 1627. Such shares shall hereinafter be referred to as
the "Shares." I hereby appoint Robert A. Fitzner, Jr., 18885 East Easter Place,
Aurora, Colorado 80016-2136 ("Fitzner") as my agent and proxy to vote the Shares
or to give written consent in lieu of voting the Shares, in person or by proxy,
at any and all meetings of the shareholders of the Company, for whatsoever
purpose called or held, and in any and all proceedings, whether at meetings of
shareholders of the Company or otherwise, or when the vote or written consent of
shareholders of the Company may be required or authorized by law. The term of
such appointment shall be from date of execution of this Irrevocable Proxy until
July 15, 1997. Until the expiration of the term of this Irrevocable Proxy,
Fitzner shall, in his sole and uncontrolled discretion, in respect of any and
all of the Shares, possess and be entitled to exercise the right to vote the
Shares for every purpose, to waive any shareholder's privilege in respect
thereof, and to consent to any lawful corporate act of the Company, as though
absolute owner of the Shares. The appointment contained herein and the powers
conferred hereby are irrevocable during the term of such appointment and
authorization. I hereby grant to Fitzner the power and authority to designate
another person ("Designee") to exercise the rights and authority which I have
granted to Fitzner herein. Thereafter, such Designee shall have all of the
rights and authority which I have conferred herein upon Fitzner. In addition to
the Shares, this Irrevocable Proxy and the rights and powers conferred herein
shall also extend to any voting securities which are issued or issuable during
the term of this Irrevocable Proxy as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation shares
issued as dividends or as a result of any reclassification, split up, or other
corporate reorganization of the Company. I have entered into a voting agreement
with Fitzner. I have made the appointment set forth herein and I am granting the
rights and authorization set forth herein pursuant to the provisions of Sections
7-107-203 and 7-107-302 of the Colorado Business Corporation Act. This is an
irrevocable proxy coupled with an interest and I am waiving any right which may
exist under common law or otherwise to revoke this Proxy during the term hereof.
Dated: 06-02-95
/s/ Steven M. Fishbein
-------------------------------------
STEVEN M. FISHBEIN
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Arlene M. Wilson, a Notary Public, hereby certify that on June 2nd,
1995, personally appeared before me the above named Steven M. Fishbein, who
being first duly sworn by me declared that he is the person who signed the
foregoing document and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day of
June, 1995.
My Commission Expires: July 24, 1995
/s/ Arlene M. Wilson
-------------------------------------
Arlene M. Wilson
4180 E. Caley Pl.
Littleton, CO 80121
Notary Public
[S E A L]
2
VOTING AGREEMENT
ROBERT A. FITZNER, JR., 18885 East Easter Place, Aurora, Colorado
80016-2136 ("Fitzner") and PETER K. O'LEARY, 667 South Emerson, Denver, Colorado
80209 ("Grantor"), for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, mutually agree as follows:
1. Grantor is the owner of 220,272 shares of the $.01 par value common
stock of Fronteer Directory Company, Inc. ("Company") represented by stock
certificate no. 1629. Such shares of common stock of the Company owned by
Grantor will be referred to herein as the "Shares." This Agreement is being
entered into pursuant to Section 7-107-302 of the Colorado Business Corporation
Act.
2. The term of this Agreement shall be for the period beginning on the
date of this Agreement and ending on September 16, 1997.
3. Attached hereto as Exhibit A and incorporated herein by reference is
a form of Irrevocable Proxy. Upon the execution of this Agreement, Grantor
hereby agrees to execute such Irrevocable Proxy. Upon execution of such
Irrevocable Proxy, Grantor and Fitzner hereby agree to deliver a copy thereof by
certified mail return receipt requested to the secretary of the Company.
4. The parties agrees that this Agreement and the Irrevocable Proxy
shall cover not only the Shares but also all voting securities issued or
issuable during the term of this Agreement as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation all
voting shares issued as dividends or as a result of any reclassification, split
up, or other corporate reorganization. Any such voting securities which become
subject to this Agreement and the Irrevocable Proxy as described in the previous
sentence shall be referred to herein as the "Other Shares." Upon receipt of
stock certificates representing Other Shares, the parties agree that the legend
set forth in paragraph 7 hereof shall be placed upon such stock certificates and
a copy of such stock certificates shall be delivered, within five calendar days
after Grantor's receipt thereof, to Fitzner or to his designee.
5. Grantor agrees that he/she will not sell, transfer, assign, pledge,
hypothecate, or in any way alienate any of the Shares or Other Shares, or any
right or interest therein, whether voluntarily, involuntarily or by operation of
law, or by gift or otherwise, until after September 15, 1997.
6. Grantor hereby irrevocably grants to Fitzner or his designee the
absolute right to purchase all or part of the Shares at any time during the
period from July 16, 1997, to September 15, 1997, at the per share market price
of the Shares or at $1.00 per share for the Shares, whichever is greater; and,
with respect to the Other Shares, at the per share market price thereof or at
the per share price determined by using $1.00 as the value of the Shares for or
with respect to which such Other Shares were issued or issuable as an addition
to, in substitution or exchange for, or with respect to, and then multiplying or
dividing such $1.00 value to reflect each transaction involving such Other
Shares, whichever is greater. The "market price" shall be the closing "bid"
price for the Shares or the Other Shares on the trading medium upon which the
Shares or Other Shares are being traded on the day the purchase right granted
hereunder is exercised by Fitzner or his designee.
7. Grantor hereby agrees that the following legend shall be placed on
each stock certificate representing the Shares and the Other Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A VOTING AGREEMENT AND THE RECORD OWNER OF THE
SHARES REPRESENTED BY THIS STOCK CERTIFICATE HAS
GRANTED AN IRREVOCABLE PROXY WITH RESPECT TO
VOTING AND CERTAIN OTHER ACTIONS WITH RESPECT TO
SUCH SHARES. IN ADDITION, IN THE VOTING AGREEMENT
THE RECORD OWNER OF THIS CERTIFICATE HAS GRANTED
THE ABSOLUTE RIGHT TO ANOTHER PERSON TO PURCHASE
THE SHARES REPRESENTED BY THIS CERTIFICATE DURING
THE PERIOD FROM JULY 16, 1997 TO SEPTEMBER 15,
1997, AND SUCH RECORD OWNER HAS AGREED NOT TO
SELL, TRANSFER, ASSIGN, PLEDGE, OR HYPOTHECATE THE
SHARES REPRESENTED BY THIS CERTIFICATE UNTIL AFTER
SEPTEMBER 15, 1997. THE TERM OF THE VOTING
AGREEMENT EXPIRES ON SEPTEMBER 16, 1997, AND THE
TERM OF THE IRREVOCABLE PROXY EXPIRES ON JULY 16,
1997."
8. Grantor acknowledges that this Agreement and the Irrevocable Proxy
permit Fitzner to designate another person to exercise all of Fitzner's rights
and authority under this Agreement and the Irrevocable Proxy. Within five
calendar days after making any such designation, Fitzner agrees to provide
written notice thereof to Grantor.
9. Grantor and Fitzner hereby agree that this Agreement and the
Irrevocable Proxy may not be terminated or revoked during their respective terms
by Grantor or Fitzner for any reason, including the death or incapacity of
Grantor, Fitzner, or Fitzner's designee. In the event of the death or incapacity
of any such person, this Agreement and the Irrevocable Proxy shall be binding
upon and shall inure to the benefit of such person's personal representative,
executor, or guardian, as the case may be.
2
<PAGE>
10. Grantor hereby waives any right under agency law or under common
law to terminate or revoke this Agreement or the Irrevocable Proxy during their
respective terms.
11. The parties agree that this Agreement and the Irrevocable Proxy
shall be governed by and in accordance with the laws of the State of Colorado.
/s/ Peter K. O'Leary
------------------------------- Date: 06-02-96
Peter K. O'Leary, Grantor
/s/ Robert A. Fitzner
------------------------------- Date: 06-02-95
Robert A. Fitzner, Jr.
3
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
I, PETER K. O'LEARY, am the owner of 220,272 shares of the $.01 par
value common stock of Fronteer Directory Company, Inc. ("Company") represented
by stock certificate no. 1627. Such shares shall hereinafter be referred to as
the "Shares." I hereby appoint Robert A. Fitzner, Jr., 18885 East Easter Place,
Aurora, Colorado 80016-2136 ("Fitzner") as my agent and proxy to vote the Shares
or to give written consent in lieu of voting the Shares, in person or by proxy,
at any and all meetings of the shareholders of the Company, for whatsoever
purpose called or held, and in any and all proceedings, whether at meetings of
shareholders of the Company or otherwise, or when the vote or written consent of
shareholders of the Company may be required or authorized by law. The term of
such appointment shall be from date of execution of this Irrevocable Proxy until
July 15, 1997. Until the expiration of the term of this Irrevocable Proxy,
Fitzner shall, in his sole and uncontrolled discretion, in respect of any and
all of the Shares, possess and be entitled to exercise the right to vote the
Shares for every purpose, to waive any shareholder's privilege in respect
thereof, and to consent to any lawful corporate act of the Company, as though
absolute owner of the Shares. The appointment contained herein and the powers
conferred hereby are irrevocable during the term of such appointment and
authorization. I hereby grant to Fitzner the power and authority to designate
another person ("Designee") to exercise the rights and authority which I have
granted to Fitzner herein. Thereafter, such Designee shall have all of the
rights and authority which I have conferred herein upon Fitzner. In addition to
the Shares, this Irrevocable Proxy and the rights and powers conferred herein
shall also extend to any voting securities which are issued or issuable during
the term of this Irrevocable Proxy as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation shares
issued as dividends or as a result of any reclassification, split up, or other
corporate reorganization of the Company. I have entered into a voting agreement
with Fitzner. I have made the appointment set forth herein and I am granting the
rights and authorization set forth herein pursuant to the provisions of Sections
7-107-203 and 7-107-302 of the Colorado Business Corporation Act. This is an
irrevocable proxy coupled with an interest and I am waiving any right which may
exist under common law or otherwise to revoke this Proxy during the term hereof.
Dated: 06-02-95
/s/ Peter K. O'Leary
------------------------------
PETER K. O'LEARY
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Arlene M. Wilson, a Notary Public, hereby certify that on June 2nd,
1995, personally appeared before me the above named Peter K. O'Leary, who being
first duly sworn by me declared that he is the person who signed the foregoing
document and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day of
June, 1995.
My Commission Expires: July 24, 1995.
/s/ Arlene M. Wilson
-----------------------------------
Arlene M. Wilson
4180 E. Caley Pl.
Littleton, CO 80121
Notary Public
[S E A L]
2
<PAGE>
VOTING AGREEMENT
ROBERT A. FITZNER, JR., 18885 East Easter Place, Aurora, Colorado
80016-2136 ("Fitzner") and ARLENE M. WILSON, 4180 East Caley Place, Littleton,
Colorado 80121 ("Grantor"), for good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, mutually agree as follows:
1. Grantor is the owner of 220,272 shares of the $.01 par value common
stock of Fronteer Directory Company, Inc. ("Company") represented by stock
certificate no. 1630. Such shares of common stock of the Company owned by
Grantor will be referred to herein as the "Shares." This Agreement is being
entered into pursuant to Section 7-107-302 of the Colorado Business Corporation
Act.
2. The term of this Agreement shall be for the period beginning on the
date of this Agreement and ending on September 16, 1997.
3. Attached hereto as Exhibit A and incorporated herein by reference is
a form of Irrevocable Proxy. Upon the execution of this Agreement, Grantor
hereby agrees to execute such Irrevocable Proxy. Upon execution of such
Irrevocable Proxy, Grantor and Fitzner hereby agree to deliver a copy thereof by
certified mail return receipt requested to the secretary of the Company.
4. The parties agrees that this Agreement and the Irrevocable Proxy
shall cover not only the Shares but also all voting securities issued or
issuable during the term of this Agreement as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation all
voting shares issued as dividends or as a result of any reclassification, split
up, or other corporate reorganization. Any such voting securities which become
subject to this Agreement and the Irrevocable Proxy as described in the previous
sentence shall be referred to herein as the "Other Shares." Upon receipt of
stock certificates representing Other Shares, the parties agree that the legend
set forth in paragraph 7 hereof shall be placed upon such stock certificates and
a copy of such stock certificates shall be delivered, within five calendar days
after Grantor's receipt thereof, to Fitzner or to his designee.
5. Grantor agrees that he/she will not sell, transfer, assign, pledge,
hypothecate, or in any way alienate any of the Shares or Other Shares, or any
right or interest therein, whether voluntarily, involuntarily or by operation of
law, or by gift or otherwise, until after September 15, 1997.
6. Grantor hereby irrevocably grants to Fitzner or his designee the
absolute right to purchase all or part of the Shares at any time during the
period from July 16, 1997, to September 15, 1997, at the per share market price
of the Shares or at $1.00 per share for the Shares, whichever is greater; and,
with respect to the Other Shares, at the per share market price thereof or at
the per share price determined by using $1.00 as the value of the Shares for or
with respect to which such Other Shares were issued or issuable as an addition
to, in substitution or exchange for, or with respect to, and then multiplying or
dividing such $1.00 value to reflect each transaction involving such Other
Shares, whichever is greater. The "market price" shall be the closing "bid"
price for the Shares or the Other Shares on the trading medium upon which the
Shares or Other Shares are being traded on the day the purchase right granted
hereunder is exercised by Fitzner or his designee.
7. Grantor hereby agrees that the following legend shall be placed on
each stock certificate representing the Shares and the Other Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A VOTING AGREEMENT AND THE RECORD
OWNER OF THE SHARES REPRESENTED BY THIS STOCK
CERTIFICATE HAS GRANTED AN IRREVOCABLE PROXY
WITH RESPECT TO VOTING AND CERTAIN OTHER
ACTIONS WITH RESPECT TO SUCH SHARES. IN
ADDITION, IN THE VOTING AGREEMENT THE RECORD
OWNER OF THIS CERTIFICATE HAS GRANTED THE
ABSOLUTE RIGHT TO ANOTHER PERSON TO PURCHASE
THE SHARES REPRESENTED BY THIS CERTIFICATE
DURING THE PERIOD FROM JULY 16, 1997 TO
SEPTEMBER 15, 1997, AND SUCH RECORD OWNER HAS
AGREED NOT TO SELL, TRANSFER, ASSIGN, PLEDGE,
OR HYPOTHECATE THE SHARES REPRESENTED BY THIS
CERTIFICATE UNTIL AFTER SEPTEMBER 15, 1997.
THE TERM OF THE VOTING AGREEMENT EXPIRES ON
SEPTEMBER 16, 1997, AND THE TERM OF THE
IRREVOCABLE PROXY EXPIRES ON JULY 16, 1997."
8. Grantor acknowledges that this Agreement and the Irrevocable Proxy
permit Fitzner to designate another person to exercise all of Fitzner's rights
and authority under this Agreement and the Irrevocable Proxy. Within five
calendar days after making any such designation, Fitzner agrees to provide
written notice thereof to Grantor.
9. Grantor and Fitzner hereby agree that this Agreement and the
Irrevocable Proxy may not be terminated or revoked during their respective terms
by Grantor or Fitzner for any reason, including the death or incapacity of
Grantor, Fitzner, or Fitzner's designee. In the event of the death or incapacity
of any such person, this Agreement and the Irrevocable Proxy shall be binding
upon and shall inure to the benefit of such person's personal representative,
executor, or guardian, as the case may be.
2
<PAGE>
10. Grantor hereby waives any right under agency law or under common
law to terminate or revoke this Agreement or the Irrevocable Proxy during their
respective terms.
11. The parties agree that this Agreement and the Irrevocable Proxy
shall be governed by and in accordance with the laws of the State of Colorado.
/s/ Arlene M. Wilson
--------------------------- Date: 06-02-95
Arlene M. Wilson, Grantor
/s/ Robert A. Fitzner
-------------------------- Date: 06-02-95
Robert A. Fitzner, Jr.
3
<PAGE>
EXHIBIT A
IRREVOCABLE PROXY
I, ARLENE M. WILSON, am the owner of 220,272 shares of the $.01 par
value common stock of Fronteer Directory Company, Inc. ("Company") represented
by stock certificate no. 1627. Such shares shall hereinafter be referred to as
the "Shares." I hereby appoint Robert A. Fitzner, Jr., 18885 East Easter Place,
Aurora, Colorado 80016-2136 ("Fitzner") as my agent and proxy to vote the Shares
or to give written consent in lieu of voting the Shares, in person or by proxy,
at any and all meetings of the shareholders of the Company, for whatsoever
purpose called or held, and in any and all proceedings, whether at meetings of
shareholders of the Company or otherwise, or when the vote or written consent of
shareholders of the Company may be required or authorized by law. The term of
such appointment shall be from date of execution of this Irrevocable Proxy until
July 15, 1997. Until the expiration of the term of this Irrevocable Proxy,
Fitzner shall, in his sole and uncontrolled discretion, in respect of any and
all of the Shares, possess and be entitled to exercise the right to vote the
Shares for every purpose, to waive any shareholder's privilege in respect
thereof, and to consent to any lawful corporate act of the Company, as though
absolute owner of the Shares. The appointment contained herein and the powers
conferred hereby are irrevocable during the term of such appointment and
authorization. I hereby grant to Fitzner the power and authority to designate
another person ("Designee") to exercise the rights and authority which I have
granted to Fitzner herein. Thereafter, such Designee shall have all of the
rights and authority which I have conferred herein upon Fitzner. In addition to
the Shares, this Irrevocable Proxy and the rights and powers conferred herein
shall also extend to any voting securities which are issued or issuable during
the term of this Irrevocable Proxy as an addition to, in substitution or
exchange for, or with respect to the Shares, including without limitation shares
issued as dividends or as a result of any reclassification, split up, or other
corporate reorganization of the Company. I have entered into a voting agreement
with Fitzner. I have made the appointment set forth herein and I am granting the
rights and authorization set forth herein pursuant to the provisions of Sections
7-107-203 and 7-107-302 of the Colorado Business Corporation Act. This is an
irrevocable proxy coupled with an interest and I am waiving any right which may
exist under common law or otherwise to revoke this Proxy during the term hereof.
Dated: 06-02-95
/s/ Arlene M. Wilson
-----------------------------
ARLENE M. WILSON
<PAGE>
STATE OF COLORADO )
) ss.
CITY AND COUNTY OF DENVER )
I, Melinda R. O'Connor, a Notary Public, hereby certify that on June 2,
1995, personally appeared before me the above named Arlene M. Wilson, who being
first duly sworn by me declared that she is the person who signed the foregoing
document and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 2nd day of
June, 1995.
My Commission Expires: 8/7/96
/s/ Melinda R. O'Connor
-----------------------------
Notary Public
[S E A L]
2
FRONTEER DIRECTORY COMPANY, INC.
1988 INCENTIVE STOCK OPTION PLAN
AS AMENDED AT JANUARY 15, 1992
1. Purpose of the Plan.
This 1988 Incentive Stock Option Plan (hereinafter called the "Plan")
for Fronteer Directory Company, Inc. (hereinafter called the "Company") is
intended to advance the interests of the Company by providing officers and other
employees who have substantial responsibility for the direction and management
of the Company with additional incentive for them to promote the success of the
Company, to increase their proprietary interest in the success of the Company,
and to encourage them to remain in its employ. The above aims will be
effectuated through the granting of certain stock options. It is intended that
certain of the options issued under the Plan and designated by the Committee
under Section 3(b) will qualify as Incentive Stock Options (hereinafter called
"ISOs") under Section 422A of the Internal Revenue Code, as amended, (the "IRC")
and the Regulations and Rulings thereunder, and the terms of the Plan shall be
interpreted in accordance with this intention.
2. Administration of the Plan.
The Board of Directors of the Company shall appoint a Stock Option
Committee (hereinafter called the "Committee") which shall consist of not less
than two (2) members, each of whom is a disinterested person, that is a director
who is not, during the one year prior to service on the Committee, granted an
option pursuant to the Plan except as may be permitted pursuant to Rule 16b-
3(c)(2) under the Securities Exchange Act of 1934. Subject to the provisions of
the Plan, the Committee shall have plenary authority, in its discretion; (a) to
determine the employees of the Company and any subsidiary (from among the class
of employees eligible under Section 3 to receive options under the Plan) to whom
options shall be granted; (b) to determine the time or times at which options
shall be granted; (c) to determine the option price of the shares subject to
each option, which price shall not be less than the minimum specified in Section
5; (d) to determine (subject to Section 7) the time or times when each option
shall become exercisable and the duration of the exercise period; and (e) to
interpret the Plan and to prescribe, amend, and rescind rules and regulations
relating to it. The members of the Committee shall serve at the pleasure of the
Board of Directors, which may remove any or all of the members at any time. The
Board of Directors may appoint new members to fill vacancies, however caused, in
the Committee; provided, however, that at all times at least one member shall be
a Director of the Company. The Committee shall select one of its members as its
Chairman and shall hold its meetings at such times and places as it shall deem
advisable. All action of the Committee shall be taken by majority vote of its
members. Any action may be taken by a written instrument signed by all the
members of the Committee, and action so taken shall be fully as effective as if
it had been taken by a vote of the members at a meeting duly called and held.
The Committee may appoint a secretary to keep minutes of its meetings and shall
make such rules and regulations for the conduct of its business as it shall deem
advisable.
The interpretation and construction by the Committee with respect to
any provision of the Plan or any option granted under it shall be final. The
Committee and its members shall not be liable for any action or determination
made by them in good faith with respect to the Plan or any option granted under
it.
3. Eligibility and Limitations on Options Granted
Under the Plan
<PAGE>
(a) Options will be granted only to persons who are employees of the
Company or a subsidiary corporation of the Company (including any subsidiary
which may be organized or acquired subsequent to adoption of this Plan). The
term "employees" shall include officers, directors, executives, and supervisory
personnel, as well as other employees of the Company or a subsidiary corporation
of the Company (including any subsidiary which may be organized or acquired
subsequent to adoption of this Plan). The term "subsidiary corporation" shall,
for the purposes of this Plan be defined in the same manner as such term is
defined in Section 425(f) of the Internal Revenue Code.
(b) At the time of the grant of each option under this Plan, the
Committee shall determine whether such option is to be designated as an ISO. No
option granted to any employee, who at the time of such grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any subsidiary, may be designated as an ISO,
unless at the time of such grant, the option price is fixed at not less than 110
percent of the fair market value of the stock subject to the option, and
exercise of such option is prohibited by its terms after the expiration of five
(5) years from the date such option is granted.
(c) The aggregate fair market value (determined at the time of grant)
of the stock for which any employee may be granted options designated as ISOs,
exercisable for the first time by an employee during any calendar year (under
this or any other stock option plan established by the Company or a subsidiary
corporation of the Company), shall not exceed $100,000.
(d) Subject to the limitations provided in this Section 3, the number
of shares of Common Stock for which options may be granted to any officer or
director of the Company in any calendar year shall be no more than the number of
shares computed as follows:
100% of the respective annual salary of such officer or
director at the beginning of such calendar year, plus any carryover
amount, divided by the fair market value per share of the Common Stock
at the date of grant of such option. The carryover amount from any such
calendar year shall be any excess of 100% of the respective annual
salary of such officer or director at the beginning of such calendar
year over the aggregate fair market value of Common Stock (determined
at the date of grant) for which an employee was granted options during
such calendar year. The carryover amount for any calendar year may be
carried forward for three years. Options granted in any year shall be
applied against the current year limitation first and then against the
remaining unused carryovers to such year in the order of the calendar
year in which such carryover amounts arose.
For purposes of the foregoing calculation, officers and
directors of the Company who do not receive an annual salary (other than a
director's fee) from the Company shall be deemed to receive an annual salary in
an amount equal to 50% of the highest salary paid to any Company Officer at the
beginning of such calendar year.
4. Shares of Stock Subject to the Plan.
There will be reserved for use upon the exercise of options to be
granted from time to time under the Plan (subject to the provisions of Section
12) an aggregate of 600,000 shares of the $0.01 par value Common Stock
(hereinafter called the "Common Stock") of the Company, which shares may be in
whole or in part, as the Board of Directors of the Company shall from time to
time determine, authorized but unissued shares of the Common Stock or issued
shares of the Common Stock which shall have been reacquired by the Company. Any
shares subject to an option under the Plan, which option for any reason expires
or is terminated unexercised as to such shares, may again be subjected to an
option under the Plan.
5. Option Price.
<PAGE>
The purchase price under each option issued shall be determined by the
Committee at the time the option is granted, but in no event shall such purchase
price be less than 100 percent of the fair market value of the Company's Common
Stock on the date of the grant.
If the Common Stock is traded in the over-the-counter market, such fair
market value shall be deemed to be the mean of the bid and the asked prices on
such day as reported by NASDAQ, or if not so reported, by the National Quotation
Bureau or another reliable source of such information. If the Common Stock is
traded on an exchange, such fair market value shall be deemed to be the mean of
the high and low prices at which it is quoted or traded on the date of grant of
the Option. If the calculation of such mean results in a fraction of a cent, the
option price shall be rounded up to the next whole cent.
Fair market value shall be determined without regard to any
restriction, other than a restriction which, by its terms, will never lapse.
6. Adjustments for Certain Transactions.
In the event that additional shares of Common Stock are issued pursuant
to a stock split or a stock dividend, the number of shares of Common Stock then
covered by each outstanding option granted hereunder shall be increased
proportionately with no increase in the total purchase price of the shares then
so covered, and the number of shares of Common Stock reserved for the purpose of
the Plan shall be increased by the same proportion. In the event that the shares
of Common Stock of the Company from time to time issued and outstanding are
reduced by a combination of shares, the number of shares of Common Stock then
covered by each outstanding option granted hereunder shall be reduced
proportionately with no reduction in the total price of the shares then so
covered, and the number of shares of Common Stock reserved for the purpose of
the Plan shall be reduced by the same proportion. In the event that the Company
should transfer assets to another corporation and distribute the stock of such
other corporation without the surrender of Common Stock of the Company, and if
such distribution is not taxable as a dividend and no gain or loss is recognized
pursuant to the Internal Revenue Code as then in effect, then the total purchase
price of the shares covered by each outstanding option shall be reduced by an
amount which bears the same ratio to the total purchase price then in effect as
the market value of the stock distributed in respect of a share of the Common
Stock of the Company, immediately following the distribution, bears to the
aggregate of the market value at such time of a share of the Common Stock of the
Company and the stock distributed in respect thereof. Similarly, if any change
in the Common Stock of the Company shall occur as a result of a
recapitalization, reorganization, merger or consolidation, the Committee shall
make appropriate adjustments in the price of the shares and/or number of shares
reserved under the Plan and any shares then covered by each outstanding option
granted under the Plan. No fractional shares shall be issued, and any fractional
shares resulting from the computations pursuant to this Section 6 shall be
eliminated from the respective option. No adjustment shall be made for cash
dividends or the issuance to stockholders of rights to subscribe for additional
Common Stock or other securities. All such adjustments shall be made by the
Committee, whose determination upon the same shall be final and binding upon the
optionees.
7. Period of Option and Certain Limitations
on Right to Exercise
(a) All options issued under the Plan shall be for such period as the
Committee shall determine, but for not more than ten (10) years from the date of
grant thereof.
(b) The period of the option, once it is granted, may be reduced only
as provided for in Section 9 in connection with the termination of employment or
death of the optionee or in Section 7(c) in the case of less than satisfactory
performance.
(c) Each option granted under this Plan shall become exercisable only
after six (6) months of continued employment of the optionee with the Company or
a subsidiary corporation of the Company immediately following the date the
option is granted.
At least six months must elapse from the date of acquisition of shares
on exercise of an ISO hereunder to the date of disposition of such shares as to
any such shares held by officers, directors or holders of 10% or more of the
outstanding shares of the Company.
(d) The exercise of any option shall also be contingent upon receipt by
the Company of cash or certified bank check to its order, or any combination of
the foregoing in an amount equal to the full option price of the shares being
purchased. For purposes of this paragraph, shares of the Company's Common Stock
that are delivered in payment of the option price shall be valued at their fair
market value determined under the method set forth in Section 5 of this Plan
applied as of the date of the exercise of the option. In lieu of payment by cash
or certified bank check, an optionee may tender other shares of Common Stock of
the Company in payment for such option shares with the value of such other
shares for purposes of the transaction to be the fair market of the Company's
Common Stock, as defined in Section 5, at the date of the tender of such other
shares.
(e) No optionee or his legal representative, legatees, or distributees,
as the case may be, will be, or will be deemed to be, a holder of any share
subject to an option or have the right to vote, receive dividends, or have any
other rights of a holder of any such share, unless and until certificates for
such shares are issued to him or them under the terms of the Plan.No adjustment
shall be made for dividends in cash or other rights for which the record date is
prior to the date such stock certificate is issued.
(f) In no event may an option be exercised after the expiration of its
term.
(g) Exercise of an option in any manner shall result in a decrease in
the number of shares of Common Stock which thereafter may be available under the
Plan by the number of shares as to which the option is exercised.
(h) Notwithstanding anything herein to the contrary, options under the
Plan shall always be granted to and exercised by officers and directors of the
Company in such a manner as to conform to the provisions of Rule 16b-3, or any
replacement rule, adopted pursuant to the provisions of the Securities Exchange
Act of 1934, as the same now exists or may, from time to time, be amended.
(i) Options granted hereunder may be exercised by the holder thereof
without regard to the chronology of various such options granted to the holder
pursuant to the Plan, except as may be prescribed by Section 422A of the IRC.
8. Non-Transferability.
Each option granted under this Plan shall be transferable only by will
or the laws of descent and distribution and shall be exercisable, during his
lifetime, only by the employee to whom the option is granted. Except as
permitted by the preceding sentence, no option granted under the Plan or any of
the rights and privileges thereby conferred shall be transferred, assigned,
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and no such option, right, or privilege shall be subject to execution,
attachment, or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate, or otherwise dispose of the option, or of any right or privilege
conferred thereby, contrary to the provisions hereof, or upon the levy of any
attachment or similar process upon such option, right or privilege, the option
and such rights and privileges shall immediately become null and void.
9. Effect of Termination of Employment, Death or Disability.
(a) In the event of the termination of employment of an optionee after
the date of issuance of an option to him either by reason of (i) a discharge for
cause or (ii) voluntary separation on the part of the optionee without the
consent of the Company or a subsidiary then employing optionee, any option or
options theretofore granted to him under this Plan to the extent not theretofore
exercised by him shall immediately terminate and cease to be exercisable in any
manner.
(b) In the event of the termination of employment of an optionee
(otherwise than by reason of death or retirement of the optionee at his
Retirement Date by the Company or a subsidiary then employing optionee), any
option or options granted to him under the Plan to the extent not theretofore
exercised shall be deemed cancelled and terminated forthwith, except that,
subject to the provisions of section (a) of this Section, such optionee may
exercise any options theretofore granted to him, which have not then expired and
which are otherwise exercisable within the provisions of Section 7(c) hereof,
within three (3) months after such termination. If the employment of an optionee
shall be terminated by reason of the optionee's retirement at his Retirement
Date by the Company or a subsidiary then employing optionee, the optionee shall
have the right to exercise such option or options held by him to the extent that
such options have not expired, at any time within three (3) months after such
retirement. The provisions of Section 7(c) to the contrary notwithstanding, upon
retirement, all options held by an optionee shall be immediately exercisable in
full. The transfer of an optionee from the employ of the Company to a subsidiary
corporation of the Company or visa versa, or from one subsidiary corporation of
the Company to another, shall not be deemed to constitute a termination of
employment for purposes of this Plan.
(c) In the event that an optionee shall die while employed by the
Company or any subsidiary of the Company or shall die within three (3) months
after retirement at his Retirement Date (by the Company or any subsidiary of the
Company), any option or options granted to him under this Plan and not
theretofore exercised by him or expired shall be exercisable by the estate of
the optionee or by any person who acquired such option by bequest or inheritance
from the optionee in full, notwithstanding Section 7(c), at any time within one
(1) year after the death of the optionee. References hereinabove to the optionee
shall be deemed to include any person entitled to exercise the option after the
death of the optionee under the terms of this Section.
(d) In the event of the termination of employment of an optionee by
reason of the optionee's disability, the optionee shall have the right,
notwithstanding the provisions of Section 7(c) hereof, to exercise all options
held by him in full, to the extent that options have not previously expired or
been exercised, at any time within one (1) year after such termination. The term
"disability" shall, for the purposes of this Plan, be defined in the same manner
as such term is defined in Section 105(d)(4) of the Internal Revenue Code, as
now in effect or as it may be amended from time to time.
(e) For the purposes of this Plan, "Retirement Date" shall mean any
date an employee is otherwise entitled to retire under the Company's retirement
plans and shall include normal retirement at age 65, early retirement at age 62,
and retirement at age 60 after 30 years of service.
10. Listing and Registration of Shares.
Each option shall be subject to the requirement that if at any time the
Stock Option Committee shall determine, in its discretion, that the listing,
registration, or qualification of the shares covered thereby upon any securities
exchange or under any state or federal law or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition of, or in
connection with, the granting of such option or the issue or purchase of shares
thereunder, such option may not be exercised in whole or in part unless and
until such listing, registration, qualification, consent, or approval shall have
been effected or obtained free of any conditions not acceptable to the
Committee.
If the shares of Common Stock for which options may be granted under
the Plan have not been registered pursuant to the Securities Act of 1933, as
amended, as a condition to the delivery of shares of Common Stock pursuant to
the exercise of an option, each optionee receiving shares of Common Stock
pursuant to the exercise of an option granted under the Plan shall represent and
acknowledge in writing that the securities being acquired are "restricted
securities" as that term is defined by Rule 144 promulgated under the Securities
Act of 1933, as amended (the "Act"), that the Company may restrict the transfer
of such Common Stock except in compliance with the Act, and that the Company may
cause the following or a similar legend to be placed on each certificate
representing such Common Stock, unless counsel for the Company is of the opinion
that such legend is unnecessary:
"The securities represented by this certificate are
'restricted securities' as defined by Rule 144 under the Securities Act
of 1933 (the "Act") and may not be offered for sale, sold, or otherwise
transferred except pursuant to an effective registration statement
under the Act or pursuant to an exemption from registration, the
availability of which is to be established to the satisfaction of the
Company."
The Company is under no obligation to register such option shares under
the Securities Act of 1933, as amended.
11. Expiration and Termination of the Plan.
Options may be granted under the Plan at any time or from time to time
as long as the total number of shares optioned or purchased under this Plan does
not exceed 300,000 shares of Common Stock. The Plan may be abandoned or
terminated at any time by the Board of Directors of the Company except with
respect to any options then outstanding under the Plan. The Plan will terminate
ten (10) years after its effective date and no option may be granted pursuant to
the Plan thereafter.
12. Amendment of Plan.
The Board of Directors may at any time and from time to time modify and
amend the Plan (including any stock option form or related document) in any
respect; provided, however, that no such amendment shall, without the approval
of the holders of a majority of the Company's outstanding Common Stock: (a)
increase (except in accordance with Section 6), the maximum number of shares for
which options may be granted under the Plan either in the aggregate or to any
individual employee; or (b) reduce (except in accordance with Section 6) the
minimum option prices which may be established under the Plan; or (c) extend the
period or periods during which options may be granted or exercised; or (d)
change the provisions relating to the determination of employees to whom options
may be granted and the number of shares to be covered by such options; or (e)
change the provisions relating to adjustments to be made upon changes in the
Company's capitalization; or (f) change the method for the selection of the
Committee as provided by Section 2 hereof. The termination or any modification
or amendment of the Plan shall not, without the consent of an employee, affect
his rights under an option theretofore granted to him.
13. Applicability of Plan to Outstanding Stock Options.
This Plan shall not affect the terms and conditions of any stock
options heretofore granted to any employee of the Company under any other plan
relating to stock options; nor shall it affect any of the rights of any employee
to whom such a stock option was granted.
14. Subject to Internal Revenue Code.
The terms of this Plan regarding ISOs and any ISOs granted under the
Plan are subject to Section 422A of the Internal Revenue Code and to all present
and future regulations and rulings of the Secretary of Treasury or his delegate
relating to the qualification of Incentive Stock Options under Section 422A of
the Internal Revenue Code. If any provision of the Plan or any ISO granted under
the Plan conflicts with Section 422A or any such regulation or ruling, then that
provision of the Plan or such option shall be void and of no effect.
In order for a stock option to be considered an incentive stock option
and receive special tax treatment under Section 422A of the Internal Revenue
Code, an employee (1) must not sell or dispose of the common stock received
under an option within two years after the option is granted, and (2) must hold
such shares for at least one year after they have been transferred to him;
provided, that such requirements shall not apply in the event of the employee's
death. Any employee who sells or disposes of such shares of Common Stock without
complying with the foregoing holding requirements, shall promptly notify the
Company of such action.
15. Effective Date of Plan.
This Plan was adopted by the Board of Directors and approved by the
shareholders of the Company as of September 30, 1988.
EMPLOYEE STOCK OWNERSHIP PLAN
AND TRUST AGREEMENT
OF
FRONTEER DIRECTORY CO.
FRONTEER DIRECTORY CO., a corporation organized under the laws of the
State of Colorado, referred to as the "Employer", makes this Agreement with
RICHARD O. FLURER, GLORIA OLSON and ERIC SCHMITZ, collectively referred to as
the "Trustee".
Recitals
The Employer hereby establishes, within this Trust Agreement, a Plan
for the administration and distribution of contributions made by the Employer
for the purpose of providing retirement benefits for eligible Employees. The
provisions of this Plan shall apply solely to an Employee whose employment with
the Employer terminates on or after the Effective Date.
NOW, THEREFORE, in consideration of their mutual covenants, the
Employer and the Trustee agree as follows:
ARTICLE I
Definitions
1.01 Plan means the retirement plan established by the Employer in the
form of this Agreement, designated as the Fronteer Directory Co. Employee Stock
Owenrship Plan. The Employer has designed this plan to invest primarily in
Employer Securities.
1.02 Employer means Fronteer Directory Co.
1.03 Trustee means Dennis w. Olson, Marlow E. Lindblom and Roland
Haux, or any successor in office who in writing accepts the position of Trustee.
1.04 Plan Administrator is the Employer unless the Employer designates
another person to hold the position of Plan Administrator. In addition to other
duties, the Plan Administrator has full responsibility for compliance with the
reporting and disclosure rules under ERISA as respects this Agreement.
1.05 Advisory Committee means the Employer's Advisory Committee as
from time to time constituted.
1.06 Employee means any employee of the Employer.
1.07 Highly Compensated Employee means an Employee who, during the
Plan Year or during the preceding 12-month period:
(a) is a more than 5% owner of the Employer (applying the constructive
ownership rules of Code Section 318, and applying the principles of
Code Section 318, for an unincorporated entity);
(b) has Compensation in excess of $75,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year);
(c) has Compensation in excess of $50,000 (as adjusted by the
Commissioner of Internal Revenue for the relevant year) and is part of
the top-paid 20% group of employees (based on Compensation for the
relevant year);
(d) has Compensation in excess of 50% of the dollar amount prescribed
in Code Section 415(b)(1)(A)(relating to defined benefit plans) and is
an officer of the Employer.
If the Employee satisfies the definition in clause (b), (c) or (d) in
the Plan Year but not during the preceding 12-month period and does not satisfy
clause (a) in either period, the Employee is a Highly Compensated Employee only
if he is one of the 100 most highly compensated Employees for the Plan Year. The
number of officers taken into account under clause (d) will not exceed the
greater of 3 or 10% of the total number (after application of the Code Section
414(q) exclusions) of Employees, but no more than 50 officers. If no Employee
satisfies the Compensation requirement in clause (d) for the relevant year, the
Advisory Committee will treat the highest paid officer as satisfying clause (d)
for that year.
For purposes of this Section 1.07, "Compensation" means Compensation as
defined in Section 1.10, except any exclusions from Compensation other than the
exclusions described in paragraphs (a), (b), (c) and (d) of Section 1.10, and
Compensation must include: (i) elective deferrals under a Code Section 401(k)
arrangment or under a Simplified Employee Pension maintained by the Employer;
and (ii) amounts paid by the Employer which are not currently includible in the
Employee's gross income because of Code Section 125 (cafeteria plans) or Code
Section 403(b) (tax-sheltered annuities). The Advisory Committee must make the
determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of the top paid 20% group, the top 100
paid Employees, the number of officers includible in clause (d) and the relevant
Compensation, consistent with Code Section 414(q) and regulations issued under
the Code section. The Employer may make a calendar year election to determine
the Highly Compensated Employees for the Plan Year, as prescribed by Treasury
regulations. A calendar year election must apply to all plans and arrangements
of the Employer. For purposes of applying any nondiscrimination test required
under the Plan or under the Code, in a manner consistent with applicable
Treasury regulations, the Advisory Committee will not treat as a separate
Employee a family member (a spouse, a lineal ascendant or descendant, or a
spouse of a lineal ascendant or descendant) of a Highly Compensated Employee
described in clause (a) of this Section, or a family member of one of the ten
Highly Compensated Employees with the greatest Compensation for the Plan Year,
but will treat the Highly Compensated Employee and all familiy members as a
single Highly Compensated Employee. This aggregation rule applies to a family
member even if that family member is a Highly Compensated Employee without
family aggregation.
The term "Highly Compensated Employee" also includes any former
Employee who separated from Service (or has a deemed Separation from Service, as
determined under Treasury regulations) prior to the Plan Year, performs no
Service for the Employer during the Plan Year, and was a Highly Compensated
Employee either for the separation year or any Plan Year ending on or after his
55th birthday. If the former Employee's Separation from Service occurred prior
to January 1, 1987, he is a Highly Compensated Employee only if he satisfied
clause (a) of this Section 1.07 or received Compensation in excess of $50,000
during: (1) the year of his Separation from Service (or the prior year); or (2)
any year ending after his 54th birthday.
1.08 Participant is an Employee who is eligible to be and becomes a
Participant in accordance with the provisions of Section 2.01.
1.09 Beneficiary is a person designated by a Participant who is or may
become entitled to a benefit under the Plan. A Beneficiary who becomes entitled
to a benefit under the Plan shall remain a Beneficiary under the Plan until the
Trustee has fully distributed his benefit to him. A Beneficiary's right to (and
the Plan Administrator's, the Advisory Committee's, or a Trustee's duty to
provide to the Beneficiary) information or data concerning the Plan shall not
arise until he first becomes entitled to receive a benefit under the Plan.
1.10 Compensation means the Participant's wages, salaries, fees for
professional service and other amounts received for personal services actually
rendered in the course of employment with the Employer maintaining the plan
(including, but not limited to, commissions paid salesmen, compensation for
services on the basis of a percentage of profits, commissions on insurance
premiums, tips and bonuses). Compensation also includes elective contributions
made by the Employer on the Employee's behalf. "Elective contributions" are
amounts excludible from the Employee's gross income under Code Section 402(a)(8)
(relating to a Code Section 401(k) arrangement), Code Section 402(h) (relating
to a Simplified Employee Pension), Code Section 125 (relating to a cafeteria
plan) or Code Section 403(b) (relating to a tax-sheltered annuity). The term
"Compensation" does not include:
(a) Employer contributions (other than "elective contributions") to a
plan of deferred compensation to the extent the contributions are not
included in the gross income of the Employee for the taxable year in
which contributed, on behalf of an Employee to a Simplified Employee
Pension Plan to the extent such contributions are excludible from the
Employee's gross income, and any distributions from a plan of deferred
compensation, regardless of whether such amounts are includible in the
gross income of the Employee when distributed.
(b) Amounts realized from the exercise of a non-qualified stock option,
or when restricted stock (or property) held by an Employee either
becomes freely transferable or is no longer subject to a substantial
risk of forfeiture.
(c) Amounts realized from the sale, exchange or other dispostion of
stock acquired under a qualified stock option.
(d) Other amounts which receive special tax benefits, such as premiums
for group term life insurance (but only to the extent that the premiums
are not includible in the gross income of the Employee), or
contributions made by an Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in Code Section 403(b) (whether or not the contributions are
excludible from the gross income of the Employee),other than "elective
contributions".
Any reference in this Plan to Compensation is a reference to the
definition in this Section 1.10, unless the Plan reference specifies a
modification to this definition. The Advisory Committee will take into account
only Compensation actually paid for the relevant period.
For any Plan Year beginning after December 31, 1988, the Advisory
Committee must take into account only the first $200,000 (or beginning January
1, 1990, such larger amount as the Commissioner of Internal Revenue may
prescribe) of any Participant's Compensation. The $200,000 Compensation
limitation applies to the combined Compensation of the Employee and of any
family member aggregated with the Employee under Section 1.09 and who is either
(i) the Employee's spouse; or (ii) the Employee's lineal descendant under the
age of 19. If the $200,000 (or adjusted) Compensation limitation applies to the
combined Compensation of the Employee and one or more family members, the
Advisory Committee will apply the contribution and allocation provisions of
Article III by prorating the $200,000 (or adjusted) limitation among the
affected Participants in proportion to each such Participant's Compensation
determined prior to application of this limitation. For any Plan Year beginning
prior to January 1, 1989, this $200,000 limitation (but not the family
aggregation requirement) applies only if the Plan is top heavy (as determined
under Section 1.29) for such Plan Year.
Nondiscrimination. For purposes of determining whether the Plan
discriminates in favor of Highly Compensated Employees, Compensation means
Compensation as defined in this Section 1.10, except any exclusions from
Compensation other than the exclusions described in paragraphs (a), (b), (c) and
(d), unless the Employer elects to use an alternate nondiscriminatory
definition, in accordance with the requirements of Code Section 414(s) and the
regulations issued under that Code section. The Employer may elect to include
all elective contributions made by the Employer on behalf of the Employees. The
Employer's election to include elective contributions must be consistent and
uniform with respect to Employees and all plans of the Employer for any
particular Plan Year. The Employer may make this election to include elective
contributions for nondiscrimination testing purposes, irrespective of whether
this Section 1.10 includes elective contributions in the general Compensation
definition applicable to the Plan.
1.11 Account means the separate account(s) which the Advisory Committee
or Trustee shall maintain for a Participant under the Plan.
1.12 Accrued Benefit means the amount standing in a Participant's
Account as of any date derived from both Employer contributions and Employee
contributions, if any.
1.13 Nonforfeitable means a Participant's or Beneficiary's
unconditional claim, legally enforceable against the Plan, to the Participant's
Accrued Benefit.
1.14 Plan Year means the fiscal year of the Plan, a 12 consecutive
month period ending every September 30.
1.15 Effective Date of this Plan is October 1, 1989.
1.16 Plan Entry Date means Effective Date and every April 1 and October
1 after the Effective Date.
1.17 Accounting Date is the last day of the Plan Year. Unless otherwise
specified in the Plan, the Advisory Committee will make all Plan allocations for
a particular Plan Year as of the Accounting Date of the Plan Year.
1.18 Trust means the Trust created under the Plan.
1.19 Trust Fund means all property of every kind held or acquired by
the Trustee under this Agreement.
1.20 Nontransferable Annuity means an annuity which by its terms
provides that it may not be sold, assigned, discounted, pledged as collateral
for a loan or security of the performance of an obligation or for any purpose to
any person other than the insurance company. If the Trustee distributes an
annuity contract, the contract must be a Nontransferable Annuity.
1.21 ERISA means the Employee Retirement Income Security Act of 1974,
as amended.
1.22 Code means the Internal Revenue Code of 1986, as amended.
1.23 Service means any period of time the Employee is in the employ of
an Employer, including any period the Employee is on unpaid leave of absence
authorized by the Employer under a uniform, nondiscriminatory policy applicable
to all Employees. "Separation from Service" means a separation from Service with
the Employer maintaining this Plan.
1.24 Hour of Service means:
(a) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is entitled
to payment, for the performance of duties during the Plan Year. The Advisory
Committee credits Hours of Service under this paragraph (a) to the Employee for
the computation period in which the Employee performs the duties, irrespective
of when paid;
(b) Each Hour of Service for back pay, irrespective of
mitigation of damages, to which the Employer has agreed or for which the
Employee has received an award. The Advisory Committee credits Hours of Service
under this paragraph (b) to the Employee for the computation period(s) to which
the award or the agreement pertains rather than the computation period in which
the award, agreement or payment is made; and
(c) Each Hour of Service for which the Employer, either
directly or indirectly, pays an Employee, or for which the Employee is entitled
to payment (irrespective of whether the employment relationship is terminated),
for reasons other than for the performance of duties during a computation
period, such as leave of absence, vacation, holiday, sick leave, illness,
incapacity (including disability), layoff, jury duty or military duty. The
Advisory Committee will credit no more than 501 Hours of Service under this
paragraph (c) to an Employee on account of any single continuous period during
which the Employee does not perform any duties (whether or not such period
occurs during a single computation period). The Advisory Committee credits Hours
of Service under this paragraph (c) in accordance with the rules of paragraph
(b) and (c) of Labor Reg. Section 2530.200b-2, which the Plan, by this
reference, specifically incorporates in full within this paragraph (c).
The Advisory Committee shall not credit an Hour of Service
under more than one of the above paragraphs. A computation period for purposes
of this Section 1.24 is the Plan Year, Year of Service period, Break in Service
period or other period, as determined under the Plan provision for which the
Advisory Committee is measuring an Employee's Hours of Service in favor of the
Employee.
The Advisory Committee will resolve any ambiguity with respect to the
crediting of an Hour of Service in favor of the Employee. The Advisory Committee
will credit every Employee with Hours of Service on the basis of the "actual"
method. For purposes of the Plan, "actual" method means the determination of
Hours of Service from records of hours worked and hours for which the Employer
makes payment or for which payment is due from the Employer.
Solely for purposes of determining whether the Employee incurs a Break
in Service under any provision of this Plan, the Advisory Committee must credit
Hours of Service during an Employee's unpaid absence period due to maternity or
paternity leave. The Advisory Committee considers an Employee on maternity or
paternity leave if the Employee's absence is due to the Employee's pregnancy,
the birth of the Employee's child, the placement with the Employee of an adopted
child, or the care of the Employee's child immediately following the child's
birth or placement. The Advisory Committee credits Hours of Service under this
paragraph on the basis of the number of Hours of Service the Employee would
receive if he were paid during the absence period or, if the Advisory Committee
cannot determine the number of Hours of Service the Employee would receive, on
the basis of 8 hours per day during the absence period. The Advisory Committee
will credit only the number (not exceeding 501) Hours of Service necessary to
prevent an Employee's Break in Service. The Advisory Committee credits all Hours
of Service described in this paragraph to the computation period in which the
absence period begins or, if the Employee does not need these Hours of Service
to prevent a Break in Service in the computation period in which his absence
period begins, the Advisory Committee credits these Hours of Service to the
immediately following computation period.
1.25 Disability means the Participant, because of a physical or mental
disability, will be unable to perform the duties of his customary position of
employment (or is unable to engage in any substantial gainful activity) for an
indefinite period which the Advisory Committee considers will be of long
continued duration. A Participant also is disabled if he incurs the permanent
loss or loss of use of a member or function of the body, or is permanently
disfigured, and incurs a Separation from Service. The Plan considers a
Participant disabled on the date the Advisory Committee determines the
Participant satisfies the definition of disability. The Advisory Committee may
require a Participant to submit to a physical examination in order to confirm
disability. The Advisory Committee will apply the provisions of this Section
1.25 in a nondiscriminatory, consistant and uniform manner.
1.26 Service for Predecessor Employer. If the Employer maintains the
plan of a predecessor employer, the Plan treats service of the Employee with the
predecessor employer as service with the Employer.
1.27 Related Employers. A related group is a controlled group of
corporations (as defined in Code Section 414(b)), trades or businesses (whether
or not incorporated) which are under common control (as defined in Code Section
414(c)) or an affiliated service group (as defined in Code Section 414(m) or in
Code Section 414(o)). If the Employer is a member of a related group, the term
"Employer" includes the related group members for purposes of crediting Hours of
Service, determining Years of Service and Breaks in Service under Articles II
and V, applying the limitations on allocations in Part 2 of Article III,
applying the top heavy rules and the minimum allocation requirements of Article
III, the definitions of Employee, Highly Compensated Employee, Compensation and
Leased Employee, and for any other purpose required by the Applicable Code
section or by a Plan provision. However, only an Employer described in Section
1.02 may contribute to the Plan and only an Employee employed by an Employer
described in Section 1.02 is eligible to participate in this Plan. For Plan
allocation purposes, "Compensation" does not include Compensation received from
a related employer that is not participating in this Plan.
1.28 Leased Employees. The Plan treats a Leased Employee as an Employee
of the Employer. A Leased Employee is an individual (who otherwise is not an
Employee of the Employer) who, pursuant to a leasing agreement between the
Employer and any other person, has performed services for the Employer (or for
the Employer and any persons related to the Employer within the meaning of Code
Section 144(a)(3)) on a substantially full time basis for at least one year and
who performs services historically performed by employees in the Employer's
business field. If a Leased Employee is treated as an Employee by reason of this
Section 1.28 of the Plan, "Compensation" includes Compensation from the leasing
organization which is attributable to services performed for the Employer.
Safe harbor plan exception. The Plan does not treat a Leased Employee
as an Employee if the leasing organization covers the employee in a safe harbor
plan and, prior to application of this safe harbor plan exception, 20% or less
of the Employer's Employees (other than Highly Compensaqted Employees) are
Leased Employees. A safe harbor plan is a money purchase pension plan providing
immediate participation, full and immediate vesting, and a nonintegrated
contribution formula equal to at least 10% of the employee's compensation
without regard to employment by the leasing organization on a specified date.
The safe harbor plan must determine the 10% contribution on the basis of
compensation as defined in Code Section 415(c)(3) plus elective contributions
(as defined in Section 1.10).
Other requirements. The Advisory Committee must apply this Section 1.28
in a manner consistent with Code Section 414(n) and Code Section 414(o) and the
regulations issued under those Code sections. The Advisory Committee will reduce
a Leased Employee's allocation of Employer contributions under this Plan by the
Leased Employee's allocation under the leasing organization's plan, but only to
the extent that allocation is attributable to the Leased Employee's service
provided to the Employer. The leasing organization's plan must be a money
purchase plan which would satisfy the definition under this Section 1.28 of a
safe harbor plan, irrespective of whether the Employer is able to use the safe
harbor plan exception.
1.29 Determination of Top Heavy Status. If this Plan is the only
qualified plan maintained by the Employer, the Plan is top heavy for a Plan Year
if the top heavy ratio as of the Determination Date exceeds 60%. The top heavy
ratio is a fraction, the numerator of which is the sum of the present value of
Accrued Benefits of all Key Employees as of the Determination Date and the
denominator of which is a similar sum determined for all Employees. The Advisory
Committee must include in the top heavy ratio, as part of the present value of
Accrued Benefits, any contribution not made as of the Determination Date but
includible under Code Section 416 and the applicable Treasury regulations, and
distributions made within the Determination Period. The Advisory Committee must
calculate the top heavy ratio by disregarding the Accrued Benefit (and
distributions, if any, of the Accrued Benefit) of any Non-Key Employee who was
formerly a Key Employee, and by disregarding the Accrued Benefit (including
distributions, if any, of the Accrued Benefit) of an individual who has not
received credit for at least one Hour of Service with the Employer during the
Determination Period. The Advisory Committee must calculate the top heavy ratio,
including th extent to which it must take into account distributions, rollovers
and transfers, in accordance with Code Section 416 and the regulations under
that Code section.
If the Employer maintains other qualified plans (including a simplified
employee pension plan), or maintained another such plan which now is terminated,
this Plan is top heavy only if it is part of the Required Aggregation Group, and
the top heavy ratio for the Required Aggregation Group and for the Permissive
Aggregation Group, if any, each exceeds 60%. The Advisory Committee will
calculate the top heavy ratio in the same manner as required by the first
paragraph of this Section 1.29, taking into account all plans within the
Aggregation Group. To the extent the Advisory Committee must take into account
distributions to a Participant, the Advisory Committee must include
distributions from a terminated plan which would have been part of the Required
Aggregation Group if it were in existence on the Determination Date. The
Advisory Committee will calculate the present value of Accrued Benefits under
defined benefit plans or simplified employee pension plans included within the
group in accordance with the terms of those plans, Code Section 416 and the
regulations under that Code section. If a Participant in a defined benefit plan
is a Non-Key Employee, the Advisory Committee will determine his Accrued Benefit
under the accrual method, if any, which is applicable uniformly to all defined
benefit plans maintained by the Employer or, if there is no uniform method, in
accordance with the slowest accrual method described in Code Section
411(b)(1)(C). To calculate the present value of benefits from a defined benefit
plan, the Advisory Committee will use the actuarial assumptions (interest and
mortality only) prescribed by the defined benefit plan(s) to value benfits for
top heavy purposes. If an aggregated plan does not have a valuation date
coinciding with the Determination Date, the Advisory Committee must value the
Accrued Benefits in the aggregated plan as of the most recent valuation date
falling within the twelve-month period ending on the Determination Date, except
as Code Section 416 and applicable Treasury regulations require for the first
and second plan year of a defined benefit plan. The Advisory Committee will
calculate the top heavy ratio with reference to the Determination Dates that
fall within the same calendar year.
Definitions. For purposes of applying the provisions of this Section
1.29:
(a) Key Employee means, as of any Determination Date, any Employee or
former Employee (or Beneficiary of such Employee) who, for any Plan
year in the Determination Period: (i) has Compensation in excess of 50%
of the dollar amount presecribed in Code Section 415(b)(1)(A) (relating
to defined benefit plans) and is an officer of the Employer; (ii) has
Compensation in excess of the dollar amount prescribed in Code Section
415(c)(1)(A) (relating to defined contribution plans) and is one of the
Employees owning the ten largest interests in the Employer; (iii) is a
more than 5% owner of the Employer; or (iv) is a more than 1% owner of
the Employer and has Compensation of more than $150,000. The
constructive ownership rules of Code Section 318 (or the principles of
that section, in the case of an unincorporated Employer,) will apply to
determine ownership in the Employer. The number of officers taken into
account under clause (i) will not exceed the greater of 3 or 10% of the
total number (after application of the Code Section 414(q)(8)
exclusions) of Employees, but no more than 50 officers. The Advisory
Committee will make the determination of who is a Key Employee in
accordance with Code Section 416(i)(1) and the regulations under that
Code section.
(b) Non-Key Employee is an employee who does not meet the definition
of Key Employee.
(c) Compensation means Compensation as determined under Section 1.07
(relating to the Highly Compensated Employee definition).
(d) Required Aggregation Group means: (1) each qualified plan of the
Employer in which at least one Key Employee participates at any time
during the Determination Period; and (2) any other qualified plan of
the Employer which enables a plan described in clause (1) to meet the
requirements of Code Section 401(a)(4) or Code Section 410.
(e) Permissive Aggregation Group is the Required Aggregation Group plus
any other qualified plans maintained by the Employer, but only if such
group would satisfy in the aggregate the requirements of Code Section
401(a)(4) and Code Section 410. The Advisory Committee will determine
the Permissive Aggregation Group.
(f) Employer means the Employer that adopts this Plan and any related
employers described in Section 1.27.
(g) Determination Date for any Plan Year is the Accounting Date of the
preceding Plan Year, or in the case of the first Plan Year of the Plan,
the Accounting Date of the Plan Year. The "Determination Period" is the
5 year period ending on the Determination Date.
1.30 Disqualified Person has the meaning ascribed to that term under
Code Section 4975(e)(2).
1.31 Employer Securities means voting common stock issued by the
Employer, or by a corporation which is a member of the same controlled group of
corporations, which is readily tradable on an established securities market.
1.32 Exempt Loan means a loan made to this Plan by a Disqualified
Person, or a loan to this Plan which is a Disqualified Person guarantees,
provided the loan satisfies the requirements to Treasury Regulation Sections
54.4975-7(b).
1.33 Leveraged Employer Securities means Employer Securities acquired
by the Trust with the proceeds of an Exempt Loan and which satisfy the
definition of "qualifying employer securities" in Code Section 4975(e)(8).
ARTICLE II
Employee Participants
2.01 Eligibility. Each Employee employed by the Employer on the
Effective Date, October 1, 1989, shall become a Participant as of October 1,
1989. Each Employee who first earns an Hour of Service after October 1, 1989
shall become a Participant in the Plan on the Plan Entry Date (if employed on
that date) coincident with or immediately following the later of the date on
which he completes one Year of Service or attains the age of 21.
2.02 Year of Service - Participation. For purposes of an Employee's
participation in the Plan under Section 2.01, the Plan takes into account all of
his Years of Service with the Employer, except as provided in Section 2.03.
"Year of Service" means a 12 consecutive month period during which the Employee
completes not less than 1,000 Hours of Service, measuring the beginning of the
first 12 month period from the Employment Commencement Date. If the Employee
does not complete 1,000 Hours of Service during the 12 month period commencing
with the Employment Commencement Date, the Plan measures the second 12 month
period from the first day of the Plan Year which includes the anniversary of the
Employment Commencement Date. The Plan measures any subsequent 12 month period
necessary for a determination of Year of Service for participation by reference
to succeeding Plan Years. "Employment Commencement Date" means the date on which
the Employee first performs an Hour of Service for the Employer.
2.03 Break in Service - Participation. For purposes of participation
in the Plan, the Plan does not apply any Break in Service rule.
2.04 Participation Upon Re-Employment. A Participant whose employment
terminates shall re-enter the Plan as a Participant on the date of his
re-employment. An Employee who satisfies the Plan's eligibility condition(s) but
who terminates employment prior to becoming a Participant becomes a Participant
in the Plan on the later of the Plan Entry Date on which he would have entered
the Plan had he not terminated employment or the date of his reemployment. Any
Employee who terminates employment prior to satisfying the Plan's eligibility
conditions becomes a Participant in accordance with the provisions of Section
2.01.
ARTICLE III
Employer Contributions and Forfeitures
Part 1. Amount of Employer Contributions and Plan Allocations: Sections 3.01
through 3.06
3.01 Amount. For each Plan Year, the Employer will contribute to the
Trust an amount which the Employer may from time to time deem advisable. The
Employer may make its contribution in cash or in Employer Securities as the
Employer from time to time may determine. The Employer may make its contribution
of Employer Securities at fair market value determined at the time of
contribution. Although the Employer may contribute to this Plan irrespective of
whether it has net profits, the Employer intends the Plan to be a profit-sharing
plan for all purposes of the Code. The Employer may not make a contribution to
the Trust for any Plan Year to the extent the contribution would exceed the
Participants' "Maximum Permissible Amounts" under Section 3.08.
The Trustee, upon written request from the Employer, must return to the
Employer the amount of the Employer's contribution made by the Employer by
mistake of fact or the amount of the Employer's contribution disallowed as a
deduction under Code Section 404. The Trustee will not return any portion of the
Employer's contribution under the provisions of this Section 3.01 more than one
year after: (a) the Employer made the contribution by mistake of fact; or (b)
the disallowance of the contribution as a deduction, and then, only to the
extent of the disallowance. The Trustee will not increase the amount of the
Employer contribution returnable under this Section 3.01 for any earnings
attributable to the contribution, but the Trustee will decrease the Employer
contribution returnable for any losses attributable to it. The Trustee may
require the Employer to furnish the Trustee whatever evidence the Trustee deems
necessary to enable the Trustee to confirm the amount the Employer has requested
be returned is properly returnable under ERISA.
3.02 Determination of Contribution. The Employer, from its records,
determines the amount of any contributions to be made by it to the Trust under
the terms of the Plan.
3.03 Time of Payment of Contribution. The Employer may pay its
contribution for each Plan Year in one or more installments without interest.
The Employer must make its contribution to the Trustee within the time
prescribed by the Code or applicable Treasury regulations.
3.04 Contribution Allocation.
(A) Method of Allocation. Subject to Section 3.04(B) and any restoration
allocation required under Section 5.04, the Advisory Committee will allocate the
credit each annual Employer contribution (and Participant forfeitures, if any),
to the Account of each Participant who satisfies the conditions of Section 3.06,
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.
<PAGE>
(B) Top Heavy Minimum Allocation.
(1) Minimum Allocation. If the Plan is top heavy in any Plan Year:
(a) Each Non-Key Employee (as defined in Section 1.29) who is
a Participant and is employed by the Employer on the last day
of the Plan Year will receive a top heavy minimum allocation
for the Plan Year, irrespective of whether he satisfies the
Hours of Service condition under Section 3.06; and
(b) The top heavy minimum allocation is the lesser of 3% of
the Non-Key Employee's Compensation for the Plan Year or the
highest contribution rate for the Plan Year made on behalf of
any Key Employee (as defined in Section 1.29). However, if a
defined benefit plan maintained by the Employer which benefits
a Key Employee depends on this Plan to satisfy the
antidiscrimination rules of Code Section 401(a)(4) or the
coverage rules of Code Section 410 (or another plan benefiting
the Key Employee so depends on such defined benefit plan), the
top heavy minimum allocation is 3% of the Non-Key Employee's
Compensation regardless of the contribution rate for the Key
Employees.
For purposes of this Section 3.04(B), the term "Participant"
includes any Employee otherwise eligible to participate in the Plan but
who is not a Participant because of his failure to make elective
deferrals under a Code Section 401(k) arrangement or because of his
failure to make mandatory employee contributions. For purposes of
clause (b), "Compensation" means Compensation as defined in Section
1.10, disregarding elective contributions and any exclusions from
Compensation, other than the exclusions described in paragraphs (a),
(b), (c) and (d) of Section 1.10 and disregarding the requirements of
Section 3.06. For purposes of this Section 3.04(B), a Participant's
contribution rate is the sum of Employer contributions (not including
Employer contributions to Social Security) and forfeitures allocated to
the Participant's Account for the Plan Year divided by his Compensation
for the entire Plan Year. However, for Plan Years beginning after
December 31, 1988, a Non-Key Employee's contribution rate does not
include any elective contributions under a Code Section 401(k)
arrangement nor any Employer matching contributions subject to the
nondiscrimination requirements of Code Section 401(k) or of Code
Section 401(m). To determine a Participant's contribution rate, the
Advisory Committee must treat all qualified top heavy defined
contribution plans maintained by the Employer (or by any related
Employers described in Section 1.27) as a single plan.
(2) Method of Compliance. The Plan will satisfy the top heavy minimum
allocation in accordance with this Section 3.04(B)(2). The Advisory
Committee first will allocate the Employer contributions (and
Participant forfeitures, if any) for the Plan Year in accordance with
the allocation formula under Section 3.04(A). The Employer then will
contribute an additional amount for the Account of any Participant who
is entitled under this Section 3.04(B) to a top heavy minimum
allocation and who contribution rate for the Plan Year is less than the
top heavy minimum allocation. The additional amount is the amount
necessary to increase the Participant's contribution rate to the top
heavy minimum allocation. The Advisory Committee will allocate the
additional contribution to the Account of the Participant on whose
behalf the Employer makes the contribution.
3.05 Forfeiture Allocation. The amount of a Participant's Accrued
Benefit forfeited under the Plan is a Participant forfeiture. Subject to any
restoration allocation required under Sections 5.04 or 9.14, the Advisory
Committee will allocate the forfeiture in accordance with Section 3.04, as an
Employer contribution for the Plan Year in which the forfeiture occurs, as if
the Participant forfeiture were an additional Employer contribution for the Plan
Year. The Advisory Committee will continue to hold the undistributed non-vested
portion of a terminated Participant's Accrued Benefit in his Account solely for
this benefit until a forfeiture occurs at the time specified in Section 5.09.
Except as provided under Section 5.04, a Participant will not share in the
allocation of a forfeiture of any portion of his Accrued Benefit. In making a
forfeiture allocation under this Section 3.05, the Advisory Committee will base
forfeitures of Employer Securities upon the fair market value of the Employer
Securities as of the Accounting Date of the forfeitures.
3.06 Accrual of Benefit. The Advisory Committee will determine the
accrual of benefit (Employer contributions and Participant forfeitures) on the
basis of the Plan Year.
Compensation Taken Into Account. In allocating an Employer contribution
to a Participant's Account, the Advisory Committee, except for purposes of
determining the top heavy minimum contribution under Section 3.04(B), will take
into account only the Compensation determined for the portion of the Plan Year
in which the Employee actually is a Participant.
Hours of Service Requirement. Subject to the top heavy minimum
allocation requirement of Section 3.04(B), the Advisory Committee will not
allocate any protion of an Employer contribution for a Plan Year to any
Participant's Account if the Participant does not complete a minimum of 1,000
Hours of Service during the Plan Year, unless the Participant terminates
employment during the Plan Year because of death or disability or because of the
attainment of Normal Retirement Age in the current Plan Year or in a prior Plan
Year.
Employment Requirement. A Participant who, during a particular Plan
Year, completes the Hours of Service requirement under this Section 3.06 will
not share in the allocation of Employer contributions and Participant
forfeitures, in any, for that Plan Year unless he is employed by the Employer on
the Accounting Date of the Plan Year, unless the Participant terminates
employment during the Plan Year because of death or disability or because of the
attainment of Normal Retirement Age in the current Plan Year or in a prior Plan
Year. Part 2. Limitations on Allocations: Sections 3.07 and 3.08
3.07 Limitations on Allocations to Participants' Accounts. The amount
of Annual Additions the Advisory Committee may allocate under this Plan on a
Participant's behalf for a Limitation Year may not exceed the Maximum
Permissible Amount. If the amount the Employer otherwise would contribute to the
Participant's Account would cause the Annual Additions for the Limitation Year
to exceed the Maximum Permissible Amount, the Employer will reduce the amount of
its contribution so the Annual Additions for the Limitation Year will equal the
Maximum Permissible Amount. If an allocation of Employer contributions, pursuant
to Section 3.04, would result in an Excess Amount (other than an Excess Amount
resulting from the circumstances described in Section 3.07(B)) to the
Participant's Account, the Advisory Committee will reallocate the Excess Amount
to the remaining Participants who are eligible for an allocation of Employer
contributions for the Plan Year in which the Limitation Year ends. The Advisory
Committee will make this reallocation on the basis of the allocation method
under the Plan as if the Participant whose Account otherwise would receive the
Excess Amount is not eligible for an allocation of Employer contributions.
(A) Estimation of Compensation. Prior to the determination of the Participant's
actual Compensation for a Limitation Year, the Advisory Committee may determine
the Maximum Permissible Amount on the basis of the Participant's estimated
annual Compensation for such Limitation Year. The Advisory Committee must make
this determination on a reasonable and uniform basis for all Participants
similarly situated. The Advisory Committee must reduce any Employer
contributions (including any allocation of forfeitures) based on estimated
annual Compensation by an Excess Amount carried over from prior years. As soon
as is administratively feasible after the end of the Limitation Year, and the
Advisory Committee will determine the Maximum Permissible Amount for such
Limitation Year on the basis of the Participant's actual Compensation for such
Limitation Year.
(B) Disposition of Excess Amount. If, pursuant to Section 3.07(A), or because of
the allocation of forfeitures, there is an Excess Amount with respect to a
Participant for a Limitation Year, the Advisory Committee will dispose of such
Excess Amount as follows:
(a) The Advisory Committee will return any nondeductible voluntary
Employee contributions to the Participant to the extent that the return
would reduce the Excess Amount.
(b) If, after the application of paragraph (a), and Excess Amount still
exists, and the Plan covers the Participant at the end of the Limiation
Year, then the Advisory Committee will use the Excess Amount(s) to
reduce future Employer contributions (including any allocation of
forfeitures) under the Plan for the next Limitation Year and for each
succeeding Limitation Year, as is necessary, for the Participant. The
Participant may elect to limit his Compensation for allocation purposes
to the extent necessary to reduce his allocation for the Limitation
Year to the Maximum Permissible Amount and eliminate the excess Amount.
(c) If, after the application of paragraph (a), an Excess Amount still
exists, and the Plan does not cover the Participant at the end of the
Limitation Year, then the Advisory Committee will hold the Excess
Amount unallocated in a suspense account. The Advisory Committee will
apply the suspense account to reduce Employer Contributions (including
allocation of forfeitures) for all remaining Participants in the next
Limitation Year, and in each succeeding Limitation Year if necessary.
(d) The Advisory Committee will not distribute any Excess Amount(s) to
Participants or to former Participants.
(C) Defined Benefit Plan Limitation. The Employer does not maintain and never
has maintained a defined benefit plan covering any Participant in this Plan.
Accordingly, no special defined benefit plan limitation applies under this Plan.
3.08 Definitions - Article III. For purposes of Article III, the
following terms mean:
(a) Annual Addition - The sum of the following amount
allocated on behalf of a Participant for a Limitation Year, of (i) all Employer
contributions; (ii) all forfeitures; and (iii) all Employee contributions.
Except to the extent provided in Treasury Regulations, Annual Additions include
excess contributions described in Code Section 401(k), excess aggregate
contributions described in Code Section 401(m) and excess deferrals described in
Code Section 402(g), irrespective of whether the Plan distributes or forfeits
such excess amounts. Annual Additions also shall include Excess Amounts
reapplied to reduce Employer contributions under Section 3.07. Amounts allocated
to an individual medical account (as defined in Code Section 415(l)(2)) included
as part of a defined benefit plan maintained by the Employerare Annual
Additions. Furthermore, Annual Additions include contributions paid or accrued
after December 31, 1985, for taxable years ending after December 31, 1985,
attributable to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, but only for purposes of the dollar limitation applicable to the
Maximum Permissible Amount.
<PAGE>
"Annual Additions" do not include any Employer contributions applied by
the Advisory Committee (not later than the due date, including extensions, for
filing the Employer's Federal income tax return for that Plan Year) to pay
interest on an Exempt Loan, and any Leveraged Employer Securities the Advisory
Committee allocates as forfeitures; provided, however, the provisions of this
sentence do not apply in a Plan Year for which the Advisory Committee allocates
more than one-third (1/3) of the Employer contributions applied to pay principal
and interest on an Exempt Loan to Restricted Participants. The Advisory
Committee may reallocate the Employer contributions in accordance with Section
3.04 to the Accounts of non-Resticted Participants to the extent necessary in
order to satisfy this special limitation. For purposes of this Section 3.08,
"Restricted Participants" mean Participants who are Highly Compensated Employees
within the meaning of Code Section 414(q).
(b) Compensation - For purposes of applying the limitations of
Part 2 of this Article III, "Compensation" means Compensation as defined in
Section 1.10, disregarding elective contributions and any exclusions from
Compensation, other than the exclusions described in paragraphs (a), (b), (c)
and (d) of Section 1.10.
(c) Maximum Permissible Amount - The lesser of (i) $30,000
(or, if greater, one-fourth (1/4) of the defined benefit dollar limitation under
Code Section 415(b)(1)(A)), or (ii) 25% of the Participant's Compensation for
the Limitation Year. The dollar amount of clause (i) will increase by the lesser
of (1) 100% of the dollar amount in effect for the Plan Year; or (2) the amount
of the Employer Securities allocated to the Participant's Employer Securities
Account as an Employer contribution for the Plan Year. The immediately preceding
sentence does not apply for any Plan Year for which the Advisory Committee
allocates more than one-third of the Employer contribution to Restricted
Participants. If there is a short Limitation Year, the Advisory Committee will
multiply the $30,000 (or adjusted) limitation by the following fraction:
Number of months in the short Limitation Year
12
(d) Employer - The Employer that adopts this Plan and any
related employers described in Section 1.27. Solely for purposes of applying the
limitations of Part 2 of this Article III, the Advisory Committee will determine
related employers described in Section 1.27 by modifying Code Section 414(b) and
(c) in accordance with Code Section 415(h).
(e) Excess Amount - The Excess of the Participant's Annual
Additions credited to the Participant's Account for the Limitation Year over the
Maximum Permissible Amount.
(f) Limitation Year - The Plan Year. If the Employer amends
the Limitation Year to a different 12 consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year for which the
Employer makes the amendment, creating a short Limitation Year.
(g) Defined Contribution Plan - A retirement plan which
provides for an individual account for each participant and for benefits based
solely on the amount contributed to the participant's account, and any income,
expenses, gains or losses, and any forfeitures of accounts of other participants
which the Plan may allocate to such participant's account. The Advisory
Committee must treat all defined contribution plans (whether or not terminated)
maintained by the Employer as a single plan. For purposes of the limitations of
Part 2 of this Article III, the Advisory Committee will treat employee
contributions made to a defined benefit plan maintained by the Employer as a
separate defined contribution plan. The Advisory Committee also will treat as a
defined contribution plan an individual medical account (as defined in Code
Section 415(1)(2)) included as part of a defined benefit plan maintained by the
Employer and, for taxable years ending after December 31, 1985, a welfare
benefit fund under Code Section 419(e) maintained by the Employer to the extent
there are post-retirement medical benefits allocated to the separate account of
a key employee (as defined in Code Section 419A(d)(3)).
(h) Defined Benefit Plan - A retirement plan which does not provide for
individual accounts for Employer contributions. The Advisory Committee must
treat all defined benefit plans (whether or not terminated) maintained by the
Employer as a single plan.
ARTICLE IV
Participant Contributions
<PAGE>
4.01 Participant Voluntary Contributions. The Plan does not permit nor
require Participant voluntary contributions.
4.02 Participant Rollover Contributions. The Plan does not permit
Participant rollover contributions.
ARTICLE V
Termination of Service - Participant Vesting
5.01 Normal Retirement Age. A Participant's Normal Retirement Age is 65
years of age. A Participant who remains in the employ of the Employer after
attaining Normal Retirement Age will continue to participate in Employer
contributions. A Participant's Accrued Benefit derived from Employer
contributions is 100% Nonforfeitable upon and after his attaining Normal
Retirement Age (if employed by the Employer on or after that date).
5.02 Participant Disability or Death. If a Participant's employment
with the Employer terminates as a result of death or disability, the
Participant's Accrued Benefit derived from Employer contributions will be 100%
Nonforfeitable.
5.03 Vesting Schedule. Except as provided in Sections 5.01 and 5.02,
for each Year of Service, a Participant's Nonforfeitable percentage of his
Accrued Benefit derived from Employer contributions equals the percentage in the
following vesting schedule:
<TABLE>
<CAPTION>
Years of Service Percent of Nonforfeitable
With the Employer Accrued Benefit
----------------- -------------------------
<S> <C>
Any service less than one (1) year None
At least one (1) year None
At least two (2) years 20%
At least three (3) years 40%
At least four (4) years 60%
At least five (5) years 80%
At least six (6) or more years 100%
</TABLE>
5.04 Cash-Out Distributions to Partially-Vested Participants/
Restoration of Forfeited Accrued Benefit. If, pursuant to Article VI, a
partially-vested Participant receives a cash-out distribution before he incurs a
Forfeiture Break in Service (as defined in Section 5.08), the cash-out
distribution will result in an immediate forfeiture of the nonvested portion of
the Participant's Accrued Benefit derived from Employer contributions. See
Section 5.09. A partially-vested Participant is a Participant whose
Nonforfeitable Percentage determined under Section 5.03 is less than one hundred
percent (100%). A cash-out distribution is a distribution of the entire present
value of the Participant's Nonforfeitable Accrued Benefit.
(A) Restoration and Conditions upon Restoration. A partially-vested Participant
who is re-employed by the Employer after receiving a cash-out distribution of
the Nonforfeitable percentage of his Accrued Benefit may repay the Trustee the
amount of the cash-out distribution attributable to Employer restoration
contributions, unless the Participant no longer has a right to restoration under
the requirements of this Section 5.04. If a partially-vested Participant makes
the cash-out distribution repayment, the Advisory Committee subject to the
conditions of this paragraph (A), must restore his Accrued Benefit attributable
to Employer contributions to the same dollar amount as the dollar amount of his
Accrued Benefit on the Accounting Date, or other valuation date, immediately
preceding the date of the cash-out distribution, unadjusted for any gains or
losses occurring subsequent to that Accounting Date, or other valuation date.
Restoration of the Participant's Accrued Benefit shall include restoration of
all Code Section 411(d)(6) protected benefits with respect to that restored
Accrued Benefit, in accordance with applicable Treasury regulations. The
Advisory Committee shall not restore a re-employed Participant's Accrued Benefit
under this paragraph if: (1) 5 years have elapsed since the Participant's first
re-employment date following the cash-out distribution; or (2) The Participant
incurred a Forfeiture Break in Service (as defined in Section 5.08). This
condition also applies if the Participant makes repayment within the Plan Year
in which he incurs the Forfeiture Break in Service and that Forfeiture Break in
Service would result in a complete forfeiture of the amount the Advisory
Committee otherwise would restore.
(B) Time and Method of Restoration. If neither of the two conditions preventing
restoration of the Participant's Accrued Benefit applies, the Advisory Committee
will restore the Participant's Accrued Benefit as of the Plan Year Accounting
Date coincident with or immediately following the repayment. To restore the
Participant's Accrued Benefit, the Advisory Committee, to the extent necessary,
will allocate to the Participant's Account: (1) the amount, if any, of
Participant forfeitures the Advisory Committee would otherwise allocate under
Section 3.05; (2) the amount, if any, of the Trust Fund net income or gain for
the Plan Year; and (3) the Employer contribution of the Plan Year to the extent
made under a discretionary formula. To the extent the amounts described in
clauses (1), (2) and (3) are insufficient to enable the Advisory Committee to
make the required restoration, the Employer must contribute, without regard to
any requirement or condition of Section 3.01, the additional amount necessary to
enable the Advisory Committee to make the required restoration. If, for a
particular Plan Year, the Advisory Committee must restore the Accrued Benefit of
more than one re-employed Participant, then the Advisory Committee will make the
restoration allocation(s) to each such Participant's Account in the same
proportion that a Participant's restored amount for the Plan Year bears to the
restored amount for the Plan Year of all re-employed Participants. The Advisory
Committee will not take into account the allocation(s) under this Section 5.04
in applying the limitation on allocations under Part 2 of Article III.
A Participant's Nonforfeitable Accrued Benefit will never be less than
the lesser of $25 or his entire Accrued Benefit, even in the application of the
vesting schedule would result in a smaller Nonforfeitable Accrued Benefit.
5.05 Segregated Account for Repaid Amount. Until the Advisory Committee
restores the Participant's Accrued Benefit, as described in Section 5.04, the
Trustee will invest the cash-out amount the Participant has repaid in a
segregated Account maintained solely for that Participant. The Trustee must
invest the amount in the Participant's segregated Account in Federally insured
interest bearing savings account(s) or time deposit(s) (or a combination of
both), or in other fixed income investments. Until commingled with the balance
of the Trust Fund on the date the Advisory Committee restores the Participant's
Accrued Benefit, the Participant's segregated Account remains a part of the
Trust, but it alone shares in any income it earns and it alone bears any expense
or loss it incurs. The Advisory Committee will direct the Trustee to repay to
the Participant as soon as is administratively practicable the full amount of
the Participant's segregated Account if the Advisory Committee determines either
of the conditions of Section 5.04(a), prevents restoration as of the applicable
Accounting Date, notwithstanding the Participant's repayment. The Advisory
Committee will direct the Trustee to commingle the Participant's segregated
account with the balance of the Trust Fund as of the second Accounting Date
immediately following the date of the Participant's repayment.
5.06 Year of Service - Vesting. For purposes of vesting under Section
5.03, Year of Service means any Plan Year during which an Employee completes not
less than 1,000 Hours of Service with the Employer.
5.07 Break in Service - Vesting. For purposes of this Article V, a
Participant incurs a "Break in Service" if during any Plan Year he does not
complete more than 500 Hours of Service with the Employer.
5.08 Included Years of Service - Vesting. For purposes of determining
"Years of Service" under Section 5.06, the Plan takes into account all Years of
Service an Employee completes with the Employer except any Year of Service
during the period the Employer did not maintain this Plan or a predecessor plan.
For the sole purpose of determining a Participant's Nonforfeitable percentage of
his Accrued Benefit derived from Employer contributions which accrued for his
benefit prior to a Forfeiture Break in Service, the Plan disregards any Year of
Service after the Participant first incurs a Forfeiture Break in Service. The
Participant incurs a Forfeiture Break in Service when he incurs 5 consecutive
Breaks in Service.
5.09 Forfeiture Occurs. A Participant's forfeiture, if any, of the
Participant's Accrued Benefit derived from Employer contributions occurs under
the Plan or the earlier of: (a) The last day of the Accounting Date of the Plan
Year in which the Participant first incurs a Forfeiture Break in Service; or,
(b) The date the Participant receives a cash-out distribution. The Advisory
Committee determines the percentage of a Participant's Accrued Benefit
forfeiture, if any, under this Section 5.09 solely by reference to the vesting
schedule of Section 5.03. A Participant will not forfeit any portion of his
Accrued Benefit for any other reason or cause except as expressly provided by
this Section 5.09 or as provided under Section 9.14.
ARTICLE VI
Time and Method of Payment of Benefits
6.01 Time of Payment of Accrued Benefit. Unless, pursuant to Section
6.03, the Participant or the Beneficiary elects in writing to a different time
or method of payment, the Advisory Committee will direct the Trustee to commence
distribution of a Participant's Nonforfeitable Accrued Benefit in accordance
with this Section 6.01. A Participant must consent, in writing, to any
distribution required under this Section 6.01 if the present value of the
Participant's Nonforfeitable Accrued Benefit, at the time of the distribution to
the Participant, exceeds $3,500 and the Participant has not attained the later
of Normal Retirement Age or age 62. Furthermore, the Participant's spouse also
must consent, in writing, to any distribution, for which Section 6.04 requires
the spouse's consent. For all purposes of this Article VI, the term "annuity
starting date" means the first day of the first period for which the Plan pays
an amount as an annuity or in any other form. A distribution date under this
Article VI, unless otherwise specified within the Plan, is the 60th day of the
Plan Year, or as soon as administratively practicable following a distribution
date. For purposes of the consent requirements under this Article VI, if the
present value of the Participant's Nonforfeitable Accrued Benefit, at the time
of any distribution, exceeds $3,500, the Advisory Committee must treat that
present value as exceeding $3,500 for purposes of all subsequent Plan
distributions to the Participant.
(A) Termination of Employment for a Reason Other Than Death. For a Participant
who terminates employment with the Employer for a reason other than death, the
Advisory Committee will direct the Trustee to commence distribution of the
Participant's Accrued Benefit, as follows:
(1) Participant's Nonforfeitable Accrued Benefit Not Exceeding $3,500.
In a lump sum, on the first distribution date after the Participant's Separation
from Service with the Employer, but in no event later than the 60th day
following the close of the Plan Year in which the Participant attains Normal
Retirement Age. If the participant has obtained Normal Retirement Age when he
separates from Service with the Employer, the distribution under this paragraph
will occur no later than the 60th day following the close of the Plan year in
which the Participant's Separation from Service occurs.
(2) Participant's Nonforfeitable Accrued Benefit Exceeds $3,500. In a
form and at the time elected by the Participant, pursuant to Section 6.03. In
the absence of an election by the Participant, the Advisory Committee will
direct the Trustee to distribute the Participant's Nonforfeitable Accrued
Benefit in a lump sum (or, if applicable, the normal annuity form of
distribution required under Section 6.04), on the 60th day following the close
of the Plan Year in which the latest of the following events occurs: (a) the
Participant attains Normal Retirement Age; (b) the Participant attains age 62;
or (c) the Participant separates from Service.
(3) Disability. If the Participant terminates employment because of
disability, in lump sum, on the first distribution date following the date in
which the Participant terminates employment because of disability, subject to
the notice and consent requirements of this Article VI and to the applicable
mandatory commencement dates described in Paragraph (1) or in Paragraph (2). (B)
Required Beginning Date. If any distribution commencement date described under
Paragraph A. of this Section 6.01, either by Plan provision or by Participant
election (or nonelection), is later than the Participant's Required Beginning
Date, the Advisory Committee instead must direct the Trustee to make
distribution under this Section 6.01 on the Participant's Required Beginning
Date. A Participant's Required Beginning Date is the April 1 following the close
of the calendar year in which the Participant attains age 70 1/2. However, if
the Participant, prior to incurring a Separation from Service, attained age 70
1/2 by January 1, 1988, and, for the five Plan Year period ending in the
calendar year in which he attained age 70 1/2 and for all subsequent years, the
Participant was not a more than 5% owner (as defined in Section 1.07(a)), the
Required Beginning Date is the April 1 following the close of the calendar year
in which the Participant separates from Service or, if earlier, the April 1
following the close of the calendar year in which the Participant becomes a more
than 5% owner. Furthermore, if a Participant who was not a more than 5% owner
attained age 70 1/2 during 1988 and did not incur a Separation from Service
prior to January 1, 1989, his Required Beginning Date is April 1, 1990. A
mandatory distribution at the Participant's Required Beginning Date will be in
lump sum (or, if applicable, the normal annuity form of distribution required
under Section 6.04) unless the Participant, pursuant to the provisions of this
Article VI, makes a valid election to receive an alternative form of payment.
(C) Death of the Participant. The Advisory Committee will direct the Trustee, in
accordance with this Section 6.01(C), to distribute to the Participant's
Beneficiary the Participant's Nonforfeitable Accrued Benefit remaining in the
Trust at the time of the Participant's death. Subject to the requirements of
Section 6.04, the Advisory Committee will determine the death benefit by
reducing the Participant's Nonforfeitable Accrued Benefit by any security
interest the Plan has against that Nonforfeitable Accrued Benefit by reason of
an outstanding Participant loan.
(1) Deceased Participant's Nonforfeitable Accrued Benefit Does Not
Exceed $3,500. The Advisory Committee, subject to the requirements of Section
6.04, must direct the Trustee to pay the deceased Participant's Nonforfeitable
Accrued Benefit in a single cash sum, as soon as administratively practicable
following the Participant's death or, if later, the date on which the Advisory
Committee receives notification of or otherwise confirms the Participant's
death.
(2) Deceased Participant's Nonforfeitable Accrued Benefit Exceeds
$3,500. The Advisory Committee must direct the Trustee to pay the deceased
Participant's Nonforfeitable Accrued Benefit at the time and in the form elected
by the Participant or, if applicable by the Beneficiary, as permitted under this
Article VI. In the absence of an election, subject to the requirements of
Section 6.04, the Advisory Committee must direct the Trustee to distribute the
Participant's undistributed Nonforfeitable Accrued Benefit in a lump sum on the
first distribution date following the date of the Participant's death, or, if
later, the first distribution date following the date the Advisory Committee
receives notificaiton of or otherwise confirms the Participant's death. If the
death benefit is payable to the Participant's surviving spouse in full, the
surviving spouse, in addition to the distribution options provided in this
Section 6.01(C), may elect distribution at any time or in any form (other than
the joint and survivor annuity) this Article VI would permit for a Participant.
6.02 Method of Payment of Accrued Benefit. Subject to the annuity
distribution requirements, if any, prescribed by Section 6.04, and any
restrictions prescribed by Section 6.03, a Participant or Beneficiary may elect
distribution under one, or any combination, of the following methods: (a) by
payment in a lump sum; or (b) by payment in monthly, quarterly or annual
installments over a fixed reasonable period of time, not exceeding the life
expectancy of the Participant, or the joint life and last survivor expectancy of
the Participant and his Beneficiary.
<PAGE>
The distribution options permitted under this Section 6.02 are
available only if the present value of the Participant Nonforfeitable Accrued
Benefit, at the time of the distribution to the Participant, exceeds $3,500. To
facilitate installment payments under this Article VI, the Advisory Committee
may direct the Trustee to segregate all or any part of the Participant's Accrued
Benefit in a separate Account. The Trustee will invest the Participant's
segregated Account in Federally insured interest bearing savings account(s) or
time deposit(s) (or a combination of both), or in other fixed income
investments. A segregated Account remains a part of the Trust, but it alone
shares in any income it earns, and it alone bears any expense or loss it incurs.
A Participant or Beneficiary may elect to receive an installment distribution in
the form of a Nontransferable Annuity Contract. Under an installment
distribution, the Participant or Beneficiary, at any time, may elect to
accelerate the payment of all, or any portion, of the Participant's unpaid
Nonforfeitable Accrued Benefit, subject to the requirements of Section 6.04.
(A) Minimum Distribution Requirements for Participants. The Advisory Committee
may not direct the Trustee to distribute the Participant's Nonforfeitable
Accrued Benefit, nor may the Participant elect to have the Trustee distribute
his Nonforfeitable Accrued Benefit, under a method of payment which, as of the
Required Beginning Date, does not satisfy the minimum distribution requirements
under Code Section 401(a)(9) and the applicable Treasury regulations. The
minimum distribution for a calendar year equals the Participant's Nonforfeitable
Accrued Benefit as of the latest valuation date preceding the beginning of the
calendar year divided by the Participant's life expectancy or, if applicable,
the joint and last survivor expectancy of the Participant and his designated
Beneficiary (as determined under Article VIII, subject to the requirements of
the Code Section 401(a)(9) regulations). The Advisory Committee will increase
the Participant's Nonforfeitable Accrued Benefit, as determined on the relevant
valuation date, for contributions for forfeitures allocated after the valuation
date and by December 31 of the valuation calendar year, and will decrease the
valuation by distributions made after the valuation date and by December 31 of
the valuation calendar year. For purposes of this valuation, the Advisory
Committee will treat any portion of the minimum distribution for the first
distribution calendar year made after the close of that year as a distribution
occurring in that first distribution calendar year. In computing a minimum
distribution, the Advisory Committee must use the unisex life expectancy
multiples under Treasury Regulation Section 1.72-9. The Advisory Committee, only
upon the Participant's written request, may compute the minimum distribution for
a calendar year subsequent to the first calendar year for which the Plan
requires a minimum distribution by redetermining the applicable life expectancy.
If the Participant's spouse is not his designated Beneficiary, a method
of payment to the Participant (whether by Participant election or by Advisory
Committee direction) may not provide more than incidental benefits to the
Beneficiary. For Plan Years beginning after December 31, 1988, the Plan must
satisfy the minimum distribution incidental benefit ("MDIB") requirement in the
Treasury regulations issued under Code Section 401(a)(9) for distributions made
on or after the Participant's Required Beginning Date and before the
Participant's death. To satisfy the MDIB requirement, the Advisory Committee
will compute the minimum distribution required by this Section 6.02(A) by
substituting the applicable MDIB divisor for the applicable life expectancy
factor, if the MDIB divisor is a lesser number. Following the Participant's
death, the Advisory Committee will compute the minimum distribution required by
this Section 6.02(A) solely on the basis of the applicable life expectancy
factor and will disregard the MDIB factor. For Plan Years beginning prior to
January 1, 1989, the Plan satisfies the incidental benefits requirement if the
distributions to the Participant satisfied the MDIB requriement or if the
present value of the retirement benefits payable solely to the Participant is
greater than 50% of the present value of the total benefits payable to the
Participant and his Beneficiaries. The Advisory Committee must determine whether
benefits to the Beneficiary are incidental as of the date the Trustee is to
commence payment of the retirement benefits to the Participant, or as of any
date the Trustee redetermines the payment period to the Participant.
The minimum distribution for the first distribution calendar year is
due by the Participant's Required Beginning Date. The minimum distribution for
each subsequent distribution calendar year, including the calendar year in which
the Participant's Required Beginning Date falls, is due by December 31 of that
year. If the Participant receives distribution in the form of a Nontransferable
Annuity Contract, the distribution satisfies this Section 6.02(A) if the
contract complies with the requirements of Code Section 401(a)(9) and the
applicable Treasury regulations.
(B) Minimum Distribution Requirements for Beneficiaries. The method of
distribution to the Participant's Beneficiary must satisfy Code Section
401(a)(9) and the applicable Treasury regulations. If the Participant's death
occurs after his Required Beginning Date or, if earlier, the date the
Participant commences an irrevocable annuity pursuant to Section 6.04, the
method of payment to the Beneficiary must provide for completion of payment over
a period which does not exceed the payment period which had commenced for the
Participant. If the Participant's death occurs prior to his Required Beginning
Date, and the Participant had not commenced an irrevocable annuity pursuant to
Section 6.04, the method of payment to the Beneficiary, subject to Section 6.04,
must provide for completion of payment to the Beneficiary over a period not
exceeding: (i) 5 years after the date of the Participant's death; or (ii) if the
Beneficiary is a designated Beneficiary, the designated Beneficiary's life
expectancy. The Advisory Committee may not direct payment of the Participant's
Nonforfeitable Accrued Benefit over a period described in clause (ii) unless the
Trustee will commence payment to the designated Beneficiary no later than the
December 31 following the close of the calendar year in which the Participant's
death occurred or, if later, and the designated Beneficiary is the Participant's
surviving spouse, December 31 of the calendar year in which the Participant
would have attained age 70 1/2. If the Trustee will make distribution in
accordance with clause (ii), the minimum distribution for a calendar year equals
the Participant's Nonforfeitable Accrued Benefit as of the latest valuation date
preceding the beginning of the calendar year divided by the designated
Beneficiary's life expectancy. The Advisory Committee must use the unisex life
expectancy multiples under Treasury Regulation Section 1.72-9 for purposes of
applying this paragraph. The Advisory Committee, only upon the written request
of the Participant or of the Participant's surviving spouse, may calculate the
life expectancy of the Participant's surviving spouse not more frequently than
annually, but may not recalculate the life expectancy of a nonspouse designated
Beneficiary after the Trustee commences payment to the designated Beneficiary.
The Advisory Committee will apply this paragraph by treating any amount paid to
the Participant's child, which becomes payable to the Participant's surviving
spouse upon the child's attaining the age of majority, as paid to the
Participant's surviving spouse. Upon the Beneficiary's written request, the
Advisory Committee will direct the Trustee to accelerate payment of all, or any
portion, of the Participant's unpaid Accrued Benefit, as soon as
administratively practicable following the effective date of that request.
6.03 Benefit Payment Elections. Not earlier than 90 days before nor
later than 30 days before the Participant's annuity starting date, the Plan
Administrator must provide a benefit notice to a Participant who is eligible to
make an election under this Section 6.03. The benefit notice must explain the
optional forms of benefit in the Plan, including the material features and
relative values of those options, and the Participant's right to defer
distribution until he attains the later of Normal Retirement Age or age 62. If a
Participant or Beneficiary makes an election prescribed by this Section 6.03,
the Advisory Committee will direct the Trustee to distribute the Participant's
Nonforfeitable Accrued Benefit in accordance with that election. Any election
under this Section 6.03 is subject to the requirements of Section 6.02 and of
Section 6.04. The Participant or Beneficiary must make an election under this
Section 6.03 by filing his election form with the Advisory Committee at any time
before the Trustee otherwise would commence to pay a Participant's Accrued
Benefit in accordance with the requirements of Article VI. (A) Participant
Elections After Termination of Employment. If the present value of a
Participant's Nonforfeitable Accrued Benefit exceeds $3,500, he may elect to
have the Trustee commence distribution as of any distribution date in the Plan
Year following the year of his Seperation from Service. The Participant may
reconsider an election at any time prior to the annuity starting date and elect
to commence distribtuion as of any other distribution date, but not earlier than
the date described in the first sentence of this Paragraph (A). A Participant
who has separated from Service may elect distribution as of any distribution
date following his attainment of Normal Retirement Age, irrespective of the
restrictions otherwise applicable under this Section 6.03(A). If the Participant
is partially-vested in his Accrued Benefit, an election under this Paragraph (A)
to distribute prior to the Participant's incurring a Forfeiture Break in Service
(as defined in Section 5.08), must be in the form of a cash-out distribution (as
defined in Article V). A Participant may not receive a cash-out distribution if,
prior to the time the Trustee actually makes the cash-out distribution, the
Participant returns to employment with the Employer.
(B) Participant Elections Prior to Termination of Employment. After a
Participant attains Normal Retirement Age, the Participant, until he retires,
has a continuing election to receive all or any portion of his Accrued Benefit.
A Participant must make an election under this Paragraph (B) on a form
prescribed by the Advisory Committee at any time during the Plan Year for which
his election is to be effective. In his written election, the Participant must
specify the percentage or dollar amount he wishes the Trustee to distribute to
him. The Participant's election relates solely to the percentage or dollar
amount specified in his election form and his right to elect to receive an
amount, if any, for a particular Plan Year greater than the dollar amount or
percentage specified in his election form terminates on the Accounting Date. The
Trustee must make a distribution to a Participant in accordance with his
election under this Paragraph (B) within the 90 day period (or as soon as
administratively practicable) after the Participant files his written election
with the Trustee. The Trustee will distribute the balance of the Participant's
Accrued Benefit not distributed pursuant to his election(s) in accordance with
the other distribution provisions of this Plan.
(C) Death Benefit Elections. If the present value of the deceased Participant's
Nonforfeitable Accrued Benefit exceeds $3,500, the Participant's Beneficiary may
elect to have the Trustee distribute the Participant's Nonforfeitable Accrued
Benefit in a form and within a period permitted under Section 6.02. The
Beneficiary's election is subject to any restrictions designated in writing by
the Participant and not revoked as of his date of death.
6.04 Annuity Distributions to Participants. The joint and survivor
annuity requirements do not apply to this Plan. The Plan does not provide any
annuity distributions to Participants nor to surviving spouses. A transfer
agreement described in Section 13.05 may not permit a plan which is subject to
the provisions of Code Section 417 to transfer assets to this Plan, unless the
transfer is an elective transfer, as described in Section 13.05.
6.05 Special Distribution and Payment Requirements. Unless the
Participant elects in writing to have the Trustee apply other distribution
provisions of the Plan, or unless other distribution provisions of the Plan
require earlier distribution of the Participant's Accrued Benefit, the Trustee
must distribute the portion of the Participant's Accured Benefit attributable to
Employer Securities (the "Eligible Portion") no later than the time prescribed
by this Section 6.05, irrespective of any other provision of the Plan. The
distribution provisions of this Section 6.05 are subject to the consent and form
of distribution requirements of Articles V and VI of the Plan.
(a) If the Participant separates from Service by reason of the
attainment of Normal Retirement Age, death, or disability, the Advisory
Committee will direct the Trustee to commence distribution of the
Eligible Portion not later than one year after the close of the Plan
Year in which that event occurs.
(b) If the Participant separates from Service for any reason other than
by reason of the attainment of Normal Retirement Age, death or
disability, the Advisory Committee will direct the Trustee to commence
distribution of the Eligible Portion not later than one year after the
Service. If the Participant resumes employment with the Employer on or
before the last day of the fifth Plan Year following the Plan Year of
his separation from Service, the distribution provisions of this
paragraph (b) do not apply. For purposes of this Section 6.05, Employer
Securites do not include any
Employer Securities acquired with the proceeds of an Exempt Loan until the close
of the Plan Year in which the borrower repays the Exempt Loan in full.
6.06 Distributions Under Domestic Relations Orders. Nothing contained
in this Plan prevents the Trustee, in accordance with the direction of the
Advisory Committee, from complying with the provisions of a qualified domestic
relations order (as defined in Code Section 414(p)). This Plan specifically
permits distribution to an alternate payee under a qualified domestic relations
order at any time, irrespective of whether the Participant has attained his
earliest retirement age (as defined under Code Section 414(p)) under the Plan. A
distribution to an alternate payee prior to the Participant's attainment of
earliest retirement age is available only if: 1) the order specifies
distribution at that time or permits an agreement between the Plan and the
alternate payee to authorize an earlier distribution; and (2) if the present
value of the alternate payee's benefits under the Plan exceeds $3,500, and the
order requires, the alternate payee consents to any distribution occurring prior
to the Participant's attainment of earliest retirement age. Nothing in this
Section 6.06 permits a Participant a right to receive distribution at a time
otherwise not permitted under the Plan nor does it permit the alternate payee to
receive a form of payment not permitted under the Plan. The Plan Administrator
must establish reasonable procedures to determine the qualified status of a
domestic relations order. Upon receiving a domestic relations order, the Plan
Administrator promptly will notify the Participant and any alternate payee named
in the order, in writing, of the receipt of the order and the Plan's procedures
for determining the qualified status of the order. Within a reasonable period of
time after receiving the domestic relations order, the Plan Administrator must
determine the qualified status of the order and must notify the Participant and
each alternate payee, in writing, of its determination. The Plan Administrator
must provide notice hereunder by mailing to the individual's address specified
in the domestic relations order, or in a manner consistent with Department of
Labor regulations. If any portion of the Participant's Nonforfeitable Accrued
Benefit is payable during the period the Plan Administrator is making its
determination of the qualified status of the domestic relations order, the
Advisory Committee must make a separate accounting of amounts payable. If the
Plan Administrator determines the order is a qualified domestic relations order
within 18 months of the date amounts first are payable following receipt of the
order, the Advisory Committee will direct the Trustee to distribute the payable
amounts in accordance with the order. If the Plan Administrator does not make
its determination of the qualified status of the order within the 18 month
determination period, the Advisory Committee will direct the Trustee to
distribute the payable amounts in the manner the Plan would distribute if the
order did not exist and will apply the order prospectively if the Plan
Administrator later determines the order is a qualified domestic relations
order. To the extent it is not inconsistent with the provisions of the qualified
domestic relations order, the Advisory Committee may direct the Trustee to
invest any partitioned amount in Federally insured, interest-bearing savings
account(s) or time deposit(s) (or a combination of both), or in other fixed
income investments. A segregated subaccount remains a part of the Trust, but it
alone shares in any income it earns, and it alone bears any expense or loss it
incurs. The Trustee will make any payments or distribution required under this
Section 6.06 by separate benefit checks or other separate distribution to
alternate payee(s).
ARTICLE VII
Employer Administrative Provisions
7.01 Information to Committee. The Employer must supply current
information to the Advisory Committee as to the name, date of birth, date of
employment, annual compensation, leaves of absence, Years of Service and date of
termination of employment of each Employee who is, or who will be eligible to
become, a Participant under the Plan, together with any other information which
the Advisory Committee considers necessary. The Employer's records as to the
current information the Employer furnishes to the Advisory Committee are
conclusive as to all persons.
7.02 No Liability. The Employer assumes no obligation or responsibility
to any of its Employees, Participants or Beneficiaries for any act of, or
failure to act, on the part of its Advisory Committee, (unless the Employer is
the Advisory Committee), the Trustee or the Plan Administrator (unless the
Employer is the Plan Administrator).
7.03 Indemnity of Committee. The Employer indemnifies and saves
harmless the Plan Administrator and the members of the Advisory Committee, and
each of them, from and against any and all loss resulting from liability to
which the Plan Administrator and the Advisory Committee, or the members of the
Advisory Committee, may be subjected by reason of any act or conduct (except
willful misconduct or gross negligence) in their official capacities in the
administration of this Trust or Plan or both, including all expenses reasonably
incurred in their defense, in case the Employer fails to provide such defense.
The indemnification provisions of this Section 7.03 do not relieve the Plan
Administrator or any Advisory Committee member from any liability he may have
under ERISA for breach of a fiduciary duty. Furthermore, the Plan Administrator
and the Advisory Committee members and the Employer may execute a letter
agreement further delineating the indemnification agreement of this Section
7.03, provided the letter agreement must be consistent with and must not violate
ERISA. The indemnification provisions of this Section 7.03 extend to the Trustee
solely to the extent provided by a letter agreement executed by the Trustee and
the Employer.
7.04 Employer Direction of Investment. The Employer has the right to
direct the Trustee to the investment and re-investment of assets comprising the
Trust Fund only if the Trustee consents in writing to permit such direction. If
the Trustee consents to Employer direction of investment, the Trustee and the
Employer shall execute a letter agreement as a part of this Plan containing such
conditions, limitations and other provisions they deem appropriate before the
Trustee will follow any Employer direction as respects the investment or
re-investment of any part of the Trust Fund.
7.05 Amendment to Vesting Schedule. Though the Employer reserves the
right to amend the vesting schedule at any time, the Advisory Committee will not
apply the amended vesting schedule to reduce the nonforfeitable percentage of
any Participant's Accrued Benefit derived from Employer contributions
(determined as of the later of the date of the Employer adopts the amendment, or
the date the amendment become effective) to a percentage less than the
Nonforfeitable percentage computed under the Plan without regard to the
amendment. If the Employer makes a permissible amendment to the vesting
schedule, each Participant having at least 3 Years of Service with the Employer
may elect to have the percentage of his Nonforfeitable Accrued Benefit computed
under the Plan without regard to the amendment. The Participant must file his
election with the Plan Administrator within 60 days of the latest of (a) the
Employer's adoption of the amendment; and (b) the effective date of the
amendment; or (c) his receipt of a copy of the amendment. The Plan
Administrator, as soon as practicable, must forward a true copy of any amendment
to the vesting schedule to each affected Participant, together with an
explanation of the effect of the amendment, the appropriate form upon which the
Participant may make an election to remain under the vesting schedule provided
under the Plan prior to the amendment and notice of the time within which the
Participant must make an election to remain under the prior vesting schedule.
For purposes of this Section 7.05, an amendment to the vesting schedule includes
any Plan amendment which directly or indirectly affects the computation of the
Nonforfeitable percentage of an Employee's rights to his Employer derived
Accrued Benefit.
ARTICLE VIII
Participant Administrative Provisions
8.01 Beneficiary Designation. Any Participant may from time to time
designate, in writing, any person or persons, contingently or successively, to
whom the Trustee will pay his Accrued Benefit on event of his death and the
Participant may designate the form and method of payment. The Advisory Committee
will prescribe the form for the written designation of Beneficiary and, upon the
Participant's filing the form with the Advisory Committee, the form effectively
revokes all designations filed prior to that date by the same Participant.
Coordination with survivor requirements. If the joint and survivor
requirements of Article VI apply to the Participant, this Section 8.01 does not
impose any special spousal consent requirements on the Participant's Beneficiary
designation. However, in the absence of spousal consent (as required by Article
VI) to the Participant's Beneficiary designation: (1) any waiver of the joint
and survivor annuity or of the preretirement survivor annuity is not valid; and
(2) if the Participant dies prior to his annuity starting date, the
Participant's Beneficiary designation will apply only to the portion of hte
death benefit which is not payable as a preretirement survivor annuity.
Regarding clause (2), if the Participant's surviving spouse is a primary
Beneficiary under the Participant's Beneficiary designation, the Trustee will
satisfy the spouse's interest in the Participant's death benefit first from the
portion which is payable as a preretirment survivor annuity.
<PAGE>
Profit sharing plan exception. If, pursuant to Section 6.04, the joint
and survivor requirements do not apply to a married Participant, that
Participant's Beneficiary designation is not valid unless the Participant's
spouse consents to the Beneficiary designation. The spousal consent requirement
in this paragraph does not apply if the Participant and his spouse are not
married throughout the one year period ending on the date of the Participant's
death, or if the Participant's spouse is the Participant's sole primary
Beneficiary.
8.02 No Beneficiary Designation. If a Participant fails to name a
Beneficiary in accordance with Section 8.01, or if the Beneficiary named by a
Participant predeceases him or dies before complete distribution of the
Participant's Accrued Benefit as prescribed by the Participant's Beneficiary
form, then the Trustee will pay the Participant's Accrued Benefit in one, or any
combination, of the methods specified under Section 6.02 in the following order
of priority to: (a) the Participant's surviving spouse; (b) the Participant's
surviving children, including adopted children, in equal shares; (c) the
Participant's surviving parents, in equal shares, or (d) the legal
representative of the estate of the last to die of the Participant and his
Beneficiary. The Advisory Committee will direct the Trustee as to the method and
to whom the Trustee will make payment under this Section 8.02.
8.03 Personal Data to Committee. Each Participant and each Beneficiary
of a deceased Participant must furnish to the Advisory Committee such evidence,
data or information as the Advisory Committee considers necessary or desirable
for the purpose of administering the Plan. The provisions of this Plan are
effective for the benefit of each Participant upon the condition precedent that
each Participant will furnish promptly full, true and complete evidence, data
and information when requested by the Advisory Committee, provided the Advisory
Committee advises each Participant of the effect of his failure to comply with
its request.
8.04 Address for Notification. Each Participant and each Beneficiary of
a deceased Participant must file with the Advisory Committee from time to time,
in writing, his post office address and any change of post office address. Any
communication, statement or notice addressed to a Participant, or Beneficiary,
at his last post office address filed with the Advisory Committee, or as shown
on the records of the Employer, binds the Participant, or Beneficiary, for all
purposes of this Plan.
8.05 Assignment or Alienation. Subject to Code Section 414(p) relating
to qualified domestic relations orders, neither a Participant nor a Beneficiary
may anticipate, assign or alienate (either at law or in equity) any benefit
provided under the Plan, and the Trustee will not recognize any such
anticipation, assignment or alienation. Furthermore, a benefit under the Plan is
not subject to attachment, garnishment, levy, execution or other legal or
equitable process.
8.06 Notice of Change in Terms. The Plan Administrator, within the time
prescribed by ERISA and the applicable regulations, must furnish all
Participants and Beneficiaries a summary description of any material amendment
to the Plan or notice of discontinuance of the Plan and all other information
request by ERISA to be furnished without charge.
8.07 Litigation Against the Trust. A court of competent jurisdiction
may authorize any appropriate equitable relief to redress violations of ERISA or
to enforce any provisions of ERISA or the terms of the Plan. A fiduciary may
receive reimbursement of expenses properly and actually incurred in the
performance of his duties with the Plan.
8.08 Information Available. Any Participant in the Plan or any
Beneficiary may examine copies of the Plan description, latest annual report,
any bargaining agreement, this Plan and Trust, contract or any other instrument
under which the Plan was established or is operated. The Plan Administrator will
maintain all of the items listed in this Section 8.08 in his office, or in such
other place or places as he may designate from time to time in order to comply
with the regulations issued under ERISA, for examination during reasonable
business hours. Upon the written request of a Participant or Beneficiary the
Plan Administrator will furnish him with a copy of any item listed in this
Section 8.08. The Plan Administrator may make a reasonable charge to the
requesting person for a copy so furnished.
8.09 Appeal Procedure for Denial of Benefits. The Plan Administrator
will provide adequate notice in writing to any Participant or to any Beneficiary
("Claimant") whose claim for benefits under the Plan the Advisory Committee has
denied. The Plan Administrator's notice to the Claimant must set forth: (a) the
specific reason for the denial; (b) specific references to pertinent Plan
provisions on which the Advisory Committee based its denial; (c) a description
of any additional material and information needed for the Claimant to perfect
his claim and an explanation of why the material or information is needed; and
(d) that any appeal the Claimant wishes to make of the adverse determination
must be in writing to the Advisory Committee within 75 days after receipt of the
Plan Administrator's notice of denial of benefits. The Plan Administrator's
notice must further advise the Claimant that his failure to appeal the action to
the Advisory Committee in writing within the 75 day period will render the
Advisory Committee's determination final, binding and conclusive. If the
Claimant should appeal to the Advisory Committee, he, or his duly authorized
representative, may submit, in writing, whatever issues and comments he, or his
duly authorized representative, believes are pertinent. The Claimant, or his
duly authorized representative, may review pertinent Plan documents. The
Advisory Committee will re-examine all facts related to the appeal and make a
final determination as to whether the denial of benefits is justified under the
circumstances. The Advisory Committee must advise the Claimant of its decision
within 60 days of the Claimant's written request for review, unless special
circumstances (such as a hearing) would make the rendering of a decision within
the 60 day limit unfeasible, but in no event shall the Advisory Committee render
a decision respecting a denial for a claim for benefits later than 120 days
after its receipt of a request for review. The Participant's notice of denial of
benefits must identify the name of each member of the Advisory Committee and the
name and address of the Advisory Committee member to whom the Claimant may
forward his appeal.
8.10 Participant Direction of Investment. Except as provided in this
Section 8.10, a Participant does not have the right to direct the Trustee with
respect to the investment or re-investment of the assets comprising the
Participant's individual Account. Each Qualified Participant may direct the
Trustee as to the investment of 25% of the value of the Participant's Accrued
Benefit attributable to the Employer Securities (the "Eligible Accrued Benefit")
within 90 days after the Accounting Date of each Plan Year (to the extent a
direction amount exceeds the amount to which a prior direction under this
Section 8.10 applies) during the Participant's Qualified Election Period. For
the last Plan Year in the Participant's Qualified Election Period, the Trustee
will substitute "50%" for "25%" in the immediately preceding sentence. The
Qualified Participant must make his direction to the Trustee in writing, the
direction may be effective no later than 180 days after the close of the Plan
Year to which the direction applies, and the direction must specify which, if
any, of the investment options the Participant selects.
A Qualified Participant may chose one of the following investment
options:
(a) The distribution of the portion of his Eligible Accrued Benefit
covered by the election. The Trustee will make the distribution within
90 days after the last day of the period during which the Qualified
Participant may make the election. The provisions of this Plan
applicable to a distribution of Employer Securities, including the put
option requirements of Article XI, apply to this investment option.
(b) The direct transfer of the portion of his Eligible Accrued Benefit
covered by the election to another qualified plan of the Employer which
accepts such transfers, but only if the transferee plan permits
employee-directed investment and does not invest in Employer Securities
to a substantial degree. The Trustee will make the direct transfer no
later than 90 days after the last day of the period during which the
Qualified Participant may make the election. For purposes of this
Section 8.10, the following definitions apply:"
(i) "Qualified Participant" means a Participant who has attained age 55
and who has completed at least 10 years of participation in the Plan. A
"year of participation" means a Plan Year in which the Participant was
eligible for an allocation of Employer contributions, irrespective of
whether the Employer actually contributed to the Plan for that Plan
year.
(ii) "Qualified Election Period" means the 6 Plan Year period beginning
with the Plan Year in which the Participant first becomes a Qualified
Participant.
ARTICLE IX
Advisory Committee - Duties with Respect to Participants' Accounts
<PAGE>
9.01 Members' Compensation, Expenses. The Employer must appoint an
Advisory Committee to administer the Plan, the members of which may or may not
be Participants in the Plan, or which may be the Plan Administrator acting
alone. The members of the Advisory Committee will serve without compensation for
services as such, but the Employer will pay all expenses of the Advisory
Committee, including the expense for any bond required under ERISA.
9.02 Term. Each member of the Advisory Committee serves until his
successor is appointed.
9.03 Powers. In case of vacancy in the membership of the Advisory
Committee, the remaining members of the Advisory Committee may exercise any and
all of the powers, authority, duties and discretion conferred upon the Advisory
Committee pending the filling of the vacancy.
9.04 General. The Advisory Committee has the following powers and
duties:
(a) To select a secretary, who need not be a member of the Advisory
Committee;
(b) To determine the rights of eligibility of an Employee to
participate in this Plan, the value of a Participant's Accrued Benefit, and the
Nonforfeitable percentage of each Participant's Accrued Benefit;
(c) To adopt rules of procedure and regulations necessary for
the proper and efficient administration of the Plan provided the rules are not
inconsistent with the terms of this Agreement;
(d) To enforce the terms of the Plan and the rules and regulations it
adopts;
(e) To direct the Trustee as respects the crediting and distribution
of the Trust;
(f) To review and render decisions respecting a claim for (or denial
of a claim for) a benefit under the Plan;
(g) To furnish the Employer with information which the Employer may
require for tax or other purposes;
(h) To engage the service of agents whom it may deem advisable to
assist it with the performance of its duties;
(i) To engage the services of an investment manager or managers (as
defined in ERISA Section 3(38)), each of whom will have full power and authority
to manage, acquire or dispose (or direct the Trustee with respect to acquisition
or disposition) of any Plan asset under its control;
(j) To establish a nondiscriminatory policy which the Trustee must
observe in making loans, if any, to Participants; and
The Advisory Committee must exercise all of its powers, duties, and
discretion under the Plan in a uniform and nondiscriminatory manner.
Loan Policy. A loan policy described in paragraph (j) must be a written
document and must include: (1) the identity of the person or positions
authorized to administer the participant loan program; (2) a procedure for
applying for the loan; (3) the criteria for approving or denying a loan; (4) the
limitations, if any, on the types and amounts of loans available; (5) the
procedure for determining a reasonable rate of interest; (6) the types of
collateral which may secure the loan; and (7) the events constituting default
and the steps the Plan will take to preserve plan assets in the event of
default.
9.05 Funding Policy. The Advisory Committee will review, not less often
than annually, all pertinent Employee information and Plan data in order to
establish the funding policy of the Plan, and to determine the appropriate
methods of carrying out the Plan's objectives. The Advisory Committee must
communicate periodically, as it deems appropriate, to the Trustee and to the
Plan investment manager the Plan's short-term and long-term financial needs so
investment policy can be coordinated with Plan financial requirements.
9.06 Manner of Action. The decision of a majority of the members
appointed and qualified controls.
9.07 Authorized Representative. The Advisory Committee may authorize
any one of its members, or its secretary, to sign on its behalf any notices,
directions, applications, certificates, consents, approvals, waivers, letters,
or other documents. The Advisory Committee must evidence this authority by an
instrument signed by all members and filed with the Trustee.
9.08 Interested Member. No member of the Advisory Committee may decide
or determine any matter concerning the distribution, nature or method of
settlement of his own benefits under the Plan, except in exercising an election
available to that member in his capacity as a Participant, unless the Plan
Administrator is acting alone in the capacity of the Advisory Committee.
9.09 Individual Accounts. The Advisory Committee will maintain, or
direct the Trustee to maintain, a separate Account, or multiple Accounts, in the
name of each Participant to reflect the Participant's Accrued Benefit under the
Plan. The Advisory Committee must maintain one Account designated as the
Employer Securities Account to reflect a Participant's interest in Employer
Securities held by the Trust and another Account designated as the General
Investments Account designated as the Employee Securities Account to reflect the
Participant's interest in the Trust Fund attributable to assets other than
Employer Securities. If a Participant re-enters the Plan subsequent to his
having a Forfeiture Break in Service (as defined in Section 5.08), the Advisory
Committee, or the Trustee, must maintain a spearate Account for the
Participant's pre-Forfeiture Break in Service Accrued Benefit and a separate
Account for his post-Forfeiture Break in Service Accrued Benefit unless the
Participant's entire Accrued Benefit under the Plan is 100% Nonforfeitable.
The Advisory Committee will make its allocations, or request the
Trustee to make its allocations, to the Accounts of the Participants in
accordance with the provsiions of Section 9.11. The Advisory Committee may
direct the Trustee to maintain a temporary segregated investment Account in the
name of a Participant to prevent a distortion of income, gain or loss
allocations under Section 9.11. The Advisory Committee shall maintain records of
its activities.
9.10 Value of Participant's Accrued Benefit. The value of each
Participant's Accrued Benefit consists of that proportion of the net worth (at
fair market value) of the Employer's Trust Fund which the net credit balance in
his Account bears to the total net credit balance in the Accounts of all
Participants. For purposes of a distribution under the Plan, the value of a
Participant's Accrued Benefit is its value as of the valuation date immediately
preceding the date of the distribution.
9.11 Allocations To Participant's Accounts. A "valuation date" under
this Plan is each Accounting Date and each interim valuation date determined
under Section 10.14. As of each valuation date the Advisory Committee must
adjust General Investment Accounts to reflect net income, gain or loss since the
last valuation date. The valuation period is the period beginning the day after
the last valuation date and ending on the current valuation date.
[A] Employer Securities Account. As of the Accounting Date of each Plan Year,
the Advisory Committee first will reduce Employer Securities Accounts for any
forfeitures arising under Section 5.09 and then will credit the Employer
Securities Account maintained for each Participant with the Participant's
allocable share of Employer Securities (including fractional shares) purchased
and paid for by the Trust or contributed in kind to the Trust, with any
forfeitures of Employer Securities and with any stock dividends on Employer
Securities allocated to his Employer Securities Account. The Advisory Committee
will allocate Employer Securities acquired with an Exempt Loan under Section
10.03(C) in accordance with that Section. Except as otherwise specifically
provided in Section 10.03[C], the Advisory Committee will base allocations to
the Participants' Accounts on dollar values expressed as shares of Employer
Securities or on the basis of actual shares where there is a single class of
Employer Securities. In making a forfeiture reduction under this Section 9.11,
the Advisory Committee, to the extent possible, first must forfeit from a
Participant's General Investments Account before making a forfeiture from his
Employer Securities Account.
[B] General Investments Account.
Trust Fund Accounts. The allocation provisions of this paragraph apply
to all Participant General Investment Accounts other than segregated investment
Accounts. The Advisory Committee first will adjust the Participant General
Investment Accounts, as those Accounts stood at the beginning of the current
valuation period, by reducing the Accounts for any forfeitures arising under
Section 5.09 or under Section 9.14 for amounts charged during the valuation
period to the Accounts in accordance with Section 9.13 (relating to
distributions) and for the amount of any General Investment Account which the
Trustee has fully distributed since the immediately preceding valuation date.
The Advisory Committee then, subject to the restoration allocation requirements
of Section 5.04 or of Section 9.14, will allocate the net income, gain or loss
pro rata to the adjusted Participant General Investment Accounts. The allocable
net income, gain or loss is the net income (or net loss), including the increase
or decrease in the fair market value of assets, since the last valuation date.
In making its allocations under this Section 9.11[B], the Advisory Committee
will exclude Employer Securities allocated to Employer Securities Accounts,
stock dividends on allocated Employer Securities and interest paid by the Trust
on an Exempt Loan. The Advisory Committee will include as income (available for
payment on an Exempt Loan) any cash dividends on Employer Securities except cash
dividends which the Advisory Committee has directed to the Trustee to distribute
in accordance with Section 10.08.
Segregated investment Accounts. A segregated investment Account
receives all income it earns and bears all expense or loss it incurs. As of the
valuation date, the Advisory Committee must reduce a segregated Account for any
forfeiture arising under Section 5.09 after the Advisory Committee has made all
other allocations, changes or adjustments to the Account for the Plan Year.
Additional rules. An Excess Amount or suspense account described in
Part 2 of Article III does not share in the allocation of net income, gain or
loss described in this Section 9.11[B]. This Section 9.11[B] applies solely to
the allocation of net income, gain or loss of the Trust. The Advisory Committee
will allocate the Employer contributions and Participant forfeitures, if any, in
accordance with Article III.
9.12 Individual Statement. As soon as practicable after the Accounting
Date of each Plan Year but within the time prescribed by ERISA and the
regulations under ERISA, the Plan Administrator will deliver to each Participant
(and to each Beneficiary) a statement reflecting the condition of his Accrued
Benefit in the Trust as of that date and such other information ERISA requires
be furnished the Participant or Beneficiary. No Participant, except a member of
the Advisory Committee, has the right to inspect the records reflecting the
Account of any other Participant.
9.13 Account Charged. The Advisory Committee will charge all
distributions made to a Participant or to his Beneficiary from his Account
against the Account of the Participant when made.
9.14 Unclaimed Account Procedure. The Plan does not require either the
Trustee or the Advisory Committee to search for, or ascertain the whereabouts
of, any Participant or Beneficiary. At the time the Participant's or
Beneficiary's benefit becomes distributable under Article VI, the Advisory
Committee, by certified or registered mail addressed to his last known address
of record with the Advisory Committee or the Employer, must notify any
Participant, or Beneficiary, that he is entitled to a distribution under this
Plan. The notice must quote the provisions of this Section 9.14 and otherwise
must comply with the notice requirements of Article VI. If the Participant, or
Beneficiary, fails to claim his distributive share or make his whereabouts known
in writing to the Advisory Committee within 6 months from the date of mailing of
the notice, the Advisory Committee will treat the Participant's or Beneficiary's
unclaimed payable Accrued Benefit as forfeited and will reallocate the unclaimed
payable Accrued Benefit in accordance with Section 3.05. Where the benefit is
distributable to the Participant, the forfeiture under this paragraph occurs as
of the last day of the notice period, if the Participant's Nonforfeitable
Accrued Benefit does not exceed $3,500, or as of the first day of the benefit is
distributable without the Participant's consent, if the present value of the
Participant's Nonforfeitable Accrued Benefit exceeds $3,500. Where the benefit
is distributable to a Beneficiary, the forfeiture occurs on the date the notice
period ends except, if the Beneficiary is the Participant's spouse and the
Nonforfeitable Accrued Benefit payable to the spouse exceeds $3,500, the
forfeiture occurs as of the first day the benefit is distributable without the
spouse's consent. Pending forfeiture, the Advisory Committee, following the
expiration of the notice period, may direct the Trustee to segregate the
Nonforfeitable Accrued Benefit in a segregated Account and to invest that
segregated Account in Federally insured interest bearing savings accounts or
time deposits (or in a combination of both), or in other fixed income
investments.
If a Participant or Beneficiary who has incurred a forfeiture of his
Accrued Benefit under the provisions of the first paragraph of this Section 9.14
makes a claim, at any time, for his forfeited Accrued Benefit, the Advisory
Committee must restore the Participant's or Beneficiary's forfeited accrued
Benefit to the same dollar amount as the dollar amount of the Accrued Benefit
forfeited, unadjusted for any gains or losses occurring subsequent to the date
of the forfeiture. The Advisory Committee will make the restoration during the
Plan Year in which the Participant or Beneficiary makes the claim first from the
amount, if any, of Participant forfeitures the Advisory Committee otherwise
would allocate for the Plan Year, then from the amount, if any, of the Trust
Fund net income or gain for the Plan Year and then from the amount, or
additional amount, the Employer contributes to enable the Advisory Committee to
make the required restoration. The Advisory Committee will direct the Trustee to
distribute the Participant's or Beneficiary's restored Accrued Benefit to him
not later than 60 days after the close of the Plan Year in which the Advisory
Committee restores the forfeited Accrued Benefit. The forfeiture provisions of
this Section 9.14 apply solely to the Participant's or to the Beneficiary's
Accrued Benefit derived from Employer contributions.
ARTICLE X
Trustee, Powers and Duties
10.01 Acceptance. The Trustee accepts the Trust created under the Plan
and agrees to perform the obligations imposed. The Trustee must provide bond for
the faithful performance of its duties under the Trust to the extent required by
ERISA.
10.02 Receipt of Contributions. The Trustee is accountable to the
Employer for the funds contributed to it by the Employer, but does not have any
duty to see that the contributions received comply with the provisions of the
Plan. The Trustee is not obliged to collect any contributions from the Employer,
nor is obliged to see that funds deposited with it are deposited according to
the provisions of the Plan.
10.03 Full Investment Powers.
(A) Trustee Powers. The Trustee has full discretion and authority with regard to
the investment of the Trust Fund, except with respect to a Plan asset under the
control or direction of a properly appointed Investment Manager or with respect
to a Plan asset subject to Employer, Participant or Advisory Committee direction
of investment. The Trustee must coordinate its investment policy with Plan
financial needs as communicated to it by the Advisory Committee. The Trustee is
authorized and empowered, but not by way of limitation, with the following
powers, rights and duties:
(a) To invest the Trust Fund primarily in Employer Securities
("primarily" meaning the authority to hold and to acquire not more than 100% of
the Trust Fund in Employer Securities) and to invest any part or all of the
Trust Fund in any common or preferred stocks, open-end or closed-end mutual
funds, put and all options traded on a national exchange, United States
retirement plan bonds, corporate bonds, debentures, convertible debentures,
commercial paper, U.S. Treasury bills, U.S. Treasury notes and other direct or
indirect obligations of the United States Government or its agencies, improved
or unimproved real estate situated in the United States, limited partnerships,
insurance contracts of any type, mortgages, notes or other property of any kind,
real or personal, and to buy or sell options on common stock on a nationally
recognized exchange with or without holding investments the Trustee deems
appropriate as a aprudent man would do under like circumstances with due regard
for the purposes of this Plan. An investment made or retained by the Trustee in
good faith is proper but must be of a kind (with the exception of Employer
Securities) constituting a diversification considered by law suitable for trust
investments.
(b) To retain in cash so much of the Trust Fund as it may deem
advisable to satisfy liquidity needs of the Plan and to deposit any cash held in
the Trust Fund in a bank account at reasonable interest. If the Trustee is a
bank or similar financial institution supervised by the United States or by a
State, this paragraph (b) includes specific authority to invest in any type of
deposit of the Trustee (or of a bank related to the Trustee within the meaning
of Code Section 414(b)) at a reasonable rate of interest or in a common trust
fund (the provisions of which govern the investment of such assets and which the
Plan incorporates by this reference) as described in Code Section 584 which the
Trustee (or its affiliate, as defined in Code Section 1504) maintains
exclusively for the collective investment of money contributed by the bank (or
the affiliate) in its capacity as Trustee and which conforms to the rules of the
Comptroller of the Currency.
(c) To manage, sell, contract to sell, grant options to purchase,
convey, exchange, transfer, abandon, improve, repair, insure, lease for any term
even though commencing in the future or extending beyond the term of the Trust,
and otherwise deal with all property, real or personal, in such manner, for such
consideration and on such terms and conditions as the Trustee decides.
(d) To credit and distribute the Trust as directed by the Advisory
Committee. The Trustee is not obliged to inquire as to whether any payee or
distributee is entitled to any payment or whether the distribution is proper or
within the terms of the Plan, or as to the manner of making any payment or
distribution. The Trustee is accountable only to the Advisory Committee for any
payment or distribution made by it in good faith on the order or direction of
the Advisory Committee.
(e) To borrow money, to assume indebtedness, extend mortgages and
encumber by mortgage or pledge.
(f) To compromise, contest, arbitrate or abandon claims and demands,
in its discretion.
(g) To vote, subject to Section 10.16, all voting stock held by the
Trust Fund.
(h) To lease for oil, gas and other mineral purposes and to create
mineral severances by grant or reservation; to pool or unitize interests in oil,
gas and other minerals; and to enter into operating agreements and to execute
division and transfer orders.
(i) To hold any securities or other property in the name of the Trustee
or its nominee, or in another form as it may deem best, with or without
disclosing the trust relationship.
(j) To perform any and all other acts in its judgment necessary or
appropriate for the proper and advantageous management, investment and
distribution of the Trust.
(k) To retain any funds or property subject to any dispute without
liability for the payment of interest, and to decline to make payment or
delivery of the funds or property until final adjudication is made by a court of
competent jurisdiction.
(l) To file all tax returns required of the Trustee.
(m) To furnish to the Employer, the Plan Administrator, and the
Advisory Committee an annual statement of account showing the condition of the
Trust Fund and all investment, receipts, disbursements and other transactions
effected by the Trustee during the Plan year covered by the statement and also
stating the assets of the Trust held at the end of the Plan Year, which accounts
are conclusive on all persons, including the Employer, the Plan administrator,
and the Advisory Committee, except as to any act or transaction concerning which
the Employer, the Plan Administrator or the Advisory Committee files with the
Trustee written exceptions or objections within 90 days after the receipt of the
accounts, or for which ERISA authorizes a longer period within which to object.
(n) To begin, maintain or defend any litigation necessary in connection
with the administration of the Plan, except that the Trustee is not obliged or
required to do so unless indemnified to its satisfaction.
(o) The Trustee will allocate any insurance proceeds received from the
purchase of insurance contracts under paragraph (a) to Participants' Accounts in
the same manner as the allocation under Section 3.04 of the Employer
contribution for the Plan Year in which the death of the insured Participant
occurs.
[B] Participant Loans. This Section 10.03[B] specifically authorizes the Trustee
to make loans on a nondiscriminatory basis to a Participant in accordance with
the loan policy established by the Advisory Committee, provided: (1) the loan
policy satisfies the requirements of Section 9.04; (2) any loan is adequately
secured and bears a reasonable rate of interest; (3) the loan provides for
repayment within a specified time; (4) the default provisions of the note
prohibit offset of the Participant's Nonforfeitable Accrued Benefit prior to the
time the Trustee otherwise would distribute the Participant's Nonforfeitable
Accrued Benefit; (5) the amount of the loan does not exceed (at the time the
Plan extends the loan) the present value of the Participant's Nonforfeitable
Accrued Benefit; and (6) the loan otherwise conforms to the exemption provided
by Code Section 4975(d)(1).
[C] Exempt Loan. This Section 10.03[C] specifically authorizes the Trustee to
enter into an Exempt Loan transaction. The following terms and conditions will
apply to any Exempt Loan:
1) The Trustee will use the proceeds of the loan within a reasonable
time after receipt only for any or all of the following purposes: (i)
to acquire Employer Securities; (ii) to repay such loan; or (iii) to
repay a prior Exempt Loan. Except as provided under Article XI, no
Employer Security acquired with the proceeds of an Exempt Loan may be
subject to a put, call or other option, or buy-sell or similar
arrangement while held by and when distributed from this Plan, whether
or not this Plan is then an employee stock ownership plan.
(2) The interest rate of the loan may not be more than a reasonable
rate of interest.
(3) Any collateral the Trustee pledges to the creditor must consist
only of the assets purchased by the borrowed funds and those assets the
Trust used as collateral on the prior Exempt Loan repaid with the
proceeds of the current Exempt Loan.
(4) The creditor may have no recourse against the Trust under the loan
except with respect to such collateral given for the loan,
contributions (other than contributions of Employer Securities) that
the Employer makes to the Trust to meet its obligations under the loan,
and earnings attributable to such collateral and the investment of such
contributions. The payment made with respect to an Exempt Loan by the
Plan during a Plan Year must not exceed an amount equal to the sum of
such contributions and earnings received during or prior to the year
less such payments in prior years. The Advisory Committee and the
Trustee must account separately for such contributions and earnings in
the books of account of the Plan until the Trust repays the loan.
(5) In the event of default upon the loan, the value of Plan assets
transferred in satisfaction of the loan must not exceed the amount of
the default, and if the lender is a Disqualified Person, the loan must
provide for transfer of Plan assets upon default only upon and to the
extent of the failure of the Plan to meet the payment schedule of the
loan.
(6) The Trustee must add and maintain all assets acquired with the
proceeds of an Exempt Loan in a suspense Account. In withdrawing assets
from the suspense Account, the Trustee will apply the provisions of
Treas. Reg. Sections 54.4975-7(b)(8) and (15) as if all securities in
the suspense Account were encumbered. Upon the payment of any portion
of the loan, the Trustee will effect the release of assets in the
suspense Account from encumbrances. For each Plan Year during the
duration of the loan, the number of Employer Securities released must
equal the number of encumbered Employer Securities held immediately
before release for the current Plan Year multiplied by a fraction. The
numerator of the fraction is the amount of principal and interest paid
for the Plan Year. The denominator of the fraction is the sum of the
numerator plus the principal and interest to be paid for all future
Plan Years. The number of future Plan Years under the loan must be
definitely ascertainable and must be determined without taking into
account any possible extension or renewal periods. If the interest rate
under the loan is variable, the interest to be paid in future Plan
Years must be computed by using the interest rate applicable as of the
end of the Plan Year. If collateral includes more than one class of
Employer Securities, the number of Employer Securities of each class to
be released for a Plan Year must be determined by applying the same
fraction to each such class. The Advisory Committee will allocate
assets withdrawn from the suspense Account to the Accounts of
Participants who otherwise share in the allocation of the Employer's
contribution for the Plan Year for which the Trustee has paid the
portion of the loan resulting in the release of the assets. The
Advisory Committee consistently will make this allocation as of each
Accounting Date on the basis of non-monetary units, taking into account
the relative Compensation of all such Participants for such Plan Year.
(7) The loan must be for a specific term and may not be payable at the
demand of any person except in the case of default.
(8) Notwithstanding the fact this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of an
exempt loan will continue after the Trustee repays the loan to be
subject to the provisions of Treas. Reg. Sections 54.4975(b)(4), (10),
(11) and (12) relating to put, call or other options and to buy-sell or
similar arrangements, except to the extent these regulations are
inconsistent with Code Section 409(h).
10.04 Records and Statements. The records of the Trustee pertaining to
the Plan must be open to the inspection of the Plan Administrator, the Advisory
Committee, and the Employer at all reasonable times and may be audited from time
to time by any person or persons as the Employer, Plan Administratior or
Advisory Committee may specify in writing. The Trustee must furnish the
Employer, Advisory Committee, or the Plan Administrator with whatever
information relating to the Trust Fund the Advisory Committee or Plan
Administrator considers necessary.
10.05 Fees and Expenses From Fund. The Trustee will receive reasonable
annual compensation as may be agreed upon from time to time between the Employer
and the Trustee. The Trustee will pay all expenses reasonably incurred by it in
its administration of the Plan from the Trust Fund unless the Employer pays the
expenses. The Advisory Committee will not treat any fee or expense paid,
directly or indirectly, by the Employer as an Employer contribution, provided
the fee or expense relates to the ordinary and necessary administration of the
Fund. No person who is receiving full pay from the Employer shall receive
compensation for services as Trustee.
10.06 Parties to Litigation. Except as otherwise provided by ERISA,
only the Employer, the Plan Administrator, the Advisory Committee, and the
Trustee are necessary parties to any court proceeding involving the Trustee or
the Trust Fund. No Participant, or Beneficiary, is entitled to any notice of
process unless required by ERISA. Any final judgment entered in any proceeding
will be conclusive upon the Employer, the Plan Administrator, the Advisory
Committee, the Trustee, Participants and Beneficiaries.
10.07 Professional Agents. The Trustee may employ and pay from the
Trust Fund reasonable compensation to agents, attorneys, accountants and other
persons to advise the Trustee as in its opinion may be necessary. The Trustee
may delegate to any agent, attorney, accountant or other person selected by it
any non-trustee power or duty vested in it by the Plan, and the Trustee may act
or refrain from acting on the advice or opinion of any agent, attorney,
accountant or other person so selected.
10.08 Distribution of Trust Fund. The Trustee will make all
distributions of benefits under the Plan in Employer Securities valued at fair
market value at the time of distribution. The Trustee will pay in cash any
fractional security share to which a Participant or his Beneficiary is entitled.
In the event the Trustee is to make a distribution in shares of Employer
Securities, the Trustee may apply any balance in a Participant's General
Investments Account to provide whole shares of Employer Securities for
distribution at the then fair market value.
If the Employer's charter or bylaws restrict ownership of substantially
all shares of Employer Securities to Employees and the Trust, as described in
Code Section 409(h)(2), the Trustee will make the distribution of a
Participant's Accrued Benefit entirely in cash.
Notwithstanding the preceding provisions of this Section 10.08, the
Trustee, if directed in writing by the Advisory Committee, will pay, in cash,
any cash dividends on Employer Securities allocated, or allocable to
Participants Employer Securities Accounts, irrespective of whether a Participant
is fully vested in his Employer Securities Account. The Advisory Committee's
direction must state whether the Trustee is to pay the cash dividend
distributions currently, or within the 90 day period following the close of the
Plan Year in which the Employer pays the dividends to the Trust. The Advisory
Committee may request the Employer to pay dividends on Employer Securities
directly to Participants.
10.09 Distribution Directions. If no one claims a payment or
distribution made from the Trust, the Trustee must promptly notify the Advisory
Committee and shall dispose of the payment in accordance with the subsequent
direction of the Advisory Committee.
10.10 Third Party. No person dealing with the Trustee is obligated to
see to the proper application of any money paid or property delivered to the
Trustee, or to inquire whether the Trustee has acted pursuant to any of the
terms of the Plan. Each person dealing with the Trustee may act upon any notice,
request or representation in writing by the Trustee, or by the Trustee's duly
authorized agent, and is not liable to any person in so acting. The certificate
of the Trustee that it is acting in accordance with the Plan will be conclusive
in favor of any person relying on the certificate. The decision of a majority of
the Trustee(s) shall control with respect to any decision regarding the
administration or investment of the Trust Fund.
10.11 Resignation. The Trustee may resign at any time as Trustee of the
Plan by giving 30 days' written notice in advance to the Employer and to the
Advisory Committee. If the Employer fails to appoint a successor Trustee within
60 days of its receipt of the Trustee's written notice of resignation, the
Trustee will treat the Employer as having appointed itself as Trustee and as
having filed its acceptance of appointment with the former Trustee.
10.12 Removal. The Employer, by giving 30 days' written notice in
advance to the Trustee, may remove any Trustee. In the event of the resignation
or removal of a Trustee, the Employer must appoint a successor Trustee if it
intends to continue the Plan. If two or more persons hold the position of
Trustee, in the event of the removal of one such person, during any period the
selection of a replacement is pending, or during any period such person is
unable to serve for any reason, the remaining person or persons will act as the
Trustee.
10.13 Interim Duties and Successor Trustee. Each successor Trustee
succeeds to the title to the Trust vested in his predecessor by accepting in
writing his appointment as successor Trustee and filing the acceptance with the
former Trustee and the Advisory Committee without the signing or filing of any
further statement. The resigning or removed Trustee, upon receipt of acceptance
in writing of the Trust by the successor Trustee, must execute all documents and
do all acts necessary to vest the title of record in any successor Trustee. Each
successor Trustee has and enjoys all of the powers, both discretionary and
ministerial, conferred under this Agreement upon his predecessor. A successor
Trustee is not personally liable for any act or failure to act of any
predecessor Trustee, except as required under ERISA. With the approval of the
Employer and the Advisory Committee, a successor Trustee, with respect to the
Plan, may accept the account rendered and the property delivered to it by a
predecessor Trustee without incurring any liability or responsibility for so
doing.
10.14 Valuation of Trust. The Trustee must value the Trust Fund as of
each Accounting Date to determine the fair market value of each Participant's
Accrued Benefit in the Trust, and the Trustee also must value the Trust Fund on
such other dates, as directed by the Advisory Committee. With respect to
activities carried on by the Plan, an independent appraiser meeting requirements
similar to those prescribed by Treasury regulations under Code Section 170(a)(1)
must perform all valuations of Employer Securities which are not readily
tradeable on an established securities market.
<PAGE>
10.15 Limitation on Liability - If Investment Manager Appointed. The
Trustee is not liable for the acts or omissions of any Investment Manager or
Managers the Advisory Committee may appoint, nor is the Trustee be under any
obligation to invest or otherwise manage any asset of the Plan which is subject
to the management of a properly appointed Investment Manager. The Advisory
Committee, the Trustee and any properly appointed Investment Manager may execute
a letter agreement as a part of this Plan delineating the duties,
responsibilities and liabilities of the Investment Manager with respect to any
part of the Trust Fund under the control of the Investment Manager.
10.16 Participant Voting Rights--Employer Securities. With respect to
the voting of Employer Securities which are not part of a registration-type
class of securities (as defined in Code Section 409(e)(4)), a Participant has
the right to direct the Trustee regarding the voting of such Employer Securities
allocated to his Employer Securities Account with respect to any corporate
matter which involves the approval of disapproval of any corporate merger or
consolidation, recapitalization, reclassification, liquidation, dissolution,
sale of substantially all assets of a trade or business, or such similar
transaction as the Treasury may prescribe in regulations. As to any Employer
Securities allocated to the Participant's Employer Securities Account which are
part of a registration-type class of securities, the voting rights provided in
this Section 10.16 extend to all corporate matters requiring a vote of
stockholders. The Trustee does not have the right to vote any Employer
Securities which a Participant (or Beneficiary) fails to vote as authorized by
this Section 10.16.
ARTICLE XI
REPURCHASE OF EMPLOYER SECURITIES
11.01 Put Option. The Employer will issue a "put option" to each
Participant receiving a distribution of Employer Securities from the Trust. The
put option will permit the Participant to sell the Employer Securities to the
Employer, at any time during two option periods, at the current fair market
value. The first put option period runs for a period of at least 60 days
commencing on the date of distribution of Employer Securities to the
Participant. The second put option period runs for a period of at least 60 days
commencing after the new determination of the fair market value of Employer
Securities by the Advisory Committee and notice to the Participant of the new
fair market value. If a Participant (Beneficiary) exercises his put option, the
Employer must purchase the Employer Securities at fair market value upon the
terms provided under Section 11.04. The Employer may grant the Trust an option
to assume the Employer's rights and obligations at the time a Participant
exercises an option under this Section 11.01.
11.02 Restriction on Employer Securities. Except upon the prior written
consent of the Employer, no Participant (or Beneficiary) may sell, assign, give
pledge, encumber, transfer or otherwise dispose of any Employer Securities now
owned or subsequently acquired by him without complying with the terms of this
Article XI. If a Participant (or Beneficiary) pledges or encumbers any Employer
Securities with the required prior written consent, any security holder's rights
with respect to such Employer Securities are subordinate and subject to the
rights of the Employer.
11.03 Lifetime Transfer/Right of First Refusal. If any Participant (or
Beneficiary) who receives Employer Securities under this Plan desires to dispose
of any of his Employer Securities for any reason during his lifetime (whether by
sale, assignment, gift or any other method of transfer), he first must offer the
Employer Securities for sale to the Employer. The Advisory Committee may require
a Participant (or beneficiary) entitled to a distribution of Employer Securities
to execute an appropriate stock transfer agreement (evidencing the right of
first refusal) prior to receiving a certificate for Employer Securities.
In the case of an offer by a third party, the offer to the Employer is
subject to all the terms and conditions set forth in Section 11.04 based on the
price equal to the fair market value per share and payable in accordance with
the terms of Section 11.04 unless the selling price and terms offered to the
Participant by the third party are more favorable to the Participant than the
selling price and terms of Section 11.04, in the event the selling price and
terms of the offer of the third party apply. The Employer must give written
notice to the offering Participant of its acceptance of the Participant's offer
within 14 days after the Participant has given written notice to the Employer or
the Employer's rights under this Section 11.03 will lapse. The Employer may
grant the Trust the option to assume the Employer's rights and obligations with
respect to all or any part of the Employer Securities offered to the Employer
under this Section 11.03.
11.04 Payment of Purchase Price. If the Employer (or the Trustee, at
the direction of the Advisory Committee) exercises an option to purchase a
Participant's Employer Securities pursuant to an offer given under Section
11.03, the purchaser(s) must make payment in lump sum or, if the distribution to
the Participant (or to his Beneficiary) constitutes a Total Distribution, in
substantially equal installments over a period not exceeding five years. A
"Total Distribution" to a Participant (or to a Beneficiary) is the distribution,
within one taxable year of the recipient, of the entire balance to the
Participant's credit under the Plan. In the case of a distribution which is not
a Total Distribution or which is a Total Distribution with respect to which the
purchaser(s) will make payment in lump sum, the purchaser(s) must pay the
Participant (or Beneficiary) the fair market value of the Employer Securities
repurchased no later than 30 days after the date the Participant (or
Beneficiary) exercises the option. In the case of a Total Distribution with
respect to which the purchaser(s) will make installment payments, the
purchaser(s) must make the first installment payment no later than 30 days after
the Participant (or Beneficiary) exercises the put option. For installment
amounts not paid within 30 days of the exercise of the put option, the
purchaser(s) must evidence the balance of the purchase price by executing a
promissory note, delivered to the selling Participant at the Closing. The note
delivered at Closing must bear a reasonable rate of interest, determined as of
the Closing Date, and the purchaser(s) must provide adequate security. The note
must provide for equal annual installments with interest payable with each
installment, the first installment being due and payable one year after the
Closing Date. The note further must provide for acceleration in the event of 30
days' default of the payment on interest or principal and must grant to the
maker of the note the right to prepay the note in whole or in part at any time
or times without penalty; provided, however, the purchaser(s) may not have the
right to make any prepayment during the calendar year or fiscal year of the
Participant (Beneficiary) in which the Closing Date occurs.
<PAGE>
11.05 Notice. A person has given Notice permitted or required under
this Article XI when the person deposits the Notice in the United States mail,
first class, postage prepaid, addressed to the person entitled to the Notice at
the address currently listed for him in the records of the Advisory Committee.
Any person affected by this Article XI has the obligation of notifying the
Advisory Committee of any change of address.
11.06 Terms and Definitions. For purposes of this Article XI:
(a) "Fair market value" means the value of the Employer Securities: (i)
determined as of the date of the exercise of an option if the exercise
is by a Disqualified Person; or (ii) in all other cases, determined as
of the most recent Accounting Date. The Advisory Committee must
determine fair market value of Employer Securities for all purposes of
the Plan by engaging the services of an independent appraiser. See
Section 10.14.
(b) "Notice" means any offer, acceptance of an offer, payment or any
other communication.
(c) "Beneficiary" includes the legal representative of a deceased
Participant.
(d) "Closing" means the place, date and time ("Closing Date") to which
the selling Participant (or his Beneficiary) and purchaser may agree
for purposes of a sale and purchase under this Article XI, provided
Closing must take place not later than 30 days after the exercise of an
offer under Section 11.01.
ARTICLE XII
Miscellaneous
12.01 Evidence. Anyone required to give evidence under the terms of the
Plan may do so by certificate, affidavit, document or other information which
the person to act in reliance may consider pertinent, reliable and genuine, and
to have been signed, made or presented by the proper party or parties. Both the
Advisory Committee and the Trustee are fully protected in acting and relying
upon any evidence described under the immediately preceding sentence.
12.02 No Responsibility for Employer Action. Neither the Trustee nor
the Advisory Committee has any obligation nor responsibility with respect to any
action required by the Plan to be taken by the Employer, any Participant or
eligible Employee, or for the failure of any of the above persons to act or make
any payment or contribution, or to otherwise provide any benefit contemplated
under this Plan. Furthermore, the Plan does not require the Trustee or the
Advisory Committee to collect any contribution required under the Plan, or
determine the correctness of the amount of any Employer contribution. Neither
the Trustee nor the Advisory Committee need inquire into or be responsible for
any action or failure to act on the part of the others. Any action required of a
corporate Employer must be by its Board of Directors or its designate.
12.03 Fiduciaries Not Insurers. The Trustee, the Advisory Committee,
the Plan Administrator and the Employer in no way guarantee the Trust Fund from
loss or depreciation. The Employer does not guarantee the payment of any money
which may be or becomes due to any person from the Trust Fund. The liability of
the Advisory Committee and the Trustee to make any payment from the Trust Fund
at any time and all times is limited to the then available assets of the Trust.
12.04 Waiver of Notice. Any person entitled to notice under the Plan
may waive the notice.
12.05 Successors. The Plan is binding upon all persons entitled to
benefits under the Plan, their respective heirs and legal representatives, upon
the Employer, it successors and assigns, and upon the Trustee, the Advisory
Committee, the Plan Administrator and their successors.
12.06 Word Usage. Words used in the masculine also apply to the
feminine where applicable, and wherever the context of the Plan dictates, the
plural includes the singular and singular includes the plural.
12.07 State Law. Colorado law shall determine all questions arising
with respect to the provisions of this Agreement except to the extent Federal
statutes supersede Colorado law.
12.08 Employment Not Guaranteed. Nothing contained in this Plan, or
with respect to the establishment of the Trust, or any modification or amendment
to the Plan or Trust, or in the creation of any Account, or the payment of any
benefit, gives any Employee, Participant, or any Beneficiary any right to
continue employment, any legal or equitable right against the Employer, or
Employee of the Employer, or against the Trustee, or its agents or employees, or
against the Plan Administrator, except as expressly provided by the Plan, the
Trust, ERISA or by a separate agreement.
ARTICLE XIII
Exclusive Benefit, Amendment, Termination
13.01 Exclusive Benefit. Except as provided under Article III, the
Employer has no beneficial interest in any asset of the Trust and no part of any
asset in the Trust shall ever revert to or be repaid to an Employer, either
directly or indirectly; nor prior to the satisfaction of all liabilities with
respect to the Participants and their Beneficiaries under the Plan, may any part
of the corpus of income of the Trust Fund, or any asset of the Trust, be (at any
time) used for, or diverted to, purposes other than the exclusive benefit of the
Participants or their Beneficiaries. However, if the Commissioner of Internal
Revenue, upon the Employer's request for initial approval of this Plan,
determines that the Trust created under the Plan is not a qualified trust exempt
from Federal income tax, then and only then (and only then) the Trustee, upon
written notice from the Employer, will return the Employer's contributions (and
increment attributable to the contributions) to the employer. The Trustee must
make the return of the Employer contribution under this Section 13.01 within one
year of a final disposition of the Employer's request for initial approval of
the Plan. The Plan and Trust will terminate upon the Trustee's return of the
Employer's contributions.
13.02 Amendment by Employer. The Employer has the right at any time and
from time to time: (a) to amend this Agreement in any manner it deems necessary
or advisable in order to qualify (or maintain qualification of) this Plan and
the Trust created under it under the appropriate provisions of Code Section
401(a); and (b) to amend this Agreement in any other manner. No amendment may
authorize or permit any of the Trust Fund (other than the part required to pay
taxes and administration expenses) to be used for or diverted to purposes other
than for the exclusive benefit of the Participants or their Beneficiaries or
estates. No amendment may cause or permit any portion of the Trust Fund to
revert to or become a property of the Employer. The Employer also may not make
any amendment which affects the rights, duties or responsibilities of the
Trustee, the Plan Administrator, or the Advisory Committee without the written
consent of the affected Trustee, the Plan Administrator, or the affected member
of the Advisory Committee.
Code Section 411(d)(6) protected benefits. An amendment (including the
adoption of this Plan as a restatement of an existing plan) may not decrease a
Participant's Accrued Benefit, except to the extent permitted under Code Section
412(c)(8), and may not reduce or eliminate Code Section 411(d)(6) protected
benefits determined immediately prior to the adoption date (or, if later, the
effective date) of the amendment. An amendment reduces or eliminates Code
Section 411(d)(6) protected benefits if the amendment has the effect of either
(1) eliminating or reducing an early retirement benefit or a retirement-type
subsidy (as defined in Treasury regulations), or (2) except as provided by
Treasury regulations, eliminating an optional form of benefit. The Advisory
Committee must disregard an amendment to the extent application of the amendment
would fail to satisfy this paragraph. If the Advisory Committee must disregard
an amendment because the amendment would violate clause (1) or clause (2), the
Advisory Committee must maintain a schedule of the early retirement option or
other optional forms of benefit the Plan must continue for the affected
Participants.
The Employer must make all amendments in writing. Each amendment must
state the date to which it is either retroactively or prospectively effective.
13.03 Discontinuance. The Employer has the right, at any time, to
suspend or discontinue its contributions under the Plan, and to terminate, at
any time, this Plan and the Trust created under this Agreement. The Plan will
terminate upon the first to occur of the following: (a) the date terminated by
action of the Employer; (b) the date the Employer shall be judicially declared
bankrupt or insolvent unless the proceeding authorized continued maintenance of
the Plan; (c) the dissolution, merger, consolidation or reorganization of the
Employer or the sale by the Employer of all or substantially all of its assets,
unless the successor or purchaser makes provision to continue the Plan, in which
event the successor or purchaser shall substitute itself as the Employer under
this Plan.
13.04 Full Vesting on Termination. Upon either full or partial
termination of the Plan, or, if applicable, upon the date of complete
discontinuance of profit-sharing plan contributions to the Plan, an affected
Participant's right to his Accrued Benefit shall be 100% Nonforfeitable
irrespective of the Nonforfeitable percentage which otherwise would apply under
Article V.
13.05 Merger/Direct Transfer. The Trustee may not consent to, or be a
party to, any merger or consolidation with another plan, or to a transfer of
assets or liabilities to another plan, unless immediately after the merger,
consolidation or transfer, the surviving Plan provides each Participant a
benefit equal to or greater than the benefit each Participant would have
received had the Plan terminated immediately before the merger or consolidation
or transfer. The Trustee possesses the specific authority to enter into merger
agreements or direct transfer of assets agreements with the trustees of other
retirement plans described in Code Section 401(a), including an elective
transfer, and to accept the direct transfer of plan assets, or to transfer
assets as a party to any such agreement, provided the other retirement plan is
not subject to the joint and survivor annuity provisions of Code Section 417.
The Trustee may accept a direct transfer of plan assets on behalf of an Employer
prior to the date the Employee satisfies the Plan's eligibility condition(s). If
the Trustee accepts such a direct transfer of plan assets, the Advisory
Committee and the Trustee must treat the Employee as a Participant for all
purposes of the Plan except the Employee is not a Participant for purposes of
sharing in Employer contributions or Participant forfeitures under the Plan
until he actually becomes a Participant in the Plan. The Trustee may not consent
to, or be a party to a merger, consolidation or transfer of assets with a
defined benefit plan, except with respect to an elective transfer. The Trustee
will hold, administer and distribute the transferred assets as a part of the
Trust Fund and the Trustee must maintain a separate Employer contribution
Account for the benefit of the Employee on whose behalf the Trustee accepted the
transfer in order to reflect the value of the transferred assets. Unless a
transfer of assets to this Plan is an elective transfer, the Plan will preserve
all Code Section 411(d)(6) protected benefits with respect to those transferred
assets, in the manner described in Section 13.02. A transfer is an elective
transfer if: (1) the transfer satisfies the first paragraph of this Section
13.05, (2) the transfer is voluntary, under a fully informed election by the
Participant; (3) the Participant has an alternative that retains his Code
Section 411(d)(6) protected benefits (including an option to leave his benefit
in the transferor plan, if that plan is not terminating); (4) the transfer
satisfies the applicable spousal consent requirements of the Code; (5) the
transferor plan satisfies the joint and survivor notice requirements of the
Code, if the Participant's transferred benefit is subject to those requirements;
(6) the Participant has a right to immediate distribution from the transferor
plan, in lieu of the elective transfer; (7) the transferred benefit is at least
the greater of the single sum distribution provided by the transferor plan for
which the Participant is eligible or the present value of the Participant's
accrued benefit under the transferor plan payable at that plan's normal
retirement age; (8) the Participant has a one hundred percent (100%)
Nonforfeitable interest in the transferred benefit; and (9) the transfer
otherwise satisfies applicable Treasury regulations. An elective transfer may
occur between two defined contribution plans, between qualified plans of any
type.
Distribution restrictions under Code Section 401(k). If the Plan
receives a direct Transfer (by merger or otherwise) of elective contributions
(or amounts treated as elective contributions) under a Plan with a Code Section
401(k) arrangement, the distribution restrictions of Code Sections 401(k)(2) and
401(k)(10) continue to apply to those transferred elective contributions.
13.06 Termination. Upon termination of the Plan, the distribution
provisions of Article VI remain operative, with the following exceptions: (1) if
the present value of the Participant's Nonforfeitable Accrued Benefit does not
exceed $3,500, the Advisory Committee will direct the Trustee to distribute the
Participant's Nonforfeitable Accrued Benefit to him in lump sum as soon as
administratively practicable after the Plan terminates; and (2) if the present
value of the Participant's Nonforfeitable Accrued Benefit exceeds $3,500, the
Participant or the Beneficiary, in addition to the distribution events permitted
under Article VI, may elect to have the Trustee commence distribution of his
Nonforfeitable Accrued Benefit as soon as administratively practicable after the
Plan terminates. To liquidate the Trust, the Advisory Committee will purchase a
deferred annuity contract for each Participant which protects the Participants's
distribution rights under the Plan, if the Participant's Nonforfeitable Accrued
Benefit exceeds $3,500 and the Participant does not elect an immediate
distribution pursuant to clause (2) above. The Trust will continue until the
Trustee in accordance with the direction of the Advisory Committee has
distributed all of the benefits under the Plan. On each valuation date, the
Advisory Committee will credit any part of a Participant's Accrued Benefit
retained in the Trust with its proportionate share of the Trust's income,
expenses, gains and losses, both realized and unrealized. Upon termination of
the Plan, the amount, if any, in a suspense account under Article III will
revert to the Employer, subject to the conditions of the Treasury regulations
permitting such a reversion. A resolution or amendment to freeze all future
benefit accruals but otherwise to continue maintenance of the Plan, is not a
termination for purposes of this Section 13.06.
IN WITNESS WHEREOF, the Employer and the Trustee have executed this
Plan and Trust Agreement this 6th day of October, 1989.
EMPLOYER:
FRONTEER DIRECTORY CO.
By /s/ Dennis W. Olson
-------------------------------
President
ATTEST:
/s/ Roland Haux
- --------------------------
Secretary
TRUSTEE:
/s/ Richard O. Flurer
---------------------------------
Richard O. Flurer
/s/ Gloria Olson
---------------------------------
Gloria Olson
/s/ Eric Schmitz
---------------------------------
Eric Schmitz
FRONTEER DIRECTORY COMPANY, INC.
401(K) PROFIT SHARING PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
2.2 DETERMINATION OF TOP HEAVY STATUS
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
2.7 RECORDS AND REPORTS
2.8 APPOINTMENT OF ADVISERS
2.9 INFORMATION FROM EMPLOYER
2.10 PAYMENT OF EXPENSES
2.11 MAJORITY ACTIONS
2.12 CLAIMS PROCEDURE
2.13 CLAIMS REVIEW PROCEDURE
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
3.2 APPLICATION FOR PARTICIPATION
3.3 EFFECTIVE DATE OF PARTICIPATION
3.4 DETERMINATION OF ELIGIBILITY
3.5 TERMINATION OF ELIGIBILITY
3.6 OMISSION OF ELIGIBLE EMPLOYEE
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
3.8 ELECTION NOT TO PARTICIPATE
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
4.8 ADJUSTMENT TO ACTUAL;CONTRIBUTION PERCENTAGE TESTS
4.9 MAXIMUM ANNUAL ADDITIONS
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
4.11 TRANSFERS FROM QUALIFIED PLANS
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
5.2 METHOD OF VALUATION
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
6.2 DETERMINATION OF BENEFITS UPON DEATH
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
6.5 DISTRIBUTION OF BENEFITS
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
6.7 TIME OF SEGREGATION OR DISTRIBUTION
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP
6.11 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
7.3 OTHER POWERS OF THE TRUSTEE
7.4 LOANS TO PARTICIPANTS
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
7.7 ANNUAL REPORT OF THE TRUSTEE
7.8 AUDIT
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
7.10 TRANSFER OF INTEREST
7.11 EMPLOYER SECURITIES AND REAL PROPERTY
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
8.2 TERMINATION
8.3 MERGER OR CONSOLIDATION
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
9.2 ALIENATION
9.3 CONSTRUCTION OF PLAN
9.4 GENDER AND NUMBER
9.5 LEGAL ACTION
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
9.7 BONDING
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
9.9 INSURER'S PROTECTIVE CLAUSE
9.10 RECEIPT AND RELEASE FOR PAYMENTS
9.11 ACTION BY THE EMPLOYER
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
9.13 HEADINGS
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
9.15 UNIFORMITY
<PAGE>
FRONTEER DIRECTORY COMPANY, INC.
401(K) PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this day of
, 19 , by and between Fronteer Directory Company, Inc. (herein referred
to as the "Employer") and Dennis Olson, Marlow Lindblom and Roland Haux (herein
referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer desires to recognize the contribution made to its
successful operation by its employees and to reward such contribution by means
of a 401(k) Profit Sharing Plan for those employees who shall qualify as
Participants hereunder;
NOW, THEREFORE, effective April 1, 1991, (hereinafter called the
"Effective Date"), the Employer hereby establishes a 401(k) Profit Sharing Plan
and creates this trust (which plan and trust are hereinafter called the "Plan")
for the exclusive benefit of the Participants and their Beneficiaries, and the
Trustee hereby accepts the Plan on the following terms:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.2 "Administrator" means the person designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means the Employer and any corporation which
is a member of a controlled group of corporations (as defined in Code Section
414(b)) which includes the Employer; any trade or business (whether or not
incorporated) which is under common control (as defined in Code Section 414(c))
with the Employer; any organization (whether or not incorporated) which is a
member of an affiliated service group (as defined in Code Section 414(m)) which
includes the Employer; and any other entity required to be aggregated with the
Employer pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means September 30th.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as
amended or replaced from time to time.
1.8 "Compensation" with respect to any Participant means total
compensation paid by the Employer for a Plan Year, excluding compensation paid
as bonuses. Amounts contributed by the Employer under the within Plan, except
for an Employee's Compensation that is deferred pursuant to Section 4.2, and any
non-taxable fringe benefits shall not be considered as Compensation.
For purposes of this Section, the determination of Compensation shall
be made by including salary reduction contributions made on behalf of an
Employee to a plan maintained under Code Section 125.
For a Participant's initial year of participation, Compensation shall
be recognized for the entire Plan Year.
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d). In applying this limitation, the family group of a Highly
Compensated Participant who is subject to the Family Member aggregation rules of
Code Section 414(q)(6) because such Participant is either a "five percent owner"
of the Employer or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as a single
Participant, except that for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants who have not attained
age nineteen (19) before the close of the year. If, as a result of the
application of such rules the adjusted $200,000 limitation is exceeded, then the
limitation shall be prorated among the affected Family Members in proportion to
each such Family Member's Compensation prior to the application of this
limitation.
1.9 "Contract" or "Policy" means a life insurance policy or annuity
contract (group or individual) issued by the insurer as elected.
1.10 "Deferred Compensation" with respect to any Participant means that
portion of the Participant's total Compensation which has been contributed to
the Plan in accordance with the Participant's deferral election pursuant to
Section 4.2.
1.11 "Early Retirement Date" means the first day of the month (prior to
the Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55 and has completed at least 6
years of service with the Employer (Early Retirement Age). A Participant shall
become fully vested upon satisfying this requirement if still employed at his
Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.12 "Elective Contribution" means the Employer's contributions to the
Plan that are made pursuant to the Participant's deferral election provided in
Section 4.2. In addition, any Employer Qualified Non-Elective Contribution made
pursuant to Section 4.6 shall be considered an Elective Contribution for
purposes of the Plan. Any such contributions deemed to be Elective Contributions
shall be subject to the requirements of Sections 4.2(b) and 4.2(c) and shall
further be required to satisfy the discrimination requirements of Regulation
1.401(k)-1(b)(3), the provisions of which are specifically incorporated herein
by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties, unless such agreement
expressly provides for such coverage in this Plan, will not be eligible to
participate in this Plan.
Employees of Affiliated Employers shall not be eligible to participate
in this Plan unless such Affiliated Employers have specifically adopted this
Plan in writing.
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.15 "Employer" means Fronteer Directory Company, Inc. and any
successor which shall maintain this Plan; and any predecessor which
has maintained this Plan. The Employer is a corporation, with
principal offices in the State of North Dakota.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of the aggregate amount of the Employer matching contributions
made pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions shall be treated as an
"annual addition" pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b).
1.19 "Family Member" means, with respect to an affected Participant,
such Participant's spouse, such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on October 1st of each year and ending the following September 30th.
1.22 "Forfeiture" means that portion of a Participant's
account that is not vested, and occurs on the earlier of:
(a) the distribution of the entire vested portion of
a Participant's account, or
(b) the last day of the Plan Year in which the
Participant incurs five (5) consecutive 1-year breaks in
service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4. In addition, the term Forfeiture shall also include amounts deemed
to be Forfeitures pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any reason.
1.24 "415 Compensation" means compensation as defined in
Section 4.9(d).
1.25 "414(s) Compensation" with respect to any Employee means his
Deferred Compensation plus "415 Compensation" paid during a Plan Year. The
amount of "414(s) Compensation" with respect to any Employee shall include
"414(s) Compensation" during the entire twelve (12) month period ending on the
last of such Plan Year.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including salary reduction contributions made on
behalf of an Employee to a plan maintained under Code Section 125.
"414(s) Compensation" in excess of $200,000 shall be
disregarded. Such amount shall be adjusted at the same time and in such manner
as permitted under Code Section 415(d).
1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determi-
nation year" or "look-back year" were "five percent
owners" as defined in Section 1.32(c).
(b) Employees who received "415 Compensation"
during the "look-back year" from the Employer in excess
of $75,000.
(c) Employees who received "415 Compensation" during
the "look-back year" from the Employer in excess of $50,000
and were in the Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were
officers of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) and
received "415 Compensation" during the "look-back year" from
the Employer greater than 50 percent of the limit in effect
under Code Section 415(b)(1)(A) for any such Plan Year. The
number of officers shall be limited to the lesser of (i) 50
employees; or (ii) the greater of 3 employees or 10 percent of
all employees. For the purpose of determining the number of
officers, Employees described in Section 1.54(a), (b), (c) and
(d) shall be excluded, but such Employees shall still be
considered for the purpose of identifying the particular
Employees who are officers. If the Employer does not have at
least one officer whose annual "415 Compensation" is in excess
of 50 percent of the Code Section 415(b)(1)(A) limit, then the
highest paid officer of the Employer will be treated as a
Highly Compensated Employee.
(e) Employees who are in the group consisting of the
100 Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b), (c) or (d)
above when these paragraphs are modified to substitute
"determination year" for "look-back year".
The "determination year" shall be the Plan Year for which
testing is being performed, and the "look-back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions
made pursuant to a salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason of the
application of Code Section 403(b). Additionally, the dollar threshold amounts
specified in (b) and (c) above shall be adjusted at such time and in such manner
as is provided in Regulations. In the case of such an adjustment, the dollar
limits which shall be applied are those for the calendar year in which the
"determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, all Affiliated Employers shall be taken into account
as a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year".
1.27 "Highly Compensated Former Employee" means a former Employee who
had a separation year prior to the "determination year" and was a Highly
Compensated Employee in the year of separation from service or in any
"determination year" after attaining age 55. Notwithstanding the foregoing, an
Employee who separated from service prior to 1987 will be treated as a Highly
Compensated Former Employee only if during the separation year (or year
preceding the separation year) or any year after the Employee attains age 55 (or
the last year ending before the Employee's 55th birthday), the Employee either
received "415 Compensation" in excess of $50,000 or was a "five percent owner".
For purposes of this Section, "determination year", "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.26. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of
Service are required to be credited to an Employee on account of any single
continuous period during which the Employee performs no duties (whether or not
such period occurs in a single computation period); (ii) an hour for which an
Employee is directly or indirectly paid, or entitled to payment, on account of a
period during which no duties are performed is not required to be credited to
the Employee if such payment is made or due under a plan maintained solely for
the purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be
made by or due from the Employer regardless of whether such payment is made by
or due from the Employer directly, or indirectly through, among others, a trust
fund, or insurer, to which the Employer contributes or pays premiums and
regardless of whether contributions made or due to the trust fund, insurer, or
other entity are for the benefit of particular Employees or are on behalf of a
group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of
determining a Year of Service, a year of participation for purposes of accrued
benefits, a 1-Year Break in Service, and employment commencement date (or
reemployment commencement date). In addition, Hours of Service will be credited
for employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income allocable to "excess amounts" which
shall equal the sum of the allocable gain or loss for the "applicable
computation period" and the allocable gain or loss for the period between the
end of the "applicable computation period" and the date of distribution ("gap
period"). The income allocable to "excess amounts" for the "applicable
computation period" and the "gap period" is calculated separately and is
determined by multiplying the income for the "applicable computation period" or
the "gap period" by a fraction. The numerator of the fraction is the "excess
amount" for the "applicable computation period". The denominator of the fraction
is the total "account balance" attributable to "Employer contributions" as of
the end of the "applicable computation period" or the "gap period", reduced by
the gain allocable to such total amount for the "applicable computation period"
or the "gap period" and increased by the loss allocable to such total amount for
the "applicable computation period" or the "gap period". The provisions of this
Section shall be applied:
(a) For purposes of Section 4.2(f), by substi-
tuting:
(1) "Excess Deferred Compensation" for "excess
amounts";
(2) "taxable year of the Participant" for
"applicable computation period";
(3) "Deferred Compensation" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(b) For purposes of Section 4.6(a), by substi-
tuting:
(1) "Excess Contributions" for "excess
amount";
(2) "Plan Year" for "applicable computation
period";
(3) "Elective Contributions" for "Employer
contributions"; and
(4) "Participant's Elective Account" for
"account balance".
(c) For purposes of Section 4.8(a), by sub-
stituting:
(1) "Excess Aggregate Contributions" for
"excess amounts";
(2) "Plan Year" for "applicable computation
period";
(3) "Employer matching contributions made
pursuant to Section 4.1(b) and any qualified
non-elective contributions or elective
deferrals taken into account pursuant to
Section 4.7(c)" for "Employer
contributions"; and
(4) "Participant's Account" for "account
balance".
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable Income for the "gap
period". Under such "safe harbor method", allocable Income for the "gap period"
shall be deemed to equal ten percent (10%) of the Income allocable to "excess
amounts" for the "applicable computation period" multiplied by the number of
calendar months in the "gap period". For purposes of determining the number of
calendar months in the "gap period", a distribution occurring on or before the
fifteenth day of the month shall be treated as having been made on the last day
of the preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next subsequent
month.
Income allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the Participant
shall be calculated from the first day of the taxable year of the Participant to
the date on which the distribution is made pursuant to either the "fractional
method" or the "safe harbor method".
1.31 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term
is defined within the meaning of the Regulations under Code
Section 416) having annual "415 Compensation" greater than 50
percent of the amount in effect under Code Section
415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual
"415 Compensation" from the Employer for a Plan Year greater
than the dollar limitation in effect under Code Section
415(c)(1)(A) for the calendar year in which such Plan Year
ends and owning (or considered as owning within the meaning of
Code Section 318) both more than one-half percent interest and
the largest interests in the Employer.
(c) a "five percent owner" of the Employer.
"Five percent owner" means any person who owns (or is
considered as owning within the meaning of Code Section 318)
more than five percent (5%) of the outstanding stock of the
Employer or stock possessing more than five percent (5%) of
the total combined voting power of all stock of the Employer
or, in the case of an unincorporated business, any person who
owns more than five percent (5%) of the capital or profits
interest in the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as
separate employers.
(d) a "one percent owner" of the Employer
having an annual "415 Compensation" from the Employer of more
than $150,000. "One percent owner" means any person who owns
(or is considered as owning within the meaning of Code Section
318) more than one percent (1%) of the outstanding stock of
the Employer or stock possessing more than one percent (1%) of
the total combined voting power of all stock of the Employer
or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits
interest in the Employer. In determining percentage ownership
hereunder, employers that would otherwise be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be treated as
separate employers. However, in determining whether an
individual has "415 Compensation" of more than $150,000, "415
Compensation" from each employer required to be aggregated
under Code Sections 414(b), (c), (m) and (o) shall be taken
into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions
made pursuant to a salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason of the
application of Code Section 403(b).
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient if:
(a) such employee is covered by a money purchase
pension plan providing:
(1) a non-integrated employer contribution rate of at
least 10% of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant
to a salary reduction agreement which are excludable
from the employee's gross income under Code Sections
125, 402(a)(8), 402(h) or 403(b);
(2) immediate participation; and
(3) full and immediate vesting.
(b) Leased Employees do not constitute more than 20%
of the recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to
the Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Date" means the first day of the month
coinciding with or next following the Participant's Normal Retirement Age (65th
birthday, or the 5th anniversary of joining the Plan, if later). A Participant
shall become fully Vested in his Account upon attaining his Normal Retirement
Age.
1.39 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a l-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan
Years beginning after December 31, 1984, an absence from work for any period by
reason of the Employee's pregnancy, birth of the Employee's child, placement of
a child with the Employee in connection with the adoption of such child, or any
absence for the purpose of caring for such child for a period immediately
following such birth or placement. For this purpose, Hours of Service shall be
credited for the computation period in which the absence from work begins, only
if credit therefore is necessary to prevent the Employee from incurring a 1-Year
Break in Service, or, in any other case, in the immediately following
computation period. The Hours of Service credited for a "maternity or paternity
leave of absence" shall be those which would normally have been credited but for
such absence, or, in any case in which the Administrator is unable to determine
such hours normally credited, eight (8) Hours of Service per day. The total
Hours of Service required to be credited for a "maternity or paternity leave of
absence" shall not exceed 501.
1.40 "Participant" means any Eligible Employee who participates in the
Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.41 "Participant's Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Non-Elective
Contributions.
1.42 "Participant's Combined Account" means the total aggregate amount
of each Participant's Elective Account and Participant's Account.
1.43 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.44 "Plan" means this instrument, including all amendments thereto.
1.45 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on October 1st of each year and ending the following September 30th,
except for the first Plan Year which commenced April 1st.
1.46 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are
made pursuant to Section 4.8 (g) which are used to satisfy the "Actual
Contribution Percentage" tests shall be considered Qualified Non-Elective
Contributions and be subject to the provisions of Sections 4.2(b) and 4.2(c).
1.47 "Regulation" means the Income Tax Regulations as promulgated by
the Secretary of the Treasury or his delegate, and as amended from time to time.
1.48 "Retired Participant" means a person who has been a Participant,
but who has become entitled to retirement benefits under the Plan.
1.49 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.50 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.51 "Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other than by death, Total
and Permanent Disability or retirement.
1.52 "Top Heavy Plan" means a plan described in Section 2.2(a)
1.53 "Top Heavy Plan Year" means the Plan Year during which
the Plan is a Top Heavy Plan.
1.54 "Top Paid Group" means the top 20 percent of Employees who
performed services for the Employer during the applicable year, ranked according
to the amount of "415 Compensation" (determined for this purpose in accordance
with Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Section 414(n)(2) and 414(o)(2) shall be considered
Employees unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and are not covered in any qualified plan maintained by the
Employer. Employees who are non-resident aliens and who received no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer
constituting United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, for the purpose of
determining the number of active Employees in any year, the following additional
Employees shall also be excluded; however, following additional Employees shall
such Employees shall still be considered for the purpose of identifying the
particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of
service;
(b) Employees who normally work less than 17
1/2 hours per week;
(c) Employees who normally work less than six
(6) months during a year; and
(d) Employees who have not yet attained age
21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on
a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
1.55 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing his usual and customary
employment with the Employer. The disability of a Participant shall be
determined by a licensed physician chosen by the Administrator. The
determination shall be applied uniformly to all Participants.
1.56 "Trustee" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.57 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.58 "Vested" means the nonforfeitable portion of any account
maintained on behalf of a Participant.
1.59 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the Employee first
performs an Hour of Service. The participation computation period beginning
after a 1-Year Break in Service shall be measured from the date on which an
Employee again performs an Hour of Service. The participation computation period
shall shift to the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service. An Employee who is credited
with the required Hours of Service in both the initial computation period (or
the computation period beginning after a 1-Year Break in Service) and the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service, shall be credited with two (2) Years of Service
for purposes of eligibility to participate.
For vesting purposes, the computation period shall be the Plan
Year, including periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the
Plan Year.
Years of Service with any Affiliated Employer shall be
recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (1) the Present
Value of Accrued Benefits of Key Employees and (2) the sum of
the Aggregate Accounts of Key Employees under this Plan and
all plans of an Aggregation Group, exceeds sixty percent (60%)
of the Present Value-of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this Plan and
all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for
any Plan Year, but such Participant was a Key Employee for any
prior Plan Year, such Participant's Present Value of Accrued
Benefit and/or Aggregate Account balance shall not be taken
into account for purposes of determining whether this Plan is
a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy
Group). In addition, if a Participant or Former Participant
has not performed any services for any Employer maintaining
the Plan at any time during the five year period ending on the
Determination Date, any accrued benefit for such Participant
or Former Participant shall not be taken into account for the
purposes of determining whether this Plan is a Top Heavy or
Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any
Plan Year in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the
sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds ninety percent
(90%) of the Present Value of Accrued Benefits and the
Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of
the most recent valuation occurring within a twelve
(12) month period ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the
amount of any contributions actually made after the
valuation date but due on or before the Determination
Date, except for the first Plan Year when such
adjustment shall also reflect the amount of any
contributions made after the Determination Date that
are allocated as of a date in that first Plan Year;
(3) any Plan distributions made within the Plan Year
that includes the Determination Date or within the
four (4) preceding Plan Years. However, in the case
of distributions made after the valuation date and
prior to the Determination Date, such distributions
are not included as distributions for top heavy
purposes to the extent that such distributions are
already included in the Participant's Aggregate
Account balance as of the valuation date.
Notwithstanding anything herein to the contrary, all
distributions, including distributions made prior to
January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have
been required to be included in an Aggregation Group,
will be counted. Further, distributions from the Plan
(including the cash value of life insurance policies)
of a Participant's account balance because of death
shall be treated as a distribution for the purposes
of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax
deductible qualified voluntary employee contributions
shall not be considered to be a part of the
Participant's Aggregate Account balance.
(5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both initiated
by the Employee and made from a plan maintained by
one employer to a plan maintained by another
employer), if this Plan provides the rollovers or
plan-to-plan transfers, it shall always consider such
rollovers or plan-to-plan transfers as a distribution
for the purposes of this Section.
(6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated by
the Employee or made to a plan maintained by the same
employer), if this Plan provides the rollover or
plan-to-plan transfer, it shall not be counted as a
distribution for purposes of this Section. If this
Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of the
Participant's Aggregate Account balance, irrespective
of the date on which such rollover or plan-to-plan
transfer is accepted.
(7) For the purposes of determining whether two
employers are to be treated as the same employer in
(5) and (6) above, all employers aggregated under
Code Section 414(b), (c), (m) and (o) are treated as
the same employer.
(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
(1) Required Aggregation Group: In determining a
Required Aggregation Group hereunder, each plan of
the Employer in which a Key Employee is a participant
in the Plan Year containing the Determination Date or
any of the four preceding Plan Years, and each other
plan of the Employer which enables any plan in which
a Key Employee participates to meet the requirements
of Code Sections 401(a)(4) or 410, will be required
to aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each
plan in the group will be considered a Top Heavy Plan
if the Required Aggregation Group is a Top Heavy
Group. No plan in the Required Aggregation Group will
be considered a Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may
also include any other plan not required to be
included in the Required Aggregation Group, provided
the resulting group, taken as a whole, would continue
to satisfy the provisions of Code Sections 401(a)(4)
and 410. Such group shall be known as a Permissive
Aggregation Group.
In the case of a Permissive Aggregation Group, only a
plan that is part of the Required Aggregation Group
will be considered a Top Heavy Plan if the Permissive
Aggregation Group is a Top Heavy Group. No plan in
the Permissive Aggregation Group will be considered a
Top Heavy Plan if the Permissive Aggregation Group is
not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar
year shall be aggregated in order to determine
whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated
plan of the Employer if it was maintained within the
last five (5) years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan Year, the
last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee, shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of
the Present Value of Accrued Benefit shall be determined as of the most
recent valuation date that falls within or ends with the 12-month
period ending on the Determination Date except as provided in Code
Section 416 and the Regulations thereunder for the first and second
plan years of a defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in
which, as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key
Employees under all defined benefit plans included
in the group, and
(2) the Aggregate Accounts of Key Employees under
all defined contribution plans included in the
group,
exceeds sixty percent (60%) of a similar sum deter-
mined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and
method", i.e., it shall determine whether the Plan has a short run need
for liquidity (e.g., to pay benefits) or whether liquidity is a long
run goal and investment growth (and stability of same) is a more
current need, or shall appoint a qualified person to do so. The
Employer or its delegate shall communicate such needs and goals to the
Trustee, who shall coordinate such Plan needs with its investment
policy. The communication of such a "funding policy and method" shall
not, however, constitute a directive to the Trustee as to investment of
the Trust Funds. Such "funding policy and method" shall be consistent
with the objectives of this Plan and with the requirements of Title I
of the Act.
(c) The Employer shall periodically review the performance of
any Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or-be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this position.
If the Employer does not appoint an Administrator, the Employer will function as
the Administrator.
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of the Plan; provided, however, that any procedure, discretionary
act, interpretation or construction shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) the discretion to determine all questions
relating to the eligibility of Employees to participate or
remain a Participant hereunder and to receive benefits under
the Plan;
(b) to compute, certify, and direct the Trustee with
respect to the amount and the kind of benefits to which any
Participant shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect
to all non-discretionary or otherwise directed disburse-
ments from the Trust;
(d) to maintain all necessary records for the admin-
istration of the Plan;
(e) to interpret the provisions of the Plan and to
make and publish such rules for regulation of the Plan as
are consistent with the terms hereof;
(f) to determine the size and type of any Contract to
be purchased from any insurer, and to designate the insurer
from which such Contract shall be purchased;
(g) to compute and certify to the Employer and to
the Trustee from time to time the sums of money necessary
or desirable to be contributed to the Plan;
(h) to consult with the Employer and the Trustee
regarding the short and long-term liquidity the Plan in order
that the Trustee can exercise any investment discretion in a
manner designed to accomplish specific objectives;
(i) to prepare and implement a procedure to notify
Eligible Employees that they may elect to have a portion of
their Compensation deferred or paid to them in cash;
(j) to assist any Participant regarding his rights,
benefits, or elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the
Employer shall supply full and timely information to the Administrator on all
matters relating to the Compensation of all Participants, their Hours of
Service, their Years of Service, their retirement, death, disability, or
termination of employment, and such other pertinent facts as the Administrator
may require; and the Administrator shall advise the Trustee of such of the
foregoing facts as may be pertinent to the Trustee's duties under the Plan. The
Administrator may rely upon such information as is supplied by the Employer and
shall have no duty or responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust
Fund unless paid by the Employer. Such expenses shall include any expenses
incident to the functioning of the Administrator, including, but not limited to,
fees of accountants, counsel, and other specialists and their agents, and other
costs of administering the Plan. Until paid, the expenses shall constitute a
liability of the Trust Fund. However, the Employer may reimburse the Trust Fund
for any administration expense incurred. Any administration expense paid to the
Trust Fund as a reimbursement shall not be considered an Employer contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with the
Administrator on forms supplied by the Employer. Written notice of the
disposition of a claim shall be furnished to the claimant within 90 days after
the application is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in the notice in language calculated to
be understood by the claimant, pertinent provisions of the Plan shall be cited,
and, where appropriate, an explanation as to how the claimant can perfect the
claim will be provided. In addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who
has been denied a benefit by a decision of the Administrator pursuant to Section
2.12 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which may
be obtained from the Administrator) a request for a hearing. Such request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court reporter to
attend the hearing. A final decision as to the allowance of the claim shall be
made by the Administrator within 60 days of receipt of the appeal (unless there
has been an extension of 60 days due to special circumstances, provided the
delay and the special circumstances occasioning it are communicated to the
claimant within the 60 day period). Such communication shall be written in a
manner calculated to be understood by the claimant and shall include specific
reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who was employed on April 1, 1991 shall
be eligible to participate and shall enter the Plan as of the first day of such
Plan Year. Any other Eligible Employee who has completed one (1) Year of Service
and has attained age 21 shall be eligible to participate hereunder as of the
date he has satisfied such requirements. The Employer shall give each
prospective Eligible Employee written notice of his eligibility to participate
in the Plan prior to the close of the Plan Year in which he first becomes an
Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible
Employee shall make application to the Employer for participation in the Plan
and agree to the terms hereof. Upon the acceptance of any benefits under this
Plan, such Employee shall automatically be deemed to have made application and
shall be bound by the terms and conditions of the Plan and all amendments
hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as
of the earlier of the first day of the Plan Year or the first day of the seventh
month of such Plan Year coinciding with or next following the date such Employee
met the eligibility requirements of Section 3.1, provided said Employee was
still employed as of such date (or if not employed on such date, as of the date
of rehire if a 1-Year break in Service has not occurred).
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each
Employee for participation in the Plan based upon information furnished by the
Employer. Such determination shall be conclusive and binding upon all persons,
as long as the same is made pursuant to the Plan and the Act. Such determination
shall be subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible
Employee, such Former Participant shall continue to vest in
his interest in the Plan for each Year of Service completed
while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed
pursuant to the terms of the Plan. Additionally, his interest
in the Plan shall continue to share in the earnings of the
Trust Fund.
(b) In the event a Participant is no longer a member
of an eligible class of Employees and becomes ineligible to
participate but has not incurred a 1-Year Break in Service,
such Employee will participate immediately upon returning to
an eligible class of Employees. If such Participant incurs a
1-Year Break in Service, eligibility will be determined under
the break in service rules of the Plan.
(c) In the event an Employee who is not a member of
an eligible class of Employees becomes a member of an eligible
class, such Employee will participate immediately if such
Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a
Participant.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery of
such incorrect inclusion is not made until after a contribution for the year has
been made, the Employer shall not be entitled to recover the contribution made
with respect to the ineligible person regardless of whether or not a deduction
is allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer,
elect voluntarily not to participate in the Plan. The election not to
participate must be communicated to the Employer, in writing, at least thirty
(30) days before the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction
elections of all Participants made pursuant to Section 4.2(a),
which amount shall be deemed an Employer's Elective
Contribution.
(b) On behalf of each Participant who is eligible to
share in matching contributions for the Plan Year, a
discretionary matching contribution equal to a percentage of
each such Participant's Deferred Compensation, the exact
percentage to be determined each year by the Employer, which
amount shall be deemed an Employer's Non-Elective
Contribution.
Except, however, in applying the matching
percentage specified above, only salary reductions up to
$312.00 shall be considered.
(c) Notwithstanding the foregoing, however, the
Employer's contributions for any Plan Year shall not exceed
the maximum amount allowable as a deduction to the Employer
under the provisions of Code Section 404. All contributions by
the Employer shall be made in cash or in such property as is
acceptable to the Trustee.
(d) Except, however, to the extent necessary to
provide the top heavy minimum allocations, the Employer shall
make a contribution even if it exceeds the amount which is
deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer his
Compensation which would have been received in the Plan Year,
but for the deferral election, by up to 15%. A deferral
election (or modification of an earlier election) may not be
made with respect to Compensation which is currently available
on or before the date the Participant executed such election
or, if later, the latest of the date the Employer adopts this
cash or deferred arrangement, or the date such arrangement
first became effective.
The amount by which Compensation is reduced
shall be that Participant's Deferred Compensation and be
treated as an Employer Elective Contribution and allocated to
that Participant's Elective Account.
(b) The balance in each Participant's Elective
Account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(c) Amounts held in the Participant's Elective
Account may not be distributable earlier than:
(1) a Participant's termination of employment,
Total and Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the existence
at the time of Plan termination of another defined
contribution plan (other than an employee stock
ownership plan as defined in Code Section 4975(e)(7))
or the establishment of a successor defined
contribution plan (other than an employee stock
ownership plan as defined in Code Section 4975(e)(7))
by the Employer or an Affiliated Employer within the
period ending twelve months after distribution of all
assets from the Plan maintained by the Employer;
(4) the date of disposition by the Employer to an
entity that is not an Affiliated Employer of
substantially all of the assets (within the meaning
of Code Section 409(d)(2)) used in a trade or
business of such corporation if such corporation
continues to maintain this Plan after the disposition
with respect to a Participant who continues
employment with the corporation acquiring such
assets;
(5) the date of disposition by the Employer or an
Affiliated Employer who maintains the Plan of its
interest in a subsidiary (within the meaning of Code
Section 409(d)(3)) to an entity which is not an
Affiliated Employer but only with respect to a
Participant who continues employment with such
subsidiary; or
(6) the proven financial hardship of a Participant,
subject to the limitations of Section 6.10.
(d) In any Plan Year, a Participant's Deferred
Compensation made under this Plan and all other plans,
contracts or arrangements of the Employer maintaining this
Plan shall not exceed, during any taxable year, the limitation
imposed by Code Section 402(g), as in effect at the beginning
of such taxable year. This dollar limitation shall be adjusted
annually pursuant to the method provided in Code Section
415(d) in accordance with Regulations.
(e) In the event a Participant has received a
hardship distribution from his Participant's Elective Account
pursuant to Section 6.10 or pursuant to Regulation
1.401(k)-1(d)(2)(iii)(B) from any other plan maintained by the
Employer, then such Participant shall not be permitted to
elect to have Deferred Compensation contributed to the Plan on
his behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar
limitation under Code Section 402(g) shall be reduced, with
respect to the Participant's taxable year following the
taxable year in which the hardship distribution was made, by
the amount of such Participant's Deferred Compensation, if
any, pursuant to this Plan (and any other plan maintained by
the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under
this Plan together with any elective deferrals (as defined in
Regulation 1.402(g)-1(b)) under another qualified cash or
deferred arrangement (as defined in Code Section 401(k)), a
simplified employee pension (as defined in Code Section
408(k)), a salary reduction arrangement (within the meaning of
Code Section 3121(a) (5)(D)), a deferred compensation plan
under Code Section 457, or a trust described in Code Section
501(c)(18) cumulatively exceed the limitation imposed by Code
Section 402(g) (as adjusted annually in accordance with the
method provided in Code Section 415(d) pursuant to
Regulations) for such Participant's taxable year; the
Participant may, not later than March 1 following the close of
his taxable year, notify the Administrator in writing of such
excess and request that his Deferred Compensation under this
Plan be reduced by an amount specified by the Participant. In
such event, the Administrator may direct the Trustee to
distribute such excess amount (and any Income allocable to
such excess amount) to the Participant not later than the
first April 15th following the close of the Participant's
taxable year. Any distribution of less than the entire amount
of Excess Deferred Compensation and Income shall be treated as
a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the
Participant's Deferred Compensation under the Plan for the
taxable year. Any distribution on or before the last day of
the Participant's taxable year must satisfy each of the
following conditions:
(1) the Participant shall designate the distribu-
tion as Excess Deferred Compensation;
(2) the distribution must be made after the date on
which the Plan received the Excess Deferred Compen-
sation; and
(3) the Plan must designate the distribution as a
distribution of Excess Deferred Compensation.
(g) Notwithstanding Section 4.2(f) above, a
Participant's Excess Deferred Compensation shall be reduced,
but not below zero, by any distribution of Excess
Contributions pursuant to Section 4.6(a) for the Plan Year
beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date
when the Participant shall be entitled to receive benefits,
the fair market value of the Participant's Elective Account
shall be used to provide additional benefits to the
Participant or his Beneficiary.
(i) Employer Elective Contributions made pursuant to
this Section may be segregated into a separate account for
each Participant in a federally insured savings account,
certificate of deposit in a bank or savings and loan
association, money market certificate, or other short-term
debt security acceptable to the Trustee until such time as the
allocations pursuant to Section 4.4 have been made.
(j) The Employer and the Administrator shall
implement the salary reduction elections provided for herein
in accordance with the following:
(1) A Participant may commence making elective
deferrals to the Plan only after first satisfying the
eligibility and participation requirements specified
in Article III. However, the Participant must make
his initial salary deferral election within a
reasonable time, not to exceed thirty (30) days,
after entering the Plan pursuant to Section 3.3. If
the Participant fails to make an initial salary
deferral election within such time, then such
Participant may thereafter make an election in
accordance with the rules governing modifications.
The Participant shall make such an election by
entering into a written salary reduction agreement
with the Employer and filing such agreement with the
Administrator. Such election shall initially be
effective beginning with the pay period following the
acceptance of the salary reduction agreement by the
Administrator, shall not have retroactive effect and
shall remain in force until revoked.
(2) A Participant may modify a prior election during
the Plan Year and concurrently make a new election by
filing a written notice with the Administrator within
a reasonable time before the pay period for which
such modification is to be effective. However,
modifications to a salary deferral election shall
only be permitted semi-annually, during election
periods established by the Administrator prior to the
first day of a Plan Year and the first day of the
seventh month of a Plan Year. Any modification shall
not have retroactive effect and shall remain in force
until revoked.
(3) A Participant may elect to prospectively revoke
his salary reduction agreement in its entirety at any
time during the Plan Year by providing the
Administrator with thirty (30) days written notice of
such revocation (or upon such shorter notice period
as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning
of the first pay period coincident with or next
following the expiration of the notice period.
Furthermore, the termination of the Participant's
employment, or the cessation of participation for any
reason, shall be deemed to revoke any salary
reduction agreement then in effect, effective
immediately following the close of the pay period
within which such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its
contribution to the Plan for each Plan Year within the time prescribed by law,
including extensions of time, for the filing of the Employer's federal income
tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated through
payroll deductions shall be paid to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from the Employer's general
assets, but in any event within ninety (90) days from the date on which such
amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated herein
by reference. Furthermore, any additional Employer contributions which are
allocable to the Participant's Elective Account for a Plan Year shall be paid to
the Plan no later than the twelve-month period immediately following the close
of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION AND EARNINGS
(a) The Administrator shall establish and maintain an
account in the name of each Participant to which the
Administrator shall credit as of each Anniversary Date all
amounts allocated to each such Participant as set forth
herein.
(b) The Employer shall provide the Administrator with
all information required by the Administrator to make a proper
allocation of the Employer's contributions for each Plan Year.
Within a reasonable period of time after the date of receipt
by the Administrator of such information, the Administrator
shall allocate such contribution as follows:
(1) With respect to the Employer's Elective
Contribution made pursuant to Section 4.1(a), to each
Participant's Elective Account in an amount equal to
each such Participant's Deferred Compensation
for the year.
(2) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(b), to each
Participant's Account in accordance with
Section 4.1(b).
Only Participants who have completed a Year of
Service during the Plan Year and are actively
employed on the last day of the Plan Year shall be
eligible to share in the matching contribution for
the year.
(c) As of each Anniversary Date any amounts which
became Forfeitures since the last Anniversary Date shall first
be made available to reinstate previously forfeited account
balances of Former Participants, if any, in accordance with
Section 6.4(e). The remaining Forfeitures, if any, shall be
used to reduce the contribution of the Employer hereunder for
the Plan Year in which such Forfeitures occur.
(d) With respect to the first Plan Year ending
September 30th, Participants shall not be required to fulfill
the service requirement specified herein to share in any
Employer contribution. However, Participants must continue to
be actively employed on the last day of such Plan Year to the
extent provided herein.
(e) For any Top Heavy Plan Year, Non-Key Employees
not otherwise eligible to share in the allocation of
contributions as provided above, shall receive the minimum
allocation provided for in Section 4.4(h) if eligible pursuant
to the provisions of Section 4.4(j).
(f) Participants who are not actively employed on the
last day of the Plan Year due to Retirement (Early, Normal or
Late), Total and Permanent Disability or death shall share in
the allocation of contributions for that Plan Year only if
otherwise eligible in accordance with this Section.
(g) As of each Anniversary Date or other valuation
date, before allocation of Employer contributions, any
earnings or losses (net appreciation or net depreciation) of
the Trust Fund shall be allocated in the same proportion that
each Participant's and Former Participant's nonsegregated
accounts bear-to the total of all Participants' and Former
Participants' nonsegregated accounts as of such date.
Participants' transfers from other qualified
plans deposited in the general Trust Fund after a valuation
date shall not share in any earnings and losses (net
appreciation or net depreciation) of the Trust Fund for such
period. Each segregated account maintained on behalf of a
Participant shall be credited or charged with its separate
earnings and losses.
(h) Minimum Allocations Required for Top Heavy Plan
Years: Notwithstanding the foregoing, for any Top Heavy Plan
Year, the sum of the Employer's contributions allocated to the
Participant's Combined Account of each Non-Key Employee shall
be equal to at least three percent (3%) of such Non-Key
Employee's "415 Compensation" (reduced by contributions and
forfeitures, if any, allocated to each Non-Key Employee in any
defined contribution plan included with this plan in a
Required Aggregation Group). However, if (i) the sum of the
Employer's contributions allocated to the Participant's
Combined Account of each Key Employee for such Top Heavy Plan
Year is less than three percent (3%) of each Key Employee's
"415 Compensation" and (ii) this Plan is not required to be
included in an Aggregation Group to enable a defined benefit
plan to meet the requirements of Code Section 401(a)(4) or
410, the sum of the Employer's contributions allocated to the
Participant's Combined Account of each Non-Key Employee shall
be equal to the largest percentage allocated to the
Participant's Combined Account of any Key Employee. However,
in determining whether a Non-Key Employee has received the
required minimum allocation, such Non-Key Employee's Deferred
Compensation and matching contributions needed to satisfy the
"Actual Contribution Percentage" tests pursuant to Section
4.7(a) shall not be taken into account.
However, no such minimum allocation shall be
required in this Plan for any Non-Key Employee who
participates in another defined contribution plan subject to
Code Section 412 providing such benefits included with this
Plan in a Required Aggregation Group.
(i) For purposes of the minimum allocations set forth
above, the percentage allocated to the Participant's Combined
Account of any Key Employee shall be equal to the ratio of the
sum of the Employer's contributions allocated on behalf of
such Key Employee divided by the "415 Compensation" for such
Key Employee.
(j) For any Top Heavy Plan Year, the minimum
allocations set forth above shall be allocated to the
Participant's Combined Account of all Non-Key Employees who
are Participants and who are employed by the Employer on the
last day of the Plan Year, including Non-Key Employees who
have (1) failed to complete a Year of Service; and (2)
declined to make mandatory contributions (if required) or, in
the case of a cash or deferred arrangement, elective
contributions to the Plan.
(k) For the purposes of this Section, "415
Compensation" shall be limited to $200,000 (unless adjusted in
such manner as permitted under Code Section 415(d))
(l) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during
the Plan Year shall share in the salary reduction
contributions made by the Employer for the year of termination
without regard to the Hours of Service credited.
(m) If a Former Participant is reemployed after five
(5) consecutive 1-Year Breaks in Service, then separate
accounts shall be maintained as follows:
(1) one account for nonforfeitable benefits attrib-
utable to pre-break service; and
(2) one account representing his status in the Plan
attributable to post-break service.
(n) Notwithstanding anything to the contrary, for
Plan Years beginning after December 31, 1989, if this is a
Plan that would otherwise fail to meet the requirements of
Code Sections 401(a)(26), 410(b)(1) or 410(b)(2)(A)(i) and the
Regulations thereunder because Employer contributions have not
been allocated to a sufficient number or percentage of
Participants for a Plan Year, then the following rules shall
apply:
(1) The group of Participants eligible to share in
the Employer's contribution for the Plan Year shall
be expanded to include the minimum number of
Participants who would not otherwise be eligible as
are necessary to satisfy the applicable test
specified above. The specific Participants who shall
become eligible under the terms of this paragraph
shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly
situated Participants, have completed the greatest
number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the
applicable test is still not satisfied, then the
group of Participants eligible to share in the
Employer's contribution for the Plan Year shall be
further expanded to include the minimum number of
Participants who are not actively employed on the
last day of the Plan Year as are necessary to satisfy
the applicable test. The specific Participants who
shall become eligible to share shall be those
Participants, when compared to similarly situated
Participants, who have completed the greatest number
of Hours of Service in the Plan Year before
terminating employment.
(3) Nothing in this Section shall permit the
reduction of a Participant's accrued benefit.
Therefore any amounts that have previously been
allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the
Employer shall make an additional contribution equal
to the amount such affected Participants would have
received had they been included in the allocations,
even if it exceeds the amount which would be
deductible under Code Section 404. Any adjustment to
the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the
last day of the Plan Year.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year,
the annual allocation derived from Employer Elective
Contributions to a Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than
the "Actual Deferral Percentage" of the Non-Highly
Compensated Participant group multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage"
for the Highly Compensated Participant group over the
"Actual Deferral Percentage" for the Non-Highly
Compensated Participant group shall not be more than
two percentage points. Additionally, the "Actual
Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual
Deferral Percentage" for the Non-Highly Compensated
Participant group multiplied by 2. The provisions of
Code Section 401(k)(3) and Regulation 1.401(k)-l(b)
are incorporated herein by reference.
However, in order to prevent the multiple use of the
alternative method described in (2) above and in Code
Section 401(m)(9)(A), any Highly Compensated
Participant eligible to make elective deferrals
pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions
under this Plan or under any other plan maintained by
the Employer or an Affiliated Employer shall have his
actual contribution ratio reduced pursuant to
Regulation 1.401(m)-2, the provisions of which are
incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral
Percentage" means, with respect to the Highly Compensated
Participant group and Non-Highly Compensated Participant group
for a Plan Year, the average of the ratios, calculated
separately for each Participant in such group, of the amount
of Employer Elective Contributions allocated to each
Participant's Elective Account for such Plan Year, to such
Participant's "414(s) Compensation" for such Plan Year. The
actual deferral ratio for each Participant and the "Actual
Deferral Percentage" for each group shall be calculated to the
nearest one-hundredth of one percent. Employer Elective
Contributions allocated to each Non-Highly Compensated
Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are
made under this Plan or any other plan maintained by the
Employer.
(c) For the purpose of determining the
actual deferral ratio of a Highly Compensated
Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because
such Participant is either a "five percent owner" of
the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415
Compensation" during the year, the following shall
apply:
(1) The combined actual deferral ratio for
the family group (which shall be treated as
one Highly Compensated Participant) shall be
determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of
all eligible Family Members (including
Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s)
Compensation", Family Members shall include
only the affected Employee's spouse and any
lineal descendants who have not attained age
19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect
to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then
in effect shall be deemed to be compliance
with this paragraph.
(2) The Employer Elective Contributions and
"414(s) Compensation" of all Family Members
shall be disregarded for purposes of
determining the "Actual Deferral Percentage"
of the Non-Highly Compensated Participant
group except to the extent taken into
account in paragraph (1) above.
(3) If a Participant is required to be
aggregated as a member of more than one
family group in a plan, all Participants who
are members of those family groups that
include the Participant are aggregated as
one family group in accordance with
paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and
4.6, a Highly Compensated Participant and a
Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election
pursuant to Section 4.2, whether or not such deferral
election was made or suspended pursuant to Section
4.2.
(e) For the purposes of this Section and
Code Sections 401(a)(4), 410(b) and 401(k), if two or
more plans which include cash or deferred
arrangements are considered one plan for the purposes
of Code Section 401(a)(4) or 410(b) (other than Code
Section 410(b)(2)(A)(ii)), the cash or deferred
arrangements included in such plans shall be treated
as one arrangement. In addition, two or more cash or
deferred arrangements may be considered as a single
arrangement for purposes of determining whether or
not such arrangements satisfy Code Sections
401(a)(4), 410(b) and 401(k). In such a case, the
cash or deferred arrangements included in such plans
and the plans including such arrangements shall be
treated as one arrangement and as one plan for
purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k). For Plan Years beginning after
December 31, 1989, plans may be aggregated under this
paragraph (e) only if they have the same plan year.
Notwithstanding the above, an
employee stock ownership plan described in Code
Section 4975(e)(7) may not be combined with this Plan
for purposes of determining whether the employee
stock ownership plan or this Plan satisfies this
Section and Code Sections 401(a)(4), 410(b) and
401(k).
(f) For the purposes of this Section, if a
Highly Compensated Participant is a Participant under
two or more cash or deferred arrangements (other than
a cash or deferred arrangement which is part of an
employee stock ownership plan as defined in Code
Section 4975(e)(7)) of the Employer or an Affiliated
Employer, all such cash or deferred arrangements
shall be treated as one cash or deferred arrangement
for the purpose of determining the actual deferral
ratio with respect to such Highly Compensated
Participant. However, if the cash or deferred
arrangements have different Plan Years, this
paragraph shall be applied by treating all cash or
deferred arrangements ending with or within the same
calendar year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's
Elective Contributions made pursuant to Section 4.4 do not satisfy one of the
tests set forth in Section 4.5(a), the Administrator shall adjust Excess
Contributions pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month
following the end of each Plan Year, the Highly Compensated
Participant having the highest actual deferral ratio shall
have his portion of Excess Contributions distributed to him
until one of the tests set forth in Section 4.5(a) is
satisfied, or until his actual deferral ratio equals the
actual deferral ratio of the Highly Compensated Participant
having the second highest actual deferral ratio. This process
shall continue until one of the tests set forth in Section
4.5(a) is satisfied. For each Highly Compensated Participant,
the amount of Excess Contributions is equal to the Elective
Contributions on behalf of such Highly Compensated Participant
(determined prior to the application of this paragraph) minus
the amount determined by multiplying the Highly Compensated
Participant's actual deferral ratio (determined after
application of this paragraph) by his "414(s) Compensation".
However, in determining the amount of Excess Contributions to
be distributed with respect to an affected Highly Compensated
Participant as determined herein, such amount shall be reduced
by any Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his taxable
year ending with or within such Plan Year.
(1) With respect to the distribution of Excess
Contributions pursuant to (a) above, such
distribution:
(i) may be postponed but not later than the
close of the Plan Year following the Plan
Year to which they are allocable;
(ii) shall be made first from unmatched
Deferred Compensation and, thereafter,
simultaneously from Deferred Compensation
which is matched and matching contributions
which relate to such Deferred Compensation.
However, any such matching contributions
which are not Vested shall be forfeited in
lieu of being distributed;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as
a distribution of Excess Contributions (and
Income).
(2) Any distribution of less than the entire amount
of Excess Contributions shall be treated as a pro
rata distribution of Excess Contributions and
Income.
(3) If the determination and correction of Excess
Contributions of a Highly Compensated Participant
whose actual deferral ratio is determined under the
family aggregation rules, then the actual deferral
ratio shall be reduced as required herein, and the
Excess Contributions for the family unit shall be
allocated among the Family Members in proportion to
the Elective Contributions of each Family Member that
were combined to determine the group actual deferral
ratio. Notwithstanding the foregoing, with respect to
Plan Years beginning prior to January 1, 1990,
compliance with the Regulations then in effect shall
be deemed to be compliance with this paragraph.
(b) Within twelve (12) months after the end of the
Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the
tests set forth in Section 4.5(a). Such contribution shall be
allocated to the Participant's Elective Account of each
Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the
year bears to the total Compensation of all Non-Highly
Compensated Participants.
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for the
Highly Compensated Participant group shall not exceed the
greater of:
(1) 125 percent of such percentage for the Non-
Highly Compensated Participant group; or
(2) the lesser of 200 percent of such percentage for
the Non-Highly Compensated Participant group, or
such.percentage for the Non-Highly Compensated
Participant group plus 2 percentage points. However,
to prevent the multiple use of the alternative method
described in this paragraph and Code Section
401(m)(9)(A), any Highly Compensated Participant
eligible to make elective deferrals pursuant to
Section 4.2 or any other cash or deferred arrangement
maintained by the Employer or an Affiliated Employer
and to make Employee contributions or to receive
matching contributions under this Plan or under any
other plan maintained by the Employer or an
Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation
1.401(m)-2. The provisions of Code Section 401(m) and
Regulations 1.401(m)-l(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8,
"Actual Contribution Percentage" for a Plan Year means, with
respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group, the average of the
ratios (calculated separately for each
Participant in each group) of:
(1) the sum of Employer matching contributions made
pursuant to Section 4.1(b) on behalf of each such
Participant for such Plan Year; to
(2) the Participant's "414(s) Compensation" for
such Plan Year.
(c) For purposes of determining the "Actual
Contribution Percentage" and the amount of Excess Aggregate
Contributions pursuant to Section 4.8(d), only Employer
matching contributions contributed to the Plan prior to the
end of the succeeding Plan Year shall be considered. In
addition, the Administrator may elect to take into account,
with respect to Employees eligible to have Employer matching
contributions pursuant to Section 4.1(b) allocated to their
accounts, elective deferral (as defined in Regulation
1.402(g)-1(b)) and qualified non-elective contributions (as
defined in Code Section 401(m)(4)(C)) contributed to any plan
maintained by the Employer. Such elective deferrals and
qualified nonelective contributions shall be treated as
Employer matching contributions subject to Regulation
1.401(m)- 1(b)(2) which is incorporated herein by reference.
However, the Plan Year must be the same as the plan year of
the plan to which the elective deferrals and the qualified
non-elective contributions are made.
(d) For the purpose of determining the actual
contribution ratio of a Highly Compensated Employee who is
subject to the Family Member aggregation rules of Code Section
414(g)(6) because such Employee is either a n five percent
owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual contribution ratio for the
family group (which shall be treated as one Highly
Compensated Participant) shall be determined by
aggregating Employer matching contributions made
pursuant to Section 4.1(b) and "414(s) Compensation"
of all eligible Family Members (including Highly
Compensated Participants). However, in applying the
$200,000 limit to "414(s) Compensation", Family
Members shall include only the affected Employee's
spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year.
Notwithstanding the foregoing, with respect to Plan
Years beginning prior to January 1, 1990, compliance
with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(2) The Employer matching contributions made pursuant
to Section 4.1(b) and "414(5) Compensation" of all
Family Members shall be disregarded for purposes of
determining the "Actual Contribution Percentage" of
the Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be aggregated as
a member of more than one family group in a plan, all
Participants who are members of those family groups
that include the Participant are aggregated as one
family group in accordance with paragraphs (1) and
(2) above.
(e) For purposes of this Section and Code Sections
401(a)(4), 410(b) and 401(m), if two or more plans of the
Employer to which matching contributions, Employee
contributions, or both, are made are treated as one plan for
purposes of Code Sections 401(a)(4) or 410(b) (other than the
average benefits test under Code Section 410(b)(2)(A)(ii)),
such plans shall be treated as one plan. In addition, two or
more plans of the Employer to which matching contributions,
Employee contributions, or both, are made may be considered as
a single plan for purposes of determining whether or not such
plans satisfy Code Sections 401(a)(4), 410(b) and 401(m). In
such a case, the aggregated plans must satisfy this Section
and Code Sections 401(a)(4), 410(b) and 401(m) as though such
aggregated plans were a single plan. For Plan Years beginning
after December 31, 1989, plans may be aggregated under this
paragraph (e) only if they have the same plan year.
Notwithstanding the above, an employee stock
ownership plan described in Code Section 4975(e)(7) may not be
aggregated with this Plan for purposes of determining whether
the employee stock ownership plan or this Plan satisfies this
Section and Code Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a
Participant under two or more plans (other than an employee
stock ownership plan as defined in Code Section 4975(e)(7))
which are maintained by the Employer or an Affiliated Employer
to which matching contributions, Employee contributions, or
both, are made, all such contributions on behalf of such
Highly Compensated Participant shall be aggregated for
purposes of determining such Highly Compensated Participant's
actual contribution ratio. However, if the plans have
different plan years, this paragraph shall be applied by
treating all plans ending with or within the same calendar
year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly
Compensated Participant and Non-Highly Compensated Participant
shall include any Employee eligible to have Employer matching
contributions pursuant to Section 4.1(b) (whether or not a
deferral election was made or suspended pursuant to Section
4.2(e)) allocated to his account for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that the "Actual Contribution
Percentage" for the Highly Compensated Participant group
exceeds the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group pursuant to Section
4.7(a), the Administrator (on or before the fifteenth day of
the third month following the end of the Plan Year, but in no
event later than the close of the following Plan Year) shall
direct the Trustee to distribute to the Highly Compensated
Participant having the highest actual contribution ratio, his
Vested portion of Excess Aggregate Contributions (and Income
allocable to such contributions) or, if forfeitable, forfeit
such non-Vested Excess Aggregate Contributions (and Income
allocable to such Forfeitures) until either one of the tests
set forth in Section 4.7(a) is satisfied, or until his actual
contribution ratio equals the actual contribution ratio of the
Highly Compensated Participant having the second highest
actual contribution ratio. This process shall continue until
one of the tests set forth in Section 4.7(a) is satisfied. The
distribution and/or Forfeiture of Excess Aggregate
Contributions shall be made in the following order:
(1) Employer matching contributions distributed
and/or forfeited pursuant to Section 4.6(a)(1);
(2) Remaining Employer matching contributions.
(b) Any distribution and/or Forfeiture of less than
the entire amount of Excess Aggregate Contributions (and
Income) shall be treated as a pro rata distribution and/or
Forfeiture of Excess Aggregate Contributions and Income.
Distribution of Excess Aggregate Contributions shall be
designated by the Employer as a distribution of Excess
Aggregate Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance with
Section 4.4.
(c) Excess Aggregate Contributions, including
forfeited matching contributions, shall be treated as Employer
contributions for purposes of Code Sections 404 and 415 even
if distributed from the Plan.
(d) For each Highly Compensated Participant, the
amount of Excess Aggregate Contributions is equal to the total
Employer matching contributions made pursuant to Section
4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section
4.7(c) on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph) minus
the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after
application of this paragraph) by his "414(s) Compensation".
The actual contribution ratio must be rounded to the nearest
one-hundredth of one percent. In no case shall the amount of
Excess Aggregate Contribution with respect to any Highly
Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b) and any
qualified non-elective contributions or elective deferrals
taken into account pursuant to Section 4.7(c) on behalf of
such Highly Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess
Aggregate Contributions with respect to any Plan Year shall be
made after first determining the Excess Contributions, if any,
to be treated as voluntary Employee contributions due to
recharacterization for the plan year of any other qualified
cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within
the Plan Year.
(f) If the determination and correction of Excess
Aggregate Contributions of a Highly Compensated Participant
whose actual contribution ratio is determined under the family
aggregation rules, then the actual contribution ratio shall be
reduced and the Excess Aggregate Contributions for the family
unit shall be allocated among the Family Members in proportion
to the sum of Employer matching contributions made pursuant to
Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section
4.7(c) of each Family Member that were combined to determine
the group actual contribution ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to
January 1, 1990, compliance with the Regulations then in
effect shall be deemed to be compliance with this paragraph.
(g) Notwithstanding the above, within twelve (12)
months after the end of the Plan Year, the Employer may make a
special Qualified Non-Elective Contribution on behalf of
Non-Highly Compensated Participants in an amount sufficient to
satisfy one of the tests set forth in Section 4.7(a). Such
contribution shall be allocated to the Participant's Elective
Account of each Non-Highly Compensated Participant in the same
proportion that each Non-Highly Compensated Participant's
Compensation for the year bears to the total Compensation of
all Non-Highly Compensated Participants. A separate accounting
shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests
pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum
"annual additions" credited to a Participant's accounts for
any "limitation year" shall equal the lesser of: (1) $30,000
(or, if greater, one-fourth of the dollar limitation in effect
under Code Section 415(b)(1)(A)) or (2) twenty-five percent
(25%) of the Participant's "415 Compensation" for such
"limitation year".
(b) For purposes of applying the limitations of Code
Section 415, "annual additions" means the sum credited to a
Participant's accounts for any "limitation year" of (1)
Employer contributions, (2) Employee contributions, (3)
forfeitures, (4) amounts allocated, after March 31, 1984, to
an individual medical account, as defined in Code Section
415(1)(2) which is part of a pension or annuity plan
maintained by the Employer and (5) amounts derived from
contributions paid or accrued after December 31, 1985, in
taxable years ending after such date, which are attributable
to post-retirement medical benefits allocated to the separate
account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code
Section 419(e)) maintained by the Employer. Except, however,
the "415 Compensation" percentage limitation referred to in
paragraph (a)(2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service which is
otherwise treated as an "annual addition", or (2) any amount
otherwise treated as an "annual addition" under Code Section
415(l)(1).
(c) For purposes of applying the limitations of Code
Section 415, the transfer of funds from one qualified plan to
another is not an "annual addition". In addition, the
following are not Employee contributions for the purposes of
Section 4.9(b)(2): (1) rollover contributions (as defined in
Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and 408(d)(3));
(2) repayments of loans made to a Participant from the Plan;
(3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4)
repayments of distributions received by an Employee pursuant
to Code Section 411(a)- (3)(D) (mandatory contributions); and
(5) Employee contributions to a simplified employee pension
excludable from gross income under Code Section 408(k) (6).
(d) For purposes of applying the limitations of Code
Section 415, "415 Compensation" shall include the
Participant's wages, salaries, fees for professional service
and other amounts received (without regard to whether or not
an amount is paid in cash) for personal services actually
rendered in the course of employment with an Employer
maintaining the Plan to the extent that the amounts are
includable in gross income (including, but not limited to,
commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance
premiums, tips, bonuses, fringe benefits, reimbursements, and
expense allowances, and in the case of a Participant who is an
Employee within the meaning of Code Section 401(c)(1) and the
regulations thereunder, the Participant's earned income (as
described in Code Section 401(c)(2) and the regulations
thereunder)) paid during the "limitation year".
"415 Compensation" shall exclude (1)(A)
contributions made by the Employer to a plan of deferred
compensation to the extent that, before the application of the
Code Section 415 limitations to the Plan, the contributions
are not includable in the gross income of the Employee for the
taxable year in which contributed, (B) contributions made by
the Employer to a plan of deferred compensation to the extent
that all or a portion of such contributions are
recharacterized as a voluntary Employee contribution, (C)
Employer contributions made on behalf of an Employee to a
simplified employee pension plan described in Code Section
408(k) to the extent such contributions are excludable from
the Employee's gross income, (D) any distributions from a plan
of deferred compensation regardless of whether such amounts
are includable in the gross income of the Employee when
distributed except any amounts received by an Employee
pursuant to an unfunded non-qualified plan to the extent such
amounts are includable in the gross income of the Employee;
(2) amounts realized from the exercise of a non-qualified
stock option or when restricted stock (or property) held by an
Employee either becomes freely transferable or is no longer
subject to a substantial risk of forfeiture; (3) amounts
realized from the sale, exchange or other disposition of stock
acquired under a qualified stock option; and (4) other amounts
which receive special tax benefits, such as premiums for group
term life insurance (but only to the extent that the premiums
are not includable in the gross income of the Employee), or
contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of any
annuity contract described in Code Section 403(b) (whether or
not the contributions are excludable from the gross income of
the Employee). For the purposes of this Section, the
determination of "415 Compensation" shall be made by not
including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of
Code Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of
Employer contributions made pursuant to a salary reduction
agreement, Code Section 403(b).
(e) For purposes of applying the limitations of Code
Section 415, the "limitation year" shall be the Plan Year.
(f) The dollar limitation under Code Section
415(b)(1)(A) stated in paragraph (a)(1) above shall be
adjusted annually as provided in Code Section 415(d) pursuant
to the Regulations. The adjusted limitation is effective as of
January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(g) For the purpose of this Section, all qualified
defined benefit plans (whether terminated or not) ever
maintained by the Employer shall be treated as one defined
benefit plan, and all qualified defined contribution plans
(whether terminated or not) ever maintained by the Employer
shall be treated as one defined contribution plan.
(h) For the purpose of this Section, if the Employer
is a member of a controlled group of corporations; trades or
businesses under common control (as defined by Code Section
1563(a) or Code Section 414(b) and (c) as modified by Code
Section 415(h)), is a member of an affiliated service group
(as defined by Code Section 414(m)), or is a member of a group
of entities required to be aggregated pursuant to Regulations
under Code Section 414(o), all Employees of such Employers
shall be considered to be employed by a single Employer.
(i) For the purpose of this Section, if this Plan is
a Code Section 413(c) plan, all Employers of a Participant who
maintain this Plan will be considered to be a single Employer.
(j)(1) If a Participant participates in more than one
defined contribution plan maintained by the Employer which
have different Anniversary Dates, the maximum "annual
additions" under this Plan shall equal the maximum "annual
additions" for the "limitation year" minus any "annual
additions" previously credited to such Participant's accounts
during the "limitation year".
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a
defined contribution plan not subject to Code Section
412 maintained by the Employer which have the same
Anniversary Date, "annual additions" will be credited
to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior
to crediting "annual additions" to the Participant's
accounts under the defined contribution plan not
subject to Code Section 412.
(3) If a Participant participates in more than one
defined contribution plan not subject to Code Section
412 maintained by the Employer which have the same
Anniversary Date, the maximum "annual additions"
under this Plan shall equal the product of (A) the
maximum "annual additions" for the "limitation year"
minus any "annual additions" previously credited
under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the
"annual additions" which would be credited to such
Participant's accounts under this Plan without regard
to the limitations of Code Section 415 and (ii) the
denominator of which is such "annual additions" for
all plans described in this subparagraph.
(k) If an Employee is (or has been) a Participant in
one or more defined benefit plans and one or more defined
contribution plans maintained by the Employer, the sum of the
defined benefit plan fraction and the defined contribution
plan fraction for any "limitation year" may not exceed 1.0.
(l) The defined benefit plan fraction for any
"limitation year" is a fraction, the numerator of which is the
sum of the Participant's projected annual benefits under all
the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d)
or 140 percent of the highest average compensation, including
any adjustments under Code Section 415(b).
Notwithstanding the above, if the
Participant was a Participant as of the first day of the first
"limitation year" beginning after December 31, 1986, in one or
more defined benefit plans maintained by the Employer which
were in existence on May 6, 1986, the denominator of this
fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had
accrued as of the close of the last "limitation year"
beginning before January 1, 1987, disregarding any changes in
the terms and conditions of the plan after May 5, 1986. The
preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements
of Code Section 415 for all "limitation years" beginning
before January 1, 1987.
(m) The defined contribution plan fraction for any
"limitation year" is a fraction, the numerator of which is the
sum of the annual additions to the Participant's Account under
all the defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior
"limitation years" (including the annual additions
attributable to the Participant's nondeductible Employee
contributions to all defined benefit plans, whether or not
terminated, maintained by the Employer, and the annual
additions attributable to all welfare benefit funds, as
defined in Code Section 419(e), and individual medical
accounts, as defined in Code Section 415(1)(2), maintained by
the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior
"limitation years" of service with the Employer (regardless of
whether a defined contribution plan was maintained by the
Employer). The maximum aggregate amount in any "limitation
year" is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under
Code Section 415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.
If the Employee was a Participant as of the
end of the first day of the first "limitation year" beginning
after December 31, 1986, in one or more defined contribution
plans maintained by the Employer which were in existence on
May 6, 1986, the numerator of this fraction will be adjusted
if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under
the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of
the end of the last "limitation year" beginning before January
1, 1987, and disregarding any changes in the terms and
conditions of the Plan made after May 6, 1986, but using the
Code Section 415 limitation applicable to the first
"limitation year" beginning on or after January 1, 1987. The
annual addition for any "limitation year" beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(n) Notwithstanding the foregoing, for any
"limitation year" in which the Plan is a Top Heavy Plan, 100%
shall be substituted for 125% in Sections 4.9(1) and 4.9(m)
unless the extra minimum allocation is being provided pursuant
to Section 4.4. However, for any "limitation year" in which
the Plan is a Super Top Heavy Plan, 100% shall be substituted
for 125% in any event.
(o) Notwithstanding anything contained in this
Section to the contrary, the limitations, adjustments and
other requirements prescribed in this Section shall at all
times comply with the provisions of Code Section 415 and the
Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of a reasonable error in
estimating a Participant's Compensation or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be
applicable, the "annual additions" under this Plan would cause
the maximum "annual additions" to be exceeded for any
Participant, the Administrator shall (1) return any voluntary
Employee contributions credited for the "limitation year" to
the extent that the return would reduce the "excess amount" in
the Participant's accounts (2) hold any "excess amount"
remaining after the return of any voluntary Employee
contributions in a "Section 415 suspense account" (3) use the
"Section 415 suspense account" in the next "limitation year"
(and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that
Participant is covered by the Plan as of the end of the
"limitation year", or if the Participant is not so covered,
allocate and reallocate the "Section 415 suspense account" in
the next "limitation year" (and succeeding "limitation years"
if necessary) to all Participants in the Plan before any
Employer or Employee contributions which would constitute
"annual additions" are made to the Plan for such "limitation
year" (4) reduce Employer contributions to the Plan for such n
limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation
year".
(b) For purposes of this Article, "excess amount" for
any Participant for a "limitation year" shall mean the excess,
if any, of (1) the "annual additions" which would be credited
to his account under the terms of the Plan without regard to
the limitations of Code Section 415 over (2) the maximum
"annual additions" determined pursuant to Section 4.9.
(c) For purposes of this Section, "Section 415
suspense account" shall mean an unallocated account equal to
the sum of excess amounts" for all Participants in the Plan
during the "limitation year". The "Section 415 suspense
account" shall not share in any earnings or losses of the
Trust Fund.
(d) The Plan may not distribute "excess amounts",
other than voluntary Employee contributions, to Participants
or Former Participants.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts
may be transferred from other qualified plans by Employees,
provided that the trust from which such funds are transferred
permits the transfer to be made and the transfer will not
jeopardize the tax exempt status of the Plan or Trust or
create adverse tax consequences for the Employer. The amounts
transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account". Such
account shall be fully Vested at all times and shall not be
subject to Forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall
be held by the Trustee pursuant to the provisions of this Plan
and may not be withdrawn by, or distributed to the
Participant, in whole or in part, except as provided in
Paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including
Regulation 1.411(d)-4), amounts attributable to elective
contributions (as defined in Regulation 1.401(k)-l(g) (4)),
including amounts treated as elective contributions, which are
transferred from another qualified plan in a plan-to-plan
transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-l(d).
(d) At Normal Retirement Date, or such other date
when the Participant or his Beneficiary shall be entitled to
receive benefits, the fair market value of the Participant's
Rollover Account shall be used to provide additional benefits
to the Participant or his Beneficiary. Any distributions of
amounts held in a Participant's Rollover Account shall be made
in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all
notice and consent requirements of Code Section 411(a)(11) and
the Regulations thereunder. Furthermore, such amounts shall be
considered as part of a Participant's benefit in determining
whether an involuntary cash-out of benefits without
Participant consent may be made.
(e) The Administrator may direct that employee
transfers made after a valuation date be segregated into a
separate account for each Participant in a federally insured
savings account, certificate of deposit in a bank or savings
and loan association, money market certificate, or other short
term debt security acceptable to the Trustee until such time
as the allocations pursuant to this Plan have been made, at
which time they may remain segregated or be invested as part
of the general Trust Fund, to be determined by the
Administrator.
(f) For purposes of this Section, the term "qualified
plan" shall mean any tax qualified plan under Code Section
401(a). The term "amounts transferred from other qualified
plans" shall mean: (i) amounts transferred to this Plan
directly from another qualified plan; (ii) lump-sum
distributions received by an Employee from another qualified
plan which are eligible for tax free rollover to a qualified
plan and which are transferred by the Employee to this Plan
within sixty (60) days following his receipt thereof; (iii)
amounts transferred to this Plan from a conduit individual
retirement account provided that the conduit individual
retirement account has no assets other than assets which (A)
were previously distributed to the Employee by another
qualified plan as a lump-sum distribution (B) were eligible
for tax-free rollover to a qualified plan and (C) were
deposited in such conduit individual retirement account within
sixty (60) days of receipt thereof and other than earnings on
said assets; and (iv) amounts distributed to the Employee from
a conduit individual retirement account meeting the
requirements of clause (iii) above, and transferred by the
Employee to this Plan within sixty (60) days of his receipt
thereof from such conduit individual retirement account.
(g) Prior to accepting any transfers to which this
Section applies, the Administrator may require the Employee to
establish that the amounts to be transferred to this Plan meet
the requirements of this Section and may also require the
Employee to provide an opinion of counsel satisfactory to the
Employer that the amounts to be transferred meet the
requirements of this Section.
(h) This Plan shall not accept any direct or indirect
transfers (as that term is defined and interpreted under Code
Section 401(a)(11) and the Regulations thereunder) from a
defined benefit plan, money purchase plan (including a target
benefit plan), stock bonus or profit sharing plan which would
otherwise have provided for a life annuity form of payment to
the Participant.
(i) Notwithstanding anything herein to the contrary,
a transfer directly to this Plan from another qualified plan
(or a transaction having the effect of such a transfer) shall
only be permitted if it will not result in the elimination or
reduction of any "Section 411(d)(6) protected benefit" as
described in Section 8.1.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary
Date, and at such other date or dates deemed necessary by the Administrator,
herein called "valuation date", to determine the net worth of the assets
comprising the Trust Fund as it exists on the "valuation date" prior to taking
into consideration any contribution to be allocated for that Plan Year. In
determining such net worth, the Trustee shall value the assets comprising the
Trust Fund at their fair market value as of the "valuation date" and shall
deduct all expenses for which the Trustee has not yet obtained reimbursement
from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date". If such
securities were not traded on the "valuation date", or if the exchange on which
they are traded was not open for business on the "valuation date", then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date", which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date or Early Retirement
Date. Upon such Normal Retirement Date or Early Retirement Date, all amounts
credited to such Participant's Combined Account shall become distributable.
However, a Participant may postpone the termination of his employment with the
Employer to a later date, in which event the participation of such Participant
in the Plan, including the right to receive allocations pursuant to Section 4.4,
shall continue until his Late Retirement Date. Upon a Participant's Retirement
Date, or as soon thereafter as is practicable, the Trustee shall distribute all
amounts credited to such Participant's Combined Account in accordance with
Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date
or other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the value of the
deceased Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections
6.6 and 6.7, to distribute any remaining amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be
taken into account in determining the amount of the death benefit.
(d) The Administrator may require such proper proof of death
and such evidence of the right of any person to receive payment of the
value of the account of a deceased Participant or Former Participant as
the Administrator may deem desirable. The Administrator's determination
of death and of the right of any person to receive payment shall be
conclusive.
(e) The Beneficiary of the death benefit payable pursuant to
this Section shall be the Participant's spouse. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the spouse has waived the right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been
abandoned (within the meaning of local law) and the
Participant has a court order to such effect (and
there is no "qualified domestic relations order" as
defined in Code Section 414(p) which provides
otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made
on a form satisfactory to the Administrator. A Participant may at any
time revoke his designation of a Beneficiary or change his Beneficiary
by filing written notice of such revocation or change with the
Administrator. However, the Participant's spouse must again consent in
writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall
be payable to his estate.
(f) Any consent by the Participant's spouse to waive any
rights to the death benefit must be in writing, must acknowledge the
effect of such waiver, and be witnessed by a Plan representative or a
notary public. Further, the spouse's consent must be irrevocable and
must acknowledge the specific nonspouse Beneficiary.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Combined Account and
invest the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit, common or collective trust
fund of a bank or a deferred annuity. In the event the Vested portion
of a Participant's Combined Account is not segregated, the amount shall
remain in a separate account for the Terminated Participant and share
in allocations pursuant to Section 4.4 until such time as a
distribution is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability, Early or Normal Retirement). However, at the election of
the Participant, the Administrator shall direct the Trustee to cause
the entire Vested portion of the Terminated Participant's Combined
Account to be payable to such Terminated Participant. Any distribution
under this paragraph shall be made in a manner which is consistent with
and satisfies the provisions of Section 6.5, including, but not limited
to, all notice and consent requirements of Code Section 411(a)(11) and
the Regulations thereunder.
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed $3,500
and has never exceeded $3,500 at the time of any prior distribution,
the Administrator shall direct the Trustee to cause the entire Vested
benefit to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall
be deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
<TABLE>
<CAPTION>
Vesting Schedule
Years of Service Percentage
---------------- ----------------
<S> <C> <C>
2 20 %
3 40 %
4 60 %
5 80 %
6 100 %
</TABLE>
(c) Notwithstanding the vesting schedule above, upon the
complete discontinuance of the Employer's contributions to the Plan or
upon any full or partial termination of the Plan, all amounts credited
to the account of any affected Participant shall become 100% Vested and
shall not thereafter be subject to Forfeiture.
(d) The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be reduced as the
result of any direct or indirect amendment to this Plan. For this
purpose, the Plan shall be treated as having been amended if the Plan
provides for an automatic change in vesting due to a change in top
heavy status. In the event that the Plan is amended to change or modify
any vesting schedule, a Participant with at least three (3) Years of
Service as of the expiration date of the election period may elect to
have his nonforfeitable percentage computed under the Plan without
regard to such amendment. If a Participant fails to make such election,
then such Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(e)(1) If any Former Participant shall be reemployed by the
Employer before a l-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive 1-Year Breaks in Service,
and such Former Participant had received, or was deemed have
received, a distribution of his entire Vested interest prior
to his reemployment, his forfeited account shall be reinstated
only if he repays the full amount distributed to him before
the earlier of five (5) years after the first date on which
the Participant is subsequently reemployed by the Employer or
the close of the first period of five (5) consecutive 1-Year
Breaks in Service commencing after the distribution, or in the
event of a deemed distribution, upon the reemployment of such
Former Participant. If a distribution occurs for any reason
other than a separation from service, the time for repayment
may not end earlier than five (5) years after the date of
distribution. In the event the Former Participant does repay
the full amount distributed to him, or in the event of a
deemed distribution, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by
any gains or losses occurring subsequent to the Anniversary
Date or other valuation date coinciding with or preceding his
termination. The source for such reinstatement shall first be
any Forfeitures occurring during the year. If such source is
insufficient, then the Employer shall contribute an amount
which is sufficient to restore any such forfeited Accounts.
(3) If any Former Participant is reemployed after a 1-Year
Break in Service has occurred, Years of Service shall include
Years of Service prior to his 1-Year Break in Service subject
to the following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre-break and post-break service shall
be used for computing Years of Service for
eligibility and for vesting purposes only after he
has been employed for one (1) Year of Service
following the date of his reemployment with the
Employer;
(ii) Any Former Participant who under the Plan does
not have a nonforfeitable right to any interest in
the Plan resulting from Employer contributions shall
lose credits otherwise allowable under (i) above if
his consecutive l-Year Breaks in Service equal or
exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of Service;
(iii) After five (5) consecutive 1-Year Breaks in
Service, a Former Participant's Vested Account
balance attributable to pre-break service shall not
be increased as a result of post-break service;
(iv) If a Former Participant who has not had his
Years of Service before a 1-Year Break in Service
disregarded pursuant to (ii) above completes one (1)
Year of Service for eligibility purposes following
his reemployment with the Employer, he shall
participate in the Plan retroactively from his date
of reemployment;
(v) If a Former Participant who has not had his Years
of Service before a 1-Year Break in Service
disregarded pursuant to (ii) above completes a Year
of Service (a 1-Year Break in Service previously
occurred, but employment had not terminated), he
shall participate in the Plan retroactively from the
first day of the Plan Year during which he completes
one (1) Year of Service.
(f) In determining Years of Service for purposes of vesting
under the Plan, Years of Service prior to the vesting computation
period in which an Employee attained his eighteenth birthday shall be
excluded.
6.5 DISTRIBUTION OF BENEFITS
(a) The Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in
one lump-sum payment in cash or in property.
(b) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such Participant's consent if such
distribution occurs prior to the later of his Normal Retirement Age or
age 62. With regard to this required consent:
(1) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
distribution of any benefit. However, any election to defer
the receipt of benefits shall not apply with respect to
distributions which are required under Section 6.5(c).
(2) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days
before the first day on which all events have occurred which
entitle the Participant to such benefit.
(3) Written consent of the Participant to the distribution
must not be made before the Participant receives the notice
and must not be made more than 90 days before the first day on
which all events have occurred which entitle the Participant
to such benefit.
(4) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent
to the distribution.
(c) Notwithstanding any provision in the Plan to the contrary,
the distribution of a Participant's benefits shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9); and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5) Plan Year period ending
in the calendar year in which he attains age 70 1/2 or, in the
case of a Participant who becomes a "five (5) percent owner"
during any subsequent Plan Year, clause (ii) shall no longer
apply and the required beginning date shall be the April 1st
of the calendar year following the calendar year in which such
subsequent Plan Year ends. Notwithstanding the foregoing,
clause (ii) above shall not apply to any Participant unless
the Participant had attained age 70 1/2 before January 1, 1988
and was not a "five (53 percent owner" at any time during the
Plan Year ending with or within the calendar year in which the
Participant attained age 66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
(d) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any
annuity Contract purchased and distributed to a Participant or spouse
shall comply with all of the requirements of the Plan.
(e) If a distribution is made at a time when a Participant is
not fully Vested in his Participant's Account and the Participant may
increase the Vested percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at
the relevant time, D is the amount of distribution, and R is
the ratio of the account balance at the relevant time to the
account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) The death benefit payable pursuant to Section 6.2 shall be
paid to the Participant's Beneficiary in one lump-sum payment in cash
or in property subject to the rules of Section 6.6(b).
(b) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of his date
of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death
occurs.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution on or as of an Anniversary Date, the distribution may be
made on such date or as soon thereafter as is practicable, but in no event later
than 180 days after the Anniversary Date. However, unless a Former Participant
elects in writing to defer the receipt of benefits (such election may not result
in a death benefit that is more than incidental), the payment of benefits shall
occur not later than the 60th day after the close of the Plan Year in which the
latest of the following events occurs: (a) the date on which the Participant
attains the earlier of age 65 or the Normal Retirement Age specified herein; (b)
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; or (c) the date the Participant terminates his
service with the Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant,
shall direct the Trustee to distribute to any Participant in any one
Plan Year up to the lesser of 100% of his Participant's Elective
Account valued as of the last Anniversary Date or other valuation date
or the amount necessary to satisfy the immediate and heavy financial
need of the Participant. Any distribution made pursuant to this Section
shall be deemed to be made as of the first day of the Plan Year or, if
later, the valuation date immediately preceding the date of
distribution, and the Participant's Elective Account shall be reduced
accordingly. Withdrawal under this Section shall be authorized only if
the distribution is on account of:
(1) Medical expenses described in Code Section 213(d) incurred
by the Participant, his spouse, or any of his dependents (as
defined in Code Section 152);
(2) The purchase (excluding mortgage payments) of a
principal residence for the Participant;
(3) Payment of tuition for the next semester or quarter
of post-secondary education for the Participant, his
spouse, children, or dependents; or
(4) The need to prevent the eviction of the Participant from
his principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No distribution shall be made pursuant to this Section
unless the Administrator, based upon the Participant's representation
and such other facts as are known to the Administrator, determines that
all of the following conditions are satisfied:
(1) The distribution is not in excess of the amount of
the immediate and heavy financial need of the Partici-
pant;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently
available under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and
voluntary Employee contributions will be suspended for at
least twelve (12) months after receipt of the hardship
distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals
for the Participant's taxable year immediately following the
taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's elective
deferrals for the taxable year of the hardship distribution.
(c) Notwithstanding the above, distributions from the
Participant's Elective Account pursuant to this Section shall be
limited solely to the Participant's Deferred Compensation.
(d) Any distribution made pursuant to this Section shall be
made in a manner which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all notice and consent
requirements of Code Section 411(a)(11) and the Regulations thereunder.
6.11 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
reached the "earliest retirement age" under the Plan. For the purposes of this
Section, "alternate payee," "qualified domestic relations order" and "earliest
retirement age" shall have the meaning set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined
by the Employer, to invest, manage, and control the Plan assets
subject, however, to the direction of an Investment Manager if the
Trustee should appoint such manager as to all or a portion of the
assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and
furnish to the Employer and/or Administrator for each Plan Year a
written annual report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by
a majority of their number, but may authorize one or more of them to
sign papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to
keep the Trust Fund invested without distinction between principal and
income and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the Trust Fund
consider, among other factors, the short and long-term financial needs
of the Plan on the basis of information furnished by the Employer. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at all times the Plan may qualify as a qualified Profit Sharing
Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to
the terms of its usual and customary bank agency agreement, under which
the duties of such bank or trust company shall be of a custodial,
clerical and record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common
law, statutory authority, including the Act, and other provisions of the Plan,
shall have the following powers and authorities, to be exercised in the
Trustee's sole discretion:
(a) To purchase, or subscribe for, any securities or
other property and to retain the same. In conjunction with
the purchase of securities, margin accounts may be opened and
maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the application of
the purchase money or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with or without
advertisement;
(c) To vote upon any stocks, bonds, or other securities; to
give general or special proxies or powers of attorney with or without
power of substitution; to exercise any conversion privileges,
subscription rights or other options, and to make any payments
incidental thereto; to oppose, or to consent to, or otherwise
participate in, corporate reorganizations or other changes affecting
corporate securities, and to delegate discretionary powers, and to pay
any assessments or charges in connection therewith; and generally to
exercise any of the powers of an owner with respect to stocks, bonds,
securities, or other property;
(d) To cause any securities or other property to be registered
in the Trustee's own name or in the name of one or more of the
Trustee's nominees, and to hold any investments in bearer form, but the
books and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in
such amount, and upon such terms and conditions, as the Trustee shall
deem advisable; and for any sum so borrowed, to issue a promissory note
as Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to
inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any
claims, debts, or damages due or owing to or from the Plan, to commence
or defend suits or legal or administrative proceedings, and to
represent the Plan in all suits and legal and administrative
proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance
companies, to be selected by the Administrator, as an investment of the
Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at
any time or from time to time, whatever rights and privileges may be
granted under such annuity, or other Contracts; to collect, receive,
and settle for the proceeds of all such annuity or other Contracts as
and when entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United
States government obligations;
(n) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock
Exchange;
(o) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(p) To pool all or any of the Trust Fund, from time to time,
with assets belonging to any other qualified employee pension benefit
trust created by the Employer or an affiliated company of the Employer,
and to commingle such assets and make joint or common investments and
carry joint accounts on behalf of this Plan and such other trust or
trusts, allocating undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts in accordance
with their respective interests;
(q) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make
loans to Participants and Beneficiaries under the following
circumstances: (1) loans shall be made available to all Participants
and Beneficiaries on a reasonably equivalent basis; (2) loans shall not
be made available to Highly Compensated Employees in an amount greater
than the amount made available to other Participants and Beneficiaries;
(3) loans shall bear a reasonable rate of interest; (4) loans shall be
adequately secured; and (5) shall provide for repayment over a
reasonable period of time.
(b) Loans shall not be granted to any Participant or his
Beneficiary that provide for a repayment period extending beyond such
Participant's Normal Retirement Date.
(c) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date
on which such loan is made, over the outstanding balance of
loans from the Plan to the Participant on the date on which
such loan was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
(d) Loans shall provide for level amortization with payments
to be made not less frequently than quarterly over a period not to
exceed five (5) years. However, loans used to acquire any dwelling unit
which, within a reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the Participant shall
provide for periodic repayment over a reasonable period of time that
may exceed five (5) years.
(e) Any loans granted or renewed on or after the last day of
the first Plan Year beginning after December 31, 1988 shall be made
pursuant to a Participant loan program. Such loan program shall be
established in writing and must include, but need not be limited to,
the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of
loans offered;
(5) the procedure under the program for determining a
reasonable rate of interest;
(6) the types of collateral which may secure a Partici-
pant loan; and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a separate
written document which, when properly executed, is hereby incorporated
by reference and made a part of the Plan. Furthermore, such Participant
loan program may be modified or amended in writing from time to time
without the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from
time to time be agreed upon in writing by the Employer and the Trustee. An
individual serving as Trustee who already receives full-time pay from the
Employer shall not receive compensation from the Plan. In addition, the Trustee
shall be reimbursed for any reasonable expenses, including reasonable counsel
fees incurred by it as Trustee. Such compensation and expenses shall be paid
from the Trust Fund unless paid or advanced by the Employer. All taxes of any
kind and all kinds whatsoever that may be levied or assessed under existing or
future laws upon, or in respect of, the Trust Fund or the income thereof, shall
be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee
shall furnish to the Employer and Administrator a written statement of account
with respect to the Plan Year for which such contribution was made setting
forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon
sales or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust
Fund;
(d) all payments and distributions made from the Trust
Fund; and
(e) such further information as the Trustee and/or
Administrator deems appropriate. The Employer, forthwith upon its
receipt of each such statement of account, shall acknowledge receipt
thereof in writing and advise the Trustee and/or Administrator of its
approval or disapproval thereof. Failure by the Employer to disapprove
any such statement of account within thirty (30) days after its receipt
thereof shall be deemed an approval thereof. The approval by the
Employer of any statement of account shall be binding as to all matters
embraced therein as between the Employer and the Trustee to the same
extent as if the account of the Trustee had been settled by judgment or
decree in an action for a judicial settlement of its account in a court
of competent jurisdiction in which the Trustee, the Employer and all
persons having or claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall deprive the
Trustee of its right to have its accounts judicially settled if the
Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the
Act and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan
in accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently. All
auditing and accounting fees shall be an expense of and may, at the
election of the Administrator, be paid from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a
written notice of his resignation.
(b) The Employer may remove the Trustee by mailing by
registered or certified mail, addressed to such Trustee at his last
known address, at least thirty (30) days before its effective date, a
written notice of his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with
all the estate, rights, powers, discretions, and duties of his
predecessor with like respect as if he were originally named as a
Trustee herein. Until such a successor is appointed, the remaining
Trustee or Trustees shall have full authority to act under the terms of
the Plan.
(d) The Employer may designate one or more successors prior to
the death, resignation, incapacity, or removal of a Trustee. In the
event a successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part
of the annual statement of account for the Plan Year required under
Section 7.7 or (ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no later than
the due date of the annual statement of account for the Plan Year. The
procedures set forth in Section 7.7 for the approval by the Employer of
annual statements of account shall apply to any special statement of
account rendered hereunder and approval by the Employer of any such
special statement in the manner provided in Section 7.7 shall have the
same effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty
or responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee
at the direction of the Administrator shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing or stock bonus plan maintained by such Participant's new
employer and represented by said employer in writing as meeting the requirements
of Code Section 401(a), provided that the trust to which such transfers are made
permits the transfer to be made.
7.11 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying Employer
securities" and "qualifying Employer real property," as those terms are defined
in the Act, provided, however, that the Trustee shall not be permitted to
acquire any qualifying Employer securities or qualifying Employer real property
if, immediately after the acquisition of such securities or property, the fair
market value of all qualifying Employer securities and qualifying Employer real
property held by the Trustee hereunder should amount to more than 100% of the
fair market value of all the assets in the Trust Fund.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. However, any
amendment which affects the rights, duties or responsibilities of the
Trustee and Administrator may only be made with the Trustee's and
Administrator's written consent. Any such amendment shall become
effective as provided therein upon its execution. The Trustee shall not
be required to execute any such amendment unless the Trust provisions
contained herein are a part of the Plan and the amendment affects the
duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it
authorizes or permits any part of the Trust Fund (other than such part
as is required to pay taxes and administration expenses) to be used
for or diverted to any purpose other than for the exclusive benefit of
the Participants or their Beneficiaries or estates; or causes any
reduction in the amount credited to the account of any Participant; or
causes or permits any portion of the Trust Fund to revert to or become
property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective if it
eliminates or reduces any "Section 411(d)(6) protected benefit" or adds
or modifies conditions relating to "Section 411(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d)(6) protected benefits" are benefits
described in Code Section 411(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator written notice
of such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated
to the accounts of all Participants in accordance with the provisions
hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Section 6.5. Distributions to a Participant shall be made in cash or in
property or through the purchase of irrevocable nontransferable
deferred commitments from an insurer. Except as permitted by
Regulations, the termination of the Plan shall not result in the
reduction of "Section 411(d)(6) protected benefits" in accordance with
Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d)(6) protected
benefits" in accordance with Section 8.1(c).
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void;
and no such benefit shall in any manner be liable for, or subject to,
the debts, contracts, liabilities, engagements, or torts of any such
person, nor shall it be subject to attachment or legal process for or
against such person, and the same shall not be recognized by the
Trustee, except to such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant
or Beneficiary is indebted to the Plan, as a result of a loan from the
Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount
distributed as shall equal such loan indebtedness shall be paid by the
Trustee to the Trustee or the Administrator, at the direction of the
Administrator, to apply against or discharge such loan indebtedness.
Prior to making a payment, however, the Participant or Beneficiary must
be given written notice by the Administrator that such loan
indebtedness is to be so paid in whole or part from his Participant's
Combined Account. If the Participant or Beneficiary does not agree that
the loan indebtedness is a valid claim against his Vested Participant's
Combined Account, he shall be entitled to a review of the validity of
the claim in accordance with procedures provided in Sections 2.12 and
2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of
1984. The Administrator shall establish a written procedure to
determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders. Further, to the
extent provided under a "qualified domestic relations order", a former
spouse of a Participant shall be treated as the spouse or surviving
spouse for all purposes under the Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the
Act and the laws of the State of North Dakota, other than its laws respecting
choice of law, to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation of the Plan or of
the Trust, by termination of either, by power of revocation or
amendment, by the happening of any contingency, by collateral
arrangement or by any other means, for any part of the corpus or income
of any trust fund maintained pursuant to the Plan or any funds
contributed thereto to be used for or diverted to, purposes other than
the exclusive benefit of Participants, Retired Participants, or their
Beneficiaries.
(b) In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to Act Section
403(c)(2)(A), the Employer may demand repayment of such excessive
contribution at any time within one (1) year following the time of
payment and the Trustees shall return such amount to the Employer
within the one (l) year period. Earnings of the Plan attributable to
the excess contributions may not be returned to the Employer but any
losses attributable thereto must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such Fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary,
contributions to this Plan are conditioned upon the initial
qualification of the Plan under Code Section 401. If the Plan receives
an adverse determination with respect to its initial qualification,
then the Plan may return such contributions to the Employer within one
year after such determination, provided the application for the
determination is made by the time prescribed by law for filing the
Employer's return for the taxable year in which the Plan was adopted,
or such later date as the Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(d), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution by
the Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Signed, sealed, and delivered in the presence of:
Fronteer Directory Company, Inc.
/s/ Lance Olson, CPA /s/ Dennis W. Olson, Pres.
- -------------------------------- ---------------------------------
Employer
/s/ Jane M. Good
- --------------------------------
WITNESSES AS TO EMPLOYER ATTEST /s/ Marlow Lindblom, VP
----------------------------------
/s/ Lance Olson, CPA /s/ Dennis W. Olson
- -------------------------------- --------------------------------- (SEAL)
TRUSTEE
/s/ Jane M. Good
- --------------------------------
WITNESSES AS TO TRUSTEE
/s/ Lance Olson, CPA /s/ Marlow Lindblom (SEAL)
- -------------------------------- ---------------------------------
TRUSTEE
/s/ Jane M. Good
- --------------------------------
WITNESSES AS TO TRUSTEE
/s/ Lance Olson, CPA /s/ Roland Haux (SEAL)
- -------------------------------- --------------------------------
TRUSTEE
/s/ Jane M. Good
- --------------------------------
WITNESSES AS TO TRUSTEE
<PAGE>
AMENDMENT I
TO
FRONTEER DIRECTORY COMPANY, INC.
401(k) PROFIT SHARING PLAN
THIS INSTRUMENT made the 29th day of March, 1994 by Fronteer
Directory Company, Inc. (the "Employer");
WITNESSETH:
WHEREAS, the Employer established the above referenced Plan and Trust for the
benefit of its employees effective April 1, 1991, and;
WHEREAS, the Employer now desires to amend the Plan;
NOW, THEREFORE, effective March 29, 1994, the Employer hereby adopts, and the
Trustees hereby assent to, the amendment of the Plan as follows:
Section 4.2(j)(2) shall be amended to read:
A Participant may modify a prior election during the Plan Year and concurrently
make a new election by filing a written notice with the Administrator within a
reasonable time before the pay period for which such modification is to be
effective. However, modifications to a salary deferral election shall only be
permitted quarterly, during election periods established by the Administrator
prior to the first day of a Plan Year and the first day of the each quarter
thereafter. Any modification shall not have retroactive effect and shall remain
in force until revoked.
Except as hereinabove expressly amended, the Fronteer Directory Company, Inc.
401(k) Profit Sharing Plan is to continue in full force and effect.
In Witness Whereof, the Employer and the Trustees have executed this Amendment I
on this 29th day of March, 1994.
/s/ Dennis Olson
--------------------------
Dennis Olson
/s/ Marlow Lindblom
--------------------------
Marlow Lindblom
/s/ Roland Haux
--------------------------
Roland Haux
<PAGE>
/s/ Dennis Olson
---------------------------
Trustee
/s/ Marlow Lindblom
---------------------------
Trustee
/s/
---------------------------
Trustee
EMPLOYMENT AGREEMENT
THIS AGREEMENT made and entered into as of the 1st day of January,
1995, by and between FRONTEER DIRECTORY COMPANY, INC., a Colorado corporation,
hereinafter referred to as "Employer" and DENNIS W OLSON, hereinafter referred
to as "Employee".
WHEREAS, Employee has entered into a contract to sell certain assets to
Employer which are Employer's principal initial business assets; and
WHEREAS, Employee is to be employed in an executive and management
position with Employer; and
WHEREAS, in recognition of the Employee's expertise and managerial
background, Employer desires to employ Employee as its President; and
WHEREAS, Employee desires to accept such employment;
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto and for other good and valuable consideration, it is hereby agreed as
follows:
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts employment upon the terms and conditions hereinafter set forth.
2. Term. The term of this Agreement shall be for a period of three
years, commencing on January 1, 1995 and terminating January 1, 1998.
3. Compensation. For all services to be rendered by Employee during the
three year period of this Agreement, Employer shall pay to Employee a minimum
base salary of $121,160 per year, which may be increased by the Board of
Directors during the term of Agreement, including any extended term.
Compensation to be paid to Employee by Employer shall be paid in equal
semi-weekly installments on Friday.
4. Duties. During the three year period of this Agreement, Employee
shall be employed by Employer to generally supervise and direct all aspects of
Employer's business. Employee agrees to serve in such office or position and
such substitute or further offices or positions with Employer or any subsidiary
of Employer as shall, from time to time, be determined by Employer's Board of
Directors; but in no event shall such office or position be of less authority
than President. Employee agrees to service as a member of the Board of Directors
of Employer and of any subsidiary of Employer.
<PAGE>
5. Confidentiality. During the term hereof, Employee agrees to treat
with confidentiality the Employer's trade and business secrets, customers,
management and marketing techniques, and acknowledges that such are key elements
to Employer's success.
6. Benefits.
A. Employee shall, during the term hereof, be entitled to all
regular employee benefits of Employer, including but not limited to
bonuses, group term life insurance or other life insurance, deferred
compensation plans, disability insurance and health and medical
insurance, as the foregoing may be provided by Employer to its
employees generally or to Employee specifically.
B. Employee shall, during the entire term hereof, be entitled
to reimbursement by Employer for reasonable expenses incurred by him on
its behalf in the course of this employment, including all reasonable
and necessary business expenses incurred because of Employee's duties,
including travel and lodging when required to travel on behalf of
Employer.
C. After determination of full disability by a physician
mutually agreed upon, Employee shall be entitled to full salary for
three months, two-thirds for three months, one-half salary for six
months and nothing thereafter except to the extent payments go beyond
the term of this Agreement.
7. Termination of Employment. During the term of this Agreement,
Employer may discharge Employee only for cause, as defined below, based upon
Employee's conduct during the term hereof. For purposes of this Agreement,
"cause" shall mean embezzlement, conversion, fraud, divulging of trade or
business secrets or acts of similar purport and gravity.
8. Merger and Reorganization. This Agreement shall not be terminated by
the voluntary dissolution of Employer, or merger, or consolidation of Employer
whereby Employer is not the surviving or resulting owner, or upon any transfer
of substantially all of the assets of Employer. In the event of any such merger
or consolidation or transfer of assets, the provisions of this Agreement shall
inure to the benefit of and be binding upon the surviving or resulting entity.
9. Titles and Headings. Titles and headings to paragraphs hereof are
for the purpose of reference only and shall in no way limit, define, or
otherwise affect the provisions hereof.
<PAGE>
10. Governing Law. This Agreement is being executed and delivered and
is intended to be performed in the State of North Dakota and shall be governed
by and construed in accordance with the laws of the State of North Dakota.
11. Stock Option. Upon the expiration of this Agreement, the Employer
shall purchase up to 500,000 shares of company stock at the price of $1.00 at
the option of the Employee.
12. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto and may be modified or amended only by written instrument
executed by both parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
EMPLOYER: EMPLOYEE:
FRONTEER DIRECTORY COMPANY INC.
BY /s/ Marlow Lindblom /s/ Dennis W. Olson
------------------------------- ---------------------------
Marlow Lindblom, Vice President Dennis W. Olson
/s/ Roland Haux
-------------------------------
Roland Haux, Secretary
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Fronteer Directory Company, Inc.
and, under the date of October 31, 1994, we reported on the consolidated
financial statements of Fronteer Directory Company, Inc. and subsidiary as of
and for the years ended September 30, 1994, 1993, and 1992. On September 1,
1995, we resigned as principal accountants. We have read Fronteer Directory
Company, Inc.'s statements included under Item 9 of its Form 10-K for the fiscal
year ended September 30, 1995, and we agree with such statements.
EIDE HELMEKE PLLP
January 9, 1996
Bismarck, North Dakota
SUBSIDIARIES OF THE REGISTRANT
State or Other Jurisdiction
Name of Incorporation
- ----- ---------------------------
Fronteer Personnel Services, Inc. ........................ North Dakota
Fronteer Marketing Group, Inc. ........................... North Dakota
Native American Document Conversion Services, LLC ........ North Dakota
RAF Financial Corporation ................................ Colorado
Secutron Corporation ..................................... Colorado
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