FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 30, 1995 OR
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from Not Applicable to
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Commission file number 0-17840
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HANDEX CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 22-2941704
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Campus Drive, Morganville, New Jersey 07751
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 536-8500
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Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which
Not Applicable registered
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
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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.
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The aggregate market value of the Common Stock held by non-affiliates of the
Registrant as of March 1, 1996 was approximately $17,740,541, computed on the
basis of the last reported sales price per share ($5.125) of such stock on the
NASDAQ National Market System.
The number of shares of the Registrant's Common Stock outstanding as of March 1,
1996 was 6,865,212.
DOCUMENTS OR PARTS THEREOF INCORPORATED BY REFERENCE
Part of Form 10-K Documents Incorporated
- - ---------------------------------- by Reference
Part III (Items 10, 11, 12 and 13) --------------------------------
Portions of the Registrant's definitive
Proxy Statement to be used in connection
with its Annual Meeting of Stockholders
to be held on
May 7, 1996
HANDEX CORPORATION
INDEX TO ANNUAL REPORT
ON FORM 10K
PART I
Item 1. Business
General 1
Environmental
Services 2
Customers and Marketing 3
Competition 4
Environmental Legislation 4
Permits, Licenses and Regulatory Approval 5
Insurance 5
Employees 5
Educational
Wholly-owned centers and franchising 6
Services 6
Customers 6
Marketing 6
Competition 7
Item 2. Properties 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of
Security Holders 7
PART II
Item 5. Market for Registrant's Common Equity
and Related Shareholder Matters 8
Item 6. Selected Consolidated Financial Data 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
Item 8. Financial Statements and Supplementary Data 16
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 16
PART III
Item 10. Directors and Executive Officers
of the Registrant 17
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain Beneficial Owners
and Management 18
Item 13. Certain Relationships and Related Transactions 18
PART IV
+Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8K 18
SIGNATURES 19
PART I
ITEM 1. BUSINESS
GENERAL
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Handex Corporation ("Company") conducts two distinct lines of business; its
environmental segment, which has been its core business, and the educational
segment, which the Company started in August 1994 with its acquisition, through
its subsidiary, New Horizons Education Corporation ("New Horizons"), of all the
issued and outstanding shares of New Horizons Franchising, Inc. and all of the
assets of New Horizons Learning Center, Inc.
The discussion that follows and note 10 to the consolidated financial
statements (see Item 8) highlight the business conditions and certain financial
information specific to each of the two business segments.
ENVIRONMENTAL BUSINESS SEGMENT
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The Company, through subsidiaries of its environmental holding subsidiary,
Handex Environmental, Inc., (collectively "Handex Environmental") provides a
comprehensive solution to hydrocarbon contamination of groundwater and soil at
CERCLA, RCRA and UST sites. Handex Environmental's full service approach
addresses the entire remediation process, from detection and delineation to
recovery and treatment. Specific services include detailed site assessments,
analysis of groundwater and soil contamination, development and installation of
on-site recovery systems, permitting services, maintenance and monitoring of
recovery systems and complete documentation of all services and systems. Handex
Environmental also provides environmental dewatering services to petroleum
producers and suppliers. In late 1988 Handex Environmental introduced
environmental site assessment services at industrial sites, primarily in the
State of New Jersey, and subsequently increased its capability to perform other
types of remediation projects through the acquisition of sludge dewatering
equipment.
Handex Environmental's primary clients continue to be the major petroleum
companies which store petroleum products in underground storage tanks. While
the bulk of Handex Environmental's underground storage tank and related services
remained concentrated at retail gasoline stations during the fiscal year ended
December 30, 1995 ("1995"), Handex Environmental continued to pursue and
obtained additional work at bulk petroleum storage terminals, refineries and
industrial sites. During 1995, Handex Environmental won and executed a series
of significant contracts throughout the country. Most of the work on these
projects involved disciplines and services new to Handex Environmental. The
projects included two superfund sites - one in Florida and one in North
Carolina, a series of landfill jobs in Texas, Maryland, Delaware and New
Hampshire, and a variety of jobs involving large scale industrial cleanups.
These projects generated over $10,000,000 in gross operating revenues in 1995.
Handex Environmental also built a backlog for this type of work, starting 1996
with a backlog of over $12,000,000. Handex Environmental intends to continue to
pursue this market to supplement its core retail gasoline station business.
Through 1991, Handex Environmental operated primarily in New Jersey,
Florida, Massachusetts, Maryland and surrounding states. In 1990, Handex
Environmental opened area offices in eastern Pennsylvania. In 1991, Handex
Environmental continued its expansion by opening area offices in: Western
Pennsylvania; Long Island, New York; Jacksonville, Florida; Chicago, Illinois;
and Charlotte, North Carolina. Handex Environmental also acquired, through a
merger, a small groundwater remediation business in Palm Springs, Florida. In
1993, Handex Environmental opened area offices in: Cincinnati, Ohio; and
Atlanta, Georgia. In 1994, Handex Environmental opened area offices in: Golden,
Colorado; Wixom, Michigan; Mobile, Alabama; and Kansas City, Missouri. In 1995,
Handex Environmental opened an office in Tampa, Florida and acquired the assets
of a local environmental concern. In 1996, Handex Environmental opened an office
in Indianapolis, Indiana. The area offices differ from Handex Environmental's
other locations in that they do not have their own remediation capability. When
such services are needed, they are provided by Handex Environmental's larger
offices or by subcontractors.
In 1995, the environmental remediation market was characterized by intense
price-based competition. Handex Environmental believes this condition will
continue to be the single, dominant factor in the market in the future. In
recent years, Handex Environmental's business has been helped considerably by
the cost reimbursement program maintained by the State of Florida through the
Florida Inland Protection Trust Fund. Toward the end of the first quarter of
1995, significant regulatory changes in Handex Environmental's Florida market
adversely affected revenues from its Florida operations. These changes
effectively narrowed the number and types of environmental clean-up expenditures
which would be reimbursable from the Fund.
Handex Environmental believes that the quality and comprehensive nature of
its services, its focus on well defined markets, both geographically and in
terms of services offered, and the response of governmental authorities to
public concern with groundwater contamination are material to the success of its
business. Handex Environmental intends to continue its strategy of focusing on
its primary service market -- hydrocarbon contamination of groundwater and soil
due to leaking underground storage tanks and related contamination sources --
and to grow by entering new geographic markets where there is active enforcement
of environmental protection statutes and significant petroleum industry
presence, by expanding its focus to include bulk petroleum storage terminals,
CERCLA and RCRA sites; by offering its services to a broader range of customers
and by continuing to improve operating efficiencies while maintaining a high
level of technical quality. In addition, Handex Environmental is expanding its
expertise and operations beyond the hydrocarbon remediation contamination
services market.
Handex Environmental currently conducts its groundwater remediation
business through nine wholly-owned subsidiaries, Handex of New Jersey, Inc.,
Handex of Maryland, Inc., Handex of Florida, Inc., Handex of New England, Inc.,
Handex of the Carolinas, Inc., Handex of Illinois, Inc., Handex of Ohio, Inc.,
Handex of Colorado, Inc. and Handex of Pennsylvania, LLC. In addition, Handex
Environmental performs other remediation services, such as sludge dewatering and
facility decontamination, through its wholly owned subsidiary, Handex
Environmental Management, Inc.
SERVICES
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Handex Environmental provides its clients with comprehensive groundwater
and soil assessment, and remediation services directed at contamination
resulting from leaking underground storage tanks, petroleum distribution systems
and related contamination sources. A Handex Environmental project team includes
hydrogeologists, engineers, and risk management specialists working with its
operations department, which includes environmental technicians, data collection
specialists and remedial system installers and operators.
A Handex Environmental project begins with the investigation of a confirmed
or suspected petroleum release. The case hydrogeologist develops a data
collection and analysis program for the site. Handex Environmental
professionals collect and evaluate information pertaining to site geology,
hydrogeology, the nature and distribution of contaminants, potential exposure
pathways and receptors. This is accomplished by employing rapid assessment
techniques such as core penetrometer surveys, on-site chemical screening and
analysis of soil and groundwater and traditional monitoring well installation.
Through the analysis of field data and the results of the analysis of soil and
groundwater samples, the hydrogeologist determines the extent of the
contamination, soil characteristic and contaminant migration pathways. This
information forms the basis for corrective action decisions.
Based on the information collected during the site characterization
process, Handex Environmental, in concert with its customer, determines the risk
posed by the site. If the risk exposure is unacceptable, Handex Environmental
may propose a soil and/or groundwater remediation program to reduce the level of
contamination to within acceptable guidelines, or, it may instead focus on its
modeling capability and regulatory knowledge to develop an argument that no
further action is required.
Handex Environmental has extensive experience designing and installing soil
and groundwater remediation systems. A typical Handex Environmental remediation
system can include groundwater extraction, soil vapor extraction, air sparging
or some combination of the three. Groundwater and air treatment systems are
designed to address site specific contaminant, concentrations and loading rates.
Remediation equipment is often modified by Handex Environmental to enhance its
performance and to provide an integrated system. The installation of the
remediation system is performed by Handex Environmental's trained installation
technicians. Handex Environmental's regulatory department specialists ensure
compliance with Federal, state and local laws pertaining to the installation and
operation of remediation systems.
Once a remediation system is installed, Handex Environmental technicians
monitor the performance of the system, collect water and soil samples and
perform routine inspection, adjustment and maintenance to ensure proper
operations. Handex Environmental monitors the progress of the remedial action
until the clean-up goals have been achieved. Handex has over 600 projects
currently being monitored. It provides groundwater data and analysis of such
data to its customers and in some cases to various regulatory bodies to comply
with certain individual state and local regulations.
Emergency Response Capabilities. As a result of Handex Environmental's
ability to provide comprehensive groundwater remediation services and the
equipment necessary to perform such services, Handex Environmental is often
called upon to respond to emergency spills or leaks by its customers or by state
or local governmental bodies or agencies. Emergency situations involve the
application of the various techniques used by Handex Environmental in providing
groundwater remediation services in non-emergency situations. However, due to
the need for prompt action as a result of the higher level of contamination
which may be present and publicity concerning the problem, Handex
Environmental's emergency response services typically involve a substantially
greater initial commitment of personnel and equipment than routine projects.
Environmental Dewatering Services. Handex Environmental provides
environmental dewatering services to petroleum producers and suppliers who
desire to replace underground storage tanks or petroleum distribution systems in
areas where groundwater is located near the surface. Dewatering consists of
pumping groundwater in order to reduce the water table elevation in a given area
to a level sufficient to permit installation of new underground storage tanks or
systems. Water generated during the dewatering process is generally
contaminated with soluble components of gasoline and is treated through the use
of mobile water treatment units employing separation and carbon adsorption prior
to its discharge back into the environment.
General Site Assessment and Remediation Services. Handex Environmental
provides environmental site assessment services to its customers. The areas of
environmental concern that need to be investigated in connection with a site
assessment include underground storage tanks, groundwater and soil quality,
areas of known hazardous spills, drum storage areas, lagoons and loading and
unloading areas. In addition, the interiors of buildings on the site must also
be examined. As areas of contamination are discovered, a cleanup plan is
designed, approved by the appropriate regulatory authorities and implemented.
Customers for environmental site assessment services have included
potential buyers, owners and operators of various industrial and commercial
facilities. In addition, banks and other financial institutions that provide
financing to such owners and operators, as well as potential acquirers of such
facilities, have requested environmental site assessments.
CUSTOMERS AND MARKETING
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Handex Environmental's principal customers are major petroleum companies,
which accounted for approximately 84.0%, 80.2% and 78.9% of Handex
Environmental's net operating revenues in 1993, 1994 and 1995, respectively.
Handex Environmental's three largest petroleum company customers, Amoco Oil
Company, Exxon Company, U.S.A. and Shell Oil Company accounted for 15.9%,
12.5%, and 11.4%, respectively, of Handex Environmental's net operating revenues
in 1995. Handex Environmental's level of business with those customers declined
from its 1994 level, reflecting adverse economic conditions, regulatory
changes, the introduction of Risk Based Corrective Action ("RBCA") in certain
states and reduced funding for environmental services. The loss of business
from any of its major customers or adverse changes in current regulations
could have a material adverse effect on Handex Environmental.
Handex Environmental currently performs approximately 80% of its work for
petroleum companies at retail gasoline stations, although it does perform and
continues to pursue, work at bulk petroleum terminals, pipelines, refineries and
industrial sites from time to time. Handex Environmental's non-petroleum
customers are primarily industrial clients and/or state and local governmental
bodies or agencies which engage Handex Environmental to provide emergency
response services. Most of Handex Environmental's jobs for petroleum companies
are performed pursuant to purchase orders or non-exclusive contracts, neither of
which provide for any minimum purchase requirements. Most customers now require
Handex Environmental to bid on certain phases of recovery projects, and Handex
Environmental believes that this trend will continue in the future. In
addition, many customers of Handex Environmental now purchase certain services
and equipment historically provided by or through Handex Environmental as part
of its full service approach from other contractors. Handex Environmental
believes the unbundling of services, such as laboratory testing and analysis, is
an indication of the increasing focus by its customers on containing costs
associated with environmental remediation projects.
Handex Environmental historically charged its customers for the services of
its employees on an hourly basis with few budgetary limitations, as well as for
the cost of materials and equipment used in connection with its services.
Starting in 1993, a majority of Handex Environmental's work has been performed
under fixed price contracts and unit prices, and it is expected that this trend
will continue.
Handex Environmental historically marketed its services through its senior
professional staff and executives who have focused primarily on existing
customers. Since competition in the groundwater remediation services industry
has increased substantially the past few years and is likely to continue to
increase further, Handex Environmental has established a sales and marketing
function with experienced professionals in this field. Since 1993, Handex
Environmental has committed significant resources for sales and marketing
activities.
COMPETITION
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While many companies are engaged in various aspects of the soil and
groundwater remediation services industry, only a few provide the full service
approach to groundwater remediation provided by Handex Environmental in its
principal geographic markets. There are, however, a large number of firms which
provide consulting and assessment services with respect to hydrocarbon recovery
and soil/groundwater remediation. In addition, a large number of firms perform
remediation services, but these firms concentrate their operations on major
spills, Superfund site cleanups, and the removal of substances such as
polychlorinated biphenols ("PCBs") and asbestos. There are also numerous small
independent pump and tank contractors which remove contaminants and transport
them to hazardous waste sites or other storage facilities. These contractors
collectively have a significant share of the market for such services.
The increasing focus on lower remediation costs by major consumers of
environmental services has heightened competition in the soil/groundwater
remediation services industry and this trend will likely continue as the
industry matures, as other companies enter the market and expand the range of
services which they offer and as Handex Environmental and its competitors move
into new geographic markets. For example, major engineering and consulting
companies are becoming increasingly involved in the engineering related aspects
and subsequent remediation of hazardous waste sites. It is also likely that
some of the major consulting firms will expand their groundwater remediation
services and compete directly with Handex Environmental. Competition from these
larger companies could have a material adverse effect on Handex Environmental's
business. Further, competition from small firms which offer a more limited
range of services but which can compete effectively on price has and may
continue to adversely affect Handex Environmental's profitability by reducing
its margins.
Handex Environmental historically responded to competition on the basis of
its ability to provide a comprehensive response to the problems of
soil/groundwater contamination and the quality of its services, rather than on
the price of its services. However, Handex Environmental believes that price
has now become of primary importance to its customers, and believes that it must
compete on this basis. Handex Environmental also believes that, over the long
term, the quality of its services will continue to be an important competitive
advantage. Accordingly, in attempting to respond to price competition, Handex
Environmental will attempt to maintain a high level of technical quality in its
services.
ENVIRONMENTAL LEGISLATION
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The current demand for Handex Environmental's soil/groundwater remediation
services is a result of a number of overlapping Federal, state and local laws
concerned with the protection of human health and the environment, as well as
regulations promulgated by administrative agencies thereunder. The principal
Federal statutes affecting groundwater include the Safe Drinking Water Act of
1974, the Resource Conservation and Recovery Act of 1976 ("RCRA") and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
("CERCLA"). One of the more important Federal regulatory developments relating
to Handex Environmental's business occurred in September 1988 when the EPA
issued comprehensive regulations under RCRA governing underground storage tanks
containing hazardous substances or petroleum. Such regulations require the
owners of underground storage tanks to upgrade or close existing tanks within 10
years, and to install release detection equipment on existing tanks over a five-
year period. Such regulations also require all new tanks which are installed
to have protection against spills, overflows and corrosion. In addition,
such regulations also prescribe the procedures by which tank owners and
operators should investigate and report confirmed or suspected releases from
tanks, and if applicable, proceed with corrective actions.
Many of the foregoing Federal statutes encourage significant state
involvement in their administration and enforcement, and various states have
been authorized by the Environmental Protection Agency to implement their own
underground storage tank programs. Various states have also enacted their own
statutes designed to protect and restore environmental quality and to deal
directly with the problem of soil and groundwater contamination. The state
statutes and regulations are in some cases, different or more stringent than the
other Federal statutes, and Handex Environmental believes that statutes and
regulations enacted at the state level have had a greater impact on the demand
for its services than those enacted at the Federal level. Some examples of such
state statutes include New Jersey's Spill Compensation and Control Act,
Environmental Clean Up Responsibility Act and its Underground Storage of
Hazardous Substances Act, Maryland's Hazardous Substance Spill Response Law,
Florida's Water Quality Assurance Act and the Florida Inland Protection Trust
Fund. The Florida Inland Protection Trust Fund, which had helped considerably
Handex Environmental' s business in Florida up through 1994, was revised by the
Florida legislature in early 1995 and now requires site prioritization and prior
approval of costs by the Florida Department of Environmental Protection for
reimbursement of cleanup expenditures. These revisions, which were intended to
assure the Fund's economic integrity, have adversely affected in a significant
manner, the operating results of Handex Environmental's operations in Florida,
and will continue to have an adverse effect on the Company given the size of
Handex Environmental's operations in that state.
PERMITS, LICENSES AND REGULATORY APPROVALS
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The installation and operation of remediation systems are subject to
various licensing, permitting, approval and reporting requirements imposed by
Federal, state and local laws. For example, National Pollutant Discharge
Elimination System ("NPDES") permits, air pollution permits and other regulatory
program permits are typically required in connection with the installation of an
active remediation system, and the terms of these permits often require ongoing
reporting to governmental agencies concerning the operation of the remediation
system. Passive remediation programs also require institutional and engineering
controls. Approvals of corrective action plans by the appropriate regulatory
agency is increasingly being required before a recovery system can be installed
to address contaminated soil and/or groundwater due to a release from an
underground storage tank.
Various state and local laws require the monitoring wells and wells used in
the recovery process to be installed by licensed well drillers, and installation
of the recovery system may also require compliance with applicable provisions of
construction and zoning laws. Some of the states in which Handex Environmental
operates require that groundwater recovery systems installed at a facility be
operated by licensed wastewater treatment plant operators. Some states have
also adopted testing and licensing programs to regulate professionals who
typically conduct subsurface investigations and propose remedial action
workplans.
In order to provide a full service approach to subsurface remediation,
Handex Environmental employs licensed well drillers, and many of its
environmental technicians are licensed wastewater treatment plant operators. In
addition, Handex Environmental employs individuals who specialize in obtaining
the required Federal, state and local environmental and operational permits
necessary for Handex Environmental and its customers to install and operate
remediation systems, facility permits, including Title V air permits and
compliance audits. Handex Environmental also provides the documentation of the
recovery process necessary to assist its customers in satisfying applicable
reporting requirements.
INSURANCE
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In 1992, the Company purchased an interest in a trade association captive
insurance group through which it obtains comprehensive general liability
insurance, with coverage limits of $5,000,000, including losses for sudden and
accidental pollution damage. While Handex Environmental believes that it
operates its business safely and prudently, there can be no assurance that
liabilities incurred from a claim for professional liability or some other risk
will be covered by insurance or, if covered, that the dollar amount of such
liabilities will not exceed coverage limits.
EMPLOYEES
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As of December 30, 1995, the number of employees at Handex Environmental,
including the corporate staff at Handex Corporation, was 576 employees. Of
these, 318 are skilled professionals (hydrogeologists, geologists, environmental
scientists and field technicians), 121 are non-professional technical support
personnel, and 137 are administrative and executive personnel.
Handex Environmental believes that a key factor in its success will be its
ability to continue to attract and retain highly skilled professionals. Handex
Environmental attempts to meet its need for these professionals both by training
hydrogeologists and geologists in the field of hydrocarbon recovery and
groundwater cleanup and by recruiting qualified candidates from other companies,
governmental agencies and colleges and universities.
None of Handex Environmental's employees are represented by a labor
organization. Handex Environmental considers relations with its employees to be
satisfactory.
EDUCATIONAL BUSINESS SEGMENT
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The Company operates its educational segment through subsidiaries of its
education holding company subsidiary, New Horizons Education Corporation
(collectively, "New Horizons") . There are two distinct businesses to the
education segment; one operates computer training centers, while the other
supplies a system of instructions, sales and management concepts concerning
computer training to independent franchisees.
New Horizons Training Centers. New Horizons operates computer training
facilities in Santa Ana, California; Chicago, Illinois; and New York, New York.
In addition, New Horizons holds a minority interest in a joint venture which
operates a facility in Cleveland, Ohio. Prior to the acquisition of New
Horizons by the Company, New Horizons operated a single training center in Santa
Ana. The other centers were acquired from franchisees, subsequent to the
acquisition, as part of New Horizons' strategic plan to operate company-owned
training centers in selected major United States markets.
Through its computer training centers, New Horizons offers comprehensive
instruction in the use of personal computers and computer software, including
instructor-led courses in software applications, networking and work stations.
Each training center is equipped with computer hardware, software, and
peripherals in order to provide students with hands-on training. Students are
provided with internally developed coursewares and other training materials
purchased by New Horizons from leading software manufacturers under license
agreements. Revenues from the computer training centers are derived from
training fees paid by clients and proceeds from the sale of training materials
related to the computer courses.
The Company believes there is a nationwide trend toward out-sourcing of
computer training. Typical students in a New Horizons' classroom consist of
individuals from private employers or various government agencies, which
contract with New Horizons to provide training in personal computer and software
applications to their personnel. Most of the classes are held at New Horizons'
facilities. However, in response to the needs of its customers, New Horizons
also provides instruction at client offices. All training is instructor-led,
with approximately 70% being conducted at the training centers and 30% at client
locations.
Franchising Operations. New Horizons began offering franchise territories
in 1992, and as of March 1, 1996, there were 121 training centers world-wide in
addition to Company-owned locations in New York, Chicago and Santa Ana,
California. During the first quarter of 1996, the Company completed the sale of
ten franchises in Japan. New Horizons sells only one franchise within a defined
geographic area. Franchisees pay an initial franchise fee and royalty and
advertising fees based on both gross training revenues and gross sales of
courseware.
A new franchise owner undergoes an intensive training program, receiving
in-depth instruction in sales, marketing, computer training and the management
of a computer training facility. New Horizons also provides franchisees with
sales, management, advertising and technical support.
Customers. Customers for the training provided at New Horizons' operated
and franchised training centers are predominantly employer-sponsored individuals
from a wide range of corporations, professional service organizations,
government agencies and municipalities. No single customer accounted for more
than 10% of New Horizons revenues during 1995.
Marketing. According to a survey conducted by International Data
Corporation, worldwide revenues for the information training industry approached
$15 billion in 1993 and are expected to grow to almost $27 billion by 2,000.
Although very fragmented, the industry is expected to produce annual growth
rates of 13%. The majority of all company-sponsored computer education and
training is currently supplied through the use of in-house training staffs. The
Company believes that there is a trend in the United States toward out-sourcing
non-core operations, such as computer training, as a means of increasing
corporate efficiency and competitiveness.
New Horizons markets its services primarily through account executives who
utilize telemarketing to target and contact potential customers. New Horizons
has also recently established a national account program designed to market
computer training services to large companies which have facilities throughout
the United States.
Competition The information technology training and education industry is
highly fragmented. Computer education and training is supplied primarily by in-
house training departments, regional personal computer application specialists,
such as ExecuTrain, Catapult and Productivity Point International, small local
independents, computer dealers and superstores and computer resellers. Except
for ExecuTrain, an Atlanta, Georgia based company, none of the Company's
competitors currently have a national presence.
The instructor-led computer training markets are locally oriented.
Although national marketing efforts are conducted, a training center's success
depends upon execution at the local level. Although competitive pricing is
important, New Horizons believes that it is currently a less important
competitive factor than the quality of training, flexibility and convenience of
service.
Training Authorization. New Horizon is authorized to provide training by
more than 30 software publishers, including Microsoft, Novell, Apple and Sun
Microsystems. The authorization agreements are typically annual in length and
are renewable at the option of the publishers. While New Horizons believes that
its relationship with software publishers are good, the loss of any one of these
agreements could have a material adverse impact on its business.
Employees. As of December 30, 1995, New Horizons employed 328 individuals,
consisting of 100 computer instructors, 80 account executives and 148 in the
administration and executive areas. None of these employees are represented by
a labor organization. New Horizons considers relations with its employees to be
satisfactory.
ITEM 2. PROPERTIES
The Company's corporate headquarters occupy a portion of a 33,000 square
foot facility in Morganville, New Jersey, which it shares with two wholly owned
subsidiaries, pursuant to a lease which expires in 2003. The lease gives the
Company an option to extend its tenancy for the entire facility for an
additional five-year period.
As of December 30, 1995, Handex Environmental conducted business at
nineteen facilities located in the states of New Jersey, New York, Pennsylvania,
Maryland, North Carolina, Ohio, Florida, Georgia, Illinois, Massachusetts,
Colorado, Michigan, Alabama, and Missouri. Handex Environmental owns facilities
in New Jersey, Maryland and Florida, while leasing facilities in all other
locations. In January 1996, Handex purchased its facility in Mt. Dora, Florida
from a general partnership whose partners are certain executive officers and
Directors of the Company.
New Horizons' headquarters and primary training centers are located in
Santa Ana and Irvine, California, pursuant to leases which expire in 1997 and
2001, respectively.
As of December 30, 1995, New Horizons conducted business at four leased
facilities located in California, Illinois and New York.
The Company believes that its properties are well maintained and are
adequate to meet current requirements and that suitable additional or substitute
space will be available as needed to accommodate any expansion of operations and
for additional offices if necessary.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in several lawsuits incidental to the ordinary
conduct of its business. The Company does not believe that the outcome of any
or all these claims will have a material adverse effect upon its business or
financial condition or result of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Common stock is traded on the NASDAQ National Market System under the
symbol HAND. The following table sets forth the range of high and low bid
quotations per share of Common stock from January 2, 1994 through December 30,
1995, as reported by the NASDAQ system.
1995 HIGH LOW
- - ---- ----- ----
1st Quarter (January 1 - April 1) 9 7
2nd Quarter (April 2 - July 1) 8-1/4 4-1/2
3rd Quarter (July 2 - September 30) 8-1/8 6-1/4
4th Quarter (October 1 - December 30) 7-3/8 4-5/8
1994 HIGH LOW
- - ---- ----- ----
1st Quarter (January 2 - April 2) 8-1/2 6-1/4
2nd Quarter (April 3 - July 2) 7-1/2 6
3rd Quarter (July 3 - October 1) 9-3/8 7
4th Quarter (October 2 - December 31) 8-5/8 6-1/4
As of March 1, 1996, the Company's Common stock was held by 264 holders of
record. The Company has never paid cash dividends on its Common stock and has
no present intention to pay cash dividends in the foreseeable future. The
Company currently intends to retain any future earnings to finance the growth of
the Company.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
Summary Consolidated Financial Data (in thousands, except per share)
SELECTED CONSOLIDATED 1995(2) 1994(2) 1993 1992 1991
------- ------- ----- ---- -----
STATEMENTS OF INCOME DATA:(1)
Total operating revenues $85,272 $64,773 $48,194 $52,098 $62,245
Subcontractor costs 15,018 12,202 9,481 9,657 12,522
------- -------- -------- -------- --------
Net operating revenues 70,254 52,571 38,713 42,441 49,723
Cost of net operating revenues 45,066 32,866 24,745 27,437 26,079
------- -------- ------- ------- -------
Gross profit 25,188 19,705 13,968 15,004 23,644
Selling, general and
administrative expenses 24,008 16,182 12,197 12,263 11,778
Provision for loss in a
joint venture, asset write-
off and termination expenses 1,113 -- -- -- --
Other income (expense), net (191) 343 424 417 134
------- ------- ------- ------- -------
Income (loss) before income (124) 3,866 2,195 3,158 12,000
taxes
Provision for income taxes 69 1,535 821 1,225 4,685
------- -------- ------ ------- -------
Net income (loss) $(193) $2,331 $1,374 $1,933 $7,315
======= ======== ======= ======= =======
Net income (loss) per share
of Common stock(3) $(.03) $ .34 $ .20 $ .28 $ 1.06
======= ======= ======= ====== =======
SELECTED CONSOLIDATED BALANCE SHEET DATA
DECEMBER DECEMBER JANUARY DECEMBER 31
30, 31, 1, ------------------
SELECTED CONSOLIDATED 1995 1994 1994 1992 1991
BALANCE SHEET DATA: ----- ----- ----- ----- ----
Working capital $23,198 $24,666 $38,194 $36,129 $34,524
Total assets 67,089 61,920 52,393 50,629 50,839
Long-term obligations,
excluding current
installments 650 464 -- -- 17
Total stockholders'
equity 49,428 49,637 47,060 46,253 45,040
(1) Certain reclassifications were made in 1994, 1993, 1992, and 1991 to
conform with the presentation in 1995.
(2) The operating results of New Horizons are included in 1995 for the entire
year and for the period from August 15, 1994 through December 31, 1994 for
1994.
(3) Net income per share of Common stock is computed based on the weighted
average number of common shares outstanding during the year as adjusted for
the five-for-four stock split in March 1991 and stock repurchase described
in Note 1 of Notes to Consolidated Financial Statements. Inclusion of the
incremental shares applicable to outstanding stock options in the
computation would have no material effect.
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and related notes and "SELECTED FINANCIAL
DATA" included elsewhere in this report.
The following table presents, for the periods indicated (i) the
percentage relationship which certain items in the Company's Consolidated
Statements of Income bear to net operating revenues and (ii) the percentage
change in the dollar amount of such items. All references to 1993 in the
financial statements refer to the fiscal year ended January 1, 1994.
PERCENTAGE RELATIONSHIP PERIOD TO PERIOD
TO NET OPERATING REVENUES CHANGE
1995 1994 1993
VS. VS. VS.
1995 1994 1993 1994 1993 1992
------ ----- ----- ----- ----- -----
Net operating revenues 100.0% 100.0% 100.0% 33.6% 35.8% (8.8)%
Cost of net operating revenues 64.1 62.5 63.9 37.1 32.8 (9.8)
Gross profit 35.9 37.5 36.1 27.8 41.1 (6.9)
Selling, general and
administrative expenses 34.2 30.8 31.5 48.4 32.7 (.5)
Provision for loss in a
joint venture, asset write-off
and termination expenses 1.6 -- -- 100.0 -- --
Interest income .9 1.5 2.0 (23.0) (0.5) 32.0
Income (loss) before income
taxes (.2) 7.4 5.7 N.A. 76.1 (30.4)
Provision for Income taxes .1 2.9 2.1 (95.5) 87.0 (33.0)
Net income (loss) (.3) 4.4 3.5 N.A. 69.7 (28.9)
GENERAL
- - --------
Handex Corporation ("Company") conducts two distinct lines of business; its
environmental segment which has been its core business and the educational
segment, which the Company started in August 1994 with its acquisition of all
the issued and outstanding shares of New Horizons Franchising, Inc. and all of
the assets of New Horizons Learning Center, Inc.
The discussion that follows and note 10 to the consolidated financial
statements (see Item 8) highlight the business conditions and certain financial
information specific to each of the two business segments.
ENVIRONMENTAL BUSINESS SEGMENT
- - -------------------------------
The Company conducts the environmental segment of its business through a
subsidiary, Handex Environmental, Inc., and its subsidiaries (collectively
"Handex Environmental").
Net operating revenues include fees for services provided directly by
Handex Environmental, and fees for arranging for subcontractors' services, as
well as proceeds from the rental and sale of equipment. Handex Environmental,
in the course of providing its services, routinely subcontracts for outside
services such as soil cartage, laboratory testing and other specialized
services. These costs are generally passed through to clients and, in
accordance with industry practice, are included in total operating revenues.
Because subcontractor services can change significantly from project to project,
changes in total operating revenues may not be truly indicative of business
trends. Accordingly, Handex Environmental views net operating revenues, which
is total operating revenues less the cost of subcontractor services, as its
primary measure of revenue growth.
Cost of net operating revenues includes professional salaries, other direct
labor, material purchases and certain direct and indirect overhead costs.
Selling, general and administrative expenses include management salaries, sales
and marketing salaries and expenses, and clerical and administrative overhead.
During 1995 and 1994, several trends continued to develop which Handex
Environmental believes will have a direct impact on its future results of
operations. Handex Environmental believes that expenses for administration,
computerization, marketing and engineering will continue to increase.
Administrative costs have increased and will continue to increase as a result of
the increasing desire of Handex Environmental's customers for more detailed
information concerning the status of their environmental projects. Handex
Environmental's marketing costs will continue to increase due to the effects of
increased competition in the environmental industry and Handex Environmental's
strategy to diversify its client base.
Handex Environmental's customers have become increasingly cost conscious
during recent periods in part due to their own financial constraints. To date,
this cost consciousness on the part of customers has manifested itself primarily
in three areas: (i) the manner in which Handex Environmental obtains its
business and charges for its services; (ii) the use of other contractors to
provide certain services traditionally provided by Handex Environmental; and
(iii) an increasing preference to purchase, rather than lease, remediation
equipment.
Over the last four years, Handex Environmental has experienced a
significant increase in customer demand for competitive bidding and/or fixed
price contracts. During 1995 and 1994, a majority of Handex Environmental's
work was performed under fixed price contracts and unit prices. Price has become
the primary factor in the environmental remediation services market. However,
management believes that, over the long term, the quality and cost effectiveness
of its services will continue to be an important competitive advantage.
Accordingly, in responding to price competition, Handex Environmental will
attempt to maintain a high level of technical quality in its services.
A majority of Handex Environmental's major customers now purchase from
other contractors equipment and certain services, such as laboratory analyses,
which were formerly provided by or through Handex Environmental as part of its
full service approach. Management believes that this trend will continue.
Handex Environmental's quarterly results may fluctuate from period to
period. Among the principal factors influencing quarterly variations are
weather, which may limit the amount of time Handex Environmental's professional
and technical personnel have in the field; the addition of new professionals who
require training and initially bill a lower percentage of their time; the timing
of receipt of discharge and other permits necessary to install dewatering and
recovery systems, and the opening of new offices, which initially have higher
expenses relative to revenues than established offices.
In recent years, Handex Environmental's business has been helped
considerably by the cost reimbursement program maintained by the State of
Florida through the Florida Inland Protection Trust Fund. During the first
quarter of 1995, the Florida Inland Protection Trust Fund was revised by the
Florida legislature and now requires site prioritization and prior approval of
costs by the Florida Department of Environmental Protection for reimbursement of
cleanup expenditures. These revisions which were intended to assure its
economic integrity, have significantly limited the number and types of
environmental cleanup expenditures which would be reimbursable from the Fund and
have therefore, adversely affected Handex Environmental's operating results in
Florida and its overall operating results in 1995. Management believes that
these revisions will continue to have an adverse effect on Handex
Environmental's operations in Florida and the Company's environmental segment
results as a whole. During 1995, Handex Environmental acquired the assets of a
small environmental concern in Florida in a strategic move to partially offset
the revenue loss resulting from revisions to the Fund reimbursement program.
EDUCATIONAL BUSINESS SEGMENT
- - -----------------------------
The Company operates the educational segment of its business through its
subsidiary, New Horizons Education Corporation, and its subsidiaries ("New
Horizons") (collectively "New Horizons).
There are two distinct businesses in the educational segment; one operates
wholly-owned training centers, and the second, supplies systems of instruction,
sales and management concepts concerning computer training to independent
franchisees.
Revenues for the training centers operated by New Horizons consist
primarily of training fees and fees derived from sales of courseware materials.
Cost of sales consists primarily of instructors' salaries and benefits,
facilities costs such as rent, utilities and classroom equipment, courseware,
and computer hardware, software and peripherals. Selling, general and
administrative expenses consist primarily of costs associated with technical
support personnel, facilities support personnel, scheduling personnel, training
personnel, accounting and finance support and sales executives.
Revenues for the franchising operation consist primarily of initial
franchise fees associated with the sale of a franchise, royalty and advertising
fees based on a percentage of franchisee gross training revenues, and percentage
royalties received on the gross sales of courseware. Cost of sales consists
primarily of costs associated with franchise support personnel who provide
system guidelines and advice on daily operating issues including sales,
marketing, instructor training and general business problems. Selling, general
and administrative expenses consist primarily of technical support, courseware
development, accounting and finance support, national account sales support, and
advertising expenses.
RESULTS OF OPERATIONS
- - ----------------------
1995 VERSUS 1994
NET OPERATING REVENUES
- - -----------------------
Consolidated net operating revenues increased $17,683,0000 or 33.6% in 1995
compared to 1994. Consolidated net operating revenues of $70,254,000 in 1995
consisted of Handex Environmental's net operating revenues of $46,521,000 (66.2%
of consolidated net operating revenues) and New Horizons' net operating
revenues of $23,733,000 (33.8% of the consolidated net operating revenues).
Handex Environmental's net operating revenues decreased $61,000 or 0.1% in
1995 compared to 1994. Excluding operating locations which were opened in 1995
and 1994, Handex Environmental's net operating revenues declined $2,348,000 or
5.2% in 1995 compared to 1994. The decline in revenues came from Handex
Environmental's operating subsidiaries in New Jersey, Maryland, Illinois and
Florida, with the Florida subsidiary accounting for over 65% of the decline in
revenues. Handex Environmental's operating results in its Florida operations and
as a whole, were adversely impacted by the revisions in early 1995 to the
Florida Inland Protection Trust Fund which effectively limited the types of
environmental cleanup expenditures which would be reimbursable under the Fund.
Management believes these revisions will continue to have a significant adverse
impact on Handex Environmental's future operating results. Handex
Environmental's net operating revenues from its New Jersey, Maryland and
Illinois markets were adversely impacted by intense price-competition. The
operations of Handex Environmental's subsidiaries in Massachusetts, Ohio and
Colorado registered revenue growth ranging from 13% in New England to 109% in
Colorado.
New Horizons' net operating revenues increased $17,744,000 or 296.3% in
1995 compared to 1994 (1994 net operating revenues were for the period August
15, 1994 through December 31, 1994). In February 1995, New Horizons bought back
and converted the New York franchise to a company-owned operation. The New York
operations contributed $2,238,000 in net operating revenues for the year.
COST OF NET OPERATING REVENUES
- - -------------------------------
Consolidated cost of net operating revenues increased $12,200,000 or 37.1%
in 1995 compared to 1994. As a percentage of consolidated net operating
revenues, the consolidated cost of net operating revenues increased to 64.1% in
1995, from 62.5% in 1994. Consolidated cost of net operating revenues of
$45,066,000 in 1995 consisted of Handex Environmental's $31,902,000 (70.8% of
consolidated cost of net operating revenues) and New Horizons' $13,164,000
(29.2% of consolidated net operating revenues).
Handex Environmental's cost of net operating revenues increased $2,306,000
or 7.8% in 1995 compared to 1994. As a percentage of its net operating revenues,
Handex Environmental's cost of net operating revenues increased to 68.6% in 1995
from 63.5% in 1994. The increase in cost of net operating revenues, both in
terms of absolute dollars and as a percentage of net operating revenues, was due
primarily to a combination of lower than expected net operating revenues and
higher employee related expenses.
New Horizons' cost of net operating revenues increased $9,894,000 or 302.6%
in 1995 compared to 1994 which was for the period August 15, 1994 through
December 31, 1994. As a percentage of its net operating revenues, New Horizons'
cost of net operating revenues increased to 55.5% in 1995 from 54.6% in 1994.
The increase in cost of net operating revenue dollars was due primarily to the
1994 period consisting only of four and one-half months compared to a full year
for 1995. The increase in cost of net operating revenues as a percentage of net
operating revenues was due primarily to higher personnel and facilities costs
and higher operating costs relative to revenues associated with New Horizons'
start-up operations in Chicago and New York.
GROSS PROFIT
- - -------------
Consolidated gross profit increased $5,483,000 or 27.8% in 1995 compared to
1994. Consolidated gross profit of $25,188,000 consisted of Handex
Environmental's contribution of $14,619,000 (58.0% of consolidated gross profit)
and New Horizons' contribution of $10,569,000 (49.0% of consolidated gross
profit). As a percentage of consolidated net operating revenues, consolidated
gross profit declined to 35.9% in 1995 from 37.5% in 1994.
Handex Environmental's gross profit decreased $2,367,000 or 13.9% in 1995
compared to 1994. As a percentage of its net operating revenues, Handex
Environmental's gross profit declined to 31.4% in 1995, from 36.5% in 1994. The
decrease in gross profit, both in terms of absolute dollars and as a percentage
of net operating revenues, was due primarily to a combination of lower than
expected net operating revenues and higher employee related expenses and lower
margins on industrial jobs.
New Horizons' gross profit increased $7,850,000 or 288.6% in 1995 compared
to 1994 (four and one half month period). As a percentage of its net operating
revenues, New Horizons' gross profit declined to 44.5% in 1995 from 45.4% in
1994. The increase in gross profit dollars in 1995 compared to 1994 was due
principally to the 1994 period being significantly shorter than 1995. The
decline in gross profit as a percentage of net operating revenues was due
principally to higher facilities and employee related expenses and the expected
lower gross profit relative to revenues associated with New Horizons' start-up
operations in Chicago and New York.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- - ---------------------------------------------
Consolidated selling, general and administrative expenses increased
$7,825,000 or 48.4% in 1995 compared to 1994. Of the consolidated selling,
general and administrative expenses of $24,008,000, Handex Environmental
incurred $14,751,000 (61.4% of consolidated selling, general and administrative
expenses) and New Horizons incurred $9,257,000 (38.6% of consolidated selling,
general and administrative expenses).
Handex Environmental's selling, general and administrative expenses
increased $802,000 or 5.7% in 1995 compared to 1994. As a percentage of its net
operating revenues, Handex Environmental's selling, general and administrative
expenses increased to 31.7% in 1995 from 29.9% in 1994. The increase in selling,
general and administrative expenses both in terms of absolute dollars and as a
percentage of its net operating revenues was due primarily to lower than
expected net operating revenues combined with increased costs related to its
sales and marketing function and the new offices opened in 1995 and 1994.
New Horizons' selling, general and administrative expenses increased
$7,024,000 or 314.6% in 1995 compared to 1994 (four and one half month
period).As a percentage of its net operating revenues, New Horizons' selling,
general and administrative expenses increased to 39.0% in 1995, from 37.3% in
1994. The increase in New Horizons' in selling, general and administrative
expense dollars was primarily due to the 1994 period being significantly shorter
than 1995 and increased sales and marketing expenses. As a percentage of its net
operating revenues, New Horizons' selling, general and administrative expenses
increased primarily due to the lower revenues associated with its start-up
operations in Chicago and New York.
PROVISION FOR LOSS IN A JOINT VENTURE, ASSET WRITE-OFF AND TERMINATION EXPENSES
- - --------------------------------------------------------------------------------
In the third quarter of 1995, the Company recognized pre-tax charges
totaling $1,113,000 or 1.6% of consolidated net operating revenues. Of this
amount, $301,000 related to Handex Environmental and $812,000 pertained to New
Horizons.
In response to the softness in the environmental services market, Handex
Environmental undertook a reduction in its work force and accordingly recorded a
charge totaling $301,000, representing payments to employees who were released.
The Company, through one of its educational subsidiaries, has a minority
interest in a limited liability company that was formed to operate a New
Horizons' training center in Cleveland, Ohio. In accordance with the limited
liability company agreement, the Company, in addition to its asset and capital
contributions, is obligated to and provided financing for certain working
capital requirements of the limited liability company. During the third quarter
of 1995, an affiliate of the majority member in the limited liability company
filed for bankruptcy. The Company recorded a charge in the amount of $650,000,
representing the funds it had loaned to the limited liability company. The
Company has been managing this operation pending the resolution of the
bankruptcy issues pertaining to the venture's majority member. The Company also
recorded a charge in the amount of $162,000, representing the unamortized
portion of the developmental costs incurred for a management information system
which was abandoned by New Horizons in the third quarter.
OTHER INCOME/EXPENSE
- - ---------------------
Interest expense for 1995 increased to $101,000 from $37,000 in 1994. The
increase was primarily due to interest expense on New Horizons capital lease
obligations resulting from fixed asset additions. As a percentage of
consolidated net operating revenues, interest expense remained at .1% in 1995
and 1994. The Company has a credit facility with a commercial bank which has not
been used since June 1991.
Interest income decreased to $608,000 in 1995 from $789,000 in 1994. As a
percentage of consolidated net operating revenues, interest income decreased to
.9% in 1995 from 1.5% in 1994. The Company's interest income generated by its
investment in tax-free notes and bonds declined significantly in 1995 compared
to 1994 primarily due to the use of investment funds in the acquisition of New
Horizons. The decline in interest income as a percentage of net operating
revenues in 1995 was due to a combination of higher net operating revenues and
lower interest income resulting from the reduced funds available for placement
in tax-free investments.
Other expenses in 1995 increased to $698,000 from $409,000 in 1994.
Included in other expenses was goodwill amortization expense from the
acquisition of New Horizons which amounted to $366,000 in 1995 and $132,000 in
1994. (a partial year). In addition, other expenses in 1995 included a higher
provision for litigation expenses compared to 1994.
INCOME TAXES
- - --------------
The provision for income taxes for 1995 was due primarily to foreign taxes,
state income and franchise taxes of certain operating subsidiaries and certain
non-deductible items for income tax purposes.
NET INCOME (LOSS)
- - -----------------
Consolidated net loss for 1995 amounted to $193,000 compared to a
consolidated net income of $2,331,000 for 1994. As a percentage of consolidated
net operating revenues, consolidated net loss was .3% compared to a consolidated
net income of 4.4%.
Handex Environmental's 1995 operations resulted in a net loss of $146,000
compared to a net income of $2,153,000 in 1994. This was due primarily to a
combination of lower than expected revenues and higher employee related
expenses.
New Horizons operations for 1995 resulted in a net loss of $47,000 compared
to a net income of $174,000 for the four and one half month period in 1994. This
was due primarily to the one time charges totaling $812,000, discussed earlier
and the less than anticipated results from the start-up operations in Chicago
and New York.
RESULTS OF OPERATIONS
- - ----------------------
1994 VERSUS 1993
NET OPERATING REVENUES
- - -----------------------
The Company's net operating revenues increased $13,858,000 or 35.8% in 1994
compared to 1993. Net operating revenues of $52,571,000 in 1994 included New
Horizons net operating revenues of $5,989,000 for the period August 15, 1994
through December 31, 1994. These revenues represented 11.4% of the Company's
total net operating revenues for 1994. Handex Environmental's net operating
revenues of $46,582,000 reflect the improved market for environmental services
during 1994, the impact of Handex Environmental's focused marketing initiatives,
disciplined
geographical expansion program and comprehensive personnel training programs
which enhanced its competitiveness. Handex Environmental's net operating
revenues increased $7,869,000 or 20.3% in 1994 compared to 1993. Each of Handex
Environmental's subsidiaries which were in operation prior to 1993 reported
revenue growth which totaled 13.5% in 1994 compared to 1993.
New Horizons combined with Handex Environmental's subsidiaries which began
operations in 1994 and 1993, contributed over 17% of the Company's net operating
revenues for 1994.
COST OF NET OPERATING REVENUES
- - ------------------------------
The Company's cost of net operating revenues for 1994 increased $8,120,000
or 32.8% compared to 1993. As a percentage of net operating revenues, the
Company's cost of net operating revenues declined to 62.5% in 1994, from 63.9%
in 1993. Cost of net operating revenues for New Horizons for 1994 amounted to
$3,269,000 (54.6% of New Horizons' revenues) and accounted for 13.2% of the
increase over last year. Handex Environmental's cost of net operating revenues,
as a percentage of net operating revenues decreased to 63.5% from 63.9% in 1993.
The increase in Handex Environmental's cost of net operating revenues in
absolute dollars was primarily due to the hiring of additional employees,
increases in materials and supplies purchased, other expenses related to the
increase in the level of business and new offices opened in 1993 and 1994. As a
percentage of net operating revenues, Handex Environmental's cost of net
operating revenues declined mainly due to the growth in net operating revenues
and improved utilization of staff resulting from its comprehensive training
programs.
GROSS PROFIT
- - -------------
The Company's gross profit for 1994 increased $5,738,000 or 41.1% compared
to 1993. As a percentage of net operating revenues, the Company's gross profit
increased to 37.5% in 1994, from 36.1% in 1993. Gross profit from New Horizons
included in 1994 amounted to $2,720,000 (45.4% of New Horizons' revenues) and
accounted for 19.5 % of the increase over last year. Handex Environmental's
gross profit, as a percentage of net operating revenues, grew to 36.5%, from
36.1% in 1993. The improvement in Handex Environmental's gross profit, both in
absolute dollars and as a percentage of its net operating revenues was due
mainly to the growth in net operating revenues.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- - --------------------------------------------
The Company's selling, general and administrative expenses for 1994
increased $3,986,000 or 32.7% compared to the same period last year. As a
percentage of net operating revenues, the Company's selling, general and
administrative expenses decreased to 30.8% in 1994, from 31.5% in 1993. New
Horizons' operations incurred $2,233,000 in selling, general and administrative
expenses (37.3% of New Horizons' revenues) and accounted for 18.3% of the
increase over last year. Handex Environmental's selling, general and
administrative expenses, as a percentage of environmental net operating revenues
declined to 29.9% in 1994 from 31.5% in 1993. The increase in Handex
Environmental's selling, general and administrative expenses in absolute dollars
was due mainly to the increase in its marketing expenses, legal and professional
fees, fees associated with the hiring of professional staff and expenses related
to new offices opened in 1993 and 1994. The decrease in Handex Environmental's
selling, general and administrative expenses as a percentage of net operating
revenues was due largely to the growth in net operating revenues.
OTHER INCOME/EXPENSE
- - ---------------------
Interest expense for 1994 increased to $37,000 from $9,000 in 1993. The
increase was primarily due to interest expense on New Horizons loan obligations.
As a percentage of net operating revenues, interest expense increased to .1% in
1994 from 0% in 1993 primarily due to New Horizons' loan obligations. The
Company did not use its credit facility with a commercial bank.
Interest income of $789,000 in 1994 decreased slightly from $793,000 in
1993. As a percentage of net operating revenues, interest income decreased to
1.5% in 1994 from 2.0% in 1993. The Company's interest income generated by its
investment in tax-free notes and bonds declined significantly in 1994 compared
to 1993 primarily due to the use of investment funds in the acquisition of New
Horizons. This was offset largely by the increase in interest income generated
under a financing agreement between Handex Environmental and one of its
customers. The decline in interest income as a percentage of net operating
revenues in 1994 was due to a combination of higher net operating revenues and
lower interest income from the Company's tax-free investments.
Other expenses in 1994 increased to $409,000 from $360,000 in 1993.
Included in other expenses for 1994 was goodwill amortization expense of
$132,000 arising from the acquisition of New Horizons. Other expenses in 1994
also included a charge in the amount of $240,000 representing advances to a bio-
remediation contractor whose operations ceased during the year. This was offset
by the reversal to income of excess accrual for litigation expenses. As a
percentage of Handex Environmental's net operating revenues, Handex
Environmental's other expenses declined from .9% in 1993 to .6% in 1994, mainly
due to the higher level of net operating revenues and lower provision for
litigation expenses.
INCOME TAXES
- - ------------
The provision for income taxes as a percentage of income before income
taxes increased to 39.7% in 1994 from 37.4% in the year ago period. The increase
in the provision for income taxes was due primarily to the reduction in the
Company's tax-free interest income.
NET INCOME
- - ----------
Net income for 1994 increased $957,000 or 69.6% from the same period last
year. Included in net income for 1994 was New Horizons' contribution which
amounted to $174,000 (2.9% of New Horizons' revenues) and which represented
12.7% of the percentage increase over last year. Excluding the revenue and net
income contributions of New Horizons, net income for Handex Environmental as a
percentage of net operating revenues, increased to 4.6% in 1994 from 3.5% for
the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
As of December 30, 1995, the Company's working capital was $23,198,000, and
its cash and cash equivalents and short-term investment totaled $6,596,000.
Working capital as of December 30, 1995 reflected a decrease of $1,468,000 from
$24,666,000, as of December 31, 1994. The Company's cash flow from operating
activities improved to $4,782,000 in 1995 from $399,000 in 1994 primarily due to
cash provided by increased depreciation and amortization expenses, lower growth
in accounts receivable balance, and increases in accounts payable and accrued
expenses. As of March 12, 1996, the Company has renegotiated an extension to
June 30, 1998 of its unsecured $5,500,000 credit facility with a commercial bank
under substantially the same terms and conditions prior to the extension. This
facility, which the Company has not used since June 1991, bears interest at
either the bank's prime rate, or the bank's short-term money market rate,
whichever the Company elects.
The Company's full service approach to its environmental services business
in certain markets and its continuing geographic expansion require capital
expenditures for machinery and equipment and expenditures related with the
establishment of new office locations. During 1995, the Company's environmental
segment spent approximately $1,300,000 on capital equipment and anticipates
spending up to $2,300,000 in 1996.
The nature of the Company's educational business segment also requires
significant cash commitments for the acquisition of computer equipment, software
and facilities. During 1995, the Company's educational segment spent
approximately $2,700,000 for capital equipment and leasehold improvements and
anticipates spending up to $3,200,000 in 1996.
Management believes that current cash and cash equivalents, together with
cash generated by operations, and its funds available under its revolving credit
facility will provide the liquidity necessary to support its current and
anticipated capital expenditures through the end of 1996.
IMPACTS OF ACCOUNTING PRONOUNCEMENTS
- - -------------------------------------
The Company's management is not aware of any current recommendations by
regulatory authorities which, if they were implemented, would have a material
effect on the liquidity, capital resources or operations of the Company.
However, the potential impact of Statement of Accounting Financial Standards
("SFAS 123") warrants further discussion.
SFAS 123, which will be effective in 1996, provides elective accounting
for stock-based employee compensation arrangements using a fair value model.
Companies currently accounting for such arrangement under APB Opinion 25
"Accounting for Stock Issued to Employees," may continue to do so; however, SFAS
123 supersedes the disclosure requirements of Opinion 25. The Company does not
believe that adoption of SFAS 123 will have a significant impact on net income
but will increase disclosure requirements for stock-based compensation.
All other applicable Statements of Financial Accounting Standards that
have been issued and have effective dates impacting 1995 and prior years'
financial statements have been adopted by the Company. The Company believes
there are no Statements of Financial Accounting Standards which have been issued
and have implementation dates in the future which will materially impact the
financial statements of future years.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following pages contain the Financial Statements and supplementary data
specified for Item 8 of Part II of Form 10-K.
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
HANDEX CORPORATION INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 30, 1995
Page
REPORT OF INDEPENDENT AUDITORS F-2
FINANCIAL STATEMENTS
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 - F-15
SCHEDULES
Schedule II - Valuation and Qualifying
Accounts and Reserves 20
All other schedules have been omitted because the material is not applicable or
is not required as permitted by the rules and regulations of the Commission, or
the required information is included in Notes to Consolidated Financial
Statements.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Handex Corporation:
We have audited the consolidated financial statements of Handex Corporation and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and the financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and the financial statement schedule
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Handex Corporation
and subsidiaries as of December 30, 1995 and December 31, 1994, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 30, 1995 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Markwick LLP
Cleveland, Ohio
February 16, 1996
<TABLE>
CONSOLIDATED BALANCE SHEETS
HANDEX CORPORATION AND SUBSIDIARIES
DECEMBER 30, 1995 AND DECEMBER 31, 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,821,474 $ 2,895,478
Marketable securities 2,775,000 3,940,000
Accounts receivable, less allowance for
doubtful accounts of $981,745 in 1995
and $934,560 in 1994 (note 3) 30,001,497 26,854,906
Inventories 539,491 298,326
Prepaid expenses 606,005 214,198
Refundable income tax 666,060 388,682
Deferred income tax assets (notes 1 and 4) 705,453 609,668
Other current assets 321,846 394,948
----------- -----------
Total current assets 39,436,826 35,596,206
----------- -----------
Property, Plant and equipment, at cost:
(note 2)
Land 517,053 518,478
Buildings and improvements 2,711,807 2,347,918
Machinery and equipment 15,431,033 12,479,364
Furniture and fixtures 2,955,294 2,284,281
Motor vehicles 5,249,370 5,087,435
----------- -----------
26,864,557 22,717,476
Less accumulated depreciation and
amortization (17,221,433) (13,980,868)
------------ -----------
Net property, plant and equipment 9,643,124 8,736,608
Excess of cost over net assets of acquired
companies, net of accumulated amortization
of $842,095 in 1995 and $421,357 in 1994 16,121,258 15,921,530
Cash surrender value of life insurance 909,839 1,054,426
Other assets (notes 5 and 13) 978,335 611,367
----------- -----------
$ 67,089,382 $ 61,920,137
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term
obligations (note 2) $ 447,227 $ 579,991
Accounts payable 7,896,838 4,523,848
Other liabilities (note 6) 7,894,616 5,826,066
----------- -----------
Total current liabilities 16,238,681 10,929,905
Long-term obligations, excluding current 649,941 464,357
installments (note 2)
Deferred income tax liability (notes 1 and 4) 772,466 888,516
Stockholders' equity:
Preferred stock without par value,
2,000,000 shares authorized, no
shares issued -- --
Common stock, $.01 par value, 15,000,000
shares authorized; issued, 7,050,212
shares in 1995 and 1994 70,502 70,502
Additional paid in capital 24,349,542 24,365,566
Retained Earnings 26,306,375 26,499,416
Treasury stock at cost - 185,000 shares in
1995 and 1994 (note 1) (1,298,125) (1,298,125)
----------- -----------
Total stockholders' equity 49,428,294 49,637,359
Commitments and contingencies (notes 9, 13
and 15) -- --
----------- -----------
$ 67,089,382 $ 61,920,137
=========== ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
HANDEX CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Total operating revenues $85,271,557 $64,772,555 $48,194,334
Subcontractor costs 15,017,661 12,201,809 9,481,455
----------- ----------- -----------
Net operating revenues (note 3) 70,253,896 52,570,746 38,712,879
Cost of net operating revenues 45,065,597 32,865,469 24,745,121
----------- ----------- -----------
Gross profit 25,188,299 19,705,277 13,967,758
Selling, general and
administrative expenses 24,007,696 16,182,303 12,196,284
Provision for loss in a joint
venture, asset write-off and
termination expenses (note 12) 1,113,167 -- --
Other income (expense):
Interest expense (100,891) (37,042) (8,601)
Interest income 607,728 789,097 792,743
Other (697,805) (409,190) (360,260)
------------ ----------- -----------
(190,968) 342,865 423,882
------------ ----------- -----------
(Loss) income before income taxes (123,532) 3,865,839 2,195,356
Provision for income taxes (note 4) 69,509 1,534,797 821,144
----------- ----------- ------------
Net (loss) income $ (193,041) 2,331,042 1,374,212
=========== =========== ============
Net (loss) income per share of
Common stock $ (0.03) $ 0.34 $ 0.20
=========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE> CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
HANDEX CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------- -------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 6,940,212 $ 70,402 $24,119,669 $22,794,162 $(731,250) $46,252,983
Repurchase of Treasury stock (85,000) -- -- -- (566,875) (566,875)
Net income, year ended
January 1, 1994 -- -- -- 1,374,212 -- 1,374,212
---------- --------- ----------- ----------- ----------- ----------
BALANCE AT JANUARY 1, 1994 6,855,212 70,402 24,119,669 24,168,374 (1,298,125) 47,060,320
Issuance of Common stock
for stock options 10,000 100 64,900 -- -- 65,000
Income tax benefit from the
exercise of stock options -- -- 1,997 -- -- 1,997
Issuance of warrants on
Common stock -- -- 179,000 -- -- 179,000
Net income, year ended
December 31, 1994 -- -- -- 2,331,042 -- 2,331,042
---------- --------- ---------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1994 6,865,212 70,502 24,365,566 26,499,416 (1,298,125) 49,637,359
Registration expense for
warrants issued in 1994 -- -- (16,024) -- -- (16,024)
Net loss, year ended
December 30, 1995 -- -- -- (193,041) -- (193,041)
---------- --------- ----------- ---------- ---------- ----------
BALANCE AT DECEMBER 30, 1995 6,865,212 $ 70,502 $24,349,542 $26,306,375 ($1,298,125) $49,428,294
========== ========= =========== =========== =========== ===========
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
HANDEX CORPORATION AND SUBSIDIARIES
YEARS ENDED DECEMBER 30, 1995, DECEMBER 31, 1994 AND JANUARY 1, 1994
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net (loss) income $(193,041) $2,331,042 $1,374,212
ADJUSTMENTS TO RECONCILE NET
INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 3,951,496 2,664,871 2,685,448
Gain on disposal of equipment (6,284) (42,711) (33,325)
Deferred taxes (211,835) 29,706 (327,102)
Cash provided (used) from the
change in:
Accounts receivable (3,146,591) (8,646,814) (1,384,659)
Inventories (241,165) (40,020) 41,143
Prepaid expenses (391,807) 211,879 (270,838)
Other current assets 73,102 368,872 (246,712)
Other assets and cash
surrender value of life
insurance (216,213) (177,392) (714,131)
Accounts payable 3,372,990 2,511,641 417,745
Other liabilities and
income taxes payable/
refundable 1,791,172 1,187,471 1,047,595
---------- ----------- -----------
Net cash provided by
operating activities 4,781,784 398,545 2,589,376
----------- ------------ -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of marketable
securities, (5,775,000) (17,855,000) (40,570,000)
Redemption of marketable
securities 6.940,000 37,010,000 39,865,000
Additions to property, plant
and equipment (4,189,036) (3,476,238) (541,096)
Cash paid for acquired
companies, net of cash
acquired. (868,589) (14,531,722) --
------------- ------------ ----------
Net cash provided (used) in
investing activities (3,892,625) 1,147,040 (1,246,096)
-------------- ------------ -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
common stock -- 65,000 --
Registration expenses on
warrants issued (16,024) -- --
Proceeds from debt obligations 766,992 556,030 --
Repurchase of treasury stock -- -- (566,875)
Principal payments on debt
obligations (714,171) (153,960) --
------------- ------------- ----------
Net cash provided (used) in
financing activities 36,797 467,070 (566,875)
-------------- ------------- ----------
Net increase in cash and cash
equivalents 925,996 2,012,655 776,405
Cash and cash equivalents at
beginning of period 2,895,478 882,823 106,418
------------ ----------- ----------
Cash and cash equivalents at end
of period $ 3,821,474 $2,895,478 $ 882,823
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION
Cash was paid for:
Interest $ 104,460 $ 37,042 $ 8,601
=========== =========== =========
Income taxes $ 568,650 $2,144,135 $ 872,390
=========== =========== ==========
Investing and financing activities
- - ----------------------------------
In 1995, the Company acquired certain assets of New Horizons' New York franchise
and a Florida based environmental concern for an aggregate cash price and
related expenses of approximately $830,000. There were no liabilities assumed in
either acquisition.
In August 1994, the Company acquired certain assets and liabilities of a
computer training school and all the issued and outstanding shares of stock of a
computer training franchising company in August, 1994 at an aggregate cash price
of $14,000,000 and related cash expenses of approximately $600,000 and non-cash
expense of $179,000. The non-cash expense represents the excess of the fair
market value over the issue price on warrants on 40,000 shares of Handex's
Common stock. Liabilities assumed totaled $2,446,000.
<FN>
See accompanying notes to consolidated financial statements
</TABLE>
HANDEX CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 30, 1995, December 31, 1994 and January 1, 1994
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------------
(a) Nature of Operations
---------------------
The Company conducts two distinct lines of business; an Environmental
segment which provides environmental consulting and remediation
services, and has been the Company's core business since it was
acquired in 1986, and; an Educational segment, which was acquired in
1994 and provides a variety of computer training services to employer-
sponsored enrollees.
(b) Basis of Accounting and Principles of Consolidation
---------------------------------------------------
The consolidated financial statements include the accounts of Handex
Corporation, and its subsidiaries, all of which are wholly owned.
All significant intercompany balances and transactions have been
eliminated in consolidation.
In August 1992, the Company's Board of Directors authorized the
purchase of up to 500,000 shares of Handex's Common stock in the open
market or in private transactions. The repurchase program lasted
through June 30, 1993, and was limited to an aggregate expenditure of
$4,500,000. The Company had repurchased 185,000 shares of the Common
stock under this program at an aggregate cost of $1,298,125.
(c) Revenue Recognition
---------------------
Revenue is recognized at the time work is performed and services are
rendered.
(d) Marketable Securities
----------------------
Funds retained for future use in the business are temporarily invested
in tax-exempt bonds and municipal funds.
Effective January 2, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 "Accounting for Certain Investments in
debt and Securities" ("SFAS 115"). SFAS 115 requires the accounting
for certain investments in debt and equity securities based on
certain specific guidelines.
The Company's investments are presented at their aggregate face value.
Amounts paid over face value are amortized through maturity.
Unamortized premiums amounted to $3,775 and are included in other
current assets. As of December 30, 1995 and December 31, 1994, the
Company's security portfolio had aggregate fair market values of
$2,775,000 and $3,945,350, respectively. There were no unrealized
gains or losses as of December 30, 1995. There were also no gains or
losses realized from the redemption of securities during the year.
(e) Inventories
------------
Inventories are stated at the lower of cost or market. Inventory
costs are determined using the first-in, first-out (FIFO) method.
(f) Property, Plant and Equipment
------------------------------
Property, plant and equipment are stated at cost.
Depreciation is provided over the estimated useful lives of the
respective assets, using the straight line method as follows:
Buildings and improvement 25 years or term of the lease whichever
is shorter
Machinery and equipment 3 to 5 years
Furniture and fixtures 5 to 10 years
Motor vehicles 5 years
(g) Income Taxes
-------------
The Company accounts for income taxes under the asset and liability
method. Under this method, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, and
operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years when those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
(h) Excess of Cost Over Net Assets Acquired
---------------------------------------
The excess of cost over net assets acquired is being amortized on a
straight-line basis principally over 40 years.
(i) Asset Impairments
-----------------
The Company periodically reviews the carrying value of certain of its
assets in relation to historical results, current business conditions
and trends to identify potential situations in which the carrying
value of assets may not be recoverable. Such assets would include,
cost in excess of fair market value of net assets of acquired
businesses and other identifiable intangible assets. If such reviews
indicate that the carrying value of such assets may not be
recoverable, the Company would estimate the undiscounted sum of the
expected future cash flows to determine if they are less than the
carrying value of such assets to ascertain if a permanent impairment
has occurred. The carrying value of any impaired assets will be
reduced to fair market value.
(j) Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments with purchased maturities of three
months or less to be cash equivalents.
(k) Net Income Per Share
---------------------
The computation of net income per share of Common stock is based on
the average number of shares outstanding during each year. Inclusion
of the incremental shares applicable to outstanding stock options in
the computation using the treasury stock method would have no material
dilutive effect. Dilutive options are not considered in the
calculation of net loss per share.
The average number of shares outstanding used in determining net
income per share was 6,865,212 in 1995, 6,863,069 in 1994, and
6,881,267 in 1993.
(l) Use of Estimates
-----------------
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
(m) Reclassification
------------------
Certain items on the 1994 and 1993 consolidated statements of income
have been reclassified to conform to the 1995 presentation.
2. LONG-TERM OBLIGATIONS
------------------------
The Company's debt and capital lease obligations represent indebtedness of
New Horizons as follows:
1995 1994
---- ------
Notes payable to bank with interest rates $ -- $304,776
adjusted to prime (8.5% at December 30, 1995),
plus up to 2.5%, paid in full in February 1995,
secured by certain assets of New Horizons
Note payable to bank at 9.99% interest rate, 170,421 253,349
payable in monthly installments of $9,306,
secured by certain assets of New Horizons
Note payable to a former franchisee, non- -- 35,000
interest bearing, unsecured, paid in full in
January 1995
Amounts due under non-cancelable leases 1,101,655 520,838
accounted for as capital leases. These leases
have effective interest rates ranging from 8.5%
to 12.3% per annum
Amount of capital leases representing interest (174,908) (69,615)
--------- --------
Present value of minimum lease payments 926,747 451,223
Less: current portion of notes payable and lease
obligations 447,227 579,991
--------- --------
$ 649,941 $ 464,357
========= ---------
The following is a summary of future payments required under the above
obligations:
DEBT LEASE
----- ------
1996 $ 99,889 $ 432,049
1997 70,532 345,130
1998 -- 218,211
1999 -- 102,605
2000 -- 3,660
2001 and after -- --
Included in the Company's plant, property and equipment is New Horizons'
equipment under capital leases amounting to $1,272,860, net of accumulated
amortization of $410,540.
The Company has received a firm commitment from a commercial bank for an
unsecured credit facility which provides a maximum credit of $5,500,000
through June 30, 1998. This credit facility bears interest at the
Company's preference of either the prime rate or LIBOR. The Company is
required to pay a fee of 1/4 of 1% of the unused balance of the facility.
3. BUSINESS AND CREDIT CONCENTRATION
----------------------------------
Handex Environmental's primary customers are major petroleum companies who
store petroleum products in underground storage tanks. New Horizons'
customers are predominantly employer-sponsored individuals from
corporations, professional service organizations, government agencies and
municipalities.
Handex Environmental has certain customers which, in one or more of the
last three years, accounted for 10% or more of both its total and net
operating revenues. The approximate total and net operating revenues for
these customers are as follows:
1995 1994 1993
----- ----- ------
Total operating revenues:
Customer 1 $ 9,267,000 $10,567,000 $9,049,000
Customer 2 6,890,000 8,592,000 7,391,000
Customer 3 6,283,000 7,306,000 7,241,000
Customer 4 4,895,000 6,138,000 5,359,000
----------- ------------ -----------
Total $27,335,000 $32,603,000 $29,040,000
=========== =========== ============
Net operating revenues:
Customer 1 $ 7,387,000 $ 8,544,000 $ 7,294,000
Customer 2 5,833,000 7,542,000 6,489,000
Customer 3 5,291,000 6,131,000 6,415,000
Customer 4 3,890,000 4,812,000 4,244,000
------------ ----------- ------------
Total $22,401,000 $27,029,000 $24,442,000
=========== =========== ===========
As of December 30, 1995 Handex Environmental's receivables from such
customers amounted to approximately $9,700,000.
New Horizons has no individual customer which accounts for 10% or more of
its operating revenues for 1995 and 1994.
4. INCOME TAXES
--------------
Income tax expense for the periods below differs from the amounts computed
by applying the U.S. federal income tax rate of 34 percent to the pretax
income as a result of the following:
1995 1994 1993
------ ------ ------
Computed "expected" tax
expense (benefit) $ (42,001) $1,314,385 $ 746,421
Amortization of excess of
cost over net assets
acquired 31,600 22,450 16,950
State and local tax
expense, net of Federal
income tax effect 62,300 287,200 232,100
Foreign income tax 36,740 6,351 --
Interest income from tax-
free investments (64,200) (149,800) (205,200)
Meals and entertainment 40,464 49,124 19,657
Other 4,606 5,087 11,216
--------- ---------- -----------
Income tax expense $ 69,509 $ 1,534,797 $ 821,144
========== =========== ============
Effective rates N/A 39.7% 37.4%
========== ========== ===========
Income tax expense
consists of:
1995 1994 1993
----- ----- -----
Federal
Current $ 150,285 $ 1,131,620 $ 760,000
Deferred (211,835) (2,281) (242,509)
State and local 94,319 399,107 303,653
Foreign 36,740 6,351 --
------------ ----------- ----------
$ 69,509 $ 1,534,797 $ 821,144
============ ============ ===========
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 30, 1995 and
December 31, 1994, are presented below:
DECEMBER 30, DECEMBER 31,
1995 1994
----- -----
Deferred tax assets:
Accounts receivable, principally due
to allowance for doubtful accounts $ 392,698 $ 373,824
Reserve for uninsured losses and
litigation 232,064 188,250
Loss on joint venture 260,000 --
Other 80,691 47,594
------------ -----------
Total gross deferred tax assets 965,453 609,668
Less valuation allowance -- --
----------- -----------
Net deferred tax assets 965,453 609,668
----------- -----------
Deferred tax liability:
Property, plant and equipment,
principally due to differences in
depreciation (724,164) (805,920)
Excess of cost over net assets of
acquired company (308,302) (82,596)
------------ -----------
Deferred tax liability (1,032,466) (888,516)
------------- -----------
Net deferred tax liability $ (67,013) $(278,848)
============== ============
There is no valuation allowance required at December 30, 1995 and December
31, 1994.
5. NOTES RECEIVABLE FROM OFFICERS
-------------------------------
Included in other assets are notes receivable from certain officers of the
Company in the aggregate amount of $468,610. One of the notes is payable
on or before September 30, 1997 and is fully secured by a mortgage on real
estate to which the loan proceeds were applied; the others are demand notes
secured by the proceeds from certain life insurance policies.
6. OTHER LIABILITIES
-----------------
Other liabilities consist of:
1995 1994
----- -----
Sales taxes payable $ 620,347 $ 713,617
Salaries, wages and bonuses payable 1,795,787 1,264,405
Amounts received on behalf of a
customer 1,205,424 1,542,451
Deferred revenues 1,564,096 994,167
Allowance for uninsured claims 250,161 270,624
Allowance for litigation expenses 330,000 200,000
Other 2,128,801 840,802
----------- ------------
$ 7,894,616 $ 5,826,066
=========== ============
7. EMPLOYEE SAVINGS PLAN
---------------------
The Company has a 401(k) Profit Sharing Trust and Plan in which all
employees in its environmental business segment not currently covered by a
collective bargaining agreement are eligible to participate. None of the
Company's employees are covered by any collective bargaining agreement.
The Company, at its option, matches each participant's contribution to the
Plan at the rate of 50% of up to 6% of each participant's compensation, up
to the maximum allowable under the Internal Revenue Code. Employer
contributions for the years ended December 30, 1995, December 31, 1994, and
January 1, 1994 totaled $360,551, $269,068 and $235,384 respectively.
Employees vest in the Company contributions at a rate of 20% per year based
upon years of service. A similar, but non-contributory plan is in place
for New Horizons' employees.
8. STOCK OPTION PLAN
------------------
The Company maintains a key employee stock option plan which provides for
the issuance of non-qualified options, incentive stock options and stock
appreciation rights. The plan currently provides for the granting of
options to purchase up to 1,200,000 shares of common stock. Incentive
stock options are exercisable for up to ten years, at an option price of
not less than the market price on the date the option is granted or at a
price of not less than 110% of the market price in the case of an option
granted to an individual who, at the time of grant, owns more than 10% of
the Company's Common stock. Non-qualified stock options may be issued at
such exercise price and on such other terms and conditions as the
Compensation Committee of the Board of Directors may determine. Optionees
may also be granted stock appreciation rights under which they may, in lieu
of exercising an option, elect to receive cash or Common stock, or a
combination thereof, equal to the excess of the market price of the Common
stock over the option price. All options were granted at fair market value
at dates of grant.
The stock option plan for directors who are not employees of the Company
provides for the issuance of up to 75,000 shares of Common stock and may be
issued at such price per share and on such other terms and conditions as
the Compensation Committee may determine. All options were granted at fair
market value at dates of grant.
The following table summarizes all transactions during 1995 and 1994 under
the Stock Option Plans.
1995 1994
----- -----
Options outstanding at beginning of
year (number of shares):
Key employees 723,900 506,500
Outside directors 24,750 24,750
Options granted (number of shares):
Key employees 30,739 253,000
Outside directors -- --
Average grant price:
Key employees $ 6.00 $ 7.96
Outside directors -- --
Options exercised (number of shares):
Key employees -- 10,000
Outside directors -- --
Average exercise price:
Key employees $ -- $ 6.50
Outside directors --
Options canceled (number of shares):
Key employees 40,900 25,600
Outside directors -- --
Options outstanding at end of year
(number of shares):
Key employees 713,739 723,900
Outside directors 24,750 24,750
Option price range:
Key employees $5.80 - $ 9.00 $5.80 - $ 9.00
Outside directors $6.50 - $11.20 $6.50 - $11.20
Options exercisable (number of
shares):
Key employees 399,500 279,700
Outside directors 24,750 24,750
Aggregate price of exercisable options
Key employees $ 2,891,810 $ 2,011,345
Outside directors 230,200 230,200
Options available for future grants
(number of shares):
Key employees 270,761 260,600
Outside directors 46,250 46,250
9. LEASES
------
The Company, is obligated under operating leases primarily for office space
and training facilities, with rental arrangements for various periods of
time ending through 2003. These leases provide for minimum fixed rents for
the following fiscal years as follows: 1996, $2,174,074; 1997, $1,854,220;
1998, $1,501,317; 1999, $1,329,248; 2000, $1,166,686; and 2001 and after,
$3,250,527 excluding the related-party lease described below. Rent expense
was $2,302,068, $1,370,365, and $1,287,231, during the years ended December
30, 1995, December 31, 1994, and January 1, 1994, respectively.
A subsidiary of the Company leased a building from a partnership comprised
of related parties. Rent under this lease, which commenced in June 1987
and was scheduled to expire in June 1999, was $36,000 for each of the years
ended December 30, 1995, December 31, 1994, and January 1, 1994. On
January 15, 1996, the Company purchased this property.
10. SEGMENT INFORMATION AND REPORTING
----------------------------------
In 1995, the Company acquired the assets of New Horizons' franchise in New
York and a Florida based environmental concern for an aggregate cash price
and related expenses of $830,000. These acquisitions have been accounted as
purchases, and accordingly the purchase prices have been allocated to
assets based upon the Company's estimate of their fair market values. The
aggregate purchase price and related expenses exceeded the fair values of
the assets by $597,000 and are included in Goodwill. .
On August 15, 1994, the Company, through New Horizons, acquired
substantially all of the assets of New Horizons Computer Learning Center,
Inc. and all of the issued and outstanding shares of stock of New Horizons
Franchising, Inc. for an aggregate cash price of $14,000,000. During 1994,
New Horizons also acquired certain assets of franchises covering the
Chicago and Cleveland markets. In February 1995, New Horizons contributed
the Cleveland assets to a newly formed joint venture in exchange for a
minority interest. The joint venture operates the Cleveland franchise.
Also in February 1995, New Horizons acquired certain assets of the
franchise covering the metropolitan New York market. New Horizons
specializes in providing instructor-led training in the use of computers
and computer software, offering courses in PC software applications,
networking, and work stations. Training is provided at New Horizons' owned
training centers located in Santa Ana, California, Chicago, Illinois, and
New York, New York. Franchising is engaged in the business of offering
systems of instructions, sales and management concepts for training in the
use of computers and computer system through the sale of franchises
throughout the United States and internationally.
These acquisitions have been accounted for as purchases, and accordingly
the purchase prices have been allocated to assets and liabilities based
upon New Horizon's estimate of their fair market values. The aggregate
purchase price and related expenses exceeded the fair values of assets and
liabilities by $14,393,077 and are included in Goodwill.
Prior to August 15, 1994, the Company's business operations were
concentrated in the environmental services industry. With the acquisition
of New Horizons, the Company extended its operations into the computer
training industry.
Information about the Company's segment operating data for 1995 follows:
NEW
ENVIRONMENTAL HORIZONS CORPORATE CONSOLIDATED
------------- ---------- ----------- ------------
Net operating
revenues $46,520,688 $23,733,208 $ -- $70,253,896
Gross Profit 14,619,091 10,569,208 -- 25,188,299
Identifiable 34,455,894 23,613,435 9,020,053 67,089,382
assets (a)
Capital 1,302,116(b) 2,730,467(b) 156,453 4,189,036
expenditures
Depreciation and 2,056,811 1,724,073(c) 170,612 3,951,496
amortization
(a) Identifiable assets are those used in the operation of each
segment. Corporate assets consist primarily of cash and
short-term marketable securities.
(b) Excludes assets of $232,675 from acquired companies.
(c) Includes write-off of the unamortized cost of management
software in the amount of $161,749.
New Horizons has no assets outside the United States and derives revenues
from the sale of franchises and royalties based on certain revenues of
licensed franchises. During 1995 revenues derived from the sale of
franchises and royalties derived from franchised operations outside the
United States amounted to approximately $681,000.
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
------------------------------------
Summarized quarterly financial data for 1995 and 1994 are as follows (in
thousands, except per share data):
INCOME
(LOSS)
NET BEFORE NET EARNINGS
OPERATING GROSS INCOME INCOME (LOSS)
YEAR QUARTER REVENUES PROFIT TAXES (LOSS) PER SHARE
---- ------- --------- ------- ------- ------- --------
1995 First $ 17,001 $ 6,221 $ 453 $ 274 $ .04
Second 17,074 6,520 612 335 .05
Third 17,757 6,428 (942) (608) (.09)
Fourth 18,422 6,019 (247) (194) (.03)
1994 First $ 9,806 $ 3,188 $ 74 $ 60 $ .01
Second 11,876 4,545 1,103 677 .10
Third 14,338 5,527 1,428 858 .12
Fourth 16,551 6,445 1,261 736 .11
The fourth quarter of 1994 reflects adjustments aggregating to
approximately $200,000 for excess provision for vacation, holiday, major
medical and dental expenses. The quarter also reflects the write-off to
expense of advances to a bio-remediation contractor amounting to $240,000
which was partially offset by the reversal to income of excess provision
for litigation expenses.
12. PROVISION FOR LOSS IN A JOINT VENTURE, ASSET WRITE-OFF AND TERMINATION
EXPENSES
-----------------------------------------------------------------------
In February 1995, one of the Company's education subsidiaries acquired a
minority interest in a limited liability company by contributing the
assets of its Cleveland operations and cash. In the third quarter of 1995,
an affiliate of the venture's majority member filed for bankruptcy and the
Company has assumed the management of these operations pending settlement
of the bankruptcy issues. The Company estimates and has provided for the
estimated loss on the joint venture in the amount of $650,000.
In addition, one of the Company's education subsidiaries wrote-off the
unamortized developmental costs of a software program which had been in
development prior to its acquisition by the Company in August 1994. The
write-off amounted to $161,748.
In the environmental segment, the Company reduced its work force in
response to softness in its environmental business and recorded a charge in
the amount of $301,419 for related termination costs.
These charges combined, all of which were recorded in the third quarter of
1995, totaled $1,113,167 before tax and on an after-tax basis, had a $0.10
impact on net income per share.
13. CAPTIVE INSURANCE COMPANY
--------------------------
In February 1992, the Company purchased stock in a holding company which
owns a captive insurance company through which the Company obtains its
general liability insurance coverage. The stock purchase price of $476,250
was paid by $158,750 in cash, which is reflected in other non-current
assets in the accompanying financial statements, and the balance is secured
by an irrevocable letter of credit. As of December 30, 1995, there has not
been any draw against the letter of credit. The Company has no obligations
to the holding company/captive insurance group other than the amount
represented by the letter of credit and as a shareholder and director of
the holding company. The Company owns 1 share (3.3%) of the 30 shares of
common stock, and 466.25 shares (23.3%) of 1,996.79 shares of Preferred
stock, Series A, issued and outstanding as of December 30, 1995.
14. FINANCIAL INSTRUMENTS
----------------------
The carrying value of cash and cash equivalents, accounts receivable,
accounts payable, and accrued liabilities is considered to approximate
their fair value due to the short maturity of these instruments.
Marketable securities are shown at fair value. Debt instruments are not
significant.
15. COMMITMENTS AND CONTINGENCIES
------------------------------
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
16. CHANGE IN FISCAL YEAR
-----------------------
On December 18, 1992, the Board of Directors approved a change in the
Company's fiscal year from one ending on December 31st of each year to a
52-53 week fiscal year ending on the Saturday nearest the last day of
December. Fiscal 1995 ended on December 30, 1995. Fiscal 1994 ended on
December 31, 1994. Fiscal 1993, the first fiscal year under this change,
ended on January 1, 1994. All references to 1993 in the financial
statements refer to the fiscal year ended January 1, 1994. The Company
filed a Form 8-K report on December 31, 1992.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
---------
The information required by this Item 10 as to the Directors of the
Company is incorporated herein by reference to the information set forth under
the caption "Election of Directors" in the Company's definitive Proxy Statement
for the Annual Meeting of Stockholders to be held on May 7, 1996, since such
Proxy Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year pursuant to
Regulation 14A. Information required by this Item 10 as to the executive
officers of the Company is included in Part I of this Annual Report on Form
10-K.
EXECUTIVE OFFICERS OF THE REGISTRANT*
-------------------------------------
The following is a list of the executive officers of the Company. The
executive officers are elected each year and serve at the pleasure of the Board
of Directors.
NAME AGE POSITION
- - ---- --- ---------
Curtis Lee Smith, Jr. 68 Chairman of the Board and
Chief Executive Officer
Thomas J. Bresnan 43 President and Chief Operating Officer
P. Craig Modesitt 39 Vice President, Sales and Marketing
Stuart O. Smith 63 Vice Chairman of the Board,
Chief Development Officer and Secretary
John T. St. James 49 Vice President, Treasurer and
Chief Financial Officer
*The description of executive officers called for in this Item is included
pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K.
Set forth below is a brief description of the background of those executive
officers of the Company who are not Directors of the Company. Information with
respect to the background of those executive officers who are also Directors of
the Company is incorporated herein by reference as set forth in Part III, Item
10, of the Company's Annual Report on Form 10-K.
JOHN T. ST. JAMES joined the Company in December 1988 and was elected its
Treasurer in January 1989, Chief Financial Officer in February 1989 and Vice
President in February 1991. Prior to joining the Company, Mr. St. James served
as Vice President and Chief Financial Officer for B.A.T.U.S., Inc., an operator
of retail concerns, from 1984 to 1987, as Vice President and Chief Financial
Officer for the Henri Bendel division of The Limited, Inc., and operator of
retail clothing stores, from 1987 to 1988; and as Vice President - Financial
Operations/Control for Brooks Fashions, Inc., an operator of retail clothing
stores, for a brief period during 1988.
P. CRAIG MODESITT joined the Company in August 1993 and was elected Vice
President, Sales and Marketing. From 1979 until that time, he was with Ejector
Systems, Inc., as both a founder and Vice President of Sales and Marketing.
Ejector Systems, Inc. is a privately-held manufacturer of groundwater
remediation equipment.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated by reference to
the information set forth under the caption "Compensation of Directors and
Executive Officers" in the Company's definitive Proxy Statement for the Annual
Meeting of Stockholders to be held on May 7, 1996, since such Proxy Statement
will be filed with the Securities and Exchange Commission not later than 120
days after the end of the Company's fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is incorporated by reference to
the information set forth under the caption "Share Ownership of Principal
Holders and Management" in the Company's definitive Proxy Statement for the
Annual Meeting of Stockholders to be held on May 7, 1996, since such Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the end of the Company's fiscal year pursuant to Regulation
14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 13 is incorporated by reference to
the information set forth under the caption "Certain Transactions" in the
Company's definitive Proxy Statement for the Annual Meeting of Stockholders to
be held on May 7, 1996, since such Proxy Statement will be filed with the
Securities and Exchange Commission not later than 120 days after the end of the
Company's fiscal year pursuant to Regulation 14A.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) (1) FINANCIAL STATEMENTS
The following Consolidated Financial Statements of the Registrant and
its subsidiaries are included in Part II, Item 8:
Page
-----
Report of Independent Auditors F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7 to F-15
(A) (2) FINANCIAL STATEMENTS SCHEDULES
The following Consolidated Financial Statement Schedules of the
Registrant and its subsidiaries are included in Item 14 hereof:
Page
-----
Report of Independent Auditors as to Schedules F-2
Schedule II Valuation and Qualifying Accounts
and Reserves 20
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
(A) (3) EXHIBITS
Reference is made to the Exhibit Index at sequential page 21 hereof.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized at Morganville, New Jersey
this 28th day of March, 1996.
HANDEX CORPORATION
By: /s/Curtis Lee Smith, Jr.
----------------------------
Curtis Lee Smith, Jr., Chairman
and Chief Executive 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:
SIGNATURE TITLE DATE
/s/Curtis Lee Smith, Jr. Chairman, and )
- - ------------------------- Chief Executive Officer )
Curtis Lee Smith, Jr. (Principal Executive )
Officer) )
)
/s/John T. St. James Vice President, )
- - ------------------------ Treasurer and )
John T. St. James Chief Financial Officer )
(Principal Financial )
and Accounting Officer) )
)
/s/Stuart O. Smith Director )
- - ----------------------- )
Stuart O. Smith ) March 28, 1996
)
/s/Thomas J. Bresnan Director )
- - ----------------------- )
Thomas J. Bresnan )
)
/s/Gregory J. Reuter Director )
- - ----------------------- )
Gregory J. Reuter )
)
/s/David A. Goldfinger Director )
- - ----------------------- )
David A. Goldfinger )
)
/s/Richard L. Osborne Director )
- - ----------------------- )
Richard L. Osborne )
)
/s/Scott R. Wilson Director )
- - ----------------------- )
Scott R. Wilson )
)
/s/William H. Heller Director )
- - ----------------------- )
William H. Heller )
)
SCHEDULE II
-----------
HANDEX CORPORATION INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
Years ended December 30, 1995, December 31, 1994, and January 1, 1994
Allowance
for
Doubtful
Accounts
Balance at December 31, 1992 $ 891,834
Additions - Charged to costs and expenses 192,943
Deductions (A) (244,686)
Balance at January 1, 1994 840,091
Additions - Charged to costs and expenses 195,552
Deductions (A) (101,083)
Balance at December 31, 1994 934,560
Additions - Charged to costs and expenses 400,375
Deductions (A) (353,190)
Balance at December 30, 1995 $ 981,745
(A) - Accounts charged off, less recoveries
EXHIBIT INDEX
PAGINATION
BY
SEQUENTIAL
EXHIBIT EXHIBIT NUMBERING
NUMBER DESCRIPTION SYSTEM
- - ----- ----------- -------
3.1 Amended Certificate of Incorporation of the Registrant (1)
3.2 By-Laws of the Registrant(1)
3.3 Amendment to Certificate of Incorporation of the Registrant
4.1 Specimen Certificate for Share of Common Stock, $.01 par value,
of the Registrant(1)
4.2 Unsecured Revolving Loan Agreement(4)
4.3 First Amendment to Unsecured Revolving Loan Agreement (7)
4.4 Working Capital Line of Credit Note (7)
10.1 Key Employees Stock Option Plan of the Registrant(1)*
10.2 Amendment No. 1 to Key Employees Stock Option Plan of the
Registrant(7)*
10.3 Form of Stock Option Agreement executed by recipients of
options under Key Employees Stock Option Plan(6)
10.4 Stock Option Agreement dated August 6, 1992, between the
Registrant and Thomas J. Bresnan (7)*
10.5 Outside Directors Stock Option Plan of the Registrant(1)*
10.6 Amendment No. 1 to the Outside Directors Stock Option Plan
of the Registrant (7)*
10.7 Form of Stock Option Agreement executed by recipients of
options under the Outside Directors Stock Option Plan(7)
10.8 Amended and Restated 401(k) Profit sharing Trust and Plan
of the Registrant(1)*
10.9 Amendment No. 1 to the Registrant's Amended and Restated
401(k) Profit Sharing Trust and Plan(2)*
10.10 Amendment No. 2 to the Registrant's Amended and Restated
401(k) Profit Sharing Trust and Plan(3)*
10.11 Amendment No. 3 to the Registrant's Amended and Restated
401(k) Profit Sharing Trust and Plan(6)*
10.12 Form of Indemnity Agreement with Directors and Officers of
the Registrant(6)
10.13 Employment Agreement dated August 3, 1992, between the
Registrant and Thomas J. Bresnan(7)*
10.14 Lease Agreement dated April 26, 1988, between Jocama
Construction Inc. and the Registrant(1)
EXHIBIT INDEX
PAGINATION
BY
SEQUENTIAL
EXHIBIT EXHIBIT NUMBERING
NUMBER DESCRIPTION SYSTEM
- - ------ ----------- -------
10.15 Addenda to the Lease Agreement dated April 6, 1988 between
Jocama Construction and the Registrant (8)
10.16 Indenture of Lease dated June 17, 1987, between Xednah
Investments and Handex of Florida, as amended (1)
10.17 Lease Agreement dated March 25, 1991, between Handex of
New England, Inc. and Metro Park Marlboro Realty Trust,
as amended (6)
10.18 Lease Agreement dated January 20, 1992, between Handex of
Maryland, Inc. and Winmeyer Commons II Limited Partnership (6)
10.19 Lease Agreement dated March 1, 1995, between New Horizons
Learning Center of Metropolitan New York, Inc. and Mid City
Associates, guaranteed by the Registrant (10)
10.20 Lease Agreement dated February 24, 1995, between New Horizons
Computer Learning Center of Cleveland LTD., LLC, and Realty
One Property Management, guaranteed by the Registrant (10)
10.21 Consulting Agreement between the Registrant and The Nassau
Group, Inc. dated December 17, 1993 (9)
10.22 Warrants for the purchase of 25,000 shares of Common Stock
$.01 par value per share of the Registrant issued to
The Nassau Group, Inc. on December 17, 1993 (9)
10.23 Warrants for the purchase of 40,000 shares of Common Stock
$.01 par value per share of the Registrant issued to
The Nassau Group, Inc. on August 15, 1994. (10)
10.24 Asset Purchase Agreement, dated as of August 15, 1994, by and
among New Horizons Computer Learning Centers, Inc. a Delaware
Corporation, New Horizons Learning Center, Inc., a California
Corporation and Michael A. Brinda (11)
10.25 Stock Purchase Agreement dated as of August 15, 1994, by
and among New Horizons Education Corporation, a Delaware
Corporation and Michael A. Brinda (11)
10.26 Lease Agreement dated April 5, 1995, between New Horizons Computer
Learning Center of Chicago, Inc., and the Equitable Life Assurance
Society of the United States (12)
10.27 Lease Agreement dated March 7, 1996, between New Horizons Computer
Learning Centers, Inc. and Mani Brothers, LLC
10.28 Contract for the sale of real estate dated January 15, 1996, between
Handex of Florida, Inc. and Xednah Investments
10.29 New Horizons Education Corporation 401(k) Profit Sharing Trust
and Plan*
10.30 Amendment No. 4 to the Registrant's Amended and Restated 401(k)
Profit Sharing Trust and Plan*
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
99.1 Directors and Officers and Company Indemnity Policy(5)
- - --------------------------------------------------
(1) Incorporated herein by reference to the appropriate exhibits to the
Registrant's Registration Statement on Form S-1 (File No. 33-28798).
(2) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1989.
(3) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended March 31,
1990.
(4) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report or Form 10-Q for the period ended June 30,
1990.
(5) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1990.
(6) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1991.
(7) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December
31,1992.
(8) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended July 3,
1993.
(9) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended January 1, 1994.
(10) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994.
(11) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Form 8-K dated August 15, 1994.
(12) Incorporated herein by reference to the appropriate exhibit to the
Registrant's Quarterly Report on Form 10-Q for the period ended April 1,
1995.
* Represents a management contract or compensatory plan or arrangement
required to be filed as an exhibit pursuant to Item 14 of Form 10-K.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> DEC-30-1995
<CASH> 3,821,474
<SECURITIES> 2,775,000
<RECEIVABLES> 30,983,242
<ALLOWANCES> 981,745
<INVENTORY> 539,491
<CURRENT-ASSETS> 39,436,826
<PP&E> 26,864,557
<DEPRECIATION> 17,221,433
<TOTAL-ASSETS> 67,089,382
<CURRENT-LIABILITIES> 16,238,681
<BONDS> 649,941
<COMMON> 70,502
0
0
<OTHER-SE> 49,357,792
<TOTAL-LIABILITY-AND-EQUITY> 67,089,382
<SALES> 70,253,896
<TOTAL-REVENUES> 70,253,896
<CGS> 45,065,597
<TOTAL-COSTS> 70,186,460
<OTHER-EXPENSES> 90,077
<LOSS-PROVISION> 400,375
<INTEREST-EXPENSE> 100,891
<INCOME-PRETAX> (123,532)
<INCOME-TAX> 69,509
<INCOME-CONTINUING> (193,041)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,041)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
HANDEX ENVIRONMENTAL RECOVERY, INC.
-----------------------------------
Pursuant to Section 242 of the
Delaware General Corporation Law
-----------------------------------
The undersigned, Curtis Lee Smith, Jr., being the Chairman of the Board of
Directors, and Gary T. Gann, being the Assistant Secretary of Handex
Environmental Recovery, Inc., a Delaware corporation (the "Corporation"), hereby
certify as follows:
1. The name of the Corporation is Handex Environmental Recovery, Inc.
2. The amendment of the Certificate of Incorporation as hereinafter set
forth has been duly adopted in accordance with Section 242 of the Delaware
General Corporation Law.
3. The Certificate of Incorporation of the Corporation is hereby amended
by deleting in its entirety the current Article I and replacing it with the
following:
"The name of the Corporation is Handex Corporation."
IN WITNESS WHEREOF, the undersigned, being the duly elected and acting
Chairman of the Board of Directors and Assistant Secretary, respectively, have
hereunto subscribed their names to this Certificate of Amendment and affirm that
the facts stated herein are true under penalties of perjury, this 9th day of
May, 1995.
/s/ Curtis Lee Smith, Jr.
------------------------------
Curtis Lee Smith, Jr.,
Chairman
/s/ Gary T. Gann
------------------------------
Gary T. Gann
Assistant Secretary
370/18746GQA.317
TABLE OF CONTENTS
PAGE
Article 1 - Basic Lease Provisions 1
Article 2 - Term 2
Article 3 - Basic Monthly Rent 3
Article 4 - Tax Rent 3
Article 5 - Operating Expense Rent 4
Article 6 - Capital Expense Rent 5
Article 7 - Security Deposit 5
Article 8 - Use 6
Article 9 - Utilities and Services 6
Article 10 - Parking License 7
Article 11 - Repairs 7
Article 12 - Condition of Premises 8
Article 13 - Entry by Landlord 8
Article 14 - Alterations 9
Article 15 - Hazardous Materials 9
Article 16 - Liens 9
Article 17 - Brokers 10
Article 18 - Insurance 10
Article 19 - Indemnification 11
Article 20 - Limitation of Liability 11
Article 21 - Damage or Destruction 12
Article 22 - Eminent Domain 13
Article 23 - Subordination 13
Article 24 - Offset Statement 13
Article 25 - Assignment and Subletting 13
Article 26 - Bankruptcy and Involuntary Assignment 15
Article 27 - Financial Statements 15
Article 28 - Holding Over 15
Article 29 - Defaults 15
Article 30 - Remedies 16
Article 31 - Attorney's Fees 16
Article 32 - Arbitration 16
Article 33 - Notices 17
Article 34 - General Provisions 17
Article 35 - Addendum 19
Exhibit A - Premises Location Plan 20
Exhibit B - Legal Description 21
Exhibit C - Rules and Regulations 22
Exhibit D - Work Letter 25
Exhibit E - Guaranty of Lease 28
Schedule 1 - Preliminary Space Plans 30
Addendum No. 1 31
LEASE
By this Lease dated March 7, 1996 for reference purpose only, Landlord
hereby leases to Tenant the Premises, together with the non-exclusive right to
use the Common Areas, upon and subject to the following terms, covenants and
conditions:
ARTICLE L-BASIC LEASE PROVISIONS
1.1 For purposes of this Lease and addenda, exhibits and other attachments
thereto, and as subject to modification, revision or amendment by other terms
and conditions of this Lease, addenda exhibits and other attachments thereto
mutually agreed by Landlord and Tenant, these certain provisions are defined as
follows:
(a) Landlord: Mani Brothers LLC
(b) Tenant: New Horizons Computer Learning
Centers, Inc. a Delaware Corporation
(c) Building: 100 Corporate Pointe, Culver
City; California
(d) Premises: Suite 180 (consisting of
approximately 10,779 rentable square
feet), Suite 195 (consisting of
approximately 4,127 rentable square feet)
and a portion of Suite 105 (consisting of
approximately 261 rentable square feet),
totaling approximately 15,167 rentable
square feet. The exact location and square
footage shall be subject to space
planning, architectural measurements and
the relocation of the tenant currently
located in Suite 195. Tenant shall have
the right to have the space planner verify
the square footage calculation prior to
lease execution. The Premises shall be
computed in accordance with the BOMA
standards. Tenant's primary entrance shall
be from the exterior of the building to
the right hand side of the existing lobby.
(e) Commencement Date: June 1, 1996, subject
to the Paragraph 2.1.(a).
(f) Termination Date: One hundred twenty
(120) months after the Commencement Date.
(g) Permitted Use: General office use for the
purpose of conducting a computer learning
center.
(h) Basic Monthly Rent: The Basic Monthly
Rent shall be Eighteen Thousand Nine
Hundred Fifty Eight and 75/100 Dollars
($18,958.75) for the first (1st) through
the sixtieth (both) month of the lease
term. The Basic Monthly Rent shall be
Twenty Five Thousand Twenty five and
55/100 Dollars ($25,025.55) for the
period from the sixty-first (61st) month
through the one hundred and twentieth
(120th) months. Said Basic Monthly Rent
shall be net of utilities.
(i) Security Deposit: Eighteen Thousand Nine
Hundred Fifty Eight and 75/100 Dollars
($18,958.75) and shall be increased on the
sixty first (61st) month to Twenty Five
Thousand Twenty Five and 55/100 Dollars
($25,025.55).
(j) Proportional Share: 13.85%
(k) Base Year:1996
(l) Procuring Broker: CB Commercial Real Estate Group, Inc. -
Hunt Barnett and Taylor Ing, as Tenant's
representative and CB Commercial Real
Estate Group, Inc. - Jeffrey S. Pion, as
Landlord's representative. In the event CB
Commercial Real Estate Group, Inc.
represents both parties herein, Landlord
and Tenant acknowledge that each has been
notified of said dual representation and
both Landlord and Tenant consent hereto to
said dual representation.
(m) Parking Allotment: See Addendum.
(n) Business Hours:8:00 AM to 6:00 PM Monday
through Friday; and 9:00 AM to 1:00 PM
Saturday, excluding holidays generally
recognized in the State of California.
Landlord acknowledges that Tenant will
conduct its business at times other than
the Building's normal hours.
(o) Land:The site upon which the Building,
Common Areas and other related
improvements, facilities, service areas
and equipment are located (as legally
described in Exhibit "B" attached herein).
(p) Common Areas: Those interior and exterior
portions of the Building and such other
areas, facilities and equipment serving
the Building, which are designated by
Landlord for the common use and benefit of
tenants, tenants' employees, customers and
invitees, and/or members of the general
public. Such areas, facilities and
equipment shall include, without
limitation: entrances; exits; lobbies;
elevators; stair-ways; corridors;
passageways; public washrooms, parking
facilities; loading areas; plazas, private
sidewalks; landscaped areas; walkways;
mechanical, electrical and telephone
rooms; utilities and related facilities;
electrical, mechanical, sprinkler, fire
detection and fire prevention and security
equipment and related facilities; duct
shafts; operating, maintenance and storage
areas; and service areas, equipment and
facilities.
ARTICLE 2-TERM
2.1 The Term of this Lease shall commence on the Commencement Date.
(a) Initial Term. The Term of the Lease shall be for the period shown
in Article 1 of the Summary of Basic Terms commencing, subject to
the provisions of the "Work Letter" attached hereto as Exhibit
"D", on the date the Premises shall be tendered to Tenant ready
for occupancy or such earlier date or later date as Tenant takes
possession or commences use of the Premises for any purpose
including construction (the "Commencement Date"). The Premises
shall be deemed ready for occupancy and Rent shall commence on
the date of issuance of a Certificate of Occupancy, Temporary
Certificate of Occupancy or other equivalent approval by the City
of Culver City of the improvements required by this Lease to be
constructed by Landlord. Landlord acknowledges that the premises
may be built in stages and Tenant's obligation to pay rent shall
commence upon completion of each stage of construction. Landlord
agrees to use its best efforts to give Tenant estimates of the
schedule for completion of the improvements and to give Tenant
ten (10) days prior notice of the anticipated date the Premises
will be ready for occupancy. The Commencement Date is a date
which Landlord has projected for occupancy, based upon its
present estimates of construction schedules. Subject to "Force
Majeure" (as that term is defined below), Tenant shall have the
right to cancel this Lease in the event Landlord has not
delivered the Premises to Tenant within one hundred twenty (120)
days after the Commencement Date, as such date may be modified by
the provisions of the "Work Letter" attached hereto as Exhibit
"D", which right is exercisable by Tenant by delivering written
notice to Landlord within five (5) business days following
expiration of said one hundred twenty (120) day period. "Force
Majeure" is hereby defined to mean any cause beyond the
reasonable control of Landlord, including but not limited to,
strikes, acts of God, war, governmental laws and regulations or
restrictions, including delays in the issuance of permits (not to
exceed one hundred twenty (120) days), inspections and approvals,
shortages of labor or materials, or delays caused by acts of
Tenant as more particularly set forth in paragraph "7" of the
"Work Letter" attached hereto as Exhibit "D". In the event
permission is given to Tenant to enter or occupy all or a portion
of the Premises prior to the Commencement Date, such occupancy
shall be subject to all of the terms and conditions of this
Lease. When the Lease Commencement Date has been determined, the
parties shall execute an amendment to this Lease in the form of
Exhibit "B" attached hereto and incorporated herein by this
reference, stating the actual Lease Commencement Date and the
date for expiration of the Term (the "Expiration Date") and
setting forth an acknowledgment by Tenant that Landlord has
completed all improvements to the Premises in accordance with
this Lease and to the satisfaction of Tenant, subject to the
items listed in a punch list, if any, delivered to Landlord
pursuant to Article "2(b)" Acceptance and Suitability below.
(b) Acceptance and Suitability. Within thirty (30) days following the
date Tenant takes possession of the Premises, Tenant may provide
Landlord with a punch list which sets forth any corrective work
to be performed by Landlord with respect to work performed by
Landlord as set forth in the Work Letter; provided, however, that
Tenant's obligation to pay Basic Monthly Rent as provided below
shall not be affected thereby. If Tenant fails to submit a punch
list to Landlord within such thirty (30) day period, Tenant
agrees that by taking possession of the Premises, it will
conclusively be deemed to have inspected the Premises and found
the Premises in satisfactory condition except for subsequently
discovered latent defects. Tenant acknowledges that neither
Landlord, nor any agent, employee or servant of Landlord, has
made any representation with respect to the Premises, or the
Building, or with respect to the suitability of them to the
conduct of Tenant's business, nor has Landlord agreed to
undertake any modifications, alternations, or improvements of the
Premises, or Building, except as specifically provided in this
Lease.
2.2 This Lease shall terminate on the Termination Date, unless terminated
sooner as may be provided elsewhere herein.
ARTICLE 3-BASIC MONTHLY RENT
3.1 The first Installment of Basic Monthly Rent is due on or before the
Commencement Date. All other installments of Basic Monthly Rent are payable in
advance on the first day of each calendar month, together with any monthly
Installments of estimated Tax Rent, Operating Expense Rent and Capital Expense
Rent (collectively "Total Monthly Rent"). Except as provided in Article 28, if
the Commencement Date is not the first day of the calendar month or the
Termination Date is not the last day of the calendar month, then Total Monthly
Rent shall be prorated based upon a thirty (30) day month.
3.2 All amounts due or relating to Tenant's occupancy under this Lease,
other than Total Monthly Rent, are due and payable within thirty (30) days of
receipt of Landlord's Invoice for same. Such amounts include, without
limitation: annual reconciliations and retroactive charges of Tax Rent,
Operating Expense Rent or Capital Expense Rent; Orders for Extra Work; charges
for extra utilities and services; and late Charges (collectively "Additional
Rent"). All amounts due under this Lease or relating to Tenant's occupancy are
deemed to be rent, receivable as such, and subject to all remedies of Landlord
for nonpayment of rent. Tenant's obligation to pay all amounts owing under this
Lease shall survive Tenant's relinquishment of possession to Landlord, or the
expiration or early termination of this Lease.
3.3 Tenant agrees that Tenant's late payment of any sum due under this
Lease will cause Landlord to Incur cost not contemplated hereunder, the exact
amount of which is impracticable or extremely difficult to fix. Therefore, if
all or any portion of any installment of Total Monthly Rent is not received by
Landlord by the tenth (10th) day of the month for which it is due, or if all or
any portion of any item of Additional Rent is not received by Landlord when due
pursuant to Article 3.5, then Tenant shall pay to Landlord a "Late Charge of ten
percent (10%) of the overdue amount. Landlord and Tenant agree that the Late
Charge represents a fair and reasonable estimate of costs that Landlord will
incur by reason of any late payment by Tenant. Landlord's acceptance of a Late
Charge shall not constitute a waiver of Tenant's default with respect to the
overdue amount, or prevent Landlord from exercising any of the other rights and
remedies available to Landlord under this Lease or pursuant to law. The Late
Charge shall be in addition to, and not in lieu of, any interest which may
accrue pursuant to Article 34.11 of this Lease.
3.4 All amounts due Landlord shall be paid by Tenant, without deduction or
offset, in lawful money of the United States of America, which shall be legal
tender at the time of payment. Payments shall be made at the office of Landlord
or to such other person or at such other place as Landlord notifies Tenant.
Landlord reserves the right to require that payments be made by certified check
or cash.
ARTICLE 4-TAX RENT
4.1 For each successive calendar year of the Term after the Base Year
("Comparison Year"), Tenant shall pay to Landlord "Tax Rent", which shall be the
Proportional Share of the amount, if any, which the aggregate annual Property
Taxes for the Comparison Year exceeds the Property Taxes for the Base Year. Tax
Rent is payable in the manner set forth in Article 4.3. If this Lease terminates
on a day other than the last day of the Comparison Year, then Tax Rent for the
Comparison Year shall be prorated.
4.2 (A) "Property Taxes" is defined for purposes of this Lease as: all
costs and expenses which Landlord or Landlord's managing agent has incurred or
will incur for real and personal property taxes, or any other assessment upon
Landlord's legal or equitable interest in the Land, Building, Common Areas and
all or any related facilities and improvements (including, without limitation,
leasehold taxes or other taxes or assessments levied in lieu thereof or in
addition thereto), whether imposed by a government authority or agency, or by a
special assessment district; any taxes resulting from a reassessment of the
Building occasioned by any cause whatsoever, including, without limitation, any
reassessment resulting from a conveyance of Landlord's interest in the Land,
Building or Common Areas (whether of not such transfer occurs before or after
the Commencement Date), or by the determination by a court that any law,
regulation, statute, or constitutional provision purporting to limit tax
increases is invalid in whole or in part: any non-progressive tax on or measured
with respect to gross receipts from the rental of space in the Building; any
user fees or charges assessed for any government services which were provided
without cost prior to the imposition of Proposition 13; any assessment, tax, fee
charge or levy for any transportation plan, fund or system within the general
geographic area of the Building; and, any actual, reasonable and documented
expenses of Landlord in contesting any of the foregoing or the assessed
valuation of the Land, Building or Common Areas. Notwithstanding the foregoing,
the definition of "Property Taxes" excludes any net income, franchise, capital
stock, estate or inheritance taxes.
(B) Upon request by Tenant, Landlord shall provide Tenant with copies
of all tax bills, assessments and charges received from any local taxing
agencies. Shall Landlord sell or convey the property of which the leased
premises are a part, Tenant shall not be obligated to pay any increase in
property taxes resulting from said sale or conveyance (Proposition 13).
4.3 As soon as practical after the beginning of each Comparison Year,
Landlord shall provide Tenant with Landlord's estimate of Property Titles and
Tax Rent for the Comparison Year. During the Comparison Year, Tenant shall pay
Landlord estimated Tax Rent in equal monthly installments on the first day of
each month. If the estimated Tax Rent for the Comparison Year is not determined
until after the beginning of the Comparison Year, the Tenant shall continue to
pay the monthly installments for the prior Comparison Year, if any, and shall
retroactively pay any underpayment of estimated Tax Rent payable for the period
from the beginning of the Comparison Year until the estimate was provided. As
soon as practical after the end of each Comparison Year, Landlord shall
determine the Property Taxes incurred in the Comparison Year. If Tenant has
underpaid its Tax Rent for the Comparison Year, then Tenant shall pay to
Landlord the full amount of such deficiency as Additional Rent. If Tenant has
overpaid its Tax Rent for the Comparison Year, then Landlord shall either credit
the overpayment toward Tenant's next installment(s) of Total Monthly Rent or, if
this Lease has terminated and Landlord has not applied the overpayment to a
default of Tenant, refund the overpayment to Tenant within thirty (30) days of
determination.
4.4 Tenant shall directly pay the taxing authority any tax levied against
the personal property or trade fixtures of Tenant in or about the Premises. If
Tenant fails to pay such tax before delinquency, then Landlord may pay such tax
on behalf of Tenant, and the amount paid shall constitute Additional Rent due
Landlord. Landlord shall upon request of Tenant, deliver to Tenant copies of any
tax bills paid by Landlord for and on behalf of Tenant.
4.5 The calculation and payment of Tax Rent is separate, distinct and
shall not be affected by the calculation and payment of either Basic Monthly
Rent, Operating Expense Rent, Capital Expense Rent or Consumer Price Index
Adjustment, if any. Any item of cost or expense included as Property Taxes shall
not be included as either Operating Expenses or Capital Expenses.
ARTICLE 5-OPERATING EXPENSE RENT
5.1 For each Comparison Year, Tenant shall pay to Landlord Operating
Expense Rent, which shall be the Proportional Share of the amount, if any, by
which the aggregate annual Operating Expenses for the Comparison Year exceeds
the Operating Expenses for the Base Year. Operating Expense Rent is payable in
the manner set forth in Article 5.4. If this Lease terminates on a day other
than the last day of the Comparison Year, then Operating Expense Rent for the
Comparison Year shall be prorated.
5.2 "Operating Expenses" is defined for purposes of this Lease as all
costs and expenses, calculated in both the Base Year and any Comparison Year as
if the Building were ninety-five percent (95%) occupied and all services were
provided to the entire Building, which Landlord or Landlord's managing agent has
incurred or will incur (without offset for any revenue derived from any source
whatsoever) in the operation, maintenance, repair, improvement, management and
administration of the Land, Building and Common Areas, plus a management fee not
to exceed four percent (4%) of gross Building and Common Areas revenue.
5.3 "Operating Expenses" includes, without limitation, costs and expenses
for: all wages, salaries, benefits, payroll taxes, other similar government
charges and other direct costs of personnel rendering services to the Building,
whether or not situated in the Building, including, without limitation, Building
managers and their assistants and supervisors, clerical, accounting, and
technical services personnel; costs to comply with all laws, ordinances, rules
and regulations; utility charges and surcharges; janitorial, mechanical,
security, landscaping, elevator, waste disposal, alarm maintenance and other
Building services; parking facility operation, maintenance and management;
labor; lighting; air conditioning; heating; ventilating; water and sewage
charges; supplies; material; tools; equipment; uniforms; operation, maintenance
and repair of systems and facilities; structural and non-structural repair;
business licenses or similar licenses or taxes; insurance premiums, deductibles
and related charges, whether required pursuant to this Lease or by any
lienholder or encumbrancer; professional fees and other expenses; and the
expenses of maintaining a building management office (not to exceed 2,500 usable
square feet), with rent imputed at the effective market rate for the building
containing the office.
5.4 As soon as practical after the beginning of each Comparison Year,
Landlord shall provide Tenant with Landlord's estimate of Operating Expenses and
Operating Expense for the Comparison Year. During the Comparison Year, Tenant
shall pay Landlord's estimated Operating Expense Rent in equal monthly
installments on the first day of each month. If the estimated Operating Expense
Rent for the Comparison Year is not determined until after the beginning of the
Comparison Year, then Tenant shall continue to pay the monthly installments for
the prior Comparison Year, if any, and shall retroactively pay any underpayment
of estimated Operating Expense Rent payable for the period from the beginning of
the Comparison Year until the estimate was provided. As soon as practical after
the end of each Comparison Year, Landlord shall determine the Operating Expenses
incurred in the Comparison Year. If Tenant has underpaid its Operating Expense
Rent for the Comparison Year, then Tenant shall pay to Landlord the full amount
of such deficiency as Additional Rent. If Tenant has overpaid its Operating
Expense Rent for the Comparison Year, then Landlord shall either credit the
overpayment toward Tenant's next installment(s) of Total Monthly Rent or, if
this Lease has terminated and Landlord has not applied the overpayment to a
default of Tenant, refund the overpayment to Tenant within thirty (30) days of
determination.
5.5 The calculation and payment of Operating Expense Rent is separate,
distinct and shall not be affected by the calculation and payment of either
Basic Monthly Rent, Tax Rent, Capital Expense Rent or Consumer Price Index
Adjustment, if any. Any item of cost or expense included as Operating Expenses
shall not be included as either Property Taxes or Capital Expenses.
ARTICLE 6-CAPITAL EXPENSE RENT
6.1 During the Term, Tenant shall pay to Landlord "Capital Expense Rent",
which shall be the Proportional Share (or any other proportion in Landlord's
sole discretion, which equitably distributes either Capital Expenses or Capital
Expense Rent among tenants) of any Capital Expenses either incurred in the
calendar year, allocated by Landlord in its sole discretion to the calendar
year, or which Landlord has in its sole discretion elected to amortize in the
year. Capital Expense Rent is payable in the manner set forth in Article 6.3. If
this Lease commences or terminates on a day other than the first or last day of
a calendar year, Capital Expense Rent for the year shall be prorated.
6.2 "Capital Expenses" is defined for purposes of this Lease as all costs
and expenses which Landlord or Landlord's managing agent has incurred or will
incur (without offset for any revenue derived from any source whatsoever) in the
making or installation of capital improvements, modifications or additions to
the Land, Building, Common Areas and/or the machinery, equipment and facilities
related thereto, either:
(a) Required by directive of a government, quasi-government or
regulatory agency or authority, but only those Capital Expenses
which are so required either:
(i) Pursuant to either a law or statue newly enacted after
the execution of this Lease or
(ii) Pursuant to an interpretation of a law or statue
existing as of the execution of this Lease, which
interpretation is newly promulgated after the execution of
this Lease
(b) Made with the intent of reducing Operating Expenses.
6.3 As soon as practical after the beginning of each calendar year (or the
Term, as the case may be), Landlord shall provide Tenant with Landlord's
estimate of the Capital expenses and Capital Expense Rent for the calendar year.
During the calendar year, Tenant shall pay Landlord's estimated Capital Expense
Rent in equal monthly installments on the first day of each month. If the
estimated Capital Expense Rent for the calendar year is not determined until
after the beginning of the calendar year, then Tenant shall continue to pay the
monthly installments for the prior calendar year, if any, and shall
retroactively pay any underpayment of estimated Capital Expense Rent payable for
the period from the beginning of the calendar year until the estimate was
provided. Landlord shall amortize the cost of any capital item over its usual
life. As soon as practical after the end of each calendar year, Landlord shall
determine the Capital Expenses incurred, allocated or amortized in the calendar
year. If Tenant has underpaid its Capital Expense Rent for the Calendar year,
then Tenant shall pay to Landlord the full amount of such deficiency as
Additional Rent. If Tenant has overpaid its Capital Expense Rent for the
calendar year, then Landlord shall either credit the overpayment toward Tenant's
next installment(s) of Total Monthly Rent or, if this Lease has terminated and
Landlord has not applied the overpayment to a default of Tenant, refund the
overpayment to Tenant within thirty (30) days of determination.
6.4 The calculation and payment of Capital Expense Rent is separate,
distinct and shall not be affected by the calculation and payment of either
Basic Monthly Rent, Tax Rent, Operating Expense Rent or Consumer Price Index
Adjustment, if any. Any item of cost or expense included as Capital Expenses
shall not be included as either Property Taxes or Operating Expenses.
ARTICLE 7-SECURITY DEPOSIT
7.1 On or before execution of this Lease, Tenant shall deposit with
Landlord the initial Security Deposit. The Initial Security Deposit and any
other sums deposited with Landlord pursuant to this Article (collectively
"Security Deposit") shall be held by Landlord as security for the faithful
performance by Tenant of all of the terms, covenants and conditions of this
Lease to be kept or performed by Tenant. If Tenant acquires additional Premises,
Tenant shall deposit additional sums with Landlord so that the Total Security
Deposit held by Landlord is equal to Tenant's then current Basic Monthly Rent.
Landlord shall not be required to SEGREGATE THE Security Deposit from its
general funds, refund any Security Deposit except as provided in Article 7.3, or
pay Tenant any interest thereon.
7.2 If Tenant defaults on any obligation hereunder, Landlord may (but
shall not be required to) use, apply or retain all or any part of the Security
Deposit for the payment of rent or any other sum in default, or to compensate
Landlord for any loss or damage which Landlord has suffered or may suffer due to
Tenant's default. Tenant shall, upon demand, restore any Security Deposit so
used, applied or retained to the amount held by landlord immediately prior
thereto.
7.3 If Tenant fully and faithfully performs every provision of this Lease
to be performed by Tenant, then, within thirty (30) days of the later of the
termination of this Lease or the surrender of the Premises to Landlord, Landlord
shall return to Tenant (or, at Landlord's option, the last assignee of Tenant
hereunder) any Security Deposit which has not been so used, applied or retained.
Notwithstanding the foregoing, Landlord may retain such portion of the Security
Deposit as is necessary to secure any remaining obligations of Tenant hereunder
(including, without limitation, Tenant's obligations pursuant to Articles 4, 5
and 6, which Tenant acknowledges comet be fully ascertained until as soon as
practical after the end of the calendar year; and Tenant waives application of
the provisions of California Civil Code section 1950.7 in respect to such
retention).
7.4 If Landlord transfers, assigns or conveys its interest in the
Premises, then Landlord shall be discharged from any liability for the return of
Tenant's Security Deposit, provided Landlord transfers to Landlord's successor
in interest that portion of the Security Deposit which has not been used,
applied or retained as per mined by this Lease.
ARTICLE 8-USE
8.1 Tenant agrees that the Permitted use is a material provision of this
Lease. Tenant shall use the Premises solely for the Permitted Use and shall not
use or permit the Premises to be used for any other purpose without the prior
written consent of Landlord. Any consent by Landlord to a change of use by
Tenant shall not be deemed a waiver of Landlord's right to withheld its consent
to any subsequent proposed change of use. Tenant shall be responsible for
obtaining all necessary permits for the conduct of its business and for
verifying that Tenant's permitted use is acceptable to the City of Culver City.
Landlord makes no representations as to Tenant's ability to obtain necessary
permits for conduct of its business. Landlord shall be responsible for obtaining
building construction permits.
8.2 Tenant shall, at Tenant's sole cost and expense, comply with all
certificates, rules, directives, orders and regulations of any public authority
(including Federal, State, County and Municipal authorities) caused by Tenant's
use of the premises which concern either the Premises or Tenant's use or
occupancy thereof. Tenant shall not use or occupy the Building, Common Areas or
Premises in violation of any law, certificate of occupancy, or covenant,
condition or restriction and shall discontinue the violating use upon Landlord's
demand.
8.3 Tenant shall not do or permit to be done anything which will
invalidate or increase the cost of any insurance policy covering the Land,
Building, Common Areas, or equipment, property and facilities therein. Tenant
shall comply with all rules, orders, regulations and requirements of any
insurance fire rating bureau or any other organization performing a similar
function. Tenant shall, upon Landlord's demand, reimburse Landlord for any
additional insurance premium which may be incurred due to Tenant's failure to
Comply with this Lease.
8.4 Tenant shall not do or permit to be done anything which will
constitute a nuisance, or obstruct, injure, annoy or interfere with the rights
of other tenants or occupants of the Building. The Premises shall not be used
for any lodging, sleeping, improper, immoral, unlawful or objectionable purpose.
Tenant shall not commit waste.
ARTICLE 9-UTILITIES AND SERVICES
9.1 Landlord shall provide Tenant with:
(a) Twenty-four (24) hour access to the Premises;
(b) Reasonable quantities of electric current for receptacles, water
for lavatory and drinking purposes, and automated elevator
service;
(c) Standard fluorescent lighting and heat, ventilation or air
conditioning as may be required for the comfortable use and
occupation of the Premises during Business Hours; and
(d) Janitorial and security services to the extent and during such
times as are determined by Landlord. (Tenant submits list.)
9.2 Notwithstanding the provisions of Article 9.1, Landlord may: restrict
access to the Premises while making any repairs, alterations or improvements to
the Premises, Common Area or Building; make reasonable nondiscriminatory changes
to the access, utilities and services landlord is obligated to provide
hereunder; make such changes in the access, utilities and services Landlord is
obligated to provide hereunder as may be reasonable and necessary to comply with
any government restriction, requirement or standard relating thereto; or prevent
access or curtail utilities or services to the Land, Building, Common Areas or
Premises during any invasion, mob, riot, public excitement or other
circumstances rendering such action advisable, in Landlord's reasonable opinion.
In the absence of an emergency, Landlord and Tenant shall agree and schedule an
appropriate date and time for such actions to commence.
9.3 If Tenant either:
(a) Requires or uses more utilities or services than generally used
by another tenant in the Building;
(b) Requires utilities or services that are not generally provided to
the Building during non-Business Hours; or
(c) Has special water, electric, cooling or ventilation needs due to
concentration of personnel, or the use of office equipment,
devices or machines which consume power or generate head in
excess of personal computers or common office photocopiers (which
may include, without limitation, communications equipment,
main-frame or mini-computers).
then Tenant shall pay, as Additional Rent, the charge for such use, as
determined by Landlord. Landlord's current charge for after-hours heating,
ventilation and air conditioning is Thirty Five and No/100 Dollars ($35.00) per
hour, as such rate may be adjusted by Landlord from time-to-time. Landlord shall
install separate circuitry or meters to accommodate and/or measure Tenant's
demand and Tenant shall pay same directly to utility.
9.4 Except as expressly provided elsewhere in this Lease, Landlord shall
not be liable for any loss or damage to Tenant or Tenant's employees, or their
respective property or business, and Tenant shall not be entitled to any
abatement or reduction of rent as a result if Landlord's failure is due to any
cause beyond Landlord's reasonable control (including, without limitation,
accident, breakage, repairs, shortage of materials or supplies, strike, lockout,
boycott, labor dispute, fire, earthquake, acts of God, rioting, insurrection,
war, Government action, and acts of pubic enemy), unless such access or services
are (i) not provided for more than thirty (30) consecutive days after receipt of
written notice from Tenant, and (ii) the Premises are incapable during said
thirty (30) consecutive day period, then, commencing on the thirty-first (31st)
day following such thirty (30) day consecutive period, Total Monthly Rent shall
abate until the services and access are restored. If Tenant's access is
prohibited as a result of any activities set forth in this paragraph for a
period of 180 days or more, Tenant shall have the right to cancel this lease.
ARTICLE 10-PARKING LICENSE
Tenant shall have a revocable license to park, in common with other
tenants, up to Tenant's Parking Allotment of automobiles in the parking
facilities of the Building, subject to the following:
(a) Tenant shall pay Landlord or Landlord's agent, the
regularly-scheduled parking rates at such time and in such manner
as Landlord or Landlord's agent may, from time to time, establish
for tenants of the Building.
(b) Tenant shall not be in default under any term or condition of
this Lease;
(c) Tenant shall abide by any reasonable rules and regulations for
use of the parking facilities that Landlord or Landlord's agent
establishes from time to time, and otherwise use the parking
facility in a safe and lawful manner;
(d) Tenant and Tenant's employees, contractors and invitees may be
required to use attended parking;
(e) No bailment shall be created hereunder or by any use of the
parking facility;
(f) Tenant and Tenant's agents, servants, employees, successors or
assigns each hereby releases Landlord's agents, servants,
employees and independent contractors from all claims for loss or
damage to (including, without limitation, vandalism and theft)
arising out of or related to use of the parking facility; and
(g) Tenant shall have this revocable license, only, and no estate
shall be conveyed to Tenant under this Article; and
(h) The location or relocation of the reserved parking spaces
identified in Article 1.1, Paragraph (m) shall be reasonably
agreed to by Landlord and Tenant.
If Tenant violates any of the terms and conditions of this Article, or fails to
use the parking facility in accordance with the terms of this Article and this
Lease, then landlord may revoke this license to the extent that landlord deems
reasonable and necessary, without liability to Tenant. Tenant's license shall
otherwise be revoked and tenement concurrently with the termination of this
Lease.
ARTICLE 11-REPAIRS
11.1 Except as provided in Article 11.2, Tenant shall, at Tenant's sole
cost and expense, keep the Premises in good condition and repair; including,
without limitation, the maintenance and repair of all glass panels and
partitions, lavatories, showers, toilets, basins, kitchen facilities and
heating, ventilation and air-conditioning systems and each of their respective
mechanical, plumbing and electrical connections (whether such systems or
facilities are fully contained in the Premises, or exist outside the Premises,
but were installed or are maintained to exclusively serve the Premises). Tenant
shall exclusively use Landlord or Landlord's approved subcontractors for all
work related to the mechanical, plumbing, heating, ventilation,
air-conditioning, electrical, fire/life safety and lighting systems, which work
shall be coordinated by Landlord; and, if Landlord independently determines that
any such work is required, Landlord may arrange for such work to be performed
without prior demand upon Tenant (but with such notice as may be required
pursuant to Article 13). All charges for work coordinated by Landlord hereunder
shall be payable by Tenant to Landlord as Additional Rent.
11.2 Landlord shall, at Landlord's initial cost and expense, repair and
maintain the Common Areas, structural portions of the Building, and all basic
mechanical, electrical, plumbing, heating, ventilation and air-conditioning
systems providing service to all tenants in the Building. Payment of such
expenses by Tenant to Landlord shall be subject to Article 5 and 6 of this
Lease. Notwithstanding the foregoing, but subject to the provisions of Article
18, if any such maintenance or repair is caused in part or in whole by the
negligence or willful misconduct of Tenant, its agents, servants, employees,
licensees invitees (which do not include unsolicited relationships with Tenant),
then Tenant shall directly pay to Landlord as Additional Rent the reasonable
charge for such maintenance and repairs. Furthermore, Tenant shall take all
reasonably necessary action to prevent any additional or future damage which
Landlord reasonably believes may be caused by Tenant, its agents, servants,
employees, licenses or invitees (which do not include unsolicited relationships
with Tenant), whether as an isolated incident or as a continuous course of
conduct, or whether individually or as a group.
11.3 Provided Landlord uses commercially reasonable efforts to minimize
interference with Tenant's use of the Premises, Landlord reserves the right to:
(a) Install, repair, maintain, relocate or replace plumbing,
electrical, HVAC and other mechanical systems above the ceiling,
below the floor, within the walls and central core;
(b) Temporarily close the Common Areas or building for maintenance,
repair, improvement or alteration of the Building or Common
Areas, or make changes to the Common Areas, including, without
limitation, changes affecting ingress, traffic flow, landscaping
and parking facilities; and
(c) Perform such other acts or make such other changes to the
Building and Common Areas that Landlord may deem appropriate
(provided Tenant's use or access to the Premises or Common Areas
is not unreasonably impaired).
11.4 Landlord shall not be liable to Tenant for any failure by Landlord to
perform the repairs and maintenance required of Landlord hereunder, unless such
failure persists for an unreasonable time after Tenant notifies Landlord in
writing of the specific need for such repairs or maintenance. Except as
expressly provided elsewhere in this Lease, there shall be no abatement of rent
and no liability of Landlord by reason of any injury to, or interference with
Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building, Common Areas or Premises.
Tenant waives any right to make repairs at Landlord's expense pursuant to
California Civil Code section 1942 or any similar law, statue or ordinance.
Tenant acknowledges that the Premises do not constitute a "Dwelling Unit" or
"Dwelling" as the term is used in California Civil Code section 1940, et. seq.
ARTICLE 12-CONDITION OF PREMISES
12.1 Subject to any provisions of this Lease concerning the making of
Leasehold Improvements in the Premise (if any), by taking possession of the
Premises hereunder, Tenant accepts the Premises as being in good order,
condition and repair (excepting only latent defects and items subject to
correction pursuant to Article 35) and otherwise as is, where is and with all
faults. All work required to bring the Premises into compliance with the
requirements of the ADA, other laws and ordinances as of the Commencement Date,
shall be the sole responsibility of Landlord, both as to performance and payment
of costs. Thereafter, Tenant shall be solely responsible to keep and maintain
its Premises in compliance with the requirements of the ADA, other laws and
ordinances. Except as may be expressly set forth in this Lease, Tenant
acknowledges that neither Landlord, nor any employee, agent or contractor of
landlord has made any representation or warranty concerning the Land, Building,
Common Areas or Premises, or the suitability of either for the conduct of
Tenant's business.
12.2 Upon the expiration of the Term or earlier termination of this Lease,
Tenant shall relinquish possession of the Premises to Landlord in the same
condition as received, ordinary wear and tear excepted, free of all trash and
rubbish, and in broom clean condition. Landlord may dispose of any personal
property remaining in the Premises in accordance with California Civil Code
section 1980, et seq., and shall be entitled to recover all costs and expenses
provided therein, including landlord's reasonable attorneys' fees and costs.
ARTICLE 13-ENTRY BY LANDLORD
13.1 Provided Landlord uses commercially reasonable efforts to minimize
interference with Tenant's business and advises Tenant an appropriate period in
advance of same, Landlord shall have the right to enter the Premises to inspect
the Premises, show the Premises to prospective purchasers, show the Premises to
prospective tenants (if Tenant has failed to exercise its option to re-lease or
in the last six (6) months of the extension terms, only), make alterations,
improvements or repairs (including construction required by the character of the
work), and environmental inspections. No advance notice shall be required for
Landlord to supply janitorial services or to post legal notices.
13.2 Notwithstanding the provisions of Article 13.1, Landlord shall be
entitled to enter the Premises without advising Tenant in advance or making the
required effort to minimize interference with Tenant's business when Tenant is
in default of this Lease, or in an "Emergency" (which shall be any circumstance
which may threaten or endanger the building, or health or property of Landlord,
other tenants, occupants or the general public, or result in a liability or loss
to Landlord).
13.3 Landlord shall at all times have a key with which to unlock all of the
doors in and to the Premises, excepting Tenant's vaults and safes. If Tenant
changes locks on any doors without Landlord's prior written consent, Landlord
shall have the right to enter the Premises, change, remove and/or replace such
locks, repair any damage and restore the Premises, and charge Tenant as
Additional Rent all expenses incurred in accomplishing the foregoing.
13.4 Except as expressly provided elsewhere in this Lease, there shall be
no abatement of rent and no liability of Landlord by reason of any injury to, or
interference with Tenant's business arising from any entry performed by Landlord
in good faith attempt to comply with the terms of this Article. Any such good
faith entry shall not constitute an eviction, or a forcible or unlawful entry or
detainer of the Premises.
ARTICLE 14-ALTERATIONS
14.1 All alterations, additions, decorations or improvements made by or on
behalf of Tenant in or to the Premises ("Alterations"), shall require Landlord's
prior reunion consent, which consent shall not be unreasonably withheld or
delayed. Tenant may make alterations, decoration or improvements of less than
$5,000 in any one instance without consent but with prior written notice to
Landlord. Tenant shall give Landlord ten (10) days' prior written notice of
Tenant's desire to make Alterations. Landlord may impose any reasonable
condition upon issuing Landlord's consent (including, without limitation:
requiring Tenant to remove Alterations at the end of the Term and restore the
Premises to the condition prior to Alterations' having been made (reasonable
wear and tear excepted); obtaining the consent of any mortgagee, encumbrance,
lender or ground lessee; providing Landlord with working drawings,
specifications, and estimated costs; providing Landlord with verification of all
required permits or approvals; and, obtaining a lien and completion bond.
14.2 Tenant shall use contractors reasonably acceptable to Landlord for all
Alterations effecting basic Building mechanical, electrical, plumbing, heating,
ventilation and air-conditioning systems; and, shall otherwise use licensed,
qualified contractors and subcontractors which shall carry course of
construction, products liability, completed operations, worker's compensation
and public liability insurance in amounts satisfactory to Landlord, naming
Landlord as an additional insured. Alterations shall be performed at the times
and in the manner specified by Landlord, and shall not interfere with access or
use of the Common Areas or other premises. Alterations shall be performed in
full compliance with all laws, rules and/or directives of any government or
regulatory agency or authority.
14.3 All permanent improvements to the Premises, Leasehold Improvements and
Alterations (including, without limitation, floor and wall coverings, blind,
drapes, cabinets, shelving, doors, locks, paneling and the like) which Landlord
has not required Tenant to remove at the end of the Term shall become the
property of Landlord upon the termination of this Lease and shall be
relinquished with the Premises.
14.4 Landlord may require Tenant to immediately remove any Alterations not
made in accordance with this Articles, and restore the Premises to the condition
immediately prior to the Alterations' having been made (reasonable wear and tear
excepted). If Tenant either fails to immediately remove Alterations not made in
accordance with this Article after Landlord's demand, or fails to remove
Alterations which Landlord required to be removed upon termination as a
condition of issuing Landlord's consent, then Landlord may perform such removal
and restore the Premises, at Tenant's sole cost and expense, to the condition
immediately prior to the Alterations' having been made (reasonable wear and tear
excepted).
14.5 Except for initial tenant improvements performed by Landlord prior to
The Commencement Date, all Alterations, removal of Alterations and restoration
the Premises which Landlord is reasonably required to perform or supervise are
subject to Landlord's charge, as Additional Rent, for all costs and expenses of
such performance and supervision (including, without limitation, review of plans
or work by Landlord's architect, engineer or other consultant), plus a
supervision fee payable to Landlord in the amount of ten percent(10%) of the
cost of such work.
ARTICLE I5-HAZARDOUS MATERIALS
15.1 Tenant shall neither create, bring into nor store in the Building,
Common Areas or Premises any "Hazardous Materials" (which shall be defined as
any substance, material, emission discharge or waste defined as "hazardous",
"toxic", or a "pollutant" or "contaminant" under any local, state or federal
government law, statue, code, order or regulation for the protection of health,
safety or the environment), excepting reasonable quantities of cleaning and
business supplies used in connection with the maintenance of the Premises or the
use of common office equipment. Tenant shall comply with all laws, regulations,
recommendations or orders promulgated by any government, quasi-government or
regulatory agency or authority, or the manufacturer of hazardous waste or
materials with regard to maintenance of records, and its handling, storage and
disposal. 'Upon Landlord's request, Tenant shall supply Landlord with a copy of
any record or certificates required to be maintained by Tenant concerning
hazardous materials or waste.
15.2 Notwithstanding the provisions of Article 15.1, if such Hazardous
Materials were brought onto or generated upon the Land, Building, Common Areas
or Premises by Tenant, and if such materials pose a material risk to the health
of occupants of the Building or Common Areas or such Hazardous Materials are
required to be removed according to law, then Tenant shall be solely responsible
for the removal and abatement of same, at Tenant's sole cost and expense, and
Tenant shall indemnify and hold Landlord harmless from any action which might
occur as a result of the presence of such Hazardous Materials brought into or
incorporated into the Land, Building, Common Areas or Premises by Tenant, its
employees, subcontractors or consultants.
ARTICLE 16-LIENS
Tenant shall keep the Land, Building and Premises free from any liens
resulting from work performed, materials furnished or obligations incurred by,
or on behalf of Tenant. Tenant shall promptly discharge any such lien by bond or
otherwise. If Tenant fails to promptly discharge any such lien after Landlord's
demand, then Landlord may discharge the lien and charge Tenant as Additional
Rent all costs and expense reasonably incurred by Landlord to do so, including
attorneys' fees and costs.
ARTICLE 17-BROKERS
Each party warrants to the other that no broker, agent, finder, person
or entity, other than Procuring Broker, was instrumental in negotiating or
consummating this Lease, or might be entitled to a commission or compensation in
connection with the execution of this lease. Each party shall indemnify and hold
the other harmless from any claim, damages, cost and expenses, including
attorneys' fees and costs, resulting from any claim that may be asserted against
the other party by any broker, agent, finder, person or entity other than
Procuring Broker which is not disclosed by such party to the other in writing
prior to entering into this Lease, or who claims a right to compensation through
such party. Landlord shall pay all commission due to the Procuring Broker in
accordance with the agreement between Landlord and Procuring Broker.
ARTICLE 18-INSURANCE
18.1 Subject to Article 5, Landlord shall, throughout the Term, provide,
maintain and keep in force: with the agreement between Landlord and Procuring
Broker.
(a) Comprehensive general liability insurance for personal injury,
bodily injury (including death), and property damage in such
amounts as Landlord from time to time determines such insurance
shall be reasonably comparable to those maintained by other
landlords on similar buildings in the area: with the agreement
between Landlord and Procuring Broker.
(b) All risk insurance or fire insurance (with standard extended
coverage and endorsement perils, leakage from fire protection
devices and water damage) covering the Building and all fixed
improvements therein, except those fixtures, improvements,
furnishings, equipment and other property which Tenant is
required to insure pursuant to Article 18.2, subparagraphs (b),
(c), (d) and (e);
(c) Insurance for loss of rental income or insurable gross profits in
such amount Landlord prudently elects to maintain;
(d) Such other insurance in such amounts as Landlord prudently elects
to maintain shall be reasonably comparable to those maintained by
other landlords on similar buildings in the area;
Insurance to be provided and maintained by Landlord herein may contain such
deductibles and exclusions and or such other terms and conditions as Landlord
prudently determines to be commercially reasonable and sufficient.
18.2 Tenant shall, during the Term, provide, maintain and keep in force:
(a) Comprehensive general liability insurance for personal and bodily
injury, including death and property damage, with respect to
Tenant's use and occupancy of the Premises, Common Areas and
Building, and the business carried on by Tenant therein, with
limits of not less than Two Million Dollars (2,000,000.00) for
any one accident or occurrence, with Landlord named as an
additional insured:
(b) All risk or fire insurance (with standard extended coverage
endorsement perils, theft, vandalism explosion, falling plaster,
steam, gas, electricity, water, rain, elements of nature, water
damage or dampness, and leakage from any part of the Building or
Land, including fire protection devices, pipes, appliances and
other plumbing) covering the full replacement cost of Tenant's
trade fixtures, furnishings, equipment, inventory, stock-in-
trade, Alterations and any improvement in and to the Premises
which are above Building standards, whether such items existed in
the Premises prior to Tenant's occupancy, or were installed in or
to exclusively serve the Premises, and whether such items were
installed by either Tenant or Landlord, and at either Tenant's or
Landlord's expense;
(c) If the Premises is on the street level floor of the Building,
insurance covering the full replacement value of any plate glass
windows or doors;
(d) Any insurance which may be required pursuant to any local, state
or federal government law, statue or regulation (including,
without limitation, workers' compensation insurance).
Notwithstanding the above, Landlord reserves the right to reasonably and
prudently change the insurance requirements set forth herein (including, without
limitation, requiring such additional insurance which Landlord reasonably and
prudently determines to be sufficient).
18.3 Tenant shall provide Landlord on or before the Commencement Date and
throughout the Term with copies of such certificates or other proof reasonably
necessary for Landlord to verify that the required insurance coverage has been
obtained, is in full force and effect and that the premiums have been paid
thereon. All policies shall contain an undertaking by the insurer to notify
landlord (and any mortgagees or ground lessors designated by Landlord) in
writing not less than thirty (30) days prior to any material change, reduction,
cancellation or other termination of coverage required hereunder. Replacement
certificates or other such proof shall be furnished to Landlord not less than
thirty (30) days prior to the expiration of any such policy or policies.
Landlord's failure to request evidence of coverage shall not constitute a waiver
of any of Landlord's rights hereunder or Tenant's obligation to so insure.
18.4 Insurance to be provided and maintained by either party pursuant to
Article 18.1, subparagraphs (b), (c) and (d), and Article 18.2, subparagraphs
(b), (c) and (d) shall include a clause or endorsement whereby the insurer
waives its right of subrogation against the other party. Landlord and Tenant
waive any rights of recovery against the other for injury or loss due to hazards
covered y insurance (or required to be covered by insurance pursuant to Articles
18.1., subparagraphs (b), (c), and (d), and 18.2, subparagraphs (b), (c), and
(d) which contain (or are required to contain) such a waiver of subrogation, to
the extent of the injury or loss covered thereby.
ARTICLE 19-lNDEMNlFlCATlON
19.1 Subject to the waivers of subrogation and liability set for thin
Article 18.4, Tenant shall defend, indemnify and hold Landlord harmless from and
against any and all liability, loss, claims, demand, damages or expenses,
including attorneys' fees, whether for personal injury, theft, property damage
or otherwise, due to or arising from:
(a) Any accident, act or omission (caused by Tenant's use of the
Premises or conduct of business therein) occurring or emanating
from the Premises, except as may be caused by the negligence or
willful misconduct, or breach or non-performance described in
Article 19.2. subparagraph (b) or (c);
(b) The negligence or willful misconduct of Tenant, its servants,
employees, agents, contractors, concessionaires or licensees, or
those over whom Tenant would normally be expected to exercise
control, whether in or about the Land, Building, Common Areas,
Premises, or parking facility; or
(c) Tenant's breach or non-performance of any material provision of
this Lease.
If any action or proceeding is brought against Landlord by reason of any such
claim, Tenant, upon notice from the Landlord, shall defend the same at Tenant's
expense by counsel reasonably satisfactory to Landlord.
19.2 Subject to the waivers of subrogation and liability set forth in
Article 18.4, Landlord shall defend, indemnify and hold Tenant harmless from and
against any an all liability, loss, claims, demand, damages or expenses,
including attorneys' fees, whether for personal injury, theft, property damage
or otherwise, due to or arising from:
(a) Any accident, act or omission in or about the Land, Building, and
Common Areas, except as may be caused by any accident, act or
omission, negligence or willful misconduct, or breach or
non-performance described in Article 19.1, subparagraphs (a)
through (c);
(b) The negligence or willful misconduct of Landlord, its servants,
employees, agents, contractors, invitees, concessionaires or
licensees, or those over whom Landlord has control, whether in or
about the Land, Building, Common Areas, Premises, or parking
facility; or
(c) Landlord's breach or non-performance of any material provision of
this Lease.
If any action or proceeding is brought against Tenant by reason of any such
claim, then Landlord, upon notice for Tenant, shall defend the same at
Landlord's expense by counsel reasonably satisfactory to Tenant.
ARTICLE 20-LIMITATION OF LIABILITY
Except as may be expressly provided in Article 21, and notwithstanding
anything to the contrary set forth in Article 19, Tenant assumes the risk of,
and Landlord shall not be liable or in any way responsible to Tenant or Tenant's
servant, employees, agents, contractors, concessionaires or licensees, or those
over whom Tenant would normally be expected to exercise control for any loss,
injury or damage to their respective.
(a) Required to be insured by Tenant pursuant to Article 18.2,
otherwise actually insured by Tenant;
(b) Resulting from entrustment of property to Landlord, or Landlord's
employees, contractors or agents ("Entrustment" to be defined to
include, without limitation, attended parking, but exclude the
nominal maintenance of Tenant's fixtures, furnishings and
property in the Premises in connection with the Permitted Use);
(c) Resulting from the intentional or negligent acts or omissions
(including, without limitation, theft and vandalism) by other
tenants of the Building (and their employees, invitees,
contractors or agents), unless caused by Landlord's failure,
after receipt of written notice, to take reasonable action to
enforce the Leases or Rules and Regulations with respect to such
other tenants, or resulting from the intentional or negligent
acts or omission of other persons or occupants in the building or
Common Areas other than the parties hereto (and their respective
employees, invitees, contract on or agents);
(d) Resulting from the construction of public work, whether in, on or
about the Land, Building, Common Areas or Premises;
(e) Resulting from the failure of Landlord to perform or observe any
of the terms, conditions or covenants of this Lease unless such
failure has persisted for an unreasonable period of time after
receipt of written notice by Landlord from Tenant specifying such
failure; or
(f) Resulting from any occurrence not otherwise specifically set
forth above, provided such occurrence is not caused by Landlord's
negligence, willful misconduct, or breach of this Lease.
ARTICLE 21-DAMAGE OR DESTRUCTION
21.1 If the interior of the Premises is damaged or destroyed by Tenant,
then Tenant shall, at Tenant's sole cost and expense, promptly repair, replace
and restore the Premises and the permanent improvements therein (including,
without limitation, any Leasehold Improvements and Alterations) to at least the
condition existing prior to the damage (reasonable wear and tear excepted)
during which time this Lease shall remain in full force and effect. If no damage
or destruction as described in Article 21.2 occurs in conjunction with the
damage or destruction to the interior of the Premises, then Tenant's rent shall
not abate as a result of same.
21.2 If any portion of the Land, Building, Common Areas, or Premises
reasonably necessary for Tenant's access, use or occupancy of the Premises is
damaged or destroyed by any cause, then the rights and obligations of Landlord
and Tenant shall be as follows:
(a) If repairs can, in Landlord's reasonable opinion, be completed
within one hundred twenty (120) days after commencement of such
repairs, then Landlord shall repair the same (to the condition
existing prior to the damage) after receipt of insurance
proceeds, during which time this Lease shall remain in full force
and effect except that Tenant's Total Monthly Rent shall abate to
the extent provided in Article 21.4; or
(b) If repairs cannot, in Landlord's opinion, be completed within
said one hundred twenty (120) day period, or if such damage or
destruction is not insured by Landlord's insurance policies,
Landlord may either:
(i) Repair the same (to Building standards) after receipt
of insurance proceeds, during which time this Lease shall
remain in full force and effect, except that Tenant's Total
Monthly Rent shall abate to the extent provided in Article
21.4; or
(ii) Provided Landlord terminates the leases of all
similarly situated tenants, Terminate this Lease upon at
least thirty (30) days' prior written notice to Tenant, this
Lease to remain in full force and effect through the
specified termination date, except that Tenant's Total
Monthly Rent shall abate to the extent provided in Article
21.4.
(c) If Landlord has failed, within one hundred twenty (120) days from
the date of damage or destruction to the Building or common areas
to make the Premises available for Tenant's use, enjoyment and
access, Tenant may terminate this Lease with thirty (30) days
prior written notice, in which event this Lease shall terminate
on the date set forth in Tenant's notice as if such date were the
expiration date of the Term.
21.3 If Landlord or Tenant elects to terminate this Lease pursuant to
Article 21.2(b)(ii) or Article 21.2 (c), respectively, and Tenant has maintained
the insurance required pursuant to Article 18.2 (b), then Tenant shall assign
its right to receive the benefits under such insurance for the repair and
restoration of the above-standard permanent improvements to the Premises. If
Tenant terminates, Tenant shall directly pay Landlord any deductible under such
policy.
21.4 Any abatement of rent hereunder shall be limited to the extent that
Tenant's use or enjoyment of the Premises or necessary common area is materially
impaired or prevented.
21.5 Notwithstanding anything to the contrary contained in this Article or
Lease; Landlord shall have no obligation to repair or restore damage or
destruction under Article 21.2 when it occurs during the last six (6) months of
he Term; however, if Landlord so elects and the damage or destruction either
prevents Tenant's reasonable access to the Premises or materially adversely
affects Tenant's use of all or a substantial part of the Premises, then Tenant
shall have the right to terminate this Lease upon thirty (30) days' prior
written notice to Landlord, which notice shall be given within fifteen (l5) days
after receipt of Landlord's election not to repair or restore.
21.6 Tenant hereby waives the application of California Civil Code sections
1932(2)and 1933(4), which shall have no force or effect in governing the
termination of this Lease.
ARTICLE 22-EMINENT DOMAIN
22.1 If all or any portion of the Land, Building, Common Areas or Premises
is taken for any public or quasi-public purpose by any lawful power or authority
by exercise of the right of appropriation, condemnation or eminent domain (or
sold in lieu of such taking), then:
(a) If such taking or sale substantially interferes with Tenant's use
and occupancy of the Premises, then Tenant may elect to terminate
this Lease on the date of surrender or sale to said authority; or
(b) If such taking or sale does not substantially interfere with
Tenant's use and occupancy of the Premises and any restoration of
the Premises is covered by insurance carried or maintained by
Landlord, then Landlord shall restore the Premises to the same
condition prior to such partial taking, otherwise, Landlord may
elect to terminate this Lease; however, in either case, Tenant's
Total Monthly Rent shall be abated with respect to that portion
of the Premises rendered unusable for the conduct of Tenant's
business therein as a result of the taking or sale, for the
period of time that such portion is so rendered unusable.
22.2 Tenant shall not assert any claim for the taking of any interest in
this Lease, the Land, Building, Common Areas or Premises and Landlord shall be
entitled to receive the entire amount of any award without deduction or offset
for any estate or interest of Tenant; however, Tenant shall be entitled to bring
a separate action for relocation expense, and damages to Tenant's personal
property, trade fixtures and goodwill. Tenant hereby waives the application of
California Code of Civil Procedure section 1265.130 to the extent that its
provision are contrary to the provision of this Article.
ARTICLE 23-SUBORDINATION
23.1 Without the necessity of the execution and delivery of any further
instruments on the part Or Tenant to effectuate such subordination, this lease
shall at all times be subject and subordinate to any liens of any mortgages or
deed of trust, or ground or underlying leases which not exist or may hereafter
be executed or placed effecting the Land and/or Building, or upon landlord's
interest or estate therein. If any ground lease or underlying lease is
terminated for any reason, any mortgage deed of trust or lien is foreclosed, or
the Land or Building is conveyed in lieu of foreclosure, then Tenant shall
attorn to and become the tenant of Landlord's successor in interest and Tenant's
right to possession of the Premises shall; not be disturbed, provided Tenant is
not in default and continues to perform; and observe all of the terms,
conditions and covenants of this Lease.
23.2 Notwithstanding the foregoing, Tenant shall execute and deliver such
reasonable instrument which may be required by any such ground lessor, lender,
mortgagee, lien holder or encumbrancer evidencing such subordination, and the
failure or refusal to do so within ten (10) business days after receipt of
Landlord's written request shall constitute a default of this Lease.
23.3 Landlord shall use its best efforts to obtain a non-disturbance
agreement from Landlord's lender in a form acceptable to Landlord's lender.
ARTICLE 24-OFFSET STATEMENT
Upon Landlord's request, Tenant shall execute, acknowledge and deliver
to Landlord a statement in writing setting forth Tenant's certification of the
following: that this Lease is unmodified (or, if modified, the nature of such
modification) and is in full force and effect; the extent to which rental or
other charges have been prepaid; and that Landlord, to Tenant's knowledge, has
not failed to cure any default of Landlord of this Lease (or specifying such
uncured defaults, if any are claimed). Tenant's failure or refusal to execute
and deliver such a statement within ten (10) business days after receipt of
Landlord's written request shall be conclusive upon Tenant that: this Lease is
in full force and effect, without modification (except as may be represented by
Landlord); except as provided in this Lease, not more than one month of rent has
been paid in advance, and not more than one month of security deposit is being
held by Landlord: and, there are no uncured defaults of Landlord. Tenant
acknowledges that such statement may be relied upon by a prospective purchaser
or encumbrancer of all or any portion of the Land, Building or Premises.
ARTICLE 25-ASSIGNMENT AND SUBLETTING
25.1 Unless Tenant has obtained the prior written consent of Landlord
(which shall not be unreasonably withheld, subject to the provisions of Article
25.3), Tenant shall not pledge, sell, transfer, hypothecate, encumber or assign
this Lease or Tenant's interest therein, sublet all or any part of the Premises,
or permit occupancy or the conduct of business in any or all of the Premises by
anyone other than Tenant. Any assignment, sublease, sale, mortgage, pledge,
encumbrance or transfer by Tenant or such other party made in contravention of
this Article shall be void and of no force or effect.
25.2 If Tenant proposes to assign this Lease or to sublet all or
any portion of the Premises, then Tenant shall give Landlord written notice of
Tenant's intent to so assign or sublet at least fifteen (15) days prior to the
proposed effective date of the assignment or sublease. The notice shall include,
with respect to each proposed assignee or subtenant; name and address; terms and
conditions of the proposed assignment or sublease; a detailed statement of facts
about the nature of the proposed use of the Premises and the proposed assignee's
or subtenant's business experience; a balance sheet showing financial condition
as of a date within ninety (90) days prior to the date of the notice; for any
proposed sublease or assignment of an area greater than four thousand rentable
square feet, statements of income, profit and loss for the last two (2) complete
fiscal years; bank and credit references; and, such other and further
information as Landlord may reasonably require.
25.3 (A) Landlord shall, within such fifteen (15) days following receipt
of Tenant's notice pursuant to Article 25.1, notify Tenant that Landlord either
grants or denies its consent for Tenant to proceed to assign or sublet on the
terms and conditions contained in Tenant's notice. Landlord's failure to timely
deny consent shall be deemed approval to assign or sublet on the terms and
conditions contained in Tenant's notice, but only to the extent that the
represented terms and conditions do not conflict with the terms and conditions
of this Lease. Landlord may deny consent to assign or sublet upon any
commercially reasonable ground (which Landlord shall specify in notifying Tenant
of such denial of consent), including, but not limited to, the following:
(a) The financial condition of the proposed assignee or subtenant, in
Landlord's reasonable opinion, is insufficient to enable it to
meet its proposed financial obligations;
(b) If Tenant is to relocate, the financial condition of Tenant after
the proposed assignment or sublease and relocation would be
insufficient to enable it to meet its financial obligations under
this Lease:
(c) The proposed use, or reputation or character of the proposed
assignee or subtenant is not in keeping with the nature of the
Building or may adversely affect the operation or reputation of
the Building;
(d) The proposed use of the Premises is not for general of office
uses compatible, in Landlord's reasonable opinion, to the other
tenants' uses (regardless of the Permitted Use); or
(e) The proposed use of the Premises conflicts with any other
existing agreements between Landlord and other tenants concerning
the Land, Building, Common Areas or Premises.
If Landlord denies consent to sublet, Tenant waives the right to terminate this
Lease pursuant to California Civil Code section 1995.310 (b). Such consent shall
not be unreasonable withheld or delayed.
(B) In the event Tenant informs Landlord of its desire to sublease
the Premises, Landlord shall have fifteen (15) days to recapture
the Premises and terminate the Lease.
25.4 One half (1/2) of any consideration, including rents, received by or
on behalf of Tenant from such assignment or sublease in excess of total Monthly
Rent shall be payable to Landlord upon receipt by Tenant as Additional Rent.
Notwithstanding the foregoing, Tenant shall be entitled to recapture from any
such excess consideration Tenant's costs and expenses for brokerage commissions,
permanent improvements, excused rent, attorneys' fees, lease takeovers, and
other common commercial lease concessions, advertising to sublet or assign and
shared services (including, without limitation, expenses of shared receptionist,
library, telephone system, photocopier, or other similar office expense); but,
expressly excluding from recapture any "down time" for non-use of any portion of
the Premises prior to such assignment or sublease.
25.5 Any allowances, rights to acquire additional Premises, rights to
extend or renew, options or any other similar concessions or consideration set
forth in this Lease and any addenda or amendments thereto are expressly
understood to be solely for the benefit of the original Tenant and shall be
null, void and of no force or effect, at Landlord's option, as of the effective
date of any assignment or subletting; however, this shall not be deemed to
retroactively nullify or void any allowances, concessions, rights or options
actually disbursed, made or exercised prior to such effective date.
25.6 Any advertisement, publicity or other public solicitation of any
assignment or subletting of the Premises shall require Landlord's prior written
consent, which shall not be unreasonably withheld or delayed.
25.7 Any permitted assignment or subletting of the Premises shall not act
to release Tenant or any subsequent assignor or sub lessor from any liability
under this Lease, and Tenant shall cause any assignee to execute an agreement
with Landlord upon a form furnished by Landlord binding the assignees or
sublease to all the terms of this Lease without relieving Tenant of any
liability hereunder. As security for Tenant's obligations under this Lease,
Tenant assigns to Landlord the right to collect all rent resulting from any
assignment or sublease of the Premises in the event of Tenant's default; and
Landlord (as assignee and attorney-in-fact for Tenant, or as a receiver for
Tenant appointed on Landlord's application, may upon written notice to Tenant
and subtenant or assignee, thereafter collect and apply such rent toward the
satisfaction of Tenant's obligations under this Lease. Tenant shall pay a
reasonable processing fee to Landlord for each assignment or sublease to
Landlord, not to exceed Five Hundred Dollars ($500.00).
25.8 Unless Tenant is a corporation or a wholly owned subsidiary of a
corporation whose stock is traded through a recognized United States exchange,
any of the following shall be deemed to be a voluntary assignment requiring
Landlord's consent: a change in business status or organization, dissolution,
merger, consolidation or other reorganization of Tenant (either voluntarily or
pursuant to any provision of the Bankruptcy Act); the sale or other transfer of
a controlling share of the voting capital stock of Tenant; or, the sale of
fifty-one percent (51%) or more of the interests of Tenant. However, if Tenant
is a corporation or a wholly owned subsidiary of a corporation whose stock is
traded through a recognized United States exchange, then, provided Tenant is not
in default hereunder, Tenant may assign this Lease or sublet the Premises to a
corporation into or with which Tenant is merged or consolidated, or to which all
or substantially all of Tenant's assets are transferred, or to any corporation
or other entity which controls or is controlled by the Tenant or is under common
control or affiliated with the Tenant. Tenant shall notify Landlord of any such
assignment or sublease in accordance with Article 33 of this Lease and
concurrently provide Landlord with the same financial information as required in
Article 25.2 with respect to any proposed assignee or sublease.
ARTICLE 26- BANKRUPTCY AND INVOLUNTARY ASSIGNMENT
26.1 Any of the following acts or occurrences with respect to either Tenant
or any guarantor of this Lease shall constitute an involuntary assignment;
filing a petition under Chapter 7, 10, 11 or any other provision of the
Bankruptcy Act now or hereafter in effect; making an assignment for the benefit
or creditors; being adjudicated bankrupt in involuntary bankruptcy proceedings,
unless the judgment is vacated within sixty (60) days from entry; becoming
insolvent (reflected by either a written admission of inability to meet current
obligations, actual inability to meet current obligations, or liabilities
exceeding assets); appointment of a receiver or trustee for any property
(including, without limitation, this Lease) unless the attachment or execution
is removed within sixty (60) days after levy; or transfer or assignment of this
Lease by operation of law (including, without limitation, transfer by will or
intestacy).
26.2 An involuntary assignment shall constitute a default by Tenant and
Landlord shall have the right to terminate this Lease. This Lease shall not be
treated as an asset of Tenant and neither Tenant nor any person claiming through
or under Tenant (or by virtue of any statue or order of any court) shall be
entitled to possession of the Premises, which shall be forthwith surrendered to
Landlord. Landlord shall be entitled to recover damages at least in the amounts
set forth in Article 30 of this Lease; however, nothing herein shall limit or
prejudice the right of Landlord to seek any other damages allowed by any
applicable statue or rule of law.
ARTICLE 27-FINANCIAL STATEMENTS
If Tenant is not in default of this Lease, and Landlord is proposing
to convey, finance or refinance Landlord's interest in the land, Building or
Common Areas, then Landlord shall have the right to require Tenant to furnish
Landlord, at Landlord's sole cost and expense, with financial statements
prepared by a Certified Public Accountant according to generally recognized
accounting principles showing Tenant's financial condition as of a date not more
than ninety (90) days prior to submission to Landlord.
ARTICLE 28-HOLDING OVER
28.1 Tenant shall not hold over after the expiration of the Term or earlier
termination of this Lease without the prior written consent of Landlord (which
shall not be subject to Article 34.1). Tenant agrees that Tenant's failure to
surrender possession of the Premises at the end of the Term can and will cause
actual damage to Landlord which is impracticable or extremely difficult to
ascertain (including, without limitation, lost opportunities to lease the
Premises, increase in the cost of improvements, lost rent and liability for
Landlord's inability to deliver timely possession of the Premises to another
tenant). Therefore, if Tenant holds over after the Term without the prior
written consent of Landlord, then Tenant shall become a Tenant at sufferance
only and shall continue to perform each and every term, condition and covenant
of this Lease during any such period of holding over; except that, in lieu of
damages to which Landlord may be entitled hereunder, Landlord may elect to have
Tenant pay Landlord liquidated damages in an amount equal to one hundred fifty
percent (l50%) of the Total Monthly Rent payable by Tenant to Landlord in the
last complete month of the Term, for each month or portion thereof which Tenant
so holds over.
28.2 If Landlord consents to Tenant's holding over after the expiration of
the Term or earlier termination of this Lease, then the tenancy shall continue
from month-to-month upon the same terms, conditions and covenants contained in
this Lease, except that for each month or portion thereof that Tenant so hold
over, Tenant shall pay to Landlord rent equal to one hundred fifty percent
(150%) of the Total Monthly Rent payable by Tenant in the last complete month of
the Term.
28.3 The foregoing provisions of this Article are in addition to any other
rights of Landlord hereunder, or as otherwise provided by law, including,
without limitation, the right to bring an action for unlawful detainer.
Landlord's acceptance of rent after expiration or earlier termination of this
Lease, or during any such period of holding over shall not be construed as a
renewal or extension of this Lease. Notwithstanding anything to the contrary
contained in this Lease, Tenant shall not be entitled to any parking discounts
or specified modes of parking during any such period of holding over.
ARTICLE 29-DEFAULTS
29.1 The occurrence of any one or more of the following events shall
constitute a default of this Lease by Tenant:
(a) Tenant's failure to pay any Basic Monthly Rent, Tax Rent,
Operating Expense Rent, Capital Expense Rent, Additional Rent or
any other payment due Landlord under this Lease;
(b) Any default set forth in Article 26 of this Lease; or
(c) Tenant's failure to observe to perform any express or implied
covenant or provisions of this Lease, other than those specified
in subparagraphs (a) and (b), above, within ten ( 10) days after
receipt of notice from Landlord; however, if more than ten (10)
days are reasonably required to so observe or perform, then
Tenant shall not be in default so long as Tenant commences
observance or performance within said ten (10) day period and
diligently prosecutes same to completion.
29.2 Any notice of default Landlord is required to give Tenant hereunder
and any notice Landlord may be required to give pursuant to California Code of
Civil Porcedure Section 1161 etseq. (or any similar law now or hereafter in
effect) may be satisfied by a single notice inclusive of the requirements of
both this Article and statutory law. Tenant shall have five (5) days from
notification by Landlord to cure any such default.
ARTICLE 30- REMEDIES
30.1 If Tenant is in default of this Lease, then Landlord may avail itself
of any remedies under law. Landlord may elect (without obligation under Article
35.1) to avail itself of the remedy described in California Civil Code Section
1951.4, in which case this Lease shall continue in full force and effect after
Tenant's breach and abandonment, and notwithstanding anything to the contrary
contained in Article 25, Tenant shall thereafter have the right to sublet or
assign this Lease subject only to reasonable limitations. If Landlord does not
elect to avail itself of the remedy described in California Civil Code Section
1951.4 and Tenant either breaches this Lease and abandons the Premises before
the end of the Term, or Tenant's right to possession is terminated by the
Landlord because of a breach of this Lease, then this Lease shall terminate, and
Landlord shall recover from Tenant the following:
(a) The worth at the time of award of the unpaid rent which had been
earned at time of termination:
(b) The worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided;
(c) The worth at the time of award of the amount by which the unpaid
rent for the balance of the Term after the time of award exceeds
the amount of such rental loss that Tenant proves could be
reasonably avoided: and
(d) Any other amount necessary to compensate Landlord for all the
detriment proximately caused by Tenant's failure to perform
Tenant's obligations under this Lease, or which in the ordinary
course of things would be likely to result therefrom (including,
without limitation, any costs of obtaining mitigating rental
income, such as excused rent, brokerage commissions, Tenant
Improvements, parking concessions, lease takeovers, cash
payments, advertising, moving costs or any other cost or Tenant
concession related to the re-leasing of the Premises upon the
default of Tenant).
The "worth at the time of award" of the amounts referred to in subparagraphs (a)
and (b) above shall be computed by allowing interest at the rate specified in
Article 34.11 of this Lease; and the "worth at the time of award" of the amounts
referred to in subparagraph (c) above shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award, plus one percent (1%).
30.2 Tenant waives any equity of redemption and any right to relief form
forfeiture as provided by California Code of Civil Procedures Section 1179 (or
any other similar applicable statute, regulation or law nor or hereafter in
effect).
ARTICLE 31- ATTORNEYS' FEES
31.1 If either Landlord or Tenant brings suit to interpret or enforce any
provision of this Lease or any rights of either party hereto, then the
prevailing party shall recover from the other party all costs and expenses,
including reasonable attorneys' fees. Notwithstanding the provisions of
California Civil Code Section 1717, the term "prevailing party" as used herein
shall include, without limitation, both a party as to whom a lawsuit is
dismissed (with or without prejudice) without the written consent of that party
and, if the lawsuit is one for declaratory relief, that party whose contentions
are substantially upheld as to the interpretations of this Lease. Any attorneys'
fees payable pursuant to this Article may be claimed either as court costs or in
a separate suit.
31.2 If Landlord is named as a defendant in any suit brought against Tenant
as a result of the tenancy created hereunder and not due to any alleged fault or
breach of this Lease on the Part of Landlord, then Tenant shall pay to Landlord
all costs and expenses incurred by Landlord in such suit, including attorneys'
fees.
ARTICLE 32- ARBITRATION
Any controversy or claim arising out of or relating to this Lease, or
the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered by the Arbitrator(s) may be entered in any
court having jurisdiction thereof. The costs and fees of the arbitrator shall be
shared equally between the parties. Any award may also include an allocation of
reasonable attorneys' fees to the prevailing party. The agreement to arbitrate
will be specifically enforceable under the prevailing law of any court having
jurisdiction. by Landlord in such suit, including attorneys' fees.
ARTICLE 33- NOTICES
33.1 Notice shall be given to Tenant by sending the originals to: Chief
Financial Officer of New Horizons Computer Learning Centers, Inc. at 1231 East
Dyer Road, Suite 140, Santa Ana, CA 92705 and to the General Counsel at 500
Campus Drive, Morganville, NJ 07751. Notice shall be given to Landlord at 100
Corporate Pointe, Suite 160, Culver City, California 90230. Either party may, by
written notice to the by Landlord in such suit, including attorneys' fees.
33.2 In order to prevent disputes concerning the giving of notice, if any
provision of this Lease (or addenda or amendments thereto) requires "notice" to
be given by either party to "notify" the other, or otherwise refers to
"notification", then such notice shall be made in writing and be given by either
personal delivery, certified mail or a nationally-recognized overnight courier
service, in each case delivery to be evidenced by a signed receipt therefor.
Notice may also be given by facsimile transmission, provided the party to whom
the transmission is addressed acknowledges actual, legible receipt by existing a
copy of the transmission (or a receipt for same) and returning a copy of same to
the sender, by facsimile transmission or otherwise. Notices shall be deemed
effective at the time of delivery, as confirmed by said signed receipts. If
either party fails or refuses to accept delivery by certified mail or overnight
courier service, or refuses to execute a receipt evidencing delivery, then
notice may be given by first-class mail and shall be deemed effective two (2)
business days after mailing.
33.3 The term "notice " shall not include any bills, invoices, rent
statements or statement of any other charges or sums due from Tenant to
Landlord, or any notice required or permitted to be given pursuant to any law or
statute.
ARTICLE 34- GENERAL PROVISIONS
34.1 Discretion Consent. Except as may be otherwise specifically provided
in this Lease, to the contrary, wheresoever and whenever Landlord or Tenant's
discretion or consent is required under this Lease, Landlord and Tenant agree
that such discretion will be exercised in a commercially reasonable manner and
that such consent will not be unreasonably withheld or delayed.
34.2 Rules and Relations. Tenant shall faithfully observe and comply with
the Rules and Regulations attached hereto as Exhibit "C", and all reasonable and
nondiscriminatory modifications or additions thereto made by Landlord from time
to time, except as modified by this Lease and Addendum hereto.
34.3 Conflict of Laws. This Lease shall be governed by and construed under
the laws of the State of California.
34.4 Venue. Any lawsuit brought by Tenant against Landlord shall be filed
in a court of competent jurisdiction in the County of Los Angeles.
34.5 Identification of Tenant. The term "Tenant" as used in this Lease
shall mean and include each person or entity that executes this Lease as Tenant,
who shall be jointly and severally liable for the keeping, observing and
performing of all of the terms, covenants, conditions, provisions and agreements
of this Lease to be kept, observed and performed by Tenant. Notice from or to
any single person or entity executing this Lease as Tenant shall be deemed to be
effective notice from or to each and every person or entity executing this Lease
as Tenant, with the same force or effect as if each such person or entity had so
given or received such notice. Any act or signature by any single person or
entity executing this Lease as Tenant concerning this tenancy or Lease
(including without limitation, any renewal, extension, expiration, termination
or modification of this Lease) shall be binding upon each person or entity
executing this Lease as Tenant with the same force and effect as if each person
or entity had so acted or signed. Any refund to any single person or entity
executing this Lease as Tenant shall be deemed to be a refund to each person or
entity executing this Lease as Tenant, as if each such refund had been
collectively made to all such persons or entities.
34.6 Successors and Assigns. Except as otherwise provided in this Lease,
each covenant, condition and provision of this Lease shall be binding upon and
shall insure to the benefit of the parties hereto, their respective heirs,
personal representatives, successors and permissible assigns.
34.7 Relinquishment of Possession. The voluntary or involuntary
relinquishment of possession of the Premises by Tenant to Landlord, or a mutual
cancellation of this Lease by both Tenant and Landlord, shall at the option of
Landlord operate as a assignment to Landlord of any or all subleases or
subtenancies and no marker shall be affected.
34.8 Performance by Tenant. If Tenant fails to perform any act to be
performed by Tenant hereunder other than payment of money to Landlord and such
failure continues for ten(10)days after Tenant's receipt of notice thereof from
Landlord, Landlord may, without waiving or releasing Tenant from any obligation,
perform any such at and all costs incurred by Landlord, together with interest
thereon at the rate specified in Article 35.11 of this Lease from the date of
such payment.
34.9 Definition of Landlord. The term "Landlord" as used in this Lease shall be
limited to mean and include only the owner at the time in question of the fee or
leasehold interest under a ground lease of the Land. If Landlord transfers
assigns or otherwise conveys any such title or leasehold, Landlord shall be
automatically freed and relieved of all liability with respect to the
performance of any covenants or obligations in this Lease to be performed from
and after the date of such transfer, assignment or conveyance, except as may be
provided in Article 7.3
34.10 Waiver. The waiver by Landlord of any breach of any term, covenant or
condition of this Lease shall neither be deemed a waiver of any concurrent or
subsequent breach of the same or any other term, covenant or condition of this
lease, nor shall any custom or practice which may develop between the parties in
the administration of the term hereof be deemed a waiver of, or in any way
affect the right of Landlord to require strict performance by Tenant. The
acceptance of rent or any sum hereunder by Landlord shall not be deemed to be a
waiver of any breach by Tenant of any term, covenant or condition of this lease
other than the failure of Tenant to pay such rent or sum, regardless of
Landlord's knowledge of such breach at the time of acceptance.
34.11 Interest. Whatsoever required in this Lease, and in lieu of the legal
rate to be used in the computation of any interest owed Landlord in any judgment
or award of the court, interest shall be charged at a rate equal to the higher
of:
(a) Ten percent (10%) per annum; or
(b) Five percent (5%) per annum, plus the rate established by the
Federal Reserve Bank of San Francisco on advances to member banks
under Sections 13 and 13(a) of the Federal Reserve Act (as now in
effect, or hereafter from time to time amended or, if there is no
such single terminable rate of advances, the closest counterpart
of such rate as shall be designated by the Superintendent of
Banks of the Sate of California, unless some other person or
agency is delegated such authority by the legislature) which is
prevailing on the twenty-fifth (25th) day of the month preceding
the "Accrual Date".
The "Accrual Date" shall be defined as follows: for purposes of Article 29, as
the initial date of default; for purposes of Article 6, the date of final
payment by Landlord for the Capital Expense; and for all other purposes, the
date of execution of this Lease. Tenant hereby agrees that the use of such
interest rate herein shall not be deemed to be interest upon a loan or
forbearance of money, for goods or things in action for use primarily for
personal, family or household purposes within the meaning of the California
Constitution, Article 15, Section 1.
34.12 Terms, Headings, and Print. The words "Landlord" and "Tenant" as used
herein shall include the plural as well as the singular. Words used in any
gender include other genders. The article headings are not a part of this Lease,
and such headings and any use of boldface, italics or underlining are for
convenience only and shall have no effect upon the construction or
interpretation of this Lease.
34.13 Time. Time is of the essence with respect to the performance of every
provision of this Lease in which time of performance is a factor.
34.14 Entire Agreement. This Lease contains the entire agreement of the
parties hereto with respect to any matter covered or mentioned in this lease and
no prior agreement or understanding oral or written, expressed or implied,
pertaining to any such matter shall be effective for any purpose. No provision
of this Lease may be amended or added to except by an agreement in writing
executed by both Landlord and Tenant or their respective successors in interest.
The parties acknowledge that all prior agreements, representations and
negotiations concerning the subject matter of this Lease, or collateral thereto,
are deemed superseded by the execution of this Lease to the extent they are not
incorporated herein and that this agreement shall be deemed to be integrated.
34.15 Severability. Any provision of this Lease which proves to be invalid,
void, or illegal shall in no way affect, impair or invalidate any other
provisions hereof, and such other provisions shall remain in full force and
effect.
34.16 Recording. Tenant shall not record this Lease or a short form
memorandum thereof without the written consent of Landlord. Any recording
without Landlord's written consent shall be a material breach of this Lease.
34.17 Plats, Riders, and Clauses. Any addenda, clauses, plats, riders and
provisions executed by both Landlord and Tenant which are inserted in, endorsed
on or affixed to this Lease are a part hereof. If there is any variations or
discrepancy between duplicate original documents held by Landlord and Tenant,
then the duplicate original held by Landlord shall be deemed controlling.
34.18 Building Name. Tenant shall not use the name of the Building for any
purpose other than the address of the business to be conducted by Tenant in the
Premises. Landlord shall have the right, without liability to Tenant, for any
damage or injury, whatsoever, to change the name or street address of the
Building.
34.19 Quiet Possession. Except as otherwise provided in this Lease, Tenant,
upon paying the rents reserved hereunder and observing and performing all of the
covenants, conditions and provisions on Tenant's part to be observed and
performed hereunder, shall have quiet possession of the Premises for the entire
Term.
34.20 Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive and, wherever possible, each remedy shall be cumulative with all other
remedies.
34.21 Examination and Delivery of Lease. Submission of this instrument for
examination or signature by Tenant does not constitute a reservation of, or
option to Lease and is not effective as a Lease or otherwise, or a binding legal
instrument until execution and delivery by all parties. Prior to such execution
and delivery, this Lease shall neither be legally binding nor effective.
34.22 Confidentiality. Tenant agrees to keep the terms of this Lease
confidential and shall not disclose same to any other person not a party hereto
without the prior written consent of Landlord; however, Tenant may disclose the
terms hereof to Tenant's real estate broker, accountants, attorneys, managing
employees, and other in privity with Tenant to the extent reasonably necessary
for Tenant's business purposes. Tenant agrees that a breach of this Article will
cause irreparable injury to Landlord and Landlord shall be entitled, together
with all other remedies in law or equity available to Landlord, to injunctive
relief to restrain such breach.
34.23 Agreed Figures. All figures set forth in this Leases represent
negotiated sums and percentages and are conclusive as between Landlord and
Tenant.
ARTICLE 35- ADDENDUM
Addendum No. 1 attached hereto is hereby incorporated in and forms a
part of this Lease
WHEREUPON, THE PARTIES HERE TO HAVE EXECUTED THIS LEASE ON THE DATE INDICATED.
TENANT:
New Horizons Computer
Learning Centers, Inc.
Date: 3/15/96 By: /s/ Charles Kinch
---------- ---------------------
Name: Charles Kinch
--------------------
Title: President
-------------------
ATTESTED:
Date: 3/15/96 By: /s/ Gary T. Gann
---------- -----------------------
Name: Gary T. Gann
---------------------
Title: Secretary
--------------------
LANDLORD:
Mani Brothers, LLC
Date: By:
--------- ----------------------
Name:
-------------------
Title:
-------------------
EXHIBIT "A"
PREMISES LOCATION PLAN
---------------------------------------
EXHIBIT "B"
LEGAL DESCRIPTION
----------------------------------------
The real Properly commonly known as 100 Corporate Pointe, Culver City,
California, and more particularly described as:
That certain real property located in the County of Los Angeles, State of
California, described as follows:
Lots 20 and 23 of Tract 33152 in the City of
Culver City, County of Los Angeles, State of
California, as per map recorded in Book 1020,
Pages 31 to 35 inclusive of Maps, in the office
of the County Recorder of said County.
EXHIBIT "C"
RULES AND REGULATIONS
--------------------------------------------------------------
Except as specifically provide to the contrary in the Lease to which
these Rules and Regulations are attached, the following Rules and Regulations
shall be applicable for purposes of this Lease.
1. No sign, placard, picture, advertisement, name or notice shall be
installed or displayed on any part of the outside or inside of the Building
without the prior consent of the Landlord. Landlord shall have the right to
remove, at Tenant's expense and without Notice any sign placard, picture,
advertisement, name or notice installed or displayed in violation of this rule.
All approved signs or lettering on doors and walls shall be printed, painted,
affixed or inscribed at the expense of Tenant using materials and in a style and
format approved by Landlord.
2. Tenant must use Landlord's Building Standard window coverings in all
exterior and atrium window offices. If Landlord objects in writing to any
curtains, blinds, shades, screens or hanging plants or other objects attached or
used in connection with any balcony, window or door of the Premise, or placed on
any windowsill, which is visible from the exterior of the Premises, Tenant shall
immediately discontinue such use. Tenant shall not place anything against or
near glass partitions or doors or windows which may appear unsightly from
outside the Premises. Landlord shall have a right of prior written approval with
respect to any matter placed by Tenant on or near Tenant's windows or balcony.
3. Subject to the provisions of Rule 8. below, Tenant shall not obstruct
any sidewalks, halls, passages, exits, entrances, elevators, escalators or
stairways of the Building. The halls, passages, exits, entrances, walls,
elevators, escalators and stairways are not open to the general public; but are
open, subject to reasonable regulations, to Tenants' business invitees. Landlord
shall in all cases retain the right to control and prevent access thereto of all
persons whose presence, in the judgment of Landlord, would be prejudicial to the
safety, character, reputation and interest of the Building and its tenants.
Neither Tenant nor its contractors, employees or invitees shall go upon the
roof(s) of the Building.
4. The directory of the Building will be provided exclusively for the
display of the names and location of tenants only and Tenant shall be entitled
to display one name per thousand rentable square feet in the Premises on the
directory. Tenant's initial listing shall be at Tenant's cost and expense, and
any revision thereto shall be made at Tenant's cost and expense.
5. All cleaning and janitorial services for the Building and the Premises
shall be provided exclusively through Landlord and, except with the written
consent of Landlord, no person or persons other than those approved by Landlord
shall be employed by Tenant or permitted to enter the Building for the purpose
of cleaning the same. Tenant shall not cause any unnecessary labor by
carelessness or indifference to the good order and cleanliness of the Premises
and Building.
6. Landlord will furnish Tenant, free of charge, with up to one key for
each parking space leased by Tenant. Thereafter, Landlord will make a reasonable
charge of any additional or replacement keys. Tenant shall not make or have made
additional keys other than those provided by Landlord, and Tenant shall not
alter any lock or install a new or additional lock or bolt on any door of its
Premises. Tenant, upon the termination of its tenancy, shall deliver to Landlord
the keys to all door locks which have been furnished to Tenant, and in the event
of loss of any keys so furnished, shall pay Landlord therefor.
7. Electric wires, telephones, telegraphs, burglar alarms or other
electric apparatus, other than those installed by Landlord at the time Tenant
occupies the Premises, shall not be installed in the Premises except with the
approval and under the direction of Landlord, and no such installation shall be
made without first obtaining written permission from Landlord to do such work.
The location of telephones, call boxes and any other equipment affixed to the
Premises shall be subject to the approval of Landlord. Any installation of
telephones, telegraphs, electric wires or other electric apparatus made without
permission shall be removed by Tenant at Tenant's own expense. Landlord
understands the nature of Tenant's business necessitates the use of movable
cables and wires for computers and consents to their installation and
re-installation thereof.
8. Freight elevator(s) shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord, in its discretion,
deems appropriate. No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
elevators except between such hours and in such elevators as may be designated
by Landlord. Tenant's initial move-in and subsequent deliveries of bulky items
(e.g., furniture, safes and similar items) shall, unless otherwise agreed in
writing by Landlord, be made during non-Business Hours. Deliveries during
Business Hours shall be limited to normal office supplies, reasonable quantities
of food and beverage supplies and other small items. No deliveries shall be made
which impede or interfere with other tenants or the operation of the Building.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects shall, if considered necessary by
Landlord, stand on such platforms as determined by Landlord to be necessary to
properly distribute the weight, which platforms shall be provided at Tenant's
expense. Business machines and mechanical equipment belonging to Tenants which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building, shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devices
sufficient to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall not
use or permit to be used in the Premises any foul or noxious gas or substance,
or permit or allow the Premises to be occupied or used in a manner which is
offensive or objectionable to Landlord or other occupants of the Building by
reason of noise, odors or vibrations.
11. Tenant shall not use any method of heating or air conditioning other
than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air conditioning and compliance with any
governmental energy saving rules, laws or regulations relating thereto. Tenant
shall not adjust thermostats. Tenant shall keep corridor doors closed. Tenant
shall close window coverings, shut off all water faucets (or other water
apparatus), and electricity, and turn off appliances and exhaust fans at the end
of each business day.
13. During non-Business Hours Landlord reserves the right to exclude from
the Building any person, unless that person is known to the person or employee
in charge of the Building and has a pass or is properly identified.
14. The toilets, urinals, wash basins and other restroom or janitorial
closet apparatus shall not be used for any purpose other that for which they
were constructed, and no foreign substance of any kind whatsoever shall be
thrown therein. Tenant shall bear any expense of breakage, stoppage or damage
resulting from the violation of this rule by Tenant 's employees or invitees.
15. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof or exterior walls of the Building. Tenant shall not
interfere with radio or television broadcasting or reception from or in the
Building or elsewhere.
16. Tenant shall not unreasonably mark, drive nails, screw or drill into
the partitions, workwood or plaster or in any way deface the Premises or any
part thereof, except in accordance with the provisions of the Lease pertaining
to alterations. Landlord reserves the right to direct electricians as to where
and how telephone and telegraph wires are to be introduced to the Premises.
Except as otherwise provided herein, Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering in any manner, except as
approved by Landlord.
17. Tenant shall not install, maintain or operate in the Premises any
vending machine without the written consent of Landlord.
18. Canvassing, soliciting and distribution of handbills or any other
written material and peddling in the Building or Common Areas are prohibited,
and Tenant shall cooperate to prevent such activities.
19. Landlord reserves the right to exclude or expel from the Building or
Common Areas any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building or parking facility.
20. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash box
or receptacle any hazardous or medical wastes, or any material which cannot be
disposed of in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with direction
issued from time to time by Landlord.
21. Tenant shall not use in any space or in the public halls of the
Building any hand trucks, except those equipped with rubber tires and side
guards or such other material-handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the Building.
22. Without the written consent of Landlord, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the business
of Tenant except as Tenant's address.
23. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency,
and shall participate in drills for same.
24. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
25. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the Building. Tenant shall not
leave vehicles in the Building parking areas overnight (except in reserved
spaces) nor park any vehicles in the Building parking areas which would exceed
height requirements, or the size of the spaces provided therefor. Landlord may,
in its sole discretion, designate separate areas for bicycles and motorcycles.
26. Tenant's requirements will be attended to only upon appropriate
application to the Building management office by an authorized individual.
Employees of Landlord shall not perform any work or do anything outside of their
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
27. Landlord reserves the right to amend or waive any rules or regulations
with respect to any other tenant, but no such waiver by Landlord shall be
construed as a amendment or waiver in favor of Tenant with respect to such Rules
and Regulations.
28. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease.
EXHIBIT "D"
WORK LETTER
This Exhibit "D" is attached to and made a part of that certain Lease
dated February 1, 1996 by and between Mani Brothers LLC (Landlord) and New
Horizons Learning Center Santa Ana, a Delaware Corporation ("Tenant") for the
Premises located at 100 Corporate Pointe. Suites 180 and 195, Culver City.
California.
1. APPLICATION OF EXHIBIT
Capitalized terms used and not otherwise defined herein shall have the
same definitions as set forth in the Lease. The provisions of this Work Letter
shall apply to the planning and completion of leasehold improvements requested
by Tenant (the "Tenant Improvements") for the fitting out of the initial
premises, as more fully set forth herein.
2. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
a) Preliminary Space Plans. Attached to this Work Letter
as Schedule "1" are preliminary space plans for the Tenant
Improvements (the "Preliminary Space Plans"), which include
without limitation, sketches and/or drawings showing locations of
doors, partitioning, electrical fixtures, outlets and switches,
plumbing fixtures and other requirements, mutually agreed upon by
Landlord and Tenant and determined by Tenant as required for its
use of the Premises. Tenant acknowledges that the Preliminary
Space Plans have been prepared by Landlord's Architect after
consultation and cooperation between Tenant and Landlord's
Architect regarding the proposed Tenant Improvements and Tenant's
requirements and that the Preliminary Space Plans are complete
with respect thereto. Landlord and Landlord's Architect shall be
entitled, in all respects, to rely upon all information supplied
by Tenant regarding the Tenant Improvements.
b) Working Drawings. Within twenty-one (21) days following
full execution of this Lease by both Landlord and Tenant,
Landlord's Architect shall prepare working drawings (the "Working
Drawings") for the Tenant Improvements based upon the approved
Preliminary Space Plans. The Working Drawings shall include
architectural drawings for the Tenant Improvements based on the
Preliminary Space Plans. Notwithstanding the Preliminary Space
Plans, in all cases the Working Drawings (I) shall be subject to
Landlord's final approval, which approval shall not be
unreasonably withheld, (ii) shall not be in conflict with
building codes for the City or County or with insurance
requirements for a fire resistive Class A office building, and
(iii) shall be in a form satisfactory to appropriate governmental
authorities responsible for issuing permits and licenses required
for construction.
(c) Approval of Working Drains. Landlord or Landlord's
Architect shall submit the Working Drawings to Tenant for
Tenant's review to confirm it is consistent with the Preliminary
Space Plan, and Tenant shall notify Landlord and Landlord's
Architect within five (5) business days after delivery thereof of
any requested revisions. Within five (5) days after receipt of
Tenant's notice, Landlord's Architect shall make all approved
revisions to the Working Drawings and submit two (2) copies
thereof to Tenant for its final review and approval, which
approval shall be given within three (3) business days
thereafter. Concurrently with the above review and approval
process, Landlord may submit all plans and specifications to City
or other governmental agencies in an attempt to expedite City
approval and issuance of all necessary permits and Licenses to
construct the Tenant Improvements as shown on the Working
Drawings. Any changes which are required by City or other
governmental agencies shall be immediately submitted to Landlord
for Landlord's review and reasonable approval, and Landlord shall
promptly notify Tenant of such changes.
(d) Schedule of Critical Dates. Set forth below is a
schedule of certain critical dates relating to Landlord's and
Tenant's respective obligations for the design and construction
of the Tenant Improvements. Such dates and the respective
obligations of Landlord and Tenant are more fully described
elsewhere in this Work Letter. The purpose of the following
schedule is to provide a reference for Landlord and Tenant and to
make certain the Final Approval Date occurs as set forth herein.
Following the Final Approval Date, Tenant shall be deemed to have
released Landlord to commence construction of the Tenant
Improvements as set forth in Section 4 below.
Reference Date Due Responsible
Party
A. "Prelimary Contemporaneously Tenant &
Space Plan with Lease Landlord
Approval" execution
B. "Working Twenty-one(21) days Landlord
Drawings after full
Completion" execution of the
Lease
C. "Working Five (5) business Tenant
Drwaing Review" days after Landlord
submits Working
Drawings to Tenant
D. "Working Five (5) business Landlord
Drawing days after Tenant
Revisions" returns Working
Drawings to
Landlord
E. "Final Approval Three (3) business Tenant
Date" days after Landlord
submits revised
Working Drawings to
Tenant
3. BUILDING PERMIT
After the Final Approval Date has occurred, Landlord shall, if
Landlord has not already done so, submit the Working Drawings to the appropriate
governmental body or bodies for final plan checking and a building permit.
Landlord, with Tenant's cooperation, shall cause to be made any change in the
Working Drawings necessary to obtain the building permit; provided, however,
after the Final Approval Date, no changes shall be made to the Working Drawings
without the prior written approval of both Landlord and Tenant, and then only
after agreement by Tenant to pay any excess costs resulting from such changes.
Tenant may terminate this lease if any unapproved modifications to working
drawings substantially effect the space, floor plan or intended use of Tenant
provided that Tenant shall reimburse Landlord for one-half (1/2) the cost of the
Landlord's expenditure to date.
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Final Approval Date has occurred and a building permit for
the work has been issued, Landlord shall, through a construction contract
("Construction Contract") with a reputable, licensed contractor selected by
Landlord ("Contractor"), cause the construction of the Tenant Improvements to be
carried out in substantial conformance with the Working Drawings in a good and
workmanlike manner using first-class materials, The costs associated with the
construction of the Tenant Improvements shall be paid as set forth in Section 5
and 6 of this Work Letter. Landlord shall see that the construction complies
with all applicable building, fire, health, and sanitary codes and regulations,
the satisfaction of which shall be evidenced by a certificate of occupancy for
the Premises. Landlord or Contractor shall maintain a comprehensive general
liability insurance policy with a limit of not less than One Million Dollars
($l,000,000.00) to insure against bodily injury and property damage during the
construction work prior to the Lease Commencement Date.
5. TENANT IMPROVEMENT ALLOWANCE
Landlord shall provide Tenant with a Tenant Improvement Allowance
towards the cost of the design, purchase and construction of the Tenant
Improvements, including without limitation design, engineering and consulting
fees (collectively, the "Tenant Improvement Costs") . The Tenant Improvement
Allowance shall be used for payment or the following Tenant Improvements Costs:
(i) Preparation by Landlord's Architect of the Preliminary
Space Plans and the Working Drawings as provided in Section 2 of
this Work Letter, including without limitation all fees charged
by City (including without limitation fees for building permits
and plan checks) in connection with the Tenant Improvements work
in the Premises;
(ii) Construction work for completion of the Tenant
Improvements as reflected in the Construction Contract:
(iii) All contractor's charges, general conditions,
performance bond premiums and construction fees; and:
(iv) Tenant Improvements as shown on the approved
Preliminary Space Plans dated _________, attached hereto as
Schedule "1".
In the event that Tenant does request modifications, changes or
alterations of the Tenant Improvements from what is shown on said approved
Preliminary Space Plans, or causes any Tenant Delays as defined in Section 7 of
this Work Letter, then all associated costs shall be borne by Tenant. If Tenant
does seek to modify change or alter the Tenant Improvements from the approved
Preliminary Space Plans, or does cause a Tenant Delay, Tenant shall pay to
Landlord any excess costs resulting therefrom in accordance with Section 6 of
this Work Letter.
6. CHANGE ORDERS
Tenant may from time to time request and obtain change orders before
or during the course of construction provided that: (1) each such request shall
be reasonable, shall be in writing and signed by or on behalf of Tenant, and
shall not result in any structural change in the Building, as reasonably
determined by Landlord, (ii) all additional charges and costs, including without
limitation architectural and engineering costs, construction and material costs,
and processing costs of any governmental entity shall be the sole and exclusive
obligation of Tenant, and (iii) any resulting delay in the completion of the
Tenant Improvements shall be deemed a Tenant Delay and in no event shall extend
the Commencement Date of the Lease. Upon Tenant's request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased or decreased cost and anticipated delay, if any,
attributable to such requested change. Within three (3) business days of the
date such estimated costs adjustment and delay are delivered to Tenant, Tenant
shall advise Landlord whether it wishes to proceed with the change order, and if
Tenant elects to proceed with the change order, Tenant shall remit, concurrently
with Tenant's notice to proceed, the amount of the increased costs, if any,
attributable to such change order. Unless Tenant includes in its initial change
order request that the work in process at the time such request is made be
halted pending approval and execution of a change order, Landlord shall not be
obligated to stop construction of the Tenant Improvements, whether or not the
change order relates to the work then in process or about to be started.
7. TENANT DELAYS
In no event shall the Commencement Date of the Lease be extended or
delayed due or attributable to delays due to the fault of Tenant ("Tenant
Delays") . Tenant Delays shall include, but are not limited to, delays caused by
or resulting from any one or more of the following:
a) Tenant's failure to timely review and reasonably
approve the Working Drawings or to furnish information to
Landlord or Landlord's Architect for the preparation by Landlord
or Landlord's Architect of the Working Drawings;
b) Tenant's request for or use of special materials,
finishes or installations which are not readily available,
provided that Landlord shall notify Tenant in writing that the
particular material, finish, or installation is not readily
available promptly upon Landlord's discovery of same; c) Change
orders requested by Tenant; d) Interference by Tenant or by
Tenant's Agents with Landlord's construction activities;
e) Tenant's unreasonable failure to approve any other item
or perform any other obligation in accordance with and by the
dates specified herein or in the Construction Contract;
f) Tenant's requested changes in the Working Drawings or
any other plans and specifications after the approval thereof by
Tenant or submission thereof by Tenant to Landlord; g) Tenant's
failure to approve written estimates of costs in accordance with
this Work Letter; and
h) Tenant's obtaining or failure to obtain any necessary
governmental approvals or permits for Tenant's intended use of
the Premises.
If the Commencement Date of this Lease is delayed by any Tenant delays, subject
to force majeure as defined in the Lease, then the commencement date of the
Lease and the payment of rent shall be accelerated by the number of days of such
delay, determined at the time the certificate of occupancy is issued. Landlord
shall provide Tenant written notice within a reasonable time of any circumstance
that Landlord believes constitute a Tenant delay. If the Premises is not ready
by the Commencement Date, adjusted by and for the Tenant's delay, the Tenant
shall be relieved from the payment of any rent under the Commencement Date.
8. TRADE FIXTURES AND EQUIPMENT
Tenant acknowledges and agrees that Tenant is solely responsible for
obtaining, delivering and installing in the Premises all necessary and desired
furniture, trade fixtures, equipment and other similar items, and that Landlord
shall have no responsibility whatsoever with regard thereto. Tenant further
acknowledges and agrees that neither the Commencement Date of the Lease nor the
payment of Rent shall be delayed for any period of time whatsoever due to any
delay in the furnishing of the Premises with such items.
9. FAILURE OF TENANT TO COMPLY
Any failure of Tenant to comply with any of the provisions contained
in this Work Letter within the times for compliance herein set forth shall be
deemed a default under the Lease. In addition to the remedies provided to
Landlord in this Work Letter upon the occurrence of such a default by Tenant,
Landlord shall have all remedies available at law or equity to a landlord
against a defaulting tenant pursuant to a written lease, including but not
limited to those set forth in the Lease.
EXHIBIT E
GUARANTY OF LEASE
This Guaranty of Lease (the "Guaranty") is attached to and made part of that
certain real estate Lease (the "Lease") dated March 7, 1996 between Mani
Brothers L.L.C. as Landlord, and New Horizons Computer Learning Centers, Inc. as
Tenant, covering the Property commonly known as 100 Corporate Pointe, Culver
City. California, Suite 180. The terms used in this Guaranty shall have the
same definitions as set forth in the Lease. In order to induce Landlord to enter
into the Lease with Tenant, New Horizons Education Corporation, a Delaware
Corporation ("Guarantors"), have agreed to execute and deliver this Guaranty to
Landlord. Each Guarantor acknowledges that Landlord would not enter into the
Lease if each Guarantor did not execute and deliver this Guaranty to Landlord.
1. GUARANTY. In consideration of the execution of the Lease by Landlord and as
a material Inducement to Landlord to execute the Lease, each Guarantor hereby
irrevocably, unconditionally, jointly and severally guarantees the full, timely
and complete (a) payment of all rent and other sums payable by Tenant to
Landlord under the Lease, and any amendments or modifications thereto by
agreement or course of conduct, and (b) performance of all covenants,
representations and warranties made by Tenant and all obligations to be
performed by Tenant pursuant to the Lease, and any amendments or modifications
thereto by agreement or course of conduct. The payment of those amounts and
performance of those obligations shall be conducted in accordance with all
terms, covenants and conditions set forth in the Lease, without deduction,
offset or excuse of any nature and without regard to the enforceability or
validity of the Lease, or any part thereof, or any disability of Tenant.
2. LANDLORD'S RIGHTS. Landlord may perform any of the following acts at any
time during the Lease Term, without notice to or assent of any Guarantor and
without in any way releasing, affecting or impairing any of Guarantor's
obligations or liabilities under this Guaranty: (a) alter, modify or amend the
Lease by agreement or course of conduct, (b) grant extensions or renewals of the
Lease, (c) assign or otherwise transfer its interest in the Lease, the Property,
or this Guaranty, (d) consent to any transfer or assignment of Tenant's or any
future tenant's interest under the Lease, (e) release one or more Guarantor, or
amend or modify this Guaranty with respect to any Guarantor, without releasing
or discharging any other Guarantor from any of such Guarantor's obligations or
liabilities under this Guaranty, (f) take and hold security for the payment of
this Guaranty and exchange, enforce, waive and release any such security, (g)
apply such security and direct the order or manner of sale thereof as Landlord,
in its sole discretion, deems appropriate, and (h) foreclose upon any such
security by judicial or nonjudicial sale, without affecting or impairing in any
way the liability of Guarantor under this Guaranty, except to the extent the
indebtedness has been paid.
3. TENANT'S DEFAULT. This Guaranty is a guaranty of payment and performance,
and not of collection. Upon any breach or default by Tenant under the Lease,
Landlord may proceed immediately against Tenant and/or any Guarantor to enforce
any of Landlord's rights or remedies against Tenant or any Guarantor pursuant to
this Guaranty, the Lease, or at law or in equity without notice to or demand
upon either Tenant or any Guarantor. This Guaranty shall not be released,
modified or affected by any failure or delay by Landlord to enforce any of its
rights or remedies under the Lease or this Guaranty, or at law or in equity.
4. GUARANTOR'S WAIVERS. Each Guarantor hereby waives (a) presentment, demand
for payment and protest of non-performance under the Lease, (b) notice of any
kind including, without limitation, notice of acceptance of this Guaranty,
protest, presentment, demand for payment, default, nonpayment, or the creation
or incurring of new or additional obligations of Tenant to Landlord, (c) any
right to require Landlord to enforce its rights or remedies against Tenant under
the Lease, or otherwise, or against any other Guarantor, (d) any right to
require Landlord to proceed against any security held from Tenant or any other
party, (e) any right of subrogation and (f) any defense arising out of the
absence, impairment or loss of any right of reimbursement or subrogation or
other right or remedy of Guarantors against Landlord or any such security,
whether resulting from an election by Landlord, or otherwise. Any part payment
by Tenant or other circumstance which operates to toll any statute of
limitations as to Tenant shall operate to toll the statute of limitations as to
Guarantor.
5. SEPARATE AND DISTINCT OBLIGATIONS. Each Guarantor acknowledges and agrees
that such Guarantor's obligations to Landlord under this Guaranty are separate
and distinct from Tenant's obligations to Landlord under the Lease. The
occurrence of any of the following events shall not have any effect whatsoever
on any Guarantor's obligations to Landlord hereunder, each of which obligations
shall continue in full force or effect as though such event had not occurred:
(a) the commencement by Tenant of a voluntary case under the federal bankruptcy
laws, as now constituted or hereafter amended or replaced, or any other
applicable federal or state bankruptcy, insolvency or other similar law
(collectively, the "Bankruptcy Laws"), (b) the consent by tenant to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official of Tenant or for any
substantial part of its property, (c) any assignment by Tenant for the benefit
of creditors, (d) the failure of Tenant generally to pay its debts as such debts
become due, (e) the taking of corporate action by Tenant in the furtherance of
any of the foregoing; or (f) the entry of a decree or order for relief by a
court having jurisdiction in respect of Tenant in any involuntary case under the
Bankruptcy Laws, or appointing a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of Tenant or for any substantial
part of its property, or ordering the winding-up or liquidation of any of its
affairs and the continuance of any such decree or order city and in effect for a
period of sixty (60) consecutive days. The liability of Guarantors under this
Guaranty is not and shall not be affected or impaired by any payment made to
Landlord under or related to the Lease for which Landlord is required to
reimburse Tenant pursuant to any court order or in settlement of any dispute,
controversy or litigation in any bankruptcy, reorganization, arrangement,
moratorium or other federal or state debtor relief proceeding. If, during any
such proceeding, the Lease is assumed by Tenant or any trustee, or thereafter
assigned by Tenant or any trustee to a third party, this Guaranty shall remain
in full force and effect with respect to the full performance of Tenant, any
such trustee or any such third party's obligations under the Lease. If the Lease
is terminated or rejected during any such proceeding, or if any of the events
described In Subparagraphs (a) through (fl of this Paragraph 5 occur, as between
Landlord and each Guarantor, Landlord shall have the right to accelerate all of
Tenant's obligations under the Lease and each Guarantor's obligations under this
Guaranty. In such event, all such obligations shall become immediately due and
payable by Guarantors to Landlord. Guarantors waive any defense arising by
reason of any disability or other defense of Tenant or by reason of the
cessation from any cause whatsoever of the liability of Tenant.
6. SUBORDINATION. All existing and future advances by Guarantor to Tenant, and
all existing and future debts of Tenant to any Guarantor, shall be subordinated
to all obligations owed to Landlord under the Lease and this Guaranty.
7. SUCCESSORS AND ASSIGNS. This Guaranty binds each Guarantor's successors and
assigns.
8. ENCUMBRANCES. If Landlord's interest in the Property or the Lease, or the
rents, issues or profits therefrom, are subject to any deed of trust, mortgage
or assignment for security, any Guarantor's acquisition of Landlord's interest
in the Property or Lease shall not affect any of Guarantor's obligations under
this Guaranty. In such event, this Guaranty shall nevertheless continue in full
force and effect for the benefit of any mortgagee, beneficiary, trustee or
assignee or any purchaser at any sale by judicial foreclosure or under any
private power of sale, and their successors and assigns. Any married Guarantor
expressly agrees that Landlord has recourse against any Guarantor~s separate
property for all of such Guarantor's obligations hereunder.
9. GUARANTOR'S DUTY. Guarantors assume the responsibility to remain informed
of the financial condition of Tenant and of all other circumstances bearing upon
the risk of Tenant's default, which reasonable inquiry would reveal, and agree
that Landlord shall have no duty to advise Guarantors of information known to it
regarding such condition or any such circumstance.
10. LANDLORD'S RELIANCE. Landlord shall not be required to inquire into the
powers of Tenant or the officers, employees, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed under
this Guaranty.
11. INCORPORATION OF CERTAIN LEASE PROVISIONS. Each Guarantor hereby represents
and warrants to Landlord that such Guarantor has received a copy of the Lease,
has read or had the opportunity to read the Lease, and understands the terms of
the Lease. The provisions in the Lease relating to the execution of additional
documents, legal proceedings by Landlord against Tenant, severability of the
provisions of the Lease, interpretation of the Lease, notices, waivers, the
applicable laws which govern the interpretation of the Lease and the authority
of the Tenant to execute the Lease are incorporated herein in their entirety by
this reference and made a part hereof. Any reference in those provisions to
"Tenant" shall mean each Guarantor and any reference in those provisions to the
"Lease" shall mean this Guaranty, except that (a) any notice which any Guarantor
desires or is required to provide to Landlord shall be effective only if signed
by ali Guarantors and (b) any notice which Landlord desires or is required to
provide to any Guarantor shall be sent to such Guarantor at such Guarantor's
address indicated below, or if no address is indicated below. at the address for
notices to be sent to Tenant under the Lease.
Signed on March 14, 1996 New Horizons
---------------------- Education Corporation,
a Delaware Corporation
1231 E. Dyer Road, Suite 110 By:/s/ Robert McMillan
- - -------------------------------- -----------------------
Santa Ana, CA 92705 Its: Secretary
- - -------------------------------- ----------------------
Address
Signed on ---------------------, 19 ----------------------------
----------------------------
- - ------------------------------- By:
------------------------
- - ------------------------------- Its:
Address ------------------------
CONSULT YOUR ATTORNEY - This document has been prepared for approval by your
attorney. No representation or recommendation is made by CB Commercial Real
Estate Group, Inc. or the Southern California Chapter of the Society of
Industrial Realtors, Inc., or the agents or employees of either of them as to
the legal sufficiency, legal effect, or tax consequences of this document or the
transaction to which it relates. These are questions for your attorney.
SCHEDULE "1"
PRELIMINARY SPACE PLANS
ADDENDUM NO.1
This Addendum dated March 7, 1996 is made a part of and is attached to
that certain Lease dated March 7, 1996 between Mani Brothers LLC ("Landlord")
and New Horizons Computer Learning Centers, Inc. ("Tenant"), concerning Suites
105 and 195 located at 100 Corporate Pointe, Culver City, California.
ARTICLE 36-LEASEHOLD IMPROVEMENTS
36.1 Landlord agrees to provide Tenant with a build-to-suit in accordance
with mutually approved preliminary space plans and working drawings ("Leasehold
Improvements") provided that the total cost relating to said remodeling and
construction does not exceed Three Hundred Ninety Two Thousand Two Hundred Fifty
and No/100 Dollars ($392,250.00) (calculated by the usable square feet of 13,075
multiplied by Thirty and No/100 Dollars ($30.00) per usable square foot ("Tenant
Improvement Allowance")). Tenant, at Tenant's sole cost, shall bear all costs
relating to the remodeling and construction of the Premises which Landlord
estimates to be in excess of the Tenant allowance ("Excess Costs"). Tenant
shall, on demand by Landlord, deposit with Landlord the excess costs. Landlord
agrees to promptly refund to Tenant any unused excess costs.
36.2 Within thirty (30) days after the Commencement Date, Tenant shall give
Landlord written notice of any claimed deficiencies in the Leasehold
Improvements. Within thirty (30) days after receipt of such notice, Landlord
shall begin any corrective work that is required and diligently prosecute same
to completion. Except with respect to any latent defects in said work, if Tenant
fails to give Landlord notice of any deficiency as provided herein, then Tenant
shall be deemed to have accepted the Leasehold Improvements inclusive of such
deficiency, and Landlord shall have no further obligation to make any corrective
work that may be required.
36.3 There shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business, fixtures,
appurtenances or equipment which commonly occurs as a result of the normal
making of any of the repairs, alterations or improvements contemplated herein.
Any delay in the completion of the Leasehold Improvements that is caused by
Tenant (including delay as a result of changes in the approved space plans
requested by Tenant, specification of products or finishes not readily
available, and delay in choosing finishes) shall constitute a "Tenant Delay".
(Open for discussion.)
36.4 "Force Majeure Delay" shall mean and be defined as delay in the
substantial completion of the Leasehold Improvements due to any cause beyond the
reasonable control of the Party, including, without limitation: acts of God;
fire and other casualties; the elements of nature; wars; black-outs or other
interruptions of utilities; strikes or other labor troubles (provided same are
not caused by illegal acts of the Party); changes in government codes or
regulations (or the interpretation of same); availability of permits; or
shortages of materials or supplies.
ARTICLE 37-LIMITATION ON LIABILITY
Notwithstanding anything in this Lease to the contrary, and excluding
insurance proceeds, it is agreed that the liability of Landlord in connection
with any matter related to this Lease will in no event exceed the fair market
value of the Property as of the date of this Lease.
ARTICLE 38-OPERATING EXPENSE EXCLUSIONS
(a) Costs incurred in connection with the original construction of
the Building or in connection with any major change in the
Building, such as adding or deleting floors;
(b) Costs of alterations or improvements to the Premises or the
Premises of other tenants;
(c) Depreciation, interest and principal payments on mortgages, and
other debt costs, if any;
(d) Costs correcting defects in or adequacy of the initial design or
construction of the Building;
(e) Expenses directly resulting from the negligence of Landlord, its
agents, servants or employees;
(f) Legal fees, planner's fees, real estate broker's leasing
commissions, and advertising expenses incurred in connection with
the original development or original leasing of the Building or
future leasing of the Building;
(g) Costs for which Landlord is reimbursed by its insurance carrier
or any tenant's insurance carrier;
(h) Any bad debt loss, rent loss, or reserves for bad debts or rent
loss;
(i) The expense of extraordinary services provided to other tenants
in the Building;
(j) Costs associates with the operation of the business of the
partnership or entity which constitutes Landlord, as the same are
distinguished from the costs of operation of the Building,
including partnership accounting and legal matters, costs of
defending any lawsuits with any mortgagee (except as the actions
of Tenant may be in issue), costs of selling, syndicating,
financing, mortgaging or hypothecating any of Landlord's interest
in the Building, costs of any disputes between Landlord and its
employees (if any) not engaged in Building operation, disputes of
Landlord with Building management, or outside fees paid in
connection with disputes with other tenants;
(k) The wages of any employee who does not devote substantially all
of his or her time to the Building;
(l) Fines, penalties, and interest;
(m) Amounts paid as ground rental by Landlord;
(n) Any Building system maintenance contracts, Earthquake or any
other type of insurance, unless such maintenance costs and/or
insurance coverage was carried during the base year or, in the
alternative, the base year Operating Costs have been "grossed-up"
to include what such maintenance and/or insurance coverage would
have cost had it been carried during the base year.
(o) Wages and fees incurred in connection with the ownership,
management and operation of the parking structure;
(p) Any Operating Costs in connection with the ground floor and
mezzanine levels, or any other floor in the Building devoted to
retail operation; and
(q) Any recalculation of or additional Operating Costs actually
incurred more than two (2) years prior to the year in which
Landlord proposed that such costs be included.
ARTICLE 39-COMMENCEMENT DATE
The Lease shall commence upon completion of tenant improvement work
which shall be targeted for June 1, 1996. Tenant, along with its contractors and
agents, shall be permitted to enter the Premises without the obligation to pay
rent thirty (30) days prior to substantial completion of the Premises provided
that said occupancy does not disturb or delay the tenant improvement work being
done by Landlord's contractor. The Lease shall commence fourteen (14) days
following substantial completion of the Premises in order to give Tenant time to
move in. Landlord is prepared to phase Tenant's occupancy and construction to
accommodate any potential delays associated with relocating the existing tenant
from Suite 195. Since Tenant is occupying the Premises in two different phases,
rent commencement shall reflect such delayed occupancy.
ARTICLE 40-PLANNING
Tenant has chosen to have its space planner, 03 Design, complete all
space planning work for the Premises including preliminary space planning,
working drawings, engineering and related work. Landlord shall pay 03 Design for
the cost of said work in an amount not to exceed Ninety Cents ($0.90) per usable
square foot. Landlord, Landlord's space planner, and Landlord's contractor shall
have the right to review and approve Tenant's space plans and working drawings.
ARTICLE 41-PARKING
Except as set forth below, Tenant shall have the right, but not the
obligation, to rent parking spaces in accordance with a ratio of four (4)
parking spaces for every one thousand (1,000) rentable square feet leased.
Parking shall be in the project's on-site parking areas at prevailing building
rates, which are currently Fifty and No/100 Dollars ($50.00) per space per month
for unreserved parking and Seventy Five and No/100 Dollars ($75.00) per space
per month for reserved parking. Tenant shall be entitled to two (2) reserved
parking spaces near the building entrance area for the purpose of loading and
unloading. The exact location of these parking spaces shall be mutually agreed
to by Landlord and Tenant. Monthly parking rates shall remain fixed for the
first three (3) years of the lease term. Thereafter, parking costs may increase
but shall not exceed the corresponding parking rates charged for comparable
parking in comparable buildings in the surrounding areas. However, the
prevailing rates shall be no less than those set forth above. Landlord shall
provide visitor parking for forty (40) cars on a monthly basis at the rate of
$0.50 per one-half (1/2) hour with a maximum of $4.00 per day for the first
three (3) years. Tenant shall guarantee income for said forty (40) visitor
parking spaces and thirty (30) standard parking spaces commencing June 1, 1997.
Landlord and Tenant shall work together to develop a parking validation system
to accommodate Tenant's visitors. In the event Tenant vacates the Premises,
Tenant shall not be obligated to guarantee the income from the forty (40)
visitor parking spaces on a monthly basis. Landlord shall provide Tenant with
free parking in accordance with a 4/1000 ratio during the first twelve (12)
months of the lease term. Said credit shall be granted to Tenant in the form of
a Basic Monthly Rent credit. Tenant shall receive a rent credit equal to Thirty
Six Thousand Six Hundred and No/100 Dollars ($36,600.00), which shall be applied
to Tenant's Basic Monthly Rent, commencing in the second (2nd) month of the
lease term. Tenant shall have the right to allocate all or part of its monthly
parking to visitors. Visitor parking on weekends and after 7:00pm during evening
shall be free, provided Landlord does not need a parking attendant to assist
Tenant's visitors
ARTICLE 42-SECURITY
Tenant shall have the right to install its own security system,
subject to Landlord's approval, for the Premises. Landlord shall provide on-site
security Monday through Friday from 7:00am to 9:00pm and Saturdays from 8:00am
to 6:00pm.
ARTICLE 43-ADVANCE RENT AND SECURITY DEPOSIT
Upon execution of the lease document by Tenant, Tenant shall pay to
Landlord the first month's rent in an amount equal to Eighteen Thousand Nine
Hundred Fifty Eight and 75/100 Dollars ($18,958.75) and a security deposit equal
to Eighteen Thousand Nine Hundred Fifty Eight and 75/100 Dollars ($18,958.75).
ARTICLE 44-RIGHT TO CANCEL
Provided Tenant has not been in default under any of the terms and
conditions of this Lease, Tenant shall have the right to terminate the Lease
effective at the end of the sixtieth (60th) month of the lease term provided
Tenant gives to Landlord nine (9) months prior written notice of Tenant's intent
to cancel said Lease. As consideration for the right to cancel, Tenant shall pay
to Landlord, at the time Tenant delivers said cancellation notice, an amount
equal to the unamortized tenant improvements and brokerage commissions amortized
at ten percent (10%) per annum, plus three (3) months Basic Monthly Rent.
ARTICLE 45-OPTION TO RENEW
Tenant shall have one (1), five (5) year option to renew the lease
provided that Tenant gives to Landlord at least nine (9) months prior written
notice of Tenant's intent to exercise said options. The rental rate for the
option period shall be at the then prevailing fair market rate for comparable
space in comparable buildings in the area. The definition of fair market shall
be negotiated in the lease document.
ARTICLE 46-RIGHT OF FIRST OPPORTUNITY
Landlord shall grant to Tenant a Right of First Opportunity on any
space which may come available on the 1st Floor. In the event that Tenant
expands into Suite 105/160 during the first twelve (12) months of the initial
lease term, the terms and conditions shall be the same as the initial lease
provided that the cost of tenant improvements shall be reduced proportionately.
Thereafter, the terms and conditions shall be at the prevailing market rate.
ARTICLE 47-ROOF RIGHTS
Tenant shall have the right to install no more than two (2) antennae
and/or satellite dishes on the roof in a location to be approved by Landlord.
The cost of installation shall be Tenant's expense and Tenant shall conform to
any and all applicable governmental requirements and approvals. Tenant shall be
responsible for the removal of said antennae and/or Satellite dish at the
expiration of the lease term and any required repair work necessary.
ARTICLE 48-DIRECTORY BOARD
Landlord, at Landlord's expense, shall furnish Tenant with space in
the building directory board in accordance with one line per 1,000 rentable
square feet leased.
ARTICLE 49-SIGNAGE
In the event Landlord creates a dedicated exterior entrance to the
Premises on the right side of the main building lobby, Tenant, at Tenant's sole
cost and expense, shall be allowed to install an eyebrow sign or monument sign
to be mutually agreed upon between Landlord and Tenant. In addition, Landlord
and Tenant shall work together to create directional signage, subject to the
mutual approval of both parties, in the parking areas. Landlord shall create a
dedicated exterior entrance to the Premises on the right side of the main lobby.
Tenant will have identification signage on the building exterior near Tenant's
entrance to be mutually agreed upon between Landlord and Tenant. Tenant shall
present a rendering of the proposed signage to Landlord for Landlord's approval.
ARTICLE 50-EXCLUSIVITY
Landlord shall not lease space to any other tenants in the Building
whose primary business shall be computer training or its equivalent or who are
competitors of New Horizons Computer Learning Center without the express written
consent of Tenant.
ARTICLE 51 - TEMPORARY SPACE
In the event the tenant improvement cost exceed $30 per usable square
foot, Landlord shall amortize the overage over the initial term at an interest
rate of ten percent (10%) per annum. However, Tenant shall receive rent credit
on temporary space on the 2nd floor on a dollar per dollar basis predicated on
$1.00 FSG per rentable square foot per month. Tenant expects to lease temporary
space on the second floor at $1.00 full service gross per rentable square foot
per month. If a tenant improvement overage exists for the premises, Tenant
shall receive a rent credit on the temporary space equal to the T1 overage. If
the tenant improvement is less than $30 per square foot, Tenant shall lease
temporary space on the second floor for $1.00 per rentable square foot full
service gross per month, commencing June 1, 1996.
In the event of a conflict between this Addendum and the Lease, the provisions
of this Addendum shall prevail.
THE WHEREUPON, THE PARTIES HERETO HAVE EXECUTED THIS ADDENDUM ON THE DATES
INDICATED.
TENANT:
New Horizons Computer
Learning Centers, Inc.
Date: 3/15/96 By: /s/ Charles Kinch
------------ ----------------------
Name: Charles Kinch
----------------------
Title: President
--------------------
ATTESTED:
Date: 3/15/96 By: /s/ Gary T. Gann
-------------- ------------------------
Name: Gary T. Gann
---------------------
Title: Secretary
---------------------
LANDLORD:
Mani Brothers, LLC
Date: By:
-------------- -----------------------
Name:
---------------------
Title:
---------------------
CONTRACT FOR THE SALE OF REAL ESTATE
This Contract for Sale is made on the 15 day of January, 1996, between
XEDNAH INVESTMENTS, a Florida General Partnership whose address is 500 Campus
Drive, Morganville, New Jersey 07751, hereinafter referred to as the "Seller"
and Handex of Florida, Inc., a Delaware corporation, authorized to do business
in Florida, whose address is 30941 Suneagle Drive, Mt. Dora, Florida 32757,
hereinafter referred to as the "Buyer".
The words "Buyer" and "Seller" include all Buyers and all Sellers listed
above.
1. Seller agrees to sell and the Buyer agrees to buy the property
described in this Contract.
2. The property to be sold consists of:
(a) The land and all the buildings, other improvements and
fixtures on the land;
(b) All of the Sellers' rights relating to the land; and
(c) All personal property specifically included in this
Contract.
The real property to be sold is commonly known as: 30941 Suneagle Drive in
the Town of Mt. Dora, the County of Lake, and State of Florida. It is shown on
the Municipal Tax Map as Sunset Hills N. 338.7 feet of Lot 2 in Block B, ORB 922
pg. 1328 & 1329. The property is more fully described as follows:
The north 338.7 feet of Lot 2, Block B, Sunset Hills, according to the plat
thereof as recorded in Plat Book 6, Page 112, Public Records Lake County
Florida.
3. The Purchase Price is: $327,000.00
4. The Buyer will pay the purchase price as follows:
5. Initial Deposit: $1,000.00
Balance to be paid at Closing of Title in cash or by certified check
(subject to adjustments at Closing)
6. Balance: $326,000.00
1. The Closing Date cannot be made final at this time. The Buyer and
Seller agree to make February 1, 1996, the estimated date for Closing. Both
parties will fully cooperate so the Closing can take place on or before the
estimated date. The Closing will be held at 500 Campus Drive, Morganville, New
Jersey 07751.
2. At the Closing the Seller will transfer ownership of the property to
the Buyer. This transfer of ownership will be free of all claims and rights of
others except as provided in other parts of this Contract. The Seller will give
the Buyer a properly executed Warranty Deed and an Affidavit of Title.
3. A Deed is a written document used to transfer ownership of property.
In this sale the Seller agrees to provide and the Buyer agrees to accept a Deed
known as a Warranty Deed.
The property is being sold "as is." The Seller does not make any
claims or promises about the condition or value of any of the property included
in this sale. The Buyer has inspected the property and relies on this
inspection and any rights which may be provided for in other parts of this
Contract.
4. The Seller is responsible for any damage to the property, except for
normal wear and tear until the Closing.
5. The Seller agrees to transfer and the Buyer agrees to accept ownership
of the property free of all claims and rights of others, except for:
(a) the rights of utility companies to maintain pipes,
poles, cables and other wires over, on and under this
street, the part of the property next to the street or
running to any other improvement on the property;
(b) recorded agreements which limit the use of the property
unless the agreements (i) are presently violated, (ii)
provide that the property would be forfeited if they were
violated, or (iii) unreasonably limit the normal use of the
property; and
(c) all items included, if any, as part of the description
of the property.
In addition to the above, the ownership of the Buyer must be insurable at
regular rates by any reputable title insurance company authorized to do business
in the State of Florida, subject only to the above exceptions.
1. The Buyer and Seller agree to adjust the following expenses as of the
Closing Date:
rents, municipal water charges, sewer charges, taxes,
interest on any mortgage to be assumed and insurance
premiums, etc.
The Buyer or the Seller may require that any person with a claim of
right affecting the property will be paid off from the proceeds of this sale.
2. At the Closing, the Buyer will be given possession of the property.
No Tenant will have any right to the property unless otherwise agreed in this
Contract.
This Contract is the entire and only Agreement between the Buyer and
Seller. This Contract replaces and cancels any previous Agreements between the
Buyer and the Seller. This Contract can only be changed by an Agreement in
writing signed by both Buyer and Seller. The Seller states that the Seller has
not made any other Contract to sell the property to anyone else.
3. This Contract is binding upon all parties who sign it and all who
succeed to their rights and responsibilities.
4. All notices under this Contract must be in writing. The notices must
be delivered personally or mailed by Certified Mail, Return Receipt Requested,
to the other party at the address written in this Contract or to that party's
attorney.
Xednah Investments, a Florida General Partnership hereby represents that
the Partners signing this Contract of Sale are the only partners of said
partnership and no other person has any interest either in the partnership or
the property.
Signed and agreed to by:
Attested: As to the Buyer:
Handex of Florida, Inc.
By: /s/ Gary T. Gann By: /s/ George Bannon
----------------------- -------------------------
Gary T. Gann, Secretary George Bannon, President
Witness: As to Seller:
Xednah Investments
By: By: /s/ Curtis Lee Smith, Jr
-------------------------- ---------------------------
Curtis Lee Smith, Jr.
Partner
By: By: /s/ Stuart O. Smith
-------------------------- -----------------------------
Stuart O. Smith,
Partner
florida.con
NEW HORIZONS EDUCATION CORPORATION
401(k) PROFIT SHARING TRUST AND PLAN
Trust and Plan Effective Date: January 1, 1995
TABLE OF CONTENTS
ARTICLE NO.
NAME AND PURPOSE 1
DEFINITIONS 2
ELIGIBILITY AND PARTICIPATION 3
CASH OR DEFERRED OPTION 4
EMPLOYER CONTRIBUTIONS 5
ALLOCATION OF EMPLOYER CONTRIBUTIONS 6
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 7
VALUATION OF ASSETS AND ADJUSTMENT OF UNSEGREGATED
ACCOUNTS 8
TERMINATION OF EMPLOYMENT 9
RETIREMENT AND DISABILITY BENEFITS 10
DEATH BENEFITS 11
DISTRIBUTIONS 12
HARDSHIP BENEFITS 13
THE TRUSTEE, ITS POWERS AND DUTIES 14
INVESTMENTS 15
SEGREGATION OF ACCOUNTS OF PARTICIPANTS 16
ADMINISTRATION 17
PROHIBITION AGAINST ALIENATION 18
AMENDMENT AND TERMINATION 19
PARTICIPATING COMPANIES 20
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS 21
LIMITATION ON ANNUAL ADDITIONS 22
TOP-HEAVY PROVISIONS 23
MISCELLANEOUS 24
INDEX
ARTICLE NO.
ADMINISTRATION 17
ALLOCATION OF EMPLOYER CONTRIBUTIONS 6
AMENDMENT AND TERMINATION 19
CASH OR DEFERRED OPTION 4
DEATH BENEFITS 11
DEFINITIONS 2
DISTRIBUTIONS 12
ELIGIBILITY AND PARTICIPATION 3
HARDSHIP BENEFITS 13
INVESTMENTS 15
LIMITATION ON ANNUAL ADDITIONS 22
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 7
MISCELLANEOUS 24
NAME AND PURPOSE 1
PARTICIPATING COMPANIES 20
PROHIBITION AGAINST ALIENATION 18
EMPLOYER CONTRIBUTIONS 5
RETIREMENT AND DISABILITY BENEFITS 10
SEGREGATION OF ACCOUNTS OF PARTICIPANTS 16
TERMINATION OF EMPLOYMENT 9
THE TRUSTEE, ITS POWERS AND DUTIES 14
TOP-HEAVY PROVISIONS 23
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS 21
VALUATION OF ASSETS AND ADJUSTMENT OF UNSEGREGATED
ACCOUNTS 8
NEW HORIZONS EDUCATION CORPORATION
401(k) PROFIT SHARING TRUST AND PLAN
THIS AGREEMENT is entered into and executed this ____ day of
____________, 1995, by and between NEW HORIZONS EDUCATION CORPORATION, a
corporation organized and existing under and by virtue of the laws of the State
of Delaware (hereinafter called the "Company"), and JOHN T. ST. JAMES, the
Trustee hereunder (hereinafter called the "Trustee");
WITNESSETH:
WHEREAS, it is the desire of the Company to provide benefits for its
employees and employees of certain of its affiliates upon their retirement, to
encourage and assist such employees in providing additional security for their
own retirement, and to provide other benefits to them and their beneficiaries
upon the happening of certain contingencies; and
WHEREAS, it is the further desire of the Company to foster loyalty to
the Company and its affiliates among their employees and the continuation in
their service of their employees; and
WHEREAS, the Company has duly authorized the establishment of a profit
sharing trust and plan for the sole and exclusive benefit of its eligible
employees and the employees of its affiliates which have adopted this Trust and
Plan; and
WHEREAS, the Company has duly authorized this Trust and Plan and the
execution of this Agreement; and
WHEREAS, it is the intention of the Company that such Trust and Plan
qualify under Sections 401(a), 401(k) and 501(a) of the Code;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings of the parties hereto, it is agreed that the New Horizons Education
Corporation 401(k) Profit Sharing Trust and Plan ("Trust and Plan") be
established effective as of January 1, 1995, as follows:
1
NAME AND PURPOSE
.1 The name of this Trust and Plan is the NEW HORIZONS
EDUCATION CORPORATION 401(k) PROFIT SHARING TRUST AND PLAN. The Trust and Plan
is hereby created in the form of this instrument for the purpose of providing
benefits to the participants upon their retirement and for the purpose of
providing such other benefits to such participants and their beneficiaries as
are hereinafter described.
.2
2
DEFINITIONS
Unless the context otherwise indicates, the following terms shall have
the following meanings whenever used in this instrument:
.1 The word "accounts" shall mean "cash option accounts"
established pursuant to Article 4 hereof and "employer contribution accounts"
established pursuant to Article 5 hereof.
.2 The words "active participant" shall mean, with respect to
any plan year, either a participant who
(a) is credited with at least One Thousand (1,000) hours as a
Covered Employee with respect to such plan year and is employed
by a Participating Company on the last day of such plan year; or
(b) with respect to a participant whose employment terminates
during such plan year by reason of his death, permanent and total
disability, or retirement, either was credited with at least One
Thousand (1,000) hours as a Covered Employee with respect to such
plan year or, based on a reasonable projection of hours worked by
such participant at the date of his termination of employment,
would have been credited with at least One Thousand (1,000) hours
as a Covered Employee with respect to such plan year if he had
continued to be employed by the Participating Companies until the
end of the plan year.
.1 The word "Administrator" shall mean the person or entity
designated as Administrator under Article 17 hereof.
.2 The words "Adoption Date" shall mean, with respect to each
Participating Company, the date as of which it shall have adopted this Trust and
Plan pursuant to Article 20 hereof.
.3 The word "affiliate" shall mean any person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with a Participating Company, and particularly shall
mean any corporation or unincorporated trade or business which is a member of a
controlled group of corporations or trades or businesses which includes a
Participating Company (within the meaning of Sections 414(b) and 414(c) of the
Code), is a member of an affiliated service group which includes a Participating
Company (within the meaning of Section 414(m) of the Internal Revenue Code) or
is a member of an arrangement within the meaning of Section 414(o) of the Code
which includes a Participating Company.
.4 The words "allocation date" shall mean the last day of each
taxable year ending after the effective date, and such other uniform dates as
the Administrator shall prescribe.
.5 The words "alternate payee" shall mean any spouse, former
spouse, child or other dependent of a participant who is recognized by a
domestic relations order as having a right to receive all, or a portion of, the
amounts credited to the accounts of such participant.
.6 The word "beneficiary" shall mean any person who receives or
is designated to receive payment of any benefit under the terms of this Trust
and Plan because of the participation of another person in this Trust and Plan.
.7 The word "Committee" shall mean the Employee Benefits
Committee constituted under the provisions of Article 17 of this Trust and Plan.
.8 The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
.9 The word "Company" shall mean New Horizons Education
Corporation, a Delaware corporation, or any corporation or any other business
organization which shall assume the obligations of New Horizons Education
Corporation under this Trust and Plan.
.10 The word "compensation" shall mean all remuneration paid by
the Participating Companies to an active participant for services rendered as a
Covered Employee, including wages, salaries, overtime and commissions, but shall
not include: (a) bonuses, whether discretionary or non-discretionary, except for
such purposes as they are by law specifically required to be included; (b) any
extra benefits such as payment by a Participating Company of hospitalization,
group insurance, expense reimbursement, amounts contributed under this Trust and
Plan (except as provided below in this Section 2.12) or any other qualified
retirement plan; (c) overtime pay; and (d) other special benefits. The amount
of a participant's compensation for any plan year shall not include any amounts
paid to the participant by a Participating Company prior to the date as of which
he became a participant pursuant to Article 3 hereof. Except as otherwise
indicated in the Trust and Plan, a participant's compensation shall include
amounts contributed by a Participating Company to the Trustee pursuant to a
participant's election under Section 4.1 hereof. For purposes of the Trust and
Plan, the amount of a participant's compensation for any plan year shall not
exceed One Hundred and Fifty Thousand Dollars ($150,000) plus such adjustments
for increases in the cost of living as shall be prescribed by the Secretary of
the Treasury pursuant to Section 401(a)(17) of the Code.
.11 The words "continuous service" shall mean for any employee
any period during which he is or was employed by a Participating Company or any
affiliate. Each such period shall be measured from his date of hire to the date
of termination of employment which follows such date of hire. Notwithstanding
the preceding provisions of this Section 2.13, if any employee is rehired within
twelve (12) months of:
(1) the date of his termination of employment, or
(2) if earlier, the first day of any period of leave of absence,
layoff, or military service after the end of which the employee
did not return to work for a Participating Company or any
affiliate prior to his termination of employment,
such employee's continuous service shall include the period of severance
measured from his date of termination until his subsequent date of rehire. Two
or more periods of employment that are included in a participant's continuous
service and that contain fractions of a year (computed in months and days) shall
be aggregated on the basis of twelve (12) months constituting a year and thirty
(30) days constituting a month.
.12 The words "Covered Employee" shall mean an employee of a
Participating Company who is neither a non-resident alien employed by a
Participating Company outside of the United States nor covered by a collective
bargaining agreement to which such Participating Company is a party. An
employee shall cease to be a "Covered Employee" upon the earliest to occur of:
(a) his termination of employment;
(b) his transfer to employment with an affiliate which is not a
Participating Company;
(c) his becoming covered by a collective bargaining agreement to
which a Participating Company is a party; or
(d) his becoming a non-resident alien employed by a
Participating Company outside of the United States.
.13 The words "date of hire" shall mean the date on which an
employee commences employment and works at least one (1) hour for a
Participating Company or any affiliate.
.14 The word "deferral" shall mean contributions made pursuant
to Section 4.1.
.15 The words "domestic relations order" shall mean, with
respect to any participant, any judgment, decree or order (including approval of
a property settlement agreement) which both:
(a) relates to the provision of child support, alimony payments
or marital property rights to a spouse, former spouse, child or
other dependent of the participant; and
(b) is made pursuant to a State domestic relations law
(including a community property law).
.16 The words "effective date" shall mean January 1, 1995, the
Trust and Plan's original effective date.
.17 The words "eligibility break-in-service" shall mean for any
employee a period of sixty (60) consecutive months commencing on the earliest to
occur of:
(a) his termination of employment; or
(b) the first day of any period of leave of absence, layoff, or
military service after the end of which the employee did not
return to work for a Participating Company or any affiliate prior
to his termination of employment;
during which the employee was not employed by a Participating Company or
any affiliate. Notwithstanding the foregoing provisions of this Section 2.19,
in the event any employee is on a leave of absence either;
(a) by reason of the pregnancy of such employee; or
(b) by reason of the birth of a child of such employee; or
(c) by reason of the placement of a child with such employee in
connection with the adoption of such child by such employee; or
(d) by reason of caring for such child for a period beginning
immediately following such birth or placement;
such employee shall, solely for the purposes of determining whether such
employee has incurred an eligibility break-in-service pursuant to this
Section 2.19, be deemed to have terminated his employment on the first
anniversary of the date of his termination of employment. The Administrator may
require any employee who leaves his employment by reason of any such pregnancy,
birth, placement or caring to furnish to the Administrator such timely
information as the Administrator may reasonably require to establish that the
employee's leave of absence was by reason of such pregnancy, birth, placement or
caring.
.18 The word "employee" shall mean any employee of a
Participating Company or an affiliate, as the case may be, or where the context
may require, a former employee of a Participating Company or an affiliate.
.19 The word "employer" shall mean, with respect to any
participant, the Participating Company or, where the context requires, the
affiliate by which he is employed.
.20 The word "hours" shall generally mean for any employee the
actual number of hours for which he was directly or indirectly paid or entitled
to payment by a Participating Company or any affiliate, including payments
pursuant to an award or agreement requiring a Participating Company or an
affiliate to pay back wages, irrespective of mitigation of damages. Hours under
this paragraph shall be calculated and credited pursuant to Section 2530.200b-
2(b) and (c) of the Department of Labor Regulations which are incorporated
herein by reference. Notwithstanding the foregoing,
(a) no employee shall be credited with more than 501 hours with
respect to payments he receives or is entitled to receive during
any single continuous period during which he performed no
services for a Participating Company or an affiliate
(irrespective of whether he has terminated employment) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, or leave of absence;
(b) no employee shall be credited with hours with respect to
payments he receives or is entitled to receive during a period
when he performed no services for a Participating Company or an
affiliate under a plan maintained solely for the purpose of
complying with applicable worker's compensation, unemployment
compensation, disability insurance or Federal Social Security
laws; and
(c) no employee shall be credited with hours with respect to
payments he receives or is entitled to receive under a pension
benefit plan to which a Participating Company or an affiliate has
contributed during a period when he performed no services for a
Participating Company or an affiliate.
Notwithstanding the foregoing provisions of this Section 2.22, in the event
any employee does not perform services for a Participating Company or any
affiliate for any period either:
(a) by reason of the pregnancy of such employee; or
(b) by reason of the birth of a child of such employee; or
(c) by reason of the placement of a child with such employee in
connection with the adoption of such child by such employee; or
(d) by reason of such employee caring for such child for a
period beginning immediately following such birth or placement;
such employee shall, solely for purposes of determining whether such
employee has incurred a One (1) Year Break-In-Service pursuant to Section 2.26
hereof, be credited either with the hours which otherwise would normally have
been credited to such employee but for such absence or, in any case in which the
Administrator is unable to determine the hours described in the preceding
clause, eight hours per day of such absence provided, however, that the total
number of hours which an employee may be credited with by reason of any such
pregnancy, birth or placement shall not exceed 501 hours. An employee shall be
credited with the hours described in the preceding sentence only in the plan
year in which the absence from work begins if the employee would be prevented
from incurring a One (1) Year Break-In-Service in such plan year solely because
the employee is credited with hours pursuant to the preceding sentence or, in
any other case, in the immediately following plan year. The Administrator may
require any employee who is absent from work because of any such pregnancy,
birth or placement to furnish to the Administrator such timely information as
the Administrator may reasonably require to establish both that the employee's
absence from work is because of such pregnancy, birth or placement and the
number of days during which the employee was absent is because of such
pregnancy, birth or placement.
.21 The words "insurance company" shall mean any legal reserve
life insurance company licensed to issue annuity contracts.
.22 The words "military service" shall mean duty in the Armed
Forces of the United States, whether voluntary or involuntary, provided that the
employee serves not more than one voluntary enlistment or tour of duty, and
further provided that such voluntary enlistment or tour of duty does not follow
involuntary duty.
.23 The words "normal retirement date" shall mean for each
participant the date upon which he attains age sixty-five (65).
.24 The words "One (1) Year Break-In-Service" shall mean for any
employee a taxable year ending after his termination of employment during which
the employee was not credited with more than five hundred (500) hours.
.25 The word "participant" shall mean any person who becomes a
participant in the Trust and Plan in accordance with Article 3 hereof and shall
also mean, as the context may require, any person who has terminated his
employment and was formerly a participant in the Trust and Plan.
.26 The words "Participating Company" shall mean the Company and
any subsidiary which has adopted this Trust and Plan pursuant to Article 20
hereof.
.27 The words "permanent and total disability" shall mean any
disability which continuously disables and wholly prevents a participant from
performing the duties of his occupation and which is expected to be of a
permanent duration, as shall be determined under the provisions of Section 10.2
hereof except that no participant shall be deemed to be permanently and totally
disabled if such disability was (a) contracted, suffered or incurred while the
participant was engaged in, or resulted from his having engaged in, a criminal
act or enterprise, or (b) resulted from his habitual drunkenness or addiction to
narcotics, or (c) resulted from any intentionally self-inflicted injury.
.28 The words "plan year" shall mean the Company's taxable year.
.29 The words "qualified domestic relations order" shall mean a
domestic relations order which satisfies the requirements of Section
414(p)(1)(A) of the Code.
.30 The word "subsidiary" shall mean any corporation organized
under the laws of any State of the United States or under the laws of any
foreign country in which the Company owns directly or indirectly any outstanding
shares either beneficially or of record.
.31 The words "taxable year" shall mean the Company's annual
accounting period, which presently is the calendar year.
.32 The words "termination of employment" shall mean for any
employee the occurrence of any one of the following events:
(a) he is discharged by a Participating Company or any affiliate
unless he is subsequently reemployed and given pay back to his
date of discharge;
(b) he voluntarily terminates employment with a Participating
Company or any affiliate;
(c) he retires from employment with a Participating Company or
any affiliate;
(d) he fails to return to work at the end of any leave of
absence authorized by a Participating Company or any affiliate,
or within any period following military service in which his
right to reemployment with a Participating Company or any
affiliate is guaranteed by law, or within three (3) days after he
has been recalled to work following a period of layoff; or
(e) he has been continuously laid-off for twenty-four (24)
months.
In the case of the occurrence of any event described in (d) or (e) of this
Section, the date of such employee's termination of employment shall be deemed
to be the first day of any such period of leave of absence, layoff, or military
service.
.33 The words "Trust and Plan" shall mean this instrument as
originally executed and as it may be amended from time to time.
.34 The word "Trustee" shall mean the trustee herein named and
any successor Trustee.
.35 The words "vested interest" shall mean with respect to any
participant the sum of (a) plus (b) minus (c) below where:
(a) equals the amounts credited to his employer contribution
account multiplied by his Vested Percentage;
(b) equals any distributions made to the participant from his
employer contribution account since his earliest date of hire
which has not been followed by five (5) consecutive One (1) Year
Breaks-In-Service, multiplied by his Vested Percentage; and
(c) equals the amount of any distributions made to the
participant from his employer contribution account since his
earliest date of hire which has not been followed by five (5)
consecutive One (1) Year Breaks-In-Service.
.36 The words "Vested Percentage" shall mean for any participant
a percentage determined on the basis of his number of years of vesting service
in accordance with the following table:
Years of Vesting Service Vested Percentage
Less than 1 year 0%
1 but less than 2 years 20%
2 " " " 3 " 40%
3 " " " 4 " 60%
4 " " " 5 " 80%
5 or more years 100%
Notwithstanding the preceding provisions of this Section, the
Vested Percentage of a participant who has attained his normal retirement date
shall be 100%.
.1 The words "vesting service" shall mean for any employee the
number of taxable years during which the employee has been or was previously
employed by a Participating Company or any affiliate, excluding:
(a) any taxable years during which the employee was credited
with less than one thousand (1,000) hours; and
(b) any years of vesting service which a terminated and rehired
participant had prior to a termination of employment if:
(i) such participant did not have a vested interest on such
date of termination of employment; and
(ii) no amount was credited to his cash option account on
such date of termination of employment; and
(iii) such participant has had five consecutive One (1) Year
Breaks-In-Service since the last day of such vesting
service.
2
ELIGIBILITY AND PARTICIPATION
.1 An employee of a Participating Company shall be qualified to
become a participant under the Trust and Plan when he has met all of the
following requirements:
(a) he is a Covered Employee;
(b) he has completed six (6) months of continuous service; and
(c) he has attained the age of twenty-one (21) years.
In the case of an employee who is rehired after a termination of
employment, such employee's date of hire for purposes of this Section shall be
deemed to be his earliest date of hire unless all of the following apply:
(a) the employee did not have a vested interest on such date of
termination of employment;
(b) the employee did not have any amount credited to his cash
option account on such date of termination of employment;
(c) the employee has incurred an eligibility break-in-service;
and
(d) the employee's period of continuous service determined under
this Section on such termination of employment shall have been
less than or equal to the period between his termination of
employment and his date of rehire.
In the event that (a), (b), (c) and (d) above all apply with respect to a
rehired employee, any periods of continuous service prior to such termination of
employment shall be cancelled and such employee's date of rehire shall then be
deemed to be his date of hire for purposes of determining his period of
continuous service under this Section.
.2 Every employee of a Participating Company who is eligible as
of the effective date shall become a participant as of that date. Every
employee of a Participating Company who becomes eligible after the effective
date shall become a participant as of the January 1 or July 1 coinciding with or
next following the date he becomes qualified.
.3 In the event that a Participating Company or an affiliate
shall reemploy a former participant whose continuous service as a former
employee is not excluded pursuant to Section 3.1 hereof, such former participant
shall again become a participant in the Trust and Plan on his date of rehire,
provided he is then a Covered Employee. Any other former participant must
requalify under the provisions of Section 3.1 hereof before he is eligible to
again become a participant.
.4
3
CASH OR DEFERRED OPTION
.1 Pursuant to uniform rules and procedures promulgated by the
Administrator, a participant may elect in writing that a portion (such portion
being within limits prescribed by the Administrator) of his unpaid compensation
for a taxable year be paid by his employer to the Trustee hereunder and be
treated as a contribution by his employer. A participant's election hereunder
shall be conditioned upon:
(a) his right to defer the imposition of federal income tax on
such contribution until a subsequent distribution of such amount
under this Trust and Plan; and
(b) the right of his employer to deduct such amount for federal
income tax purposes after taking into account any contributions
made by the employer under any other profit sharing, pension and
stock bonus plans maintained by the employer which meet the
requirements of Section 401(a) of the Code.
The Administrator may prescribe the maximum amount of a participant's
unpaid compensation that is subject to the election described in this Section
4.1.
.2 All amounts paid to the Trustee pursuant to Section 4.1
above shall be paid in cash not later than the date on which such amounts can
reasonably be segregated from the employer's general assets, which in no event
shall be more than ninety (90) days after the date on which such amount would
otherwise have been payable to the participant in cash.
.3 Any amounts contributed to the Trust and Plan pursuant to
Section 4.1 above on behalf of a participant shall be held by the Trustee as a
part of the trust fund created under this Trust and Plan, shall be specifically
allocated to a cash option account for the benefit of such participant and shall
be invested, reinvested, and administered in accordance with the terms of this
Trust and Plan. The amounts credited to a participant's cash option account
shall be fully vested and nonforfeitable at all times.
.4 Except as provided in Article 13, in no event may a
participant withdraw any amounts credited to his cash option account prior to
the time such amounts become distributable to him pursuant to Articles 9 and 10
hereof.
.5 The amounts credited to a participant's cash option account
shall not be alienated, disposed of or in any manner encumbered and are made
expressly subject to the provisions against alienation set forth in Article 18
of this Trust and Plan.
.6 In the event a participant receives a distribution from his
cash option account as a result of hardship as described in Article 13, such
participant's elective deferrals shall be suspended for 12 months after his
receipt of such hardship distribution. In addition, for the calendar year
immediately following the calendar year of the hardship distribution such
participant shall be barred from making elective deferrals in excess of (a)
minus (b) below where (a) equals the applicable limit under Code Section 402(g)
for such immediately following calendar year; and (b) equals the amount of such
participant's elective deferrals for the calendar year of the hardship
distribution.
.7
4
EMPLOYER CONTRIBUTIONS
.1 With respect to any taxable year, a Participating Company
may pay to the Trustee, not later than the last day upon which such
Participating Company may make a contribution under this Trust and Plan and
secure under the Code of the United States a deduction of such contribution in
the computation of its Federal Income Taxes for such taxable year, a
contribution in cash or other property in such amount as is determined by the
Participating Company in its sole discretion. Such contribution shall be in
addition to any amounts contributed under Article 4 and nothing contained herein
shall require a Participating Company to make any contribution under this
Article with respect to any plan year.
.2 The Administrator shall, as soon as reasonably possible
after the payment by a Participating Company of its contribution, furnish to the
Trustee such information, including information concerning the compensation of
participants during such taxable year, as may be necessary for the proper
administration of this Trust and Plan.
.3
5
ALLOCATION OF EMPLOYER CONTRIBUTIONS
.1 Upon an employee becoming a participant the Administrator
shall notify the Trustee and provide the Trustee with such information
concerning said participant as the Trustee may need. Upon being notified by the
Administrator that an employee has become a participant, the Trustee shall
establish an employer contribution account in the name of such participant.
.2 The Participating Companies' contributions for any taxable
year shall be allocated among the employer contribution accounts of the
participants who were active participants with respect to such taxable year.
The employer contribution account of each such active participant shall be
credited with that portion of the Participating Companies' contributions for
such taxable year which bears the same relationship to the contributions of the
Participating Companies as such active participant's compensation for such
taxable year bears to the total compensation of all such active participants for
such taxable year.
.3 In no event may a participant withdraw any amounts credited
to his employer contribution account prior to the time such amounts become
distributable to him pursuant to Articles 9 and 10 hereof.
.4 The amount determined to be credited to each participant's
employer contribution account under this Article shall be added to amounts
previously credited to said accounts which remain credited to such accounts, and
shall for all purposes be deemed to have been credited on the aforesaid
allocation date which coincides with the last day of the taxable year for which
the contribution was made. Such crediting to the accounts of participants shall
not vest any right, title or interest in or to any assets of the Trust in any
participant.
.5
6
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
.1 The amount and allocation of contributions under this Trust
and Plan shall be subject to several limitations. Those limitations shall be as
follows:
(a) contributions made by the Participating Companies to the
Trust and Plan pursuant to a participant's cash or deferred
election under Article 4 of the Trust and Plan shall be subject
to the individual deferral limit described in Section 7.2 hereof;
(b) contributions made by the Participating Companies to the
Trust and Plan pursuant to a participant's cash or deferred
election under Article 4 of the Trust and Plan shall be subject
to the limits set forth in Section 7.3 hereof;
(c) all contributions made pursuant to Article 4 and Article 5
of the Trust and Plan, including contributions made pursuant to a
participant's election under Article 4 and employer contributions
made pursuant to Article 5, shall, in the aggregate, be subject
to the deductibility limit set forth in Section 7.4 hereof; and
(d) the allocation of all of the foregoing contributions shall,
in the aggregate, be subject to the limitation on annual
additions set forth in Article 22 hereof.
.2 In no event shall contributions made pursuant to a
participant's election under Article 4 of the Trust and Plan with respect to the
taxable year of the participant plus similar amounts contributed on a similar
basis by any other employer (whether or not related to a Participating Company)
required by law to be aggregated with such contributions under this Trust and
Plan exceed Nine Thousand Two Hundred and Forty Dollars ($9,240.00), plus any
increase for cost-of-living as determined from time to time pursuant to
regulations issued by the Secretary of the Treasury or his delegate pursuant to
Section 415(d) of the Code. In the event that the deferrals for a participant's
taxable year shall exceed such limit, the excess deferrals, reduced by the
amount of excess deferrals previously distributed to such participant in
accordance with Section 7.5 hereof for the taxable year, together with any
earnings allocable to such excess deferrals during the taxable year shall be
refunded to the participant by the April 15th next following the close of such
taxable year. The amount of any such refund shall be debited to the
participant's cash option account.
In the event that the Administrator shall receive notice from a
participant by the March 1 next following the close of the participant's taxable
year that the deferrals together with similar deferrals under plans of other
employers shall have exceeded such limit, the Administrator shall cause the
amount of excess deferrals specified by the participant, together with any
earnings allocable to such excess elective deferrals during the taxable year, to
be refunded to the participant by the April 15th next following the receipt of
such notice. The amount of any such refund shall be debited to the
participant's cash option account.
.3 Deferrals shall be limited so that the average deferral
percentage for the highly compensated participants shall not exceed an amount
determined based upon the average deferral percentage for the participants who
are not highly compensated participants, as follows:
(A) (B)
Average Deferral Limit on Average
Percentage for Deferral Percentage
Participants who for Highly Compensated
are Not Highly Participants
Compensated
Less than 2% 2 times Column (A)
2% or more but less Column (A) plus 2%
than 8%
8% or more 1.25 times Column (A)
For purposes of the foregoing, the "deferral percentage" for a participant for
any plan year shall equal the deferral allocated to his cash option account
during the plan year that either would have been received by the participant in
the plan year, if not for the deferral election, or are attributable to services
performed during the plan year and would have been received by the employee
within 2-1/2 months after the close of the plan year, if not for the deferral
election, as a percentage of his compensation for such plan year. For purposes
of determining the deferral percentage of a highly compensated participant, all
contributions made on his behalf by the Participating Companies pursuant to a
cash or deferred arrangement under all tax qualified retirement plans maintained
by the Participating Companies shall be treated as if made under the Trust and
Plan. For purposes of this Trust and Plan, an employee shall be considered to
be "highly compensated" for a plan year if either:
(c) during the preceding plan year, he:
(i) was at any time a five percent (5%) actual or
constructive owner of a Participating Company or its
affiliate; or
(ii) received total remuneration from the Participating
Companies and their affiliates in excess of Seventy-Five
Thousand Dollars ($75,000.00) (plus any increase for
cost-of-living as shall be prescribed by the Secretary of
the Treasury pursuant to Section 414(q)(1) of the Code); or
(iii) received total remuneration from the Participating
Companies and their affiliates in excess of Fifty Thousand
Dollars ($50,000.00)(plus any increase for cost-of-living as
shall be prescribed by the Secretary of the Treasury
pursuant to Section 414(q)(1) of the Code) and was in the
"top paid group" of employees of the Participating Companies
and their affiliates for such plan year; or
(iv) was at any time an officer of a Participating Company
or one of its affiliates and received total remuneration in
excess of Forty-Five Thousand Dollars ($45,000.00) or, if
greater, fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of the Code for such plan year (plus
any increase for cost of living after 1989 as determined by
the Secretary of the Treasury or his delegate); or
(d) during the current plan year, he either:
(i) was at any time a five percent (5%) actual or
constructive owner of a Participating Company or its
affiliate; or
(ii) was one of the one hundred (100) highest paid employees
of the Participating Companies and their affiliates for the
current plan year and meets the requirements of
subparagraphs (a)(ii), (a)(iii) or (a)(iv) above for the
current plan year.
For purposes of determining whether an employee is "highly
compensated," the words "total remuneration" shall mean for any participant all
amounts paid to him as payment for services rendered by him to the Participating
Companies or any affiliate which must be taken into account for purposes of
satisfying one of the definitions of compensation contained in the Treasury
regulations issued under Section 415 of the Code.
For purposes of determining the members of the "top paid group" under
subparagraph (a)(iii) above, a participant is a member of the top paid group for
any plan year if for such plan year the participant is a member of a group
consisting of the top paid twenty percent (20%) of employees of the
Participating Companies, and all affiliates ranked on the basis of total
remuneration from the Participating Companies and all affiliates during the plan
year. In determining the members of the top paid group, the following employees
shall be excluded:
(A) employees who have not completed six (6) months service;
(B) employees who normally work less than seventeen and one-half
(17-1/2) hours per week;
(C) employees who normally work not more than six (6) months
during any year;
(D) employees who have not attained age twenty-one (21);
(E) except to the extent provided in regulations, employees who
are included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and a Participating
Company or any affiliate; and
(F) employees who are nonresident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) of the
Code) from the Participating Companies or any affiliate which
constitutes income from sources within the Unites States (within
the meaning of Section 861(a)(3) of the Code).
The Participating Companies may elect (in such manner as may be provided by the
Secretary of the Treasury or his delegate) to apply subparagraph (A), (B), (C),
or (D) above by substituting a shorter period of service, smaller number of
hours or months, or lower age for the period of service, number of hours or
months, or age (as the case may be) than that specified in such subparagraph.
For purposes of determining the number and identity of "officers" in
subparagraph (a)(iv) above:
(I) The total number of employees treated as officers shall be
limited to the lesser of:
(1) fifty (50); or
(2) the greater of three (3) employees or ten percent (10%) of
all employees of the Participating Companies and all
affiliates; but
(II) If no employee would be described as an officer pursuant to
subparagraph (a)(iv) above, the highest paid officer shall be
treated as described in such subparagraph.
A former employee shall also be treated as a highly compensated
participant if:
(a) such employee was a highly compensated participant when he
terminated employment; or
(b) such employee was a highly compensated participant at any time
after attaining age fifty-five (55).
In addition, if any individual is a member of the family of a five
percent (5%) owner or of a highly compensated employee in the group consisting
of the ten (10) highly compensated employees paid the greatest total
remuneration by the Participating Companies during the plan year, then for
purposes of any Section of this Trust and Plan which uses the term highly
compensated employee or highly compensated participant, (i) such individual
shall not be considered a separate employee, and (ii) any such compensation paid
to such individual by the Participating Companies (and any applicable
contribution on behalf of such individual) shall be treated as if it were paid
to (or on behalf of) the highly compensated employee or participant. For
purposes of the foregoing, the word "family" shall mean, with respect to any
employee, such employee's spouse and lineal ascendants or descendants and the
spouses of such lineal ascendants or descendants.
.1 In no event shall the amount of all contributions by the
Participating Companies pursuant to Article 5, together with all amounts
contributed by Participating Companies to the Trustee pursuant to participants'
deferral elections under Section 4.1 hereof, exceed the maximum amount allowable
as a deduction under Section 404(a)(3) of the Code or any statute of similar
import, including the amount of any contribution carryforward allowable under
said Section 404(a)(3). This limitation shall not apply to contributions which
may be required in order to provide the minimum contributions described in
Article 23 for any plan year in which this Trust and Plan is top-heavy. Nor
shall this limitation apply to contributions which may be required in order to
recredit the account of any rehired participant whose account is to be
recredited with previously forfeited amounts as described in Section 9.3 hereof.
.2 In the event that the limitations set forth in Section 7.3
hereof shall be exceeded, the Administrator shall take action to reduce future
deferrals hereof as appropriate. Such action may include a reduction in the
future rate of deferrals of any highly compensated employee pursuant to any
legally permissible procedure. In the event that such action shall fail to
prevent the excess, prior deferrals, reduced by the amount of excess deferrals
previously distributed to such participant in accordance with Section 7.2 hereof
for the plan year, plus any income and minus any loss allocable thereto to the
end of the preceding plan year, shall be distributed to the affected highly
compensated employees no later than two and one-half (2-1/2) months following
the end of the plan year in which such contributions were made. In the event
that distributions must be made in order to bring the Trust and Plan into
compliance with Section 7.3 hereof, the Administrator shall reduce the deferral
percentage or contribution percentage of highly compensated participants in
descending order, beginning with the highly compensated participant(s) with the
highest such percentage, until such limitations have been satisfied. In
performing such reduction, the reduced deferral percentage or contribution
percentage of any affected highly compensated participant shall in no event be
lower than that of the highly compensated participant with the next highest such
percentage.
Distributions of excess deferrals or excess contributions shall
be made to highly compensated employees on the basis of the respective portions
of such contributions attributable to such employees taking into account the
family aggregation rules contained in Section 7.3 hereof. Such contributions
shall be treated as annual additions under Section 22.1 hereof.
For purposes of adjusting excess deferrals and excess
contributions to take into account income and losses to the end of the preceding
plan year, the income or loss shall be equal to the income or loss for the plan
year allocable to the account to which the excess was allocated multiplied by a
fraction, the numerator of which is the excess deferrals or contributions
credited to such account for the plan year and the denominator of which is the
total account balance without regard to any income or loss occurring during such
plan year. Any adjustments made in cash option accounts shall be made in a
uniform and nondiscriminatory manner for similarly situated participants.
2
VALUATION OF ASSETS AND
ADJUSTMENT OF UNSEGREGATED ACCOUNTS
.1 To the extent the accounts have not been segregated for
investment purposes pursuant to Article 16 hereof, the Trustee shall, as soon as
practicable following each allocation date value all unsegregated assets of the
Trust as of the allocation date. The Trustee shall use the fair market values
of securities or other assets in making said determination. The Trustee shall
then subtract from the total value of the unsegregated assets of said Trust the
total of all unsegregated cash option accounts and employer contribution
accounts as of said allocation date. Each such unsegregated account shall be
credited with that portion of the excess of the value of the unsegregated assets
over the total of all unsegregated accounts which bears the same relationship to
the total of such excess as the amount in said unsegregated account bears to the
total of all unsegregated accounts. The amount credited to each unsegregated
account shall be reduced in similar proportion in the event the total of all
unsegregated accounts as of said allocation date exceeds the total value of all
unsegregated assets of the Trust as of said allocation date. Such adjustments
in the amounts credited to unsegregated accounts shall be deemed to have been
made on said allocation date. It is intended that this Article 8 operate to
distribute among all unsegregated accounts in the Trust, all income of the Trust
and changes in the value of the Trust's unsegregated assets, as the case may be.
In adjusting unsegregated accounts after valuing unsegregated assets of the
Trust as of any allocation date, no contributions of the Participating Companies
pursuant to Article 4 or Article 5 hereof shall be taken into account until the
allocation date coinciding with or next following the date such contributions
were both actually paid to the Trustee by the Participating Companies and
credited to the accounts of participants.
.2
2
TERMINATION OF EMPLOYMENT
.1 In the event of the termination of employment of a
participant for any reason other than death, permanent and total disability, or
retirement pursuant to Article 10 hereof, the participant shall be entitled to
receive a distribution of the sum of the following amounts:
(a) the amount credited to his cash option account; and
(b) his vested interest.
.2 The amount described in Section 9.1 above shall be
distributed to the terminated participant in the form of an immediate lump sum
payment as soon as practicable after his date of termination of employment, but
not later than his normal retirement date. Notwithstanding the foregoing, in
the event the amount to be distributed to a terminated participant exceeds Three
Thousand Five Hundred Dollars ($3,500.00), such amount shall be distributed to a
participant in the form of a single lump sum payment at any time prior to his
normal retirement date as such participant shall select, provided that if the
participant is married, the participant's spouse consents in writing to such
distribution. Any such payment shall be made as soon as administratively
feasible after the Trustee receives a request for payment from such terminated
participant. If a participant does not receive the amounts distributable to him
in accordance with the preceding paragraph prior to his normal retirement date,
the amounts distributable to such participant shall be distributed in accordance
with the provisions of Article 12 hereof as though he had retired on his normal
retirement date under Article 10 hereof.
.3 If a terminated participant's Vested Percentage in his
employer contribution account is less than 100%, an amount equal to (a) minus
(b) below where:
(a) equals the amount credited to his employer contribution
account; and
(b) equals his vested interest;
shall be forfeited as of the earliest of (1) the date on or after the
participant's termination of employment on which the participant receives a
distribution of the amounts described in Section 9.1 hereof; (2) the last day of
the plan year during which the participant shall incur five consecutive One (l)
Year Breaks-In-Service; or (3) the date the participant dies. Any such
forfeited amount shall be debited to the participant's employer contribution
account. If any amounts remain credited to his employer contribution account
after said forfeiture, said amounts shall thereafter be held, administered and
distributed in accordance with Section 9.2 above. Notwithstanding the preceding
provisions of this Section 9.3, if a terminated participant's Vested Percentage
is zero (0) and there are no amounts credited to his cash option account, the
amounts which are credited to his employer contribution account shall be
forfeited as of the date of the participant's termination of employment.
If the terminated participant shall be rehired by a Participating
Company or any affiliate prior to the time the terminated participant incurs
five consecutive One (1) Year Breaks-In-Service, he shall immediately be
reinstated as a participant in this Trust and Plan and the amount which had been
previously debited to his employer contribution account and forfeited pursuant
to the provisions of this Section 9.3 shall be recredited to his employer
contribution account on the date such participant is rehired.
Notwithstanding any other provision of this Trust and Plan to the
contrary, in order to balance the accounts maintained under the Trust and Plan
after giving effect to the recrediting of the rehired participant's employer
contribution account and the later adjustment of such accounts pursuant to
Article 8 or Article 16 hereof, the Company may, at its option:
(b) if none of the accounts have been segregated for investment
purposes pursuant to Article 16 hereof, reduce the gain, if any,
in the value of the Trust and Plan's assets (since the most
recent allocation date) for purposes of adjusting the accounts
pursuant to Article 8 hereof as of any allocation dates which
coincide with or follow the date of the participant's rehire up
to and including the allocation date which coincides with the
last day of the plan year during which such participant was
rehired; and/or
(c) reduce the value of the forfeitures which are otherwise
reallocable as of the allocation date which coincides with the
last day of the plan year during which such participant was
rehired; and/or
(d) reduce the amount of the employer contributions which are
otherwise allocable among the employer contribution accounts of
participants pursuant to Article 5 for the plan year during which
such participant was rehired; and/or
(e) take some combination of the actions described in (a), (b)
and (c) above as the Company shall in its sole discretion
determine;
provided that the total of the amounts described in (a), (b) and (c) above with
respect to any plan year shall not exceed the aggregate amounts which were
recredited to the employer contribution accounts of all participants who were
rehired during such plan year. Any amounts recredited to a rehired
participant's employer contribution account pursuant to this Section 9.3 shall
not be an annual addition for purposes of Article 22 of this Trust and Plan with
respect to the plan year during which such recrediting occurs.
To the extent that the sum of the amounts described in (a), (b) and
(c) above for any plan year is less than the aggregate amounts which were
recredited to the employer contribution accounts (as later adjusted pursuant to
Article 8 or Article 16 hereof) of all participants who were rehired during the
plan year, the Company shall cause the Participating Companies to contribute to
the Trust and Plan an amount equal to the difference between the aggregate
amounts which were recredited to the employer contribution accounts (as later
adjusted pursuant to Article 8 or Article 16 hereof) of all participants who
were rehired during the plan year and the sum of the amounts described in (a),
(b) and (c) above, and such contribution shall be made by any such Participating
Company no later than the close of the plan year next following the plan year
during which such participants were rehired.
.1 The amounts forfeited pursuant to Section 9.3 hereof shall
be used to reduce the contributions to be made by the Participating Companies
for the taxable year which includes the date of forfeiture. The amounts
forfeited pursuant to Section 9.3 hereof shall be reallocated among the employer
contribution accounts of active participants who are employed by one of the
Participating Companies on the allocation date which is the last day of the
taxable year which includes the date of forfeiture as though such amounts were
contributed by the Participating Companies with respect to such taxable year.
In no event shall forfeitures be used to increase the benefits any participant
would otherwise receive under the Trust and Plan.
.2 If the accounts have been segregated for investment purposes
pursuant to Article 16 hereof, any amounts forfeited pursuant to Section 9.3
hereof shall be invested in such media as the Administrator shall direct until
reallocated among the employer contribution accounts of the remaining active
participants pursuant to Section 9.4 hereof.
.3
2
RETIREMENT AND DISABILITY BENEFITS
.1 A participant who retires on or after his normal retirement
date shall be entitled to receive an amount equal to the amounts credited to his
accounts. Except as provided in Section 12.1 hereof, such amount shall be
distributed or commence to be distributed as soon as administratively feasible
but in no event later than sixty (60) days after the close of the plan year
which includes the date of his retirement. Such distribution shall be made in
accordance with the provisions of Article 12 hereof.
.2 Upon receipt from a participant or a person authorized by
him or on his behalf of a request that distributions be made on account of such
participant's permanent and total disability, or upon its own motion, the
Administrator shall determine the extent of such participant's disability and
may, to assist it in making such determination, cause appropriate medical
diagnoses and tests to be made at the expense of the participant's employer. If
the Administrator shall determine that the participant is permanently and
totally disabled, as defined in Section 2.29 hereof, such disabled participant
shall be entitled to receive an amount equal to the amounts credited to his
accounts. Except as provided in Section 12.1 hereof, such amounts shall be
distributed or commence to be distributed as soon as administratively feasible
but in no event later than sixty (60) days after the close of the plan year
which includes the later of the date the Administrator determines that such
participant is permanently and totally disabled or the date said participant
actually retires. Such distribution shall be made in accordance with the
provisions of Article 12 hereof.
.3 Each participant who is eligible for benefits under this
Article 10 shall apply therefor on a form which shall be given to him for that
purpose by the Administrator provided, however, that the foregoing requirement
shall not apply in any case in which a participant shall be unable, for
physical, mental or any other reason satisfactory to the Administrator to make
such application. Upon finding that such participant satisfies the eligibility
requirements for benefits under this Article 10, the Administrator shall
promptly notify the Trustee in writing of his eligibility and of the method of
distribution selected in accordance with Article 12.
.4
3
DEATH BENEFITS
.1 In the event of the termination of employment of a
participant by reason of his death, his designated beneficiary shall be entitled
to receive a distribution which shall be made or commence to be made as soon as
administratively feasible but in no event later than sixty (60) days after the
close of the plan year which includes the date of his death, unless such
beneficiary defers the distribution until a later date pursuant to Section 12.1
hereof. The amount of such distribution shall be equal to the amounts then
credited to the deceased participant's accounts. Such distribution shall be
made in accordance with the provisions of Article 12 hereof.
.2 In the event of the death of a retired or terminated
participant prior to the date distribution has been made to him, his designated
beneficiary shall be entitled to receive a distribution which shall be made or
commence to be made as soon as administratively feasible but in no event later
than sixty (60) days after the close of the plan year which includes the date of
the former participant's death, unless such beneficiary defers the distribution
until a later date pursuant to Section 12.1 hereof. The amount of such
distribution shall be equal to the amounts then credited to his accounts. Such
distribution shall be made in accordance with the provisions of Article 12
hereof.
.3 In the event of the death of a participant after the date of
distribution or the commencement of distribution to him, no benefits shall be
payable to his beneficiary except to the extent provided for by the method under
which the participant was receiving distributions under Article 12 hereof.
.4 Notwithstanding anything contained in this Trust and Plan to
the contrary, the designated beneficiary of a participant who is married at the
time of his death shall, for all purposes of this Trust and Plan, be deemed to
be the surviving spouse of the deceased participant unless either (a) both the
deceased participant and the surviving spouse had signed a document designating
some person or entity other than the surviving spouse as the participant's
designated beneficiary and such spouse's signature was properly notarized or (b)
it is established to the satisfaction of the Administrator that the signature of
the spouse cannot be obtained either because the spouse cannot be located or
because of such other circumstances as the Secretary of the Treasury may
prescribe by lawful regulations. Any consent given by a spouse pursuant to this
Section 11.4 shall be effective only with respect to such spouse and shall not
be effective with respect to any other spouse of such participant.
.5 Subject to Section 11.4 hereof, upon becoming a participant,
an employee shall designate in writing to the Administrator the beneficiary
and/or contingent beneficiary to receive, in the event of his death, any amounts
distributable pursuant to this Article 11.
.6 Subject to Section 11.4 hereof, a participant may at any
time change his designation of his beneficiary, or the amounts to be paid any
beneficiary, by notifying the Administrator of any such change in writing. Each
such change of designation shall be deemed to be a ratification and confirmation
of any earlier designations insofar as they are not inconsistent with such
change of designation.
.7 Upon the death of a participant, the Administrator shall
immediately deliver to the Trustee any designation of beneficiary or change of
designation filed with it by such deceased participant and not previously
delivered to the Trustee.
.8 The Trustee shall be completely protected in making payments
to any person in any sums in accordance with beneficiary designations. There
shall be no liability on the part of the Administrator to any person because of
any delay in filing with the Trustee any designation or change filed with it by
a participant. If a new designation is filed with the Trustee after any
disbursements have been made in accordance with a previous designation, or in
accordance with Section 11.9 hereof because either no designation was on file or
the designation on file did not dispose of all amounts distributable, a
distribution made before receipt of such new designation shall be irrevocable,
but all distributions after receipt by the Trustee of such new designation shall
be made in accordance with such new designation.
.9 In the event that upon the death of a participant, the
beneficiary designation on file with the Trustee or Administrator which is in
effect on the date of such participant's death does not dispose in its entirety
of the amounts distributable under this Trust and Plan upon his death, or in the
event no designation shall be on file with the Trustee or Administrator at the
time of such death, then the amounts distributable on behalf of said
participant, the disposition of which was not determined by the deceased
participant's designation, shall be distributed to the participant's spouse if
she survives the participant, or, if she does not survive, said amount shall be
distributed to the personal representative of the participant for distribution
as a part of the participant's estate.
.10 Any ambiguity in a participant's designation shall be
resolved by the Administrator. If so requested by the Trustee, the
Administrator shall cause a participant to clarify his designation and, if
necessary, execute a new designation containing such clarification.
.11
4
DISTRIBUTIONS
.1 Distributions will normally commence as of the dates
specified in Articles 9 and 10 hereof. However, a participant or beneficiary
may elect in writing to defer any distribution until a later date provided that:
(a) in the case of a living participant or former participant,
distribution must commence on or before the April 1 following the
end of the calendar year in which he attains age seventy and one-
half (70-1/2); or
(b) in the case of a deceased participant or former participant,
distributions after his death shall be payable either:
(i) by the December 31 of the calendar year containing the
5th anniversary of the participant's death; or
(ii) if distribution commences to his beneficiary, either:
(A) on or before the December 31 of the calendar year
immediately following the calendar year in which the
participant died; or
(B) if his spouse is his beneficiary, by the later of
the December 31 of the calendar year immediately
following the calendar year in which the participant
died and the December 31 of the calendar year in which
the participant would have attained age 70 1/2;
over a period not extending beyond the life expectancy
of such beneficiary; or
(iii) if the participant's distribution had commenced prior
to his death under a form of payment meeting the
requirements of subparagraph (a)(ii) above, such
distribution must be completed by the remainder of the
period specified in said subparagraph (a)(ii); and
(iv) if the participant's distribution had not commenced
prior to his death under a form of payment meeting the
requirements of subparagraph (a)(ii) above and the
participant's spouse is entitled to a distribution hereunder
but dies prior to the commencement of such distribution,
then the limitations of this Section 12.1(b) shall be
applied as if the spouse were the participant.
If retirement benefits are paid to a participant's child, such payments
shall be deemed to be paid to the participant's spouse if such benefits will
become payable to such spouse upon such child reaching majority or any other
event permitted under any lawful regulations issued by the Secretary of the
Treasury. The life expectancy of a participant and his spouse may be
redetermined from time to time but not more frequently than annually.
.1 Subject to Section 12.1 above, a participant or beneficiary
shall receive the amounts distributable to him under Articles 9 or 10 pursuant
to a single lump sum payment.
.2 All distributions required under this Article 12 shall be
determined and made in accordance with the regulations under Section 401(a)(9)
of the Code, including the minimum distribution incidental benefit requirement
of Section 1.401(a)(9)-2 of the regulations.
.3 The Administrator shall notify the Trustee immediately of a
participant's or beneficiary's election of a method of distribution, and the
Trustee shall make all distributions in accordance with such method of
distribution. At any time that amounts remain credited to any accounts of such
participant or beneficiary, he may file with the Administrator instructions
changing the method of distribution. If a participant or beneficiary files such
instructions, the Administrator shall promptly direct the Trustee in writing to
adopt the new method of distribution for any amounts remaining credited to such
person's accounts. In no case shall the Trustee be obligated to accept any
instructions for a change in the method of distribution, if, in its judgment, it
will be unduly expensive to carry out instructions. There shall be no liability
on the part of the Administrator to any person because of any delay in notifying
the Trustee of a change in method of distribution filed with it.
.4 The Trustee shall, upon notification by the Administrator as
to the eligibility of and method of distribution applicable to a participant or
beneficiary, make payment directly from the trust fund to such person.
.5 Any accounts which have been segregated for investment
purposes pursuant to Article 16 hereof may, at the election of a distributee who
is receiving a distribution in the form of a single lump sum payment, be
distributed in the form of the assets which constitute the accounts being
distributed, provided there is an active market for such assets.
.6 Notwithstanding the preceding provisions of this Article 12,
if the aggregate of the amounts credited to a participant's accounts under the
Trust and Plan does not exceed or at the time of any prior distribution did not
exceed Three Thousand Five Hundred Dollars ($3,500) as of the date distribution
of the participant's accounts is commenced, the Administrator shall distribute
the participant's accounts to the participant or beneficiary thereof in the form
of a single lump sum payment.
.7 As long as there remain any amounts credited to an account,
the Trustee shall continue to maintain and administer said account in accordance
with the terms and provisions of the Trust and Plan.
.8 Each distributee shall have the right to direct that any
distribution which, under Code Section 402(c), qualifies as an eligible rollover
distribution be transferred directly to an eligible retirement plan. A
distributee may direct that part of the distribution be transferred directly to
an eligible retirement plan and the balance be paid to him, provided that the
amount directly transferred to the eligible retirement plan shall be at least
Five Hundred Dollars ($500.00). A distributee is not permitted to direct that
this distribution be transferred directly to more than one eligible retirement
plan. In the event that a distributee fails to make any direction, the
distribution shall be paid directly to him after deduction of appropriate
withholding taxes.
Unless the context otherwise indicates, the following terms shall
have the following meanings whenever used in this Section 12.9:
(a) "eligible rollover distribution" shall mean any distribution of
all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does
not include:
(i) any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (of life expectancy) of
the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more;
(ii) any distribution to the extent such distribution is
required under Section 12.1 above which reflects the
requirements under Section 401(a)(9) of the Code; and
(iii) the portion of any distribution that is not includible
in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities).
(b) "eligible retirement plan" shall mean:
(i) an individual retirement account described in Section
408(a) of the Code;
(ii) an individual retirement annuity described in Section
408(b) of the Code;
(iii) an annuity plan described in Section 403(a) of the
Code; or
(iv) a qualified trust described in Section 401(a) of the
Code;
that accepts the distributee's eligible rollover distribution.
Notwithstanding the foregoing, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(e) "distributee" shall mean:
(i) an employee or former employee; and
(ii) an employee's or a former employee's surviving spouse
and an employee's or former employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code,
without regard to the interest of the spouse or former
spouse.
(f) "direct rollover" shall mean a payment by the Trust and Pan to
the eligible retirement plan specified by the distributee.
(g)
3
HARDSHIP BENEFITS
.1 In case of hardship, a participant may apply to the
Administrator for distribution of all or a portion of the amounts credited to
his cash option account. For purposes of this Section 13.1, a distribution
shall be on account of hardship only if the distribution both is made on account
of an immediate and heavy financial need of the participant and is necessary to
satisfy such financial need. In no event shall any amounts be distributed to a
participant from his cash option account prior to his attainment of age fifty-
nine and one-half (59-1/2), unless the Administrator determines that the
participant is unable to eliminate the hardship out of other resources which are
reasonably available to the participant.
.2 A distribution will be made on account of an immediate and
heavy financial need of the participant only if the distribution is on account
of:
(a) medical expenses described in Code Section 213(d) previously
incurred by the participant, the participant's spouse, or any
dependents of the participant (as defined in Code Section 152) or
necessary for these persons to obtain medical care;
(b) purchase (excluding mortgage payments) of a principal
residence for the participant;
(c) payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the
participant, his or her spouse, children, or dependents; or
(d) the need to prevent the eviction of the participant from his
principal residence or foreclosure on the mortgage of the
participant's principal residence.
A distribution will be necessary to satisfy an immediate and heavy
financial need of a participant only if both of the following requirements are
satisfied:
(a) the distribution is not in excess of the amount of the
immediate and heavy financial need of the participant, including
amounts to pay taxes or penalties reasonably anticipated to
result from the distribution; and
(b) the participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently
available under all plans maintained by the Participating
Companies and affiliates.
If the Administrator determines that the criteria set forth above are
satisfied, it shall order a distribution from the participant's cash option
account subject to the limits set forth in Section 13.3 below. Amounts
distributed to a participant under this Section shall be debited to his cash
option account as they are paid.
.3 The amount of any such distribution (i) shall not exceed the
amount determined by the Administrator as necessary to satisfy such immediate
and heavy financial need of the participant, (ii) shall not exceed the amount of
cash or deferred contributions made to such participant's cash option account
and minus any withdrawals made from such participant's cash option account and
(iii) shall not exceed the amount credited to such participant's cash option
account on the date of such distribution. A distribution generally may be
treated as necessary to satisfy a financial need if the Administrator relies
upon the participant's written representation, unless the Administrator or its
authorized employees have actual knowledge to the contrary that the need cannot
reasonably be relieved:
(1) through reimbursement or compensation by insurance or
otherwise;
(2) by liquidation of the participant's assets;
(3) by cessation of deferral contributions under the Plan; or
(4) by other distributions or nontaxable loans from plans
maintained by the Company or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms in an amount sufficient to
satisfy the need. Neither the application for nor payment of any distribution
in accordance with Section 13.1 shall have the effect of terminating a
participant's participation in the Plan. The Administrator may prescribe the
use of such forms, conduct such investigation, and require the making of such
representations and warranties, as it deems desirable to carry out the purpose
of this Article 13.
.4 Notwithstanding any other provision of this Article 13, in
no event may a married participant receive a hardship distribution from the Plan
unless either (a) within a period of ninety (90) days preceding the date the
distribution is actually made to the participant, the participant's spouse
consents in writing to such distribution and such spouse's signature is properly
notarized, or (b) it is established to the satisfaction of the Administrator
that the signature of the spouse cannot be obtained either because the spouse
cannot be located or because of such other circumstances as the Secretary of the
Treasury may prescribe by lawful regulation.
.5
2
THE TRUSTEE, ITS POWERS AND DUTIES
.1 The Trustee shall not be obligated to institute any action
or proceeding to compel any Participating Company to make any contributions to
this Trust, nor shall the Trustee be obligated to make any inquiry as to whether
any amount deposited with it is the amount provided to be deposited under the
terms of the Trust and Plan. The Trustee shall keep books of account which
shall show all receipts and disbursements and a complete record of the operation
of the Trust, and the Trustee shall at least annually and at such other times as
the Administrator shall so request render a report of the operation of this
Trust to the Participating Companies and the Administrator. The Trustee shall
file with the Internal Revenue Service such returns and other information
concerning the Trust Fund as may be required of the Trustee by the Code and any
valid Regulations thereunder. The Trustee shall not be obligated to pay any
interest on any funds which may come into its hands. The Trustee is a party to
this Trust and Plan solely for the purposes set forth in this instrument and to
perform the acts herein set forth, and no obligation or duty shall be expected
or required of it except as expressly stated herein or in the Employee
Retirement Income Security Act of 1974 and any valid Regulations issued
thereunder by the Secretary of Labor or the Secretary of the Treasury. The
Trustee may consult with counsel (who may or may not be counsel for a
Participating Company) selected by the Trustee concerning any question which may
arise with reference to its powers or duties under this Trust and Plan, and the
opinion of such counsel shall be full and complete authority and protection in
respect of any action taken, suffered or omitted by the Trustee in good faith
and in accordance with such opinion, provided due care is exercised in the
selection of such counsel.
.2 The Trustee may resign from this Trust by mailing to the
Company a written notice of resignation addressed to the Company at the last
address of the Company on file with the Trustee, or by delivering such written
notice to the Company at such address. The Company may remove the Trustee by
written notice of such removal mailed to the Trustee at the last address of the
Trustee on file with the Company, or by delivering such written notice to the
Trustee at such address. Such resignation or removal shall take effect on the
date specified in the notice of resignation or removal, but not less than thirty
(30) days, nor more than sixty (60) days, following the date of mailing of such
notice or delivery of such notice if it be not mailed, unless the Company and
the Trustee agree that the resignation or removal be effective on some other
date. Upon such resignation or removal, the Trustee shall be entitled to its
fees to the effective date of resignation or removal and any and all costs or
expenses paid or incurred by the Trustee in connection with this Trust and Plan.
In no event shall such resignation or removal terminate this Trust and Plan, but
the Company shall forthwith appoint a successor Trustee to carry out the terms
of this Trust and Plan, which successor Trustee shall be any individual, trust
company or bank selected by the Company. In case of the resignation or removal
of the Trustee, the Trustee shall forthwith turn over to the successor Trustee
all assets in its possession, and copies of such records as may be necessary to
permit the successor Trustee to carry out its duties.
.3 The expenses of administration of the Trust incurred by the
Trustee, including counsel fees and including Trustee's fees as such may from
time to time be agreed upon between the Company and the Trustee, shall be paid
in any one of the following manners as determined by the Company in its sole
discretion:
(a) the expenses may be paid directly by the Participating
Companies to the Trustee; or
(b) the expenses may be paid out of the Trust Fund. Fees and
expenses of the Trustee which have not been paid will be a lien
upon the Trust Fund. In no event will any Trustee who is a full-
time employee of a Participating Company or any affiliate receive
compensation from the Trust and Plan, except for reimbursement of
expenses properly and actually incurred.
.4 Subject to Section 12.2 hereof, any segregation or
distribution of assets required under this Trust may be made in cash or in kind,
or partly in cash and partly in kind, according to the discretion of the
Trustee, but any such segregation or distribution shall be made on the basis of
the most recent valuation made pursuant to Article 8 or Article 16 hereof.
.5 In the event that the Company shall have appointed more than
one individual, trust company or bank to act jointly as Trustee hereunder, any
action which this Trust and Plan authorizes or requires the Trustee to do shall
be done by action of the majority of the then acting co-trustees, or, in the
case of two such persons acting jointly as Trustee, by action of both such
trustees. Such action may be taken at any meeting of the co-trustees then
acting, or by written authorization and affirmative consent without a meeting.
The co-trustees by written agreement among themselves, a copy of which shall be
filed with the Company and the Administrator, may allocate among themselves any
of the powers and duties of the Trustee under this Trust and Plan. In such
event the co-trustee to whom a power or duty is allocated may take action with
respect thereto without the consent of any other co-trustee. Any person, firm,
partnership or corporation may rely upon the written signatures of such number
of the co-trustees as are hereunder empowered to take action as the signature of
the Trustee hereunder. Notwithstanding any other provision of this Trust and
Plan to the contrary, so long as at least one individual, trust company or bank
shall continue to act as Trustee hereunder, the Company shall not be under any
duty to appoint a successor to any co-trustee who shall resign or be removed.
.6
3
INVESTMENTS
.1 In addition to the powers and duties conferred and imposed
upon the Trustee by the other provisions of this Trust and Plan, the Trustee
shall, subject to the limitations set forth in this Trust and Plan, have the
following powers and duties:
(a) To invest and reinvest the principal and income of the Trust
Fund and keep the same invested with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims, without distinction between
principal and income and without regard to any limitations, other than such
prudent man rule, prescribed by law or custom upon the investments of
fiduciaries, in each and every kind of property, whether real, personal or
mixed, tangible or intangible, and wherever situated, including but not limited
to annuity contracts of an insurance company on the life of any participant,
shares of any Regulated Investment Company, units of any common trust fund of
any bank or trust company now in existence or hereafter established, shares of
common, preference and preferred stock, put and call options, rights, options,
subscriptions, warrants, trust receipts, investment trust certificates,
mortgages, leases, bonds, notes, debentures, equipment or collateral trust
certificates and other corporate, individual or government obligations, whether
secured or unsecured; to invest and reinvest in and retain any stocks, bonds or
other securities of any corporate trustee serving hereunder, or any parent or
affiliate thereof; to invest in commodities and commodity contracts; to invest
and reinvest in any time or savings deposits of the Trustee or any parent or
affiliate thereof if such deposits bear a reasonable rate of interest or of any
bank, trust company, or savings and loan institution, which deposits may but
need not be guaranteed by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation; and in addition to become a
general partner or limited partner in any partnership or limited partnership the
purposes of which are to invest or reinvest the partnership assets in any such
properties or deposits;
(b) To invest a portion or all of the Trust Fund in units of any
common or group trust created solely for the purpose of providing a satisfactory
diversification of investments for participating trusts; provided that such
common or group trust, (l) limits participation thereunder to pension and profit
sharing trusts which qualify under Section 501(a) of the Code, as amended, (2)
prohibits income and/or principal attributable to a participating trust from
being used for any purpose other than the exclusive benefit of the employees or
their beneficiaries of such participating trust, (3) prohibits assignment by a
participating trust of any part of such participating trust's equity or interest
in the common or group trust, (4) is created or organized in the United States
and is maintained at all times as a domestic trust in the United States; as long
as the Trustee holds such units hereunder, the instrument establishing such
common or group trust (including all amendments thereto) shall be deemed to have
been adopted and made a part of this Trust and Plan;
(c) Upon written direction of the Company, to invest or reinvest
all or a portion of the Trust Fund in qualifying employer securities or
qualifying employer real property as such terms are defined in Section 4975 of
the Code and Section 407(d) of the Employee Retirement Income Security Act of
1974, which investment may constitute not more than one hundred percent (100%)
of the fair market value of the assets of the Trust Fund, and to retain, or to
sell, exchange or otherwise dispose of any such securities or real property held
in this Trust Fund. In the event of any such investment, the Trustee shall file
with the appropriate District Director of Internal Revenue such returns and
other information as shall be required from time to time by the Code and valid
regulations, rulings and procedures thereunder;
(d) To sell, convert, redeem, exchange, grant options for the
purchase or exchange of, or otherwise dispose of, any real or personal property,
at public or private sale, for cash or upon credit, with or without security,
without obligation on the part of any person dealing with the Trustee to see to
the application of the proceeds of or to inquire into the validity, expediency
or propriety of any such disposal;
(e) To manage, operate, repair, partition and improve and
mortgage or lease (with or without option to purchase) for any length of time
any real property held in the Trust Fund; to renew or extend any mortgage or
lease, upon any terms the Trustee may deem expedient; to agree to reduction of
the rate of interest on any mortgage note; to agree to any modification in the
terms of any lease or mortgage or of any guarantee pertaining to either of them;
to enforce any covenant or condition of any lease or mortgage or of any
guarantee pertaining to either of them or to waive any default in the
performance thereof; to exercise and enforce any right of foreclosure; to bid on
property on foreclosure; to take a deed in lieu of foreclosure with or without
paying consideration therefor and in, connection therewith to release the
obligation on the bond secured by the mortgage; and to exercise and enforce in
any action, suit or proceeding at law or in equity any rights or remedies in
respect of any lease or mortgage or of any guarantee pertaining to either of
them;
(f) To exercise, personally or by general or limited proxy, the
right to vote any shares of stock or other securities held in the Trust Fund; to
delegate discretionary voting power to trustees of a voting trust for any period
of time; and to exercise or sell, personally or by power of attorney, any
conversion or subscription or other rights appurtenant to any securities or
other property held in the Trust Fund;
(g) To join in or oppose any reorganization, recapitalization,
consolidation, merger or liquidation, or any plan therefor, or any lease (with
or without an option to purchase), mortgage or sale of the property of any
organization the securities of which are held in the Trust Fund; to pay from the
Trust Fund any assessments, charges or compensation specified in any plan of
reorganization, recapitalization, consolidation, merger or liquidation, to
deposit any property with any committee or depositary; and to retain any
property allotted to the Trust Fund in any reorganization, recapitalization,
consolidation, merger or liquidation;
(h) To borrow money from any lender (including the Trustee
hereunder, where applicable in its capacity as a banking corporation when
permitted to do so by the applicable laws and regulations then in effect) in any
amount and upon such terms and conditions and for such purposes as the Trustee
shall deem necessary; for any money so borrowed the Trustee may issue its
promissory note as Trustee and to secure the repayment of any such loan, with
interest, may pledge or mortgage all or any part of the Trust Fund, and no
person loaning money to the Trustee shall be obligated to see to the application
of the money loaned or to inquire into the validity, expediency or propriety of
any such borrowing;
(i) To compromise, settle or arbitrate any claim, debt or
obligation of or against the Trust Fund; to enforce or abstain from enforcing
any right, claim, debt or obligation; and to abandon any property determined by
it to be worthless;
(j) To continue to hold any property of the Trust Fund whether
or not productive of income; to reserve from investment and keep unproductive of
income, without liability for interest, such cash as it deems advisable or, in
its discretion, to hold the same, without limitation on duration, on deposit in
the commercial department or in an interest-bearing account in the savings
department of any bank, trust company, or savings and loan institution
(including the Trustee where applicable in its capacity as a banking
corporation) in which deposits are guaranteed by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation;
(k) To hold property of the Trust Fund in its own name or in the
name of a nominee, without disclosure of this Trust, or in bearer form so that
it will pass by delivery, but no such holding shall relieve the Trustee of its
responsibility for the safe custody and disposition of the Trust Fund in
accordance with the provisions of this Trust and Plan, and the Trustee's records
shall at all times show that such property is part of the Trust Fund;
(l) To make, execute and deliver, as Trustee, any deeds,
conveyances, leases (with or without option to purchase), mortgages, options,
contracts, waiver or other instruments that the Trustee shall deem necessary or
desirable in the exercise of its powers under this Trust;
(m) To employ, at the expense of the Trust Fund, agents who are
not regular employees of the Trustee, and to delegate in writing to them and
authorize them to exercise such powers and perform such duties required of the
Trustee hereunder without limitation as the Trustee may determine in its
uncontrolled discretion; the Trustee shall not be responsible for any loss
occasioned by any such agents selected by it with reasonable care;
(n) To pay out of the Trust Fund all taxes imposed or levied
with respect to the Trust Fund and in its discretion to contest the validity or
amount of any tax, assessment, penalty, claim or demand respecting the Trust
Fund; however, unless the Trustee shall have first been indemnified to its
satisfaction or arrangements satisfactory to it shall have been made for the
payment of all costs and expenses, it shall not be required to contest the
validity of any tax, or to institute, maintain or defend against any other
action or proceeding either at law or in equity;
(o) Except as otherwise provided in this Trust and Plan, to do
all acts, execute all instruments, take all proceedings and exercise all rights
and privileges with relation to any assets constituting a part of the Trust
Fund, which it may deem necessary or advisable to carry out the purposes of this
Trust and Plan;
(p) During the minority or incapacity of any participant, former
participant or beneficiary under this Trust and Plan, to make payment to such
participant, former participant or beneficiary or to an appropriate member, as
determined by the Administrator, of such participant's, former participant's or
beneficiary's family for the care, maintenance and support of such participant,
former participant or beneficiary in such amounts and at such times as the
Administrator may determine, and the receipt of such minor or incapacitated
person or member of such minor's or incapacitated person's family to whom
payment has been made shall be a full discharge and acquittance to the Trustee
for the amount so paid; and
(q) Upon direction by the Administrator, to purchase contracts
of life insurance on the lives of key persons whose death might affect adversely
the earnings of a Participating Company. Any such contracts shall be owned by
the Trustee and any and all benefits, including any amounts payable upon the
death of the person insured shall be payable to the Trustee and considered as an
investment for the benefit of the Trust as a whole.
.2 Notwithstanding any other provisions of this Trust and Plan,
the Company may appoint, from time to time, one or more:
(a) banks, as defined in the Investment Advisers Act of 1940;
(b) persons registered as investment advisers under said Act; or
(c) insurance companies qualified to perform investment advisory
services under the laws of more than one state;
to act as the Investment Manager of all or such portions of the Trust Fund
as the Company in its sole discretion shall direct without regard to whether the
accounts have been segregated for investment purposes pursuant to Article 16
hereof. In order to serve as Investment Manager, any such bank, person or
insurance company must state in writing to the Company and the Trustee that it
meets the requirements set forth in this Section 15.2 to be an Investment
Manager and that it acknowledges that it shall be a fiduciary with respect to
this Trust and Plan during all periods that it shall serve as such. During any
period that an Investment Manager has been appointed with respect to the Trust
Fund or a portion thereof, it shall have such powers and authority with respect
to the management, acquisition or disposition of any asset of the Trust Fund or
such portion thereof as shall be set forth in the investment management
agreement between the Company and the Investment Manager, and, to the extent of
the Investment Manager's powers and authority, the Trustee shall have no duties
or obligations with respect to the investment, management, acquisition or
disposition of such assets. The Company may, at any time, remove any Investment
Manager or change the portion of the Trust Fund subject to its management by
written notice to the Trustee and the Investment Manager. Any Investment
Manager may resign by written notice to the Company and the Trustee. Unless the
Company appoints a successor to an Investment Manager which has resigned or been
removed, or which is no longer managing a portion of the Trust Fund, the powers,
duties and obligations of the Trustee with respect to the portion of the Trust
Fund formerly managed by the Investment Manager shall be automatically restored.
.3 All income from investments and reinvestments made as
provided in this Article 15 shall be treated as principal, and investments and
reinvestments shall be made without distinction between income and principal.
.4 In no case shall the Trustee enter into or engage in any
transaction which is defined as a prohibited transaction by Section 4975 of the
Code, or by Section 406 of the Employee Retirement Income Security Act of 1974,
except to the extent any such transaction is permitted under another provision
of said United States Code or under a valid regulation or exemption promulgated
by a responsible agency of the Federal government.
.5
4
SEGREGATION OF ACCOUNTS OF PARTICIPANTS
.1 The Company may, in its sole discretion, from time to time,
direct that some or all of the accounts of similarly situated participants and
beneficiaries be segregated for investment purposes and that such persons be
permitted to direct the investment of such accounts in such media, whether
limited or unlimited, as shall be designated by the Company, from time to time,
subject to the limitations of Section 16.2 hereof. Any direction of the Company
pursuant to this Section 16.1 shall apply to all similarly situated participants
and beneficiaries in a uniform and non-discriminatory manner. In the event the
Company directs that the accounts be segregated for investment purposes, the
Company shall give at least ten (10) days notice to participants, beneficiaries
and the Trustee of such fact.
.2 All segregated accounts of each participant and beneficiary,
shall be invested in such media, whether limited or unlimited, as shall be
designated by the Company, from time to time, as per the instructions of such
participant or beneficiary, and pursuant to uniform rules and procedures
promulgated by the Company. All such directions shall be deemed to be
continuing directions until they shall have been revoked or changed. A
participant or beneficiary may revoke or change his direction of investment at
such uniform times as shall be prescribed by the Administrator and in accordance
with such uniform rules and procedures promulgated by the Administrator. To the
extent any participant or beneficiary fails to give investment directions to the
Trustee, amounts credited to his accounts shall be invested in such media as the
Trustee shall direct.
.3 On the day immediately prior to the date the accounts become
segregated for investment purposes pursuant to Section 16.1 hereof, the Trustee
shall, in accordance with the provisions of Article 8 hereof, value the assets
of the trust fund and adjust the accounts to reflect each such account's
allocable portion of any change in the value of the assets of the Trust which
has occurred since the most recent prior adjustment of said accounts, in
accordance with the provisions of the Trust and Plan as it exists as of such
day.
.4 Each segregated account shall be valued and adjusted by the
Trustee pursuant to uniform rules and procedures promulgated by the
Administrator and approved by the Trustee, and which are similar to the rules
and procedures for valuing assets and adjusting unsegregated accounts as
described in Article 8 hereof as of each allocation date, each other date upon
which a distribution, withdrawal or loan is made from such account, and the date
immediately prior to the date the accounts cease to be segregated for investment
purposes pursuant to Section 16.5 hereof. The Trustee shall use the fair market
values of securities or other assets in determining the value of the assets of
an account. Such account shall be adjusted as of such date to reflect the
income received or accrued, realized, and unrealized profits and losses,
expenses, payments to a participant or beneficiary and all other transactions of
the period since the last valuation date. It is intended that this Section 16.4
operate to adjust each segregated account in the trust to reflect all income
attributable to the account and changes in the value of the account's assets, as
the case may be, as of any allocation date.
.5 Upon ten (10) days written notice to the Trustee and the
affected participants and beneficiaries, the Company may direct that the
segregated accounts shall cease to be segregated effective as of a date
specified by the Company. As of the date immediately preceding the date as of
which the accounts shall cease to be segregated, the Trustee shall value the
assets of the accounts pursuant to Section 16.4 hereof and credit or debit such
accounts with any gain or loss in the value of the assets of said accounts since
the most recent prior valuation date. Upon completion of said valuation and
adjustment of accounts, the accounts shall cease to have specific assets
allocated to them and shall thereafter be adjusted as provided in Article 8
hereof.
.6
5
ADMINISTRATION
.1 The Board of Directors of the Company shall appoint the
Administrator which shall be any person or entity, including the Company or any
Participating Company. Said Board of Directors shall notify the Trustee of the
identity of the Administrator and of any change in the Administrator. Except as
expressly set forth herein with respect to the duties and responsibilities of
the Trustee, the Employee Benefits Committee, the Investment Manager or the
Company, the Administrator shall administer the Trust and Plan and shall have
all powers and duties granted or imposed on an "administrator" by the Employee
Retirement Income Security Act of 1974. The Administrator shall determine any
and all questions of fact, resolve all questions of interpretation of this
instrument which may arise under any of the provisions of this Trust and Plan as
to which no other provision for determination is made hereunder, and exercise
all other powers and discretions necessary to be exercised under the terms of
this Trust and Plan which it is herein given or for which no contrary provision
is made. Subject to the provisions of Section 17.6, the Administrator's
decision with respect to any matter shall be final and binding upon the Trustee
and all other parties concerned, and neither the Administrator nor any of its
directors, officers or employees, if applicable, shall be liable in that regard
except for gross abuse of the discretion given it and them under the terms of
this Trust and Plan. All determinations of the Administrator shall be made in a
uniform, consistent and non-discriminatory manner with respect to all
participants and beneficiaries in similar circumstances. The Administrator may,
from time to time, designate one or more persons or agents to carry out any or
all of its duties hereunder.
.2 If any participant, any beneficiary, or the authorized
representative of a participant or beneficiary shall file an application for
benefits hereunder and such application is denied, in whole or in part, he shall
be notified in writing of the specific reason or reasons for such denial unless
the granting or denial of the application is in the sole discretion of the
Administrator in which event the notice to the applicant shall state that the
Administrator has denied the application pursuant to the exercise of its
discretionary powers under the Trust and Plan. The notice shall also set forth
the specific plan provisions upon which the denial is based, an explanation of
the provisions of Section 17.6 hereof, and any other information deemed
necessary or advisable by the Administrator.
.3 The Board of Directors of the Company shall appoint the
members of an Employee Benefits Committee which shall consist of three (3) or
more members. The members of the Committee shall remain in office at the will
of the Board of Directors and the Board of Directors may from time to time
remove any of said members with or without cause. A member of the Committee may
resign upon written notice to the remaining member or members of the Committee
and to the Company respectively. The fact that a person is a participant or a
former participant or a prospective participant shall not disqualify him from
acting as a member of the Committee. In case of the death, resignation or
removal of any member of the Committee, the remaining members shall act until a
successor-member shall be appointed by the Board of Directors of the Company.
The Secretary of the Company shall notify the Trustee and the Administrator in
writing of the names of the original members of the Committee, of any and all
changes in the membership of the Committee, of the member designated as
Chairman, and the member designated as Secretary, and of any changes in either
office. Until notified of a change, the Trustee and the Administrator shall be
protected in assuming that there has been no change in the membership of the
Committee or the designation of Chairman or of Secretary since the last
notification was filed with it. The Trustee and the Administrator shall be
under no obligation at any time to inquire into the membership of the Committee
or its officers. All communications to the Committee shall be addressed to its
Secretary at the address of the Company on file with the Trustee.
.4 On all matters and questions the decision of a majority of
the members of the Committee shall govern and control; but a meeting need not be
called or held to make any decision. The Committee shall appoint one of its
members to act as its Chairman and another member to act as Secretary. The
terms of office of these members shall be determined by the Committee, and the
Secretary and/or Chairman may be removed by the other members of the Committee
for any reason which such other members may deem just and proper. The Secretary
shall do all things directed by the Committee. Although the Committee shall act
by decision of a majority of its members as above provided, nevertheless in the
absence of written notice to the contrary, every person may deal with the
Secretary and consider his acts as having been authorized by the Committee. Any
notice served or demand made on the Secretary shall be deemed to have been
served or made upon the Committee.
.5 No member of the Committee shall be disqualified from acting
on any question because of his interest therein. No fee or compensation shall
be paid to any member of the Committee for his services as such, but the
Committee shall be reimbursed for its expenses by the Participating Companies.
The Committee and the Administrator may hire such attorneys, accountants,
actuaries, agents, clerks, and secretaries as it may deem desirable in the
performance of its functions, and the expense associated with the hiring or
retention of any such person or persons shall be paid directly by the
Participating Companies.
.6 Any participant, any beneficiary, or any authorized
representative of a participant or beneficiary whose application for benefits
hereunder has been denied, in whole or in part, by the Administrator may upon
written notice to the Committee request a review by the Committee of such denial
of his application. Such review may be made by written briefs submitted by the
applicant and the Administrator or at a hearing, or by both as shall be deemed
necessary by the applicant. The Committee may, in its sole discretion, appoint
an appeal examiner to conduct such review. Any appeal examiner shall be an
officer of the Participating Company or affiliate which employs or most recently
employed the applicant. Any hearing conducted by an appeal examiner shall be
held in such location as shall be reasonably convenient to the applicant. Any
hearing conducted by the Committee shall be held in the corporate headquarters
of the Company, unless the Committee shall specify otherwise. The date and time
of any such hearing shall be designated by the Committee or the appeal examiner
upon not less than seven (7) days notice to the applicant and the Administrator
unless both of them accept shorter notice. The Committee or the appeal examiner
shall make every effort to schedule the hearing on a day and at a time which is
convenient to both the applicant and the Administrator. The Committee may, in
its sole discretion, establish such rules of procedure as it may deem necessary
or advisable for the conduct of any such review or of any such hearing. After
the review has been completed, the Committee or the appeal examiner shall render
a decision in writing, a copy of which shall be sent to both the applicant and
the Administrator. Such decision shall set forth the specific reasons for the
decision and the specific provisions of the Trust and Plan upon which the
decision is based and, if the decision is made by an appeal examiner, the rights
of the applicant or the Administrator to request a review by the entire
Committee of the decision of the appeal examiner. Either the applicant or the
Administrator may request a review of an adverse decision of the appeal examiner
by filing a written request with the Committee within thirty (30) days after
receipt of a copy of the appeal examiner's decision. Any such request shall
specify whether the review is to be based solely upon the written record or also
upon a hearing before the Committee. The review of a decision of the appeal
examiner shall be conducted by the Committee in accordance with the procedures
of this Section 17.6. There shall be no further appeal from a decision rendered
by the Committee.
.7 The interpretations, determinations and decisions of the
Administrator, or an appeal examiner, or the Committee shall, except to the
extent provided in Section 17.6 above, be final and binding upon all persons
with respect to any right, benefit or privilege hereunder. The review
procedures of Section 17.6 above shall be the sole and exclusive remedy and
shall be in lieu of all actions at law or in equity, whether pursuant to
arbitration or otherwise, except as otherwise provided in the Employee
Retirement Income Security Act of 1974.
.8 Neither the Committee nor any of its members nor any appeal
examiner shall be liable for any act taken by the Committee or the appeal
examiner pursuant to any provision of this Trust and Plan except for gross abuse
of the discretion given the Committee, or the member, or the appeal examiner
hereunder. No member of the Committee shall be liable for the act of any other
member.
.9 Except as otherwise provided in ERISA, the Administrator,
Committee, Board of Directors of the Company, Trustee (other than a corporate
Trustee), and their respective officers, employees, members and agents shall
incur no personal liability of any nature whatsoever in connection with any act
done or omitted to be done in the administration of the Plan or its related
Trust. The Company shall indemnify, defend, and hold harmless the
Administrator, Committee, Board of Directors of the Company, Trustee (other than
a corporate Trustee), and their respective officers, employees, members and
agents, for all acts taken or omitted in carrying out their responsibilities
under the terms of the Plan and its related Trust or other responsibilities
imposed upon such persons by ERISA. The Company shall indemnify such persons
for expenses of defending an action by a participant, beneficiary, government
entity, or other persons, including all legal fees and other costs of such
defense. The Company will also reimburse such a person for any monetary
recovery in a successful action against such person in any federal or state
court or arbitration. In addition, if the claim is settled out of court with
the concurrence of the Company, the Company shall indemnify such person for any
monetary liability under said settlement. This indemnification for all acts or
omissions is intentionally broad, but shall not provide indemnification for
embezzlement or diversion of Trust funds for the benefit of any such persons,
nor shall it provide indemnification for excise taxes imposed under Section 4975
of the Code and for any corporate Trustee.
.10
6
PROHIBITION AGAINST ALIENATION
.1 Unless the context otherwise indicates, the following terms
used herein shall have the following meanings whenever used in this Article 18:
(a) The words "domestic relations order" shall mean, with respect to
any participant, any judgment, decree or order (including
approval of a property settlement agreement) which both:
(i) related to the provision of child support, alimony
payments or marital property rights to a spouse, former
spouse, child or other dependent of the participant; and
(ii) is made pursuant to a State domestic relations law
(including a community property law).
(b) The words "qualified domestic relations order" shall mean a
domestic relations order which satisfies the requirements of
Section 414(p)(1)(A) of the Internal Revenue Code.
.2 Except as otherwise provided in this Article 18, neither any
property nor any interest in any property held for the benefit of any
participant or beneficiary shall be alienated, disposed of or in any manner
encumbered, voluntarily, involuntarily or by operation of law, while in the
possession or control of the Trustee except by an act of the Trustee or the
participant or beneficiary specifically authorized hereunder.
.3 Section 18.2 hereof shall not apply to the creation,
assignment or recognition of a right to any benefit under this Trust and Plan
pursuant to a qualified domestic relations order and shall not apply to the
payment of any benefits to an alternate payee pursuant to such an order.
.4 In the event this Trust and Plan is served with a domestic
relations order, the Administrator shall promptly notify the participant and any
alternate payee to whom such order relates of the receipt of such order and this
Trust and Plan's procedures for determining whether such order is a qualified
domestic relations order. Within a reasonable time after receipt of such
domestic relations order, the Administrator shall determine whether such order
is a qualified domestic relations order and shall notify the participant and
each concerned alternate payee of its determination. During any period in which
the issue of whether a domestic relations order is a qualified domestic
relations order is being determined, the Administrator shall direct the Trustee
to credit the amounts which would have been payable to an alternate payee during
such period if the order had been determined to be a qualified domestic
relations order during such period to a segregated account under this Trust and
Plan and to debit such amounts from the appropriate accounts of the participant.
Notwithstanding anything in the Plan to the contrary, a "segregated account"
established pursuant to this Section 18.4 shall be treated as an unsegregated
account and invested by the Trustee pursuant to Article 14. If the domestic
relations order is determined to be a qualified domestic relations order within
eighteen (18) months after this Trust and Plan is served with such domestic
relations order, the Administrator shall hold and dispose of the amounts
credited to the segregated account in accordance with the terms of the qualified
domestic relations order. If it is determined within eighteen (18) months after
this Trust and Plan is served with such domestic relations order that either:
(a) such domestic relations order is not a qualified domestic
relations order; or
(b) the issue with respect to whether such domestic relations
order is a qualified domestic relations order is not resolved;
the Administrator shall transfer the amounts credited to the segregated
account to the appropriate accounts maintained for the benefit of the person who
would have been entitled to such amounts if this Trust and Plan had never been
served with such domestic relations order. If eighteen (18) months have elapsed
since this Trust and Plan was served with such domestic relations order and such
order is subsequently determined to be a qualified domestic relations order,
such order shall only be applied prospectively.
.5 Any alternate payee who is entitled to receive amounts from
this Trust and Plan pursuant to a qualified domestic relations order shall, to
the extent of his interest under this Trust and Plan and except as otherwise
provided in such qualified domestic relations order, have the same rights as a
beneficiary of a participant under this Trust and Plan. Notwithstanding
anything in this Section 18.5 to the contrary, an alternate payee may receive a
distribution of the amount specified under a qualified domestic relations order
prior to the participant attaining his "earliest retirement age" (as defined by
Internal Revenue Code Section 414(p)(4)(B)).
.6
7
AMENDMENT AND TERMINATION
.1 This Trust and Plan may be modified, altered, amended,
changed or terminated by the Company with respect to all or any of the
Participating Companies at any time or from time to time without the consent of
any Participating Company but no rights of participants or beneficiaries
receiving benefits under this Trust and Plan and no other vested rights under
this Trust and Plan shall in any way be modified except that such rights may be
modified if such a modification is necessary to establish or to continue the
qualified status of this Trust and Plan under the terms of Section 401 of the
Code or its successor section. This Trust and Plan may be modified and amended
retroactively, if necessary, to secure exemption effective as of January 1, 1995
or any other date specified herein under Section 401 of the Code, or for any
other lawful reason. No amendment shall be binding on the Trustee until the
receipt of such amendment by the Trustee.
.2 Upon termination of this Trust and Plan with respect to any
Participating Company, the Trustee shall value all assets of the trust fund and
adjust the accounts of participants. Any accrued expenses and fees of the
Trustee and any expenses and fees relating to such termination incurred or to be
incurred by the Trustee shall be equitably allocated among and charged to the
then existing accounts of participants who are affected by such termination
unless directly paid by the Participating Companies to the Trustee. If the
accounts have not been segregated for investment purposes pursuant to Article 16
hereof, the assets of the Trust shall be valued and the accounts adjusted in
accordance with Article 8 hereof. If the accounts have been segregated for
investment purposes pursuant to Article 16 hereof, the accounts shall be valued
pursuant to Section 16.4 hereof.
.3 The amounts credited to any affected participant's accounts
may either (a) in accordance with the provisions of Article 12 hereof, be
distributed immediately to the participant if he is living on the date of
termination or, if he shall have died before distribution, to his designated
beneficiary, or (b) continue to be held in trust and distributed upon the
participant's termination of employment as is provided in this Trust and Plan;
provided, however, that no distribution of amounts contributed by a participant
to his cash option account shall occur if a Participating Company establishes or
maintains a successor plan. A successor plan shall mean a defined contribution
plan, other than an employee stock ownership plan or a simplified employee
pension plan maintained by a Participating Company. A plan shall not be
successor plan if less than two percent of the participants in this Plan
(determined as of the date of termination) were eligible to participate under
the successor plan at any time during the 24 month period beginning 12 months
before the time of termination.
.4 Upon the partial termination of this Trust and Plan or upon
complete discontinuance of contributions to this Trust and Plan, all amounts
credited at the time of such partial termination or complete discontinuance to
the accounts of participants affected by such partial termination or complete
discontinuance shall be fully vested and nonforfeitable. However, after any
such partial termination or complete discontinuance of contributions the Trustee
shall continue to administer this Trust and Plan in the manner in which this
Trust and Plan was administered before any such partial termination and a
participant shall only be entitled to receive distribution of his accounts upon
the occurrence of an event which under the terms of this Trust and Plan would
entitle him to such a distribution. For purposes of this Section 19.4, no event
shall be a "partial termination" unless: (i) the Company has so designated such
event in a writing delivered to the Trustee; or (ii) such event has been finally
and expressly determined to be a partial termination within the meaning of
Section 411(d) of the Code of 1986, as amended, in an administrative or judicial
proceeding to which both the Company and the Commissioner of Internal Revenue or
his delegate were parties.
.5
8
PARTICIPATING COMPANIES
.1 Any subsidiary which has the same taxable year as the
Company shall become a Participating Company in this Trust and Plan by order of
the Board of Directors of the Company and the ratification of the subsidiary's
Board of Directors. Each Participating Company (including the Company) and its
Adoption Date shall be noted on Exhibit A attached hereto.
.2 Upon order of its Board of Directors, a Participating
Company may terminate this Trust and Plan with respect to participants employed
by said Participating Company by an instrument in writing executed by the
appropriate officers of the Participating Company and delivered to the Company
and the Trustee. The Trustee shall thereupon make distributions of the accounts
of participants employed by said Participating Company as provided in Section
19.3 hereof.
.3
9
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS
.1 Transfers From Another Qualified Retirement Plan. In the
event that:
(a) any Covered Employee who shall be or shall have been a
participant under another qualified retirement plan which
satisfies the requirements of Section 401 of the Code; and
(b) either
(i) the custodian or trustee of the assets held pursuant to
said plan on behalf of said Covered Employee; or
(ii) the custodian or trustee of the assets of an individual
retirement account established pursuant to Section 408 of
the Code to hold the assets distributed to said employee
from said plan; or
(iii) a Covered Employee who holds assets distributed to him
during the preceding sixty (60) days from such plan or from
an individual retirement account described in paragraph (ii)
above;
shall agree to transfer said assets to the Trustee hereunder; and
(a) the assets to be so transferred shall not be made available to
said Covered Employee in the course of the transfer except to the
extent permitted by paragraph (b)(iii) above; and
(d) the Administrator consents to such transfer.
the Trustee hereunder shall accept such transferred assets and hold and
administer them pursuant to the terms and provisions of this Trust and Plan and
this Article 21. Upon the receipt of said assets the Trustee shall value them
and credit the fair market value of such assets to the appropriate accounts of
the Covered Employee on whose behalf the assets were so transferred, as the
Administrator shall direct. In no event shall any assets be transferred from
another qualified retirement plan to this Trust and Plan if the transfer of such
assets would require that the provisions of this Trust and Plan governing
distributions be amended to comply with the provisions of Section 401(a)(11) or
411(d)(6) of the Code.
.1 Transfers To Another Qualified Retirement Plan. In the
event that:
(a) any participant hereunder shall terminate his employment and
subsequently become a participant under the qualified retirement
plan of another employer, which plan meets the requirements of
Section 401 of the Code; and
(b) said former participant shall have amounts credited to an account
held for him hereunder which shall not have been distributed to
the former participant and which are distributable to him
pursuant to terms of the Trust and Plan; and
(c) such participant shall request that the assets of the trust fund
representing the amounts credited to his accounts be transferred
to said successor plan; and
(d) either
(i) the custodian or trustee of the assets held pursuant to
said successor plan shall apply to the Trustee hereunder for
transfer to it of assets held pursuant to this Trust and
Plan representing said former participant's account; or
(ii) said successor plan shall provide for the receipt of
assets transferred to it from other qualified retirement
plans; and
(e) the assets to be transferred shall not be made available to said
participant in the course of the transfer except to the extent
permitted by Section 402(c)(3) of the Code;
the Trustee hereunder shall transfer to the trustee or custodian of said
successor plan assets of the trust representing the amount credited to the
participant's account on the date of transfer. Said transfer shall not be made
until the Administrator is assured to its full satisfaction that the
participant's interest to be transferred shall be fully vested and
nonforfeitable under the terms of the successor plan, and that said interest
shall neither be alienable nor otherwise subject to disposition or encumbrance
by the participant, except pursuant to a qualified domestic relations order.
2
LIMITATION ON ANNUAL ADDITIONS
.1 Notwithstanding anything contained in this Trust and Plan to
the contrary, in no event shall the annual additions to a participant's accounts
for any plan year exceed the maximum amount allowable as an annual addition
under Section 415 of the Code and lawful regulations promulgated thereunder.
For purposes of this Section 22.1, the words "annual additions" shall mean for a
participant, for any plan year, the sum of the amounts contributed by the
Participating Companies to the Trustee pursuant to a participant's election
under Section 4.1 hereof and employer contribution account under Article 5
hereof, plus all other amounts credited to the participant's accounts under any
other defined contribution plan maintained by any Participating Company.
.2 In the event that the limitations contained in Section 22.1
hereof otherwise would be exceeded for a participant, the annual benefits and
annual additions on behalf of such participant under this Trust and Plan and all
other plans of a Participating Company or any affiliate which meet the
requirements of Section 401(a) of the Code shall be reduced in the following
order so that such limitations shall be satisfied:
(a) first, the participant's voluntary employee contributions
shall be reduced;
(b) second, the excess of the participant's projected employer
funded annual benefit under any defined benefit pension plan of a
Participating Company or affiliate over the participant's accrued
employer funded annual benefit under such plan shall be reduced;
(c) third, employer contributions on behalf of the participant
pursuant to the participant's 401(k) election under any cash or
deferred arrangement described in Section 401(k) of the Code
shall be reduced;
(d) fourth, employer contributions under any other defined
contribution plan of a Participating Company or affiliate shall
be reduced;
(e) fifth, employer contributions under this Trust and Plan
shall be reduced; and
(f) sixth, accrued employer funded annual benefits under any
defined benefit plan of a Participating Company or affiliate
shall be reduced.
If there is more than one plan maintained by a Participating Company or
affiliate in a category described above, the reduction shall be made within a
relevant category on a plan by plan basis in reverse order of the plans'
respective effective dates. In lieu of the foregoing, the Administrator and the
participant may agree to an alternative order for reduction of the participant's
annual benefits and annual additions.
In the event that, after the application of the preceding paragraph of
this Trust and Plan, there still remain amounts which arise as a result of a
reasonable error in estimating a participant's compensation, a reasonable error
in determining the amount of deferrals made pursuant to Section 4.1 that may be
made under the limits of Section 415, the allocation of forfeitures or other
limited facts and circumstances which the Commissioner of Internal Revenue finds
justify the availability of the rules set forth in this Section 22.2 and which,
if allocated to a participant, would be in excess of the limits on annual
additions set forth in Section 22.1, such excess amounts shall be used as of the
next allocation date and any succeeding allocation dates, as necessary, to
reduce the Participating Company contributions which would otherwise be made for
such participant for the plan years ending on such allocation dates. In the
event such participant is not employed by a Participating Company on the next
allocation date or on any succeeding allocation date on which excess amounts
still remain, such excess amounts shall be used as of such allocation date and
on any succeeding allocation date to reduce the Participating Company
contributions for all participants who are then entitled to allocations.
Until any excess amounts described above are used to reduce
Participating Company contributions, they shall be held in a suspense account.
Such suspense account shall not be subject to the periodic valuation procedure
described in Article 8 or Article 16 hereof and will in no event be adjusted to
take account of the income and/or gains or losses of the Trust Fund.
Notwithstanding any other provisions of the Trust and Plan to the contrary in
the event the Trust and Plan is terminated at a time when there is an amount
credited to a suspense account pursuant to this Section 22.2, such amount shall
be returned to the Participating Companies on a pro rata basis.
Notwithstanding anything in this Section 22.2 to the contrary, to the
extent all or a portion of a participant's deferrals made pursuant to Section
4.1 constitutes an excess amount, such deferral shall be returned to the
participant.
4
TOP-HEAVY PROVISIONS
.1 During any plan year that this Trust and Plan is top-heavy
as determined in accordance with Section 23.2 hereof, the special restrictions
contained in Sections 23.3 and 23.4 hereof shall apply.
.2 This Trust and Plan shall be considered to be top-heavy in
any plan year if, as of the determination date for such plan year, all the
aggregation groups of which this Trust and Plan is a member are top-heavy
groups. In the event that in any plan year this Trust and Plan is a member of
an aggregation group which is not a top-heavy group, this Trust and Plan shall
not be considered to be top-heavy for such plan year.
Unless the context otherwise indicates, the following terms used
herein shall have the following meanings whenever used in this Article 23:
(a) "determination date" shall mean, for any plan year, the last day
of the preceding plan year;
(b) "key employee" shall mean a "key employee" as described in
Section 416(i) of the Code which is hereby incorporated by
reference and which is described for informational purposes
herein as any employee or former employee of a Participating
Company or an affiliate who at any time during the plan year, or
the four (4) preceding plan years is:
(i) an officer of a Participating Company or an affiliate
having compensation from the Participating Companies and all
affiliates for the plan year of determination greater than
Forty-Five Thousand Dollars ($45,000) or, if greater, one
hundred fifty percent (150%) of the amount specified in
Section 415(c)(1)(A) of the Code (plus any increase for
cost-of-living as determined from time to time pursuant to
regulations issued by the Secretary of the Treasury or his
delegate pursuant to Section 415(d) of the Code);
(ii) a one-half of one percent (.5%) actual or constructive
owner of a Participating Company or an affiliate who owns
one of the ten (10) largest interests in a Participating
Company or an affiliate and who is an employee of a
Participating Company or an affiliate having compensation
from a Participating Company and all affiliates for the plan
year of determination greater than Thirty Thousand Dollars
($30,000) or, if greater, the amount specified in Section
415(c)(1)(A) of the Code (plus any increase for cost-of-
living as determined from time to time pursuant to
regulations issued by the Secretary of the Treasury or his
delegate pursuant to Section 415(d) of the Code);
(iii) a five percent (5%) actual or constructive owner of a
Participating Company or an affiliate; or
(iv) a one percent (1%) actual or constructive owner of a
Participating Company or an affiliate having compensation
from a Participating Company and all affiliates for the plan
year of determination greater than One Hundred Fifty
Thousand Dollars ($150,000.00);
provided that any such employee also performed services for a
Participating Company or an affiliate during the five (5) plan
year period ending on the determination date; and provided that
an amount held for the beneficiary of a key employee who is
deceased shall be deemed to be an amount held for a key employee;
(a) "non-key employee" shall mean any employee of a Participating
Company or an affiliate who is not a key employee including any
employee who was formerly a key employee;
(b) "permissive aggregation group" shall mean the required
aggregation group plus each pension, profit sharing and stock
bonus plan of a Participating Company or any affiliate, including
each such terminated plan maintained by a Participating Company
or an affiliate during the five (5) year period ending on the
determination date, which, when considered as a group with the
required aggregation group, would continue to comply with
Sections 401(a)(4) and 410 of the Code;
(c) "required aggregation group" shall mean each pension, profit
sharing and stock bonus plan of a Participating Company or any
affiliate, including each such terminated plan maintained by a
Participating Company or an affiliate during the five (5) year
period ending on the determination date, in which a key employee
is a participant and each other pension, profit sharing and stock
bonus plan which enables such plans to meet the requirements of
Section 401(a)(4) or 410 of the Code including such a plan
terminated within the five (5) year period ending on the
determination date to the extent required by law;
(d) "top-heavy group" shall mean any aggregation group if the sum, as
of the determination date, of:
(i) the present value of the cumulative accrued benefits
for key employees under all defined benefit plans included
in such group; and
(ii) the aggregate of the account balances of key employees
under all defined contribution plans included in such group;
exceeds sixty percent (60%) of a similar sum determined for all
participants, former participants and beneficiaries permitted to
be taken into account pursuant to Section 416(g) of the Code,
with such values being determined for each plan as of the most
recent valuation date occurring within the twelve (12) month
period ending on the determination date and subject to
appropriate adjustments under said Section 416(g) and lawful
regulations issued thereunder.
For purposes of this subsection (f), however, the accrued
benefits and account balances of any individual who has not
performed services for a Participating Company at any time during
the five-year period ending on the determination date shall be
disregarded; and
(e) "valuation date" means:
(i) in the case of a defined contribution plan, a date as
of which account balances are valued,
(ii) in the case of a defined benefit plan, a date as of
which liabilities and assets are valued for computing plan
costs for purposes of determining the plan's minimum funding
requirements under Section 412 of the Code.
In making any of the aforementioned determinations, contributions
due but unpaid as of the determination date shall be included in determining the
value of account balances, if any. In addition, the actuarial factors and
assumptions set forth in the defined benefit plans included in the aggregation
groups shall be utilized in determining the present value of cumulative accrued
benefits. Furthermore, for purposes of making the aforementioned calculations
with respect to defined benefit plans, proportional subsidies, and benefits not
relating to retirement benefits such as pre-retirement death and disability
benefits and post retirement medical benefits, are to be disregarded but
nonproportional subsidies are to be taken into account.
.1 During any plan year that this Trust and Plan is top-heavy,
the Participating Companies shall make a contribution on behalf of each non-key
employee who is a participant on the allocation date coinciding with the last
day of such year, or was a participant whose employment terminated on or as of
said allocation date which is at least equal to the greater of (a) or (b) below
where:
(a) equals the lesser of (i) or (ii) below where
(i) equals three percent (3%) of the non-key employee's
compensation from the Participating Companies and all
affiliates during the plan year; and
(ii) equals the largest percentage of compensation from the
Participating Companies and all affiliates (disregarding any
such compensation in excess of Two Hundred Thousand Dollars
($200,000) per plan year per key employee) provided to any
key employee by the contributions of the Participating
Companies; and
(b) equals such other percent of the non-key employee's compensation
from the Participating Companies and all affiliates as may be
necessary to satisfy the requirements of Section 401 and 416 of
the Code as prescribed by the Secretary of the Treasury in lawful
regulations.
For purposes of determining the percentage set forth in subparagraph (a)(ii)
above, the Participating Companies' contributions made pursuant to Section 4.1
hereof in accordance with a participant's election under said Section shall be
taken into account.
If this Trust and Plan is top-heavy for a plan year and if a
participant who is a non-key employee is also a participant in any other defined
contribution plan maintained by a Participating Company, the minimum
contribution provided hereunder shall be provided before any minimum under such
other plan and shall reduce the amount of the top-heavy minimum, if any,
required thereunder. Furthermore, if this Trust and Plan is top-heavy for a
plan year and if a participant who is a non-key employee is also a participant
in any defined benefit plan maintained by a Participating Company, the minimum
benefit provided under such defined benefit plan shall be provided before any
minimum contribution under this Trust and Plan and the benefit provided under
such defined benefit plan shall be offset by the actuarial equivalent of the
amounts, if any, credited to the participant's accounts for such year under this
Trust and Plan and any other defined contribution plan maintained by a
Participating Company.
.1 During any plan year that this Trust and Plan is top-heavy,
the limitations on annual additions and annual benefits set forth in Section 415
(e) of the Code shall be modified by the substitution of the phrase "one hundred
percent (100%)" for the phrase "one hundred twenty-five percent (125%)" wherever
the latter phrase appears in said Section 415 (e) and by the substitution of the
amount 'Forty-One Thousand Five Hundred Dollars ($41,500)" for the amount "Fifty
One Thousand Eight Hundred Seventy-Five Dollars ($51,875)" wherever the latter
amount appears in Section 415(e)(6)(B)(i) of said Code.
.2
2
MISCELLANEOUS
.1 No insurance company shall be deemed to be a party to this
Trust and Plan for any purpose, nor shall it be responsible for the validity of
this Trust and Plan. No such company shall be required to look into the terms
of this Trust and Plan or question any action of the Trustee hereunder, nor be
responsible to see that any action of the Trustee is authorized by the terms of
this Trust and Plan. Any such insurance company shall be fully discharged from
any and all liability for any amount paid to the Trustee or paid in accordance
with the direction of the Trustee, or for any change made or action taken by
such insurance company upon such direction, and no insurance company shall be
obligated to see to the distribution or further application of any moneys so
paid by it. The certificate of the Trustee may be received by any insurance
company as conclusive evidence of any of the matters mentioned in this Trust and
Plan, and each insurance company shall be fully protected in taking or
permitting any action on the faith thereof and shall incur no liability or
responsibility for doing so.
.2 In the event a Participating Company shall at any time be
judicially declared bankrupt or insolvent, or in the event of its dissolution,
merger or consolidation, without any provisions being made for the continuation
of this Trust and Plan, the Trust and Plan created hereunder shall terminate
with respect to such Participating Company and the Trustee shall make
distributions as provided in Section 19.3 hereof.
.3 In the event the Trust and Plan shall merge or consolidate
with, or transfer any of its assets or liabilities to any other plan, each
participant shall be entitled to receive, if the Trust and Plan were terminated
immediately thereafter, a benefit which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer if the Trust and Plan had then terminated, in
accordance with Section 414(1) of the Code and Section 208 of the Employee
Retirement Income Security Act of 1974 and any lawful regulations issued
thereunder.
.4 Neither anything contained herein, nor any contribution made
hereunder, nor any other acts done in pursuance of this Trust and Plan, shall be
construed as entitling any participant to be continued in the employ of any
Participating Company or any affiliate for any period of time nor as obliging
any Participating Company or any affiliate to keep any participant in its employ
for any period of time, nor shall any employee of any Participating Company or
any affiliate nor anyone else have any rights whatsoever, legal or equitable,
against any Participating Company or the Trustee as a result of this Trust and
Plan except those expressly granted to him hereunder.
.5 No contribution or payment by a Participating Company to the
Trustee of this Trust and Plan, nor any income of the Trust Fund, shall in any
event revert or be credited to or be used for the benefit of any Participating
Company, and all such contributions, payments and income shall be used solely
and exclusively for the benefit of the participants and their beneficiaries
under this Trust and Plan, except that the Trustee shall return to a
Participating Company upon written direction of the Administrator:
(a) any contributions made by the Participating Company by a
mistake of fact, provided such contributions are returned to the
Participating Company within one (1) year after the date such
contributions were made;
(b) any contributions made for plan years during which this
Trust and Plan does not (either initially or because of an
amendment) qualify under Section 401(a) of the Code, provided
such contributions are returned to the Participating Company
within one (l) year after the date of denial of qualification;
and
(c) any contributions, to the extent that their deduction is
disallowed under Section 404 of the Code, provided that such
disallowed contributions are returned to the Participating
Company within one (l) year after the disallowance of the
deduction.
.6 Whenever any pronoun is used herein, it shall be construed
to include the masculine pronoun, the feminine pronoun or the neuter pronoun as
shall be appropriate. Wherever the singular is used herein it shall include the
plural and vice-versa as the context shall require.
.7 This Trust and Plan shall be construed under and in
accordance with the law and laws of the State of Delaware and of the United
States of America.
appropri
appropriate officers duly authorized, and JOHN T. ST. JAMES, the Trustee, have
caused this Trust and Plan to be executed this ___ day of ___________, 1995,
effective for all purposes, except as otherwise provided herein, as of
January 1, 1995.
NEW HORIZONS EDUCATION CORPORATION
By
---------------------------------
And
--------------------------------
-----------------------------------
JOHN T. ST. JAMES, Trustee
NH.PLN
EXHIBIT A
Participating Company Adoption Date
New Horizons Franchising, Inc. January 1, 1995
New Horizons Computer Learning January 1, 1995
Centers, Inc.
NH.PLN
Automatic Paragraph Numbering used. Definition follows this Comment.HANDEX
ENVIRONMENTAL RECOVERY, INC.
401(k) PROFIT SHARING TRUST AND PLAN
Amended and Restated Generally Effective
January 1, 1994
TABLE OF CONTENTS
ARTICLE NO.
NAME AND PURPOSE 1
DEFINITIONS 2
ELIGIBILITY AND PARTICIPATION 3
CASH OR DEFERRED OPTION 4
EMPLOYER MATCHING CONTRIBUTIONS 5
REGULAR EMPLOYER CONTRIBUTIONS 6
ALLOCATION OF REGULAR EMPLOYER CONTRIBUTIONS 7
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 8
INSURANCE CONTRACTS 9
VALUATION OF ASSETS AND ADJUSTMENT OF UNSEGREGATED
ACCOUNTS 10
TERMINATION OF EMPLOYMENT 11
RETIREMENT AND DISABILITY BENEFITS 12
DEATH BENEFITS 13
DISTRIBUTIONS 14
HARDSHIP BENEFITS 15
THE TRUSTEE, ITS POWERS AND DUTIES 16
INVESTMENTS 17
SEGREGATION OF ACCOUNTS OF PARTICIPANTS 18
ADMINISTRATION 19
PROHIBITION AGAINST ALIENATION 20
AMENDMENT AND TERMINATION 21
PARTICIPATING COMPANIES 22
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS 23
LIMITATION ON ANNUAL ADDITIONS 24
TOP-HEAVY PROVISIONS 25
MISCELLANEOUS 26
INDEX
ARTICLE NO.
ADMINISTRATION 19
ALLOCATION OF REGULAR EMPLOYER CONTRIBUTIONS 7
AMENDMENT AND TERMINATION 21
CASH OR DEFERRED OPTION 4
DEATH BENEFITS 13
DEFINITIONS 2
DISTRIBUTIONS 14
ELIGIBILITY AND PARTICIPATION 3
EMPLOYER MATCHING CONTRIBUTIONS 5
HARDSHIP BENEFITS 15
INSURANCE CONTRACTS 9
INVESTMENTS 17
LIMITATION ON ANNUAL ADDITIONS 24
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS 8
MISCELLANEOUS 26
NAME AND PURPOSE 1
PARTICIPATING COMPANIES 22
PROHIBITION AGAINST ALIENATION 20
REGULAR EMPLOYER CONTRIBUTIONS 6
RETIREMENT AND DISABILITY BENEFITS 12
SEGREGATION OF ACCOUNTS OF PARTICIPANTS 18
TERMINATION OF EMPLOYMENT 11
THE TRUSTEE, ITS POWERS AND DUTIES 16
TOP-HEAVY PROVISIONS 25
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS 23
VALUATION OF ASSETS AND ADJUSTMENT OF UNSEGREGATED
ACCOUNTS 10
AMENDMENT AND RESTATEMENT OF
THE HANDEX ENVIRONMENTAL RECOVERY, INC.
401(k) PROFIT SHARING PLAN
IN THE FORM OF THE HANDEX ENVIRONMENTAL RECOVERY,
INC. 401(k) PROFIT SHARING TRUST AND PLAN
THIS AMENDMENT AND RESTATEMENT is entered into and executed this ____
day of ____________, 1994, by and between HANDEX ENVIRONMENTAL RECOVERY, INC., a
corporation organized and existing under and by virtue of the laws of the State
of Delaware (hereinafter called the "Company"), and JOHN T. St. JAMES, the
Trustee hereunder (hereinafter called the "Trustee");
WITNESSETH:
WHEREAS, effective January 1, 1987, the Company adopted the Handex
Environmental Recovery, Inc. 401(k) Profit Sharing Plan (the "Prior Plan") in
the form of an adoption of the Massachusetts Financial Services 401(k) Cash or
Deferred Profit Sharing Retirement Plan and Trust for Corporations, Associations
and Self-Employed Individuals, a prototype plan; and
WHEREAS, the Company previously amended and restated the Prior Plan in
its entirety in the form of an individually designed, nonprototype plan (the
"Existing Plan"), to conform it to the provisions of the Tax Reform Act of 1986
and the Omnibus Budget Reconciliation Act of 1987, and to effect such other
changes as the Company deemed necessary or desirable; and
WHEREAS, the Company desires to amend the Existing Plan to conform the
Plan to final regulations under Section 401(k) and 401(m) of the Code, and to
effect certain other changes as the Company deems necessary or desirable; and
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings of the parties hereto, it is agreed that the Prior Plan shall be
amended and restated effective, except as otherwise provided herein, as of
January 1, 1994, as follows:
1
NAME AND PURPOSE
.1 The name of this Trust and Plan is the HANDEX ENVIRONMENTAL
RECOVERY, INC. 401(k) PROFIT SHARING TRUST AND PLAN. The Trust and Plan was
originally created and is hereby continued in the form of this instrument for
the purpose of providing benefits to the participants upon their retirement and
for the purpose of providing such other benefits to such participants and their
beneficiaries as are hereinafter described.
.2
2
DEFINITIONS
Unless the context otherwise indicates, the following terms shall have
the following meanings whenever used in this instrument:
.1 The word "accounts" shall mean "cash option accounts"
established pursuant to Article 4 hereof, "matching employer contribution
accounts" established pursuant to Article 5 hereof, and "regular employer
contribution accounts" established pursuant to Article 6 hereof.
.2 The words "active participant" shall mean, with respect to
any plan year, either a participant who
(a) is credited with at least One Thousand (1,000) hours as a
Covered Employee with respect to such plan year and is employed
by a Participating Company on the last day of such plan year; or
(b) with respect to a participant whose employment terminates
during such plan year by reason of his death, permanent and total
disability, or retirement, either was credited with at least One
Thousand (1,000) hours as a Covered Employee with respect to such
plan year or, based on a reasonable projection of hours worked by
such participant at the date of his termination of employment,
would have been credited with at least One Thousand (1,000) hours
as a Covered Employee with respect to such plan year if he had
continued to be employed by the Participating Companies until the
end of the plan year.
.1 The word "Administrator" shall mean the person or entity
designated as Administrator under Article 19 hereof.
.2 The words "Adoption Date" shall mean, with respect to each
Participating Company, the date as of which it shall have adopted this Trust and
Plan pursuant to Article 22 hereof.
.3 The word "affiliate" shall mean any person that, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with a Participating Company, and particularly shall
mean any corporation or unincorporated trade or business which is a member of a
controlled group of corporations or trades or businesses which includes a
Participating Company (within the meaning of Sections 414(b) and 414(c) of the
Code), is a member of an affiliated service group which includes a Participating
Company (within the meaning of Section 414(m) of the Internal Revenue Code) or
is a member of an arrangement within the meaning of Section 414(o) of the Code
which includes a Participating Company.
.4 The words "allocation date" shall mean the last day of each
taxable year ending after the effective date, and such other uniform dates as
the Administrator shall prescribe.
.5 The words "alternate payee" shall mean any spouse, former
spouse, child or other dependent of a participant who is recognized by a
domestic relations order as having a right to receive all, or a portion of, the
amounts credited to the accounts of such participant.
.6 The word "beneficiary" shall mean any person who receives or
is designated to receive payment of any benefit under the terms of this Trust
and Plan because of the participation of another person in this Trust and Plan.
.7 The word "Committee" shall mean the Employee Benefits
Committee constituted under the provisions of Article 19 of this Trust and Plan.
.8 The word "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
.9 The word "Company" shall mean Handex Environmental Recovery,
Inc., a Delaware corporation, or any corporation or any other business
organization which shall assume the obligations of Handex Environmental
Recovery, Inc. under this Trust and Plan.
.10 The word "compensation" shall mean all remuneration paid by
the Participating Companies to an active participant for services rendered as a
Covered Employee, including wages, salaries and commissions, but shall not
include: (a) bonuses, whether discretionary or non-discretionary, except for
such purposes as they are by law specifically required to be included; (b) any
extra benefits such as payment by a Participating Company of hospitalization,
group insurance, expense reimbursement, amounts contributed under this Trust and
Plan (except as provided below in this Section 2.12) or any other qualified
retirement plan; (c) overtime pay; and (d) other special benefits. The amount
of a participant's compensation for any plan year shall not include any amounts
paid to the participant by a Participating Company prior to the date as of which
he became a participant pursuant to Article 3 hereof. Except as otherwise
indicated in the Trust and Plan, a participant's compensation shall include
amounts contributed by a Participating Company to the Trustee pursuant to a
participant's election under Section 4.1 hereof. For purposes of the Trust and
Plan, the amount of a participant's compensation for any plan year shall not
exceed One Hundred and Fifty Thousand Dollars ($150,000) plus such adjustments
for increases in the cost of living as shall be prescribed by the Secretary of
the Treasury pursuant to Section 401(a)(17) of the Code.
.11 The words "continuous service" shall mean for any employee
any period during which he is or was employed by a Participating Company or any
affiliate. Each such period shall be measured from his date of hire to the date
of termination of employment which follows such date of hire. Notwithstanding
the preceding provisions of this Section 2.13, if any employee is rehired within
twelve (12) months of:
(1) the date of his termination of employment, or
(2) if earlier, the first day of any period of leave of absence,
layoff, or military service after the end of which the employee
did not return to work for a Participating Company or any
affiliate prior to his termination of employment,
such employee's continuous service shall include the period of severance
measured from his date of termination until his subsequent date of rehire. Two
or more periods of employment that are included in a participant's continuous
service and that contain fractions of a year (computed in months and days) shall
be aggregated on the basis of twelve (12) months constituting a year and thirty
(30) days constituting a month.
.12 The words "Covered Employee" shall mean an employee of a
Participating Company who is neither a non-resident alien employed by a
Participating Company outside of the United States nor covered by a collective
bargaining agreement to which such Participating Company is a party. An
employee shall cease to be a "Covered Employee" upon the earliest to occur of:
(a) his termination of employment;
(b) his transfer to employment with an affiliate which is not a
Participating Company;
(c) his becoming covered by a collective bargaining agreement to
which a Participating Company is a party; or
(d) his becoming a non-resident alien employed by a
Participating Company outside of the United States.
.13 The words "date of hire" shall mean the date on which an
employee commences employment and works at least one (1) hour for a
Participating Company or any affiliate.
.14 The word "deferral" shall mean contributions made pursuant
to Section 4.1.
.15 The words "domestic relations order" shall mean, with
respect to any participant, any judgment, decree or order (including approval of
a property settlement agreement) which both:
(a) relates to the provision of child support, alimony payments
or marital property rights to a spouse, former spouse, child or
other dependent of the participant; and
(b) is made pursuant to a State domestic relations law
(including a community property law).
.16 The words "effective date" shall mean January 1, 1987, the
Trust and Plan's original effective date.
.17 The words "eligibility break-in-service" shall mean for any
employee a period of sixty (60) consecutive months commencing on the earliest to
occur of:
(a) his termination of employment; or
(b) the first day of any period of leave of absence, layoff, or
military service after the end of which the employee did not
return to work for a Participating Company or any affiliate prior
to his termination of employment;
during which the employee was not employed by a Participating Company or
any affiliate. Notwithstanding the foregoing provisions of this Section 2.19,
in the event any employee is on a leave of absence either;
(a) by reason of the pregnancy of such employee; or
(b) by reason of the birth of a child of such employee; or
(c) by reason of the placement of a child with such employee in
connection with the adoption of such child by such employee; or
(d) by reason of caring for such child for a period beginning
immediately following such birth or placement;
such employee shall, solely for the purposes of determining whether such
employee has incurred an eligibility break-in-service pursuant to this
Section 2.19, be deemed to have terminated his employment on the first
anniversary of the date of his termination of employment. The Administrator may
require any employee who leaves his employment by reason of any such pregnancy,
birth or placement to furnish to the Administrator such timely information as
the Administrator may reasonably require to establish that the employee's leave
of absence was by reason of such pregnancy, birth or placement.
.18 The word "employee" shall mean any employee of a
Participating Company or an affiliate, as the case may be, or where the context
may require, a former employee of a Participating Company or an affiliate.
.19 The word "employer" shall mean, with respect to any
participant, the Participating Company or, where the context requires, the
affiliate by which he is employed.
.20 The word "hours" shall generally mean for any employee the
actual number of hours for which he was directly or indirectly paid or entitled
to payment by a Participating Company or any affiliate, including payments
pursuant to an award or agreement requiring a Participating Company or an
affiliate to pay back wages, irrespective of mitigation of damages. Hours under
this paragraph shall be calculated and credited pursuant to Section 2530.200b-
2(b) and (c) of the Department of Labor Regulations which are incorporated
herein by reference. Notwithstanding the foregoing,
(a) no employee shall be credited with more than 501 hours with
respect to payments he receives or is entitled to receive during
any single continuous period during which he performed no
services for a Participating Company or an affiliate
(irrespective of whether he has terminated employment) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty, or leave of absence;
(b) no employee shall be credited with hours with respect to
payments he receives or is entitled to receive during a period
when he performed no services for a Participating Company or an
affiliate under a plan maintained solely for the purpose of
complying with applicable workmen's compensation, unemployment
compensation, disability insurance or Federal Social Security
laws; and
(c) no employee shall be credited with hours with respect to
payments he receives or is entitled to receive under a pension
benefit plan to which a Participating Company or an affiliate has
contributed during a period when he performed no services for a
Participating Company or an affiliate.
Notwithstanding the foregoing provisions of this Section 2.22, in the event
any employee does not perform services for a Participating Company or any
affiliate for any period either:
(a) by reason of the pregnancy of such employee; or
(b) by reason of the birth of a child of such employee; or
(c) by reason of the placement of a child with such employee in
connection with the adoption of such child by such employee; or
(d) by reason of such employee caring for such child for a
period beginning immediately following such birth or placement;
such employee shall, solely for purposes of determining whether such
employee has incurred a One (1) Year Break-In-Service pursuant to Section 2.28
hereof, be credited either with the hours which otherwise would normally have
been credited to such employee but for such absence or, in any case in which the
Administrator is unable to determine the hours described in the preceding
clause, eight hours per day of such absence provided, however, that the total
number of hours which an employee may be credited with by reason of any such
pregnancy, birth or placement shall not exceed 501 hours. An employee shall be
credited with the hours described in the preceding sentence only in the plan
year in which the absence from work begins if the employee would be prevented
from incurring a One (1) Year Break-In-Service in such plan year solely because
the employee is credited with hours pursuant to the preceding sentence or, in
any other case, in the immediately following plan year. The Administrator may
require any employee who is absent from work because of any such pregnancy,
birth or placement to furnish to the Administrator such timely information as
the Administrator may reasonably require to establish both that the employee's
absence from work is because of such pregnancy, birth or placement and the
number of days during which the employee was absent is because of such
pregnancy, birth or placement.
.21 The words "insurance company" shall mean any legal reserve
life insurance company licensed to issue annuity contracts in the State of
New Jersey.
.22 The words "Joint and Survivor Annuity" shall mean an annuity
contract purchased from an insurance company which provides that the amounts
distributable to a participant under the Trust and Plan shall be paid to the
participant for his lifetime in equal monthly amounts commencing on the date
specified in this Trust and Plan until the payment made as of the first day of
the month during which the participant shall die and that an amount which is not
less than fifty percent (50%) nor more than one hundred percent (100%) of the
monthly amount payable to the participant shall be payable to the person who was
the spouse of the participant on the date distribution commenced to the
participant, commencing on the first day of the month following the death of the
participant, if such person is then living, and ending with the payment made on
the first day of the month during which such person shall die.
.23 The words "Life Annuity" shall mean an annuity contract
purchased from an insurance company which provides that the amounts
distributable to an unmarried participant or a beneficiary who is a deceased
participant's surviving spouse under the Trust and Plan shall be paid to the
participant or beneficiary for his lifetime in equal monthly amounts commencing
on the date specified in the Trust and Plan and payable each month thereafter
until the month during which the participant or beneficiary dies.
.24 The words "military service" shall mean duty in the Armed
Forces of the United States, whether voluntary or involuntary, provided that the
employee serves not more than one voluntary enlistment or tour of duty, and
further provided that such voluntary enlistment or tour of duty does not follow
involuntary duty.
.25 The words "normal retirement date" shall mean for each
participant the date upon which he attains age sixty-five (65).
.26 The words "One (1) Year Break-In-Service" shall mean for any
employee a taxable year ending after his termination of employment during which
the employee was not credited with more than five hundred (500) hours.
.27 The word "participant" shall mean any person who becomes a
participant in the Trust and Plan in accordance with Article 3 hereof and shall
also mean, as the context may require, any person who has terminated his
employment and was formerly a participant in the Trust and Plan.
.28 The words "Participating Company" shall mean the Company and
any subsidiary which has adopted this Trust and Plan pursuant to Article 22
hereof.
.29 The words "permanent and total disability" shall mean any
disability which continuously disables and wholly prevents a participant from
performing the duties of his occupation and which is expected to be of a
permanent duration, as shall be determined under the provisions of Section 12.3
hereof except that no participant shall be deemed to be permanently and totally
disabled if such disability was (a) contracted, suffered or incurred while the
participant was engaged in, or resulted from his having engaged in, a criminal
act or enterprise, or (b) resulted from his habitual drunkenness or addiction to
narcotics, or (c) resulted from any intentionally self-inflicted injury.
.30 The words "plan year" shall mean the Company's taxable year.
.31 The words "qualified domestic relations order" shall mean a
domestic relations order which satisfies the requirements of Section
414(p)(1)(A) of the United States Internal Revenue Code.
.32 The words "restatement date" shall mean January 1, 1989, the
date on which this instrument generally became effective.
.33 The word "subsidiary" shall mean any corporation organized
under the laws of any State of the United States or under the laws of any
foreign country in which the Company owns directly or indirectly any outstanding
shares either beneficially or of record.
.34 The words "taxable year" shall mean the Company's annual
accounting period, which presently is the calendar year.
.35 The words "termination of employment" shall mean for any
employee the occurrence of any one of the following events:
(a) he is discharged by a Participating Company or any affiliate
unless he is subsequently reemployed and given pay back to his
date of discharge;
(b) he voluntarily terminates employment with a Participating
Company or any affiliate;
(c) he retires from employment with a Participating Company or
any affiliate;
(d) he fails to return to work at the end of any leave of
absence authorized by a Participating Company or any affiliate,
or within ninety (90) days following such employee's release from
military service or within any other period following military
service in which his right to reemployment with a Participating
Company or any affiliate is guaranteed by law, or within three
(3) days after he has been recalled to work following a period of
layoff; or
(e) he has been continuously laid-off for twenty-four (24)
months.
In the case of the occurrence of any event described in (d) or (e) of this
Section 2.37, the date of such employee's termination of employment shall be
deemed to be the first day of any such period of leave of absence, layoff, or
military service.
.36 The words "Trust and Plan" shall mean this instrument as
originally executed and as it may be amended from time to time, or, where the
context requires, the Handex Environmental Recovery, Inc. 401(k) Profit Sharing
Plan, an adoption of the Massachusetts Financial Services 401(k) Cash or
Deferred Profit Sharing Retirement Plan and Trust for Corporations, Associations
and Self-Employed Individuals, a prototype plan, as it existed from time to time
prior to the restatement date.
.37 The word "Trustee" shall mean the trustee herein named and
any successor Trustee.
.38 The words "vested interest" shall mean with respect to any
participant the sum of (a) plus (b) minus (c) below where:
(a) equals the amounts credited to his regular employer
contribution account and matching employer contribution account,
multiplied by his Vested Percentage;
(b) equals any distributions made to the participant from his
regular employer contribution account and matching employer
contribution account since his earliest date of hire which has
not been followed by five (5) consecutive One (1) Year Breaks-In-
Service, multiplied by his Vested Percentage; and
(c) equals the amount of any distributions made to the
participant from his regular employer contribution account and
matching employer contribution account since his earliest date of
hire which has not been followed by five (5) consecutive One (1)
Year Breaks-In-Service.
.39 The words "Vested Percentage" shall mean for any participant
a percentage determined on the basis of his number of years of vesting service
in accordance with the following table:
Years of Vesting Service Vested Percentage
Less than 1 year 0%
1 but less than 2 years 20%
2 " " " 3 " 40%
3 " " " 4 " 60%
4 " " " 5 " 80%
5 or more years 100%
Notwithstanding the preceding provisions of this Section 2.41, the
Vested Percentage of a participant who has attained his normal retirement date
shall be 100%.
.1 The words "vesting service" shall mean for any employee the
number of taxable years during which the employee has been or was previously
employed by a Participating Company or any affiliate, excluding:
(a) any taxable years during which the employee was credited
with less than one thousand (1,000) hours; and
(b) any years of vesting service which a terminated and rehired
participant had prior to a termination of employment if:
(i) such participant did not have a vested interest on such
date of termination of employment; and
(ii) no amount was credited to his cash option account on
such date of termination of employment; and
(iii) such participant has had five consecutive One (1) Year
Breaks-In-Service since the last day of such vesting
service.
2
ELIGIBILITY AND PARTICIPATION
.1 Every employee of the Participating Companies who was a
participant in the Trust and Plan as it existed immediately prior to the
restatement date shall continue to be a participant on and after the restatement
date.
.2 An employee of a Participating Company shall be qualified to
become a participant under the Trust and Plan when he has met all of the
following requirements:
(a) he is a Covered Employee;
(b) he has completed six (6) months of continuous service; and
(c) he has attained the age of twenty-one (21) years.
In the case of an employee who is rehired after a termination of
employment, such employee's date of hire for purposes of this Section 3.2 shall
be deemed to be his earliest date of hire unless all of the following apply:
(a) the employee did not have a vested interest on such date of
termination of employment;
(b) the employee did not have any amount credited to his cash
option account on such date of termination of employment;
(c) the employee has incurred an eligibility break-in-service;
and
(d) the employee's period of continuous service determined under
this Section 3.2 on such termination of employment shall have
been less than or equal to the period between his termination of
employment and his date of rehire.
In the event that (a), (b), (c) and (d) above all apply with respect to a
rehired employee, any periods of continuous service prior to such termination of
employment shall be cancelled and such employee's date of rehire shall then be
deemed to be his date of hire for purposes of determining his period of
continuous service under this Section 3.2.
.3 Every employee of a Participating Company who is eligible as
of the restatement date shall become a participant as of that date. Every
employee of a Participating Company who becomes eligible after the restatement
date shall become a participant as of the January 1 or July 1 coinciding with or
next following the date he becomes qualified.
.4 In the event that a Participating Company or an affiliate
shall reemploy a former participant whose continuous service as a former
employee is not excluded pursuant to Section 3.2 hereof, such former participant
shall again become a participant in the Trust and Plan on his date of rehire,
provided he is then a Covered Employee. Any other former participant must
requalify under the provisions of Section 3.2 hereof before he is eligible to
again become a participant.
.5
3
CASH OR DEFERRED OPTION
.1 Pursuant to uniform rules and procedures promulgated by the
Administrator, a participant may elect in writing that a portion (such portion
being within limits prescribed by the Administrator) of his unpaid compensation
for a taxable year be paid by his employer to the Trustee hereunder and be
treated as a contribution by his employer. A participant's election hereunder
shall be conditioned upon:
(a) his right to defer the imposition of federal income tax on
such contribution until a subsequent distribution of such amount
under this Trust and Plan; and
(b) the right of his employer to deduct such amount for federal
income tax purposes after taking into account any contributions
made by such employer under Article 5 hereunder and after taking
into account any contributions made by the employer under any
other profit sharing, pension and stock bonus plans maintained by
the employer which meet the requirements of Section 401(a) of the
Code.
The Administrator may prescribe the maximum amount of a participant's
unpaid compensation that is subject to the election described in this Section
4.1.
.2 All amounts paid to the Trustee pursuant to Section 4.1
above shall be paid in cash not later than the date on which such amounts can
reasonably be segregated from the employer's general assets, which in no event
shall be more than ninety (90) days after the date on which such amount would
otherwise have been payable to the participant in cash.
.3 Any amounts contributed to the Trust and Plan pursuant to
Section 4.1 above on behalf of a participant shall be held by the Trustee as a
part of the trust fund created under this Trust and Plan, shall be specifically
allocated to a cash option account for the benefit of such participant and shall
be invested, reinvested, and administered in accordance with the terms of this
Trust and Plan. The amounts credited to a participant's cash option account
shall be fully vested and nonforfeitable at all times.
.4 Except as provided in Article 15, in no event may a
participant withdraw any amounts credited to his cash option account prior to
the time such amounts become distributable to him pursuant to Articles 11 and 12
hereof.
.5 The amounts credited to a participant's cash option account
shall not be alienated, disposed of or in any manner encumbered and are made
expressly subject to the provisions against alienation set forth in Article 20
of this Trust and Plan.
.6 In the event a participant receives a distribution from his
cash option account as a result of hardship as described in Article 15, such
participant's elective deferrals shall be suspended for 12 months after his
receipt of such hardship distribution. In addition, for the calendar year
immediately following the calendar year of the hardship distribution such
participant shall be barred from making elective deferrals in excess of (a)
minus (b) below where (a) equals the applicable limit under Code Section 402(g)
for such immediately following calendar year; and (b) equals the amount of such
participant's elective deferrals for the calendar year of the hardship
distribution.
.7
4
MATCHING EMPLOYER CONTRIBUTIONS
.1 The Participating Companies may make a contribution to the
Trust and Plan on behalf of each participant on whose behalf a deferral is made.
The amount of such matching contribution, if any, shall be determined by the
Company through action of its Board of Directors and shall be announced to the
participants prior to the beginning of the plan year in which such matching
contribution shall be allocated. Such amount, if any, shall be credited to the
matching employer contribution account of each participant on whose behalf
contributions are made pursuant to Section 4.1 hereof.
.2 Notwithstanding Section 5.1 above, no matching contributions
shall be made under Section 5.1 with respect to any participant to the extent
any contributions made on behalf of such Participant under Section 4.1 hereof
are in excess of any limitation described in Section 8.2 or 8.3 hereof.
.3 The Administrator shall, as soon as reasonably possible
after the payment by the Participating Companies of their contribution, furnish
to the Trustee such information, including information concerning the
compensation of participants during such taxable year, as may be necessary for
the proper administration of this Trust and Plan.
.4 In no event may a participant withdraw any amounts credited
to his matching employer contribution account prior to the time such amounts
become distributable to him pursuant to Articles 11 and 12 hereof.
.5 The amount determined to be credited to each participant's
matching employer contribution account under this Article 5 shall be added to
amounts previously credited to said accounts which remain credited to such
accounts, and shall for all purposes be deemed to have been credited on the
aforesaid allocation date which coincides with the last day of the taxable year
for which the contribution was made. Such crediting to the accounts of
participants shall not vest any right, title or interest in or to any assets of
the Trust in any participant.
.6
5
REGULAR EMPLOYER CONTRIBUTIONS
.1 With respect to any taxable year, a Participating Company
may pay to the Trustee, not later than the last day upon which such
Participating Company may make a contribution under this Trust and Plan and
secure under the Code of the United States a deduction of such contribution in
the computation of its Federal Income Taxes for such taxable year, a
contribution in cash or other property in such amount as is determined by the
Participating Company in its sole discretion. Such contribution shall be in
addition to any amounts contributed under Articles 4 and 5 hereof and nothing
contained herein shall require a Participating Company to make any contribution
under this Article 6 with respect to any plan year.
.2 The Administrator shall, as soon as reasonably possible
after the payment by a Participating Company of its contribution, furnish to the
Trustee such information, including information concerning the compensation of
participants during such taxable year, as may be necessary for the proper
administration of this Trust and Plan.
.3
6
ALLOCATION OF REGULAR EMPLOYER CONTRIBUTIONS
.1 Accounts being maintained by the Trustee immediately prior
to the restatement date shall continue to be maintained under the Trust and Plan
as amended and restated herein, and shall be credited debited and adjusted as
provided in this Trust and Plan. Such accounts shall be categorized, as of the
restatement date, as follows:
(a) To the extent a participant's account was credited with cash
or deferred contributions made by a Participating Company on his
behalf, such account shall be deemed to be a cash option account;
and
(b) To the extent a participant's account was credited with
employer matching contributions made by a Participating Company
on his behalf, such account shall be deemed to be a matching
employer contribution account.
.2 Upon an employee becoming a participant the Administrator
shall notify the Trustee and provide the Trustee with such information
concerning said participant as the Trustee may need. Upon being notified by the
Administrator that an employee has become a participant, the Trustee shall
establish a regular employer contribution account in the name of such
participant.
.3 The Participating Companies' regular contributions for any
taxable year shall be allocated among the regular employer contribution accounts
of the participants who were active participants with respect to such taxable
year. The regular employer contribution account of each such active participant
shall be credited with that portion of the Participating Companies' regular
contributions for such taxable year which bears the same relationship to the
regular contributions of the Participating Companies as such active
participant's compensation for such taxable year bears to the total compensation
of all such active participants for such taxable year.
.4 In no event may a participant withdraw any amounts credited
to his regular employer contribution account prior to the time such amounts
become distributable to him pursuant to Articles 11 and 12 hereof.
.5 The amount determined to be credited to each participant's
regular employer contribution account under this Article 7 shall be added to
amounts previously credited to said accounts which remain credited to such
accounts, and shall for all purposes be deemed to have been credited on the
aforesaid allocation date which coincides with the last day of the taxable year
for which the contribution was made. Such crediting to the accounts of
participants shall not vest any right, title or interest in or to any assets of
the Trust in any participant.
.6
7
LIMITATIONS ON CONTRIBUTIONS AND ALLOCATIONS
The following Sections of this Article shall be effective as of
January 1, 1989:
.1 The amount and allocation of contributions under this Trust
and Plan shall be subject to several limitations. Those limitations shall be as
follows:
(a) contributions made by the Participating Companies to the
Trust and Plan pursuant to a participant's cash or deferred
election under Article 4 of the Trust and Plan shall be subject
to the individual deferral limit described in Section 8.2 hereof;
(b) contributions made by the Participating Companies to the
Trust and Plan pursuant to a participant's cash or deferred
election under Article 4 of the Trust and Plan and the matching
employer contributions made pursuant to Article 5 of the Trust
and Plan shall be subject to the limits set forth in Section 8.3
hereof;
(c) all contributions made pursuant to Article 4, Article 5 and
Article 6 of the Trust and Plan, including contributions made
pursuant to a participant's election under Article 4, matching
employer contributions made pursuant to Article 5, and regular
employer contributions made pursuant to Article 6, shall, in the
aggregate, be subject to the deductibility limit set forth in
Section 8.4 hereof; and
(d) the allocation of all of the foregoing contributions shall,
in the aggregate, be subject to the limitation on annual
additions set forth in Article 24 hereof.
.2 In no event shall contributions made pursuant to a
participant's election under Article 4 of the Trust and Plan with respect to the
taxable year of the participant plus similar amounts contributed on a similar
basis by any other employer (whether or not related to a Participating Company)
required by law to be aggregated with such contributions under this Trust and
Plan exceed Seven Thousand Dollars ($7,000.00), plus any increase for cost-of-
living as determined from time to time pursuant to regulations issued by the
Secretary of the Treasury or his delegate pursuant to Section 415(d) of the
Code. In the event that the deferrals for a participant's taxable year shall
exceed such limit, the excess deferrals, reduced by the amount of excess
deferrals previously distributed to such participant in accordance with Section
8.5 hereof for the taxable year, together with any earnings allocable to such
excess deferrals during the taxable year shall be refunded to the participant by
the April 15th next following the close of such taxable year. The amount of any
such refund shall be debited to the participant's cash option account.
In the event that the Administrator shall receive notice from a
participant by the March 1 next following the close of the participant's taxable
year that the deferrals together with similar deferrals under plans of other
employers shall have exceeded such limit, the Administrator shall cause the
amount of excess deferrals specified by the participant together with any
earnings allocable to such excess elective deferrals during the taxable year to
be refunded to the participant by the April 15th next following the receipt of
such notice. The amount of any such refund shall be debited to the
participant's cash option account.
.3 Deferrals shall be limited so that the average deferral
percentage for the highly compensated participants shall not exceed an amount
determined based upon the average deferral percentage for the participants who
are not highly compensated participants, as follows:
(A) (B)
Average Deferral Limit on Average
Percentage for Deferral Percentage
Participants who for Highly Compensated
are Not Highly Participants
Compensated
Less than 2% 2 times Column (A)
2% or more but less Column (A) plus 2%
than 8%
8% or more 1.25 times Column (A)
For purposes of the foregoing, the "deferral percentage" for a participant for
any plan year shall equal the deferral allocated to his cash option account
during the plan year that either would have been received by the participant in
the plan year, if not for the deferral election, or are attributable to services
performed during the plan year and would have been received by the employee
within 2-1/2 months after the close of the plan year, if not for the deferral
election, as a percentage of his compensation for such plan year. For purposes
of determining the deferral percentage of a highly compensated participant, all
contributions made on his behalf by the Participating Companies pursuant to a
cash or deferred arrangement under all tax qualified retirement plans maintained
by the Participating Companies shall be treated as if made under the Trust and
Plan. For purposes of this Trust and Plan, an employee shall be considered to
be "highly compensated" for a plan year if either:
(c) during the preceding plan year, he:
(i) was at any time a five percent (5%) actual or
constructive owner of a Participating Company or its
affiliate; or
(ii) received total remuneration from the Participating
Companies and their affiliates in excess of Seventy-Five
Thousand Dollars ($75,000.00) (plus any increase for
cost-of-living as shall be prescribed by the Secretary of
the Treasury pursuant to Section 414(q)(1) of the Code); or
(iii) received total remuneration from the Participating
Companies and their affiliates in excess of Fifty Thousand
Dollars ($50,000.00)(plus any increase for cost-of-living as
shall be prescribed by the Secretary of the Treasury
pursuant to Section 414(q)(1) of the Code) and was in the
'top paid group' of employees of the Participating Companies
and their affiliates for such plan year; or
(iv) was at any time an officer of a Participating Company
or one of its affiliates and received total remuneration in
excess of Forty-Five Thousand Dollars ($45,000.00) or, if
greater, fifty percent (50%) of the amount in effect under
Section 415(b)(1)(A) of the Code for such plan year (plus
any increase for cost of living after 1989 as determined by
the Secretary of the Treasury or his delegate); or
(d) during the current plan year, he either:
(i) was at any time a five percent (5%) actual or
constructive owner of a Participating Company or its
affiliate; or
(ii) was one of the one hundred (100) highest paid employees
of the Participating Companies and their affiliates for the
current plan year and meets the requirements of
subparagraphs (a)(ii), (a)(iii) or (a)(iv) above for the
current plan year.
For purposes of determining whether an employee is "highly
compensated," the words "total remuneration" shall mean for any participant all
amounts paid to him as payment for services rendered by him to the Participating
Companies or any affiliate which must be taken into account for purposes of
satisfying one of the definitions of compensation contained in the Treasury
regulations issued under Section 415 of the Code.
For purposes of determining the members of the "top paid group" under
subparagraph (a)(iii) above, a participant is a member of the top paid group for
any plan year if for such plan year the participant is a member of a group
consisting of the top paid twenty percent (20%) of employees of the
Participating Companies, and all affiliates ranked on the basis of total
remuneration from the Participating Companies and all affiliates during the plan
year. In determining the members of the top paid group, the following employees
shall be excluded:
(A) employees who have not completed six (6) months service;
(B) employees who normally work less than seventeen and one-half
(17-1/2) hours per week;
(C) employees who normally work not more than six (6) months
during any year;
(D) employees who have not attained age twenty-one (21);
(E) except to the extent provided in regulations, employees who
are included in a unit of employees covered by an agreement which
the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and a Participating
Company or any affiliate; and
(F) employees who are nonresident aliens and who receive no
earned income (within the meaning of Section 911(d)(2) of the
Code) from the Participating Companies or any affiliate which
constitutes income from sources within the Unites States (within
the meaning of Section 861(a)(3) of the Code).
The Participating Companies may elect (in such manner as may be provided by the
Secretary of the Treasury or his delegate) to apply subparagraph (A), (B), (C),
or (D) above by substituting a shorter period of service, smaller number of
hours or months, or lower age for the period of service, number of hours or
months, or age (as the case may be) than that specified in such subparagraph.
For purposes of determining the number and identity of 'officers' in
subparagraph (a)(iv) above:
(I) The total number of employees treated as officers shall be
limited to the lesser of:
(1) fifty (50); or
(2) the greater of three (3) employees or ten percent (10%) of
all employees of the Participating Companies and all
affiliates; but
(II) If no employee would be described as an officer pursuant to
subparagraph (a)(iv) above, the highest paid officer shall be
treated as described in such subparagraph.
A former employee shall also be treated as a highly compensated
participant if:
(a) such employee was a highly compensated participant when he
terminated employment; or
(b) such employee was a highly compensated participant at any time
after attaining age fifty-five (55).
In addition, the matching employer contributions made under Article 5
hereof for a plan year shall be limited so that the average contribution
percentage for the highly compensated participants shall not exceed an amount
determined based upon the average contribution percentage for the participants
who are not highly compensated participants, as follows:
(A) (B)
Average Contribution Limit on Average
Percentage for Contribution Percentage
Participants who for Highly Compensated
are Not Highly Participants
Compensated
Less than 2% 2 times Column (A)
2% or more but less Column (A) plus 2%
than 8%
8% or more 1.25 times Column (A)
For purposes of the foregoing, the "contribution percentage" for a participant
in any plan year shall equal the matching employer contributions which:
(a) were made on his behalf under Article 5 hereof;
(b) were allocated to his account during the plan year; and
(c) were paid to the Trust by the end of the subsequent plan year;
as a percentage of his compensation for such plan year. For purposes of
determining the contribution percentage of a highly compensated participant, all
matching employer contributions made on his behalf under all tax qualified
retirement plans maintained by the Participating Companies shall be treated as
if made under the Trust and Plan. If, for any plan year, the Trust and Plan
satisfies the average deferral percentage test, then the Participating Companies
may elect, in such manner as the Secretary of the Treasury or his delegate may
provide, to take into account as additional amounts for purposes of satisfying
the average contribution percentage test, amounts contributed to the Trust and
Plan pursuant to a participant's election under Section 4.1 hereof.
If both the average deferral percentage and the average contribution
percentage of the highly compensated participants exceeds one and twenty-five
hundredths (1.25) multiplied by the corresponding average deferral percentage
and average contribution percentage of the non-highly compensated participants,
deferrals made for a plan year plus the matching employer contributions made by
the Participating Companies for such plan year shall be limited so that the sum
of the average deferral percentage and the average contribution percentage for
the highly compensated participants does not exceed the "aggregate limit." The
"aggregate limit" is equal to the greater of (a) and (b) below where:
(a) equals the sum of (i) and (ii) below, where:
(i) equals 1.25 times the greater of the deferral percentage or
the contribution percentage for the non-highly compensated
participants; and
(ii) equals two (2) percentage points plus the lesser of the
deferral percentage or the contribution percentage for the
non-highly compensated participants. In no event, however,
shall this amount exceed twice the lesser of the deferral
percentage or the contribution percentage for the non-highly
compensated participants; and
(b) equals the sum of (i) and (ii) below, where:
(i) equals 1.25 times the lesser of the deferral percentage or
the contribution percentage for the non-highly compensated
participants; and
(ii) equals two (2) percentage points plus the greater of the
deferral percentage or the contribution percentage for the
non-highly compensated participants. In no event, however,
shall this amount exceed twice the greater of the deferral
percentage or the contribution percentage for the non-highly
compensated participants.
In addition, if any individual is a member of the family of a five
percent (5%) owner or of a highly compensated employee in the group consisting
of the ten (10) highly compensated employees paid the greatest total
remuneration by the Participating Companies during the plan year, then for
purposes of any Section of this Trust and Plan which uses the term highly
compensated employee or highly compensated participant, (i) such individual
shall not be considered a separate employee, and (ii) any such compensation paid
to such individual by the Participating Companies (and any applicable
contribution on behalf of such individual) shall be treated as if it were paid
to (or on behalf of) the highly compensated employee or participant. For
purposes of the foregoing, the word "family" shall mean, with respect to any
employee, such employee's spouse and lineal ascendants or descendants and the
spouses of such lineal ascendants or descendants.
.1 In no event shall the amount of all contributions by the
Participating Companies pursuant to Article 5 and Article 6 hereof, together
with all amounts contributed by Participating Companies to the Trustee pursuant
to participants' deferral elections under Section 4.1 hereof, exceed the maximum
amount allowable as a deduction under Section 404(a)(3) of the Code or any
statute of similar import, including the amount of any contribution carryforward
allowable under said Section 404(a)(3). This limitation shall not apply to
contributions which may be required in order to provide the minimum
contributions described in Article 25 for any plan year in which this Trust and
Plan is top-heavy. Nor shall this limitation apply to contributions which may
be required in order to recredit the account of any rehired participant whose
account is to be recredited with previously forfeited amounts as described in
Section 11.3 hereof.
.2 In the event that the limitations set forth in Section 8.3
hereof shall be exceeded, the Administrator shall take action to reduce future
deferrals hereof and/or matching employer contributions made pursuant to
Article 5 as appropriate. Such action may include a reduction in the future
rate of deferrals of any highly compensated employee pursuant to any legally
permissible procedure. In the event that such action shall fail to prevent the
excess, prior deferrals, reduced by the amount of excess deferrals previously
distributed to such participant in accordance with Section 8.2 hereof for the
plan year, plus any income and minus any loss allocable thereto to the end of
the preceding plan year, shall be distributed to the affected highly compensated
employees no later than two and one-half (2-1/2) months following the end of the
plan year in which such contributions were made. In the event of any such
distribution of deferrals, any matching employer contribution, plus any income
and minus any loss allocable thereto to the end of the preceding plan year,
shall be returned to the Participating Companies and the participant's cash
option account, and if applicable, his matching employer contribution account
shall be debited with the amount of such distribution. In the event that
distributions must be made in order to bring the Trust and Plan into compliance
with Section 8.3 hereof, the Administrator shall reduce the deferral percentage
or contribution percentage of highly compensated participants in descending
order, beginning with the highly compensated participant(s) with the highest
such percentage, until such limitations have been satisfied. In performing such
reduction, the reduced deferral percentage or contribution percentage of any
affected highly compensated participant shall in no event be lower than that of
the highly compensated participant with the next highest such percentage.
Distributions of excess deferrals or excess contributions shall
be made to highly compensated employees on the basis of the respective portions
of such contributions attributable to such employees taking into account the
family aggregation rules contained in Section 8.3 hereof. Such contributions
shall be treated as annual additions under Section 24.1 hereof.
For purposes of adjusting excess deferrals and excess
contributions to take into account income and losses to the end of the preceding
plan year, the income or loss shall be equal to the income or loss for the plan
year allocable to the account to which the excess was allocated multiplied by a
fraction, the numerator of which is the excess deferrals or contributions
credited to such account for the plan year and the denominator of which is the
total account balance without regard to any income or loss occurring during such
plan year. Any adjustments made in cash option accounts or matching employer
contribution accounts shall be made in a uniform and nondiscriminatory manner
for similarly situated participants.
2
INSURANCE CONTRACTS
.1 Prior to January 1, 1994, the Company, pursuant to uniform
rules and procedures promulgated by the Administrator, and whether or not the
accounts have been segregated for investment purposes pursuant to Article 18
hereof, permitted participants to use part of the amounts credited to their
accounts to purchase insurance on their individual lives. The proceeds upon the
maturity by death in whole or in part of any contract shall have been for the
benefit of the beneficiaries of the participant with respect to whom the
maturity occurs subject to the other provisions of this Trust and Plan. The
contract shall be issued in the name of the Trustee who shall retain until its
maturity by death or its disposition under the terms of this Trust and Plan all
incidents of ownership therein. The proceeds of said contract shall be payable
directly to the beneficiary of the participant for whose benefit it was
purchased. The premium on any such contract purchased for a participant's
benefit shall be paid from the amounts credited to such participant's accounts
and said accounts shall be debited by the amount of premiums so paid. In no
event shall the aggregate of the entire amounts paid for term life insurance
plus 50% of the amount paid for ordinary life insurance contracts for any
participant be as much as 25% of the aggregate of contributions which have been
allocated to his accounts since the date he first became a participant.
.2 All contracts purchased shall contain such provisions
against alienation and levying thereon as the Administrator may deem appropriate
and shall be procurable. Premium payments for such insurance shall be on a
single premium or level premium basis and premium payments shall be charged
against applicable accounts as of the date of payment.
.3 During the time any contract is held under the provisions of
the Trust and Plan, the participant whose life is insured by such contract may,
in his discretion, direct the Trustee to instruct the insurance company to apply
the dividends or returns of premium accumulated under the contract in any manner
permitted by such contract.
.4 When, on any premium payment date, the premiums then due on
all contracts held by the Trustee for the benefit of any participant shall
exceed the amount credited to such participant's accounts or the amount which
may under the 25% limitation stated in Section 9.1 hereof be used to pay
premiums upon ordinary life insurance contracts for a participant, the
participant shall proceed as follows:
(a) direct the Trustee to instruct the insurance company to
apply any dividends, endowments or returns of premium accumulated
under such contracts for the payment of premiums to the extent
necessary; and
(b) in the event the Trustee applies the dividends, endowments
and returns of premium accumulated as aforesaid, but said amount
is insufficient to meet premium payments due under such
contracts, such participant may pay any remaining premiums or a
portion thereof then due himself; and
(c) in the event payment of the premiums is not made under
subsections (a) and (b) above, the Trustee may borrow the
contracts' cash surrender value to pay said premiums, to the
extent said borrowings are insufficient to pay said premiums.
The Trustee shall instruct the insurance company to have the
contracts placed upon a paid-up basis, to the extent necessary,
provided that in the event said contracts may not be placed upon
a paid-up basis according to the general practice of the
insurance company, such contracts shall be reduced to cash and
the amounts received thereby shall be credited to the partici
pant's accounts.
.5 If available, any contract purchased by the Trustee shall
contain an automatic premium loan provision exercisable by the Trustee at the
direction of the participant in the event of non-payment of the premium and
shall also permit conversion to paid up insurance by the Trustee at the
direction of the participant.
.6 Insurance contracts purchased may contain double indemnity
and waiver of premium provisions, insofar as permitted by the insurance company.
In any event the cost of such benefits with respect to a participant shall be
borne by him.
.7 If the Trustee shall hold an insurance contract on the life
of a terminated participant on his date of termination of employment (if his
employment terminates for some reason other than death), the terminated
participant shall have the right to purchase any such contract from the Trust
and Plan by paying to the Trustee an amount equal to its cash surrender value
within thirty (30) days after his termination of employment. If such amount is
so paid, the Trustee shall assign all its right, title and interest in and to
such contract to the terminated participant. If any such contract is not
purchased by the terminated participant, the Trustee shall surrender said
contract to the insurance company for its cash surrender value. As of the date
the participant terminates his employment, such participant's accounts will be
credited with any such contract's cash surrender value. In the event that the
participant shall die after his termination of employment but prior to the date
such contract is either transferred to the participant or surrendered to the
insurance company for its cash surrender value, such participant shall be deemed
to have died while an employee and, pursuant to Section 13.1 hereof, the
proceeds of such contract shall be payable to the participant's beneficiary in
accordance with the provisions of Article 13 hereof, and the deceased
participant's accounts shall be debited by an amount equal to the amount that
was credited to such accounts upon such participant's termination of employment
as provided in the preceding sentence.
.8
3
VALUATION OF ASSETS AND
ADJUSTMENT OF UNSEGREGATED ACCOUNTS
.1 To the extent the accounts have not been segregated for
investment purposes pursuant to Article 18 hereof, the Trustee shall, as soon as
practicable following each allocation date value all unsegregated assets of the
Trust as of the allocation date. The Trustee shall use the fair market values
of securities or other assets in making said determination. The Trustee shall
then subtract from the total value of the unsegregated assets of said Trust the
total of all unsegregated cash option accounts, matching employer contribution
accounts and regular employer contribution accounts as of said allocation date.
Each such unsegregated account shall be credited with that portion of the excess
of the value of the unsegregated assets over the total of all unsegregated
accounts which bears the same relationship to the total of such excess as the
amount in said unsegregated account bears to the total of all unsegregated
accounts. The amount credited to each unsegregated account shall be reduced in
similar proportion in the event the total of all unsegregated accounts as of
said allocation date exceeds the total value of all unsegregated assets of the
Trust as of said allocation date. Such adjustments in the amounts credited to
unsegregated accounts shall be deemed to. have been made on said allocation
date. It is intended that this Article 10 operate to distribute among all
unsegregated accounts in the Trust, all income of the Trust and changes in the
value of the Trust's unsegregated assets, as the case may be. In adjusting
unsegregated accounts after valuing unsegregated assets of the Trust as of any
allocation date, no contributions of the Participating Companies pursuant to
Article 4, Article 5 or Article 6 hereof shall be taken into account until the
allocation date coinciding with or next following the date such contributions
were both actually paid to the Trustee by the Participating Companies and
credited to the accounts of participants.
.2
2
TERMINATION OF EMPLOYMENT
.1 In the event of the termination of employment of a
participant for any reason other than death, permanent and total disability, or
retirement pursuant to Article 12 hereof, the participant shall be entitled to
receive a distribution of the sum of the following amounts:
(a) the amount credited to his cash option account; and
(b) his vested interest.
.2 The amount described in Section 11.1 above shall be
distributed to the terminated participant in the form of an immediate lump sum
payment as soon as practicable after his date of termination of employment, but
not later than his normal retirement date. Notwithstanding the foregoing, in
the event the amount to be distributed to a terminated participant exceeds Three
Thousand Five Hundred Dollars ($3,500.00), such amount shall be distributed to a
participant in the form of a single lump sum payment at any time prior to his
normal retirement date as such participant shall select, provided that if the
participant is married, the participant's spouse consents in writing to such
distribution. Any such payment shall be made as soon as administratively
feasible after the Trustee receives a request for payment from such terminated
participant. If a participant does not receive the amounts distributable to him
in accordance with the preceding paragraph prior to his normal retirement date,
the amounts distributable to such participant shall be distributed in accordance
with the provisions of Article 14 hereof as though he had retired on his normal
retirement date under Article 12 hereof.
.3 If a terminated participant's Vested Percentage in his
regular employer contribution account and matching employer contribution account
is less than 100%, an amount equal to (a) minus (b) below where:
(a) equals the amount credited to his regular employer
contribution account and matching employer contribution account;
and
(b) equals his vested interest;
shall be forfeited as of the earliest of (1) the date on or after the
participant's termination of employment on which the participant receives a
distribution of the amounts described in Section 11.1 hereof; (2) the last day
of the plan year during which the participant shall incur five consecutive One
(l) Year Breaks-In-Service; or (3) the date the participant dies. Any such
forfeited amount shall be debited to the participant's regular employer
contribution account and/or matching employer contribution account. If any
amounts remain credited to his regular employer contribution account or matching
employer contribution account after said forfeiture, said amounts shall
thereafter be held, administered and distributed in accordance with Section 11.2
above. Notwithstanding the preceding provisions of this Section 11.3, if a
terminated participant's Vested Percentage is zero (0) and there are no amounts
credited to his cash option account, the amounts which are credited to his
regular employer contribution account and matching employer contribution account
shall be forfeited as of the date of the participant's termination of
employment.
If the terminated participant shall be rehired by a Participating
Company or any affiliate prior to the time the terminated participant incurs
five consecutive One (1) Year Breaks-In-Service, he shall immediately be
reinstated as a participant in this Trust and Plan and the amount which had been
previously debited to his regular employer contribution account and/or matching
employer contribution account and forfeited pursuant to the provisions of this
Section 11.3 shall be recredited to his regular employer contribution account
and/or matching employer contribution account on the date such participant is
rehired.
Notwithstanding any other provision of this Trust and Plan to the
contrary, in order to balance the accounts maintained under the Trust and Plan
after giving effect to the recrediting of the rehired participant's regular
employer contribution account and matching employer contribution account and the
later adjustment of such accounts pursuant to Article 10 or Article 18 hereof,
the Company may, at its option:
(b) if none of the accounts have been segregated for investment
purposes pursuant to Article 18 hereof, reduce the gain, if any,
in the value of the Trust and Plan's assets (since the most
recent allocation date) for purposes of adjusting the accounts
pursuant to Article 10 hereof as of any allocation dates which
coincide with or follow the date of the participant's rehire up
to and including the allocation date which coincides with the
last day of the plan year during which such participant was
rehired; and/or
(c) reduce the value of the forfeitures which are otherwise
reallocable as of the allocation date which coincides with the
last day of the plan year during which such participant was
rehired; and/or
(d) reduce the amount of the regular employer contributions
which are otherwise allocable among the regular employer
contribution accounts of participants pursuant to Article 6 for
the plan year during which such participant was rehired; and/or
(e) take some combination of the actions described in (a), (b)
and (c) above as the Company shall in its sole discretion
determine;
provided that the total of the amounts described in (a), (b) and (c) above with
respect to any plan year shall not exceed the aggregate amounts which were
recredited to the regular employer contribution accounts and matching employer
contribution accounts of all participants who were rehired during such plan
year. Any amounts recredited to a rehired participant's regular employer
contribution account and matching employer contribution account pursuant to this
Section 11.3 shall not be an annual addition for purposes of Article 24 of this
Trust and Plan with respect to the plan year during which such recrediting
occurs.
To the extent that the sum of the amounts described in (a), (b) and (c)
above for any plan year is less than the aggregate amounts which were recredited
to the regular employer contribution accounts and matching employer contribution
accounts (as later adjusted pursuant to Article 10 or Article 18 hereof) of all
participants who were rehired during the plan year, the Company shall cause the
Participating Companies to contribute to the Trust and Plan an amount equal to
the difference between the aggregate amounts which were recredited to the
regular employer contribution accounts and matching employer contribution
accounts (as later adjusted pursuant to Article 10 or Article 18 hereof) of all
participants who were rehired during the plan year and the sum of the amounts
described in (a), (b) and (c) above, and such contribution shall be made by any
such Participating Company no later than the close of the plan year next
following the plan year during which such participants were rehired.
.1 The amounts forfeited pursuant to Section 11.3 hereof shall
be used to reduce the contributions to be made by the Participating Companies
for the taxable year which includes the date of forfeiture. The amounts
forfeited pursuant to Section 11.3 hereof shall be reallocated first among the
matching employer contribution accounts and then among the regular employer
contribution accounts of active participants who are employed by one of the
Participating Companies on the allocation date which is the last day of the
taxable year which includes the date of forfeiture as though such amounts were
contributed by the Participating Companies with respect to such taxable year.
In no event shall forfeitures be used to increase the benefits any participant
would otherwise receive under the Trust and Plan.
.2 If the accounts have been segregated for investment purposes
pursuant to Article 18 hereof, any amounts forfeited pursuant to Section 11.3
hereof shall be invested in such media as the Administrator shall direct until
reallocated among the employer contribution accounts of the remaining active
participants pursuant to Section 11.4 hereof.
.3
2
RETIREMENT AND DISABILITY BENEFITS
.1 A participant who retires on or after his normal retirement
date shall be entitled to receive an amount equal to the amounts credited to his
accounts. Except as provided in Section 14.1 hereof, such amount shall be
distributed or commence to be distributed as soon as administratively feasible
but in no event later than sixty (60) days after the close of the plan year
which includes the date of his retirement. Such distribution shall be made in
accordance with the provisions of Article 14 hereof.
.2 A participant who continues in the employ of a Participating
Company or an affiliate until his completion of ten (10) years of vesting
service and his attainment of age fifty-five (55), but not his normal retirement
date, shall be eligible to retire. Such a participant shall be deemed to have
retired upon the date of his termination of employment and shall be entitled to
receive the amount credited to the accounts held for his benefit. Except as
provided in Section 14.1 hereof, such amount shall be distributed to the
participant as soon as administratively feasible after his early retirement date
but not later than sixty (60) days after the close of the plan year which
includes his normal retirement date as such retired participant shall select.
Such distribution shall be made in accordance with the provisions of Article 14
hereof.
.3 Upon receipt from a participant or a person authorized by
him or on his behalf of a request that distributions be made on account of such
participant's permanent and total disability, or upon its own motion, the
Administrator shall determine the extent of such participant's disability and
may, to assist it in making such determination, cause appropriate medical
diagnoses and tests to be made at the expense of the participant's employer. If
the Administrator shall determine that the participant is permanently and
totally disabled, as defined in Section 2.31 hereof, such disabled participant
shall be entitled to receive an amount equal to the amounts credited to his
accounts. Except as provided in Section 14.1 hereof, such amounts shall be
distributed or commence to be distributed as soon as administratively feasible
but in no event later than sixty (60) days after the close of the plan year
which includes the later of the date the Administrator determines that such
participant is permanently and totally disabled or the date said participant
actually retires. Such distribution shall be made in accordance with the
provisions of Article 14 hereof.
.4 Each participant who is eligible for benefits under this
Article 12 shall apply therefor on a form which shall be given to him for that
purpose by the Administrator provided, however, that the foregoing requirement
shall not apply in any case in which a participant shall be unable, for
physical, mental or any other reason satisfactory to the Administrator to make
such application. Upon finding that such participant satisfies the eligibility
requirements for benefits under this Article 12, the Administrator shall
promptly notify the Trustee in writing of his eligibility and of the method of
distribution selected in accordance with Article 14.
.5
3
DEATH BENEFITS
.1 In the event of the termination of employment of a
participant by reason of his death, his designated beneficiary shall be entitled
to receive a distribution which shall be made or commence to be made as soon as
administratively feasible but in no event later than sixty (60) days after the
close of the plan year which includes the date of his death, unless such
beneficiary defers the distribution until a later date pursuant to Section 14.1
hereof. The amount of such distribution shall be equal to the amounts then
credited to the deceased participant's accounts. Such distribution shall be
made in accordance with the provisions of Article 14 hereof.
.2 In the event of the death of a retired or terminated
participant prior to the date distribution has been made to him, his designated
beneficiary shall be entitled to receive a distribution which shall be made or
commence to be made as soon as administratively feasible but in no event later
than sixty (60) days after the close of the plan year which includes the date of
the former participant's death, unless such beneficiary defers the distribution
until a later date pursuant to Section 14.1 hereof. The amount of such
distribution shall be equal to the amounts then credited to his accounts. Such
distribution shall be made in accordance with the provisions of Article 14
hereof.
.3 In the event of the death of a participant after the date of
distribution or the commencement of distribution to him, no benefits shall be
payable to his beneficiary except to the extent provided for by the method under
which the participant was receiving distributions under Article 14 hereof.
.4 Notwithstanding anything contained in this Trust and Plan to
the contrary, the designated beneficiary of a participant who is married at the
time of his death shall, for all purposes of this Trust and Plan, be deemed to
be the surviving spouse of the deceased participant unless either (a) both the
deceased participant and the surviving spouse had signed a document designating
some person or entity other than the surviving spouse as the participant's
designated beneficiary and such spouse's signature was properly notarized or (b)
it is established to the satisfaction of the Administrator that the signature of
the spouse cannot be obtained either because the spouse cannot be located or
because of such other circumstances as the Secretary of the Treasury may
prescribe by lawful regulations. Any consent given by a spouse pursuant to this
Section 13.4 shall be effective only with respect to such spouse and shall not
be effective with respect to any other spouse of such participant.
.5 Subject to Section 13.4 hereof, upon becoming a participant,
an employee shall designate in writing to the Administrator the beneficiary
and/or contingent beneficiary to receive, in the event of his death, any amounts
distributable pursuant to this Article 13.
.6 Subject to Section 13.4 hereof, a participant may at any
time change his designation of his beneficiary, or the amounts to be paid any
beneficiary, by notifying the Administrator of any such change in writing. Each
such change of designation shall be deemed to be a ratification and confirmation
of any earlier designations insofar as they are not inconsistent with such
change of designation.
.7 Upon the death of a participant, the Administrator shall
immediately deliver to the Trustee any designation of beneficiary or change of
designation filed with it by such deceased participant and not previously
delivered to the Trustee.
.8 The Trustee shall be completely protected in making payments
to any person in any sums in accordance with beneficiary designations. There
shall be no liability on the part of the Administrator to any person because of
any delay in filing with the Trustee any designation or change filed with it by
a participant. If a new designation is filed with the Trustee after any
disbursements have been made in accordance with a previous designation, or in
accordance with Section 13.9 hereof because either no designation was on file or
the designation on file did not dispose of all amounts distributable, a
distribution made before receipt of such new designation shall be irrevocable,
but all distributions after receipt by the Trustee of such new designation shall
be made in accordance with such new designation.
.9 In the event that upon the death of a participant, the
beneficiary designation on file with the Trustee or Administrator which is in
effect on the date of such participant's death does not dispose in its entirety
of the amounts distributable under this Trust and Plan upon his death, or in the
event no designation shall be on file with the Trustee or Administrator at the
time of such death, then the amounts distributable on behalf of said
participant, the disposition of which was not determined by the deceased
participant's designation, shall be distributed to the participant's spouse if
she survives the participant, or, if she does not survive, said amount shall be
distributed to the personal representative of the participant for distribution
as a part of the participant's estate.
.10 Any ambiguity in a participant's designation shall be
resolved by the Administrator. If so requested by the Trustee, the
Administrator shall cause a participant to clarify his designation and, if
necessary, execute a new designation containing such clarification.
.11
4
DISTRIBUTIONS
.1 Distributions will normally commence as of the dates
specified in Articles 11 and 12 hereof. However, a participant or beneficiary
may elect in writing to defer any distribution until a later date provided that:
(a) in the case of a living employee or former employee:
(i) distribution must commence on or before the April 1
following the end of the calendar year in which he attains
age seventy and one-half (70-1/2); and
(ii) annuities and distributions in installments shall not
be payable beyond the life expectancy of the participant and
beyond the joint life expectancies of the participant and
his spouse or beneficiary; and
(b) in the case of a deceased employee or former employee,
distributions after his death shall be payable either:
(i) by the December 31 of the calendar year containing the
5th anniversary of the participant's death; or
(ii) if distribution commences to his beneficiary, either:
(A) on or before the December 31 of the calendar year
immediately following the calendar year in which the
participant died; or
(B) if his spouse is his beneficiary, by the later of
the December 31 of the calendar year immediately
following the calendar year in which the participant
died and the December 31 of the calendar year in which
the participant would have attained age 70 1/2;
over a period not extending beyond the life expectancy
of such beneficiary; or
(iii) if the employee's distribution had commenced prior to
his death under a form of payment meeting the requirements
of subparagraph (a)(ii) above, such distribution must be
completed by the remainder of the period specified in said
subparagraph (a)(ii); and
(iv) if the employee's distribution had not commenced prior
to his death under a form of payment meeting the
requirements of subparagraph (a)(ii) above and the
employee's spouse is entitled to a distribution hereunder
but dies prior to the commencement of such distribution,
then the limitations of this Section 14.1(b) shall be
applied as if the spouse were the employee.
If retirement benefits are paid to a participant's child, such payments
shall be deemed to be paid to the participant's spouse if such benefits will
become payable to such spouse upon such child reaching majority or any other
event permitted under any lawful regulations issued by the Secretary of the
Treasury. If amounts are distributable in some form other than a Joint and
Survivor Annuity or a Life Annuity, the life expectancy of a participant and his
spouse may be redetermined from time to time but not more frequently than
annually.
.1 Subject to Section 14.1 above and Sections 14.3 and 14.4
below, a participant or beneficiary may elect to receive the amounts
distributable to him under Articles 11 or 12 pursuant to one or a combination of
the following optional methods of distribution:
(a) In a single lump sum payment; or
(b) In nearly equal installments payable to the distributee from
the trust fund over a period of years specified by the
distributee or, if he shall die after the commencement of
payments but prior to the completion of said installments, to his
designated beneficiary; or
(c) In equal monthly payments under an annuity contract
purchased by the Trustee from an insurance company.
To elect either one or a combination of said methods of distribution, a
participant or beneficiary shall notify the Administrator of such election in
writing prior to the date the amounts credited to his accounts are distributed
pursuant to Articles 11 and 12. Notwithstanding the foregoing provisions of
this Section 14.2, an unmarried participant shall receive his distribution in
the form of a Life Annuity purchased from an insurance company unless he shall
elect some other method of distribution.
.2 Notwithstanding any other provisions of this Article 14
(except Section 14.10), a married participant shall receive the amounts
distributable to him under Articles 11 or 12 hereof in the form of a Joint and
Survivor Annuity unless either (a) both the participant and his spouse sign a
document electing another form of payment and the spouse's signature is properly
notarized or (b) it is established to the satisfaction of the Administrator that
the signature of the spouse cannot be obtained either because the spouse cannot
be located or because of such other circumstances as the Secretary of the
Treasury may prescribe by lawful regulations. Any consent given by a spouse
pursuant to this Section 14.3 shall be effective only with respect to such
spouse and shall not be effective with respect to any other spouse of such
participant. Any married participant shall be allowed to elect, in accordance
with this Section 14.3, to receive the amounts distributable to him pursuant to
a method of distribution (described in Section 14.2 above) other than in the
form of a Joint and Survivor Annuity during the period commencing ninety (90)
days after such married participant receives a written explanation of the Joint
and Survivor Annuity. The date amounts otherwise become distributable to a
participant pursuant to this Trust and Plan shall be postponed if necessary to
provide such ninety (90) days notice. Subject to the spousal consent
requirement pertaining to married participants, any married participant may
revoke a prior distribution election and elect another method of distribution,
if desired, as long as such ninety (90) day period has not expired.
.3 Notwithstanding any other provisions of this Article 14
(except Section 14.10), in the event a participant dies before the distribution
of his benefits under the Trust and Plan has been made or commenced to be made
and the surviving spouse of such participant is the deceased participant's
beneficiary, such surviving spouse shall receive the amounts distributable to
her in the form of a Life Annuity unless such surviving spouse signs a document
electing another form of payment and such signature is properly notarized. Any
such surviving spouse shall be allowed to elect to receive the amounts
distributable to her pursuant to a method of distribution (described in Section
14.2 above) other than a Life Annuity during the period commencing ninety (90)
days after such surviving spouse receives a written explanation of the Life
Annuity. The date any amounts otherwise become distributable to a surviving
spouse pursuant to Article 13 hereof shall be postponed if necessary to provide
such ninety (90) days notice. Any such surviving spouse may revoke a prior
distribution election and elect another method of distribution, if desired, as
long as such ninety (90) day period has not expired.
.4 For calendar years on and after January 1, 1989, all
distributions required under this Article 14 shall be determined and made in
accordance with the regulations under Section 401(a)(9) of the Code, including
the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2
of the regulations.
.5 The Administrator shall notify the Trustee immediately of a
participant's or beneficiary's election of a method of distribution, and the
Trustee shall make all distributions in accordance with such method of
distribution. Subject to Sections 14.3 and 14.4 hereof, at any time that
amounts remain credited to any accounts of such participant or beneficiary, he
may file with the Administrator instructions changing the method of
distribution. If a participant or beneficiary files such instructions, the
Administrator shall promptly direct the Trustee in writing to adopt the new
method of distribution for any amounts remaining credited to such person's
accounts. In no case shall the Trustee be obligated to accept any instructions
for a change in the method of distribution, if, in its judgment, it will be
unduly expensive to carry out instructions. There shall be no liability on the
part of the Administrator to any person because of any delay in notifying the
Trustee of a change in method of distribution filed with it.
.6 The Trustee shall, upon notification by the Administrator as
to the eligibility of and method of distribution applicable to a participant or
beneficiary, take either of the following actions to effect distributions to
such person as directed by the Administrator:
(a) purchase from an insurance company an appropriate annuity
contract; or
(b) make payment directly from the trust fund to such person.
Any amounts paid to an insurance company for an annuity contract
shall be debited to the accounts of the participant with respect
to whom the annuity contract was purchased.
.7 In the event that the Trustee obtains an annuity contract
for the benefit of a participant or beneficiary, the Trustee may transfer
ownership of the contract to such participant or beneficiary and deliver said
contract to him.
.8 Any accounts which have been segregated for investment
purposes pursuant to Article 18 hereof may, at the election of a distributee who
is receiving a distribution in the form of a single lump sum payment, be
distributed in the form of the assets which constitute the accounts being
distributed, provided there is an active market for such assets.
.9 Notwithstanding the preceding provisions of this Article 14
(including, without limitation Sections 14.3 and 14.4 hereof), if the aggregate
of the amounts credited to a participant's accounts under the Trust and Plan
does not exceed Three Thousand Five Hundred Dollars ($3,500) as of the date
distribution of the participant's accounts is commenced, the Administrator shall
distribute the participant's accounts to the participant or beneficiary thereof
in the form of a single lump sum payment.
.10 As long as there remain any amounts credited to an account,
the Trustee shall continue to maintain and administer said account in accordance
with the terms and provisions of the Trust and Plan.
.11 Effective on and after January 1, 1993, each distributee
shall have the right to direct that any distribution which, under Code Section
402(c), qualifies as an eligible rollover distribution be transferred directly
to an eligible retirement plan. A distributee may direct that part of the
distribution be transferred directly to an eligible retirement plan and the
balance be paid to him, provided that the amount directly transferred to the
eligible retirement plan shall be at least Five Hundred Dollars ($500.00). A
distributee is not permitted to direct that this distribution be transferred
directly to more than one eligible retirement plan. In the event that a
distributee fails to make any direction, the distribution shall be paid directly
to him after deduction of appropriate withholding taxes.
Unless the context otherwise indicates, the following terms shall
have the following meanings whenever used in this Section 14.12:
(a) "eligible rollover distribution" shall mean any distribution of
all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution does
not include:
(i) any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (of life expectancy) of
the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's
designated beneficiary, or for a specified period of ten
years or more;
(ii) any distribution to the extent such distribution is
required under Section 14.1 above which reflects the
requirements under Section 401(a)(9) of the Code; and
(iii) the portion of any distribution that is not includible
in gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities).
(b) "eligible retirement plan" shall mean:
(i) an individual retirement account described in Section
408(a) of the Code;
(ii) an individual retirement annuity described in Section
408(b) of the Code;
(iii) an annuity plan described in Section 403(a) of the
Code; or
(iv) a qualified trust described in Section 401(a) of the
Code;
that accepts the distributee's eligible rollover distribution.
Notwithstanding the foregoing, in the case of an eligible
rollover distribution to the surviving spouse, an eligible
retirement plan is an individual retirement account or individual
retirement annuity.
(e) "distributee" shall mean:
(i) an employee or former employee; and
(ii) an employee's or a former employee's surviving spouse
and an employee's or former employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code,
without regard to the interest of the spouse or former
spouse.
(f) "direct rollover" shall mean a payment by the Trust and Pan to
the eligible retirement plan specified by the distributee.
3
HARDSHIP BENEFITS
The following Sections of this Article 14 shall be effective as of
January 1, 1989:
.1 In case of hardship, a participant may apply to the
Administrator for distribution of all or a portion of the amounts credited to
his cash option account. For purposes of this Section 15.1, a distribution
shall be on account of hardship only if the distribution both is made on account
of an immediate and heavy financial need of the participant and is necessary to
satisfy such financial need. In no event shall any amounts be distributed to a
participant from his cash option account prior to his attainment of age fifty-
nine and one-half (59-1/2), unless the Administrator determines that the
participant is unable to eliminate the hardship out of other resources which are
reasonably available to the participant.
.2 A distribution will be made on account of an immediate and
heavy financial need of the participant only if the distribution is on account
of:
(a) medical expenses described in Code Section 213(d) previously
incurred by the participant, the participant's spouse, or any
dependents of the participant (as defined in Code Section 152) or
necessary for these persons to obtain medical care;
(b) purchase (excluding mortgage payments) of a principal
residence for the participant;
(c) payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the
participant, his or her spouse, children, or dependents; or
(d) the need to prevent the eviction of the participant from his
principal residence or foreclosure on the mortgage of the
participant's principal residence.
A distribution will be necessary to satisfy an immediate and heavy
financial need of a participant only if both of the following requirements are
satisfied:
(a) the distribution is not in excess of the amount of the
immediate and heavy financial need of the participant, including
amounts to pay taxes or penalties reasonably anticipated to
result from the distribution; and
(b) the participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently
available under all plans maintained by the Participating
Companies and affiliates.
If the Administrator determines that the criteria set forth above are
satisfied, it shall order a distribution from the participant's cash option
account subject to the limits set forth in Section 15.3 below. Amounts
distributed to a participant under this Section shall be debited to his cash
option account as they are paid.
.3 The amount of any such distribution (i) shall not exceed the
amount determined by the Administrator as necessary to satisfy such immediate
and heavy financial need of the employee, (ii) shall not exceed the amount
credited to such participant's cash option account on December 31, 1988 plus the
amount of cash or deferred contributions made to such participant's cash option
account after December 31, 1988 and minus any withdrawals made from such
participant's cash option account after December 31, 1988 and (iii) shall not
exceed the amount credited to such participant's cash option account on the date
of such distribution. A distribution generally may be treated as necessary to
satisfy a financial need if the Administrator relies upon the participant's
written representation, unless the Administrator or its authorized employees
have actual knowledge to the contrary that the need cannot reasonably be
relieved:
(1) through reimbursement or compensation by insurance or
otherwise;
(2) by liquidation of the participant's assets;
(3) by cessation of deferral contributions under the Plan; or
(4) by other distributions or nontaxable loans from plans
maintained by the Company or by any other employer, or by borrowing from
commercial sources on reasonable commercial terms in an amount sufficient to
satisfy the need. Neither the application for nor payment of any distribution
in accordance with Section 15.1 shall have the effect of terminating a
participant's participation in the Plan. The Administrator may prescribe the
use of such forms, conduct such investigation, and require the making of such
representations and warranties, as it deems desirable to carry out the purpose
of this Article 15.
.4 Notwithstanding any other provision of this Article 15, in
no event may a married participant receive a hardship distribution from the Plan
unless either (a) within a period of ninety (90) days preceding the date the
distribution is actually made to the participant, the participant's spouse
consents in writing to such distribution and such spouse's signature is properly
notarized, or (b) it is established to the satisfaction of the Administrator
that the signature of the spouse cannot be obtained either because the spouse
cannot be located or because of such other circumstances as the Secretary of the
Treasury may prescribe by lawful regulation.
.5
2
THE TRUSTEE, ITS POWERS AND DUTIES
.1 The Trustee shall not be obligated to institute any action
or proceeding to compel any Participating Company to make any contributions to
this Trust, nor shall the Trustee be obligated to make any inquiry as to whether
any amount deposited with it is the amount provided to be deposited under the
terms of the Trust and Plan. The Trustee shall keep books of account which
shall show all receipts and disbursements and a complete record of the operation
of the Trust, and the Trustee shall at least annually and at such other times as
the Administrator shall so request render a report of the operation of this
Trust to the Participating Companies and the Administrator. The Trustee shall
file with the Internal Revenue Service such returns and other information
concerning the Trust Fund as may be required of the Trustee by the Code and any
valid Regulations thereunder. The Trustee shall not be obligated to pay any
interest on any funds which may come into its hands. The Trustee is a party to
this Trust and Plan solely for the purposes set forth in this instrument and to
perform the acts herein set forth, and no obligation or duty shall be expected
or required of it except as expressly stated herein or in the Employee
Retirement Income Security Act of 1974 and any valid Regulations issued
thereunder by the Secretary of Labor or the Secretary of the Treasury. The
Trustee may consult with counsel (who may or may not be counsel for a
Participating Company) selected by the Trustee concerning any question which may
arise with reference to its powers or duties under this Trust and Plan, and the
opinion of such counsel shall be full and complete authority and protection in
respect of any action taken, suffered or omitted by the Trustee in good faith
and in accordance with such opinion, provided due care is exercised in the
selection of such counsel.
.2 The Trustee may resign from this Trust by mailing to the
Company a written notice of resignation addressed to the Company at the last
address of the Company on file with the Trustee, or by delivering such written
notice to the Company at such address. The Company may remove the Trustee by
written notice of such removal mailed to the Trustee at the last address of the
Trustee on file with the Company, or by delivering such written notice to the
Trustee at such address. Such resignation or removal shall take effect on the
date specified in the notice of resignation or removal, but not less than thirty
(30) days, nor more than sixty (60) days, following the date of mailing of such
notice or delivery of such notice if it be not mailed, unless the Company and
the Trustee agree that the resignation or removal be effective on some other
date. Upon such resignation or removal, the Trustee shall be entitled to its
fees to the effective date of resignation or removal and any and all costs or
expenses paid or incurred by the Trustee in connection with this Trust and Plan.
In no event shall such resignation or removal terminate this Trust and Plan, but
the Company shall forthwith appoint a successor Trustee to carry out the terms
of this Trust and Plan, which successor Trustee shall be any individual, trust
company or bank selected by the Company. In case of the resignation or removal
of the Trustee, the Trustee shall forthwith turn over to the successor Trustee
all assets in its possession, and copies of such records as may be necessary to
permit the successor Trustee to carry out its duties.
.3 The expenses of administration of the Trust incurred by the
Trustee, including counsel fees and including Trustee's fees as such may from
time to time be agreed upon between the Company and the Trustee, shall be paid
in any one of the following manners as determined by the Company in its sole
discretion:
(a) the expenses may be paid directly by the Participating
Companies to the Trustee; or
(b) the expenses may be paid out of the Trust Fund. Fees and
expenses of the Trustee which have not been paid will be a lien
upon the Trust Fund. In no event will any Trustee who is a full-
time employee of a Participating Company or any affiliate receive
compensation from the Trust and Plan, except for reimbursement of
expenses properly and actually incurred.
.4 Subject to Section 14.2 hereof, any segregation or
distribution of assets required under this Trust may be made in cash or in kind,
or partly in cash and partly in kind, according to the discretion of the
Trustee, but any such segregation or distribution shall be made on the basis of
the most recent valuation made pursuant to Article 10 or Article 18 hereof.
.5 In the event that the Company shall have appointed more than
one individual, trust company or bank to act jointly as Trustee hereunder, any
action which this Trust and Plan authorizes or requires the Trustee to do shall
be done by action of the majority of the then acting co-trustees, or, in the
case of two such persons acting jointly as Trustee, by action of both such
trustees. Such action may be taken at any meeting of the co-trustees then
acting, or by written authorization and affirmative consent without a meeting.
The co-trustees by written agreement among themselves, a copy of which shall be
filed with the Company and the Administrator, may allocate among themselves any
of the powers and duties of the Trustee under this Trust and Plan. In such
event the co-trustee to whom a power or duty is allocated may take action with
respect thereto without the consent of any other co-trustee. Any person, firm,
partnership or corporation may rely upon the written signatures of such number
of the co-trustees as are hereunder empowered to take action as the signature of
the Trustee hereunder. Notwithstanding any other provision of this Trust and
Plan to the contrary, so long as at least one individual, trust company or bank
shall continue to act as Trustee hereunder, the Company shall not be under any
duty to appoint a successor to any co-trustee who shall resign or be removed.
.6
3
INVESTMENTS
.1 In addition to the powers and duties conferred and imposed
upon the Trustee by the other provisions of this Trust and Plan, the Trustee
shall, subject to the limitations set forth in this Trust and Plan, have the
following powers and duties:
(a) To invest and reinvest the principal and income of the Trust
Fund and keep the same invested with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent man acting in a like
capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims, without distinction between
principal and income and without regard to any limitations, other than such
prudent man rule, prescribed by law or custom upon the investments of
fiduciaries, in each and every kind of property, whether real, personal or
mixed, tangible or intangible, and wherever situated, including but not limited
to annuity contracts of an insurance company on the life of any participant,
shares of any Regulated Investment Company, units of any common trust fund of
any bank or trust company now in existence or hereafter established, shares of
common, preference and preferred stock, put and call options, rights, options,
subscriptions, warrants, trust receipts, investment trust certificates,
mortgages, leases, bonds, notes, debentures, equipment or collateral trust
certificates and other corporate, individual or government obligations, whether
secured or unsecured; to invest and reinvest in and retain any stocks, bonds or
other securities of any corporate trustee serving hereunder, or any parent or
affiliate thereof; to invest in commodities and commodity contracts; to invest
and reinvest in any time or savings deposits of the Trustee or any parent or
affiliate thereof if such deposits bear a reasonable rate of interest or of any
bank, trust company, or savings and loan institution, which deposits may but
need not be guaranteed by the Federal Deposit Insurance Corporation or the
Federal Savings and Loan Insurance Corporation; and in addition to become a
general partner or limited partner in any partnership or limited partnership the
purposes of which are to invest or reinvest the partnership assets in any such
proper,ties or deposits;
(b) To invest a portion or all of the Trust Fund in units of any
common or group trust created solely for the purpose of providing a satisfactory
diversification of investments for participating trusts; provided that such
common or group trust, (l) limits participation thereunder to pension and profit
sharing trusts which qualify under Section 501(a) of the Code, as amended, (2)
prohibits income and/or principal attributable to a participating trust from
being used for any purpose other than the exclusive benefit of the employees or
their beneficiaries of such participating trust, (3) prohibits assignment by a
participating trust of any part of such participating trust's equity or interest
in the common or group trust, (4) is created or organized in the United States
and is maintained at all times as a domestic trust in the United States; as long
as the Trustee holds such units hereunder, the instrument establishing such
common or group trust (including all amendments thereto) shall be deemed to have
been adopted and made a part of this Trust and Plan;
(c) Upon written direction of the Company, to invest or reinvest
all or a portion of the Trust Fund in qualifying employer securities or
qualifying employer real property as such terms are defined in Section 4975 of
the Code of 1986, as amended, and Section 407(d) of the Employee Retirement
Income Security Act of 1974, which investment may constitute not more than one
hundred percent (100%) of the fair market value of the assets of the Trust Fund,
and to retain, or to sell, exchange or otherwise dispose of any such securities
or real property held in this Trust Fund. In the event of any such investment,
the Trustee shall file with the appropriate District Director of Internal
Revenue such returns and other information as shall be required from time to
time by the Code of 1986, as amended, and valid regulations, rulings and
procedures thereunder;
(d) To sell, convert, redeem, exchange, grant options for the
purchase or exchange of, or otherwise dispose of, any real or personal property,
at public or private sale, for cash or upon credit, with or without security,
without obligation on the part of any person dealing with the Trustee to see to
the application of the proceeds of or to inquire into the validity, expediency
or propriety of any such disposal;
(e) To manage, operate, repair, partition and improve and
mortgage or lease (with or without option to purchase) for any length of time
any real property held in the Trust Fund; to renew or extend any mortgage or
lease, upon any terms the Trustee may deem expedient; to agree to reduction of
the rate of interest on any mortgage note; to agree to any modification in the
terms of any lease or mortgage or of any guarantee pertaining to either of them;
to enforce any covenant or condition of any lease or mortgage or of any
guarantee pertaining to either of them or to waive any default in the
performance thereof; to exercise and enforce any right of foreclosure; to bid on
property on foreclosure; to take a deed in lieu of foreclosure with or without
paying consideration therefor and in, connection therewith to release the
obligation on the bond secured by the mortgage; and to exercise and enforce in
any action, suit or proceeding at law or in equity any rights or remedies in
respect of any lease or mortgage or of any guarantee pertaining to either of
them;
(f) To exercise, personally or by general or limited proxy, the
right to vote any shares of stock or other securities held in the Trust Fund; to
delegate discretionary voting power to trustees of a voting trust for any period
of time; and to exercise or sell, personally or by power of attorney, any
conversion or subscription or other rights appurtenant to any securities or
other property held in the Trust Fund;
(g) To join in or oppose any reorganization, recapitalization,
consolidation, merger or liquidation, or any plan therefor, or any lease (with
or without an option to purchase), mortgage or sale of the property of any
organization the securities of which are held in the Trust Fund; to pay from the
Trust Fund any assessments, charges or compensation specified in any plan of
reorganization, recapitalization, consolidation, merger or liquidation, to
deposit any property with any committee or depositary; and to retain any
property allotted to the Trust Fund in any reorganization, recapitalization,
consolidation, merger or liquidation;
(h) To borrow money from any lender (including the Trustee
hereunder, where applicable in its capacity as a banking corporation when
permitted to do so by the applicable laws and regulations then in effect) in any
amount and upon such terms and conditions and for such purposes as the Trustee
shall deem necessary; for any money so borrowed the Trustee may issue its
promissory note as Trustee and to secure the repayment of any such loan, with
interest, may pledge or mortgage all or any part of the Trust Fund, and no
person loaning money to the Trustee shall be obligated to see to the application
of the money loaned or to inquire into the validity, expediency or propriety of
any such borrowing;
(i) To compromise, settle or arbitrate any claim, debt or
obligation of or against the Trust Fund; to enforce or abstain from enforcing
any right, claim, debt or obligation; and to abandon any property determined by
it to be worthless;
(j) To continue to hold any property of the Trust Fund whether
or not productive of income; to reserve from investment and keep unproductive of
income, without liability for interest, such cash as it deems advisable or, in
its discretion, to hold the same, without limitation on duration, on deposit in
the commercial department or in an interest-bearing account in the savings
department of any bank, trust company, or savings and loan institution
(including the Trustee where applicable in its capacity as a banking
corporation) in which deposits are guaranteed by the Federal Deposit Insurance
Corporation or the Federal Savings and Loan Insurance Corporation;
(k) To hold property of the Trust Fund in its own name or in the
name of a nominee, without disclosure of this Trust, or in bearer form so that
it will pass by delivery, but no such holding shall relieve the Trustee of its
responsibility for the safe custody and disposition of the Trust Fund in
accordance with the provisions of this Trust and Plan, and the Trustee's records
shall at all times show that such property is part of the Trust Fund;
(l) To make, execute and deliver, as Trustee, any deeds,
conveyances, leases (with or without option to purchase), mortgages, options,
contracts, waiver or other instruments that the Trustee shall deem necessary or
desirable in the exercise of its powers under this Trust;
(m) To employ, at the expense of the Trust Fund, agents who are
not regular employees of the Trustee, and to delegate in writing to them and
authorize them to exercise such powers and perform such duties required of the
Trustee hereunder without limitation as the Trustee may determine in its
uncontrolled discretion; the Trustee shall not be responsible for any loss
occasioned by any such agents selected by it with reasonable care;
(n) To pay out of the Trust Fund all taxes imposed or levied
with respect to the Trust Fund and in its discretion to contest the validity or
amount of any tax, assessment, penalty, claim or demand respecting the Trust
Fund; however, unless the Trustee shall have first been indemnified to its
satisfaction or arrangements satisfactory to it shall have been made for the
payment of all costs and expenses, it shall not be required to contest the
validity of any tax, or to institute, maintain or defend against any other
action or proceeding either at law or in equity;
(o) Except as otherwise provided in this Trust and Plan, to do
all acts, execute all instruments, take all proceedings and exercise all rights
and privileges with relation to any assets constituting a part of the Trust
Fund, which it may deem necessary or advisable to carry out the purposes of this
Trust and Plan;
(p) During the minority or incapacity of any participant, former
participant or beneficiary under this Trust and Plan, to make payment to such
participant, former participant or beneficiary or to an appropriate member, as
determined by the Administrator, of such participant's, former participant's or
beneficiary's family for the care, maintenance and support of such participant,
former participant or beneficiary in such amounts and at such times as the
Administrator may determine, and the receipt of such minor or incapacitated
person or member of such minor's or incapacitated person's family to whom
payment has been made shall be a full discharge and acquittance to the Trustee
for the amount so paid; and
(q) Upon direction by the Administrator, to purchase contracts
of life insurance on the lives of key persons whose death might affect adversely
the earnings of a Participating Company. Any such contracts shall be owned by
the Trustee and any and all benefits, including any amounts payable upon the
death of the person insured shall be payable to the Trustee and considered as an
investment for the benefit of the Trust as a whole.
.2 Notwithstanding any other provisions of this Trust and Plan,
the Company may appoint, from time to time, one or more:
(a) banks, as defined in the Investment Advisers Act of 1940;
(b) persons registered as investment advisers under said Act; or
(c) insurance companies qualified to perform investment advisory
services under the laws of more than one state;
to act as the Investment Manager of all or such portions of the Trust Fund
as the Company in its sole discretion shall direct without regard to whether the
accounts have been segregated for investment purposes pursuant to Article 18
hereof. In order to serve as Investment Manager, any such bank, person or
insurance company must state in writing to the Company and the Trustee that it
meets the requirements set forth in this Section 17.2 to be an Investment
Manager and that it acknowledges that it shall be a fiduciary with respect to
this Trust and Plan during all periods that it shall serve as such. During any
period that an Investment Manager has been appointed with respect to the Trust
Fund or a portion thereof, it shall have such powers and authority with respect
to the management, acquisition or disposition of any asset of the Trust Fund or
such portion thereof as shall be set forth in the investment management
agreement between the Company and the Investment Manager, and, to the extent of
the Investment Manager's powers and authority, the Trustee shall have no duties
or obligations with respect to the investment, management, acquisition or
disposition of such assets. The Company may, at any time, remove any Investment
Manager or change the portion of the Trust Fund subject to its management by
written notice to the Trustee and the Investment Manager. Any Investment
Manager may resign by written notice to the Company and the Trustee. Unless the
Company appoints a successor to an Investment Manager which has resigned or been
removed, or which is no longer managing a portion of the Trust Fund, the powers,
duties and obligations of the Trustee with respect to the portion of the Trust
Fund formerly managed by the Investment Manager shall be automatically restored.
.3 All income from investments and reinvestments made as
provided in this Article 17 shall be treated as principal, and investments and
reinvestments shall be made without distinction between income and principal.
.4 In no case shall the Trustee enter into or engage in any
transaction which is defined as a prohibited transaction by Section 4975 of the
Code, or by Section 406 of the Employee Retirement Income Security Act of 1974,
except to the extent any such transaction is permitted under another provision
of said United States Code or under a valid regulation or exemption promulgated
by a responsible agency of the Federal government.
.5
4
SEGREGATION OF ACCOUNTS OF PARTICIPANTS
.1 The Company may, in its sole discretion, from time to time,
direct that some or all of the accounts of similarly situated participants and
beneficiaries be segregated for investment purposes and that such persons be
permitted to direct the investment of such accounts in such media, whether
limited or unlimited, as shall be designated by the Company, from time to time,
subject to the limitations of Section 18.2 hereof. Any direction of the Company
pursuant to this Section 18.1 shall apply to all similarly situated participants
and beneficiaries in a uniform and non-discriminatory manner. In the event the
Company directs that the accounts be segregated for investment purposes, the
Company shall give at least ten (10) days notice to participants, beneficiaries
and the Trustee of such fact.
.2 All segregated accounts of each participant and beneficiary,
shall be invested in such media, whether limited or unlimited, as shall be
designated by the Company, from time to time, as per the instructions of such
participant or beneficiary, and pursuant to uniform rules and procedures
promulgated by the Company. All such directions shall be deemed to be
continuing directions until they shall have been revoked or changed. A
participant or beneficiary may revoke or change his direction of investment at
such uniform times as shall be prescribed by the Administrator and in accordance
with such uniform rules and procedures promulgated by the Administrator. To the
extent any participant or beneficiary fails to give investment directions to the
Trustee, amounts credited to his accounts shall be invested in such media as the
Trustee shall direct.
.3 On the day immediately prior to the date the accounts become
segregated for investment purposes pursuant to Section 18.1 hereof, the Trustee
shall, in accordance with the provisions of Article 10 hereof, value the assets
of the trust fund and adjust the accounts to reflect each such account's
allocable portion of any change in the value of the assets of the Trust which
has occurred since the most recent prior adjustment of said accounts, in
accordance with the provisions of the Trust and Plan as it exists as of such
day.
.4 Each segregated account shall be valued and adjusted by the
Trustee pursuant to uniform rules and procedures promulgated by the
Administrator and approved by the Trustee, and which are similar to the rules
and procedures for valuing assets and adjusting unsegregated accounts as
described in Article 10 hereof as of each allocation date, each other date upon
which a distribution, withdrawal or loan is made from such account, and the date
immediately prior to the date the accounts cease to be segregated for investment
purposes pursuant to Section 18.5 hereof. The Trustee shall use the fair market
values of securities or other assets in determining the value of the assets of
an account. Such account shall be adjusted as of such date to reflect the
income received or accrued, realized, and unrealized profits and losses,
expenses, payments to a participant or beneficiary and all other transactions of
the period since the last valuation date. It is intended that this Section 18.4
operate to adjust each segregated account in the trust to reflect all income
attributable to the account and changes in the value of the account's assets, as
the case may be, as of any allocation date.
.5 Upon ten (10) days written notice to the Trustee and the
affected participants and beneficiaries, the Company may direct that the
segregated accounts shall cease to be segregated effective as of a date
specified by the Company. As of the date immediately preceding the date as of
which the accounts shall cease to be segregated, the Trustee shall value the
assets of the accounts pursuant to Section 18.4 hereof and credit or debit such
accounts with any gain or loss in the value of the assets of said accounts since
the most recent prior valuation date. Upon completion of said valuation and
adjustment of accounts, the accounts shall cease to have specific assets
allocated to them and shall thereafter be adjusted as provided in Article 10
hereof.
.6
5
ADMINISTRATION
.1 The Board of Directors of the Company shall appoint the
Administrator which shall be any person or entity, including the Company or any
Participating Company. Said Board of Directors shall notify the Trustee of the
identity of the Administrator and of any change in the Administrator. Except as
expressly set forth herein with respect to the duties and responsibilities of
the Trustee, the Employee Benefits Committee, the Investment Manager or the
Company, the Administrator shall administer the Trust and Plan and shall have
all powers and duties granted or imposed on an "administrator" by the Employee
Retirement Income Security Act of 1974. The Administrator shall determine any
and all questions of fact, resolve all questions of interpretation of this
instrument which may arise under any of the provisions of this Trust and Plan as
to which no other provision for determination is made hereunder, and exercise
all other powers and discretions necessary to be exercised under the terms of
this Trust and Plan which it is herein given or for which no contrary provision
is made. Subject to the provisions of Section 19.6, the Administrator's
decision with respect to any matter shall be final and binding upon the Trustee
and all other parties concerned, and neither the Administrator nor any of its
directors, officers or employees, if applicable, shall be liable in that regard
except for gross abuse of the discretion given it and them under the terms of
this Trust and Plan. All determinations of the Administrator shall be made in a
uniform, consistent and non-discriminatory manner with respect to all
participants and beneficiaries in similar circumstances. The Administrator may,
from time to time, designate one or more persons or agents to carry out any or
all of its duties hereunder.
.2 If any participant, any beneficiary, or the authorized
representative of a participant or beneficiary shall file an application for
benefits hereunder and such application is denied, in whole or in part, he shall
be notified in writing of the specific reason or reasons for such denial unless
the granting or denial of the application is in the sole discretion of the
Administrator in which event the notice to the applicant shall state that the
Administrator has denied the application pursuant to the exercise of its
discretionary powers under the Trust and Plan. The notice shall also set forth
the specific plan provisions upon which the denial is based, an explanation of
the provisions of Section 19.6 hereof, and any other information deemed
necessary or advisable by the Administrator.
.3 The Board of Directors of the Company shall appoint the
members of an Employee Benefits Committee which shall consist of three (3) or
more members. The members of the Committee shall remain in office at the will
of the Board of Directors and the Board of Directors may from time to time
remove any of said members with or without cause. A member of the Committee may
resign upon written notice to the remaining member or members of the Committee
and to the Company respectively. The fact that a person is a participant or a
former participant or a prospective participant shall not disqualify him from
acting as a member of the Committee. In case of the death, resignation or
removal of any member of the Committee, the remaining members shall act until a
successor-member shall be appointed by the Board of Directors of the Company.
The Secretary of the Company shall notify the Trustee and the Administrator in
writing of the names of the original members of the Committee, of any and all
changes in the membership of the Committee, of the member designated as
Chairman, and the member designated as Secretary, and of any changes in either
office. Until notified of a change, the Trustee and the Administrator shall be
protected in assuming that there has been no change in the membership of the
Committee or the designation of Chairman or of Secretary since the last
notification was filed with it. The Trustee and the Administrator shall be
under no obligation at any time to inquire into the membership of the Committee
or its officers. All communications to the Committee shall be addressed to its
Secretary at the address of the Company on file with the Trustee.
.4 On all matters and questions the decision of a majority of
the members of the Committee shall govern and control; but a meeting need not be
called or held to make any decision. The Committee shall appoint one of its
members to act as its Chairman and another member to act as Secretary. The
terms of office of these members shall be determined by the Committee, and the
Secretary and/or Chairman may be removed by the other members of the Committee
for any reason which such other members may deem just and proper. The Secretary
shall do all things directed by the Committee. Although the Committee shall act
by decision of a majority of its members as above provided, nevertheless in the
absence of written notice to the contrary, every person may deal with the
Secretary and consider his acts as having been authorized by the Committee. Any
notice served or demand made on the Secretary shall be deemed to have been
served or made upon the Committee.
.5 No member of the Committee shall be disqualified from acting
on any question because of his interest therein. No fee or compensation shall
be paid to any member of the Committee for his services as such, but the
Committee shall be reimbursed for its expenses by the Participating Companies.
The Committee and the Administrator may hire such attorneys, accountants,
actuaries, agents, clerks, and secretaries as it may deem desirable in the
performance of its functions, and the expense associated with the hiring or
retention of any such person or persons shall be paid directly by the
Participating Companies.
.6 Any participant, any beneficiary, or any authorized
representative of a participant or beneficiary whose application for benefits
hereunder has been denied, in whole or in part, by the Administrator may upon
written notice to the Committee request a review by the Committee of such denial
of his application. Such review may be made by written briefs submitted by the
applicant and the Administrator or at a hearing, or by both as shall be deemed
necessary by the applicant. The Committee may, in its sole discretion, appoint
an appeal examiner to conduct such review. Any appeal examiner shall be an
officer of the Participating Company or affiliate which employs or most recently
employed the applicant. Any hearing conducted by an appeal examiner shall be
held in such location as shall be reasonably convenient to the applicant. Any
hearing conducted by the Committee shall be held in the corporate headquarters
of the Company, unless the Committee shall specify otherwise. The date and time
of any such hearing shall be designated by the Committee or the appeal examiner
upon not less than seven (7) days notice to the applicant and the Administrator
unless both of them accept shorter notice. The Committee or the appeal examiner
shall make every effort to schedule the hearing on a day and at a time which is
convenient to both the applicant and the Administrator. The Committee may, in
its sole discretion, establish such rules of procedure as it may deem necessary
or advisable for the conduct of any such review or of any such hearing. After
the review has been completed, the Committee or the appeal examiner shall render
a decision in writing, a copy of which shall be sent to both the applicant and
the Administrator. Such decision shall set forth the specific reasons for the
decision and the specific provisions of the Trust and Plan upon which the
decision is based and, if the decision is made by an appeal examiner, the rights
of the applicant or the Administrator to request a review by the entire
Committee of the decision of the appeal examiner. Either the applicant or the
Administrator may request a review of an adverse decision of the appeal examiner
by filing a written request with the Committee within thirty (30) days after
receipt of a copy of the appeal examiner's decision. Any such request shall
specify whether the review is to be based solely upon the written record or also
upon a hearing before the Committee. The review of a decision of the appeal
examiner shall be conducted by the Committee in accordance with the procedures
of this Section 19.6. There shall be no further appeal from a decision rendered
by the Committee.
.7 The interpretations, determinations and decisions of the
Administrator, or an appeal examiner, or the Committee shall, except to the
extent provided in Section 19.6 above, be final and binding upon all persons
with respect to any right, benefit or privilege hereunder. The review
procedures of Section 19.6 above shall be the sole and exclusive remedy and
shall be in lieu of all actions at law or in equity, whether pursuant to
arbitration or otherwise, except as otherwise provided in the Employee
Retirement Income Security Act of 1974.
.8 Neither the Committee nor any of its members nor any appeal
examiner shall be liable for any act taken by the Committee or the appeal
examiner pursuant to any provision of this Trust and Plan except for gross abuse
of the discretion given the Committee, or the member, or the appeal examiner
hereunder. No member of the Committee shall be liable for the act of any other
member.
.9 Except as otherwise provided in ERISA, the Administrator,
Committee, Board of Directors of the Company, Trustee (other than a corporate
Trustee), and their respective officers, employees, members and agents shall
incur no personal liability of any nature whatsoever in connection with any act
done or omitted to be done in the administration of the Plan or its related
Trust. The Company shall indemnify, defend, and hold harmless the
Administrator, Committee, Board of Directors of the Company, Trustee (other than
a corporate Trustee), and their respective officers, employees, members and
agents, for all acts taken or omitted in carrying out their responsibilities
under the terms of the Plan and its related Trust or other responsibilities
imposed upon such persons by ERISA. The Company shall indemnify such persons
for expenses of defending an action by a participant, beneficiary, government
entity, or other persons, including all legal fees and other costs of such
defense. The Company will also reimburse such a person for any monetary
recovery in a successful action against such person in any federal or state
court or arbitration. In addition, if the claim is settled out of court with
the concurrence of the Company, the Company shall indemnify such person for any
monetary liability under said settlement. This indemnification for all acts or
omissions is intentionally broad, but shall not provide indemnification for
embezzlement or diversion of Trust funds for the benefit of any such persons,
nor shall it provide indemnification for excise taxes imposed under Section 4975
of the Code and for any corporate Trustee.
.10
6
PROHIBITION AGAINST ALIENATION
.1 Unless the context otherwise indicates, the following terms
used herein shall have the following meanings whenever used in this Article 20:
(a) The words "domestic relations order" shall mean, with respect to
any participant, any judgment, decree or order (including
approval of a property settlement agreement) which both:
(i) related to the provision of child support, alimony
payments or marital property rights to a spouse, former
spouse, child or other dependent of the participant; and
(ii) is made pursuant to a State domestic relations law
(including a community property law).
(b) The words "qualified domestic relations order" shall mean a
domestic relations order which satisfies the requirements of
Section 414(p)(1)(A) of the Internal Revenue Code.
.2 Except as otherwise provided in this Article 20, neither any
property nor any interest in any property held for the benefit of any
participant or beneficiary shall be alienated, disposed of or in any manner
encumbered, voluntarily, involuntarily or by operation of law, while in the
possession or control of the Trustee except by an act of the Trustee or the
participant or beneficiary specifically authorized hereunder.
.3 Section 20.2 hereof shall not apply to the creation,
assignment or recognition of a right to any benefit under this Trust and Plan
pursuant to a qualified domestic relations order and shall not apply to the
payment of any benefits to an alternate payee pursuant to such an order.
.4 In the event this Trust and Plan is served with a domestic
relations order, the Administrator shall promptly notify the participant and any
alternate payee to whom such order relates of the receipt of such order and this
Trust and Plan's procedures for determining whether such order is a qualified
domestic relations order. Within a reasonable time after receipt of such
domestic relations order, the Administrator shall determine whether such order
is a qualified domestic relations order and shall notify the participant and
each concerned alternate payee of its determination. During any period in which
the issue of whether a domestic relations order is a qualified domestic
relations order is being determined, the Administrator shall direct the Trustee
to credit the amounts which would have been payable to an alternate payee during
such period if the order had been determined to be a qualified domestic
relations order during such period to a segregated account under this Trust and
Plan and to debit such amounts from the appropriate accounts of the participant.
Notwithstanding anything in the Plan to the contrary, a "segregated account"
established pursuant to this Section 20.4 shall be treated as an unsegregated
account and invested by the Trustee pursuant to Article 16. If the domestic
relations order is determined to be a qualified domestic relations order within
eighteen (18) months after this Trust and Plan is served with such domestic
relations order, the Administrator shall hold and dispose of the amounts
credited to the segregated account in accordance with the terms of the qualified
domestic relations order. If it is determined within eighteen (18) months after
this Trust and Plan is served with such domestic relations order that either:
(a) such domestic relations order is not a qualified domestic
relations order; or
(b) the issue with respect to whether such domestic relations
order is a qualified domestic relations order is not resolved;
the Administrator shall transfer the amounts credited to the segregated
account to the appropriate accounts maintained for the benefit of the person who
would have been entitled to such amounts if this Trust and Plan had never been
served with such domestic relations order. If eighteen (18) months have elapsed
since this Trust and Plan was served with such domestic relations order and such
order is subsequently determined to be a qualified domestic relations order,
such order shall only be applied prospectively.
.5 Any alternate payee who is entitled to receive amounts from
this Trust and Plan pursuant to a qualified domestic relations order shall, to
the extent of his interest under this Trust and Plan and except as otherwise
provided in such qualified domestic relations order, have the same rights as a
beneficiary of a participant under this Trust and Plan. Notwithstanding
anything in this Section 20.5 to the contrary, an alternate payee may receive a
distribution of the amount specified under a qualified domestic relations order
prior to the participant attaining his "earliest retirement age" (as defined by
Internal Revenue Code Section 414(p)(4)(B)).
.6
7
AMENDMENT AND TERMINATION
.1 This Trust and Plan may be modified, altered, amended,
changed or terminated by the Company with respect to all or any of the
Participating Companies at any time or from time to time without the consent of
any Participating Company but no rights of participants or beneficiaries
receiving benefits under this Trust and Plan and no other vested rights under
this Trust and Plan shall in any way be modified except that such rights may be
modified if such a modification is necessary to establish or to continue the
qualified status of this Trust and Plan under the terms of Section 401 of the
Code or its successor section. This Trust and Plan may be modified and amended
retroactively, if necessary, to secure exemption effective as of January 1, 1989
or any other date specified herein, under Section 401 of the Code. No amendment
shall be binding on the Trustee until the receipt of such amendment by the
Trustee.
.2 Upon termination of this Trust and Plan with respect to any
Participating Company, the Trustee shall value all assets of the trust fund and
adjust the accounts of participants. Any accrued expenses and fees of the
Trustee and any expenses and fees relating to such termination incurred or to be
incurred by the Trustee shall be equitably allocated among and charged to the
then existing accounts of participants who are affected by such termination
unless directly paid by the Participating Companies to the Trustee. If the
accounts have not been segregated for investment purposes pursuant to Article 18
hereof, the assets of the Trust shall be valued and the accounts adjusted in
accordance with Article 10 hereof. If the accounts have been segregated for
investment purposes pursuant to Article 18 hereof, the accounts shall be valued
pursuant to Section 18.4 hereof.
.3 The amounts credited to any affected participant's accounts
may either (a) in accordance with the provisions of Article 14 hereof, be
distributed immediately to the participant if he is living on the date of
termination or, if he shall have died before distribution, to his designated
beneficiary, or (b) continue to be held in trust and distributed upon the
participant's termination of employment as is provided in this Trust and Plan;
provided, however, that no distribution of amounts contributed by a participant
to his cash option account shall occur if a Participating Company establishes or
maintains a successor plan. A successor plan shall mean a defined contribution
plan, other than an employee stock ownership plan or a simplified employee
pension plan maintained by a Participating Company. A plan shall not be
successor plan if less than two percent of the participants in this Plan
(determined as of the date of termination) were eligible to participate under
the successor plan at any time during the 24 month period beginning 12 months
before the time of termination.
.4 Upon the partial termination of this Trust and Plan or upon
complete discontinuance of contributions to this Trust and Plan, all amounts
credited at the time of such partial termination or complete discontinuance to
the accounts of participants affected by such partial termination or complete
discontinuance shall be fully vested and nonforfeitable. However, after any
such partial termination or complete discontinuance of contributions the Trustee
shall continue to administer this Trust and Plan in the manner in which this
Trust and Plan was administered before any such partial termination and a
participant shall only be entitled to receive distribution of his accounts upon
the occurrence of an event which under the terms of this Trust and Plan would
entitle him to such a distribution. For purposes of this Section 21.4, no event
shall be a "partial termination" unless: (i) the Company has so designated such
event in a writing delivered to the Trustee; or (ii) such event has been finally
and expressly determined to be a partial termination within the meaning of
Section 411(d) of the Code of 1986, as amended, in an administrative or judicial
proceeding to which both the Company and the Commissioner of Internal Revenue or
his delegate were parties.
.5
8
PARTICIPATING COMPANIES
.1 Any subsidiary which has the same taxable year as the
Company shall become a Participating Company in this Trust and Plan by order of
the Board of Directors of the Company and the ratification of the subsidiary's
Board of Directors. Each Participating Company (including the Company) and its
Adoption Date shall be noted on Exhibit A attached hereto.
.2 Upon order of its Board of Directors, a Participating
Company may terminate this Trust and Plan with respect to participants employed
by said Participating Company by an instrument in writing executed by the
appropriate officers of the Participating Company and delivered to the Company
and the Trustee. The Trustee shall thereupon make distributions of the accounts
of participants employed by said Participating Company as provided in Section
21.3 hereof.
.3
9
TRANSFERS INVOLVING OTHER QUALIFIED RETIREMENT PLANS
.1 Transfers From Another Qualified Retirement Plan. In the
event that:
(a) any Covered Employee who shall be or shall have been a
participant under another qualified retirement plan which
satisfies the requirements of Section 401 of the Code; and
(b) either
(i) the custodian or trustee of the assets held pursuant to
said plan on behalf of said Covered Employee; or
(ii) the custodian or trustee of the assets of an individual
retirement account established pursuant to Section 408 of
the Code to hold the assets distributed to said employee
from said plan; or
(iii) a Covered Employee who holds assets distributed to him
during the preceding sixty (60) days from such plan or from
an individual retirement account described in paragraph (ii)
above;
shall agree to transfer said assets to the Trustee hereunder; and
(a) the assets to be so transferred shall not be made available to
said Covered Employee in the course of the transfer except to the
extent permitted by paragraph (b)(iii) above; and
(d) the Administrator consents to such transfer.
the Trustee hereunder shall accept such transferred assets and hold and
administer them pursuant to the terms and provisions of this Trust and Plan and
this Article 23. Upon the receipt of said assets the Trustee shall value them
and credit the fair market value of such assets to the appropriate accounts of
the Covered Employee on whose behalf the assets were so transferred, as the
Administrator shall direct. In no event shall any assets be transferred from
another qualified retirement plan to this Trust and Plan if the transfer of such
assets would require that the provisions of this Trust and Plan governing
distributions be amended to comply with the provisions of Section 401(a)(11) or
411(d)(6) of the Code.
.1 Transfers To Another Qualified Retirement Plan. In the
event that:
(a) any participant hereunder shall terminate his employment and
subsequently become a participant under the qualified retirement
plan of another employer, which plan meets the requirements of
Section 401 of the Code; and
(b) said former participant shall have amounts credited to an account
held for him hereunder which shall not have been distributed to
the former participant and which are distributable to him
pursuant to terms of the Trust and Plan; and
(c) such participant shall request that the assets of the trust fund
representing the amounts credited to his accounts be transferred
to said successor plan; and
(d) either
(i) the custodian or trustee of the assets held pursuant to
said successor plan shall apply to the Trustee hereunder for
transfer to it of assets held pursuant to this Trust and
Plan representing said former participant's account; or
(ii) said successor plan shall provide for the receipt of
assets transferred to it from other qualified retirement
plans; and
(e) the assets to be transferred shall not be made available to said
participant in the course of the transfer except to the extent
permitted by Section 402(a)(5) of the Code;
the Trustee hereunder shall transfer to the trustee or custodian of said
successor plan assets of the trust representing the amount credited to the
participant's account on the date of transfer. Said transfer shall not be made
until the Administrator is assured to its full satisfaction that the
participant's interest to be transferred shall be fully vested and
nonforfeitable under the terms of the successor plan, and that said interest
shall neither be alienable nor otherwise subject to disposition or encumbrance
by the participant, except pursuant to a qualified domestic relations order.
2
LIMITATION ON ANNUAL ADDITIONS
.1 Notwithstanding anything contained in this Trust and Plan to
the contrary, in no event shall the annual additions to a participant's accounts
for any plan year exceed the maximum amount allowable as an annual addition
under Section 415 of the Code and lawful regulations promulgated thereunder.
For purposes of this Section 24.1, the words "annual additions" shall mean for a
participant, for any plan year, the sum of the amounts contributed by the
Participating Companies to the Trustee pursuant to a participant's election
under Section 4.1 hereof, contributions credited to the participant's matching
employer contribution account under Article 5 hereof and regular employer
contribution account under Article 6 hereof, plus all other amounts credited to
the participant's accounts under any other defined contribution plan maintained
by any Participating Company.
.2 In the event that the limitations contained in Section 24.1
hereof otherwise would be exceeded for a participant, the annual benefits and
annual additions on behalf of such participant under this Trust and Plan and all
other plans of a Participating Company or any affiliate which meet the
requirements of Section 401(a) of the Code shall be reduced in the following
order so that such limitations shall be satisfied:
(a) first, the participant's voluntary employee contributions
shall be reduced;
(b) second, the excess of the participant's projected employer
funded annual benefit under any defined benefit pension plan of a
Participating Company or affiliate over the participant's accrued
employer funded annual benefit under such plan shall be reduced;
(c) third, matching employer contributions under this Trust and
Plan shall be reduced;
(d) fourth, employer contributions on behalf of the participant
pursuant to the participant's 401(k) election under any cash or
deferred arrangement described in Section 401(k) of the Code
shall be reduced;
(e) fifth, employer contributions under any other defined
contribution plan of a Participating Company or affiliate shall
be reduced;
(f) sixth, regular employer contributions under this Trust and
Plan shall be reduced; and
(g) seventh, accrued employer funded annual benefits under any
defined benefit plan of a Participating Company or affiliate
shall be reduced.
If there is more than one plan maintained by a Participating Company or
affiliate in a category described above, the reduction shall be made within a
relevant category on a plan by plan basis in reverse order of the plans'
respective effective dates. In lieu of the foregoing, the Administrator and the
participant may agree to an alternative order for reduction of the participant's
annual benefits and annual additions.
In the event that, after the application of the preceding paragraph of
this Trust and Plan, there still remain amounts which arise as a result of a
reasonable error in estimating a participant's compensation, a reasonable error
in determining the amount of deferrals made pursuant to Section 4.1 that may be
made under the limits of Section 415, the allocation of forfeitures or other
limited facts and circumstances which the Commissioner of Internal Revenue finds
justify the availability of the rules set forth in this Section 24.2 and which,
if allocated to a participant, would be in excess of the limits on annual
additions set forth in Section 24.1, such excess amounts shall be used as of the
next allocation date and any succeeding allocation dates, as necessary, to
reduce the Participating Company contributions which would otherwise be made for
such participant for the plan years ending on such allocation dates. In the
event such participant is not employed by a Participating Company on the next
allocation date or on any succeeding allocation date on which excess amounts
still remain, such excess amounts shall be used as of such allocation date and
on any succeeding allocation date to reduce the Participating Company
contributions for all participants who are then entitled to allocations.
Until any excess amounts described above are used to reduce
Participating Company contributions, they shall be held in a suspense account.
Such suspense account shall not be subject to the periodic valuation procedure
described in Article 10 or Article 18 hereof and will in no event be adjusted to
take account of the income and/or gains or losses of the Trust Fund.
Notwithstanding any other provisions of the Trust and Plan to the contrary in
the event the Trust and Plan is terminated at a time when there is an amount
credited to a suspense account pursuant to this Section 24.2, such amount shall
be returned to the Participating Companies on a pro rata basis.
Notwithstanding anything in this Section 24.2 to the contrary, to the
extent all or a portion of a participant's deferrals made pursuant to Section
4.1 constitutes an excess amount, such deferral shall be returned to the
participant.
4
TOP-HEAVY PROVISIONS
.1 During any plan year that this Trust and Plan is top-heavy
as determined in accordance with Section 25.2 hereof, the special restrictions
contained in Sections 25.2, 25.3 and 25.4 hereof shall apply.
.2 This Trust and Plan shall be considered to be top-heavy in
any plan year if, as of the determination date for such plan year, all the
aggregation groups of which this Trust and Plan is a member are top-heavy
groups. In the event that in any plan year this Trust and Plan is a member of
an aggregation group which is not a top-heavy group, this Trust and Plan shall
not be considered to be top-heavy for such plan year.
Unless the context otherwise indicates, the following terms used
herein shall have the following meanings whenever used in this Article 25:
(a) "determination date" shall mean, for any plan year, the last day
of the preceding plan year;
(b) "key employee" shall mean a "key employee" as described in
Section 416(i) of the Code which is hereby incorporated by
reference and which is described for informational purposes
herein as any employee or former employee of a Participating
Company or an affiliate who at any time during the plan year, or
the four (4) preceding plan years is:
(i) an officer of a Participating Company or an affiliate
having compensation from the Participating Companies and all
affiliates for the plan year of determination greater than
Forty-Five Thousand Dollars ($45,000) or, if greater, one
hundred fifty percent (150%) of the amount specified in
Section 415(c)(1)(A) of the Code (plus any increase for
cost-of-living as determined from time to time pursuant to
regulations issued by the Secretary of the Treasury or his
delegate pursuant to Section 415(d) of the Code);
(ii) a one-half of one percent (.5%) actual or constructive
owner of a Participating Company or an affiliate who owns
one of the ten (10) largest interests in a Participating
Company or an affiliate and who is an employee of a
Participating Company or an affiliate having compensation
from a Participating Company and all affiliates for the plan
year of determination greater than Thirty Thousand Dollars
($30,000) or, if greater, the amount specified in Section
415(c)(1)(A) of the Code (plus any increase for cost-of-
living as determined from time to time pursuant to
regulations issued by the Secretary of the Treasury or his
delegate pursuant to Section 415(d) of the Code);
(iii) a five percent (5%) actual or constructive owner of a
Participating Company or an affiliate; or
(iv) a one percent (1%) actual or constructive owner of a
Participating Company or an affiliate having compensation
from a Participating Company and all affiliates for the plan
year of determination greater than One Hundred Fifty
Thousand Dollars ($150,000.00);
provided that any such employee also performed services for a
Participating Company or an affiliate during the five (5) plan
year period ending on the determination date; and provided that
an amount held for the beneficiary of a key employee who is
deceased shall be deemed to be an amount held for a key employee;
(a) "non-key employee" shall mean any employee of a Participating
Company or an affiliate who is not a key employee including any
employee who was formerly a key employee;
(b) "permissive aggregation group" shall mean the required
aggregation group plus each pension, profit sharing and stock
bonus plan of a Participating Company or any affiliate, including
each such terminated plan maintained by a Participating Company
or an affiliate during the five (5) year period ending on the
determination date, which, when considered as a group with the
required aggregation group, would continue to comply with
Sections 401(a)(4) and 410 of the Code;
(c) "required aggregation group" shall mean each pension, profit
sharing and stock bonus plan of a Participating Company or any
affiliate, including each such terminated plan maintained by a
Participating Company or an affiliate during the five (5) year
period ending on the determination date, in which a key employee
is a participant and each other pension, profit sharing and stock
bonus plan which enables such plans to meet the requirements of
Section 401(a)(4) or 410 of the Code including such a plan
terminated within the five (5) year period ending on the
determination date to the extent required by law;
(d) "top-heavy group" shall mean any aggregation group if the sum, as
of the determination date, of:
(i) the present value of the cumulative accrued benefits
for key employees under all defined benefit plans included
in such group; and
(ii) the aggregate of the account balances of key employees
under all defined contribution plans included in such group;
exceeds sixty percent (60%) of a similar sum determined for all
participants, former participants and beneficiaries permitted to
be taken into account pursuant to Section 416(g) of the Code,
with such values being determined for each plan as of the most
recent valuation date occurring within the twelve (12) month
period ending on the determination date and subject to
appropriate adjustments under said Section 416(g) and lawful
regulations issued thereunder.
For purposes of this subsection (f), however, the accrued
benefits and account balances of any individual who has not
performed services for a Participating Company at any time during
the five-year period ending on the determination date shall be
disregarded; and
(e) "valuation date" means:
(i) in the case of a defined contribution plan, a date as
of which account balances are valued,
(ii) in the case of a defined benefit plan, a date as of
which liabilities and assets are valued for computing plan
costs for purposes of determining the plan's minimum funding
requirements under Section 412 of the Code.
In making any of the aforementioned determinations, contributions
due but unpaid as of the determination date shall be included in determining the
value of account balances, if any. In addition, the actuarial factors and
assumptions set forth in the defined benefit plans included in the aggregation
groups shall be utilized in determining the present value of cumulative accrued
benefits. Furthermore, for purposes of making the aforementioned calculations
with respect to defined benefit plans, proportional subsidies, and benefits not
relating to retirement benefits such as pre-retirement death and disability
benefits and post retirement medical benefits, are to be disregarded but
nonproportional subsidies are to be taken into account.
.1 During any plan year that this Trust and Plan is top-heavy,
the Participating Companies shall make a contribution on behalf of each non-key
employee who is a participant on the allocation date coinciding with the last
day of such year, or was a participant whose employment terminated on or as of
said allocation date which is at least equal to the greater of (a) or (b) below
where:
(a) equals the lesser of (i) or (ii) below where
(i) equals three percent (3%) of the non-key employee's
compensation from the Participating Companies and all
affiliates during the plan year; and
(ii) equals the largest percentage of compensation from the
Participating Companies and all affiliates (disregarding any
such compensation in excess of Two Hundred Thousand Dollars
($200,000) per plan year per key employee) provided to any
key employee by the contributions of the Participating
Companies; and
(b) equals such other percent of the non-key employee's compensation
from the Participating Companies and all affiliates as may be
necessary to satisfy the requirements of Section 401 and 416 of
the Code as prescribed by the Secretary of the Treasury in lawful
regulations.
For purposes of determining the percentage set forth in subparagraph (a)(ii)
above, the Participating Companies' contributions made pursuant to Section 4.1
hereof in accordance with a participant's election under said Section shall be
taken into account.
If this Trust and Plan is top-heavy for a plan year and if a
participant who is a non-key employee is also a participant in any other defined
contribution plan maintained by a Participating Company, the minimum
contribution provided hereunder shall be provided before any minimum under such
other plan and shall reduce the amount of the top-heavy minimum, if any,
required thereunder. Furthermore, if this Trust and Plan is top-heavy for a
plan year and if a participant who is a non-key employee is also a participant
in any defined benefit plan maintained by a Participating Company, the minimum
benefit provided under such defined benefit plan shall be provided before any
minimum contribution under this Trust and Plan and the benefit provided under
such defined benefit plan shall be offset by the actuarial equivalent of the
amounts, if any, credited to the participant's accounts for such year under this
Trust and Plan and any other defined contribution plan maintained by a
Participating Company.
.1 During any plan year that this Trust and Plan is top-heavy,
the limitations on annual additions and annual benefits set forth in Section 415
(e) of the Code shall be modified by the substitution of the phrase "one hundred
percent (100%)" for the phrase "one hundred twenty-five percent (125%)" wherever
the latter phrase appears in said Section 415 (e) and by the substitution of the
amount 'Forty-One Thousand Five Hundred Dollars ($41,500)" for the amount "Fifty
One Thousand Eight Hundred Seventy-Five Dollars ($51,875)" wherever the latter
amount appears in Section 415(e)(6)(B)(i) of said Code.
.2
2
MISCELLANEOUS
.1 No insurance company shall be deemed to be a party to this
Trust and Plan for any purpose, nor shall it be responsible for the validity of
this Trust and Plan. No such company shall be required to look into the terms
of this Trust and Plan or question any action of the Trustee hereunder, nor be
responsible to see that any action of the Trustee is authorized by the terms of
this Trust and Plan. Any such insurance company shall be fully discharged from
any and all liability for any amount paid to the Trustee or paid in accordance
with the direction of the Trustee, or for any change made or action taken by
such insurance company upon such direction, and no insurance company shall be
obligated to see to the distribution or further application of any moneys so
paid by it. The certificate of the Trustee may be received by any insurance
company as conclusive evidence of any of the matters mentioned in this Trust and
Plan, and each insurance company shall be fully protected in taking or
permitting any action on the faith thereof and shall incur no liability or
responsibility for doing so.
.2 In the event a Participating Company shall at any time be
judicially declared bankrupt or insolvent, or in the event of its dissolution,
merger or consolidation, without any provisions being made for the continuation
of this Trust and Plan, the Trust and Plan created hereunder shall terminate
with respect to such Participating Company and the Trustee shall make
distributions as provided in Section 21.3 hereof.
.3 In the event the Trust and Plan shall merge or consolidate
with, or transfer any of its assets or liabilities to any other plan, each
participant shall be entitled to receive, if the Trust and Plan were terminated
immediately thereafter, a benefit which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer if the Trust and Plan had then terminated, in
accordance with Section 414(1) of the Code and Section 208 of the Employee
Retirement Income Security Act of 1974 and any lawful regulations issued
thereunder.
.4 Neither anything contained herein, nor any contribution made
hereunder, nor any other acts done in pursuance of this Trust and Plan, shall be
construed as entitling any participant to be continued in the employ of any
Participating Company or any affiliate for any period of time nor as obliging
any Participating Company or any affiliate to keep any participant in its employ
for any period of time, nor shall any employee of any Participating Company or
any affiliate nor anyone else have any rights whatsoever, legal or equitable,
against any Participating Company or the Trustee as a result of this Trust and
Plan except those expressly granted to him hereunder.
.5 No contribution or payment by a Participating Company to the
Trustee of this Trust and Plan, nor any income of the Trust Fund, shall in any
event revert or be credited to or be used for the benefit of any Participating
Company, and all such contributions, payments and income shall be used solely
and exclusively for the benefit of the participants and their beneficiaries
under this Trust and Plan, except that the Trustee shall return to a
Participating Company upon written direction of the Administrator:
(a) any contributions made by the Participating Company by a
mistake of fact, provided such contributions are returned to the
Participating Company within one (1) year after the date such
contributions were made;
(b) any contributions made for plan years during which this
Trust and Plan does not (either initially or because of an
amendment) qualify under Section 401(a) of the Code, provided
such contributions are returned to the Participating Company
within one (l) year after the date of denial of qualification;
and
(c) any contributions, to the extent that their deduction is
disallowed under Section 404 of the Code, provided that such
disallowed contributions are returned to the Participating
Company within one (l) year after the disallowance of the
deduction.
.6 Whenever any pronoun is used herein, it shall be construed
to include the masculine pronoun, the feminine pronoun or the neuter pronoun as
shall be appropriate. Wherever the singular is used herein it shall include the
plural and vice-versa as the context shall require.
.7 This Trust and Plan shall be construed under and in
accordance with the law and laws of the State of Delaware and of the United
States of America.
.8 Notwithstanding any provision of this Amendment and
Restatement to the contrary, this Amendment and Restatement shall not affect the
balances credited to the accounts of any participant as of the restatement date,
which balances shall remain credited to his accounts until such date subsequent
to the retirement date as of which his accounts shall be credited, debited or
adjusted as provided in this Trust and Plan.
IN WITNESS WHEREOF, HANDEX ENVIRONMENTAL RECOVERY, INC., by its
appropriate officers duly authorized, and JOHN T. ST. JAMES, the Trustee, have
caused this Trust and Plan to be executed this ___ day of ___________, 1994,
effective for all purposes, except as otherwise provided herein, as of
January 1, 1994.
HANDEX ENVIRONMENTAL RECOVERY, INC.
By
-----------------------------------
And
----------------------------------
-------------------------------------
JOHN T. ST. JAMES, Trustee
091/18746CJF.60K
EXHIBIT A
Participating Company Adoption Date
Handex Environmental Recovery, Inc. January 1, 1989
Handex Environmental Management, Inc. January 1, 1989
Handex of New Jersey, Inc. January 1, 1989
Handex of Maryland, Inc. January 1, 1989
Handex of Florida, Inc. January 1, 1989
Handex of New England, Inc. January 1, 1989
Handex of Ohio, Inc. March 11, 1993
Handex of the Carolinas, Inc. August 15, 1991
Handex of Colorado, Inc. January 11, 1994
Handex of Illinois, Inc. September 13, 1994
091/18746CJF.60K
EXHIBIT 21.1
SUBSIDIARIES OF HANDEX
Handex Corporation has the following subsidiaries, all of which are incorporated
in the State of Delaware, except New Horizons Franchising, Inc., which is a
California corporation.
1. Handex of New Jersey, Inc.
2. Handex of Maryland, Inc.
3. Handex of Florida, Inc.
4. Handex of New England, Inc.
5. Handex Environmental Management, Inc.
6. Handex of the Carolinas, Inc.
7. Handex of Illinois, Inc.
8. Handex of Ohio, Inc.
9. Handex of Colorado, Inc.
10. Handex Environmental, Inc.
11. Handex of Pennsylvania, LLC
12. New Horizons Computer Learning Centers, Inc.
13. New Horizons Education Corporation
14. New Horizons Franchising, Inc.
15. New Horizons Computer Learning Center of Chicago, Inc.
16. New Horizons Computer Learning Center of Metropolitan
New York, Inc.
The Board of Directors and Stockholders
Handex Corporation:
We consent to incorporation by reference in the Registration Statement (No. 33-
32239) on Form S-8 of Handex Corporation of our report dated February 16, 1996,
relating to the consolidated balance sheets of Handex Corporation and
subsidiaries as of December 30, 1995 and December 31, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 30, 1995, and all
related schedules, which report appears in the December 30, 1995 annual report
on Form 10-K of Handex Corporation.
/s/ KPMG Peat Markwick LLP
- - -----------------------------
KPMG Peat Marwick LLP
Cleveland, Ohio
March 28, 1996
March 28, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
Pursuant to the requirements of the Securities and Exchange Act of 1934, we
are transmitting herewith the attached Form 10-K.
Very truly yours,
Handex Corporation
By: /s/ John T. St. James
--------------------------
John T. St. James
Vice President, Treasurer
