<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
-----------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
VITALINK PHARMACY SERVICES, INC.
--------------------------------
COMMISSION FILE NUMBER 0-19820
------------------------------
Incorporated in Delaware E.I. 37-0903482
- ------------------------ ---------------
1250 E. Diehl Road, Suite 208, Naperville, Illinois 60563
- ---------------------------------------------------------
Telephone: (630) 245-4800
- ---------
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 twelve months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
25,857,275 Common Shares were outstanding as of January 14, 1998.
This report contains 13 pages.
1
<PAGE>
VITALINK PHARMACY SERVICES, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
FINANCIAL STATEMENTS
The consolidated balance sheet as of November 30, 1997, the consolidated income
statements for the three and six month periods ended November 30, 1997 and 1996,
and the consolidated statements of cash flows for the six month periods ended
November 30, 1997 and 1996, have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position,
results of operations and cash flows at November 30, 1997, and for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's May 31, 1997 Annual Report to shareholders,
previously filed with the Commission. The results of operations for the three
and six month periods ended November 30, 1997 and 1996, and cash flows for the
six month period ended November 30, 1997 and 1996, are not necessarily
indicative of the operating results or cash flows for the full year.
2
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share data)
<TABLE>
<CAPTION>
November 30, 1997 May 31, 1997
----------------- ------------
(unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 12,554 $ 3,660
Receivables (net of allowances of $7,564 and $4,872) 85,414 79,745
Inventories 26,558 25,193
Deferred income taxes 9,858 9,590
Due from affiliate 2,271 --
Other 1,168 1,829
-------- --------
Total current assets 137,823 120,017
Property and equipment, at cost (net of accumulated depreciation) 24,581 22,908
Due from affiliate -- 1,053
Pharmacy contracts (net of amortization of $6,110 and $4,579) 15,828 39,313
Goodwill (net of amortization of $9,686 and $5,705) 342,480 326,884
Other assets (net of amortization of $5,359 and $4,689) 5,408 6,630
-------- --------
Total assets $526,120 $516,805
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 21,526 $ 22,867
Accrued expenses 19,602 20,979
Current portion of long-term debt 2,476 2,165
-------- --------
Total current liabilities 43,604 46,011
-------- --------
Long-term debt 100,733 104,873
-------- --------
Deferred income taxes and other long-term liabilities 16,035 17,390
-------- --------
Stockholders' equity
Common stock (80,000,000 shares authorized,
25,739,171 and 25,402,510 shares issued and
outstanding, $.01 par value) 258 254
Contributed capital 289,053 281,956
Retained earnings 76,437 66,321
-------- --------
Total stockholders' equity 365,748 348,531
-------- --------
Total liabilities & stockholders' equity $526,120 $516,805
======== ========
</TABLE>
Note: The balance sheet at May 31, 1997 has been taken from the audited
financial statements at that date.
3
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Consolidated Income Statements
(unaudited)
(in thousands, except earnings per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
November 30 November 30
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES $123,257 $43,346 $241,515 $82,719
COST OF GOODS SOLD 63,991 22,154 125,343 42,159
-------- ------- -------- -------
GROSS PROFIT 59,266 21,192 116,172 40,560
-------- ------- -------- -------
OPERATING EXPENSES
Payroll expenses 29,082 9,387 56,720 17,585
Selling, general and
administrative expenses 10,446 3,465 20,987 6,807
Provision for doubtful accounts 2,166 735 4,504 1,351
Unusual item -- -- 3,087 --
Depreciation and amortization 4,882 1,348 9,059 2,595
-------- ------- -------- -------
Total operating expenses 46,576 14,935 94,357 28,338
-------- ------- -------- -------
INCOME FROM OPERATIONS 12,690 6,257 21,815 12,222
INTEREST INCOME AND OTHER, NET 215 281 518 545
INTEREST EXPENSE (1,774) (42) (3,552) (53)
-------- ------- -------- -------
INCOME BEFORE INCOME TAXES 11,131 6,496 18,781 12,714
INCOME TAXES 4,969 2,610 8,665 5,116
-------- ------- -------- -------
NET INCOME $ 6,162 $ 3,886 $ 10,116 $ 7,598
======== ======= ======== =======
AVERAGE SHARES OUTSTANDING 25,622 13,980 25,504 13,980
======== ======= ======== =======
EARNINGS PER SHARE $0.24 $0.28 $0.40 $0.54
======== ======= ======== =======
</TABLE>
4
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
November 30
1997 1996
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 10,116 $ 7,598
Reconciliation of net income to cash provided by operating activities:
Depreciation and amortization 9,059 2,595
Provision for doubtful accounts 4,504 1,351
Decrease in deferred income taxes (155) (3)
Change in assets and liabilities, net of acquisitions:
Change in receivables (10,860) (2,487)
Change in inventories (551) (1,558)
Change in other current assets 160 (95)
Change in accounts payable and accrued expenses (3,990) (734)
Change in income taxes payable (1,077) 99
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 7,206 6,766
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in property and equipment (4,301) (1,927)
Decrease (increase) in due from affiliate (1,218) 3,493
Acquisition of pharmacy business (5,550) (5,291)
Payment for termination of Non-Competition Agreement 18,500 --
Deferred payments on previous acquisitions (314) (900)
Other items, net (1,911) (556)
-------- -------
NET CASH PROVIDED BY
(USED IN) INVESTING ACTIVITIES 5,206 (5,181)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of debt (1,601) (1,337)
Proceeds from long-term borrowings 983 --
Net repayment under revolving credit facility (2,900) --
-------- -------
NET CASH USED IN FINANCING ACTIVITIES (3,518) (1,337)
-------- -------
NET INCREASE IN CASH 8,894 248
CASH AT BEGINNING OF PERIOD 3,660 889
-------- -------
CASH AT END OF PERIOD $ 12,554 $ 1,137
======== =======
</TABLE>
5
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended November 30, 1997
(unaudited)
(dollars in thousands)
Reclassifications
- -----------------
Certain reclassifications have been made in prior year financial statements to
conform to the current year presentation.
Mergers and Acquisitions
- ------------------------
Fiscal 1998
On September 30, 1997, Vitalink Pharmacy Services, Inc., (the "Company"),
acquired Home Care Medical Equipment, Inc. ("Home Care") located in Oklahoma
City, Oklahoma in exchange for 351,318 shares of the Company's common stock.
Additional shares of the Company's common stock may be issued contingent on a
yet to be determined closing balance sheet adjustment.
On July 11, 1997, the Company acquired certain assets of the institutional
pharmacy and medical supply businesses of Nationwide Pharmacies, Inc., located
in Upper Marlboro, Maryland, for $5,550 in cash plus the assumption of $30 in
liabilities and future contingent payments not to exceed $400 based on the
achievement of certain future profitability objectives.
Fiscal 1997
TeamCare Acquisition
- --------------------
On February 12, 1997, the Company merged with TeamCare, Inc. ("TeamCare"),
GranCare, Inc.'s ("GranCare") institutional pharmacy business, by acquiring all
of the outstanding shares of GranCare after the spin-off of its skilled nursing
business (the "TeamCare Merger"). The Company issued approximately 11,400,000
shares of common stock and funded the redemption of approximately $100,000 face
value of GranCare senior subordinated notes. The merger was accounted for using
the purchase method of accounting with an effective date of February 1, 1997
and, accordingly, the results of operations of TeamCare have been included in
the Company's consolidated financial statements since February 1, 1997. The
purchase price of $332,500 was allocated to the net assets acquired based on
their estimated fair values at the date of the merger. The excess of the
purchase price over the fair value of net assets acquired was approximately
$296,858 and has been recorded as goodwill, which is being amortized on a
straight-line basis over 40 years.
In September 1997, the Company reached a settlement in its lawsuit against
GranCare to enforce a Non-Competition Agreement that the parties entered into as
part of the Company's acquisition of TeamCare. Under the terms of a Termination
and Release Agreement by and between the Company, GranCare, Manor Care, Inc.,
Apollo Management L.P. and Living Centers of America, Inc., GranCare agreed to
pay $18,500 to Vitalink in consideration for the cancellation of and termination
of the Non-Competition Agreement.
6
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended November 30, 1997
(unaudited)
(dollars in thousands)
Mergers and Acquisitions (continued)
- ------------------------------------
In November, Vitalink received the $18,500 payment from GranCare. In addition,
on November 24, 1997, the Company received a notice of non-renewal from GranCare
which effectively terminates the pharmaceutical supply agreement between
Vitalink and GranCare on February 28, 2002. The Company was also notified that
it has been released from its limited guarantee to Health Retirement Properties
Trust that was entered into in connection with the TeamCare acquisition.
Accordingly, Vitalink reduced the amount of the purchase price previously
allocated to the GranCare relationship (pharmaceutical supply agreement) from
$34,262 to $11,400 and reduced the amortization period from 20 years to 6 years.
The TeamCare purchase price has been allocated, on a preliminary basis, to the
net assets purchased and liabilities assumed as presented below as of November
30, 1997:
<TABLE>
<S> <C>
Working capital $ 21,066
Property and equipment 12,832
Pharmaceutical Supply Agreement 11,400
Other assets 2,240
Goodwill 296,858
Other liabilities (11,896)
--------
Purchase price $332,500
========
</TABLE>
The following unaudited pro forma information for the three and six months ended
November 30,1996 presents a summary of the consolidated results of operations of
the Company and TeamCare as if the merger had occurred at the beginning of
fiscal 1996 after giving effect to goodwill amortization, acquisition debt
interest expense and related income tax effects:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
<S> <C> <C>
Net revenues $110,442 $217,372
Net income $ 6,009 $ 11,127
Earnings per share $ 0.24 $ 0.44
</TABLE>
The pro forma information is presented for informational purposes only and is
not necessarily indicative of results that would have occurred had the merger
been effective at the beginning of fiscal 1996, nor is the pro forma information
necessarily indicative of results that will be obtained in the future.
7
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Three and Six Months Ended November 30, 1997
(unaudited)
(dollars in thousands)
Mergers and Acquisitions (continued)
- ------------------------------------
Other Acquisitions
- ------------------
On July 31, 1996, the Company acquired Medisco Pharmacies, Inc., located in San
Bernardino, California for $5,291 in cash plus the assumption of $2,510 in
liabilities and future payments totalling $1,150.
The above acquisitions are accounted for under the purchase method of accounting
with the assets recorded at their estimated fair market values at the date of
acquisition. The estimated fair market values of pharmacy contracts acquired
are amortized over the expected remaining lives not to exceed 10 years including
estimated contract renewals. Goodwill, representing the excess of acquisition
costs over the fair market value of acquired assets, is amortized over 40 years.
Liquidity and Capital Resources
- -------------------------------
The Company meets its ongoing capital requirements and operating needs from
operating cash flows. Cash flows provided by operating activities were $7,206
in the six month period ended November 30, 1997 compared with $6,766 in the
prior year period. Effective October 1, 1997, the Company assumed
responsibility of managing all of its cash activities through the implementation
of an integrated cash management program. Previously, the Company's cash
activities, except for the activities of the TeamCare pharmacies, were managed
through an arrangement with Manor Care, Inc. ("Manor Care").
As Manor Care no longer manages the Company's cash activities, the Company now
receives direct payment from Manor Care for the delivery of products and
services to Manor Care and certain patients in Manor Care operated facilities.
As a result, receivables representing approximately $3,682 of amounts billed in
the last month of the quarter ended November 30, 1997 are included in the
consolidated balance sheet and classified as "Receivables".
Except for the issuance of the Company's common stock for certain acquisitions,
previously acquired businesses were financed with operating cash flows or
borrowings under the Company's revolving credit facility. The purchase
contracts for acquisitions generally stipulate future payments contingent upon
achievement of future profitability objectives.
In connection with the TeamCare Merger, the Company entered into a credit
facility (the "Credit Facility") with various banks providing for unsecured
borrowings of up to $200,000. Funds used to redeem substantially all of
GranCare's $100,000 face value senior subordinated notes were obtained through
borrowings under the Credit Facility. At November 30, 1997, there were $94,500
in borrowings outstanding under the Credit Facility and the Company was in
compliance with the terms of the Credit Facility.
8
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Three Months Ended November 30, 1997
(unaudited)
(dollars in millions)
Liquidity and Capital Resources (continued)
- ------------------------------- ----------
At November 30, 1997, $105,500 was available under the Credit Facility and
$12,554 of cash was available for general corporate working capital, potential
acquisitions of pharmacies, the internal development of additional pharmacies
and capital expenditures.
The Company believes that its current cash balances, cash generated from
operations and available funds under the Credit Facility will be adequate to
meet the Company's foreseeable capital and other cash requirements.
Results of Operations
- ---------------------
Net revenues for the three months ended November 30, 1997 were $123,257, an
increase of $79,911 over the same period last year. Net revenues in the six
months ended November 30, 1997 were $241,515, an increase of $158,796 over the
same period last year. The increase in revenues is primarily attributable to
TeamCare sales, which were $69,762 and $140,026 for the three and six month
periods ended November 30, 1997.
Gross profit for the three months ended November 30, 1997 was $59,266, an
increase of $38,074 over the same period last year. Gross profit for the six-
month period ended November 30, 1997 was $116,172, an increase of $75,612 over
the same period last year. The gross profit margin was 48.1% for the three and
six months ended November 30, 1997, compared with 48.9% and 49.0% for the same
three and six month periods last year. The reduction in gross margin percentage
was due to a variety of pricing related factors, including certain third party
reimbursement reductions and customer base changes.
During the second quarter of 1998, operating expenses increased $31,641 to
$46,576 or 37.8% of net revenues compared with $14,935 or 34.4% of net revenues
in the second quarter of 1997. Included in operating expenses for the six months
ended November 30, 1997 is an unusual item representing a non-recurring pre-tax
charge of $3,087 relating to costs of the August 1997 resignation of the
Company's Chief Executive Officer ($2,737) and the consolidation of all
corporate functions in Naperville, Illinois ($350). For the six-month period
ended November 30, 1997, excluding the unusual item, operating expenses
increased $62,932 to $91,270 or 37.8% of net revenues compared with $28,338 or
34.3% of net revenues as of the six-month period ended November 30, 1996.
The increase in operating expenses is primarily attributable to the inclusion of
TeamCare's results effective February 1, 1997. The increase in operating costs
as a percentage of net revenue is mainly attributable to TeamCare's higher
payroll costs as a percentage of revenue, TeamCare's higher selling, general and
administration costs and the amortization of goodwill and pharmacy contracts
arising from the TeamCare Merger ($3,591).
9
<PAGE>
Vitalink Pharmacy Services, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Three Months Ended November 30, 1997
(unaudited)
(dollars in millions)
Results of Operations (continued)
- ---------------------------------
The increase in interest expense is largely attributable to interest expense
incurred under Credit Facility borrowings used to consummate the TeamCare
Merger. The effective income tax rate in the second quarter of 1998 increased to
44.6% compared with 40.2% in the year earlier period. In the six-month period
ended November 30, 1997 the effective income tax rate increased to 46.1%
compared with 40.2% in the prior year six-month period. The increase in the
effective tax rate is primarily due to the non-deductible nature of the TeamCare
Merger goodwill.
Earnings Per Share
- ------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share ("SFAS No. 128"),
which is effective for interim and annual periods ending after December 15,
1997. Early adoption is prohibited.
Had the Company adopted SFAS No. 128 in the first quarter of fiscal 1998, basic
earnings and diluted earnings per share would have been $.24 and $.28 for the
three months ended November 30, 1997 and 1996, respectively. For the six months
ended November 30, 1997 and 1996, basic earnings per share would have been $.40
and $.54, respectively, and diluted earnings per share would have been $.39 and
$.53, respectively.
Other Matters
- -------------
In October 1997, the Company engaged an investment banking firm to review
strategic business alternatives in connection with Manor Care's announcement to
explore strategic alternatives with respect to its 50.5% ownership interest in
the Company.
10
<PAGE>
VITALINK PHARMACY SERVICES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
- -------
At the annual shareholders' meeting on November 20, 1997, the
shareholders elected the directors who had been nominated by the
Company. The number of votes cast was as follows:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
Stewart W. Bainum, Jr. 19,368,343 68,531
Joseph R. Buckley 19,368,707 68,167
Anil K. Gupta 19,416,279 20,595
James A. MacCutcheon 19,368,712 68,162
James H. Rempe 19,368,712 68,162
Essel W. Bailey, Jr. 19,418,793 18,081
</TABLE>
The shareholders also voted to approve resolutions to adopt the
Amended and Restated 1996 Long-Term Incentive Plan and the 1997 Non-
Employee Director Stock Compensation Plan. The number of votes cast
was as follows:
<TABLE>
<CAPTION>
Broker -
For Against Abstain Non Votes
--- ------- ------- ---------
<S> <C> <C> <C> <C>
1996 Amended and
Restated Incentive Plan 18,782,509 646,020 8,345 -0-
1997 Non-Employee Director
Stock Compensation Plan 19,078,067 350,280 8,527 -0-
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
- -------
Exhibits
--------
4.3 Vitalink Pharmacy Services, Inc. Retirement Savings and
Investment Plan
4.4 Vitalink Pharmacy Services, Inc. Retirement Savings and
Investment Plan Master Trust Agreement
4.5 Vitalink Pharmacy Services, Inc. Non-Qualified Retirement
Savings and Investment Plan
10.32 Amendment to Master Agreement for Infusion Therapy Products and
Services, dated as of September 19, 1997, by and between the
Company and Manor Care Health Services, Inc.
10.33 Amendment to Master Pharmacy Consulting Agreement, dated as of
September 19, 1997, by and between the Company and Manor Care
Health Services, Inc.
11
<PAGE>
VITALINK PHARMACY SERVICES, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Exhibits (continued)
--------------------
10.34 Amendment to Pharmacy Services Consultant Agreement, dated as
of September 19, 1997, by and between the Company and Manor
Care Health Services, Inc.
10.35 Amendment to Master Agreement for Pharmacy Services, dated as
of September 19, 1997, by and between the Company and Manor
Care Health Services, Inc.
10.36 Employment Agreement dated November 1, 1997, between the
Company and Thomas J. Santoro.
There were no reports filed on Form 8-K for the three months ended
November 30, 1997.
12
<PAGE>
VITALINK PHARMACY SERVICES, INC. AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VITALINK PHARMACY SERVICES, INC.
--------------------------------
(Registrant)
Date: January 14, 1998 By: /s/ Scott T. Macomber
------------------------------
Scott T. Macomber
Senior Vice President, Finance and
Chief Financial Officer
13
<PAGE>
EXHIBIT 4.3
LOUIS KRAVITZ & ASSOCIATES, INC.
Vitalink Pharmacy Services, Inc.
Retirement Savings and Investment Plan
It is hereby certified that the following is a true and
correct copy of the Louis Kravitz & Associates, Inc.
Master 401(k) Profit Sharing Plan,
as adopted by the Company in the Adoption Agreement.
LOUIS KRAVITZ & ASSOCIATES, INC.
BY /s/ Louis Kravitz
-----------------------------
Copyright (c) 1994 Louis Kravitz & Associates, Inc. All Rights Reserved.
November 1, 1994
20
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
Article I General....................................................I-1
Article II Definitions................................................II-1
Article III Eligibility, Participation and Service.....................III-1
Article IV Contributions and Forfeitures..............................IV-1
Article V Allocations and Loans......................................V-1
Article VI Deferrals and Hardship Withdrawals.........................VI-1
Article VII Matching Contributions, Joining
Bonuses and Coordination with Deferrals....................VII-1
Article VIII Payments of Benefits.......................................VIII-1
Article IX Age 70-1/2 Distribution Requirements.......................IX-1
Article X Joint and Survivor Annuity Requirements....................X-1
Article XI Top-Heavy Provisions.......................................XI-1
Article XII The Trust..................................................XII-1
Article XIII Administration.............................................XIII-1
Article XIV Amendments, Action by Employer
and Mergers................................................XIV-1
Article XV Plan Termination...........................................XV-1
Article XVI Adoption and Withdrawal by
Other Organization.........................................XVI-1
Article XVII Miscellaneous..............................................XVII-1
</TABLE>
<PAGE>
ARTICLE I
GENERAL
1.01 PURPOSE
This new (or amended and restated) Plan is created for the purpose of
enabling eligible employees of the Employer to secure retirement, disability and
other benefits. It is the Plan's objective to provide employees of the Employer
with a greater incentive to work efficiently, to stimulate such employees'
desire to remain with the Employer, and to develop in them a sense of
responsibility and sincere interest in the successful operation of the Employer.
The Plan is designed to qualify as a profit sharing plan for purposes of
Sections 401(a), 402, 412 and 417 of the Internal Revenue Code of 1986 (the
"Code"). The Plan also provides for (1) a qualified cash or deferred
arrangement designed to meet the requirements of Section 401(k) of the Code, and
(2) matching contributions and after-tax voluntary employee contributions
designed to meet the requirements of Section 401(m) of the Code. The Plan and
Trust are intended to meet the requirements of Sections 401(a) and 501(a) of the
Code, and applicable state law.
Contributions made pursuant to the Plan shall be for the exclusive benefit
of participants and beneficiaries, and shall be held and invested pursuant to
the terms of the Trust Agreement, which is intended to form a part of the Plan.
The provisions of the Plan and Trust shall apply only to Employees who are
employed by the Employers on or after the Effective Date specified in the
Adoption Agreement.
21
<PAGE>
1.02 QUALIFIED CASH OR DEFERRED ARRANGEMENT AND MATCHING CONTRIBUTIONS
This Plan provides for a qualified cash or deferred arrangement and
matching contributions, as defined by Sections 401(k) and 401(m), respectively,
of the Code. Accordingly, the Plan provides for three types of Employer
-----
contributions: Deferrals, Matching Contributions and Profit Sharing
Contributions (including Employer contributions to satisfy the "Top-Heavy"
requirements of Article XI). These contributions are generally allocated to the
Deferred Income Account, the Matching Contribution Account (or Joining Bonus
Account) and the Employer Contribution Account, respectively.
The Plan also permits the Company to apply different eligibility, vesting
and forfeiture rules to each type of Employer contribution. Accordingly,
definitions and Plan provisions relating to eligibility, vesting and forfeitures
shall be applied according to the type of Employer contribution to which such
definition or Plan provision relates.
1.03 EFFECTIVE DATES
If this Plan is a new plan (that is, the Original Effective Date is in
calendar year 1989 or later), the provisions of this Plan shall be effective as
of the Original Effective Date.
If this Plan is an amendment and restatement of an existing plan to comply
with current and prior tax laws, the provisions of this Plan shall generally be
effective as of the later of (i) the Original Effective Date or (ii) the first
day of the Plan Year beginning in 1987. Notwithstanding the preceding, certain
provisions relating to changes to the following laws or subjects shall be
effective as follows:
22
<PAGE>
LAW OR SUBJECT EFFECTIVE DATE
-------------- --------------
1. Retirement Equity Act of 1984 Plan Years beginning in 1985
(REA) (in general)
2. Loan requirements (REA-related) Loans made after August 18, 1985
3. Section 417(a)(2)(A) of the Code Plan Years beginning after
(REA technical correction October 22, 1986
regarding spousal waiver)
4. Section 415 of the Code Limitation Years beginning in 1987
5. Omnibus Budget Reconciliation No provisions necessary; Plan
Act of 1986 already complied prior to Plan
Years beginning in 1988.
6. Leased Employees Services performed after
December 31, 1986
7. Section 401(a)(27) of the Code Plan Years beginning in 1986
(no profits required for profit
sharing contribution)
8. Loan requirements (Department of a. Loans made after
Labor regulations) October 18, 1989, and
b. Loans made on or after
the last day of the Plan
Year beginning in 1989.
9. Tax Reform Act of 1986 (most Plan Years beginning in 1989
provisions)
10. Section 411(d)(6) of the Code Plan Years beginning in 1989
(for "existing" plans - see
IRS regulations)
11. Hardship withdrawals from a. Withdrawals made after
Deferred Income Accounts March 31, 1989, and
b. Withdrawals made in Plan Years
beginning after 1988.
23
<PAGE>
1.04 ADDITIONAL REQUIREMENTS FOR PLANS BENEFITING OWNER-EMPLOYEES
If this Plan provides contributions or benefits for one or more Owner-
Employees who control both the business for which this Plan is established and
one or more other trades or businesses, this Plan and the plan established for
other trades or businesses must, when looked at as a single plan, satisfy
Sections 401(a) and (d) of the Code for the Employees of this and all other
trades or businesses.
If the Plan provides contributions or benefits for one or more Owner-
Employees who control one or more other trades or businesses, the employees of
the other trades or businesses must be included in a plan which satisfies
Sections 401(a) and (d) of the Code and which provides contributions and
benefits not less favorable than provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two or
more trades or businesses which are not controlled and the individual controls a
trade or business, then the contributions or benefits of the employees under the
plan of the trades or businesses which are controlled must be as favorable as
those provided for him under the most favorable plan of the trade or business
which is not controlled.
For purposes of the preceding paragraphs, an Owner-Employee, or two or more
Owner-Employees, will be considered to control a trade or business if the Owner-
Employee, or two or more Owner-Employees together:
(a) own the entire interest in an unincorporated trade or business, or
(b) in the case of a partnership, own more than 50% of either the
capital interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more Owner-
Employees shall be treated as owning any interest in a partnership which is
owned, directly or indirectly, by a partnership which such Owner-Employee, or
such two or more Owner-Employees, are considered to control within the meaning
of the preceding sentence.
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1.05 NO LIFE INSURANCE
This Plan does not provide for the purchase of individual life insurance
contracts on the life of any Participant, the premiums for which are charged to
the Account of such Participant. If the Company wishes to provide such
insurance, it must amend the Plan to include all applicable provisions regarding
insurance (e.g. incidental death benefit rules).
1.06 CHANGES TO PLAN PROVISIONS
This Plan and Trust may be amended either by the adoption of an
individually drafted amendment or the execution of another Adoption Agreement.
The provisions of the amended Adoption Agreement shall apply only to Employees
who are employed by the Employer(s) on or after the Plan Amendment Effective
Date specified in the Adoption Agreement.
Any amendment which affects the Vested Percentage of a Participant shall be
subject to the following conditions:
(a) A Participant's Vested Percentage shall be no less than his Vested
Percentage as of the later of the date such amendment is adopted or the
date such amendment is effective.
(b) A Participant who has at least 3 Years of Service (5 Years of
Service for Plan Years beginning before January 1, 1989) shall be permitted
to elect (in accordance with procedures prescribed by the Administrator) to
have his Vested Percentage computed under the vesting schedule in effect
prior to such amendment.
If any provision of this Plan (including any applicable Plan rules and
procedures) results in any discrimination prohibited by Section 401(a)(4) of the
Code, such provision shall be rendered invalid (including any benefit accrued
under such provision). Instead, the affected provision shall be operated in a
manner consistent with Section 401(a)(4) of the Code.
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1.07 PERMITTED DISPARITY
If an Employer maintains another plan which (a) provides for permitted
disparity under Section 401(l) of the Code, and (b) covers a Participant of this
Plan, then the Integrated Allocation Method may not be selected in Section 5.06.
---
The intent of this Section 1.07 is to prevent an accidental violation of the
"overall permitted disparity" limits of regulation 1.401(l)-5. (Note: The
----
Company may use permitted disparity in this Plan and in another plan of an
Employer by amending the Plan to include the requirements of regulation
1.401(l)-5(a)(2). However, the Company shall then be considered to have adopted
an "individually-designed plan", rather than a "volume submitter plan".)
1.08 COMPLIANCE WITH SECTIONS 410(B) AND 401(A)(26) OF THE CODE
If the Plan (or a portion of the Plan) fails to satisfy Section 410(b) of
the Code for a Plan Year (1) even after all administrative methods have been
applied (e.g. designating two or more separate plans of the Employer as a single
plan), and (2) solely because Section 5.05 or 7.04(b) [whichever is applicable]
requires the completion of more than 500 Hours of Service and/or employment on
the last day of the Plan Year, then the following individuals (in the following
order and only to the extent necessary to satisfy Section 410(b) of the Code for
such Plan Year) shall also be eligible for an allocation of Profit Sharing
Contributions or Matching Contributions [whichever is applicable] for such Plan
Year:
(a) Participants (but not Inactive Participants who become Inactive
Participants during the Plan Year) who (i) are still employed by the
Employer on the last day of the Plan Year, and (ii) complete at least 999
Hours of Service during the Plan Year;
(b) Step (a) shall be applied again, but substituting "998 Hours of
Service" for "999 Hours of Service" in clause (ii) of step (a). This step
(b) shall be repeated as many times as necessary to satisfy Section 410(b)
of the Code for the Plan Year, by successively reducing the Hours of
Service requirement by one Hour each time;
(c) Inactive Participants who (i) become Inactive Participants during
the Plan Year, (ii) are still employed by the Employer on the last day of
the Plan Year, and (iii) complete at least 999 Hours of Service during the
Plan Year;
(d) Step (c) shall be applied again, but substituting "998 Hours of
Service" for "999 Hours of Service" in clause (iii) of step (c). This step
(d) shall be repeated as many times as necessary to satisfy Section 410(b)
of the Code for the Plan Year, by successively reducing the Hours of
Service requirement by one Hour each time;
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(e) Participants (but not Inactive Participants who become Inactive
Participants during the Plan Year) who (i) are not employed by the Employer
---
on the last day of the Plan Year, and (ii) complete at least 999 Hours of
Service during the Plan Year;
(f) Step (e) shall be applied again, but substituting "998 Hours of
Service" for "999 Hours of Service" in clause (ii) of step (e). This step
(f) shall be repeated as many times as necessary to satisfy Section 410(b)
of the Code for the Plan Year, by successively reducing the Hours of
Service requirement by one Hour each time (but not below 500 Hours of
Service);
(g) Inactive Participants who (i) become Inactive Participants during
the Plan Year, (ii) are not employed by the Employer on the last day of the
---
Plan Year, and (iii) complete at least 999 Hours of Service during the Plan
Year;
(h) Step (g) shall be applied again, but substituting "998 Hours of
Service" for "999 Hours of Service" in clause (iii) of step (g). This step
(h) shall be repeated as many times as necessary to satisfy Section 410(b)
of the Code for the Plan Year, by successively reducing the Hours of
Service requirement by one Hour each time (but not below 500 Hours of
Service).
If the Plan fails to satisfy Section 401(a)(26) of the Code for a Plan
Year, then rules similar to the foregoing rules shall become applicable.
1.09 REVISED $150,000 COMPENSATION LIMIT UNDER
CODE SECTION 401(A)(17)
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect
for a calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this
Plan to the limitation under Section 401(a)(17) of the Code shall mean the OBRA
'93 annual compensation limit set forth in this provision.
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If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
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ARTICLE II
DEFINITIONS
Where the following words and phrases appear in this Plan, they shall have the
respective meanings set forth below, unless the context clearly indicates to the
contrary:
2.01 "ACCOUNT" OR "ACCOUNTS" shall mean the records relating to any (if
one exists) of the following (depending upon its usage in the applicable
Plan provision): (a) Deferred Income Account, (b) Employee Contribution
Account, (c) Employer Contribution Account, (d) Forfeiture Account, (e)
Joining Bonus Account, (f) Matching Contribution Account, (g) Prior Plan
Account, (h) Qualified Matching Contribution Account, (i) Qualified
Nonelective Contribution Account, (j) Rollover Contribution Account, and/or
(k) such other individual account(s) created by the Administrator pursuant
to the provisions of the Plan.
2.02 "ADDITIONS" shall mean the total of the following amounts allocated
to a Participant's Account with respect to each Limitation Year:
(a) Employer contributions (as defined in Section 4.01(a)) and
Forfeitures,
(b) Voluntary contributions, and
(c) Any amounts attributable to Sections 401(h), 415(l) and 419A(d)
[all relating to certain medical benefits] of the Code, but only to the
extent provided by such sections of the Code.
Notwithstanding the foregoing, Additions shall not include (i) Employer
contributions (including Deferrals), Forfeitures and voluntary contributions
which are either distributed to a Participant or held in a suspense account
(both as described in the fourth paragraph of Section 5.09) and (ii) Excess
Deferrals which are distributed in accordance with Sections 6.04(c) and (e).
In addition, for Limitation Years beginning before January 1, 1987, not all
voluntary contributions are Additions. Instead, only the lesser of (i) one-
half of the Participant's voluntary contributions, or (ii) the amount of the
Participant's voluntary contributions in excess of 6% of his Earnings for
such Limitation Year, shall be considered Additions.
2.03 "ADJUSTED GROSS EARNINGS" shall mean Gross Earnings, reduced by all
of the following items (even if includible in gross income): reimbursements
or other expense allowances, fringe benefits (cash and noncash), moving
expenses, deferred compensation and welfare benefits. In the case of certain
Self-Employed Individuals, Adjusted Gross Earnings shall mean a percentage
of his Earned Income. The preceding percentage shall be determined in
accordance with regulation 1.414(s)-1(f)(1), which takes into account what
portion of the Gross Earnings of Non-Highly Compensated Employees (as a
group) is included in the Adjusted Gross Earnings of Non-Highly Compensated
Employees (as a group).
2.04 "ADOPTION AGREEMENT" shall mean the Adoption Agreement executed by
the Employer adopting this Plan. The Adoption Agreement shall be a part of
this Plan.
2.05 "ADMINISTRATOR" shall mean the Company, or the person or persons,
or the committee named in the Adoption Agreement to administer the Plan in
accordance with Article XIII.
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2.06 "AFFILIATED COMPANY(IES)" shall mean any corporation which is a
member of a controlled group of corporations of which the Employer is a
part, and any trade or business (whether or not incorporated) which is
under common control with an Employer or an affiliated service group of
which the Employer is a member, as determined under Sections 414(b), 414(c)
and 414(m) of the Code, and for purposes of determining the "maximum
benefit" under Section 5.09, under Section 415(h) of the Code. The term
Affiliated Company shall also include any other entity required to be
aggregated with the Employer pursuant to regulations under Section 414(o)
of the Code.
2.07 "AUTHORIZED LEAVE OF ABSENCE" shall mean an absence from employment
by an Employee authorized by the Employer under the Employer's standard
personnel practices. An absence due to service in the armed forces of the
United States during a period of declared war or national emergency or
through the operation of a compulsory military service law and/or during
the period thereafter in which an Employee's reemployment rights are
guaranteed by federal law shall be considered an Authorized Leave of
Absence.
2.08 "BALANCED FUND" shall mean that portion of the Trust which shall be
invested and reinvested in types (and combinations) of investments
authorized for the Equity Fund, Fixed Income Fund and the Short-Term Income
Fund, as the Administrator, Trustee or Investment Manager shall deem
suitable.
2.09 "BENEFICIARY" shall mean the person or persons (natural or
otherwise) designated by a Member in accordance with Section 8.04 of this
Plan to receive any death benefit which shall be payable under this Plan.
2.10 "BENEFIT" shall mean the value of a Member's nonforfeitable
interest in his Account(s) which he or his Beneficiary is entitled to
receive pursuant to Article VIII. Depending upon the context in which it is
used, the term Benefit may mean a Member's Benefit attributable to a single
Account.
2.11 "Break-In-Service" shall mean either (a) or (b) below:
(a) If the Elapsed Time method of computing Years of Service is
chosen in the Adoption Agreement, any twelve consecutive month period of
severance commencing on the date an Employee experiences a Termination
of Employment or on the anniversary of such date, and during which time
he is not an Employee. Notwithstanding the foregoing, a period of
severance shall not include the period between the first and second
anniversaries of the date the Employee is first absent from work for
maternity or paternity reasons.
(b) If the Hours of Service method of computing Years of Service is
chosen in the Adoption Agreement, a Computation Period during which an
Employee fails to complete more than 500 Hours of Service.
2.12 "CODA" shall mean a cash or deferred arrangement, under which a
covered employee may elect to have his employer either (i) contribute an
amount on the employee's behalf to a trust which is a part of a tax-
qualified plan, or (ii) provide such amount to the employee in cash (or
other form of taxable benefit). A CODA shall also include a salary
reduction arrangement. A qualified CODA is a CODA which (i) satisfies the
requirements of Section 401(k) of the Code, and (ii) is part of a tax-
qualified plan.
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<PAGE>
2.13 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
2.14 "COMPANY" shall mean the corporation, partnership or sole
proprietorship named in the Adoption Agreement, including any successor to
the Company.
2.15 "COMPENSATION" shall mean those amounts elected in the Adoption
Agreement which are paid to a Participant during a Plan Year. The
Administrator may establish rules to provide that certain Compensation
earned, but not yet paid because of the timing of payroll periods/pay days,
shall be treated as "paid" if the conditions described in regulation
1.415-2(d)(5)(ii) are satisfied.
(a) If not specifically stated otherwise, any amounts that are
included or excluded from the definition of Compensation shall also
include or exclude, respectively, elective Employer contributions
attributable to such amounts made pursuant to a salary reduction
agreement which are not includible in the gross income of the Employee
under Sections 125, 402(a)(8),402(h) or 403(b) of the Code.
(b) If not specifically stated otherwise, Compensation includes
Earned Income as a Self-Employed Individual to the extent allowed under
regulation 1.414(s)-1(f)(1), which takes into account what portion of
the Gross Earnings of Non-Highly Compensated Employees (as a group) is
included in the Compensations of Non-Highly Compensated Employees (as a
group).
(c) If not specifically stated otherwise, Compensation shall
exclude all Compensation from entities other than an Employer.
(d) Compensation shall exclude all Compensation paid to an Inactive
Participant during the period he is an Inactive Participant.
Notwithstanding the first sentence of this Section, in the case of a Plan
which was originally adopted prior to May 14, 1990, and if elected in the
Adoption Agreement, Compensation shall be determined on an "accrued" basis.
However, the preceding election (if made) shall expire at the end of the
Plan Year which begins in 1991.
For Plan Years beginning in 1989 and later, Compensation shall not exceed
$200,000 (or such higher amount in accordance with Sections 401(a)(17) and
415(d) of the Code). If a Plan Year is less than 12 months, the $200,000 (or
such higher amount) shall be prorated accordingly.
If a Leased Employee becomes a Participant, his Compensation shall include
similar Compensation from the leasing organization which is attributable to
services performed for an Employer.
2.16 "Computation Period" shall mean the 12-consecutive month period
used in measuring an Employee's Year(s) of Service and Break(s)-In-Service.
In general, for purposes of determining eligibility to participate in the
Plan, the Computation Period shall be the 12-consecutive month period
starting on the Employee's Employment Commencement Date and anniversaries
thereof. However, see Section 3.01(a) regarding whether the eligibility
Computation Period will shift to a Plan Year basis. The Computation Period
used in determining Years of Service and Breaks-in-Service for purposes of
vesting shall be the Plan Year if the Hours of Service method of computing
Years of Service (as described in Section 3.05(a)) is selected in the
Adoption Agreement.
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2.17 "DEFERRAL(S)" shall mean the amount of a Participant's Compensation
withheld and contributed to the Plan in accordance with the salary reduction
agreement described in Article VI. Deferrals constitute Employer
contributions. For purposes of Sections 6.03(c) [regarding the limits of
Section 402(g) of the Code], 6.05 [regarding the ADP Test] and 7.09(a)
[regarding the ACP Test], Deferrals shall not include those Deferrals
distributed pursuant to the fourth paragraph of Section 5.09 [regarding
Section 415 of the Code].
2.18 "DEFERRED INCOME ACCOUNT" shall mean the Account of a Participant
to which Deferrals and any investment gains or losses thereon are credited.
2.19 "DISABILITY" shall mean a physical or mental condition which
permanently prevents an Employee from satisfactorily performing his usual
duties for the Employer or the duties of such other position or job which
the Employer makes available to him and for which such Employee is qualified
by reason of his training, education or experience. The determination
whether a Participant satisfies this definition of Disability shall be made
by the Administrator in accordance with nondiscriminatory rules and
procedures established by the Administrator (which may include a physical
examination, medical reports and other evidence).
2.20 "EARNED INCOME" shall mean "earned income" within the meaning of
Section 401(c)(2) of the Code as an "employee" or "owner-employee" as
defined in Sections 401(c)(l) and 401(c)(3) of the Code. That is, it shall
mean the net earnings from self-employment in the trade or business with
respect to which the Plan is established, for which personal services of the
individual are a material income-producing factor. Net earnings will be
determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to this Plan or any other qualified Plan to
the extent deductible under Code Section 404. Net earnings are further
reduced by the deduction allowed to the Employer by Code Section 164(f) for
taxable years beginning after December 31, 1989 (relating to FICA taxes on
self-employment income).
2.21 "EARNINGS" shall mean the amounts specified in the Adoption
Agreement. Earnings for any applicable period (Plan Year, Limitation Year,
etc.) is the Earnings paid (or treated as "paid" under rules described in
the first paragraph of Section 2.15 [the definition of Compensation]) during
such applicable period. However, Earnings may be determined on an "accrued"
basis if the conditions of the second "flush left" paragraph of Section 2.15
(modified by substituting the term "applicable period" for the term "Plan
Year") are satisfied.
Notwithstanding the preceding paragraph, Earnings for a Participant in a
defined contribution plan who is permanently and totally disabled (as
defined in Section 22(e)(3) of the
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Code) is the Earnings such Participant would have received for the
Limitation Year if the Participant had been paid at the rate of Earnings
paid immediately before becoming permanently and totally disabled; such
imputed Earnings for the disabled Participant may be taken into account only
if the Participant is not a Highly Compensated Employee and contributions
made on behalf of such Participant are nonforfeitable when made.
2.22 "EFFECTIVE DATE" shall mean the date specified in the Adoption
Agreement.
2.23 "ELIGIBLE EMPLOYEE" shall mean an Employee other than an Excluded
Employee who has satisfied the requirements for eligibility for
participation as set forth in the Adoption Agreement.
2.24 "EMPLOYEE" shall mean any person who is receiving remuneration for
personal services rendered to an Employer (or would be receiving such
remuneration except for an Authorized Leave of Absence) in the capacity of
an "employee," as defined in Section 3121(d)(l) or (2) of the Code (as
opposed to that of an independent contractor), but excluding nonresident
aliens who receive no U.S. earned income from the Employer. The term
Employee shall also include an individual who is (i) a Self-Employed
Individual of an Employer, or (ii) a Leased Employee of an Employer, unless
such Leased Employee is excluded pursuant to Section 2.58.
2.25 "EMPLOYEE CONTRIBUTION ACCOUNT" shall mean the Account maintained
to record a Participant's voluntary contributions and adjustments relating
thereto as provided in Section 4.03.
2.26 "EMPLOYER" or "EMPLOYERS" shall mean the Company, other adopting
Employers, if any, listed in the Adoption Agreement, and any other
Affiliated Company which may adopt this Plan in accordance with Article XVI
(including any successor to the Employer).
2.27 "EMPLOYER CONTRIBUTION ACCOUNT" shall mean the Account maintained
to record a Participant's share of the contributions of the Employer and
adjustments relating thereto.
2.28 "EMPLOYMENT COMMENCEMENT DATE" shall mean the date an Employee
first performed an Hour of Service with the Employer or any Prior Employer,
if earlier.
2.29 "ENTRY DATE" shall mean the date or dates Eligible Employees
commence participation in the Plan as specified in the Adoption Agreement.
In addition, the Effective Date and the first day of any Plan Year are Entry
Dates.
2.30 "EQUITY FUND" shall mean that portion of the Trust which shall be
invested and reinvested in common stocks, preferred stocks, or in bonds,
notes, or debentures which are convertible into common or preferred stocks,
mutual or pooled equity investment funds and the type of investments
authorized for the Short Term Income Fund as the Administrator, Trustee or
Investment Manager shall deem suitable.
2.31 "ERISA" shall mean Public Law No. 93-406, the Employee Retirement
Income Security Act of 1974, as amended from time to time.
2.32 "EXCESS COMPENSATION" shall mean a Participant's Compensation, if
any, in excess of the Integration Level.
2.33 "EXCLUDED EMPLOYEE" shall mean an Employee defined as such in the
Adoption Agreement. In addition, an Excluded Employee shall include an
Employee who is a member of a legally recognized collective bargaining unit,
but only if (i) a
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collective bargaining agreement does not provide for participation by
covered Employees in this Plan, and (ii) the representative of such
collective bargaining unit has had an opportunity to bargain in good faith
concerning retirement benefits.
2.34 "FAMILY MEMBER" shall mean an Employee who is related to a Key
Highly Compensated Employee because he is such Key Highly Compensated
Employee's spouse or lineal ascendant or descendant, or is the spouse of
such a lineal ascendant/descendant.
For purposes of applying Section 401(a)(17) of the Code to a Key Highly
Compensated Employee and his Family Members under Section 5.08 (regarding
allocations of Employer contributions), the term "Family Member" shall
include only the Key Highly Compensated Employee's spouse and lineal
descendants who have not attained age 19 by the end of the Plan Year.
2.35 "FIDUCIARIES" shall mean the Employers, the Administrator, Trustee,
any Investment Manager, and such other persons or entities designated as
Fiduciaries, but only with respect to the specific responsibilities of each
for Plan and Trust administration, all as described herein.
2.36 "FIXED INCOME FUND" shall mean that portion of the Trust which
shall be invested and reinvested in investments providing a return which is
fixed, limited or determinable in advance by the terms of the contract or
the instrument creating or evidencing such investment, such as corporate
bonds, corporate notes or corporate debentures, insurance company investment
contracts, mortgages, real estate loans secured by trust deeds, Treasury
Bonds, Treasury Bills, Treasury Notes or other such similar short-term
obligations of the United States Government or any instrumentality thereof,
in savings accounts, certificates of deposit or other interest bearing
accounts which provide a reasonable rate of interest, in commercial paper or
bankers' acceptances, in other similar securities or evidences of
indebtedness, or mutual or pooled fixed income investment funds as the
Trustee, Administrator or Investment Manager shall deem suitable.
2.37 "FORFEITURE ACCOUNT" shall mean the Account(s) established pursuant
to Section 4.02 or Section 7.07, depending upon the context in which such
term is used.
2.38 "FORFEITURE(S)" shall mean (i) the portion of a Member's Account(s)
which is forfeited because of Termination of Employment before full vesting
as determined under Section 8.01(d), or (ii) the portion of an Excess
Aggregate Contribution which is forfeited in accordance with Sections
7.13(a) or 7.14(c)(iii).
2.39 "FORM W-2 EARNINGS" shall mean amounts from an Employer ,
Affiliated Company, or any entity predecessor to the Employer that are
required to be reported as wages on Form W-2 [box 10 on the 1991 Form W-2]
for income tax purposes pursuant to Sections 6041(d) and 6051(a)(3) of the
Code. However, Form W-2 Earnings shall exclude moving expense
payments/reimbursements to the extent such amounts are reasonably believed
to be deductible under Section 217 of the Code. In the case of a Self-
Employed Individual, Form W-2 Earnings shall mean his Earned Income.
2.40 "FORMER PARTICIPANT" shall mean a Participant or Inactive
Participant who experienced a Termination of Employment, who has a balance
in his Account which has not been paid in full and who has not again become
a Participant pursuant to Article III.
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2.41 "GENERAL FUND" shall mean a special Investment Fund, established to
hold and invest assets of the Trust not invested in the other Investment
Funds.
2.42 "GOVERNING BODY" shall mean:
(a) in the case of a corporation, its board of directors.
(b) in the case of a partnership, the partners designated to act on
behalf of the partnership.
(c) in the case of a sole proprietorship, the sole proprietor.
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2.43 "GROSS EARNINGS" shall mean Earnings, plus elective Employer
contributions (attributable to Earnings) made pursuant to a salary reduction
agreement which are not includible in the gross income of the Employee under
Sections 125, 402(a)(8), 402(h) or 403(b) of the Code.
2.44 "GUARANTEED FUND" shall mean that portion of the Trust which shall
be invested and reinvested in securities backed by the United States
Government, or its agencies or subsidiaries, and/or insurance contract or
contracts which provide for a guaranteed rate of interest.
2.45 "HIGHLY COMPENSATED EMPLOYEE" shall mean, for any Plan Year, an
Employee who is considered "highly compensated" during the "Look-Back Year"
or the "Determination Year."
(a) An Employee shall be considered highly compensated during the
Look-Back Year if the Employee, at any time during the Look-Back Year,
is in one of the following categories:
(i) a greater than 5% owner of an Employer or an Affiliated
Company,
(ii) receives Gross Earnings in excess of $75,000,
(iii) an officer of an Employer or an Affiliated Company and
receives Gross Earnings in excess of 50% of the amount in effect
under Section 415(b)(1)(A) for the calendar year in which the Look-
Back Year begins, or
(iv) receives Gross Earnings in excess of $50,000 and is in the
"Top 20% Group."
(b) An Employee shall be considered highly compensated during the
Determination Year if the Employee, at any time during the Determination
Year:
(i) is a greater than 5% owner of an Employer or an
Affiliated Company, or
(ii) (1) is described in subsections (a)(ii), (a)(iii) [where
subsection (a)(iii) is modified by substituting Determination Year
for Look-Back Year] or (a)(iv), and
(2) is one of the 100 Employees paid the highest Gross
Earnings.
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(c) For purposes of this Section, the following definitions are
applicable:
(i) "Determination Year" shall mean the Plan Year.
--------------------
(ii) "Look-Back Year" shall mean the 12-month period
----------------
immediately preceding the Determination Year (see special exception
in subsection (h) below).
(iii) "Top 20% Group" shall mean the group of Employees who are
---------------
paid the highest Gross Earnings during the applicable period. The
size of the Top 20% Group is equal to 20% of the number of
Employees (see subsection (g) below for exclusion and rounding
rules).
(d) For purposes of this Section, the term Employee shall include
or exclude (as elected in the Adoption Agreement):
(i) Leased Employees who meet certain safe-harbor exceptions
under IRS regulation 1.414(q)-1T,A-7(b)(2); and/or
(ii) Employees who are covered by a collective bargaining
agreement, but only if (1) 90% or more of the Employees of the
Employer and Affiliated Companies are covered under collective
bargaining agreements, and (2) the Plan does not cover any Employee
covered by a collective bargaining agreement.
(e) The $75,000 and $50,000 in subsections (a)(ii) and (a)(iv),
respectively, shall automatically increase (starting with the
Determination/Look-Back Year beginning in 1988) to reflect cost-of-
living increases described in Section 415(d) of the Code. The increased
amount for any Determination/Look-Back Year shall be the dollar
limitation in effect for the calendar year in which such
Determination/Look-Back Year begins.
(f) For purposes of subsection (a)(iii),
(i) The maximum number of officers who are considered Highly
Compensated Employees shall be determined as follows:
Maximum Number of Officers
Considered Highly
Number of Employees Compensated Employees
------------------- --------------------------
30 or less 3
31 to 500 10% of the number of Employees
500 or more 50
If the number of officers exceeds the maximum number of
officers considered Highly Compensated Employees according to the
above schedule, only those with the highest Gross Earnings during
the applicable period shall be considered Highly Compensated
Employees.
(ii) If no officer has Gross Earnings in excess of 50% of the
amount in effect under Section 415(b)(1)(A) of the Code, then the
officer with the highest Gross Earnings during the applicable period
shall be deemed a Highly Compensated Employee.
(iii) For purposes of determining the number of Employees in
the left-hand column of the schedule in paragraph (i) above, the
following Employees shall be excluded (unless modified in the
Adoption Agreement):
(1) Employees who have not completed 6 months of service
by the end of the
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applicable period
(2) Employees who normally work less than 17-1/2 hours
per week
(3) Employees who normally work not more than 6 months a
year
(4) Employees who have not attained age 21 by the end of
the applicable period
(iv) If "10% of the number of Employees" in the right-hand
column of the schedule in paragraph (i) above is not an integer,
the result shall be rounded in the manner specified in the Adoption
Agreement.
(g) For purposes of determining the size of the Top 20% Group in
subsections (a)(iv) and (c)(iii):
(i) The number of Employees to which the 20% is multiplied
shall take into account the exclusions described in subsection
(f)(iii) above.
(ii) If "20% of the number of Employees" is not an integer, the
result shall be rounded in the same manner as described in
subsection (f)(iv) above.
(h) Notwithstanding subsections (a), (b), and (c), if the Plan Year
of this Plan (and all other plans of the Employer) is the calendar year,
the Company may elect in the Adoption Agreement to define the Look-Back
Year as the Plan Year (if the Plan Year is not a 12-month period, the
Look-Back Year shall mean the 12-month period which ends on the last day
of the Plan Year). If this election is made, no Determination Year
calculations will be necessary, and the Look-Back Year rules will apply
to the Plan Year (or applicable 12-month period). [See IRS regulation
1.414(q)-1T,A-14(b)].
2.46 "HIGHLY COMPENSATED PARTICIPANT" shall mean, for any Plan Year, a
Highly Compensated Employee who is also an "eligible employee" for such Plan
Year (as defined in regulation 1.401(k)-1(g)(4) or 1.401(m)-1(f)(4), for
purposes of Article VI or VII, respectively). Accordingly, a Highly
Compensated Employee is a Highly Compensated Participant if he is directly
or indirectly eligible (1) to make a Deferral (in the case of Article VI),
or (2) to have Aggregate Contributions [as defined in Section 7.02]
allocated to his Account(s) (in the case of Article VII). While the
preceding sentence generally covers all Highly Compensated Employees who are
Participants, the term Highly Compensated Participant also includes a Highly
Compensated Employee who is not a Participant solely because of any of the
following reasons:
(a) he has not contributed to another plan of the Employer,
(b) he is "suspended" because of a distribution/withdrawal, a loan,
or an election not to participate (unless the election not to
participate is made pursuant to a "one-time election" as defined in
regulation 1.401(k)-1(g)(4)(ii) or 1.401(m)-1(f)(4)(ii), for purposes of
Article VI or VII, respectively), or
(c) he may not receive an Addition on account of Section 415(c)(1)
or 415(e) of the Code.
By contrast, if the Plan provides for a "service" requirement to be eligible
for Deferrals or Aggregate Contributions, a Highly Compensated Employee
shall not be considered a Highly Compensated Participant unless the service
is actually performed. For example, if Section 7.04(b) requires 1,000 Hours
of Service or employment on the last day of the Plan Year, a Highly
Compensated Employee who does not receive a Matching Contribution because of
failure to satisfy such service requirement is not considered a Highly
---
Compensated Participant for such Plan Year.
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<PAGE>
2.47 "HOUR OF SERVICE" shall mean:
(a) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These hours
will be credited to the Employee for the Computation Period in which the
duties are performed; and
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), layoff, jury duty, military duty, or
leave of absence. No more than 501 Hours of Service will be credited
under this paragraph for any single continuous period (whether or not
such period occurs in a single Computation Period). Hours under this
paragraph will be calculated and credited pursuant to Section 2530.200b-
2 of the Department of Labor Regulations which are incorporated herein
by this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The same Hours
of Service will not be credited both under paragraph (a) or paragraph
(b), as the case may be, and under this paragraph (c). These hours will
be credited to the Employee for the Computation Period or Periods to
which the award or agreement pertains rather than the Computation Period
in which the award, agreement or payment is made.
Hours of Service will be credited for employment with an Employer or with an
Affiliated Company which is not an Employer, and with any other entity
required to be aggregated with the Employer pursuant to Sections 414(n) and
(o) of the Code.
Effective for absences in Plan Years beginning with or in calendar year 1985
and solely for purposes of determining whether a Break-In-Service for
participation and vesting purposes has occurred in a Computation Period, an
individual who is absent from work for maternity or paternity reasons shall
receive credit for the Hours of Service which would otherwise have been
credited to such individual but for such absence, or in any case in which
such hours cannot be determined, 8 Hours of Service per day of such absence.
For purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of a birth of a child of the individual, (3) by
reason of the placement of a child with the individual in connection with
the adoption of such child by such individual, or (4) for purposes of caring
for such child for a period beginning immediately following such birth or
placement. The Hours of Service credited under this paragraph shall be
credited (1) only in the Computation Period in which the absence begins if
the crediting is necessary to prevent a Break-In-Service in that period, or
(2) in all other cases, in the following Computation Period. The
Administrator may require the Participant to furnish such timely information
as the Administrator may reasonably require to establish that the absence
from work was for maternity or paternity reasons (as described in this
paragraph) and the number of days for which there was such an absence.
The Administrator shall determine Hours of Service on the basis of actual
hours for which an Employee is paid or entitled to payment. However, if
records of such hours are not available, the Administrator may determine
Hours of Service based upon days of employment in a Computation Period by
crediting an Employee with 10 Hours of Service for each day for which the
Employee would be required
39
<PAGE>
to be credited with at least one Hour of Service under the preceding
paragraphs. Alternatively, the Administrator may adopt such other
equivalency rule as permitted under Department of Labor Regulations Section
2530.200b-3 (as amended from time to time), which are incorporated herein by
this reference.
The Administrator shall determine the number of Hours of Service, if any, to
be credited to an Employee under the foregoing rules in a uniform and
nondiscriminatory manner and in accordance with Section 2530.200b-2 of the
Department of Labor Regulations (as amended from time to time), which are
incorporated herein by this reference.
2.48 "Inactive Participant" shall mean an Employee who has become a
Participant in the Plan pursuant to Article III, but whose participation in
the Plan is suspended because of his becoming included in one of the
following categories:
(a) A Participant who becomes an Excluded Employee (see Section
3.03(b)).
(b) A Participant who has been transferred from employment with an
Employer to either employment with a unit of an Employer or an
Affiliated Company not participating in this Plan (see Section 3.06).
(c) A Participant who has waived further participation in this Plan
(see Section 3.08).
(d) A Participant whose participation in the Plan has otherwise
ceased but whose employment has not terminated.
2.49 "INTEGRATION LEVEL" shall mean the amount specified in the Adoption
Agreement.
2.50 "INTEGRATION PERCENTAGE" shall mean:
(a) In the case of a Plan Year beginning prior to 1989, the rate of
tax under Section 3111(a) of the Code (relating to the Employer's OASDI
tax) at the beginning of the Plan Year, or
40
<PAGE>
(b) In the case of a Plan Year beginning in 1989 and later, the
product of (i) the "Fraction" in the schedule below and (ii) the greater
of (1) 5.7%, or (2) the rate of tax under Section 3111(a) of the Code at
the beginning of the Plan Year attributable to the old-age insurance
portion of OASDI.
IF THE INTEGRATION LEVEL
THE
BUT IS LESS THAN "FRACTION"
EXCEEDS OR EQUAL TO IS
------- ---------------- ---------
1. $ 0 the greater of (a) $10,000
or (b) 20% of SSTWB in effect
on the first day of the
Plan Year 1.0
2. the greater of (a) 80% of SSTWB in effect on
$10,000, or (b) 20% the first day of the
of SSTWB in effect Plan Year. 4.3
on the first day of ---------
the Plan Year. 5.7
3. 80% of SSTWB in less than 100% of SSTWB in
effect on the first effect on the first day of
day of the Plan the Plan Year. 5.4
Year. ---------
5.7
4. If the Integration Level equals the SSTWB in effect on the first day
of the Plan Year, the "Fraction" is 1.0.
2.51 "INTERIM VALUATION DATES(S)" shall mean the date or dates during
the Plan Year on which an interim valuation is made in accordance with
Section 5.04(b).
2.52 "INVESTMENT FUND(S)" shall mean the investment funds established by
the Trustee on the direction of the Administrator. Such funds may include
(but are not limited to) a Balanced Fund, Equity Fund, Fixed Income Fund,
Guaranteed Fund, Participant Directed Fund and Short-Term Income Fund. If
separate Investment Funds are not established, Investment Fund shall mean
the assets of the Trust.
2.53 "INVESTMENT INCOME" shall mean the net gain or loss of the Trust
from investments, as reflected by interest payments, dividends, realized and
unrealized gains and losses on securities, other investment transactions and
expenses paid from the Trust. In determining the Investment Income of the
Trust for any period, assets shall be valued on the basis of their fair
market value as determined in accordance with Section 5.02. The Investment
Income, if any, of assets held under each Investment Fund(s) or segregated
accounts maintained by the Trustee on the direction of the Administrator
shall be determined separately. Expenses shall be allocated by the
Administrator to each separate
41
<PAGE>
fund, if any, on a reasonable and equitable basis as it may in its sole
discretion decide.
2.54 "INVESTMENT MANAGER" shall mean any Fiduciary (other than a trustee
or named fiduciary, as defined in Section 402(a)(2) of ERISA):
(a) who has the power to manage, acquire, or dispose of any assets
of the plan;
(b) who is (1) registered as an investment advisor under the
Investment Advisors Act of 1940; (2) is a bank as defined in ERISA; or
(3) is an insurance company qualified to perform services described in
paragraph (a) under the laws of more than one State; and
(c) who has acknowledged in writing that he is a Fiduciary with
respect to the Plan.
2.55 "JOINING BONUS" shall mean an Employer contribution made pursuant
to Article VII to newly eligible Participants to encourage such Participants
to make Deferrals to the Plan.
2.56 "JOINING BONUS ACCOUNT" shall mean the Account of a Participant to
which a Joining Bonus and any investment gains or losses thereon are
credited. The Administrator may choose not to establish a separate Joining
Bonus Account, in which case a Joining Bonus shall be credited to the
Matching Contribution Account. The preceding sentence shall not be
applicable if different vesting schedules apply to the Joining Bonus Account
and to the Matching Contribution Account.
2.57 "KEY HIGHLY COMPENSATED EMPLOYEE" shall mean a Highly Compensated
Employee who is either:
(a) a greater than 5% owner of an Employer or Affiliated Company,
or
(b) one of the 10 Highly Compensated Employees paid the greatest
Gross Earnings during the Plan Year.
2.58 "LEASED EMPLOYEE" shall mean an individual who is treated as an
Employee of an Employer (if he is not already an Employee of an Employer)
because such individual, pursuant to an agreement between an Employer and
any other person ("leasing organization"), has performed services for an
Employer (or for an Employer and related persons determined in accordance
with Section 414(n)(6) of the Code) on a substantially full time basis for a
period of at least one year, and such services are of a type historically
performed by employees in the business field of the Employer. Contributions
or benefits provided a Leased Employee by the leasing organization which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
A Leased Employee shall not be considered an Employee of an Employer if:
(a) such individual is covered by a money purchase pension plan
providing:
(i) a nonintegrated employer contribution rate of at least 10%
of Gross Earnings (Gross Earnings from the leasing organization
which is attributable to services performed for an Employer shall
be treated as Gross Earnings from an Employer),
(ii) immediate participation, and
(iii) full and immediate vesting; and
(b) Leased Employees constitute 20% or less of the Employer's Non-
Highly Compensated Employees.
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<PAGE>
2.59 "LIMITATION YEAR" shall mean the 12-consecutive month period ending
on the date specified in the Adoption Agreement, including periods before
the Effective Date. If the Limitation Year has been amended since the
Original Effective Date, the provisions of the related amendment shall be
incorporated into this Plan by reference.
2.60 "MATCHING CONTRIBUTION ACCOUNT" shall mean the Account of a
Participant to which Matching Contributions and any investment gains or
losses thereon are credited. The Administrator may choose not to establish a
separate Matching Contribution Account, in which case Matching Contributions
shall be credited to the Employer Contribution Account. The preceding
sentence shall not be applicable if different vesting schedules apply to the
Employer Contribution Account and to the Matching Contribution Account.
2.61 "MATCHING CONTRIBUTIONS" shall mean Employer contributions made
pursuant to Article VII to match Deferrals contributed to the Plan.
2.62 "MAXIMUM ADDITION" shall mean, with respect to any Limitation Year,
the greater of (i) $30,000, or (ii) one-fourth of the defined benefit dollar
limitation in effect under Section 415(b)(1)(A) of the Code for such
Limitation Year. With respect to a Limitation Year of less than 12 months
because of an amendment changing the Limitation Year to a different 12-
consecutive month period, Maximum Addition shall mean the amount described
in the preceding sentence, multiplied by a fraction: the numerator of which
is the number of months in such short Limitation Year, and the denominator
of which is 12.
2.63 "MEMBER(S)" shall mean Participants, Former Participants and
Inactive Participants.
2.64 "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean, for any Plan Year, an
Employee of the Employer who is neither a Highly Compensated Employee nor a
Family Member.
2.65 "NON-HIGHLY COMPENSATED PARTICIPANT" shall mean, for any Plan Year,
a Non-Highly Compensated Employee who is also an "eligible employee" for
such Plan Year (as defined in regulation 1.401(k)-1(g)(4) or 1.401(m)-
1(f)(4), for purposes of Article VI or VII, respectively). In addition, the
rules in the definition of "Highly Compensated Participant" shall similarly
apply here. This may be accomplished by substituting the word "Non-Highly"
for the word "Highly" wherever it appears in the definition of "Highly
Compensated Participant".
2.66 "NORMAL RETIREMENT AGE" shall mean the age or date specified in the
Adoption Agreement. Notwithstanding the foregoing, Normal Retirement Age
shall not be later than the later of (i) age 65, or (ii) the 5th ("10th" for
Plan Years beginning before January 1, 1988) anniversary of the
Participant's Entry Date .
2.67 "NORMAL RETIREMENT DATE" shall mean the first day of the month in
which the Member attains his Normal Retirement Age.
2.68 "ORIGINAL EFFECTIVE DATE" shall mean the date this Plan was first
put into effect as specified in the Adoption Agreement.
2.69 "OWNER-EMPLOYEE" shall mean an individual who is a sole proprietor,
or who is a partner owning more than 10 percent of either the capital or
profits interest of the partnership.
2.70 "PARITY BREAK" shall mean, if elected in the Adoption Agreement,
either
43
<PAGE>
(a) or (b) below:
(a) If the Elapsed Time method of computing Years of Service is
chosen in the Adoption Agreement, a Break-In-Service which causes an
Employee's Years of Service prior to such Break-In-Service to be
cancelled. An Employee will incur a Parity Break if he has a Break-In-
Service and his continuous period of severance (in determining an
Employee's period of severance, the period between the first and second
anniversaries of the date the Employee is first absent from work for
maternity or paternity reasons shall not be considered a period of
severance) equals or exceeds:
(i) For Plan Years commencing in or after calendar year 1985,
the greater of five years or the period of Years of Service earned
prior to such Break-In-Service; or
(ii) For Plan Years commencing prior to calendar year 1985, the
period of Years of Service earned prior to such Break-In-Service.
If an Employee completed a Parity Break before the beginning of the
Plan Year commencing with or in 1985, his prior Years of Service
shall be cancelled even if the Parity Break included less than five
consecutive Breaks-In-Service.
(b) If the Hours of Service method of computing Years of Service is
chosen in the Adoption Agreement, a Break-In-Service which causes an
Employee's Years of Service prior to such Break-In-Service to be
cancelled. An Employee will incur a Parity Break if he has a Break-In-
Service and the number of his consecutive one-year Breaks-In-Service
equals or exceeds:
(i) For Plan Years commencing in or after calendar year 1985,
the greater of five years or the aggregate number of Years of
Service earned prior to such Break-In-Service; or
(ii) For Plan Years commencing prior to calendar year 1985, the
aggregate number of Years of Service earned prior to such Break-In-
Service. If an Employee completed a Parity Break before the
beginning of the Plan Year commencing with or in 1985, his prior
Years of Service shall be cancelled even if the Parity Break
included less than five consecutive Breaks-In-Service.
For purposes of determining whether or not a Parity Break has occurred,
Years of Service (or the "aggregate number of Years of Service" if the
Elapsed Time method is elected) shall not include any Years of Service
previously cancelled by reason of any other prior Break-In-Service or Parity
Break.
Once an Employee becomes a Participant, a Deferred Income Account is
established on his behalf. Because a Participant is always 100% vested in
his Deferred Income Account, any Employee who has become a Participant shall
not incur a Parity Break regardless of the number of his one-year Breaks-In-
Service.
2.71 "PARTICIPANT" shall mean an Employee of an Employer participating
in the Plan in accordance with the provisions of Article III, and is not a
Former Participant or an Inactive Participant.
2.72 "PARTICIPANT DIRECTED FUND" shall mean that portion of a
Participant's Accounts which are held in a segregated fund within the Trust
and invested under the Participant's direction. A Participant shall be
solely responsible for the portion of his Account(s) so invested. The
Participant shall have the right and power to select any broker, salesman,
or agent he desires to execute his investment orders. The Participant shall
also have the right and power to
44
<PAGE>
designate an Investment Manager, who shall have control over the selection
of the investments. This power of delegation must be exercised in writing
delivered to the Trustee and Administrator and must be signed and dated by
both the Participant and the Investment Manager. If a Participant dies
before his Account(s) is totally distributed, his control over the selection
of investments for the portion of his Account(s) in the Participant Directed
Fund shall immediately vest in the person or organization he designated as
Investment Manager. If no person or organization is so designated, then the
control of investment shall immediately vest in the Beneficiaries of his
Account(s) on a proportionate basis. If no Beneficiary is designated, the
control shall immediately vest in the personal representative of his estate,
or if none, then in the Trustee.
Neither the Trustee nor the Administrator shall have any investment
responsibility with respect to such Participant Directed Fund. All expenses
resulting from investments made at the direction of a Participant and all
Trustee expenses attributable to a Participant Directed Fund shall be borne
solely by such Participant's Participant Directed Fund. The Administrator
shall allocate other expenses attributable to administering Participant
Directed Funds on a reasonable and equitable basis to each such Participant
Directed Fund.
The Administrator and the Trustee shall not be liable nor responsible for
any loss resulting to any Participant or Beneficiary by reason of any sale
or investment made or other action taken pursuant to and in accordance with
the direction of the Participant, any Investment Manager or any other
investment advisor selected by the Participant or Beneficiary.
2.73 "PARTNER-EMPLOYEE" shall mean, in the case of a partnership, an
individual who is a partner of the Employer.
2.74 "PLAN" shall mean the plan as set forth herein and as amended from
time to time. The name of the Plan shall be the name specified in the
Adoption Agreement.
2.75 "PLAN AMENDMENT EFFECTIVE DATE" shall mean the date, if applicable,
specified in the Adoption Agreement.
2.76 "PLAN YEAR" shall mean the 12-consecutive month period ending on
the date specified in the Adoption Agreement, including periods before the
Effective Date. If the Plan Year has been amended since the Original
Effective Date, the provisions of the related amendment shall be
incorporated into this Plan by reference.
2.77 "PRIOR EMPLOYER(S)" shall mean those entities, if any, specified in
the Adoption Agreement.
2.78 "PRIOR PLAN" shall mean the plan, if any, specified in the Adoption
Agreement, that existed immediately prior to its complete amendment and
restatement into this Plan.
2.79 "PRIOR PLAN ACCOUNT" shall mean the account(s) of Participants who
were participants in the Prior Plan on the day before the Effective Date of
this Plan and shall be maintained in accordance with the Adoption Agreement.
2.80 "PROFIT SHARING CONTRIBUTIONS" shall mean discretionary Employer
contributions which are allocated in accordance with Section 5.06 (including
contributions to satisfy the requirements of Sections 5.06(c) and 11.05).
2.81 "QUALIFIED DOMESTIC RELATIONS ORDER" shall mean a qualified
domestic relations order as described in Section 414(p) of the Code.
45
<PAGE>
2.82 "QUALIFIED MATCHING CONTRIBUTION ACCOUNT" shall mean the Account of
a Participant to which Qualified Matching Contributions and any investment
gains or losses are credited. For Plan Years beginning before January 1,
1989, the Administrator may choose not to establish a separate Qualified
Matching Contribution Account, in which case Qualified Matching
Contributions shall be credited to the Deferred Income Account, the Matching
Contribution Account or the Employer Contribution Account (in accordance
with rules established by the Administrator).
If the Matching Contribution Account meets the requirements applicable to
the Qualified Matching Contribution Account specified in Section 6.09
(regarding full vesting and withdrawal/distribution restrictions), the
Administrator may choose not to establish a separate Qualified Matching
Contribution Account, in which case Qualified Matching Contributions shall
be credited to the Matching Contribution Account.
2.83 "QUALIFIED MATCHING CONTRIBUTIONS" shall mean Matching
Contributions which are used by the Administrator for the purpose of either:
(a) avoiding the nondiscrimination requirements of Section 7.08
(the ACP Test), or
(b) enabling the Plan to comply with the nondiscrimination
requirements of Section 6.05 (the ADP Test).
(See Sections 7.08 and 6.09 for details regarding such contributions.)
2.84 "QUALIFIED NONELECTIVE CONTRIBUTION ACCOUNT" shall mean the Account
of a Participant to which Qualified Nonelective Contributions made to this
Plan (as opposed to such contributions under another plan of the Employer)
and any investment gains or losses are credited. For Plan Years beginning
before January 1, 1989, the Administrator may choose not to establish a
separate Qualified Nonelective Contribution Account, in which case Qualified
Nonelective Contributions shall be credited to the Deferred Income Account
or the Employer Contribution Account (in accordance with rules established
by the Administrator).
2.85 "QUALIFIED NONELECTIVE CONTRIBUTIONS" shall mean amounts (including
certain Forfeitures) contributed by the Employer for the purpose of enabling
the Plan to comply with the nondiscrimination requirements of Sections 6.05
(the ADP Test), 7.08 (the ACP Test) or 7.14 (the Multiple Use Test). (See
Sections 6.08, 7.12 and 7.14 for details regarding such contributions.)
2.86 "REA" shall mean Public Law No. 98-397, the Retirement Equity Act
of 1984, as amended from time to time.
2.87 "ROLLOVER CONTRIBUTION" shall mean the taxable portion of:
(a) With respect to periods before January 1, 1993, a "qualified
total distribution" within the meaning of Section 402(a)(5)(E)(i) of the
Code, or a "rollover contribution" within the meaning of Section
408(d)(3)(A)(ii) of the Code; or
(b) With respect to periods after December 31, 1992, an "eligible
rollover distribution" within the meaning of Section 402(c)(4) of the
Code, or a "rollover contribution" within the meaning of Section
408(d)(3)(A)(ii) of the Code.
A Rollover Contribution shall also include a transfer by a trustee from
another qualified retirement plan to the Trustee of this Plan of a
Participant's interest in such other qualified retirement plan.
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<PAGE>
2.88 "SAFE HARBOR EARNINGS #A" shall mean an Employee's Earned Income,
wages, salaries and fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
Employer, Affiliated Company, or any entity predecessor to the Employer to
the extent that such amounts are includible in gross income (including, but
not limited to, commissions paid salesmen, compensation for services on the
basis of a percentage of profits, commissions on insurance premiums, tips,
bonuses, fringe benefits, reimbursements and expense allowances).
Safe Harbor Earnings #A shall include foreign earned income (as defined in
Section 911(b) of the Code), whether or not excludable from gross income
under Section 911 of the Code; and Safe Harbor Earnings #A shall exclude the
following:
(a) Employer contributions to a plan of deferred compensation which
are not includible in the Employee's gross income for the taxable year
in which contributed or Employer contributions under a simplified
employee pension plan to the extent such contributions are deductible by
the Employee, or any distributions from a plan of deferred compensation;
(b) Amounts realized from the exercise of a non-qualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferrable or is no longer subject to a
substantial risk of forfeiture;
(c) Amounts realized from the sale, exchange or other disposition
of stock acquired under a qualified stock option; and
(d) Other amounts which received special tax benefits, or
contributions made by the Employer or Affiliated Company (whether or not
under a salary reduction agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether or not the amounts are
actually excludable from the gross income of the Employee).
2.89 "SAFE HARBOR EARNINGS #B" shall mean Safe Harbor Earnings #A, plus
the following:
(a) Amounts described in Sections 104(a)(3), 105(a) and 105(h) of
the Code, but only to the extent that these amounts are includible in
the gross income of the Employee;
(b) Amounts paid or reimbursed by the Employer, Affiliated Company,
or an entity predecessor to the Employer, for moving expenses incurred
by an Employee, but only to the extent that these amounts are not
deductible by the Employee under Section 217 of the Code;
(c) The value of a non-qualified stock option granted to an
Employee by the Employer, Affiliated Company, or an entity predecessor
to the Employer, but only to the extent that the value of the option is
includible in the gross income of the Employee for the taxable year in
which granted; and
(d) The amount includible in the gross income of an Employee upon
making the election described in Section 83(b) of the Code.
2.90 "SELF-EMPLOYED INDIVIDUAL" shall mean an individual who has Earned
Income for the taxable year from the trade or business for which the Plan is
established (including an individual who would have had Earned Income but
for the fact that the trade or business had no net profits for the taxable
year), or a Partner-Employee or an Owner-Employee.
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<PAGE>
2.91 "SHORT-TERM INCOME FUND" shall mean that portion of the Trust which
shall be invested and reinvested in short-term investments providing a known
return such as Treasury Bills, Treasury Notes or other such similar short-
term obligations of the United States Government or any instrumentality
thereof, in savings accounts, certificates of deposit, repurchase
agreements, or other interest bearing accounts which provide a reasonable
rate of interest, in commercial paper or bankers' acceptances, or in other
similar investments, or in mutual or pooled investment funds as the
Administrator, Trustee or Investment Manager shall deem suitable and in
loans to Participants.
2.92 "SOCIAL SECURITY TAXABLE WAGE BASE (SSTWB)" shall mean the maximum
amount of earnings which may be considered wages in a given calendar year
under Sections 3121(a)(l) and 3121(x)(1) of the Code for purposes of
computing Social Security (OASDI) taxes.
2.93 "TERMINATION OF EMPLOYMENT" shall mean separation from active
employment with an Employer resulting from retirement, death, Disability,
voluntary or involuntary severance of employment, or failure to return to
active employment with an Employer by the date on which an Authorized Leave
of Absence expired.
2.94 "TEFRA" shall mean Public Law No. 97-248, the Tax Equity and Fiscal
Responsibility Act of 1982, as amended from time to time.
2.95 "TOP HEAVY VESTING SCHEDULE" shall mean the schedule specified in
the Adoption Agreement.
2.96 "TRA86" shall mean Public Law No. 99-514, the Tax Reform Act of
1986, as amended from time to time.
2.97 "TRUST" or "TRUST FUND" shall mean the employee benefit trust fund
maintained in accordance with a Trust Agreement which the Employer(s) has
adopted, or in lieu thereof, or in addition thereto, the fund or funds held
and invested in accordance with the terms of a group deposit administration
or similar insurance contract or contracts.
2.98 "TRUST AGREEMENT" shall mean that certain agreement or agreements
between the Company and the Trustee establishing the Trust or Trusts, or in
lieu thereof, or in addition thereto, the group deposit administration or
similar insurance contract or contracts, which shall be a part of this Plan.
2.99 "TRUSTEE" shall mean the corporation or corporations (including
without limitation any legal reserve life insurance company or companies) or
individual or individuals named in the Trust Agreement and appointed to
hold, invest, reinvest, and disburse the Trust Fund.
2.100 "VALUATION DATE(S)" shall mean the last day of each Plan Year.
However, the Administrator may direct that valuations occur more frequently
on a one-time or on a regular basis.
2.101 "VESTED PERCENTAGE" shall mean the percentage (which may differ
depending upon the Account to which such percentage relates) of a
Participant's nonforfeitable interest in his Employer Contribution Account,
Joining Bonus Account or Matching Contribution Account (depending upon the
applicable Plan provision), determined in accordance with the schedule(s)
specified in the Adoption Agreement.
(a) If applicable, the Vested Percentage of an Employee who was a
Participant in the Plan on the day before the first day of the Plan Year
48
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beginning in 1989 shall be determined in accordance with the alternative
schedule specified in the Adoption Agreement.
(b) In determining a Participant's Vested Percentage, all his Years
of Service shall be included, unless otherwise specified in the Adoption
Agreement. Such exclusion of certain Years of Service shall only be
permitted if (i) the Original Effective Date of this Plan is in calendar
year 1989 or later; or (ii) the Plan or Prior Plan previously excluded
such Years of Service.
(c) If Years of Service prior to the Original Effective Date are
excluded, the Original Effective Date is modified (extended to an
earlier date) to include service under a "predecessor plan," as defined
in IRS Regulation 1.411(a)-5(b)(3).
(d) Notwithstanding the foregoing, a Participant's Vested
Percentage shall be 100% upon the attainment of his Normal Retirement
Age (but only if he is employed on such date).
2.102 "WAGES" shall mean regular (base) salary or wages from an Employer
for personal services rendered, including elective Employer contributions
(attributable to Wages) made pursuant to a salary reduction agreement which
are not includible in the gross income of the Employee under Sections 125,
402(a)(8), 402(h) or 403(b) of the Code. In the case of certain Self-
Employed Individuals, Wages shall mean a percentage of his Earned Income.
The preceding percentage shall be determined in accordance with regulation
1.414(s)-1(f)(1), which takes into account what portion of the Gross
Earnings of Non-Highly Compensated Employees (as a group) is included in the
Wages of Non-Highly Compensated Employees (as a group).
2.103 "YEARS OF SERVICE" shall mean an Employee's period of employment
as determined in accordance with Article III.
49
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ARTICLE III
ELIGIBILITY, PARTICIPATION AND SERVICE
3.01 ELIGIBILITY
(a) Eligible Employee: An Employee other than an Excluded Employee
shall become an Eligible Employee upon attainment of the minimum age and
completion of the minimum service specified in the Adoption Agreement
(and taking into account how service is computed for purposes of
eligibility to participate: the Hours of Service method [Section
3.05(a)] or the Elapsed Time method [Section 3.05(b)]). If the minimum
service requirement specified in the Adoption Agreement is one Year of
Service (using the Hours of Service method), the second and subsequent
eligibility Computation Periods shall be measured in terms of Plan
Years, commencing with the Plan Year in which occurs the first
anniversary of the Employee's Employment Commencement Date, but
excluding Years of Service cancelled because of a Parity Break.
(b) Special Rule For Two or Three Years of Service: This subsection
shall apply if the Adoption Agreement provides that an Employee must
complete two or three Years of Service to become an Eligible Employee.
If an Employee has a Break-In-Service prior to completing one Year of
Service in each of two or three (whichever is applicable) Computation
Periods, his Hours of Service prior to such Break-In-Service shall be
cancelled and he shall be treated as a new Employee for purposes of
meeting the requirements for becoming an Eligible Employee in this
Section.
(c) Special Rule for Hours of Service Method: This subsection shall
apply if the Adoption Agreement provides that the Hours of Service
method under Section 3.05(a) is used for purposes of eligibility to
participate. An Employee shall not be credited with a Year of Service
until the end of the Computation Period in which he is credited with at
least 1,000 Hours of Service.
(d) Compliance with TRA86 One-Year Eligibility Requirement: If the
minimum service requirement used in subsection (a) above is greater than
one Year of Service (or equivalent, e.g. 12 or less months of
employment, depending upon the number of Hours of Service completed),
such minimum service requirement shall no longer be permitted for Plan
Years beginning after December 31, 1988. Accordingly, a separate minimum
service requirement (no greater than one Year of Service or equivalent)
for Plan Years beginning after December 31, 1988 must be specified in
the Adoption Agreement.
Note: Had this Plan not had a qualified CODA, the Plan would have been
permitted to have a minimum service requirement greater than one Year of
Service. This "plan design" can still be accomplished by selecting the
appropriate requirements in Sections 5.05 or 7.04(b) to be eligible for
an allocation of Profit Sharing Contributions or Matching Contributions,
respectively.
(e) Loss of Service: The provisions of Section 3.05(c) regarding
cancellation of certain Years of Service shall also apply for purposes
of eligibility to participate.
3.02 DATE OF PARTICIPATION
(a) Prior Plan Participants: An Employee participating under the
provisions of the Prior Plan, if any, on the day preceding the Effective
Date,
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shall continue to participate in accordance with the provisions of this Plan
as of the Effective Date.
(b) Effective Date Employees: An Employee who is an Eligible Employee
------------------------
on the Effective Date shall become a Participant in the Plan on the Effective
Date, provided he is employed by an Employer on the Effective Date.
(c) Other Employees: Each Employee who does not become a Participant in
---------------
this Plan pursuant to subsections (a) and (b) above, shall become a
Participant in the Plan on the Entry Date coinciding with or immediately
succeeding the date such Employee becomes an Eligible Employee, provided he
is employed by an Employer on such Entry Date.
(d) Termination of Employment: A Participant who experiences a
-------------------------
Termination of Employment shall cease to participate in the Plan as of his
date of Termination of Employment.
3.03 EXCLUDED EMPLOYEES
(a) Participation in Plan: An Employee who ceases to be an Excluded
---------------------
Employee shall become a Participant in this Plan on the later of (i) the date
he ceases to be an Excluded Employee, or (ii) the Entry Date on which he
would have otherwise become a Participant had he not been an Excluded
Employee.
(b) Cessation of Participation: Notwithstanding any other provision of
--------------------------
this Plan, if any Participant becomes an Excluded Employee, such Participant
shall cease further participation under this Plan and shall become an
Inactive Participant, and shall continue in such status thereafter. Such
Inactive Participant may again become a Participant in this Plan in
accordance with subsection (a) above.
3.04 PARTICIPATION UPON REEMPLOYMENT
Upon the reemployment of an Employee who experienced a Termination of
Employment, the following rules shall apply in determining his participation in
the Plan.
(a) Former Participants: If an Employee who was a Participant is
-------------------
reemployed, he shall become a Participant on his date of reemployment unless
such Employee is an Excluded Employee.
(b) Other Former Employees: If a former Employee who was not a
----------------------
Participant is reemployed, he shall be eligible to participate in the Plan in
accordance with Section 3.01, taking account of his prior Years of Service
unless cancelled by reason of a Parity Break or Section 3.01(b). However, if
such Employee on his Termination of Employment date was an Eligible Employee
but had not become a Participant in the Plan, then such Employee shall
participate in the Plan on the later of his date of reemployment or the Entry
Date on which he would have otherwise become a Participant had he not had a
Termination of Employment unless such Employee's prior Years of Service are
cancelled by reason of a Parity Break or Section 3.01(b).
3.05 YEARS OF SERVICE
This Section 3.05 shall apply for purposes other than eligibility to participate
in the Plan, which is covered by Section 3.01.
(a) Hours of Service Method for Crediting Years of Service: This
------------------------------------------------------
subsection shall apply if the Hours of Service method is selected in the
Adoption Agreement. Subject to the loss of service provisions of Section
3.05(c), an Employee shall be credited with a Year of Service for each
Computation Period during which he is credited with 1,000 or more Hours of
Service. Years of Service shall include the following:
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(i) Periods of employment with an Employer, an Affiliated Company
and a Prior Employer, if one is specified in the Adoption Agreement;
(ii) Periods of employment with a corporation, trade or business
predecessor to an Employer;
(iii) Periods of employment as an "employee" or "owner-employee" (as
defined in Sections 401(c)(l) and 401(c)(3) of the Code) of any sole
proprietorship or partnership which was predecessor to an Employer; and
(iv) Periods of employment as a Leased Employee.
(b) Elapsed Time Method For Crediting Years of Service: This subsection
--------------------------------------------------
shall apply if the Elapsed Time method is selected in the Adoption Agreement.
Years of Service shall be measured in whole years and fractions of a year
with fractions of a Year of Service determined on the basis of 365 days
equaling one year. Subject to the loss of service provisions of Section
3.05(c), an Employee's Years of Service shall be determined from his
Employment Commencement Date and anniversaries thereof, and shall include the
following:
(i) The total period or periods of employment with an Employer, an
Affiliated Company and a Prior Employer, if one is specified in the
Adoption Agreement;
(ii) Any period of severance of employment following a Termination
of Employment, if the Employee returns to employment with the Employer or
an Affiliated Company within 12 months of such severance;
(iii) The first 12 months of any Authorized Leave of Absence,
including an absence for maternity or paternity reasons;
(iv) If the Employee quits, is discharged, or retires at any time
during the first 12 months of an Authorized Leave of Absence, the period
of severance after the date he so quits, is discharged, or retires, if he
returns to employment with the Employer or an Affiliated Company within
12 months of the date when his Authorized Leave of Absence began;
(v) Periods of employment with a corporation, trade or business
predecessor to an Employer;
(vi) Periods of employment as an "employee" or "owner-employee" (as
defined in Sections 401(c)(l) and 401(c)(3) of the Code) of any sole
proprietorship or partnership which was predecessor to an Employer; and
(vii) Periods of employment as a Leased Employee.
(c) Loss of Service: An Employee's Years of Service for purposes of
---------------
eligibility to participate in this Plan and/or vesting may be cancelled if
such Employee incurs a Break-In-Service in accordance with the following
rules:
(i) Participants: Because a Participant shall not incur a Parity
Break (see the last paragraph of the definition of Parity Break in
Article II), a Participant's Years of Service earned prior to his Break-
In-Service shall be aggregated with his Years of Service earned after
such Break-In-Service.
(ii) Other Employees: If an Employee not included in subparagraph
(i) incurs a Break-In-Service, his Years of Service prior to such Break-
In-Service shall be cancelled if he incurs a Parity Break.
This subsection (c) shall not apply if the Adoption Agreement provides that
Employees must complete more than one Year of Service to become an Eligible
Employee.
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3.06 TRANSFER OF EMPLOYMENT
If a Participant transfers employment between Employers, he shall maintain all
his rights and obligations under the Plan so long as he remains a Participant in
the Plan. In such a case, his employment shall be considered to be
uninterrupted as if no transfer had been made. However, if a Participant's
employment is transferred to an Affiliated Company or a unit of an Employer not
participating in the Plan, such Participant shall become an Inactive Participant
on the date of such transfer. Such an Inactive Participant may again become a
Participant upon his transfer to an Employer or unit of an Employer
participating in the Plan or by the adoption of the Plan by the Affiliated
Company.
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3.07 INACTIVE PARTICIPANTS
Compensation received by an Employee during the period he is an Inactive
Participant is not taken into account under this Plan. Accordingly, an Inactive
Participant shall not be entitled to (1) share in Profit Sharing Contributions
and Forfeitures allocated pursuant to Article V, (2) make Deferrals pursuant to
Article VI, or (3) share in Matching Contributions allocated pursuant to
Article VII, on account of such Compensation. Upon Termination of Employment, an
Inactive Participant shall have the value of his Accounts determined and
distributed in accordance with Article VIII.
3.08 IRREVOCABLE WAIVER OF PARTICIPATION
If permitted in the Adoption Agreement, an Employee who would otherwise be
eligible to participate in the Plan may irrevocably waive his right to
participate in the Plan. The Employee shall complete such form or forms as may
be required by the Administrator and the Employer, which may include a statement
which releases and holds harmless the Administrator and the Employer from any
and all liability and responsibility associated with the Employee's election to
irrevocably waive his right to participate in the Plan.
54
<PAGE>
ARTICLE IV
CONTRIBUTIONS AND FORFEITURES
4.01 EMPLOYER CONTRIBUTIONS
(a) Amount of Contribution: Each Employer agrees to contribute for each
----------------------
Plan Year an amount, if any, to be determined in its sole discretion by the
Governing Body of the Employer. However, such amount shall not be less than
the sum of (1) total Deferrals for such Plan Year, (2) total Matching
Contributions and Joining Bonuses required, if any, under Article VII, and
(3) total "Top-Heavy" minimum contributions required, if any, under
Section 11.05.
Each Employer shall designate what portion of the contributions under
this Section 4.01(a) is attributable to (1) Deferrals, (2) Matching
Contributions and/or Joining Bonuses, and (3) Profit Sharing Contributions.
(b) Time of Payment: All contributions of the Employer shall be paid to
---------------
the Trustee, and payment shall normally be made not later than the time
prescribed by law for filing the federal income tax return of the Employer,
including any extensions which may be granted for the filing of such tax
return.
(c) Corrections: In the event the Administrator determines that a
-----------
Participant was excluded from participation in error, or was mistakenly
omitted and was not credited with allocations pursuant to Articles V, VI,
and/or VII, or an error caused a Participant to be credited with less than
his full allocations pursuant to Articles V, VI, and/or VII, the
Administrator shall determine the amounts (or additional amounts) which
should have been credited to such Participant's Account. To correct any such
error or omission, the corrected amount may be deducted from Forfeitures
and/or Investment Income prior to allocating such amounts to other
Participants in lieu of adjusting Accounts of other Participants. In addition
to (or instead of) the preceding adjustment, the Employer may make a special
contribution (in addition to the contribution described in Section 4.01(a))
to correct any such error or omission.
4.02 DISPOSITION OF FORFEITURES ATTRIBUTABLE TO EMPLOYER CONTRIBUTION
ACCOUNTS
This Section 4.02 discusses the treatment of Forfeitures attributable only to
Employer Contribution Accounts. For a discussion of Forfeitures attributable to
the Matching Contribution Accounts and the Joining Bonus Accounts, see Sections
7.07 and 7.13.
For Plan Years beginning prior to January 1, 1989, the treatment of Forfeitures
and Forfeiture Accounts attributable to Employer Contribution Accounts shall be
determined under the terms of the Prior Plan. For Plan Years beginning after
December 31, 1988, the provisions of this Section 4.02 shall be applicable.
Forfeitures shall occur as of the date a Forfeiture Account is established in
accordance with subsection (a) below.
(a) Establishment of Forfeiture Accounts: The Administrator shall
------------------------------------
establish a Forfeiture Account to record a Former Participant's Forfeiture,
if any. A Former Participant's Forfeiture Account shall be established as of
the earlier of the date the Former Participant receives a distribution of his
Benefit, or the end of the Plan Year in which the Former Participant incurs
five consecutive Breaks-In-Service. The value of the preceding Forfeiture
Account shall be equal to the value of the non-vested portion of such Former
55
<PAGE>
Participant's Employer Contribution Account on the date the Forfeiture
Account is established. Forfeiture Accounts shall become available for
allocation as of the end of the Plan Year described in the Adoption
Agreement, or, if earlier, as of the end of the Plan Year in which the Former
Participant incurs five consecutive Breaks-In-Service. Such Forfeiture
Accounts shall first be used as Qualified Nonelective Contributions pursuant
to Sections 6.07, 7.11 or 7.14 (Note: Sections 6.07, 7.11 and 7.14 are
----
effective for Plan Years beginning after December 31, 1990). Any Forfeiture
Accounts not used as Qualified Nonelective Contributions shall be allocated
to the Employer Contribution Accounts of eligible Participants in accordance
with Section 5.07.
If elected in the Adoption Agreement, then notwithstanding the preceding
paragraph, in the case of a Plan subject to subsection (b)(i) below
(repayment of a prior distribution is required in order to restore a Former
Participant's Forfeiture Account), the Forfeiture Accounts of certain Former
Participants shall only become available for allocation under the "Delayed
Forfeiture Allocation Method." Under the Delayed Forfeiture Allocation
Method, if (i) the Forfeiture Account of a Former Participant has not yet
become available for allocation in accordance with the preceding paragraph,
(ii) such Former Participant returns to employment with the Employer, and
(iii) such Former Participant is eligible for a restoration of his Forfeiture
Account pursuant to subsection (b)(i) below, then his Forfeiture Account
shall not become available for allocation in accordance with the preceding
---
paragraph until the end of the Plan Year in which occurs the end of the
repayment period described in subsection (b)(i) below.
(b) Restoration of Forfeiture Accounts: If a Former Participant
----------------------------------
receives a distribution of less than his entire Employer Contribution Account
and subsequently returns to employment with the Employer before having five
consecutive Breaks-In-Service, his right to the restoration of his prior
Forfeiture Account shall be governed by paragraph (i) or (ii) below,
whichever is selected in the Adoption Agreement:
(i) Repayment of Prior Distribution: If such Former Participant
-------------------------------
repays the amount of such distribution, the repaid amount and his
Forfeiture Account shall be added to his new Employer Contribution
Account as of the end of the Plan Year in which such amount is repaid.
Such repayment must be made on or before the earlier of (1) the
Participant incurring five consecutive one-year Breaks-In-Service
following the date of distribution, or (2) the date five years after the
date of resumption of employment. If such Former Participant does not
make repayment within the prescribed period, his right to the restoration
of his prior Forfeiture Account shall lapse.
(ii) No Repayment Required: The Administrator shall add back to the
---------------------
(Former) Participant's Employer Contribution Account the Forfeiture
Account as of the Valuation Date immediately preceding the date of
reemployment. To determine such Participant's vested interest in his
Employer Contribution Account upon any subsequent Termination of
Employment, the following formula shall be applicable:
X = P (AB + D) - D, where
"X" equals the vested interest
"P" equals the Vested Percentage
"AB" equals the value of the Employer Contribution Account
"D" equals the amount of the prior distribution(s).
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<PAGE>
(c) Forfeiture Accounts at Plan Termination: Notwithstanding Section
---------------------------------------
4.02(b), an individual's rights to Forfeiture restoration shall lapse when
this Plan is terminated and such individual has either (i) failed to repay
his prior distribution in accordance with Section 4.02(b)(i) prior to the
date the Plan is terminated or (ii) not resumed employment prior to the date
the Plan is terminated. Any Forfeiture Accounts remaining on the date the
Plan is terminated shall be disposed of in accordance with Section 15.03.
(d) Source of Funds for Restored Forfeitures: If a Forfeiture Account
----------------------------------------
has already been allocated pursuant to Sections 4.02(a), 5.07, 6.07, 7.11 or
7.14, but such Forfeiture Account must be restored in accordance with
Sections 4.02(a) or (b), such restoration shall be made from: (i) other
Forfeitures which become available, (ii) Employer contributions under Section
4.01(a), or (iii) Investment Income. Alternatively, the Employer may make a
special contribution to restore such Forfeiture Account.
(e) Non-Vested Former Participants: For purposes of this Section 4.02
------------------------------
and Article VIII, if the value of a Former Participant's (or Inactive
Participant's) Benefit is zero at his date of Termination of Employment, the
Former Participant (or Inactive Participant) shall be deemed to have received
a distribution of his Benefit on his date of Termination of Employment.
4.03 VOLUNTARY AND ROLLOVER CONTRIBUTIONS BY PARTICIPANTS
(a) Company Discretion: If provided in the Adoption Agreement,
------------------
Participants may be permitted to elect to make voluntary contributions to the
Trust, and/or Participants may be permitted to contribute Rollover
Contributions. The Administrator shall give Participants adequate advance
notice prior to the beginning of a Plan Year for which voluntary
contributions will, or will not, be permitted. If voluntary contributions are
permitted under this Plan, Section 6.11 may provide that Discriminatory
Deferrals can be recharacterized as voluntary contributions.
(b) Amount of Voluntary Contributions: With respect to a Plan Year when
---------------------------------
voluntary contributions are permitted, the amount of voluntary contributions
(including Discriminatory Deferrals recharacterized as voluntary
contributions in accordance with Section 6.11) made by any Participant shall
be subject to the limitations set forth in the Adoption Agreement and Article
V. Voluntary contributions may be made by payroll deductions or by other
methods and at other intervals in accordance with rules established by the
Administrator. Voluntary contributions received by the Employer shall be
transmitted to the Trustee within 30 days after they have been collected.
57
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(c) Rollover Contributions: With the approval of the Administrator, a
----------------------
Participant may contribute a Rollover Contribution into the Trust. The
Administrator, in its sole discretion, shall determine whether or not a
Participant shall be permitted to make a Rollover Contribution. The
Administrator shall develop like and non-discriminatory rules and procedures.
The Administrator may require the Participant to supply all the information
it deems necessary, including but not limited to the amount and nature of the
property to be contributed, and a statement that such contribution
constitutes a Rollover Contribution.
(d) Separate Fund: The voluntary contributions and Rollover
-------------
Contributions of Participants shall be accounted for separately from that
portion of the Trust attributable to Employer contributions. Such
contributions may, but need not, be held and invested in a segregated
separate fund within the Trust established and maintained for this purpose.
(e) Individual Accounts: The Administrator shall create and maintain
-------------------
adequate records to record the interest in the Trust of voluntary
contributions and Rollover Contributions. Such records shall be in the form
of individual Accounts in accordance with Section 5.01. Each Participant
electing to make voluntary contributions shall have an Employee Contribution
Account, and each Participant contributing a Rollover Contribution shall have
a Rollover Contribution Account.
(f) Valuation and Allocations: If Employee Contribution Accounts and/or
-------------------------
Rollover Contribution Accounts are held and invested in a separate fund, the
Administrator or Trustee shall determine the net worth of the assets of the
separate fund or funds as of each Valuation Date or Interim Valuation Date in
accordance with Section 5.02. Investment Income shall be allocated to the
Employee Contribution Accounts and/or Rollover Contribution Accounts as of
each Valuation Date or Interim Valuation Date as provided in Section 5.04.
(g) Vesting: A Participant's Employee Contribution Account and/or
-------
Rollover Contribution Account shall at all times be fully vested and shall
not be forfeitable for any cause.
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(h) Withdrawals from Employee Contribution Accounts: The Administrator
-----------------------------------------------
shall adopt uniform rules and procedures pertaining to the withdrawal from
Employee Contribution Accounts. A Participant may elect to make a withdrawal
from his Employee Contribution Account by filing an adequate advance written
notice with the Administrator. Such withdrawal may be up to an amount equal
to the balance then credited to said Account, determined as of the last
preceding Valuation Date (or Interim Valuation Date), including any
contributions made after such Valuation Date (or Interim Valuation Date) up
to the date of withdrawal. Withdrawals from Rollover Contribution Accounts
shall not be permitted. A withdrawal under this subsection (h) shall not have
any effect on either his other Accounts in the Plan or his Vested Percentage
in such other Accounts.
(i) Distribution: Upon Termination of Employment, a Participant's
------------
Employee Contribution Account and/or Rollover Contribution Account shall be
distributed in accordance with Article VIII in the same manner and conditions
as other Accounts.
(j) Forms: Elections to make contributions, withdraw contributions,
-----
discontinue contributions or resume contributions shall be in writing, signed
by the Participant and on such form or forms as the Administrator shall
require.
(k) Consent and Annuity Requirements: Notwithstanding Sections 4.03(h)
--------------------------------
and (i), any withdrawal or distribution of an Account described in this
Section 4.03 shall:
(i) require the consent of the Participant if the value of all of
the Participant's Accounts in this Plan exceeds $3,500; and
(ii) be subject to the requirements of Article X (but only to the
extent Article X is otherwise applicable).
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ARTICLE V
ALLOCATIONS AND LOANS
5.01 INDIVIDUAL ACCOUNTS
The Administrator shall create and maintain adequate records to disclose the
interest in the Trust of each Member and Beneficiary. Such records shall be in
the form of individual Accounts, and credits and charges shall be made to such
Accounts in the manner herein described. The maintenance of individual Accounts
is only for accounting purposes, and a segregation of the assets of the Trust to
each Account shall not be required.
5.02 VALUATION OF THE TRUST
The Administrator, or if it so directs, the Trustee, shall determine the net
worth of the assets of the Trust and of any separate fund therein as of each
Valuation Date and Interim Valuation Date. In determining such net worth, the
Administrator or Trustee shall evaluate the assets at their "fair market value"
as of such Valuation Date or Interim Valuation Date as described herein.
The "fair market value" of the Trust Fund assets shall be determined in
compliance with this Section and the principles of Section 3(26) of ERISA and
regulations issued pursuant thereto. Valuation shall be based upon information
reasonably available to the Administrator, including data from, but not limited
to, newspapers and financial publications of general circulation, statistical
and valuation services, records of securities exchanges, appraisals by qualified
persons, transactions and bona fide offers in assets of the type in question and
other information customarily used in the valuation of property for purposes of
Internal Revenue Code. The Administrator may elect to value any bank deposit,
certificate of deposit, bond, interest-bearing insurance contract, promissory
note or other evidence of indebtedness at its unpaid face value, with interest
accrued to the Valuation Date or Interim Valuation Date, if the obligation is
not in default. The value of any real property held in the Trust Fund,
determined as of the end of any Plan Year, shall be considered to remain
unchanged until the end of the following Plan Year. In determining the value of
the Plan's investment in a collective investment fund, separate account,
partnership or similar entity, the Administrator may (but need not) rely upon
the most recent prior valuation of units or interests in the fund, separate
account, partnership or entity made on or on behalf of the fund, separate
account, partnership or entity. With respect to securities for which there is a
generally recognized market, the published selling prices on or nearest to such
Valuation Date or Interim Valuation Date shall establish the fair market value
of such security. The fair market value so determined shall be conclusive for
all purposes of the Plan and Trust.
5.03 INVESTMENT OF ACCOUNTS
If elected in the Adoption Agreement, separate Investment Funds shall be
established. In addition, such election may limit the type(s) of Account (and
contributions attributable to such Account) which may be invested in such
Investment Funds.
(a) "Eligible Accounts": If permitted above, a Participant's Account(s)
-----------------
(and related contributions) shall be invested in the Investment Fund or Funds
in accordance with the Participant's investment election as made on the form
or forms provided by the Administrator.
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(b) "Non-Eligible Accounts": If separate Investment Funds are
---------------------
established, but an Account is not invested in any Investment Fund (because
either (i) a Participant does not wish to invest such Account in any
Investment Fund, or (ii) Investment Funds are limited to certain type(s) of
Account), the "non-eligible" Account (and related contributions) shall be
invested in the General Fund.
(c) Change of Investment Election: A Participant may change his
-----------------------------
investment election with respect to future contributions under subsection (a)
as of the first day of the Plan Year and/or at such other times as the
Administrator shall provide under uniform rules and procedures.
The Administrator, in its sole discretion, may also permit Participants
to change the investment of their entire Account(s). If the Administrator
permits such a change, it shall establish such rules and procedures as it
deems appropriate. For example, the Administrator could require that the
Participant's Account be invested (i) in the same Investment Fund or Funds
and in the same proportions as the future contributions made on such
Participant's behalf, or (ii) in any or all of the Investment Funds in even
percentages of 10%, 20% or 25%. The effective date of such a change with
respect to a Participant's entire Account shall be as of such date as
determined by the Administrator.
The Administrator may require Participants to provide written
notification of a change of investment up to 60 days in advance on such form
or forms and in accordance with such procedures as the Administrator shall
determine.
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(d) Temporary Investments: Pending the investment election of monies in
---------------------
one of the Investment Funds, the Trustee or Investment Manager may invest
such monies in the Short-Term Income Fund, if any, or a separate fund with
similar type short-term investments.
5.04 ALLOCATION OF INVESTMENT INCOME
(a) Allocation on Valuation Date: As of each Valuation Date, the
----------------------------
Investment Income of each Investment Fund (or if none, of the Trust) and each
separate fund in the Trust, if any, since the preceding Valuation Date, shall
be determined by the Administrator and allocated to the Account or Accounts
of Members and Beneficiaries who had balances in their Accounts on the
Valuation Date.
Investment Income of each of the Investment Funds (or if none, of the
Trust) shall be allocated to each Account in the Investment Fund on the
Valuation Date according to the ratio that a person's "Adjusted Account
Balance" (as defined herein) bears to the total of the "Adjusted Account
Balances" of all persons as of such Valuation Date in such Investment Fund.
For purposes of this Section, a person's "Adjusted Account Balance" as of
any Valuation Date shall be:
(i) The balance in the person's Account in the Investment Fund (or
if none, in the Trust) as of the immediately preceding Valuation Date;
plus
(ii) A portion of Deferrals, Matching Contributions, voluntary
contributions and Rollover Contributions made on the person's behalf and
not withdrawn since the immediately preceding Valuation Date; plus
(iii) A portion of transfers from another Investment Fund to the
person's Account since the immediately preceding Valuation Date; less
(iv) Distributions, withdrawals, and transfers to another Investment
Fund, from the person's Account since the immediately preceding Valuation
Date. For purposes of this paragraph (iv), the Deferrals, Matching
Contributions, voluntary contributions and Rollover Contributions made on
the person's behalf and withdrawn since the preceding Valuation Date
shall not be treated as withdrawals.
The Investment Income of any special separate fund or funds in the
Trust shall be allocated among the Accounts in such separate fund or funds in
the same manner as for the Investment Funds.
The Administrator may adopt any other non-discriminatory method or
methods, in addition to or in lieu of the foregoing, to equitably allocate
Investment Income to Accounts and/or to determine Adjusted Account Balances for
purposes of such allocations.
No Investment Income shall be allocated to Forfeiture Accounts.
Investment Income on funds held in Forfeiture Accounts shall be allocated to
Participants in a nondiscriminatory manner as determined by the Administrator.
(b) Interim Valuation Date: The Administrator may, but shall not be
----------------------
required to provide for an interim valuation of the Accounts in the Trust (or
any separate fund therein) for the purpose of making distributions to Members
or providing for the transfer between Investment Funds since the preceding
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Valuation Date or Interim Valuation Date. The Administrator shall determine
the percentage increase or decrease in the net worth of the assets in the
Trust (and/or separate fund in the Trust) or in each Investment Fund from the
preceding Valuation Date to the Interim Valuation Date after excluding all
distributions made since the preceding Valuation Date or Interim Valuation
Date. In determining such percentage increase or decrease in the net worth of
such assets, all Investment Income of the Trust (and/or separate fund
therein) or of each Investment Fund during the period between the preceding
Valuation Date and Interim Valuation Date shall be included and determined in
the same manner as provided for in subsection (a). The revalued Accounts from
which a distribution or transfer shall be made shall be multiplied by the
appropriate percentages so determined in order to reflect such increase or
decrease.
The percentages once so determined shall be applied to all Accounts from
which distributions or transfers are made until the next Valuation Date or
Interim Valuation Date, whichever is earlier. Any increase or decrease in the
net worth of the assets so distributed to or retained from such Accounts
shall increase or decrease the total Investment Income which is to be
allocated on the next following Valuation Date or Interim Valuation Date.
5.05 ELIGIBILITY FOR ALLOCATION OF PROFIT SHARING CONTRIBUTION
As of the end of each Plan Year, the Profit Sharing Contributions for the Plan
Year made pursuant to Section 4.01 shall be allocated among those Participants
and those Inactive Participants who became Inactive Participants during such
Plan Year and who meet the requirements specified in the Adoption Agreement.
Such allocation shall be made in accordance with Section 5.06.
5.06 ALLOCATION OF PROFIT SHARING CONTRIBUTION
The Profit Sharing Contributions shall be allocated to eligible Participants and
Inactive Participants in accordance with either subsection (a) or (b) below,
whichever is elected in the Adoption Agreement.
(a) Integrated Allocation Method
----------------------------
(i) Excess Allocation: The Profit Sharing Contribution shall first
-----------------
be allocated to the Employer Contribution Accounts of eligible
Participants and Inactive Participants who earned Excess Compensation
during such Plan Year in accordance with either paragraph (1) or (2)
below. Paragraph (1) shall be applicable for Plan Years beginning prior
to 1989, and paragraph (2) shall be applicable for Plan Years beginning
in 1989 and later.
(1) For Plan Years which begin prior to 1989, the Employer
Contribution Account of each eligible Participant and Inactive
Participant shall receive an allocation equal to the Integration
Percentage multiplied by the individual's Excess Compensation,
unless some other smaller percentage is chosen by the Company with
respect to such Plan Year (this includes the situation where the
amount of the Employers' contribution is less than the Integration
Percentage multiplied by the total Excess Compensation of all
eligible individuals).
(2) For Plan Years beginning in and after 1989, the Employer
Contribution Account of each eligible Participant and Inactive
Participant shall receive an allocation equal to a percentage
multiplied by the individual's Excess Compensation. The percentage
referred to in the preceding sentence is that percentage which is
equivalent
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to the ratio determined by dividing the Employers' contribution by the
sum of (I) the total Compensation of all such eligible individuals and
(II) the total Excess Compensation of all such eligible individuals
(unless the Company chooses a smaller percentage for such Plan Year).
However, the percentage may not exceed the Integration Percentage for the
Plan Year.
(ii) Remaining Allocation: The remaining portion, if any, of the
--------------------
Profit Sharing Contribution for the Plan Year which is in excess of the
amounts allocated under paragraph (i) above shall be allocated to the
Employer Contribution Accounts of all eligible Participants and Inactive
Participants according to the ratio that each Participant's or Inactive
Participant's Compensation for the Plan Year bears to the total
Compensation of all eligible Participants and Inactive Participants for
the Plan Year.
(b) Non-Integrated Allocation Method: The Profit Sharing Contribution
--------------------------------
shall be allocated to the Employer Contribution Accounts of all eligible
Participants and Inactive Participants according to the ratio that each
Participant's or Inactive Participant's Compensation for the Plan Year bears
to the total Compensation of all eligible Participants and Inactive
Participants for the Plan Year.
(c) Top-Heavy Allocation: Notwithstanding subsections (a) or (b) above,
--------------------
if this Plan is "Top-Heavy" (as defined in Article XI) for the Plan Year, the
Profit Sharing Contribution shall first be allocated to satisfy the minimum
allocation required under Section 11.05(b) (unless such requirement is
satisfied by another defined contribution plan). The remaining Profit Sharing
Contribution, if any, shall be allocated in accordance with the terms of
subsections (a) or (b) (and treating the "Top-Heavy" allocation under this
subsection (c) as an allocation under subsections (a) or (b)).
5.07 ALLOCATION OF FORFEITURES ATTRIBUTABLE TO EMPLOYER CONTRIBUTION
ACCOUNTS
This Section 5.07 discusses the allocation of Forfeitures attributable only to
Employer Contribution Accounts. For a discussion of Forfeitures attributable to
the Matching Contribution Accounts and the Joining Bonus Accounts, see Sections
7.07 and 7.13.
For Plan Years beginning prior to January 1, 1989, the allocation of Forfeitures
attributable to Employer Contribution Accounts shall be determined under the
terms of the Prior Plan. For Plan Years beginning after December 31, 1988,
Forfeitures which have become available for allocation during a Plan Year in
accordance with Section 4.02 (other than Forfeitures which have been deemed
Qualified Nonelective Contributions pursuant to Sections 6.07, 7.11 or 7.14)
shall be added to Profit Sharing Contributions for such Plan Year, and allocated
in accordance with Section 5.06.
5.08 POSSIBLE REDUCTION OF ALLOCATION TO KEY HIGHLY COMPENSATED
EMPLOYEES AND FAMILY MEMBERS
Notwithstanding Sections 5.06 and 5.07, the allocations of Profit Sharing
Contributions and Forfeitures to the Employer Contribution Accounts of a Key
Highly Compensated Employee and his Family Members shall be reduced to comply
with Sections 401(a)(17) and 414(q)(6) of the Code, but only to the extent
required by applicable regulations. Any "excess" resulting from such reduction
shall be reallocated to all Participants and Inactive Participants (including
Key Highly Compensated Employees and Family Members) under Sections 5.06 and
5.07. If after such reallocation there still remains an "excess" on account of
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this Section 5.08, the additional "excess" shall again be reallocated. This
process may be repeated as many times as necessary until such "excess" is
exhausted.
5.09 MAXIMUM ALLOCATION
The contribution on behalf of or by Participants shall be limited in accordance
with Code Section 415 and regulations thereunder, which are incorporated by
reference. This Section explains the application of Code Section415 and in the
event of any omission or conflicting statements, Code Section 415 and
regulations thereunder shall govern.
Notwithstanding anything contained in this Plan to the contrary, the total
Additions made to the Account of a Participant for any Limitation Year shall not
exceed the lesser of (a) the Maximum Addition or (b) 25% of the Participant's
Earnings for the Limitation Year. (Certain Additions attributable to Code
Sections 401(h), 415(l) and 419A(d) (relating to certain medical benefits) are
not subject to the 25% limit in the preceding sentence.)
To comply with Section 415(f)(1)(B) of the Code (which provides that all defined
contribution plans [including voluntary employee contribution accounts in a
defined benefit plan] of the Employer, whether or not terminated, shall be
considered as one defined contribution plan), Additions shall be limited as
described in the Adoption Agreement.
If Additions shall exceed the above limitation because of circumstances
described in regulation 1.415-6(b)(6), any Deferrals and/or voluntary
contributions (under this Plan or any other qualified plan of the Employer) made
by the Participant for the Limitation Year which caused the excess shall be paid
to the Participant. If excess Additions still exist, the method described in
regulation 1.415-6(b)(6)(ii) shall be used; that is, such excess Additions shall
generally be held in a suspense account (to which no Investment Income shall be
credited) and be used to reduce future Employer contributions for the affected
Participant.
Notwithstanding the foregoing, the otherwise permissible Additions for any
Participant under this Plan may be reduced to the extent necessary to prevent
disqualification of the Plan under Code Section 415(e), which imposes additional
limitations on the benefits for Participants who also participate in one or more
tax-qualified defined benefit pension plan of the Employer. The Administrator
shall advise affected Participants of any additional limitation of their
Additions required by the preceding sentence.
The Administrator shall comply with the provisions of the preceding paragraph as
specified in the Adoption Agreement and to the extent necessary so that the sum
of the Defined Contribution Fraction and the Defined Benefit Fraction (both
defined below) shall not exceed one (1.0):
(a) Defined Contribution Fraction
-----------------------------
(i) Numerator: The numerator of the Defined Contribution Fraction
---------
is the sum of the Annual Additions for all Limitation Years, where
"Annual Addition" is defined as the total of the following amounts
allocated to a Participant's accounts under all defined contribution
plans maintained by the Employer (except as otherwise provided under
Section 415(c)(6) of the Code) with respect to each Limitation Year:
(1) Employer contributions (including "salary deferrals" and
forfeitures, if any),
(2) voluntary contributions, and
(3) any amounts attributable to Sections 401(h), 415(l) and
419A(d)
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(relating to certain medical benefits) of the Code, but only to the
extent provided by such sections of the Code.
Notwithstanding the foregoing, Annual Additions shall not include
amounts which are deemed not to be Annual Additions pursuant to
regulations 1.415-6(b)(l)(i) and 1.415-6(b)(6). In addition, for
Limitation Years beginning before January 1, 1987, not all voluntary
contributions are Annual Additions. Instead, only the lesser of (i) one-
half of the Participant's voluntary contributions, or (ii) the amount of
the Participant's voluntary contributions in excess of 6% of his Earnings
for such Limitation Year, shall be considered Annual Additions.
In addition, the numerator shall take into account any reductions
allowed as a result of changes caused by TEFRA (the pre-TEFRA "1.4 rule")
and Top-Heavy restrictions (the pre-Top-Heavy TEFRA "1.0 rule"). [See
paragraph (iii) below for an additional numerator reduction.]
(ii) Denominator: The denominator of the Defined Contribution Fraction
-----------
is either (1) or (2) as follows:
(1) The sum of the "Adjusted Maximum Annual Addition" for each
Limitation Year.
(2) The sum of (A) and (B) as follows:
(A) The sum of the "Maximum Annual Addition" for each
Limitation Year ending before January 1, 1983, multiplied by the
"Transition Fraction."
(B) The sum of the "Adjusted Maximum Annual Addition" for
each Limitation Year ending after December 31, 1982.
The Plan Administrator shall select only one of the above
denominators to be used under this Section 5.09, and such
denominator shall be applied to each Participant. However, the
denominator described in clause (ii)(2) may only be elected if the
affected Plan was in existence on July 1, 1982.
(iii) Numerator Reduction: If this Plan and all other plans required to
-------------------
be aggregated under Section 415(f) of the Code satisfied Section 415 of the
Code as of the end of the Limitation Year beginning before January 1, 1987
(that is, the pre-TRA86 "1.0 rule"), the numerator of the Defined
Contribution Fraction shall be reduced (but not below "zero") to the extent
necessary so that the sum of the Defined Contribution Fraction and the
Defined Benefit Fraction (both computed in accordance with Sections 415 and
416(h) of the Code, as amended by TRA86) does not exceed 1.0 for the
Limitation Year beginning before January 1, 1987. In determining the amount
of the reduction, the denominator of the Defined Contribution Fraction shall
take into account the Transition Fraction method (as modified, if applicable,
by Section 416(h) of the Code), if elected, under Section 415(e)(6) of the
Code.
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(iv) Certain Terms: For purposes of this subsection (a):
-------------
(1) "Maximum Annual Addition" shall mean the lesser of the
-----------------------
dollar amount described in Section 415(c)(l)(A) of the Code for the
applicable Limitation Year, or 25% of the Participant's Earnings for
the applicable Limitation Year.
(2) "Adjusted Maximum Annual Addition" shall mean the lesser of
--------------------------------
1.25 times the dollar amount described in Section 415(c)(l)(A) of
the Code for the applicable Limitation Year, or 1.4 times 25% of the
Participant's Earnings for the applicable Limitation Year.
(3) "Transition Fraction" shall mean the fraction,
-------------------
(A) the numerator of which is the lesser of
(I) $51,875, or
(II) 1.4 times 25% of the Participant's Earnings for
the Limitation Year ending in 1981, and
(B) the denominator of which is the lesser of
(I) $41,500, or
(II) 25% of the Participant's Earnings for the
Limitation Year ending in 1981.
(4) With respect to a Limitation Year of less than 12 months
because of an amendment changing the Limitation Year to a different
12-consecutive month period, the "dollar amount described in Section
415(c)(1)(A) of the Code" used in subparagraphs (1) and (2) above
shall be prorated to reflect the number of months in such short
Limitation Year.
(b) Defined Benefit Fraction: The numerator of the Defined Benefit
------------------------
Fraction is the "projected annual benefit" (as defined below) of the
Participant under all defined benefit plans required to be aggregated under
Section 415 of the Code, determined as of the
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close of the Limitation Year. The denominator of the Defined Benefit Fraction
is the lesser of 1.25 times 12 times the Maximum Monthly Pension or 1.4 times
12 times the Participant's monthly average Earnings paid by the Employers and
each Affiliated Company during the three consecutive Limitation Years when
such Earnings were the highest.
A Participant's "projected annual benefit" is equal to the projected
benefit under the applicable Plan (taking into account the Participant's
accrued pensions determined as of (1) the end of the Limitation Year which
began prior to 1983 [the pre-TEFRA grandfather accrued pension] and (2) the
end of the Limitation Year which began prior to 1987 [the pre-TRA86
grandfather accrued pension]), based upon the following assumptions:
(i) The Participant will continue in employment until reaching
normal retirement age.
(ii) The Participant's compensation for the Limitation Year under
consideration will remain the same until reaching normal retirement age.
(iii) All other relevant factors will remain constant for all future
Limitation Years.
For purposes of this subsection (b),
(i) "Maximum Monthly Pension" shall mean one-twelfth of the greater
-----------------------
of (1) the dollar amount described in Section 415(b)(l)(A) of the Code for
the applicable Limitation Year, and (2) the Participant's pre-TRA86
grandfather accrued pension (after taking into account his pre-TEFRA
grandfather accrued pension).
(ii) The denominator of the Defined Benefit Fraction shall be
further adjusted as required under Section 415(b) of the Code to reflect the
form of the benefit, the Participant's social security retirement age, the
date the benefit commences and length of service of less than 10 years.
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5.10 LOANS TO PARTICIPANTS WHO ARE PARTIES-IN-INTEREST
If permitted in the Adoption Agreement, the Administrator may, in its sole
discretion, authorize the Trustee to loan money to a Participant or an Inactive
Participant who is a "party-in-interest" (as defined by Section 3(14) of ERISA)
from the Trust. The general terms and conditions of loans (which are intended
to comply with Section 2550.408b-1 of the Department of Labor Regulations) shall
be determined pursuant to the provisions of this Section 5.10. Loans under this
Section 5.10 shall (i) be made available to all eligible individuals on a
reasonably equivalent basis, and (ii) not be made available to Highly
Compensated Employees in an amount greater than the amount made available to
other Employees. The Administrator shall adopt additional rules and regulations
necessary to carry out the provisions of this Section 5.10. Such rules shall be
uniformly applicable to all eligible individuals, and the determination of
whether to approve an application for a loan shall be on a like and
nondiscriminatory basis.
(a) Administration of Loan Program: The Administrator shall administer
------------------------------
the provisions of this Section 5.10, unless the Administrator delegates such
responsibility to another person pursuant to Section 13.04.
(b) Purpose of Loan: The Administrator may choose to limit loans to a
---------------
specific purpose(s).
(c) Application: An application for a loan by a Participant shall be
-----------
made in writing to the Administrator on such form or forms as the
Administrator may require. The Administrator may also require (if applicable)
the Participant to produce such documents and other evidence of a financial
need and the amount of the financial need. If the loan is secured by any part
of the Participant's Account, the loan application must also include the
Participant's consent to a possible reduction of his Benefit to satisfy the
repayment of such loan. If the Participant is married at the time of the
loan, the application must also include the spouse's consent to and
acknowledgement of the effect of such possible reduction. The consents
required under this paragraph shall be obtained no earlier than 90 days
before the date such loan is made, and the spouse's consent shall be
witnessed by a notary public (or, if permitted by the Administrator, by a
representative of the Administrator). If the Participant is unmarried at the
time of the loan or if the Participant later remarries, the consent of the
new spouse shall not be required.
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(d) Amount of Loan: The Administrator shall require that the total
--------------
balance of all loans outstanding for a Participant shall not exceed the
limits described in Section 2550.408b-1 of the Department of Labor
Regulations. In addition, the Administrator may refuse to grant any loan to
the extent such loan is treated as a taxable distribution under Section 72(p)
of the Code.
(e) Interest: Each loan shall bear a reasonable rate of interest to be
--------
fixed by the Administrator and/or the Trustee. The Administrator and Trustee
shall not discriminate among Participants in the matter of interest rates;
but loans granted at different times or for different durations may bear
different interest rates if the difference in rates is justified by different
general economic conditions.
(f) Repayment of Loan: Repayment shall normally be by payroll deduction
-----------------
on an installment basis (but not less frequently than quarterly), with the
amortization of the principal and interest over the period of the loan. A
different arrangement for repayment may be made by mutual agreement between
the Administrator and the Participant, provided that such arrangement is
consistent with bank practices for similar type loans. The period of
repayment for any loan shall be arrived at by mutual agreement between the
Administrator and the Participant, but shall normally not extend beyond five
years for loans other than for the purchase of the principal residence of the
Participant. Refinancing of the loan shall not be made available by the
Administrator. That is, in the event interest rates have dropped due to a
change in economic conditions, a new loan at the current interest rate may
not be negotiated to replace the prior loan(s). If a Participant's employment
terminates or the Plan terminates, the loan shall become immediately due. No
distribution of Benefits shall be made to any Participant, Inactive
Participant or to a Beneficiary of any such Participant or Inactive
Participant unless and until all unpaid loans, including interest thereon,
have been liquidated.
(g) Fees/Expenses: The Administrator may charge reasonable set-up and
-------------
periodic service fees and other related expenses directly to the Participant.
(h) Security: Loans shall be evidenced by the Participant's promissory
--------
note and shall be secured by the Participant's Account or any other form of
security acceptable to the Administrator. If on any date the value of such
security is less than the unpaid principal amount of any loan to the
Participant outstanding on such date, the Administrator shall require such
Participant to either tender additional security
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acceptable to the Administrator equal in value to the difference between the
value of such Participant's security and the unpaid principal then
outstanding, or accelerate principal repayment to the extent necessary to
make the unpaid principal amount of such loan equal to the value of the
Participant's security.
(i) Loan Default: Foreclosure on any loan and attachment of the security
------------
shall generally not occur until the Participant's Benefit becomes payable in
accordance with Article VIII.
(j) Hardship Withdrawals of Deferrals: The Administrator may establish
---------------------------------
special rules and limits for loans in situations involving a concurrent
hardship withdrawal under Section 6.12(d).
(k) Additional Limits: The Administrator may further limit the amount
-----------------
loaned to any Participant in order to maintain a reserve chargeable against
the Participant's Benefit for income taxes which would have to be withheld by
the Trustee if the loan becomes a deemed distribution to the Participant. Any
such taxes required to be withheld by the Trustee (whether or not such a
reserve has been created) shall be charged to and reduce the Participant's
Benefit to the extent possible and any excess shall be treated as an
administrative expense of the Plan which shall be reimbursed by the
Participant in question.
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ARTICLE VI
DEFERRALS AND HARDSHIP WITHDRAWALS
6.01 GENERAL
This Article VI is intended to provide guidelines regarding special
qualification, nondiscrimination and distribution rules under Section 401(k) and
other related Sections of the Code. The Administrator shall adopt additional
rules necessary (1) to carry out this Article VI (including, if applicable,
special rules unique to Partner-Employees), and (2) to implement special,
transitional and operational rules permitted under IRS regulations (for example,
the "restructuring" rules of regulation 1.401(k)-1(h)(3)(iii)).
Regulations under Sections 401(a)(4) and 410(b) consider the portion of this
Plan attributable to Deferrals to be a separate plan apart from the portions of
the Plan attributable to Profit Sharing Contributions or Matching Contributions.
Accordingly, if the provisions of this Article conflict with any other
provisions of this Plan, the provision that shall govern depends upon whether
such provision applies to Deferrals, Profit Sharing Contributions or Matching
Contributions.
6.02 DEFINITIONS
For purposes of this Article VI, the following words or phrases shall have the
following meanings:
(a) "Actual Deferral Percentage (ADP)" shall mean the percentage
--------------------------------
obtained by dividing the Participant's Deferrals for the Plan Year by the
Participant's ADP Compensation for the Plan Year. However, see Sections
6.06(a), (b) and (c) and 7.09(a) regarding whether (i) additional amounts are
added to Deferrals to increase the ADP, or (ii) certain Deferrals are
excluded to lower the ADP. In addition, see subsection (b) below and Sections
6.06(d) and (e) regarding situations where the ADP of a Highly Compensated
Participant is decreased to satisfy the ADP Test in Section 6.05. If a
Participant's ADP Compensation for the Plan Year is "zero", no ADP shall be
computed for such Participant (see Section 6.05(b)(iv)).
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(b) "Adjusted ADP" shall mean, in the case of a Plan which fails to
------------
satisfy the ADP Test in Section 6.05, the eventual ADP calculated under the
following leveling method, under which the ADP of the Highly Compensated
Participant with the highest ADP is reduced to the extent required to:
(i) enable the Plan to satisfy the ADP Test, or
(ii) cause such Highly Compensated Participant's ADP to equal the
ADP of the Highly Compensated Participant with the next highest ADP.
This process must be repeated until the Plan satisfies the ADP Test.
In addition, the term Adjusted ADP shall be substituted for the term ADP
wherever such term is used in the Plan.
(c) "ADP Compensation" shall mean the Participant's Compensation for the
----------------
Plan Year, unless the definition of Compensation fails to satisfy the
requirements of Section 414(s) of the Code ["Condition A"].
(i) If Condition A exists, then ADP Compensation shall instead mean
the Participant's Compensation for the Plan Year, but excluding Deferrals
made for the Plan Year.
(ii) If Condition A continues to exist after the definition of ADP
Compensation has been revised in accordance with paragraph (i) above,
then ADP Compensation shall instead mean the Participant's Compensation
for the entire Plan Year, including Compensation earned prior to his
Entry Date.
(iii) If Condition A continues to exist after the definition of ADP
Compensation has been revised in accordance with paragraph (ii) above,
then ADP Compensation shall instead mean the Participant's Compensation
for the entire Plan Year, including Compensation earned prior to his
Entry Date, but excluding Deferrals made for the Plan Year.
(iv) If Condition A continues to exist after the definition of ADP
Compensation has been revised in accordance with paragraph (iii) above,
then the Plan must be amended to provide for a definition of ADP
Compensation that satisfies the requirements of Section 414(s) of the
Code.
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For Plan Years beginning in 1989 and later, ADP Compensation shall not
exceed $200,000 (or such higher amount in accordance with Sections 401(a)(17)
and 415(d) of the Code). If a Plan Year is less than 12 months, the $200,000
(or such higher amount) shall be prorated accordingly.
(d) "Discriminatory Deferrals" shall mean those Deferrals, Qualified
------------------------
Nonelective Contributions and Qualified Matching Contributions which caused
the ADP Test in Section 6.05 to be exceeded. The amount of Discriminatory
Deferrals attributable to any Highly Compensated Participant is equal to such
Participant's Deferrals (or other amounts treated as Deferrals) minus the
product of (i) such Participant's Adjusted ADP, times (ii) such Participant's
ADP Compensation.
(e) "Excess Deferrals" shall mean, for any calendar year, Deferrals made
----------------
by a Participant in excess of the greater of (i) $7,000 or (ii) the dollar
limitation in effect under Section 402(g)(1) of the Code for such calendar
year (see Section 6.03(c)).
6.03 ELECTION TO MAKE DEFERRALS
(a) Election Forms: The Administrator shall provide each Participant with
--------------
an election form authorizing the deferral of his Compensation. Compensation
which is "currently available" (as described in regulation 1.401(k)-
1(a)(3)(iii)) may not be deferred. The timing/frequency, amount and any other
limitations regarding the Deferrals shall be governed by the terms specified
in the Adoption Agreement.
If elected in the Adoption Agreement, the Administrator shall define the
term "Make-Up" Deferrals and establish rules and procedures regarding how
such Deferrals may be made. The general intent is to allow Participants to
make Deferrals in excess of "current" limits, as long as the "cumulative"
limits for the Plan Year are not exceeded. An example of the preceding is a
plan which has a maximum individual deferral rate of 10% of compensation, but
which allows a participant who defers nothing in the first half of the plan
year to defer 20% of compensation for the remainder of the plan year.
In addition to (or in lieu of) the terms specified in the Adoption
Agreement, the Administrator may establish such rules and procedures as are
necessary to implement this subsection (a). The election made under this
subsection (a) will remain in effect until modified in accordance with
subsection (b) below.
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(b) Modification of Deferral Election: The Administrator shall establish
---------------------------------
rules and procedures regarding when (at least once each Plan Year) and how a
Participant may increase, decrease, suspend or resume Deferrals (or begin
Deferrals, in the case of a Participant who does not elect to make Deferrals
when first eligible).
(c) Maximum Amount of Deferrals: Notwithstanding subsection (a) above,
---------------------------
no Participant shall be permitted to make Deferrals under this Plan
(including similar amounts under other plan(s) maintained by the Employer),
for any calendar year, in excess of the greater of $7,000 or the dollar
--------
limitation in effect under Section 402(g)(1) of the Code for such calendar
year. The foregoing limit shall not apply to certain "transitional" Deferrals
(i) of certain Partner-Employees (see Section 1105(c)(4) of TRA86) or (ii)
attributable to services performed during 1986 (see Section 1105(c)(5) of
TRA86).
In addition, no Participant shall be permitted to make Deferrals to the
extent total Additions allocated to the Participant would exceed the limits
of Section 5.09 (regarding Section 415 of the Code). However, those Deferrals
distributed pursuant to the fourth paragraph of Section 5.09 are not treated
as Additions.
(d) Automatic Cessation of Deferrals: Notwithstanding subsections (a)
--------------------------------
and (b) above, the Administrator may suspend the Deferrals of a Highly
Compensated Participant in order to meet the ADP Test in Section 6.05. This
suspension can be based upon the results of the ADP Test on an "actual" or
"projected" basis, in accordance with rules and procedures established by the
Administrator.
In addition, the Administrator may suspend the Deferrals of any
Participant to comply with subsection (c) above.
(e) Allocation of Deferrals: Deferrals shall be credited to the
-----------------------
Participant's Deferred Income Account, which shall be 100% vested at all
times, and shall normally be paid by the Employer to the Trustee within 30
days following the month for which the amount was withheld (but no later than
the end of the 12-month period following the Plan Year to which such
Deferrals relate).
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<PAGE>
6.04 DISTRIBUTION OF EXCESS DEFERRALS
(a) General: If a Participant has made Excess Deferrals for the
-------
calendar year, whether because of oversight, because the Participant is
covered by more than one qualified CODA of the Employer or because the
Participant is covered by a qualified CODA of another unrelated employer,
such Excess Deferrals (including gains/losses) shall be returned to the
Participant.
(b) Gains and Losses: The gains and losses (collectively referred to as
----------------
"income") to be distributed under subsection (a) above shall be the
Investment Income for the calendar year attributable to Excess Deferrals, as
determined in accordance with methods described in Section 5.04. The
Administrator may also elect to distribute income for the period between the
end of the applicable calendar year and the date of distribution (the "gap
period"). Such election shall be applied consistently to all Excess Deferrals
attributable to a particular calendar year. However, the Administrator may
change such election from year to year.
Notwithstanding the foregoing, for periods before the issuance of final
regulations under Section 402(g) of the Code on August 15, 1991, the
determination of distributable income may be determined under proposed
regulation 1.402(g)-1(d)(5), which generally provided for specific methods of
determining income for both the calendar year and the gap period.
(c) Timing: A distribution under this Section 6.04 shall generally be
------
made by the April 15th of the following calendar year, subject to the
following rules:
(i) If a Participant's Deferrals under this Plan for a calendar
year exceeds the $7,000 (or higher) limitation described in Section
6.03(c), the Administrator shall distribute such Excess Deferrals (and
allocable income) without any special instructions from the Participant
[i.e., the Participant shall be deemed to have notified the Administrator
that he has made Excess Deferrals under the Plan].
(ii) If any of a Participant's Deferrals under this Plan is an
Excess Deferral solely because the Participant is covered under more than
one qualified CODA (whether of this Employer or another unrelated
employer), it shall be the responsibility of the Participant to inform
the Administrator in writing by the March 1st preceding the above April
15th date, of the amount of Excess Deferrals made to this Plan. The
Administrator shall not be required to investigate the accuracy of the
76
<PAGE>
information provided by the Participant; and if such information is
provided after March 1st, the Administrator shall not guarantee that
distribution of the Excess Deferrals (including allocable income) will
occur by April 15th.
(iii) If Excess Deferrals are distributed to the Participant in the
same calendar year as the calendar year in which such Excess Deferrals
arose, the allocable income from the beginning of the calendar year to
the date of distribution shall be determined in a manner similar to the
method described in subsection (b)(ii) above.
(d) Consent Not Needed: Distributions of Excess Deferrals shall not be
------------------
subject to the requirements of Section 8.02(b)(iv) and Article X (regarding
the notice and consent rules of Sections 411(a)(11) and 417 of the Code).
(e) Treatment Under Code Section 415: Deferrals which become Excess
--------------------------------
Deferrals shall continue to be considered Additions, unless such Excess
Deferrals are distributed by April 15th of the following calendar year in
accordance with subsection (c) above.
6.05 SPECIAL NONDISCRIMINATION TESTS
Deferrals of Highly Compensated Participants shall be limited in accordance with
this Section 6.05, which is intended to comply with the nondiscrimination tests
described in Section 401(k)(3) of the Code and related regulations.
(a) Average Deferral Percentage Test: For any Plan Year, the Average
--------------------------------
ADP for the group of Highly Compensated Participants shall not exceed the
Average ADP for the group of Non-Highly Compensated Participants as follows:
IF THE AVERAGE ADP FOR THE THEN THE AVERAGE ADP FOR THE
GROUP OF NON-HIGHLY COMPENSATED GROUP OF HIGHLY COMPENSATED
PARTICIPANTS FOR THE PARTICIPANTS FOR THE
PLAN YEAR (DENOTED "R") IS: PLAN YEAR SHALL NOT EXCEED:
------------------------------- ----------------------------
2% or less 2.0 times "R"
2% to 8% 2.0% plus "R"
8% or more 1.25 times "R"
The nondiscrimination limits of this Section 6.05(a) shall be referred to
as the "ADP Test."
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<PAGE>
(b) Special Rules: For purposes of applying the ADP Test of subsection
-------------
(a) above, the following rules are applicable:
(i) Excess Deferrals: Excess Deferrals shall count as Deferrals
----------------
for purposes of determining the ADP of a Highly Compensated Participant.
However, Excess Deferrals shall not count as Deferrals for purposes of
---
determining the ADP of a Non-Highly Compensated Participant.
(ii) Required Aggregation: If this Plan satisfies the requirements
--------------------
of Sections 401(k), 401(a)(4), or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if aggregated with this
Plan, then all the cash or deferred arrangements included in such other
plans shall be aggregated with the cash or deferred arrangement included
in this Plan.
Notwithstanding the preceding paragraph,
(1) for Plan Years beginning after December 31, 1988, an "ESOP"
plan may not be aggregated with this Plan.
(2) for Plan Years beginning after December 31, 1989, a plan
whose plan year differs from the Plan Year of this Plan may not be
aggregated with this Plan.
(iii) Aggregation of Deferrals of Highly Compensated Employees: If
--------------------------------------------------------
a Highly Compensated Employee is also a participant under another plan of
the Employer which includes a cash or deferred arrangement, the ADP of
such Highly Compensated Employee under this Plan shall take into account
such other cash or deferred arrangement. For Plan Years beginning after
December 31, 1988, if the plan year of such other plan differs from the
Plan Year of this Plan, the ADP of such Highly Compensated Employee for
such Plan Year under this Plan shall be determined by including only
amounts attributable to plan years which end in the same calendar year as
this Plan Year.
This paragraph (iii) shall not be effective if the affected plans
are mandatorily disaggregated under regulation 1.401(k)-1(g)(11)(iii).
(iv) Deferrals Refunded Under Code Section 415: Deferrals which
-----------------------------------------
are distributed pursuant to the fourth paragraph of Section 5.09 shall be
disregarded for purposes of the ADP Test.
(v) Participants Taken Into Account: Any Employee who was a
-------------------------------
Participant at any time during the Plan Year shall be taken into account,
even if such Participant has experienced a Termination of Employment
prior to the last day of such Plan Year. However, a Participant whose ADP
Compensation for the Plan Year is "zero" shall not be taken into account.
---
(vi) Rounding of Percentages: For Plan Years beginning after
-----------------------
December 31, 1988, the ADP and the Average ADP shall be rounded to the
nearest one-hundredth of 1%.
(vii) Family Members: The ADP of a Family Member shall not be
--------------
separately calculated. Instead, the ADP of the Key Highly Compensated
Employee shall be computed by combining his Deferrals and ADP
Compensation with those of his Family Member(s). Notwithstanding the
$200,000 limit on ADP Compensation in Section 6.02, for Plan Years
beginning after December 31, 1988, the ADP Compensation of such
"aggregated" Key Highly Compensated Employee shall be the sum of (1) plus
(2), as follows:
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<PAGE>
(1) the sum of the ADP Compensation of each of the Key Highly
Compensated Employee, his spouse, and lineal descendants who have
not attained age 19 before the close of such Plan Year; and such sum
shall be limited to $200,000 (or such larger amount described in
Section 6.02), plus
(2) the sum of the ADP Compensation of each other Family Member
not described in (1), where each individual ADP Compensation shall
be limited to $200,000 (or such larger amount described in Section
6.02).
6.06 FAILURE TO PASS THE ADP TEST
If the ADP Test is not satisfied, the Employer and/or Administrator may
take one or more of the following steps:
(a) treat Forfeitures attributable to Employer Contribution Accounts as
Qualified Nonelective Contributions for Plan Years beginning after December
31, 1990 (see Section 6.07)
(b) include Qualified Nonelective Contributions in the ADP (see Section
6.08)
79
<PAGE>
(c) include Qualified Matching Contributions in the ADP (see Section
6.09)
(d) refund Deferrals which exceeded the limits (see Section 6.10)
(e) recharacterize certain Deferrals as voluntary contributions (see
Section 6.11).
6.07 FORFEITURES ATTRIBUTABLE TO EMPLOYER CONTRIBUTION ACCOUNTS
For Plan Years beginning on or after January 1, 1991, if the ADP Test is not
satisfied, Forfeiture Accounts which have become available for allocation
pursuant to Section 4.02 shall not be allocated in accordance with Section 5.07.
Instead, enough Forfeitures as necessary shall be treated as Qualified
Nonelective Contributions pursuant to Section 6.08 to satisfy the ADP Test.
That is, for purposes of the Plan, such Forfeitures shall not be subject to the
provisions of Section 5.07, but will be subject to the provisions of Section
6.08.
Any Forfeitures not deemed to be Qualified Nonelective Contributions pursuant to
the preceding paragraph shall be allocated in accordance with Section 5.07,
unless such Forfeitures are deemed to be Qualified Nonelective Contributions
pursuant to Sections 7.11 or 7.14, to satisfy the ACP Test or the Multiple Use
Test, respectively.
6.08 QUALIFIED NONELECTIVE CONTRIBUTIONS
If the ADP Test is not satisfied, the Employer may elect to make Qualified
Nonelective Contributions for the Plan Year. Such contributions shall be
allocated to Non-Highly Compensated Participants (including Non-Highly
Compensated Participants who have a Termination of Employment prior to the end
of the Plan Year) in the following manner:
(a) The initial allocation shall be made to the Non-Highly Compensated
Participant with the lowest ADP Compensation for the Plan Year. The amount of
such allocation shall be the lesser of (i) total Qualified Nonelective
Contributions made for the Plan Year under this Section 6.08, or (ii) the
maximum amount permitted under Section 5.09 (regarding Section 415 of the
Code). [Note: Instead of the term "Compensation," this Section 6.08 uses the
----
term "ADP Compensation" and Section 5.09 uses the term "Earnings." Since
these three terms generally have different meanings, care should be exercised
when carrying out this Section 6.08.]
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<PAGE>
(b) If there still remain Qualified Nonelective Contributions after step
(a) above, the second allocation shall be made to the Non-Highly Compensated
Participant with the next lowest ADP Compensation for the Plan Year.
Similarly, the amount of such allocation shall be the lesser of (i) remaining
Qualified Nonelective Contributions, or (ii) the maximum amount permitted
under Section 5.09.
(c) If there still remain Qualified Nonelective Contributions after step
(b) above, step (b) shall then be applied to the Non-Highly Compensated
Participant with the next lowest ADP Compensation for the Plan Year. In
addition, step (b) shall be repeated as many times as necessary until
Qualified Nonelective Contributions are exhausted.
Qualified Nonelective Contributions under this Section 6.08 shall
(a) be allocated to the Qualified Nonelective Contribution Account (or a
"substitute" Account described in Section 2.84),
(b) be made within 12 months after the end of the applicable Plan Year,
and
(c) be treated as Deferrals for purposes of Sections 6.02(a) and 6.05.
The Qualified Nonelective Contribution Account (or other Account to which
Qualified Nonelective Contributions are allocated) shall
(a) be fully vested at all times, and
(b) be subject to the withdrawal and distribution restrictions in
Section 6.12.
Even if the Employer does not make Qualified Nonelective Contributions to this
Plan, the Administrator may nevertheless elect to treat other Employer
contributions to this Plan or any other defined contribution plan of the
Employer as Qualified Nonelective Contributions for this Plan. The preceding
sentence shall only apply to Employer contributions if the "account" to which
such contributions are allocated
(a) meets the requirements of the preceding paragraph applicable to the
Qualified Nonelective Contribution Account, and
(b) meets other nondiscrimination requirements described in regulations
under Section 401(k) of the Code.
6.09 QUALIFIED MATCHING CONTRIBUTIONS
If the ADP Test is not satisfied (or if the Administrator wishes to avoid
[completely or partially] the nondiscrimination requirements of Section 7.08
[the ACP Test]), the Administrator may elect to treat Qualified Matching
Contributions as Deferrals for purposes of Sections 6.02(a) and 6.05.
Qualified Matching Contributions shall be allocated to the Qualified Matching
Contribution Account (or a "substitute" Account described in Section 2.82), and
such Account shall
(a) be fully vested at all times, and
(b) be subject to the withdrawal and distribution restrictions in Section
6.12.
Even if the Employer does not make Qualified Matching Contributions to this
Plan, the Administrator may nevertheless elect to treat Employer matching
contributions to any other defined contribution plan of the Employer as
Qualified Matching Contributions for this Plan. The preceding sentence shall
only apply to Employer matching contributions if the "account" to which such
contributions are allocated
(a) meets the requirements of the preceding paragraph applicable to the
Qualified Matching Contribution Account, and
81
<PAGE>
(b) meets other nondiscrimination requirements described in regulations
under Sections 401(k) and (m) of the Code.
This Section 6.09 is effective only if the Qualified Matching Contributions
to be treated as Deferrals for a Plan Year are made within 12 months after
the end of such Plan Year.
6.10 REFUND OF DISCRIMINATORY DEFERRALS
(a) General: If the ADP Test is not satisfied and Qualified Nonelective
-------
Contributions and/or Qualified Matching Contributions (if any) are still
insufficient to satisfy the ADP Test, the Discriminatory Deferrals (including
gains/losses) attributable to a Highly Compensated Participant shall be
distributed to the Participant.
82
<PAGE>
(b) Family Members: A distribution of Discriminatory Deferrals under
--------------
this Section 6.10 to a Key Highly Compensated Employee and his Family Members
shall be accomplished by allocating the Discriminatory Deferrals among such
Employees in proportion to the Deferrals (including Qualified Nonelective
Contributions and Qualified Matching Contributions treated as Deferrals) of
each such Employee for the applicable Plan Year.
(c) Gains and Losses: The gains and losses (collectively referred to as
----------------
"income") to be distributed under subsection (a) above shall be the
Investment Income for the Plan Year attributable to Discriminatory Deferrals,
as determined in accordance with methods described in Section 5.04. The
Administrator may also elect to distribute income for the period between the
end of the applicable Plan Year and the date of distribution (the "gap
period"). Such election shall be applied consistently to all Discriminatory
Deferrals attributable to a particular Plan Year. However, the Administrator
may change such election from year to year.
Notwithstanding the foregoing, for periods before the issuance of
final regulations under Section 401(k) of the Code on August 15, 1991, the
determination of distributable income may be determined under proposed
regulation 1.401(k)-1(f)(4)(ii), which generally provided for specific
methods of determining income for both the Plan Year and the gap period.
(d) Timing: A distribution under this Section 6.10 must be made by the
------
end of the following Plan Year. (Note: The Employer is subject to a 10%
----
excise tax if Discriminatory Deferrals are distributed more than 2-1/2 months
after the end of the applicable Plan Year.)
(e) Consent Not Needed: Distributions of Discriminatory Deferrals shall
------------------
not be subject to the requirements of Section 8.02(b)(iv) and Article X
(regarding the notice and consent rules of Sections 411(a)(11) and 417 of the
Code).
6.11 RECHARACTERIZATION OF DISCRIMINATORY DEFERRALS
(a) General: If permitted in the Adoption Agreement, a Highly
-------
Compensated Participant who would otherwise receive a refund of his
Discriminatory Deferrals in accordance with Section 6.10 may instead elect to
have such Discriminatory Deferrals recharacterized as voluntary contributions
to the Plan.
83
<PAGE>
(b) Limitations:
-----------
(i) This Section 6.11 shall become effective only if voluntary
contributions are permitted under Section 4.03.
(ii) Qualified Nonelective Contributions and Qualified Matching
Contributions may not be recharacterized.
(iii) Discriminatory Deferrals of a Participant may not be
recharacterized to the extent such Deferrals, when added to other
voluntary contributions of such Participant, exceed the limits (if any)
permitted under Section 4.03.
(iv) Discriminatory Deferrals which have been recharacterized shall
continue to be treated as Deferrals for purposes of Sections 404, 409,
411, 412, 415, 416 and 417 of the Code. Discriminatory Deferrals
attributable to Plan Years beginning after December 31, 1988 shall be
subject to Section 6.12 (regarding withdrawal/distribution restrictions).
(v) Discriminatory Deferrals which have been recharacterized shall
not be treated as "compensation" for purposes of Sections 404 and 415 of
the Code.
(c) Taxability: The Deferrals which are to be recharacterized shall be
----------
the earliest Deferrals made for the Plan Year ("first-in, first-out"). (Note:
----
Such recharacterized Deferrals shall be includible in the Highly Compensated
Participant's gross income in the calendar year for which such Deferrals were
made.)
(d) Timing and Methodology: Recharacterization of Discriminatory
----------------------
Deferrals may not be made later than the later of (1) 2-1/2 months following
the end of the applicable Plan Year, or (2) October 24, 1988. For purposes of
this Section 6.11, recharacterization will be deemed to have occurred on the
date the last affected Highly Compensated Participant is given written
notification of the amount recharacterized and the consequences thereof.
(Note: See regulation 1.401(k)-1(f)(3)(ii) and (iii). The preceding
----
regulation also requires the reporting of recharacterization to the Employer
and the IRS.)
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<PAGE>
6.12 WITHDRAWALS AND DISTRIBUTIONS FROM THE DEFERRED INCOME, QUALIFIED
NONELECTIVE CONTRIBUTION AND QUALIFIED MATCHING CONTRIBUTION
ACCOUNTS
(a) General: Notwithstanding any provision of the Plan to the contrary,
-------
distributions or withdrawals from the Deferred Income Account, the Qualified
Nonelective Contribution Account or the Qualified Matching Contribution
Account shall not be made except in one of the following circumstances:
(i) An event described in Sections 8.01(b), (c) or (d) [regarding
disability, death or Termination of Employment].
(ii) An event described in Section 8.01(a) [regarding Normal
Retirement Date], but only if the Benefit is payable on account of either
Termination of Employment or attainment of at least age 59-1/2. That is,
if Normal Retirement Age were age 55, a Participant who reaches age 55,
but has not had a Termination of Employment, may not receive a
distribution of his Deferred Income Account.
(iii) Attainment of age 59-1/2.
(iv) Termination of this Plan without establishment or maintenance
of another defined contribution plan (see Section 15.04 for specific
details).
(v) In the case of a corporation, the sale (or other disposition)
by the corporation of either (I) "substantially all" of its assets or
(II) its interest in a subsidiary. The preceding sentence shall apply
only to Employees who continue employment with the (I) buyer or (II)
subsidiary, respectively. After March 31, 1988, a distribution may not be
made under this paragraph (v) unless it is a "lump sum distribution" (as
defined in Section 401(k)(10)(B) of the Code).
(vi) Occurrence of a hardship (see subsection (b) below).
(vii) Distribution of Excess Deferrals for any calendar year (see
Section 6.04).
(viii) Failure to satisfy the ADP, ACP or Multiple Use Tests of
Sections 6.05, 7.08 and 7.14, respectively.
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<PAGE>
(b) Hardship Withdrawals
--------------------
(i) For Plan Years beginning before January 1, 1989, hardship
withdrawals shall be governed by the terms of the Prior Plan (if one
existed), if such terms were a reasonable interpretation of Section
401(k) of the Code [in the absence of IRS final and proposed regulations
issued August 5, 1988]. Operation in accordance with IRS proposed
regulations issued November 10, 1981 shall be deemed a reasonable
interpretation.
(ii) Hardship withdrawals made on or before March 31, 1989 shall
also be governed by the standards described in paragraph (i) above.
(iii) Hardship withdrawals not described in either paragraph (i) or
(ii) above shall be governed by the "immediate and heavy financial need
test" described in subsection (c) below and the "other resources test"
described in subsection (d) below.
(c) Immediate and Heavy Financial Need: A hardship withdrawal shall
----------------------------------
only be made if the Participant has an "immediate and heavy financial need".
A Participant shall be deemed to have an immediate and heavy financial need
if the hardship withdrawal is for any of the following:
(i) Expenses incurred for (or necessary to obtain) the medical
care of the Participant, his spouse and his dependents. Such medical care
must normally be tax-deductible within the meaning of Section 213(d) of
the Code.
(ii) Costs directly related to the purchase of the principal
residence of the Participant (excluding mortgage payments).
(iii) Tuition and related educational fees for the next 12 months of
post-secondary education for the Participant and his spouse, children
(whether or not still a dependent) and dependents.
(iv) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of his principal
residence.
The amount of the immediate and heavy financial need shall include
amounts necessary to pay anticipated federal, state or local income taxes
or penalties attributable to a hardship withdrawal.
(d) Other Resources: A hardship withdrawal shall only be made if it is
---------------
necessary to satisfy the financial need described in subsection (c) above.
The determination of whether the hardship withdrawal is necessary shall be
determined on the basis of the Safe Harbor Rule or the Facts and
Circumstances Rule (both described below), as elected in the Adoption
Agreement.
(i) Safe Harbor Rule: A hardship withdrawal shall be deemed to be
----------------
necessary if all of the following are satisfied:
---
(1) The withdrawal does not exceed the amount of the immediate
and heavy financial need.
(2) The Participant has obtained all distributions other than
hardship withdrawals (such as withdrawal of after-tax voluntary
contributions) and all non-taxable loans currently available under
---
all plans maintained by the Employer.
---
(3) All qualified and non-qualified plans (but not health or
welfare plans) of the Employer provide that the Participant will not
be allowed to make Deferrals and other employee contributions for a
period of at least 12 months after the date of the hardship
withdrawal. However, the preceding rule shall not require the
suspension of mandatory employee contributions under a defined
benefit plan.
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<PAGE>
(4) All "401(k)" plans of the Employer limit the amount of
Deferrals that the Participant may make in the calendar year
following the calendar year of the hardship withdrawal to the
difference between the maximum allowed for such later calendar year
(see Section 6.03(c)) and the amount of the Participant's Deferrals
for the calendar year of the hardship withdrawal.
(ii) Facts and Circumstances Rule: A hardship withdrawal shall
----------------------------
generally be treated as necessary if the Employer relies upon the
Participant's written representation (unless the Employer has actual
knowledge to the contrary) that the need cannot reasonably be relieved by
one or more of the following methods:
(1) Through reimbursement or compensation by insurance or
otherwise.
(2) By the reasonable liquidation of the Participant's assets,
or the assets of his spouse and minor children that are reasonably
available to the Participant.
(3) By borrowing from commercial sources at reasonable terms.
(4) By discontinuing Deferrals or after-tax employee
contributions to the Plan.
(5) By other distributions or non-taxable loans from plans
maintained by the Employer or by any other unrelated employer.
A Participant shall not be required to avail himself of any of the
above resources if the effect would be to increase his hardship or need.
For example, if a plan loan would disqualify a Participant from obtaining
necessary financing to purchase a principal residence, a plan loan will
not be a required method of relieving such Participant's hardship need.
(e) Amount Available for Hardship Withdrawals: For Plan Years beginning
-----------------------------------------
before January 1, 1989, the amount available for hardship withdrawals under
this Section 6.12 shall be the sum of the values of the Deferred Income
Account, the Qualified Nonelective Contribution Account and the Qualified
Matching Contribution Account, reduced by any amounts which are "offsetted"
against the foregoing Accounts. Such "offsetting" amounts would include (but
are not limited to) outstanding Plan loan(s) (including loans made to satisfy
the requirements of subsection (d) above).
For Plan Years beginning after December 31, 1988, the amount available
for hardship withdrawals under this Section 6.12 shall be (i) plus (ii) plus
(iii) plus (iv) less (v) less (vi) as follows:
(i) the value of the Deferred Income Account as of the
Transitional Valuation Date (as defined herein), plus
(ii) Deferrals made after the Transitional Valuation Date, plus
(iii) the value as of the Transitional Valuation Date of that
portion of the Qualified Nonelective Contribution Account attributable to
amounts which enable the Plan to comply with the ADP Test in Section 6.05
(Note: The Qualified Nonelective Contribution Account also contains
----
amounts which enable the Plan to comply with the ACP Test and the
Multiple Use Test), plus
(iv) the value of the Qualified Matching Contribution Account as of
the Transitional Valuation Date, less
(v) any hardship withdrawals since the Transitional Valuation
Date, less
(vi) any other amounts which (1) are "offsetted" against the
foregoing Accounts, and (2) are attributable to either (A) the value of
the foregoing
87
<PAGE>
Accounts as of the Transitional Valuation Date, or (B) Deferrals made
after the Transitional Valuation Date. Such "offsetting" amounts would
include (but are not limited to) distributions and outstanding Plan
loan(s) (including loans made to satisfy the requirements of subsection
(d) above). In determining whether the preceding amounts are attributable
to any portion of the foregoing Accounts, the Administrator shall apply
the same rules established elsewhere in the Plan regarding "timing"; e.g.
"last-in; first-out," etc.
For purposes of this subsection (e), the term Transitional Valuation Date
shall mean the later of (1) the last day of the last Plan Year ending before
July 1, 1989, or (2) December 31, 1988. If the Transitional Valuation Date is
not a Valuation Date or Interim Valuation Date, this subsection (e) shall be
applied by substituting the phrase "Valuation (or Interim Valuation) Date
immediately preceding the Transitional Valuation Date" for "Transitional
Valuation Date" in paragraphs (i) through (vi) above.
(f) Maximum Number of Hardship Withdrawals: During any 12-month period,
--------------------------------------
the maximum number of hardship withdrawals shall be limited as provided in
the Adoption Agreement.
(g) Consent Requirements: Unless specifically provided otherwise in the
--------------------
Plan, distributions and withdrawals under this Section 6.12 shall be subject
to the requirements of Section 8.02(b)(iv) and Article X (regarding the
notice and consent rules of Sections 411(a)(11) and 417 of the Code).
(h) Forms and Procedures: The Administrator shall establish forms and
--------------------
procedures necessary to carry out this Section 6.12.
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ARTICLE VII
MATCHING CONTRIBUTIONS, JOINING BONUSES
---------------------------------------
AND COORDINATION WITH DEFERRALS
-------------------------------
7.01 GENERAL
This Article VII is intended to provide guidelines regarding special
qualification, nondiscrimination and distribution rules under Section 401(m) and
other related Sections of the Code. The Administrator shall adopt additional
rules necessary (1) to carry out this Article VII (including, if applicable,
special rules unique to Partner-Employees), and (2) to implement special,
transitional and operational rules permitted under IRS regulations (for example,
the "restructuring" rules of regulation 1.401(m)-1(g)(5)(ii)).
Regulations under Sections 401(a)(4) and 410(b) consider the portion of this
Plan attributable to Matching Contributions to be a separate plan apart from the
portions of the Plan attributable to Profit Sharing Contributions or Deferrals.
Accordingly, if the provisions of this Article conflict with any other
provisions of this Plan, the provision that shall govern depends upon whether
such provision applies to Matching Contributions, Profit Sharing Contributions
or Deferrals.
If contributions under this Article VII are discretionary, the Employer shall
designate what portion, if any, of the Employer contributions under Section 4.01
shall be used to fund Matching Contributions and/or Joining Bonuses.
7.02 DEFINITIONS
For purposes of this Article VII, the following words or phrases shall have the
following meanings:
(a) "Actual Contribution Percentage (ACP)" shall mean the percentage
------------------------------------
obtained by dividing the Participant's Aggregate Contributions for the Plan
Year by the Participant's ADP Compensation for the Plan Year. However, see
Sections 6.06(c) and (e), and 7.09(a), (b) and (c) regarding whether
(i) additional amounts are added to Aggregate Contributions to increase the
ACP, or (ii) certain Matching Contributions are excluded
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<PAGE>
to lower the ACP. In addition, see subsection (c) below and Section 7.13
regarding situations where the ACP of a Highly Compensated Participant is
decreased to satisfy the ACP Test in Section 7.08. If a Participant's ADP
Compensation for the Plan Year is "zero", no ACP shall be computed for such
Participant (see Section 7.08(b)(iv)).
(b) "ADP Compensation" shall have the same meaning as such term is used
----------------
in Section 6.02. Because the ACP Test is independent of the ADP Test, the
definition of ADP Compensation for purposes of this Article VII may differ
from the definition of ADP Compensation for purposes of Article VI.
(c) "Adjusted ACP" shall mean, in the case of a Plan which fails to
------------
satisfy the ACP Test in Section 7.08, the eventual ACP calculated under the
following leveling method, under which the ACP of the Highly Compensated
Participant with the highest ACP is reduced to the extent required to:
(i) enable the Plan to satisfy the ACP Test, or
(ii) cause such Highly Compensated Participant's ACP to equal the
ACP of the Highly Compensated Participant with the next highest ACP.
This process must be repeated until the Plan satisfies the ACP Test. In
addition, the term Adjusted ACP shall be substituted for the term ACP
wherever such term is used in the Plan.
(d) "Aggregate Contributions" shall mean, with respect to any Plan Year
-----------------------
and any Participant, the total of (i) his voluntary contributions made for
such year, and (ii) Matching Contributions allocated to his Matching
Contribution Account (and, if applicable, his Qualified Matching Contribution
Account) during such year. Voluntary contributions include Discriminatory
Deferrals which have been recharacterized as voluntary contributions for the
Plan Year in accordance with Section 6.11. However, voluntary contributions
that are distributed pursuant to the fourth paragraph of Section 5.09 shall
not be considered Aggregate Contributions.
(e) "Average ACP" shall mean, for a group of Participants, the average
-----------
of the ACP's for each Participant in such group.
(f) "Average ADP" shall mean, for a group of Participants, the average
-----------
of the ADP's for each Participant in such group.
(g) "Combined ADP/ACP Limit" shall mean, in the case of a Plan Year
----------------------
beginning after December 31, 1988, the greater of (i) the Primary Combined
ADP/ACP Limit, or (ii) the Secondary Combined ADP/ACP Limit.
(h) "Excess Aggregate Contributions" shall mean those Aggregate
------------------------------
Contributions and Qualified Nonelective Contributions which caused the ACP
Test to be exceeded. The amount of Excess Aggregate Contributions
attributable to any Highly Compensated Participant is equal to such
Participant's Aggregate Contributions (or other amounts treated as Aggregate
Contributions) minus the product of (i) such Participant's Adjusted ADP,
times (ii) such Participant's ADP Compensation.
(i) "Primary Combined ADP/ACP Limit" shall mean the sum of
------------------------------
(i) 1.25 times the greater of (1) the Average ADP for the group of
Non-Highly Compensated Participants, or (2) the Average ACP for the group
of Non-Highly Compensated Participants for the plan year beginning with
or within the plan year of the plan containing the cash or deferred
arrangement; plus
(ii) the lesser of
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(1) 2.0 times the lesser of the Average ADP or Average ACP
described in paragraph (i) above, or
(2) 2% plus the lesser of the Average ADP or Average ACP
described in paragraph (i) above.
(j) "Secondary Combined ADP/ACP Limit" shall mean the sum of
--------------------------------
(i) 1.25 times the lesser of (1) the Average ADP for the group of
Non-Highly Compensated Participants, or (2) the Average ACP for the group
of Non-Highly Compensated Participants for the plan year beginning with
or within the plan year of the plan containing the cash or deferred
arrangement; plus
(ii) the lesser of
(1) 2.0 times the greater of the Average ADP or Average ACP
described in paragraph (i) above, or
(2) 2% plus the greater of the Average ADP or Average ACP
described in paragraph (i) above.
7.03 JOINING BONUS
If elected in the Adoption Agreement, eligible Participants (and Inactive
Participants) shall receive an allocation of a Joining Bonus.
(a) Funding: The funding of the Joining Bonus by the Employer shall be
-------
discretionary or required, as elected in the Adoption Agreement.
(b) Eligibility: A Participant (and Inactive Participant who became an
-----------
Inactive Participant during the Plan Year) shall be eligible for a Joining
Bonus for a Plan Year if he meets all of the following requirements:
(i) he meets the requirements specified in the Adoption Agreement,
(ii) his Entry Date occurs in such Plan Year (that is, such Plan
Year is his first Plan Year of participation, even if his Deferrals for
such Plan Year is $0).
(iii) he has made Deferrals (greater than $0) for each payroll
period (from his Entry Date to the last day of the Plan Year) during
which he received Compensation and was eligible to make Deferrals, and
(iv) he has never received a Joining Bonus during any prior period
of Plan participation.
(c) Allocation:
----------
(i) If the funding of the Joining Bonus is required to be made by
the Employer, the Joining Bonus Account of each eligible individual shall
receive an allocation of the amount specified in the Adoption Agreement.
(ii) If the funding of the Joining Bonus is discretionary on the
part of the Employer, the total Employer contribution attributable to
Joining Bonuses shall be allocated to the Joining Bonus Account of each
eligible individual so that each eligible Account shall be allocated the
same amount.
(d) Vesting of Joining Bonus Account: A Participant's Vested Percentage
--------------------------------
in his Joining Bonus Account shall be either (i) 100%, or (ii) determined in
accordance with the vesting schedule applicable to such Participant's
Matching Contribution Account, whichever is elected in the Adoption
Agreement. (Note: If the same vesting schedule applies to both the Joining
----
Bonus Account and the Matching Contribution Account, the Administrator may
choose not to establish a separate Joining Bonus Account, in which case a
Joining Bonus shall be allocated to the Matching Contribution Account.)
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<PAGE>
(e) Treatment as Matching Contributions: Unless specifically provided
-----------------------------------
otherwise in this Section 7.03, Plan provisions applicable to Matching
Contributions shall similarly apply to Joining Bonuses.
7.04 MATCHING CONTRIBUTIONS
If elected in the Adoption Agreement, eligible Participants (and Inactive
Participants) shall receive an allocation of a Matching Contribution.
(a) Funding: The funding of Matching Contributions by the Employer
-------
shall be discretionary or required, as elected in the Adoption Agreement. If
the funding is required, the Employer shall contribute such amount as
necessary to satisfy Section 7.05(b), taking into account Forfeitures under
Sections 7.07(a) and 7.13(i)(i).
(b) Eligibility: A Participant (and Inactive Participant who became an
-----------
Inactive Participant during the applicable Plan Year) shall be eligible for a
Matching Contribution if he meets the requirement(s) specified in the
Adoption Agreement.
(c) Loss of Matching Contribution: Notwithstanding any provision in
-----------------------------
this Plan to the contrary, a Matching Contribution (or a portion thereof)
shall not be allocated to the extent such allocation results in any
discrimination prohibited by Section 401(a)(4) of the Code because such
Matching Contribution relates to an Excess Deferral, a Discriminatory
Deferral [both as defined in Section 6.02], or an Excess Aggregate
Contribution. In addition, such "forfeited" Matching Contribution shall not
be taken into account under any provision of this Plan. For example, the
forfeited Matching Contribution shall not be treated as an Aggregation
Contribution for purposes of the ACP Test in Section 7.08.
7.05 ALLOCATION OF MATCHING CONTRIBUTION
Matching Contributions shall be allocated as of the last day of the Plan Year in
accordance with either subsection (a) or (b) below, whichever is applicable.
(a) Discretionary Funding: If the funding of the Matching Contribution
---------------------
is discretionary on the part of the Employer, the total Employer contribution
attributable to Matching Contributions shall be allocated to the Matching
Contribution Accounts of all eligible individuals according to the ratio that
each individual's Deferrals for the Plan Year bears to the total Deferrals of
all eligible individuals. For purposes of this subsection (a), Deferrals in
excess of the amount specified in the Adoption Agreement shall not be taken
into account in determining the ratio described in the preceding sentence. In
addition, an individual's allocation of Matching Contributions shall be
limited to the amount described in the Adoption Agreement.
(b) Required Funding: If the funding of the Matching Contribution is
----------------
required to be made by the Employer, the Matching Contribution Account of
each eligible individual shall receive an allocation of a percentage of his
Deferrals for the Plan Year, as specified in the Adoption Agreement, and
subject to the limitations specified in the Adoption Agreement.
7.06 VESTING OF MATCHING CONTRIBUTION ACCOUNT
This Plan may provide that a Participant's (or Inactive Participant's) Vested
Percentage in his Matching Contribution Account will differ from his Vested
Percentage in his Employer Contribution Account, according to the elections made
in the Adoption Agreement.
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<PAGE>
7.07 FORFEITURES ATTRIBUTABLE TO THE MATCHING CONTRIBUTION ACCOUNT
For Plan Years beginning prior to January 1, 1989, the treatment of Forfeitures
and Forfeiture Accounts attributable to Matching Contribution Accounts on
account of a Participant's Termination of Employment with less than 100% vesting
shall be determined under the terms of the Prior Plan. For Plan Years beginning
after December 31, 1988, the provisions of this Section 7.07 shall be
applicable.
In general, the treatment of Forfeitures and Forfeiture Accounts attributable to
Matching Contribution Accounts under this Section 7.07 shall be exactly the same
treatment applied to Forfeitures and Forfeiture Accounts attributable to
Employer Contribution Accounts, as described in Section 4.02. In other words,
in applying the provisions of Section 4.02 to this Section 7.07, Section 4.02
shall be read by substituting the term "Matching Contribution Account(s)" for
the term "Employer Contribution Account(s)" wherever it appears.
For example, a Former Participant's Forfeiture Account attributable to Matching
Contribution Accounts shall be established as of the earlier of the date the
Former Participant receives a distribution of his Benefit, or the end of the
Plan Year in which the Former
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<PAGE>
Participant incurs five consecutive Breaks-In-Service. Similarly, Forfeiture
Accounts attributable to Matching Contribution Accounts shall become available
for allocation at the same time as Forfeiture Accounts attributable to Employer
Contribution Accounts (i.e., as of the end of the Plan Year described in the
Adoption Agreement, or, if earlier, as of the end of the Plan Year in which the
Former Participant incurs five consecutive Breaks-In-Service). However, where
Section 4.02(a) provides for the allocation of Forfeiture Accounts in accordance
with Section 5.07, the allocation of Forfeiture Accounts attributable to
Matching Contribution Accounts shall instead be governed by the applicable
method below:
(a) If the funding of Matching Contributions is required (see Section
7.04(a)), Forfeitures under this Section 7.07 shall be applied to reduce the
amount of the contribution required to be made by the Employer of the Former
Participant or Inactive Participant pursuant to Sections 7.04(a) and 7.05. If
Forfeitures available for the Plan Year exceed the required Employer
contribution for the Plan Year, such excess Forfeitures shall be held in a
suspense account (to which no Investment Income shall be credited) and be
used to reduce future contributions required to be made by such Employer.
(b) If the funding of Matching Contributions is discretionary (see
Section 7.04(a)), Forfeitures under this Section 7.07 shall be added to the
Employer contribution for the Plan Year, and allocated in accordance with
Section 7.05(a).
7.08 SPECIAL NONDISCRIMINATION TESTS
Aggregate Contributions of Highly Compensated Participants shall be limited in
accordance with this Section 7.08, which is intended to comply with the
nondiscrimination tests described in Section 401(m)(2) of the Code and related
regulations.
(a) Average Contribution Percentage Test: For any Plan Year, the
------------------------------------
Average ACP for the group of Highly Compensated Participants shall not exceed
the Average ACP for the group of Non-Highly Compensated Participants as
follows:
IF THE AVERAGE ACP FOR THEN THE AVERAGE ACP FOR
THE GROUP OF NON-HIGHLY COMPENSATED THE GROUP OF HIGHLY COMPENSATED
PARTICIPANTS FOR THE PARTICIPANTS FOR THE
PLAN YEAR (DENOTED "R") IS: PLAN YEAR SHALL NOT EXCEED:
----------------------------------- -------------------------------
2% or less 2.0 times "R"
2% to 8% 2.0% plus "R"
8% or more 1.25 times "R"
The nondiscrimination limits of this Section 7.08(a) shall be referred to
as the "ACP Test."
(b) Special Rules: For purposes of applying the ACP Test of subsection
-------------
(a) above, the following rules are applicable:
(i) Qualified Matching Contributions: Qualified Matching
--------------------------------
Contributions which have been taken into account under the ADP Test (see
Section 6.09) shall be disregarded for purposes of the ACP Test.
(ii) Required Aggregation: If this Plan satisfies the requirements
--------------------
of
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<PAGE>
Sections 401(m), 401(a)(4), or 410(b) of the Code only if aggregated with
one or more other plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if aggregated with this
Plan, then all the Aggregate Contributions included in such other plans
shall be aggregated with the Aggregate Contributions included in this
Plan.
Notwithstanding the preceding paragraph,
(1) for Plan Years beginning after December 31, 1988, an "ESOP"
plan may not be aggregated with this Plan.
(2) for Plan Years beginning after December 31, 1989, a plan
whose plan year differs from the Plan Year of this Plan may not be
aggregated with this Plan.
(iii) Aggregation of Aggregate Contributions of Highly Compensated
------------------------------------------------------------
Employees: If a Highly Compensated Employee is also a participant under
---------
another plan of the Employer which includes Aggregate Contributions, the
ACP of such Highly Compensated Employee under this Plan shall take into
account such other Aggregate Contributions. For Plan Years beginning
after December 31, 1988, if the plan year of such other plan differs from
the Plan Year of this Plan, the ACP of such Highly Compensated Employee
for such Plan Year under this Plan shall be determined by including only
amounts attributable to plan years which end in the same calendar year as
this Plan Year.
This paragraph (iii) shall not be effective if the affected plans
are mandatorily disaggregated under regulation 1.401(m)-1(f)(14), which
references regulation 1.401(k)-1(g)(11)(iii).
(iv) Voluntary Contributions Refunded Under Code Section 415:
-------------------------------------------------------
Voluntary contributions which are distributed pursuant to the fourth
paragraph of Section 5.09 shall be disregarded for purposes of the ACP
Test.
(v) Participants With No Compensation: A Participant whose ADP
---------------------------------
Compensation for the Plan Year is "zero" shall not be taken into account.
---
(vi) Rounding of Percentages: For Plan Years beginning after
-----------------------
December 31, 1988, the ACP and the Average ACP shall be rounded to the
nearest one-hundredth of 1%.
(vii) Family Members: The ACP of a Family Member shall not be
--------------
separately calculated. Instead, the ACP of the Key Highly Compensated
Employee shall be computed by combining his Aggregate Contributions and
ADP Compensation with those of his Family Member(s). Notwithstanding the
$200,000 limit on ADP Compensation in Section 6.02, for Plan Years
beginning after December 31, 1988, the ADP Compensation of such
"aggregated" Key Highly Compensated Employee shall be the sum of (1) plus
(2), as follows:
(1) the sum of the ADP Compensation of each of the Key Highly
Compensated Employee, his spouse, and lineal descendants who have
not attained age 19 before the close of such Plan Year; and such sum
shall be limited to $200,000 (or such larger amount described in
Section 6.02), plus
(2) the sum of the ADP Compensation of each other Family Member
not described in (1), where each individual ADP Compensation shall
be limited to $200,000 (or such larger amount described in Section
6.02).
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<PAGE>
7.09 FAILURE TO PASS THE ACP TEST
If the ACP Test is not satisfied, the Employer and/or Administrator may take one
or more of the following steps:
(a) include certain Deferrals in the ACP (see Section 7.10)
(b) treat Forfeitures attributable to Employer Contribution Accounts as
Qualified Nonelective Contributions for Plan Years beginning after
December 31, 1990 (see Section 7.11)
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<PAGE>
(c) include Qualified Nonelective Contributions in the ACP (see Section
7.12)
(d) distribute or forfeit Aggregate Contributions which exceeded the
limits (see Section 7.13)
7.10 DEFERRALS
If the ACP Test is exceeded, the Administrator may elect to treat certain
Deferrals (but not Deferrals which are distributed pursuant to the fourth
paragraph of Section 5.09) of Non-Highly Compensated Participants as Aggregate
Contributions for purposes of the ACP Test. This Section 7.10 is effective only
if the ADP Test in Section 6.05 is satisfied both with and without taking such
Deferrals into account.
7.11 FORFEITURES ATTRIBUTABLE TO EMPLOYER CONTRIBUTION ACCOUNTS
For Plan Years beginning on or after January 1, 1991, if the ACP Test is not
satisfied, Forfeiture Accounts which have become available for allocation
pursuant to Section 4.02 shall not be allocated in accordance with Section 5.07.
Instead, if any Forfeitures remain after the application of Section 6.07
(regarding the use of Forfeitures to satisfy the ADP Test), enough Forfeitures
as necessary shall be treated as Qualified Nonelective Contributions pursuant to
Section 7.12 to satisfy the ACP Test. That is, for purposes of the Plan, such
Forfeitures shall not be subject to the provisions of Section 5.07, but will be
subject to the provision of Section 7.12.
Any Forfeitures not deemed to be Qualified Nonelective Contributions pursuant to
the preceding paragraph shall be allocated in accordance with Section 5.07,
unless such Forfeitures are deemed to be Qualified Nonelective Contributions
pursuant Section 7.14 to satisfy the Multiple Use Test.
7.12 QUALIFIED NONELECTIVE CONTRIBUTIONS
If the ACP Test is exceeded, the Employer may elect to make Qualified
Nonelective Contributions for the Plan Year. Such contributions shall be
allocated to Non-Highly Compensated Participants (including Non-Highly
Compensated Participants who have a Termination of Employment prior to the end
of the Plan Year) in the following manner:
(a) The initial allocation shall be made to the Non-Highly Compensated
Participant with the lowest ADP Compensation for the Plan Year. The amount of
such allocation shall be the lesser of (i) total Qualified Nonelective
Contributions made for the Plan Year under this Section 7.12, or (ii) the
maximum amount permitted under Section 5.09 (regarding Section 415 of the
Code). [Note: Instead of the term "Compensation," this Section 7.12 uses the
----
term "ADP Compensation" and Section 5.09 uses the term "Earnings." Since
these three terms generally have different meanings, care should be exercised
when carrying out this Section 7.12.]
(b) If there still remain Qualified Nonelective Contributions after step
(a) above, the second allocation shall be made to the Non-Highly Compensated
Participant with the next lowest ADP Compensation for the Plan Year.
Similarly, the amount of such allocation shall be the lesser of (i) remaining
Qualified Nonelective Contributions, or (ii) the maximum amount permitted
under Section 5.09.
(c) If there still remain Qualified Nonelective Contributions after step
(b) above, step (b) shall then be applied to the Non-Highly Compensated
Participant with the next lowest ADP Compensation for the Plan Year. In
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<PAGE>
addition, step (b) shall be repeated as many times as necessary until
Qualified Nonelective Contributions are exhausted.
Qualified Nonelective Contributions under this Section 7.12 shall
(a) be allocated to the Qualified Nonelective Contribution Account (or a
"substitute" Account described in Section 2.84),
(b) be treated as Aggregate Contributions for purposes of Sections
7.02(a) and 7.08,
(c) not include Qualified Nonelective Contributions which have been
treated as Deferrals in accordance with Section 6.08, and
(d) be made within 12 months after the end of the applicable Plan Year.
The Qualified Nonelective Contribution Account (or other Account to which
Qualified Nonelective Contributions are allocated) shall
(a) be fully vested at all times, and
(b) be subject to the withdrawal and distribution restrictions in
Section 6.12.
Even if the Employer does not make Qualified Nonelective Contributions to this
Plan, the Administrator may nevertheless elect to treat other Employer
contributions to this Plan or any other defined contribution plan of the
Employer as Qualified Nonelective Contributions for
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<PAGE>
this Plan. The preceding sentence shall only apply to Employer contributions if
the "account" to which such contributions are allocated
(a) meets the requirements of the preceding paragraph applicable to the
Qualified Nonelective Contribution Account, and
(b) meets other nondiscrimination requirements described in regulations
under Section 401(k) of the Code.
7.13 DISTRIBUTION OR FORFEITURE OF EXCESS AGGREGATE CONTRIBUTIONS
(a) General: If the ACP Test is not satisfied and Qualified Nonelective
-------
Contributions and/or Deferrals (if any) are still insufficient to satisfy the
ACP Test, the Excess Aggregate Contribution (including gains/losses)
attributable to a Highly Compensated Participant shall be disposed of as
follows:
(i) In the case of a Participant whose Vested Percentage in his
Matching Contribution Account as of the end of the applicable Plan Year
is 0%, the Excess Aggregate Contribution (including gains/losses) shall
become a Forfeiture as of the end of the applicable Plan Year.
(ii) In the case of a Participant whose Vested Percentage in his
Matching Contribution Account as of the end of the applicable Plan Year
is 100%, the Excess Aggregate Contribution (including gains/losses) shall
be distributed to the Participant.
(iii) In the case of a Participant whose Vested Percentage in his
Matching Contribution Account as of the end of the applicable Plan Year
is greater than 0%, but less than 100%, the Excess Aggregate Contribution
(including gains/losses) shall become a Forfeiture under paragraph (i) to
the extent non-vested and be distributed under paragraph (ii) to the
extent vested.
(b) Deferrals: Notwithstanding anything to the contrary in this
---------
Section 7.13, Deferrals shall not be forfeited or distributed under this
Section 7.13.
(c) Accounting for Excess Aggregate Contributions: The Administrator
---------------------------------------------
shall establish rules regarding what portions, if any, of the following
amounts for the Plan Year constitute Excess Aggregate Contributions:
voluntary Employee contributions, Matching Contributions and Qualified
Nonelective Contributions.
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<PAGE>
(d) Voluntary Employee Contributions: Notwithstanding subsections(a)(i)
--------------------------------
and (a)(iii) above, voluntary Employee contributions shall not become
Forfeitures. Instead, voluntary Employee contributions which are Excess
Aggregate Contributions shall be distributed to the Participant.
(e) Family Members: Excess Aggregate Contributions attributable to a
--------------
Key Highly Compensated Employee and his Family Members shall be allocated
among such Employees in proportion to the Aggregate Contributions (including
Qualified Nonelective Contributions treated as Aggregate Contributions) of
each such Employee for the applicable Plan Year. Excess Aggregate
Contributions allocated in accordance with the preceding sentence shall then
be distributed and/or forfeited in accordance with subsections (a)(i),
(a)(ii) or (a)(iii) above, whichever is applicable.
(f) Gains and Losses: The gains and losses (collectively referred to as
----------------
"income") to be distributed under subsection (a) above shall be the
Investment Income for the Plan Year attributable to Excess Aggregate
Contributions, as determined in accordance with methods described in Section
5.04. The Administrator may also elect to distribute income for the period
between the end of the applicable Plan Year and the date of distribution (the
"gap period"). Such election shall be applied consistently to all Excess
Aggregate Contributions attributable to a particular Plan Year. However, the
Administrator may change such election from year to year.
Notwithstanding the foregoing, for periods before the issuance of final
regulations under Section 401(m) of the Code on August 15, 1991, the
determination of distributable income may be determined under proposed
regulation 1.401(m)-1(e)(3)(ii), which generally provided for specific
methods of determining income for both the Plan Year and the gap period.
(g) Timing: A distribution under this Section 7.13 must be made by the
------
end of the following Plan Year. (Note: The Employer is subject to a 10%
excise tax if Excess Aggregate Contributions are distributed more than 2-1/2
months after the end of the applicable Plan Year.)
(h) Consent Not Needed: Distributions of Excess Aggregate Contributions
------------------
shall not be subject to the requirements of Section 8.02(b)(iv) and Article X
(regarding the notice and consent rules of Sections 411(a)(11) and 417 of the
Code).
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(i) Forfeitures: Any amounts forfeited pursuant to subsections
-----------
(a)(i) and (a)(iii) above shall be treated as follows:
(i) If the funding of the Matching Contribution is required to be
made by the Employer (see Section 7.04(a)), Forfeitures under subsections
(a)(i) and (a)(iii) above shall be applied to reduce the amount of the
contribution required to be made by the Employer pursuant to Sections
7.04(a) and 7.05 for the Plan Year for which Excess Aggregate
Contributions arose, or for the next Plan Year (if not possible or
practical for the current Plan Year).
(ii) If the funding of the Matching Contributions is discretionary
(see Section 7.04(a)), Forfeitures under subsections (a)(i) and (a)(iii)
above shall be allocated to the Matching Contribution Accounts of
eligible Non-Highly Compensated Participants for the Plan Year for which
Excess Aggregate Contributions arose in the following manner:
(1) the eligible Non-Highly Compensated Participants are those
who meet the requirements for eligibility for a Matching Contribution
under Section 7.04(b).
(2) the allocation shall be pro rata according to the ratio that
each eligible individual's Matching Contribution for the Plan Year
bears to the total Matching Contributions of all eligible individuals
for the Plan Year.
(3) if it is not possible or practical to make the allocation as
of the end of the current Plan Year, the above Forfeitures shall be
added to the discretionary Employer contribution for the next Plan
Year.
(j) Treatment of Excess Aggregate Contributions: Aggregate Contributions
-------------------------------------------
(and amounts treated as Aggregate Contributions) which are considered
Employer contributions for purposes of Sections 404 and 415 of the Code
shall continue to be considered Employer contributions when such Aggregate
Contributions become Excess Aggregate Contributions (even if such Excess
Aggregate Contributions are forfeited or distributed in accordance with this
Section 7.13).
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7.14 MULTIPLE USE LIMITATION
(a) General: This Section 7.14 describes the rules to implement Section
-------
401(m)(9)(A) of the Code and regulation 1.401(m)-2, which generally provide
that the Employer cannot use the "2 times/2% plus" discrimination test under
more than one plan or cash or deferred arrangement of the Employer.
This Section 7.14 shall take effect only if one or more Highly
----
Compensated Employee is eligible under both a plan of the Employer which
contains a cash or deferred arrangement (e.g. Deferrals) and a plan of
the Employer which provides for voluntary Employee contributions or
Matching Contributions. (Note: These plans could be one single plan or
----
separate plans of the Employer.) If the Employer has more than one plan
which contains a cash or deferred arrangement and/or more than one plan
which provides for voluntary Employee contributions or Matching
Contributions, this Section 7.14 shall be applied separately with respect
to each combination of plans of different types.
This Section 7.14 shall not take effect if
---
(i) the Plan Year begins before January 1, 1989, or
(ii) during the Plan Year, either the Average ADP or the Average
ACP of Highly Compensated Participants (under this Plan and any other
affected plan of the Employer) does not exceed 1.25 times the Average
ADP or the Average ACP, respectively, of Non-Highly Compensated
Participants.
(b) Multiple Use Test: Deferrals, voluntary contributions and Matching
-----------------
Contributions (including amounts treated as such) shall be limited in
accordance with this subsection (b) to comply with Section 401(m)(9)(A) of
the Code. The nondiscrimination limits of this subsection (b) shall be
referred to as the "Multiple Use Test," which provides that the sum of the
Average ADP and Average ACP of Highly Compensated Participants (under this
Plan and any other affected plan of the Employer) shall not exceed the
Combined ADP/ACP Limit (which is calculated taking into account the Average
ADP and Average ACP of Non-Highly Compensated Participants).
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For purposes of determining the Average ADP and Average ACP of Highly
Compensated Participants, the following rules are applicable:
(i) Qualified Nonelective Contributions, Qualified Matching
Contributions and Deferrals (whichever is applicable) shall be taken into
account to the extent necessary to satisfy the ADP Test and the ACP Test.
(ii) Deferrals may be treated as Matching Contributions only to the
extent necessary to satisfy the ACP Test. That is, Deferrals which are
not necessary to satisfy the ACP Test may not be treated as Matching
Contributions.
(iii) Excess Deferrals, Discriminatory Deferrals and Excess Aggregate
Contributions shall be disregarded. That is, the preceding amounts must
be first corrected, and such corrected amounts will not be used to
determine the Average ADP and Average ACP.
(c) Failure to Pass the Multiple Use Test. If the Multiple Use Test in
-------------------------------------
subsection (b) above is not satisfied, the Administrator shall take one of
the following steps (or combinations of steps) in accordance with rules and
procedures it has established, to the extent necessary to satisfy the
Multiple Use Test:
(i) Treat Forfeitures attributable to Employer Contribution Accounts
as Qualified Nonelective Contributions for Plan Years beginning after
December 31, 1990, similar to the treatment of Forfeitures used to
satisfy the ADP Test (see Section 6.07). However, Forfeitures used to
satisfy the ADP Test (see Section 6.07) or the ACP Test (see Section
7.11) may not be used to satisfy the Multiple Use Test.
(ii) Refund Deferrals in a manner similar to rules for Discriminatory
Deferrals;
(iii) Distribute or forfeit Aggregate Contributions in a manner
similar to rules for Excess Aggregate Contributions.
The Highly Compensated Participants who shall be affected by this
subsection (c) shall be those who meet one of the following requirements (or
any combinations) in accordance with rules and procedures established by the
Administrator:
(i) only those Highly Compensated Participants who have made
Deferrals;
(ii) only those Highly Compensated Participants who have had
Aggregate Contributions made on their behalf;
(iii) only those Highly Compensated Participants who have made
Deferrals and have had Aggregate Contributions made on their behalf;
(iv) only those Highly Compensated Participants who are eligible to
make Deferrals and eligible to have Aggregate Contributions made on their
behalf (whether or not Deferrals or Aggregate Contributions have actually
been made).
Distributions of any amounts under this subsection (c) shall not be
subject to the requirements of Section 8.02(b)(iv) and Article X (regarding
the notice and consent rules of Sections 411(a)(11) and 417 of the Code).
7.15 COORDINATION OF EXCESS DEFERRALS, DISCRIMINATORY DEFERRALS AND EXCESS
AGGREGATE CONTRIBUTIONS
The Administrator shall establish rules to coordinate the distribution and/or
forfeiture of the following amounts which may occur in the same Plan Year (or
calendar year, if applicable):
(a) Excess Deferrals under Section 6.04,
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(b) Discriminatory Deferrals as a result of the failure of the Plan to
satisfy the ADP Test in Section 6.05, and
(c) Excess Aggregate Contributions as a result of the failure of the Plan
to satisfy the ACP Test in Section 7.08.
Such coordination shall take into account (1) the gains/losses applicable to
such amounts, (2) the ADP, ACP and Multiple Use Tests under Sections 6.05, 7.08
and 7.14, respectively, and (3) IRS regulations regarding such matters.
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ARTICLE VIII
PAYMENT OF BENEFITS
8.01 TYPES OF BENEFITS
(a) Normal Retirement Benefit: A Participant or an Inactive
-------------------------
Participant who has attained his Normal Retirement Date shall be entitled to
receive a normal retirement Benefit as follows:
(i) in the case of a Participant (or Inactive Participant) who has
experienced a Termination of Employment, the entire value of his Accounts
payable in accordance with Section 8.02.
(ii) in the case of a Participant (or Inactive Participant) who is
still employed by an Employer, either paragraph (1) or (2) below as
elected in the Adoption Agreement:
(1) No amount is payable until there is a Termination of
Employment.
(2) An amount equal to the entire value of his Accounts as of
his "Deemed Retirement Date," but subject to the limitations of
Section 6.12(a)(ii) regarding a distribution from the Deferral Income
Account. For purposes of this paragraph (2), a Participant's (or
Inactive Participant's) Deemed Retirement Date is the date (if any)
selected by such Participant (or Inactive Participant). Such Benefit
shall be payable in accordance with Section 8.02 in the same manner
as if the Participant (or Inactive Participant) had actually
experienced a Termination of Employment on his Deemed Retirement
Date.
A Participant (or Inactive Participant) may exercise the option under this
paragraph (2) only once. That is, a Participant (or Inactive Participant) who
has received a distribution of his Benefit while still employed by an Employer
shall not be entitled to another "in-service" distribution (unless required by
Article IX).
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Notwithstanding any provision of the Plan to the contrary, a Participant
(or Inactive Participant) who has received a distribution of his Benefit under
this paragraph (2) shall continue to be eligible (if otherwise eligible) for an
allocation under Articles V, VI, VII and XI.
(b) Disability Benefit: If a Participant's or Inactive Participant's
------------------
Termination of Employment with the Employer is on account of Disability, he
shall be entitled to receive a disability Benefit equal to the entire value
of his Accounts payable in accordance with Sections 8.02 and 8.03.
(c) Death Benefit: In the event that the Termination of Employment of a
-------------
Participant or Inactive Participant is caused by his death, his Beneficiary
shall be entitled to a death Benefit equal to the entire value of his
Accounts payable in accordance with Sections 8.02 and 8.03 after receipt by
the Administrator of acceptable proof of death.
(d) Other Termination Benefits: In the event of the Termination of
--------------------------
Employment of a Participant or Inactive Participant before becoming eligible
for a Benefit under subsections (a), (b) or (c), the Participant or Inactive
Participant shall be entitled to receive a Benefit equal to his Vested
Percentage (which may differ depending upon the Account to which such Vested
Percentage relates) in the value of his Accounts payable in accordance with
Section 8.02.
8.02 PAYMENT OF BENEFITS
Except as may be required by the provisions of Section 8.03 or Article X,
payment of Benefits shall be made in accordance with this Section.
(a) Application for Payment: Upon a Member's or Beneficiary's
-----------------------
entitlement to payment of Benefits under Section 8.01, he shall file with
the Administrator his written application on such form or forms, and subject
to any other uniform and nondiscriminatory conditions, as the Administrator
may require. The Administrator may withhold payment of a Benefit until
proper application is made.
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(b) Time of Payment: Payment of Benefits shall be made according to
---------------
this subsection (b), unless the Company elects another method regarding the
timing of payment in the Adoption Agreement.
(i) Upon entitlement to a Benefit under Section 8.01(c) (on account
of death), full payment or commencement of payment shall be made within
the 90-day period following the date of death (or receipt by the
Administrator of acceptable proof of death) if the Beneficiary is the
Member's spouse. If the Beneficiary is not the Member's spouse, rules
similar to those described in paragraph (ii) below shall apply.
(ii) Upon entitlement to a Benefit under Sections 8.01(a) or (b) (for
reasons of retirement or Disability), full payment or commencement of
payment shall be made as soon as practical following the last day of the
Plan Year in which the retirement or Disability occurs or receipt by the
Administrator of acceptable proof of Disability, if later. However, the
Administrator may establish rules for earlier payment where practical.
(iii) Upon entitlement to a Benefit under Section 8.01(d), full
payment or commencement is as follows:
(1) With respect to a Member whose Vested Percentage in all his
Accounts is 100%, payment shall generally be made as soon as
practical following the last day of the Plan Year in which his
Termination of Employment occurs. However, the Administrator may
establish rules for earlier payment where practical.
(2) With respect to a Member whose Vested Percentage in any
Account is less than 100%, payment shall generally be made as soon as
practical following the last day of the Plan Year in which his
Termination of Employment occurs. However, the Administrator may
establish rules for earlier payment where practical.
(3) With respect to a Member whose Benefit (determined separately
with respect to each Account) is zero (because either his Vested
Percentage is 0% or the value of his Account is zero), the Member
shall be deemed to have received a distribution of such Benefit on
his date of Termination of Employment for purposes of this Article
VIII and Sections 4.02 and 7.07.
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(iv) If a Member's Benefit under Sections 8.01(a), (b) or (d) exceeds
$3,500, payment of his Benefit may not be made without his consent. If a
Member does not consent to immediate payment, his Benefit shall remain in
the Trust and be paid upon the earliest of (1) his death, (2) attainment
of the later of age 62 or his Normal Retirement Date, or (3) his
subsequent consent to payment on an earlier date. The Administrator shall
also require consent of the Member's spouse if such consent is required
pursuant to Article X.
(v) Unless a Member elects otherwise, payment of a Member's Benefit
must commence not later than 60 days after the close of the Plan Year
following the latest of (1) his Termination of Employment, (2) attainment
of age 65 or his Normal Retirement Date, if earlier, or (3) the 10th
anniversary of the date on which the Member commenced participation in
the Plan. For purposes of this paragraph, the failure of a Member to
consent to a distribution payable in accordance with this paragraph shall
be deemed to be an election by such Member to defer commencement of his
Benefit.
(vi) Payment of Benefits under Section 8.01(c) to a Member's
Beneficiary on account of the Member's death shall not require the
consent of the Beneficiary, even if the Death Benefit exceeds $3,500.
(c) Determination of Benefit: A Member's Benefit shall be based
upon the value of his Account determined as of the Valuation Date
coinciding with or immediately preceding the date of distribution,
plus (i) Deferrals, Matching Contributions, voluntary contributions
and Rollover Contributions made during the period since such
Valuation Date, and less (ii) any distributions or withdrawals from
the Account(s) since such Valuation Date. The value of the Account
may be further adjusted to reflect Interim Valuations made pursuant
to Section 5.04(b). If a Member's Benefit exceeds $3,500 at the time
of any distribution, then such Member's Benefit at any subsequent
time shall be deemed to exceed $3,500. Accordingly, any reference in
this Plan to "exceeds $3,500" shall take into account the preceding
"deemed to exceed $3,500" rule. [An illustration of how this
paragraph is intended to operate is as follows: Suppose the Plan
allows periodic installment payments, and Member X elects to receive
his $5,000 Benefit over 60 monthly installments of approximately $100
each. After 24 monthly installments, X's remaining Benefit is $3,200.
The Member may not be "cashed-out" with a single sum distribution of
---
$3,200 without his consent because although his current Benefit does
-------
not exceed $3,500, his initial Benefit exceeded $3,500.]
-------
(d) Method of Payment: Payment of Benefits shall be in a single
sum unless (i) a different form is otherwise required by Article X,
(ii) periodic installment payments are permitted in the Adoption
Agreement, or (iii) the Prior Plan provided forms of payment which
may not be eliminated pursuant to Section 411(d)(6) of the Code, in
which case the Plan must be amended to include such forms of payment.
If periodic installment payments are permitted, they shall be in
substantially equal amounts (but not less than $100 per month) for a
specified number of years, but not to exceed the Member's actuarially
determined life expectancy at the date payments are to commence. Such
periodic payments shall be made not less frequently than annually.
The Administrator may direct the Trustee to segregate and deposit a
cash sum equal to the Member's Benefit in one or more bank savings
accounts, savings certificates or other separate fund as the
Administrator may from time to time have established and maintained
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by the Trustee for this purpose, and to pay such Investment Income as may
accrue on the sum so deposited. Periodic installment payments shall also
be subject to the rules contained in Article IX.
The amount which a Member or Beneficiary is entitled to receive at any
time, and from time to time, may be paid in cash or in securities, or in any
combination thereof.
8.03 PAYMENT OF DISABILITY AND DEATH BENEFITS
(a) Disability Benefit: Payment of a Disability Benefit to a
------------------
Member shall be in a single sum unless the provisions of Article X apply.
(b) Death Benefit: Payment of a Death Benefit to the Beneficiary(ies)
-------------
of a deceased Member shall be in a single sum unless the provisions of
Article X apply.
8.04 DESIGNATION OF BENEFICIARY
Subject to the applicable state laws governing a Member's right to retirement
plan benefits, any Qualified Domestic Relations Order and the restrictions
contained herein, a Member may designate a Beneficiary to receive the Benefit
payable upon his death, or may change any such designation (without consent of
any previously designated Beneficiary) on any form acceptable to the
Administrator and received by the Administrator at any time prior to the
Member's death.
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A Member's surviving spouse shall automatically be his Beneficiary unless:
(a) The spouse has consented in writing to the designation of a
Beneficiary other than the spouse, the spouse's consent acknowledges the
effect of such designation and the spouse's consent has been witnessed by a
notary public, or if permitted by the Administrator, by a representative of
the Administrator, or
(b) It is established to the satisfaction of the Administrator or his
representative that the consent of the Member's spouse may not be obtained
because there is no spouse, because the spouse cannot be located or because
of such other circumstances as may be permitted under Internal Revenue
Service regulations pertaining to Section 417(a)(2) of the Code, or
(c) The Member and the Member's spouse (if entitled to a Pre-Retirement
Spouse's Annuity) have elected to waive the Pre-Retirement Spouse's Annuity
as provided in Section 10.06.
The consent or waiver described in paragraphs (a) and (c) above shall be valid
only if such consent or waiver specifically acknowledges the chosen Beneficiary.
That is, the Member may not designate another Beneficiary without the consent of
the Member's spouse.
A designation of Beneficiary other than the spouse shall be automatically
revoked on the marriage or remarriage (other than a common law marriage) of a
Member, and any designation of the spouse as Beneficiary shall be automatically
revoked upon any finalized divorce of a Member subsequent to the date of filing
of his designation of Beneficiary.
If there is no designated Beneficiary alive when a death Benefit becomes
payable, the Beneficiary shall be deemed to be (1) the Member's surviving
spouse, or, if none, (2) the Member's surviving children (including any adopted
children) in equal shares, or, if none, (3) the Member's heirs-at-law as
determined in the reasonable judgement of the Administrator, or if none exist,
(4) the Plan.
Payments made pursuant to the foregoing shall be a complete discharge of the
liabilities under the Plan for such payments and the Administrator may require
the Beneficiary to execute such application forms and releases as the
Administrator deems necessary and appropriate.
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8.05 UNCLAIMED BENEFITS
The Administrator, the Trustee and the Employers shall not be required to
determine, or to make investigation to determine, the identity or mailing
address of any Member or Beneficiary, and they shall have discharged their
obligation when they shall have sent checks and other papers by registered or
certified mail to such Member or Beneficiary at the address designated to it by
such Member or Beneficiary, or if the Member or Beneficiary makes no such
designation, at his last address in the records of the Employers.
In the event a Member or a Beneficiary cannot be located, the Administrator may
direct the Trustee to segregate and deposit a cash sum equal to such Member's or
Beneficiary's Benefit in a separate fund within the Trust to be invested in one
or more savings accounts, savings certificates or such other investment vehicle
as the Administrator shall determine. Any Investment Income as may accrue in
such separate fund shall be added to the Member's or Beneficiary's Benefit.
If a Benefit remains unclaimed for a period of three years following the date
the Benefit first becomes payable to a Member or Beneficiary under the terms of
this Article, the Administrator may consider that such Benefit is forfeited.
Such Forfeiture shall be allocated on the next succeeding Valuation Date with
other Forfeitures; provided, however, if such Member or Beneficiary is located
after such allocation and makes a claim for his Benefit, such Member or
Beneficiary shall be paid an amount equal to the Benefit which was forfeited in
accordance with this Section 8.05. Payment of such Benefit shall be from the
current Forfeitures, or the Employer, in its sole discretion, may make a special
contribution.
8.06 QUALIFIED DOMESTIC RELATIONS ORDERS
This Plan specifically permits the payment of Benefits to an "alternate payee"
(as defined in Section 414(p)(8) of the Code) pursuant to the terms of a
Qualified Domestic Relations Order. In addition, payment of Benefits to a
Member (or his Beneficiary) may not be made to the extent such payment conflicts
with the terms of a Qualified Domestic Relations Order.
The Administrator shall adopt rules and procedures to implement this
Section 8.06, including procedures to determine whether a "domestic relations
order" (as defined in Section 414(p)(1)(B) of the Code) qualifies as a Qualified
Domestic Relations Order.
8.07 CODE SECTION 401(A)(31) REQUIREMENTS
This Section applies to distributions made on or after January 1, 1993.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the Administrator, to have any portion
of an eligible rollover distribution paid directly to an eligible retirement
plan specified by the distributee in a direct rollover.
For purposes of this Section, the following words or phrases shall have the
following meanings:
(a) Eligible Rollover Distribution: An eligible rollover distribution is
------------------------------
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:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies)
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of the distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a)(9) of the Code; and 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: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the Code, an
individual retirement annuity described in Section 408(b) of the Code, an
annuity plan described in Section 403(a) of the Code, or a qualified trust
described in Section 401(a) of the Code, that accepts the distributee's
eligible rollover distribution. However, 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.
(c) Distributee: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving spouse and the
Employee's or former Employee's spouse or former spouse who is the alternate
payee under a Qualified Domestic Relations Order are distributees with
regard to the interest of the spouse or former spouse.
(d) Direct Rollover: A direct rollover is a payment by the Plan to the
eligible retirement plan specified by the distributee.
8.08 WAIVER OF THE 30-DAY NOTICE PERIOD
Notwithstanding any provision of the Plan to the contrary, if a distribution is
one to which Sections 401(a)(11) and 417 of the Code do not apply, such
distribution may commence less than 30 days after the notice required under
Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that:
(a) the Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after receiving the
notice to consider the decision of whether or not to elect a distribution
(and, if applicable, a particular distribution option), and
(b) the Participant, after receiving the notice, affirmatively elects a
distribution.
This Section shall generally apply to distributions made on or after
January 1, 1994. However, this Section may be applied to earlier distributions
in accordance with Section IV of IRS Notice 93-26.
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ARTICLE IX
AGE 70-1/2 DISTRIBUTION REQUIREMENTS
9.01 GENERAL RULES
(a) Except as otherwise provided in Article X, Joint and
Survivor Annuity Requirements, the requirements of this Article shall apply
to any distribution of a Member's Benefit and will take precedence over any
inconsistent provisions of this Plan. Unless otherwise specified, the
provisions of this Article apply to calendar years beginning after December
31, 1984.
(b) All distributions required under this Article shall be determined and
made in accordance with the Income Tax 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.
9.02 REQUIRED BEGINNING DATE
The entire interest of a Member must be distributed or begin to be distributed
no later than the Member's Required Beginning Date.
9.03 LIMITS ON DISTRIBUTION PERIODS
As of the first Distribution Calendar Year, distributions, if not made in a
single sum, may only be made over one of the following periods (or a combination
thereof):
(a) The life of the Member;
(b) The life of the Member and a Designated Beneficiary;
(c) A period certain not extending beyond the Life Expectancy
of the Member; or
(d) A period certain not extending beyond the joint and last
survivor expectancy of the Member and a Designated Beneficiary.
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9.04 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR
If the Member's Benefit is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the Required
Beginning Date:
(a) Individual Account
------------------
(i) If a Member's Benefit is to be distributed over (1) a
period not extending beyond the Life Expectancy of the Member or
the joint life and last survivor expectancy of the Member and
the Member's Designated Beneficiary, or (2) a period not
extending beyond the Life Expectancy of the Designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first
Distribution Calendar Year, must at least equal the quotient
obtained by dividing the Member's Benefit by the Applicable Life
Expectancy.
(ii) For calendar years beginning before January 1, 1989,
if the Member's spouse is not the Designated Beneficiary, the
method of distribution selected must assure that at least 50% of
the present value of the amount available for distribution is
paid within the Life Expectancy of the Member.
(iii) For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year, shall
not be less than the quotient obtained by dividing the Member's
Benefit by the lesser of (1) the Applicable Life Expectancy, or
(2) if the Member's spouse is not the Designated Beneficiary,
the applicable divisor determined from the table set forth in
Q&A-4 of Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Member shall be distributed
using the Applicable Life Expectancy in Section 9.04(a)(i) as
the relevant divisor without regard to regulations
Section 1.401(a)(9)-2.
(iv) The minimum distribution required for the Member's
first Distribution Calendar Year must be made on or before the
Member's Required Beginning Date. The minimum distribution for
other calendar years, including the minimum distribution for the
Distribution Calendar Year in which the Member's Required
Beginning Date occurs, must be made on or before December 31 of
that Distribution Calendar Year.
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(b) Other Forms: If the Member's Benefit is distributed in the form of an
------------
annuity purchased from an insurance company, distributions thereunder shall
be made in accordance with the requirements of Section 401(a)(9) of the Code
and the regulations thereunder.
9.05 DEATH DISTRIBUTION PROVISIONS
(a) Distribution Beginning Before Death: If the Member dies after
------------------------------------
distribution of his or her Benefit has begun, the remaining portion of
such Benefit will continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Member's death.
(b) Distribution Beginning After Death: If the Member dies before the
----------------------------------
the distribution of his or her Benefit begins, distribution of the Member's
entire Benefit shall be completed by December 31 of the calendar year
containing the fifth anniversary of the Member's death except to the extent
that an election is made to receive distributions in accordance with (i) or
(ii) below:
(i) If any portion of the Member's Benefit is payable to a
Designated Beneficiary, distributions may be made over the life or over a
period certain not greater than the Life Expectancy of the Designated
Beneficiary commencing on or before December 31 of the calendar year
immediately following the calendar year in which the Member died;
(ii) If the Designated Beneficiary is the Member's surviving spouse,
the date distributions are required to begin in accordance with (i) above
shall not be earlier than the later of (1) December 31 of the calendar
year immediately following the calendar year in which the Member died, or
--
(2) December 31 of the calendar year in which the Member would have
attained age 70-1/2.
If the Member has not made an election pursuant to this Section
9.05(b) by the time of his or her death, the Member's Designated
Beneficiary must elect the method of distribution no later than the
earlier of (1) December 31 of the calendar year in which distributions
would be required to begin under this Section 9.05, or (2) December 31 of
--
the calendar year which contains the fifth anniversary of the date of
death of the Member. If the Member has no Designated Beneficiary, or if
the Designated Beneficiary does not elect a method of distribution,
distribution of the Member's entire Benefit must be completed by December
31 of the calendar year containing the fifth anniversary of the Member's
death.
(c) For purposes of Section 9.05(b), if the surviving spouse dies after
the Member, but before payments to such spouse begin, the provisions of
Section 9.05(b), with the exception of paragraph (ii) therein, shall be
applied as if the surviving spouse were the Member.
(d) For purposes of this Section 9.05, any amount paid to a child of the
Member will be treated as if it has been paid to the surviving spouse if the
amount becomes payable to the surviving spouse when the child reaches the age
of majority.
(e) For the purposes of this Section 9.05, distribution of a Member's
Benefit is considered to begin on the Member's Required Beginning Date (or,
if Section 9.05(c) is applicable, the date distribution is required to begin
to the surviving spouse pursuant to Section 9.05(b)). If distribution in the
form of an annuity described in Section 9.04(b) irrevocably commences to the
Member before the Required Beginning Date, the
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date distribution is considered to begin is the date distribution actually
commences.
9.06 DEFINITIONS
(a) Applicable Life Expectancy: The Life Expectancy (or joint
--------------------------
and last survivor expectancy) calculated using the attained age of the
Member (or Designated Beneficiary) as of the Member's (or Designated
Beneficiary's) birthday in the applicable calendar year reduced by one for
each calendar year which has elapsed since the date Life Expectancy was
first calculated. If Life Expectancy is being recalculated, the Applicable
Life Expectancy shall be the Life Expectancy as so recalculated. The
applicable calendar year shall be the first Distribution Calendar Year, and
if Life Expectancy is being recalculated such succeeding calendar year. If
annuity payments commence in accordance with Section 9.04(b) before the
Required Beginning Date, the applicable calendar year is the year such
payments commence. If distribution is in the form of an immediate annuity
purchased after the Member's death with the Member's remaining Benefit, the
applicable calendar year is the year of purchase.
(b) Designated Beneficiary: The individual who is designated
----------------------
as the Beneficiary under the Plan in accordance with Section 401(a)(9) of
the Code and the regulations thereunder.
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(c) Distribution Calendar Year: A calendar year for which a
--------------------------
minimum distribution is required. For distributions beginning before the
Member's death, the first Distribution Calendar Year is the calendar year
immediately preceding the calendar year which contains the Member's
Required Beginning Date. For distributions beginning after the Member's
death, the first Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to Section 9.05.
(d) Life Expectancy: Life Expectancy and joint and last
---------------
survivor expectancy are computed by use of the expected return multiples in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Member (or spouse, in the
case of distributions described in Section 9.05(b)(ii)), by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Such election shall be irrevocable as to the Member
(or spouse) and shall apply to all subsequent years. The Life Expectancy of
a nonspouse Beneficiary may not be recalculated.
(e) Member's Benefit
----------------
(i) The Account as of the last Valuation Date in the
calendar year immediately preceding the Distribution Calendar Year
(Valuation Calendar Year) increased by the amount of any
contributions or Forfeitures allocated to the Account as of dates in
the Valuation Calendar Year after the Valuation Date and decreased by
distributions made in the Valuation Calendar Year after the Valuation
Date.
(ii) Exception for Second Distribution Calendar Year: For
purposes of paragraph (i) above, if any portion of the minimum
distribution for the first Distribution Calendar Year is made in the
second Distribution Calendar Year on or before the Required Beginning
Date, the amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
(f) Required Beginning Date
-----------------------
(i) General Rule: The Required Beginning Date of a Member
------------
is the first day of April of the calendar year following the
calendar year in which the Member attains age 70-1/2.
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(ii) Transitional Rules
------------------
(1) The Required Beginning Date of a Member who attains age
70-1/2 before January 1, 1988, shall be determined in accordance
with (A) or (B) below:
(A) Non-5-percent owners: The Required
--------------------
Beginning Date of a Member who is not a 5-percent owner is
the first day of April of the calendar year following the
calendar year in which the later of retirement or
attainment of age 70-1/2 occurs.
(B) 5-percent owners: The Required Beginning
----------------
Date of a Member who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day of
April following the later of:
(I) the calendar year in which the Member
attains age 70-1/2, or
(II) the earlier of the calendar year with
or within which ends the Plan Year in which the Member
becomes a 5-percent owner, or the calendar year in
which the Member retires.
(2) The Required Beginning Date of a Member who is
not a 5-percent owner who attains age 70-1/2 during 1988
who has not retired as of January 1, 1989, is April 1,
1990.
(iii) 5-percent owner: A Member is treated as a 5-percent
---------------
owner for purposes of this Section if such Member is a 5-percent
owner as defined in Section 416(i) of the Code (determined in
accordance with Section 416 of the Code but without regard to
whether the Plan is top-heavy) at any time during the Plan Year
ending with or within the calendar year in which such owner attains
age 66-1/2 or any subsequent Plan Year.
(iv) Once distributions have begun to a 5-percent owner
under this Section, they must continue to be distributed, even if
the Member ceases to be a 5-percent owner in a subsequent year.
9.07 TRANSITIONAL RULE
-----------------
(a) Notwithstanding the other requirements of this Article and
subject to the requirements of Article X, distribution on behalf of any
Member, including a 5-percent owner, may be made in accordance with all of
the following requirements (regardless of when such distribution
commences):
(i) The distribution by the Trust is one which would not have
disqualified such Trust under Section 401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of 1984.
(ii) The distribution is in accordance with a method of
distribution designated by the Member whose Benefit in the Trust is
being distributed or, if the Member is deceased, by a Beneficiary of
such Member.
(iii) Such designation was in writing, was signed by the
Member or Beneficiary, and was made before January 1, 1984.
(iv) The Member had accrued a Benefit under the Plan as of
December 31, 1983.
(v) The method of distribution designated by the Member or the
Beneficiary specifies the time at which distribution will commence,
the period over which distributions will be made, and in the case of
any distribution upon the Member's death, the Beneficiaries of the
Member listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation contains the
required information described above with respect to the distributions to
be made upon the death of the Member.
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(c) For any distribution which commences before January 1,
1984, but continues after December 31, 1983, the Member or the Beneficiary,
to whom such distribution is being made, will be presumed to have
designated the method of distribution under which the distribution is being
made if the method of distribution was specified in writing and the
distribution satisfies the requirements in Sections 9.07(a)(i) and (v).
(d) If a designation is revoked, any subsequent distribution
must satisfy the requirements of Section 401(a)(9) of the Code and the
regulations thereunder. If a designation is revoked subsequent to the date
distributions are required to begin, the Trust must distribute by the end
of the calendar year following the calendar year in which the revocation
occurs the total amount not yet distributed which would have been required
to have been distributed to satisfy Section 401(a)(9) of the Code and the
regulations thereunder, but for the TEFRA Section 242(b)(2) election. For
calendar years beginning after December 31, 1988, such distributions must
meet the minimum distribution incidental benefit requirements in
Section 1.401(a)(9)-2 of the Income Tax Regulations. Any changes in the
designation will be considered to be a revocation of the designation.
However, the mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be considered to
be a revocation of the designation, so long as such substitution or
addition does not alter the period over which distributions are to be made
under the designation, directly or indirectly (for example, by altering the
relevant measuring life). In the case in which an amount is transferred or
rolled over from one plan to another plan, the rules in Q&A J-2 and Q&A J-3
of regulation Section 1.401(a)(9)-1 shall apply.
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ARTICLE X
JOINT AND SURVIVOR ANNUITY REQUIREMENTS
10.01 COVERAGE
(a) General: The provisions of this Article will apply to this Plan
-------
unless:
(i) Members cannot or do not elect payment of their Benefits in the
form of a life annuity, and
(ii) On the death of a Member, his Benefit (reduced by the amount of
such Member's loan(s) pursuant to Section 5.10(c)) will be paid to
the Member's surviving spouse, or if there is no surviving spouse, or
if the surviving spouse has already consented in a manner conforming
to the waiver requirements set forth in this Article, then to the
Member's designated Beneficiary.
(b) Certain Participants Covered: The provisions of this Article shall
----------------------------
apply to a Member even if the Plan is otherwise not covered, if this Plan
(with respect to such Member) is a direct or indirect transferee on or after
January 1, 1985 of one of the following plans:
(i) a defined benefit plan,
(ii) a defined contribution plan which is subject to the funding
standards of Section 412 of the Code,
(iii) any other plan which does not meet the exceptions described in
subsection (a) above, or
(iv) a plan which received amounts from another transferee plan.
However, the provisions of this Article shall apply only to the amount
transferred to this Plan on or after January 1, 1985 and not to the Member's
entire Benefit.
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(c) Precedence: If this Article applies to this Plan or a Member, the
----------
provisions of this Article shall take precedence over any conflicting
provision in this Plan.
(d) Exception: The provisions of this Article shall not apply to a Member
---------
(or Beneficiary) whose Benefit is $3,500 or less. Such Member (or
Beneficiary) shall receive payment of his Benefit in accordance with the
otherwise applicable provisions of this Plan.
10.02 JOINT AND SURVIVOR ANNUITY
A Member's Benefit shall be paid in the form of a joint and survivor annuity.
In the case of a Member who is not married, the term "joint and survivor
annuity" shall mean an annuity for the life of such Member. However, the Member
and spouse or former spouse may elect not to receive a joint and survivor
annuity, as provided in this Article, in which case the Member's Benefit will be
paid in accordance with the otherwise applicable provisions of this Plan. More
than one spouse may be entitled to survivor annuity benefits. For example, two
former spouses may have been awarded survivor benefits and there may also be a
current spouse. In such case, this Section shall be applied by dividing the
Member's Benefit in proportion to the spousal entitlements and then applying
this Section to each portion as if each portion were a separate Benefit
belonging to the Member and the spouse or former spouse in question. The rules
in this Section apply to all former Members with vested Benefits, the
distribution of which had not commenced prior to January 1, 1985.
10.03 PURCHASE OF ANNUITY
The joint and survivor annuity payable under this Article shall be provided by
purchasing a nontransferable annuity contract from an insurance company with the
Member's Benefit (subject to the apportionment rules in Section 10.02 relating
to multiple spouses). The annuity contract shall provide for monthly payments
to the Member for life, beginning on the date selected by the Member (but no
later than the latest of the Member's (1) Normal Retirement Date, (2) 62nd
birthday, or (3) date of Termination of Employment). These payments shall end
with the payment for the calendar month in which the Member's death occurs, with
the provision that if the Member dies after his Benefit commences and is
survived by a spouse or former spouse entitled to survivor benefits, such spouse
or former spouse shall receive monthly payments of between 50 and 100 percent of
the Member's Benefit (as elected by the Member), beginning with the payment for
the calendar month following the month in which the Member died and ending with
the payment for the calendar month in which the spouse or former spouse dies.
In addition, the annuity contract must contain provisions which meet all
requirements of this Article (e.g. consent, waiver, etc.).
10.04 WAIVER
A Member and his spouse or former spouse may elect, in the manner prescribed by
the Administrator, not to receive a joint and survivor annuity (in which case
the Member shall receive his or her Benefit as otherwise provided in the Plan).
Such an election may be made or revoked at any time, but it shall become
irrevocable when payment of the Member's Benefit commences, or an annuity
contract is purchased, if earlier. Spousal consents to elections waiving the
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<PAGE>
joint and survivor annuity are required and must be given in writing witnessed
by a notary public, or, if permitted, by the Administrator, or by a
representative of the Administrator. The preceding consent or waiver shall not
be valid unless such consent or waiver specifically acknowledges the chosen
Beneficiary. Accordingly, the Member may not designate another Beneficiary
without the consent of the Member's spouse. Spousal consent may be waived by
the Administrator if a Member has no spouse or the spouse cannot be located, or
for such other reasons authorized in applicable Treasury Regulations.
10.05 NOTICE REQUIREMENTS
The Administrator shall provide each Member within the Election Period a written
explanation of: (i) the terms and conditions of a joint and survivor annuity;
(ii) the Member's right to make and the effect of an election to waive the joint
and survivor annuity form of payment; (iii) the rights of a Member's spouse; and
(iv) the right to make and the effect of a revocation of a previous election to
waive the joint and survivor annuity.
For purposes of this Section:
(a) "Election Period" shall mean the period no earlier than 30 days and no
---------------
later than 90 days before the Member's Annuity Starting Date.
(b) "Annuity Starting Date" shall mean the first day of the first period
---------------------
for which the amount is payable as an annuity, or if a benefit is not payable
in the form of an annuity, the first day on which all events have occurred
which entitle the Member to such benefit.
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<PAGE>
10.06 PAYMENT OF DEATH BENEFIT
The payment of Benefits due upon the death of a Member pursuant to
Section 8.01(c) shall be governed by this Section 10.06.
(a) Married Members: The Benefit payable upon the death of a married
---------------
Member shall be in the form of a "Pre-retirement Spouse's Annuity" (as
defined herein) unless one of the following applies:
(i) The single sum value of the Benefit payable to the spouse is
$3,500 or less.
(ii) The Member and his spouse have elected to waive the Pre-
retirement Spouse's Annuity.
(iii) The Member's spouse, after the death of the Member, elects to
receive the Benefit in a form other than the Pre-retirement Spouse's
Annuity.
For purposes of this Plan, "Pre-retirement Spouse's Annuity" shall mean
an annuity payable for the life of the surviving spouse, which can be
purchased by the Member's Benefit payable upon the death of the Member (but
reduced by the amount of such Member's loan(s) pursuant to Section 5.10(c)).
Such Pre-retirement Spouse's Annuity shall be provided by purchasing a
nontransferable annuity contract from an insurance company chosen by the
Administrator.
The Pre-retirement Spouse's Annuity shall commence within a reasonable
time after the death of the Member. The spouse may elect to defer payment of
the annuity to a later date, but not beyond the April 1 following the date
the Member would have attained age 70-1/2.
The Member's spouse may elect in writing and in the manner prescribed by
the Administrator, not to receive payment of the Benefit in the form of the
Pre-retirement Spouse's Annuity. The spouse may elect to receive payment of
the Benefit as provided in Section 8.02(d).
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<PAGE>
Under rules established by the Administrator, the Administrator shall
notify Members of their right to make a "Qualified Election" and to revoke
any such election within the "Election Period." The Administrator shall
comply with the foregoing sentence by providing each Member, during the
"Disclosure Period," a written explanation of the Pre-retirement Spouse's
Annuity in such terms and in such manner as would be comparable to the
explanation described in Section 10.05.
For purposes of this Section 10.06,
(i) "Qualified Election" shall mean a waiver of a Pre-retirement
------------------
Spouse's Annuity. The waiver must be in writing and must be consented to
by the Member's spouse. The spouse's consent to a waiver must be
witnessed by a representative of the Administrator or notary public.
Notwithstanding this consent requirement, if the Member establishes to
the satisfaction of the Administrator that such written consent may not
be obtained because there is no spouse or the spouse cannot be located, a
waiver will be deemed a Qualified Election. Any consent necessary under
this provision will be valid only with respect to the spouse who signs
the consent, or in the event of a deemed Qualified Election, the
designated spouse. Additionally, a revocation of a prior waiver may be
made by a Member without the consent of the spouse at any time before the
commencement of benefits. The number of revocations shall not be limited.
If the Qualified Election is made prior to the first day of the Plan Year
in which the Member attains age 35, such Qualified Election shall become
invalid as of such date. To extend the waiver of the Pre-retirement Spouse's
Annuity beyond such date, another Qualified Election must be made.
(ii) "Election Period" shall mean the period which begins on the
---------------
Member's Entry Date and ends on the date of the Member's death.
(iii) "Disclosure Period" shall mean (and subject to regulations
-----------------
under Section 417 of the Code) the latest of the following:
(1) the period beginning on the Member's Entry Date and ending
with the close of the Plan Year preceding the Plan Year in which the
Member attains age 35, or
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<PAGE>
(2) the two-year period beginning one year preceding the date
the Member becomes a Participant and ending one year following such
date, or
(3) the two-year period beginning one year preceding the date
Section 10.01(b) becomes applicable to a Member and ending one year
following such date.
If a Member experiences a Termination of Employment before age 35, such
Member's Disclosure Period shall be the two-year period beginning one year
preceding such Member's date of Termination of Employment and ending one
year following such date. If such Member resumes employment with an
Employer, his Disclosure Period shall be redetermined.
If a former spouse of a Member is entitled to receive a portion of the
Member's Benefit under a Qualified Domestic Relations Order, the requirement
to pay the Member's death Benefit in the form of a Pre-retirement Spouse's
Annuity shall not apply unless it is consistent with such Qualified Domestic
Relations Order.
More than one spouse may be entitled to a Pre-retirement Spouse's
Annuity. For example, two former spouses may have been awarded survivor
benefits and there may also be a current spouse. In such case, this Section
shall be applied by dividing the Member's Benefit in proportion to the
spousal entitlements and then applying this Section to each portion as if
each portion were a separate Benefit belonging to the Member and the spouse
or former spouse in question.
(b) Other Members: The benefit payable to a Beneficiary upon the death
-------------
of either:
(i) A Member who is not married on his date of death, or
(ii) A Member whose spouse will not receive a Pre-retirement
Spouse's Annuity in accordance with subsection (a) hereof shall be in a
single sum unless the Plan permits some other form of payment.
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<PAGE>
10.07 TRANSITIONAL RULES
(a) Any living Member not receiving payment of Benefits on August 23,
1984, who would otherwise not receive payment of his Benefit prescribed by
the previous sections of this Article must be given the opportunity to elect
to have the prior sections of this Article apply if such Member is credited
with at least one Hour of Service under the Plan or a predecessor Plan in a
Plan Year beginning on or after January 1, 1976, and such Member had at
least 10 Years of Service when he separated from service.
(b) Any living Member not receiving payment of Benefits on August 23,
1984, who was credited with at least one Hour of Service under this Plan or
a predecessor Plan on or after September 2, 1974, and who is not otherwise
credited with any service in a Plan Year beginning on or after January 1,
1976, must be given the opportunity to have his Benefit paid in accordance
with subsection (d) of this Section.
(c) The respective opportunities to elect (as described in subsections
(a) and (b) above) must be afforded to the appropriate Members during the
period commencing on August 23, 1984, and ending on the date Benefit payment
would otherwise commence to said Members.
(d) Any Member who has elected pursuant to subsection (b) of this Section
and any Member who does not elect under subsection (a) or who meets the
requirements of subsection (a) except that such Member does not have at
least 10 Years of Service when he or she separates from service, shall have
his Benefit distributed in accordance with all of the following requirements
if Benefits would have been payable in the form of a life annuity:
(i) Automatic Joint and Survivor Annuity. If Benefits in the form of
------------------------------------
a life annuity become payable to a married Member who:
(1) begins to receive payments under the Plan on or after Normal
Retirement Date; or
(2) dies on or after Normal Retirement Date while still working
for the Employer; or
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(3) begins to receive payments on or after the qualified early
retirement age; or
(4) separates from service on or after attaining Normal
Retirement Date (or the qualified early retirement age) and after
satisfying the eligibility requirements for the payment of Benefits
under the Plan and thereafter dies before beginning to receive such
Benefits;
then such Benefits will be received under this Plan in the form of a
qualified joint and survivor annuity, unless the Member has elected
otherwise during the election period. The election period must begin at
least 6 months before the Member attains qualified early retirement age
and end not more than 90 days before the commencement of Benefit payment.
Any election hereunder will be in writing and may be changed by the
Member at any time.
(ii) Election of Early Survivor Annuity. A Member who is employed
----------------------------------
after attaining the qualified early retirement age will be given the
opportunity to elect, during the election period, to have a survivor
annuity payable on death. If the Member elects the survivor annuity,
payments under such annuity must not be less than the payments which
would have been made to the spouse under the qualified joint and survivor
annuity if the Member had retired on the day before his or her death. Any
election under this provision will be in writing and may be changed by
the Member at any time. The election period begins on the later of (1)
the 90th day before the Member attains the qualified early retirement
age, or (2) the date on which participation begins, and ends on the date
the Member terminates employment.
(iii) For purposes of this subsection (d):
(1) Qualified early retirement age is the latest of:
(A) the earliest date, under the Plan, on which the Member
may elect to receive retirement Benefits,
(B) the first day of the 120th month beginning before the
Member reaches his Normal Retirement Date, or
(C) the date the Member begins participation.
(2) Qualified joint and survivor annuity is an annuity for the
life of the Member with a survivor annuity for the life of the spouse
which is not less than 50 percent and not more than 100 percent of
the amount of the annuity which is payable during the joint lives of
the Member and the spouse and which is the amount of annuity which
can be purchased with the Member's Benefit.
10.08 WAIVER OF ANNUITY PAYMENTS
The waivers described in Sections 10.04 and 10.06 must specify a particular form
of benefit to be provided. Such particular form of benefit may be changed only
if the spouse executes another waiver.
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ARTICLE XI
TOP-HEAVY PROVISIONS
11.01 GENERAL
For any Plan Year during which the Plan is a member of a "Top-Heavy Group," the
provisions of this Article shall become applicable, to the extent such
provisions are more liberal than the remaining provisions of this Plan.
Notwithstanding the foregoing, the Plan is not a member of a "Top-Heavy Group"
if it is also a member of an Aggregation Group which is not a "Top-Heavy Group."
The term "Top-Heavy Group" shall mean an Aggregation Group in which more than
60% of all Benefits (as of the Determination Date) provided under the plans in
such Aggregation Group are attributable to Key Employees. The terms "Top-Heavy"
and "Top-Heavy Plan" shall have similar meanings.
11.02 DEFINITIONS
(a) "Actuarial Equivalent" or "Actuarially Equivalent" shall mean, for
-------------------- ----------------------
purposes of this Article, equality in value of the aggregate amounts expected
to be received under different forms of payment, based upon an interest rate
of 8% per annum and the 1983 Individual Annuity Mortality Table (these
actuarial assumptions are derived from regulation 1.401(a)(4)-
3(d)(5)(iv)(B)). If the actuarial assumptions contained in the top heavy
provisions of the applicable defined benefit plan conflict with the preceding
sentence, the top heavy provisions of the applicable defined benefit plan
shall take precedence.
(b) "Aggregation Group" shall mean the group of plans which includes
-----------------
(i) each plan (whether or not terminated) of the Employer in which a
Key Employee is a Participant at any time during the applicable Plan Year
or any of the 4 preceding Plan Years;
(ii) each other plan of the Employer which enables any plan described
in (i) above to meet the requirements of Code Sections 401(a)(4) or 410;
and
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(iii) any other plan of the Employer which the Employer may designate
as part of the Aggregation Group, but only if the resulting Aggregation
Group continues to meet the requirements of Code Sections 40l(a)(4) and
410.
(c) "Benefits" shall mean, for purposes of this Article, the following:
----------
(i) In the case of a defined benefit plan, the single sum Actuarial
Equivalent present value of the accrued pension of each Participant. The
value of such Benefits as of any Determination Date shall be the value as
of the most recent Valuation Date which is within a 12-month period
ending on the Determination Date.
For purposes of this Article, the accrued pension of an Employee other
than a Key Employee shall be determined under (a) the method, if any, that
uniformly applies for accrual purposes under all plans maintained by the
Employers, or (b) if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the fractional
accrual rate of Section 411(b)(1)(C) of the Code.
(ii) In the case of a defined contribution plan, the value of the
Accounts of each Participant. The value of such Accounts as of any
Determination Date shall be the value as of the most recent Valuation
Date which is within a 12-month period ending on the Determination Date.
If this Plan is not subject to the minimum funding requirements of
Section 412 of the Code, the value of an Account shall not include
Employer contributions made after the Determination Date, except for the
first Plan Year.
(iii) In the case of all plans, the accrued benefit attributable to
nondeductible Employee contributions.
(iv) Benefits shall include all distributions made (under a plan
described in subsection (b) above) during the 5-year period ending on the
Determination Date. Such distributions include those under a terminated
and liquidated plan which, if it had not been liquidated, would have been
required to be included in the Aggregation Group.
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(v) Benefits shall not include:
---
(1) Benefits of a Former Key Employee.
(2) any rollover (or similar transfers) initiated by the
Participant and made after December 31, 1983. This sentence shall
only be applicable to the transferee plan and only to the extent
provided in government regulations.
(3) amounts which are deductible Employee contributions (IRA-
type).
(4) Benefits of any Former Participant who has not performed
services for the Employer at any time during the 5-year period ending
on the Determination Date.
(d) "Determination Date" shall mean, with respect to any Plan Year,
------------------
(i) the last day of the preceding Plan Year, or
(ii) in the case of the first Plan Year of any plan, the last day of
such Plan Year.
(e) "Employer" shall mean, for purposes of this Article, the Employer and
--------
the Affiliated Companies.
(f) "Former Key Employee" shall mean, for any Plan Year, an Employee (or
-------------------
his Beneficiary) who is a Non-Key Employee for such Plan Year, but was a Key
Employee in a prior Plan Year.
(g) "Key Employee" shall mean, for any Plan Year, an Employee or former
------------
Employee (or their Beneficiaries) who, at any time during the Plan Year
containing the Determination Date for the Plan Year in question or any of the 4
preceding Plan Years, is or was
(i) an officer of an Employer having annual Earnings (Gross Earnings
for Plan Years beginning after December 31, 1988) greater than 50 percent
of the amount in effect under Section 415(b)(1)(A) of the Code for the
applicable Plan Year. For purposes of the preceding sentence, the maximum
number of officers who may be deemed Key Employees shall be determined as
follows:
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<PAGE>
MAXIMUM NUMBER OF OFFICERS
NUMBER OF EMPLOYEES* DEEMED KEY EMPLOYEES
-------------------- -------------------------
30 or less 3
31 to 500 10% of the number of Employees**
500 or more 50
__________
*For purposes of determining the number of Employees, see
Section 2.45 (regarding Highly Compensated Employees) regarding which
Employees may be excluded.
** If the result is not an integer, the result shall be
increased to the next integer. Notwithstanding the preceding
sentence, if IRS regulations applicable to Top-Heavy plans are
amended (either formally or informally) to conform to similar
regulations applicable to Highly Compensated Employees, then the
rounding rules under Section 2.45 shall be applicable to this Section
11.02(g)(i).
In addition, if the number of officers exceeds the maximum
number of officers deemed Key Employees according to the above
schedule, only those with the highest one-year Earnings (Gross
Earnings for Plan Years beginning after December 31, 1988) during the
applicable period shall be deemed Key Employees.
(ii) One of the 10 Employees
(1) owning (or considered as owning within the meaning of
Section 318 of the Code) both more than a 1/2% interest and the
largest interests in an Employer (if two Employees have the same
interest in an Employer, the Employee having the greater annual
Earnings (Gross Earnings for Plan Years beginning after December 31,
1988) shall be treated as owning a larger interest), and
(2) having an annual Earnings (Gross Earnings for Plan Years
beginning after December 31, 1988) greater than the amount in effect
under Code Section 415(c)(l)(A).
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(iii) a greater than 5% owner of an Employer, or
(iv) a greater than 1% owner of an Employer having an annual Earnings
(Gross Earnings for Plan Years beginning after December 31, 1988) greater
than $150,000.
For purposes of determining ownership in paragraphs (ii), (iii) and (iv)
above, the rules of subsections (b), (c) and (m) of Section 414 of the Code
shall not apply.
(h) "Non-Key Employee" shall mean an Employee who is not a Key Employee.
----------------
(i) "Participant" shall mean, for purposes of this Article, Participants
-----------
(as defined in Article II) and in the case of a Code Section 401(k) plan, an
Employee who has met the eligibility requirements of such plan, but who has
declined to reduce his salary according to the terms of the plan. Participants
shall not include, for purposes of this Article, Employees who have waived their
right to participate in this Plan in accordance with Section 3.08. Participants
shall include an Employee excluded from Plan participation merely because his
Compensation is below a stated amount.
(j) "Valuation Date" shall mean
--------------
(i) in the case of a defined benefit plan, the date used for computing
annual plan costs for minimum funding under Section 412 of the Code,
regardless of whether a valuation is performed for the applicable year.
(ii) in the case of a defined contribution plan, the date used for
allocating trust earnings, contributions or forfeitures.
11.03 VESTING
The Vested Percentage of each Participant who has at least one Hour of Service
while the Plan was Top-Heavy shall be not less than the percentage determined
under the Top Heavy Vesting Schedule. For purposes of determining a
Participant's nonforfeitable percentage under the Top Heavy Vesting Schedule,
his Years of Service prior to the Original Effective Date shall be excluded.
However, the Original Effective Date shall be modified to include service under
a "predecessor plan," as defined in IRS regulation 1.411(a)-5(b)(3).
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In the event the Plan ceases to be Top-Heavy, a Participant's Vested Percentage
shall thereafter be determined by the schedule in effect prior to the Plan being
Top-Heavy. Notwithstanding the foregoing,
(a) A Participant's Vested Percentage shall be no less than his Vested
Percentage as of the end of the last year during which the Plan was Top-
Heavy.
(b) A Participant who has at least 5 Years of Service (3 Years of Service
for Plan Years beginning after December 31, 1988) shall be permitted to elect
(in accordance with procedures prescribed by the Administrator) to have his
Vested Percentage computed under the Top Heavy Vesting Schedule, in lieu of
the schedule in effect prior to the Plan being Top-Heavy.
11.04 COMPENSATION
Notwithstanding the definition of Compensation in Article II, Compensation shall
not exceed $200,000 or such higher amount for the Plan Year as permitted under
Section 416(d) of the Code. This Section 11.04 shall expire at the end of the
Plan Year which begins in 1988.
11.05 MINIMUM BENEFITS
(a) In the case of a defined benefit plan,
(i) The Accrued Pension of a Participant who is Non-Key Employee
shall not be less than the product of (1), (2) and (3) as follows:
(1) 2%
(2) Years of Top-Heavy Service (maximum of 10)
(3) Average Top-Heavy Gross Earnings
(ii) For purposes of this Section, Years of Top-Heavy Service shall
mean an Employee's Years of Service, but excluding
(1) Years of Service during a Plan Year which begins before
January 1, 1984;
(2) Years of Service in which the Plan is not Top-Heavy; and
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(3) Years of Service prior to the Participant's date of
participation in the defined benefit plan.
(iii) For purposes of this Section, Average Top-Heavy Gross Earnings
shall mean an Employee's average monthly Gross Earnings during the five
consecutive Plan Years which produces the highest average, but excluding
Gross Earnings during Plan Years beginning after the last Plan Year in
which the Plan is Top-Heavy.
(iv) The minimum accrued pension described in this Section shall be
payable in the form of a "single life pension." If the accrued pension is
actually paid in any other form, it shall be adjusted so that it is
actuarially equivalent (as determined under the defined benefit plan) to
the "single life pension" form.
(v) In the event the Plan ceases to be Top-Heavy, a Participant's
accrued pension shall not be less than the accrued pension computed under
this Section 11.05.
(b) In the case of a defined contribution plan, the Employer Contribution
Account for the Plan Year of a Participant who is a Non-Key Employee and who
is employed on the last day of the Plan Year (regardless of whether such
Participant completed 1,000 Hours of Service in such Plan Year) shall be
allocated an amount at least equal to the product of (i) and (ii) as follows:
(i) the Participant's Gross Earnings (while a Participant) for the
Plan Year;
(ii) the lesser of (1) 3% and (2) the allocation of Employer
contributions and forfeitures (under all defined contribution plans in
the Aggregation Group) for such Plan Year on behalf of the most highly
benefited Key Employee, expressed as a percentage of such Employee's
Earnings (not in excess of $200,000 or such higher amount as permitted
under Code Section 416(d)[Code Section 401(a)(17) for Plan Years
beginning after December 31, 1988]). Item (2) shall not be applicable if
any of the defined contribution plans required to be included in the
Aggregation Group enables a defined benefit plan required to be included
in the Aggregation Group to meet the requirements of Sections 401(a)(4)
or 410 of the Code.
To the extent it does not conflict with the "allocation" formula under
the defined contribution plan, the minimum allocation required under this
subsection (b) shall be satisfied by first allocating the Employer
contribution for the Plan Year towards the minimum allocation. This would
generally be true in the case of a defined contribution plan which is not
subject to Section 412 of the Code (relating to minimum funding rules).
For example, an integrated profit sharing plan would apply the Employer
contribution first to the minimum allocation under this subsection (b), and
then to the "integrated" portion of the plan.
If the Employer contribution is entirely allocated under the terms of the
allocation formula under the defined contribution plan, any additional amount
necessary to satisfy the minimum allocation required under this subsection
(b) shall be contributed by the Employer.
For purposes of this subsection (b), Employer contributions attributable
to a salary reduction or similar arrangement shall not be taken into account
for Plan Years beginning before 1985. For Plan Years beginning after 1984 and
before 1989, such contributions shall offset the minimum Benefits required
pursuant to this Article. For Plan Years beginning after 1988, such
contributions may not be used to offset the minimum Benefits required
pursuant to this Article.
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For purposes of this subsection (b), "matching contributions" (as defined
in Section 401(m)(4)(A) of the Code) used to satisfy the requirements of
Sections 401(k) and (m) of the Code may not be used to offset the minimum
Benefits required pursuant to this Article for Plan Years beginning after
1988.
(c) The defined benefit plan minimum described in subsection (a) may be
satisfied by one or a combination of defined benefit plans. In addition,
Participants covered only under a defined benefit plan shall receive the
defined benefit minimum.
(d) The defined contribution plan minimum described in subsection (b)
may be satisfied by one or a combination of defined contribution plans. In
addition, Participants covered only under a defined contribution plan shall
receive the defined contribution minimum.
(e) If a Participant is covered under both a defined benefit plan and a
defined contribution plan, the minimum benefit requirements of this Section
11.05 may be satisfied by one of the following methods (in lieu of
subsections (a), (b), (c) or (d)), as elected in the Adoption Agreement:
(i) The Participant receives only the minimum described in
subsection (a).
(ii) The Participant receives the minimum described in subsection
(a) and the vested Benefit under the defined benefit plan is offset by
the annuitized value of the vested Benefit under the defined contribution
plan (i.e. "floor offset").
(iii) No special minimums are required, provided that a
comparability analysis (using rules and regulations prescribed by the
Internal Revenue Service) proves that total benefits (on an aggregated
basis for all Participants) under both the defined benefit and defined
contribution plans are at least equal to the defined benefit minimum (on
an aggregated basis for all Participants).
(iv) The Participant receives contributions and forfeitures under
the defined contribution plan equal to 5% of his Gross Earnings (while a
Participant) for the Plan Year.
11.06 CODE SECTION 415 LIMITATIONS
If the Plan is Top-Heavy, the provisions of the Plan containing maximum benefits
under Section 415 of the Code shall be amended by substituting "1.0" for "1.25"
wherever it appears and substituting "$41,500" for "$51,875" wherever it
appears.
This Section 11.06 shall not be effective if the exceptions of Sections
416(h)(2) and (3) of the Code are met.
11.07 TERMINATED (OR PARTIALLY TERMINATED) DEFINED BENEFIT PLANS
Notwithstanding anything in this Plan to the contrary, in the case of a defined
benefit plan which has been terminated (or partially terminated with respect to
a group of Participants) and is in the process of distributing all affected plan
assets (or transferring such assets to another plan) as soon as administratively
feasible,
(a) minimum benefits under Section 11.05(a) shall cease to accrue as of
the date of plan termination, and
(b) for purposes of Section 11.05(e), such terminated defined benefit
plan shall be deemed to have ceased to exist as of the date of plan
termination, so that the Participant will not be considered to be covered
under both a defined benefit plan and a defined contribution plan.
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This Section 11.07 shall not be effective if the Employer maintains another
defined benefit plan which is a member of the Top-Heavy Group.
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ARTICLE XII
THE TRUST
For the purpose of providing for the payment of Benefits under the Plan and to
hold, invest and administer the assets of the Plan, the Company shall enter into
one or more Trust Agreements with one or more Trustees, or in lieu thereof, or
in addition thereto, one or more contracts with a legal reserve life insurance
company.
The Company shall have the responsibility of selecting the Trustee, monitoring
the Trustee's performance, removing the Trustee, selecting successors, and
determining the form and the terms of the agreement to be entered into with the
Trustee.
All contributions under this Plan shall be paid to the Trustee and deposited in
the Trust. All contributions made by an Employer are expressly conditioned upon
the continued qualification of the Plan under the Code, including any amendments
to the Plan, and upon the deductibility (unless the Employer is a "tax-exempt"
organization) under Section 404 of the Code of such contributions made to
provide Plan benefits. All assets of the Trust, including Investment Income,
shall be retained for the exclusive benefit of Members and Beneficiaries and
shall be used to pay benefits to such persons or to pay administrative expenses
of the Plan and Trust to the extent not paid by an Employer and shall not revert
to or inure to the benefit of any Employer.
Notwithstanding anything herein to the contrary, if permitted under the Code or
regulations thereunder, upon an Employer's request, any contribution which was
made by a mistake of fact, or was conditioned upon initial qualification of the
Plan (but only if the application for qualification was made by the time
prescribed by law for filing the Employer's return for the taxable year in which
the Plan is adopted, or such later date as the Secretary of the Treasury may
prescribe), or upon the deductibility of the contribution under Section 404 of
the Code, shall be returned to the Employer within one year after the payment of
the contribution, the denial of the initial qualification, or the disallowance
of the deduction (to the extent disallowed), whichever is applicable.
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The assets of the Trust may be invested in any investment permitted by law for
the investment of the assets of an employee benefit trust in accordance with the
terms of the Trust Agreement. In particular, up to 100% of Plan assets may be
invested and reinvested in qualifying common stock, preferred stock, bonds,
notes, other securities and/or real property of the Employer to the extent
permitted under ERISA.
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ARTICLE XIII
ADMINISTRATION
13.01 FIDUCIARY RESPONSIBILITY
The Fiduciaries shall have only those specific powers, duties, responsibilities
and obligations as are specifically granted or delegated to them under the Plan
and the Trust. It is intended under the Plan and the Trust that each Fiduciary
shall be responsible for the proper exercise of its own powers, duties,
responsibilities, and obligations as provided for under this Plan and the Trust,
and shall not be responsible for any act or failure to act of another Fiduciary.
A Fiduciary from time to time may allocate or delegate to any other persons or
organizations any of its rights, powers, duties and responsibilities, except
Trustee duties. Any such allocation or delegation shall be made in writing.
Wherever in the Plan or the Trust Agreement it is provided that a person or
entity has the power to appoint another person or entity with discretionary
authority or control respecting the operation or administration of the Plan or
the Trust, the responsibility of the appointing party with respect to that
appointment is limited to the selection of the appointee and the periodic review
of the performance of the appointee. Any violation of the responsibilities by
the appointee will not be considered a breach by the appointing party.
13.02 RESPONSIBILITY OF TRUSTEE
The Trustee shall be the named Fiduciary for asset management, and shall have
exclusive authority and discretion to manage and control the assets of the Plan,
except to the extent that such authority and discretion for all or a specified
portion of the Plan's asset is delegated and allocated by the Administrator to
one or more Investment Managers or assumed by the Administrator. The Trustee
and Investment Manager shall not be liable for the acts or omissions of the
Administrator or the Employers, nor shall they be liable or responsible for the
portion or portions of the Trust managed by persons other than themselves.
In the event all or a portion of the Trust is invested in the general account of
an insurance company pursuant to a deposit administration contract (or contract
of like purpose), the Administrator shall be the named Fiduciary with respect to
the portion of the Trust so invested; provided, however, the insurance company
shall be the Investment Manager with respect to any portion of the Trust
invested in one or more separate accounts (as distinguished from the general
account) of the insurance company pursuant to such contract. The insurance
company will hold such portion or portions of the Trust in accordance with the
contract and will keep records of all investments, receipts, disbursements,
transfers, and other transactions, and will make available such information as
is required to be made available by ERISA and by regulations thereunder to the
Administrator in order to allow it to make such reports as are required by
ERISA. The insurance company will provide such valuations of the Plan's assets
as may be made in accordance with the terms of the contract in order to enable
the Administrator to comply with ERISA.
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13.03 APPOINTMENT OF ADMINISTRATOR
The Plan shall be administered by the Administrator who shall be appointed by
and serve at the pleasure of the Company. The Administrator may resign by
giving notice in writing to the Company and the Trustee.
All usual and reasonable expenses of the Administrator may be paid in whole or
in part by the Employers, and any expenses not paid by the Employers shall be
paid by the Trustee out of the principal or income of the Trust. If an Employee
serves as the Administrator, either individually or jointly with others, he
shall not receive compensation with respect to his services as such.
13.04 AUTHORITY OF ADMINISTRATOR
The Administrator is the named Fiduciary to administer the Plan. The
Administrator shall have authority to control and manage the operation and
administration of the Plan and shall discharge its duties with respect to the
Plan solely in the interest of the Members and Beneficiaries. The Administrator
shall have all powers necessary to exercise its authority and discharge its
responsibilities, including, but not by way of limitation, the following:
(a) To decide all questions relating to eligibility and to
determine the amount, manner and time of payment of any Benefits hereunder;
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(b) To maintain in conjunction with the Employers all
necessary records for the administration of the Plan and Trust other than
those maintained by the Trustee or other Fiduciaries;
(c) To certify to the Trustee the amount and kind of Benefits
payable under the Plan and authorize all Benefit disbursements by the
Trustee from the Trust;
(d) To appoint and remove any Investment Manager and to
periodically review their performance;
(e) To construe and interpret the Plan and Trust Agreement and
to make and publish such rules for the regulation of the Plan and the Trust
as are not inconsistent with their terms;
(f) To employ one or more persons to render advice with regard
to any responsibility any Fiduciary has under the Plan;
(g) To receive from the Employers, Members and Beneficiaries
such information and prescribe the use of such forms as shall be necessary
for the proper administration of the Plan and the Trust, including
procedures to be followed by distributees in obtaining Benefits;
(h) To prepare and distribute, in such manner as it determines
to be appropriate, information explaining the Plan;
(i) To furnish the Employers, upon request, such annual reports
with respect to the administration of the Plan as are reasonable and
appropriate;
(j) To delegate, if the Administrator is a committee, to one or
more of its members the rights to act in its behalf in all matters
connected with the administration of the Plan;
(k) To receive and review reports of the financial condition
and of the receipts and disbursements of the Trust from the Trustee;
(l) To appoint and contract with such independent public
accountant or accountants as shall be necessary to comply with the
reporting and disclosure requirements of any applicable federal or state
law, or such legal counsel, actuarial counsel or other counsel as it deems
necessary or advisable in discharging its duties hereunder.
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The Administrator may from time to time allocate or delegate to any member(s),
person(s) or organization(s) any of its rights, powers, duties, and
responsibilities, provided that such allocation or delegation is made to and
accepted in writing by such member(s), person(s), or organization(s). Any such
allocation or delegation shall be reviewed periodically by the Administrator and
shall be terminable upon such notice as the Administrator in its discretion
deems reasonable and proper under the circumstances.
13.05 RULES AND DECISIONS
The Administrator may adopt such rules as it deems necessary, desirable, or
appropriate. When making a determination or calculation, the Administrator
shall be entitled to rely upon information furnished by a Member, Beneficiary,
Employer, the legal counsel of an Employer, the Trustee or Investment Manager.
The Administrator and any representative whom it chooses to assist it to carry
out its responsibilities under the Plan shall have the maximum discretionary
authority permitted by law to interpret, construe, and administer the Plan, to
make determinations regarding Plan participation, enrollment and eligibility for
benefits, to evaluate and determine the validity of benefit claims, and to
resolve any and all claims and disputes regarding the rights and entitlements of
individuals to participate in the Plan and to receive benefits and payments
pursuant to the Plan. The decisions of the Administrator and its
representatives shall be given the maximum deference permitted by law.
13.06 PROCEDURES
The Administrator, if more than one person, may act at a meeting or in writing
without a meeting. Such Administrator shall elect one of its members as
chairman, appoint a secretary, who may or may not be a member, and advise the
Trustee of such actions in writing. The secretary shall keep a record of all
meetings and forward all necessary communications to the Employers and the
Trustee. The Administrator may adopt such bylaws and regulations as it deems
desirable for the conduct of its affairs. All decisions of the Administrator
shall be taken by action of a majority of its members including actions at a
meeting or in writing without a meeting. A quorum of the Administrator shall
consist of a majority of members present. A member who is a Participant shall
not vote on any question relating specifically to himself.
13.07 INFORMATION
To enable the Administrator to perform its functions, the Employers shall supply
full and timely information to the Administrator on all matters relating to
Members, including their Compensation, retirement, death, Termination of
Employment, and the cause thereof, and such other pertinent facts as the
Administrator may require; and the Administrator shall advise the Trustee of
such of the foregoing facts as may be pertinent to the Trustee's administration
of the Trust.
13.08 FUNDING POLICY AND METHOD
The Administrator from time to time shall establish a funding policy and method
for carrying out the objectives of the Plan which is consistent with the
requirements of ERISA. In this connection, the Administrator shall consider the
Plan's short and long run financial needs and communicate those requirements to
the Trustee and any Investment Manager.
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13.09 APPLICATION FOR BENEFIT AND OTHER FORMS
The Administrator may require a Member or Beneficiary to complete and file an
application for Benefit payments and all such other forms approved by the
Administrator and to furnish all pertinent information requested by the
Administrator. The Administrator may rely upon all such information so
furnished it, including such person's current mailing address.
13.10 CLAIMS PROCEDURE
The Administrator shall make all determinations as to the right of any person to
a Benefit.
Claims shall be made and processed according to the following procedures:
(a) Claims must be in writing and must be delivered to the
Administrator.
(b) The Administrator will act on a claim within a reasonable
period of time after its receipt. Claims shall be acted upon within 90 days
after receipt of the claim by the Administrator, unless special circumstances
require an extension of time. If such an extension of time is required,
written notice of the extension and the special
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circumstances shall be given to the claimant prior to the termination of the
initial 90-day period. In no event shall such extension exceed a period of 90
days from the end of such initial period. Claims not acted upon within the
time prescribed herein shall be deemed denied for purposes of proceeding to
the review stage.
(c) The Administrator shall provide to every claimant whose claim is
denied written notice setting forth in a manner calculated to be understood
by the claimant:
(i) The specific reason or reasons for the denial;
(ii) Specific reference to pertinent Plan provisions on
which the denial is based;
(iii) A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why
such material or information is necessary;
(iv) An explanation of the Plan's claim review procedure.
(d) The claimant shall be afforded a reasonable opportunity to appeal a
denial of the claim to the Administrator for a full and fair review. Such
appeal must be made in writing upon application to the Administrator and may
not be made more than 60 days following receipt by the claimant of written
notification of denial of his claim. The claimant or his duly authorized
representative shall be permitted to review pertinent documents and submit
issues and comments in writing.
The decision upon review shall be made promptly, and not later than 60
days after receipt of a request for a review, unless special circumstances
require an extension of time for processing, in which case a decision shall
be rendered as soon as possible but not later than 120 days after receipt of
a request for review. If requested, a hearing shall be granted by the
Administrator.
The decision on review shall be in writing and shall include specific
references to the pertinent Plan provisions on which the decision is based.
The Administrator may designate a representative to receive, review and decide
claims in accordance with subparagraphs (a), (b), and (c) of this Section.
However, the Administrator will receive, review and decide all appeals in
accordance with subparagraph (d) of this Section.
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13.11 FACILITY OF PAYMENT
Whenever, in the Administrator's opinion, a person entitled to receive any
payment of a Benefit or installment thereof hereunder is under a legal
disability or is incapacitated in any way so as to be unable to manage his
financial affairs, the Administrator may direct the Trustee to make payments to
such person or to his legal representative or to a relative or friend of such
person for his benefit, or the Administrator may direct the Trustee to apply the
payment for the Benefit of such person in such manner as the Administrator
considers advisable. Any payment of a Benefit or installment thereof in
accordance with the provisions of this Section shall be a complete discharge of
any liability for the making of such payment under the provisions of the Plan.
13.12 RECORDS AND REPORTS
The Administrator shall exercise such authority and responsibility as it deems
appropriate in order to comply with ERISA and governmental regulations issued
thereunder relating to maintenance of plan records and filing of such reports as
may be required by federal or state agencies.
13.13 SERVICE OF PROCESS
The Administrator shall be the agent of the Plan for the service of legal
process.
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ARTICLE XIV
AMENDMENTS, ACTION BY EMPLOYER AND MERGERS
------------------------------------------
14.01 AMENDMENTS
The Company may, by action described in Section 14.02, make from time to time
any amendment (including the termination or partial termination of this Plan in
accordance with Article XV) or amendments to this Plan which do not cause any
part of the Trust to be used for, or diverted to, any purpose other than the
exclusive benefit of Members and their Beneficiaries; provided, however, that
the Company may make any amendment it determines necessary or desirable, with or
without retroactive effect, to comply with the Code and regulations thereunder.
Except to the extent allowed under regulations, no amendment may be made which
has the effect of:
(a) decreasing the Account of a Member,
(b) eliminating or reducing an early retirement benefit or a retirement-
type subsidy, or
(c) eliminating an optional form of benefit,
with respect to benefits attributable to service before such amendment. In the
case of a retirement-type subsidy, the preceding sentence shall apply only with
respect to a Participant who satisfies (either before or after the amendment)
the pre-amendment conditions for the subsidy.
14.02 ACTION BY EMPLOYER
Any action by the Company, or by any Employer other than the Company, may be by
resolution of its Governing Body, or may be taken by any person or persons duly
authorized by resolution of the Governing Body of such Employer to take such
action. Any Employer may delegate to the Company the authority to act on its
behalf with respect to the administration of the Plan or the adoption of such
additional amendments to the Plan as may be required by the Internal Revenue
Service.
14.03 SUCCESSOR EMPLOYER
In the event of the dissolution, merger, consolidation, or reorganization of an
Employer, provision may be made by which the Plan and Trust will be continued by
the successor, and, in that event, such successor shall be substituted for the
Employer under the Plan. The substitution of the successor shall constitute an
assumption of Plan liabilities by the successor and the successor shall have all
of the powers, duties and responsibilities of such Employer under the Plan.
14.04 PLAN ASSETS
In the event of any merger or consolidation of the Plan with, or transfer in
whole or in part of the assets or liabilities of the Trust to, another fund held
under any other plan of deferred compensation maintained or to be established
for the benefit of all or some of the Members of this Plan, the assets of the
Trust applicable to such Members shall be transferred to the other fund only if:
(a) Each Member would (if either this Plan or the other Plan then
terminated) receive a Benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the Benefit he would have been
entitled to receive immediately before the merger, consolidation or transfer
(if this Plan had then terminated);
(b) Resolutions of the Governing Body of an Employer under this Plan, and
of any new or successor employer of the affected Members, shall authorize
such transfer of assets; and, in the case of the new or successor employer of
the affected Members, its resolutions shall include an assumption of
liabilities with respect to such Member's inclusion in the new employer's
plan; and
(c) Such other plan and fund are qualified under Sections 401(a) and
501(a) of the Code.
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ARTICLE XV
PLAN TERMINATION
----------------
15.01 RIGHT TO TERMINATE
The Employers hope and expect to continue the Plan indefinitely. Nevertheless,
the Employers maintain the right to terminate or partially terminate the Plan
with respect to any of its Employees at any time. The Employers also reserve
the right to suspend or to discontinue, partially or completely, its
contributions under the Plan with respect to any of its Employees at any time.
In the event of any dissolution, merger, consolidation, or reorganization of the
Company, the Plan shall terminate and the Trust shall be liquidated, unless the
Plan is continued by a successor to the Company in accordance with
Section 14.03.
15.02 PARTIAL TERMINATION
Upon termination of the Plan with respect to a group of Participants and
Inactive Participants which constitutes a partial termination of the Plan, the
Trustee shall, in accordance with the directions of the Administrator, allocate
and segregate for the benefit of the Participants and Inactive Participants then
or theretofore employed by the Employer with respect to whom the Plan is being
terminated the proportionate interest of such Participants and Inactive
Participants in the Trust as reflected by their Accounts, which shall become
fully vested. In addition, the Trustee shall similarly allocate and segregate
the proportionate interest of affected Former Participants and Beneficiaries in
the Trust as reflected by their vested Accounts. The assets so allocated and
segregated under this Section 15.02 shall be used by the Trustee to pay Benefits
to or on behalf of the preceding individuals in accordance with Section 15.04.
15.03 FORFEITURES UPON PLAN TERMINATION
If any unallocated Forfeiture Accounts exist on the date the Plan is terminated
(because such Forfeiture Accounts have not yet become available for allocation
under Section 5.07, a (Former) Participant's rights to Forfeiture restoration
have lapsed in accordance with Section 4.02(c), or Forfeitures have not yet been
allocated under Section 7.13(i)), such Forfeiture
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Accounts shall be disposed of in accordance with Plan provisions established by
the Company. Such Plan provisions may include (but are not limited to)
provisions that cause Forfeiture Accounts to be (1) allocated to some or all
Participants in a nondiscriminatory manner, (2) used to reduce Employer
contributions required, if any, under the Plan, (3) used to pay administrative
expenses of the Plan and Trust, and/or (4) reverted to an Employer
(notwithstanding any Plan provision to the contrary). In addition, such Plan
provisions (1) may be established at the time the Plan is initially adopted (or
amended and restated) or at the time the Plan is terminated, and (2) shall form
a part of this Plan.
15.04 LIQUIDATION OF THE TRUST FUND
Upon termination of the Plan, the Accounts of all Participants and Inactive
Participants affected thereby shall become fully vested, and the Administrator
shall direct the Trustee to distribute the assets remaining in the Trust,
subject to the restrictions below, after payment of any expenses properly
chargeable thereto, to Participants, Inactive Participants, Former Participants,
and Beneficiaries affected by the termination in proportion to their respective
vested Account balances.
In the case of assets attributable to the Deferred Income Account, the Qualified
Nonelective Contribution Account and the Qualified Matching Contribution
Account, such assets may not be distributed unless (1) the Employer or an
Affiliated Company does not establish or maintain another defined contribution
plan [other than (i) an "ESOP" (as defined in Section 4975(e) or 409 of the
Code), (ii) a "SEP" (as defined in Section 408(k) of the Code), or (iii) a plan
in which fewer than 2% of the Participants of this Plan are eligible to
participate at any time 12 months before or 12 months after the termination of
this Plan] at any time during the 12-month period following the date of final
distribution of all such assets, and (2) with respect to distributions after
March 31, 1988, the distribution is a "lump sum distribution" (as defined in
Section 401(k)(10)(B) of the Code).
If the assets attributable to the Deferred Income Account, the Qualified
Nonelective Contribution Account and the Qualified Matching Contribution Account
cannot be distributed because the above requirements are not satisfied, such
assets shall first be transferred (if possible) to such other defined
contribution plan. Then the assets attributable to the remaining Accounts shall
be distributed in accordance with the first paragraph of this Section. This
sequence of events shall be followed to preserve any favorable tax and rollover
rules under Section 402 of the Code.
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15.05 MANNER OF DISTRIBUTION
Any distribution may be made, in whole or in part, in cash, securities or other
assets in kind as the Administrator in its sole discretion shall determine. All
non-cash distributions shall be valued at fair market value at date of
distribution. In addition, notwithstanding Section 8.02(b)(iv), distributions
with a value in excess of $3,500 may:
(a) in the case where the Employer or an Affiliated Company
maintains no other defined contribution plan (other than an "ESOP"), be
distributed to the Participant without his/her consent; or
(b) in the case where the Employer or an Affiliated Company
maintains another defined contribution plan (other than an "ESOP"), be
transferred to such other plan if the Participant does not consent to an
immediate distribution.
15.06 DISCONTINUANCE OF EMPLOYER CONTRIBUTIONS
In the event of the complete discontinuance of contributions to the Plan by an
Employer, the Accounts of all Participants and Inactive Participants employed by
such Employer shall as of the date of such discontinuance become nonforfeitable.
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ARTICLE XVI
ADOPTION AND WITHDRAWAL BY OTHER ORGANIZATIONS
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16.01 PROCEDURE FOR ADOPTION
(a) Affiliated Company: Subject to the provisions of Section
------------------
16.03, an Affiliated Company now in existence or hereafter formed or
acquired, which is not already an Employer under this Plan, and which is
otherwise legally eligible may, with the consent and approval of the
Company, adopt the Plan and Trust, for all or any classification of persons
in its employment, and thereby from and after the specified effective date
become an Employer under this Plan. Such adoption shall be effectuated and
evidenced by a formal resolution of the Governing Body of such Affiliated
Company. The adopting resolution may contain such specific changes and
variations in the Plan or the Trust as may be acceptable to the Company and
the Trustee. The adopting resolution of an Affiliated Company shall become,
as to such Affiliated Company and its Employees, a part of this Plan as
then in effect. It shall not be necessary for such adopting Affiliated
Company to execute the Plan or Trust as then in effect. The effective date
of the Plan for any such adopting Affiliated Company shall be that stated
in the adopting resolution and from and after such effective date such
adopting Affiliated Company shall assume all the rights, obligations and
liabilities of an Employer under the Plan and Trust.
(b) Acquisition of Entity Which Becomes Part of Employer: In
----------------------------------------------------
the event the Employer acquires an entity which becomes part of the
Employer (as opposed to the situation where the acquired entity becomes a
separate Affiliated Company as described in subsection (a) above), service
performed for such prior entity shall not constitute service performed for
the Employer unless the Company amends the Plan to provide otherwise. Such
amendment may also contain other changes and variations in the Plan or the
Trust as are necessary to carry out the Company's intent.
16.02 WITHDRAWAL
Any participating Employer, by action of its Governing Body and notice to the
Company and Trustee, may withdraw from the Plan and Trust at any time without
affecting other Employers not withdrawing by complying with the provisions of
the Plan and Trust. A withdrawing Employer may arrange for the continuation by
itself or its successor of this Plan and Trust in separate forms for its own
Employees, with such amendments if any, as it may deem proper, and may arrange
for continuation of the Plan and Trust by merger with an existing plan and fund
and transfer of Trust assets.
16.03 ADOPTION CONTINGENT UPON AND CONTINUED QUALIFICATION
The adoption of this Plan and its related Trust by an Affiliated Company as
provided in Section 16.01(a) is hereby made contingent and subject to the
condition precedent that the Plan after its adoption by the Affiliated Company
continues to meet all the statutory requirements for qualified plans, including
but not limited to Sections 401(a) and 501(a) of the Code, as amended. The
Company may request a determination from the appropriate District Director of
Internal Revenue to the effect that the Plan and Trust herein set forth, or as
amended before the receipt of such letter, continues to meet the requirements of
150
<PAGE>
the applicable federal statutes for tax qualification purposes after the
adoption of the Plan by the Affiliated Company. If such an approval letter is
denied, such adoption shall become void and inoperative and any contributions
made by or for such organization shall be promptly refunded by the Trustee.
Furthermore, if the Plan or the Trust in its operation becomes disqualified or
would become disqualified under the Code for any reason because of the Plan's
adoption by any Employer, the portion of the Trust allocable to the Employees of
such Employer shall be segregated as soon as is administratively feasible,
pending either the prompt
(a) correction of the conditions which would cause the disqualification
to the satisfaction of the Internal Revenue Service, so as not to affect the
continued qualified status of the Plan;
(b) requalification of the Plan and Trust;
(c) withdrawal of such Employer from this Plan and Trust and a
continuation by itself or its successor, of a plan and trust separately from
this Plan and Trust, or by merger with another existing plan and fund, with a
transfer of said segregated portion of Trust assets, as provided by Section
16.02; or
(d) termination of the Plan and Trust as to such Employer and its
Employees.
151
<PAGE>
ARTICLE XVII
MISCELLANEOUS
-------------
17.01 NONGUARANTEE OF EMPLOYMENT
Nothing contained in this Plan shall be construed as a contract of employment
between an Employer and any Employee, or as a right of any Employee to be
continued in the employment of an Employer, or as a limitation of the right of
an Employer to discharge any of its Employees, with or without cause.
17.02 RIGHT TO TRUST ASSETS
No Employee shall have any right to, or interest in, any assets of the Trust
upon termination of his employment or otherwise, except as provided from time to
time under this Plan, and then only to the extent of the Benefits payable under
the Plan to such Employee out of the assets of the Trust.
17.03 NONALIENATION OF BENEFITS
Except as otherwise provided in the Plan, Benefits payable under this Plan shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any
kind, either voluntary or involuntary, including any such liability which is for
alimony or other payments for the support of a spouse or former spouse, or for
any other relative of the Employee, prior to actually being received by the
person entitled to the Benefit under the terms of the Plan; and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, charge, or
otherwise dispose of any right to Benefits payable hereunder shall be void. The
Trust shall not in any manner be liable for, or subject to, the debts,
contracts, liabilities, engagements, or torts of any person entitled to Benefits
hereunder. The provisions of this Section shall not apply in the case of a
Qualified Domestic Relations Order.
17.04 GOVERNING LAW
Except as otherwise specifically provided under any federal law applicable to
this Plan, this Plan shall be construed and applied according to the laws of the
State specified in the Adoption Agreement.
17.05 BONDING, INSURANCE AND INDEMNITY
(a) Bonding: To the extent required under ERISA or any other federal
-------
law of similar import, the Company shall obtain, pay for, and keep current a
bond or bonds with respect to the Administrator and each Employee who
receives, handles, disburses, or otherwise exercises custody or control of
any of the assets of the Plan.
(b) Insurance: The Company may, in its discretion obtain, pay for, and
---------
keep current a policy or policies of insurance, insuring the Administrator,
the members of its Governing Body, or each other Employer and Employees to
whom any fiduciary responsibility with respect to the administration of the
Plan has been delegated, against any and all liabilities, costs and expenses
incurred by such persons, including attorney's fees, as a result of any act,
or omission to act, in connection with the performance of their duties,
responsibilities and obligations under the Plan and any applicable federal or
state law.
(c) Indemnity: If the Company does not obtain, pay for and keep current
---------
any type of insurance policy or policies referred to in subsection (b), or if
such insurance is provided but any of the parties referred to in subsection
(b)
152
<PAGE>
above incur any liabilities, costs or expenses which are not covered or
exceed the limits under such policies, then, in either event, the Employers
shall, to the extent permitted by law, indemnify and hold harmless such
parties against any and all liabilities, costs and expenses incurred by such
parties in performing their duties and responsibilities under this Plan,
including attorney's fees, provided such party or parties were acting in good
faith within what was reasonably believed to have been in the best interests
of the Plan and its Participants.
153
<PAGE>
17.06 ADOPTION CONTINGENT UPON INITIAL AND CONTINUED QUALIFICATION
The adoption of this Plan and its related Trust by the Employers is hereby made
contingent and subject to the condition precedent that the Plan and Trust meet
all the statutory requirements for qualified plans, including but not limited to
Sections 401(a) and 501(a) of the Code. The Employers may request an initial
letter of determination from the appropriate District Director of Internal
Revenue to the effect that the Plan and Trust, as herein set forth or as amended
before the receipt of such letter, meets the requirements of the applicable
federal statutes for tax qualification purposes for the Employers and its
covered Employees. If the request for initial qualification is denied, the
adoption shall become void and inoperative and any contributions made by the
Employers shall be returned to the Employers within one year after the date of
the denial, but only if the request for initial qualification was made by the
time prescribed by law for filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date as the Secretary of the Treasury
may prescribe.
17.07 TRANSFER OF ASSETS
This Plan specifically permits a transfer from the Trust of a Member's Account
to another qualified retirement plan.
17.08 SEVERABILITY CLAUSE
If any portion of this Plan shall be rendered invalid by a court of competent
jurisdiction, such rendering shall not impair the validity of the remaining
portions of the Plan.
17.09 GENDER, TENSE AND HEADINGS
Whenever any words are used in the masculine gender, they shall be construed as
though they were also used in the feminine gender in all cases where they would
so apply. Whenever any words used herein are in the singular form, they shall
be construed as though they were also used in the plural form in all cases where
they would so apply.
Headings of Articles, Sections and subsections as used herein are inserted
solely for convenience and reference and constitute no part of the Plan.
154
<PAGE>
MODIFICATION TO LOUIS KRAVITZ & ASSOCIATES, INC.
MASTER 401(K) PROFIT SHARING PLAN
AND ADOPTION AGREEMENT
Notwithstanding anything contained within or to the contrary in the Louis
Kravitz & Associates, Inc. Master 401(k) Profit Sharing Plan and Adoption
Agreement, the following shall apply to the Vitalink Pharmacy Services, Inc.
Retirement Savings Plan effective October 1, 1997.
PLAN DOCUMENT
- -------------
1. Section 2.101 is hereby amended in its entirety by adding the following
items after 2.101(d):
"(e) Notwithstanding the above, the following vesting schedules shall
apply:
For prior Grancare Inc. employees 100% immediate vesting.
For employees hired before October 1, 1997 who were not prior Grancare
employees and who were not prior Manor Care, Inc. employees, 100% immediate
vesting.
For prior Manor Care, Inc. employees and for matching accounts transferred
from the manor care, inc. retirement savings and investment plan and for
matching contributions and profit sharing contributions made on or after
october 1, 1997 for such employees:
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than three years 0%
3 years 20%
4 years 40%
5 years or more 100%
For employees hired on or after October 1, 1997:
YEARS OF SERVICE PERCENTAGE
---------------- ----------
Less than five 0%
Five or more 100%"
5
<PAGE>
2. Section 2.53 is hereby amended in its entirety to read as follows:
"2.53 "Investment Income" shall mean the net gain or loss of the Trust
from investments, as reflected by interest payments, dividends, realized
and unrealized gains and losses on securities, and other similar
transactions. In determining the Investment Income of the Trust for any
period, assets shall be valued on the basis of their fair market value as
determined in accordance with Section 5.02. The Investment Income, if any,
of assets held under each Investment Fund(s) or segregated accounts
maintained by the Trustee on the direction of the Administrator shall be
determined separately."
3. Article V is hereby amended by inserting a new Section 5.04A after Section
5.04, to read as follows:
"5.04A Allocation of Expenses
Section 5.04 discusses the allocation of Investment Income. This Section
5.04A discusses the allocation of expenses. In general, Article XII
provides that expenses of the Plan and Trust shall be paid from the assets
of the Trust to the extent such expenses are not paid by an Employer. In
addition, if Section 5.07 so provides, Forfeitures attributable to Employer
Contribution Accounts shall be used to pay expenses of the Plan and Trust.
If expenses of the Plan and Trust are paid either (1) by an Employer, or
(2) through the use of Forfeitures, there is no need to allocate such
expenses to the Accounts of Members and Beneficiaries. However, where
expenses are paid from the assets of the Trust, such expenses shall be
allocated to Accounts in accordance with uniform, consistent and
nondiscriminatory rules established by the Administrator. [For example,
expenses may be allocated to only certain Accounts or all Accounts. In
addition, each affected Account may be allocated a prorata share of an
expense, or each affected account may be allocated an equal share of an
expense.]"
4. Section 7.07(a) is hereby amended by deleting the phrase "(to which no
Investment Income shall be credited)".
5. Section 2.100 is hereby amended in its entirety to read as follows:
"2.100 "Valuation Date(s)" shall generally mean the end of each
"business" day unless the Investment Fund or the per share value of the
Investment Fund is not normally valued daily. For example, the Investment
Fund may be valued weekly, monthly, quarterly, annually or at other time
intervals.
In the case of an Investment Fund which meets the foregoing exception, the
term Valuation Date shall mean the date(s) such Investment Fund is actually
valued. However, in no event shall a valuation occur less frequently than
annually, with the last day of each Plan Year serving as a Valuation Date
(or one of the Valuation Dates)."
6
<PAGE>
6. Section 2.01 is hereby amended by adding the following paragraph at the end
thereof:
"Notwithstanding anything in the Plan to the contrary, the value of an
Account as of any time shall be determined on a "cash" basis. that is,
contributions or Investment Income which have accrued to an Account shall
not be recognized for purposes of determining the value of such Account
until such amount is actually credited (or deposited) to such Account."
7. A new Section 2.104 is hereby added at the end of Article II to read as
follows:
"2.104 "Matching Allocation Period" shall mean [X] the Plan Year." [ ] a
calendar month." [ ] a calendar quarter." [ ] a "payroll period" (may
vary for different groups of Employees)."
8. The first sentence of Section 2.15 is hereby amended by deleting the phrase
"during a Plan Year." and inserting in lieu thereof "during a Matching
Allocation Period.".
9. Sections 7.04(b) and 7.05 are each hereby amended by deleting the words
"Plan Year" wherever they appear, and inserting in lieu thereof "Matching
Allocation Period".
10. The next-to-last paragraph of Section 2.15 is hereby amended in its
entirety to read as follows:
"For plan years beginning in 1989 and later, Compensation taken into
account under the Plan for any Plan Year shall not exceed the "401(a)(17)
Limit" (as defined herein) for such Plan Year. That is, the sum of
Compensations for all Matching Allocation Periods within any Plan Year
shall not exceed the 401(a)(17) Limit for such Plan Year. Accordingly, the
Administrator shall establish uniform and nondiscriminatory rules to
provide for those situations in which the preceding sum of Compensations
will exceed the 401(a)(17) Limit.
7
<PAGE>
For purposes of this Section, the term "401(a)(17) Limit" shall mean the
amount determined under section 401(a)(17) of the code for the applicable
Plan Year.
(a) The 401(a)(17) Limit shall be adjusted in accordance with (i) Section
415(d) of the Code [for Plan Years beginning before 1994] or (ii)
Section 401(a)(17)(b) of the Code [for Plan Years beginning after
1993].
(b) The 401(a)(17) Limit may take into account the "reasonable, good-faith
standards during the transition years", as elaborated in an Internal
Revenue Service field directive dated June 12, 1992 regarding such
subject. That is, although regulations under Section 401(a)(17) of
the Code require that the 401(a)(17) Limit for any calendar year
applies to Plan Years beginning in such calendar year, such
regulations are not effective until the Plan Year beginning in 1994.
During the "transition years", the IRS field directive shall be
operative. Accordingly, if a Plan Year ends in 1989 or earlier, the
----
401(a)(17) Limit is $200,000; $209,200 if the Plan Year ends in 1990;
----
....; $150,000 if the Plan Year begins in 1994, etc.
------
(c) If a Plan Year is less than 12 months, the 401(a)(17) Limit for such
short Plan Year shall be prorated."
11. The second "flush left" paragraph of Section 4.02 is hereby amended in its
entirety to read as follows:
"This Section 4.02 is effective for Plan Years beginning on or after the
date specified in the Adoption Agreement. (For Plan Years beginning prior
to the preceding Plan Years, the treatment of Forfeitures and allocation of
Forfeiture Accounts attributable to Employer Contribution Accounts shall be
determined under the terms of the Prior Plan.) Forfeitures shall occur as
of the date a Forfeiture Account is established in accordance with
subsection (a) below."
12. The first paragraph of Section 4.02(a) is hereby amended by deleting the
last two sentences and inserting in lieu thereof the following:
"Such Forfeiture Accounts shall be allocated in accordance with Section
5.07."
13. The second paragraph of Section 4.02(a) is hereby deleted in its entirety.
8
<PAGE>
14. The second paragraph of Section 5.07 is hereby amended in its entirety to
read as follows:
"For Plan Years beginning prior to the effective date specified for Section
4.02, the allocation of Forfeitures attributable to Employer Contribution
Accounts shall be determined under the terms of the Prior Plan. For Plan
Years beginning on or after the effective date specified for Section 4.02,
Forfeitures which have become available for allocation during a Plan Year
in accordance with Section 4.02 shall be added to Profit Sharing
Contributions.
If any Forfeitures still remain, such excess shall be held in a suspense
account and be applied as previously described in future Plan Years."
15. The following Sections are hereby deleted in their entirety: 6.06(a);
6.07; 7.09(b); 7.11; and 7.14(c)(i).
16. The first paragraph of Section 7.07 is hereby amended in its entirety to
read as follows:
"This Section 7.07 is effective for Plan Years beginning on or after the
effective date specified for Section 4.02. For Plan Years beginning prior
to the preceding Plan Years, the treatment of Forfeitures and allocation of
Forfeiture Accounts attributable to Matching Contribution Accounts on
account of a Participant's Termination of Employment with less than 100%
vesting shall be determined under the terms of the Prior Plan."
17. Section 7.13(i)(ii)(1) is hereby amended in its entirety to read as
follows:
"(1) the eligible Non-Highly Compensated Participants are those (A) who
made Deferrals during the Plan Year, and (B) whose Matching Contribution
Accounts are greater than zero dollars as of the end of the Plan Year."
18. Section 5.03(c) is hereby amended in its entirety to read as follows:
"(c) Change of Investment Election: The Administrator shall establish
-----------------------------
rules and procedures under which Participants may:
(i) change their investment election with respect to future
contributions under subsection (a), and
(ii) transfer their Account(s) (all or a portion) from one Investment
Fund to another."
9
<PAGE>
19. Section 5.10(c) is hereby amended in its entirety to read as follows:
"(c) Application: an application for a loan by a Participant shall be
-----------
made in writing to the Administrator on such form or forms as the
Administrator may require. The Administrator may also require (if
applicable) the Participant to produce such documents and other evidence of
a financial need and the amount of the financial need. If the loan is
secured by any part of the Participant's Account, the loan application must
also include the Participant's consent to a possible reduction of his
Benefit to satisfy the repayment of such loan. The preceding consent shall
be obtained no earlier than 90 days before the date such loan is made.
If (1) the Plan is subject to the provisions of Article X, (2) a loan is
secured by any part of a Participant's Account, and (3) such Participant is
married at the time of the loan, the loan application must also include the
spouse's consent to and acknowledgment of the effect of the possible
reduction described in the preceding paragraph. The spouse's consent shall
(1) be obtained no earlier than 90 days before the date such loan is made,
and (2) be witnessed by a notary public (or if permitted by the
Administrator, by a representative of the Administrator). If the
Participant is unmarried at the time of the loan or if the Participant
later remarries, the consent of the new spouse shall not be required."
20. Section 6.11(b)(iv) is hereby amended by deleting the last sentence
thereof.
21. Section 6.02(c) is hereby amended in its entirety to read as follows:
"(c) 'ADP Compensation' shall mean the Participant's Compensation for the
----------------
Plan Year, unless either (1) the definition of Compensation fails to
satisfy the requirements of Section 414(s) of the Code ['Condition A'], or
(2) the applicable nondiscrimination test (either the ADP test in Section
6.05 or the ACP test in Section 7.08) is not satisfied ['Condition B'].
(i) If either Condition A or Condition B exists, then ADP Compensation
--
shall instead mean the Participant's Compensation for the Plan Year,
but excluding Deferrals made for the Plan Year.
(ii) If either Condition A or Condition B continues to exist after the
--
definition of ADP Compensation has been revised in accordance with
paragraph (i) above, then ADP Compensation shall instead mean the
Participant's Compensation for the entire Plan Year, including
Compensation earned prior to his Entry Date.
(iii) If either Condition A or Condition B continues to exist after the
--
definition of ADP Compensation has been revised in accordance with
paragraph (ii) above, then ADP Compensation shall instead mean the
Participant's Compensation for the entire Plan Year, including
Compensation earned prior to his Entry Date, but excluding Deferrals
made for the Plan Year.
10
<PAGE>
(iv) If, after the definition of ADP Compensation has been revised in
accordance with paragraph (iii) above, Condition A no longer exists,
but Condition B continues to exist, then ADP Compensation shall have
the same meaning as defined in the first sentence of Section 6.02(c)
or paragraph (i), (ii) or (iii) above, whichever is the first
-----
definition that satisfies the requirements of Section 414(s) of the
Code.
(v) If, after the definition of ADP Compensation has been revised in
accordance with paragraph (iii) above, Condition A continues to exist
(and whether or not Condition B continues to exist), then the Plan
must be amended to provide for a definition of ADP Compensation that
satisfies the requirements of Section 414(s) of the Code.
22. Section 13.09 is hereby amended in its entirety to read as follows:
"13.09 FORMS
Where necessary, the Administrator shall develop written election forms,
applications, etc. that a Member or Beneficiary must complete and submit
(including any additional pertinent information). The Administrator may
rely upon all such information so furnished it, including such person's
current mailing address. The Administrator may accept forms sent by
facsimile.
Notwithstanding the foregoing, the Administrator may establish rules,
procedures and circumstances under which an individual may make elections,
applications, etc. in a form other than a written form (e.g., telephonic
voice response system), unless such non-written form is prohibited by law."
11
<PAGE>
23. Section 8.02(b)(iii)(1) is hereby amended in its entirety to read as
follows:
"With respect to a Member whose Vested Percentage in all his Accounts is
---
100%, payment shall generally be made as soon as practical following the
Member's date of termination."
24. Section 8.02(b)(iii)(2) is hereby amended in its entirety to read as
follows:
"With respect to a Member whose Vested Percentage in any Account is less
---
than 100%, payment shall generally be made as soon as practical following
the Member's date of termination."
25. Section 8.02(b)(ii) is hereby amended in its entirety to read as follows:
"Upon entitlement to a Benefit under Section 8.01(a) or (b) (for reasons of
retirement or Disability), full payment or commencement of payment shall be
made as soon as practical following the date such retirement occurs or the
date such Disability occurs or the date of receipt by the Administrator of
acceptable proof of such Disability, if later."
26. Section 9.05(b) is hereby amended in its entirety to read as follows:
"(b) Distribution Beginning After Death: If the Member dies before the
----------------------------------
distribution of his or her Benefit begins, distribution of the Member's
entire Benefit shall be completed as soon as practical following the
Member's death except to the extent that an election is made to receive
distributions in accordance with (i) or (ii) below:
(i) if any portion of the Member's Benefit is payable to a Designated
Beneficiary, distributions may be made over the life or over a period
certain not greater than the Life Expectancy of the Designated
Beneficiary commencing as soon as practical following the death of the
Member.
(ii) if the Designated Beneficiary is the Member's surviving spouse,
the date distributions are required to begin in accordance with (i)
above shall be made as soon as practical following the Member's death.
If the Member has not made an election pursuant to this Section 9.05(b) by
the time of his or her death, the Member's Designated Beneficiary must
elect the method of distribution as soon as practical following the
Member's death. If the Member has no Designated Beneficiary, or if the
Designated Beneficiary does not elect a method of distribution,
distribution of the Member's entire Benefit must be completed as soon as
practical following the Member's death."
12
<PAGE>
ADOPTION AGREEMENT
- ------------------
Item M.3.b is hereby modified in its entirety to read as follows:
"b. Matching Contributions on behalf of any Participant shall be
limited to the following amount: Check applicable item(s):
[ ] no limit is applicable
[X] Participants with 1-5 years of service 25% of his/her
deferrals
Participants with 6-9 years of service 75% of his/her
deferrals
Participants with 10 or more years of service 100% of
his/her deferrals
[ ] % of his Compensation
----
[ ] Total Matching Contributions on behalf of any Participant
for the Plan Year shall not exceed $ .
--------- -------
Item H.1 is hereby modified in its entirety to read as follows:
"1. Employee voluntary contributions are not permitted. However,
employee voluntary contribution accounts will be maintained for
voluntary balances transferred from a prior plan."
Item K.4 is hereby modified in its entirety to read as follows:
"Top Heavy Vesting Schedule (Section 2.95) shall mean:
The same vesting schedule as described in Section 2.101 except
that for employees hired after October 1, 1997 the following
schedule shall apply:
Years of Service Percentage
---------------- ----------
Less than three years 0%
3 years 20%
4 years 40%
5 years or more 100%"
IN WITNESS WHEREOF, the Company has adopted this Modification as of
the 18th day of September, 1997.
---- ----------------
By /s/ Stephen A. Thompson
------------------------
13
<PAGE>
LOUIS KRAVITZ & ASSOCIATES, INC.
MASTER 401(K) PROFIT SHARING PLAN
It is hereby certified that the following is a true and
correct copy of the Louis Kravitz & Associates, Inc.
Master 401(k) Profit Sharing Plan,
as adopted by the Company in the Adoption Agreement.
LOUIS KRAVITZ & ASSOCIATES, INC.
BY /s/ Louis Kravitz
----------------------------
Copyright (c) 1994 Louis Kravitz & Associates, Inc. All Rights Reserved.
November 1, 1994
20
<PAGE>
MODIFICATION TO LOUIS KRAVITZ & ASSOCIATES, INC.
MASTER 401(k) PROFIT SHARING PLAN AND
ADOPTION AGREEMENT
Notwithstanding anything contained within or to the contrary in the Louis
Kravitz & Associates, Inc. Master 401(k) Profit Sharing Plan and Adoption
Agreement, the following shall apply to the Vitalink Pharmacy Services, Inc.
401(k) Profit Sharing Plan, effective February 15, 1997.
1. Item G.4 of the Adoption Agreement is hereby amended in its entirety to
read as follows:
"4. Compensation in First Year of Participation: For purposes of
-------------------------------------------
allocating the Employer's Profit Sharing Contribution and Forfeitures for
the Plan Year in which a Participant begins or resumes participation in the
Plan, Compensation paid before a Participant's participation began or
resumed shall be excluded.
For purposes of this Item G.4, participation in the Plan is determined in
accordance with Section 3.02(c) and as if the minimum service eligibility
requirement in Section 3.01(a) were two Years of Service."
2. Section 5.05 is hereby modified in its entirety to read as follows:
"At of the end of each Plan Year, the Profit Sharing Contributions for the
Plan Year made pursuant to Section 4.01 shall be allocated among those
participants and those Inactive Participants who became Inactive
Participants during such Plan Year and who meet the following requirements:
(i) Participants who complete at least 1,000 Hours of Service
during the Plan Year, and
<PAGE>
(ii) Participants who are still employed by the Employer on the
last day of the Plan Year, and
(iii) Participants who would have also been Participants if the
minimum service eligibility requirement in Section 3.01(a)
were two Years of Service.
Notwithstanding any of the above requirements, a Participant who has
experienced a Termination of Employment during the Plan Year on account of
death, Disability or retirement on or after his Normal Retirement Date
shall be eligible for an Employer contribution. Such allocation shall be
made in accordance with Section 5.06."
3. Article II is hereby amended by adding the following section after
Section 2.103:
"2.104 `Deferral Period' shall mean each calendar quarter (January 1
to March 31, April 1 to June 30, July 1 to September 30, and October 1
to December 31).
4. Section 7.04(b) is hereby amended in its entirety to read as follows:
"(b) Eligibility: A Participant (and Inactive Participant who
-----------
became an Inactive Participant during the applicable Deferral Period)
shall be eligible for a Matching Contribution for any Deferral Period
if he is employed by the Employer on the valuation date in such
Deferral Period."
2
<PAGE>
5. Section 7.05 is hereby amended in its entirety to read as follows:
"Matching Contributions for any Deferral Period shall be allocated as
of the Valuation Date in such Deferral Period. The amount of Matching
Contributions to be allocated to the Matching Contribution Account of
any eligible individual shall be 25% of such individual's Deferrals
made for such Deferral Period, but not to exceed 1% of such
individual's Deferrable Compensation."
6. Section 16.01 of the Plan Document is hereby modified by adding a new
Section 16.01(c) at the end thereof to read as follows:
"(c) Loans Acquired Due to Merger of Plans: Notwithstanding any
-------------------------------------
provisions of the Plan to the contrary, and pursuant to Subsection (b)
above, the following shall apply in the event the Employer acquires an
entity and merges the Plan of the acquired entity into this Plan.
(i) Resolutions of the Governing Body of the Employer authorizing the
transfer of assets due to a merger of plan, shall include
participant loans and such participant loans shall become part of
this Plan.
(ii) The general terms and conditions of loans shall be determined
pursuant to the provisions of the prior plan from which the loans
were originated."
7. Item R of the Adoption Agreement is hereby modified in its entirety to
read as follows:
"R. LOANS (Section 5.10) Loans are not permitted except in the event of a
-----
merger as provided for in Section 16.01(c)."
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8. Section 4.03(h) is hereby modified by deleting the fourth sentence and
inserting in lieu thereof the following:
"Withdrawals from Rollover Contribution Accounts shall be permitted."
9. Section F.3 of the Adoption Agreement is hereby amended in its entirety
to read as follows:
"YEARS OF SERVICE WITH ANY PRIOR EMPLOYER, HAVING A 401(k) PLAN
AT THE TIME OF ACQUISITION, acquired by Vitalink Pharmacy
Services, Inc. after January 1, 1995 shall count for purposes of
determining eligibility in the Vitalink Pharmacy Services, Inc.
401(k) Profit Sharing Plan. Except as otherwise stated, the
eligibility requirement for the Vitalink Pharmacy Services, Inc.
401(k) Profit Sharing Plan is one year of service."
10. Items M.2, M.3 and M.4 of the Adoption Agreement are hereby deleted in
their entirety.
IN WITNESS WHEREOF, the Company has adopted this Modification as of the
30th day of March, 1997.
VITALINK PHARMACY SERVICES, INC.
By: /s/ Stephen A. Thompson
---------------------------------
Vice President
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EXHIBIT 4.4
LOUIS KRAVITZ & ASSOCIATES, INC.
Vitalink Pharmacy Services, Inc.,
Retirement Savings and Investment Plan
MASTER TRUST AGREEMENT
It is hereby certified that the following is a true and
correct copy of the Louis Kravitz & Associates, Inc.
Master Trust Agreement,
as adopted by the Company in the Adoption Agreement.
LOUIS KRAVITZ & ASSOCIATES, INC.
BY /s/ Louis Kravitz
-----------------------
Copyright 1993 Louis Kravitz & Associates, Inc. All Rights Reserved.
<PAGE>
LOUIS KRAVITZ & ASSOCIATES, INC.
MASTER TRUST AGREEMENT
This Trust Agreement between the Company and the Trustee is effective as of
the Effective Date specified in the Adoption Agreement.
RECITALS
WHEREAS, the Company established the Plan; and
WHEREAS, the Plan provides among other things, that the Company shall
execute a trust agreement for the purpose of carrying out the Plan; and that
contributions made or caused to be made by the Company and any Employers
pursuant to the Plan shall be paid over to the Trustee; and
WHEREAS, the Company desires to establish a trust as provided in the Plan
to implement and carry out provisions thereof; and this Trust Agreement is so
designed for that purpose and has been designated as a part of the Plan to meet
the requirements of Sections 401 and 501 of the Internal Revenue Code of 1986,
as amended; and
WHEREAS, the Company desires the Trustee to act as Trustee of the Trust and
the Trustee is willing to so act pursuant to the terms of this Trust Agreement;
NOW, THEREFORE, in consideration of the mutual undertakings of the parties
thereto, it is hereby agreed by the undersigned as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
The following words and phrases when used herein shall have the following
meanings, unless the context clearly indicates otherwise. All definitions
included in the Plan shall be deemed to be incorporated herein to the extent
necessary.
1.01 "ADMINISTRATOR" shall be the Plan Administrator named in the
Adoption Agreement.
1.02 "COMPANY" shall mean the Company named in the Adoption
Agreement, or its successor or successors.
1.03 "EMPLOYER" OR "EMPLOYERS" shall mean the Company and each other
Affiliated Company which may become an Employer pursuant to the terms of
the Plan.
1.04 "ERISA" shall mean Public Law No. 93-406, the Employee
Retirement Income Security Act of 1974, as amended from time to time.
1.05 "INVESTMENT MANAGER", if any, shall mean an "investment manager"
as defined in Section 3(38) of ERISA, appointed by the Administrator in
accordance with the terms of this Trust Agreement and the Plan.
1.06 "PLAN" shall mean the Plan named in the Adoption Agreement, as
amended from time to time.
1.07 "TRUST" OR "TRUST AGREEMENT" shall mean the Trust named in the
Adoption Agreement, and the trust agreement set forth herein, as amended
from time to time.
1.08 "TRUST FUND" shall mean all sums contributed or transferred to
this Trust, together with all other property and accruals therefrom, which
may hereafter become subject to the Trust.
1.09 "TRUSTEE" OR "TRUSTEES" shall mean the Trustee(s) named in the
Adoption Agreement. If more than one Trustee is named in the Adoption
Agreement, the power to act as Trustee shall require the actions described
in the Adoption Agreement (e.g., any Trustee acting alone, a majority of
Trustees acting together, or such other method described in the Adoption
Agreement).
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If there is a change in Trustee pursuant to Sections 4.08 and 4.09,
the Plan and Trust Agreement need not be amended to include such changes.
In lieu of an amendment, the written notice of resignation, removal or
appointment/acceptance, or the formal resolution of the Company shall
constitute the amendment and be made a part of the Plan and Trust
Agreement.
2
<PAGE>
ARTICLE II
FIDUCIARIES AND ALLOCATION OF RESPONSIBILITIES
----------------------------------------------
2.01 FIDUCIARIES
The following persons are hereby named as fiduciaries under this Trust.
(a) Fiduciaries With Respect to Appointment of Others
-------------------------------------------------
(i) The Company: Acting through its Governing Body, the Company shall
------------
be responsible for the appointment, removal, or replacement of the
Administrator and the Trustee.
(ii) The Administrator: The Administrator shall be responsible for
------------------
the appointment, removal, or replacement of any Investment Manager.
(b) Fiduciary With Respect to Control or Management of the Assets
-------------------------------------------------------------
(i) The Trustee: The Trustee shall be the named fiduciary with
------------
respect to the investment of Trust assets only during such times as it
has exclusive authority and discretion to manage and control the
investment of the Trust Fund. Otherwise, the Administrator shall be the
named fiduciary with respect to the investment of the Trust Fund, unless
the Administrator appoints an Investment Manager.
(ii) Investment Manager: In its discretion the Administrator may
-------------------
appoint one or more Investment Managers to manage, acquire, and dispose
of all or a portion of the Trust Fund designated by the Administrator.
(iii) Administrator: The Administrator may assume the authority to
--------------
manage, acquire, and dispose of all or a portion of the Trust Fund.
(c) Fiduciary With Respect to Plan Administration: The Administrator
----------------------------------------------
shall be the Fiduciary with respect to administration of the Plan. The
responsibilities and duties of the Administrator are set forth in the Plan.
2.02 JOINT FIDUCIARY RESPONSIBILITIES
This Article II is intended to allocate to each Fiduciary the individual
responsibility for the prudent execution of the functions assigned to him. None
of such responsibilities, nor any other responsibility, shall be shared by two
or more of such Fiduciaries unless such sharing shall be provided by specific
provision of the Plan or of this Trust; and such Fiduciaries have expressly
accepted such responsibilities. Whenever one Fiduciary is required by the Plan
or the Trust to follow the directions of another Fiduciary, the two Fiduciaries
shall not be deemed to have been assigned a shared responsibility. The
responsibility of the Fiduciary giving the directions shall be deemed his sole
responsibility. The responsibility of the Fiduciary receiving those directions
shall be to follow them, insofar as such instructions are consistent with the
provisions of this instrument.
2.03 ALLOCATION OR DELEGATION OF FIDUCIARY RESPONSIBILITIES
By written instrument, each of the Fiduciaries (other than the Trustee and any
Investment Manager) may allocate to others and delegate to others any of its
rights, powers and duties, terminable upon such notice as the delegating
Fiduciary deems prudent. Anyone may serve in more than one fiduciary capacity
with respect to the Plan and Trust.
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2.04 CO-FIDUCIARY LIABILITY
It is the intent of this Trust Agreement that each of the Fiduciaries under the
Plan and Trust shall be solely responsible for its own acts or omissions.
Except to the extent imposed by ERISA, no Fiduciary shall have the duty to
question whether any other Fiduciary is fulfilling all of the responsibilities
imposed upon such other Fiduciary by ERISA, as the same may be amended from time
to time, or by any regulations or rulings issued thereunder. No Fiduciary shall
have any liability for a breach of fiduciary responsibility of another Fiduciary
with respect to this Plan and Trust Agreement unless:
(a) he participates knowingly in such breach;
(b) he knowingly undertakes to conceal such breach;
(c) he has actual knowledge of such breach and fails to take responsible
remedial action to remedy said breach; or,
(d) he has enabled such other Fiduciary to commit a breach of the
latter's fiduciary responsibilities through his negligence in performing his
own specific fiduciary responsibilities under this Trust Agreement.
If the Company establishes more than one trust with a different trustee pursuant
to the terms of the Plan, the Trustee of this Trust and such other trustee(s) of
such other trust(s) shall not be co-trustees (as described in ERISA). The
Trustee shall act only with respect to the Trust established pursuant to this
Trust Agreement.
2.05 INDEMNITY
The Company shall indemnify and hold harmless the Trustee and Trust Fund against
any loss or liability, including reasonable attorney fees imposed upon the
Trustee as a result of any acts taken in accordance with written directions; by
reason of failure to act because of no written directions from the
Administrator, Investment Manager or any other person designated to act on their
behalf; or by reason of the Trustee's good faith execution of its duties in the
administration of this Trust, unless such loss or liability is due to the
Trustee's negligence or misconduct.
2.06 PARTICIPANT DIRECTED FUND
Notwithstanding any provisions of the Trust, a Fiduciary shall not be
responsible for any portion of the Trust attributable to a Participant Directed
Fund. Rules governing a Participant Directed Fund are contained in the Plan.
4
<PAGE>
ARTICLE III
INVESTMENT OF THE TRUST FUND
----------------------------
3.01 POWERS AND RESPONSIBILITIES
Unless otherwise directed in writing by the Administrator, the Trustee shall
have the full power and authority to invest the funds of the Trust in any
investment permitted by law for the investment of the assets of an employee
benefit trust. The Administrator may appoint an Investment Manager to direct
the investment and management of all or a portion of the Trust Fund, or assume
such responsibilities itself. The Administrator shall notify the Trustee in
writing of its assumption of investment responsibilities, or of the appointment
of an Investment Manager, and may revoke any such appointment by giving written
notice thereof to the Trustee. The appointment, selection, and retention of a
qualified Investment Manager shall be solely the responsibility of the
Administrator. The Trustee is authorized and entitled to rely upon the fact
that said Investment Manager is at all times a qualified Investment Manager
under ERISA, until such time as the Trustee has received a written notice from
the Administrator to the contrary, or otherwise has knowledge of the
disqualification of the Investment Manager. The Trustee shall rely upon the
fact that said Investment Manager is authorized to direct the investment and
management of the assets of the Trust, until such time as the Administrator
shall notify the Trustee in writing that another Investment Manager has been
appointed in the place and stead of the Investment Manager named; or,
alternatively, that the Investment Manager named has been removed and the
responsibility for the investment and management of the Trust assets has been
transferred back to the Trustee.
In the event an Investment Manager is appointed by the Administrator, he shall
direct the Trustee with respect to the investment and management of all or a
portion of the assets of the Trust Fund. The Trustee shall not be liable nor
responsible for losses or unfavorable results arising from its compliance with
proper directions of the Investment Manager that are made in accordance with the
terms of the Plan and Trust, and which are not contrary to the provisions of any
applicable Federal or State statute regulating such investment and management of
the assets of an employee benefit trust. All Investment Manager directions
concerning investments shall be signed by such person or persons, acting on
behalf of the Investment Manager, as may be duly authorized in writing. The
Trustee shall be under no duty to question any Investment Manager directions;
nor to review any securities or other property of the Trust constituting assets
thereof with respect to which an Investment Manager has investment
responsibility; nor to make any suggestions to such Investment Manager in
connection therewith. As promptly as possible, the Trustee shall comply with
any written direction given by the Investment Manager hereunder. The Trustee
shall not be liable in any manner, nor for any reason, for the making or
retention of any investment pursuant to such directions of the Investment
Manager. The Investment Manager shall not direct the purchase, sale, or
retention of any assets of the Trust Fund, if such directions are not in
compliance with any applicable Federal or State statute regulating such
investment and management of the assets of an employee benefit trust.
During any such period or periods of time an Investment Manager is authorized to
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<PAGE>
direct the investment and management of the Trust assets, the Trustee shall have
no obligation to determine the existence of any conversion, redemption,
exchange, subscription, or other right relating to any securities. Unless the
Trustee receives written instructions from the Investment Manager within a
reasonable time prior to the expiration of any right described in the preceding
sentence, there shall be no obligation by the Trustee to exercise any such
right.
Except as may be provided in ERISA, the Trustee and Investment Manager shall not
be liable for the acts or omissions of the Administrator or the Employer, nor
shall they be liable or responsible for the portion or portions of the Trust
Fund managed by persons other than themselves.
3.02 INSURANCE COMPANIES PROTECTED IN DEALING WITH TRUSTEE
Insurance companies issuing contracts to the Trustee under this Trust Agreement
may deal with the Trustee alone in accordance with the terms and conditions of
such contracts. They shall be fully protected in accepting and acting upon the
request, advice or representation of, or any instrument executed by, the
Trustee. For all such purposes, the Trustee shall be regarded as sole owner of
such contracts. No insurance company shall be required to inquire into the
terms of this Trust Agreement, nor to determine whether action taken by the
Trustee is authorized thereby. No insurance company dealing with the Trustee
shall have any obligation to determine that any person upon whose life the
Trustee makes any contract application is, in fact, an employee of the Employer
or is otherwise eligible for retirement benefits or otherwise participates in
the Plan. Such insurance company shall not be responsible for: the validity of
this Trust; the acts of any person or of the Company in its establishment,
maintenance or administration; or the proper application or disposition of any
money paid by such insurance company, either as dividends or as annuity
payments, as death proceeds
6
<PAGE>
under contracts, under pledge, or pursuant to surrender thereof. It shall be
conclusively presumed in favor of insurance companies and others dealing with
the Trust in good faith, that any and all actions taken by the Trustee in
connection with any matter or thing connected with this Trust has been duly
authorized, pursuant to the terms of this Trust Agreement.
3.03 OWNERSHIP OF INSURANCE CONTRACTS AND PAYMENT OF INSURANCE PREMIUMS
The Administrator may direct the Trustee to acquire insurance or annuity
contracts on the lives of individual Participants, or may direct the Trustee to
enter into a group deposit administration contract or contracts with an
insurance company for the purpose of investing all or a portion of the Trust
Fund.
Subject to the power of the Administrator to direct the Trustee as reserved in
the preceding paragraph of this Section 3.03, the Trustee shall have all the
rights and authority of a legal owner of any insurance or annuity contracts held
in the Trust, including the right to execute all necessary receipts and releases
to the insurer. However, the Trustee shall have no duty to make applications
for the purchase of any such contracts, or to pay any premiums thereon, or to
exercise any rights, privileges or options, or to take any other action with
respect to such contracts unless the Trustee receives written directions to do
so by the Administrator.
The Trustee shall notify the Administrator upon receipt of notice of any
premiums due on any such contracts held by it, but shall not be liable for
payment of any premiums on any such contracts unless there are sufficient funds
in the Trust available for the payment of such premiums. The Trustee shall not
have any duty to pay premiums on any such contracts, except out of funds
designated by the Administrator as available therefor.
3.04 STANDARD OF PRUDENCE
In carrying out each of its responsibilities under this Trust, the Trustee, the
Administrator, the Company, and Investment Manager, if any, shall act solely in
the interest of the Members and Beneficiaries. They shall act with the care,
skill, prudence, and diligence, under the circumstances then prevailing and in
the conduct of an enterprise of a like character and with like aims, as that
used by a prudent man acting in a like capacity and familiar with such matters.
7
<PAGE>
ARTICLE IV
RIGHTS, POWERS AND DUTIES
4.01 GENERAL DUTIES OF THE TRUSTEE
It shall be the duty of the Trustee to hold the funds received from time to time
from the Employer; to manage, invest and reinvest the Trust Fund pursuant to the
provisions hereinafter set forth; and to collect the income therefrom. Upon
receipt by the Trustee, such funds shall become a part of the corpus of the
Trust Fund, and shall be invested and reinvested as such. The Trustee shall
make payments from the Trust Fund pursuant to the directions of the
Administrator as hereinafter provided. The Trustee shall be responsible only
for such sums as shall actually be received by it as Trustee. It shall not be
the duty of the Trustee to collect any sum from any Employer, nor to determine
or verify the accuracy thereof. The Trustee shall not be concerned with the
determination of the benefits payable to any Member or Beneficiary under the
Plan.
The Trustee shall use ordinary care and reasonable diligence in the exercise of
its powers and the performance of its duties as Trustee hereunder. It shall not
be liable for: any mistake of judgment; any action taken in good faith; or any
loss, unless resulting from its own negligence or willful misconduct; all,
however, subject to the applicable responsibilities imposed upon the Trustee
under ERISA.
4.02 GENERAL DUTIES OF ADMINISTRATOR
The Administrator shall have the duty, authority and responsibility to direct
the administration of the Plan. To the extent provided in the Plan and this
Trust, the Trustee shall follow the written directions of the Administrator.
When so directed in writing by the Administrator, the Trustee shall segregate
the Trust Fund, set up special trust accounts, and disburse the Trust Fund when
disbursement becomes proper under the terms of the Plan. During the existence
of the Plan, the Administrator may not direct that any payments be made which
would cause any portion of the Trust Fund to be used for or diverted to purposes
other than for the exclusive benefit of the Members and Beneficiaries.
4.03 THIRD PERSONS DEALING WITH TRUSTEE
With respect to any action whatsoever concerning the money, funds or property in
the hands of the Trustee, the signature of the Trustee shall be sufficient as to
any persons not a party hereto. No person not a party hereto shall be required
to interpret the terms and conditions of the Plan or of this Trust Agreement as
to the authority of the Trustee; nor be responsible for ascertaining that any
action of the Trustee is authorized by the terms of the Plan or of this Trust
Agreement.
4.04 SPECIFIC POWERS OF TRUSTEE
Except for those of the following powers which are investment powers, and which
have been delegated specifically by the Administrator to an Investment Manager
separate from the Trustee, and subject to all limitations stated elsewhere in
the Plan and Trust Agreement, the Trustee shall have the following powers
affecting the Trust and Trust Fund:
(a) To hold, invest and reinvest, the principal or income of the Trust
Fund in bonds, common or preferred stock, other securities, or property
(personal, real or mixed, improved or unimproved, and tangible or
intangible);
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<PAGE>
(b) To hold, invest and reinvest, in any type of interest-bearing account
maintained by any bank or savings and loan association selected by the
Trustee, including: any owned by the Trustee or any of its affiliates; or any
common or collective trust fund, or pooled investment fund, established and
maintained by the Trustee for trusts exempt under Section 501 of the Internal
Revenue Code.
The assets so invested shall be subject to all the provisions of the
instruments establishing and governing such funds. Those instruments of group
trusts, including any subsequent amendments, are hereby incorporated and made
a part of this Trust Agreement.
(c) To acquire an interest as a limited partner in any partnership or
joint venture, all in accordance with the provisions of ERISA and any
regulations issued pursuant thereto;
9
<PAGE>
(d) To manage, control, purchase, sell, convey, exchange, partition,
divide, subdivide, improve, or repair, any or all property of the Trust Fund.
In connection with any disposal of property, to grant options and sell upon
deferred payments. Upon termination of the Trust, to sell forthwith any or
all property of the Trust Fund and convert the same into cash;
(e) To borrow or raise money for the purpose of the Trust upon such terms
as the Trustee may determine;
(f) If the Trust Fund shall at any time contain any real property, to
lease such property or any part thereof, for terms within or extending beyond
the duration of the Trust. To grant for like terms the right to mine or drill
for and remove therefrom gas, oil, and other minerals; to create
restrictions, easements, and other servitudes thereon;
(g) With respect to bonds, shares of stock, and other securities: to have
all the rights, powers, and privileges of an owner, including though without
limiting the foregoing, the power of voting, giving proxies, payment of
calls, assessments, and other powers deemed expedient for the protection of
the interests of the Trust Fund; to participate in voting trusts, pooling
agreements, assenting to corporate sales, leases and encumbrances, regardless
of any limitations elsewhere in the Plan and this Trust Agreement relative to
investments by the Trustee; to have the power of selling or exercising stock
subscription or conversion rights, participating in foreclosures,
reorganizations, consolidations, mergers, and liquidations. In connection
with any such proceedings, to deposit securities with and transfer titles to
any protective or other committee, under such terms respecting deposit
thereof as the Trustee shall determine;
(h) To hold, sell, collect, sue for, or change any investments, in its
own name or in its name as Trustee or in the name of its nominee or nominees,
with or without disclosure of fiduciary relationship, with the Trustee being
responsible for the acts of any such nominee affecting such property, and the
books of the Trustee showing at all times that all such investments are part
of the Trust Fund;
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<PAGE>
(i) To retain all or any portion of the Trust Fund in cash temporarily
awaiting investment without liability for interest thereon; to retain in
cash without liability for interest thereon so much of the Trust Fund as the
Trustee may deem advisable for the purpose of meeting contemplated payments
under the Plan; and to deposit cash in any bank or savings and loan
association selected by it, including any owned by the Trustee or any of its
affiliates;
(j) To abandon, compromise, contest, and arbitrate claims and demands; to
institute, compromise, and defend actions at law or equity (but without
obligation to do so); and to employ such counsel as the Trustee shall deem
advisable, all at the risk and expense of the Trust Fund;
(k) To make loans to participants, if provided for in the Plan, and only
upon the direction of the Administrator;
(l) To advance its own funds to the Trust, if permitted by law, for any
Trust purpose. Such advances with legal interest thereon shall be a first
lien on the principal and the gross income of the Trust Fund, and to be
first repaid out of the gross income or principal of the Trust Fund;
(m) Upon any division, or partial or final distribution of the Trust
Fund, to partition, allot, and distribute the Trust Fund in undivided
interest or in kind, or partly in money and partly in kind, at fair market
values determined by the Trustee; and in the Administrator's sole
discretion, to sell such property as the Administrator may deem necessary to
make division or distribution;
(n) To hold, invest and reinvest, in any single premium contract or group
annuity contract of deposit administration, immediate participation or other
group-type or individual-type contract issued by a life insurance company
authorized to do business under the laws of two or more States and qualified
to be an Investment Manager. However, the Trustee shall not be liable for
the validity of any statements contained in any application for any such
contract, which statements cover information beyond the Trustee's knowledge;
(o) To pay expenses of administering the Plan and Trust pursuant to
Section 4.07, to the extent such expenses are not paid by the Employer.
All discretions in this Trust Agreement conferred upon the Trustee shall, unless
specifically limited, be absolute. The enumeration of certain powers and
discretions of the Trustee is not to be construed as limiting its general powers
and discretions. The Trustee is hereby vested with and has, as to the Trust
Fund, and in the execution of this Trust Agreement (but subject at all times to
any specific provisions and limitations in the Plan and this Trust Agreement
contained), all the powers and discretions that any absolute owner of property
has or may have.
4.05 RECORDS TO BE MAINTAINED BY TRUSTEE
The Trustee shall maintain full and complete records of its transactions for,
and funds held for the account of, the Trust. Its books and records relating
thereto shall be open to inspection and audit at all reasonable times by the
Company, the Administrator, or their duly authorized representatives.
4.06 REPORTS TO BE FURNISHED BY THE TRUSTEE
Within sixty (60) days after the end of each Plan Year and at such other times
determined by the Administrator, the Trustee shall file with the Administrator a
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<PAGE>
written statement of account setting forth all investments, transactions,
receipts, and disbursements effected by it during the period. Such statement
shall contain an exact description of all property purchased and sold, the cost
or proceeds of sale, and show the investments held on the last day thereof,
including the cost of each item as carried on the books of the Trustee, and the
fair market value thereof, if applicable.
When the Trustee is unable to arrive at a value based upon information from
independent sources, it may rely upon information from the Company,
Administrator, appraisers, or other sources; and shall not incur any liability
for inaccurate valuation based on good faith reliance upon such information.
The reasonable costs incurred in establishing values of Trust assets shall be a
charge against the Trust Fund.
The Administrator may approve the Trustee's written statement of account by
written notice of approval delivered to the Trustee, or by failure to deliver to
the Trustee written objections to such statement of account within sixty (60)
days from the date the statement of account was delivered to the Administrator.
The statement of account shall be deemed approved upon receipt by the Trustee of
the Administrator's written approval of the statement of account, or upon the
passage of the sixty day period of time, except for any matters covered by
written objections that have been delivered to the Trustee by the Administrator
and for which the Trustee has not given an explanation or made an adjustment
satisfactory to the Administrator.
4.07 COMPENSATION OF THE TRUSTEE, PAYMENT OF TAXES, ETC.
All expenses of administering the Plan and Trust, including the Trustee's
compensation for its services as may from time to time be agreed upon, shall be
paid from the Trust Fund unless paid by the Employer. However, if the Trustee
is an Employee receiving full-time pay from an Employer, he shall not receive
compensation for his services. The Trustee is authorized to determine and pay
out of the Trust all other expenses, including taxes, fees, and investment and
other expenses incurred in connection with the administration of the Trust Fund;
or for which the Trust, or the Trustee in discharge of its duties as Trustee
thereunder, may become liable, unless paid by the Employer. If the Trust or any
part of it shall become liable for the payment of any property, estate,
inheritance, income, or other charge, tax or assessment which the Trustee shall
be required to pay, the Trustee shall be authorized to pay such item out of any
monies or other property in its hands for the account of the persons whose
interest hereunder is liable therefor. At least ten (10) days prior to making
any such payment, the Trustee shall give the Administrator written notice of its
intention to do so. Prior to making any transfers or distributions from the
Trust Fund, the Trustee also may require such release or other documents from
any lawful taxing authority as it shall deem necessary or advisable.
Any amount hereunder due the Trustee, or for which the Trustee may become liable
as Trustee under the Plan and this Trust Agreement, which has not been paid by
the Employer within a reasonable time shall become a lien on the Trust Fund and
said amount may be paid by the Trustee from the Trust Fund as an expense
thereof.
In the event any distributions made to Members or Beneficiaries shall constitute
taxable income under the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act, or any amendments thereto, or under the laws of any State,
then at the time distribution is made and upon direction of the Administrator to
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<PAGE>
the Trustee, any Federal or State income tax due thereon shall be withheld from
any distributions made to the Member or Beneficiary. The amounts so withheld by
the Trustee shall be paid to the respective Federal and State governments.
4.08 RESIGNATION OR REMOVAL
The Trustee may resign by mailing to the Administrator and the Company, at their
last known addresses, written notice of resignation, which shall become
effective upon the expiration of thirty (30) days following the date of mailing
or upon written acceptance of the resignation by the Company prior to that time.
The Company may remove the Trustee on thirty (30) days written notice, by
mailing to the Trustee written notice of removal (which notice may be waived by
the Trustee).
In the event of its resignation or removal, the Trustee shall transfer, assign
and deliver the Trust Fund to the successor Trustee, after retaining such
reasonable amount it deems necessary to provide for its expenses in the
settlement of its accounts, its compensation, and any taxes or advances
chargeable against or payable out of the Trust Fund and known to the Trustee.
The Trustee shall render a full and complete accounting of all assets and funds
held by it within thirty (30) days of its giving notice of resignation or the
receipt by the Trustee of notice of removal.
Upon acceptance of the Trust and without further assignment or transfer, the
successor shall become vested with all the title, estate, rights and powers
(including discretionary powers), and be subject to all the duties and
obligations of the Trustee originally appointed. The resigned or removed
Trustee shall have no further responsibility to act hereunder except as to the
rendering of a final accounting.
Until the date it shall have become such successor Trustee, no successor Trustee
shall be liable or responsible for anything done or omitted in the
administration of the Trust; nor, except upon the Administrator's written
direction, shall it be required to inquire into or take any action concerning
the acts of any predecessor Trustee.
Upon the failure of the Company to appoint a successor Trustee by the effective
date of the resignation or removal of the Trustee, the Administrator shall
become successor Trustee until another successor Trustee is appointed.
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4.09 FILLING VACANCIES
Vacancies occurring in the trusteeship, however caused, shall be filled by
written designation of the Company of a successor Trustee and the successor
Trustee's written acceptance of the Trust. Within sixty (60) days after its
occurrence, any vacancy not filled under the foregoing provisions may be filled
by appointment of a Trustee by a court of competent jurisdiction on application
by the Company or any person interested in the Trust.
4.10 INTERPLEADER, ETC., IN CASE OF DISPUTES
In the event that any dispute shall arise as to the person or persons to whom
payment or delivery of any funds, contracts or property shall be made, the
Trustee may retain such funds, contracts or property without liability for
interest. Until a satisfactory agreement covering such dispute, or a final
adjudication concerning it, shall have been made, the Trustee may decline to
make delivery. In such event, the Trustee may file an appropriate action in
interpleader, the costs of same to be borne by the parties thereto, and not by
the Trustee. However, if the costs described are not borne by the parties, then
they shall be costs of administering the Trust.
4.11 COURT PROCEEDINGS
In any application to the courts, or proceeding or action in the courts, only
the Company and the Trustee shall be necessary parties, and no Members or other
persons shall be entitled to any notice or service of process. After all
appeals, if any, any judgment entered in such a proceeding or action shall be
conclusive upon all claimants under this Trust.
4.12 ADEQUACY OF TRUST FUND
The Trustee shall not be responsible for the adequacy of the Trust Fund to meet
and discharge any or all payments and liabilities under the Plan. Except for
the Administrator, all persons dealing with the Trustee are released from the
necessity of inquiring into the decision or authority of the Trustee to act, and
from responsibility for the application of any monies, securities or other
property paid or delivered to the Trustee.
14
<PAGE>
4.13 DIRECTIONS TO TRUSTEE
As evidence of the authority of any person or persons acting as Administrator,
The Trustee may accept a certified copy of the resolutions of the Governing Body
of the Company naming such person or persons as the Administrator; and shall be
entitled to recognize as such and act upon the instructions, directions,
consents, and requests of the Administrator last certified to it. The Trustee
may accept, as evidence of any action taken or resolution adopted by the
Administrator, a written memorandum or certificate signed by any one or more
persons authorized in writing by the Administrator to so sign. The Trustee may
continue to act in accordance with any such action or resolution until receipt
by it of notice rescinding or superseding such action or resolution.
The Trustee shall be held harmless in relying upon any certificate, notice,
resolution, consent, order, or other communication purporting to have been
signed by the Administrator which it believes to be genuine, and without
obligation on the part of the Trustee to ascertain whether or not the provisions
of the Plan are thereby being complied with.
The Trustee shall not be required to make any investigation to determine the
mailing address of any Member or the identity or mailing address of any
Beneficiary, and shall be entitled to withhold making any payments until such
information is certified to it by the Administrator.
Notices or communications from the Trustee to the Administrator shall be
addressed to such person or persons as shall have been certified to the Trustee
by the Administrator, and shall be sent to such person or persons at whatever
address he or they shall have prescribed in writing to the Trustee.
4.14 ADVICE OF ADMINISTRATOR
If at any time the Trustee is in doubt concerning the course which it shall
follow in connection with any matter relating to the administration of the
Trust, it may request the Administrator to advise it with respect thereto. The
Trustee may rely, without liability, upon the advice or direction which is given
by the Administrator in response to such request.
15
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4.15 RECEIPT FOR BENEFIT PAYMENT
On final payment or distribution to any Member or his Beneficiary or the legal
representatives of any such person in accordance with the provisions of the Plan
and this Trust Agreement, the Trustee shall be entitled to demand a receipt for
full satisfaction of all claims against the Trust, the Trustee, the
Administrator, and the Employers.
4.16 INVESTMENT IN SECURITIES OF THE COMPANY
The Administrator may direct that the Trust Fund be invested and reinvested in
the common stock, preferred stocks, bonds, or other securities of the Company;
and to purchase from and to loan to the Company any property (whether real,
personal or mixed), provided such investments are made in accordance with ERISA
and regulations issued thereunder.
Section 407 of ERISA limits the percentage of the Trust Fund that may be
invested in "qualifying employer securities" or "qualifying employer real
properties" (both as defined in Section 407(d) of ERISA). In general, the
maximum percentage is as follows:
(a) If the Plan is an "eligible individual account plan" (as defined in
Section 407(d) of ERISA; e.g., a defined contribution plan, but not a money
purchase plan [unless a money purchase plan meets certain requirements
described in clause (iii) of Section 407(d)(3)(A) of ERISA]), up to 100% of
the Trust Fund may be so invested.
(b) If the Plan is a defined benefit plan or a money purchase plan which
is not an "eligible individual account plan", only up to 10% of the Trust
Fund may be so invested. In general, the preceding 10% is determined as of
the date of the acquisition of such "qualifying" investments.
4.17 TRANSFER OF TRUST ASSETS
Upon the direction of the Administrator, the Trustee shall transfer assets to
the trust of another qualified retirement plan, or to such other trust or trusts
created pursuant to the terms of the Plan; and accept the transfer of assets
from a trust created pursuant to a qualified retirement plan.
16
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ARTICLE V
AMENDMENT, TERMINATION AND DURATION OF TRUST
5.01 AMENDMENT
The Company shall have the right at any time and from time-to-time to modify or
amend this Trust Agreement in whole or in part. However, except as otherwise
expressly provided in the Plan and Trust, no amendment shall be made at any time
pursuant to which the Trust Fund may be diverted to purposes other than for the
exclusive benefit of the Members and Beneficiaries. Further, no modification or
amendment which affects the rights, duties or responsibilities of the Trustee
may be made without the Trustee's consent.
Notwithstanding anything contained herein to the contrary, upon reasonable
notice to the Trustee, this Trust Agreement may be amended at any time by the
Company if deemed necessary to conform to the provisions and requirements of
ERISA or the Internal Revenue Code or regulations promulgated pursuant thereto
in order to maintain the tax-exempt status hereof thereunder, or to conform to
the provisions and requirements of any law, regulation, order or ruling
affecting the character or purpose of the Plan or Trust.
5.02 TERMINATION
This Trust Agreement may be terminated at any time by a written instrument
signed on behalf of the Company by its appropriate officer or officers and
delivered to the Trustee. As the result of such termination, no part of the
Trust Fund shall be used for or diverted to purposes other than for the
exclusive benefit of the persons entitled to benefits under the Plan, except as
provided in this Section 5.02, or as otherwise expressly provided for in the
Plan and Trust.
Notwithstanding anything contained in this Trust Agreement to the contrary, if
the Plan is a defined benefit pension plan (as defined by ERISA), and upon
termination of the Plan there remains funds in the Trust Fund after payment of
all expenses and the satisfaction of all liabilities with respect to persons
entitled to benefits under the Plan, then the Trustee shall disburse such
remaining funds in accordance with the provisions of the Plan, which may include
returning such funds to an Employer.
5.03 TRUST IRREVOCABLE
The Trust hereby created shall be irrevocable. However, nothing herein
contained shall prevent the Company from terminating the Trust in the manner
provided in Section 5.02.
5.04 DURATION OF TRUST
The Trust hereby created shall continue in effect for the maximum period of time
permitted by law, unless this Trust is terminated in accordance with Section
5.02.
17
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ARTICLE VI
MISCELLANEOUS
6.01 RELATION TO PLAN
All words and phrases used herein shall have the same meaning as in the Plan,
and this Trust Agreement and the Plan shall be read and construed together. In
the event of an irreconcilable conflict between this Trust Agreement and the
Plan with regards to the duties, liabilities, rights, and powers of the Trustee,
this Trust Agreement shall prevail and control. Whenever in the Plan it is
provided that the Trustee shall act as therein provided, it shall be empowered,
and is hereby authorized, to do so for all purposes as fully as though
specifically so provided herein. However, no amendments to the Plan made
subsequent to the date hereof which substantially increase the duties or
responsibilities of the Trustee shall bind or affect the Trustee until approved
in writing by the Trustee. The Administrator shall furnish the Trustee with
copies of the Plan and all amendments thereto.
6.02 ASSIGNMENT
Except as may be provided in the Plan, none of the benefits, payments, proceeds,
claims or rights of any Member or Beneficiary hereunder shall be subject to any
claims of any creditor of any Member or Beneficiary. In particular, the same
shall not be subject to attachment or garnishment or other legal process by any
creditor of any Member or Beneficiary. No Member or Beneficiary shall have the
right to alienate, anticipate, commute, pledge, encumber, or assign any of the
benefits which he may expect to receive, contingently or otherwise, under this
Trust Agreement and the Plan. The provisions of this Section shall not apply in
the case of a Qualified Domestic Relations Order.
6.03 SUCCESSOR COMPANY
If any successor to the Company continues the Plan, it shall concurrently become
a successor party to this Trust Agreement by giving to the Trustee written
notice by duly authorized persons of its adoption of the Plan and this Trust
Agreement. Said written notice shall constitute such successor a signatory
hereto.
6.04 USE OF TRUST FUNDS
Except as provided for in this Trust Agreement and the Plan, under no
circumstances shall any contributions by an Employer to the Trust, or any part
of the Trust Fund, be recoverable by an Employer from the Trustee, or be used
for or diverted to purposes other than for the exclusive purposes of providing
benefits to Members and Beneficiaries; provided, however, that:
(a) In the event an Employer requests an initial letter of determination
from the Internal Revenue Service to the effect that the Plan and this
Trust satisfy the requirements of Sections 401 and 501 of the Internal
Revenue Code, but such request is denied, the contributions of such
Employer shall be returned by the Trustee to the Employer within one (1)
year of such denial, but only if the request was made by the time
prescribed by law for filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date as the Secretary of the
Treasury may prescribe.
(b) To the extent disallowed as a deduction under the Internal Revenue
Code Section 404, a contribution of an Employer for any Plan Year shall be
returned
18
<PAGE>
by the Trustee to the Employer within one (1) year after the final
disallowance of the deduction by the Internal Revenue Service or the Courts.
(c) A contribution made by an Employer due to a mistake of fact may be
returned to the Employer within one (1) year after payment of the
contribution.
6.05 UNENFORCEABLE PROVISIONS
If any provision of this Trust Agreement shall be for any reason invalid or
unenforceable, the remaining provisions shall, nevertheless, be carried into
effect.
6.06 CONSTRUCTION
This Trust Agreement shall be construed, administered, and enforced fairly and
equitably in accordance with the purposes of the Plan and in accordance with
ERISA and the Internal Revenue Code; and where State law is applicable, under
laws of the state specified in the Adoption Agreement.
6.07 POOLING OF ASSETS
In the event the Company adopts or becomes a contributing employer under another
plan which is qualified under Section 401(a) of the Internal Revenue Code of
1954, as amended, or any successor to such Section 401(a) plan, the Trustee from
time to time may pool all or any portion of the assets of this Trust Fund with
assets belonging to such other tax-qualified plan into one single Trust Fund.
The Trustee may commingle such assets, make joint or common investments, and
carry joint accounts on behalf of this Trust Fund and such other trust,
allocating undivided shares or interests in such investments or accounts or in
any pooled assets to the two or more trusts in accordance with their respective
interests. The Trustee may also buy or sell any assets or undivided interests
therein in this Trust Fund, or in any other trust with which the assets of this
Trust Fund may be pooled, to or from this Trust Fund or such other trust at such
prices or valuations as the Trustee may in good faith determine to be the fair
market value of such assets or undivided interests.
6.08 INDEMNITY AND INSURANCE
This Section shall apply only if the Trustee or Trustees are individuals
employed by the Company or an Employer. This Section shall not apply if the
Trustee is a bank, trust company, insurance company or other corporation.
In its discretion, the Company may obtain, pay for, and keep current a policy or
policies of insurance, insuring the Trustees against any and all liabilities,
costs and expenses (including attorney's fees) incurred by the Trustees as a
result of any act, or omission to act, in connection with the performance of
their duties, responsibilities, and obligations under the Plan and Trust and any
applicable Federal or State law.
If the Company does not obtain, pay for, and keep current any type of insurance
policy or policies referred to in the preceding paragraph, or if such insurance
is provided but the Trustees incur any costs or expenses which are not covered
under such policies, then, in either event, the Company, to the extent permitted
by law, shall indemnify and hold harmless such parties against any and all
costs, expenses, and liabilities incurred by such parties in performing their
duties and responsibilities under the Plan and Trust, including attorney's fees,
provided such party or parties were acting in good faith within what was
reasonably believed to have been in the best interests of the Plan and Trust and
the Participants and Beneficiaries of the Plan and Trust.
19
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EXHIBIT 4.5
VITALINK PHARMACY SERVICES, INC.
NON-QUALIFIED RETIREMENT SAVINGS AND
INVESTMENT PLAN
<PAGE>
TABLE OF CONTENTS
-----------------
PAGE
----
ARTICLE 1 PURPOSE 1
ARTICLE 2 DEFINITIONS 1
2.1 Account 1
2.2 Affiliate 1
2.3 Authorized Leave of Absence 1
2.4 Beneficiary 1
2.5 Board 1
2.6 Code 1
2.7 Committee 2
2.8 Company 2
2.9 Company Matching Account 2
2.10 Compensation 2
2.11 Deferral 2
2.12 Deferral Agreement 2
2.13 Deferral Contributions Account 2
2.14 Disability 2
2.15 Effective Date 3
2.16 Employee 3
2.17 Employer 3
2.18 Employment Commencement Date 3
2.19 Entry Date 3
2.20 Investment Funds 3
2.21 Normal Retirement 3
2.22 Normal Retirement Age 3
2.23 Participant 3
2.24 Plan 3
2.25 Plan Year 4
2.26 Profit Sharing Account 4
2.27 Service 4
2.28 Termination Date 4
2.29 Termination of Employment 4
2.30 Trust or Trust Fund 4
2.31 Trust Agreement 4
2.32 Trustee 4
2.33 Valuation Date 4
2.34 Vested Percentage 5
2.35 Years of Service 6
2.36 Vitalink 401(k) Plan 6
ARTICLE 3 ADMINISTRATION OF THE PLAN 6
i
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ARTICLE 4 PARTICIPATION AND DEFERRAL AGREEMENTS 7
4.1 Eligibility and Participation 7
4.2 Rollovers 7
4.3 Limitations on Deferrals; Waiver; Committee Discretion 7
ARTICLE 5 ACCOUNTS 8
5.1 Accounts 8
5.2 Deferral Contribution Account 8
5.3 Company Matching Account 10
5.4 Profit Sharing Account 11
5.5 Earnings on Accounts 11
5.6 Investment Fund Options 12
5.7 Changes in Investment Funds 12
5.8 Valuation of Accounts 12
5.9 Statement of Accounts 12
5.10 Distribution of Accounts 13
5.11 Vesting of Accounts 13
ARTICLE 6 BENEFITS TO PARTICIPANTS 13
6.1 Benefits Under the Plan 13
6.2 Unscheduled Withdrawal 14
6.3 Immediate Distribution 14
ARTICLE 7 DISABILITY 14
ARTICLE 8 SURVIVOR BENEFITS 14
ARTICLE 9 EMERGENCY BENEFIT 15
ARTICLE 10 ADOPTION AND WITHDRAWAL BY OTHER ORGANIZATIONS 15
10.1 Procedure for Adoption 15
10.2 Withdrawal 16
ARTICLE 11 MISCELLANEOUS 16
11.1 Amendment or Termination 16
11.2 Designation of Beneficiary 16
11.3 Limitation of Participant's Right 17
11.4 Obligations to Employer 17
ii
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11.5 Nonalienation of Benefits 17
11.6 Withholding of Taxes 17
11.7 Trust Fund 17
11.8 Unfunded Status of Plan 18
11.9 Severability 18
11.10 Governing Law 18
11.11 Headings 18
11.12 Gender, Singular & Plural 18
11.13 Notice 18
11.14 Claims Procedure 18
iii
<PAGE>
VITALINK PHARMACY SERVICES, INC.
NON-QUALIFIED RETIREMENT SAVINGS AND
INVESTMENT PLAN
ARTICLE 1
PURPOSE
The purpose of the Vitalink Pharmacy Services, Inc. Non-Qualified
Retirement Savings and Investment Plan is to provide a means whereby Vitalink
Pharmacy Services, Inc. and its Affiliates may afford increased financial
security, on a tax-favored basis, to a select group of key management employees
of the Company and its Affiliates and other designated individuals who have
rendered and continue to render valuable services to the Company and its
Affiliates which constitute an important contribution towards the Company's
continued growth and success.
ARTICLE 2
DEFINITIONS
2.1 Account. "Account" means the account established on the books of
-------
account of the Company pursuant to Section 5.1, with respect to a Participant.
2.2 Affiliate. "Affiliate" means any firm, partnership or
---------
corporation that adopts this Plan in accordance with Article 10 and (a) directly
or indirectly through one or more intermediaries controls, is controlled by, or
is under common control with the Company or (b) is otherwise authorized by the
Board to be considered an Employer for purposes of this Plan.
2.3 Authorized Leave of Absence. "Authorized Leave of Absence" means
---------------------------
an absence from employment by an Employee authorized by an Employer under an
Employer's standard personnel practices. An absence due to service in the armed
forces of the United States during a period of declared war or national
emergency or through the operation of a compulsory military service law and/or
during the period thereafter in which an Employee's reemployment rights are
guaranteed by federal law shall be considered an Authorized Leave of Absence.
2.4 Beneficiary. "Beneficiary" means the person or persons
-----------
designated as such in accordance with Section 11.2.
2.5 Board. "Board" means the Board of Directors of the Company.
-----
2.6 Code. "Code" means the Internal Revenue Code of 1986, as amended
----
from time to time.
2.7 Committee. "Committee" means the Compensation Committee of the
---------
Board, as constituted from time to time, or such other committee as may be
1
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designated from time to time by the Board.
2.8 Company. "Company" means Vitalink Pharmacy Services, Inc.
-------
2.9 Company Matching Account. "Company Matching Account" means the
------------------------
Account to which Company Matching Contributions and investment earnings thereon
are recorded.
2.10 Compensation. "Compensation" means the basic cash compensation
------------
before any payroll deductions for taxes or any other purposes, including regular
commissions paid by an Employer to an Employee in respect of such Employee's
Service to an Employer during the Plan Year, increased by any amounts with
respect to which the Employee has elected to defer or reduce remuneration for
federal income tax purposes (a) under this Plan, (b) under the Vitalink 401(k)
Plan, or (c) under any "cafeteria plan" (as described in Section 125 of the
Code) maintained by an Employer. Compensation shall not include any amounts paid
to the Employee as (w) bonuses, (x) overtime pay, (y) except as otherwise
provided in the preceding sentence, any amounts paid during that Plan Year on
account of the Employee under this Plan or under any other employee pension
benefit plan (as defined in Section 3(2) of ERISA), and (z) except as otherwise
provided in the preceding sentence, any amounts which are not includable in the
Employee's income for federal income tax purposes.
2.11 Deferral. "Deferral" means the amount of a Participant's
--------
Compensation withheld and contributed to the Plan in accordance with the
Participant's Deferral Agreement.
2.12 Deferral Agreement. "Deferral Agreement" means the authorization
------------------
form which an eligible individual files with the Company to participate in the
Plan.
2.13 Deferral Contributions Account. "Deferral Contributions Account"
------------------------------
means the Account to which Deferrals and investment earnings thereon are
recorded.
2.14 Disability. "Disability" means a physical or mental condition
----------
which permanently prevents an Employee from satisfactorily performing his usual
duties for an Employer or the duties of such other position or job which an
Employer makes available to him and for which such Employee is qualified by
reason of his training, education or experience. The determination whether a
Participant satisfies this definition of Disability shall be made by the
Committee in accordance with nondiscriminatory rules and procedures established
by the Committee (which may include a physical examination, medical reports and
other evidence).
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2.15 Effective Date. "Effective Date" means the effective date of the
--------------
Plan, which is October 1, 1997.
2.16 Employee. "Employee" means any person who is receiving
--------
remuneration for personal Services rendered to an Employer (or would be
receiving such remuneration except for an Authorized Leave of Absence) in the
capacity of an "employee," as defined in Section 3121(d)(1) or (2) of the Code
(as opposed to that of an independent contractor), but excluding nonresident
aliens who receive no U.S. earned income from an Employer.
2.17 Employer. "Employer" means the Company or any of its
--------
Affiliates.
2.18 Employment Commencement Date. "Employment Commencement Date"
----------------------------
means the date an Employee first performed an hour of Service with an Employer
or any prior employer with whom Service is credited under this Plan, if earlier.
2.19 Entry Date. "Entry Date" means the date or dates eligible
----------
Employees commence participation in the Plan -- January 1, April 1, July 1, and
October 1 of each Plan Year. In addition, the Effective Date and the first day
of any Plan Year are Entry Dates.
2.20 Investment Funds. "Investment Funds" means the investment funds
----------------
established by the Trustee from time to time on the direction of the Committee.
2.21 Normal Retirement. "Normal Retirement" means with respect to a
-----------------
Participant the termination of the Participant's Service with all Employers for
reasons other than death at any time on or after the date on which the
Participant attains his Normal Retirement Age.
2.22 Normal Retirement Age. "Normal Retirement Age" means age 65.
---------------------
2.23 Participant. "Participant" means an Employee or other individual
-----------
who is eligible to participate in the Plan and who has filed a completed and
executed Deferral Agreement with the Committee or its designated representatives
and is participating in the Plan in accordance with the provisions of Article 4.
2.24 Plan. "Plan" means the Vitalink Pharmacy Services, Inc. Non-
----
Qualified Retirement Savings and Investment Plan, as amended from time to time.
2.25 Plan Year. "Plan Year" means the calendar year.
---------
3
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2.26 Profit Sharing Account. "Profit Sharing Account" means the
----------------------
Account to which Discretionary Profit Sharing Contributions and investment
earnings thereon are recorded.
2.27 Service. "Service" means the period of time during which a full-
-------
time employment relationship exists between an Employee and an Employer,
including any period during which the Employee is on an Authorized Leave of
Absence, whether paid or unpaid. All Years of Service with Grancare, Inc., Manor
Care, Inc. and Nationwide Pharmacy Services count for purposes of eligibility
and vesting under this Plan.
2.28 Termination Date. "Termination Date" means the date of a
----------------
Participant's Termination of Employment.
2.29 Termination of Employment. "Termination of Employment" means
-------------------------
separation from active employment with an Employer resulting from Normal
Retirement, death, Disability, voluntary or involuntary severance of employment,
or failure to return to active employment with an Employer by the date on which
an Authorized Leave of Absence expired.
2.30 Trust or Trust Fund. "Trust" or "Trust Fund" means the trust
-------------------
fund maintained in accordance with a Trust Agreement which the Company has
adopted.
2.31 Trust Agreement. "Trust Agreement" means that certain agreement
---------------
or agreements between the Company and the Trustee establishing the Trust or
Trusts.
2.32 Trustee. "Trustee" means the corporation or corporations
-------
(including without limitation any legal reserve life insurance company or
companies) or individual or individuals named in the Trust Agreement and
appointed to hold, invest, reinvest, and disburse the Trust Fund.
2.33 Valuation Date. "Valuation Date" generally means the
--------------
end of each "business" day, unless the Investment Fund or the per share value of
the Investment Fund is not normally valued daily, in which case the term
Valuation Date means the date such Investment Fund is actually valued. However,
in no event shall a valuation occur less frequently than annually, with the last
day of each Plan Year serving as a Valuation Date (or one of the Valuation
Dates).
2.34 Vested Percentage. "Vested Percentage" means the
-----------------
percentage (which may differ depending upon the Account to which such percentage
relates) of a Participant's nonforfeitable interest in his Deferral Contribution
Account, Company Matching Account, or Profit Sharing Account according to the
following criteria:
(a) A Participant's Vested Percentage shall be 100% in his
Deferral Contribution Account.
4
<PAGE>
(b) A Participant's Vested Percentage shall be 100% upon the
attainment of Normal Retirement Age (but only if he is employed by an
Employer on such date).
(c) Notwithstanding the above, the following vesting schedules
shall apply:
(i) 100% immediate vesting for prior Grancare Inc.
employees.
(ii) 100% immediate vesting for Employees hired before
October 1, 1997 who were not prior Grancare Inc. employees and
who were not prior Manor Care, Inc. employees.
(iii) Vesting according to the following schedule for
prior Manor Care, Inc. employees and for matching accounts
transferred from the Manor Care, Inc. Retirement Savings and
Investment Plan and for Company Matching Contributions and
Discretionary Profit Sharing Contributions made on or after
October 1, 1997 for such Employees:
Years of Service Percentage
---------------- ----------
Less than 3 years 0%
3 years 20%
4 years 40%
5 years 100%
(iv) Vesting according to the following schedule for
Employees hired on or after October 1, 1997:
Years of Service Percentage
---------------- ----------
Less than 5 0%
5 or more 100%
2.35 Years of Service. "Years of Service" shall be measured in whole
----------------
years and fractions of a year with fractions of a Year of Service determined on
the basis of 365 days equaling one year. An Employee's Years of Service shall be
determined from his Employment Commencement Date and anniversaries thereof, and
shall include the following:
(a) The total period or periods of employment with an Employer;
5
<PAGE>
(b) Any period of severance of employment following a Termination
of Employment, if the Employee returns to employment with an Employer
within 12 months of such severance;
(c) The first 12 months of any Authorized Leave of Absence,
including an absence for maternity or paternity reasons; and
(d) If the Employee quits, is discharged, or retires at any time
during the first 12 months of an Authorized Leave of Absence, the period
of severance after the date he so quits, is discharged, or retires, if he
returns to employment with an Employer within 12 months of the date when
his Authorized Leave of Absence began.
2.36 Vitalink 401(k) Plan. "Vitalink 401(k) Plan" means
--------------------
the Vitalink Pharmacy Services, Inc. Retirement Savings And Investment Plan.
ARTICLE 3
ADMINISTRATION OF THE PLAN
The Committee is hereby authorized to administer the Plan and to
establish, adopt, or revise such rules and regulations as it may deem necessary
or advisable for the administration of the Plan. The Committee shall have
discretionary authority to construe and interpret the Plan and to determine the
rights, if any, of Participants and Beneficiaries under the Plan. The
Committee's resolution of any matter concerning the Plan shall be final and
binding upon any Participant and Beneficiary affected thereby. Members of the
Committee shall be eligible to participate in the Plan while serving as members
of the Committee, but a member of the Committee shall not vote or act upon any
matter which relates solely to such member's interest in the Plan as a
Participant.
6
<PAGE>
ARTICLE 4
PARTICIPATION AND DEFERRAL AGREEMENTS
4.1 Eligibility and Participation.
-----------------------------
(a) Eligibility. Eligibility to participate in the Plan shall be
-----------
limited to executives or other key Employees of the Company or its
Affiliates who are selected by the Board in its sole discretion and who
have at least one-half of a Year of Service.
(b) Participation. An eligible individual may elect to make a
-------------
Deferral by submitting a Deferral Agreement to the Committee prior to any
Entry Date after he first satisfies the requirements to be eligible to
participate in this Plan. Pursuant to such Deferral Agreement, a
Participant shall elect the percentage by which the Compensation of such
Participant will be deferred and shall provide such other information as
the Committee shall require. Notwithstanding anything in this Plan to the
contrary, any election by a Participant to defer his Compensation under the
Plan for any Plan Year in which the Participant has not made the maximum
elective deferrals under Section 402(g) of the Code or the terms of the
Vitalink 401(k) Plan shall not be given effect. A Participant's election to
defer Compensation shall be irrevocable, except as otherwise specifically
provided in this Plan.
4.2 Rollovers. All amounts previously deferred under the
---------
Manor Care, Inc. Nonqualified Retirement Savings And Investment Plan (the "Manor
Care Plan"), all matching contributions previously credited under the Manor Care
Plan, and all investment earnings thereon, all of which are held by the trustee
of the Manor Care Plan shall be automatically transferred to the Trustee of this
Plan and allocated to the Participant's Deferral Contribution Account and
Company Matching Account, as the case may be, under this Plan as of the
Effective Date of this Plan. All amounts rolled over into a Participant's
Deferral Contribution Account and Company Matching Account shall be subject to
all the provisions of this Plan.
4.3 Limitations on Deferrals; Waiver; Committee Discretion.
------------------------------------------------------
The Committee may further limit any minimum or maximum amount deferred by any
Participant or group of Participants, or waive any minimum and maximum limits
for any Participant or group of Participants, for any reason.
7
<PAGE>
ARTICLE 5
ACCOUNTS
5.1 Accounts. For record-keeping purposes only, a Deferral
--------
Contribution Account, a Company Matching Account, and a Profit Sharing Account
shall be established and maintained as applicable for each Participant as part
of his Account in the Plan. The Committee shall establish and maintain separate
Accounts with respect to each Participant. The amount by which Compensation is
deferred pursuant to Section 5.2 shall be credited by the Company to the
Participant's Deferral Contribution Account no later than the first day of the
month following the month in which such Compensation would otherwise have been
paid. All of the Participant's Accounts shall be reduced by the amount of any
payments made by the Company to the Participant or the Participant's Beneficiary
pursuant to this Plan. The Company shall credit a Participant's Company
Matching Account in accordance with Section 5.3. The Company shall credit a
Participant's Profit Sharing Account in accordance with Section 5.4.
5.2 Deferral Contribution Account.
-----------------------------
(a) Deferrals.
---------
(i) Each Plan Year, the Employer employing a Participant
who has elected in a Deferral Agreement to defer his
Compensation pursuant to this Section 5.2(a) shall withhold from
such Participant's Compensation the amount of Compensation
deferred under this Plan, as elected by such Participant. A
Participant's election to defer Compensation under this Plan
shall be in a whole percentage of his Compensation. Such
Deferrals shall be made through regular payroll deductions by
notifying the Committee or its designated representatives, no
later than the day preceding the first applicable payroll period
as of which such election is intended to become effective,
pursuant to a Deferral Agreement or such notification procedures
as the Committee may establish, from time to time. Such election
shall remain in effect for subsequent Plan Years until
suspended, modified or revoked pursuant to Section 5.2(b).
(ii) The aggregate maximum amount by which a Participant
may elect to defer his Compensation for any Plan Year under this
Plan and under the Vitalink 401(k) Plan shall not exceed 15% of
his Compensation for any Plan Year. For any Plan Year, the
amount contributed by the Company to the Participant's Deferral
Contribution Account under this Plan shall be the difference
between the aggregate maximum Deferrals elected by the
Participant under this Plan and under the Vitalink 401(k) Plan
and the amounts contributed (and not otherwise required to be
8
<PAGE>
refunded) to the Participant's Deferred Income Account under the
Vitalink 401(k) Plan for such Plan Year.
(iii) A Participant's election to defer his Compensation
pursuant to a Deferral Agreement shall also constitute his
agreement to defer and have contributed to this Plan the amount,
if any, which the Administrator of the Vitalink 401(k) Plan
determines must be refunded to such Participant during the Plan
Year due to application of the nondiscrimination rules or other
limitations to the Vitalink 401(k) Plan. The Committee shall
establish uniform and nondiscriminatory procedures regarding the
timing and manner in which such additional Deferrals are made to
the Plan.
(b) Suspension or Modification of Deferrals. A Participant may
---------------------------------------
elect to increase, decrease, suspend, or recommence his Deferrals by
notifying the Committee or its designated representatives no later than the
day preceding the first applicable payroll period as to which such election
is intended to become effective, pursuant to such rules and notification
procedures as the Committee may establish, from time to time. Subsequent
elections to increase, decrease or recommence Deferrals shall not apply to
any Deferrals which represent payment for Services performed (including
commissions earned) prior to the beginning of the first day of the payroll
period to which such increase, decrease or recommencement of Deferrals
applies. The Deferrals of a Participant shall be suspended automatically
for any payroll period in which such Participant does not receive any
Compensation, including periods of an Authorized Leave of Absence.
(c) Method of Allocating Deferral Contributions. Each
-------------------------------------------
Participant who elected to defer his Compensation during a Plan Year
pursuant to the provisions of this Section 5.2 shall receive an allocation
of deferred Compensation to his Deferral Contribution Account for such Plan
Year equal to the amount by which he elected to defer his Compensation for
such Plan Year pursuant to the provisions of Section 5.2(a).
(d) Termination of Employment. A Participant's Deferrals shall
-------------------------
terminate upon the Participant's Termination of Employment.
5.3 Company Matching Account.
------------------------
(a) Each Plan Year, each Participant shall receive an
allocation to his Company Matching Account for such Plan Year (the "Company
Matching Contribution"), provided that such Participant is still employed
--------
9
<PAGE>
by an Employer on the last day of the Plan Year to which the Company
Matching Contribution relates. Notwithstanding the previous sentence, a
Participant who has a Termination of Employment during the Plan Year on
account of death, Disability, or Normal Retirement shall receive a Company
Matching Contribution under this Section 5.3 for such Plan Year. The
Company Matching Contribution for each Plan Year shall be contributed to
the Plan no later than the due date, including extensions, for the
Company's income tax return for its fiscal year end which coincides with or
includes the end of such Plan Year.
(b) The aggregate maximum Company Matching Contribution
allocable to a Participant for any Plan Year under this Plan and under the
Vitalink 401(k) Plan shall be equal to the first 6% of a Participant's
Compensation that is subject to Deferrals under this Plan and the Vitalink
401(k) Plan multiplied by the applicable Matching Percentage determined
from the following table:
Years of Service Matching Percentage
---------------- -------------------
1 to 5 25%
6 to 9 75%
10 or more 100%
The Company Matching Contribution under this Plan for such Plan Year
shall be the difference between the aggregate maximum Company Matching
Contribution allocable to the Participant and the Company Matching
Contribution made for such Participant under the Vitalink 401(k) Plan.
(c) If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery
of such incorrect inclusion is not made until after a contribution for the
Plan Year has been made and allocated, the Company shall not be entitled to
recover the Company Matching Contribution made with respect to such
Participant regardless of whether or not a deduction is allowable with
respect to such contribution.
5.4 Profit Sharing Account.
----------------------
(a) If Profit Sharing Contributions (as defined in the Vitalink
401(k) Plan) are made under the Vitalink 401(k) Plan, an Employer may make
a discretionary profit sharing contribution (a "Discretionary Profit
Sharing Contribution") under this Plan to a Participant's Profit Sharing
Account if such Participant is still employed by an Employer on the last
day of the Plan Year. Notwithstanding the previous sentence, a Participant
who has a Termination of employment during the Plan Year on account of
10
<PAGE>
death, Disability, or Normal Retirement shall be eligible for a
Discretionary Profit Sharing Contribution under this Section 5.4 using the
same allocation formula that was used by the Company in determining the
amount of the Profit Sharing Contribution under the Vitalink 401(k) Plan.
The Discretionary Profit Sharing Contribution, if any, for each Plan Year
shall be contributed to the Plan no later than the due date, including
extensions, for the Company's income tax return for its fiscal year end
which coincides with or includes the end of such Plan Year.
(b) If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously included and discovery
of such incorrect inclusion is not made until after a contribution for the
Plan Year has been made and allocated, the Company shall not be entitled to
recover the Discretionary Profit Sharing Contribution made with respect to
such Participant regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with
respect to such Participant shall constitute a forfeiture for the Plan Year
in which the discovery is made.
5.5 Earnings on Accounts. A Participant's Account shall be
--------------------
invested in the Investment Funds available under the Plan from time to time in
accordance with the Investment Funds elected by the Participant from time to
time. Participants may allocate their Accounts among the Investment Funds
available under the Plan only in whole percentages of not less than 1% for any
Investment Fund. The gross rate of return, positive or negative, credited under
each Investment Fund is based upon the actual performance of the corresponding
Investment Fund which the Committee may designate from time to time, and shall
equal the total return of such Investment Fund net of asset based charges,
including, without limitation, money management fees and fund expenses. The net
rate of return, positive or negative, credited under each Investment Fund shall
be determined by subtracting the allocable share of trustee and administrative
fees and expenses charged by United Missouri Bank, or any successor Trustee or
Committee, from the gross rate of return. The Company by action of the
Committee reserves the right, on a prospective basis, to add or delete
Investment Funds; provided, however, that any such change in the Investment
-----------------
Funds available under the Plan, shall only affect the rate at which earnings
will be credited to a Participant's Account in the future, and shall not affect
the existing value of a Participant's Account, including any earnings credited
under the Plan up to the date of such change.
5.6 Investment Fund Options. Except as otherwise provided
-----------------------
pursuant to Section 5.5, the Investment Funds available under the Plan shall
consist of the options selected by the Committee, in its sole discretion.
Notwithstanding that the gross rates of return credited to Participants'
11
<PAGE>
Accounts under the Investment Funds are based upon the actual performance of the
designated Investment Funds, or such other investment funds as the Committee may
designate, the Committee shall not be obligated to invest any Compensation
deferred by Participants under this Plan, or any other amounts, in such
Investment Funds. Notwithstanding anything to the contrary, shares of stock of
the Company or any of its Affiliates or any related company shall not be an
Investment Fund.
5.7 Changes in Investment Funds. A Participant may change
---------------------------
the Investment Funds for his Account not more frequently than once per day by
filing a new investment election form with the Committee or its designated
representatives or as otherwise provided by the Committee, in its sole
discretion. Any such changes made by a Participant shall apply to the
allocation of the Participant's existing Account balances and new Deferrals,
Company Matching Contributions, and Discretionary Profit Sharing Contributions
under the Plan. Changes shall be effective following the day of receipt of a
new investment election form by the Committee or its designated representatives.
Any changes in election of Investment Funds must be in whole percentages.
5.8 Valuation of Accounts. The value of a Participant's
---------------------
Account as of any date shall equal the amounts theretofore credited to such
Account, including any earnings (positive or negative) deemed to be earned on
such Account in accordance with Section 5.5 through the Valuation Date preceding
such date, less the amounts theretofore deducted from such Account.
Notwithstanding anything in the Plan to the contrary, the value of an Account as
of any time shall be determined on a "cash" basis. That is, Compensation which
is deferred or earnings which have accrued to an Account shall not be recognized
for purposes of determining the value of such Account until such amount is
actually credited (or deposited) to such Account.
5.9 Statement of Accounts. The Committee shall provide to
---------------------
each Participant, not less frequently than quarterly, a statement in such form
as the Committee deems desirable setting forth the balance standing to the
credit of the Participant in his Account.
5.10 Distribution of Accounts. Any distribution made to or
------------------------
on behalf of a Participant from his Account in an amount which is less than the
entire balance of such Account shall be made pro rata from each of the
Investment Funds to which such Account is then allocated, unless another manner
of distribution is approved by the Committee in its discretion.
5.11 Vesting of Accounts. Each Participant shall be 100%
-------------------
vested at all times in the amounts credited to such Participant's Deferral
Contribution Account. A Participant's interest in any credit to his Company
Matching Account or his Profit Sharing Account and earnings thereon shall be
vested in accordance with his applicable Vested Percentage.
12
<PAGE>
ARTICLE 6
BENEFITS TO PARTICIPANTS
6.1 Benefits Under the Plan.
-----------------------
(a) Benefits Upon Normal Retirement. If a Participant is
-------------------------------
employed by an Employer at his Normal Retirement Age, his Company Matching
Account and Profit Sharing Account, to the extent not previously fully
vested, shall fully vest at that time. If the Participant continues in an
Employer's employ after Normal Retirement Age, he shall continue to be
eligible to make Deferrals under the Plan and to share in the allocations
of Company Matching Contributions and Discretionary Profit Sharing
Contributions under the Plan until his actual Normal Retirement. Upon
Normal Retirement, a Participant shall be entitled to receive benefits
equal to the total value of his Accounts in the Plan as determined in
accordance with the provisions of Section 5.8. Such benefits shall be paid
in a lump sum as soon as practicable following Normal Retirement.
(b) Benefits Upon Termination of Employment. In the case of a
---------------------------------------
Participant whose Service with an Employer terminates prior to the earliest
date on which he is eligible for Normal Retirement, other than on account
of his Disability or death, such Participant shall be entitled to receive
(i) 100% of the value of his Deferral Contribution Account, (ii) the Vested
Percentage of the value of his Company Matching Account, and (iii) the
Vested Percentage of the value of his Profit Sharing Account. Such values
shall be determined in accordance with the provisions of Section 5.8. Such
Participant's vested Accounts shall be distributed in a lump sum as soon as
practicable following the Participant's Termination Date. The unvested
portion of a Participant's Company Matching Account and Profit Sharing
Account shall be forfeited to the Company upon the Participant's receipt of
a distribution of the total vested amounts of his Accounts under the Plan.
6.2 Unscheduled Withdrawal. A Participant may withdraw the
----------------------
entire vested amount of his Account in the Plan at any time, subject to a
penalty equal to a 10% reduction in his entire Account balance, which shall be
forfeited to the Company. After receiving any such distribution, a Participant
shall not be permitted to participate in or elect a new Deferral under the Plan
for a period of one year following the date of the distribution.
6.3 Immediate Distribution. From time to time, the
----------------------
Committee may, in its sole discretion, determine that the inclusion of an
Employee in the Plan jeopardizes the ability of the Plan to continue to satisfy
the requirements under Section 3(36) of ERISA. In such an instance, the
Committee may direct the immediate distribution to such Employee of any vested
amount in his Deferral Contribution Account, Company Matching Account and Profit
Sharing Account.
13
<PAGE>
ARTICLE 7
DISABILITY
If a Participant has a Termination of Employment by reason of Disability
while in the employ of the Company, his Company Matching Account and his Profit
Sharing Account shall become fully vested, and he shall be entitled to receive
benefits equal to the total value of his Accounts in the Plan as determined in
accordance with the provisions of Section 5.8. Such benefits shall be paid in a
lump sum as soon as practicable following the Termination Date.
ARTICLE 8
SURVIVOR BENEFITS
Upon the death of a Participant who was employed by the Company at the
time of his death, such deceased Participant's Company Matching Account and
Profit Sharing Account shall become fully vested, and his Beneficiary (as
determined under Section 11.2) shall be entitled to receive benefits equal to
the total value of the deceased Participant's Accounts in the Plan as determined
in accordance with the provisions of Section 5.8. Such benefits shall be paid
in a lump sum as soon as practicable following the Participant's death, in lieu
of any benefits otherwise payable under the Plan to or on behalf of such
Participant.
ARTICLE 9
EMERGENCY BENEFIT
In the event that the Committee, upon written request of a Participant,
determines, in its sole discretion, that the Participant has suffered an
unforeseeable financial emergency, the Company shall pay to the Participant, as
soon as practicable following such determination, an amount necessary to meet
the emergency, after deducting any and all taxes as may be required to be
withheld pursuant to Section 11.6 (the "Emergency Benefit"). For purposes of
this Plan, an unforeseeable financial emergency is an unexpected need for cash
arising from an illness, casualty loss, sudden financial reversal, or other such
unforeseeable occurrence. Cash needs arising from foreseeable events such as
the purchase of a house or education expenses for children shall not be
---------
considered to be the result of an unforeseeable financial emergency. Any
amounts paid to a Participant as an Emergency Benefit shall be treated as a
distribution from the Participant's Account, but shall not be subject to a
---
reduction penalty. Notwithstanding anything in this Plan to the contrary, a
Participant who receives an Emergency Benefit in any Plan Year shall not be
entitled to make any further deferrals for the remainder of such Plan Year.
14
<PAGE>
ARTICLE 10
ADOPTION AND WITHDRAWAL BY OTHER ORGANIZATIONS
10.1 Procedure for Adoption.
----------------------
(a) Affiliates. Subject to the consent and approval of the
----------
Company, an Affiliate now in existence or hereafter formed or acquired,
which is not already a participating Employer under this Plan, and which is
otherwise legally eligible may, with the consent and approval of the
Company, adopt the Plan and Trust, and thereby from and after the specified
effective dated become a participating Employer under this Plan. Such
adoption shall be effectuated and evidenced by a formal resolution for the
Board of Directors of such Affiliate. The adopting resolution may contain
such specific changes and variations in the Plan or the Trust as may be
acceptable to the Company and the Trustee. The adopting resolution for an
Affiliate shall become, as to such Affiliate and its Employees, a part of
this Plan as then in effect. It shall not be necessary for such adopting
Affiliate to execute the Plan or Trust as then in effect. The effective
date of the Plan for any such adopting Affiliate shall be that stated in
the adopting resolution and from and after such effective date such
adopting Affiliate shall assume all the rights, obligations and liabilities
of an Employer under the Plan and Trust.
(b) Acquisition of Entity Which Becomes Part of Employer: In
----------------------------------------------------
the event an Employer acquires an entity which becomes part of an Employer
(as opposed to the situation where the acquired entity becomes a separate
Affiliate as described in Section 10.2(a) above), Service performed for
such prior entity shall constitute Service performed for an Employer unless
the Board amends the Plan to provide otherwise. Such amendment may also
contain other changes and variations in the Plan or the Trust as are
necessary to carry out the intent of the Company.
10.2 Withdrawal. Any participating Employer, by action for
----------
its Board of Directors and notice to the Company and the Trustee, may withdraw
from the Plan and Trust at any time without affecting other Employers not
withdrawing by complying with the provisions of the Plan and Trust. A
withdrawing Employer may arrange for the continuation by itself or its successor
of this Plan and Trust in separate forms for its own Employees, with such
amendments if any, as it may deem proper, and may arrange for continuation of
the Plan and Trust by merger with an existing plan and fund and transfer of
Trust assets.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment or Termination. The Plan may be amended, suspended,
------------------------
discontinued or terminated at any time by the Board, or by any other committee
15
<PAGE>
or entity authorized by the Board, provided, however, that no such amendment,
-------- -------
suspension, discontinuance or termination shall reduce or in any manner
adversely affect the rights of any Participant with respect to benefits that are
payable or may become payable under the Plan based upon the balance of the
Participant's Account as of the effective date of such amendment, suspension,
discontinuance or termination.
11.2 Designation of Beneficiary. Each Participant may designate a
--------------------------
Beneficiary or Beneficiaries (which Beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such Beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committee and shall not be
effective until received by the Committee, or its designee. If a Participant has
failed to designate a Beneficiary, or if the Beneficiary designated by the
Participant is dead or cannot be located, then the Participant's Account shall
be distributed in the following order of priority: (a) first to the
Participant's surviving spouse, if any, (b) second among the Participant's then
living children, in equal shares, if any, and (c) third to the personal
representative of the Participant's estate.
11.3 Limitation of Participant's Right. Nothing in this Plan shall
---------------------------------
be construed as conferring upon any Participant any right to continue in the
employment of an Employer, nor shall it interfere with the rights of an Employer
to terminate the employment of any Participant and/or take any personnel action
affecting any Participant without regard to the effect which such action may
have upon such Participant as a recipient or prospective recipient of benefits
under the Plan.
11.4 Obligations to Employer. If a Participant becomes entitled to a
-----------------------
distribution of benefits under the Plan, and if at such time the Participant has
outstanding any debt, obligation, or other liability representing an amount
owing to an Employer, then such Employer may offset such amount owed to it
against the amount of benefits otherwise distributable. Such determination shall
be made by the Committee.
11.5 Nonalienation of Benefits. Except as expressly provided herein,
-------------------------
no Participant or Beneficiary shall have the power or right to transfer
(otherwise than by will or the laws of descent and distribution), alienate, or
otherwise encumber the Participant's interest under the Plan. An Employer's
obligations under this Plan are not assignable or transferable except to (a) a
corporation which acquires all or substantially all of an Employer's assets or
(b) any corporation into which an Employer may be merged or consolidated. The
provisions of the Plan shall inure to the benefit of each Participant and the
Participant's Beneficiaries, heirs, executors, administrators or successors in
interest.
11.6 Withholding of Taxes. The Employer may make such provisions and
--------------------
take such actions as it may deem necessary or appropriate for the withholding of
16
<PAGE>
any taxes which an Employer is required by any law or regulation of any
governmental authority, whether Federal, state or local, to withhold in
connection with any benefits under the Plan, including, but not limited to, the
withholding of appropriate sums from any amount otherwise payable to the
Participant (or his Beneficiary). Each Participant, however, shall be
responsible for the payment of all individual tax liabilities relating to any
such benefits.
11.7 Trust Fund. The Employer shall be responsible for the
----------
payment of all benefits provided under the Plan. At its discretion, the Company
may establish one or more trusts, with such trustees as the Board may approve,
for the purpose of providing for the payment of such benefits. Such trust or
trusts may be irrevocable, but the assets thereof shall be subject to the claims
of the Company's creditors. To the extent any benefits provided under the Plan
are actually paid from any such trust, an Employer shall have no further
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, an Employer.
11.8 Unfunded Status of Plan. The Plan is intended to
-----------------------
constitute an "unfunded" plan of deferred compensation for Participants.
Benefits payable hereunder shall be payable out of the general assets of the
Company, and no segregation of any assets whatsoever for such benefits shall be
made. With respect to any payments not yet made to a Participant, nothing
contained herein shall give any such Participant any rights that are greater
than those of a general creditor of the Company.
11.9 Severability. If any provision of this Plan is held
------------
unenforceable, the remainder of the Plan shall continue in full force and effect
without regard to such unenforceable provision and shall be applied as though
the unenforceable provision were not contained in the Plan.
11.10 Governing Law. The Plan shall be construed in accordance with
-------------
and governed by the laws of the State of Missouri, without reference to the
principles of conflict laws.
11.11 Headings. Headings are inserted in this Plan for convenience of
--------
reference only and are to be ignored in the construction of the provisions of
the Plan.
11.12 Gender, Singular & Plural. All pronouns and any variations
-------------------------
thereof shall be deemed to refer to the masculine, feminine, or neuter, as the
identify of the person or persons may require. As the context may require, the
singular may be read as the plural and the plural as the singular.
11.13 Notice. Any notice or filing required or permitted to
------
be given to the Committee under the Plan shall be sufficient if in writing and
hand delivered, or sent by registered or certified mail, to the Committee or to
such representatives as the Committee may designate from time to time. Such
17
<PAGE>
notice shall be deemed given as to the date of delivery or, if delivery is made
by mail, as of the date shown on the postmark on the receipt for registration or
certification.
11.14 Claims Procedure. The Committee shall make all determinations
----------------
as to the right of any person to a benefit under this Plan.
Claims shall be made and processed according to the following
procedures:
(a) Claims must be in writing and must be delivered to the
Committee.
(b) The Committee will act on a claim within a reasonable
period of time after its receipt. Claims shall be acted upon within 90 days
after receipt of the claim by the Committee, unless special circumstances
require an extension of time. If such an extension of time is required,
written notice of the extension and the special circumstances shall be
given to the claimant prior to the termination of the initial 90-day
period. In no event shall such extension exceed a period of 90 days from
the end of such initial period. Claims not acted upon within the time
prescribed herein shall be deemed denied for purposes of proceeding to the
review stage.
(c) The Committee shall provide to every claimant whose claim
is denied written notice setting forth in a manner calculated to be
understood by the claimant:
(i) The specific reason or reasons for the denial;
(ii) Specific reference to pertinent Plan provisions on
which the denial is based;
(iii) A description of any additional material or
information necessary for the claimant to perfect the claim and
an explanation of why such material or information is necessary;
(iv) An explanation of the Plan's claim review procedure.
(d) The claimant shall be afforded a reasonable opportunity to
appeal a denial of the claim to the Committee for a full and fair review.
Such appeal must be made in writing upon application to the Committee and
may not be made more than 60 days following receipt by the claimant of
written notification of denial of his claim. The claimant or his duly
authorized representative shall be permitted to review pertinent documents
and submit issues and comments in writing.
18
<PAGE>
The decision upon review shall be made promptly, and not later than 60
days after receipt of a request for a review, unless special circumstances
require an extension of time for processing, in which case a decision shall be
rendered as soon as possible but not later than 120 days after receipt of a
request for review. If requested, a hearing shall be granted by the Committee.
The decision on review shall be in writing and shall include specific
references to the pertinent Plan provisions on which the decision is based.
The Committee may designate a representative to receive, review and
decide claims in accordance with Sections 11.14 (a), (b), and (c). However, the
Committee will receive, review and decide all appeals in accordance with Section
11.14(d).
IN WITNESS WHEREOF, Vitalink Pharmacy Services, Inc. has caused this Plan
to be executed this 29th day of September, 1997, to be effective as of
October 1, 1997.
Vitalink Pharmacy Services, Inc.
By: /s/ Stephen A. Thompson
-------------------------------------
Its: Senior Vice President
------------------------------------
19
<PAGE>
EXHIBIT 10.32
AMENDMENT TO
MASTER AGREEMENT FOR INFUSION THERAPY PRODUCTS AND SERVICES
AGREEMENT made and entered into to as of the 19th day of September 1997 by
and between Vitalink Pharmacy Services, Inc. ("Vitalink") and ManorCare Health
Services, Inc. ("MCHS").
WHEREAS, Vitalink and MCHS have previously entered into that certain Master
Agreement for Infusion Therapy Products and Services dated June 1, 1991 (the
"Agreement"); and
WHEREAS, Vitalink and MCHS desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, and other
good and sufficient consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Section 1 of the Agreement is replaced in its entirety by the
following new Section 1:
1. TERM. The term of this Agreement shall be from June 1, 1991 to
September 30, 2002. At each October 1 during the remaining period of
this Agreement, the term shall automatically renew for an additional
one (1) year period unless either party notifies the other party of
its intent not to renew no later than ninety (90) days prior to each
such October 1.
2. Section 5 of the Agreement is replaced in its entirety by the
following new Section 5:
5. INFUSION CHARGES:
----------------
A. Vitalink's charges for infusion therapy drugs under each
separate Infusion Therapy Services Agreement shall be based upon
prevailing market rates for each Facility. "Market rates" shall be
defined as those within the fiftieth percentile (50%) of charges paid
by similar licensed non-MCHS facilities that receive similar services
from Vitalink. MCHS shall be allowed to audit Vitalink's books and
records to verify market rates.
B. Effective January 1, 1998, Vitalink's charges for infusion
therapy services under each separate Infusion Therapy Services
Agreement for residents whose charges are paid by a third party payor
such as an insurance company,
<PAGE>
-2-
HMO, or Medicare risk contract payor shall be as stated in Exhibit A,
attached hereto.
3. Each Infusion Therapy Services Agreement for the Facilities shall be
deemed to have been amended consistently with the terms, conditions
and obligations contained herein.
4. Except as specifically provided herein the Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties enter into this Agreement on the date first
above written.
VITALINK PHARMACY SERVICES, INC.
ATTEST:/s/ Robert W. Horner III By: /s/ Donna L. De Nardo
------------------------ ------------------------------
Secretary
Title: President
---------------------------
MANORCARE HEALTH SERVICES, INC.
ATTEST:/s/ K. Peter Kemezys By: /s/ James H. Rempe
------------------------ ------------------------------
Secretary
Title: Senior Vice President
---------------------------
_
<PAGE>
-3-
EXHIBIT A
---------
1. MCHS will pay Vitalink a percentage of the per diem rate received by MCHS
for each managed care patient whether such patient receives medication or
not, as set forth below.
2. If a managed care patient in a MCHS facility receives no medications,
Vitalink will be paid 7.2% of the per diem rate received by MCHS for such
patient.
3. If the contracted per diem rate received by MCHS includes routine
medications only (i.e., oral, topical medications and all insulin), Vitalink
will be paid 7.2% of the per diem rate for each day of service.
4. If the contracted per diem rate received by MCHS includes routine (i.e.,
oral, topical medications and all insulin) and extraordinary (i.e.,
injectible (excluding insulin) and infusion medications) Vitalink will be
paid 13% of the per diem rate for each day of service.
5. If the managed care contract with MCHS excludes all medications, MCHS will
so advise Vitalink in writing in advance of accepting any such patient.
Vitalink and the managed care organization will thereafter negotiate drug
prices separately. Vitalink will be solely responsible for the billing and
collection of any services provided in such circumstances.
6. The percentages described above will be paid for all MCHS patients covered
by managed care contracts and referred through the MCHS Coordinated Care
Center. MCHS will notify the pharmacy at the time of admission that a
patient is covered under a managed care contract. If such patients are not
identified at such time, then usual and customary pricing will be utilized
by Vitalink and paid by MCHS.
7. All managed care patients will be subject to a formulary as agreed upon by
Vitalink and the managed care organization which identifies those drugs
which may be therapeutically substituted. In addition, drugs with extremely
high cost (i.e., AWP per dose greater than $35.00) will be carved out of any
such contract between the managed care organization and MCHS and be treated
separately. In the event that Vitalink and the managed care organization
cannot agree to such formulary, Vitalink has the right to refuse to provide
services to the patients of such managed care organization. In the event
that Vitalink so refuses, Manor Care shall have the right to identify an
alternative provider for such services.
8. The percentages set forth above will be reviewed periodically (i.e., every
six months). The review will compare the current actual percentages (based
on actual utilization at usual and customary charges divided by the
applicable per diem rates) to those percentages set forth above. The
percentage of the per diem rate to be billed thereafter will be the
percentages set forth above plus or minus 50% of the difference between
those percentages and the current actual percentages depending on whether
the current actual percentages are higher (plus) or lower (minus) than the
percentages set forth above.
At the time of discharge, any drugs not administered to managed care
patients, are to be returned to the pharmacy or disposed of in compliance
with government regulations. Unused medications may not be sent home with
patients.
<PAGE>
EXHIBIT 10.33
AMENDMENT TO
MASTER PHARMACY CONSULTING AGREEMENT
AGREEMENT made and entered into as of the 19th day of September 1997 by and
between Vitalink Pharmacy Services, Inc. ("Vitalink") and ManorCare Health
Services, Inc. ("MCHS").
WHEREAS, Vitalink and MCHS have previously entered into that certain Master
Pharmacy Consulting Agreement dated June 1, 1991 (the "Agreement"); and
WHEREAS, Vitalink and MCHS desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, and other
good and sufficient consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Section 1 of the Agreement is replaced in its entirety by the
following new Section 1:
1. TERM. The term of this Agreement shall be from June 1, 1991 to
September 30, 2002. At each October 1 during the remaining period of
this Agreement, the term shall automatically renew for an additional
one (1) year period unless either party notifies the other party of
its intent not to renew no later than ninety (90) days prior to each
such October 1.
2. Section 5 of the Agreement shall be amended by adding the additional
following language:
Effective June 1, 2001, for each Facility Consultant Pharmacy
Services Agreement MCHS shall compensate Vitalink based upon
prevailing market rates for each Facility. "Market rate" shall be
defined as those within the fiftieth percentile (50%) of charges paid
by similar licensed non-MCHS facilities that receive similar services
from Vitalink. MCHS shall be allowed to audit Vitalink's books and
records to verify market rates.
3. Each Facility Consultant Pharmacy Services Agreement for the
Facilities shall be deemed to have been amended consistently with the
terms, conditions and obligations contained herein.
4. Except as specifically provided herein, the Agreement remains in full
force and effect.
<PAGE>
-2-
IN WITNESS WHEREOF, the parties enter into this Agreement on the date first
above written.
VITALINK PHARMACY SERVICES, INC.
ATTEST: /s/ Robert W. Horner III By: /s/ Donna L. DeNardo
------------------------ --------------------------------
Secretary
Title: President
-----------------------------
MANORCARE HEALTH SERVICES, INC.
ATTEST: /s/ K. Peter Kemezys By: /s/ James H. Rempe
------------------------ --------------------------------
Assistant Secretary
Title: Senior VP
-----------------------------
<PAGE>
EXHIBIT 10.34
AMENDMENT TO
PHARMACY SERVICES CONSULTANT AGREEMENT
AGREEMENT made and entered into as of the 19th day of September 1997 by and
between Vitalink Pharmacy Services, Inc. ("Vitalink") and ManorCare Health
Services, Inc. ("MCHS").
WHEREAS, Vitalink and MCHS have previously entered into that certain
Pharmacy Services Consulting Agreement dated May 31, 1991 (the "Agreement"); and
WHEREAS, Vitalink and MCHS desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, and other
good and sufficient consideration, receipt of which is acknowledged, the parties
agree as follows:
1. The Agreement is amended throughout, as of May 31, 1998, to change any
reference to "long term care" to "skilled nursing" so as to make the
provisions of the Agreement applicable only to MCHS skilled nursing
beds.
2. Except as specifically provided herein, the Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties enter into this Agreement on the date first
above written.
VITALINK PHARMACY SERVICES, INC.
ATTEST: /s/ Robert W. Horner, III By: /s/ Donna L. DeNardo
-------------------------- ----------------------------
Secretary
Title: President
--------------------------
MANORCARE HEALTH SERVICES, INC.
ATTEST: /s/ K. Peter Kemezys By: /s/ James H. Rempe
-------------------------- ----------------------------
Assistant Secretary
Title: Senior V.P.
--------------------------
<PAGE>
EXHIBIT 10.35
AMENDMENT TO
MASTER AGREEMENT FOR PHARMACY SERVICES
AGREEMENT made and entered into as of the 19th day of September 1997 by and
between Vitalink Pharmacy Services, Inc. ("Vitalink") and ManorCare Health
Services, Inc. ("MCHS").
WHEREAS, Vitalink and MCHS have previously entered into that certain Master
Agreement for Pharmacy Services dated June 1, 1991 (the "Agreement"); and
WHEREAS, Vitalink and MCHS desire to amend the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein, and other
good and sufficient consideration, receipt of which is acknowledged, the parties
agree as follows:
1. Section 1 of the Agreement is replaced in its entirety by the
following new Section 1:
1. TERM. The term of this Agreement shall be from June 1, 1991 to
September 30, 2002. At each October 1 during the remaining period of
this Agreement, the term shall automatically renew for an additional
one (1) year period unless either party notifies the other party of
its intent not to renew no later than ninety (90) days prior to each
such October 1.
2. Section 5 of the Agreement is replaced in its entirety by the
following new Section 5:
5. DRUG CHARGES:
------------
A. Vitalink's charges for pharmaceuticals under each separate
Pharmacy Services Agreement shall be based upon prevailing market
rates for each Facility. "Market rates" shall be defined as those
within the fiftieth percentile (50%) of charges paid by similar
licensed non-MCHS facilities that receive similar services from
Vitalink. MCHS shall be allowed to audit Vitalink's books and records
to verify market rates.
B. Effective January 1, 1998, Vitalink's charges for
pharmaceuticals under each separate Pharmacy Services Agreement for
residents who charges are paid by a third party payor such as an
insurance company, HMO, or Medicare risk contract payor shall be as
stated in Exhibit A, attached hereto.
3. Section 6 of the Agreement is replaced in its entirety by the
following new Section 6:
6. BILLING FOR PHARMACY SERVICES:
-----------------------------
A. At the discretion of MCHS, the billings for pharmacy services
to residents at each Facility who are private pay or whose care is
otherwise paid for by non-governmental third party payors shall be
handled in either of the following ways:
i) MCHS will perform all billing and collection activity,
and incur any and all bad debt, for residents at each
Facility who are private pay or
<PAGE>
-2-
whose care is otherwise paid for by non-governmental
insurance programs. Thus, for such residents, Vitalink shall
bill Facility for such private pay or insurance residents
and in consideration of the above services to be provided
by, and the assumption of the risk of bad debts, the
Facility will receive a 3% administrative fee off the amount
of such invoice for private pay or non-governmental
insurance residents; or
ii) Vitalink shall bill and collect each resident directly
and shall be responsible for any resulting non-payment or
bad debt. There shall be no administrative fee paid.
B. Vitalink shall bill MCHS for all pharmaceuticals provided to
Medicare residents and MCHS shall then bill the Medicare program for
all Medicare residents.
C. Vitalink shall directly bill the appropriate governmental
entity for all Medicaid residents.
D. In the event either the Medicare program or any state Medicaid
program requires that billings be handled in a specific manner, the
parties agree that this Agreement shall automatically be amended to
comply with such requirements(s).
4. Section 15 of the Agreement is replaced in its entirety by the
following new Section 15:
15. RELATED PARTY DOCTRINE. The parties acknowledge the existence of
the Medicare principal commonly known as the related party doctrine
(hereinafter "Related Party Doctrine"). While the parties believe
that the Related Party Doctrine does not apply because the parties
and/or the transactions herein are covered by an exception or
exceptions thereto, the parties desire to make provisions in the event
that there is a ruling otherwise. Therefore, as of January 1, 1998,
in the event that the Medicare program (including any fiscal
intermediary or other agent of the Medicare program) applies to the
Related Party Doctrine, in whole or in part, to any Facility cost
report or other claim for reimbursement, then the Facility shall be
solely responsible for any economic impact in which such application
results. The parties hereto further acknowledge Vitalink shall in no
way be responsible for the difference between the amount Vitalink
billed the Facility for Medicare residents and the amount actually
reimbursed or proposed to be reimbursed by the Medicare program to the
Facility. This section shall survive termination of this Agreement.
5. The following new Section 20 shall be added to the Agreement:
20. SERVICES. During the term of this Agreement, Vitalink shall
provide such ancillary services such as computer-prepared patient
medical records, disease management services, drug contra-indications
and the like, at the highest levels that are available within the
institutional pharmacy industry.
6. The following new Section 21 shall be added to the Agreement:
21. ARBITRATION. Any dispute between the parties shall be subject to
arbitration before a single arbitrator pursuant to the commercial
arbitration rules of the
<PAGE>
-3-
American Arbitration Association. Such arbitration shall be held in
Montgomery County, Maryland. Each party shall pay their own expenses
and the parties shall be equally responsible for the expenses of the
Arbitrator.
7. Each Pharmacy Agreement for the Facilities shall be deemed to have been
amended consistently with the terms, conditions and obligations contained
herein.
8. Except as specifically provided herein, the Agreement remains in full
force and effect.
IN WITNESS WHEREOF, the parties enter into this Agreement on the date first
above written.
VITALINK PHARMACY SERVICES, INC.
ATTEST: /s/ Robert W. Horner III By: /s/ Donna L. DeNardo
------------------------- -----------------------------------
Secretary
Title: President
-------------------------------
MANORCARE HEALTH SERVICES, INC.
ATTEST: /s/ K. Peter Kemezys By: /s/ James H. Rempe
----------------------- ----------------------------------
Assistant Secretary
Title: Senior V.P.
-------------------------------
<PAGE>
-4-
EXHIBIT A
---------
1. MCHS will pay Vitalink a percentage of the per diem rate received by MCHS
for each managed care patient whether such patient receives medication or
not, as set forth below.
2. If a managed care patient in a MCHS facility receives no medications,
Vitalink will be paid 7.2% of the per diem rate received by MCHS for such
patient.
3. If the contracted per diem rate received by MCHS includes routine
medications only (i.e., oral, topical medications and all insulin),
Vitalink will be paid 7.2% of the per diem rate for each day of service.
4. If the contracted per diem rate received by MCHS includes routine (i.e.,
oral, topical medications and all insulin) and extraordinary (i.e.,
injectible (excluding insulin) and infusion medications) Vitalink will be
paid 13% of the per diem rate for each day of service.
5. If the managed care contract with MCHS excludes all medications, MCHS will
so advise Vitalink in writing in advance of accepting any such patient.
Vitalink and the managed care organization will thereafter negotiate drug
prices separately. Vitalink will be solely responsible for the billing and
collection of any services provided in such circumstances.
6. The percentages described above will be paid for all MCHS patients covered
by managed care contracts and referred through the MCHS Coordinated Care
Center. MCHS will notify the pharmacy at the time of admission that a
patient is covered under a managed care contract. If such patients are not
identified at such time, then usual and customary pricing will be utilized
by Vitalink and paid by MCHS.
7. All managed care patients will be subject to a formulary as agreed upon by
Vitalink and the managed care organization which identifies those drugs
which may be therapeutically substituted. In addition, drugs with extremely
high cost (i.e., AWP per dose greater than $35.00) will be carved out of
any such contract between the managed care organization and MCHS and be
treated separately. In the event that Vitalink and the managed care
organization cannot agree to such formulary, Vitalink has the right to
refuse to provide services to the patients of such managed care
organization. In the event that Vitalink so refuses, Manor Care shall have
the right to identify an alternative provider for such services.
8. The percentages set forth above will be reviewed periodically (i.e., every
six months). The review will compare the current actual percentages (based
on actual utilization at usual and customary charges divided by the
applicable per diem rates) to those percentages set forth above. The
percentage of the per diem rate to be billed thereafter will be the
percentages set forth above plus or minus 50% of the difference between
those percentages and the current actual percentages depending on whether
the current actual percentages are higher (plus) or lower (minus) than the
percentages set forth above.
9. At the time of discharge, any drugs not administered to managed care
patients, are to be returned to the pharmacy or disposed of in compliance
with government regulations. Unused medications may not be sent home with
patients.
<PAGE>
EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") dated this 1st day of November, 1997 between
Vitalink Pharmacy Services, Inc. ("Employer" or "Vitalink"), a Delaware
corporation with its principal office at 1250 East Diehl Road, Suite 208,
Naperville, Illinois 60563 ("Principal Office"), and Thomas J. Santoro
("Employee"), sets forth the terms and conditions governing the employment
relationship between Employee and Vitalink.
1. Employment. During the term of this Agreement, as hereinafter defined,
Employer hereby employs Employee as Vice President and Corporate Controller.
Employee hereby accepts such employment upon the terms and conditions
hereinafter set forth and agrees to faithfully and to the best of his/her
ability perform such duties as may be from time to time assigned by Employer,
its Board of Directors or its designees, such duties at all times to be rendered
at the Principal Office of Employer and to be consistent with the duties
customarily associated with Employee's position and title.
2. Term. Subject to the provisions for termination hereinafter provided,
the term of this Agreement shall begin on the date of this Agreement and shall
terminate on April 30, 1999. Upon expiration of said period, the parties may
extend the term of they mutually agree to do so.
3. Compensation. For all services rendered by Employee under this
Agreement during the term thereof, Employer shall pay Employee the following
compensation:
a) Salary. A base salary of One Hundred Fifteen Thousand Dollars
($115,000.00) per annum payable in accordance with Employer's standard payroll
practices from time to time in effect. Such salary shall be reviewed annually
and may be increased in accordance with Employer's standard practices.
b) Incentive Bonus. Employee shall have the opportunity to earn a
percentage of the base salary set forth in subparagraph 3(a) above in Employer's
bonus plans as adopted from time to time by Employer's Board of Directors.
c) Automobile. Employer shall provide Employee with the use of a
suitable automobile during the term of this Agreement, and shall provide gas,
oil, maintenance, insurance and other operating expenses for such automobile, or
may provide a car allowance in lieu of the foregoing, in accordance with
Employer's standard practices.
d) Stock Options. Employee shall be eligible to receive options
under the Vitalink Pharmacy Services, Inc. 1996 Long Term Incentive Plan, or
similar plan, to
<PAGE>
purchase common shares of Vitalink or receive stock appreciation rights in
accordance with the policy of the Vitalink Board of Directors as in effect from
time to time.
e) Other Benefits. Employee shall, when eligible, be entitled to
participate in all other fringe benefits accorded headquarters employees by
Employer as are in effect from time to time.
4. Extent of Services. Employee shall devote his full time, attention,
and energies to the business of Employer, and shall not during the term of this
Agreement be engaged in any other business activity whether or not such business
activity is pursued for gain, profit, or other pecuniary advantage; but this
shall not be construed as preventing Employee from investing his/her assets in
the securities of public companies, or the securities of private companies or
limited partnerships, if such holdings are passive investments of One Percent
(1%) of less of outstanding securities and Employee does not hold positions of
director, officer, employee or general partner of such company or partnership.
Employee warrants and represents that he/she has no contracts or obligations to
others which would materially inhibit the performance of his/her services under
this Agreement.
5. Disclosure of Use of Information. Employee recognizes and acknowledges
that Employer's and its affiliates' present and prospective clients, contracts,
development plans, operating data, policies and personnel, as they may exist
from time to time, are valuable, special and unique assets of Employer's
business. Throughout the term of this Agreement and for a period of two (2)
years after its termination or expiration for whatever cause or reason, Employee
shall not directly or indirectly, or cause others to: (1) make use of or
disclose to others any information relating to the business of Employer that has
not otherwise been made public, including but not limited to Employer's and its
affiliates' present or prospective clients, contracts, development plans,
operating data and policies; or (2) without Employer's prior written consent,
offer employment to or employ on behalf of Employee or any other person, any
person who at any time is or has been within the preceding one (1) year an
employee of Employer or any affiliate of Employer, or induce such person
directly to leave his or her employment. In the event of an actual or threatened
breach by Employee of the provisions of this paragraph, Employer shall be
entitled to injunctive relief restraining Employee from committing such breach
or threatened breach. Nothing herein stated shall be construed as
<PAGE>
preventing Employer from pursuing any other remedies available to Employer for
such breach or threatened breach, including the recovery of damages from
Employee.
6. Notices. Any notice, request or demand required or permitted to be
given under this Agreement shall be in writing, and shall be delivered
personally to the recipient or sent by certified, registered or overnight mail
to his/her resident in the case of Employee, or to the Principal Office in the
case of the Employer.
7. Elective Position. Nothing contained in this Agreement is intended
to nor shall be construed to abrogate, limit or affect the powers, rights and
privileges of the Board of Directors or stockholders to remove Employee as Vice
President and Corporate Controller, with or without just cause, during the term
of this Agreement or to elect someone other than Employee as Vice President and
Corporate Controller as provided by law and the By-Laws of Employer; provided;
however, that if Employee is so removed without cause, it is expressly
understood and agreed, in the event any one or combination of the foregoing
occurs, Employee's rights under this Agreement shall in no way be prejudiced,
and Employee shall be entitled to immediately receive compensation referred to
in paragraph 3 above, except ungranted stock options, provided that he is ready,
willing and able to perform the duties and responsibilities set forth above.
Notwithstanding the foregoing, the election or appointment of Employee to a
different executive position shall not be considered removal hereunder.
Employee upon removal shall be entitled to pursue other employment, and Employer
shall be entitled to receive as offset and thereby reduce its payment, the
amount received by Employee from any other active employment. As a condition to
Employee receiving his compensation from Employer, Employee agrees to furnish
Employer annually with full information regarding such other employment and to
permit inspection of his employment records and copies of his income tax
returns. Employer shall receive credit for unemployment insurance benefits,
social security insurance or like amounts actually received by Employee.
8. Waiver of Breach. The waiver of either party of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
9. Assignment. The rights and obligations of Employer under this
Agreement shall insure to the benefit of and shall be binding upon the
successors and assigns of Employer. The obligations of Employee hereunder may
not be assigned or delegated.
<PAGE>
10. Termination of Agreement. This Agreement shall terminate upon the
following events and conditions:
(a) Upon expiration of its term.
(b) For just cause, including but not limited to refusal to carry
out duties and instructions relative to this position, dishonesty,
violation of this Agreement, and any willful acts or omissions inimical
to or contrary to policies of Employer not arbitrarily applied in the case
of Employee. Just cause shall also include solicitation by Employee of
offers of employment from others and solicitation by Employee of the
services of, or positive response by Employee to solicitation by,
professional search or executive recruitment organizations prior to the
last year of this Agreement. Employee shall be entitled to fourteen (14)
days advance written notice of termination, except where the basis for
termination constitutes conduct on the part of Employee involving
dishonesty or bad faith, in which case the termination shall be effective
upon the sending of notice.
(c) In the event that Employee is unable to perform the services
called for hereunder by reason of incapacity or disablement for more than
six (6) months (whether or not consecutive) in any period of twenty-four
(24) consecutive months, Employer shall have the right to terminate this
Agreement by written notice to Employee. Not withstanding such termination,
Employee shall be entitled to any disability benefits accorded headquarters
employees pursuant to paragraph 3(e) above. In the event of such
termination, all non-vested obligations of Employer or Employee pursuant to
this Agreement shall terminate.
(d) In the event of Employee's death during the term of this
Agreement, the Agreement shall terminate as of the date thereof.
11. Entire Agreement. This instrument contains the entire agreement of the
parties. It may be changed only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension, or
discharge is sought. This Agreement shall be governed by the laws of the State
of Illinois, and any litigation shall be conducted in the State of Illinois.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
Employer:
Attest: VITALINK PHARMACY SERVICES, INC.
/s/ Robert W. Horner, III /s/ Donna L. DeNardo
__________________________________ By:_____________________________________
Robert W. Horner, III Donna L. DeNardo
Secretary President and Chief Operating Officer
Witness: Employee:
/s/ Scott T. Macomber /s/ Thomas J. Santoro
__________________________________ ________________________________________
Thomas J. Santoro
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<PAGE>
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<FISCAL-YEAR-END> MAY-31-1998 MAY-31-1998
<PERIOD-START> SEP-01-1997 JUN-01-1997
<PERIOD-END> NOV-30-1997 NOV-30-1997
<CASH> 0 12,554
<SECURITIES> 0 0
<RECEIVABLES> 0 85,414
<ALLOWANCES> 0 7,564
<INVENTORY> 0 26,558
<CURRENT-ASSETS> 0 137,823
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<INCOME-PRETAX> 11,131 18,781
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