<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 0-20540
ON ASSIGNMENT, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4023433
(State of Incorporation) (IRS Employer Identification No.)
26651 WEST AGOURA ROAD, CALABASAS, CA 91302
(Address of principal executive offices)
(Zip Code)
(818) 878-7900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
At April 30, 1998, the total number of outstanding shares of the Company's
Common Stock ($0.01 par value) was 10,823,439.
<PAGE> 2
ON ASSIGNMENT, INC.
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NUMBER
-----------
<S> <C>
Item 1 - Consolidated Financial Statements
Consolidated Balance Sheets at March 31, 1998
and December 31, 1997 (Unaudited) 3
Consolidated Statements of Income for the three months
ended March 31, 1998 and March 31, 1997 (Unaudited) 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1998 and March 31, 1997 (Unaudited) 5, 6
Notes to Consolidated Financial Statements (Unaudited) 7, 8, 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10, 11, 12
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security-Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
Index to Exhibits 15
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 23,282,000 $ 18,339,000
Marketable securities, current 5,070,000 5,370,000
Accounts receivable, net (Note 4) 16,018,000 15,215,000
Advances and deposits 115,000 67,000
Prepaid expenses 1,096,000 679,000
Income taxes receivable -- 111,000
Deferred income taxes 1,252,000 1,218,000
------------ ------------
Total current assets 46,833,000 40,999,000
------------ ------------
Office Furniture, Equipment and
Leasehold Improvements, net (Note 5) 2,609,000 2,572,000
Workers' compensation deposits 725,000 596,000
Goodwill, net (Note 6) 522,000 534,000
Other assets 226,000 163,000
------------ ------------
TOTAL ASSETS $ 50,915,000 $ 44,864,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued payroll $ 4,506,000 $ 3,043,000
Accounts payable 469,000 414,000
Accrued expenses 2,381,000 2,135,000
Income taxes payable 953,000 --
------------ ------------
Total current liabilities 8,309,000 5,592,000
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock (Note 8) 0 0
Common stock (Note 9) 108,000 107,000
Paid-in capital (Note 9) 13,112,000 12,099,000
Retained earnings 29,390,000 27,072,000
Cumulative foreign currency translation adjustment (Note 10) (4,000) (6,000)
------------ ------------
Total stockholders' equity 42,606,000 39,272,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 50,915,000 $ 44,864,000
============ ============
</TABLE>
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
REVENUES $28,567,000 $23,570,000
COST OF SERVICES 19,754,000 16,435,000
----------- -----------
GROSS PROFIT 8,813,000 7,135,000
OPERATING EXPENSES 5,397,000 4,661,000
----------- -----------
OPERATING INCOME 3,416,000 2,474,000
INTEREST INCOME 302,000 155,000
----------- -----------
INCOME BEFORE INCOME TAXES 3,718,000 2,629,000
PROVISION FOR INCOME TAXES 1,400,000 999,000
----------- -----------
NET INCOME $ 2,318,000 $ 1,630,000
=========== ===========
BASIC EARNINGS PER SHARE (Notes 9 and 12) $ 0.22 $ 0.16
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING (Notes 9 and 12) 10,767,000 10,372,000
=========== ===========
DILUTED EARNINGS PER SHARE (Notes 9 and 12) $ 0.21 $ 0.15
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING (Notes 9 and 12) 11,202,000 10,860,000
=========== ===========
</TABLE>
4
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,318,000 $ 1,630,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 218,000 172,000
Increase in allowance for doubtful accounts 88,000 60,000
Decrease in income taxes receivable 111,000 0
(Increase) Decrease in deferred income taxes (34,000) 39,000
Loss on disposal of furniture and equipment 10,000 7,000
(Increase) Decrease in accounts receivable (889,000) 472,000
Increase in accounts payable and accrued expenses 1,764,000 147,000
Increase in income taxes payable 1,233,000 667,000
(Increase) Decrease in workers' compensation deposits (129,000) 27,000
(Increase) Decrease in prepaid expenses (417,000) 69,000
Increase in other assets (66,000) 0
------------ ------------
Net cash provided by operating activities 4,207,000 3,290,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (1,000,000) (500,000)
Proceeds from the maturity of marketable securities 1,300,000 2,000,000
Acquisition of office furniture, equipment and
leasehold improvements (250,000) (298,000)
Proceeds from sale of furniture and equipment 0 3,000
(Increase) Decrease in advances and deposits (48,000) 39,000
------------ ------------
Net cash provided by investing activities 2,000 1,244,000
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of common stock options 644,000 511,000
Proceeds from issuance of common stock -
Employee Stock Purchase Plan 90,000 85,000
------------ ------------
Net cash provided by financing activities 734,000 596,000
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,943,000 5,130,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 18,339,000 11,102,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 23,282,000 $ 16,232,000
============ ============
</TABLE>
5
<PAGE> 6
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Cash paid during the period for income taxes, net of refunds $ 91,000 $ 293,000
================= =================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH
TRANSACTIONS:
<TABLE>
<CAPTION>
Three Months Ended March 31,
-------------------------------------------
1998 1997
----------------- -----------------
<S> <C> <C>
Tax benefit of disqualifying dispositions $ 280,000 $ 100,000
================= =================
</TABLE>
6
<PAGE> 7
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. The accompanying consolidated financial statements have been prepared by the
Company, pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC). This Report on Form 10-Q should be read in conjunction with
the Company's annual report on Form 10-K for the year ended December 31, 1997.
Certain information and footnote disclosures which are normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and regulations.
The information reflects all normal and recurring adjustments which, in the
opinion of Management, are necessary for a fair presentation of the financial
position of the Company and its results of operations for the interim periods
set forth herein. The results for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the full year or any
other period.
2. On January 1, 1997, the Company effected a corporate reorganization resulting
in a consolidation of the Company's divisional field operations into Assignment
Ready, Inc., a Delaware corporation and wholly-owned subsidiary of the Company,
in order to centralize management functions into one entity, to optimize
regional activities and achieve economies of scale.
3. The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
4. Accounts receivable are stated net of an allowance for doubtful accounts of
$814,000 and $734,000 at March 31, 1998 and December 31, 1997, respectively.
5. Office furniture, equipment and leasehold improvements are stated net of
accumulated depreciation and amortization of $2,806,000 and $2,616,000 at March
31, 1998 and December 31, 1997, respectively.
6. Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired. It is being amortized on a straight-line basis over 15
years. Goodwill is stated net of accumulated amortization of $187,000 and
$175,000 at March 31, 1998 and December 31, 1997, respectively.
7. Effective January 1, 1998, the Company implemented the On Assignment, Inc.
Deferred Compensation Plan. The plan permits a select group of management or
highly compensated employees or directors to annually elect to defer up to 100
percent of base salary, annual bonus or fees on a pre-tax basis, and earn
tax-deferred interest on these amounts. Distributions from the plan are made at
retirement, death or termination of employment, in a lump sum, or over five, ten
or fifteen years. At March 31, 1998, the liability under the plan, which is
reflected in accrued expenses, was approximately $173,000. A life insurance
policy is maintained on the participants relating to the plan, whereby the
Company is the sole owner and beneficiary of such insurance.
7
<PAGE> 8
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (continued)
In addition, a Master Trust Agreement has been established and, at least
annually, the Company will transfer assets for its respective future liabilities
created with respect to the annual deferral amounts and annual company
contribution amounts, if any, for such participants for all periods prior to the
transfer.
8. At March 31, 1998 and December 31, 1997, Preferred Stock at a par value of
$0.01 per share consisted of 1,000,000 shares authorized and 0 shares issued and
outstanding.
9. At March 31, 1998 and December 31, 1997, Common Stock at a par value of $0.01
per share consisted of 25,000,000 shares authorized and 10,795,435 and
10,727,235 shares issued and outstanding, respectively.
On September 24, 1997, the Board of Directors authorized a two-for-one stock
split, effected as a 100 percent common stock dividend, distributed on October
20, 1997 to shareholders of record on October 13, 1997. All references in the
accompanying consolidated financial statements to number of shares and per share
amounts of the Company's common stock have been retroactively restated to
reflect the increased number of common shares outstanding. In addition,
stockholders' equity has been restated to give retroactive recognition to the
stock split by reclassifying from paid-in capital to common stock the par value
of the additional shares arising from the split.
10. On May 12, 1997, the Company formed Assignment Ready Inc., a Canadian
corporation and wholly-owned subsidiary of the Company, and commenced operations
in Canada during the third quarter of 1997.
Assets and liabilities of foreign operations, where the functional currency is
the local currency, are translated into U.S. dollars at the rate of exchange in
effect on the balance sheet date. Income and expenses are translated at the
average rates of exchange prevailing during the period. The related translation
adjustments are recorded as cumulative foreign currency translation adjustments,
a separate component of stockholders' equity.
11. On February 12, 1998, the Company adopted the On Assignment, Inc. Change in
Control Severance Plan to provide severance benefits for officers and other
eligible employees who are terminated following an acquisition of the Company.
Under the plan, if an eligible employee is involuntarily terminated within 18
months of a Change in Control, as defined in the Severance Plan, then the
employee will be entitled to salary plus target bonus payable in a lump sum. The
amounts payable would range from one month to 18 months of salary and target
bonus depending on the employee's length of service and position with the
Company.
8
<PAGE> 9
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
ON ASSIGNMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (continued)
12. In December 1997, the Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share." Basic earnings per share are computed
based upon the weighted average number of common shares outstanding and diluted
earnings per share are computed based upon the weighted average number of common
shares outstanding and dilutive common share equivalents (consisting of
incentive stock options and non-qualified stock options) outstanding during the
periods using the treasury stock method.
Following is a reconciliation of the shares used to compute basic and diluted
earnings per share:
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Weighted average number of shares outstanding
used to compute basic earnings per share 10,767,000 10,372,000
Dilutive effect of stock options 435,000 488,000
---------- ----------
Number of shares used to compute diluted earnings per share 11,202,000 10,860,000
========== ==========
</TABLE>
13. In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130), which is effective for fiscal years beginning after December 15, 1997.
SFAS No. 130 defines comprehensive income as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from nonowner sources. SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general purpose financial statements. SFAS No. 130
requires that an enterprise (i) classify items of other comprehensive income by
their nature in a financial statement and (ii) display the accumulated balance
of other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of the balance sheet. Disclosure in the
accompanying consolidated balance sheets and statements of income has not been
made as the nonowner transactions of the Company consist only of foreign
currency translation adjustments, which are insignificant to the consolidated
financial statements as of March 31, 1998 and December 31, 1997.
9
<PAGE> 10
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The discussion in this Report contains forward-looking statements that involve
risks and uncertainties. The Company's actual results could differ materially
from those discussed herein. Factors that could cause or contribute to such
differences include, but are not limited to, the integration of acquired
operations, management of growth, risks inherent in expansion into new
professions and new markets, the Company's ability to attract, train and retain
qualified Account Managers and temporary employees in the laboratory, science,
financial and environmental fields, and other risks discussed in "Risk Factors
That May Affect Future Results" in Item 1 of the Company's Annual Report on Form
10-K for the year ended December 31, 1997, as well as those discussed elsewhere
in this Report and from time to time in the Company's other reports filed with
the Securities and Exchange Commission.
CHANGES IN RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997:
REVENUES - Revenues increased by 21.2% from $23,570,000 for the three months
ended March 31, 1997, to $28,567,000 for the three months ended March 31, 1998,
as a result of the increased revenues of the Lab Support and the Healthcare
Financial Staffing divisions, partially offset by a decrease in the revenues of
the EnviroStaff division.
The growth of the Lab Support division's revenues were primarily attributable to
an increase in the number of temporary employees on assignment and to a lesser
extent to an increase in average hourly billing rates during the 1998 period.
The increase in the number of temporary employees on assignment in the Lab
Support division was primarily attributable to the strong performance in most of
the markets in which the Lab Support division has older, better established
branches and to a lesser extent the contribution of new offices opened in the
past year.
The growth of the Healthcare Financial Staffing division's revenues were
primarily attributable to an increase in the number of temporary employees on
assignment and to a lesser extent to an increase in average hourly billing rates
during the 1998 period, which were principally attributable to a concentration
on new business with a higher price structure. The increase in the number of
temporary employees on assignment in the Healthcare Financial Staffing division
was primarily attributable to the strong performance in most of the markets in
which the Healthcare Financial Staffing division has older, better established
branches and to a lesser extent the contribution of new offices opened in the
past year.
The decrease in the EnviroStaff division's revenues were primarily attributable
to the continuing transition of the division's business away from remediation
and the resulting planned decline in remediation assignments, partially offset
by increases in revenue from the division's higher margin core business and an
increase in average hourly billing rates during the 1998 period.
10
<PAGE> 11
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN RESULTS OF OPERATIONS (CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997:
COST OF SERVICES - Cost of services consists solely of compensation for
temporary employees and payroll taxes and benefits paid by the Company in
connection with such compensation. Cost of services increased 20.2% from
$16,435,000 for the three months ended March 31, 1997, to $19,754,000 for the
three months ended March 31, 1998. Cost of services as a percentage of revenues
decreased from 69.7% in the 1997 period to 69.1% in the 1998 period. This
decrease was primarily attributable to an increase in conversion fee revenue of
the Lab Support and Healthcare Financial Staffing divisions in the 1998 period.
OPERATING EXPENSES - Operating expenses include the costs associated with the
Company's network of Account Managers and branch offices, including Account
Manager compensation, rent, other office expenses and advertising for temporary
employees, and corporate office expenses, such as the salaries of corporate
operations and support personnel, management compensation, Account Manager
recruiting and training expenses, corporate advertising and promotion, rent and
other general and administrative expenses. Operating expenses increased 15.8%
from $4,661,000 for the three months ended March 31, 1997, to $5,397,000 for the
three months ended March 31, 1998. Operating expenses as a percentage of
revenues decreased from 19.8% in the 1997 period to 18.9% in the 1998 period.
This result was primarily attributable to improved Account Manager productivity
and leveraging a more efficient centralized support system over a larger revenue
base.
INTEREST INCOME - Interest income increased 94.8% from $155,000 for the three
months ended March 31, 1997, to $302,000 for the three months ended March 31,
1998, primarily as a result of interest earned on higher interest-bearing cash,
cash equivalent and marketable security account balances in the 1998 period.
PROVISION FOR INCOME TAXES - Provision for income taxes increased 40.1% from
$999,000 for the three months ended March 31, 1997 to $1,400,000 for the three
months ended March 31, 1998. The Company's effective tax rate decreased from
38.0% in the 1997 period to 37.7% in the 1998 period.
11
<PAGE> 12
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's primary sources of cash for the three months ended March 31, 1997
and 1998 were funds provided by operating activities. For the three months ended
March 31, 1997, operating activities provided $3,290,000 of cash compared to
$4,207,000 for the three months ended March 31, 1998. This increase was
primarily attributable to an increase in accounts payable and accrued expenses,
income taxes payable and higher net income. The increase was partially offset by
an increase in accounts receivable and prepaid expenses.
Cash provided by investing activities totaled $1,244,000 for the three months
ended March 31, 1997, compared to $2,000 for the three months ended March 31,
1998. This was primarily attributable to lower net proceeds from the maturity of
marketable securities in the 1998 period.
Cash provided by financing activities was $596,000 for the three months ended
March 31, 1997, compared to $734,000 for the three months ended March 31, 1998.
The increase was attributable to greater proceeds from the issuance of common
stock pursuant to the Company's Stock Option Plan and Employee Stock Purchase
Plan during the 1998 period.
Effective November 25, 1997, the Company renewed its unsecured bank line of
credit. The maximum borrowings allowable under this agreement are $7,000,000 and
bear interest at the bank's reference rate (8.50% at March 31, 1998). The
agreement expires on July 1, 1999. No borrowings were outstanding under this
credit line at March 31, 1998.
The Company believes that its cash balances, together with funds from operations
and its borrowing capacity, will be sufficient to meet its cash requirements
through at least the next twelve months.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
ITEM 5 - OTHER INFORMATION
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.15 On Assignment, Inc. Change In Control Severance Plan and
Summary Plan Description
10.16 On Assignment, Inc. Deferred Compensation Plan
10.17 Master Trust Agreement for On Assignment, Inc. Deferred
Compensation Plan
11.1 Statement regarding computation of earnings per share
(b) Reports on Form 8-K
The Company filed a Form 8-K with the Securities and Exchange
Commission on February 4, 1998.
13
<PAGE> 14
PART II - OTHER INFORMATION
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.
ON ASSIGNMENT, INC.
Date: May 14, 1998 By: /s/ H. Tom Buelter
------------------- -----------------------
H. Tom Buelter
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 1998 By: /s/ Ronald W. Rudolph
------------------- -----------------------
Ronald W. Rudolph
Sr. Vice President, Finance & Operations
Support, and Chief Financial Officer
(Principal Financial and Accounting Officer)
14
<PAGE> 15
PART II - OTHER INFORMATION
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
10.15 On Assignment, Inc. Change in Control Severance Plan and Summary Plan Description
10.16 On Assignment, Inc. Deferred Compensation Plan
10.17 Master Trust Agreement for On Assignment, Inc. Deferred Compensation Plan
11.1 Statement regarding computation of earnings per share
</TABLE>
15
<PAGE> 1
- --------------------------------------------------------------------------------
ON ASSIGNMENT, INC.
CHANGE IN CONTROL SEVERANCE PLAN
AND
SUMMARY PLAN DESCRIPTION
Plan Effective Date: February 12, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
ON ASSIGNMENT, INC.
CHANGE IN CONTROL SEVERANCE PLAN
AND
SUMMARY PLAN DESCRIPTION
The On Assignment, Inc. Change in Control Severance Plan (the "Plan") is
primarily designed to provide eligible employees of On Assignment, Inc. (the
"Company") whose employment is terminated on or after February 12, 1998 with
separation pay in the event of an involuntary termination.
This Plan is designed to be an "employee welfare benefit plan," as defined in
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). This Plan is governed by ERISA and, to the extent applicable, the
laws of the State of California. This document constitutes both the official
plan document and the required summary plan description under ERISA.
I. ELIGIBILITY
You will be an Eligible Employee for purposes of receiving severance benefits
under the Plan if:
o you are a regular, full-time employee of the Company and are identified
on Exhibit A;
o your active employment is Involuntarily Terminated within the eighteen
(18) month period following a Change in Control;
o you execute the General Release of All Claims (the "General Release"), a
copy of which is attached as Exhibit B, within five (5) business days
after your termination date or, if you are age forty (40) or over, you
execute the General Release, a copy of which is attached as Exhibit C,
within forty-five (45) business days after your termination; and
o you are not in one of the excluded categories listed below.
You are not eligible for severance benefits under this Plan if:
o you are a temporary employee, part-time employee working fewer than 30
hours per week (no minimum number of hours shall apply to salaried
employees), probationary employee or student employee, excluding, in any
event, employees hired to be placed on assignment with clients of the
Company;
o you voluntarily terminate employment;
o you are employed with a successor employer which directly or indirectly
acquires (i) all or any portion of the assets or operations of the
Company or any subsidiary, (ii) all or any portion of the outstanding
capital stock of the Company, or (iii) fifty percent (50%) or more of
the capital stock of any subsidiary of the Company. However, you would
be
<PAGE> 3
eligible for severance benefits pursuant to the terms of the Plan
upon a subsequent termination within 18 months following a Change in
Control; or
o you are dismissed for Cause, whether or not you already received notice
of a termination which would otherwise qualify you for severance
benefits.
II. HOW THE PLAN WORKS
If you are eligible for severance benefits under the Plan, the amount of your
severance pay will be determined in accordance with the guidelines set forth
below, subject to the Golden Parachute Tax limitation and Pooling limitation set
forth below. You will receive your severance pay in a lump-sum payment which
will be made as soon as administratively practicable after the occurrence of the
following events:
o your Involuntary Termination within eighteen months after a Change in
Control;
o the Company's receipt of your executed General Release; and
o the expiration of any rescission period applicable to your executed
General Release.
Severance Guidelines
If your employment is Involuntarily Terminated within eighteen (18) months after
a Change in Control, you will be paid:
o 150% of the Eligible Employee's Annual Base Pay and Target Bonus, if the
Eligible Employee was the Chief Executive Officer of the Company
immediately before the Change in Control;
o 100% of the Eligible Employee's Annual Base Pay and Target Bonus, if the
Eligible Employee was a senior vice president or above (other than the
CEO) of the Company immediately before the Change in Control;
o 75% of the Eligible Employee's Annual Base Pay and Target Bonus, if the
Eligible Employee was a vice president (whether or not an executive
officer, but excluding the executive officers at or above the level of
senior vice president) of the Company immediately before the Change in
Control;
o 1 month of the Eligible Employee's Annual Base Pay and Incentive
Compensation for each year or partial year of service to the Company as
an employee, up to a maximum of 6 months of Annual Base Pay, with a
minimum of two months of Annual Base Pay, if the Eligible Employee was a
"director," "manager," Operations Manager or Senior Account Manager
immediately before the Change in Control;
2
<PAGE> 4
o 1 month of the Eligible Employee's Annual Base Pay for each year or
partial year of service to the Company as an employee, up to a maximum
of 3 months of Annual Base Pay, with a minimum of one month of Annual
Base Pay, if the Eligible Employee was an exempt employee (other than an
officer, director or manager) of the Company immediately before the
Change in Control; or
o 1 week of the Eligible Employee's Annual Base Pay for each year or
partial year of service to the Company as an employee, up to a maximum
of 3 months of Annual Base Pay, with a minimum of one week of Annual
Base Pay, for all other Eligible Employee.
Annual Base Pay generally means your annualized base salary at the rate in
effect during the last regularly scheduled payroll period immediately preceding
the occurrence of the Change in Control and does not include, for example,
bonuses, overtime compensation, incentive pay, fringe benefits, sales
commissions or expense allowances.
Cause means your willful breach of duty unless waived by the Company (which
willful breach is limited to your deliberate and consistent refusal to perform
your duties or the deliberate and consistent refusal to conform to or follow any
reasonable policy adopted by the Company provided you have had prior written
notice of such refusal), your unauthorized use or disclosure of the confidential
information or trade secrets of the Company, your conviction of a felony under
the laws of the United States or any state thereof, or your gross negligence.
Change in Control shall be deemed to occur upon the consummation of any of the
following transactions:
1. a merger or consolidation in which the Company is not the surviving
entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation; or
2. the sale, transfer or other disposition of all or substantially all of
the assets of the Company; or
3. any reverse merger in which the Company is the surviving entity, but in
which 50% or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock
immediately prior to such merger; or
4. the acquisition by any person (or entity) directly or indirectly of 50%
or more of the combined voting power of the outstanding shares of
Company capital stock.
Incentive Compensation shall mean 100% of the commission, bonus or other
incentive-type pay paid to you for the immediately preceding calendar year.
3
<PAGE> 5
Involuntary Termination shall mean the termination of your employment with the
Company (or, if applicable, successor entity) other than by reason of death or
disability:
(A) involuntarily upon your discharge or dismissal other than for
Cause, or
(B) upon your resignation following (I) a reduction in your level
of Annual Base Pay and any Target Bonus or (II) a relocation of your
place of employment which is more than 35 miles from your place of
employment prior to the Change in Control, provided and only if such
change or reduction is effected without your written concurrence, or
(C) voluntarily or involuntarily in the case of an employee who
was an executive officer or vice president immediately before the
applicable Change in Control upon the employee's resignation following a
change in the employee's position with the Company (or, if applicable,
with the successor entity) that is effected without the employee's
consent and materially reduces his or her level of responsibility or
authority.
Target Bonus shall mean 100% of the bonus potential established for the employee
by the Board for the applicable fiscal year.
Golden Parachute Tax Limitation
In the event that the cash severance payment you would receive under this Plan,
when added to any other payments or benefits received by you, would (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code ("Code") and (ii) be subject to the 20% excise tax imposed
by Section 4999 of the Code, then your cash severance payments shall be either
payable in full or
payable as to such lesser amount which would result in no portion
of the compensation payable to you being subject to excise tax
under Section 4999 of the Code,
whichever of the foregoing amounts, taking into account the applicable Federal,
state and local income taxes and the 20% excise tax imposed by Code Section
4999, results in your receipt, on an after-tax basis, of the greatest amount. No
payments due you outside of this Plan shall be reduced by reason of this
paragraph. Unless you and the Company agree otherwise in writing, any
determination required to make this adjustment shall be made in writing by the
Company's independent public accountants or other outside auditors selected by
the Company immediately prior to the change of control triggering the parachute
payments, whose determination shall be binding upon you and the Company. You and
the Company are obligated to furnish to the accountants such information and
documents as the accountants may reasonably request. The Company shall bear all
costs of engaging the accountants in connection with these calculations.
4
<PAGE> 6
Pooling Limitation. If the Company and the other party to the transaction
constituting a Change in Control agree that the transaction is to be treated as
a "pooling of interests" for financial reporting purposes, and if the
transaction in fact is so treated, then the benefits payable under the Plan
shall be reduced or revoked to the extent that the Board determines in good
faith that the payment of benefits under the Plan would preclude the use of
"pooling of interests" accounting treatment.
III. OTHER IMPORTANT INFORMATION
Plan Administration. As the Plan Administrator, the Company has full
discretionary authority to administer and interpret the Plan, including
discretionary authority to determine eligibility for benefits under the Plan and
the amount of benefits (if any) payable per participant. Any determination by
the Plan Administrator will be final and conclusive upon all persons. Any
determination by the Board that the Pooling limitation requires termination of
the Plan and/or payment of no or reduced benefits shall be final and conclusive
on all persons.
Benefits. When benefits are due, they will be paid from the general assets of
the Company. The Company is not required to establish a trust to fund the Plan.
The benefits provided under this Plan are not assignable and may be conditioned
upon your compliance with any confidentiality agreement you have entered into
with the Company or upon your compliance with any Company policy or program
communicated to you in writing.
Claims Procedure. If you believe you are incorrectly denied a benefit or are
entitled to a greater benefit than the benefit you receive under the Plan, you
may submit a signed, written application to the Plan Administrator within ninety
(90) days of your termination. You will be notified of the approval or denial of
this claim within ninety (90) days of the date that the Plan Administrator
receives the claim, unless special circumstances require an extension of time
for processing the claim. If your claim is denied, the notification will state
specific reasons for the denial and you will have sixty (60) days from receipt
of the written notification of the denial of your claim to file a signed,
written request for a review of the denial with the Plan Administrator. This
request should include the reasons you are requesting a review, facts supporting
your request and any other relevant comments. Pursuant to its discretionary
authority to administer and interpret the Plan and to determine eligibility for
benefits under the Plan, the Plan Administrator will generally make a final,
written determination of your eligibility for benefits within sixty (60) days of
receipt of your request for review.
Plan Terms. Except as otherwise set forth herein, this Plan supersedes any and
all prior separation, severance and salary continuation arrangements, programs
and plans which were previously offered by the Company for the purpose of paying
benefits upon a termination following a Change in Control, including pursuant to
employment agreement or offer letter. Nothing in this Plan shall affect an
employee's right to severance benefits under circumstances not involving a
termination following a Change in Control. In no event, however, shall any
individual receive severance benefits under both this Plan and any other
separation, severance pay and salary continuation program, plan or other
arrangement with the Company.
5
<PAGE> 7
Plan Amendment or Termination. The Company reserves the right to terminate or
amend the Plan at any time upon the vote of a two-thirds majority of the Board
of Directors; provided, however, that no amendment may be made after the
occurrence of a Change in Control. Any termination or amendment of the Plan may
be made effective immediately with respect to any benefits not yet paid, whether
or not prior notice of such amendment or termination has been given to affected
employees.
Taxes. The Company will withhold all applicable taxes and other payroll
deductions from any severance payment.
No Right To Employment. This Plan does not provide you with any right to
continue employment with the Company or affect the Company's right, which right
is hereby expressly reserved, to terminate the employment of any individual at
any time for any reason with or without cause.
IV. STATEMENT OF ERISA RIGHTS
As a participant in the Plan, you are entitled to certain rights and protections
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA").
ERISA provides that all Plan participants shall be entitled to:
1. Examine, without charge, at the Plan Administrator's office, all
Plan documents, including all documents filed by the Plan with
the U.S. Department of Labor.
2. Obtain copies of all Plan documents and other Plan information
upon written request to the Plan Administrator. The Plan
Administrator may make a reasonable charge for the copies.
3. Receive a summary of the Plan's annual financial report.
4. File suit in a federal court, if you, as a participant, request
materials and do not receive them within thirty (30) days of your
request. In such a case, the court may require the Plan
Administrator to provide the materials and to pay you a fine of
up to $100 for each day's delay until the materials are received,
unless the materials were not sent because of reasons beyond the
control of the Plan Administrator.
In addition to creating rights for certain employees of the Company under the
Plan, ERISA imposes obligations upon the people who are responsible for the
operation of the Plan. The people who operate the Plan (called "fiduciaries")
have a duty to do so prudently and in the interest of the Company's employees
who are covered by the Plan.
No one, including your employer or any other person, may fire you or otherwise
discriminate against you in any way to prevent you from obtaining a benefit to
which you are entitled under the Plan or from exercising your rights under
ERISA.
6
<PAGE> 8
If your claim for a severance benefit is denied or ignored, in whole or in part,
you have a right to file suit in a federal or a state court. If Plan fiduciaries
are misusing the Plan's assets (if any) or if you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of Labor
or file suit in a federal court. The court will decide who will pay court costs
and legal fees. If you are successful in your lawsuit, the court may, if it so
decides, order the party you have sued to pay your legal costs, including
attorney fees. However, if you lose, the court may order you to pay these costs
and fees, for example, if it finds that your claim or suit is frivolous.
If you have any questions about the Plan, this statement or your rights under
ERISA, you should contact the Plan Administrator or the nearest Area Office of
the U.S. Labor-Management Services Administration, Department of Labor.
7
<PAGE> 9
ADDITIONAL PLAN INFORMATION
<TABLE>
<CAPTION>
=======================================================================================
<S> <C>
Name of Plan: On Assignment, Inc. Change in Control Severance Plan
- ---------------------------------------------------------------------------------------
Company Sponsoring Plan: On Assignment, Inc.
26651 West Agoura Road
Calabasas, California 91302
- ---------------------------------------------------------------------------------------
Employer Identification 95-4023433
Number:
- ---------------------------------------------------------------------------------------
Plan Number: 504
- ---------------------------------------------------------------------------------------
Plan Year: The calendar year; the first plan year is a short plan
year starting February 12, 1998 and ending December 31,
1998
- ---------------------------------------------------------------------------------------
Plan Administrator: On Assignment, Inc.
26651 West Agoura Road
Calabasas, California 91302
(818) 878-7900
- ---------------------------------------------------------------------------------------
Agent for Service of Plan Administrator
Legal Process:
- ---------------------------------------------------------------------------------------
Type of Plan: Severance Plan/Employee Welfare Benefit Plan
- ---------------------------------------------------------------------------------------
Plan Costs: The cost of the Plan is paid by On Assignment, Inc.
=======================================================================================
</TABLE>
8
<PAGE> 10
EXHIBIT A
GENERAL RELEASE OF ALL CLAIMS
In consideration of the severance benefits to be paid to me by On
Assignment, Inc. in accordance with the terms of the On Assignment, Inc. Change
in Control Severance Plan, a copy of which has been given to me, I hereby fully
and forever release and discharge On Assignment, Inc., its officers, directors,
agents, employees, successors, predecessors, subsidiaries and assigns
(hereinafter, collectively called "On Assignment") from all claims and causes of
action arising out of or relating in any way to my employment with On Assignment
including the termination of my employment.
1. I understand and agree that this RELEASE is a full and complete
waiver of all claims, including, but not limited to, claims of wrongful
discharge, breach of contract, breach of the covenant of good faith and fair
dealing, violation of public policy, defamation, personal injury, emotional
distress, claims under Title VII of the Civil Rights Act of 1964, as amended,
the Fair Labor Standards Act, the California Fair Employment and Housing Act,
the Equal Pay Act of 1963, the Americans With Disabilities Act, California Labor
Code Section 1197.5, the Civil Rights Act of 1866, the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any other state and
federal laws and regulations relating to employment or employment
discrimination. I further understand that by this RELEASE I agree not to assist,
encourage, institute or cause to be instituted the filing of any administrative
charge or legal proceeding against On Assignment relating to employment
discrimination.
2. I also hereby agree that nothing contained in this RELEASE shall
constitute or be treated as an admission of liability or wrongdoing by me or On
Assignment.
3. In addition, and in further consideration of the foregoing, I hereby
expressly waive any and all rights and benefits conferred upon me by the
provisions of Section 1542 of the Civil Code of the State of California, which
states as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
4. I hereby acknowledge that I have read and understand the foregoing
RELEASE and that I sign it voluntarily and without coercion. I further
acknowledge that I was given an opportunity to consider and review this RELEASE
and to consult with an attorney of my own choosing concerning the waivers
contained in this RELEASE, that I have done so and that the waivers made herein
are knowing, conscious and with full appreciation that I am forever foreclosed
from pursing any of the rights so waived.
Executed this _____ day of ___________, 199__.
-----------------------------------------------
Employee
<PAGE> 11
EXHIBIT B
GENERAL RELEASE OF ALL CLAIMS
In consideration of the severance benefits to be paid to me by On
Assignment, Inc. in accordance with the terms of the On Assignment, Inc. Change
in Control Severance Plan (the "Plan"), a copy of which has been given to me, I
hereby fully and forever release and discharge On Assignment, Inc., its
officers, directors, agents, employees, successors, predecessors, subsidiaries
and assigns (hereinafter, collectively called "On Assignment") from all claims
and causes of action arising out of or relating in any way to my employment with
On Assignment including the termination of my employment.
1. I understand and agree that this RELEASE is a full and complete
waiver of all claims, including, but not limited to, claims of wrongful
discharge, breach of contract, breach of the covenant of good faith and fair
dealing, violation of public policy, defamation, personal injury, emotional
distress, claims under Title VII of the Civil Rights Act of 1964, as amended,
the Fair Labor Standards Act, the California Fair Employment and Housing Act,
the Equal Pay Act of 1963, the Americans With Disabilities Act, California Labor
Code Section 1197.5, the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967, as amended, the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any other state and federal laws and
regulations relating to employment or employment discrimination. I further
understand that by this RELEASE I agree not to assist, encourage, institute or
cause to be instituted the filing of any administrative charge or legal
proceeding against On Assignment relating to employment discrimination.
2. I also hereby agree that nothing contained in this RELEASE shall
constitute or be treated as an admission of liability or wrongdoing by me or On
Assignment.
3. In addition, and in further consideration of the foregoing, I hereby
expressly waive any and all rights and benefits conferred upon me by the
provisions of Section 1542 of the Civil Code of the State of California, which
states as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor.
4. I understand that I may have 21 days after receipt of this RELEASE
within which I may review and consider, discuss with an attorney of my own
choosing, and decide to execute or not execute it. I also understand for a
period of seven (7) days after I sign this RELEASE, I may revoke this RELEASE
and that the RELEASE will not become effective until seven (7) days after I sign
it, and only then if I do not revoke it. In order to revokes this RELEASE, I
must deliver to the Chief Executive Officer, by no later than seven (7) days
after I execute this RELEASE, a letter stating that I am revoking it.
a. I understand that if I choose to revoke this RELEASE
within seven (7) days after I sign it, any severance benefits which I would
otherwise be entitled to receive, will not be due and payable, and the RELEASE
will have no effect. If I do not elect to sign this RELEASE, I understand that I
will not receive any severance benefits under this Plan or any other plan.
<PAGE> 12
EMPLOYEE'S ACCEPTANCE OF RELEASE
5. BEFORE SIGNING MY NAME TO THIS RELEASE, I STATE THAT: I HAVE READ IT; I
UNDERSTAND IT AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS; I AM AWARE OF MY
RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING IT; AND I HAVE SIGNED IT
KNOWINGLY AND VOLUNTARILY.
Executed this _____ day of ___________, 199__.
-----------------------------------------------
Employee
<PAGE> 1
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
EFFECTIVE JANUARY 1, 1998
COPYRIGHT (C) 1997
BY COMPENSATION RESOURCE GROUP, INC.
ALL RIGHTS RESERVED
<PAGE> 2
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
----
<S> <C>
PURPOSE .......................................................................................1
ARTICLE 1 DEFINITIONS....................................................................1
ARTICLE 2 SELECTION, ENROLLMENT, ELIGIBILITY.............................................7
2.1 SELECTION BY COMMITTEE.........................................................7
2.2 ENROLLMENT REQUIREMENTS........................................................7
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION.....................................7
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS..................................7
ARTICLE 3 DEFERRAL COMMITMENTS/COMPANY MATCHING/CREDITING TAXES.........................7
3.1 MINIMUM DEFERRALS..............................................................7
3.2 MAXIMUM DEFERRAL...............................................................8
3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM.....................................8
3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS.........................................9
3.5 ANNUAL COMPANY CONTRIBUTION AMOUNT.............................................9
3.6 INVESTMENT OF TRUST ASSETS.....................................................9
3.7 VESTING........................................................................9
3.8 CREDITING/DEBITING OF ACCOUNT BALANCES.........................................9
3.9 FICA AND OTHER TAXES..........................................................12
3.10 DISTRIBUTIONS.................................................................12
ARTICLE 4 SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL
ELECTION; 401(K) ROLL-OVER...................................................12
4.1 SHORT-TERM PAYOUT.............................................................12
4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM................................13
4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES.........13
4.4 WITHDRAWAL ELECTION...........................................................13
ARTICLE 5 RETIREMENT BENEFIT...........................................................14
5.1 RETIREMENT BENEFIT............................................................14
5.2 PAYMENT OF RETIREMENT BENEFIT.................................................14
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT...............................14
</TABLE>
- --------------------------------------------------------------------------------
i
<PAGE> 3
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 6 PRE-RETIREMENT SURVIVOR BENEFIT...............................................14
6.1 PRE-RETIREMENT SURVIVOR BENEFIT...............................................14
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT....................................14
ARTICLE 7 TERMINATION BENEFIT...........................................................15
7.1 TERMINATION BENEFIT...........................................................15
7.2 PAYMENT OF TERMINATION BENEFIT................................................15
ARTICLE 8 DISABILITY WAIVER AND BENEFIT.................................................15
8.1 DISABILITY WAIVER.............................................................15
8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT.....................................16
ARTICLE 9 BENEFICIARY DESIGNATION.......................................................16
9.1 BENEFICIARY...................................................................16
9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT..............................16
9.3 ACKNOWLEDGEMENT...............................................................17
9.4 NO BENEFICIARY DESIGNATION....................................................17
9.5 DOUBT AS TO BENEFICIARY.......................................................17
9.6 DISCHARGE OF OBLIGATIONS......................................................17
ARTICLE 10 LEAVE OF ABSENCE..............................................................17
10.1 PAID LEAVE OF ABSENCE.........................................................17
10.2 UNPAID LEAVE OF ABSENCE.......................................................18
ARTICLE 11 TERMINATION, AMENDMENT OR MODIFICATION........................................18
11.1 TERMINATION...................................................................18
11.2 AMENDMENT.....................................................................19
11.3 PLAN AGREEMENT................................................................19
11.4 EFFECT OF PAYMENT.............................................................19
ARTICLE 12 ADMINISTRATION................................................................19
12.1 COMMITTEE DUTIES..............................................................19
12.2 AGENTS........................................................................20
12.3 BINDING EFFECT OF DECISIONS...................................................20
12.4 INDEMNITY OF COMMITTEE........................................................20
12.5 EMPLOYER INFORMATION..........................................................20
</TABLE>
- --------------------------------------------------------------------------------
ii
<PAGE> 4
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 13 OTHER BENEFITS AND AGREEMENTS.................................................20
13.1 COORDINATION WITH OTHER BENEFITS..............................................20
ARTICLE 14 CLAIMS PROCEDURES.............................................................20
14.1 PRESENTATION OF CLAIM.........................................................20
14.2 NOTIFICATION OF DECISION......................................................21
14.3 REVIEW OF A DENIED CLAIM......................................................21
14.4 DECISION ON REVIEW............................................................21
14.5 LEGAL ACTION..................................................................22
ARTICLE 15 TRUST.........................................................................23
15.1 ESTABLISHMENT OF THE TRUST....................................................23
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST...................................23
15.3 DISTRIBUTIONS FROM THE TRUST..................................................23
ARTICLE 16 MISCELLANEOUS.................................................................23
16.1 STATUS OF PLAN................................................................23
16.2 UNSECURED GENERAL CREDITOR....................................................23
16.3 EMPLOYER'S LIABILITY..........................................................23
16.4 NONASSIGNABILITY..............................................................24
16.5 NOT A CONTRACT OF EMPLOYMENT..................................................24
16.6 FURNISHING INFORMATION........................................................24
16.7 TERMS.........................................................................24
16.8 CAPTIONS......................................................................24
16.9 GOVERNING LAW.................................................................24
16.10 NOTICE........................................................................25
16.11 SUCCESSORS....................................................................25
16.12 SPOUSE'S INTEREST.............................................................25
16.13 VALIDITY......................................................................25
16.14 INCOMPETENT...................................................................25
16.15 COURT ORDER...................................................................25
16.16 DISTRIBUTION IN THE EVENT OF TAXATION.........................................26
16.17 INSURANCE.....................................................................26
16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL..........................26
</TABLE>
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iii
<PAGE> 5
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
ON ASSIGNMENT, INC.
DEFERRED COMPENSATION PLAN
Effective January 1, 1998
PURPOSE
The purpose of this Plan is to provide specified benefits to a select
group of management and highly compensated Employees and Directors who
contribute materially to the continued growth, development and future business
success of On Assignment, Inc., a Delaware corporation, and its subsidiaries, if
any, that sponsor this Plan. This Plan shall be unfunded for tax purposes and
for purposes of Title I of ERISA.
ARTICLE 1
DEFINITIONS
For purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean, with respect to a Participant, a credit on
the records of the Employer equal to the sum of (i) the Deferral Account
balance and (ii) the Company Contribution Account balance. The Account
Balance, and each other specified account balance, shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to a
Participant, or his or her designated Beneficiary, pursuant to this
Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary relating to services performed during any calendar year, whether
or not paid in such calendar year or included on the Federal Income Tax
Form W-2 for such calendar year, payable to a Participant as an Employee
under any Employer's annual bonus and cash incentive plans, excluding
stock options.
1.3 "Annual Company Contribution Amount" shall mean, for any one Plan Year,
the amount determined in accordance with Section 3.5.
1.4 "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Annual Bonus and Directors Fees that a Participant elects
to have, and is deferred, in accordance with Article 3, for any one Plan
Year. In the event of a Participant's Retirement, Disability (if
deferrals cease in accordance with Section 8.1), death or a Termination
of Employment prior to the end of a Plan Year, such year's Annual
Deferral Amount shall be the actual amount withheld prior to such event.
- --------------------------------------------------------------------------------
-1-
<PAGE> 6
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
1.5 "Annual Installment Method" shall be an Annual Installment payment over
the number of years selected by the Participant in accordance with this
Plan, calculated as follows: The Account Balance of the Participant
shall be calculated as of the close of business on the last business day
of the year. The Annual Installment shall be calculated by multiplying
this balance by a fraction, the numerator of which is one, and the
denominator of which is the remaining number of annual payments due the
Participant. By way of example, if the Participant elects a 10 year
Annual Installment Method, the first payment shall be 1/10 of the
Account Balance, calculated as described in this definition. The
following year, the payment shall be 1/9 of the Account Balance,
calculated as described in this definition. Each Annual Installment
shall be paid on or as soon as practicable after the last business day
of the applicable year.
1.6 "Base Annual Salary" shall mean the annual cash compensation relating to
services performed during any calendar year, whether or not paid in such
calendar year or included on the Federal Income Tax Form W-2 for such
calendar year, excluding bonuses, commissions, overtime, fringe
benefits, stock options, relocation expenses, incentive payments,
non-monetary awards, directors fees and other fees, automobile and other
allowances paid to a Participant for employment services rendered
(whether or not such allowances are included in the Employee's gross
income). Base Annual Salary shall be calculated before reduction for
compensation voluntarily deferred or contributed by the Participant
pursuant to all qualified or non-qualified plans of any Employer and
shall be calculated to include amounts not otherwise included in the
Participant's gross income under Code Sections 125, 402(e)(3), 402(h),
or 403(b) pursuant to plans established by any Employer; provided,
however, that all such amounts will be included in compensation only to
the extent that, had there been no such plan, the amount would have been
payable in cash to the Employee.
1.7 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.8 "Beneficiary Designation Form" shall mean the form established from time
to time by the Committee that a Participant completes, signs and returns
to the Committee to designate one or more Beneficiaries.
1.9 "Board" shall mean the board of directors of the Company.
1.10 "Change in Control" shall mean the first to occur of any of the
following events:
(a) Any "person" (as that term is used in Section 13 and 14(d)(2) of
the Securities Exchange Act of 1934 ("Exchange Act")) becomes
the beneficial owner (as that term is used in Section 13(d) of
the Exchange Act), directly or indirectly, of 50% or more of the
Company's capital stock entitled to vote in the election of
directors;
- --------------------------------------------------------------------------------
-2-
<PAGE> 7
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Plan Document
================================================================================
(b) During any period of not more than two consecutive years, not
including any period prior to the adoption of this Plan,
individuals who at the beginning of such period constitute the
board of directors of the Company, and any new director (other
than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in
clause (a), (c), (d) or (e) of this Section 1.10) whose election
by the board of directors or nomination for election by the
Company's stockholders was approved by a vote of at least
three-fourths (3/4ths) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(c) The shareholders of the Company approve any consolidation or
merger of the Company, other than a consolidation or merger of
the Company in which the holders of the common stock of the
Company immediately prior to the consolidation or merger hold
more than 50% of the common stock of the surviving corporation
immediately after the consolidation or merger;
(d) The shareholders of the Company approve any plan or proposal for
the liquidation or dissolution of the Company; or
(e) The shareholders of the Company approve the sale or transfer of
all or substantially all of the assets of the Company to parties
that are not within a "controlled group of corporations" (as
defined in Code Section 1563) in which the Company is a member.
1.11 "Claimant" shall have the meaning set forth in Section 14.1.
1.12 "Code" shall mean the Internal Revenue Code of 1986, as it may be
amended from time to time.
1.13 "Committee" shall mean the committee described in Article 12.
1.14 "Company" shall mean On Assignment, Inc., a Delaware corporation, and
any successor to all or substantially all of the Company's assets or
business.
1.15 "Company Contribution Account" shall mean (i) the sum of the
Participant's Annual Company Contribution Amounts, plus (ii) amounts
credited in accordance with all the applicable crediting provisions of
this Plan that relate to the Participant's Company Contribution Account,
less (iii) all distributions made to the Participant or his or her
Beneficiary pursuant to this Plan that relate to the Participant's
Company Contribution Account.
1.16 "Deduction Limitation" shall mean the following described limitation on
a benefit that may otherwise be distributable pursuant to the provisions
of this Plan. Except as otherwise provided, this limitation shall be
applied to all distributions that are "subject to the Deduction
Limitation"
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Master Plan Document
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under this Plan. If an Employer determines in good faith prior to a
Change in Control that there is a reasonable likelihood that any
compensation paid to a Participant for a taxable year of the Employer
would not be deductible by the Employer solely by reason of the
limitation under Code Section 162(m), then to the extent deemed
necessary by the Employer to ensure that the entire amount of any
distribution to the Participant pursuant to this Plan prior to the
Change in Control is deductible, the Employer may defer all or any
portion of a distribution under this Plan. Any amounts deferred pursuant
to this limitation shall continue to be credited/debited with additional
amounts in accordance with Section 3.8 below, even if such amount is
being paid out in installments. The amounts so deferred and amounts
credited thereon shall be distributed to the Participant or his or her
Beneficiary (in the event of the Participant's death) at the earliest
possible date, as determined by the Employer in good faith, on which the
deductibility of compensation paid or payable to the Participant for the
taxable year of the Employer during which the distribution is made will
not be limited by Section 162(m), or if earlier, the effective date of a
Change in Control. Notwithstanding anything to the contrary in this
Plan, the Deduction Limitation shall not apply to any distributions made
after a Change in Control.
1.17 "Deferral Account" shall mean (i) the sum of all of a Participant's
Annual Deferral Amounts, plus (ii) amounts credited in accordance with
all the applicable crediting provisions of this Plan that relate to the
Participant's Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate
to his or her Deferral Account.
1.18 "Director" shall mean any member of the board of directors of any
Employer.
1.19 "Directors Fees" shall mean the annual fees paid by any Employer,
including retainer fees and meetings fees, as compensation for serving
on the board of directors.
1.20 "Disability" shall mean a period of disability during which a
Participant qualifies for permanent disability benefits under the
Participant's Employer's long-term disability plan, or, if a Participant
does not participate in such a plan, a period of disability during which
the Participant would have qualified for permanent disability benefits
under such a plan had the Participant been a participant in such a plan,
as determined in the sole discretion of the Committee. If the
Participant's Employer does not sponsor such a plan, or discontinues to
sponsor such a plan, Disability shall be determined by the Committee in
its sole discretion.
1.21 "Disability Benefit" shall mean the benefit set forth in Article 8.
1.22 "Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the
Committee to make an election under the Plan.
1.23 "Employee" shall mean a person who is an employee of any Employer.
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1.24 "Employer(s)" shall mean the Company and/or any of its subsidiaries (now
in existence or hereafter formed or acquired) that have been selected by
the Board to participate in the Plan and have adopted the Plan as a
sponsor.
1.25 "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as it may be amended from time to time.
1.26 "Participant" shall mean any Employee or Director (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan,
(iii) who signs a Plan Agreement, an Election Form and a Beneficiary
Designation Form, (iv) whose signed Plan Agreement, Election Form and
Beneficiary Designation Form are accepted by the Committee, (v) who
commences participation in the Plan, and (vi) whose Plan Agreement has
not terminated. A spouse or former spouse of a Participant shall not be
treated as a Participant in the Plan or have an account balance under
the Plan, even if he or she has an interest in the Participant's
benefits under the Plan as a result of applicable law or property
settlements resulting from legal separation or divorce.
1.27 "Plan" shall mean the Company's Deferred Compensation Plan, which shall
be evidenced by this instrument and by each Plan Agreement, as they may
be amended from time to time.
1.28 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between an Employer and a
Participant. Each Plan Agreement executed by a Participant and the
Participant's Employer shall provide for the entire benefit to which
such Participant is entitled under the Plan; should there be more than
one Plan Agreement, the Plan Agreement bearing the latest date of
acceptance by the Employer shall supersede all previous Plan Agreements
in their entirety and shall govern such entitlement. The terms of any
Plan Agreement may be different for any Participant, and any Plan
Agreement may provide additional benefits not set forth in the Plan or
limit the benefits otherwise provided under the Plan; provided, however,
that any such additional benefits or benefit limitations must be agreed
to by both the Employer and the Participant.
1.29 "Plan Year" shall mean a period beginning on January 1 of each calendar
year and continuing through December 31 of such calendar year.
1.30 "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in
Article 6.
1.31 "Retirement", "Retire(s)" or "Retired" shall mean, with respect to an
Employee, severance from employment from all Employers for any reason
other than a leave of absence, death or Disability on or after the
earlier of the attainment of (a) age sixty-five (65) or (b) age
fifty-five (55) with ten (10) Years of Service; and shall mean with
respect to a Director who is not an Employee, severance of his or her
directorships with all Employers on or after the later of (y) the
attainment of age seventy (70), or (z) in the sole discretion of the
Committee, an age later than age seventy (70).
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If a Participant is both an Employee and a Director, Retirement shall
not occur until he or she Retires as both an Employee and a Director,
which Retirement shall be deemed to be a Retirement as a Director;
provided, however, that such a Participant may elect, at least three
years prior to Retirement and in accordance with the policies and
procedures established by the Committee, to Retire for purposes of this
Plan at the time he or she Retires as an Employee, which Retirement
shall be deemed to be a Retirement as an Employee.
1.32 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.33 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.34 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.35 "Termination of Employment" shall mean the severing of employment with
all Employers, or service as a Director of all Employers, voluntarily or
involuntarily, for any reason other than Retirement, Disability, death
or an authorized leave of absence. If a Participant is both an Employee
and a Director, a Termination of Employment shall occur only upon the
termination of the last position held; provided, however, that such a
Participant may elect, at least three years before Termination of
Employment and in accordance with the policies and procedures
established by the Committee, to be treated for purposes of this Plan as
having experienced a Termination of Employment at the time he or she
ceases employment with an Employer as an Employee.
1.36 "Trust" shall mean one or more trusts established pursuant to that
certain Master Trust Agreement, dated as of ________ 1, 199_ between the
Company and the trustee named therein, as amended from time to time.
1.37 "Unforeseeable Financial Emergency" shall mean an unanticipated
emergency that is caused by an event beyond the control of the
Participant that would result in severe financial hardship to the
Participant resulting from (i) a sudden and unexpected illness or
accident of the Participant or a dependent of the Participant, (ii) a
loss of the Participant's property due to casualty, or (iii) such other
extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant, all as determined in the
sole discretion of the Committee.
1.38 "Years of Service" shall mean the total number of full years in which a
Participant has been employed by one or more Employers. For purposes of
this definition, a year of employment shall be a 365 day period (or 366
day period in the case of a leap year) that, for the first year of
employment, commences on the Employee's date of hiring and that, for any
subsequent year, commences on an anniversary of that hiring date. Any
partial year of employment shall not be counted.
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Deferred Compensation Plan
Master Plan Document
================================================================================
ARTICLE 2
SELECTION, ENROLLMENT, ELIGIBILITY
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a
select group of management and highly compensated Employees and
Directors of the Employers, as determined by the Committee in its sole
discretion. From that group, the Committee shall select, in its sole
discretion, Employees and Directors to participate in the Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
Employee or Director shall complete, execute and return to the Committee
a Plan Agreement, an Election Form and a Beneficiary Designation Form,
all within 30 days after he or she is selected to participate in the
Plan. In addition, the Committee shall establish from time to time such
other enrollment requirements as it determines in its sole discretion
are necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an Employee or
Director selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
including returning all required documents to the Committee within the
specified time period, that Employee or Director shall commence
participation in the Plan on the first day of the month following the
month in which the Employee or Director completes all enrollment
requirements. If an Employee or a Director fails to meet all such
requirements within the period required, in accordance with Section 2.2,
that Employee or Director shall not be eligible to participate in the
Plan until the first day of the Plan Year following the delivery to and
acceptance by the Committee of the required documents.
2.4 TERMINATION OF PARTICIPATION AND/OR DEFERRALS. If the Committee
determines in good faith that a Participant no longer qualifies as a
member of a select group of management or highly compensated employees,
as membership in such group is determined in accordance with Sections
201(2), 301(a)(3) and 401(a)(1) of ERISA, the Committee shall have the
right, in its sole discretion, to (i) terminate any deferral election
the Participant has made for the remainder of the Plan Year in which the
Participant's membership status changes, (ii) prevent the Participant
from making future deferral elections and/or (iii) immediately
distribute the Participant's then Account Balance as a Termination
Benefit and terminate the Participant's participation in the Plan.
ARTICLE 3
DEFERRAL COMMITMENTS/COMPANY CONTRIBUTIONS/CREDITING/TAXES
3.1 MINIMUM DEFERRALS.
(a) BASE ANNUAL SALARY, ANNUAL BONUS AND DIRECTOR'S FEES. For each
Plan Year, a Participant may elect to defer, as his or her
Annual Deferral Amount, Base Annual Salary,
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Deferred Compensation Plan
Master Plan Document
================================================================================
Annual Bonus and/or Director's Fees in the following minimum
amounts for each deferral elected:
<TABLE>
<CAPTION>
-----------------------------------------------------
DEFERRAL MINIMUM AMOUNT
-----------------------------------------------------
<S> <C>
Base Annual Salary $ 2,000
Annual Bonus $ 2,000
Directors Fees $ 0
-----------------------------------------------------
</TABLE>
If an election is made for less than stated minimum amounts, or
if no election is made, the amount deferred shall be zero.
(b) SHORT PLAN YEAR. Notwithstanding the foregoing, if a Participant
first becomes a Participant after the first day of a Plan Year,
the minimum Base Annual Salary deferral shall be an amount equal
to the minimum set forth above, multiplied by a fraction, the
numerator of which is the number of complete months remaining in
the Plan Year and the denominator of which is 12.
3.2 MAXIMUM DEFERRAL.
(a) BASE ANNUAL SALARY, ANNUAL BONUS AND DIRECTORS FEES. For each
Plan Year, a Participant may elect to defer, as his or her Annual
Deferral Amount, Base Annual Salary, Annual Bonus and/or
Directors Fees up to the following maximum percentages for each
deferral elected:
---------------------------- -------------------------
DEFERRAL MAXIMUM AMOUNT
---------------------------- -------------------------
Base Annual Salary 100%
Annual Bonus 100%
Directors Fees 100%
---------------------------- -------------------------
(b) Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, the maximum
Annual Deferral Amount, with respect to Base Annual Salary,
Annual Bonus and Directors Fees shall be limited to the amount of
compensation not yet earned by the Participant as of the date the
Participant submits a Plan Agreement and Election Form to the
Committee for acceptance.
3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM.
(a) FIRST PLAN YEAR. In connection with a Participant's commencement
of participation in the Plan, the Participant shall make an
irrevocable deferral election for the Plan Year in which the
Participant commences participation in the Plan, along with such
other elections as the Committee deems necessary or desirable
under the Plan. For these elections to be valid,
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Deferred Compensation Plan
Master Plan Document
================================================================================
the Election Form must be completed and signed by the
Participant, timely delivered to the Committee (in accordance
with Section 2.2 above) and accepted by the Committee.
(b) SUBSEQUENT PLAN YEARS. For each succeeding Plan Year, an
irrevocable deferral election for that Plan Year, and such other
elections as the Committee deems necessary or desirable under
the Plan, shall be made by timely delivering to the Committee,
in accordance with its rules and procedures, before the end of
the Plan Year preceding the Plan Year for which the election is
made, a new Election Form. If no such Election Form is timely
delivered for a Plan Year, the Annual Deferral Amount shall be
zero for that Plan Year.
3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base
Annual Salary portion of the Annual Deferral Amount shall be withheld
from each regularly scheduled Base Annual Salary payroll in equal
amounts, as adjusted from time to time for increases and decreases in
Base Annual Salary. The Annual Bonus and/or Directors Fees portion of
the Annual Deferral Amount shall be withheld at the time the Annual
Bonus or Directors Fees are or otherwise would be paid to the
Participant, whether or not this occurs during the Plan Year itself.
3.5 ANNUAL COMPANY CONTRIBUTION AMOUNT. For each Plan Year, an Employer, in
its sole discretion, may, but is not required to, credit any amount it
desires to any Participant's Company Contribution Account under this
Plan, which amount shall be for that Participant the Annual Company
Contribution Amount for that Plan Year. The amount so credited to a
Participant may be smaller or larger than the amount credited to any
other Participant, and the amount credited to any Participant for a Plan
Year may be zero, even though one or more other Participants receive an
Annual Company Contribution Amount for that Plan Year. The Annual
Company Contribution Amount, if any, shall be credited as of the last
day of the Plan Year. If a Participant is not employed by an Employer as
of the last day of a Plan Year other than by reason of his or her
Retirement or death while employed, the Annual Company Contribution
Amount for that Plan Year shall be zero.
3.6 INVESTMENT OF TRUST ASSETS. The Trustee of the Trust shall be
authorized, upon written instructions received from the Committee or
investment manager appointed by the Committee, to invest and reinvest
the assets of the Trust in accordance with the applicable Trust
Agreement, including the disposition of stock and reinvestment of the
proceeds in one or more investment vehicles designated by the Committee.
3.7 VESTING. A Participant shall at all times be 100% vested in his or her
Account Balance.
3.8 CREDITING/DEBITING OF ACCOUNT BALANCES. In accordance with, and subject
to, the rules and procedures that are established from time to time by
the Committee, in its sole discretion, amounts
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Deferred Compensation Plan
Master Plan Document
================================================================================
shall be credited or debited to a Participant's Account Balance in
accordance with the following rules:
(a) ELECTION OF MEASUREMENT FUNDS. A Participant, in connection with
his or her initial deferral election in accordance with Section
3.3(a) above, shall elect, on the Election Form, one or more
Measurement Fund(s) (as described in Section 3.8(c) below) to be
used to determine the additional amounts to be credited to his
or her Account Balance for the first calendar quarter or portion
thereof in which the Participant commences participation in the
Plan and continuing thereafter for each subsequent calendar
quarter in which the Participant participates in the Plan,
unless changed in accordance with the next sentence. Commencing
with the first calendar quarter that follows the Participant's
commencement of participation in the Plan and continuing
thereafter for each subsequent calendar quarter in which the
Participant participates in the Plan, no later than the next to
last business day of the calendar quarter, the Participant may
(but is not required to) elect, by submitting an Election Form
to the Committee that is accepted by the Committee, to add or
delete one or more Measurement Fund(s) to be used to determine
the additional amounts to be credited to his or her Account
Balance, or to change the portion of his or her Account Balance
allocated to each previously or newly elected Measurement Fund.
If an election is made in accordance with the previous sentence,
it shall apply to the next calendar quarter and continue
thereafter for each subsequent calendar quarter in which the
Participant participates in the Plan, unless changed in
accordance with the previous sentence.
(b) PROPORTIONATE ALLOCATION. In making any election described in
Section 3.8(a) above, the Participant shall specify on the
Election Form, in increments of five percentage points (5%), the
percentage of his or her Account Balance to be allocated to a
Measurement Fund (as if the Participant was making an investment
in that Measurement Fund with that portion of his or her Account
Balance).
(c) MEASUREMENT FUNDS. The Participant may elect one or more of the
following measurement funds, based on certain measurement funds
(the "Measurement Funds"), for the purpose of crediting
additional amounts to his or her Account Balance:
(1) John Hancock International Equities Portfolio (described
as a mutual fund seeking to achieve long-term growth of
capital by investing primarily in foreign securities);
(2) John Hancock Small Cap Growth Portfolio (described as a
mutual fund which seeks long-term growth of capital
through a diversified portfolio investing primarily in
common stocks of small-sized emerging growth companies);
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Master Plan Document
================================================================================
(3) John Hancock Large Cap Growth Portfolio (described as a
mutual fund which seeks to achieve above-average capital
appreciation through ownership of common stocks and
convertible securities of companies believed to offer
above-average capital appreciation opportunities);
(4) John Hancock Growth & Income Portfolio (described as a
mutual fund which seeks to achieve intermediate and
long-term growth of capital, with income as a secondary
consideration, through investment principally in common
stocks of companies believed to offer growth potential
over both the intermediate and the long-term); and
(5) John Hancock Money Market Portfolio (described as a mutual
fund which seeks maximum current income consistent with
capital preservation and liquidity through high-quality
money market instruments).
As necessary, the Committee may, in its sole discretion,
discontinue, substitute or add a Measurement Fund. Each such
action will take effect as of the first day of the calendar
quarter that follows by thirty (30) days the day on which the
Committee gives Participants advance written notice of such
change.
(d) CREDITING OR DEBITING METHOD. The performance of each elected
Measurement Fund (either positive or negative) will be
determined by the Committee, in its sole discretion, based on
the performance of the Measurement Funds themselves. A
Participant's Account Balance shall be credited or debited on a
daily basis based on the performance of each Measurement Fund
selected by the Participant, as determined by the Committee in
its sole discretion, as though (i) a Participant's Account
Balance were invested in the Measurement Fund(s) selected by the
Participant, in the percentages applicable to such calendar
quarter, as of the close of business on the first business day
of such calendar quarter, at the closing price on such date;
(ii) the portion of the Annual Deferral Amount that was actually
deferred during any calendar quarter were invested in the
Measurement Fund(s) selected by the Participant, in the
percentages applicable to such calendar quarter, no later than
the close of business on the third business day after the day on
which such amounts are actually deferred from the Participant's
Base Annual Salary through reductions in his or her payroll, at
the closing price on such date; and (iii) any distribution made
to a Participant that decreases such Participant's Account
Balance ceased being invested in the Measurement Fund(s), in the
percentages applicable to such calendar quarter, no earlier than
three business days prior to the distribution, at the closing
price on such date.
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Deferred Compensation Plan
Master Plan Document
================================================================================
(e) NO ACTUAL INVESTMENT. Notwithstanding any other provision of
this Plan that may be interpreted to the contrary, the
Measurement Funds are to be used for measurement purposes only,
and a Participant's election of any such Measurement Fund, the
allocation to his or her Account Balance thereto, the calculation
of additional amounts and the crediting or debiting of such
amounts to a Participant's Account Balance shall not be
considered or construed in any manner as an actual investment of
his or her Account Balance in any such Measurement Fund. In the
event that the Company or the Trustee (as that term is defined in
the Trust), in its own discretion, decides to invest funds in any
or all of the Measurement Funds, no Participant shall have any
rights in or to such investments themselves. Without limiting the
foregoing, a Participant's Account Balance shall at all times be
a bookkeeping entry only and shall not represent any investment
made on his or her behalf by the Company or the Trust; the
Participant shall at all times remain an unsecured creditor of
the Company.
3.9 FICA AND OTHER TAXES. For each Plan Year in which an Annual Deferral
Amount is being withheld from, or an Annual Company Contribution Amount
is being first credited to, a Participant, the Participant's Employer(s)
shall withhold from that portion of the Participant's Base Annual Salary
and Bonus that is not being deferred, in a manner determined by the
Employer(s), the Participant's share of FICA and other employment taxes
on such Annual Deferral Amount. If necessary, the Committee may reduce
the Account Balance in order to comply with this Section 3.9.
3.10 DISTRIBUTIONS. The Participant's Employer(s), or the trustee of the
Trust, shall withhold from any payments made to a Participant under this
Plan all federal, state and local income, employment and other taxes
required to be withheld by the Employer(s), or the trustee of the Trust,
in connection with such payments, in amounts and in a manner to be
determined in the sole discretion of the Employer(s) and the trustee of
the Trust.
ARTICLE 4
SHORT-TERM PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual
Deferral Amount, a Participant may irrevocably elect to receive a future
"Short-Term Payout" from the Plan with respect to such Annual Deferral
Amount. Subject to the Deduction Limitation, the Short-Term Payout shall
be a lump sum payment in an amount that is equal to the Annual Deferral
Amount plus amounts credited or debited in the manner provided in
Section 3.8 above on that amount, determined at the time that the
Short-Term Payout becomes payable (rather than the date of a Termination
of Employment). Subject to the Deduction Limitation and the other terms
and
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Master Plan Document
================================================================================
conditions of this Plan, each Short-Term Payout elected shall be
paid out during a period beginning 1 day and ending 60 days after the
last day of any Plan Year designated by the Participant that is at least
five Plan Years after the Plan Year in which the Annual Deferral Amount
is actually deferred. By way of example, if a five year Short-Term
Payout is elected for Annual Deferral Amounts that are deferred in the
Plan Year commencing January 1, 1998, the five year Short-Term Payout
would become payable during a 60 day period commencing January 1, 2004.
4.2 OTHER BENEFITS TAKE PRECEDENCE OVER SHORT-TERM. Should an event occur
that triggers a benefit under Article 5, 6, 7 or 8, any Annual Deferral
Amount, plus amounts credited or debited thereon, that is subject to a
Short-Term Payout election under Section 4.1 shall not be paid in
accordance with Section 4.1 but shall be paid in accordance with the
other applicable Article.
4.3 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES.
If the Participant experiences an Unforeseeable Financial Emergency, the
Participant may petition the Committee to (i) suspend any deferrals
required to be made by a Participant and/or (ii) receive a partial or
full payout from the Plan. The payout shall not exceed the lesser of the
Participant's Account Balance, calculated as if such Participant were
receiving a Termination Benefit, or the amount reasonably needed to
satisfy the Unforeseeable Financial Emergency. If, subject to the sole
discretion of the Committee, the petition for a suspension and/or payout
is approved, suspension shall take effect upon the date of approval and
any payout shall be made within 60 days of the date of approval. The
payment of any amount under this Section 4.3 shall not be subject to the
Deduction Limitation.
4.4 WITHDRAWAL ELECTION. A Participant (or, after a Participant's death, his
or her Beneficiary) may elect, at any time, to withdraw all of his or
her Account Balance, calculated as if there had occurred a Termination
of Employment as of the day of the election, less a withdrawal penalty
equal to 10% of such amount (the net amount shall be referred to as the
"Withdrawal Amount"). This election can be made at any time, before or
after Retirement, Disability, death or Termination of Employment, and
whether or not the Participant (or Beneficiary) is in the process of
being paid pursuant to an installment payment schedule. If made before
Retirement, Disability or death, a Participant's Withdrawal Amount shall
be his or her Account Balance calculated as if there had occurred a
Termination of Employment as of the day of the election. No partial
withdrawals of the Withdrawal Amount shall be allowed. The Participant
(or his or her Beneficiary) shall make this election by giving the
Committee advance written notice of the election in a form determined
from time to time by the Committee. The Participant (or his or her
Beneficiary) shall be paid the Withdrawal Amount within 60 days of his
or her election. Once the Withdrawal Amount is paid, the Participant's
participation in the Plan shall terminate and the Participant shall not
be eligible to participate in the Plan in the future. The payment of
this Withdrawal Amount shall not be subject to the Deduction Limitation.
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Master Plan Document
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ARTICLE 5
RETIREMENT BENEFIT
5.1 RETIREMENT BENEFIT. Subject to the Deduction Limitation, a Participant
who Retires shall receive, as a Retirement Benefit, his or her Account
Balance.
5.2 PAYMENT OF RETIREMENT BENEFIT. A Participant, in connection with his or
her commencement of participation in the Plan, shall elect on an
Election Form to receive the Retirement Benefit in a lump sum or
pursuant to an Annual Installment Method of 5, 10 or 15 years. The
Participant may annually change his or her election to an allowable
alternative payout period by submitting a new Election Form to the
Committee, provided that any such Election Form is submitted at least 2
years prior to the Participant's Retirement and is accepted by the
Committee in its sole discretion. The Election Form most recently
accepted by the Committee shall govern the payout of the Retirement
Benefit. If a Participant does not make any election with respect to the
payment of the Retirement Benefit, then such benefit shall be payable in
a lump sum. The lump sum payment shall be made, or installment payments
shall commence, no later than 60 days after the date the Participant
Retires. Any payment made shall be subject to the Deduction Limitation.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFIT. If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and
shall be paid to the Participant's Beneficiary (a) over the remaining
number of years and in the same amounts as that benefit would have been
paid to the Participant had the Participant survived, or (b) in a lump
sum, if requested by the Beneficiary and allowed in the sole discretion
of the Committee, that is equal to the Participant's unpaid remaining
Account Balance.
ARTICLE 6
PRE-RETIREMENT SURVIVOR BENEFIT
6.1 PRE-RETIREMENT SURVIVOR BENEFIT. Subject to the Deduction Limitation,
the Participant's Beneficiary shall receive a Pre-Retirement Survivor
Benefit equal to the Participant's Account Balance if the Participant
dies before he or she Retires, experiences a Termination of Employment
or suffers a Disability.
6.2 PAYMENT OF PRE-RETIREMENT SURVIVOR BENEFIT. A Participant, in connection
with his or her commencement of participation in the Plan, shall elect
on an Election Form whether the Pre-Retirement Survivor Benefit shall be
received by his or her Beneficiary in a lump sum or pursuant to an
Annual Installment Method of 5, 10 or 15 years. The Participant may
annually change this election to an allowable alternative payout period
by submitting a new Election
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Form to the Committee, which form must be accepted by the Committee in
its sole discretion. The Election Form most recently accepted by the
Committee prior to the Participant's death shall govern the payout of
the Participant's Pre-Retirement Survivor Benefit. If a Participant does
not make any election with respect to the payment of the Pre-Retirement
Survivor Benefit, then such benefit shall be paid in a lump sum. Despite
the foregoing, if the Participant's Account Balance at the time of his
or her death is less than $25,000, payment of the Pre-Retirement
Survivor Benefit may be made, in the sole discretion of the Committee,
in a lump sum or pursuant to an Annual Installment Method of not more
than 60 years. The lump sum payment shall be made, or installment
payments shall commence, no later than 60 days after the date the
Committee is provided with proof that is satisfactory to the Committee
of the Participant's death. Any payment made shall be subject to the
Deduction Limitation.
ARTICLE 7
TERMINATION BENEFIT
7.1 TERMINATION BENEFIT. Subject to the Deduction Limitation, the
Participant shall receive a Termination Benefit, which shall be equal to
the Participant's Account Balance if a Participant experiences a
Termination of Employment prior to his or her Retirement, death or
Disability.
7.2 PAYMENT OF TERMINATION BENEFIT. If the Participant's Account Balance at
the time of his or her Termination of Employment is less than $25,000,
payment of his or her Termination Benefit shall be paid in a lump sum.
If his or her Account Balance at such time is equal to or greater than
that amount, the Committee, in its sole discretion, may cause the
Termination Benefit to be paid in a lump sum or in substantially equal
Annual Installment payments over a period of time that does not exceed
five years in duration. The lump sum payment shall be made, or
installment payments shall commence, no later than 60 days after the
date the date of the Participant's Termination of Employment. Any
payment made shall be subject to the Deduction Limitation.
ARTICLE 8
DISABILITY WAIVER AND BENEFIT
8.1 DISABILITY WAIVER.
(a) WAIVER OF DEFERRAL. A Participant who is determined by the
Committee to be suffering from a Disability shall be excused
from fulfilling that portion of the Annual Deferral Amount
commitment that would otherwise have been withheld from a
Participant's Base Annual Salary, Annual Bonus and/or Directors
Fees for the Plan Year during which the Participant first
suffers a Disability. During the period of Disability, the
Participant shall not be allowed to make any additional deferral
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elections, but will continue to be considered a Participant
for all other purposes of this Plan.
(b) RETURN TO WORK. If a Participant returns to employment, or
service as a Director, with an Employer, after a Disability
ceases, the Participant may elect to defer an Annual Deferral
Amount for the Plan Year following his or her return to
employment or service and for every Plan Year thereafter while a
Participant in the Plan; provided such deferral elections are
otherwise allowed and an Election Form is delivered to and
accepted by the Committee for each such election in accordance
with Section 3.3 above.
8.2 CONTINUED ELIGIBILITY; DISABILITY BENEFIT. A Participant suffering a
Disability shall, for benefit purposes under this Plan, continue to be
considered to be employed, or in the service of an Employer as a
Director, and shall be eligible for the benefits provided for in
Articles 4, 5, 6 or 7 in accordance with the provisions of those
Articles. Notwithstanding the above, the Committee shall have the right
to, in its sole and absolute discretion and for purposes of this Plan
only, and must in the case of a Participant who is otherwise eligible to
Retire, deem the Participant to have experienced a Termination of
Employment, or in the case of a Participant who is eligible to Retire,
to have Retired, at any time (or in the case of a Participant who is
eligible to Retire, as soon as practicable) after such Participant is
determined to be suffering a Disability, in which case the Participant
shall receive a Disability Benefit equal to his or her Account Balance
at the time of the Committee's determination; provided, however, that
should the Participant otherwise have been eligible to Retire, he or she
shall be paid in accordance with Article 5. The Disability Benefit shall
be paid in a lump sum within 60 days of the Committee's exercise of such
right. Any payment made shall be subject to the Deduction Limitation.
ARTICLE 9
BENEFICIARY DESIGNATION
9.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary(ies) (both primary as well as
contingent) to receive any benefits payable under the Plan to a
beneficiary upon the death of a Participant. The Beneficiary designated
under this Plan may be the same as or different from the Beneficiary
designation under any other plan of an Employer in which the Participant
participates.
9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the
Beneficiary Designation Form, and returning it to the Committee or its
designated agent. A Participant shall have the right to
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change a Beneficiary by completing, signing and otherwise complying with
the terms of the Beneficiary Designation Form and the Committee's rules
and procedures, as in effect from time to time. If the Participant names
someone other than his or her spouse as a Beneficiary, a spousal
consent, in the form designated by the Committee, must be signed by that
Participant's spouse and returned to the Committee. Upon the acceptance
by the Committee of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be canceled. The Committee shall be
entitled to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Committee prior to his or her death.
9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary
shall be effective until received and acknowledged in writing by the
Committee or its designated agent.
9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the
Participant's designated Beneficiary shall be deemed to be his or her
surviving spouse. If the Participant has no surviving spouse, the
benefits remaining under the Plan to be paid to a Beneficiary shall be
payable to the executor or personal representative of the Participant's
estate.
9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee
shall have the right, exercisable in its discretion, to cause the
Participant's Employer to withhold such payments until this matter is
resolved to the Committee's satisfaction.
9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the
Committee from all further obligations under this Plan with respect to
the Participant, and that Participant's Plan Agreement shall terminate
upon such full payment of benefits.
ARTICLE 10
LEAVE OF ABSENCE
10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take a paid leave of absence
from the employment of the Employer, the Participant shall continue to
be considered employed by the Employer and the Annual Deferral Amount
shall continue to be withheld during such paid leave of absence in
accordance with Section 3.3.
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10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the
Participant's Employer for any reason to take an unpaid leave of absence
from the employment of the Employer, the Participant shall continue to
be considered employed by the Employer and the Participant shall be
excused from making deferrals until the earlier of the date the leave of
absence expires or the Participant returns to a paid employment status.
Upon such expiration or return, deferrals shall resume for the remaining
portion of the Plan Year in which the expiration or return occurs, based
on the deferral election, if any, made for that Plan Year. If no
election was made for that Plan Year, no deferral shall be withheld.
ARTICLE 11
TERMINATION, AMENDMENT OR MODIFICATION
11.1 TERMINATION. Although each Employer anticipates that it will continue
the Plan for an indefinite period of time, there is no guarantee that
any Employer will continue the Plan or will not terminate the Plan at
any time in the future. Accordingly, each Employer reserves the right to
discontinue its sponsorship of the Plan and/or to terminate the Plan at
any time with respect to any or all of its participating Employees and
Directors, by action of its board of directors. Upon the termination of
the Plan with respect to any Employer, the Plan Agreements of the
affected Participants who are employed by that Employer, or in the
service of that Employer as Directors, shall terminate and their Account
Balances, determined as if they had experienced a Termination of
Employment on the date of Plan termination or, if Plan termination
occurs after the date upon which a Participant was eligible to Retire,
then with respect to that Participant as if he or she had Retired on the
date of Plan termination, shall be paid to the Participants as follows:
Prior to a Change in Control, if the Plan is terminated with respect to
all of its Participants, an Employer shall have the right, in its sole
discretion, and notwithstanding any elections made by the Participant,
to pay such benefits in a lump sum or pursuant to an Annual Installment
Method of up to 15 years, with amounts credited and debited during the
installment period as provided herein. If the Plan is terminated with
respect to less than all of its Participants, an Employer shall be
required to pay such benefits in a lump sum. After a Change in Control,
the Employer shall be required to pay such benefits in a lump sum. The
termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under
the Plan as of the date of termination; provided however, that the
Employer shall have the right to accelerate installment payments without
a premium or prepayment penalty by paying the Account Balance in a lump
sum or pursuant to an Annual Installment Method using fewer years
(provided that the present value of all payments that will have been
received by a Participant at any given point of time under the different
payment schedule shall equal or exceed the present value
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of all payments that would have been received at that point in time
under the original payment schedule).
11.2 AMENDMENT. Any Employer may, at any time, amend or modify the Plan in
whole or in part with respect to that Employer by the action of its
board of directors; provided, however, that no amendment or modification
shall be effective to decrease or restrict the value of a Participant's
Account Balance in existence at the time the amendment or modification
is made, calculated as if the Participant had experienced a Termination
of Employment as of the effective date of the amendment or modification
or, if the amendment or modification occurs after the date upon which
the Participant was eligible to Retire, the Participant had Retired as
of the effective date of the amendment or modification. The amendment or
modification of the Plan shall not affect any Participant or Beneficiary
who has become entitled to the payment of benefits under the Plan as of
the date of the amendment or modification; provided, however, that the
Employer shall have the right to accelerate installment payments by
paying the Account Balance in a lump sum or pursuant to an Annual
Installment Method using fewer years (provided that the present value of
all payments that will have been received by a Participant at any given
point of time under the different payment schedule shall equal or exceed
the present value of all payments that would have been received at that
point in time under the original payment schedule).
11.3 PLAN AGREEMENT. Despite the provisions of Sections 11.1 and 11.2 above,
if a Participant's Plan Agreement contains benefits or limitations that
are not in this Plan document, the Employer may only amend or terminate
such provisions with the consent of the Participant.
11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 4, 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries
under this Plan and the Participant's Plan Agreement shall terminate.
ARTICLE 12
ADMINISTRATION
12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of the Board, or such committee as the Board shall
appoint. Members of the Committee may be Participants under this Plan.
The Committee shall also have the discretion and authority to (i) make,
amend, interpret, and enforce all appropriate rules and regulations for
the administration of this Plan and (ii) decide or resolve any and all
questions including interpretations of this Plan, as may arise in
connection with the Plan. Any individual serving on the Committee who is
a Participant shall not vote or act on any matter relating solely to
himself or herself. When making a
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determination or calculation, the Committee shall be entitled to rely on
information furnished by a Participant or the Company.
12.2 AGENTS. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties
as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may
be counsel to any Employer.
12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee
with respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
12.4 INDEMNITY OF COMMITTEE. All Employers shall indemnify and hold harmless
the members of the Committee, and any Employee to whom the duties of the
Committee may be delegated, against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the
Committee or any of its members or any such Employee.
12.5 EMPLOYER INFORMATION. To enable the Committee to perform its functions,
each Employer shall supply full and timely information to the Committee
on all matters relating to the compensation of its Participants, the
date and circumstances of the Retirement, Disability, death or
Termination of Employment of its Participants, and such other pertinent
information as the Committee may reasonably require.
ARTICLE 13
OTHER BENEFITS AND AGREEMENTS
13.1 COORDINATION WITH OTHER BENEFITS. The benefits provided for a
Participant and Participant's Beneficiary under the Plan are in addition
to any other benefits available to such Participant under any other plan
or program for employees of the Participant's Employer. The Plan shall
supplement and shall not supersede, modify or amend any other such plan
or program except as may otherwise be expressly provided.
ARTICLE 14
CLAIMS PROCEDURES
14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as
a "Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the
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Plan. If such a claim relates to the contents of a notice received by
the Claimant, the claim must be made within 60 days after such notice
was received by the Claimant. All other claims must be made within 180
days of the date on which the event that caused the claim to arise
occurred. The claim must state with particularity the determination
desired by the Claimant.
14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's
claim within a reasonable time, and shall notify the Claimant in
writing:
(a) that the Claimant's requested determination has been made, and
that the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole
or in part, to the Claimant's requested determination, and such
notice must set forth in a manner calculated to be understood by
the Claimant:
(i) the specific reason(s) for the denial of the claim, or
any part of it;
(ii) specific reference(s) to pertinent provisions of the
Plan upon which such denial was 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; and
(iv) an explanation of the claim review procedure set forth
in Section 14.3 below.
14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a
Claimant (or the Claimant's duly authorized representative) may file
with the Committee a written request for a review of the denial of the
claim. Thereafter, but not later than 30 days after the review procedure
began, the Claimant (or the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole
discretion, may grant.
14.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other
special circumstances require additional time, in which case the
Committee's decision must
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be rendered within 120 days after such date. Such decision must be
written in a manner calculated to be understood by the Claimant, and it
must contain:
(a) specific reasons for the decision;
(b) specific reference(s) to the pertinent Plan provisions upon
which the decision was based; and
(c) such other matters as the Committee deems relevant.
14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Claimant's right to
commence any legal action with respect to any claim for benefits under
this Plan.
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ARTICLE 15
TRUST
15.1 ESTABLISHMENT OF THE TRUST. The Company shall establish the Trust, and
each Employer shall at least annually transfer over to the Trust such
assets as the Employer determines, in its sole discretion, are necessary
to provide, on a present value basis, for its respective future
liabilities created with respect to the Annual Deferral Amounts and
Annual Company Contribution Amounts for such Employer's Participants for
all periods prior to the transfer, as well as any debits and credits to
the Participants' Account Balances for all periods prior to the
transfer, taking into consideration the value of the assets in the trust
at the time of the transfer.
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
and the Plan Agreement shall govern the rights of a Participant to
receive distributions pursuant to the Plan. The provisions of the Trust
shall govern the rights of the Employers, Participants and the creditors
of the Employers to the assets transferred to the Trust. Each Employer
shall at all times remain liable to carry out its obligations under the
Plan.
15.3 DISTRIBUTIONS FROM THE TRUST. Each Employer's obligations under the Plan
may be satisfied with Trust assets distributed pursuant to the terms of
the Trust, and any such distribution shall reduce the Employer's
obligations under this Plan.
ARTICLE 16
MISCELLANEOUS
16.1 STATUS OF PLAN. The Plan is intended to be a plan that is not qualified
within the meaning of Code Section 401(a) and that "is unfunded and is
maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employee" within the meaning of ERISA Sections 201(2),
301(a)(3) and 401(a)(1). The Plan shall be administered and interpreted
to the extent possible in a manner consistent with that intent.
16.2 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights,
interests or claims in any property or assets of an Employer. For
purposes of the payment of benefits under this Plan, any and all of an
Employer's assets shall be, and remain, the general, unpledged
unrestricted assets of the Employer. An Employer's obligation under the
Plan shall be merely that of an unfunded and unsecured promise to pay
money in the future.
16.3 EMPLOYER'S LIABILITY. An Employer's liability for the payment of
benefits shall be defined only by the Plan and the Plan Agreement, as
entered into between the Employer and a Participant. An
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Employer shall have no obligation to a Participant under the Plan except
as expressly provided in the Plan and his or her Plan Agreement.
16.4 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or
convey in advance of actual receipt, the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are
expressly declared to be, unassignable and non-transferable. No part of
the amounts payable shall, prior to actual payment, be subject to
seizure, attachment, garnishment or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a Participant
or any other person, be transferable by operation of law in the event of
a Participant's or any other person's bankruptcy or insolvency or be
transferable to a spouse as a result of a property settlement or
otherwise.
16.5 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan
shall not be deemed to constitute a contract of employment between any
Employer and the Participant. Such employment is hereby acknowledged to
be an "at will" employment relationship that can be terminated at any
time for any reason, or no reason, with or without cause, and with or
without notice, unless expressly provided in a written employment
agreement. Nothing in this Plan shall be deemed to give a Participant
the right to be retained in the service of any Employer, either as an
Employee or a Director, or to interfere with the right of any Employer
to discipline or discharge the Participant at any time.
16.6 FURNISHING INFORMATION. A Participant or his or her Beneficiary will
cooperate with the Committee by furnishing any and all information
requested by the Committee and take such other actions as may be
requested in order to facilitate the administration of the Plan and the
payments of benefits hereunder, including but not limited to taking such
physical examinations as the Committee may deem necessary.
16.7 TERMS. Whenever any words are used herein in the masculine, they shall
be construed as though they were in the feminine in all cases where they
would so apply; and whenever any words are used herein in the singular
or in the plural, they shall be construed as though they were used in
the plural or the singular, as the case may be, in all cases where they
would so apply.
16.8 CAPTIONS. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.
16.9 GOVERNING LAW. Subject to ERISA, the provisions of this Plan shall be
construed and interpreted according to the internal laws of the State of
California without regard to its conflicts of laws principles.
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16.10 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address
below:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Such notice shall be deemed given as of 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.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
16.11 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Participant's Employer and its successors and assigns and
the Participant and the Participant's designated Beneficiaries.
16.12 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of
a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in
any manner, including but not limited to such spouse's will, nor shall
such interest pass under the laws of intestate succession.
16.13 VALIDITY. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidity shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
16.14 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person's property, the Committee may direct payment of such benefit to
the guardian, legal representative or person having the care and custody
of such minor, incompetent or incapable person. The Committee may
require proof of minority, incompetence, incapacity or guardianship, as
it may deem appropriate prior to distribution of the benefit. Any
payment of a benefit shall be a payment for the account of the
Participant and the Participant's Beneficiary, as the case may be, and
shall be a complete discharge of any liability under the Plan for such
payment amount.
16.15 COURT ORDER. The Committee is authorized to make any payments directed
by court order in any action in which the Plan or the Committee has been
named as a party. In addition, if a court
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determines that a spouse or former spouse of a Participant has an
interest in the Participant's benefits under the Plan in connection with
a property settlement or otherwise, the Committee, in its sole
discretion, shall have the right, notwithstanding any election made by a
Participant, to immediately distribute the spouse's or former spouse's
interest in the Participant's benefits under the Plan to that spouse or
former spouse.
16.16 DISTRIBUTION IN THE EVENT OF TAXATION.
(a) IN GENERAL. If, for any reason, all or any portion of a
Participant's benefits under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the
Committee before a Change in Control, or the trustee of the
Trust after a Change in Control, for a distribution of that
portion of his or her benefit that has become taxable. Upon the
grant of such a petition, which grant shall not be unreasonably
withheld (and, after a Change in Control, shall be granted), a
Participant's Employer shall distribute to the Participant
immediately available funds in an amount equal to the taxable
portion of his or her benefit (which amount shall not exceed a
Participant's unpaid Account Balance under the Plan). If the
petition is granted, the tax liability distribution shall be
made within 90 days of the date when the Participant's petition
is granted. Such a distribution shall affect and reduce the
benefits to be paid under this Plan.
(b) TRUST. If the Trust terminates in accordance with Section 3.6(e)
of the Trust and benefits are distributed from the Trust to a
Participant in accordance with that Section, the Participant's
benefits under this Plan shall be reduced to the extent of such
distributions.
16.17 INSURANCE. The Employers, on their own behalf or on behalf of the
trustee of the Trust, and, in their sole discretion, may apply for and
procure insurance on the life of the Participant, in such amounts and in
such forms as the Trust may choose. The Employers or the trustee of the
Trust, as the case may be, shall be the sole owner and beneficiary of
any such insurance. The Participant shall have no interest whatsoever in
any such policy or policies, and at the request of the Employers shall
submit to medical examinations and supply such information and execute
such documents as may be required by the insurance company or companies
to whom the Employers have applied for insurance.
16.18 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company and
each Employer is aware that upon the occurrence of a Change in Control,
the Board or the board of directors of a Participant's Employer (which
might then be composed of new members) or a shareholder of the Company
or the Participant's Employer, or of any successor corporation might
then cause or attempt to cause the Company, the Participant's Employer
or such successor to refuse to comply with its obligations under the
Plan and might cause or attempt to cause the Company or the
Participant's Employer to institute, or may institute, litigation
seeking to deny Participants the benefits intended under the Plan. In
these circumstances, the purpose of the Plan could be
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frustrated. Accordingly, if, following a Change in Control, it should
appear to any Participant that the Company, the Participant's Employer
or any successor corporation has failed to comply with any of its
obligations under the Plan or any agreement thereunder or, if the
Company, such Employer or any other person takes any action to declare
the Plan void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or to recover from any
Participant the benefits intended to be provided, then the Company and
the Participant's Employer irrevocably authorize such Participant to
retain counsel of his or her choice at the expense of the Company and
the Participant's Employer (who shall be jointly and severally liable)
to represent such Participant in connection with the initiation or
defense of any litigation or other legal action, whether by or against
the Company, the Participant's Employer or any director, officer,
shareholder or other person affiliated with the Company, the
Participant's Employer or any successor thereto in any jurisdiction.
IN WITNESS WHEREOF, the Company has signed this Plan document as of
__________, 199_.
"Company"
On Assignment, Inc.
a Delaware corporation
By: __________________________________
Title: _______________________________
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MASTER TRUST AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
ARTICLE 1 NAME, INTENTIONS, IRREVOCABILITY, DEPOSIT AND DEFINITIONS......................1
1.1 NAME...........................................................................1
1.2 INTENTIONS.....................................................................1
1.3 IRREVOCABILITY; CREDITOR CLAIMS................................................1
1.4 INITIAL DEPOSIT................................................................2
1.5 ADDITIONAL DEFINITIONS.........................................................2
1.6 GRANTOR TRUST..................................................................4
ARTICLE 2 GENERAL ADMINISTRATION.........................................................4
2.1 COMMITTEE DIRECTIONS AND ADMINISTRATION BEFORE CHANGE IN CONTROL...............4
2.2 ADMINISTRATION UPON CHANGE IN CONTROL..........................................5
2.3 CONTRIBUTIONS..................................................................5
2.4 TRUST FUND.....................................................................5
2.5 DISTRIBUTION OF EXCESS TRUST FUND TO EMPLOYERS.................................5
ARTICLE 3 POWERS AND DUTIES OF TRUSTEE...................................................6
3.1 INVESTMENT DIRECTIONS..........................................................6
3.2 INVESTMENT UPON CHANGE IN CONTROL..............................................6
3.3 MANAGEMENT OF INVESTMENTS......................................................6
3.4 SECURITIES.....................................................................9
3.5 SUBSTITUTION...................................................................9
3.6 DISTRIBUTIONS..................................................................9
3.7 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS ON INSOLVENCY.......................12
3.8 COSTS OF ADMINISTRATION.......................................................14
3.9 TRUSTEE COMPENSATION AND EXPENSES.............................................14
3.10 PROFESSIONAL ADVICE...........................................................14
3.11 PAYMENT ON COURT ORDER........................................................14
3.12 PROTECTIVE PROVISIONS.........................................................14
3.13 INDEMNIFICATIONS..............................................................15
ARTICLE 4 INSURANCE CONTRACTS...........................................................15
4.1 TYPES OF CONTRACTS............................................................15
4.2 OWNERSHIP.....................................................................15
</TABLE>
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<TABLE>
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4.3 RESTRICTIONS ON TRUSTEE'S RIGHTS..............................................16
ARTICLE 5 TRUSTEE'S ACCOUNTS............................................................16
5.1 RECORDS.......................................................................16
5.2 ANNUAL ACCOUNTING; FINAL ACCOUNTING...........................................16
5.3 VALUATION.....................................................................17
5.4 DELEGATION OF DUTIES..........................................................17
ARTICLE 6 RESIGNATION OR REMOVAL OF TRUSTEE.............................................17
6.1 RESIGNATION; REMOVAL..........................................................17
6.2 SUCCESSOR TRUSTEE.............................................................18
6.3 SETTLEMENT OF ACCOUNTS........................................................18
ARTICLE 7 CONTROVERSIES, LEGAL ACTIONS AND COUNSEL......................................18
7.1 CONTROVERSY...................................................................18
7.2 JOINDER OF PARTIES............................................................19
7.3 EMPLOYMENT OF COUNSEL.........................................................19
ARTICLE 8 INSURERS......................................................................20
8.1 INSURER NOT A PARTY...........................................................20
8.2 AUTHORITY OF TRUSTEE..........................................................20
8.3 CONTRACT OWNERSHIP............................................................20
8.4 LIMITATION OF LIABILITY.......................................................20
8.5 CHANGE OF TRUSTEE.............................................................20
ARTICLE 9 AMENDMENT AND TERMINATION.....................................................20
9.1 AMENDMENT.....................................................................20
9.2 FINAL TERMINATION.............................................................22
ARTICLE 10 MISCELLANEOUS.................................................................22
10.1 DIRECTIONS FOLLOWING CHANGE IN CONTROL........................................22
10.2 TAXES.........................................................................22
10.3 THIRD PERSONS.................................................................23
10.4 NONASSIGNABILITY; NONALIENATION...............................................23
10.5 THE PLANS.....................................................................23
10.6 APPLICABLE LAW................................................................23
10.7 NOTICES AND DIRECTIONS........................................................23
10.8 SUCCESSORS AND ASSIGNS........................................................24
10.9 GENDER AND NUMBER.............................................................24
</TABLE>
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<TABLE>
<S> <C>
10.10 HEADINGS......................................................................24
10.11 COUNTERPARTS..................................................................24
10.12 BENEFICIAL INTEREST...........................................................24
10.13 THE TRUST AND PLANS...........................................................24
10.14 EFFECTIVE DATE................................................................24
</TABLE>
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MASTER TRUST AGREEMENT
FOR
ON ASSIGNMENT, INC.
DEFERRED COMPENSATION PLAN
THIS MASTER TRUST AGREEMENT ("Master Trust Agreement") is made
and entered into as of __________, 199__, between On Assignment, Inc., a
Delaware corporation (the "Company"), and Wachovia Bank, N.A., a national
banking association (the "Trustee"), to evidence the master trust (the "Trust")
to be established, pursuant to those executive deferral plans of the Company now
or hereafter existing that require the establishment of a trust, for the benefit
of a select group of management, highly compensated employees and/or Directors
who contribute materially to the continued growth, development and business
success of the Company and those subsidiaries of the Company, if any, that
participate in the Plans (collectively, "Subsidiaries," or singularly,
"Subsidiary").
ARTICLE 1
NAME, INTENTIONS, IRREVOCABILITY,
DEPOSIT AND DEFINITIONS
1.1 NAME. The name of the Trust created by this Agreement (the "Trust")
shall be:
MASTER TRUST AGREEMENT FOR
ON ASSIGNMENT, INC. DEFERRED COMPENSATION PLAN
1.2 INTENTIONS. The Company wishes to establish the Trust and to contribute
to the Trust assets that shall be held therein, subject to the claims of
the Company's and the Subsidiaries' creditors in the event of their
Insolvency (as defined below) until paid to Participants and their
Beneficiaries in such manner and at such times as specified in the
Plans. It is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of
the Plans as unfunded plans maintained for the purpose of providing
supplemental compensation for a select group of management, highly
compensated employees and/or Directors for purposes of Title I of ERISA
(as defined below). In addition, it is the intention of the Company and
the Subsidiaries to make contributions to the Trust to provide
themselves with a source of funds to assist them in the meeting of their
liabilities under the Plans.
1.3 IRREVOCABILITY; CREDITOR CLAIMS. The Trust hereby established shall be
irrevocable. Except as otherwise provided in Sections 2.5 and 9.2, the
principal of the Trust, and any
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earnings thereon, shall be held separate and apart from other funds of
the Company and the Subsidiaries and shall be used exclusively for the
uses and purposes of the Participants and the general creditors of the
Company and the Subsidiaries as herein set forth. The Participants and
their Beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created under
the Plans and this Master Trust Agreement shall be mere unsecured
contractual rights of the Participants and their Beneficiaries against
the Company and the Subsidiaries. Any assets held by the Trust will be
subject to the claims of the Company's and the Subsidiaries' general
creditors under federal and state law in the event of Insolvency.
1.4 INITIAL DEPOSIT. The Company hereby deposits with the Trustee in trust
$100, which shall become the principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this Master
Trust Agreement.
1.5 ADDITIONAL DEFINITIONS. In addition to the definitions set forth above,
for purposes hereof, unless otherwise clearly apparent from the context,
the following terms have the following indicated meanings:
(a) "Beneficiary" shall mean one or more persons, trusts, estates or
other entities, designated in accordance with a Plan, that are
entitled to receive benefits under a Plan upon the death of a
Participant.
(b) "Board" shall mean the board of directors of the Company.
(c) "Change in Control" shall mean the first to occur of any of the
following events:
(i) Any "person" (as that term is used in Section 13 and
14(d)(2) of the Securities Exchange Act of 1934
("Exchange Act")) becomes the beneficial owner (as that
term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 50% or more of the Company's
capital stock entitled to vote in the election of
directors;
(ii) During any period of not more than two consecutive
years, not including any period prior to the adoption of
this Trust, individuals who, at the beginning of such
period constitute the board of directors of the Company,
and any new director (other than a director designated
by a person who has entered into an agreement with the
Company to effect a transaction described in clause (i),
(iii), (iv) or (v) of this Section 1.5(c)) whose
election by the board of directors or nomination for
election by the Company's stockholders was approved by a
vote of at least three-fourths (3/4ths) of the directors
then still in office, either were directors at the
beginning of the
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period or whose election or nomination for election was
previously so approved, cease for any reason to
constitute at least a majority thereof;
(iii) The shareholders of the Company approve any
consolidation or merger of the Company, other than a
consolidation or merger of the Company in which the
holders of the common stock of the Company immediately
prior to the consolidation or merger hold more than 50%
of the common stock of the surviving corporation
immediately after the consolidation or merger;
(iv) The shareholders of the Company approve any plan or
proposal for the liquidation or dissolution of the
Company; or
(v) The shareholders of the Company approve the sale or
transfer of substantially all of the Company's assets to
parties that are not within a "controlled group of
corporations" (as defined in Code Section 1563) in which
the Company is a member.
(d) "Committee" shall mean the administrative committee appointed by
the Board to administer this Trust.
(e) "Director" shall mean any member of the board of directors of
the Company or any Subsidiary.
(f) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as it may be amended from time to time.
(g) "Insolvent" shall have the meaning set forth in Section 3.7(a)
below.
(h) "Insolvent Entity" shall have the meaning set forth in Section
3.7(a) below.
(i) "IRS" shall mean the Internal Revenue Service.
(j) "Participant" shall mean a person who is a participant in one or
more of the Plans in accordance with their terms and conditions.
(k) "Payment Schedule" shall have the meaning set forth in Section
3.6(b) below.
(l) "Plan(s)" shall mean one or more of the executive deferral plans
established now or in the future by the Company that require the
establishment of a trust.
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(m) "Plan Year" shall mean the Plan Year chosen for this Master
Trust Agreement by the Board.
(n) "Trust Fund" shall mean the assets held by the Trustee pursuant
to the terms of this Master Trust Agreement and for the purposes
of the Plans.
1.6 GRANTOR TRUST. The Trust is intended to be a "grantor trust," of which
the Company and the Subsidiaries are the grantors, within the meaning of
subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended, and the Trust shall be construed
accordingly.
ARTICLE 2
GENERAL ADMINISTRATION
2.1 COMMITTEE DIRECTIONS AND ADMINISTRATION BEFORE CHANGE IN CONTROL. Until
a Change in Control has occurred, this Section 2.1 shall be effective
and the Committee shall direct the Trustee as to the administration of
the Trust in accordance with the following provisions:
(a) The Committee shall be identified to the Trustee by a copy of
the resolution of the Board appointing the Committee. In the
absence thereof, the Board shall be the Committee. Persons
authorized to give directions to the Trustee on behalf of the
Committee shall be identified to the Trustee by written notice
from the Committee, and such notice shall contain specimens of
the authorized signatures. The Trustee shall be entitled to rely
on such written notice as evidence of the identity and authority
of the persons appointed until a written cancellation of the
appointment, or the written appointment of a successor, is
received by the Trustee.
(b) Directions by the Committee, or its delegate, to the Trustee
shall be in writing and signed by the Committee or persons
authorized by the Committee, or may be made by such other method
as is acceptable to the Trustee.
(c) The Trustee may conclusively rely upon directions from the
Committee in taking any action with respect to this Master Trust
Agreement, including the making of payments from the Trust Fund
and the investment of the Trust Fund pursuant to this Master
Trust Agreement. The Trustee shall have no liability for actions
taken, or for failure to act, on the direction of the Committee.
The Trustee shall have no liability for failure to act in the
absence of proper written directions.
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(d) The Trustee may request instructions from the Committee and
shall have no duty to act or liability for failure to act if
such instructions are not forthcoming from the Committee. If
requested instructions are not received within a reasonable
time, the Trustee may, but is under no duty to, act on its own
discretion to carry out the provisions of this Master Trust
Agreement in accordance with this Master Trust Agreement and the
Plans.
2.2 ADMINISTRATION UPON CHANGE IN CONTROL. In the event of a Change in
Control, the authority of the Committee to administer the Trust and
direct the Trustee, as set forth in Section 2.1 above, shall cease, and
the Trustee shall have complete authority to administer the Trust.
2.3 CONTRIBUTIONS. Except as provided in any Plan, the Company and the
Subsidiaries, in their sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with
the Trustee to augment the principal to be held, administered and
disposed of by the Trustee as provided in this Master Trust Agreement.
Neither the Trustee nor any Participant or Beneficiary shall have any
right to compel such additional deposits. The Trustee shall have no duty
to collect or enforce payment to it of any contributions or to require
that any contributions be made, and shall have no duty to compute any
amount to be paid to it nor to determine whether amounts paid comply
with the terms of the Plans; provided, however, that following a Change
in Control, the Trustee shall have the right, in its sole and absolute
discretion, to compel a contribution to the Trust from the Company to
make-up for any shortfall between (i) the anticipated obligations of the
Plans and Trust and (ii) the Trust Fund.
2.4 TRUST FUND. The contributions received by the Trustee from the Company
and the Subsidiaries shall be held and administered pursuant to the
terms of this Master Trust Agreement as a single fund without
distinction between income and principal and without liability for the
payment of interest thereon except as expressly provided in this Master
Trust Agreement. During the term of this Trust, all income received by
the Trust, net of expenses and taxes, shall be accumulated and
reinvested.
2.5 DISTRIBUTION OF EXCESS TRUST FUND TO EMPLOYERS. In the event that the
Committee, prior to a Change in Control, or the Trustee in its sole and
absolute discretion, after a Change in Control, determines that the
Trust Fund exceeds 125 percent of the anticipated benefit obligations
and administrative expenses that are to be paid under the Plans and
Trust, the Trustee, at the direction of the Committee prior to a Change
in Control, or in its sole and absolute discretion after a Change in
Control, shall distribute to the Company and the Subsidiaries such
excess portion of the Trust Fund.
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ARTICLE 3
POWERS AND DUTIES OF TRUSTEE
3.1 INVESTMENT DIRECTIONS. Except as provided in this Section and Section
3.2 below, the Committee shall provide the Trustee with all investment
instructions. The Trustee shall neither affect nor change investments of
the Trust Fund, except as directed in writing by the Committee, and
shall have no right, duty or responsibility to recommend investments or
investment changes; provided, that the Trustee may (i) deposit cash on
hand from time to time in any bank savings account, certificate of
deposit, or other instrument creating a deposit liability for a bank,
including the Trustee's own banking department, if the Trustee is a
bank, without such prior direction, or (ii) invest in government
securities, bonds with specific ratings, equities, or mutual funds
composed of such investments, all within broad investment guidelines
established by the Committee from time to time.
3.2 INVESTMENT UPON CHANGE IN CONTROL. In the event of a Change in Control,
the authority of the Committee to direct investments of the Trust Fund
shall cease and the Trustee shall have complete authority to direct
investments of the Trust Fund. The president of the Company shall notify
the Trustee in writing when a Change in Control has occurred. The
Trustee has no duty to inquire whether a Change in Control has occurred
and may rely on notification by the president of the Company of a Change
in Control; provided, however, that if any officer, former officer,
director or former director of the Company or any Subsidiary (other than
the president of the Company), or any Participant notifies the Trustee
that there has been or there may be a Change in Control, the Trustee
shall have the duty to satisfy itself as to whether a Change in Control
has in fact occurred. The Company and the Subsidiaries shall indemnify
and hold harmless the Trustee for any damages or costs (including
attorneys' fees) that may be incurred because of reliance on the
president's notice or lack thereof.
3.3 MANAGEMENT OF INVESTMENTS. Subject to Section 3.1 above, the Trustee
shall have, without exclusion, all powers conferred on the Trustee by
applicable law, unless expressly provided otherwise herein, and all
rights associated with assets of the Trust shall be exercised by the
Trustee or the person designated by the Trustee, and shall in no event
be exercisable by or rest with Participants or their Beneficiaries. The
Trustee shall have full power and authority to invest and reinvest the
Trust Fund in any investment permitted by law, exercising the judgment
and care that persons of prudence, discretion and intelligence would
exercise under the circumstances then prevailing, considering the
probable income and safety of their capital, including, without limiting
the generality of the foregoing, the power:
(a) To invest and reinvest the Trust Fund, together with the income
therefrom, in common stock, preferred stock, convertible
preferred stock, mutual funds, bonds,
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debentures, convertible debentures and bonds, mortgages, notes,
time certificates of deposit, commercial paper and other
evidences of indebtedness (including those issued by the Trustee
or any of its affiliates), other securities, policies of life
insurance, annuity contracts, options to buy or sell securities
or other assets, and other property of any kind (personal, real,
or mixed, and tangible or intangible); provided, however, that
in no event may the Trustee invest in securities (including
stock or rights to acquire stock) or obligations issued by the
Company or the Subsidiaries, other than a de minimis amount held
in common investment vehicles in which the Trustee invests;
(b) To deposit or invest all or any part of the assets of the Trust
Fund in savings accounts or certificates of deposit or other
deposits which bear a reasonable interest rate in a bank,
including the commercial department of the Trustee, if such bank
is supervised by the United States or any State;
(c) To hold, manage, improve, repair and control all property, real
or personal, forming part of the Trust Fund and to sell, convey,
transfer, exchange, partition, lease for any term, even
extending beyond the duration of this Trust, and otherwise
dispose of the same from time to time in such manner, for such
consideration, and upon such terms and conditions as the Trustee
shall determine;
(d) To have, respecting securities, all the rights, powers and
privileges of an owner, including the power to give proxies, pay
assessments and other sums deemed by the Trustee to be necessary
for the protection of the Trust Fund, to vote any corporate
stock either in person or by proxy, with or without power of
substitution, for any purpose; to participate in voting trusts,
pooling agreements, foreclosures, reorganizations,
consolidations, mergers and liquidations, and in connection
therewith to deposit securities with and transfer title to any
protective or other committee under such terms as the Trustee
may deem advisable; to exercise or sell stock subscriptions or
conversion rights; and, regardless of any limitation elsewhere
in this instrument relative to investment by the Trustee, to
accept and retain as an investment any securities or other
property received through the exercise of any of the foregoing
powers;
(e) To hold in cash, without liability for interest, such portion of
the Trust Fund which, in its discretion, shall be reasonable
under the circumstances, pending investments, or payment of
expenses, or the distribution of benefits;
(f) To take such actions as may be necessary or desirable to protect
the Trust Fund from loss due to the default on mortgages held in
the Trust including the appointment of agents or trustees in
such other jurisdictions as may seem desirable, to
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transfer property to such agents or trustees, to grant such
powers as are necessary or desirable to protect the Trust or its
assets, to direct such agents or trustees, or to delegate such
power to direct, and to remove such agents or trustees;
(g) To employ and rely on advice given by such agents including
custodians and counsel as may be reasonably necessary and to pay
them reasonable compensation; to settle, compromise or abandon
all claims and demands in favor of or against the Trust assets;
(h) To cause title to property of the Trust to be issued, held or
registered in the individual name of the Trustee, or in the name
of its nominee(s) or agents, or in such form that title will
pass by delivery;
(i) To exercise all of the further rights, powers, options and
privileges granted, provided for, or vested in trustees
generally under the laws of the State whose laws are applicable
to this Master Trust Agreement, as provided in Section 10.6
below, so that the powers conferred upon the Trustee herein
shall not be in limitation of any authority conferred by law,
but shall be in addition thereto;
(j) To borrow money from any source (including the Trustee) and to
execute promissory notes, mortgages or other obligations and to
pledge or mortgage any Trust assets as security;
(k) To lend certificates representing stocks, bonds, or other
securities to any brokerage or other firm selected by the
Trustee;
(l) To institute, compromise and defend actions and proceedings; to
pay or contest any claim; to settle a claim by or against the
Trustee by compromise, arbitration, or otherwise; to release, in
whole or in part, any claim belonging to the Trust to the extent
that the claim is uncollectible;
(m) To use securities depositories or custodians and to allow such
securities as may be held by a depository or custodian to be
registered in the name of such depository or its nominee or in
the name of such custodian or its nominee;
(n) To invest the Trust Fund from time to time in one or more
investment funds, which funds shall be registered under the
Investment Company Act of 1940; and
(o) To do all other acts necessary or desirable for the proper
administration of the Trust Fund, as if the Trustee were the
absolute owner thereof.
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However, nothing in this section shall be construed to mean the Trustee
assumes any responsibility for the performance of any investment made by
the Trustee in its capacity as trustee under the operations of this
Master Trust Agreement. Notwithstanding any powers granted to the
Trustee pursuant to this Master Trust Agreement or to applicable law,
the Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains therefrom,
within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Internal Revenue
Code of 1986, as amended.
3.4 SECURITIES. Voting or other rights in securities shall be exercised by
the person or entity responsible for directing such investments, and the
Trustee shall have no duty to exercise voting or proxy or other rights
relating to any investment managed or directed by the Committee. If any
foreign securities are purchased pursuant to the direction of the
Committee, it shall be the responsibility of the person or entity
responsible for directing such investments to advise the Trustee in
writing of any laws or regulations, either foreign or domestic, that
apply to such foreign securities or to the receipt of dividends or
interest on such securities.
3.5 SUBSTITUTION. Notwithstanding any provision of any Plan or the Trust to
the contrary, the Company and/or any Subsidiary shall at all times have
the power to reacquire the Trust Fund by substituting readily marketable
securities (other than stock, a debt obligation or other security issued
by the Company or any Subsidiary) and/or cash of an equivalent value and
such other property shall, following such substitution, constitute the
Trust Fund. Notwithstanding the foregoing, any such substitution shall
be subject to the approval of the Trustee, which approval may be
unreasonably withheld.
3.6 DISTRIBUTIONS.
(a) The establishment of the Trust and the payment or delivery to
the Trustee of money or other property shall not vest in any
Participant or Beneficiary any right, title, or interest in and
to any assets of the Trust. To the extent that any Participant
or Beneficiary acquires the right to receive payments under any
of the Plans, such right shall be no greater than the right of
an unsecured general creditor of the Company and the
Subsidiaries and such Participant or Beneficiary shall have only
the unsecured promise of the Company and the Subsidiaries that
such payments shall be made.
(b) Concurrent with the establishment of this Trust, the Company
shall deliver to the Trustee a schedule (the "Payment Schedule")
that indicates the amounts payable in respect of each
Participant (and his or her Beneficiaries) on a Plan by Plan
basis, provides a formula or formulas or other instructions
acceptable to the Trustee for
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determining the amounts so payable, specifies the form in which
such amount is to be paid (as provided for or available under
the applicable Plans), and the time of commencement for payment
of such amounts. The Payment Schedule shall be updated annually
and upon a Change in Control and from time to time thereafter as
is necessary. Except as otherwise provided herein, prior to a
Change in Control, the Trustee shall make payments to the
Participants and their Beneficiaries in accordance with such
Payment Schedule. Despite the foregoing, after a Change in
Control, the Trustee shall make payments in accordance with the
terms and provisions of each of the Plans and related plan
agreements. The Trustee, at the direction of the Committee or,
after a Change in Control, on its own volition, may make any
distribution required to be made by it hereunder by delivering:
(i) Its check payable to the person to whom such
distribution is to be made, to the person, or, if prior
to a Change in Control, to the Company for redelivery to
such person; provided that before a Change in Control,
the Committee may direct the Trustee to deliver one or
more lump sum checks payable to the Company, and the
Company shall prepare and deliver individual checks for
each Participant or Beneficiary; or
(ii) Its check payable to an insurer for the benefit of such
person, to the insurer, or, if prior to a Change in
Control, to the Company for redelivery to the insurer;
or
(iii) Contracts held on the life of the Participant to whom or
with respect to whom the distribution is being made, to
the Participant or Beneficiary, or, if prior to a Change
in Control, to the Company for redelivery to the person
to whom such distribution is to be made; or
(iv) If a distribution is being made, in whole or in part, of
other assets, assignments or other appropriate documents
or certificates necessary to effect a transfer of title,
to the Participant or Beneficiary, or, if prior to a
Change in Control, to the Company for redelivery to such
person.
(c) If the principal of the Trust, and any earnings thereon, are not
sufficient, determined on a Plan by Plan basis, to make payments
of benefits in accordance with the terms of the Plans, the
Company and the Subsidiaries shall make the balance of each such
payment as it falls due. The Trustee shall notify the Company
and the Subsidiaries when principal and earnings are not
sufficient.
(d) The Company and the Subsidiaries may make payment of benefits
directly to Participants or their Beneficiaries as they become
due under the terms of the Plans.
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The Company and the Subsidiaries shall notify the Trustee of
their decisions to make payment of benefits directly prior to
the time amounts are payable to Participants or their
Beneficiaries.
(e) Notwithstanding anything contained in this Master Trust
Agreement to the contrary, if at any time the Trust is finally
determined by the IRS not to be a "grantor trust" with the
result that the income of the Trust Fund is not treated as
income of the Company or the Subsidiaries pursuant to Sections
671 through 679 of the Internal Revenue Code of 1986, as
amended, or if a tax is finally determined by the IRS to be
payable by one or more Participants or Beneficiaries with
respect to any interest in the Plans or the Trust Fund prior to
payment of such interest to any such Participant or Beneficiary,
the Trustee shall immediately determine each Participant's share
of the Trust Fund in accordance with the Plans, and the Trustee
shall immediately distribute such share in a lump sum to each
Participant or Beneficiary entitled thereto, regardless of
whether such Participant's employment has terminated (provided
such Participant has a vested interest in his or her accrued
benefits under the Plans) and regardless of form and time of
payments specified in or pursuant to the Plans. Any remaining
assets (less any expenses or costs due under Sections 3.8 and
3.9 of this Master Trust Agreement) shall then be paid by the
Trustee to the Company and the Subsidiaries in such amounts, and
in the manner instructed by the Committee. If the value of the
Trust Fund is less than the benefit obligations under the Plans,
the foregoing described distributions will be limited to a
Participant's share of the Trust Fund, determined by allocating
assets to the Participant based on the ratio of the
Participant's benefit obligations under the Plans to the total
benefit obligations under the Plans. Prior to a Change in
Control, the Trustee shall rely solely on the directions of the
Committee with respect to the occurrence of the foregoing events
and the resulting distributions to be made, and the Trustee
shall not be responsible for any failure to act in the absence
of such direction.
(f) The Trustee shall make provision for the reporting and
withholding of any federal, state or local taxes that may be
required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plans and shall pay amounts
withheld to the appropriate taxing authorities or determine that
such amounts have been reported, withheld and paid by the
Company and the Subsidiaries.
(g) Prior to a Change in Control, payments by the Trustee shall be
delivered or mailed to addresses supplied by the Committee and
the Trustee's obligation to make such payments shall be
satisfied upon such delivery or mailing. Prior to a Change in
Control, the Trustee shall have no obligation to determine the
identity of persons
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entitled to benefits or their mailing addresses. After a Change
in Control, the Trustee shall have such obligations.
(h) Prior to a Change in Control, the entitlement of a Participant
or his or her Beneficiaries to benefits under the Plans shall be
determined by the Company and the Subsidiaries or such party as
they shall designate under the Plans, and any claim for such
benefits shall be considered and reviewed under the procedures
set out in the Plans. After a Change in Control, the Trustee or
its agents shall have such obligations.
3.7 TRUSTEE RESPONSIBILITY REGARDING PAYMENTS ON INSOLVENCY.
(a) The Trustee shall cease payment of benefits to Participants and
their Beneficiaries if the Company, or any Subsidiary, is
Insolvent (the "Insolvent Entity"). The Insolvent Entity shall
be considered "Insolvent" for purposes of this Master Trust
Agreement if:
(i) the Insolvent Entity is unable to pay its debts as they
become due, or
(ii) the Insolvent Entity is subject to a pending proceeding
as a debtor under the United States Bankruptcy Code.
For purposes of this Section 3.7, if an entity is determined to be
Insolvent, each Subsidiary in which such entity has an equity interest
shall also be deemed to be an Insolvent Entity. However, the insolvency
of a Subsidiary will not cause a parent corporation to be deemed
Insolvent.
(b) At all times during the continuance of this Trust, as provided
in Section 1.3 above, the principal and income of the Trust
shall be subject to claims of the general creditors of the
Company and its Subsidiaries under federal and state law as set
forth below:
(i) The Board and the president of the Company shall have
the duty to inform the Trustee in writing of the
Company's or any Subsidiary's Insolvency. If a person
claiming to be a creditor of the Company or any
Subsidiary alleges in writing to the Trustee that the
Company or any Subsidiary has become Insolvent, the
Trustee shall determine whether the Company or any
Subsidiary is Insolvent and, pending such determination,
the Trustee shall discontinue payment of benefits to the
Insolvent Entity's Participants or their Beneficiaries.
Prior to a Change in Control, the Trustee may
conclusively rely on any determination it receives from
the Board or the
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president of the Company with respect to the Insolvency
of the Company or any Subsidiary.
(ii) Unless the Trustee has actual knowledge of the Company's
or a Subsidiary's Insolvency, or has received notice
from the Company, a Subsidiary, or a person claiming to
be a creditor alleging that the Company or a Subsidiary
is Insolvent, the Trustee shall have no duty to inquire
whether the Company or any Subsidiary is Insolvent. The
Trustee may in all events rely on such evidence
concerning the Company's or any Subsidiary's solvency as
may be furnished to the Trustee and that provides the
Trustee with a reasonable basis for making a
determination concerning the Company's or any
Subsidiary's solvency. In this regard, the Trustee may
rely upon a letter from the Company's or a Subsidiary's
auditors as to the Company's or any Subsidiary's
financial status.
(iii) If at any time the Trustee has determined that the
Company or any Subsidiary is Insolvent, the Trustee
shall discontinue payments to the Insolvent Entity's
Participants or their Beneficiaries, and shall hold the
portion of the assets of the Trust allocable to the
Insolvent Entity for the benefit of the Insolvent
Entity's general creditors. Nothing in this Master Trust
Agreement shall in any way diminish any rights of
Participants or their Beneficiaries to pursue their
rights as general creditors of the Insolvent Entity with
respect to benefits due under the Plans or otherwise.
(iv) The Trustee shall resume the payment of benefits to
Participants or their Beneficiaries in accordance with
this Article 3 of this Master Trust Agreement only after
the Trustee has determined that the alleged Insolvent
Entity is not Insolvent (or is no longer Insolvent).
(c) Provided that there are sufficient assets, if the Trustee
discontinues the payment of benefits from the Trust pursuant to
Section 3.7(b) hereof and subsequently resumes such payments,
the first payment following such discontinuance shall include
the aggregate amount of all payments due to Participants or
their Beneficiaries under the terms of the Plans for the period
of such discontinuance, plus earnings on such amount based on
the average interest rate in effect for 30-day Treasury Bills
over such period of discontinuance, less the aggregate amount of
any payments made to Participants or their Beneficiaries by the
Company or any Subsidiary in lieu of the payments provided for
hereunder during any such period of discontinuance. Prior to a
Change in Control, the Committee shall instruct the Trustee as
to such amounts, and after a Change in Control, the Trustee
shall determine such amounts in accordance with the terms and
provisions of the Plans.
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3.8 COSTS OF ADMINISTRATION. The Trustee is authorized to incur reasonable
obligations in connection with the administration of the Trust,
including attorneys' fees, administrative fees and appraisal fees. Such
obligations shall be paid by the Company and the Subsidiaries. The
Trustee is authorized to pay such amounts from the Trust Fund if the
Company or the Subsidiaries fail to pay them within 60 days of
presentation of a statement of the amounts due.
3.9 TRUSTEE COMPENSATION AND EXPENSES. The Trustee shall be entitled to
reasonable compensation for its services as from time to time agreed
upon between the Trustee and the Company. If the Trustee and the Company
fail to agree upon a compensation, or following a Change in Control, the
Trustee shall be entitled to compensation at a rate equal to the rate
charged by the Trustee for similar services rendered by it during the
current fiscal year for other trusts similar to this Trust. The Trustee
shall be entitled to reimbursement for expenses incurred by it in the
performance of its duties as the Trustee, including reasonable fees for
legal counsel. The Trustee's compensation and expenses shall be paid by
the Company and the Subsidiaries. The Trustee is authorized to withdraw
such amounts from the Trust Fund if the Company or the Subsidiaries fail
to pay them within 60 days of presentation of a statement of the amounts
due.
3.10 PROFESSIONAL ADVICE. The Company and the Subsidiaries specifically
acknowledge that the Trustee may find it desirable or expedient to
retain legal counsel (who may also be legal counsel for the Company
generally) or other professional advisors to advise it in connection
with the exercise of any duty under this Master Trust Agreement,
including, but not limited to, any matter relating to or following a
Change in Control or the Insolvency of the Company or any Subsidiary.
The Trustee shall be fully protected in acting upon the advice of such
legal counsel or advisors.
3.11 PAYMENT ON COURT ORDER. To the extent permitted by law, the Trustee is
authorized to make any payments directed by court order in any action in
which the Trustee has been named as a party. The Trustee is not
obligated to defend actions in which the Trustee is named, but shall
notify the Company or Committee of any such action and may tender
defense of the action to the Company, Committee, Participant or
Beneficiary whose interest is affected. The Trustee may in its
discretion defend any action in which the Trustee is named, and any
expenses incurred by the Trustee shall be paid by the Company and the
Subsidiaries. The Trustee is authorized to pay such amounts from the
Trust Fund if the Company or the Subsidiaries fail to pay them within
sixty (60) days of presentation of a statement of the amounts due.
3.12 PROTECTIVE PROVISIONS. Notwithstanding any other provision contained in
this Master Trust Agreement to the contrary, the Trustee shall have no
obligation to (i) determine the
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existence of any conversion, redemption, exchange, subscription or other
right relating to any securities purchased of which notice was given
prior to the purchase of such securities and shall have no obligation to
exercise any such right unless the Trustee is advised in writing by the
Committee both of the existence of the right and the desired exercise
thereof within a reasonable time prior to the expiration of the right to
exercise, or (ii) advance any funds to the Trust. Furthermore, the
Trustee is not a party to the Plans.
3.13 INDEMNIFICATIONS.
(a) The Company and the Subsidiaries shall indemnify and hold the
Trustee harmless from and against all loss or liability
(including expenses and reasonable attorneys' fees) to which it
may be subject by reason of its execution of its duties under
this Trust, or by reason of any acts taken in good faith in
accordance with any directions, or acts omitted in good faith
due to absence of directions, from the Company, the Committee or
a Participant, unless such loss or liability is due to the
Trustee's gross negligence or willful misconduct. The indemnity
described herein shall be provided by the Company and the
Subsidiaries.
(b) In the event that the Trustee is named as a defendant in a
lawsuit or proceeding involving one or more of the Plans or the
Trust Fund, the Trustee shall be entitled to receive on a
current basis the indemnity payments provided for in this
Section, provided however that if the final judgment entered in
the lawsuit or proceeding holds that the Trustee is guilty of
gross negligence or willful misconduct with respect to the Trust
Fund, the Trustee shall be required to refund the indemnity
payments that it has received.
(c) All releases and indemnities provided in this Master Trust
Agreement shall survive the termination of this Master Trust
Agreement.
ARTICLE 4
INSURANCE CONTRACTS
4.1 TYPES OF CONTRACTS. To the extent that the Trustee is directed by the
Committee prior to a Change in Control to invest part or all of the
Trust Fund in insurance contracts, the type and amount thereof shall be
specified by the Committee. The Trustee shall be under no duty to make
inquiry as to the propriety of the type or amount so specified.
4.2 OWNERSHIP. Each insurance contract issued shall provide that the Trustee
shall be the owner thereof with the power to exercise all rights,
privileges, options and elections granted by or permitted under such
contract or under the rules of the insurer. The exercise
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by the Trustee of any incidents of ownership under any contract shall,
prior to a Change in Control, be subject to the direction of the
Committee.
4.3 RESTRICTIONS ON TRUSTEE'S RIGHTS. The Trustee shall have no power to
name a beneficiary of the policy other than the Trust, to assign the
policy (as distinct from conversion of the policy to a different form)
other than to a successor Trustee, or to loan to any person the proceeds
of any borrowing against such policy. Despite the foregoing, the Trustee
may (i) loan to the Company or any Subsidiary the proceeds of any
borrowing against an insurance policy held in the Trust Fund or (ii)
assign all, or any portion, of a policy to the Company or any Subsidiary
if under other provisions of this Master Trust Agreement the Company or
any Subsidiary is entitled to receive assets from the Trust.
ARTICLE 5
TRUSTEE'S ACCOUNTS
5.1 RECORDS. The Trustee shall maintain accurate records and detailed
accounts of all investments, receipts, disbursements and other
transactions hereunder. Such records shall be available at all
reasonable times for inspection by the Company and Subsidiaries or their
authorized representative. The Trustee, at the direction of the
Committee, shall submit to the Committee and to any insurer such
valuations, reports or other information as the Committee may reasonably
require and, in the absence of fraud or bad faith, the valuation of the
Trust Fund by the Trustee shall be conclusive.
5.2 ANNUAL ACCOUNTING; FINAL ACCOUNTING.
(a) Within 60 days following the end of each Plan Year and within 60
days after the removal or resignation of the Trustee or the
termination of the Trust, the Trustee shall file with the
Committee a written account setting forth a description of all
properties purchased and sold, all receipts, disbursements and
other transactions effected by it during the Plan Year or, in
the case of removal, resignation or termination, since the close
of the previous Plan Year, and listing the properties held in
the Trust Fund as of the last day of the Plan Year or other
period and indicating their values. Such values shall be either
cost or market as directed by the Committee in accordance with
the terms of the Plans.
(b) The Committee may approve such account either by written notice
of approval delivered to the Trustee or by its failure to
express written objection to such account delivered to the
Trustee within 60 days after the date of which such account was
delivered to the Committee.
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(c) The approval by the Committee of an accounting shall be binding
as to all matters embraced in such accounting on all parties to
this Master Trust Agreement and on all Participants and
Beneficiaries, to the same extent as if such accounting had been
settled by a judgment or decree of a court of competent
jurisdiction in which the Trustee, the Committee, the Company,
the Subsidiaries and all persons having or claiming any interest
in any Plan or the Trust Fund were made parties.
(d) Despite the foregoing, nothing contained in this Master Trust
Agreement shall deprive the Trustee of the right to have an
accounting judicially settled, if the Trustee, in the Trustee's
sole discretion, desires such a settlement.
5.3 VALUATION. The assets of the Trust Fund shall be valued at their
respective fair market values on the date of valuation, as determined by
the Trustee based upon such sources of information as it may deem
reliable, including, but not limited to, stock market quotations,
statistical valuation services, newspapers of general circulation,
financial publications, advice from investment counselors, brokerage
firms or insurance companies, or any combination of sources. Prior to a
Change in Control, the Committee shall instruct the Trustee as to the
value of assets for which market values are not readily obtainable by
the Trustee. If the Committee fails to provide such values, the Trustee
may take whatever action it deems reasonable, including employment of
attorneys, appraisers, life insurance companies or other professionals,
the expense of which shall be an expense of administration of the Trust
Fund and payable by the Company and the Subsidiaries. The Trustee may
rely upon information from the Company and the Subsidiaries, the
Committee, appraisers or other sources and shall not incur any liability
for an inaccurate valuation based in good faith upon such information.
5.4 DELEGATION OF DUTIES. The Company or the Committee, or both, may at any
time employ the Trustee as their agent to perform any act, keep any
records or accounts and make any computations that are required of the
Company, any Subsidiary or the Committee by this Master Trust Agreement
or the Plans. The Trustee may be compensated for such employment and
such employment shall not be deemed to be contrary to the Trust. Nothing
done by the Trustee as such agent shall change or increase its
responsibility or liability as Trustee hereunder.
ARTICLE 6
RESIGNATION OR REMOVAL OF TRUSTEE
6.1 RESIGNATION; REMOVAL. The Trustee may resign at any time by written
notice to the Company, which shall be effective 60 days after receipt of
such notice unless the Company
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and the Trustee agree otherwise. Prior to a Change in Control, the
Trustee may be removed by the Company on 60 days notice or upon shorter
notice accepted by the Trustee. After a Change in Control, the Trustee
may be removed by a majority vote of the Participants, and if a
Participant is dead, his or her Beneficiaries (who collectively shall
have one vote among them and shall vote in place of such deceased
Participant), on 60 days notice or upon shorter notice accepted by the
Trustee.
6.2 SUCCESSOR TRUSTEE. If the Trustee resigns or is removed, a successor
shall be appointed by the Company, in accordance with this Section, by
the effective date of the resignation or removal under Section 6.1
above. The successor shall be a bank, trust company, or similar
independent third party with a market capitalization of at least $10
billion that is granted corporate trustee powers under state or federal
law. After the occurrence of a Change in Control, a successor Trustee
may not be appointed without the consent of a majority of the
Participants. If no such appointment has been made, the Trustee may
apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in connection
with the proceeding shall be allowed as administrative expenses of the
Trust.
6.3 SETTLEMENT OF ACCOUNTS. Upon resignation or removal of the Trustee and
appointment of a successor Trustee, all assets shall subsequently be
transferred to the successor Trustee. The transfer shall be completed
within 90 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit. Upon the transfer
of the assets, the successor Trustee shall succeed to all of the powers
and duties given to the Trustee in this Master Trust Agreement. The
resigning or removed Trustee shall render to the Committee an account in
the form and manner and at the time prescribed in Section 5.2. The
approval of such accounting and discharge of the Trustee shall be as
provided in such Section.
ARTICLE 7
CONTROVERSIES, LEGAL ACTIONS AND COUNSEL
7.1 CONTROVERSY. If any controversy arises with respect to the Trust, the
Trustee shall take action as directed by the Committee or, in the
absence of such direction or after a Change in Control, as it deems
advisable, whether by legal proceedings, compromise or otherwise. The
Trustee may retain the funds or property involved without liability
pending settlement of the controversy. The Trustee shall be under no
obligation to take any legal action of whatever nature unless there
shall be sufficient property in the Trust to indemnify the Trustee with
respect to any expenses or losses to which it may be subjected.
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7.2 JOINDER OF PARTIES. In any action or other judicial proceedings
affecting the Trust, it shall be necessary to join as parties the
Trustee, the Committee, the Company and the Subsidiaries. No Participant
or other person shall be entitled to any notice or service of process.
Any judgment entered in such a proceeding or action shall be binding on
all persons claiming under the Trust. Nothing in this Master Trust
Agreement shall be construed as to deprive a Participant or Beneficiary
of his or her right to seek adjudication of his or her rights by
administrative process or by a court of competent jurisdiction.
7.3 EMPLOYMENT OF COUNSEL. The Trustee may consult with legal counsel (who
may be counsel for the Company or any Subsidiary) and shall be fully
protected with respect to any action taken or omitted by it in good
faith pursuant to the advice of counsel.
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ARTICLE 8
INSURERS
8.1 INSURER NOT A PARTY. No insurer shall be deemed to be a party to the
Trust and an insurer's obligations shall be measured and determined
solely by the terms of contracts and other agreements executed by it.
8.2 AUTHORITY OF TRUSTEE. An insurer shall accept the signature of the
Trustee to any documents or papers executed in connection with such
contracts. The signature of the Trustee shall be conclusive proof to the
insurer that the person on whose life an application is being made is
eligible to have a contract issued on his or her life and is eligible
for a contract of the type and amount requested.
8.3 CONTRACT OWNERSHIP. An insurer shall deal with the Trustee as the sole
and absolute owner of any insurance contracts and shall have no
obligation to inquire whether any action or failure to act on the part
of the Trustee is in accordance with or authorized by the terms of the
Plans or this Master Trust Agreement.
8.4 LIMITATION OF LIABILITY. An insurer shall be fully discharged from any
and all liability for any action taken or any amount paid in accordance
with the direction of the Trustee and shall have no obligation to see to
the proper application of the amounts so paid. An insurer shall have no
liability for the operation of the Trust or the Plans, whether or not in
accordance with their terms and provisions.
8.5 CHANGE OF TRUSTEE. An insurer shall be fully discharged from any and all
liability for dealing with a party or parties indicated on its records
to be the Trustee until such time as it shall receive at its home office
written notice of the appointment and qualification of a successor
Trustee.
ARTICLE 9
AMENDMENT AND TERMINATION
9.1 AMENDMENT. Subject to the limitations set forth in this Section 9.1,
this Master Trust Agreement may be amended by a written instrument
executed by the Trustee and the Company. Notwithstanding the foregoing,
no such amendment shall conflict with the terms of the Plans or shall
make the Trust revocable after it has become irrevocable in accordance
with Section 1.3 above. Any amendment, change or modification shall be
subject to the following rules:
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(a) General Rule. Subject to Sections 9.1(b), (c) and (d) below,
this Master Trust Agreement may be amended:
(i) By the Company and the Trustee, provided, however, that
if an amendment would in any way adversely affect the
rights accrued under the Plans in the Trust Fund by any
Participant or Beneficiary, each and every Participant
and Beneficiary whose rights in the Trust Fund would be
adversely affected must consent to the amendment before
this Master Trust Agreement may be so amended; and
(ii) By the Company and the Trustee as may be necessary to
comply with laws which would otherwise render the Trust
void, voidable or invalid in whole or in part.
(b) Limitation. Notwithstanding that an amendment may be permissible
under Section 9.1(a) above, this Master Trust Agreement shall
not be amended by an amendment that would:
(i) Cause any of the assets of the Trust to be used for or
diverted to purposes other than for the exclusive
benefit of Participants and Beneficiaries as set forth
in the Plans, except as is required to satisfy the
claims of the Company's or a Subsidiary's general
creditors; or
(ii) Be inconsistent with the terms of any Plan, including
the terms of any Plan regarding termination, amendment
or modification of the Plan.
(c) Writing and Consent. Any amendment to this Master Trust
Agreement shall be set forth in writing and signed by the
Company and the Trustee and, if consent of any Participant or
Beneficiary is required under Section 9.1(a), the Participant or
Beneficiary whose consent is required. Any amendment may be
current, retroactive or prospective, in each case as provided
therein.
(d) The Company and Trustee. In connection with the exercise of the
rights under this Section 9.1:
(i) prior to a Change in Control, the Trustee shall have no
responsibility to determine whether any proposed
amendment complies with the terms and conditions set
forth in Sections 9.1(a) and (b) above and may
conclusively rely on the directions of the Committee
with respect thereto, unless the Trustee has knowledge
of a proposed transaction or transactions that would
result in a Change in Control; and
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(ii) this Master Trust Agreement may not be amended or
terminated by the Company for two (2) years following a
Change in Control without the written consent of
two-thirds of the Participants; provided, however, the
Trust Agreement may be amended by the Company and the
Trustee following a Change in Control without the
written consent of the Participants to comply with legal
or regulatory requirements necessary to maintain the tax
status of the Plans or the Trust for Participants or
Beneficiaries.
(e) Taxation. This Master Trust Agreement shall not be amended,
altered, changed or modified in a manner that would cause the
Participants and/or Beneficiaries under any Plan to be taxed on
the benefits under any Plan in a year other than the year of
actual receipt of benefits.
9.2 FINAL TERMINATION. The Trust shall not terminate until the date on which
Participants and their Beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans and all of the expenses of the Trust
have been paid, and on such date the Trust shall terminate. Upon
termination of the Trust, any assets remaining in the Trust shall be
returned to the Company and the Subsidiaries. Such remaining assets
shall be paid by the Trustee to the Company and the Subsidiaries in such
amounts and in the manner instructed by the Company, whereupon the
Trustee shall be released and discharged from all obligations hereunder.
From and after the date of termination and until final distribution of
the Trust Fund, the Trustee shall continue to have all of the powers
provided herein as are necessary or expedient for the orderly
liquidation and distribution of the Trust Fund.
ARTICLE 10
MISCELLANEOUS
10.1 DIRECTIONS FOLLOWING CHANGE IN CONTROL. Despite any other provision of
this Master Trust Agreement that may be construed to the contrary,
following a Change in Control, all powers of the Committee, the Company
and the Board to direct the Trustee under this Master Trust Agreement
shall terminate, and the Trustee shall act on its own discretion to
carry out the terms of this Master Trust Agreement in accordance with
the Plans and this Master Trust Agreement.
10.2 TAXES. The Company and the Subsidiaries shall from time to time pay
taxes of any and all kinds whatsoever that at any time are lawfully
levied or assessed upon or become payable in respect of the Trust Fund,
the income or any property forming a part thereof, or any security
transaction pertaining thereto. To the extent that any taxes lawfully
levied or
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assessed upon the Trust Fund are not paid by the Company and the
Subsidiaries, the Trustee shall have the power to pay such taxes out of
the Trust Fund and shall seek reimbursement from the Company and the
Subsidiaries. Prior to making any payment, the Trustee may require such
releases or other documents from any lawful taxing authority as it shall
deem necessary. The Trustee shall contest the validity of taxes in any
manner deemed appropriate by the Company or its counsel, but at the
Company's and the Subsidiaries' expense, and only if it has received an
indemnity bond or other security satisfactory to it to pay any such
expenses. Prior to a Change in Control, the Trustee (i) shall not be
liable for any nonpayment of tax when it distributes an interest
hereunder on directions from the Committee, and (ii) shall have no
obligation to prepare or file any tax return on behalf of the Trust
Fund, any such return being the sole responsibility of the Committee.
The Trustee shall cooperate with the Committee in connection with the
preparation and filing of any such return. After a Change in Control,
the Trustee shall have such duties and obligations.
10.3 THIRD PERSONS. All persons dealing with the Trustee are released from
inquiring into the decisions or authority of the Trustee and from seeing
to the application of any moneys, securities or other property paid or
delivered to the Trustee.
10.4 NONASSIGNABILITY; NONALIENATION. Benefits payable to Participants and
their Beneficiaries under this Master Trust Agreement may not be
anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or
other legal or equitable process.
10.5 THE PLANS. The Trust and the Plans are parts of a single, integrated
employee benefit plan system and shall be construed together. In the
event of any conflict between the terms of this Master Trust Agreement
and the agreements that constitute the Plans, such conflict shall be
resolved in favor of this Master Trust Agreement.
10.6 APPLICABLE LAW. Except to the extent, if any, preempted by ERISA, this
Master Trust Agreement shall be governed by and construed in accordance
with the internal laws of the State of California. Any provision of this
Master Trust Agreement prohibited by law shall be ineffective to the
extent of any such prohibition, without invalidating the remaining
provisions hereof.
10.7 NOTICES AND DIRECTIONS. Whenever a notice or direction is given by the
Committee to the Trustee, it shall be in the form required by Section
2.1. Actions by the Company shall be by the Board or a duly authorized
officer, with such actions certified to the Trustee by an appropriately
certified copy of the action taken. The Trustee shall be protected in
acting upon any such notice, resolution, order, certificate or other
communication believed by it to be genuine and to have been signed by
the proper party or parties.
- --------------------------------------------------------------------------------
-23-
<PAGE> 27
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Trust Agreement
================================================================================
10.8 SUCCESSORS AND ASSIGNS. This Master Trust Agreement shall be binding
upon and inure to the benefit of the Company, the Subsidiaries and the
Trustee and their respective successors and assigns.
10.9 GENDER AND NUMBER. Words used in the masculine shall apply to the
feminine where applicable, and when the context requires, the plural
shall be read as the singular and the singular as the plural.
10.10 HEADINGS. Headings in this Master Trust Agreement are inserted for
convenience of reference only and any conflict between such headings and
the text shall be resolved in favor of the text.
10.11 COUNTERPARTS. This Master Trust Agreement may be executed in an original
and any number of counterparts, each of which shall be deemed to be an
original of one and the same instrument.
10.12 BENEFICIAL INTEREST. The Company and the Subsidiaries are the true
beneficiaries hereunder in that the payment of benefits, directly or
indirectly to or for a Participant or Beneficiary by the Trustee, is in
satisfaction of the Company's and the Subsidiaries' liability therefor
under the Plans. Nothing in this Master Trust Agreement shall establish
any beneficial interest in any person other than the Company and the
Subsidiaries.
10.13 THE TRUST AND PLANS. This Trust, the Plans and each Participant's Plan
Agreement are part of and constitute a single, integrated employee
benefit plan and trust, shall be construed together as the entire
agreement between the Company, the Trustee, the Participants and the
Beneficiaries with regard to the subject matter thereof, and shall
supersede all previous negotiations, agreements and commitments with
respect thereto.
10.14 EFFECTIVE DATE. The effective date of this Master Trust Agreement shall
be _________, 199_.
IN WITNESS WHEREOF the Company and the Trustee have signed this
Master Trust Agreement as of the date first written above.
TRUSTEE: THE COMPANY:
______________________ On Assignment, Inc.
a Delaware corporation,
- --------------------------------------------------------------------------------
-24-
<PAGE> 28
ON ASSIGNMENT, INC.
Deferred Compensation Plan
Master Trust Agreement
================================================================================
_____________________________ By: _________________________
Title: ___________________
- --------------------------------------------------------------------------------
-25-
<PAGE> 1
EXHIBIT 11.1
ON ASSIGNMENT, INC.
STATEMENTS OF COMPUTATION OF NET EARNINGS PER
COMMON AND COMMON EQUIVALENT SHARES (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Net income used to compute basic and
diluted earnings per share $ 2,318,000 $ 1,630,000
=========== ===========
Basic earnings per share $ 0.22 $ 0.16
----------- -----------
Weighted average number of shares outstanding
used to compute basic earnings per share 10,767,000 10,372,000
Dilutive effect of stock options 435,000 488,000
----------- -----------
Number of shares used to compute
diluted earnings per share 11,202,000 10,860,000
----------- -----------
Diluted earnings per share $ 0.21 $ 0.15
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEETS (UNAUDITED) AND CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE QUARTERLY
PERIOD ENDED MARCH 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 24,007,000
<SECURITIES> 5,070,000
<RECEIVABLES> 16,832,000
<ALLOWANCES> 814,000
<INVENTORY> 0
<CURRENT-ASSETS> 46,833,000
<PP&E> 5,415,000
<DEPRECIATION> 2,806,000
<TOTAL-ASSETS> 50,915,000
<CURRENT-LIABILITIES> 8,309,000
<BONDS> 0
0
0
<COMMON> 108,000
<OTHER-SE> 42,498,000
<TOTAL-LIABILITY-AND-EQUITY> 50,915,000
<SALES> 0
<TOTAL-REVENUES> 28,567,000
<CGS> 0
<TOTAL-COSTS> 19,754,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,718,000
<INCOME-TAX> 1,400,000
<INCOME-CONTINUING> 2,318,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,318,000
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.21
</TABLE>
