UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
[ ] 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 0-23155
TRIMERIS, INC.
(Exact name of registrant as specified in its charter)
Delaware 56-1808663
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4727 University Drive
Durham, North Carolina 27707
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (919) 419-6050
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. [X] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of August
12, 1998 was 10,590,026.
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
FORM 10-Q
For the Six Months Ended June 30, 1998
INDEX
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Balance Sheets as of June 30, 1998 (unaudited) and
December 31, 1997 ............................................ 1
Statements of Operations (unaudited) for the Three and
Six Months Ended June 30, 1998 and 1997 and Period From
Inception (January 7, 1993) Through June 30, 1998 ............ 2
Statements of Cash Flows (unaudited) for the Six Months
Ended June 30, 1998 and 1997 and Period From Inception
(January 7, 1993) Through June 30, 1998 ...................... 3
Notes to Financial Statements (unaudited) .................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................... 6
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 11
Item 2. Changes in Securities and Use of Proceeds .................... 11
Item 3. Defaults Upon Senior Securities .............................. 11
Item 4. Submission of Matters to a Vote of Security Holders .......... 11
Item 5. Other Information ............................................ 11
Item 6. Exhibits and Reports on Form 8-K ............................. 12
Signature Page ....................................................... 13
Exhibit Index ........................................................ 14
<PAGE>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
TRIMERIS, INC.
(A Development Stage Company)
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1998
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ............................................................... $ 32,557 $ 22,834
Short-term investments .................................................................. 4,863 5,894
Accounts receivable ..................................................................... 101 110
Prepaid expenses ........................................................................ 6 15
-------- --------
Total current assets ................................................................... 37,527 28,853
Property, furniture and equipment, net .................................................... 756 1,425
-------- --------
Other assets:
Exclusive license agreement, net ........................................................ 30 28
Patent costs, net ....................................................................... 442 506
Equipment deposits ...................................................................... 86 108
Other, net .............................................................................. 3 3
-------- --------
Total other assets ..................................................................... 561 645
-------- --------
Total assets ........................................................................... $ 38,844 $ 30,923
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................................ $ 722 $ 209
Current installments of capital lease obligations ....................................... 259 348
Accrued compensation .................................................................... 608 478
Accrued expenses ........................................................................ 1,205 1,171
-------- --------
Total current liabilities .............................................................. 2,794 2,206
Capital lease obligations, less current installments ...................................... 240 717
-------- --------
Total liabilities ...................................................................... 3,034 2,923
-------- --------
Commitments and contingencies
Stockholders' equity:
Series A, B, C, and D preferred stock at $.001 par value per share, 62,667
shares authorized, zero shares issued and outstanding at December 31, 1997
and June 30, 1998 (unaudited) -- --
Common Stock at $.001 par value per share, 80,000 shares authorized, 10,549
and 10,590 shares issued and outstanding at December 31, 1997 and
June 30, 1998 (unaudited) .............................................................. 11 11
Additional paid-in capital .............................................................. 67,360 67,547
Deficit accumulated during the development stage ........................................ (29,393) (37,690)
Deferred compensation ................................................................... (1,950) (1,650)
Notes receivable from stockholders ...................................................... (218) (218)
-------- --------
Net stockholders' equity ............................................................... 35,810 28,000
-------- --------
Total liabilities and stockholders' equity ............................................. $ 38,844 $ 30,923
======== ========
</TABLE>
See accompanying notes to financial statements.
1
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Three Months Six Months (January 3, 1993)
Ended June 30, Ended June 30, To June 30,
-------------------- --------------------- --------
1997 1998 1997 1998 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue ......................................................... $ 162 $ 85 $ 212 $ 175 $ 765
-------- -------- -------- -------- --------
Operating expenses:
Research and development ...................................... 1,411 4,650 2,859 7,233 29,563
General and administrative .................................... 371 1,187 786 2,227 9,683
-------- -------- -------- -------- --------
Total operating expenses ..................................... 1,782 5,837 3,645 9,460 39,246
-------- -------- -------- -------- --------
Operating loss .................................................. (1,620) (5,752) (3,433) (9,285) (38,481)
-------- -------- -------- -------- --------
Other income (expense):
Interest income ............................................... 29 454 33 1,038 1,744
Interest expense .............................................. (41) (32) (78) (50) (953)
-------- -------- -------- -------- --------
(12) 422 (45) 988 791
-------- -------- -------- -------- --------
Net loss ...................................................... $ (1,632) $ (5,330) $ (3,478) $ (8,297) $(37,690)
======== ======== ======== ======== ========
Basic net loss per share ........................................ $ (0.26) $ (0.50) $ (0.59) $ (0.78)
======== ======== ======== ========
Weighted average shares used in per share computations .......... 6,326 10,632 5,897 10,627
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Cumulative
From Inception
Six Months Ended (January 3, 1993)
June 30, To June 30,
--------------------------- --------
1997 1998 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss ........................................................... $ (3,478) $ (8,297) $(37,690)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation ...................................................... 300 239 2,428
Other amortization ................................................ 66 10 47
Amortization of deferred compensation ............................. -- 300 686
Provision for equipment held for resale ........................... -- -- 61
Stock issued for consulting services .............................. -- -- 5
Stock issued to repay interest on notes to
stockholders .................................................... -- -- 195
Debt issued for research and development .......................... -- -- 194
Loss on disposal of property and equipment ........................ -- -- 16
Changes in operating assets and liabilities:
Accounts receivable and loans to employees ...................... (9) (9) (110)
Prepaid expenses ................................................ (266) (9) (15)
Other assets .................................................... (12) (30) (117)
Accounts payable ................................................ 82 (513) 209
Accrued compensation ............................................ -- (130) 478
Accrued expenses ................................................ (183) (34) 1,081
-------- -------- --------
Net cash used by operating activities .......................... (3,500) (8,473) (32,532)
-------- -------- --------
Cash flows from investing activities:
Purchases of short-term investments ................................ -- (4,790) (9,653)
Sales of short-term investments .................................... 3,759 3,759
Purchases of property and equipment ................................ (102) (130) (765)
Equipment held for resale .......................................... -- -- (61)
Organization costs ................................................. -- -- (8)
Patent costs ....................................................... (32) (64) (513)
-------- -------- --------
Net cash provided (used) by investing activities ............... (134) (1,225) (7,241)
-------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of notes payable ............................ -- -- 6,150
Lease costs ........................................................ -- -- (13)
Principal payments under capital lease obligations ................. (256) (212) (2,039)
Proceeds from issuance of Common Stock ............................. 2 -- 31
Proceeds from issuance of Preferred Stock .......................... 12,777 -- 23,896
Proceeds from initial public offering, net ......................... -- -- 34,532
Proceeds from exercise of stock options ............................ -- 5 14
Proceeds from employee stock purchase plan exercise ................ -- 182 182
Repayment of notes receivable from stockholders .................... -- -- 50
Stock issuance costs ............................................... (109) -- (196)
-------- -------- --------
Net cash provided (used) by financing activities ............... 12,414 (25) 62,607
-------- -------- --------
Net increase (decrease) in cash and cash equivalents ................. 8,780 (9,723) 22,834
Cash and cash equivalents, beginning of period ....................... 132 32,557 --
-------- -------- --------
Cash and cash equivalents, end of period ............................. $ 8,912 $ 22,834 $ 22,834
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
TRIMERIS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to discover
and develop novel therapeutic agents that block viral infection by inhibiting
viral fusion with host cells. These financial statements have been prepared in
accordance with Statement of Financial Accounting Standards No. 7, "Accounting
and Reporting by Development Stage Enterprises," to recognize the fact that the
Company is devoting substantially all of its efforts to establishing a new
business and planned principal operations have not commenced.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and applicable
Securities and Exchange Commission regulations for interim financial
information. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of financial position and results of operations have been
made. Operating results for interim periods are not necessarily indicative of
results which may be expected for a full year. The information included in this
Form 10-Q should be read in conjunction with the Risk Factors and Management's
Discussion and Analysis of Financial Condition and Results of Operations
sections and the 1997 financial statements and notes thereto included in the
Company's 1997 Form 10-K filed with the Securities and Exchange Commission on
March 31, 1998, and the Company's Registration Statement on Form S-1 as declared
effective by the Securities and Exchange Commission on October 6, 1997 and
amended pursuant to Rule 462 (b) on October 7, 1997 (the "S-1 Registration
Statement").
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
2. BASIC NET LOSS PER SHARE
For periods beginning with the year ended December 31, 1997, the Company
adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In accordance with
this statement, primary net loss per common share is replaced with basic loss
per common share which is calculated by dividing net loss by the
weighted-average number of common shares outstanding for the period after
certain adjustments described below. Fully diluted net income per common share
is replaced with diluted net income per common share reflecting the maximum
dilutive effect of common stock issuable upon exercise of stock options, stock
warrants, and conversion of preferred stock. Diluted net loss per common share
is not shown, as common equivalent shares from stock options, and stock
warrants, would have an antidilutive effect. Prior period per share data has
been restated to reflect the adoption of SFAS No. 128. In accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB 83"),
all common shares and common equivalent shares issued during the twelve-month
period prior to the initial filing of the registration statement relating to the
Company's initial public offering, even when anti-dilutive, have been included
in the calculation as if they were outstanding for all periods, using the
treasury stock method. The basic net loss per common share gives retroactive
effect to the conversion of all outstanding shares of Preferred Stock into
6,261,615 shares of Common Stock upon the completion of the Company's initial
public offering.
4
<PAGE>
3. STATEMENTS OF CASH FLOWS
Interest of approximately $56,000 and $50,000 was paid during the six months
ended June 30, 1997 and 1998, respectively. Capital leases of $195,000 and
$760,000 were incurred for the six months ended June 30, 1997 and 1998,
respectively for the purchase of new furniture and equipment.
4. INITIAL PUBLIC OFFERING OF STOCK
In October, 1997, the Company closed its initial public offering of common
stock at $12 per share. The net proceeds of the offering, including the proceeds
received in connection with the exercise of the Underwriters' over-allotment
option which closed in November, 1997, were approximately $34.5 million after
deducting applicable issuance costs and expenses. In connection with the public
offering, all the outstanding Preferred Stock was converted into approximately
6,261,615 shares of the Company's Common Stock.
5. STOCK SPLIT
Effective July 11, 1997, the Company declared a one for eight and one-half
reverse stock split for common shareholders. This stock split has been
retroactively applied and all periods presented have been restated.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Statements in this Form 10-Q that are not historical fact are forward-looking
statements. These forward-looking statements are based largely on the Company's
expectations and are subject to a number of known and unknown risks and
uncertainties, many of which are beyond the Company's control. Accordingly, the
Company's actual prospective results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, in addition to those discussed herein under the
heading "Factors That May Affect Future Results" and elsewhere in this Form
10-Q, the following: (i) uncertainties associated with the Company's status as a
development stage company with a limited operating history and a history of
losses since inception; (ii) risks inherent in the Company's present reliance on
a single product candidate; (iii) uncertainties, unanticipated developments or
delays related to the Company's technology, clinical trials and clinical trial
strategy and the adverse impact such events may have on the Company's existing
capital resources; (iv) the ability of the Company to maintain existing or enter
into additional collaborative and/or licensing arrangements with third parties
to assist in the commercialization, testing, manufacturing and marketing of its
product candidates; (v) the Company's ability to obtain adequate additional
funding needed to meet the substantial costs associated with the development of
existing and new product candidates; (vi) the enactment of new or unanticipated
regulatory requirements related to the testing and United States Food and Drug
Administration ("FDA") approval of the Company's product candidates and the
ability to receive FDA approval for the Company's product candidates; (vii) the
possibility of infringement of the Company's intellectual property rights and
the Company's ability to protect its product candidates, technology and other
proprietary information; (viii) the Company's ability to develop manufacturing,
sales, marketing and distribution capabilities; (ix) the Company's dependence on
third parties for clinical trials, (x) the Company's ability to obtain
third-party reimbursement for any products that may be approved by the FDA; (xi)
the Company's ability to recruit and retain key employees; and (xii) the
Company's ability to achieve market acceptance of its product candidates and to
effectively compete with other companies currently developing similar product
candidates, including companies with substantially greater financial and
technical resources. Further information regarding these factors, as well as
other factors that could cause actual results to differ materially from those
set forth in such forward-looking statements, is discussed under the headings
"Risk Factors" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and in the 1997 financial statements and notes
thereto included in the Company's 1997 Form 10-K, which should be read in
conjunction with this Form 10-Q. The Company undertakes no obligation to release
publicly the results of any revisions to the statements contained in this report
to reflect events or circumstances arising after the date hereof.
OVERVIEW
Trimeris commenced operations in January 1993, has a limited operating history
and is a development stage company. Since its inception, substantially all of
the Company's resources have been dedicated to the development, patenting,
preclinical testing, nonclinical animal studies, and a Phase I/II clinical trial
of T-20, the development of a manufacturing process for T-20, production of drug
material for future clinical trials, the development of its proprietary
technology platform and research and development and preclinical testing of
other potential product candidates and compounds discovered by the Company. The
Company has received revenue solely from SBIR grants and an investigative
contract and has yet to generate any revenue from product sales or royalties,
and there can be no assurance that it will be able to generate any such revenue
or royalties in the future.
6
<PAGE>
Product candidates and compounds discovered by the Company and developed
through the Company's product development programs will require significant
additional, time-consuming and costly research and development, preclinical
testing, nonclinical animal studies, and extensive clinical trials prior to
submission of any regulatory application for commercial use. The Company has
incurred losses since its inception and, as of June 30, 1998 had an accumulated
deficit of approximately $37.7 million. Such losses have resulted principally
from expenses incurred in the Company's research and development activities
associated with the development, patenting, preclinical testing, nonclinical
animal studies, and a Phase I/II clinical trial of T-20, the development of a
manufacturing process for T-20, production of drug material for future clinical
trials, the development of its proprietary technology platform, research and
development and preclinical testing of other potential product candidates and
compounds discovered by the Company, and from general and administrative
expenses. The Company expects to continue to incur substantial losses for the
foreseeable future. There can be no assurance that the Company will ever
generate significant revenue or achieve profitable operations.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1998
REVENUE. Revenue recognized for the three months ended June 30, 1998 consisted
of approximately $85,000 of income from SBIR grants. Revenue recognized for the
three months ended June 30, 1997 consisted of approximately $62,000 of income
from SBIR grants and $100,000 from an investigative contract which was completed
in 1997.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from approximately $1.4 million for the three months ended June 30,
1997 to approximately $4.7 million for the three months ended June 30, 1998. The
increase is primarily due to increased costs related to additional personnel and
related laboratory research supplies to support these personnel, nonclinical
animal studies, and the purchase and manufacture of drug product material for
future T-20 Phase II clinical trials. Total research personnel were 28 and 43 at
June 30, 1997 and 1998, respectively. The Company expects its research and
development expenses to increase substantially in the future due to continued
expansion of product development activities, including preclinical research and
testing, nonclinical animal studies, expanded clinical trials, and the
manufacture of drug material.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
increased from approximately $371,000 for the three months ended June 30, 1997
to approximately $1.2 million for the three months ended June 30, 1998. The
increase is due to costs related to additional personnel and consultants to
support the Company's growth and additional professional fees required to
support the Company's obligations as a publicly traded Company. The Company
expects its administrative expenses to increase in the future to support the
expansion of its product development activities and to meet the requirements of
operating as a public company.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other expenses changed from approximately $12,000 in expense for
the three months ended June 30, 1997 to $422,000 in income for the three months
ended June 30, 1998. This change was primarily due to increased interest income
due to larger cash balances.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1998
REVENUE. Revenue recognized for the nine months ended June 30, 1998 consisted of
approximately $175,000 of income from SBIR grants. Revenue recognized for the
three months ended June 30, 1997 consisted of approximately $112,000 of income
from SBIR grants and $100,000 from an investigative contract which was completed
in 1997.
RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses
increased from approximately $2.9 million for the six months ended June 30, 1997
to approximately $7.2 million
7
<PAGE>
for the six months ended June 30, 1998. The increase is primarily due to
increased costs related to additional personnel and related laboratory research
supplies to support these personnel, nonclinical animal studies, and the
purchase and manufacture of drug product material for future T-20 Phase II
clinical trials. Total research personnel were 28 and 43 at June 30, 1997 and
1998, respectively. The Company expects its research and development expenses to
increase substantially in the future due to continued expansion of product
development activities, including preclinical testing, nonclinical animal
studies and clinical trials.
GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses
increased from approximately $786,000 for the six months ended June 30, 1997 to
approximately $2.2 million for the six months ended June 30, 1998. The increase
is due to costs related to additional personnel and consultants to support the
Company's growth and additional professional fees required to support the
Company's obligations as a publicly traded Company. The Company expects its
administrative expenses to increase in the future to support the expansion of
its product development activities and to meet the requirements of operating as
a public company.
OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and
expense. Total other expenses changed from approximately $45,000 in expense for
the six months ended June 30, 1997 to approximately $1.0 million in income for
the six months ended June 30, 1998. This change was primarily due to increased
interest income due to larger cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through the
private placement of equity securities, the issuance of notes to stockholders
and equipment lease financing and the Company's initial public offering, which
provided approximately $34.5 million after deducting applicable issuance costs
and expenses. Net cash used by operating activities was approximately $3.5
million and approximately $8.5 million for the six months ended June 30, 1997
and 1998, respectively. The cash used by operating activities was used primarily
to fund research and development and general and administrative expenses. Cash
provided by financing activities was approximately $12.4 million for the six
months ended June 30, 1997, primarily from the sale of equity securities,
compared to a use of approximately $25,000 for the six months ended June 30,
1998.
As of June 30, 1998, the Company had approximately $28.7 million in cash and
cash equivalents and short-term investments, compared to approximately $37.4
million as of December 31, 1997.
8
<PAGE>
The Company has experienced negative cash flows from operations since its
inception and does not anticipate generating sufficient positive cash flows to
fund its operations in the foreseeable future. The Company has expended, and
expects to continue to expend in the future, substantial funds to pursue its
product candidate and compound discovery and development efforts, including
expenditures for continued nonclinical animal studies and clinical trials of
T-20, research and development and preclinical testing of other product
candidates and compounds discovered by the Company and the development of its
proprietary technology platform. As of June 30, 1998, the Company had
commitments to conduct nonclinical animal studies of approximately $1.0 million.
These expenditures may be financed with capital or operating leases, debt or
working capital. The Company expects that its existing capital resources and the
interest earned thereon will be adequate to fund its capital requirements
through 1998. However, the Company's future capital requirements and the
adequacy of available funds will depend on many factors, including the results
of the clinical trials relating to T-20, the progress and scope of the Company's
product development programs, the magnitude of these programs, the results of
preclinical testing, nonclinical animal studies and clinical trials, the need
for additional facilities based on the results of these clinical trials and
other product development programs, changes in the focus and direction of the
Company's product development programs, the costs involved in preparing, filing,
processing, maintaining, protecting and enforcing patent claims and other
intellectual property rights, competitive factors and technological advances,
the cost, timing and outcome of regulatory reviews, changes in the requirements
of the United States Food and Drug Administration (the "FDA"), administrative
and legal expenses, evaluation of the commercial viability of potential product
candidates and compounds, the establishment of capacity, either internally or
through relationships with third parties, for manufacturing, sales, marketing
and distribution functions and other factors, many of which are outside of the
Company's control. Thus, there can be no assurance that the Company's existing
capital resources, together with the interest earned thereon, will be sufficient
to fund the Company's capital requirements during the period discussed above.
The Company believes that substantial additional funds will be required to
continue to fund its operations and that the Company will be required to obtain
additional funds through equity or debt financing or licenses, agreements or
other arrangements with collaborative partners and others, or from other
sources. The terms of any such equity financings may be dilutive to stockholders
and the terms of any debt financings may contain restrictive covenants which
limit the Company's ability to pursue certain courses of action. There can be no
assurance that such funds will be available to the Company on acceptable terms,
if at all, or that such financings will be adequate to meet the Company's future
capital requirements. If adequate funds are not available, the Company may be
required to delay, scale-back or eliminate certain aspects of its preclinical
testing, clinical trials and research and development programs or attempt to
obtain funds through arrangements with collaborative partners or others that may
require the Company to relinquish rights to certain of its technologies or
product candidates or compounds, which could have a material adverse effect on
the Company's business, financial condition and results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company expects to incur substantial losses for the foreseeable future
and expects losses to increase as the Company's research and development,
preclinical testing, nonclinical animal studies and clinical trial efforts
expand. The amount and timing of the Company's operating expenses will depend on
several factors, many of which are beyond the Company's control, including the
status of the Company's research and development activities, product candidate
and compound discovery and development efforts, including preclinical testing,
nonclinical animal studies and clinical trials, the timing of regulatory
actions, the costs involved in preparing, filing, prosecuting, maintaining,
protecting and enforcing patent claims and other proprietary rights, the ability
of the Company to establish, internally or through relationships with third
parties, manufacturing, sales, marketing and distribution capabilities,
technological and other changes in the competitive landscape, changes in the
Company's existing research and development relationships and strategic
alliances, evaluation of the commercial viability of potential product
candidates and other factors. As a result, the Company believes that
period-to-period comparisons of financial results in the future are not
necessarily meaningful and results of operations in prior periods should not be
relied upon as an indication of future performance. Any deviations in the
Company's clinical trial schedule, results from the Company's clinical trials,
or the Company's financial results, from the expectations of securities analysts
and investors could have a material adverse effect on the market price of the
Common Stock.
The Company's ability to achieve profitability will depend, in part, upon its
or its collaborated partners' ability to successfully develop and obtain
regulatory approval for T-20 and other product candidates
9
<PAGE>
and compounds discovered by the Company, and to develop the capacity, either
internally or through relationships with third parties, to manufacture, sell,
market and distribute approved products, if any. Achievement of these goals is
dependent upon many factors which are beyond the control of the Company,
including, but not limited to, results of planned and future clinical trials,
changes in the requirements of the FDA, results of preclinical and nonclinical
studies, the Company's ability to obtain third-party reimbursement for any
products that may be approved by the FDA, the Company's ability to develop, or
enter into favorable agreements with third parties to develop, efficient
manufacturing and distribution processes for its products, and the development
of competitive therapies. There can be no assurance that the Company will ever
generate significant revenues or achieve profitable operations.
The Company is currently attempting to develop a novel manufacturing process
for T-20 which could be more cost-effective than currently available methods of
production. There can be no assurance of success of this process development.
Currently available manufacturing methodologies are expensive and such costs, as
well as the Company's current dependence on third parties for the manufacture of
its products, and product candidates, could adversely affect the Company's
profit margins and its ability to commercialize T-20. There can be no assurance
that the Company will be able to manufacture T-20 on a cost-effective or timely
basis.
T-20 CLINICAL TRIALS
In August 1997, T-20 completed TRI-001, a multi-dose, dose escalation Phase I/II
trial which assessed the safety, plasma pharmacokinetics and antiviral activity
of T-20 as a monotherapy over 14 days. No drug-related adverse effects were seen
in any of the 16 patients tested. The four patients in the highest dose group
experienced a reduction in viral load to below detectable levels (less than 500
copies/ml) during the treatment period.
In July 1998, TRI-003, a Phase II clinical trial that will enroll up to 78
patients at up to 12 sites in the United States was announced. TRI-003 is
designed to assess the anitiviral activity, safety and plasma pharmacokinetics
of multiple doses of T-20 therapy administered via an infusion device developed
by MiniMed, Inc., a product currently approved for insulin infusion by
diabetics. At entry all enrolled patients may either be on no other
antiretroviral therapy or a stable regimen which will not change during the
trial. TRI-003 replaces TRI-002 which was a smaller study announced in June 1998
and was limited to patients who had failed the protease inhibitor indinavir.
The Company is currently considering various other Phase II trials which will
evaluate the chronic effect of T-20 used alone and with other antiretroviral
drugs. The Company is also considering other Phase II trials which will evaluate
T-20's use in other acute indications.
10
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Use of Proceeds:
The following information updates and supplements the information
regarding use of proceeds originally filed in the Company's Form
10-Q for the quarter ended September 30, 1997, as amended to date,
and relates to securities sold by the Company pursuant to the S-1
Registration Statement. Through June 30, 1998, the Company has
expended approximately $5,804,000 of the total net proceeds from its
initial public offering of $34,532,000 for working capital. The
unused proceeds of $28,728,000 are invested in temporary
investments, primarily short-term corporate debt securities. All
proceeds used or invested were direct or indirect payments to
others. This use of proceeds does not represent a material change in
the use of proceeds described in the Company's Prospectus filed as a
part of the S-1 Registration Statement.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were voted upon at the Company's Annual
Stockholders' Meeting held on June 17, 1998:
FOR AGAINST WITHHELD
Election of the following
Directors:
Jeffrey M. Lipton 8,902,343 0 3,222
Brian H. Dovey 8,855,509 0 50,056
Amendment to the Company's
Amended And Restated
Stock Incentive Plan 6,064,607 1,523,990 291,481
Appointment of KPMG Peat
Marwick LLP as
independent accountants
for the year ended
December 31, 1998 8,904,853 312 400
Item 5. Other Information
Any stockholder proposal submitted outside the processes of Rule 14a-8
under the Securities and Exchange Act of 1934 for presentation to the Company's
1999 Annual Meeting of Stockholders will be considered untimely for purposes of
Rules 14a-4 and 14a-5 if notice thereof is received by the Company after
April 4, 1999.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q are
listed on the Exhibit Index immediately preceding such exhibits and are
incorporated herein by reference.
(b) Reports on Form 8-K
None
12
<PAGE>
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.
Trimeris, Inc.
(Registrant)
August 12, 1998 /s/ M.ROSS JOHNSON
M. Ross Johnson
President, Chief Executive
Officer, and Chief Scientific
Officer
August 12, 1998 /s/ MATTHEW A. MEGARO
Matthew A. Megaro
Chief Operating Officer,
Chief Financial Officer,
Executive Vice President and
Secretary (Principal Accounting
and Financial Officer)
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EXHIBIT INDEX
Number Description
10.1 Master Lease Agreement dated May 28, 1998 between the Company and Finova
Technology Finance, Inc.
10.2 Prototype Defined Contribution Plan and Trust for the Trimeris, Inc.
Employee 401 (k) Plan
10.3 Adoption Agreement for the Trimeris, Inc. Employee 401 (k) Plan
11.1 Computations of Basic Loss Per Share
27.1 Financial Data Schedule
14
EXIBIT 10.1
[FINOVA LOGO (Registered Trademark)]
[Financial Innovators]
FINOVA Technology Finance, Inc.
10 Waterside Drive
Farmington, Connecticut 06032-3065
(860) 676-1818
MASTER LEASE No. S6610, Dated May 28, 1998
FINOVA Technology Finance, Inc. ("we", "us" or "FINOVA") agrees to lease to
Trimeris, Inc. ("you" or "Lessee") and you agree to lease from us, the Equipment
described in any schedule to this Lease (a "Schedule"). The Equipment also
includes any replacement parts, repairs, additions and accessories that you may
add to the Equipment. We may treat any Schedule as a separate lease containing
all of the provisions of this Lease.
1. PURCHASING AND INSTALLING THE EQUIPMENT
We will purchase the Equipment from the Supplier you chose or you in the event
of a Sale and Leaseback. The Supplier will deliver the Equipment to you at your
expense. You will properly install the Equipment at your expense at the
location(s) indicated in the Schedule.
2. TERM.
o The Term of each Schedule begins when any of the Equipment on that Schedule
is delivered to you, or a later date that we agree to in writing.
o The Term continues until you fully perform all of your obligations under
this Lease and the Schedule.
o If the Equipment is not delivered, installed and accepted by you by the
date indicated in the Schedule , we may terminate this Lease and the
Schedule as to the Equipment that was not delivered, installed and accepted
by giving you 10 days written notice of termination. Any advance rental
payment you may have paid us is nonrefundable, even if the Term never
starts or if we rightfully terminate this Lease or the Schedule.
o Before we make any progress payment or final payment for the Equipment on
any Schedule, we require the following:
o That no payment is past due to us under any lease, loan or other financial
arrangement that you or any guarantor have with us or with FINOVA Capital
Corporation.
o That you are complying with all the terms of this Lease.
o That we have received all the documents we requested, including the signed
Schedule and Delivery and Acceptance Certificate.
o That there has been no material adverse change in your financial condition,
business, operations or prospects, or that of any guarantor, from the
condition that you disclosed to us in your application for credit.
3. RENT
o The rent is indicated on the Schedule. The rent is payable periodically in
advance from time to time (for example, monthly). You agree that you owe us
the total of all of these rent payments over the Term of the Schedule.
o The first rent payment is due at the beginning of the Term or at a later
date that we agree to in writing. Subsequent rent payments are due on the
same day of each successive period until you pay us in full all of the rent
and any other charges or expenses you owe us.
o If the first rent payment is due later than the beginning of the Term, you
will also pay us interim rent on the first rent payment date. The interim
rent will be for the period from the beginning of the Term until the date
that the first rent payment is due. Interim rent will be calculated at the
same rate as the regular rent payment, but on a daily basis for the number
of days for which interim rent is due.
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o YOUR OBLIGATION TO PAY US ALL RENT IS ABSOLUTE AND UNCONDITIONAL. YOU ARE
NOT EXCUSED FROM PAYING THE RENT, IN FULL, FOR ANY REASON. YOU AGREE THAT
YOU HAVE NO DEFENSE FOR FAILURE TO PAY THE RENT AND YOU WILL NOT MAKE ANY
COUNTERCLAIMS OR SETOFFS TO AVOID PAYING THE RENT.
4. NON-CANCELABLE LEASE. YOU AGREE THAT YOU MAY NOT CANCEL OR TERMINATE THIS
LEASE OR ANY SCHEDULE.
5. PROTECTION OF OUR INTEREST IN THE EQUIPMENT; FEES.
o The Equipment is our property. It will remain our property. You will not
own the Equipment unless the Schedule gives you an option to purchase the
Equipment and you have exercised that option and paid us in full for the
Equipment and any other amounts you may owe us. If we request, you will put
labels stating "PROPERTY OF FINOVA" on the Equipment where they are clearly
visible.
o You give us permission to add to this Lease or any Schedule the serial
numbers and other information about the Equipment.
o While this Lease is intended to be a lease (and not a loan), you grant us a
security interest in the Equipment to protect our interest in the Equipment
if this Lease is later determined to be a security agreement. You give us
permission to file this Lease or a Uniform Commercial Code financing
statement, at your expense, in order to perfect this security interest. You
also give us permission to sign your name on the Uniform Commercial Code
financing statements where this is permitted by law.
o You will pay our cost to do searches for other filings or judgments against
you or your affiliates. You will also pay any filing, recording or stamp
fees or taxes resulting from filing this Lease or a Uniform Commercial Code
financing statement. You will also pay our fees in effect from time to time
for documentation, administration and Termination of this Lease.
o At your expense, you will defend our ownership rights in the Equipment
against, and keep the Equipment free of, any legal process, liens, security
interests, attachments, levies and executions. You will give us immediate
written notice of any legal process, liens, attachments, levies or
executions, and you will indemnify us against any loss that results to us
from these causes.
o You will notify us at least 15 days before you change the address of your
principal executive office.
o You will promptly sign and return additional documents that we may request
in order to protect our interest in the Equipment.
o The Equipment is personal property and will remain personal property. You
will not incorporate it into real estate and will not do anything that will
cause the Equipment to become part of real estate or a fixture.
6. CARE, USE, LOCATION AND ALTERATION OF THE EQUIPMENT
o You will make sure that the Equipment is maintained in good operating
condition, and that it is serviced, repaired and overhauled when this is
necessary to keep the Equipment in good operating condition. All
maintenance must be done according to the Supplier's or Manufacturer's
requirements or recommendations. All maintenance must also comply with any
legal or regulatory requirements.
o You will maintain service logs for the Equipment and permit us to inspect
the Equipment, the service logs and service reports. You give us permission
to make copies of the service logs and service reports.
o We will give you prior notice if we, or our agent, want to inspect the
Equipment or the service logs or service reports. We may inspect it during
regular business hours. You will pay our travel, meals and lodging costs to
inspect the Equipment, but only for one inspection per year. If we find
during an inspection that you are not complying with this Lease, you will
pay our travel, meals and lodging costs, our salary costs, and the costs
and fees of our agents for
2
<PAGE>
reinspection. You will promptly cure any problems with the Equipment that
are discovered during our inspection.
o You will use the Equipment only for business purposes. You will obey all
legal and regulatory requirements in your use of the Equipment.
o You will make all additions, modifications and improvements to the
Equipment that are required by law or government regulation. Otherwise, you
will not alter the Equipment without our written permission. You will
replace all worn, lost, stolen or destroyed parts of the Equipment with
replacement parts that are as good or better than the original parts. The
new parts will become our property upon replacement.
o You will not remove the Equipment from the location indicated in the
Schedule without our written permission.
7. RETURN OF EQUIPMENT. UNLESS OTHERWISE STATED IN THE SCHEDULE:
o You must give us written notice at least 120 days before the end of the
Term if you want to purchase the equipment from us (assuming the Schedule
provides you with an option to purchase the Equipment).
o You must give us written notice at least 120 days before the end of the
Term if you want to return the Equipment to us.
o If you do not give us written notice at least 120 days before the end of
the Term either that you want to purchase or that you want to return the
Equipment, you will continue to rent the Equipment and this Lease and the
Schedule will be automatically extended until 120 days after we receive
your notice. The rent will be the fair market rental value of the
Equipment, as determined by us. Unless we notify you otherwise, the fair
market rental value will not exceed the rent then being charged under this
Lease and the Schedule.
o If you do give us 120 days written notice that you want to purchase the
Equipment but you do not pay us the purchase price, you will continue to
rent the Equipment. The rent will be the fair market rental value of the
Equipment, as determined by us. You will continue to pay us this rent until
you have paid the purchase price for the Equipment. The rent payments will
not be credited to the purchase price.
o If you do give us 120 days written notice that you want to return the
Equipment to us, but you do not return the Equipment in compliance with the
return conditions contained in the next paragraph, you will continue to
rent the Equipment. The rent will be the fair market rental value of the
Equipment, as determined by us. You will continue to pay us this rent until
you have returned the Equipment to us in compliance with these return
conditions.
o Return conditions: - You will return the Equipment, freight and insurance
prepaid by you, to us at a location we request in the United States of
America. It will be returned in good operating condition, as required by
section 6 above. The Equipment will not be subject to any liens when it is
returned
* You will pack or crate the Equipment for shipping in the original
containers, or comparable ones. You will do this carefully and follow
all recommendations of the Supplier and the Manufacturer as to packing
or crating.
* You will also return to us the plans, specifications, operating
manuals, software documentation, discs, warranties and other documents
furnished by the Manufacturer or Supplier. You will also return to us
all service logs and service reports, as well as all written materials
that you may have concerning the maintenance and operation of the
Equipment.
* At our request, you will provide us with up to 60 days free storage of
the Equipment at your location, and will let us (or our agent) have
access to the Equipment in order to inspect it and sell it.
* You will pay us what it costs us to repair the Equipment if you do not
return it in the required condition.
3
<PAGE>
8. RISK OF LOSS
o You have the complete risk of loss or damage to the Equipment. Loss or
damage to the Equipment will not relieve you of your obligation to pay
rent.
o If any Equipment is lost or damaged, you have two choices (although if you
are in default under this Lease, we and not you will have the two options).
The choices are:
(1) Repair or replace the damaged or lost Equipment so that, once again, we own
Equipment in good operating condition and have clear title to it.
(2) Pay us the present value (as of the date of payment) of the remaining rent
payments and our residual interest in the Equipment. We will calculate the
present value using a discount rate of five (5%) percent per year. Once you
have paid us this amount and any other amount that you may owe us, you (or
your insurer) may keep the Equipment for salvage purposes, on an "AS IS,
WHERE IS" basis.
9. INSURANCE
o Until you have properly returned the Equipment to us, you will keep it
insured. The amount of the insurance, the coverage, and the insurance
company must be acceptable to us.
o If you do not provide us with written evidence of insurance that is
acceptable to us, we may buy the insurance ourselves, at your expense. You
will promptly pay us the cost of this insurance. We have no obligation to
purchase any insurance. Any insurance that we purchase will be our
insurance, and not yours, and may insure the Equipment beyond the end of
the Term.
o Insurance proceeds may be used to repair or replace damaged or lost
Equipment or to pay us the present value of the rent and our residual
interest in the Equipment. (See section 8, "Risk of Loss", above.)
o You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and
to endorse your name on all documents, checks or drafts relating to
insurance claims for Equipment.
10. TAXES
o You will pay all sales, use, excise, stamp, documentary and ad valorum
taxes, license and registration fees, assessments, fines, penalties and
similar charges imposed on the ownership, possession, use or lease of the
Equipment.
o You will pay all taxes (other than our federal or state net income taxes)
imposed on you or on us or the rent payments.
o You will reimburse us for any of these taxes that we pay or advance.
o Unless we notify you otherwise, we will file and pay for any personal
property taxes on the Equipment. You will reimburse us for the full amount
of these taxes, without regard to early payment discount. We may estimate
the amount of these taxes in advance and bill you periodically in advance
for these taxes.
11. INDEMNITY
o You will indemnify us, defend us and hold us harmless. This applies to any
and all claims, expenses and attorney's fees concerning or arising from the
Equipment, this Lease, or any Schedule. It includes any claims concerning
the manufacture, selection, delivery, possession, use, operation or return
of the Equipment.
o This obligation of yours to indemnify us continues even after the Term is
over.
12. DEFAULT
You are in default if any of the following happens:
o You do not pay us, when it is due, any rent payment or other payment that
you owe us under this Lease, any Schedule, or any other lease, loan or
other financial arrangement that you have with us or with FINOVA Capital
Corporation.
o Any of the financial information that you give us is not true and complete,
or you fail to tell us anything that would make the financial information
misleading.
4
<PAGE>
o You do something you are not permitted to do, or you fail to do anything
that is required of you, under this Lease, any Schedule or any other lease,
loan or other financial arrangement that you have with us.
o An event of default occurs for any other lease, loan or obligation of yours
that exceeds $25,000.
o You file bankruptcy, or involuntary bankruptcy is filed against you or any
guarantor and is not dismissed within 60 days.
o You are subject to any other insolvency proceeding other than bankruptcy
(for example, a receivership action or an assignment for benefit of
creditors) and such proceeding that is involuntary is not dismissed within
60 days.
o Without our permission, which shall not be unreasonably withheld or
delayed, you sell all or a substantial part of its assets, merge or
consolidate, or a majority of your voting stock or interests is
transferred.
o There is a material adverse change in your financial condition, business,
operations or prospects, or that of any guarantor, from the condition that
you disclosed to us in your application for credit.
13. REMEDIES, DEFAULT INTEREST, LATE FEES
If you are in default we may exercise one or more of our "remedies." Each of our
remedies is independent. We may exercise any of our remedies, all of our
remedies or none of our remedies. We may exercise them in any order we choose.
Our exercise of any remedy will not prevent us from exercising any other remedy
or be an "election of remedies." If we do not exercise a remedy, or if we delay
in exercising a remedy, this does not mean that we are forgiving your default or
that we are giving up our right to exercise the remedy. Our remedies allow us to
do one or more of the following:
o Require you to immediately pay us all rent for the entire Term for any or
all Schedules.
o Require you to immediately pay us all amounts that you are required to pay
us for the entire Term of any other leases, loans or other financial
arrangements that you have with us.
o Sue you for all rent, purchase obligation and other amounts you owe us
Future rent and purchase obligation will be discounted to present value
using a discount rate of five (5%) percent per year.
o Require you at your expense to assemble the Equipment at a location we
request in the United States of America.
o Remove and repossess the Equipment from where it is located, without demand
or notice, or make the Equipment inoperable. We have your permission to
remove any physical obstructions to removal of the Equipment. We may also
disconnect and separate all Equipment from other property. No court order,
court hearing or "legal process" will be required for us to repossess the
Equipment. You will not be entitled to any damages resulting from removal
or repossession of the Equipment. We may use, ship, store, repair or lease
any Equipment that we repossess. We may sell any repossessed Equipment at
private or public sale. You give us permission to show the Equipment to
buyers at your location free of charge during normal business hours. If we
do this, we do not have to remove the Equipment from your location. If we
repossess the Equipment and sell it, we will give you credit for the net
sale price, after subtracting our costs of repossessing and selling the
Equipment. If we rent the Equipment to somebody else, we will give you
credit for the net rent received, after subtracting our costs of
repossessing and renting the Equipment, but the credit will be discounted
to present value using the discount rate that we used in calculating your
rental payment under the Schedule for the Equipment. The credit will be
applied against what you owe us under this Lease, the Schedules and any
other leases, loans or other financial arrangements that you have with us.
If the credit exceeds the amount you owe under this Lease, the Schedules
and any other leases, loans or other financial arrangements that you have
with us, we will refund the amount of the excess to you.
o You will also pay us the following:
o All our expenses of enforcing our remedies. This includes all our expenses
to repossess, store, ship, repair and sell the Equipment.
5
<PAGE>
o Our reasonable attorney's fees and expenses.
o Default interest on everything you owe us from the date of your default to
the date on which we are paid in full. The "default interest rate" will be
one and one-half (1.5%) percent per month. If this interest rate exceeds
the highest legal interest rate, you will only be required to pay us
default interest at the highest legal interest rate.
You realize that the damages we could suffer as a result of your default are
very uncertain. You also realize that the value of an unexpired lease Term is
difficult or impossible to calculate. This is why we have agreed with you in
advance on the discount rates and default interest rate to be used in
calculating the payments you will owe us if you default. You agree that, for
these reasons, the payments you will owe us if you default are "agreed" or
"liquidated" damages. You understand that these payments are not "penalties" or
"forfeitures."
You will pay us a late fee whenever you pay any amount that you owe us more than
ten (10) days after it is due. You will pay the late fee within one month after
the late payment was originally due. The late fee will be ten (10%) percent of
the late payment. If this exceeds the highest legal amount we can charge you;
you will only be required to pay the highest legal amount. The late fee is
intended to reimburse us for our collection costs that are caused by late
payment. It is charged in addition to all other amounts you are required to pay
us, including default interest.
14. PERFORMING YOUR OBLIGATIONS IF YOU DO NOT
If you do not perform one or more of your obligations under this Lease or a
Schedule, we may perform it for you. We will notify you in writing at least ten
(10) days before we do this. We do not have to perform any of your obligations
for you. If we do choose to perform them, you will pay us all of our expenses to
perform the obligations. You will also reimburse us for any money that we
advance to perform your obligations, together with interest at the default
interest rate on that amount. This will be additional "rent" that you will owe
us and you will pay it at the same time that your next rent payment is due.
15. ASSIGNMENT
WE MAY ASSIGN THIS LEASE OR ANY SCHEDULE OR ANY RENT PAYMENTS WITHOUT YOUR
PERMISSION.
WE MAY GRANT A SECURITY INTEREST IN THE EQUIPMENT WITHOUT YOUR PERMISSION.
THE PERSON TO WHOM WE ASSIGN IS CALLED THE "ASSIGNEE." THE ASSIGNEE WILL NOT
HAVE ANY OF OUR OBLIGATIONS UNDER THIS LEASE. YOU WILL NOT BE ABLE TO RAISE ANY
DEFENSE, COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE.
AFTER ASSIGNMENT YOU MAY "QUIETLY ENJOY" THE USE OF THE EQUIPMENT SO LONG AS YOU
ARE NOT IN DEFAULT.
UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER YOUR
RIGHTS UNDER THIS LEASE OR ANY SCHEDULE. YOU ALSO ARE NOT ALLOWED TO SUBLET THE
EQUIPMENT OR LET ANYBODY ELSE USE IT UNLESS WE GIVE YOU OUR WRITTEN PERMISSION.
16. UNIFORM COMMERCIAL CODE DISCLAIMERS OF WARRANTIES AND WAIVERS
WE DID NOT MANUFACTURE OR SUPPLY THE EQUIPMENT. WE ARE NOT A DEALER IN THE
EQUIPMENT. INSTEAD, YOU CHOSE THE EQUIPMENT.
WE DO NOT MAKE ANY WARRANTY AS TO THE EQUIPMENT. WE DO NOT MAKE ANY WARRANTY AS
TO "MERCHANTABILITY" OR "SUITABILITY" OR "FITNESS FOR A PARTICULAR PURPOSE" OR
"NONINFRINGEMENT" OF ANY PATENT, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHT.
WE WILL NOT BE RESPONSIBLE FOR ANY LOSS, DAMAGE, OR INJURY TO YOU OR ANYBODY
ELSE AS A RESULT OF ANY DEFECTS, HIDDEN OR OTHERWISE, IN THE EQUIPMENT UNDER
"STRICT LIABILITY" LAWS OR ANY OTHER LAWS.
WE WILL NOT BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES,
LOSS OF PROFITS OR GOODWILL.
6
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WE MAKE NO WARRANTY AS TO THE TREATMENT OF THIS LEASE FOR TAX OR ACCOUNTING
PURPOSES.
If the Equipment is unsatisfactory, you will continue to pay us all rent and
other amounts you are required to pay us. You must seek repair or replacement of
the Equipment solely from the Manufacturer or Supplier and not from us. You may
use our rights under any Manufacturer or Supplier warranties on the Equipment to
get it repaired or replaced. Neither the Manufacturer nor the Supplier is our
"agent," so they cannot speak for us and they are not allowed to make any
changes in this Lease or any Schedule, or give up any of our rights.
17. UNIFORM COMMERCIAL CODE ARTICLE 2A PROVISIONS.
This Lease is a "Finance Lease" under Article 2A of the Uniform Commercial Code.
You agree that (a) we have advised you of the identity of the Supplier, (b) you
may have rights under the "supply contract" under which we are purchasing the
Equipment from the Supplier and (c) you may contact the Supplier for a
description of these rights.
YOU WAIVE ANY AND ALL OF YOUR RIGHTS AND REMEDIES UNDER ARTICLE 2A OF THE
UNIFORM COMMERCIAL CODE, INCLUDING SECTIONS 2A-508 THROUGH 2A-522 OF THE UNIFORM
COMMERCIAL CODE.
18. ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE OF
PROCESS, WAIVER OF JURY TRIAL.
THIS LEASE WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN WRITING.
THIS LEASE IS GOVERNED BY THE LAWS OF THE STATE OF ARIZONA, THE STATE IN WHICH
OUR OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF
THIS LEASE OCCURED AND FROM WHICH PAYMENT FOR THE EQUIPMENT WILL BE ORDERED
HOWEVER, IF THIS LEASE IS UNENFORCEABLE UNDER ARIZONA LAW, IT WILL INSTEAD BE
GOVERNED BY THE LAWS OF THE STATE IN WHICH THE EQUIPMENT IS LOCATED.
YOU MAY ONLY SUE US IN A FEDERAL OR STATE COURT THAT IS LOCATED IN MARICOPA
COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES,
INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL
JURISDICTION OF THESE ARIZONA COURTS. YOU WILL NOT CLAIM THAT MARICOPA
COUNTY, ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A PROPER
"VENUE."
WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH
PROCESS IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO YOUR
ADDRESS INDICATED AFTER YOUR SIGNATURE BELOW.
YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.
19. INFORMATION SUPPLIED BY YOU AND ANY GUARANTOR
o All financial information and other information that you or any guarantor
have given us is true and complete. You or any guarantor have not failed to
tell us anything that would make the financial information misleading.
There has been no material adverse change in your financial condition,
business, operations or prospects, or the financial condition of any
guarantor, from the financial condition that you disclosed to us in your
application for credit.
o You have supplied us with information about the Equipment. You promise to
us that the amount we are paying for the Equipment is no more than the fair
and usual price for this kind of Equipment, taking into account any
discounts, rebates and allowances that you or any affiliate of yours may
have been given for the Equipment.
o During the Term you will promptly give copies of any filings you make with
the Securities and Exchange Commission (SEC). You and any guarantor will
also provide us with the following financial statements:
o Quarterly balance sheet and statements of earnings and cash flow - within
45 days after the
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end of your first three fiscal quarters in each fiscal year. These will be
certified by the chief financial officer.
o Annual balance sheet and statements of earnings and cash flow - within 90
days after the end of each fiscal year. These will be audited by
independent auditors acceptable to FINOVA. Their audit report must be
unqualified.
These financial statements will be prepared according to generally accepted
accounting principles, consistently applied.
All financial statements and SEC filings that you or any guarantor provide us
will be true and complete. They will not fail to tell us anything that would
make them misleading.
20. BOARD MEETINGS/STOCKHOLDERS' MEETINGS
You will give to us notice of all meetings of your stockholders (or if you are a
partnership or limited liability company, of your partners or members). You will
also send us copies of all documents sent to the stockholders, partners or
members for these meetings at the same time you send the documents to them. We
have your permission to attend and observe (but not participate in) all meetings
of your stockholders (or, if you are a partnership or limited liability company,
of your partners or members).
21. NOTICES
We may give you written notice in person, by mail, by overnight delivery
service, or by fax. Notice will be sent to your address below your signature.
Mail notice will be effective three (3) days after we mail it with prepaid
postage to the right address. Overnight delivery notice requires a receipt and
tracking number. Fax notice requires a receipt from the sending machine showing
that it has been sent to your fax number and received.
You may give us notice the same way that we may give you notice.
22. GENERAL
This Lease benefits our successors and assigns. This Lease benefits only those
successors and assigns of yours that we have approved in writing.
This Lease binds your successors and assigns. This Lease binds only those
successors and assigns of ours that clearly assume our obligations in writing.
TIME IS OF THE ESSENCE OF THIS LEASE.
This Lease and all of the Schedules is the entire agreement between you and us
concerning the Equipment.
Only an employee of FINOVA who is authorized by corporate resolution or policy
may modify or amend this Lease or any Schedule on our behalf, and this must be
in writing. Only he or she may give up any of our rights, and this must be in
writing. If more than one person is the Lessee under this Lease, then each of
you is jointly and severally liable for your obligations under this Lease.
This Lease is only for your benefit and for our benefit, as well as our
successors and assigns. It is not intended to benefit any other person.
If any provision in this Lease is unenforceable, then that provision must be
deleted. Only unenforceable provisions are to be deleted. The rest of the lease
will remain as written.
23. COVENANT
o You shall take all action necessary to assure that there will be no
material adverse change to your business by reason of the advent of the
year 2000, including without limitation that all computer based systems,
embedded microchips and other processing capabilities effectively recognize
and process dates after April 1, 1999. At our request, you will provide to
us assurance reasonably acceptable to us that your computer-based systems,
embedded microchips and other processing capabilities are year 2000
compatible.
24. REPRESENTATIONS AND WARRANTIES
You represent and warrant to us as follows:
o You have complied with all "environmental laws" and will continue to comply
with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored or disposed of by you or at your properties
except in compliance with all environmental laws. "Environmental laws" mean
all federal, state or local environmental laws and regulations, including
the following laws: CERCLA, RCRA,
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Hazardous Materials Transport Act and The Federal Water Pollution Control
Act. "Hazardous substances" means all hazardous or toxic wastes, materials
or substances, as defined in the environmental laws, as well as oil,
flammable substances, asbestos that is or could become friable, urea
formaldehyde insulation, polychlorinated biphenyls and radon gas.
o You have taken all action necessary to assure that there will be no
material adverse change to your business by reason of the advent of the
year 2000, including without limitation that all computer based systems,
embedded microchips and other processing capabilities effectively recognize
and process dates after April 1, 1999.
25. PUBLICITY
We may make press releases and publish a tombstone announcing this transaction
and its total amount. You may not publicize this transaction in any way without
our prior written consent.
LESSOR: LESSEE:
FINOVA TECHNOLOGY FINANCE, INC. TRIMERIS, INC.
10 WATERSIDE DRIVE 4727 UNIVERSITY DRIVE
FARMINGTON, CONNECTICUT 06032-3065 DURHAM, NC 27707
BY:___________________________
BY:________________________________
PRINTED
PRINTED NAME:_________________________
NAME:______________________________
TITLE:________________________
TITLE:_____________________________
Taxpayer
FAX NUMBER: (860) 676-1814 ID#___________________________
DATE FAX
ACCEPTED:__________________________ NUMBER:_______________________
DATED:________________________
STATE OF _________________
COUNTY OF _______________
I acknowledge that __________________, who stated that he/she is
_______________________ of the Lessee named above, signed this Master Lease
Agreement in my presence today: ____________________. He/she acknowledged to me
that his/her signature on this Master Lease Agreement was authorized by a valid
resolution or other valid authorization from Lessee's board of directors or
other governing body.
________________________
Notary Public
[SEAL]
9
PRAXIS CONSULTING, INC. REGIONAL PROTOTYPE
DEFINED CONTRIBUTION PLAN AND TRUST
Copyright 1998 Praxis Consulting, Inc.
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS.................................... 13
2.2 DETERMINATION OF TOP HEAVY STATUS.............................. 13
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER.................... 16
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY........................ 16
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES.................. 16
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR......................... 17
2.7 RECORDS AND REPORTS............................................ 18
2.8 APPOINTMENT OF ADVISERS........................................ 18
2.9 INFORMATION FROM EMPLOYER...................................... 18
2.10 PAYMENT OF EXPENSES............................................ 18
2.11 MAJORITY ACTIONS............................................... 18
2.12 CLAIMS PROCEDURE............................................... 18
2.13 CLAIMS REVIEW PROCEDURE........................................ 18
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY...................................... 19
3.2 EFFECTIVE DATE OF PARTICIPATION................................ 19
<PAGE>
3.3 DETERMINATION OF ELIGIBILITY................................... 19
3.4 TERMINATION OF ELIGIBILITY..................................... 20
3.5 OMISSION OF ELIGIBLE EMPLOYEE.................................. 20
3.6 INCLUSION OF INELIGIBLE EMPLOYEE............................... 20
3.7 ELECTION NOT TO PARTICIPATE.................................... 20
3.8 CONTROL OF ENTITIES BY OWNER-EMPLOYEE.......................... 20
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION................ 21
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION..................... 22
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS........... 22
4.4 MAXIMUM ANNUAL ADDITIONS....................................... 26
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS...................... 32
4.6 TRANSFERS FROM QUALIFIED PLANS................................. 32
4.7 VOLUNTARY CONTRIBUTIONS........................................ 33
4.8 DIRECTED INVESTMENT ACCOUNT.................................... 34
4.9 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS..................... 34
4.10 ACTUAL CONTRIBUTION PERCENTAGE TESTS........................... 35
4.11 INTEGRATION IN MORE THAN ONE PLAN.............................. 35
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND.................................... 35
5.2 METHOD OF VALUATION............................................ 35
<PAGE>
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT...................... 36
6.2 DETERMINATION OF BENEFITS UPON DEATH........................... 36
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY............... 37
6.4 DETERMINATION OF BENEFITS UPON TERMINATION..................... 37
6.5 DISTRIBUTION OF BENEFITS....................................... 40
6.6 DISTRIBUTION OF BENEFITS UPON DEATH............................ 43
6.7 TIME OF SEGREGATION OR DISTRIBUTION............................ 47
6.8 DISTRIBUTION FOR MINOR BENEFICIARY............................. 47
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN................. 47
6.10 PRE-RETIREMENT DISTRIBUTION.................................... 47
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP.............................. 47
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS...................... 48
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS............................. 48
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE.......................... 49
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE.................... 49
7.3 OTHER POWERS OF THE TRUSTEE.................................... 51
7.4 LOANS TO PARTICIPANTS.......................................... 53
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS....................... 54
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES.................. 54
7.7 ANNUAL REPORT OF THE TRUSTEE................................... 55
7.8 AUDIT.......................................................... 55
<PAGE>
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE................. 56
7.10 TRANSFER OF INTEREST........................................... 56
7.11 TRUSTEE INDEMNIFICATION........................................ 57
7.12 EMPLOYER SECURITIES AND REAL PROPERTY.......................... 57
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT...................................................... 57
8.2 TERMINATION.................................................... 58
8.3 MERGER OR CONSOLIDATION........................................ 58
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS............................................. 59
9.2 PARTICIPANT'S RIGHTS........................................... 59
9.3 ALIENATION..................................................... 59
9.4 CONSTRUCTION OF PLAN........................................... 60
9.5 GENDER AND NUMBER.............................................. 60
9.6 LEGAL ACTION................................................... 60
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS......................... 60
9.8 BONDING........................................................ 60
9.9 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE..................... 61
9.10 INSURER'S PROTECTIVE CLAUSE.................................... 61
9.11 RECEIPT AND RELEASE FOR PAYMENTS............................... 61
9.12 ACTION BY THE EMPLOYER......................................... 61
9.13 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY............. 61
<PAGE>
9.14 HEADINGS....................................................... 62
9.15 APPROVAL BY INTERNAL REVENUE SERVICE........................... 62
9.16 UNIFORMITY..................................................... 62
9.17 PAYMENT OF BENEFITS............................................ 62
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER.................... 62
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS........................ 62
10.3 DESIGNATION OF AGENT........................................... 63
10.4 EMPLOYEE TRANSFERS............................................. 63
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES.......... 63
10.6 AMENDMENT...................................................... 63
10.7 DISCONTINUANCE OF PARTICIPATION................................ 64
10.8 ADMINISTRATOR'S AUTHORITY...................................... 64
10.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE.............. 64
ARTICLE XI
CASH OR DEFERRED PROVISIONS
11.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION................ 65
11.2 PARTICIPANT'S SALARY REDUCTION ELECTION........................ 65
11.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS........... 68
11.4 ACTUAL DEFERRAL PERCENTAGE TESTS............................... 70
11.5 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS................. 72
11.6 ACTUAL CONTRIBUTION PERCENTAGE TESTS........................... 75
<PAGE>
11.7 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS............. 77
11.8 ADVANCE DISTRIBUTION FOR HARDSHIP.............................. 80
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE I
DEFINITIONS
- --------------------------------------------------------------------------------
As used in this Plan, the following words and phrases shall have the
meanings set forth herein unless a different meaning is clearly required by the
context:
1.1 "ACT" means the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.
1.2 "ADMINISTRATOR" means the person(s) or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "ADOPTION AGREEMENT" means the separate Agreement which is executed by
the Employer and accepted by the Trustee which sets forth the elective
provisions of this Plan and Trust as specified by the Employer.
1.4 "AFFILIATED EMPLOYER" means the Employer and any corporation which is a
member of a controlled group of corporations (as defined in Code Section 414(b))
which includes the Employer; any trade or business (whether or not incorporated)
which is under common control (as defined in Code Section 414(c)) with the
Employer; any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.5 "AGGREGATE ACCOUNT" means with respect to each Participant, the value of
all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the provisions of Section 2.2.
1.6 "ANNIVERSARY DATE" means the anniversary date specified in C3 of the
Adoption Agreement.
1.7 "BENEFICIARY" means the person to whom a share of a deceased
Participant's interest in the Plan is payable, subject to the restrictions of
Sections 6.2 and 6.6.
1.8 "CODE" means the Internal Revenue Code of 1986, as amended or replaced
from time to time.
1.9 "COMPENSATION" with respect to any Participant means one of the following
as elected in the Adoption Agreement. However, Compensation for any
Self-Employed Individual shall be equal to his Earned Income.
(a) Information required to be reported under Sections 6041, 6051
and 6052 (wages, tips and Other Compensation Box on Form W-2).
Compensation is defined as wages, as defined in Code Section 3401(a),
and all other payments of Compensation to an Employee by the Employer
(in the course of the Employer's trade or business) for which the
Employer is required to furnish the Employee a written statement under
Code Sections 6041(d) and 6051(a)(3). Compensation must be determined
without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the
employment or the services performed (such as the exception for
agricultural labor in Section 3401(a)(2)).
(b) Section 3401(a) wages. Compensation is defined as wages within
the meaning of Code Section 3401(a) for the purposes of income tax
withholding at the source but determined without regard to any rules
that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the
exception for agricultural labor in Code Section 3401(a)(2)).
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(c) 415 safe-harbor compensation. Compensation is defined as wages,
salaries, and fees for professional services and other amounts received
(without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are
includible in gross income (including, but not limited to, commissions
paid salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses, fringe
benefits, and reimbursements, or other expense allowances under a
nonaccountable plan (as described in Regulation Section 1.62-2(c)), and
excluding the following:
(1) Employer contributions to a plan of deferred compensation which
are not includible in the Employee's gross income for the taxable
year in which contributed, or Employer contributions under a
simplified employee pension plan to the extent such contributions
are deductible by the Employee, or any distributions from a plan of
deferred compensation;
(2) Amounts realized from the exercise of a nonqualified stock
option, or when restricted stock (or property) held by the Employee
either becomes freely transferable or is no longer subject to a
substantial risk of forfeiture;
(3) Amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option; and
(4) Other amounts which received special tax benefits, or
contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of an annuity contract
described in section 403(b) of the Internal Revenue Code (whether or
not the contributions are actually excludable from the gross income
of the Employee).
If, in connection with the adoption of any amendment, the definition of
Compensation has been modified, then, for Plan Years prior to the Plan Year
which includes the adoption date of such amendment, Compensation means
compensation determined pursuant to the Plan then in effect.
In addition, if specified in the Adoption Agreement, Compensation for
all Plan purposes shall also include compensation which is not currently
includible in the Participant's gross income by reason of the application of
Code Sections 125, 402(a)(8), 402(h)(1)(B), or 403(b).
Compensation in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d). In applying this limitation, the family group of a Highly
Compensated Participant who is subject to the Family Member aggregation rules of
Code Section 414(q)(6) because such Participant is either a "five percent owner"
of the Employer or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as a single
Participant, except that for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants who have not attained
age nineteen (19) before the close of the year. If, as a result of the
application of such rules, the adjusted $200,000 limitation is exceeded, then
(except for purposes of determining the portion of Compensation up to the
integration level if this plan is integrated), the limitation shall be prorated
among the affected individuals in proportion to each such individual's
Compensation as determined under this Section prior to the application of this
limitation.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation for each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
Compensation limit. The OBRA '93 annual Compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of
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living in accordance with Section 401(a)(17)(B) of the Internal Revenue Code.
The cost-of-living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual Compensation limit
will be multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Section 401(a)(17) of the Code shall mean the
OBRA '93 annual Compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
Compensation limit in effect for that prior determination period. For this
purpose, for determination periods beginning before the first day of the Plan
Year beginning on or after January 1, 1994, the OBRA '93 annual Compensation
limit is $150,000.
1.10 "CONTRACT" or "POLICY" means any life insurance policy, retirement
income policy, or annuity contract (group or individual) issued by the Insurer.
In the event of any conflict between the terms of this Plan and the terms of any
insurance contract purchased hereunder, the Plan provisions shall control.
1.11 "DEFERRED COMPENSATION" means, with respect to any Participant, that
portion of the Participant's total Compensation which has been contributed to
the Plan in accordance with the Participant's deferral election pursuant to
Section 11.2.
1.12 "EARLY RETIREMENT DATE" means the date specified in the Adoption
Agreement on which a Participant or Former Participant has satisfied the age and
service requirements specified in the Adoption Agreement (Early Retirement Age).
A Participant shall become fully Vested upon satisfying this requirement if
still employed at his Early Retirement Age.
A Former Participant who terminates employment after satisfying the
service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.13 "EARNED INCOME" means with respect to a Self-Employed Individual, the
net earnings from self-employment in the trade or business with respect to which
the Plan is established, for which the personal services of the individual are a
material income-producing factor. Net earnings will be determined without regard
to items not included in gross income and the deductions allocable to such
items. Net earnings are reduced by contributions by the Employer to a qualified
Plan to the extent deductible under Code Section 404. In addition, for Plan
Years beginning after December 31, 1989, net earnings shall be determined with
regard to the deduction allowed to the Employer by Code Section 164(f).
1.14 "ELECTIVE CONTRIBUTION" means the Employer's contributions to the Plan
that are made pursuant to the Participant's deferral election pursuant to
Section 11.2, excluding any such amounts distributed as "excess annual
additions" pursuant to Section 4.4. In addition, if selected in E3 of the
Adoption Agreement, the Employer's matching contribution made pursuant to
Section 11.1(b) shall or shall not be considered an Elective Contribution for
purposes of the Plan, as provided in Section 11.1(b). Elective Contributions
shall be subject to the requirements of Sections 11.2(b) and 11.2(c) and shall
further be required to satisfy the discrimination requirements of Regulation
1.401(k)-1(b)(3), the provisions of which are specifically incorporated herein
by reference.
1.15 "ELIGIBLE EMPLOYEE" means any Employee specified in D1 of the Adoption
Agreement.
1.16 "EMPLOYEE" means any person who is employed by the Employer, but
excludes any person who is employed as an independent contractor. The term
Employee shall also include Leased Employees as provided in Code Section 414(n)
or (o).
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Except as provided in the Non-Standardized Adoption Agreement, all
Employees of all entities which are an Affiliated Employer will be treated as
employed by a single employer.
1.17 "EMPLOYER" means the entity specified in the Adoption Agreement, any
Participating Employer (as defined in Section 10.1) which shall adopt this Plan,
any successor which shall maintain this Plan and any predecessor which has
maintained this Plan.
1.18 "EXCESS COMPENSATION" means, with respect to a Plan that is integrated
with Social Security, a Participant's Compensation which is in excess of the
amount set forth in the Adoption Agreement.
1.19 "EXCESS CONTRIBUTIONS" means, with respect to a Plan Year, the excess of
Elective Contributions and Qualified Non-Elective Contributions made on behalf
of Highly Compensated Participants for the Plan Year over the maximum amount of
such contributions permitted under Section 11.4(a).
1.20 "EXCESS DEFERRED COMPENSATION" means, with respect to any taxable year
of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 11.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.4 when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year.
1.21 "FAMILY MEMBER" means, with respect to an affected Participant, such
Participant's spouse, and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.22 "FIDUCIARY" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.23 "FISCAL YEAR" means the Employer's accounting year as specified in the
Adoption Agreement.
1.24 "FORFEITURE" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Participant's Account, or
(b) the last day of the Plan Year in which the Participant incurs
five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. In addition, the term Forfeiture shall also include
amounts deemed to be Forfeitures pursuant to any other provision of this Plan.
1.25 "FORMER PARTICIPANT" means a person who has been a Participant, but who
has ceased to be a Participant for any reason.
1.26 "414(S) COMPENSATION" with respect to any Employee means his
Compensation as defined in Section 1.9. However, for purposes of this Section,
Compensation shall be Compensation paid and, if selected in the Adoption
Agreement, shall only be recognized as of an Employee's effective date of
participation. If, in connection with the adoption of any amendment, the
definition of "414(s) Compensation" has been modified, then
4
<PAGE>
for Plan Years prior to the Plan Year which includes the adoption date of such
amendment, "414(s) Compensation" means compensation determined pursuant to the
Plan Year in effect.
In addition, if specified in the Adoption Agreement, "414(s)
Compensation" shall also include compensation which is not currently includible
in the Participant's gross income by reason of the application of Code Sections
125, 402(a)(8), 402(h)(1)(B), or 403(b), plus Elective Contributions
attributable to Deferred Compensation recharacterized as
voluntary Employee contributions pursuant to 11.5(a).
1.27 "415 COMPENSATION" means compensation as defined in Section 4.4(f)(2).
If, in connection with the adoption of any amendment, the definition of
"415 Compensation" has been modified, then, for Plan Years prior to the Plan
Year which includes the adoption date of such amendment, "415 Compensation"
means compensation determined pursuant to the Plan then in effect.
1.28 "HIGHLY COMPENSATED EMPLOYEE" means an Employee described in Code
Section 414(q) and the Regulations thereunder and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"look-back year" were "five percent owners" as defined in Section
1.35(c).
(b) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $50,000 and were in the Top Paid
Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of the
Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50 percent of the limit
in effect under Code Section 415(b)(1)(A) for any such Plan Year. The
number of officers shall be limited to the lesser of (i) 50 employees;
or (ii) the greater of 3 employees or 10 percent of all employees. If
the Employer does not have at least one officer whose annual "415
Compensation" is in excess of 50 percent of the Code Section
415(b)(1)(A) limit, then the highest paid officer of the Employer will
be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees
paid the greatest "415 Compensation" during the "determination year" and
are also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year."
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately preceding
twelve-month period. However, if the Plan Year is a calendar year, or if another
Plan of the Employer so provides, then the "look-back year" shall be the
calendar year ending with or within the Plan Year for which testing is being
performed, and the "determination year" (if applicable) shall be the period of
time, if any, which extends beyond the "look-back year" and ends on the last day
of the Plan Year for which testing is being performed (the "lag period"). With
respect to this election, it shall be applied on a uniform and consistent basis
to all plans, entities, and arrangements of the Employer.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, Code Section 403(b). Additionally, the dollar
threshold amounts specified in (b) and (c) above shall be adjusted at such time
and in such manner as is provided in Regulations. In the case of such an
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<PAGE>
adjustment, the dollar limits which shall be applied are those for the calendar
year in which the "determination year" or "look back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, all Affiliated Employers shall be taken into account as a single
employer and Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) shall be considered Employees unless such Leased Employees are covered
by a plan described in Code Section 414(n)(5) and are not covered in any
qualified plan maintained by the Employer. The exclusion of Leased Employees for
this purpose shall be applied on a uniform and consistent basis for all of the
Employer's retirement plans. In addition, Highly Compensated Former Employees
shall be treated as Highly Compensated Employees without regard to whether they
performed services during the "determination year."
1.29 "HIGHLY COMPENSATED FORMER EMPLOYEE" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.28. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
1.30 "HIGHLY COMPENSATED PARTICIPANT" means any Highly Compensated Employee
who is eligible to participate in the Plan.
1.31 "HOUR OF SERVICE" means (1) each hour for which an Employee is directly
or indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period; (2) each hour
for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. The same Hours of Service shall not be credited both
under (1) or (2), as the case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or
due from the Employer regardless of whether such payment is made by or due from
the Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
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An Hour of Service must be counted for the purpose of determining a Year
of Service, a year of participation for purposes of accrued benefits, a 1-Year
Break in Service, and employment commencement date (or reemployment commencement
date). The provisions of Department of Labor regulations 2530.200b-2(b) and (c)
are incorporated herein by reference.
Hours of Service will be credited for employment with all Affiliated
Employers and for any individual considered to be a Leased Employee pursuant to
Code Sections 414(n) or 414(o) and the Regulations thereunder.
Hours of Service will be determined on the basis of the method selected
in the Adoption Agreement.
1.32 "INSURER" means any legal reserve insurance company which shall issue
one or more policies under the Plan.
1.33 "INVESTMENT MANAGER" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.34 "JOINT AND SURVIVOR ANNUITY" means an annuity for the life of a
Participant with a survivor annuity for the life of the Participant's spouse
which is not less than 1/2, nor greater than the amount of the annuity payable
during the joint lives of the Participant and the Participant's spouse. The
Joint and Survivor Annuity will be the amount of benefit which can be purchased
with the Participant's Vested interest in the Plan.
1.35 "KEY EMPLOYEE" means an Employee as defined in Code Section 416(i) and
the Regulations thereunder. Generally, any Employee or former Employee (as well
as each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415
Compensation" greater than 50 percent of the amount in effect under Code
Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from
the Employer for a Plan Year greater than the dollar limitation in
effect under Code Section 415(c)(1)(A) for the calendar year in which
such Plan Year ends and owning (or considered as owning within the
meaning of Code Section 318) both more than one-half percent interest
and the largest interests in the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner"
means any person who owns (or is considered as owning within the meaning
of Code Section 318) more than five percent (5%) of the outstanding
stock of the Employer or stock possessing more than five percent (5%) of
the total combined voting power of all stock of the Employer or, in the
case of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers. However, in determining
whether an individual has
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"415 Compensation" of more than $150,000, "415 Compensation" from each
employer required to be aggregated under Code Sections 414(b), (c), (m) and
(o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts that would otherwise be excluded from a
Participant's gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions made pursuant
to a salary reduction agreement, Code Section 403(b).
1.36 "LATE RETIREMENT DATE" means the date of, or the first day of the month
or the Anniversary Date coinciding with or next following, whichever corresponds
to the election made for the Normal Retirement Date, a Participant's actual
retirement after having reached his Normal Retirement Date.
1.37 "LEASED EMPLOYEE" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
leased employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer.
A leased employee shall not be considered an Employee of the recipient
if: (i) such employee is covered by a money purchase pension plan providing: (1)
a nonintegrated employer contribution rate of at least 10 percent of
compensation, as defined in Code Section 415(c)(3), but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the employee's gross income under Code Sections 125, 402(a)(8), 402(h), or
403(b), (2) immediate participation, and (3) full and immediate vesting; and
(ii) leased employees do not constitute more than 20 percent of the recipient's
nonhighly compensated workforce.
1.38 "NET PROFIT" means with respect to any Fiscal Year the Employer's net
income or profit for such Fiscal Year determined upon the basis of the
Employer's books of account in accordance with generally accepted accounting
principles, without any reduction for taxes based upon income, or for
contributions made by the Employer to this Plan and any other qualified plan.
1.39 "NON-ELECTIVE CONTRIBUTION" means the Employer's contributions to the
Plan other than those made pursuant to the Participant's deferral election made
pursuant to Section 11.2 and any Qualified Non-Elective Contribution. In
addition, if selected in E3 of the Adoption Agreement, the Employer's Matching
Contribution made pursuant to Section 4.3(b) shall be considered a Non-Elective
Contribution for purposes of the Plan.
1.40 "NON-HIGHLY COMPENSATED PARTICIPANT" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.41 "NON-KEY EMPLOYEE" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.42 "NORMAL RETIREMENT AGE" means the age specified in the Adoption
Agreement at which time a Participant shall become fully Vested in his
Participant's Account.
1.43 "NORMAL RETIREMENT DATE" means the date specified in the Adoption
Agreement on which a Participant shall become eligible to have his benefits
distributed to him.
1.44 "1-YEAR BREAK IN SERVICE" means the applicable computation period during
which an Employee has not completed more than 500 Hours of Service with the
Employer. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
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"Authorized leave of absence" means an unpaid, temporary cessation from
active employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.45 "OWNER-EMPLOYEE" means a sole proprietor who owns the entire interest in
the Employer or a partner who owns more than 10% of either the capital interest
or the profits interest in the Employer and who receives income for personal
services from the Employer.
1.46 "PARTICIPANT" means any Eligible Employee who participates in the Plan
as provided in Section 3.2 and has not for any reason become ineligible to
participate further in the Plan.
1.47 "PARTICIPANT'S ACCOUNT" means the account established and maintained by
the Administrator for each Participant with respect to his total interest under
the Plan resulting from (a) the Employer's contributions in the case of a Profit
Sharing Plan or Money Purchase Plan, and (b) the Employer's Non-Elective
Contributions in the case of a 401(k) Profit Sharing Plan.
1.48 "PARTICIPANT'S COMBINED ACCOUNT" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest under the Plan resulting from the Employer's contributions.
1.49 "PARTICIPANT'S ELECTIVE ACCOUNT" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions and Qualified Non-Elective Contributions. A separate accounting
shall be maintained with respect to that portion of the Participant's Elective
Account attributable to Elective Contributions made pursuant to Section 11.2,
Employer matching contributions if they are deemed to be Elective Contributions,
and any Qualified Non-Elective Contributions.
1.50 "PARTICIPANT'S ROLLOVER ACCOUNT" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from amounts transferred from another qualified
plan or "conduit" Individual Retirement Account in accordance with Section 4.6.
1.51 "PLAN" means this instrument (hereinafter referred to as Praxis
Consulting, Inc. Regional Prototype Defined Contribution Plan and Trust Basic
Plan Document #01) including all amendments thereto, and the Adoption Agreement
as adopted by the Employer.
1.52 "PLAN YEAR" means the Plan's accounting year as specified in C2 of the
Adoption Agreement.
1.53 "PRE-RETIREMENT SURVIVOR ANNUITY" means an immediate annuity for the
life of the Participant's spouse, the payments under which must be equal to the
actuarial equivalent of 50% of the Participant's Vested interest in the Plan as
of the date of death.
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1.54 "QUALIFIED NON-ELECTIVE ACCOUNT" means the account established hereunder
to which Qualified Non-Elective Contributions are allocated.
1.55 "QUALIFIED NON-ELECTIVE CONTRIBUTION" means the Employer's contributions
to the Plan that are made pursuant to E5 of the Adoption Agreement and Section
11.1(d) which are used to satisfy the "Actual Deferral Percentage" tests.
Qualified Non-Elective Contributions are nonforfeitable when made and are
distributable only as specified in Sections 11.2(c) and 11.8. In addition, the
Employer's contributions to the Plan that are made pursuant to Section 11.7(h)
and which are used to satisfy the "Actual Contribution Percentage" tests shall
be considered Qualified Non-Elective Contributions.
1.56 "QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTION ACCOUNT" means the account
established and maintained by the Administrator for each Participant with
respect to his total interest under the Plan resulting from the Participant's
tax deductible qualified voluntary employee contributions made pursuant to
Section 4.9.
1.57 "REGULATION" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.58 "RETIRED PARTICIPANT" means a person who has been a Participant, but who
has become entitled to retirement benefits under the Plan.
1.59 "RETIREMENT DATE" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.60 "SELF-EMPLOYED INDIVIDUAL" means an individual who has earned income for
the taxable year from the trade or business for which the Plan is established,
and, also, an individual who would have had earned income but for the fact that
the trade or business had no net profits for the taxable year. A Self-Employed
Individual shall be treated as an Employee.
1.61 "SHAREHOLDER-EMPLOYEE" means a Participant who owns more than five
percent (5%) of the Employer's outstanding capital stock during any year in
which the Employer elected to be taxed as a Small Business Corporation under the
applicable Code Section.
1.62 "SHORT PLAN YEAR" means, if specified in the Adoption Agreement, that
the Plan Year shall be less than a 12 month period. If chosen, the following
rules shall apply in the administration of this Plan. In determining whether an
Employee has completed a Year of Service for benefit accrual purposes in the
Short Plan Year, the number of the Hours of Service required shall be
proportionately reduced based on the number of days in the Short Plan Year. The
determination of whether an Employee has completed a Year of Service for vesting
and eligibility purposes shall be made in accordance with Department of Labor
Regulation 2530.203-2(c). In addition, if this Plan is integrated with Social
Security, the integration level shall also be proportionately reduced based on
the number of days in the Short Plan Year.
1.63 "SUPER TOP HEAVY PLAN" means a plan described in Section 2.2(b).
1.64 "TAXABLE WAGE BASE" means, with respect to any year, the maximum amount
of earnings which may be considered wages for such year under Code Section
3121(a)(1).
1.65 "TERMINATED PARTICIPANT" means a person who has been a Participant, but
whose employment has been terminated other than by death, Total and Permanent
Disability or retirement.
1.66 "TOP HEAVY PLAN" means a plan described in Section 2.2(a).
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1.67 "TOP HEAVY PLAN YEAR" means a Plan Year commencing after December 31,
1983 during which the Plan is a Top Heavy Plan.
1.68 "TOP PAID GROUP" shall be determined pursuant to Code Section 414(q) and
the Regulations thereunder and generally means the top 20 percent of Employees
who performed services for the Employer during the applicable year, ranked
according to the amount of "415 Compensation" (as determined pursuant to Section
1.28) received from the Employer during such year. All Affiliated Employers
shall be taken into account as a single employer, and Leased Employees shall be
treated as Employees pursuant to Code Section 414(n) or (o). Employees who are
non-resident aliens who received no earned income (within the meaning of Code
Section 911(d)(2)) from the Employer constituting United States source income
within the meaning of Code Section 861(a)(3) shall not be treated as Employees.
Additionally, for the purpose of determining the number of active Employees in
any year, the following additional Employees shall also be excluded, however,
such Employees shall still be considered for the purpose of identifying the
particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a
year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are
covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a
uniform and consistent basis for all purposes for which the Code Section 414(q)
definition is applicable.
1.69 "TOTAL AND PERMANENT DISABILITY" means the inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment that can be expected to result in death or which has lasted or
can be expected to last for a continuous period of not less than 12 months. The
disability of a Participant shall be determined by a licensed physician chosen
by the Administrator. However, if the condition constitutes total disability
under the federal Social Security Acts, the Administrator may rely upon such
determination that the Participant is Totally and Permanently Disabled for the
purposes of this Plan. The determination shall be applied uniformly to all
Participants.
1.70 "TRUSTEE" means the person or entity named in B6 of the Adoption
Agreement and any successors.
1.71 "TRUST FUND" means the assets of the Plan and Trust as the same shall
exist from time to time.
1.72 "VESTED" means the nonforfeitable portion of any account maintained on
behalf of a Participant.
1.73 "VOLUNTARY CONTRIBUTION ACCOUNT" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's nondeductible voluntary
contributions made pursuant to Section 4.7.
1.74 "YEAR OF SERVICE" means the computation period of twelve (12)
consecutive months, herein set forth, and during which an Employee has completed
at least 1000 Hours of Service.
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For purposes of eligibility for participation, the initial computation
period shall begin with the date on which the Employee first performs an Hour of
Service (employment commencement date). The computation period beginning after a
1-Year Break in Service shall be measured from the date on which an Employee
again performs an Hour of Service. The succeeding computation periods shall
begin with the first anniversary of the Employee's employment commencement date.
However, if one (1) Year of Service or less is required as a condition of
eligibility, then after the initial eligibility computation period, the
eligibility computation period shall shift to the current Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service. An Employee who is credited with 1,000 Hours of Service in both
the initial eligibility computation period and the first Plan Year which
commences prior to the first anniversary of the Employee's initial eligibility
computation period will be credited with two Years of Service for purposes of
eligibility to participate.
For vesting purposes, and all other purposes not specifically addressed
in this Section, the computation period shall be the Plan Year, including
periods prior to the Effective Date of the Plan unless specifically excluded
pursuant to the Adoption Agreement.
Years of Service and breaks in service will be measured on the same
computation period.
Years of Service with any predecessor Employer which maintained this
Plan shall be recognized. Years of Service with any other predecessor Employer
shall be recognized as specified in the Adoption Agreement.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY PROVISIONS AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.3(i) of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year beginning
after December 31, 1983, in which, as of the Determination Date, (1) the
Present Value of Accrued Benefits of Key Employees and (2) the sum of
the Aggregate Accounts of Key Employees under this Plan and all plans of
an Aggregation Group, exceeds sixty percent (60%) of the Present Value
of Accrued Benefits and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan Year, but
such Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether any
Aggregation Group which includes this Plan is a Top Heavy Group). In
addition, if a Participant or Former Participant has not performed any
services for any Employer maintaining the Plan at any time during the
five year period ending on the Determination Date, any accrued benefit
for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top Heavy
or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year
beginning after December 31, 1983, in which, as of the Determination
Date, (1) the Present Value of Accrued Benefits of Key Employees and (2)
the sum of the Aggregate Accounts of Key Employees under this Plan and
all plans of an Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits and
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the Aggregate Accounts of all Key and Non-Key Employees under this Plan
and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most recent
valuation occurring within a twelve (12) month period ending on the
Determination Date;
(2) for a Profit Sharing Plan, an adjustment for any contributions
due as of the Determination Date. Such adjustment shall be the
amount of any contributions actually made after the valuation date
but before the Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are allocated
as of a date in that first Plan Year;
(3) for a Money Purchase Plan, contributions that would be allocated
as of a date not later than the Determination Date, even though
those amounts are not yet made or required to be made.
(4) any Plan distributions made within the Plan Year that includes
the Determination Date or within the four (4) preceding Plan Years.
However, in the case of distributions made after the valuation date
and prior to the Determination Date, such distributions are not
included as distributions for top heavy purposes to the extent that
such distributions are already included in the Participant's
Aggregate Account balance as of the valuation date. In the case of a
distribution of an annuity Contract, the amount of such distribution
is deemed to be the current actuarial value of the Contract,
determined on the date of the distribution. Notwithstanding anything
herein to the contrary, all distributions, including distributions
made prior to January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have been required to
be included in an Aggregation Group, will be counted. Further,
distributions from the Plan (including the cash value of life
insurance policies) of a Participant's account balance because of
death shall be treated as a distribution for the purpose of this
paragraph.
(5) any Employee contributions, whether voluntary or mandatory.
However, amounts attributable to tax deductible qualified voluntary
employee contributions shall not be considered to be a part of the
Participant's Aggregate Account balance.
(6) with respect to unrelated rollovers and plan-to-plan transfers
(ones which are both initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by another
employer), if this Plan provides the rollovers or plan-to-plan
transfers, it shall always consider such rollovers or plan-to-plan
transfers as a distribution for the purposes of this Section. If
this Plan is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or plan-to-plan
transfers accepted after December 31, 1983 as part of the
Participant's Aggregate Account balance. However, rollovers or
plan-to-plan transfers accepted prior to January 1, 1984 shall be
considered as part of the Participant's Aggregate Account balance.
(7) with respect to related rollovers and plan-to-plan transfers
(ones either not initiated by the Employee or made to a plan
maintained by the same employer), if this Plan provides the rollover
or plan-to-plan transfer, it shall not be counted as a distribution
for purposes of this Section. If this Plan is the plan accepting
such rollover or plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of the Participant's
Aggregate Account balance, irrespective of the date on which such
rollover or plan-to-plan transfer is accepted.
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(8) For the purposes of determining whether two employers are to be
treated as the same employer in 2.2(c)(6) and 2.2(c)(7) above, all
employers aggregated under Code Section 414(b), (c), (m) and (o) are
treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or
a Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each qualified plan of the Employer,
including any Simplified Employee Pension Plan, in which a Key
Employee is a participant in the Plan Year containing the
Determination Date or any of the four preceding Plan Years, and each
other qualified plan of the Employer which enables any qualified
plan in which a Key Employee participates to meet the requirements
of Code Sections 401(a)(4) or 410, will be required to be
aggregated. Such group shall be known as a Required Aggregation
Group.
In the case of a Required Aggregation Group, each plan in the group
will be considered a Top Heavy Plan if the Required Aggregation
Group is a Top Heavy Group. No plan in the Required Aggregation
Group will be considered a Top Heavy Plan if the Required
Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also include any
other plan of the Employer, including any Simplified Employee
Pension Plan, not required to be included in the Required
Aggregation Group, provided the resulting group, taken as a whole,
would continue to satisfy the provisions of Code Sections 401(a)(4)
and 410. Such group shall be known as a Permissive Aggregation
Group.
In the case of a Permissive Aggregation Group, only a plan that is
part of the Required Aggregation Group will be considered a Top
Heavy Plan if the Permissive Aggregation Group is a Top Heavy Group.
No plan in the Permissive Aggregation Group will be considered a Top
Heavy Plan if the Permissive Aggregation Group is not a Top Heavy
Group.
(3) Only those plans of the Employer in which the Determination
Dates fall within the same calendar year shall be aggregated in
order to determine whether such plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of the
Employer if it was maintained within the last five (5) years ending
on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding
Plan Year, or (b) in the case of the first Plan Year, the last day of
such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined
benefit plan, the Present Value of Accrued Benefit for a Participant
other than a Key Employee shall be as determined using the single
accrual method used for all plans of the Employer and Affiliated
Employers, or if no such single method exists, using a method which
results in benefits accruing not more rapidly than the slowest accrual
rate permitted under Code Section 411(b)(1)(C). The determination of the
Present Value of Accrued Benefit shall be determined as of the most
recent valuation date that falls within or ends with the 12-month period
ending on the Determination Date, except as provided in Code Section 416
and the Regulations thereunder for the first and second plan years of a
defined benefit plan.
However, any such determination must include present value of
accrued benefit attributable to any Plan distributions referred to in
Section 2.2(c)(4) above, any Employee contributions referred to in
Section 2.2(c)(5) above or any related or unrelated rollovers referred
to in Sections 2.2(c)(6) and 2.2(c)(7) above.
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(g) "Top Heavy Group" means an Aggregation Group in which, as of the
Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees under all
defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined for
all Participants.
(h) The Administrator shall determine whether this Plan is a Top
Heavy Plan on the Anniversary Date specified in the Adoption Agreement.
Such determination of the top heavy ratio shall be in accordance with
Code Section 416 and the Regulations thereunder.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the
Trustee and the Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure that the Plan is
being operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method,"
i.e., it shall determine whether the Plan has a short run need for
liquidity (e.g., to pay benefits) or whether liquidity is a long run
goal and investment growth (and stability of same) is a more current
need, or shall appoint a qualified person to do so. The Employer or its
delegate shall communicate such needs and goals to the Trustee, who
shall coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not, however,
constitute a directive to the Trustee as to investment of the Trust
Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of the Act.
(c) The Employer may, in its discretion, appoint an Investment
Manager to manage all or a designated portion of the assets of the Plan.
In such event, the Trustee shall follow the directive of the Investment
Manager in investing the assets of the Plan managed by the Investment
Manager.
(d) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person,
including, but not limited to, the Employees of the Employer, shall be eligible
to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer does
not appoint an Administrator, the Employer will function as the Administrator.
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2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the
Plan for the exclusive benefit of the Participants and their Beneficiaries,
subject to the specific terms of the Plan. The Administrator shall administer
the Plan in accordance with its terms and shall have the power and discretion to
construe the terms of the Plan and determine all questions arising in connection
with the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general
administration of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust
Fund;
(d) to maintain all necessary records for the administration of
the Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the terms
hereof;
(f) to determine the size and type of any Contract to be purchased
from any Insurer, and to designate the Insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be contributed
to the Trust Fund;
(h) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
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(i) to prepare and distribute to Employees a procedure for notifying
Participants and Beneficiaries of their rights to elect Joint and
Survivor Annuities and Pre-Retirement Survivor Annuities if required by
the Code and Regulations thereunder;
(j) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator,
may appoint counsel, specialists, advisers, and other persons as the
Administrator or the Trustee deems necessary or desirable in connection with the
administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall
supply full and timely information to the Administrator on all matters relating
to the Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless
paid by the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred. Any administration expense paid to the Trust
Fund as a reimbursement shall not be considered an Employer contribution.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
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Any Employee, former Employee, or Beneficiary of either, who has been
denied a benefit by a decision of the Administrator pursuant to Section 2.12
shall be entitled to request the Administrator to give further consideration to
his claim by filing with the Administrator a written request for a hearing. Such
request, together with a written statement of the reasons why the claimant
believes his claim should be allowed, shall be filed with the Administrator no
later than 60 days after receipt of the written notification provided for in
Section 2.12. The Administrator shall then conduct a hearing within the next 60
days, at which the claimant may be represented by an attorney or any other
representative of his choosing and expense and at which the claimant shall have
an opportunity to submit written and oral evidence and arguments in support of
his claim. At the hearing (or prior thereto upon 5 business days written notice
to the Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the Administrator which
are pertinent to the claim at issue and its disallowance. Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the party causing
the court reporter to attend the hearing. A final decision as to the allowance
of the claim shall be made by the Administrator within 60 days of receipt of the
appeal (unless there has been an extension of 60 days due to special
circumstances, provided the delay and the special circumstances occasioning it
are communicated to the claimant within the 60 day period). Such communication
shall be written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee shall be eligible to participate hereunder on the
date he has satisfied the requirements specified in the Adoption Agreement.
3.2 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee who has become eligible to be a Participant shall
become a Participant effective as of the day specified in the Adoption
Agreement.
In the event an Employee who has satisfied the Plan's eligibility
requirements and would otherwise have become a Participant shall go from a
classification of a noneligible Employee to an Eligible Employee, such Employee
shall become a Participant as of the date he becomes an Eligible Employee.
In the event an Employee who has satisfied the Plan's eligibility
requirements and would otherwise become a Participant shall go from a
classification of an Eligible Employee to a noneligible Employee and becomes
ineligible to participate and has not incurred a 1-Year Break in Service, such
Employee shall participate in the Plan as of the date he returns to an eligible
class of Employees. If such Employee does incur a 1-Year Break in Service,
eligibility will be determined under the Break in Service rules of the Plan.
3.3 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.4 TERMINATION OF ELIGIBILITY
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In the event a Participant shall go from a classification of an Eligible
Employee to an ineligible Employee, such Former Participant shall continue to
vest in his interest in the Plan for each Year of Service completed while a
noneligible Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan. Additionally, his
interest in the Plan shall continue to share in the earnings of the Trust Fund.
3.5 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary after the
application of Section 4.3(e), so that the omitted Employee receives a total
amount which the said Employee would have received had he not been omitted. Such
contribution shall be made regardless of whether or not it is deductible in
whole or in part in any taxable year under applicable provisions of the Code.
3.6 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture for the Plan Year in
which the discovery is made.
3.7 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year. For Standardized Plans, a Participant or an
Eligible Employee may not elect not to participate. Furthermore, the foregoing
election not to participate shall not be available with respect to partners in a
partnership.
3.8 CONTROL OF ENTITIES BY OWNER-EMPLOYEE
(a) If this Plan provides contributions or benefits for one or more
Owner-Employees who control both the business for which this Plan is
established and one or more other entities, this Plan and the plan
established for other trades or businesses must, when looked at as a
single Plan, satisfy Code Sections 401(a) and (d) for the Employees of
this and all other entities.
(b) If the Plan provides contributions or benefits for one or more
Owner-Employees who control one or more other trades or businesses, the
employees of the other trades or businesses must be included in a plan
which satisfies Code Sections 401(a) and (d) and which provides
contributions and benefits not less favorable than provided for
Owner-Employees under this Plan.
(c) If an individual is covered as an Owner-Employee under the plans
of two or more trades or businesses which are not controlled and the
individual controls a trade or business, then the benefits or
contributions of the employees under the plan of the trades or
businesses which are controlled must be as favorable as those provided
for him under the most favorable plan of the trade or business which is
not controlled.
(d) For purposes of the preceding paragraphs, an Owner-Employee, or
two or more Owner-Employees, will be considered to control an entity if
the Owner-Employee, or two or more Owner-Employees together:
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(1) own the entire interest in an unincorporated entity, or
(2) in the case of a partnership, own more than 50 percent of either
the capital interest or the profits interest in the partnership.
(e) For purposes of the preceding sentence, an Owner-Employee, or
two or more Owner-Employees shall be treated as owning any interest in a
partnership which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
(a) For a Money Purchase Plan -
(1) The Employer shall make contributions over such period of years
as the Employer may determine on the following basis. On behalf of
each Participant eligible to share in allocations, for each year of
his participation in this Plan, the Employer shall contribute the
amount specified in the Adoption Agreement. All contributions by the
Employer shall be made in cash or in such property as is acceptable
to the Trustee. The Employer shall be required to obtain a waiver
from the Internal Revenue Service for any Plan Year in which it is
unable to make the full required contribution to the Plan. In the
event a waiver is obtained, this Plan shall be deemed to be an
individually designed plan.
(2) For any Plan Year beginning prior to January 1, 1990, and if
elected in the non-standardized Adoption Agreement for any Plan Year
beginning on or after January 1, 1990, the Employer shall not
contribute on behalf of a Participant who performs less than a Year
of Service during any Plan Year, unless there is a Short Plan Year
or a contribution is required pursuant to 4.3(h).
(3) Notwithstanding the foregoing, the Employer's contribution for
any Fiscal Year shall not exceed the maximum amount allowable as a
deduction to the Employer under the provisions of Code Section 404.
However, to the extent necessary to provide the top heavy minimum
allocations, the Employer shall make a contribution even if it
exceeds the amount which is deductible under Code Section 404.
(b) For a Profit Sharing Plan -
(1) For each Plan Year, the Employer shall contribute to the Plan
such amount as specified by the Employer in the Adoption Agreement.
Notwithstanding the foregoing, however, the Employer's contribution
for any Fiscal Year shall not exceed the maximum amount allowable as
a deduction to the Employer under the provisions of Code Section
404. All contributions by the Employer shall be made in cash or in
such property as is acceptable to the Trustee.
(2) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution
even if it exceeds current or accumulated Net Profit or the amount
which is deductible under Code Section 404.
4.2 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
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The Employer shall generally pay to the Trustee its contribution to the
Plan for each Plan Year within the time prescribed by law, including extensions
of time, for the filing of the Employer's federal income tax return for the
Fiscal Year.
4.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of
each Anniversary Date, or other valuation date, all amounts allocated to
each such Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
(1) For a Money Purchase Plan:
(i)The Employer's Contribution shall be allocated to each
Participant's Combined Account in the manner set forth in
Section 4.1 herein and as specified in Section E2 of the
Adoption Agreement.
(2) For an Integrated Profit Sharing Plan:
(i)The Employer's contribution shall be allocated to each
Participant's Account, except as provided in Section 4.3(f), in
a dollar amount equal to 5.7% of the sum of each Participant's
total Compensation plus Excess Compensation. If the Employer
does not contribute such amount for all Participants, each
Participant will be allocated a share of the contribution in the
same proportion that his total Compensation plus his total
Excess Compensation for the Plan Year bears to the total
Compensation plus the total Excess Compensation of all
Participants for that year.
Regardless of the preceding, 4.3% shall be substituted for 5.7%
above if Excess Compensation is based on more than 20% and less than
or equal to 80% of the Taxable Wage Base. If Excess Compensation is
based on less than 100% and more than 80% of the Taxable Wage Base,
then 5.4% shall be substituted for 5.7% above.
(ii)The balance of the Employer's contribution over the amount
allocated above, if any, shall be allocated to each
Participant's Combined Account in the same proportion that his
total Compensation for the Year bears to the total Compensation
of all Participants for such year.
(iii) Except, however, for any Plan Year beginning prior to
January 1, 1990, and if elected in the non-standardized Adoption
Agreement for any Plan Year beginning on or after January 1,
1990, a Participant who performs less than a Year of Service
during any Plan Year shall not share in the Employer's
contribution for that year, unless there is a Short Plan Year or
a contribution is required pursuant to Section 4.3(h).
(3) For a Non-Integrated Profit Sharing Plan:
(i)The Employer's contribution shall be allocated to each
Participant's Account in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all Participants for such year.
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(ii)Except, however, for any Plan Year beginning prior to
January 1, 1990, and if elected in the non-standardized Adoption
Agreement for any Plan Year beginning on or after January 1,
1990, a Participant who performs less than a Year of Service
during any Plan Year shall not share in the Employer's
contribution for that year, unless there is a Short Plan Year or
a contribution is required pursuant to Section 4.3(h).
(c) As of each Anniversary Date or other valuation date, before
allocation of Employer contributions and Forfeitures, any earnings or
losses (net appreciation or net depreciation) of the Trust Fund shall be
allocated in the same proportion that each Participant's and Former
Participant's nonsegregated accounts bear to the total of all
Participants' and Former Participants' nonsegregated accounts as of such
date. If any nonsegregated account of a Participant has been distributed
prior to the Anniversary Date or other valuation date subsequent to a
Participant's termination of employment, no earnings or losses shall be
credited to such account.
Notwithstanding the above, with respect to contributions made to
the Plan after the previous Anniversary Date or allocation date, the
method specified in the Adoption Agreement shall be used.
(d) Participants' Accounts shall be debited for any insurance or
annuity premiums paid, if any, and credited with any dividends or
interest received on insurance contracts.
(e) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to
reinstate previously forfeited account balances of Former Participants,
if any, in accordance with Section 6.4(g)(2) or be used to satisfy any
contribution that may be required pursuant to Section 3.5 and/or 6.9.
The remaining Forfeitures, if any, shall be treated in accordance with
the Adoption Agreement. Provided, however, that in the event the
allocation of Forfeitures provided herein shall cause the "annual
addition" (as defined in Section 4.4) to any Participant's Account to
exceed the amount allowable by the Code, the excess shall be reallocated
in accordance with Section 4.5. Except, however, for any Plan Year
beginning prior to January 1, 1990, and if elected in the
non-standardized Adoption Agreement for any Plan Year beginning on or
after January 1, 1990, a Participant who performs less than a Year of
Service during any Plan Year shall not share in the Plan Forfeitures for
that year, unless there is a Short Plan Year or a contribution required
pursuant to Section 4.3(h).
(f) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions and Forfeitures allocated to the
Participant's Combined Account of each Non-Key Employee shall be equal
to at least three percent (3%) of such Non-Key Employee's "415
Compensation" (reduced by contributions and forfeitures, if any,
allocated to each Non-Key Employee in any defined contribution plan
included with this plan in a Required Aggregation Group). However, if
(i) the sum of the Employer's contributions and Forfeitures allocated to
the Participant's Combined Account of each Key Employee for such Top
Heavy Plan Year is less than three percent (3%) of each Key Employee's
"415 Compensation" and (ii) this Plan is not required to be included in
an Aggregation Group to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410, the sum of the Employer's
contributions and Forfeitures allocated to the Participant's Combined
Account of each Non-Key Employee shall be equal to the largest
percentage allocated to the Participant's Combined Account of any Key
Employee.
However, for each Non-Key Employee who is a Participant in a
paired Profit Sharing Plan or 401(k) Profit Sharing Plan and a paired
Money Purchase Plan, the minimum 3% allocation specified above shall be
provided in the Money Purchase Plan.
If this is an integrated Plan, then for any Top Heavy Plan Year
the Employer's contribution shall be allocated as follows:
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(1) An amount equal to 3% multiplied by each Participant's
Compensation for the Plan Year shall be allocated to each
Participant's Account. If the Employer does not contribute such
amount for all Participants, the amount shall be allocated to each
Participant's Account in the same proportion that his total
Compensation for the Plan Year bears to the total Compensation of
all Participants for such year.
(2) The balance of the Employer's contribution over the amount
allocated under subparagraph (1) hereof shall be allocated to each
Participant's Account in a dollar amount equal to 3% multiplied by a
Participant's Excess Compensation. If the Employer does not
contribute such amount for all Participants, each Participant will
be allocated a share of the contribution in the same proportion that
his Excess Compensation bears to the total Excess Compensation of
all Participants for that year.
(3) The balance of the Employer's contribution over the amount
allocated under subparagraph (2) hereof shall be allocated to each
Participant's Account in a dollar amount equal to 2.7% multiplied by
the sum of each Participant's total Compensation plus Excess
Compensation. If the Employer does not contribute such amount for
all Participants, each Participant will be allocated a share of the
contribution in the same proportion that his total Compensation plus
his total Excess Compensation for the Plan Year bears to the total
Compensation plus the total Excess Compensation of all Participants
for that year.
Regardless of the preceding, 1.3% shall be substituted for 2.7%
above if Excess Compensation is based on more than 20% and less than
or equal to 80% of the Taxable Wage Base. If Excess Compensation is
based on less than 100% and more than 80% of the Taxable Wage Base,
then 2.4% shall be substituted for 2.7% above.
(4) The balance of the Employer's contributions over the amount
allocated above, if any, shall be allocated to each Participant's
Account in the same proportion that his total Compensation for the
Plan Year bears to the total Compensation of all Participants for
such year.
For each Non-Key Employee who is a Participant in this Plan and
another non-paired defined contribution plan maintained by the Employer,
the minimum 3% allocation specified above shall be provided as specified
in F3 of the Adoption Agreement.
(g) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer's
contributions and Forfeitures allocated on behalf of such Key Employee
divided by the "415 Compensation" for such Key Employee.
(h) For any Top Heavy Plan Year, the minimum allocations set forth
in this Section shall be allocated to the Participant's Combined Account
of all Non-Key Employees who are Participants and who are employed by
the Employer on the last day of the Plan Year, including Non-Key
Employees who have (1) failed to complete a Year of Service; or (2)
declined to make mandatory contributions (if required) or, in the case
of a cash or deferred arrangement, elective contributions to the Plan.
(i) Notwithstanding anything herein to the contrary, in any Plan
Year in which the Employer maintains both this Plan and a defined
benefit pension plan included in a Required Aggregation Group which is
top heavy, the Employer shall not be required to provide a Non-Key
Employee with both the full separate minimum defined benefit plan
benefit and the full separate defined contribution plan allocations.
Therefore, if the Employer maintains both a Defined Benefit and a
Defined Contribution Plan that are a Top Heavy Group, the top heavy
minimum benefits shall be provided as follows:
(1) Applies if F1b of the Adoption Agreement is Selected -
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(i)The requirements of Section 2.1 shall apply except that each
Non-Key Employee who is a Participant in the Profit Sharing Plan
or Money Purchase Plan and who is also a Participant in the
Defined Benefit Plan shall receive a minimum allocation of five
percent (5%) of such Participant's "415 Compensation" from the
applicable Defined Contribution Plan(s).
(ii)For each Non-Key Employee who is a Participant only in the
Defined Benefit Plan the Employer will provide a minimum
non-integrated benefit equal to 2% of his highest five
consecutive year average "415 Compensation" for each Year of
Service while a Participant in the Plan, in which the Plan is
top heavy, not to exceed ten.
(iii) For each Non-Key Employee who is a Participant only in
this Defined Contribution Plan, the Employer shall provide a
contribution equal to 3% of his "415 Compensation."
(2) Applies if F1c of the Adoption Agreement is Selected -
(i)The minimum allocation specified in Section 4.3(i)(1)(i)
shall be 7 1/2% if the Employer elects in the Adoption Agreement
for years in which the Plan is Top Heavy, but not Super Top
Heavy.
(ii)The minimum benefit specified in Section 4.3(i)(1)(ii) shall
be 3% if the Employer elects in the Adoption Agreement for years
in which the Plan is Top Heavy, but not Super Top Heavy.
(iii) The minimum allocation specified in Section 4.3(i)(1)(iii)
shall be 4% if the Employer elects in the Adoption Agreement for
years in which the Plan is Top Heavy, but not Super Top Heavy.
(j) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000 (unless adjusted in such manner as permitted under
Code Section 415(d)). However, for Plan Years beginning prior to January
1, 1989, the $200,000 limit shall apply only for Top Heavy Plan Years
and shall not be adjusted.
(k) Notwithstanding anything herein to the contrary, any Participant
who terminated employment during the Plan Year for reasons other than
death, Total and Permanent Disability, or retirement shall or shall not
share in the allocations of the Employer's Contributions and Forfeitures
as provided in the Adoption Agreement. Notwithstanding the foregoing,
for Plan Years beginning after 1989, if this is a standardized Plan, any
such terminated Participant shall share in the allocations as provided
in this Section provided such Participant completed more than 500 Hours
of Service.
(l) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability, or
retirement shall share in the allocations as provided in this Section
regardless of whether they completed a Year of Service during the Plan
Year.
(m) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his employer derived account balance in
the Plan attributable to post-break service.
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(n) Notwithstanding any election in the Adoption Agreement to the
contrary, if this is a non-standardized Plan that would otherwise fail
to meet the requirements of Code Sections 401(a)(26), 410(b)(1), or
410(b)(2)(A)(i) and the Regulations thereunder because Employer
Contributions have not been allocated to a sufficient number or
percentage of Participants for a Plan Year, then the following rules
shall apply:
(1) The group of Participants eligible to share in the Employer's
contribution and Forfeitures for the Plan Year shall be expanded to
include the minimum number of Participants who would not otherwise
be eligible as are necessary to satisfy the applicable test
specified above. The specific participants who shall become eligible
under the terms of this paragraph shall be those who are actively
employed on the last day of the Plan Year and, when compared to
similarly situated Participants, have completed the greatest number
of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable test
is still not satisfied, then the group of Participants eligible to
share in the Employer's contribution and Forfeitures for the Plan
Year shall be further expanded to include the minimum number of
Participants who are not actively employed on the last day of the
Plan Year as are necessary to satisfy the applicable test. The
specific Participants who shall become eligible to share shall be
those Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated to
satisfy these requirements. In such event, the Employer shall make an
additional contribution equal to the amount such affected Participants
would have received had they been included in the allocations, even if
it exceeds the amount which would be deductible under Code Section 404.
Any adjustment to the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the last day of the Plan
Year.
4.4 MAXIMUM ANNUAL ADDITIONS
(a)(1) If the Participant does not participate in, and has never
participated in another qualified plan maintained by the Employer, or a
welfare benefit fund (as defined in Code Section 419(e)), maintained by
the Employer, or an individual medical account (as defined in Code
Section 415(l)(2)) maintained by the Employer, which provides Annual
Additions, the amount of Annual Additions which may be credited to the
Participant's accounts for any Limitation Year shall not exceed the
lesser of the Maximum Permissible Amount or any other limitation
contained in this Plan. If the Employer contribution that would
otherwise be contributed or allocated to the Participant's accounts
would cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, the amount contributed or allocated will be
reduced so that the Annual Additions for the Limitation Year will equal
the Maximum Permissible Amount.
(2) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation
Year, uniformly determined for all Participants similarly situated.
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation
Year shall be determined on the basis of the Participant's actual
compensation for such Limitation Year.
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(4) If there is an excess amount pursuant to Section 4.4(a)(2) or
Section 4.5, the excess will be disposed of in one of the following
manners, as uniformly determined by the Plan Administrator for all
Participants similarly situated:
(i)Any Deferred Compensation or nondeductible Voluntary Employee
Contributions, to the extent they would reduce the Excess
Amount, will be distributed to the Participant;
(ii)If, after the application of subparagraph (i), an Excess
Amount still exists, and the Participant is covered by the Plan
at the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
contributions (including any allocation of Forfeitures) for such
Participant in the next Limitation Year, and each succeeding
Limitation Year if necessary;
(iii) If, after the application of subparagraph (i), an Excess
Amount still exists, and the Participant is not covered by the
Plan at the end of a Limitation Year, the Excess Amount will be
held unallocated in a suspense account. The suspense account
will be applied to reduce future Employer contributions
(including allocation of any Forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding
Limitation Year if necessary;
(iv)If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section, it will not
participate in the allocation of investment gains and losses. If
a suspense account is in existence at any time during a
particular limitation year, all amounts in the suspense account
must be allocated and reallocated to participants' accounts
before any employer contributions or any employee contributions
may be made to the plan for that limitation year. Excess amounts
may not be distributed to participants or former participants.
(b)(1) This subsection applies if, in addition to this Plan, the
Participant is covered under another qualified Regional Prototype
defined contribution plan maintained by the Employer, or a welfare
benefit fund (as defined in Code Section 419(e)) maintained by the
Employer, or an individual medical account (as defined in Code Section
415(l)(2)) maintained by the Employer, which provides Annual Additions,
during any Limitation Year. The Annual Additions which may be credited
to a Participant's accounts under this Plan for any such Limitation Year
shall not exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant's accounts under the other plans and
welfare benefit funds for the same Limitation Year. If the Annual
Additions with respect to the Participant under other defined
contribution plans and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the Employer
contribution that would otherwise be contributed or allocated to the
Participant's accounts under this Plan would cause the Annual Additions
for the Limitation Year to exceed this limitation, the amount
contributed or allocated will be reduced so that the Annual Additions
under all such plans and welfare benefit funds for the Limitation Year
will equal the Maximum Permissible Amount. If the Annual Additions with
respect to the Participant under such other defined contribution plans
and welfare benefit funds in the aggregate are equal to or greater than
the Maximum Permissible Amount, no amount will be contributed or
allocated to the Participant's account under this Plan for the
Limitation Year.
(2) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in
Section 4.4(a)(2).
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the Limitation
Year will be determined on the basis of the Participant's actual
Compensation for the Limitation Year.
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(4) If, pursuant to Section 4.4(b)(2) or Section 4.5, a Participant's
Annual Additions under this Plan and such other plans would result in an
Excess Amount for a Limitation Year, the Excess Amount will be deemed to
consist of the Annual Additions last allocated, except that Annual
Additions attributable to a welfare benefit fund or individual medical
account will be deemed to have been allocated first regardless of the
actual allocation date.
(5) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date
of another plan, the Excess Amount attributed to this Plan will be
the product of:
(i)the total Excess Amount allocated as of such date, times
(ii)the ratio of (1) the Annual Additions allocated to the
Participant for the Limitation Year as of such date under this
Plan to (2) the total Annual Additions allocated to the
Participant for the Limitation Year as of such date under this
and all the other qualified defined contribution plans.
(6) Any Excess Amount attributed to this Plan will be disposed in
the manner described in Section 4.4(a)(4).
(c) If the Participant is covered under another qualified defined
contribution plan maintained by the Employer which is not a Regional
Prototype Plan, Annual Additions which may be credited to the
Participant's account under this Plan for any Limitation Year will be
limited in accordance with Section 4.4(b), unless the Employer provides
other limitations in the Adoption Agreement.
(d) If the Employer maintains, or at any time maintained, a
qualified defined benefit plan covering any Participant in this Plan the
sum of the Participant's Defined Benefit Plan Fraction and Defined
Contribution Plan Fraction will not exceed 1.0 in any Limitation Year.
The Annual Additions which may be credited to the Participant's account
under this Plan for any Limitation Year will be limited in accordance
with the Limitation on Allocations Section of the Adoption Agreement.
(e) For purposes of applying the limitations of Code Section 415,
the transfer of funds from one qualified plan to another is not an
"annual addition." In addition, the following are not Employee
contributions for the purposes of Section 4.4(f)(1)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
from the Plan; (3) repayments of distributions received by an Employee
pursuant to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section
411(a)(3)(D) (mandatory contributions); and (5) Employee contributions
to a simplified employee pension excludable from gross income under Code
Section 408(k)(6).
(f) For purposes of this Section, the following terms shall be
defined as follows:
(1) Annual Additions means the sum credited to a Participant's
accounts for any Limitation Year of (1) Employer contributions, (2)
effective with respect to "limitation years" beginning after
December 31, 1986, Employee contributions, (3) forfeitures, (4)
amounts allocated, after March 31, 1984, to an individual medical
account, as defined in Code Section 415(l)(2), which is part of a
pension or annuity plan maintained by the Employer and (5) amounts
derived from contributions paid or accrued after December 31, 1985,
in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account
of a key employee (as defined in Code Section 419A(d)(3)) under a
welfare benefit fund (as defined in Code Section 419(e)) maintained
by the Employer. Except, however, the "415 Compensation" percentage
limitation referred to in paragraph (a)(2) above shall not apply to:
(1) any contribution for medical benefits (within the meaning of
Code Section 419A(f)(2)) after separation from
27
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service which is otherwise treated as an "annual addition," or (2)
any amount otherwise treated as an "annual addition" under Code
Section 415(l)(1). Notwithstanding the foregoing, for "limitation
years" beginning prior to January 1, 1987, only that portion of
Employee contributions equal to the lesser of Employee
contributions in excess of six percent (6%) of "415 Compensation"
or one-half of Employee contributions shall be considered an
"annual addition."
For this purpose, any Excess Amount applied under Sections 4.4(a)(4)
and 4.4(b)(6) in the Limitation Year to reduce Employer
contributions shall be considered Annual Additions for such
Limitation Year.
(2) Compensation means a Participant's Compensation as elected in
the Adoption Agreement. However, regardless of any selection made in
the Adoption Agreement, "415 Compensation" shall exclude
compensation which is not currently includible in the Participant's
gross income by reason of the application of Code Sections 125,
402(a)(8), 402(h)(1)(B), or 403(b).
For limitation years beginning after December 31, 1991, for
purposes of applying the limitations of this article, compensation
for a limitation year is the compensation actually paid or made
available during such limitation year.
Notwithstanding the preceding sentence, compensation for a
participant in a defined contribution plan who is permanently and
totally disabled (as defined in section 22(e)(3) of the Internal
Revenue Code) is the compensation such participant would have
received for the limitation year if the participant had been paid at
the rate of compensation paid immediately before becoming
permanently and totally disabled; such imputed compensation for the
disabled participant may be taken into account only if the
participant is not a Highly Compensated Employee and contributions
made on behalf of such participant are nonforfeitable when made.
(3) Defined Benefit Fraction means a fraction, the numerator of
which is the sum of the Participant's Projected Annual Benefits
under all the defined benefit plans (whether or not terminated)
maintained by the Employer, and the denominator of which is the
lesser of 125 percent of the dollar limitation determined for the
Limitation Year under Code Sections 415(b) and (d) or 140 percent of
his Highest Average Compensation including any adjustments under
Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as
of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than 125 percent of
the sum of the annual benefits under such plans which the
Participant had accrued as of the end of the close of the last
Limitation Year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the plan after May 5, 1986.
The preceding sentence applies only if the defined benefit plans
individually and in the aggregate satisfied the requirements of Code
Section 415 for all Limitation Years beginning before January 1,
1987.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation is
being made pursuant to the Employer's election in F1 of the Adoption
Agreement. However, for any Plan Year in which this Plan is a Super
Top Heavy Plan, 100 shall be substituted for 125 in any event.
(4) Defined Contribution Dollar Limitation means $30,000, or, if
greater, one-fourth of the defined benefit dollar limitation set
forth in Code Section 415(b)(1) as in effect for the Limitation
Year.
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(5) Defined Contribution Fraction means a fraction, the numerator of
which is the sum of the Annual Additions to the Participant's
account under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all prior
Limitation Years, (including the Annual Additions attributable to
the Participant's nondeductible voluntary employee contributions to
any defined benefit plans, whether or not terminated, maintained by
the Employer and the annual additions attributable to all welfare
benefit funds, as defined in Code Section 419(e), and individual
medical accounts, as defined in Code Section 415(l)(2), maintained
by the Employer), and the denominator of which is the sum of the
maximum aggregate amounts for the current and all prior Limitation
Years of Service with the Employer (regardless of whether a defined
contribution plan was maintained by the Employer). The maximum
aggregate amount in any Limitation Year is the lesser of 125 percent
of the Defined Contribution Dollar Limitation or 35 percent of the
Participant's Compensation for such year. For Limitation Years
beginning prior to January 1, 1987, the "annual addition" shall not
be recomputed to treat all Employee contributions as an Annual
Addition.
If the Employee was a Participant as of the end of the first day of
the first Limitation Year beginning after December 31, 1986, in one
or more defined contribution plans maintained by the Employer which
were in existence on May 5, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the Defined Benefit
Fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product of (1) the
excess of the sum of the fractions over 1.0 times (2) the
denominator of this fraction, will be permanently subtracted from
the numerator of this fraction. The adjustment is calculated using
the fractions as they would be computed as of the end of the last
Limitation Year beginning before January 1, 1987, and disregarding
any changes in the terms and conditions of the plan made after May
5, 1986, but using the Code Section 415 limitation applicable to the
first Limitation Year beginning on or after January 1, 1987.
Notwithstanding the foregoing, for any Top Heavy Plan Year, 100
shall be substituted for 125 unless the extra minimum allocation is
being made pursuant to the Employer's election in F1 of the Adoption
Agreement. However, for any Plan Year in which this Plan is a Super
Top Heavy Plan, 100 shall be substituted for 125 in any event.
(6) Employer means the Employer that adopts this Plan and all
Affiliated Employers, except that for purposes of this Section,
Affiliated Employers shall be determined pursuant to the
modification made by Code Section 415(h).
(7) Excess Amount means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(8) Highest Average Compensation means the average Compensation for
the three consecutive Years of Service with the Employer that
produces the highest average. A Year of Service with the Employer is
the 12 consecutive month period defined in Section E1 of the
Adoption Agreement which is used to determine Compensation under the
Plan.
(9) Limitation Year means the Compensation Year (a 12 consecutive
month period) as elected by the Employer in the Adoption Agreement.
All qualified plans maintained by the Employer must use the same
Limitation Year. If the Limitation Year is amended to a different 12
consecutive month period, the new Limitation Year must begin on a
date within the Limitation Year in which the amendment is made.
(10) Maximum Permissible Amount means the maximum Annual Addition
that may be contributed or allocated to a Participant's account
under the plan for any Limitation Year, which shall not exceed the
lesser of:
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(i)the Defined Contribution Dollar Limitation, or
(ii)25 percent of the Participant's Compensation for the
Limitation Year.
The Compensation Limitation referred to in (ii) shall not apply
to any contribution for medical benefits (within the meaning of
Code Sections 401(h) or 419A(f)(2)) which is otherwise treated
as an annual addition under Code Sections 415(l)(1) or
419A(d)(2).
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different 12 consecutive month
period, the Maximum Permissible Amount will not exceed the Defined
Contribution Dollar Contribution multiplied by the
following fraction:
number of months in the short Limitation Year
12
(11) Projected Annual Benefit means the annual retirement benefit
(adjusted to an actuarially equivalent straight life annuity if such
benefit is expressed in a form other than a straight life annuity or
qualified Joint and Survivor Annuity) to which the Participant would
be entitled under the terms of the plan assuming:
(i)the Participant will continue employment until Normal
Retirement Age (or current age, if later), and
(ii)the Participant's Compensation for the current Limitation
Year and all other relevant factors used to determine benefits
under the Plan will remain constant for all future Limitation
Years.
(g) Regional Prototype Plan means a plan the form of which has been
the subject of a favorable notification letter from the Internal Revenue
Service.
(h) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
4.5 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's annual Compensation, a reasonable
error in determining the amount of elective deferrals (within the
meaning of Code Section 402(g)(3)) that may be made with respect to any
Participant under the limits of Section 4.4, or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable, the
"annual additions" under this Plan would cause the maximum provided in
Section 4.4 to be exceeded, the Administrator shall treat the excess in
accordance with Section 4.4(a)(4).
4.6 TRANSFERS FROM QUALIFIED PLANS
(a) If specified in the Adoption Agreement and with the consent of
the Administrator, amounts may be transferred from other qualified
plans, provided that the trust from which such funds are transferred
permits the transfer to be made and the transfer will not jeopardize the
tax exempt status of the Plan or create adverse tax consequences for the
Employer. The amounts transferred shall be set up
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in a separate account herein referred to as a "Participant's Rollover
Account." Such account shall be fully Vested at all times and shall
not be subject to forfeiture for any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be withdrawn
by, or distributed to the Participant, in whole or in part, except as
provided in Paragraphs (c) and (d) of this Section.
(c) Amounts attributable to elective contributions (as defined in
Regulation 1.401(k)-1(g)(4)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d).
(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Participant's Rollover Account shall be
used to provide additional benefits to the Participant or his
Beneficiary. Any distributions of amounts held in a Participant's
Rollover Account shall be made in a manner which is consistent with and
satisfies the provisions of Section 6.5, including, but not limited to,
all notice and consent requirements of Code Sections 411(a)(11) and 417
and the Regulations thereunder. Furthermore, such amounts shall be
considered as part of a Participant's benefit in determining whether an
involuntary cash-out of benefits without Participant consent may be
made.
(e) The Administrator may direct that employee transfers made after
a valuation date be segregated into a separate account for each
Participant until such time as the allocations pursuant to this Plan
have been made, at which time they may remain segregated or be invested
as part of the general Trust Fund, to be determined by the
Administrator.
(f) For purposes of this Section, the term "qualified plan" shall
mean any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts
transferred to this Plan directly from another qualified plan; (ii)
lump-sum distributions received by an Employee from another qualified
plan which are eligible for tax free rollover to a qualified plan and
which are transferred by the Employee to this Plan within sixty (60)
days following his receipt thereof; (iii) amounts transferred to this
Plan from a conduit individual retirement account provided that the
conduit individual retirement account has no assets other than assets
which (A) were previously distributed to the Employee by another
qualified plan as a lump-sum distribution (B) were eligible for tax-free
rollover to a qualified plan and (C) were deposited in such conduit
individual retirement account within sixty (60) days of receipt thereof
and other than earnings on said assets; and (iv) amounts distributed to
the Employee from a conduit individual retirement account meeting the
requirements of clause (iii) above, and transferred by the Employee to
this Plan within sixty (60) days of his receipt thereof from such
conduit individual retirement account.
(g) Prior to accepting any transfers to which this Section applies,
the Administrator may require the Employee to establish that the amounts
to be transferred to this Plan meet the requirements of this Section and
may also require the Employee to provide an opinion of counsel
satisfactory to the Employer that the amounts to be transferred meet the
requirements of this Section.
(h) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it will
not result in the elimination or reduction of any "Section 411(d)(6)
protected benefit" as described in Section 8.1.
4.7 VOLUNTARY CONTRIBUTIONS
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(a) If this is an amendment to a Plan that had previously allowed
voluntary Employee contributions, then, except as provided in 4.7(b)
below, this Plan will not accept voluntary Employee contributions for
Plan Years beginning after the Plan Year in which this Plan is adopted
by the Employer.
(b) For 401(k) Plans, if elected in the Adoption Agreement, each
Participant may, at the discretion of the Administrator in a
nondiscriminatory manner, elect to voluntarily contribute a portion of
his compensation earned while a Participant under this Plan. Such
contributions shall be paid to the Trustee within a reasonable period of
time but in no event later than 90 days after the receipt of the
contribution.
(c) The balance in each Participant's Voluntary Contribution Account
shall be fully Vested at all times and shall not be subject to
Forfeiture for any reason.
(d) A Participant may elect to withdraw his voluntary contributions
from his Voluntary Contribution Account and the actual earnings thereon
in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 411(a)(11) and 417 and the Regulations
thereunder. If the Administrator maintains sub-accounts with respect to
voluntary contributions (and earnings thereon) which were made on or
before a specified date, a Participant shall be permitted to designate
which sub-account shall be the source for his withdrawal. No Forfeitures
shall occur solely as a result of an Employee's withdrawal of Employee
contributions.
In the event such a withdrawal is made, or in the event a
Participant has received a hardship distribution pursuant to Regulation
1.401(k)-1(d)(2)(iii)(B) from any plan maintained by the Employer, then
such Participant shall be barred from making any voluntary contributions
for a period of twelve (12) months after receipt of the withdrawal or
distribution.
(e) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Voluntary Contribution Account shall be
used to provide additional benefits to the Participant or his
Beneficiary.
(f) The Administrator may direct that voluntary contributions made
after a valuation date be segregated into a separate account until such
time as the allocations pursuant to this Plan have been made, at which
time they may remain segregated or be invested as part of the general
Trust Fund, to be determined by the Administrator.
4.8 DIRECTED INVESTMENT ACCOUNT
(a) If elected in the Adoption Agreement, all Participants may
direct the Trustee as to the investment of all or a portion of any one
or more of their individual account balances. Participants may direct
the Trustee in writing to invest their account in specific assets as
permitted by the Administrator provided such investments are in
accordance with the Department of Labor regulations and are permitted by
the Plan. That portion of the account of any Participant so directing
will thereupon be considered a Directed Investment Account.
(b) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and their Directed Investment Account
shall be charged and credited as the case may be to each account. The
Directed Investment Account shall not share in Trust Fund Earnings, but
it shall be charged or credited as appropriate with the net earnings,
gains, losses and expenses as well as any appreciation or depreciation
in market value during each Plan Year attributable to such account.
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<PAGE>
(c) The Administrator shall establish a procedure, to be applied in
a uniform and nondiscriminatory manner, setting forth the permissible
investment options under this Section, how often changes between
investments may be made, and any other limitations that the
Administrator shall impose on a Participant's right to direct
investments.
4.9 QUALIFIED VOLUNTARY EMPLOYEE CONTRIBUTIONS
(a) If this is an amendment to a Plan that previously permitted
deductible voluntary contributions, then each Participant who made a
"Qualified Voluntary Employee Contribution" within the meaning of Code
Section 219(e)(2) as it existed prior to the enactment of the Tax Reform
Act of 1986, shall have his contribution held in a separate Qualified
Voluntary Employee Contribution Account which shall be fully Vested at
all times. Such contributions, however, shall not be permitted if they
are attributable to taxable years beginning after December 31, 1986.
(b) A Participant may, upon written request delivered to the
Administrator, make withdrawals from his Qualified Voluntary Employee
Contribution Account. Any distribution shall be made in a manner which
is consistent with and satisfies the provisions of Section 6.5,
including, but not limited to, all notice and consent requirements of
Code Sections 411(a)(11) and 417 and the Regulations thereunder.
(c) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits,
the fair market value of the Qualified Voluntary Employee Contribution
Account shall be used to provide additional benefits to the Participant
or his Beneficiary.
(d) Unless the Administrator directs Qualified Voluntary Employee
Contributions made pursuant to this Section be segregated into a
separate account for each Participant, they shall be invested as part of
the general Trust Fund and share in earnings and losses.
4.10 ACTUAL CONTRIBUTION PERCENTAGE TESTS
In the event this Plan previously provided for voluntary or mandatory
Employee contributions, then, with respect to Plan Years beginning after
December 31, 1986, such contributions must satisfy the provisions of Code
Section 401(m) and the Regulations thereunder.
4.11 INTEGRATION IN MORE THAN ONE PLAN
If the Employer and/or an Affiliated Employer maintain qualified
retirement plans integrated with Social Security such that any Participant in
this Plan is covered under more than one of such plans, then such plans will be
considered to be one plan and will be considered to be integrated if the extent
of the integration of all such plans does not exceed 100%. For purposes of the
preceding sentence, the extent of integration of a plan is the ratio, expressed
as a percentage, which the actual benefits, benefit rate, offset rate, or
employer contribution rate, whatever is applicable under the Plan bears to the
limitation applicable to such Plan. If the Employer maintains two or more
standardized paired plans, only one plan may be integrated with Social Security.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date," to determine the net worth of the assets comprising the
Trust Fund as it exists on the "valuation date." In determining such net worth,
the Trustee shall
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value the assets comprising the Trust Fund at their fair market value as of the
"valuation date" and shall deduct all expenses for which the Trustee has not yet
obtained reimbursement from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust
Fund which are listed on a registered stock exchange, the Administrator shall
direct the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date." If such
securities were not traded on the "valuation date," or if the exchange on which
they are traded was not open for business on the "valuation date," then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date." Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date," which bid price shall be obtained from a registered broker or an
investment banker. In determining the fair market value of assets other than
securities for which trading or bid prices can be obtained, the Trustee may
appraise such assets itself, or in its discretion, employ one or more appraisers
for that purpose and rely on the values established by such appraiser or
appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on or after his Normal Retirement Date or Early
Retirement Date. Upon such Normal Retirement Date or Early Retirement Date, all
amounts credited to such Participant's Combined Account shall become
distributable. However, a Participant may postpone the termination of his
employment with the Employer to a later date, in which event the participation
of such Participant in the Plan, including the right to receive allocations
pursuant to Section 4.3, shall continue until his Late Retirement Date. Upon a
Participant's Retirement Date, or as soon thereafter as is practicable, the
Administrator shall direct the distribution of all amounts credited to such
Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct, in accordance with the provisions of
Sections 6.6 and 6.7, the distribution of the deceased Participant's
accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct, in accordance with the provisions of Sections 6.6 and 6.7, the
distribution of any remaining amounts credited to the accounts of such
deceased Former Participant to such Former Participant's Beneficiary.
(c) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value
of the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) Unless otherwise elected in the manner prescribed in Section
6.6, the Beneficiary of the Pre-Retirement Survivor Annuity shall be the
Participant's spouse. Except, however, the Participant may designate a
Beneficiary other than his spouse for the Pre-Retirement Survivor
Annuity if:
(1) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in Section
6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary, or
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(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic relations
order" as defined in Code Section 414(p) which provides otherwise),
or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on
a form satisfactory to the Administrator. A Participant may at any time
revoke his designation of a Beneficiary or change his Beneficiary by
filing written notice of such revocation or change with the
Administrator. However, the Participant's spouse must again consent in
writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. The Participant may, at any time, designate a
Beneficiary for death benefits payable under the Plan that are in excess
of the Pre-Retirement Survivor Annuity. In the event no valid
designation of Beneficiary exists at the time of the Participant's
death, the death benefit shall be payable to his estate.
(e) If the Plan provides an insured death benefit and a Participant
dies before any insurance coverage to which he is entitled under the
Plan is effected, his death benefit from such insurance coverage shall
be limited to the standard rated premium which was or should have been
used for such purpose.
(f) In the event of any conflict between the terms of this Plan and
the terms of any Contract issued hereunder, the Plan provisions shall
control.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Administrator, in
accordance with the provisions of Sections 6.5 and 6.7, shall direct the
distribution to such Participant of all amounts credited to such Participant's
Combined Account as though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date, or other valuation date,
coinciding with or subsequent to the termination of a Participant's
employment for any reason other than retirement, death, or Total and
Permanent Disability, the Administrator may direct that the amount of
the Vested portion of such Terminated Participant's Combined Account be
segregated and invested separately. In the event the Vested portion of a
Participant's Combined Account is not segregated, the amount shall
remain in a separate account for the Terminated Participant and share in
allocations pursuant to Section 4.3 until such time as a distribution is
made to the Terminated Participant. The amount of the portion of the
Participant's Combined Account which is not Vested may be credited to a
separate account (which will always share in gains and losses of the
Trust Fund) and at such time as the amount becomes a Forfeiture shall be
treated in accordance with the provisions of the Plan regarding
Forfeitures.
Regardless of whether distributions in kind are permitted, in
the event that the amount of the Vested portion of the Terminated
Participant's Combined Account equals or exceeds the fair market value
of any insurance Contracts, the Trustee, when so directed by the
Administrator and agreed to by the Terminated Participant, shall assign,
transfer, and set over to such Terminated Participant all Contracts on
his life in such form or with such endorsements, so that the settlement
options and forms
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of payment are consistent with the provisions of Section 6.5. In the
event that the Terminated Participant's Vested portion does not at
least equal the fair market value of the Contracts, if any, the
Terminated Participant may pay over to the Trustee the sum needed to
make the distribution equal to the value of the Contracts being
assigned or transferred, or the Trustee, pursuant to the Participant's
election, may borrow the cash value of the Contracts from the Insurer
so that the value of the Contracts is equal to the Vested portion of
the Terminated Participant's Combined Account and then assign the
Contracts to the Terminated Participant.
Distribution of the funds due to a Terminated Participant shall
be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of
the Employer (upon the Participant's death, Total and Permanent
Disability, Early or Normal Retirement). However, at the election of the
Participant, the Administrator shall direct that the entire Vested
portion of the Terminated Participant's Combined Account to be payable
to such Terminated Participant provided the conditions, if any, set
forth in the Adoption Agreement have been satisfied. Any distribution
under this paragraph shall be made in a manner which is consistent with
and satisfies the provisions of Section 6.5, including but not limited
to, all notice and consent requirements of Code Sections 411(a)(11) and
417 and the Regulations thereunder.
Notwithstanding the above, if the value of a Terminated
Participant's Vested benefit derived from Employer and Employee
contributions does not exceed, and at the time of any prior
distribution, has never exceeded $3,500, the Administrator shall direct
that the entire Vested benefit be paid to such Participant in a single
lump-sum without regard to the consent of the Participant or the
Participant's spouse. A Participant's Vested benefit shall not include
Qualified Voluntary Employee Contributions within the meaning of Code
Section 72(o)(5)(B) for Plan Years beginning prior to January 1, 1989.
(b) The Vested portion of any Participant's Account shall be a
percentage of such Participant's Account determined on the basis of the
Participant's number of Years of Service according to the vesting
schedule specified in the Adoption Agreement.
(c) For any Top Heavy Plan Year, one of the minimum top heavy
vesting schedules as elected by the Employer in the Adoption Agreement
will automatically apply to the Plan. The minimum top heavy vesting
schedule applies to all benefits within the meaning of Code Section
411(a)(7) except those attributable to Employee contributions, including
benefits accrued before the effective date of Code Section 416 and
benefits accrued before the Plan became top heavy. Further, no decrease
in a Participant's Vested percentage may occur in the event the Plan's
status as top heavy changes for any Plan Year. However, this Section
does not apply to the account balances of any Employee who does not have
an Hour of Service after the Plan has initially become top heavy and the
Vested percentage of such Employee's Participant's Account shall be
determined without regard to this Section 6.4(c).
If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall continue to use the vesting schedule
in effect while the Plan was a Top Heavy Plan for each Employee who had
an Hour of Service during a Plan Year when the Plan was Top Heavy.
(d) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(e) If this is an amended or restated Plan, then notwithstanding the
vesting schedule specified in the Adoption Agreement, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption
date of this amendment and restatement. The computation of a
Participant's nonforfeitable percentage of his interest in the Plan
shall
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not be reduced as the result of any direct or indirect amendment
to this Article, or due to changes in the Plan's status as a Top Heavy
Plan.
(f) If the Plan's vesting schedule is amended, or if the Plan is
amended in any way that directly or indirectly affects the computation
of the Participant's nonforfeitable percentage or if the Plan is deemed
amended by an automatic change to a top heavy vesting schedule, then
each Participant with at least 3 Years of Service as of the expiration
date of the election period may elect to have his nonforfeitable
percentage computed under the Plan without regard to such amendment or
change. Notwithstanding the foregoing, for Plan Years beginning before
January 1, 1989, or with respect to Employees who fail to complete at
least one (1) Hour of Service in a Plan Year beginning after December
31, 1988, five (5) shall be substituted for three (3) in the preceding
sentence. If a Participant fails to make such election, then such
Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of the
amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(g)(1) If any Former Participant shall be reemployed by the Employer
before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had
not occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such
Former Participant had received a distribution of his entire Vested
interest prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to him
before the earlier of five (5) years after the first date on which
the Participant is subsequently reemployed by the Employer or the
close of the first period of 5 consecutive 1-Year Breaks in Service
commencing after the distribution. If a distribution occurs for any
reason other than a separation from service, the time for repayment
may not end earlier than five (5) years after the date of
separation. In the event the Former Participant does repay the full
amount distributed to him, the undistributed portion of the
Participant's Account must be restored in full, unadjusted by any
gains or losses occurring subsequent to the Anniversary Date or
other valuation date preceding his termination. If an employee
receives a distribution pursuant to this section and the employee
resumes employment covered under this plan, the employee's
employer-derived account balance will be restored to the amount on
the date of distribution if the employee repays to the plan the full
amount of the distribution attributable to employer contributions
before the earlier of 5 years after the first date on which the
participant is subsequently re-employed by the employer, or the date
the participant incurs 5 consecutive 1-year breaks in service
following the date of the distribution. If a non-Vested Former
Participant was deemed to have received a distribution and such
Former Participant is reemployed by the Employer before five (5)
consecutive 1-Year Breaks in Service, then such Participant will be
deemed to have repaid the deemed distribution as of the date of
reemployment.
(3) If any Former Participant is reemployed after a 1-Year Break in
Service has occurred, Years of Service shall include Years of
Service prior to his 1-Year Break in Service subject to the
following rules:
(i)Any Former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting from
Employer contributions shall lose credits if his consecutive
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1-Year Breaks in Service equal or exceed the greater of (A) five
(5) or (B) the aggregate number of his pre-break Years of
Service;
(ii)After five (5) consecutive 1-Year Breaks in Service, a
Former Participant's Vested Account balance attributable to
pre-break service shall not be increased as a result of
post-break service;
(iii) A Former Participant who is reemployed and who has not had
his Years of Service before a 1-Year Break in Service
disregarded pursuant to (i) above, shall participate in the Plan
as of his date of reemployment;
(iv)If a Former Participant completes a Year of Service (a
1-Year Break in Service previously occurred, but employment had
not terminated), he shall participate in the Plan retroactively
from the first day of the Plan Year during which he completes
one (1) Year of Service.
(h) In determining Years of Service for purposes of vesting under
the Plan, Years of Service shall be excluded as specified in the
Adoption Agreement.
6.5 DISTRIBUTION OF BENEFITS
(a)(1) Unless otherwise elected as provided below, a Participant who
is married on the "annuity starting date" and who does not die before
the "annuity starting date" shall receive the value of all of his
benefits in the form of a Joint and Survivor Annuity. The Joint and
Survivor Annuity is an annuity that commences immediately and shall be
equal in value to a single life annuity. Such joint and survivor
benefits following the Participant's death shall continue to the spouse
during the spouse's lifetime at a rate equal to 50% of the rate at which
such benefits were payable to the Participant. This Joint and Survivor
Annuity shall be considered the designated qualified Joint and Survivor
Annuity and automatic form of payment for the purposes of this Plan.
However, the Participant may elect to receive a smaller annuity benefit
with continuation of payments to the spouse at a rate of seventy-five
percent (75%) or one hundred percent (100%) of the rate payable to a
Participant during his lifetime which alternative Joint and Survivor
Annuity shall be equal in value to the automatic Joint and 50% Survivor
Annuity. An unmarried Participant shall receive the value of his benefit
in the form of a life annuity. Such unmarried Participant, however, may
elect in writing to waive the life annuity. The election must comply
with the provisions of this Section as if it were an election to waive
the Joint and Survivor Annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect to have any
annuity provided for in this Section distributed upon the attainment of
the "earliest retirement age" under the Plan. The "earliest retirement
age" is the earliest date on which, under the Plan, the Participant
could elect to receive retirement benefits.
(2) Any election to waive the Joint and Survivor Annuity must be
made by the Participant in writing during the election period and be
consented to by the Participant's spouse. If the spouse is legally
incompetent to give consent, the spouse's legal guardian, even if
such guardian is the Participant, may give consent. Such election
shall designate a Beneficiary (or a form of benefits) that may not
be changed without spousal consent (unless the consent of the spouse
expressly permits designations by the Participant without the
requirement of further consent by the spouse). Such spouse's consent
shall be irrevocable and must acknowledge the effect of such
election and be witnessed by a Plan representative or a notary
public. Such consent shall not be required if it is established to
the satisfaction of the Administrator that the required consent
cannot be obtained because there is no spouse, the spouse cannot be
located, or other circumstances that may be prescribed by
Regulations. The election made by the Participant and consented to
by his spouse may be revoked by the Participant in writing without
the consent of the spouse at any time during the election period.
The number of revocations shall not be limited. Any new election
must
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comply with the requirements of this paragraph. A former spouse's
waiver shall not be binding on a new spouse.
(3) The election period to waive the Joint and Survivor Annuity
shall be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section and Section 6.6, the "annuity
starting date" means the first day of the first period for which an
amount is paid as an annuity, or, in the case of a benefit not
payable in the form of an annuity, the first day on which all events
have occurred which entitles the Participant to such benefit.
(5) With regard to the election, the Administrator shall provide to
the Participant no less than 30 days and no more than 90 days before
the "annuity starting date" a written explanation of:
(i)the terms and conditions of the Joint and Survivor
Annuity, and
(ii)the Participant's right to make and the effect of an
election to waive the Joint and Survivor Annuity, and
(iii) the right of the Participant's spouse to consent to any
election to waive the Joint and Survivor Annuity, and
(iv)the right of the Participant to revoke such election, and
the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a Joint
and Survivor Annuity, or if such Participant is not married, in the form
of a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the distribution to a Participant or his
Beneficiary any amount to which he is entitled under the Plan in one or
more of the following methods which are permitted pursuant to the
Adoption Agreement:
(1) One lump-sum payment in cash or in property;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide such
installment payments, the Administrator may direct that the
Participant's interest in the Plan be segregated and invested
separately, and that the funds in the segregated account be used for
the payment of the installments. The period over which such payment
is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his
designated Beneficiary);
(3) Purchase of or providing an annuity. However, such annuity may
not be in any form that will provide for payments over a period
extending beyond either the life of the Participant (or the lives of
the Participant and his designated Beneficiary) or the life
expectancy of the Participant (or the life expectancy of the
Participant and his designated Beneficiary).
(c) The present value of a Participant's Joint and Survivor Annuity
derived from Employer and Employee contributions may not be paid without
his written consent if the value exceeds, or has ever exceeded at the
time of any prior distribution, $3,500. Further, the spouse of a
Participant must consent in writing to any immediate distribution. If
the value of the Participant's benefit derived from Employer and
Employee contributions does not exceed $3,500 and has never exceeded
$3,500 at the time of any prior distribution, the Administrator may
immediately distribute such benefit without such Participant's consent.
No distribution may be made under the preceding sentence after the
"annuity starting date" unless the Participant and his spouse consent in
writing to such distribution. Any written consent required under this
paragraph must be obtained not more than 90 days before commencement of
the distribution and shall be made in a manner consistent with Section
6.5(a)(2).
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(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded at the time of any prior distribution,
$3,500 shall require such Participant's consent if such distribution
commences prior to the later of his Normal Retirement Age or age 62.
With regard to this required consent:
(1) No consent shall be valid unless the Participant has received a
general description of the material features and an explanation of
the relative values of the optional forms of benefit available under
the Plan that would satisfy the notice requirements of Code Section
417.
(2) The Participant must be informed of his right to defer receipt
of the distribution. If a Participant fails to consent, it shall be
deemed an election to defer the commencement of payment of any
benefit. However, any election to defer the receipt of benefits
shall not apply with respect to distributions which are required
under Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
"annuity starting date."
(4) Written consent of the Participant to the distribution must not
be made before the Participant receives the notice and must not be
made more than 90 days before the "annuity starting date."
(5) No consent shall be valid if a significant detriment is imposed
under the Plan on any Participant who does not consent to the
distribution.
(e) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, made on or after January 1,
1985, whether under the Plan or through the purchase of an annuity
Contract, shall be made in accordance with the following requirements
and shall otherwise comply with Code Section 401(a)(9) and the
Regulations thereunder (including Regulation Section 1.401(a)(9)-2), the
provisions of which are incorporated herein by reference:
(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the
calendar year in which the Participant attains age 70 1/2 or (ii)
the calendar year in which the Participant retires, provided,
however, that this clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at any time during the
five (5) Plan Year period ending in the calendar year in which he
attains age 70 1/2 or, in the case of a Participant who becomes a
"five (5) percent owner" during any subsequent Plan Year, clause
(ii) shall no longer apply and the required beginning date shall be
the April 1st of the calendar year following the calendar year in
which such subsequent Plan Year ends. Alternatively, distributions
to a Participant must begin no later than the applicable April 1st
as determined under the preceding sentence and must be made over the
life of the Participant (or the lives of the Participant and the
Participant's designated Beneficiary) or, if benefits are paid in
the form of a Joint and Survivor Annuity, the life expectancy of the
Participant (or the life expectancies of the Participant and his
designated Beneficiary) in accordance with Regulations. For Plan
Years beginning after December 31, 1988, clause (ii) above shall not
apply to any Participant unless the Participant had attained age 70
1/2 before January 1, 1988 and was not a "five (5) percent owner" at
any time during the Plan Year ending with or within the calendar
year in which the Participant attained age 66 1/2 or any subsequent
Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall only
be made in accordance with the incidental death benefit requirements
of Code Section 401(a)(9)(G) and the Regulations thereunder.
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Additionally, for calendar years beginning before 1989,
distributions may also be made under an alternative method which
provides that the then present value of the payments to be made over
the period of the Participant's life expectancy exceeds fifty
percent (50%) of the then present value of the total payments to be
made to the Participant and his Beneficiaries.
(f) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a life
annuity) shall be redetermined annually in accordance with Regulations
if permitted pursuant to the Adoption Agreement. If the Participant or
the Participant's spouse may elect whether recalculations will be made,
then the election, once made, shall be irrevocable. If no election is
made by the time distributions must commence, then the life expectancy
of the Participant and the Participant's spouse shall not be subject to
recalculation. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be non-transferable
when distributed. Furthermore, the terms of any annuity Contract
purchased and distributed to a Participant or spouse shall comply with
all of the requirements of this Plan.
(h) Subject to the spouse's right of consent afforded under the
Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation to
have his retirement benefit paid in an alternative method acceptable
under Code Section 401(a) as in effect prior to the enactment of the Tax
Equity and Fiscal Responsibility Act of 1982.
(i) If a distribution is made at a time when a Participant who has
not terminated employment is not fully Vested in his Participant's
Account and the Participant may increase the Vested percentage in such
account:
(1) A separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution, and
(2) At any relevant time the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by the
formula:
X equals P(AB plus (RxD)) - (R x D)
For purposes of applying the formula: P is the Vested percentage at
the relevant time, AB is the account balance at the relevant time, D
is the amount of distribution, and R is the ratio of the account
balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested Participant
who dies before the annuity starting date and who has a surviving spouse
shall have the Pre-Retirement Survivor Annuity paid to his surviving
spouse. The Participant's spouse may direct that payment of the
Pre-Retirement Survivor Annuity commence within a reasonable period
after the Participant's death. If the spouse does not so direct, payment
of such benefit will commence at the time the Participant would have
attained the later of his Normal Retirement Age or age 62. However, the
spouse may elect a later commencement date. Any distribution to the
Participant's spouse shall be subject to the rules specified in Section
6.6(h).
(b) Any election to waive the Pre-Retirement Survivor Annuity before
the Participant's death must be made by the Participant in writing
during the election period and shall require the spouse's irrevocable
consent in the same manner provided for in Section 6.5(a)(2). Further,
the spouse's consent must acknowledge the specific nonspouse
Beneficiary. Notwithstanding the foregoing, the nonspouse Beneficiary
need not be acknowledged, provided the consent of the spouse
acknowledges that the spouse
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has the right to limit consent only to a specific Beneficiary and that
the spouse voluntarily elects to relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor Annuity
shall begin on the first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's death. An
earlier waiver (with spousal consent) may be made provided a written
explanation of the Pre-Retirement Survivor Annuity is given to the
Participant and such waiver becomes invalid at the beginning of the Plan
Year in which the Participant turns age 35. In the event a Vested
Participant separates from service prior to the beginning of the
election period, the election period shall begin on the date of such
separation from service.
(d) With regard to the election, the Administrator shall provide
each Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation of
the Pre-Retirement Survivor Annuity containing comparable information to
that required pursuant to Section 6.5(a)(4). For the purposes of this
paragraph, the term "applicable period" means, with respect to a
Participant, whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in
which the Participant attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Participant
attains age 35;
(2) A reasonable period after the individual becomes a Participant.
For this purpose, in the case of an individual who becomes a
Participant after age 32, the explanation must be provided by the
end of the three-year period beginning with the first day of the
first Plan Year for which the individual is a Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity with
respect to the Participant;
(4) A reasonable period ending after Code Section 401(a)(11) applies
to the Participant; or
(5) A reasonable period after separation from service in the case of
a Participant who separates before attaining age 35. For this
purpose, the Administrator must provide the explanation beginning
one year before the separation from service and ending one year
after separation.
(e) The Pre-Retirement Survivor Annuity provided for in this Section
shall apply only to Participants who are credited with an Hour of
Service on or after August 23, 1984. Former Participants who are not
credited with an Hour of Service on or after August 23, 1984 shall be
provided with rights to the Pre-Retirement Survivor Annuity in
accordance with Section 303(e)(2) of the Retirement Equity Act of 1984.
(f) If the value of the Pre-Retirement Survivor Annuity derived from
Employer and Employee contributions does not exceed $3,500 and has never
exceeded $3,500 at the time of any prior distribution, the Administrator
shall direct the immediate distribution of such amount to the
Participant's spouse. No distribution may be made under the preceding
sentence after the annuity starting date unless the spouse consents in
writing. If the value exceeds, or has ever exceeded at the time of any
prior distribution, $3,500, an immediate distribution of the entire
amount may be made to the surviving spouse, provided such surviving
spouse consents in writing to such distribution. Any written consent
required under this paragraph must be obtained not more than 90 days
before commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)(2).
(g)(1) In the event there is an election to waive the Pre-Retirement
Survivor Annuity, and for death benefits in excess of the Pre-Retirement
Survivor Annuity, such death benefits shall be paid to the
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Participant's Beneficiary by either of the following methods, as
elected by the Participant (or if no election has been made prior to
the Participant's death, by his Beneficiary) subject to the rules
specified in Section 6.6(h) and the selections made in the Adoption
Agreement:
(i)One lump-sum payment in cash or in property;
(ii)Payment in monthly, quarterly, semi-annual, or annual cash
installments over a period to be determined by the Participant
or his Beneficiary. After periodic installments commence, the
Beneficiary shall have the right to reduce the period over which
such periodic installments shall be made, and the cash amount of
such periodic installments shall be adjusted accordingly.
(iii) If death benefits in excess of the Pre-Retirement Survivor
Annuity are to be paid to the surviving spouse, such benefits
may be paid pursuant to (i) or (ii) above, or used to purchase
an annuity so as to increase the payments made pursuant to the
Pre-Retirement Survivor Annuity;
(2) In the event the death benefit payable pursuant to Section 6.2
is payable in installments, then, upon the death of the Participant,
the Administrator may direct that the death benefit be segregated
and invested separately, and that the funds accumulated in the
segregated account be used for the payment of the installments.
(h) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant made on or after January
1, 1985, shall be made in accordance with the following requirements and
shall otherwise comply with Code Section 401(a)(9) and the Regulations
thereunder.
(1) If it is determined, pursuant to Regulations, that the
distribution of a Participant's interest has begun and the
Participant dies before his entire interest has been distributed to
him, the remaining portion of such interest shall be distributed at
least as rapidly as under the method of distribution selected
pursuant to Section 6.5 as of his date of death.
(2) If a Participant dies before he has begun to receive any
distributions of his interest in the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries in accordance with
the following rules subject to the selections made in the Adoption
Agreement and Subsections 6.6(h)(3) and 6.6(i) below:
(i)The entire death benefit shall be distributed to the
Participant's Beneficiaries by December 31st of the calendar
year in which the fifth anniversary of the Participant's death
occurs;
(ii)The 5-year distribution requirement of (i) above shall not
apply to any portion of the deceased Participant's interest
which is payable to or for the benefit of a designated
Beneficiary. In such event, such portion shall be distributed
over the life of such designated Beneficiary (or over a period
not extending beyond the life expectancy of such designated
Beneficiary) provided such distribution begins not later than
December 31st of the calendar year immediately following the
calendar year in which the Participant died;
(iii) However, in the event the Participant's spouse (determined
as of the date of the Participant's death) is his designated
Beneficiary, the provisions of (ii) above shall apply except
that the requirement that distributions commence within one year
of the Participant's death shall not apply. In lieu thereof,
distributions must commence on or before the later of: (1)
December 31st of the calendar year immediately following the
calendar year in which the Participant died; or (2) December
31st of the calendar year in which the Participant
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would have attained age 70 1/2. If the surviving spouse dies before
distributions to such spouse begin, then the 5-year distribution
requirement of this Section shall apply as if the spouse was the
Participant.
(3) Notwithstanding subparagraph (2) above, or any selections made
in the Adoption Agreement, if a Participant's death benefits are to
be paid in the form of a Pre-Retirement Survivor Annuity, then
distributions to the Participant's surviving spouse must commence on
or before the later of: (1) December 31st of the calendar year
immediately following the calendar year in which the Participant
died; or (2) December 31st of the calendar year in which the
Participant would have attained age 70 1/2.
(i) For purposes of Section 6.6(h)(2), the election by a designated
Beneficiary to be excepted from the 5-year distribution requirement (if
permitted in the Adoption Agreement) must be made no later than December
31st of the calendar year following the calendar year of the
Participant's death. Except, however, with respect to a designated
Beneficiary who is the Participant's surviving spouse, the election must
be made by the earlier of: (1) December 31st of the calendar year
immediately following the calendar year in which the Participant died
or, if later, the calendar year in which the Participant would have
attained age 70 1/2; or (2) December 31st of the calendar year which
contains the fifth anniversary of the date of the Participant's death.
An election by a designated Beneficiary must be in writing and shall be
irrevocable as of the last day of the election period stated herein. In
the absence of an election by the Participant or a designated
Beneficiary, the 5-year distribution requirement shall apply.
(j) For purposes of this Section, the life expectancy of a
Participant and a Participant's spouse (other than in the case of a life
annuity) shall or shall not be redetermined annually as provided in the
Adoption Agreement and in accordance with Regulations. If the
Participant or the Participant's spouse may elect, pursuant to the
Adoption Agreement, to have life expectancies recalculated, then the
election, once made shall be irrevocable. If no election is made by the
time distributions must commence, then the life expectancy of the
Participant and the Participant's spouse shall not be subject to
recalculation. Life expectancy and joint and last survivor expectancy
shall be computed using the return multiples in Tables V and VI of
Regulation Section 1.72-9.
(k) In the event that less than 100% of a Participant's interest in
the Plan is distributed to such Participant's spouse, the portion of the
distribution attributable to the Participant's Voluntary Contribution
Account shall be in the same proportion that the Participant's Voluntary
Contribution Account bears to the Participant's total interest in the
Plan.
(l) Subject to the spouse's right of consent afforded under the
Plan, the restrictions imposed by this Section shall not apply if a
Participant has, prior to January 1, 1984, made a written designation to
have his death benefits paid in an alternative method acceptable under
Code Section 401(a) as in effect prior to the enactment of the Tax
Equity and Fiscal Responsibility Act of 1982.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever a distribution is to
be made, or a series of payments are to commence, on or as of an Anniversary
Date, the distribution or series of payments may be made or begun on such date
or as soon thereafter as is practicable, but in no event later than 180 days
after the Anniversary Date. However, unless a Former Participant elects in
writing to defer the receipt of benefits (such election may not result in a
death benefit that is more than incidental), the payment of benefits shall begin
not later than the 60th day after the close of the Plan Year in which the latest
of the following events occurs: (a) the date on which the Participant attains
the earlier of age 65 or the Normal Retirement Age specified herein; (b) the
10th anniversary of the year in which the Participant commenced participation in
the Plan; or (c) the date the Participant terminates his service with the
Employer.
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Notwithstanding the foregoing, the failure of a Participant and, if
applicable, the Participant's spouse, to consent to a distribution pursuant to
Section 6.5(d), shall be deemed to be an election to defer the commencement of
payment of any benefit sufficient to satisfy this Section.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored,
first from Forfeitures, if any, and then from an additional Employer
contribution if necessary.
6.10 PRE-RETIREMENT DISTRIBUTION
For Profit Sharing Plans and 401(k) Profit Sharing Plans, if elected in
the Adoption Agreement, at such time as a Participant shall have attained the
age specified in the Adoption Agreement, the Administrator, at the election of
the Participant, shall direct the distribution of up to the entire amount then
credited to the accounts maintained on behalf of the Participant. However, no
such distribution from the Participant's Account shall occur prior to 100%
Vesting. In the event that the Administrator makes such a distribution, the
Participant shall continue to be eligible to participate in the Plan on the same
basis as any other Employee. Any distribution made pursuant to this Section
shall be made in a manner consistent with Section 6.5, including, but not
limited to, all notice and consent requirements of Code Sections 411(a)(11) and
417 and the Regulations thereunder.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) For Profit Sharing Plans, if elected in the Adoption Agreement,
the Administrator, at the election of the Participant, shall direct the
distribution to any Participant in any one Plan Year up to the lesser of
100% of his Participant's Combined Account valued as of the last
Anniversary Date or other valuation date or the amount necessary to
satisfy the immediate and heavy financial need of the Participant. Any
distribution made pursuant to this Section shall be deemed to be made as
of the first day of the Plan Year or, if later, the valuation date
immediately preceding the date of distribution, and the account from
which the distribution is made shall be reduced accordingly. Withdrawal
under this Section shall be authorized only if the distribution is on
account of:
(1) Medical expenses described in Code Section 213(d) incurred by
the Participant, his spouse, or any of his dependents (as defined in
Code Section 152) or expenses necessary for these persons to obtain
medical care;
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant;
(3) Funeral expenses for a member of the Participant's family;
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(4) Payment of tuition and related educational fees for the next 12
months of post-secondary education for the Participant, his spouse,
children, or dependents; or
(5) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No such distribution shall be made from the Participant's
Account until such Account has become fully Vested.
(c) Any distribution made pursuant to this Section shall be made in
a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 411(a)(11) and 417 and the Regulations
thereunder.
6.12 LIMITATIONS ON BENEFITS AND DISTRIBUTIONS
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
reached the "earliest retirement age" under the Plan. For the purposes of this
Section, "alternate payee," "qualified domestic relations order" and "earliest
retirement age" shall have the meaning set forth under Code Section 414(p).
6.13 SPECIAL RULE FOR NON-ANNUITY PLANS
If elected in the Adoption Agreement, the following shall apply to a
Participant in a Profit Sharing Plan or 401(k) Profit Sharing Plan and to any
distribution, made on or after the first day of the first plan year beginning
after December 31, 1988, from or under a separate account attributable solely to
accumulated deductible employee contributions, as defined in Code Section
72(o)(5)(B), and maintained on behalf of a participant in a money purchase
pension plan, (including a target benefit plan):
(a) The Participant shall be prohibited from electing benefits in the
form of a life annuity;
(b) Upon the death of the Participant, the Participant's entire Vested
account balances will be paid to his or her surviving spouse, or, if there
is no surviving spouse or the surviving spouse has already consented to
waive his or her benefit, in accordance with Section 6.6, to his designated
Beneficiary;
(c) Except to the extent otherwise provided in this Section and Section
6.5(h), the other provisions of Sections 6.2, 6.5 and 6.6 regarding spousal
consent and the forms of distributions shall be inoperative with respect to
this Plan.
(d) If a distribution is one to which Sections 401(a)(11) and 417 of the
Internal Revenue Code do not apply, such distribution may commence less
than 30 days after the notice required under Section 1.411(a)-11(c) of the
Income Tax Regulations is given, provided that:
(1) the Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after the notice
to consider the decision of whether or not to elect a distribution (and,
if applicable, a particular distribution option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
This Section shall not apply to any Participant if it is determined that
this Plan is a direct or indirect transferee of a defined benefit plan or money
purchase plan, or a target benefit plan, stock bonus or profit sharing plan
which would otherwise provide for a life annuity form of payment to the
Participant.
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ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by
the Employer to invest, manage, and control the Plan assets subject,
however, to the direction of an Investment Manager if the Employer
should appoint such manager as to all or a portion of the assets of the
Plan;
(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their
death, to their Beneficiaries
(c) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income and
in such securities or property, real or personal, wherever situated, as
the Trustee shall deem advisable, including, but not limited to, stocks,
common or preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The Trustee shall at
all times in making investments of the Trust Fund consider, among other
factors, the short and long-term financial needs of the Plan on the
basis of information furnished by the Employer. In making such
investments, the Trustee shall not be restricted to securities or other
property of the character expressly authorized by the applicable law for
trust investments; however, the Trustee shall give due regard to any
limitations imposed by the Code or the Act so that at all times this
Plan may qualify as a qualified Plan and Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical
and record-keeping nature.
(c) The Trustee may from time to time transfer to a common,
collective, or pooled trust fund maintained by any corporate Trustee
hereunder pursuant to Revenue Ruling 81-100, all or such part of the
Trust Fund as the Trustee may deem advisable, and such part or all of
the Trust Fund so transferred shall be subject to all the terms and
provisions of the common, collective, or pooled trust fund which
contemplate the commingling for investment purposes of such trust assets
with trust assets of other trusts. The Trustee may withdraw from such
common, collective, or pooled trust fund all or such part of the Trust
Fund as the Trustee may deem advisable.
(d) The Trustee, at the direction of the Administrator and pursuant
to instructions from the individual designated in the Adoption Agreement
for such purpose and subject to the conditions set forth in the Adoption
Agreement, shall ratably apply for, own, and pay all premiums on
Contracts on the lives of the Participants. Any initial or additional
Contract purchased on behalf of a Participant shall have a face amount
of not less than $1,000, the amount set forth in the Adoption Agreement,
or the limitation of the Insurer, whichever is greater. If a life
insurance Contract is to be purchased for a Participant, the aggregate
premium for ordinary life insurance for each Participant must be less
than 50% of the
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aggregate contributions and Forfeitures allocated to a Participant's
Combined Account. For purposes of this limitation, ordinary life
insurance Contracts are Contracts with both non-decreasing death
benefits and non-increasing premiums. If term insurance or universal
life insurance is purchased with such contributions, the aggregate
premium must be 25% or less of the aggregate contributions and
Forfeitures allocated to a Participant's Combined Account. If both
term insurance and ordinary life insurance are purchased with such
contributions, the amount expended for term insurance plus one-half of
the premium for ordinary life insurance may not in the aggregate
exceed 25% of the aggregate Employer contributions and Forfeitures
allocated to a Participant's Combined Account. The Trustee must
distribute the Contracts to the Participant or convert the entire
value of the Contracts at or before retirement into cash or provide
for a periodic income so that no portion of such value may be used to
continue life insurance protection beyond retirement. Notwithstanding
the above, the limitations imposed herein with respect to the purchase
of life insurance shall not apply, in the case of a Profit Sharing
Plan, to the portion of a Participant's Account that has accumulated
for at least two (2) Plan Years.
Notwithstanding anything hereinabove to the contrary, amounts
credited to a Participant's Qualified Voluntary Employee Contribution
Account pursuant to Section 4.9, shall not be applied to the purchase
of life insurance contracts.
(e) The Trustee will be the owner of any life insurance Contract
purchased under the terms of this Plan. The Contract must provide that
the proceeds will be payable to the Trustee; however, the Trustee shall
be required to pay over all proceeds of the Contract to the
Participant's designated Beneficiary in accordance with the distribution
provisions of Article VI. A Participant's spouse will be the designated
Beneficiary pursuant to Section 6.2, unless a qualified election has
been made in accordance with Sections 6.5 and 6.6 of the Plan, if
applicable. Under no circumstances shall the Trust retain any part of
the proceeds. However, the Trustee shall not pay the proceeds in a
method that would violate the requirements of the Retirement Equity Act,
as stated in Article VI of the Plan, or Code Section 401(a)(9) and the
Regulations thereunder.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of this Plan, shall
have the following powers and authorities to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other property
and to retain the same. In conjunction with the purchase of securities,
margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase,
or otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing
with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or propriety
of any such sale or other disposition, with or without advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription
rights or other options, and to make any payments incidental thereto; to
oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the
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books and records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to inquire
into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash balances
as the Trustee may, from time to time, deem to be in the best interests
of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as it may deem advisable any
securities or other property received or acquired by it as Trustee
hereunder, whether or not such securities or other property would
normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents
of transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or
defend suits or legal or administrative proceedings, and to represent
the Plan in all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their
reasonable expenses and compensation, and such agent or counsel may or
may not be agent or counsel for the Employer;
(k) To apply for and procure from the Insurer as an investment of
the Trust Fund such annuity, or other Contracts (on the life of any
Participant) as the Administrator shall deem proper; to exercise, at any
time or from time to time, whatever rights and privileges may be granted
under such annuity, or other Contracts; to collect, receive, and settle
for the proceeds of all such annuity, or other Contracts as and when
entitled to do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, or, if
the options are not traded on a national securities exchange, are
guaranteed by a member firm of the New York Stock Exchange;
(o) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(p) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or any Affiliated Employer, and to commingle
such assets and make joint or common investments and carry joint
accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments or accounts
or any pooled assets of the two or more trusts in accordance with their
respective interests;
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(q) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
(r) Directed Investment Account. The powers granted to the Trustee
shall be exercised in the sole fiduciary discretion of the Trustee.
However, if elected in the Adoption Agreement, each Participant may
direct the Trustee to separate and keep separate all or a portion of his
interest in the Plan; and further each Participant is authorized and
empowered, in his sole and absolute discretion, to give directions to
the Trustee in such form as the Trustee may require concerning the
investment of the Participant's Directed Investment Account, which
directions must be followed by the Trustee subject, however, to
restrictions on payment of life insurance premiums. Neither the Trustee
nor any other persons including the Administrator or otherwise shall be
under any duty to question any such direction of the Participant or to
review any securities or other property, real or personal, or to make
any suggestions to the Participant in connection therewith, and the
Trustee shall comply as promptly as practicable with directions given by
the Participant hereunder. Any such direction may be of a continuing
nature or otherwise and may be revoked by the Participant at any time in
such form as the Trustee may require. The Trustee may refuse to comply
with any direction from the Participant in the event the Trustee, in its
sole and absolute discretion, deems such directions improper by virtue
of applicable law, and in such event, the Trustee shall not be
responsible or liable for any loss or expense which may result. Any
costs and expenses related to compliance with the Participant's
directions shall be borne by the Participant's Directed Investment
Account.
Notwithstanding anything hereinabove to the contrary, the
Trustee shall not, at any time after December 31, 1981, invest any
portion of a Directed Investment Account in "collectibles" within the
meaning of that term as employed in Code Section 408(m).
7.4 LOANS TO PARTICIPANTS
(a) If specified in the Adoption Agreement, the Trustee (or, if
loans are treated as Directed Investment pursuant to the Adoption
Agreement, the Administrator) may, in the Trustee's (or, if applicable,
the Administrator's) sole discretion, make loans to Participants or
Beneficiaries under the following circumstances: (1) loans shall be made
available to all Participants and Beneficiaries on a reasonably
equivalent basis; (2) loans shall not be made available to Highly
Compensated Employees in an amount greater than the amount made
available to other Participants; (3) loans shall bear a reasonable rate
of interest; (4) loans shall be adequately secured; and (5) shall
provide for periodic repayment over a reasonable period of time.
(b) Loans shall not be made to any Shareholder-Employee or
Owner-Employee unless an exemption for such loan is obtained pursuant to
Act Section 408 and further provided that such loan would not be subject
to tax pursuant to Code Section 4975.
(c) Loans shall not be granted to any Participant that provide for a
repayment period extending beyond such Participant's Normal Retirement
Date.
(d) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant during
the one year period ending on the day before the date on which such
loan is made, over the outstanding balance of loans from the Plan to
the Participant on the date on which such loan was made, or
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(2) the greater of (A) one-half (1/2) of the present value of the
non-forfeitable accrued benefit of the Employee under the Plan, or
(B), if permitted pursuant to the Adoption Agreement, $10,000.
For purposes of this limit, all plans of the Employer shall be
considered one plan. Additionally, with respect to any loan made prior
to January 1, 1987, the $50,000 limit specified in (1) above shall be
unreduced.
(e) No Participant loan shall take into account the present value of
such Participant's Qualified Voluntary Employee Contribution
Account.
(f) Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed five
(5) years. However, loans used to acquire any dwelling unit which,
within a reasonable time, is to be used (determined at the time the loan
is made) as a principal residence of the Participant shall provide for
periodic repayment over a reasonable period of time that may exceed five
(5) years. Notwithstanding the foregoing, loans made prior to January 1,
1987 which are used to acquire, construct, reconstruct or substantially
rehabilitate any dwelling unit which, within a reasonable period of time
is to be used (determined at the time the loan is made) as a principal
residence of the Participant or a member of his family (within the
meaning of Code Section 267(c)(4)) may provide for periodic repayment
over a reasonable period of time that may exceed five (5) years.
Additionally, loans made prior to January 1, 1987, may provide for
periodic payments which are made less frequently than quarterly and
which do not necessarily result in level amortization.
(g) An assignment or pledge of any portion of a Participant's
interest in the Plan and a loan, pledge, or assignment with respect to
any insurance Contract purchased under the Plan, shall be treated as a
loan under this Section.
(h) Any loan made pursuant to this Section after August 18, 1985
where the Vested interest of the Participant is used to secure such loan
shall require the written consent of the Participant's spouse in a
manner consistent with Section 6.5(a) provided the spousal consent
requirements of such Section apply to the Plan. Such written consent
must be obtained within the 90-day period prior to the date the loan is
made. Any security interest held by the Plan by reason of an outstanding
loan to the Participant shall be taken into account in determining the
amount of the death benefit or Pre-Retirement Survivor Annuity. However,
no spousal consent shall be required under this paragraph if the total
accrued benefit subject to the security is not in excess of $3,500.
(i) With regard to any loans granted or renewed on or after the last
day of the first Plan Year beginning after December 31, 1988, a
Participant loan program shall be established which must include, but
need not be limited to, the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
(4) limitations, if any, on the types and amounts of loans offered,
including what constitutes a hardship or financial need if selected
in the Adoption Agreement;
(5) the procedure under the program for determining a reasonable
rate of interest;
(6) the types of collateral which may secure a Participant loan; and
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(7) the events constituting default and the steps that will be taken
to preserve plan assets.
Such Participant loan program shall be contained in a separate
written document which, when properly executed, is hereby incorporated
by reference and made a part of this plan. Furthermore, such Participant
loan program may be modified or amended in writing from time to time
without the necessity of amending this Section of the Plan.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to
time, in accordance with the terms of the Plan, make payments out of the Trust
Fund. The Trustee shall not be responsible in any way for the application of
such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as set forth in
the Trustee's fee schedule (if the Trustee has such a schedule) or as agreed
upon in writing by the Employer and the Trustee. An individual serving as
Trustee who already receives full-time pay from the Employer shall not receive
compensation from this Plan. In addition, the Trustee shall be reimbursed for
any reasonable expenses, including reasonable counsel fees incurred by it as
Trustee. Such compensation and expenses shall be paid from the Trust Fund unless
paid or advanced by the Employer. All taxes of any kind and all kinds whatsoever
that may be levied or assessed under existing or future laws upon, or in respect
of, the Trust Fund or the income thereof, shall be paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary
Date or receipt of the Employer's contribution for each Plan Year, the Trustee,
or its agent, shall furnish to the Employer and Administrator a written
statement of account with respect to the Plan Year for which such contribution
was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be
deemed an approval thereof. The approval by the Employer of any
statement of account shall be binding as to all matters embraced therein
as between the Employer and the Trustee to the same extent as if the
account of the Trustee had been settled by judgment or decree in an
action for a judicial settlement of its account in a court of competent
jurisdiction in which the Trustee, the Employer and all persons having
or claiming an interest in the Plan were parties; provided, however,
that nothing herein contained shall deprive the Trustee of its right to
have its accounts judicially settled if the Trustee so desires.
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7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the Act
and the regulations thereunder for any Plan Year, the Administrator
shall direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan in
accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a report of his audit setting forth his
opinion as to whether any statements, schedules or lists, that are
required by Act Section 103 or the Secretary of Labor to be filed with
the Plan's annual report, are presented fairly in conformity with
generally accepted accounting principles applied consistently.
(b) All auditing and accounting fees shall be an expense of and may,
at the election of the Administrator, be paid from the Trust Fund.
(c) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or such other date as
may be prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at
least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering
same to the Employer, shall, without further act, become vested with all
the estate, rights, powers, discretions, and duties of his predecessor
with like respect as if he were originally named as a Trustee herein.
Until such a successor is appointed, the remaining Trustee or Trustees
shall have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with
the like effect as if he were originally named as Trustee herein
immediately upon the death, resignation, incapacity, or removal of his
predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of account
with respect to the portion of the Plan Year during which he served as
Trustee. This statement shall be either (i) included as part of the
annual statement of account for the Plan Year required under Section 7.7
or (ii) set forth in a special statement. Any such special statement of
account should be rendered to the Employer no later than the due date of
the annual statement of account for the Plan Year. The procedures set
forth in Section 7.7 for the approval by the Employer of annual
statements of account shall apply to any special statement of account
rendered hereunder and approval by the Employer of any such special
statement in the manner provided in Section 7.7 shall have the same
effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty or
responsibility to investigate the acts or transactions of any
predecessor who has rendered all statements of account required by
Section 7.7 and this subparagraph.
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7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee
at the direction of the Administrator shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing, or stock bonus plan maintained by such Participant's
new employer and represented by said employer in writing as meeting the
requirements of Code Section 401(a), provided that the trust to which such
transfers are made permits the transfer to be made.
(a) Notwithstanding any provision of the plan to the contrary, with respect
to distributions made after December 31, 1992, a Participant shall be permitted
to elect to have any "eligible rollover distribution" transferred directly to an
"eligible retirement plan" specified by the Participant. The Plan provisions
otherwise applicable to distributions continue to apply to the direct transfer
option. The Participant shall, in the time and manner prescribed by the
Administrator, specify the amount to be directly transferred and the "eligible
retirement plan" to receive the transfer. Any portion of a distribution which is
not transferred shall be distributed to the Participant.
(b) For purposes of this Section, the term "eligible rollover distribution"
means any distribution other than a distribution of substantially equal periodic
payments over the life or life expectancy of the Participant (or joint life or
joint life expectancies of the Participant and the designated beneficiary) or a
distribution over a period certain of ten years or more. Amounts required to be
distributed under Code Section 401(a)(9) are not eligible rollover
distributions. The direct transfer option described in subsection (a) applies
only to eligible rollover distributions which would otherwise be includible in
gross income if not transferred.
(c) For purposes of this Section, the term "eligible retirement plan" means
an individual retirement account as described in Code Section 408(a), an
individual retirement annuity as described in Code Section 408(b), an annuity
plan as described in Code Section 403(a), or a defined contribution plan as
described in Code Section 401(a) which is exempt from tax under Code Section
501(a) and which accepts rollover distributions.
(d) The election described in subsection (a) also applies to the surviving
spouse after the Participant's death; however, distributions to the surviving
spouse may only be transferred to an individual retirement account or individual
retirement annuity. For purposes of subsection (a), a spouse or former spouse
who is the alternate payee under a qualified domestic relations order as defined
in Code Section 414(p) will be treated as the Participant.
7.11 TRUSTEE INDEMNIFICATION
The Employer agrees to indemnify and save harmless the Trustee against
any and all claims, losses, damages, expenses and liabilities the Trustee may
incur in the exercise and performance of the Trustee's powers and duties
hereunder, unless the same are determined to be due to gross negligence or
willful misconduct.
7.12 EMPLOYER SECURITIES AND REAL PROPERTY
The Trustee shall be empowered to acquire and hold "qualifying Employer
securities" and "qualifying Employer real property," as those terms are defined
in the Act. However, no more than 100%, in the case of a Profit Sharing Plan or
401(k) Plan or 10%, in the case of a Money Purchase Plan of the fair market
value of all the assets in the Trust Fund may be invested in "qualifying
Employer securities" and "qualifying Employer real property."
ARTICLE VIII
AMENDMENT, TERMINATION, AND MERGERS
8.1 AMENDMENT
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(a) The Employer shall have the right at any time to amend this Plan
subject to the limitations of this Section. However, any amendment which
affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's
written consent. Any such amendment shall become effective as provided
therein upon its execution. The Trustee shall not be required to execute
any such amendment unless the amendment affects the duties of the
Trustee hereunder.
(b) The Employer may (1) change the choice of options in the
Adoption Agreement, (2) add overriding language in the Adoption
Agreement when such language is necessary to satisfy Code Sections 415
or 416 because of the required aggregation of multiple plans, and (3)
add certain model amendments published by the Internal Revenue Service
which specifically provide that their adoption will not cause the Plan
to be treated as an individually designed plan. An Employer that amends
the Plan for any other reason, including a waiver of the minimum funding
requirement under Code Section 412(d), will no longer participate in
this Regional Prototype Plan and will be considered to have an
individually designed plan.
(c) The Employer expressly delegates authority to the sponsoring
organization of this Plan, the right to amend this Plan by submitting a
copy of the amendment to each Employer who has adopted this Plan after
first having received a ruling or favorable determination from the
Internal Revenue Service that the Plan as amended qualifies under Code
Section 401(a) and the Act.
(d) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Trust Fund (other than such part as is required
to pay taxes and administration expenses) to be used for or diverted to
any purpose other than for the exclusive benefit of the Participants or
their Beneficiaries or estates; or causes any reduction in the amount
credited to the account of any Participant; or causes or permits any
portion of the Trust Fund to revert to or become property of the
Employer.
(e) Except as permitted by Regulations (including Regulation
1.411(d)-4), no Plan amendment or transaction having the effect of a
Plan amendment (such as a merger, plan transfer or similar transaction)
shall be effective if it eliminates or reduces any "Section 411(d)(6)
protected benefit" or adds or modifies conditions relating to "Section
411(d)(6) protected benefits" the result of which is a further
restriction on such benefit unless such protected benefits are preserved
with respect to benefits accrued as of the later of the adoption date or
effective date of the amendment. "Section 411(d)(6) protected benefits"
are benefits described in Code Section 411(d)(6)(A), early retirement
benefits and retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the
Plan by delivering to the Trustee and Administrator written notice of
such termination. Upon any full or partial termination all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested and shall not thereafter be subject to forfeiture, and all
unallocated amounts shall be allocated to the accounts of all
Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall direct
the distribution of the assets to Participants in a manner which is
consistent with and satisfies the provisions of Section 6.5.
Distributions to a Participant shall be made in cash (or in property if
permitted in the Adoption Agreement) or through the purchase of
irrevocable nontransferable deferred commitments from the Insurer.
Except as permitted by Regulations, the termination of the Plan shall
not result in the reduction of "Section 411(d)(6) protected benefits" as
described in Section 8.1.
8.3 MERGER OR CONSOLIDATION
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This Plan may be merged or consolidated with, or its assets and/or
liabilities may be transferred to any other plan only if the benefits which
would be received by a Participant of this Plan, in the event of a termination
of the plan immediately after such transfer, merger or consolidation, are at
least equal to the benefits the Participant would have received if the Plan had
terminated immediately before the transfer, merger or consolidation and such
merger or consolidation does not otherwise result in the elimination or
reduction of any "Section 411(d)(6) protected benefits" as described in Section
8.1(e).
ARTICLE IX
MISCELLANEOUS
9.1 EMPLOYER ADOPTIONS
(a) Any organization may become the Employer hereunder by executing
the Adoption Agreement in form satisfactory to the Trustee, and it shall
provide such additional information as the Trustee may require. The
consent of the Trustee to act as such shall be signified by its
execution of the Adoption Agreement.
(b) Except as otherwise provided in this Plan, the affiliation of
the Employer and the participation of its Participants shall be separate
and apart from that of any other employer and its participants
hereunder.
9.2 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.3 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall
be payable to any person (including a Participant or his Beneficiary)
shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber, or
charge the same shall be void; and no such benefit shall in any manner
be liable for, or subject to, the debts, contracts, liabilities,
engagements, or torts of any such person, nor shall it be subject to
attachment or legal process for or against such person, and the same
shall not be recognized except to such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, for any reason, under any provision
of this Plan. At the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion of the amount to
be distributed as shall equal such indebtedness shall be paid to the
Plan, to apply against or discharge such indebtedness. Prior to making a
payment, however, the Participant or Beneficiary must be given written
notice by the Administrator that such indebtedness is to be so paid in
whole or part from his Participant's Combined Account. If the
Participant or Beneficiary does not agree that the indebtedness is a
valid claim against his Vested Participant's Combined Account, he shall
be entitled to a review of the validity of the claim in accordance with
procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other
domestic relations orders permitted to be so treated by the
Administrator under the provisions of the Retirement Equity Act of 1984.
The Administrator shall establish a written procedure to determine the
qualified status of domestic relations orders and to administer
distributions
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under such qualified orders. Further, to the extent provided under a
"qualified domestic relations order," a former spouse of a Participant
shall be treated as the spouse or surviving spouse for all purposes
under the Plan.
9.4 CONSTRUCTION OF PLAN
This Plan and Trust shall be construed and enforced according to the Act
and the laws of the State or Commonwealth in which the Employer's principal
office is located, other than its laws respecting choice of law, to the extent
not pre-empted by the Act.
9.5 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.6 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
9.7 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Trust, by
termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any Trust Fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make a contribution under a
mistake of fact pursuant to Section 403(c)(2)(A) of the Act, the
Employer may demand repayment of such contribution at any time within
one (1) year following the time of payment and the Trustees shall return
such amount to the Employer within the one (1) year period. Earnings of
the Plan attributable to the contributions may not be returned to the
Employer but any losses attributable thereto must reduce the amount so
returned.
9.8 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such Fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
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9.9 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the Insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.10 INSURER'S PROTECTIVE CLAUSE
The Insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The Insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the Insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the Insurer.
9.11 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary,
or to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of this Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer.
9.12 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
9.13 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator, (3) the Trustee, and (4) any Investment Manager appointed
hereunder. The named Fiduciaries shall have only those specific powers, duties,
responsibilities, and obligations as are specifically given them under the Plan.
In general, the Employer shall have the sole responsibility for making the
contributions provided for under Section 4.1; and shall have the sole authority
to appoint and remove the Trustee and the Administrator; to formulate the Plan's
"funding policy and method"; and to amend the elective provisions of the
Adoption Agreement or terminate, in whole or in part, the Plan. The
Administrator shall have the sole responsibility for the administration of the
Plan, which responsibility is specifically described in the Plan. The Trustee
shall have the sole responsibility of management of the assets held under the
Trust, except those assets, the management of which has been assigned to an
Investment Manager, who shall be solely responsible for the management of the
assets assigned to it, all as specifically provided in the Plan. Each named
Fiduciary warrants that any directions given, information furnished, or action
taken by it shall be in accordance with the provisions of the Plan, authorizing
or providing for such direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or action of another
named Fiduciary as being proper under the Plan, and is not required under the
Plan to inquire into the propriety of any such direction, information or action.
It is intended under the Plan that each named Fiduciary shall be responsible for
the proper exercise of its own powers, duties, responsibilities and obligations
under the Plan. No named Fiduciary shall guarantee the Trust Fund in any manner
against investment loss or depreciation in asset value. Any person or group may
serve in more than one Fiduciary capacity.
9.14 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
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9.15 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, if, pursuant to
a timely application filed by or in behalf of the Plan, the Commissioner
of Internal Revenue Service or his delegate should determine that the
Plan does not initially qualify as a tax-exempt plan under Code Sections
401 and 501, and such determination is not contested, or if contested,
is finally upheld, then if the Plan is a new plan, it shall be void ab
initio and all amounts contributed to the Plan, by the Employer, less
expenses paid, shall be returned within one year and the Plan shall
terminate, and the Trustee shall be discharged from all further
obligations. If the disqualification relates to an amended plan, then
the Plan shall operate as if it had not been amended and restated.
(b) Except as specifically stated in the Plan, any contribution by
the Employer to the Trust Fund is conditioned upon the deductibility of
the contribution by the Employer under the Code and, to the extent any
such deduction is disallowed, the Employer may within one (1) year
following a final determination of the disallowance, whether by
agreement with the Internal Revenue Service or by final decision of a
court of competent jurisdiction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable
to the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.16 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner.
9.17 PAYMENT OF BENEFITS
Benefits under this Plan shall be paid, subject to Section 6.10 and
Section 6.11 only upon death, Total and Permanent Disability, normal or early
retirement, termination of employment, or upon Plan Termination.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ELECTION TO BECOME A PARTICIPATING EMPLOYER
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any Affiliated Employer may adopt this Plan and all of the
provisions hereof, and participate herein and be known as a Participating
Employer, by a properly executed document evidencing said intent and will of
such Participating Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each Participating Employer shall be required to select the same
Adoption Agreement provisions as those selected by the Employer other
than the Plan Year, the Fiscal Year, and such other items that must, by
necessity, vary among employers.
(b) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(c) The Trustee may, but shall not be required to, commingle, hold
and invest as one Trust Fund all contributions made by Participating
Employers, as well as all increments thereof.
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(d) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or
a Participating Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such Participant's Combined
Account as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall continue
to his credit.
(e) Any expenses of the Plan which are to be paid by the Employer or
borne by the Trust Fund shall be paid by each Participating Employer in
the same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to
the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a part of this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION AND FORFEITURES
Any contribution or Forfeiture subject to allocation during each Plan
Year shall be allocated among all Participants of all Participating Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Except in the case of a Standardized Plan, any Participating Employer
shall be permitted to discontinue or revoke its participation in the Plan at any
time. At the time of any such discontinuance or revocation, satisfactory
evidence thereof and of any applicable conditions imposed shall be delivered to
the Trustee. The Trustee shall thereafter transfer, deliver and assign Contracts
and other Trust Fund assets allocable to the Participants of such Participating
Employer to such new Trustee as shall have been designated by such Participating
Employer, in the event that it has established a separate pension plan for its
Employees provided, however, that no such transfer shall be made if the result
is the elimination or reduction of any "Section 411(d)(6) protected benefits" in
accordance with Section 8.1(e). If no successor is designated, the Trustee shall
retain such assets for the Employees
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of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust Fund as it
relates to such Participating Employer be used for or diverted for purposes
other than for the exclusive benefit of the Employees of such Participating
Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
10.9 PARTICIPATING EMPLOYER CONTRIBUTION FOR AFFILIATE
If any Participating Employer is prevented in whole or in part from
making a contribution which it would otherwise have made under the Plan by
reason of having no current or accumulated earnings or profits, or because such
earnings or profits are less than the contribution which it would otherwise have
made, then, pursuant to Code Section 404(a)(3)(B), so much of the contribution
which such Participating Employer was so prevented from making may be made, for
the benefit of the participating employees of such Participating Employer, by
other Participating Employers who are members of the same affiliated group
within the meaning of Code Section 1504 to the extent of their current or
accumulated earnings or profits, except that such contribution by each such
other Participating Employer shall be limited to the proportion of its total
current and accumulated earnings or profits remaining after adjustment for its
contribution to the Plan made without regard to this paragraph which the total
prevented contribution bears to the total current and accumulated earnings or
profits of all the Participating Employers remaining after adjustment for all
contributions made to the Plan without regard to this paragraph.
A Participating Employer on behalf of whose employees a contribution is
made under this paragraph shall not be required to reimburse the contributing
Participating Employers.
ARTICLE XI
CASH OR DEFERRED PROVISIONS
Notwithstanding any provisions in the Plan to the contrary, the
provisions of this Article shall apply with respect to any 401(k) Profit Sharing
Plan.
Notwithstanding anything in this Article to the contrary, effective as
of the Plan Year in which this amendment becomes effective, the Actual Deferral
Percentage Test and the Actual Contribution Percentage Test shall be applied
(and adjusted) by applying the Family Member aggregation rules of Code Section
414(q)(6).
11.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 11.2(a), which amount shall be
deemed an Employer's Elective Contribution, plus
(b) If specified in E3 of the Adoption Agreement, a matching
contribution equal to the percentage specified in the Adoption Agreement
of the Deferred Compensation of each Participant eligible to share in
the allocations of the matching contribution, which amount shall be
deemed an Employer's Non-Elective or Elective Contribution as selected
in the Adoption Agreement, plus
(c) If specified in E4 of the Adoption Agreement, a discretionary
amount, if any, which shall be deemed an Employer's Non-Elective
Contribution, plus
(d) If specified in E5 of the Adoption Agreement, a Qualified
Non-Elective Contribution.
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(e) Notwithstanding the foregoing, however, the Employer's
contributions for any Fiscal Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or
in such property as is acceptable to the Trustee.
(f) Except, however, to the extent necessary to provide the top
heavy minimum allocations, the Employer shall make a contribution even
if it exceeds current or accumulated Net Profit or the amount which is
deductible under Code Section 404.
(g) Employer Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee as of the earliest date on which
such contributions can reasonably be segregated from the Employer's
general assets, but in any event within ninety (90) days from the date
on which such amounts would otherwise have been payable to the
Participant in cash. The provisions of Department of Labor regulations
2510.3-102 are incorporated herein by reference. Furthermore, any
additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan
no later than the twelve-month period immediately following the close of
such Plan Year.
11.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) If selected in the Adoption Agreement, each Participant may
elect to defer his Compensation which would have been received in the
Plan Year, but for the deferral election, subject to the limitations of
this Section and the Adoption Agreement. A deferral election (or
modification of an earlier election) may not be made with respect to
Compensation which is currently available on or before the date the
Participant executed such election, or if later, the latest of the date
the Employer adopts this cash or deferred arrangement, or the date such
arrangement first became effective. Any elections made pursuant to this
Section shall become effective as soon as is administratively feasible.
Additionally, if elected in the Adoption Agreement, each
Participant may elect to defer and have allocated for a Plan Year all or
a portion of any cash bonus attributable to services performed by the
Participant for the Employer during such Plan Year and which would have
been received by the Participant on or before two and one-half months
following the end of the Plan Year but for the deferral. A deferral
election may not be made with respect to cash bonuses which are
currently available on or before the date the Participant executed such
election. Notwithstanding the foregoing, cash bonuses attributable to
services performed by the Participant during a Plan Year but which are
to be paid to the Participant later than two and one-half months after
the close of such Plan Year will be subjected to whatever deferral
election is in effect at the time such cash bonus would have otherwise
been received.
The amount by which Compensation and/or cash bonuses are reduced
shall be that Participant's Deferred Compensation and be treated as an
Employer Elective Contribution and allocated to that Participant's
Elective Account.
Once made, a Participant's election to reduce Compensation shall
remain in effect until modified or terminated. Modifications may be made
as specified in the Adoption Agreement, and terminations may be made at
any time. Any modification or termination of an election will become
effective as soon as is administratively feasible.
(b) The balance in each Participant's Elective Account shall be
fully Vested at all times and shall not be subject to Forfeiture for any
reason.
(c) Amounts held in the Participant's Elective Account and Qualified
Non-Elective Account may be distributable as permitted under the Plan,
but in no event prior to the earlier of:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
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(2) a Participant's attainment of age 59 1/2;
(3) the proven financial hardship of a Participant, subject to the
limitations of Section 11.8;
(4) the termination of the Plan without the existence at the time of
Plan termination of another defined contribution plan (other than an
employee stock ownership plan as defined in Code Section 4975(e)(7))
or the establishment of a successor defined contribution plan (other
than an employee stock ownership plan as defined in Code Section
4975(e)(7)) by the Employer or an Affiliated Employer within the
period ending twelve months after distribution of all assets from
the Plan maintained by the Employer;
(5) the date of the sale by the Employer to an entity that is not an
Affiliated Employer of substantially all of the assets (within the
meaning of Code Section 409(d)(2)) with respect to a Participant who
continues employment with the corporation acquiring such assets; or
(6) the date of the sale by the Employer or an Affiliated Employer
of its interest in a subsidiary (within the meaning of Code Section
409(d)(3)) to an entity that is not an Affiliated Employer with
respect to a Participant who continues employment with such
subsidiary.
(d) In any Plan Year beginning after December 31, 1986, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed the limitation imposed by Code Section 402(g), as in
effect for the calendar year in which such Plan Year began. If such
dollar limitation is exceeded solely from elective deferrals made under
this Plan or any other Plan maintained by the Employer, a Participant
will be deemed to have notified the Administrator of such excess amount
which shall be distributed in a manner consistent with Section 11.2(f).
This dollar limitation shall be adjusted annually pursuant to the method
provided in Code Section 415(d) in accordance with Regulations.
(e) In the event a Participant has received a hardship distribution
pursuant to Regulation 1.401(k)-1(d)(2)(iii)(B) from any other plan
maintained by the Employer or from his Participant's Elective Account
pursuant to Section 11.8, then such Participant shall not be permitted
to elect to have Deferred Compensation contributed to the Plan on his
behalf for a period of twelve (12) months following the receipt of the
distribution. Furthermore, the dollar limitation under Code Section
402(g) shall be reduced, with respect to the Participant's taxable year
following the taxable year in which the hardship distribution was made,
by the amount of such Participant's Deferred Compensation, if any, made
pursuant to this Plan (and any other plan maintained by the Employer)
for the taxable year of the hardship distribution.
(f) If a Participant's Deferred Compensation under this Plan
together with any elective deferrals (as defined in Regulation
1.402(g)-1(b)) under another qualified cash or deferred arrangement (as
defined in Code Section 401(k)), a simplified employee pension (as
defined in Code Section 408(k)), a salary reduction arrangement (within
the meaning of Code Section 3121(a)(5)(D)), a deferred compensation plan
under Code Section 457, or a trust described in Code Section 501(c)(18)
cumulatively exceed the limitation imposed by Code Section 402(g) (as
adjusted annually in accordance with the method provided in Code Section
415(d) pursuant to Regulations) for such Participant's taxable year, the
Participant may, not later than March 1st following the close of his
taxable year, notify the Administrator in writing of such excess and
request that his Deferred Compensation under this Plan be reduced by an
amount specified by the Participant. In such event, the Administrator
shall direct the Trustee to distribute such excess amount (and any
Income allocable to such excess amount) to the Participant not later
than the first April 15th following the close of the Participant's
taxable year. Distributions in accordance with this paragraph may be
made for any taxable year of the Participant
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which begins after December 31, 1986. Any distribution of less than
the entire amount of Excess Deferred Compensation and Income shall be
treated as a pro rata distribution of Excess Deferred Compensation and
Income. The amount distributed shall not exceed the Participant's
Deferred Compensation under the Plan for the taxable year. Any
distribution on or before the last day of the Participant's taxable
year must satisfy each of the following conditions:
(1) the Participant shall designate the distribution as Excess
Deferred Compensation;
(2) the distribution must be made after the date on which the Plan
received the Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution of
Excess Deferred Compensation.
Any distribution under this Section shall be made first from
unmatched Deferred Compensation and, thereafter, simultaneously from
Deferred Compensation which is matched and matching contributions which
relate to such Deferred Compensation. However, any such matching
contributions which are not Vested shall be forfeited in lieu of being
distributed.
For the purpose of this Section, "Income" means the amount of
income or loss allocable to a Participant's Excess Deferred Compensation
and shall be equal to the sum of the allocable gain or loss for the
taxable year of the Participant and the allocable gain or loss for the
period between the end of the taxable year of the Participant and the
date of distribution ("gap period"). The income or loss allocable to
each such period is calculated separately and is determined by
multiplying the income or loss allocable to the Participant's Deferred
Compensation for the respective period by a fraction. The numerator of
the fraction is the Participant's Excess Deferred Compensation for the
taxable year of the Participant. The denominator is the balance, as of
the last day of the respective period, of the Participant's Elective
Account that is attributable to the Participant's Deferred Compensation
reduced by the gain allocable to such total amount for the respective
period and increased by the loss allocable to such total amount for the
respective period.
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable income or loss for
the "gap period." Under such "safe harbor method," allocable income or
loss for the "gap period" shall be deemed to equal ten percent (10%) of
the income or loss allocable to a Participant's Excess Deferred
Compensation for the taxable year of the Participant multiplied by the
number of calendar months in the "gap period." For purposes of
determining the number of calendar months in the "gap period," a
distribution occurring on or before the fifteenth day of the month shall
be treated as having been made on the last day of the preceding month
and a distribution occurring after such fifteenth day shall be treated
as having been made on the first day of the next subsequent month.
Income or loss allocable to any distribution of Excess Deferred
Compensation on or before the last day of the taxable year of the
Participant shall be calculated from the first day of the taxable year
of the Participant to the date on which the distribution is made
pursuant to either the "fractional method" or the "safe harbor method."
Notwithstanding the above, for any distribution under this
Section which is made after August 15, 1991, such distribution shall not
include any income for the "gap period". Further provided, for any
distribution under this Section which is made after August 15, 1991, the
amount of Income may be computed using a reasonable method that is
consistent with Section 4.3(c), provided such method is used
consistently for all Participants and for all such distributions for the
Plan Year.
Notwithstanding the above, for the 1987 calendar year, Income
during the "gap period" shall not be taken into account.
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(g) Notwithstanding the above, a Participant's Excess Deferred
Compensation shall be reduced, but not below zero, by any distribution
and/or recharacterization of Excess Contributions pursuant to Section
11.5(a) for the Plan Year beginning with or within the taxable year of
the Participant.
(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market value
of the Participant's Elective Account shall be used to provide benefits
to the Participant or his Beneficiary.
(i) Employer Elective Contributions made pursuant to this Section
may be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate, or other
short-term debt security acceptable to the Trustee until such time as
the allocations pursuant to Section 11.3 have been made.
(j) The Employer and the Administrator shall adopt a procedure
necessary to implement the salary reduction elections provided for
herein.
11.3 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of
each Anniversary Date, or other valuation date, all amounts allocated to
each such Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper allocation of
the Employer's contributions for each Plan Year. Within a reasonable
period of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
(1) With respect to the Employer's Elective Contribution made
pursuant to Section 11.1(a), to each Participant's Elective Account
in an amount equal to each such Participant's Deferred Compensation
for the year.
(2) With respect to the Employer's Matching Contribution made
pursuant to Section 11.1(b), to each Participant's Account, or
Participant's Elective Account as selected in E3 of the Adoption
Agreement, in accordance with Section 11.1(b).
Except, however, a Participant who is not credited with a Year of
Service during any Plan Year shall or shall not share in the
Employer's Matching Contribution for that year as provided in E3 of
the Adoption Agreement. However, for Plan Years beginning after
1989, if this is a standardized Plan, a Participant shall share in
the Employer's Matching Contribution regardless of Hours of Service.
(3) With respect to the Employer's Non-Elective Contribution made
pursuant to Section 11.1(c), to each Participant's Account in
accordance with the provisions of Sections 4.3(b)(2) or 4.3(b)(3),
whichever is applicable, 4.3(k) and 4.3(l).
(4) With respect to the Employer's Qualified Non-Elective
Contribution made pursuant to Section 11.1(d), to each Participant's
Qualified Non-Elective Contribution Account in the same proportion
that each such Participant's Compensation for the year bears to the
total Compensation of all Participants for such year. However, for
any Plan Year beginning prior to January 1, 1990, and if elected in
the non-standardized Adoption Agreement for any Plan Year beginning
on or after January 1, 1990, a Participant who is not credited with
a Year of Service during any Plan Year shall not share in the
Employer's Qualified Non-Elective Contribution for that year, unless
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required pursuant to Section 4.3(h). In addition, the provisions of
Sections 4.3(k) and 4.3(l) shall apply with respect to the allocation
of the Employer's Qualified Non-Elective contribution.
(c) Notwithstanding anything in the Plan to the contrary, for Plan
Years beginning after December 31, 1988, in determining whether a
Non-Key Employee has received the required minimum allocation pursuant
to Section 4.3(f) such Non-Key Employee's Deferred Compensation and
matching contributions used to satisfy the "Actual Deferral Percentage"
test pursuant to Section 11.4(a) or the "Actual Contribution Percentage"
test of Section 11.6(a) shall not be taken into account.
(d) Notwithstanding anything herein to the contrary, participants
who terminated employment during the Plan Year shall share in the salary
reduction contributions made by the Employer for the year of termination
without regard to the Hours of Service credited.
(e) Notwithstanding anything herein to the contrary (other than
Sections 11.3(d) and 11.3(g)), any Participant who terminated employment
during the Plan Year for reasons other than death, Total and Permanent
Disability, or retirement shall or shall not share in the allocations of
the Employer's Matching Contribution made pursuant to Section 11.1(b),
the Employer's Non-Elective Contributions made pursuant to Section
11.1(c), the Employer's Qualified Non-Elective Contribution made
pursuant to Section 11.1(d), and Forfeitures as provided in the Adoption
Agreement. Notwithstanding the foregoing, for Plan Years beginning after
1989, if this is a standardized Plan, any such terminated Participant
shall share in such allocations provided the terminated Participant
completed more than 500 Hours of Service.
(f) Notwithstanding anything herein to the contrary, Participants
terminating for reasons of death, Total and Permanent Disability, or
retirement shall share in the allocation of the Employer's Matching
Contribution made pursuant to Section 11.1(b), the Employer's
Non-Elective Contributions made pursuant to Section 11.1(c), the
Employer's Qualified Non-Elective Contribution made pursuant to Section
11.1(d), and Forfeitures as provided in this Section regardless of
whether they completed a Year of Service during the Plan Year.
(g) Notwithstanding any election in the Adoption Agreement to the
contrary, if this is a non-standardized Plan that would otherwise fail
to meet the requirements of Code Sections 401(a)(26), 410(b)(1), or
410(b)(2)(A)(i) and the Regulations thereunder because Employer matching
Contributions made pursuant to Section 11.1(b), Employer Non-Elective
Contributions made pursuant to Section 11.1(c) or Employer Qualified
Non-Elective Contributions made pursuant to Section 11.1(d) have not
been allocated to a sufficient number or percentage of Participants for
a Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share in the respective
contributions for the Plan Year shall be expanded to include the
minimum number of Participants who would not otherwise be eligible
as are necessary to satisfy the applicable test specified above. The
specific participants who shall become eligible under the terms of
this paragraph shall be those who are actively employed on the last
day of the Plan Year and, when compared to similarly situated
Participants, have completed the greatest number of Hours of Service
in the Plan Year.
(2) If after application of paragraph (1) above, the applicable test
is still not satisfied, then the group of Participants eligible to
share for the Plan Year shall be further expanded to include the
minimum number of Participants who are not actively employed on the
last day of the Plan Year as are necessary to satisfy the applicable
test. The specific Participants who shall become eligible to share
shall be those Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
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11.4 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1986, the annual allocation derived from Employer
Elective Contributions and Qualified Non-Elective Contributions to a
Participant's Elective Account and Qualified Non-Elective Account
shall satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group
multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral Percentage"
for the Non-Highly Compensated Participant group shall not be more
than two percentage points. Additionally, the "Actual Deferral
Percentage" for the Highly Compensated Participant group shall not
exceed the "Actual Deferral Percentage" for the Non-Highly
Compensated Participant group multiplied by 2. The provisions of
Code Section 401(k)(3) and Regulation 1.401(k)-1(b) are incorporated
herein by reference. However, for Plan Years beginning after
December 31, 1988, to prevent the multiple use of the alternative
method described in (2) above and Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective deferrals
pursuant to Section 11.2 and to make Employee contributions or to
receive matching contributions under this Plan or under any other
plan maintained by the Employer or an Affiliated Employer shall have
his actual contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are incorporated herein by
reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the average of
the ratios, calculated separately for each Participant in such group, of
the amount of Employer Elective Contributions and Qualified Non-Elective
Contributions allocated to each Participant's Elective Account and
Qualified Non-Elective Account for such Plan Year, to such Participant's
"414(s) Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each group,
for Plan Years beginning after December 31, 1988, shall be calculated to
the nearest one-hundredth of one percent of the Participant's "414(s)
Compensation." Employer Elective Contributions allocated to each
Non-Highly Compensated Participant's Elective Account shall be reduced
by Excess Deferred Compensation to the extent such excess amounts are
made under this Plan or any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Participant who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual deferral ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be the
greater of: (i) the ratio determined by aggregating Employer
Elective Contributions and "414(s) Compensation" of all eligible
Family Members who are Highly Compensated Participants without
regard to family aggregation; and (ii) the ratio determined by
aggregating Employer Elective Contributions and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000 limit
to "414(s) Compensation" for Plan Years beginning after December 31,
1988, Family Members shall include only the affected Employee's
spouse and any lineal descendants who have not attained age 19
before the close of the Plan Year.
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(2) The Employer Elective Contributions and "414(s) Compensation" of
all Family Members shall be disregarded for purposes of determining
the "Actual Deferral Percentage" of the Non-Highly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1) and
(2) above.
(d) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 401(b)(2)(A)(ii) as in
effect for Plan Years beginning after December 31, 1988), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may
be considered as a single arrangement for purposes of determining
whether or not such arrangements satisfy Code Sections 401(a)(4), 410(b)
and 401(k). In such a case, the cash or deferred arrangements included
in such plans and the plans including such arrangements shall be treated
as one arrangement and as one plan for purposes of this Section and Code
Sections 401(a)(4), 410(b) and 401(k). For plan years beginning after
December 31, 1989, plans may be aggregated under this paragraph (e) only
if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(k).
(e) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two (2) or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part of
an employee stock ownership plan as defined in Code Section 4975(e)(7)
for Plan Years beginning after December 31, 1988) of the Employer or an
Affiliated Employer, all such cash or deferred arrangements shall be
treated as one cash or deferred arrangement for the purpose of
determining the actual deferral ratio with respect to such Highly
Compensated Participant. However, for Plan Years beginning after
December 31, 1988, if the cash or deferred arrangements have different
Plan Years, this paragraph shall be applied by treating all cash or
deferred arrangements ending with or within the same calendar year as a
single arrangement.
11.5 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions and Qualified Non-Elective Contributions do not satisfy one of the
tests set forth in Section 11.4, for Plan Years beginning after December 31,
1986, the Administrator shall adjust Excess Contributions
pursuant to the options set forth below:
(a) On or before the fifteenth day of the third month following the
end of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him and/or at his election recharacterized
as a voluntary Employee contribution pursuant to Section 4.7 until one
of the tests set forth in Section 11.4 is satisfied, or until his actual
deferral ratio equals the actual deferral ratio of the Highly
Compensated Participant having the second highest actual deferral ratio.
This process shall continue until one of the tests set forth in Section
11.4 is satisfied. For each Highly Compensated Participant, the amount
of Excess Contributions is equal to the Elective Contributions and
Qualified Non-Elective Contributions made on behalf of such Highly
Compensated Participant (determined prior to the application of this
paragraph) minus the amount determined by multiplying the Highly
Compensated Participant's actual deferral ratio (determined after
application of this paragraph) by his "414(s) Compensation." However, in
determining
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the amount of Excess Contributions to be distributed and/or
recharacterized with respect to an affected Highly Compensated
Participant as determined herein, such amount shall be reduced by any
Excess Deferred Compensation previously distributed to such affected
Highly Compensated Participant for his taxable year ending with or
within such Plan Year. Any distribution and/or recharacterization of
Excess Contributions shall be made in accordance with the following:
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i)may be postponed but not later than the close of the Plan
Year following the Plan Year to which they are allocable;
(ii)shall be made first from unmatched Deferred Compensation
and, thereafter, simultaneously from Deferred Compensation which
is matched and matching contributions which relate to such
Deferred Compensation. However, any such matching contributions
which are not Vested shall be forfeited in lieu of being
distributed;
(iii) shall be made from Qualified Non-Elective Contributions
only to the extent that Excess Contributions exceed the balance
in the Participant's Elective Account attributable to Deferred
Compensation and Employer matching contributions.
(iv)shall be adjusted for Income; and
(v)shall be designated by the Employer as a distribution of
Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess Contributions
pursuant to (a) above, such recharacterized amounts:
(i)shall be deemed to have occurred on the date on which the
last of those Highly Compensated Participants with Excess
Contributions to be recharacterized is notified of the
recharacterization and the tax consequences of such
recharacterization;
(ii)for Plan Years ending on or before August 8, 1988, may be
postponed but not later than October 24, 1988;
(iii) shall not exceed the amount of Deferred Compensation on
behalf of any Highly Compensated Participant for any Plan Year;
(iv)shall be treated as voluntary Employee contributions for
purposes of Code Section 401(a)(4) and Regulation 1.401(k)-1(b).
However, for purposes of Sections 2.2 and 4.3(f),
recharacterized Excess Contributions continue to be treated as
Employer contributions that are Deferred Compensation. For Plan
Years beginning after December 31, 1988, Excess Contributions
recharacterized as voluntary Employee contributions shall
continue to be nonforfeitable and subject to the same
distribution rules provided for in Section 11.2(c);
(v)which relate to Plan Years ending on or before October 24,
1988, may be treated as either Employer contributions or
voluntary Employee contributions and therefore shall not be
subject to the restrictions of Section 11.2(c);
(vi)are not permitted if the amount recharacterized plus
voluntary Employee contributions actually made by such Highly
Compensated Participant, exceed the maximum amount of voluntary
Employee contributions (determined prior to application of
Section 11.6) that such
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Highly Compensated Participant is permitted to make under the
Plan in the absence of recharacterization;
(vii) shall be adjusted for Income.
(3) Any distribution and/or recharacterization of less than the
entire amount of Excess Contributions shall be treated as a pro rata
distribution and/or recharacterization of Excess Contributions and
Income.
(4) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose actual deferral ratio is
determined under the family aggregation rules shall be accomplished
as follows:
(i)If the actual deferral ratio for the Highly Compensated
Participant is determined in accordance with Section
11.4(c)(1)(ii), then the actual deferral ratio shall be reduced
as required herein and the Excess Contributions for the family
unit shall be allocated among the Family Members in proportion
to the Elective Contributions of each Family Member that were
combined to determine the group actual deferral ratio.
(ii)If the actual deferral ratio for the Highly Compensated
Participant is determined under Section 11.4(c)(1)(i), then the
actual deferral ratio shall first be reduced as required herein,
but not below the actual deferral ratio of the group of Family
Members who are not Highly Compensated Participants without
regard to family aggregation. The Excess Contributions resulting
from this initial reduction shall be allocated (in proportion to
Elective Contributions) among the Highly Compensated
Participants whose Elective Contributions were combined to
determine the actual deferral ratio. If further reduction is
still required, then Excess Contributions resulting from this
further reduction shall be determined by taking into account the
contributions of all Family Members and shall be allocated among
them in proportion to their respective Elective Contributions.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer shall make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient to
satisfy one of the tests set forth in Section 11.4(a). Such contribution
shall be allocated to the Participant's Qualified Non-Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.
(c) For purposes of this Section, "Income" means the income or loss
allocable to Excess Contributions which shall equal the sum of the
allocable gain or loss for the Plan Year and the allocable gain or loss
for the period between the end of the Plan Year and the date of
distribution ("gap period"). The income or loss allocable to Excess
Contributions for the Plan Year and the "gap period" is calculated
separately and is determined by multiplying the income or loss for the
Plan Year or the "gap period" by a fraction. The numerator of the
fraction is the Excess Contributions for the Plan Year. The denominator
of the fraction is the total of the Participant's Elective Account
attributable to Elective Contributions and the Participant's Qualified
Non-Elective Account as of the end of the Plan Year or the "gap period,"
reduced by the gain allocable to such total amount for the Plan Year or
the "gap period" and increased by the loss allocable to such total
amount for the Plan Year or the "gap period."
In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable Income for the
"gap period." Under such "safe harbor method," allocable Income for the
"gap period" shall be deemed to equal ten percent (10%) of the Income
allocable to Excess Contributions for the Plan Year of the Participant
multiplied by the number of calendar months in the "gap period." For
purposes of determining the number of calendar months in the "gap
period,"
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a distribution occurring on or before the fifteenth day of the
month shall be treated as having been made on the last day of the
preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next
subsequent month.
Notwithstanding the above, for Plan Years which began in 1987,
Income during the "gap period" shall not be taken into account.
Notwithstanding the above, for any distribution under this
Section which is made after August 15, 1991, such distribution shall not
include any Income for the "gap period". Further provided, for any
distribution under this Section which is made after August 15, 1991, the
amount of Income may be computed using a reasonable method that is
consistent with Section 4.3(c), provided such method is used
consistently for all Participants and for all such distributions for the
Plan Year.
(d) Any amounts not distributed or recharacterized within 2 1/2
months after the end of the Plan Year shall be subject to the 10%
Employer excise tax imposed by Code Section 4979.
11.6 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage," for Plan Years beginning
after the later of the Effective Date of this Plan or December 31, 1986,
for the Highly Compensated Participant group shall not exceed the
greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the Non-Highly
Compensated Participant group, or such percentage for the Non-Highly
Compensated Participant group plus 2 percentage points. However, for
Plan Years beginning after December 31, 1988, to prevent the
multiple use of the alternative method described in this paragraph
and Code Section 401(m)(9)(A), any Highly Compensated Participant
eligible to make elective deferrals pursuant to Section 11.2 or any
other cash or deferred arrangement maintained by the Employer or an
Affiliated Employer and to make Employee contributions or to receive
matching contributions under any plan maintained by the Employer or
an Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2. The provisions of Code
Section 401(m) and Regulations 1.401(m)-1(b) and 1.401(m)-2 are
incorporated herein by reference.
(b) For the purposes of this Section and Section 11.7, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately
for each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 11.1(b) (to the extent such matching contributions are not
used to satisfy the tests set forth in Section 11.4), voluntary
Employee contributions made pursuant to Section 4.7 and Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 11.5 on behalf of each such Participant for such
Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
11.7(d), only Employer matching contributions (excluding matching
contributions forfeited or distributed pursuant to Section 11.2(f),
11.5(a), or 11.7(a)) contributed to the Plan prior to the end of the
succeeding Plan Year shall be considered. In addition, the Administrator
may elect to take into account, with respect to Employees eligible to
have Employer
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matching contributions made pursuant to Section 11.1(b) or
voluntary Employee contributions made pursuant to Section 4.7 allocated
to their accounts, elective deferrals (as defined in Regulation
1.402(g)-1(b)) and qualified non-elective contributions (as defined in
Code Section 401(m)(4)(C)) contributed to any plan maintained by the
Employer. Such elective deferrals and qualified non-elective
contributions shall be treated as Employer matching contributions
subject to Regulation 1.401(m)-1(b)(2) which is incorporated herein by
reference. However, for Plan Years beginning after December 31, 1988,
the Plan Year must be the same as the plan year of the plan to which the
elective deferrals and the qualified non-elective contributions are
made.
(d) For the purpose of determining the actual contribution ratio of
a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Employee is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant) shall
be the greater of: (i) the ratio determined by aggregating Employer
matching contributions made pursuant to Section 11.1(b) (to the
extent such matching contributions are not used to satisfy the tests
set forth in Section 11.4), voluntary Employee contributions made
pursuant to Section 4.7, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.5 and
"414(s) Compensation" of all eligible Family Members who are Highly
Compensated Participants without regard to family aggregation; and
(ii) the ratio determined by aggregating Employer matching
contributions made pursuant to Section 11.1(b) (to the extent such
matching contributions are not used to satisfy the tests set forth
in Section 11.4), voluntary Employee contributions made pursuant to
Section 4.7, Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 11.5 and "414(s)
Compensation" of all eligible Family Members (including Highly
Compensated Participants). However, in applying the $200,000 limit
to "414(s) Compensation" for Plan Years beginning after December 31,
1988, Family Members shall include only the affected Employee's
spouse and any lineal descendants who have not attained age 19
before the close of the Plan Year.
(2) The Employer matching contributions made pursuant to Section
11.1(b) (to the extent such matching contributions are not used to
satisfy the tests set forth in Section 11.4), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and "414(s) Compensation" of all Family Members shall
be disregarded for purposes of determining the "Actual Contribution
Percentage" of the Non-Highly Compensated Participant group except
to the extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1) and
(2) above.
(e) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as
one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than
the average benefits test under Code Section 410(b)(2)(A)(ii) as in
effect for Plan Years beginning after December 31, 1988), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or
both, are made may be considered as a single plan for purposes of
determining whether or not such plans satisfy Code Sections 401(a)(4),
410(b) and 401(m). In such a case, the aggregated plans must satisfy
this Section and Code Sections 401(a)(4),
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410(b) and 401(m) as though such aggregated plans were a single plan.
For plan years beginning after December 31, 1989, plans may be
aggregated under this paragraph only if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) may not be aggregated with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a Participant under two
or more plans (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7) for Plan Years beginning after December 31,
1988) which are maintained by the Employer or an Affiliated Employer to
which matching contributions, Employee contributions, or both, are made,
all such contributions on behalf of such Highly Compensated Participant
shall be aggregated for purposes of determining such Highly Compensated
Participant's actual contribution ratio. However, for Plan Years
beginning after December 31, 1988, if the plans have different plan
years, this paragraph shall be applied by treating all plans ending with
or within the same calendar year as a single plan.
(g) For purposes of Section 11.6(a) and 11.7, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to have matching contributions made pursuant to
Section 11.1(b) (whether or not a deferred election was made or
suspended pursuant to Section 11.2(e)) allocated to his account for the
Plan Year or to make salary deferrals pursuant to Section 11.2 (if the
Employer uses salary deferrals to satisfy the provisions of this
Section) or voluntary Employee contributions pursuant to Section 4.7
(whether or not voluntary Employee contributions are made) allocated to
his account for the Plan Year.
(h) For purposes of this Section, "Matching Contribution" shall mean
an Employer contribution made to the Plan, or to a contract described in
Code Section 403(b), on behalf of a Participant on account of an
Employee contribution made by such Participant, or on account of a
participant's deferred compensation, under a plan maintained by the
Employer.
11.7 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that for Plan Years beginning after December 31,
1986, the "Actual Contribution Percentage" for the Highly Compensated
Participant group exceeds the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group pursuant to Section 11.6(a),
the Administrator (on or before the fifteenth day of the third month
following the end of the Plan Year, but in no event later than the close
of the following Plan Year) shall direct the Trustee to distribute to
the Highly Compensated Participant having the highest actual
contribution ratio, his portion of Excess Aggregate Contributions (and
Income allocable to such contributions) or, if forfeitable, forfeit such
non-Vested Excess Aggregate Contributions attributable to Employer
matching contributions (and Income allocable to such Forfeitures) until
either one of the tests set forth in Section 11.6(a) is satisfied, or
until his actual contribution ratio equals the actual contribution ratio
of the Highly Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of the tests
set forth in Section 11.6(a) is satisfied. The distribution and/or
Forfeiture of Excess Aggregate Contributions shall be made in the
following order:
(1) Employer matching contributions distributed and/or forfeited
pursuant to Section 11.5(a)(1);
(2) Voluntary Employee contributions including Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5(a)(2);
(3) Remaining Employer matching contributions.
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(b) Any distribution or Forfeiture of less than the entire amount of
Excess Aggregate Contributions (and Income) shall be treated as a pro
rata distribution of Excess Aggregate Contributions and Income.
Distribution of Excess Aggregate Contributions shall be designated by
the Employer as a distribution of Excess Aggregate Contributions (and
Income). Forfeitures of Excess Aggregate Contributions shall be treated
in accordance with Section 4.3. However, no such Forfeiture may be
allocated to a Highly Compensated Participant whose contributions are
reduced pursuant to this Section.
(c) Excess Aggregate Contributions attributable to amounts other
than voluntary Employee contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes
of Code Sections 404 and 415 even if distributed from the Plan.
(d) For the purposes of this Section and Section 11.6, "Excess
Aggregate Contributions" means, with respect to any Plan Year, the
excess of:
(1) the aggregate amount of Employer matching contributions made
pursuant to Section 11.1(b) (to the extent such contributions are
taken into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or
elective deferrals taken into account pursuant to Section 11.6(c)
actually made on behalf of the Highly Compensated Participant group
for such Plan Year, over
(2) the maximum amount of such contributions permitted under the
limitations of Section 11.6(a).
(e) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the total Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken into
account pursuant to Section 11.6(a)), voluntary Employee contributions
made pursuant to Section 4.7, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.5 and any
Qualified Non-Elective Contributions or elective deferrals taken into
account pursuant to Section 11.6(c) on behalf of the Highly Compensated
Participant (determined prior to the application of this paragraph)
minus the amount determined by multiplying the Highly Compensated
Participant's actual contribution ratio (determined after application of
this paragraph) by his "414(s) Compensation." The actual contribution
ratio must be rounded to the nearest one-hundredth of one percent for
Plan Years beginning after December 31, 1988. In no case shall the
amount of Excess Aggregate Contribution with respect to any Highly
Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken into
account pursuant to Section 11.6(a)), voluntary Employee contributions
made pursuant to Section 4.7, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.5 and any
Qualified Non-Elective Contributions or elective deferrals taken into
account pursuant to Section 11.6(c) on behalf of such Highly Compensated
Participant for such Plan Year.
(f) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for the plan year of
any other qualified cash or deferred arrangement (as defined in Code
Section 401(k)) maintained by the Employer that ends with or within the
Plan Year or which are treated as voluntary Employee contributions due
to recharacterization pursuant to Section 11.5.
(g) The determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules
shall be accomplished as follows:
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(1) If the actual contribution ratio for the Highly Compensated
Participant is determined in accordance with Section 11.6(d)(1),
then the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken
into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or
elective deferrals taken into account pursuant to Section 11.6(c) of
each Family Member that were combined to determine the group actual
contribution ratio.
(2) If the actual contribution ratio for the Highly Compensated
Participant is determined under Section 11.6(d)(2), then the actual
contribution ratio shall first be reduced, as required herein, but
not below the actual contribution ratio of the group of Family
Members who are not Highly Compensated Participants without regard
to family aggregation. The Excess Aggregate Contributions resulting
from this initial reduction shall be allocated among the Highly
Compensated Participants whose Employer matching contributions made
pursuant to Section 11.1(b) (to the extent taken into account
pursuant to Section 11.6(a)), voluntary Employee contributions made
pursuant to Section 4.7, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 11.5 and any
Qualified Non-Elective Contributions or elective deferrals taken
into account pursuant to Section 11.6(c) were combined to determine
the actual contribution ratio. If further reduction is still
required, then Excess Aggregate Contributions resulting from this
further reduction shall be determined by taking into account the
contributions of all Family Members and shall be allocated among
them in proportion to their respective Employer matching
contributions made pursuant to Section 11.1(b) (to the extent taken
into account pursuant to Section 11.6(a)), voluntary Employee
contributions made pursuant to Section 4.7, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 11.5 and any Qualified Non-Elective Contributions or
elective deferrals taken into account pursuant to Section 11.6(c).
(h) Notwithstanding the above, within twelve (12) months after the
end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 11.6. Such contribution shall be allocated to the
Participant's Qualified Non-Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants. A separate
accounting shall be maintained for the purpose of excluding such
contributions from the "Actual Deferral Percentage" tests pursuant to
Section 11.4.
(i) For purposes of this Section, "Income" means the income or loss
allocable to Excess Aggregate Contributions which shall equal the sum of
the allocable gain or loss for the Plan Year and the allocable gain or
loss for the period between the end of the Plan Year and the date of
distribution ("gap period"). The income or loss allocable to Excess
Aggregate Contributions for the Plan Year and the "gap period" is
calculated separately and is determined by multiplying the income or
loss for the Plan Year or the "gap period" by a fraction. The numerator
of the fraction is the Excess Aggregate Contributions for the Plan Year.
The denominator of the fraction is the total Participant's Account and
Voluntary Contribution Account attributable to Employer matching
contributions subject to Section 11.6, voluntary Employee contributions
made pursuant to Section 4.7, and any Qualified Non-Elective
Contributions and elective deferrals taken into account pursuant to
Section 11.6(c) as of the end of the Plan Year or the "gap period,"
reduced by the gain allocable to such total amount for the Plan Year or
the "gap period" and increased by the loss allocable to such total
amount for the Plan Year or the "gap period."
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In lieu of the "fractional method" described above, a "safe
harbor method" may be used to calculate the allocable Income for the
"gap period." Under such "safe harbor method," allocable Income for the
"gap period" shall be deemed to equal ten percent (10%) of the Income
allocable to Excess Aggregate Contributions for the Plan Year of the
Participant multiplied by the number of calendar months in the "gap
period." For purposes of determining the number of calendar months in
the "gap period," a distribution occurring on or before the fifteenth
day of the month shall be treated as having been made on the last day of
the preceding month and a distribution occurring after such fifteenth
day shall be treated as having been made on the first day of the next
subsequent month.
The Income allocable to Excess Aggregate Contributions resulting
from recharacterization of Elective Contributions shall be determined
and distributed as if such recharacterized Elective Contributions had
been distributed as Excess Contributions.
Notwithstanding the above, for any distribution under this
Section which is made after August 15, 1991, such distribution shall not
include any Income for the "gap period". Further provided, for any
distribution under this Section which is made after August 15, 1991, the
amount of Income may be computed using a reasonable method that is
consistent with Section 4.3(c), provided such method is used
consistently for all Participants and for all such distributions for the
Plan Year.
Notwithstanding the above, for Plan Years which began in 1987,
Income during the "gap period" shall not be taken into account.
Notwithstanding the above, for any distribution under this
Section which is made after August 15, 1991, such distribution shall not
include any Income for the "gap period". Further provided, for any
distribution under this Section which is made after August 15, 1991, the
amount of Income may be computed using a reasonable method that is
consistent with Section 4.3(c), provided such method is used
consistently for all Participants and for all such distributions for the
Plan Year.
11.8 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan Year
up to the lesser of (1) 100% of his accounts as specified in the
Adoption Agreement valued as of the last Anniversary Date or other
valuation date or (2) the amount necessary to satisfy the immediate and
heavy financial need of the Participant. Any distribution made pursuant
to this Section shall be deemed to be made as of the first day of the
Plan Year or, if later, the valuation date immediately preceding the
date of distribution, and the account from which the distribution is
made shall be reduced accordingly. Withdrawal under this Section shall
be authorized only if the distribution is on account of one of the
following or any other items permitted by the Internal Revenue Service:
(1) Medical expenses described in Code Section 213(d) incurred by
the Participant, his spouse, or any of his dependents (as defined in
Code Section 152) or expenses necessary for these persons to obtain
medical care;
(2) The purchase (excluding mortgage payments) of a principal
residence for the Participant; (3) Payment of tuition and related
educational fees for the next 12 months of post-secondary education
for the Participant, his spouse, children, or dependents; or
(4) The need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
(b) No such distribution shall be made from the Participant's
Account until such Account has become fully Vested.
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(c) No distribution shall be made pursuant to this Section unless
the Administrator, based upon the Participant's representation and such
other facts as are known to the Administrator, determines that all of
the following conditions are satisfied:
(1) The distribution is not in excess of the amount of the immediate
and heavy financial need of the Participant (including any amounts
necessary to pay any federal, state, or local taxes or penalties
reasonably anticipated to result from the distribution);
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available
under all plans maintained by the Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and voluntary
Employee contributions will be suspended for at least twelve (12)
months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals for the
Participant's taxable year immediately following the taxable year of
the hardship distribution in excess of the applicable limit under
Code Section 402(g) for such next taxable year less the amount of
such Participant's elective deferrals for the taxable year of the
hardship distribution.
(d) Notwithstanding the above, distributions from the Participant's
Elective Account and Qualified Non-Elective Account pursuant to this
Section shall be limited solely to the Participant's Deferred
Compensation and any income attributable thereto credited to the
Participant's Elective Account as of December 31, 1988.
(e) Any distribution made pursuant to this Section shall be made in
a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 411(a)(11) and 417 and the Regulations
thereunder.
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AMENDMENT TO
NATIONAL STRATEGIC RETIREMENT CONSULTING,INC.
REGIONAL PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
1. Article VI of the Plan is amended by the addition of the new subsection,
effective as of the following date:
a. For Plans not entitled to extended reliance as described in Revenue
Ruling 94-76, the first day of the first Plan Year beginning on or after
December 31, 1994, or if later, 90 days after December 31, 1994; or
b. For Plans entitled to extended reliance as described in Revenue
Ruling 94-76, as of the first day of the first plan year beginning in 1999.
` However, in the event of a transfer of assets to the Plan from a money
purchase plan that occurs after the date of the most recent determination
letter, the effective date of the amendment shall be the date immediately
preceding the date of such transfer of assets.
TRANSFER OF ASSETS FROM A MONEY PURCHASE PLAN
Notwithstanding any provision of this plan to the contrary, to the extent
that any optional form of benefit under this plan permits a distribution
prior to the employee's retirement, death, disability, or severance from employ-
ment, and prior to plan termination, the optional form of benefit is not
available with respect to benefits attributable to assets (including the post-
transfer earnings thereon) and liabilities that are transferred, within the
meaning of section 414(1) of the Internal Revenue Code (other than any portion
of those assets and liabilities attributable to voluntary employee contribu-
tions).
2. Article VI is amended by the addition of the following new subsection,
effective as of December 12, 1994;
UNIFORMED SERVICES
Notwithstanding any provision of this plan to the contrary, contributions,
benefits and service credit with respect to qualified military service will
be provided in accordance with Section 414(u) of the Internal Revenue Code.
Loan repayments will be suspended under this plan as permitted under
code Section 414(u)(4).
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Pursuant to the terms of the Plan regarding amendments,
NSRC, as the sponsor of the prototype, hereby adopt this
amendment as of the date set forth below.
National Strategic Retirement Consulting, Inc.
By: Laura S. Millwood
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/s/ Laura s. Millwood
Title: Director of Compliance
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Date: 6/24/97
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EXHIBIT 10.3
ADOPTION AGREEMENT FOR
NATIONAL STRATEGIC RETIREMENT CONSULTING, INC.
NON-STANDARDIZED 401(K) PROFIT SHARING
PLAN AND TRUST
The undersigned Employer adopts the National Strategic Retirement
Consulting, Inc. Non-Standardized 401(k) Profit Sharing Plan and Trust for
those Employees who shall qualify as Participants hereunder, to be known as
the
A1 Trimeris, Inc. Employee 401(k) Plan
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(Enter Plan Name)
It shall be effective as of the date specified below. The Employer hereby
selects the following Plan specifications:
CAUTION: The failure to properly fill out this Adoption Agreement may result
in disqualification of the Plan.
EMPLOYER INFORMATION
B1 Name of Employer Trimeris, Inc.
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B2 Address 4727 University Drive, Ste. 100
Durham NC 27702
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City State Zip
Telephone (919) 419-6050
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B3 Employer Identification Number 56-1808663
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B4 Date Business Commenced January 7, 1993
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B5 TYPE OF ENTITY
a.( )S Corporation
b.( )Professional Service Corporation
c.(X) Corporation
d.( )Sole Proprietorship
e.( )Partnership
f.( )Other_______________________________________________________________
AND, is the Employer a member of...
g. a controlled group? ( ) Yes (X) No
h. an affiliated service group? ( ) Yes (X) No
Copyright 1995-R National Strategic Retirement Consulting, Inc.
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B6 NAME(S) OF TRUSTEE(S)
a. Matthew Megaro
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b. M. Ross Johnson
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c.
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d.
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e.
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B7 TRUSTEES' ADDRESS
a.(X) Use Employer Address
b.( ) ____________________________________________________________________
Street
____________________________________________________________________
City State Zip
B8 LOCATION OF EMPLOYER'S PRINCIPAL OFFICE:
a.(X) State b. ( ) Commonwealth of c. North Carolina and this Plan
and Trust shall be governed under the same.
B9 EMPLOYER FISCAL YEAR means the 12 consecutive month period:
Commencing on a. January 1st (e.g., January 1st) and
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month day
ending on b. December 31st.
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month day
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PLAN INFORMATION
C1 EFFECTIVE DATE
This Adoption Agreement of the National Strategic Retirement Consulting,
Inc. Non-Standardized 401(k) Profit Sharing Plan and Trust shall:
a.( )establish a new Plan and Trust effective as of (hereinafter
called the "Effective Date").
b.(X) constitute an amendment and restatement in its entirety of a
previously established qualified Plan and Trust of the Employer which
was effective January 1, 1994 (hereinafter called the "Effective
Date"). Except as specifically provided in the Plan, the effective
date of this amendment and restatement is January 1, 1998 (For TRA '86
amendments, enter the first day of the first Plan Year beginning in
1989).
C2 PLAN YEAR means the 12 consecutive month period:
Commencing on a. January 1st (e.g., January 1st)
and ending on b. December 31st.
IS THERE A SHORT PLAN YEAR?
c. (X) No
d. ( ) Yes, beginning_______________________
and ending ____________________________.
C3 ANNIVERSARY DATE of Plan (Annual Valuation Date)
a. December 31st
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month day
C4 PLAN NUMBER assigned by the Employer (select one)
a. (X) 001 b. ( ) 002 c. ( ) 003 d. ( ) Other
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C5 NAME OF PLAN ADMINISTRATOR (Document provides for the Employer to appoint an
Administrator. If none is named, the Employer will become the
Administrator.)
a.(X) Employer (Use Employer Address)
b.( )Name __________________________________________________________
Address ( ) Use Employer Address
_________________________________________________________
_________________________________________________________
City State Zip
Telephone____________________________
Administrator's I.D. Number____________________
C6 PLAN'S AGENT FOR SERVICE OF LEGAL PROCESS
a.(X) Employer (Use Employer Address)
b.( )Name________________________________________________________________
Address_____________________________________________________________
_____________________________________________________________
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ELIGIBILITY, VESTING AND RETIREMENT AGE
D1 ELIGIBLE EMPLOYEES (Plan Section 1.15) shall mean:
a.(X) all Employees who have satisfied the eligibility requirements.
b.( ) all Employees who have satisfied the eligibility requirements
except those checked below:
1.( ) Employees paid by commissions only.
2.( ) Employees hourly paid.
3.( ) Employees paid by salary.
4.( ) Employees whose employment is governed by a collective
bargaining agreement between the Employer and "employee
representatives" under which retirement benefits were the subject
of good faith bargaining. For this purpose, the term "employee
representatives" does not include any organization more than half
of whose members are employees who are owners, officers, or
executives of the Employer.
5.( ) Highly Compensated Employees.
6.( ) Employees who are non-resident aliens who received no earned
income (within the meaning of Code Section 911(d)(2)) from the
Employer which constitutes income from sources within the United
States (within the meaning of Code Section 861(a)(3)).
7.( ) Other
NOTE:For purposes of this section, the term Employee shall include all
Employees of this Employer and any leased employees deemed to be
Employees under Code Section 414(n) or 414(o).
D2 EMPLOYEES OF AFFILIATED EMPLOYERS (Plan Section 1.16)
Employees of Affiliated Employers:
a. (X) will not or N/A
b. ( ) will
be treated as Employees of the Employer adopting the Plan.
NOTE:If D2b is elected, each Affiliated Employer should execute this
Adoption Agreement as a Participating Employer.
D3 HOURS OF SERVICE (Plan Section 1.31) will be determined on the basis of the
method selected below. Only one method may be selected. The method selected
will be applied to all Employees covered under the Plan.
a.(X) On the basis of actual hours for which an Employee is paid or entitled
to payment.
b.( ) On the basis of days worked. An Employee will be credited with ten
(10) Hours of Service if under the Plan such Employee would be
credited with at least one (1) Hour of Service during the day.
c.( ) On the basis of weeks worked. An Employee will be credited forty-five
(45) Hours of Service if under the Plan such Employee would be
credited with at least one (1) Hour of Service during the week.
d.( ) On the basis of semi-monthly payroll periods. An Employee will be
credited with ninety-five (95) Hours of Service if under the Plan such
Employee would be credited with at least one (1) Hour of Service
during the semi-monthly payroll period.
e.( ) On the basis of months worked. An Employee will be credited with one
hundred ninety (190) Hours of Service if under the Plan such Employee
would be credited with at least one (1) Hour of Service during the
month.
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D4 CONDITIONS OF ELIGIBILITY (Plan Section 3.1) (Check either a OR b and c, and
if applicable, d)
Any Eligible Employee will be eligible to participate in the Plan if such
Eligible Employee has satisfied the service and age requirements, if any,
specified below:
a.( ) NO AGE OR SERVICE REQUIRED.
b.(X) SERVICE REQUIREMENT. (may not exceed 1 year)
1. (X) None
2. ( ) 1/2 Year of Service
3. ( ) 1 Year of Service
4. ( ) Other
NOTE:If the Year(s) of Service selected is or includes a fractional year, an
Employee will not be required to complete any specified number of
Hours of Service to receive credit for such fractional year. If
expressed in Months of Service, an Employee will not be required to
complete any specified number of Hours of Service in a particular
month.
c.(X) AGE REQUIREMENT (may not exceed 21)
1. ( ) N/A - No Age Requirement.
2. ( ) 20 1/2
3. (X) 21
4. ( ) Other
d.( ) FOR NEW PLANS ONLY - Regardless of any of the above age or service
requirements, any Eligible Employee who was employed on the Effective
Date of the Plan shall be eligible to participate hereunder and shall
enter the Plan as of such date.
D5 EFFECTIVE DATE OF PARTICIPATION (Plan Section 3.2) An Eligible Employee
shall become a Participant as of:
a.( ) the first day of the Plan Year in which he met the requirements.
b.( ) the first day of the Plan Year in which he met the requirements, if
he met the requirements in the first 6 months of the Plan Year, or as
of the first day of the next succeeding Plan Year if he met the
requirements in the last 6 months of the Plan Year.
c.( ) the earlier of the first day of the seventh month or the first day of
the Plan Year coinciding with or next following the date on which he
met the requirements.
d.( ) the first day of the Plan Year next following the date on which he
met the requirements. (Eligibility must be 1/2 Year of Service or less
and age 20 1/2 or less.)
e.( ) the first day of the month coinciding with or next following the date
on which he met the requirements.
f.(X) Other: immediately , provided that an Employee who has satisfied the
maximum age and service requirements that are permissible in Section
D4 above and who is otherwise entitled to participate, shall commence
participation no later than the earlier of (a) 6 months after such
requirements are satisfied, or (b) the first day of the first Plan
Year after such requirements are satisfied, unless the Employee
separates from service before such participation date.
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D6 VESTING OF PARTICIPANT'S INTEREST (Plan Section 6.4(b))
The vesting schedule, based on number of Years of Service, shall be as
follows:
a.( ) 100% upon entering Plan. (Required if eligibility requirement is
greater than one (1) Year of Service.)
b.( ) 0-2 years 0% c.( ) 0-4 years 0%
3 years 100% 5 years 100%
d.( ) 0-1 year 0% e.(X) 1 year 25%
2 years 20% 2 years 50%
3 years 40% 3 years 75%
4 years 60% 4 years 100%
5 years 80% 6 years 100%
f.( ) 1 year 20% g.( ) 0-2 years 0%
2 years 40% 3 years 20%
3 years 60% 4 years 40%
4 years 80% 5 years 60%
5 years 100% 6 years 80%
7 years 100%
h.( )Other - Must be at least as liberal as either c or g above.
Years of Service Percentage
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D7 FOR AMENDED PLANS (Plan Section 6.4(f)) If the vesting schedule has been
amended to a less favorable schedule, enter the pre-amended schedule below:
a.(X) Vesting schedule has not been amended or amended schedule is more
favorable in all years.
b.( )Years of Service Percentage
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D8 TOP HEAVY VESTING (Plan Section 6.4(c)) If this Plan becomes a Top Heavy
Plan, the following vesting schedule, based on number of Years of Service,
for such Plan Year and each succeeding Plan Year, whether or not the Plan is
a Top Heavy Plan, shall apply and shall be treated as a Plan amendment
pursuant to this Plan. Once effective, this schedule shall also apply to any
contributions made prior to the effective date of Code Section 416 and/or
before the Plan became a Top Heavy Plan.
a.(X) N/A (D6a, b, d, e or f was selected)
b.( ) 0-1 year 0% c.( )0-2 years 0%
2 years 20% 3 years 100%
3 years 40%
4 years 60%
5 years 80%
6 years 100%
NOTE:This section does not apply to the Account balances of any Participant
who does not have an Hour of Service after the Plan has initially
become top heavy. Such Participant's Account balance attributable to
Employer contributions and Forfeitures will be determined without
regard to this section.
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D9 VESTING (Plan Section 6.4(h)) In determining Years of Service for vesting
purposes, Years of Service attributable to the following shall be EXCLUDED:
a.( ) Service prior to the Effective Date of the Plan or a predecessor
plan.b. (X) N/A.
c.( ) Service prior to the time an Employee attained age 18.d. (X) N/A.
D10 PLAN SHALL RECOGNIZE SERVICE WITH PREDECESSOR EMPLOYER
a.(X) No.
b.( ) Yes: Years of Service with shall be recognized for the purpose
of this Plan.
NOTE:If the predecessor Employer maintained this qualified Plan, then Years
of Service with such predecessor Employer shall be recognized pursuant
to Section 1.74, and b. must be marked.
D11 NORMAL RETIREMENT AGE ("NRA") (Plan Section 1.42) means:
a.( ) the date a Participant attains his birthday. (not to exceed
65th)
b.(X) the later of the date a Participant attains his 65th birthday (not to
exceed 65th) or the c. 5th (not to exceed 5th) anniversary of the
first day of the Plan Year in which participation in the Plan
commenced.
D12 NORMAL RETIREMENT DATE (Plan Section 1.43) shall commence:
a.( ) as of the Participant's "NRA."
OR (must select b. or c. AND 1. or 2.)
b.( ) as of the first day of the month...
c.(X) as of the Anniversary Date...
1. (X) coinciding with or next following the Participant's "NRA."
2. ( ) nearest the Participant's "NRA."
D13 EARLY RETIREMENT DATE (Plan Section 1.12) means the:
a.(X) No Early Retirement provision provided.
b.( ) date on which a Participant...
c.( ) first day of the month coinciding with or next following the date
on which a Participant...
d.( ) Anniversary Date coinciding with or next following the date on
which a Participant...
AND, if b, c or d was selected...
1. ( ) attains his birthday and has
2. ( ) completed at least Years of Service.
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CONTRIBUTIONS, ALLOCATIONS AND DISTRIBUTIONS
E1 a.COMPENSATION (Plan Section 1.9) with respect to any Participant means:
1. (X) Wages, tips and other Compensation on Form W-2.
2. ( ) Section 3401(a) wages (wages for withholding purposes).
3. ( ) 415 safe-harbor compensation.
AND COMPENSATION
1. ( ) shall
2. (X) shall not
exclude (even if includible in gross income) reimbursements or other
expense allowances, fringe benefits (cash or noncash), moving expenses,
deferred compensation, and welfare benefits.
b.COMPENSATION shall be
1. (X) actually paid (must be selected if Plan is integrated)
2. ( ) accrued
c.HOWEVER, FOR NON-INTEGRATED PLANS, Compensation shall exclude (select
all that apply):
1. (X) N/A. No exclusions
2. ( ) overtime
3. ( ) bonuses
4. ( ) commissions
5. ( ) other
d.FOR PURPOSES OF THIS SECTION E1, Compensation shall be based on:
1. (X) the Plan Year.
2. ( ) the Fiscal Year coinciding with or ending within the Plan Year.
3. ( ) the Calendar Year coinciding with or ending within the Plan Year.
NOTE:The Limitation Year shall be the same as the year on which Compensation
is based.
e.HOWEVER, for an Employee's first year of participation, Compensation
shall be recognized as of:
1. ( ) the first day of the Plan Year.
2. (X) the date the Participant entered the Plan.
f.IN ADDITION, COMPENSATION and "414(s) Compensation" 1. (X) shall 2. ( )
shall not include compensation which is not currently includible in the
Participant's gross income by reason of the application of Code Sections
125, 402(a)(8), 402(h)(1)(B) or 403(b).
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E2 SALARY REDUCTION ARRANGEMENT - ELECTIVE CONTRIBUTION (Plan Section 11.2)
Each Employee may elect to have his Compensation reduced by:
a.( ) %
b.(X) up to 12 %
c.( ) from % to %
d.( ) up to the maximum percentage allowable not to exceed the limits of
Code Sections 401(k), 404 and 415.
AND...
e.(X) A Participant may elect to commence salary reductions as of the
beginning of each month (ENTER AT LEAST ONE DATE OR PERIOD). A
Participant may modify the amount of salary reductions as of the
beginning of each month (ENTER AT LEAST ONE DATE OR PERIOD).
AND...
Shall cash bonuses paid within 2 1/2 months after the end of the Plan Year
be subject to the salary reduction election?
f. ( ) Yes
g. (X) No
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E3 FORMULA FOR DETERMINING EMPLOYER'S MATCHING CONTRIBUTION (Plan Section
11.1(b))
a.( ) N/A. There shall be no matching contributions.
b.( ) The Employer shall make matching contributions equal to % (e.g.
50%) of the Participant's salary reductions.
c.(X) The Employer may make matching contributions equal to a
discretionary percentage, to be determined by the Employer, of the
Participant's salary reductions.
d.( ) The Employer shall make matching contributions equal to the sum of
% of the portion of the Participant's salary reduction which
does not exceed % of the Participant's Compensation plus %
of the portion of the Participant's salary reduction which exceeds
% of the Participant's Compensation, but does not exceed %
of the Participant's Compensation.
e.( ) The Employer shall make matching contributions equal to the
percentage determined under the following schedule:
Participant's Total Matching Percentage
Years of Service
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FOR PLANS WITH MATCHING CONTRIBUTIONS
f.(X) Matching contributions g. ( ) shall h. (X) shall not be used in
satisfying the deferral percentage tests. (If used, full vesting and
restrictions on withdrawals will apply and the match will be deemed to
be an Elective Contribution).
i.(X) Shall a Year of Service be required in order to share in the
matching contributions?
With respect to Plan Years beginning after 1989...
1. ( ) Yes (Could cause Plan to violate minimum participation and
coverage requirements under Code Sections 401(a)(26) and 410)
2. (X) No
With respect to Plan Years beginning before 1990...
1. (X) N/A, new Plan, or same as years beginning after 1989.
2. ( ) Yes
3. ( ) No
j.(X) In determining matching contributions, only salary reductions up to
12 % of a Participant's Compensation will be matched. k.( ) N/A
l.( ) The matching contribution made on behalf of a Participant for any
Plan Year shall not exceed $ . m. (X) N/A
n.(X) Matching contributions shall be made on behalf of
1. (X) all Participants.
2. ( ) only Non-Highly Compensated Employees.
o.(X) Notwithstanding anything in the Plan to the contrary, all matching
contributions which relate to distributions of Excess Deferred
Compensation, Excess Contributions, and Excess Aggregate Contributions
shall be Forfeited. (Select this option only if it is applicable.)
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E4 WILL A DISCRETIONARY EMPLOYER CONTRIBUTION BE PROVIDED (OTHER THAN A
DISCRETIONARY MATCHING OR QUALIFIED NON-ELECTIVE CONTRIBUTION) (Plan
Section 11.1(c))?
a.( )No.
b.( )Yes, the Employer may make a discretionary contribution out of its
current or accumulated Net Profit.
c.(X) Yes, the Employer may make a discretionary contribution which is not
limited to its current or accumulated Net Profit.
IF YES (b. or c. is selected above), the Employer's discretionary
contribution shall be allocated as follows:
d.(X) FOR A NON-INTEGRATED PLAN
The Employer discretionary contribution for the Plan Year shall be allocated
in the same ratio as each Participant's Compensation bears to the total of
such Compensation of all Participants.
e.( ) FOR AN INTEGRATED PLAN
The Employer discretionary contribution for the Plan Year shall be allocated
in accordance with Plan Section 4.3(b)(2) based on a Participant's
Compensation in excess of:
f. ( ) The Taxable Wage Base.
g. ( ) The greater of $10,000 or 20% of the Taxable Wage Base.
h. ( ) ___ % of the Taxable Wage Base. (See Note below)
i. ( ) $___. (see Note below)
NOTE:The integration percentage of 5.7% shall be reduced to:
1.4.3% if h. or i. above is more than 20% and less than or equal to
80% of the Taxable Wage Base.
2.5.4% if h. or i. above is less than 100% and more than 80% of the
Taxable Wage Base.
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E5 QUALIFIED NON-ELECTIVE CONTRIBUTIONS (Plan Section 11.1(d))
a.(X) N/A. There shall be no Qualified Non-Elective Contributions except
as provided in Section 11.5(b) and 11.7(h).
b.( ) The Employer shall make a Qualified Non-Elective Contribution equal
to % of the total Compensation of all Participants eligible to share
in the allocations.
c.( ) The Employer may make a Qualified Non-Elective Contribution in an
amount to be determined by the Employer.
E6 FORFEITURES (Plan Section 4.3(e))
a.Forfeitures of contributions other than matching contributions shall
be...
1. ( ) added to the Employer's contribution under the Plan.
2. (X) allocated to all Participants eligible to share in the
allocations in the same proportion that each Participant's
Compensation for the year bears to the Compensation of all
Participants for such year.
b.Forfeitures of matching contributions shall be...
1. ( ) N/A. No matching contributions or match is fully vested.
2. (X) used to reduce the Employer's matching contribution.
3. ( ) allocated to all Participants eligible to share in the
allocations in proportion to each such Participant's Compensation
for the year.
4. ( ) allocated to all Non-Highly Compensated Employee's eligible to
share in the allocations in proportion to each such Participant's
Compensation for the year.
E7 ALLOCATIONS TO ACTIVE PARTICIPANTS (Plan Section 4.3) With respect to Plan
Years beginning after 1989, a Participant...
a.( ) shall (Plan may become discriminatory)
b.(X) shall not
be required to complete a Year of Service in order to share in any
Non-Elective Contributions (other than matching contributions) or Qualified
Non-Elective Contributions. For Plan Years beginning before 1990, the Plan
provides that a Participant must complete a Year of Service to share in the
allocations.
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E8 ALLOCATIONS TO TERMINATED PARTICIPANTS (Plan Section 4.3(k)) Any Participant
who terminated employment during the Plan Year (i.e. not actively employed
on the last day of the Plan Year) for reasons other than death, Total and
Permanent Disability or retirement:
a.With respect to Employer Non-Elective Contributions (other than matching),
Qualified Non-Elective Contributions, and Forfeitures:
1. For Plan Years beginning after 1989,
i. ( ) N/A, Plan does not provide for such contributions.
ii. ( ) shall share in the allocations provided such Participant
completed more than 500 Hours of Service.
iii.( ) shall share in such allocations provided such Participant
completed a Year of Service.
iv. (X) shall not share in such allocations, regardless of Hours
of Service.
2. For Plan Years beginning before 1990,
i. (X) N/A, new Plan, or same as for Plan Years beginning after
1989.
ii. ( ) shall share in such allocations provided such Participant
completed a Year of Service.
iii.( ) shall not share in such allocations, regardless of Hours of
Service.
NOTE:If a.1.iii or iv is selected, the Plan could violate minimum
participation and coverage requirements under Code Sections 401(a)(26)
and 410.
b.With respect to the allocation of Employer Matching Contributions, a
Participant:
1. For Plan Years beginning after 1989,
i. ( ) N/A, Plan does not provide for matching contributions.
ii. ( ) shall share in the allocations, regardless of Hours of
Service.
iii.( ) shall share in the allocations provided such Participant
completed more than 500 Hours of Service.
iv. ( ) shall share in such allocations provided such Participant
completed a Year of Service.
v. (X) shall not share in such allocations, regardless of Hours of
Service.
2. For Plan Years beginning before 1990,
i. (X) N/A, new Plan, or same as years beginning after 1989.
ii. ( ) shall share in the allocations, regardless of Hours of
Service.
iii.( ) shall share in such allocations provided such Participant
completed a Year of Service.
iv. ( ) shall not share in such allocations, regardless of Hours of
Service.
NOTE:If b.1.iv or v is selected, the Plan could violate minimum
participation and coverage requirements under Code Section 401(a)(26)
and 410.
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E9 ALLOCATIONS OF EARNINGS (Plan Section 4.3(c))
Allocations of earnings with respect to amounts contributed to the Plan
after the previous Anniversary Date or other valuation date shall be
determined...
a.( ) by using a weighted average.
b.( ) by treating one-half of all such contributions as being a part of the
Participant's nonsegregated account balance as of the previous
Anniversary Date or valuation date.
c.(X) by using the method specified in Section 4.3(c).
d.( ) other ___
E10 LIMITATIONS ON ALLOCATIONS (Plan Section 4.4)
a.If any Participant is or was covered under another qualified defined
contribution plan maintained by the Employer, or if the Employer maintains
a welfare benefit fund, as defined in Code Section 419(e), or an
individual medical account, as defined in Code Section 415(l)(2), under
which amounts are treated as Annual Additions with respect to any
Participant in this Plan:
1. (X) N/A.
2. ( ) The provisions of Section 4.4(b) of the Plan will apply.
3. ( ) Provide the method under which the Plans will limit total
Annual Additions to the Maximum Permissible Amount, and will
properly reduce any Excess Amounts, in a manner that precludes
Employer discretion.
b.If any Participant is or ever has been a Participant in a defined benefit
plan maintained by the Employer:
1. (X) N/A.
2. ( ) In any Limitation Year, the Annual Additions credited to the
Participant under this Plan may not cause the sum of the Defined
Benefit Plan Fraction and the Defined Contribution Fraction to
exceed 1.0. If the Employer's contribution that would otherwise
be made on the Participant's behalf during the limitation year
would cause the 1.0 limitation to be exceeded, the rate of
contribution under this Plan will be reduced so that the sum of
the fractions equals 1.0. If the 1.0 limitation is exceeded
because of an Excess Amount, such Excess Amount will be reduced
in accordance with Section 4.4(a)(4) of the Plan.
3. ( ) Provide the method under which the Plans involved will satisfy
the 1.0 limitation in a manner that precludes Employer discretion.
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E11 DISTRIBUTIONS UPON DEATH (Plan Section 6.6(h))
Distributions upon the death of a Participant prior to receiving any
benefits shall...
a.(X) be made pursuant to the election of the Participant or beneficiary.
b.( ) begin within 1 year of death for a designated beneficiary and be
payable over the life (or over a period not exceeding the life
expectancy) of such beneficiary, except that if the beneficiary is the
Participant's spouse, begin within the time the Participant would have
attained age 70 1/2.
c.( ) be made within 5 years of death for all beneficiaries.
d.( ) other ___
E12 LIFE EXPECTANCIES (Plan Section 6.5(f)) for minimum distributions required
pursuant to Code Section 401(a)(9) shall...
a.(X) be recalculated at the Participant's election.
b.( ) be recalculated.
c.( ) not be recalculated.
E13 CONDITIONS FOR DISTRIBUTIONS UPON TERMINATION
Distributions upon termination of employment pursuant to Section 6.4(a) of
the Plan shall not be made unless the following conditions have been
satisfied:
a.(X) N/A. Immediate distributions may be made at Participant's election.
b.( ) The Participant has incurred 1-Year Break(s) in Service.
c.( ) The Participant has reached his or her Early or Normal Retirement
Age.
d.( ) Distributions may be made at the Participant's election on or after
the Anniversary Date following termination of employment.
e.( ) Other ___
E14 FORM OF DISTRIBUTIONS (Plan Sections 6.5 and 6.6) Distributions under the
Plan may be made...
a.1. ( ) in lump sums.
2. (X) in lump sums or installments.
b. AND, pursuant to Plan Section 6.13,
1. (X) no annuities are allowed (avoids Joint and Survivor rules).
2. ( ) annuities are allowed (Plan Section 6.13 shall not apply).
NOTE: b.1. above may not be elected if this is an amendment to a plan which
permitted annuities as a form of distribution or if this Plan has
accepted a plan to plan transfer of assets from a plan which permitted
annuities as a form of distribution.
c. AND may be made in...
1. (X) cash only (except for insurance or annuity contracts).
2. ( ) cash or property.
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TOP HEAVY REQUIREMENTS
F1 TOP HEAVY DUPLICATIONS (Plan Section 4.3(i)): When a Non-Key Employee is a
Participant in this Plan and a Defined Benefit Plan maintained by the
Employer, indicate which method shall be utilized to avoid duplication of
top heavy minimum benefits.
a.(X) The Employer does not maintain a Defined Benefit Plan.
b.( ) A minimum, non-integrated contribution of 5% of each Non-Key
Employee's total Compensation shall be provided in this Plan, as
specified in Section 4.3(i). (The Defined Benefit and Defined
Contribution Fractions will be computed using 100% if this choice is
selected.)
c.( ) A minimum, non-integrated contribution of 7 1/2% of each Non-Key
Employee's total Compensation shall be provided in this Plan, as
specified in Section 4.3(i). (If this choice is selected, the Defined
Benefit and Defined Contribution Fractions will be computed using 125%
for all Plan Years in which the Plan is Top Heavy, but not Super Top
Heavy.)
d.( ) Specify the method under which the Plans will provide top heavy
minimum benefits for Non-Key Employees that will preclude Employer
discretion and avoid inadvertent omissions, including any adjustments
required under Code Section 415(e).
F2 PRESENT VALUE OF ACCRUED BENEFIT (Plan Section 2.2) for Top Heavy purposes
where the Employer maintains a Defined Benefit Plan in addition to this
Plan, shall be based on...
a.(X) N/A. The Employer does not maintain a defined benefit plan.
b.( ) Interest Rate:
Mortality Table:
F3 TOP HEAVY DUPLICATIONS: Employer maintaining two (2) or more Defined
Contribution Plans.
a.(X) N/A.
b.( ) A minimum, non-integrated contribution of 3% of each Non-Key
Employee's total Compensation shall be provided in the Money Purchase
Plan (or other plan subject to Code Section 412), where the Employer
maintains two (2) or more non-paired Defined Contribution Plans.
c.( ) Specify the method under which the Plans will provide top heavy
minimum benefits for Non-Key Employees that will preclude Employer
discretion and avoid inadvertent omissions, including any adjustments
required under Code Section 415(e).
18
<PAGE>
MISCELLANEOUS
G1 LOANS TO PARTICIPANTS (Plan Section 7.4)
a.(X) Yes, loans may be made up to $50,000 or 1/2 Vested interest.
b.( ) No, loans may not be made.
If YES, (check all that apply)...
c.(X) loans shall be treated as a Directed Investment.
d.( ) loans shall only be made for hardship or financial necessity.
e.(X) the minimum loan shall be $1,000.
f.( ) $10,000 de minimis loans may be made regardless of Vested interest.
(If selected, Plan may need security in addition to Vested interest.)
NOTE:Department of Labor Regulations require the adoption of a SEPARATE
written loan program setting forth the requirements outlined in Plan
Section 7.4.
G2 DIRECTED INVESTMENT ACCOUNTS (Plan Section 4.8) are permitted for the
interest in any one or more accounts.
a.(X) Yes, regardless of the Participant's Vested interest in the Plan.
b.( ) Yes, but only with respect to the Participant's Vested interest in
the Plan.
c.( ) Yes, but only with respect to those accounts which are 100% Vested.
d.( ) No directed investments are permitted.
G3 TRANSFERS FROM QUALIFIED PLANS (Plan Section 4.6)
a.(X) Yes, transfers from qualified plans (and rollovers) will be allowed.
b.( ) No, transfers from qualified plans (and rollovers) will not be
allowed.
AND, transfers shall be permitted...
c.(X) from any Employee, even if not a Participant.
d.( ) from Participants only.
G4 EMPLOYEES' VOLUNTARY CONTRIBUTIONS (Plan Section 4.7)
a.( ) Yes, Voluntary Contributions are allowed subject to the limits of
Section 4.10.
b.(X) No, Voluntary Contributions will not be allowed.
NOTE: TRA '86 subjects voluntary contributions to strict discrimination
rules.
19
<PAGE>
G5 HARDSHIP DISTRIBUTIONS (Plan Sections 6.11 and 11.8)
a.(X) Yes, from any accounts which are 100% Vested.
b.( ) Yes, from Participant's Elective Account only.
c.( ) Yes, but limited to the Participant's Account only.
d.( ) No.
NOTE:Distributions from a Participant's Elective Account are limited to the
portion of such account attributable to such Participant's Deferred
Compensation and earnings attributable thereto up to December 31,
1988. Also hardship distributions are not permitted from a
Participant's Qualified Non-Elective Account.
G6 PRE-RETIREMENT DISTRIBUTION (Plan Section 6.10)
a.( ) If a Participant has reached the age of , distributions may be made,
at the Participant's election, from any accounts which are 100% Vested
without requiring the Participant to terminate employment.
b.(X) No pre-retirement distribution may be made.
NOTE: Distributions from a Participant's Elective Account and Qualified
Non-Elective Account are not permitted prior to age 59 1/2.
G7 LIFE INSURANCE (Plan Section 7.2(d)) may be purchased with Plan
contributions.
a.(X) No life insurance may be purchased.
b.( ) Yes, at the option of the Administrator.
c.( ) Yes, at the option of the Participant.
AND, the purchase of initial or additional life insurance shall be
subject to the following limitations: (select all that apply)
d.( ) N/A, no limitations.
e.( ) each initial Contract shall have a minimum face amount of $ .
f.( ) each additional Contract shall have a minimum face amount of $ .
g.( ) the Participant has completed Years of Service.
h.( ) the Participant has completed Years of Service while a
Participant in the Plan.
i.( ) the Participant is under age on the Contract issue date.
j.( ) the maximum amount of all Contracts on behalf of a Participant
shall not exceed $ .
k.( ) the maximum face amount of life insurance shall be $ .
20
<PAGE>
The adopting Employer may not rely on an opinion letter issued by the National
Office of the Internal Revenue Service as evidence that the plan is qualified
under Code Section 401. In order to obtain reliance with respect to plan
qualification, the Employer must apply to the appropriate Key District Office
for a determination letter.
This Adoption Agreement may be used only in conjunction with basic Plan document
01. This Adoption Agreement and the basic Plan document shall together be known
as National Strategic Retirement Consulting, Inc. Non-Standardized 401(k) Profit
Sharing Plan and Trust 01-005.
The adoption of this Plan, its qualification by the IRS, and the related tax
consequences are the responsibility of the Employer and its independent tax and
legal advisors.
National Strategic Retirement Consulting, Inc. will notify the Employer of
any amendments made to the Plan or of the discontinuance or abandonment of
the Plan provided this Plan has been acknowledged by National Strategic
Retirement Consulting, Inc. or its authorized representative. Furthermore, in
order to be eligible to receive such notification, we agree to notify
National Strategic Retirement Consulting, Inc. of any change in address.
21
<PAGE>
IN WITNESS WHEREOF, the Employer and Trustee hereby cause this Plan to be
executed on . Furthermore, this Plan may not be used unless acknowledged by
National Strategic Retirement Consulting, Inc. or its authorized representative.
EMPLOYER:
Trimeris, Inc.
By:_________________________________
--------------------------------- ---------------------------
TRUSTEE TRUSTEE
---------------------------------- ----------------------------
TRUSTEE TRUSTEE
----------------------------------
TRUSTEE
PARTICIPATING EMPLOYER:
N/A
- -------------------------------------
(enter name)
By: N/A
- -------------------------------------
This Plan may not be used, and shall not be deemed to be a Regional Prototype
Plan, unless an authorized representative of National Strategic Retirement
Consulting, Inc. has acknowledged the use of the Plan. Such acknowledgment is
for administerial purposes only. It acknowledges that the Employer is using the
Plan but does not represent that this Plan, including the choices selected on
the Adoption Agreement, has been reviewed by a representative of the sponsor or
constitutes a qualified retirement plan.
National Strategic Retirement Consulting, Inc.
By: LAURA S. MILLWOOD
------------------------
/s/ Laura S. Millwood
Exhibit 11.1 Computations of Basic Loss Per Share.
TRIMERIS, INC.
STATEMENTS RE: COMPUTATIONS OF BASIC LOSS PER SHARE
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
--------------------- ---------------------
1997 1998 1997 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Common shares outstanding (weighted average) (1) ..................... 6,226 10,532 5,797 10,527
Common Stock equivalents (using the treasury stock method):
Stock Options and Awards (weighted average) Pursuant
to Staff Accounting Bulletin No. 83 (2) ............................ 100 100 100 100
-------- -------- -------- --------
Total weighted average shares ........................................ 6,326 10,632 5,897 10,627
======== ======== ======== ========
Net loss ............................................................. $ (1,632) $ (5,330) $ (3,478) $ (8,297)
======== ======== ======== ========
Basic net loss per share ............................................. $ (0.26) $ (0.50) $ (0.59) $ (0.78)
======== ======== ======== ========
</TABLE>
(1) Assumes the retroactive conversion of the Preferred Stock into shares of
Common Stock which occurred upon the completion of the Company's Initial
Public Offering in October, 1997, for all periods presented.
(2) Includes all options and awards issued during the twelve-month period prior
to the initial filing of the registration statement relating to the
Company's Initial Public Offering, in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 83.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 22,834
<SECURITIES> 5,894
<RECEIVABLES> 110
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 28,853
<PP&E> 3,832
<DEPRECIATION> 2,407
<TOTAL-ASSETS> 30,923
<CURRENT-LIABILITIES> 2,206
<BONDS> 0
0
0
<COMMON> 11
<OTHER-SE> 27,989
<TOTAL-LIABILITY-AND-EQUITY> 30,923
<SALES> 0
<TOTAL-REVENUES> 175
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,460
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50
<INCOME-PRETAX> (8,297)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,297)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
