Form 10-KSB
U.S. Securities and Exchange Commission
Washington D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-70334-A
INTERNATIONAL ASSETS HOLDING CORPORATION
(Exact name of small business issuer as specified in its charter)
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Delaware 59-2921318
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
250 Park Avenue South, Suite 200
Winter Park, FL 32789
(Address of principal executive offices)
(407) 629-1400
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ].
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $9,916,924
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the last sale price of such stock as of December 15,
1999: $5,000,393.
The number of shares outstanding of Common Stock was 1,785,478 as of December
15, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrants Proxy Statement, to be filed, for the Annual Meeting
of Stockholders to be held on February 15, 2000 are incorporated by reference
into Part III.
Transitional small business disclosure format Yes [ ] No [X]
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INTERNATIONAL ASSETS HOLDING CORPORATION
1999 FORM 10-KSB
TABLE OF CONTENTS
PART I Page
Item 1. Description of Business....................................3
Item 2. Description of Property.................................. 11
Item 3. Legal Proceedings........................................ 11
Item 4. Submission of Matters to a Vote of Security Holders...... 11
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters...................................... 11
Item 6. Management's Discussion and Analysis or Plan of Operation.12
Item 7. Consolidated Financial Statements........................ 19
Item 8. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure........................ 20
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.20
Item 10. Executive Compensation.................................... 21
Item 11. Security Ownership of Certain Beneficial Owners
and Management............................................ 22
Item 12. Certain Relationships and Related Transactions............ 22
Item 13. Exhibits and Reports on Form 8-K.......................... 22
Signatures................................................ 25
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate and securities market fluctuations, competition
from within and from outside the investment brokerage industry, new products
and services in the investment brokerage industry, changing trends in
customer profiles, Year 2000 issues and changes in laws and regulations
applicable to the Company. Although the Company believes that its
expectations with respect to the forward-looking statements are based upon
reasonable assumptions within the bounds of its knowledge of its business
and operations, there can be no assurances that the actual results,
performance or achievement of the Company will not differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements.
General
International Assets Holding Corporation is a Delaware corporation formed in
October 1987 for the purpose of serving as a holding company for
International Assets Advisory Corp. ("IAAC") and other subsidiaries.
Currently, the Company has six wholly owned subsidiaries, IAAC, Global
Assets Advisors, Inc. ("GAA"), INTLTRADER.COM, INC. ("ITCI"), International
Asset Management Corp. ("IAMC"), International Financial Products, Inc.
("IFP") and OffshoreTrader.com Ltd ("OTCL"). All of the Company's
subsidiaries are Florida corporations except OTCL which is a Bermuda
exempted company. As used in this Form 10-KSB, the term "Company" refers,
unless the context requires otherwise, to International Assets Holding
Corporation and its subsidiaries IAAC, GAA, ITCI, IAMC, IFP and OCTL. IAAC
operates a full-service securities brokerage firm specializing in global
investing on behalf of its clients. GAA provides investment advisory and
money management services. ITCI was formed to provide on-line brokerage
transactions of foreign and domestic securities using the internet. IAMC
functions as the manager of the physical assets of the Company. IFP, which
is currently inactive, was formed as a financial publishing and marketing
group to sell products that are not investments, but are related to the
global financial market. OTCL was formed to explore global internet
securities trading for non-U.S. citizens. The Company also has a 50%
interest in International Assets New York, LLC, ("IANY") a Delaware limited
liability company. IANY is a 50/50 joint venture with Lakeside Investments,
LLC. IANY was formed as a branch office of IAAC for the purpose of offering
a variety of financial strategies to high net worth private investors in the
U.S. and certain foreign countries.
IAAC was formed in April 1981 by the Company's Chairman of the Board, Diego
J. Veitia. During its first two years of business, IAAC focused primarily on
private placements. In 1982, IAAC entered the securities brokerage business
and became a member of the National Association of Securities Dealers
("NASD"). In 1982 IAAC began to focus on the sale of global equity and debt
securities to high net worth private clients and, to a lesser degree, small
to medium size financial institutions.
The Company believes that it has developed an effective approach for
attracting the investment capital of high net worth private clients. This
approach centers on the need for such investors to diversify their
investment portfolios by purchasing global equity and debt securities. The
Company believes it is proper for investors to become increasingly global in
their investment activities, to correspond to the increasingly globalized
economy. On the equity side, the Company emphasizes both capital and
currency appreciation. In the sale of debt securities, the higher yields
available overseas and the potential for currency appreciation are stressed.
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Historically, the securities industry's focus for channeling private client
funds into international investments has been through mutual funds. While
the Company believes that its expertise in the international markets puts it
in a unique position to add value in the sale of global products such as
mutual funds, its main focus is on the direct investment in carefully
selected international securities by its private clients. The Company has
developed an experienced team specializing in the research, selection,
trading, currency exchange and execution of individual equity and fixed
income products on a global basis.
The Company acts as an introducing broker, in that it does not clear its own
securities transactions, but instead contracts to have such transactions
cleared through a clearing broker on a fully disclosed basis. In a fully
disclosed clearing transaction, the identity of the Company's client is
known to the clearing broker. Generally, a clearing broker physically
maintains the client's account and performs a variety of services as agent
for the Company, including clearing all securities transactions (delivery of
securities sold, receipt of securities purchased and transfer of related
funds).
IAAC is currently registered as a securities broker-dealer under the
Securities Exchange Act of 1934 and the state securities statutes of 49
states and the District of Columbia. IAAC is a member of the NASD, which is
a self-regulatory body exercising broad supervisory powers over securities
broker-dealers operating in the United States. IAAC is also a member of the
Securities Investor Protection Corporation ("SIPC"), which is a public
corporation established to afford a measure of protection to the account
balances of customers of securities broker-dealers that become insolvent.
GAA is registered with the Securities and Exchange Commission ("SEC"), and
the State of Florida as an investment advisor. As an SEC registered
investment advisor, investment advisor notification in other states will
proceed as is required by the various states. GAA's primary focus is on the
development of specialized accounts for high net worth private clients. GAA
is dedicated to providing the individual investor with domestic and
international money management and offers a series of investment portfolios
tailor-made for the individual investor seeking investment diversification
across a variety of economies and currencies in order to provide the
opportunity for higher overall investment returns. GAA's strategy is to
capitalize on its experienced teams specializing in the research, selection,
trading, currency exchange and execution of individual equity and fixed
income products on a global basis.
ITCI is currently registered as a securities broker-dealer under the
Securities Exchange Act of 1934 and the state securities statutes of 32
states and the District of Columbia. ITCI was formed by the Company in May
1998 to provide on-line brokerage transactions of foreign and domestic
securities using the internet and was formerly known as International Trader
Association, Inc. ITCI has not yet commenced its on-line brokerage
activities. ITCI is also a member of the NASD and SIPC.
IAMC was formed by the Company in 1988 to purchase and manage all of the
fixed assets of the Company. The assets held by IAMC are available for use
by the subsidiaries of the Company.
IFP was formed in 1995 to publish, advertise and sell a wide range of
informational investment tools such as books, newsletters, tapes and faxes
targeted at individual global investors. IFP is operationally inactive but
the legal entity remains active in its state of incorporation.
OTCL was incorporated on April 15, 1999 as a Bermuda exempted company and is
100% owned by International Assets Holding Corporation. OTCL was
incorporated to explore global internet securities trading for non-U.S.
citizens. In June 1999 OTCL was funded with a $25,000 share capital
contribution from International Assets Holding Corporation. Exempted Bermuda
companies, although resident in Bermuda, may only carry on business that is
external to Bermuda. However, exempted Bermuda companies may trade with
other exempted Bermuda companies. OTCL has not yet generated operating
revenues.
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In September 1998 the Company entered into a 50/50 Joint Venture ("JV") with
Lakeside Investments, LLC (Lakeside) of New York. In October 1998 the JV
effected the incorporation of IANY a 50/50 owned entity formed to transact
business out of an office in New York City as a brokerage branch of IAAC and
through the money management arm of GAA. IANY offers a variety of financial
strategies to high net worth private investors. Among the strategies to be
offered are selected approaches to international tax planning with the
primary goal of utilizing established, but less understood techniques to
reduce the exposure of wealthy clients living in a number of high tax
jurisdictions. Additionally, IANY will utilize strategies that are expected
to provide clients with a degree of asset protection in an increasingly
litigious environment. The New York City office of IANY opened in January
1999 and began generating operating revenues during May 1999.
Business Strategy
The Company's business strategy is to use its marketing and global
securities expertise to take advantage of opportunities for growth in the
global securities market. Management believes that there are favorable
opportunities for growth in the retail online securities brokerage, fee
based money management, wholesale trading and institutional sales areas of
the international securities market.
The Company believes that its expertise in the global securities area
presents an opportunity for the Company to expand its market niche into
retail online securities brokerage, wholesale trading and small
institutional sales. The Company believes that it will grow and maintain its
retail brokerage business through the emphasis on fee based money management
services. The Company further believes that this international market niche
has been relatively minimized by the major and mid-sized securities
brokerage firms.
The Company expects to continue offering discretionary money management
accounts with specifically designated objectives in a defined investment
area. The Company also intends to continue to expand its activities in both
the private client and institutional sectors of international securities. In
addition, the Company plans to continue to sponsor the development of
proprietary unit investment trusts, where management believes it can add
value for its clients.
The International Securities Markets
The Company believes that investment in the international markets by U.S.
investors will continue to grow in the coming years, as the global capital
markets continue to grow. In 1980 the non-U.S. world stock market
capitalization totaled $931 billion. In 1998 that number grew over nine-fold
to $8.9 trillion (based on a study produced by Ibbotson Associates, a
company which studies capital markets). The number of American Depository
Receipts ("ADR") that are now trading on U.S. exchanges further evidences
this growth. ADRs, which represent shares in foreign companies, issued by
U.S. banks and traded in this country as domestic shares simplify trading in
foreign securities by eliminating currency exchange and legal obstacles. In
1998, ADR trading volume reached over 20 billion shares, a 43% increase from
1997 (based on a study produced by J.P. Morgan).
Management believes that the two main justifications for the rapid growth in
international investing by U.S. investors are diversification and
potentially superior investment returns. The U.S. market had an exceptional
year in 1998, with an annual return of 28.6%, making it the fourth best
performing developed global stock market (Ibbotson Associates). Less obvious
was that Belgium with 67.7%, Italy with 52.9% and Spain with 50.2% all had
better returns. During the twenty year period from 1979 to 1998 the average
U.S. stock market performance, using rolling 10 year average returns,
exceeded the international stock performance only four years over the twenty
year period from 1979 to 1998 (Ibbotson Associates).
While investing in international markets also involves risk considerations
not typically associated with investing in securities of U.S. issuers, the
Company believes that such considerations are outweighed by the benefits of
diversification and potentially superior returns. Among the risk
considerations involved in investing in international markets is that less
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information may be available about foreign companies than about domestic
companies. Foreign companies are also generally not subject to uniform
accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to
domestic companies. In addition, unlike investing in U.S. companies,
securities of non-U.S. companies are generally denominated in foreign
currencies, thereby subjecting each security to changes in value when the
underlying foreign currency strengthens or weakens against the U.S. dollar.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of
investments in different countries as seen from an international
perspective. Currency exchange rates can also be affected unpredictably by
intervention of U.S. or foreign governments or central banks or by currency
controls or political developments in the U.S. or abroad.
The value of international fixed income products also responds to interest
rate changes in both the U.S. and abroad. In general, the value of such
products will rise when interest rates fall, and fall when interest rates
rise. Interest rates in the U.S. and other foreign countries may change
independently of each other. Thus foreign fixed income products may increase
in value while U.S. fixed income products decrease in value and vice versa.
International markets and securities may also not be as liquid as U.S.
securities and their markets. Investing in international securities may
further result in higher expenses than investing in domestic securities
because of the cost of converting foreign currencies to U.S. dollars and
expenses relating to foreign custody. Investment in international securities
may also be subject to local economic or political risks, including
instability of some foreign governments, the possibility of currency
blockage or the imposition of withholding taxes on dividend or interest
payments and the potential for expropriation, nationalization or
confiscatory taxation and limitations on the use or removal of funds or
other assets.
As an example of the types of risk discussed above, market declines in the
emerging markets, particularly those of Southeast Asia during 1997, resulted
in substantial declines in the valuation of Southeast Asian investment
portfolios. While these market declines can provide low cost buying
opportunities for clients of the Company, declines in these markets can also
cause client concerns and a reluctance to make further investments in
foreign markets. Any such reluctance could lead to reduced commission
revenues to the Company as well as trading losses from market price declines
and overall volatility. These developments could have a material impact on
the consolidated financial statements.
The Brokerage Business
For the fiscal years ended September 30, 1999 and 1998, approximately 62%
and 75%, respectively, of the Company's total revenues were derived from
commissions earned from transactions with its retail clients. The Company's
client base is composed primarily of high net worth individuals. The average
age of its clients is approximately 53 and a substantial portion are
retirees. Clients are distributed nationwide. However, a particularly large
number of clients reside in Florida, California, New York, Texas and
Pennsylvania. The Company has approximately 8,300 active client accounts at
September 30, 1999.
Retail commissions are charged on both exchange and over-the-counter agency
transactions based on a schedule, which is subject to change, that the
Company has formulated in accordance with guidelines promulgated by the
NASD. During 1995 the Company began selling proprietary Unit Investment
Trust ("UIT") products. The Company acts as the managing underwriter for
these UIT products.
The Company has also developed a niche market in the sale of international
debt securities. The Company uses its capital to purchase debt securities
and, in turn, makes offerings as low as $10,000 available to its private
clients.
<PAGE>
Transactions in securities may be effected on either a cash or margin basis.
Through its clearing agent, the Company allows its clients to maintain
margin accounts for securities purchased or sold short through the Company.
Principal Transactions
In addition to executing trades as agent, the Company acts as a principal in
executing trades in over-the-counter debt and equity securities. When
transactions are executed by the Company on a principal basis, the Company
receives, in lieu of commissions, markups or markdowns that constitute
revenues from principal transactions. To facilitate trading by its clients,
the Company buys, sells and maintains inventories of approximately 350
primarily international securities. The Company currently executes principal
transactions from retail order flow and wholesale order flow. Retail order
flow is generated from the execution of principal transactions originating
from a retail client through a retail account executive. Wholesale order
flow is generated from the execution of order flow directly from other
securities broker/dealers trading desks.
The Company places its capital at risk by also trading as a "market maker"
in a select group of approximately 240 international securities which are
traded by the Company's clients. The Company's emphasis in such trades is on
earning revenues from the spread between customer buy and sell orders.
Revenues from principal transactions depend upon the general trend of prices
and level of activity in the securities markets, the skill of employees
responsible for managing the Company's trading accounts and the size of its
inventories. The activities of the Company in trading as a principal require
the commitment of capital and create an opportunity for profit and risk of
loss due to market fluctuations.
The level of securities positions carried in the Company's trading accounts
fluctuates significantly. The size of such positions on any one date may not
be representative of the Company's exposure on any other date because the
securities positions vary substantially depending upon economic and market
conditions, the allocation of capital among types of inventories, customer
demands and trading volume. The aggregate value of the securities in the
Company's inventory is limited by certain requirements of the SEC Net
Capital Rule. See "Net Capital Requirements."
Marketing
The Company believes that its ability to deliver its global securities
message in a cost-effective manner is a key element to its operations. The
Company uses a variety of marketing tools. These include targeted direct
mail, newsletter publishing, advertising, public relations and promoting
public appearances by Mr. Veitia, the Company's Chairman and Chief Executive
Officer.
After some experimentation with a variety of marketing tools in the
Company's early years, management has found direct mail marketing to be the
most cost-effective mechanism for attracting customers. The Company believes
that it has developed an expertise in attracting high net worth clients
through the use of low cost, direct mail marketing techniques. The Company
further believes that the most important aspect of its direct mail marketing
effort is its database of potential clients. The Company's database
currently has access to approximately 1,000,000 names, including
approximately 8,300 clients and 25,000 subscribers and prospective clients
that receive the Company's newsletter. The Company also sends existing and
prospective clients separate items such as research reports, fax and E-mail
alerts and other special reports with a narrower focus than its newsletters.
During 1999 IAAC launched www.iaac.com as an information resource for
clients and prospective clients. The web site acts a vehicle for IAAC to
communicate and develop interest in international investing at IAAC.
<PAGE>
Competition
The Company encounters competition in conducting its business and such
competition is expected to continue. Although the securities industry, in
general, is intensely competitive, the Company believes that competition is
less intense in its niche market. However, the Company competes with many
firms with capital and personnel resources far in excess of those which are
presently available to the Company or which are expected to be available to
the Company in the future. During the past several years the securities
industry has seen the emergence of the online securities business. The
Company has addressed this industry change by commenceing in the development
of its own online securities brokerage firm with ITCI. Additionally, the
Company is affected and will continue to be affected by the investing
public's interest in international securities. In this regard, international
securities are in competition with other investment vehicles offered by
other securities broker-dealers and financial intermediaries such as
commercial banks, savings banks, insurance companies and similar
institutions. The Company believes that the principal competitive factors in
the securities industry are the quality and ability of professional
personnel and the relative prices of services and products offered. The
Company believes that, to date, it has been able to compete favorably with
other broker-dealers and financial intermediaries primarily on the basis of
the quality of its services and the depth of its expertise in the
international securities market.
Research Services
The Company's research activities include reviewing general market
conditions, specific industries, and individual companies and providing
information with respect thereto in Company newsletters, which discuss
international economic and currency trends and give readers specific
investment recommendations and ideas. These services are made available
without charge to clients.
The Company's investment research committee (the "Investment Committee")
makes decisions concerning the overall investment policy of the Company
based on its assessment of macro-economic and macro-market factors. The
Investment Committee also makes determinations regarding the allocation of
Company and client assets into geographic, currency, and security type
(debt, equity and cash) categories. After this allocation decision has been
made, the research analysts recommend individual securities for investment.
The focus is on the analysis of a particular company and its debt or equity
securities.
Once the investment committee has made its initial recommendations, the
research department analyzes such recommendations to determine which
recommendations are appropriate for the Company's client base. Focus is
placed on equity securities which are priced at a retail level, generally
$50 per share or less. In addition, since private clients are less
diversified than institutions, there is an emphasis on blue-chip and higher
quality investments. Following its analysis of these factors, the research
department issues a list of international securities from which account
executives can make recommendations to their clients.
Administration and Operations
The Company's trading and operations personnel are responsible for executing
orders, transmitting information on all transactions to its clearing broker,
mailing confirmations to clients, receiving all funds and securities,
depositing all client funds into a bank account in the name of the clearing
broker and transmitting securities to the Company's clearing broker for
custody.
The Company also utilizes the services of a securities clearing broker. The
Company's clearing broker performs many back office functions for the
Company in connection with its duties as custodian of all client funds and
securities. When a new account is established, the new account information
is sent to the clearing broker, which in turn sets up and maintains the
information for the account. All securities and monies are held in custody
by the clearing broker. The clearing broker prepares and mails account
statements directly to clients on behalf of the Company. Transaction
confirmations for customers are formatted through the clearing broker's wire
system for printing and mailing by IAAC. The Company's brokers and
operations staff are able to receive on-line account information from the
<PAGE>
clearing broker. By engaging the processing services of a clearing broker,
the Company is exempt from certain reserve requirements imposed by Rule
15c3-3 under the Securities Exchange Act of 1934, as amended. See "Net
Capital Requirements."
The Company's clearing broker also extends credit to the Company and its
customers to enable them to purchase securities on margin. Margin accounts
allow customers to deposit less than the full cost of a security purchased
with the balance of the purchase price being provided as a loan to the
customer secured by the securities purchased. The amount of the loan in
purchasing securities on margin is subject to both the margin regulations
("Regulation T") of the Board of Governors of the Federal Reserve System and
the Company's clearing broker's internal policies. In most transactions,
Regulation T limits the amount loaned to a client for the purchase of a
particular security to 50% of the purchase price.
The Company maintains internal records of all transactions, which are
compared on a daily basis to clearing transaction generated reports. The
Company uses automated computer capabilities for these functions, which it
will continue to expand.
The Company believes that its internal controls and safeguards against
securities theft are adequate. As required by the NASD and other
authorities, the Company carries a fidelity bond covering any loss or theft
of securities, as well as embezzlement and forgery. The amount of the
required fidelity bond is based on 120% of the previous 12 months highest
required net capital. IAAC annually assesses the total required bond
coverage and carries a $600,000 limit. ITCI will also annually assess the
total required bond coverage and currently carries a $60,000 limit.
The Company's administrative staff oversees internal financial controls,
accounting functions, office services and compliance with regulatory
requirements.
Regulation
The securities industry in the United States is subject to extensive
regulation under Federal and state laws. The SEC is the Federal agency
charged with administration of the Federal securities laws. Much of the
regulation of broker-dealers, however, has been delegated to self-regulatory
organizations, principally the NASD and the national securities exchanges.
The self-regulatory organizations adopt rules (which are subject to approval
by the SEC) that govern the industry and conduct periodic examinations of
member broker-dealers. Securities firms are also subject to regulation by
state securities commissions in the states in which they do business. IAAC
is currently registered as a broker-dealer in 49 states and the District of
Columbia. ITCI is currently registered as a broker-dealer in 32 states and
the District of Columbia.
The regulations to which broker-dealers are subject cover all aspects of the
securities business, including sales methods, trading practices among
broker-dealers, capital structure of securities firms, uses and safekeeping
of customers' funds and securities, record keeping, the conduct of
directors, officers and employees and supervision of branches and registered
representatives. Lack of adequate supervision could subject the
broker-dealer to regulatory sanctions. Additional legislation, changes in
rules promulgated by the SEC and by self-regulatory organizations, or
changes in the interpretation or enforcement of existing laws and rules
often directly affect the method of operation and profitability of
broker-dealers. The SEC, the self-regulatory organizations and state
securities commissions may conduct administrative proceedings, which can
result in censure, fine, suspension or expulsion of a broker-dealer, its
officers or employees. Such administrative proceedings, whether or not
resulting in adverse findings, can require substantial expenditures. The
principal purpose of regulation and discipline of broker-dealers is the
protection of customers and the securities markets, rather than the
protection of creditors and stockbrokers of broker-dealers.
IAAC and ITCI are required by Federal law to belong to SIPC. The SIPC fund
provides protection for securities held in customer accounts of up to
$500,000 per customer, with a limitation of $100,000 on claims for cash
balances. In addition, securities in an account at the Company's clearing
broker are afforded additional protection by the clearing broker of up to
$9,500,000.
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Net Capital Requirements
IAAC is subject to the SEC's uniform net capital rule (Rule 15c3-1 (the
"Rule")), which is designed to measure the liquidity of a broker-dealer and
the maintenance of minimum net capital deemed necessary to meet its
commitments to its customers. The Rule provides that a broker-dealer doing
business with the public must not permit its aggregate indebtedness to
exceed 15 times its net capital (the "Basic Method") or, alternatively, that
it not permit its net capital to be less than 2% of aggregate debit items
computed in accordance with the Rule (the "Alternative Method"). The Rule
requires IAAC to maintain minimum net capital at an amount equal to the
greater of $100,000, 6-2/3% of aggregate indebtedness or $2,500 for each
security in which it makes a market (unless a security in which it makes a
market has a market value of $5 or less, in which event the amount of net
capital shall not be less than $1,000 for each such security) with a ceiling
of $1,000,000.
ITCI is also subject to the Rule, which requires ITCI to maintain minimum
net capital at an amount equal to the greater of $50,000, 12.5% of aggregate
indebtedness (for the first year of operations) and 6-2/3% of aggregate
indebtedness after the first year of operations and requires that the ratio
of aggregate indebtedness to net capital not exceed 8 to 1 for the first
year of operations.
Any failure to maintain the required net capital may subject a broker-dealer
to expulsion by the NASD, the SEC or other regulatory bodies, and may
ultimately require its liquidation.
IAAC and ITCI are both in compliance with the Rule, as well as the
applicable minimum net capital requirements of the NASD. IAAC and ITCI have
each elected to compute net capital under the Basic Method. In computing net
capital under the Rule, various adjustments are made to net worth with a
view to excluding assets not readily convertible into cash and to providing
a conservative statement of other assets, such as a firm's position in
securities. To that end, a deduction is made against the market value of
securities to reflect the possibility of a market decline before their
disposition. For every dollar that net capital is reduced, by means of such
deductions or otherwise (for example, through operating losses or capital
distributions), the maximum aggregate indebtedness a firm may carry is
reduced. Thus, net capital rules, which are unique to the securities
industry, impose financial restrictions upon the Company's business that are
more severe than those imposed on other types of businesses. Compliance with
the net capital rules may limit the operations of the Company because such
rules require minimum capital for such purposes as underwriting securities
distributions, and maintaining the inventory required for trading in
securities.
Net capital changes from day to day. As of September 30, 1999 and 1998, IAAC
had excess net capital of $2,502,802 and $2,845,889, respectively, and a
ratio of aggregate indebtedness to net capital of .40 to 1 and .27 to 1,
respectively. As of September 30, 1999 ITCI had excess net capital of
$251,680 and a ratio of aggregate indebtedness to net capital of .27 to 1.
Pursuant to paragraph (k)(2)(ii) of SEC Rule 15c3-3, IAAC and ITCI are each
exempt from customer reserve requirements and providing information relating
to possession or control of securities.
Employees
At September 30, 1999, the Company had 83 employees, of which 79 were full
time employees. Of such employees, 10 have managerial responsibilities, 31
are account executives, 8 are traders and 34 have administrative and
operational duties, including persons engaged in other service areas such as
customer service, research, money management, accounting, operations,
compliance and marketing. The Company considers its relationship with its
employees to be good.
<PAGE>
Compliance with Environmental Regulations
The Company must comply with various federal, state and local regulations
relating to the protection of the environment. Federal, state and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of
the environment will not, in the opinion of the Company, have a material
effect on the capital expenditures, earnings, or the competitive position of
the Company.
ITEM 2. DESCRIPTION OF PROPERTY.
The Company currently occupies leased office space of approximately 13,815
square feet at 250 Park Avenue South, Winter Park, Florida. The lease
expires in May, 2001. The Company believes that suitable additional space
will be available as needed to accommodate any future expansion of its
operations.
ITEM 3. LEGAL PROCEEDINGS.
During the year ended September 30, 1998, the Company received notification
from an NASD arbitration panel that an award of $99,845 plus $100,000
reimbursement for a portion of the claimant's legal fees was awarded. These
costs have been included in other operating expenses in the accompanying
consolidated statement of operations.
The Company is party to certain litigation as of September 30, 1999 which
relates primarily to matters arising in the ordinary course of business.
Management of the Company anticipates that the final resolution of these
items will not have a material adverse effect on the Company's consolidated
financial statements.
The foregoing discussion contains certain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements involve various risks and uncertainties with
respect to current legal proceedings. Although the Company believes that its
expectation with respect to the forward-looking statements are based upon
reasonable assumptions within the bounds of its knowledge of its business
and operations, there can be no assurances that the actual results,
performance or achievement of the Company will not differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock trades on the NASDAQ SmallCap Market under the
symbol IAAC. On November 14, 1997 the Board of Directors of the Company
declared a 10% stock dividend for shareholders of record on December 26,
1997 and payable on January 20, 1998. Also, on February 23, 1999 the Board
of Directors of the Company declared a 10% stock dividend for shareholders
of record on March 5, 1999 and payable on March 26, 1999.
As a result of the stock dividend of record date March 5, 1999 the common
stock prices prior to March 5, 1999 (Fiscal Year 1999 second fiscal quarter)
presented have been restated (reduced) by 10%. Also, as a result of the
stock dividend of record date December 26, 1997 the common stock prices
prior to December 26, 1997 (Fiscal Year 1998 first fiscal quarter) presented
have been restated (reduced) by an additional 10%.
<PAGE>
The following table sets forth, for the periods indicated, the range of high
and low sales prices per Common Share as reported by NASDAQ, which prices do
not include retail mark-ups, mark-downs, or commissions and represent prices
between dealers and not necessarily actual transactions.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
High Low
The Company's Common Stock, as traded under the symbol IAAC
Fiscal Year 1998
First Quarter.............................................................. 4 11/32 4 19/64
Second Quarter............................................................. 3 55/64 2 61/64
Third Quarter.............................................................. 3 13/32 2 23/32
Fourth Quarter............................................................. 3 1/16 1 23/64
Fiscal Year 1999
First Quarter...............................................................2 3/32 47/64
Second Quarter............................................................ 12 39/64 1 3/16
Third Quarter............................................................. 17 1/2 4
Fourth Quarter........................................................... 9 1/4 5 11/16
</TABLE>
There were approximately 116 shareholders of record of the Common Stock at
September 30, 1999. The total shareholders of record stated does not include
the approximate number of total beneficial shareholders.
The Company has never paid or declared cash dividends on its Common Stock
and does not intend to pay cash dividends on its Common Stock in the
foreseeable future. The Company presently expects to retain its earnings to
finance the development and expansion of its business. The payment by the
Company of cash dividends, if any, on its Common Stock in the future is
subject to the discretion of the Board of Directors and will depend on the
Company's earnings, financial condition, capital requirements and other
relevant factors.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this report.
Certain statements in this discussion may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and unknown risks
including, but not limited to, changes in general economic and business
conditions, interest rate and securities market fluctuations, competition
from within and from outside the investment brokerage industry, new products
and services in the investment brokerage industry, changing trends in
customer profiles, Year 2000 issues and changes in laws and regulation
applicable to the Company. Although the Company believes that its
expectation with respect to the forward-looking statements are based upon
reasonable assumptions within the bounds of its knowledge of its business
and operations, there can be no assurances that the actual results,
performance or achievement of the Company will not differ materially from
any future results, performance or achievements expressed or implied by such
forward-looking statements.
The Company's assets increased from $6,560,081 at September 30, 1998, to
$8,777,538 at September 30, 1999, or an increase of $2,217,457. The
Company's liabilities increased from $1,148,931 at September 30, 1998, to
$2,638,532 at September 30, 1999, or an increase of $1,489,601. The increase
in the net assets (assets less liabilities) of $727,856 resulted from net
income of $397,181, cash proceeds of $289,471 from the exercise of stock
options, $30,271 non-cash expense related to the exercise of a stock option
that had a variable exercise provision and $23,829 for the tax benefit
related to the exercise of a non-qualified stock option, net of the $12,896
cost of repurchased stock for the year ended September 30, 1999.
<PAGE>
The Company's consolidated balance sheet at September 30, 1999, reflects a
net payable to clearing broker, for trades which had not yet settled for
cash, due to the costs of securities purchased exceeding the proceeds from
the sale of securities.
The Company's principal activities, securities brokerage and the trading of
and market-making in securities, are highly competitive and extremely
volatile. The earnings of the Company are subject to wide fluctuations since
many factors over which the Company has little or no control, particularly
the overall volume of trading and the volatility and general level of market
prices, may significantly affect its operations.
Results of Operations:
1999 Compared to 1998
The Company's revenues are derived primarily from commissions earned on the
sale of securities and net dealer inventory and investment gains (trading
income) in securities purchased or sold for the Company's account. For the
years ended September 30, 1999 and 1998, approximately 62% and 75%,
respectively, of the Company's revenues were derived from commissions earned
on the sale of securities, with approximately 33% and 19%, respectively, of
revenues coming from net dealer inventory and investment gains.
Total revenues increased by approximately 6% to $9,916,924 in 1999 from
$9,350,223 in 1998. This increase was primarily attributable to a $1,470,932
increase in net dealer inventory and investment gains that was partially
offset by a $805,478 decrease in commission revenue.
Commission revenue decreased by approximately 12% to $6,194,591 for 1999
from $7,000,069 for 1998. Revenues from commissions are affected by both
retail trading volume and the dollar amount of retail trades. Based on the
number of retail trades processed, 1999 volume decreased by approximately
13% from 1998 levels. The dollar average of retail trades increased by 3%
for 1999 as compared with 1998. The average number of account executives
decreased from an average of 39 in 1998 to an average of 30 in 1999, or a
decrease of approximately 23%.
Net dealer inventory and investment gains increased by approximately 82% to
$3,262,671 for 1999 from $1,791,739 for 1998. The increase in net dealer
inventory and investment gains is primarily attributable to increases in
both wholesale trading and increases in Company investment portfolio
valuations. The increases in wholesale trading and investment portfolio
valuations were partially offset by decreases in retail equity and retail
fixed income trading activity. The increase in wholesale trading is
attributable to the ongoing development of new wholesale trading
relationships by the Company as well as maintenance of existing wholesale
relationships. The Company's retail trading department primarily
concentrates on global securities which it believes are likely to be traded
by the Company's clients. By focusing on these types of securities, retail
trading income is more directly related to commission income and order flow.
Revenues from management and investment advisory fees increased by
approximately 13% to $83,236 for 1999 from $73,657 for 1998. The increase is
primarily due to increases in the dollar amount of money under management
partially offset by decreases in investment supervisory fees.
Interest and dividend revenue decreased by approximately 10% to $242,580 for
1999 from $269,855 in 1998. This decrease is primarily attributable to
decreases in interest bearing securities held by the Company throughout the
year versus the portion of equity securities held by the Company due to the
increase in wholesale trading activity.
Total expenses decreased by $425,829, or approximately 4% from 1998 as
compared to 1999. The major expenses incurred by the Company relate to
direct costs of its securities operations such as commissions and clearing
fees, employees compensation and benefits, communications and promotion
expense.
<PAGE>
Commissions and clearing fees decreased by $289,059, or approximately 7%
from 1998 as compared to 1999. This decrease in commissions and clearing
fees is directly related to the 12% decrease in commission revenue.
Employees compensation and benefits increased by $807,645, or approximately
42% from 1998 as compared to 1999. The increase in employees compensation
and benefits expense is primarily due to the increase in performance based
bonus expense and an increase in retirement plan profit sharing expense. The
increase in performance based bonus and retirement plan profit sharing
expense is based on the $695,371 income before income taxes incurred for
1999 compared to the $297,159 loss before income taxes for 1998. The
increase in employees compensation and benefits is also due to the creation
of additional staff positions related to ITCI's start-up as well as IAAC's
staffing needs.
Communications expense decreased by $59,454, or approximately 18% from 1998
as compared to 1999. This decrease is due to decreased telephone expense due
to the corresponding decrease in average account executives from 39 in 1998
to 30 for 1999.
Promotion expense decreased by $352,539, or approximately 30% from 1998 as
compared to 1999. This decrease is primarily due to the planned reduction of
promotion expenditures for print media, including newsletter publication,
lead generation and related postage expense.
Occupancy and equipment rental expense increased by $83,039, or
approximately 23% from 1998 as compared to 1999. This increase was due to a
previously negotiated lease increase for the Company's premises as well as
increases in other operating lease expense. The increase was also due to a
negotiated, time specific rent adjustment realized during the five months
from September 1997 through January 1998.
Professional fees decreased by $175,704, or 41% from 1998 as compared to
1999. This decrease is primarily due to significantly higher legal fees
incurred during 1998 related to a closed 1998 NASD arbitration matter.
As a result of the above, the Company is reporting net income of $397,181
for the year ended September 30, 1999. This is compared to a net loss of
$217,338 for the year ended September 30, 1998. The Company's effective
income tax rate was approximately 43% for 1999 compared to the effective
income tax benefit of 27% for 1998. The effective tax rate decrease for 1998
from the expected 34% benefit is primarily due to the effect of permanent
differences.
1998 Compared to 1997
Total revenues decreased by approximately 24% to $9,350,223 in 1998 from
$12,301,621 in 1997. This decrease was primarily attributable to a
$2,249,192 decrease in commission revenue primarily due to a decrease in
retail security order flow. Commission revenue decreased by approximately
24% to $7,000,069 for 1998 from $9,249,261 for 1997. Revenues from
commissions are affected by both retail trading volume and the dollar amount
of retail trades. Based on the number of retail trades processed, 1998
volume decreased by approximately 13% from 1997 levels. In addition, the
dollar average of retail trades decreased by 14% for 1998 as compared with
1997. The average number of account executives decreased from an average of
44 in 1997 to an average of 39 in 1998, or a decrease of approximately 11%.
Net dealer inventory and investment gains decreased by approximately 27% to
$1,791,739 for 1998 from $2,457,892 for 1997. The decrease in net dealer
inventory and investment gains is primarily attributable to decreases in
both retail trading and decreases in Company investment portfolio valuations
due to the volatility of the foreign and especially Asian financial markets.
The decreases in retail trading and investment portfolio valuations were
partially offset by increases in wholesale trading activity. The increase in
wholesale trading is attributable to the ongoing development of new
wholesale trading relationships by the Company as well as maintenance of
existing wholesale relationships. The Company's retail trading department
primarily concentrates on global securities which it believes are likely to
be traded by the Company's clients. By focusing on these types of
securities, trading income is more directly related to commission income and
order flow.
<PAGE>
Revenues from management and investment advisory fees decreased by
approximately 9% to $73,657 for 1998 from $81,302 for 1997. The decrease is
primarily due to decreases in the dollar amount of money under management as
well as decreases in investment supervisory fees.
Interest and dividend revenue decreased by approximately 3% to $269,855 for
1998 from $279,041 in 1997. This decrease is partly attributable to somewhat
lower yields on securities and investments held by the Company throughout
the 1998 fiscal year. The decrease is also attributable to decreases in
invested funds available from the operations of the Company.
Total expenses decreased by $1,433,987, or approximately 13% from 1997 as
compared to 1998. This decrease in total expense is related to the
corresponding decrease in total revenues. The major expenses incurred by the
Company relate to direct costs of its securities operations such as
commissions and clearing fees, employees compensation and benefits,
communications and promotion expense.
Commissions and clearing fees decreased by $936,854, or approximately 18%
from 1997 as compared to 1998. This decrease in commissions and clearing
fees is directly related to the 24% decrease in commission revenue and the
27% decrease in net dealer inventory and investment gains.
Employees compensation and benefits decreased by $683,493, or approximately
26% from 1997 as compared to 1998. The decrease in employees compensation
and benefits expense is primarily due to the decrease in performance based
bonus expense and a decrease in retirement plan profit sharing expense. The
decrease in performance based bonus and retirement plan profit sharing
expense is based on the $297,159 loss before income taxes incurred for 1998
compared to the $1,220,252 income before income taxes for 1997.
Communications expense decreased by $45,012, or approximately 12% from 1997
as compared to 1998. This decrease is due to decreased telephone expense due
to the corresponding decrease in average account executives from 44 in 1997
to 39 for 1998.
Promotion expense decreased by $42,000, or approximately 3% from 1997 as
compared to 1998. This decrease is primarily due to the reduction of
promotion related expenditures including travel and entertainment
expenditures. Expenditures by the marketing department for print media,
including newsletter publication and postage, remained approximately the
same for 1998 as compared to 1997.
Occupancy and equipment rental expense increased by $35,750, or
approximately 11% from 1997 as compared to 1998. This increase was due to a
scheduled rent increase previously negotiated with the owner of the
Company's leased premises as well as an increase in other leased equipment
expense.
Professional fees increased by $62,303, or approximately 17% from 1997 as
compared to 1998. This increase is primarily due to the legal fees incurred
from a closed NASD arbitration matter. Other operating expenses increased by
$179,394, or approximately 32% from 1997 as compared to 1998. Approximately
$100,000 of the increase in other operating expenses is for the award of the
same closed arbitration matter and an additional $100,000 of the increase is
for partial reimbursement of the claimant's legal fees also awarded to the
claimant in the same matter. Other operating expenses included various other
expenses that decreased from 1997 to 1998 offsetting a portion of the
expenses related to the closed arbitration matter.
As a result of the above, the Company is reporting a net loss of $217,338
for the year ended September 30, 1998. This is compared to net income of
$717,869 for the year ended September 30, 1997. The Company's effective
income tax benefit was approximately 26.8% for 1998 compared to the
effective income tax rate of 41.2% for 1997. The effective tax rate decrease
for 1998 from the expected 34% benefit is primarily due to the effect of
permanent differences.
<PAGE>
Liquidity and Capital Resources
Substantial portions of the Company's assets are liquid. At September 30,
1999, approximately 88% of the Company's assets consisted of cash,
cash equivalents and marketable securities. All assets are financed by
the Company's equity capital, short-term borrowings from securities
lending transactions and other payables.
IAAC, a wholly owned registered securities broker/dealer subsidiary, is
subject to the requirements of the SEC and the NASD relating to liquidity
and net capital levels. At September 30, 1999, IAAC had net capital of
$2,980,302 which was $2,502,802 in excess of its minimum net capital
requirement at that date.
ITCI, a wholly owned registered securities broker subsidiary, is also
subject to the requirements of the SEC and the NASD relating to liquidity
and net capital levels. ITCI has not yet commenced operations. The net
capital requirement for ITCI is based on ITCI's planned status as an
introducing securities broker. At September 30, 1999, ITCI had net capital
of $301,680, which was $251,680 in excess of its minimum net capital
requirement at that date.
In the opinion of management, the Company's existing capital and cash flow
from operations will be adequate to meet the Company's capital needs for at
least the next twelve months in light of known and reasonably estimated
trends. The Company believes that it has the internal financial resources to
implement the initial online trading of foreign and domestic securities
activities and operations of ITCI without additional outside capital.
However, at this time additional financing is being sought primarily for
desired marketing efforts intended to generate potential online client and
online securities transaction growth. Any additional financing will also
support the required technology and staffing enhancements that would be
required if the marketing efforts are successful in generating significant
growth for ITCI. In conjunction with the Company's plans for ITCI, the
Company has engaged PaineWebber as its exclusive financial advisor to
arrange and negotiate a private placement of securities issued by the
Company or to find a strategic partner. PaineWebber has been engaged to use
its best efforts in connection with a private placement and does not have
any obligation to purchase any securities issued by the Company or to
provide financing of any kind to the Company.
Year 2000 Compliance
The securities industry is, to a significant extent, technologically driven
and dependent. In addition to some internally utilized technological
applications, the Company's businesses are materially dependant upon the
performance of exchanges, market centers, counterparties, customers and
vendors (collectively "the Company's material third parties") who, in turn,
may be heavily reliant on technological applications. In sum, the securities
industry is interdependent with each other, strengthened or weakened by the
quality and performance of its attendant information and embedded
technology.
The Company is aware that the Year 2000 provides potential problems with the
programming code in existing computer systems. The Year 2000 problem is
extensive and complex as virtually every computer operation will be affected
to some degree by the change of the two digit year value to 00. The issue is
whether computer systems will properly recognize date-sensitive information
<PAGE>
when the year changes to 2000. Systems that do not properly recognize such
information could generate erroneous data or fail.
The failure or faulty performance of computer systems could potentially have
a far ranging impact on the Company's business such as a diminution in its
ability to (a) ascertain information vital to strategic decision making by
both the Company and its customers; (b) perform interest rate and pricing
calculations; (c) execute and settle proprietary and customer transactions;
(d) undertake regulatory surveillance and risk management; (e) maintain
accurate books and records and provide timely reports; (f) maintain
appropriate internal financial operations and accounting; and (g) access
credit facilities for both the Company and its customers.
Accordingly it is necessary for the Company, to the extent reasonably
practicable, to identify the internal computer systems and software which
are likely to have a critical impact on its operations, make an assessment
of its Year 2000 readiness and modify or replace information and embedded
technology as needed. Some of these critical internal data processing
systems include the Company's internal Novel network, sales contact
management software, general ledger accounting software, trading income
calculation software and retail commission tracking programs. Assessment of
these internal programs is primarily completed and final remediation is in
process and largely completed. In addition, the Company has primarily
completed a Year 2000 readiness assessment for the Company's material third
parties.
Because the Company utilizes the services of Wexford Clearing Services
Corporation ("Wexford") in its business, data processing system aspects of
the Year 2000 problem related to securities clearing, custody of client
securities, back office operations, cashiering and margin and credit will be
addressed by Wexford (a wholly owned guaranteed subsidiary of Prudential
Securities Incorporated "Prudential"). Although Wexford is the contracting
party for the provision of these critical services, Wexford, in fact,
delivers those services through the operations of Prudential, a leading
registered broker and dealer. Consequently, it is the readiness of
Prudential that is critical when assessing the Year 2000 compliance of the
clearing and operations capacity of the Company's active broker-dealer
subsidiaries. Prudential has been assessed, by internal industry standards
established by the Securities Industry Association, to be within the top
tier of Year 2000 readiness. During industry-wide testing conducted by the
Securities Industry Association, in which Prudential took part, Prudential
and other participants were able to input transactions and send them to the
appropriate markets for execution, confirmation and clearance under
simulated Year 2000 conditions.
Additionally, the Company has assessed the state of readiness of almost all
known technologically oriented service vendors and believes, based on
letters of certification, that these vendors are Year 2000 compliant. This
determination does not mean that the vast majority of the Company's material
third parties pose no Year 2000 risk to the Company. First, the Company is
relying in large measure on these parties' assessments of their readiness.
Second, there are several vendors, which account for a substantial portion
of the Company's mission critical operations, which may be partially or
largely, but not fully, Year 2000 compliant. Finally, certain critical third
parties, such as exchanges, clearing houses, depositaries and other service
vendors have no direct functional contact with the Company (as they operate
directly with Wexford) but may impact the Company's operations.
<PAGE>
During fiscal year 1997 the Company began the strategic review process as it
relates to the Year 2000 process. The Board of Directors of the Company
approved the Company's Year 2000 plan at its meeting on July 17, 1998. This
plan includes all phases necessary and budgetary consideration for each
fiscal year through the Year 2000.
The Year 2000 remediation plan and process includes (1) identification,
modification and testing of non-compliant Year 2000 code; (2)
identification, inventory, assessment and, if necessary, modification of
internal ad hoc systems or applications that may be material to the
Company's operations; (3) with the exception of counterparties and
customers, documentation of the assessment of the readiness of the Company's
material third parties; and (4) a timetable for completion of all year 2000
plan implementation steps for amendment to the plan as required. During the
year ended September 30, 1999 and 1998 the Company incurred approximately
$95,000 and $76,000, respectively, of costs related to the Year 2000
problem. The Company had originally budgeted a total of $193,000 for Year
2000 related costs for the 20 month period from June 1998 through January
2000. These Year 2000 costs include both capital expenditures and period
expenses. This Year 2000 budget will be funded from the working capital of
the Company. Provided there is an absence of unanticipated critical events,
the Company does not expect Year 2000 costs to have a material effect on its
operating results, financial condition or cash flows.
As a contingency plan, the Company intends to have information systems
personnel on site or on stand-by availability, from December 31, 1999
through January 2, 2000, on a 24-hour basis, to insure that any Year 2000
problems which may arise will be addressed and corrected immediately. The
Company has been informed that Prudential intends to implement a similar
contingency plan. The Company believes these measures will be sufficient
because of the following reasons: (1) the Company has reviewed and modified,
to the extent it can ascertain the problem, mission critical code and
embedded technology; (2) the Company has minimal internally generated
systems; and (3) the Company's vendors have represented that they are Year
2000 compliant.
However, it is the Company's position there are no alternatives in the event
the exchanges or other market centers fail to perform, and the Company
believes it is highly likely that the factors which may prevent a particular
clearing firm from performing, would similarly affect all other clearing
firms, which would either preclude the availability of alternative clearing
service providers or overwhelm the resources of surviving alternative
clearing services providers. In other words, the Year 2000 presents a
problem which is not likely to be susceptible to remediation at a future
date, if it is not fixed in advance.
The Company is cautiously optimistic about its current state of readiness
and its ability to make any further necessary modifications to internal
systems in time for the Year 2000. The Company also believes that its major
third party service provider, Prudential/Wexford, has undertaken a
systematic approach to the Year 2000 problem and will complete its plan
which is designed to achieve a state of readiness. However, there are
factors outside the control of the Company which make certainty impossible
such as: (1) the inability to assess the readiness of market counterparties
and customers; (2) the inability to achieve assurance as to any material
third parties' representations of readiness; (3) the global exposure of
material third parties to Year 2000 problems outside the United States which
have a corresponding effect within the domestic securities markets and
operations; and (4) the limitations in anticipating all aspects of a problem
with which there is no prior historical experience. The presence of any or
all of these and other factors may well have a material adverse effect on
the Company's business, operating results, financial condition and cash
flows.
<PAGE>
Effects of Inflation
Because the Company's assets are, to a large extent, liquid in nature, they
are not significantly affected by inflation. Increases in the Company's
expenses, such as employee compensation, rent and communications, due to
inflation, may not be readily recoverable in the prices of services offered
by the Company. In addition, to the extent that inflation results in rising
interest rates and has other adverse effects on the securities markets and
on the value of the securities held in inventory, it may adversely affect
the Company's financial position and results of operations.
ITEM 7. CONSOLIDATED FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Independent Auditors' Report........................................F-1
Consolidated Balance Sheets as of
September 30, 1999 and 1998....................................F-2
Consolidated Statements of Operations for the Years Ended
September 30, 1999 and 1998....................................F-3
Consolidated Statements of Stockholders' Equity for the Years Ended
September 30, 1999 and 1998....................................F-4
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1999 and 1998....................................F-5
Notes to Consolidated Financial Statements..........................F-7
<PAGE>
Independent Auditors' Report
The Board of Directors
International Assets Holding Corporation
and Subsidiaries:
We have audited the accompanying consolidated balance sheets of International
Assets Holding Corporation and Subsidiaries as of September 30, 1999 and 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for the years then ended. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of International Assets
Holding Corporation and Subsidiaries as of September 30, 1999 and 1998 and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ KPMG
Orlando, Florida
November 5, 1999
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C>
Assets 1999 1998
----------------- ------------------
Cash $ 380,070 617,628
Cash deposits with clearing broker 3,798,679 2,424,486
Foreign currency 30,255 3,961
Receivable from clearing broker, net -- 791,753
Other receivables 42,694 63,523
Securities owned, at market value 3,585,566 2,014,734
Investment in Joint Venture 15,639 --
Income taxes receivable 115,081 67,398
Deferred income tax benefit 84,033 127,065
Property and equipment, at cost:
Leasehold improvements 52,953 52,953
Furniture and equipment 1,082,129 902,719
----------------- ------------------
1,135,082 955,672
Less accumulated depreciation and amortization (731,057) (605,059)
----------------- ------------------
Net property and equipment 404,025 350,613
Other assets, net of accumulated amortization of
$144,508 in 1999 and $118,504 in 1998 321,496 98,920
================= ==================
Total assets $ 8,777,538 6,560,081
================= ==================
Liabilities and Stockholders' Equity
Liabilities:
Foreign currency sold, but not yet purchased
$ 36,482 7,206
Securities sold, but not yet purchased, at market value 990,482 290,403
Payable to clearing broker, net 230,443 --
Accounts payable 154,950 72,600
Accrued employee compensation and benefits 744,076 291,536
Accrued expenses 260,565 352,544
Deferred income taxes 91,807 16,797
Payable to Joint Venture 9,384 --
Other liabilities 120,343 117,845
----------------- ------------------
Total liabilities 2,638,532 1,148,931
----------------- ------------------
Stockholders'
equity:
Preferred stock, $.01 par value. Authorized 1,000,000
shares; issued and outstanding -0- shares -- --
Common stock, $.01 par value. Authorized 3,000,000
shares; issued and outstanding 1,725,428 shares in September
1999 and 1,481,574 shares in September 1998 17,254 14,816
Additional paid-in capital 4,588,928 3,564,648
Retained earnings 1,532,824 1,831,686
----------------- ------------------
Total stockholders' equity 6,139,006 5,411,150
Commitments and contingent liabilities
================= ==================
Total liabilities and stockholders' equity $ 8,777,538 6,560,081
================= ==================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
------------------ -------------------
Revenues:
Commissions $ 6,194,591 7,000,069
Net dealer inventory and investment gains 3,262,671 1,791,739
Management and investment advisory fees 83,236 73,657
Account maintenance fees 107,846 164,238
Interest and dividends 242,580 269,855
Loss from joint venture (34,361) --
Other 60,361 50,665
------------------ -------------------
Total revenues 9,916,924 9,350,223
------------------ -------------------
Expenses:
Commissions and clearing fees 4,000,910 4,289,969
Employees compensation and benefits 2,734,437 1,926,792
Communications 268,841 328,295
Promotion 833,805 1,186,344
Occupancy and equipment rental 444,273 361,234
Interest 4,829 5,704
Professional 250,587 426,291
fees
Insurance 165,052 197,718
Depreciation and amortization 152,002 177,991
Other operating expenses 366,817 747,044
------------------ -------------------
Total expenses 9,221,553 9,647,382
------------------ -------------------
Income (loss) before income taxes 695,371 (297,159)
Income tax expense (benefit) 298,190 (79,821)
================== ===================
Net income (loss) $ 397,181 (217,338)
================== ===================
Earnings (loss) per share:
Basic $ 0.24 (0.13)
================== ===================
Diluted $ 0.20 (0.13)
================== ===================
Weighted average number of common shares outstanding:
Basic 1,668,814 1,686,888
================== ===================
Diluted 2,024,266 1,686,888
================== ===================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Additional Total
Preferred Common paid-in Retained Treasury stockholders'
stock stock capital earnings stock equity
------------- ------------ ------------- ----------- ------------ -----------------
Balances at September 30, 1997 $ -- 14,113 3,125,043 2,688,238 -- 5,827,394
Acquisition of 63,336 common shares -- -- -- -- (168,297) (168,297)
Acquisition of 7,000 common shares -- -- -- -- (30,609) (30,609)
Retirement of 70,336 common shares held
in treasury -- (703) (134,379) (63,824) 198,906 --
10% stock dividend -- 1,406 573,984 (575,390) -- --
Net loss -- -- -- (217,338) -- (217,338)
-------------- ------------ ------------ ------------ ------------ -----------------
Balances at September 30, 1998 -- 14,816 3,564,648 1,831,686 -- 5,411,150
Acquisition of 5,316 common shares -- -- -- -- (12,896) (12,896)
Retirement of 5,316 common shares held
in treasury -- (53) (11,485) (1,358) 12,896 --
Exercise of Employee Stock Option -- 1,008 342,563 -- -- 343,571
10% stock dividend -- 1,483 693,202 (694,685) -- --
Net income -- -- -- 397,181 -- 397,181
-------------- ------------- ----------- ------------- ------------- ---------------
Balances at September 30, 1999 $ -- 17,254 4,588,928 1,532,824 -- 6,139,006
============== ============= =========== ============= ============= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1999 and 1998
1999 1998
------------- ------------
Cash flows from operating activities:
Net income (loss) $ 397,181 (217,338)
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortization 152,001 177,991
Deferred income taxes 118,043 (81,476)
Non-cash compensation 30,271 --
Loss from joint venture 34,361 --
Tax benefit from exercise of
nonqualified stock option 23,829 --
Cash provided by (used for) changes in:
Receivable from clearing broker, net 791,753 (386,703)
Other receivables 20,829 (4,921)
Securities owned, at market value (1,570,832) 1,813,910
Income taxes receivable (47,683) (63,743)
Other assets (54,682) 47,773
Foreign currency sold, but not yet
purchased 29,276 3,214
Securities sold, but not yet
purchased, at market value 700,079 (391,651)
Payable to clearing broker, net 230,443 --
Accounts payable 82,350 (43,467)
Accrued employee compensation
and benefits 452,540 (609,437)
Accrued expenses (91,979) 84,230
Payable to joint venture 9,384 --
Other liabilities 2,498 8,484
------------- -----------
Net cash provided by operating
activities 1,309,662 336,866
Cash flows from investing activities:
Investment in joint venture (50,000) --
Acquisition of property and equipment
and other assets (373,308) (58,724)
------------ -----------
Net cash used for investing activities (423,308) (58,724)
Cash flows from financing activities:
Exercise of stock options 289,471
Acquisition of common shares related to
repurchase program -- (30,609)
Acquisition of common shares related to
terminated ESOP participants and RSP
participants (12,896) (168,297)
Net cash provided by (used for) financing
activities 276,575 (198,906)
------------ ---------
Net increase in cash and cash equivalents 1,162,929 79,236
Cash and cash equivalents at beginning of year 3,046,075 2,966,839
------------ ----------
Cash and cash equivalents at end of year $ 4,209,004 3,046,075
============ ==========
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1999 and 1998
1999 1998
------------ -------------
Supplemental disclosures of cash flow information:
Cash paid for interest: $ 4,829 5,704
------------ ------------
Income taxes paid $ 204,000 75,399
------------ ------------
Supplemental disclosure of noncash financing
activities:
On March 26, 1999, the Company issued 148,199
shares of common stock in conjunction with a
ten percent stock dividend.
On January 20, 1998, the Company issued 140,648
shares of common stock in conjunction with a
ten percent stock dividend.
See accompanying notes to consolidated financial statements.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements include the accounts of
International Assets Holding Corporation (the Company or the
parent company) and its six wholly-owned subsidiaries,
International Assets Advisory Corp., International Assets
Management Corp., Global Assets Advisors, Inc., International
Financial Products, Inc., INTLTRADER.COM (ITCI), and
OffshoreTrader.com Ltd. International Assets Advisory Corp.
is a registered broker/dealer under the Securities Act of 1934.
Its securities transactions are cleared through Wexford
Clearing Services Corporation (a wholly-owned, guaranteed
subsidiary of Prudential Securities Incorporated) on a fully
disclosed basis. International Assets Management Corp. was
formed to manage the physical assets of the Company. Global
Assets Advisors, Inc. provides investment advisory and account
management services. International Financial Products, Inc. is
inactive but was formed to market products which were not
investments, but were related to the financial industry.
INTLTRADER.COM, INC. was formed to provide on-line brokerage
transactions of foreign and domestic securities using the
Internet. ITCI has not yet commenced its on-line brokerage
activities. OffshoreTrader.com Ltd. was incorporated to
explore global internet securities trading for non-U.S.
citizens. All significant intercompany balances and transactions
have been eliminated in consolidation.
(b) Cash and Cash Equivalents
Cash equivalents consist of cash deposits with clearing broker and
foreign currency. Cash deposits with clearing broker consist of
cash and money market funds stated at cost which approximates
market. The money market funds earn interest at varying rates on a
daily basis. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments
with original maturities of three months or less to be cash
equivalents.
(c) Foreign Currency
The value of a foreign currency, including a foreign currency
sold, but not yet purchased, is converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at the close of
business on the measurement date.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(d) Financial Instruments
As of September 30, 1999 and 1998, the carrying value of the
Company's financial instruments including cash, cash deposits with
clearing broker, foreign currency, receivables, accounts payable
and accrued expenses approximate their fair values, based on the
short-term maturities of these instruments. Additionally, the
carrying value of securities owned and any securities and foreign
currency sold, but not yet purchased, approximate their fair value
at September 30, 1999 and 1998 as they are based on quoted market
prices.
(e) Valuation of Securities
Each listed security is valued at the last reported sale price.
Listed securities not traded on an exchange that day, and other
securities, which are traded in the over-the-counter market, are
valued at the market's current bid price for securities owned and
current asked price for securities sold, but not yet purchased.
The value of a foreign security is determined in its national
currency on the exchange on which it is traded, which value is
then converted into its U.S. dollar equivalent at the foreign
exchange rate in effect following the close of the stock exchange
in the country where the security is issued and traded.
As of September 30, 1999, securities includes a limited
partnership ownership interest of $86,992. The limited partnership
ownership interest is recorded at fair value, which has been
determined by management. This limited partnership ownership
interest is held for the Company's investing purposes and is not
held for sale to the Company's customers.
(f) Revenue Recognition
The revenues of the Company are derived principally from
commissions earned on the sale of securities, from management and
investment advisory fees, from account maintenance fees charged to
customers and from realized and unrealized trading income in
securities purchased or sold for the Company's account. Commission
and trading income are recorded as of the trade date of the
securities. Interest income is recorded on the accrual basis and
dividend income is recognized upon receipt.
(g) Depreciation and Amortization
Depreciation on property and equipment is calculated using the
straight-line method over the estimated useful lives of the
assets, which range from five to seven years. Leasehold
improvements are amortized using the straight-line method over
the estimated period of benefit to be received from the assets,
which approximates six years.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
Intangible assets, included in other assets in the accompanying
consolidated balance sheets, are amortized using the straight-line
method over the estimated period of benefit to be received from
the assets, which approximates five years.
(h) Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates as expected to apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce
deferred tax assets to an amount that, in the opinion of
management, is more likely than not to be realized.
The Company and its subsidiaries file consolidated federal and
state income tax returns.
(i) Advertising
The Company expenses costs of advertising as incurred and has
included these expenses in promotion expenses in the accompanying
consolidated statements of operations. Advertising costs for the
years ended September 30, 1999 and 1998 were $397,090 and
$872,882, respectively.
(j) Stock Option Plan
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation", which permits entities to recognize as
expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also
allows entities to continue to apply the provisions of APB Opinion
No. 25 which provides that compensation expense would be recorded
on the date of grant only if the current market price of the
underlying stock exceeded the exercise price and pro forma
disclosures as if the fair-value-based method defined in SFAS No.
123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma
disclosure provisions of SFAS No. 123.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(k) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that effect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported revenues and expenses during the period. Actual results
could differ from these estimates.
(l) Earnings Per Share
Basic earnings (loss) per share has been computed by dividing net
income (loss) by the weighted average number of common shares
outstanding. Diluted earnings (loss) per share has been computed
by dividing net income (loss) by the weighted average number of
common shares and dilutive potential common shares outstanding.
All options were excluded from the calculation of diluted loss per
share for the year ended September 30, 1998, because their
inclusion would have been antidilutive.
(m) Future Application of Accounting Standards
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities
in the statement of financial position and measure those
instruments at fair value. The implementation date of SFAS 133 was
amended by SFAS 137 and is now effective for all fiscal quarters
of fiscal years beginning after June 15, 2001. The Company is
currently reviewing SFAS 133 to see what impact, if any, it will
have on the Company.
(2) Related Party Transactions
During the years ended September 30, 1999 and 1998, the Board of
Directors of the Company approved the reimbursement of
approximately $3,000 and $39,000, respectively, of expenses
incurred in connection with responding to issues raised during a
Securities and Exchange Commission (SEC) inspection of an
affiliated company.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(3) Securities Owned and Securities Sold, But Not Yet Purchased
Securities owned and securities sold, but not yet purchased at
September 30, 1999 and 1998 consist of trading and investment
securities at market values as follows:
Sold, but not
Owned yet purchased
--------- ----------------
1999:
Obligations of U.S. Government $ 241,396 --
Common stock and American
Depository Receipts 2,573,717 945,053
Corporate and municipal bonds 209,340 --
Foreign government obligations 257,083 --
Unit investment trusts, mutual
funds and other investments 304,030 45,429
-------------- ----------------
$ 3,585,566 990,482
============== ================
1998:
Obligations of U.S. Government $ 373,841 --
Common stock and American
Depository Receipts 836,057 290,403
Corporate and municipal bonds 341,066 --
Foreign government obligations 26,713 --
Unit investment trusts, mutual
funds and other investments 437,057 --
------------- -----------------
$ 2,014,734 290,403
============= =================
(4) Financial Instruments with Off-Balance Sheet Risk
The Company is party to certain financial instruments with
off-balance sheet risk in the normal course of business as a
registered securities broker/dealer. In addition, the Company has
sold securities that it does not currently own and will
therefore be obligated to purchase such securities at a future
date. The Company has recorded these obligations in the
consolidated financial statements at September 30, 1999 at market
values of the related securities (totaling $990,482) and will
incur a loss if the market value of the securities increases
subsequent to September 30, 1999.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(5) Capital and Cash Reserve Requirements
As of September 30, 1999 and 1998, IAAC is subject to the
Securities and Exchange Commission uniform net capital rule
(Rule 15c3-1), which requires the maintenance of minimum net
capital at an amount equal to the greater of $100,000, 6-2/3%
of aggregate indebtedness, or $2,500 for each security in which
a market is made with a bid price over $5 and $1,000 for each
security in which a market is made with a bid price of $5 or
less with a ceiling of $1,000,000, and requires that the ratio
of aggregate indebtedness to net capital not to exceed 15 to 1.
As of September 30, 1999, IAAC had excess net capital of
$2,502,802 and a ratio of aggregate indebtedness to net capital
of .40 to 1.
As of September 30, 1999, ITCI is subject to the Securities and
Exchange Commission uniform net capital rule (Rule 15c3-1),
which requires the maintenance of minimum net capital at an
amount equal to the greater of $50,000, 12.5% of aggregate
indebtedness (for the first year of operations) and 6-2/3% of
aggregate indebtedness after the first year of operations and
requires that the ratio of aggregate indebtedness to net capital
not exceed 8 to 1 for the first year of operations. At September
30, 1999, ITCI had excess net capital of $251,680 and a ratio of
aggregate indebtedness to net capital of approximately .27 to 1.
IAAC and ITCI are exempt from customer reserve requirements and
providing information relating to possession or control of
securities pursuant to Rule 15c3-3 of the Securities and
Exchange Act of 1934. Both IAAC and ITCI meet the exemptive
provisions of Paragraph (k)(2)(ii).
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(6) Leases
The Company is obligated under various noncancelable operating
leases for the rental of its office facilities and certain
office equipment. Rent expense associated with these operating
leases amounted to $344,900 and $284,800 for the years ended
September 30, 1999 and 1998, respectively. The future minimum
lease payments under noncancelable operating leases as of
September 30, 1999 are as follows:
Year ending September 30,
----------------------------------------
2000 $ 385,600
2001 289,700
2002 81,700
2003 50,500
2004 3,300
----------------
Total future minimum lease payments $ 810,800
================
(7) Income Taxes
Income tax expense (benefit) for the years ended September 30,
1999 and 1998 consists of:
Current Deferred Total
----------- ------------ -----------
1999:
Federal $ 154,065 100,790 254,855
State 26,082 17,253 43,335
----------- ------------ -----------
$ 180,147 118,043 298,190
=========== ============ ===========
1998:
Federal $ 1,345 (69,568) (68,223)
State 310 (11,908) (11,598)
----------- ------------ -----------
$ 1,655 (81,476) (79,821)
=========== ============ ===========
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
Total income tax expense (benefit) for the years ended September 30, 1999
and 1998 differed from the amounts computed by applying the U.S. federal
income tax rate of 34% to income (loss) before income taxes as a result
of the following:
1999 1998
--------------------- ---------------------
% of % of
pretax pretax
Amount income Amount income
--------- ---------- ---------- ----------
Computed "expected" tax
expense (benefit) $ 236,426 34.0% $ (101,034) (34.0)%
Increase (decrease) in income
tax expense resulting from:
State income taxes,
net of federal
income tax benefit 28,601 4.1 (7,655) (2.6)
Meals and entertainment
expense not deductible
for tax purposes 27,841 4.0 21,552 7.3
Memberships, net 4,822 .7 7,076 2.4
Other, net 500 .1 240 .1
--------- ---------- ---------- ----------
$ 298,190 42.9% $ (79,821) (26.8)%
========= ========== ========== ==========
Deferred income taxes as of September 30, 1999 and 1998 reflect the impact
of "temporary differences" between amounts of assets and liabilities for
financial statement purposes and such amounts as measured by tax laws.
The temporary differences give rise to deferred tax assets and
liabilities, which are summarized below as of September 30, 1999 and 1998:
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
1999 1998
---------- ----------
Gross deferred tax liabilities:
Accumulated depreciation and amortization $ (18,843) (16,797)
Software development costs (72,964) --
---------- ----------
Total gross deferred tax liabilities (91,807) (16,797)
---------- ----------
Gross deferred tax assets:
Accrued reserves 39,696 84,667
Investment in Limited Partnership 3,802 --
Rent abatement 2,410 8,208
Amortization of other assets 35,279 29,885
Contributions carryover 2,846 4,305
---------- ----------
Total gross deferred tax assets 84,033 127,065
---------- ----------
$ (7,774) 110,268
========== ==========
There was no valuation allowance for deferred tax assets as of
September 30, 1999 and 1998. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent
upon the generation of future taxable income or the reversal of
deferred tax liabilities during the periods in which those temporary
differences become deductible. Management considers the scheduled
reversal of deferred tax liabilities, projected future taxable income
and tax planning strategies in making this assessment. As of September
30, 1999, based upon the level of historical taxable income and
projections for future taxable income, management believes it is more
likely than not that the Company will realize the benefits of these
deductible differences.
(8) Employee Benefit Plans
Effective May 1, 1999, the Company has implemented a defined
contribution 401(k) Profit Sharing Plan ("401(k) Plan"). The
401(k) Plan amends and restates the Company's employee stock
ownership plan ("ESOP"), which was effective December 30, 1992.
This plan retains the 401(k) profit sharing features of the
December 30, 1992 plan, and effective May 1, 1999, deletes the
employee stock ownership plan provisions. Those participants
who had account balances in the ESOP portion of the plan, as of
May 1, 1999 will retain certain ESOP rights, such as the right
to receive distributions in the form of employer common stock.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
All Company employees who have completed one year of continuous service
and who have attained the age of twenty-one are eligible to participate
in the 401(k) Plan. The 401(k) Plan allows employees to elect to defer a
portion of their salary into the 401(k). The amount contributed reduces
the employee's taxable compensation. IAAC has the option to make a
matching contribution at the sole discretion of IAAC.
IAAC implemented a defined contribution Retirement Savings Plan ("RSP")
effective January 1, 1995. All employees who have completed one year of
continuous service and who have attained the age of twenty-one are
eligible for the RSP. The contributions to the RSP are at the sole
discretion of IAAC.
IAAC's contributions to the various employee benefit plans for the years
ended September 30, 1999 and 1998 are summarized as follows:
1999 1998
-------------- ---------------
RSP $ 44,408 --
ESOP- 401(k) portion 25,592 1,209
-------------- ---------------
$ 70,000 1,209
============== ===============
Employer contributions gradually vest over seven years, and employee
contributions are fully vested at all times, are paid upon death,
disability, retirement or termination of employment.
As of September 30, 1999 and 1998, 250,172 and 343,332 common shares of
the Company were allocated to ESOP participants, respectively. During the
years ended September 30, 1999 and 1998, 3,540 and 64,062 common shares
of the Company were purchased from terminated ESOP participants.
As of September 30, 1999 and 1998, 64,703 and 62,585 common shares of the
Company were allocated to RSP participants, respectively. During the
years ended September 30, 1999 and 1998, 1,776 and 5,589, respectively,
common shares of the Company were purchased from terminated RSP
participants.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
(9) Stock Options
The International Assets Holding Corporation Stock Option Plan (the Plan)
was adopted by the Board of Directors of the Company and approved by the
Company's stockholders during January 1993. The Plan permits the granting
of awards to employees and directors of the Company and its subsidiaries
in the form of stock options. Stock options granted under the Plan may be
"incentive stock options" meeting the requirements of Section 422 of the
Internal Revenue Code of 1986, as amended, or nonqualified stock options
which do not meet the requirements of Section 422. As of September 30,
1999, a total of 770,000 shares of the Company's common stock had been
reserved for issuance pursuant to options granted under the Plan.
The Plan is administered by the Company's Board of Directors or a
committee thereof. The Plan gives broad powers to the Board of Directors
to administer and interpret the Plan, including the authority to select
the individuals to be granted options and rights and to prescribe the
particular form and conditions of each option or right granted. All
options are granted at an exercise price equal to the fair market value
or 110 percent of the fair market value of the Company's common stock on
the date of the grant. Awards may be granted pursuant to the Plan through
January 2003. The Plan may be terminated earlier by the Board of
Directors at its sole discretion.
At September 30, 1999, there were 22,450 additional shares available for
grant under the Plan. Using the Black Scholes option-pricing model, the
per share weighted-average fair value of stock options granted during
1999 and 1998, where exercise price equals the market price of the stock
on the grant date, was $.96 and $1.66, respectively. The per share
weighted average fair value of stock options granted during 1999, where
exercise price is greater than the market price on the grant date was
$.68.
The following weighted average assumptions were used:
1999 1998
------------ ------------
Exercise price equal to market
price on grant date:
Expected risk-free interest rate 5.16% 5.56%
Expected life 5.2 years 6.0 years
Expected volatility 55.3% 55.60%
Expected dividend yield 0.00% 0.00%
Exercise price greater than market
price on grant date:
Expected risk free interest rate 5.14% --
Expected life 5 years --
Expected volume 54.2% --
Expected dividend yield 0.00% --
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options in the consolidated financial statements. Had the Company
determined compensation cost based on the fair value at the grant date
for its stock options under SFAS No. 123, the Company's net income (loss)
and earnings (loss) per share would have been reduced to the pro forma
amounts indicated below:
1999 1998
-------- --------
Net income (loss) As reported $ 397,181 (217,338)
Pro forma $ 255,653 (305,656)
Basic earnings (loss) per share As reported $ .24 (.13)
Pro forma $ .15 (.18)
Diluted earnings (loss) per share As reported $ .20 (.13)
Pro forma $ .13 (.18)
Pro forma net income (loss) reflects only options granted in 1999, 1998,
1997 and 1996. Therefore, the full impact of calculating compensation
cost for stock options under SFAS No. 123 is not reflected in the pro
forma net income (loss) amounts presented above because compensation cost
is reflected over the options' expected life ranging from 5 to 7 years
and compensation cost for options granted prior to October 1, 1995 is not
considered.
Stock option activity during the fiscal years ended September 30, 1998
and 1999 is as follows:
Number of Weighted-average
shares exercise price
------------- ----------------
Outstanding at September 30, 1997 511,500 $ 2.98
Granted 22,000 2.84
Exercised -- --
Forfeited (46,750) 3.33
Expired -- --
------------- ----------------
Outstanding at September 30, 1998 486,750 2.94
Granted 279,500 1.63
Exercised (101,558) 2.98
Forfeited (23,792) 3.21
Expired -- --
------------- ----------------
Outstanding at September 30, 1999 640,900 $ 2.35
============= ================
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
At September 30, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $1.36 - 7.25 and
7.34 years, respectively.
At September 30, 1999 and 1998, the number of options exercisable was
176,600 and 221,650, respectively, and the weighted-average exercise
price of those options was $3.22 and $3.31, respectively.
Incentive Stock Options
As of September 30, 1999, options outstanding under qualified incentive
stock options, including their grant date, exercise price and expiration
date, were as follows:
Options Exercise
outstanding Grant date price Expiration date
----------------- ---------------- ---------- -----------------
86,500 January 23, 1993 $ 4.22 January 23, 2003
13,200 August 12, 1994 4.55 August 12, 2004
11,000 December 21, 1995 2.48 December 21, 2005
121,000 December 28, 1995 2.27 December 28, 2005
59,300 December 28, 1995 2.07 December 28, 2005
4,400 March 7, 1996 2.48 March 7, 2006
33,000 December 11, 1996 2.74 December 11, 2006
11,000 August 26, 1997 3.56 August 26, 2007
11,000 February 13, 1998 3.07 February 13, 2008
5,500 October 1, 1998 1.62 October 1, 2008
110,000 November 2, 1998 1.50 November 2, 2008
110,000 November 2, 1998 1.36 November 2, 2008
22,000 November 2, 1998 1.36 November 2, 2008
11,000 January 6, 1999 1.36 January 6, 2009
-----------------
608,900
=================
The options granted on January 23, 1993 are exercisable at 25% per year
beginning two years from the date of grant. The options granted on August
12, 1994, December 21, 1995, March 7, 1996, December 11, 1996, August 26,
1997 and February 13, 1998, October 1, 1998 and January 6, 1999, are
exercisable at 20% per year beginning three years from the date of grant.
The options granted on December 28, 1995 and the 22,000 options granted
on November 2, 1998 are exercisable at 20% per year beginning one year
from the date of grant. The 220,000 options granted on November 2, 1998
are exercisable at 30%, 30%, 40% over a three-year period beginning a
year from the date of grant.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
As of September 30, 1999 and 1998, 174,400 and 205,700 options,
respectively, were exercisable under qualified incentive stock options.
During the year ended September 30, 1999, 84,100 options were exercised
with a weighted average exercise price of $2.83. There were no options
exercised during the year ended September 30, 1998.
Nonqualified Stock Options
As of September 30, 1999, options outstanding under nonqualified options,
including their grant date, exercise price and expiration date, were as
follows:
Options Exercise
outstanding Grant date price Expiration date
----------------- ------------- ---------- -------------------
11,000 7/20/98 2.61 7/20/2008
11,000 1/6/99 1.36 1/6/2009
10,000 6/4/99 7.25 6/4/2009
------------------
32,000
==================
The nonqualified stock options granted July 20, 1998, January 6, 1999
and June 4, 1999 are exercisable at 20% per year beginning one year
from the date of grant.
As of September 30, 1999 and 1998, 2,200 and 15,950 options,
respectively, were exercisable under nonqualified stock options. During
the year ended September 30, 1999, 17,458 options were exercised with a
weighted average exercise price of $3.69. There were no options
exercised during the year ended September 30, 1998.
(10) ITCI Stock Option and Plan
The Board of Directors of ITCI adopted a stock option plan ("ITCI Plan")
retroactively as of December 31, 1998. The ITCI Plan is intended to
constitute both an "incentive stock option" and a "plan" within the
meaning of qualifying under Section 422 of the Internal Revenue Code of
1986, as amended, and the regulations thereunder. The ITCI Plan permits
the granting of an option of 111 common shares (approximately 10 percent
of the total common shares) of ITCI to a sole participant. The ITCI Plan
expires on December 31, 2002. Retroactively, as of December 1, 1998 this
one incentive stock option was granted to a sole participant. The
purchase price of the 111 common shares is $98.95 per common share, being
100 percent of the fair market value per share of common stock as of
December 1, 1998.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
The right to exercise the options granted and purchase the option shares
does not vest unless certain defined ITCI financial benchmarks are met.
If the first of these financial benchmarks is met, 55 option shares vest
on September 30, 2000. If the second financial benchmark is met, 56
option shares vest on September 30, 2001. Some defined partial vesting is
allowed if the defined financial benchmarks are partially achieved.
There has been no vesting as of September 30, 1999 and like the Parent,
the Company recognizes compensation expense under APB No. 25 and no such
expense would be recognized until the achievement of the financial
benchmarks.
(11) Preferred Stock
The Company has authorized 1,000,000 shares of its preferred stock for
issuance at a par value of $.01 per share. As of September 30, 1999 and
1998, no shares have been issued and the specific rights and privileges
of these shares have not yet been determined by the Board of Directors.
(12) Stock Dividend
On February 12, 1999, the Company declared a ten percent stock dividend
to shareholders of record as of March 5, 1999. On March 26, 1999 the
Company issued 148,199 shares of common stock in conjunction with this
dividend. Accordingly, amounts equal to the fair market value (based on
quoted market prices as adjusted) of the additional shares issued have
been charged to retained earnings and credited to common stock and
additional paid-in capital.
Earnings per common share, weighted average shares outstanding, and all
stock option activity have been restated to reflect the ten percent stock
dividend.
(13) Commitments and Contingent Liabilities
The Company has entered into employment agreements with its chief
executive officer and chief operating officer which expire March 24,
2001. Under the terms of the agreements, the two officers will receive a
specified annual compensation to be paid by an affiliate of the Company,
a bonus to each officer, monthly automobile allowances and reimbursement
for personal income tax preparation fees. Bonuses are calculated by
applying the consolidated return-on-equity percentage for that year to
the consolidated pre-tax earnings adjusted before the deduction for
officer bonus expense and as adjusted for certain financial transactions.
The executive bonus percentage is subject to a minimum of 5 percent and a
maximum of 15 percent of adjusted consolidated pre-tax earnings of the
Company's parent. In the event of termination of the agreements by the
Company other than for cause, as defined, or if the executives resign as
a result of a breach by the Company, the agreements provide for payments
to such individuals in an amount equal to 100 percent of their total
compensation for 24 months following the date of termination.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
Subsequent to September 30, 1999, the chief operating officer of the
Company resigned due to medical reasons.
ITCI, a wholly owned subsidiary of the Company, has entered into an
employment agreement with its chief operating officer which expires
September 30, 2001. Under the terms of the agreement, the officer will
receive a specified annual compensation to be paid by the Company, an
annual bonus, $5,000 moving allowance, and a temporary housing allowance.
The annual bonus will be equal to the greater of $20,000 or 10 percent of
the Company's net profits before tax for fiscal years 1999 and 2000 and
10 percent of the Company's net profits before tax for fiscal year 2001.
On August 10, 1999, ITCI entered into a one-year service agreement for a
non-exclusive license to display financial information that can be
accessed by customers on the Company's web site. The annual licensing fee
is $125,800. The service agreement will commence once the web site is
operational.
On July 23, 1999, ITCI entered into a development agreement for certain
software development related to the Company's web site. To date, $30,000
related to software development has been paid and capitalized; the
remaining $90,000 will be paid upon completion and testing of the
software. In addition, $2,700 per month will be paid for application
support for a term of 18 months.
The Board of Directors has authorized the Company to continue its
repurchase of up to $500,000 in shares of the Company's common stock in
the open market through the year ended September 30, 1999. The stock
purchases may be made in the open market from time to time as market
conditions permit. The Company is required to comply with Rule 10b-18 and
Regulation M of the Securities and Exchange Commission which regulate the
specific terms in which shares may be repurchased. Since the inception of
the repurchase program on March 13, 1996, the Company has repurchased and
retired a total of 39,193 shares (as adjusted for the 10% stock
dividends) in the open market at a total of $129,233. During the fiscal
year ended September 30, 1999, the Company did not repurchase any Company
shares through open market repurchases.
In addition, concurrent with the open market repurchase program, the
Company has repurchased and retired an additional 104,580 shares from
terminated participants of the Company's 401(k) Plan and RSP for a total
cost of $256,893 since the inception of the program.
<PAGE>
INTERNATIONAL ASSETS HOLDING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1999 and 1998
On September 30, 1998, the Company signed a 50/50 Joint Venture Agreement
(JV) with Lakeside Investments, LLC (Lakeside) of New York. On October 1,
1998, the joint venture effected the incorporation of International
Assets New York, LLC (IANY) a 50/50 owned entity formed to transact the
business for the JV. IANY has elected partnership federal income tax
treatment. Each party contributed an equal capital contribution of
$50,000 during the year ended September 30, 1999 and committed to
contribute an additional optional $150,000 at a later date. A principal
of Lakeside actively manages the new business. IANY offers a variety of
financial strategies to high net worth private investors resident in the
United States and certain foreign countries. The Company accounts for
this investment under the equity method of accounting.
(14) Subsequent Events
During November 1999 one incentive stock option for 33,000 shares was
exercised generating cash proceeds of $45,012.
Also during November 1999, the Company announced that the Board of
Directors of the Company authorized the continuation of the stock
repurchase program through September 30, 2000.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The following table lists certain information about the directors, executive
officers and significant employees of the Company:
Director Officer
Name Age Since Since Position
------ --- -------- ------- --------
Diego J. Veitia 56 1987 1987 Director, Chairman of the
Board, Chief Executive
Officer and President
Stephen A. Saker 53 1990 1991 Director, Vice President
and Secretary
Jerome F. Miceli 56 1990 - Director of the Company
Robert A. Miller, PhD 56 1998 - Director of the Company
Jeffrey L. Rush, M.D. 59 1999 - Director of the Company
Jonathan C. Hinz 37 - 1995 Chief Financial Officer
and Treasurer
Tresa N. Veitia 34 - 1999 Vice President and
Director of Marketing
Each of the Company's directors have been elected to serve until the next
annual meeting of stockholders and until his respective successor is elected
and qualified. Officers are elected annually by the Board of Directors.
Diego J. Veitia founded the Company in 1987 to serve as a holding company
for IAAC and other subsidiaries. He has served as Chairman of the Board,
director and Chief Executive Officer of the Company since its inception. He
also served as President of the Company from 1987 until 1991. In November
1999 Mr. Veitia resumed the role of President of the Company as well as
President of all of the subsidiaries of the Company. Mr. Veitia founded IAAC
in 1981 and has served as Chairman of the Board and director since that
time. Mr. Veitia is also currently serving as Chairman, Chief Executive
Officer and President of GAA, ITCI, IAMC, IFP and OTCL. Mr. Veitia also
serves as Chairman and President of Veitia and Associates, Inc., an inactive
registered investment advisor. Mr. Veitia served as Chairman of All Seasons
Global Fund, Inc., a publicly held closed-end management investment company
from October 1987 until October 1996. During the last five years Mr. Veitia
has also served as director of America's All Seasons Income Fund, Inc., an
inactive management investment company.
Stephen A. Saker has been a director of the Company since 1990 and has
served as Secretary and Vice President of the Company since 1991.
Mr. Saker has also served as director, Executive Vice President and
Secretary of IAAC since 1985. Mr. Saker currently serves as Vice
President, Secretary and Director of GAA, IAMC, OTCL and ITCI. Since
November 1991,
<PAGE>
Mr. Saker has served as Vice President, Treasurer and Secretary of Veitia
and Associates, Inc., an inactive registered investment advisor. Mr. Saker
also served as Secretary and director of All Seasons Global Fund, Inc.
from October 1987 until October 1996.
Jerome F. Miceli has been a director of the Company since 1990. In November
1999 Mr. Miceli resigned, due to medical reasons, from all of his officer
positions with the Company and all of his officer and director positions
of the Company's subsidiaries. Mr. Miceli continues to serve as a Director
and consultant to the Company. Mr. Miceli served as President, Chief
Operating Officer and Treasurer of the Company from 1991 to 1999.
Mr. Miceli has also served as President, Chief Executive Officer,
Treasurer and director of IAAC from 1990 to 1999. Until November 1999
Mr. Miceli also served as President, Treasurer and Director of ITCI, GAA,
IAMC, IFP and OTCL. In addition, from December 1990 until October 1996,
Mr. Miceli served as Treasurer and director of All Seasons Global Fund
Inc., a publicly held closed-end management investment company. Mr. Miceli
also served as President of Veitia and Associates, Inc., an inactive
registered investment advisor, from 1990 until 1999.
Robert A. Miller, Ph.D. became a director of the Company in February 1998.
Dr. Miller has served as President of Nazareth College in Rochester,
New York since 1998. Dr. Miller served as the Academic Vice President of
Queens College in Charlotte, North Carolina from 1994 to 1998. In
addition, Dr. Miller served as Provost of Antioch University in Ohio
from 1991 to 1994. Dr. Miller served as a director of All Seasons Global
Fund, Inc. from 1988 until 1996.
Jeffrey L. Rush, M.D. became a director of the Company in February
1999. Dr. Rush is a graduate of Dartmouth and State University New York
Medical School in 1966. He has been a Board Certified Radiologist since
1972. Dr. Rush served as Chairman of the Radiology Department at Alvarado
Medical Center, San Diego, CA from 1972 - 1994. In addition, he served on
the Advisory Board, National Medical Enterprises (Tenet Health) from 1982 -
1990. Dr. Rush presently serves as Chairman of Pacific Medical Building,
LP, a developer and owner of medical office buildings and clinics. He has
served in that capacity since 1991.
Jonathan C. Hinz joined the Company in October 1995 and currently serves
as Chief Financial Officer and Treasurer for the Company, IAAC, GAA, ITCI,
IFP, IAMC and OTCL. Prior to joining the Company, Mr. Hinz served as Chief
Financial Officer and Controller of Computer Science Innovations, Inc.
from 1987 to 1995. Mr. Hinz is a certified public accountant.
Tresa N. Veitia joined IAAC in September 1995 and currently serves as Vice
President and Director of Marketing for the Company, IAAC, GAA, ITCI, IFP
and OTCL. Prior to joining the Company, Ms. Veitia was an account supervisor
at Ogilvy & Mather in New York. Ms. Veitia received an MBA from Columbia
University in 1989.
Compliance with Section 16(a) of the Exchange Act
Pursuant to Section 16(a) of the Exchange Act and the rules issued
thereunder, the Company's executive officers, directors and owners of in
excess of 10% of the issued and outstanding common stock are required to
file with the SEC reports of ownership and changes in ownership of the
common stock of the Company. Copies of such reports are required to be
furnished to the Company. Based solely on the review of such reports
furnished to the Company, the Company believes that during fiscal year 1999,
all of its executive officers and directors complied with the Section 16(a)
requirements.
ITEM 10. EXECUTIVE COMPENSATION.
Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual meeting of Shareholders, which is incorporated
herein by reference.
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual meeting of Shareholders, which is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to this item will be contained in the Proxy
Statement for the 1999 Annual meeting of Shareholders, which is incorporated
herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The Company's consolidated financial statements are listed in the
index set forth in Item 7 on this Form 10-KSB. Financial
statement schedules are not required under the related
instructions of the SEC or are inapplicable, and therefore,
have been omitted.
(b) There were no reports filed on Form 8-K.
(c) The following exhibits are incorporated by reference herein
unless otherwise indicated:
(3.1) The Company's Certificate of Incorporation and amendments are
incorporated by reference to Exhibits 3.1, 3.2, and 3.3 of the
Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(3.2) The Company's By-laws are incorporated by reference to Exhibit
3.4, of the Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on February 2,
1994.
(4.1) The Company's Form of Common Stock Certificate is incorporated by
reference to Exhibit 4.1, of the Registrant's Registration
Statement on Form SB-2 (No. 33-70334-A), as amended, filed with
the SEC on February 2, 1994.
(4.2) The Company's Revised Form of Warrant Certificate is
incorporated by reference to Exhibit 4.2, of the Registrant's
Registration Statement on Form SB-2 (No. 33-70334-A), as amended,
filed with the SEC on February 2, 1994.
(4.3) The Company's Warrant Agreement dated January 31, 1994, between
the Company and Chemical Bank is incorporated by reference to
Exhibit 4.3, of the Registrant's Registration Statement on Form
SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(4.4) The Company's Revised Form of Subscription Agreement is
incorporated by reference to Exhibit 4.4, of the Registrant's
Registration Statement on Form SB-2 (No. 33-70334-A), as amended,
filed with the SEC on February 2, 1994.
(10.1) The Company's International Assets Holding Corporation Stock
Option Plan is incorporated by reference to Exhibit 10.2, of the
Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(10.1.a)The Company's International Assets Holding Corporation Stock
Option Plan, Amendment dated December 28, 1995, is incorporated
by reference to Exhibit 10.2 (a), of the Registrant's
Registration Statement on Form S-8 (No. 333-10727), filed with
the SEC on August 23, 1996.
(10.2) The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP") is incorporated by
<PAGE>
reference to Exhibit 10.3, of the Registrant's Registration
Statement on Form SB-2 (No. 33-70334-A), as amended, filed with
the SEC on February 2, 1994.
(10.2.a)The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), First Amendment dated
November 4, 1993, is incorporated by reference to Exhibit
10.3(a), of the Registrant's Registration Statement on Form S-8
(No. 333-10727), filed with the SEC on August 23, 1996.
(10.2.b)The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated
July 19, 1994, is incorporated by reference to Exhibit 10.3(b),
of the Registrant's Registration Statement on Form S-8
(No. 333-10727), filed with the SEC on August 23, 1996.
(10.2.c)The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1994-1, dated
December 30, 1994, is incorporated by reference to Exhibit
10.3(c), of the Registrant's Registration Statement on Form S-8
(No. 333-10727), filed with the SEC on August 23, 1996.
(10.2.d)The Company's International Assets Advisory Corporation Employee
Stock Ownership Plan and Trust ("ESOP"), Amendment 1995-1, dated
July 21, 1995, is incorporated by reference to Exhibit 10.3(d),
of the Registrant's Registration Statement on Form S-8
(No. 333-10727), filed with the SEC on August 23, 1996.
(10.2.e)*The Company's International Assets Advisory Corporation 401(k)
Profit Sharing Plan, entered into as of May 1, 1999.
(10.3) The Company's $200,000 ESOP Loan Agreement dated as of December
30, 1992, is incorporated by reference to Exhibit 10.4, of the
Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on February 2,
1994.
(10.4) The Company's $200,000 ESOP Note dated December 30, 1992, payable
to the Company, is incorporated by reference to Exhibit 10.5, of
the Registrant's Registration Statement on Form SB-2
(No. 33-70334-A), as amended, filed with the SEC on February 2,
1994.
(10.5) The Company's ESOP Pledge Agreement dated December 30, 1992,
between the Company and the ESOP, is incorporated by reference
to Exhibit 10.6, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(10.6) The Company's Clearing Agreement dated February 29, 1984, between
Prudential Securities, Inc. and IAAC, as amended, is incorporated
by reference to Exhibit 10.10, of the Registrant's Registration
Statement on Form SB-2 (No. 33-70334-A), as amended, filed with
the SEC on February 2, 1994.
(10.7) The Company's Revised Form of Employment Agreement, between the
Company and Jerome F. Miceli is incorporated by reference to
Exhibit 10.11, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
(10.8) The Company's Revised Form of Employment Agreement, between the
Company and Diego J. Veitia is incorporated by reference to
Exhibit 10.12, of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
<PAGE>
(10.9) The Company's Lease dated November 5, 1993, by and between
Barnett Bank of Central Florida and IAAC is incorporated by
reference to Exhibit 10.15, of the Registrant's Registration
Statement on Form SB-2 (No. 33-70334-A), as amended, filed
with the SEC on February 2, 1994.
(10.10) The Company's Joint Venture Agreement dated September 30,
1998, by and between the Company and Lakeside Investments,
LLC, a limited liability company organized under the laws of
Delaware, is incorporated by reference to Exhibit 10.10 of
Form 10-KSB, for the fiscal year ended September 30, 1998, as
filed with the SEC on December 24, 1998.
(10.11) The Company's Limited Liability Company Agreement dated
September 30, 1998, by and between the Company and Lakeside
Investments, LLC,. for International Assets New York, LLC, a
limited liability company organized under the laws of
Delaware, is incorporated by reference to Exhibit 10.11 of
Form 10-KSB, for the fiscal year ended September 30, 1998, as
filed with the SEC on December 24, 1998.
(10.12) The Company's Employment Agreement, entered into as of March
24, 1999, between the Company and Diego J. Veitia, is
incorporated by reference to Exhibit 10.12 of Form 10-QSB, for
the quarterly period ending June 30, 1999, as filed with the
SEC on August 12, 1999.
(10.13) The Company's Employment Agreement, entered into as of March
24, 1999, between the Company and Jerome F. Miceli, is
incorporated by reference to Exhibit 10.13 of Form 10-QSB, for
the quarterly period ending June 30, 1999, as filed with the
SEC on August 12, 1999.
(11)* The Statement of Computation of per share earnings is attached
hereto as Exhibit 11.
(21)* List of Subsidiaries of the Company.
(99) The Articles of Incorporation, and amendments thereto, and the
By-laws of IAAC are incorporated by reference to Exhibits 99.1,
99.2 and 99.3 of the Registrant's Registration Statement on
Form SB-2 (No. 33-70334-A), as amended, filed with the SEC on
February 2, 1994.
---------------
*Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the under signed, thereunto duly authorized.
INTERNATIONAL ASSETS HOLDING
CORPORATION
Dated: December 23, 1999 By: /s/ Diego J. Veitia
-------------------
Diego J. Veitia, President
and Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons in the capacities
and on the dates indicated.
Signature Title Date
/s/ Diego J. Veitia President, Chief Executive Officer December 23, 1999
--------------- and Chairman of the Board
Diego J. Veitia
/s/ Stephen A. Saker Vice President, Secretary, December 23, 1999
-------------------- and Director
Stephen A. Saker
/s/ Jerome F. Miceli Director December 23, 1999
--------------------
Jerome F. Miceli
/s/ Robert A. Miller Director December 23, 1999
--------------------
Robert A. Miller
/s/ Jeffrey L. Rush Director December 23, 1999
-------------------
Jeffrey L. Rush
/s/ Jonathan C. Hinz Chief Financial Officer and December 23, 1999
-------------------- Treasurer
Jonathan C. Hinz
<PAGE>
THOMAS F. KERNEY, P.A.
DEFINED CONTRIBUTION PLAN AND TRUST
BASIC PLAN DOCUMENT
<PAGE>
TABLE OF CONTENTS
Article 1 Plan Eligibility and Participation...................................1
1.1 Eligibility for Plan Participation......................................1
1.2 Excluded Employees......................................................1
(a) Independent contractors............................................1
(b) Leased Employees...................................................1
1.3 Employees of Related Employers..........................................2
(a) Nonstandardized Plans..............................................2
(b) Standardized Plans.................................................2
1.4 Minimum Age and Service Conditions......................................2
(a) Maximum permissible age and service conditions.....................2
(b) Year of Service....................................................2
(c) Eligibility Computation Periods....................................2
(d) Effective Date of Plan.............................................3
(e) Amendment of age and service requirements..........................3
1.5 Entry Dates.............................................................3
(a) Entry Date requirements............................................3
(b) Single annual Entry Date...........................................3
1.6 Eligibility Break in Service Rules......................................3
(a) Rule of Parity Break in Service....................................3
(b) One-year Break in Service rule for Plans
using a two Years of Service eligibility condition...............4
(c) One-year holdout Break in Service rule.............................4
1.7 Eligibility Upon Reemployment...........................................5
1.8 Operating Rules for Employees Excluded by Class.........................5
(a) Eligible Participant becomes part of an excluded
class of Employees...............................................5
(b) Excluded Employee becomes part of an eligible class of Employees...5
1.9 Special Eligibility Provisions (Nonstandardized Plans Only).............5
1.10 Relationship to Accrual of Benefits.....................................5
1.11 Waiver of Participation.................................................5
Article 2 Employer Contributions and Allocations...............................1
2.1 Amount of Employer Contributions........................................1
(a) Limitation on Employer Contributions...............................1
(b) Limitation on Included Compensation................................1
(c) Offset for contributions under another qualified plan
maintained by the Employer.......................................1
2.2 Profit Sharing Plan Contribution and Allocations........................1
(a) Amount of Employer Contribution....................................1
(b) Allocation formula for Employer Contributions......................2
(c) Special rules for determining Included Compensation................3
2.3 Money Purchase Plan Contribution and Allocations........................4
(a) Employer Contributions.............................................4
(b) Allocation formula for Employer Contributions......................4
(c) Permitted Disparity Method.........................................4
(d) Special rules for determining Included Compensation................6
(e) Limit on contributions where Employer maintains another
plan in addition to a money purchase plan........................6
2.4 401(k) Plan Contributions and Allocations...............................6
(a) Section 401(k) Deferrals...........................................6
(b) Employer Matching Contributions....................................7
<PAGE>
(c) Qualified Matching Contributions (QMACs)...........................8
(d) Employer Nonelective Contributions.................................8
(e) Qualified Nonelective Contributions (QNECs)........................8
(f) Safe Harbor Contributions..........................................9
(g) Prior SIMPLE 401(k) plan...........................................9
2.5 Allocation Conditions...................................................9
(a) Safe harbor allocation condition...................................9
(b) Application of last day of employment rule in year of
termination.....................................................10
2.6 Fail-Safe Coverage Provision...........................................10
(a) Category 1 Employees and Otherwise Eligible Participants who
are Nonhighly Compensated and who are still employed by the
Employer on the last day of the Plan Year but who failed to
satisfy the Plan's Hours of Service condition...................11
(b) Category 2 Employees and Otherwise Eligible Participants who
are Nonhighly Compensated and who terminated employment
during the Plan Year with more than 500 Hours of Service........11
Article 3 Employee After-Tax Contributions, Rollovers and Transfers............1
3.1 Employee After-Tax Contributions........................................1
3.2 Rollover Contributions..................................................1
3.3 Transfer of Assets......................................................1
(a) Protection of Protected Benefits...................................2
(b) Transferee plan....................................................2
(c) Transfers from a Defined Benefit Plan, money purchase
plan or 401(k) plan..............................................2
(d) Qualified Transfer.................................................2
Article 4 Participant Vesting..................................................1
4.1 In General..............................................................1
(a) Attainment of Normal Retirement Age................................1
(b) Vesting upon death, becoming Disabled, or attainment
of Early Retirement Age..........................................1
4.2 Vesting Schedules.......................................................1
(a) Full and immediate vesting schedule................................1
(b) 7-year graded vesting schedule.....................................1
(c) 6-year graded vesting schedule.....................................1
(d) 5-year cliff vesting schedule......................................2
(e) 3-year cliff vesting schedule......................................2
(f) Modified vesting schedule..........................................2
4.3 Shift to/from Top-Heavy Vesting Schedule................................2
4.4 Vesting Computation Period..............................................2
(a) Anniversary Years..................................................2
(b) Measurement on same Vesting Computation Period.....................2
4.5 Crediting Years of Service for Vesting Purposes.........................2
(a) Calculating Hours of Service.......................................2
(b) Excluded service...................................................2
4.6 Vesting Break in Service Rules..........................................3
(a) One-year holdout Break in Service..................................3
(b) Five-Year Forfeiture Break in Service..............................3
(c) Rule of Parity Break in Service....................................3
4.7 Amendment of Vesting Schedule...........................................4
4.8 Special Vesting Rule - In-Service Distribution When Account
Balance Less than 100% Vested......................................4
Article 5 Forfeitures..........................................................1
5.1 In General..............................................................1
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5.2 Timing of forfeiture....................................................1
(a) Cash-Out Distribution..............................................1
(b) Five-Year Forfeiture Break in Service..............................1
(c) Lost Participant or Beneficiary....................................1
(d) Forfeiture of Employer Matching Contributions......................1
5.3 Forfeiture Events.......................................................1
(a) Cash-Out Distribution..............................................1
(b) Five-Year Forfeiture Break in Service..............................4
(c) Lost Participant or Beneficiary....................................4
(d) Forfeiture of Employer Matching Contributions.....................4
5.4 Timing of Forfeiture Allocation.........................................4
5.5 Method of Allocating Forfeitures........................................4
(a) Reallocation of Forfeitures........................................4
(b) Reduction of contributions.........................................5
(c) Payment of Plan expenses...........................................5
Article 6 Special Service Crediting Provisions.................................1
6.1 Year of Service - Eligibility...........................................1
(a) Selection of Hours of Service......................................1
(b) Use of Equivalency Method..........................................1
(c) Use of Elapsed Time Method.........................................1
6.2 Eligibility Computation Period..........................................1
6.3 Year of Service -Vesting................................................1
(a) Selection of Hours of Service......................................1
(b) Equivalency Method.................................................2
(c) Elapsed Time Method................................................2
6.4 Vesting Computation Period..............................................2
6.5 Definitions.............................................................2
(a) Equivalency Method.................................................2
(b) Elapsed Time Method................................................2
6.6 Switching Crediting Methods.............................................3
(a) Shift from crediting Hours of Service to Elapsed Time..............3
(b) Shift from Elapsed Time Method to an Hours of Service method.......3
6.7 Service with Predecessor Employers......................................3
Article 7 Limitation on Participant Allocations................................1
7.1 Annual Additions Limitation - No Other Plan Participation...............1
(a) Annual Additions Limitation........................................1
(b) Using estimated Total Compensation.................................1
(c) Disposition of Excess Amount.......................................1
7.2 Annual Additions Limitation - Participation in Another Plan.............2
(a) In general.........................................................2
(b) This Plan's Annual Addition Limitation.............................2
(c) Annual Additions reduction.........................................2
(d) No Annual Additions permitted......................................2
(e) Using estimated Total Compensation.................................3
(f) Excess Amounts.....................................................3
(g) Disposition of Excess Amounts......................................3
7.3 Modification of correction procedures...................................3
7.4 Definitions Relating to the Annual Additions Limitation.................4
(a) Annual Additions...................................................4
<PAGE>
(b) Defined Contribution Dollar Limitation.............................4
(c) Excess Amount......................................................4
(d) Limitation Year....................................................4
(e) Maximum Permissible Amount.........................................4
(f) Total Compensation.................................................5
7.5 Participation in a Defined Benefit Plan.................................5
(a) Repeal of rule.....................................................5
(b) Special definitions relating to Section 7.5........................5
Article 8 Plan Distributions...................................................1
8.1 Distribution Options....................................................1
8.2 Amount Eligible for Distribution........................................1
8.3 Distributions After Termination of Employment...........................1
(a) Account Balance exceeding $5,000...................................1
(b) Account Balance not exceeding $5,000...............................1
(c) "Separation from service" under a 401(k) plan......................2
(d) Disabled Participant...............................................2
(e) Determining whether vested Account Balance exceeds $5,000..........2
(f) Effective date of $5,000 vested Account Balance Rule...............3
8.4 Distribution upon the Death of the Participant..........................3
(a) Post-retirement death benefit......................................3
(b) Pre-retirement death benefit.......................................3
(c) Determining a Participant's Beneficiary............................3
(d) Timing and form of pre-retirement death benefit....................4
8.5 Distributions Prior to Termination of Employment........................5
(a) Employee After-Tax Contributions, Rollover Contributions,
and transfers....................................................5
(b) Employer Contributions.............................................5
(c) Section 401(k) Deferrals, Qualified Nonelective
Contributions, Qualified Matching Contributions, and
Safe Harbor Contributions........................................5
8.6 Hardship Distribution...................................................6
(a) Immediate and heavy financial need.................................6
(b) Conditions for taking a Hardship withdrawal........................6
(c) Amount available for distribution..................................6
8.7 Participant Consent.....................................................7
(a) Participant notice.................................................7
(b) Special rules......................................................7
8.8 Direct Rollovers........................................................7
(a) Eligible Rollover Distribution.....................................8
(b) Eligible Retirement Plan...........................................8
(c) Direct Rollover....................................................8
(d) Direct Rollover notice.............................................8
(e) Special rules for Hardship withdrawals of Section 401(k)
Deferrals........................................................9
8.9 Sources of Distribution.................................................9
Article 9 Joint and Survivor Annuity Requirements..............................1
9.1 Applicability...........................................................1
(a) Election to have requirements apply................................1
(b) Election to have requirements not apply............................1
(c) Accumulated deductible employee contributions......................1
9.2 Qualified Joint and Survivor Annuity (QJSA).............................1
9.3 Qualified Preretirement Survivor Annuity (QPSA).........................1
<PAGE>
9.4 Definitions.............................................................1
(a) Qualified Joint and Survivor Annuity (QJSA)........................2
(b) Qualified Preretirement Survivor Annuity (QPSA)....................2
(c) Distribution Commencement Date.....................................2
(d) Qualified Election.................................................2
(e) QPSA Election Period...............................................3
(f) Pre-Age 35 Waiver..................................................3
9.5 Notice Requirements.....................................................3
(a) QJSA...............................................................3
(b) QPSA...............................................................3
9.6 Exception to the Joint and Survivor Annuity Requirements................3
9.7 Transitional Rules......................................................4
(a) Automatic joint and survivor annuity...............................4
(b) Election of early survivor annuity................................ 4
(c) Qualified Early Retirement Age.....................................5
Article 10 Required Distributions..............................................1
10.1 Required Distributions Before Death.....................................1
(a) Deferred distributions.............................................1
(b) Required minimum distributions.....................................1
10.2 Required Distributions After Death......................................2
(a) Distribution beginning before death................................2
(b) Distribution beginning after death.................................2
10.3 Definitions.............................................................2
(a) Required Beginning Date............................................2
(b) Five-Percent Owner.................................................3
(c) Designated Beneficiary.............................................3
(d) Applicable Life Expectancy.........................................3
(e) Life Expectancy....................................................4
(f) Distribution Calendar Year.........................................4
(g) Participant's Benefit..............................................4
10.4 SBJPA Elections.........................................................4
(a) Distributions under Old-Law Required Beginning Date rules..........4
(b) Option to postpone distributions...................................4
(c) Election to stop minimum required distributions....................4
10.5 Transitional Rule.......................................................5
Article 11 Plan Administration and Special Operating Rules.....................1
11.1 Plan Administrator......................................................1
(a) Acceptance of responsibility by designated Plan Administrator......1
(b) Resignation of designated Plan Administrator.......................1
(c) Named Fiduciary....................................................1
11.2 Duties and Powers of the Plan Administrator.............................1
(a) Delegation of duties and powers....................................1
(b) Specific duties and powers.........................................1
11.3 Employer Responsibilities...............................................2
11.4 Plan Administration Expenses............................................2
11.5 Qualified Domestic Relations Orders (QDROs).............................2
(a) In general.........................................................2
(b) Qualified Domestic Relations Order (QDRO)..........................2
(c) Recognition as a QDRO..............................................2
<PAGE>
(d) Contents of QDRO...................................................3
(e) Impermissible QDRO provisions......................................3
(f) Immediate distribution to Alternate Payee..........................3
(g) No fee for QDRO determination......................................3
(h) Default QDRO procedure.............................................3
11.6 Claims Procedure........................................................5
(a) Filing a claim.....................................................5
(b) Notification of Plan Administrator's decision......................5
(c) Review procedure...................................................5
(d) Decision on review.................................................5
(e) Default claims procedure...........................................5
11.7 Operational Rules for Short Plan Years..................................6
11.8 Operational Rules for Related Employer Groups...........................6
Article 12 Trust Provisions....................................................1
12.1 Creation of Trust.......................................................1
12.2 Trustee.................................................................1
(a) Discretionary Trustee..............................................1
(b) Directed Trustee...................................................1
12.3 Responsibilities of Trustee.............................................1
12.4 More than One Person as Trustee.........................................3
12.5 Annual Valuation........................................................3
12.6 Reporting to Plan Administrator and Employer............................3
12.7 Reasonable Compensation.................................................3
12.8 Resignation and Removal of Trustee......................................3
12.9 Indemnification of Trustee..............................................3
12.10 Appointment of Custodian................................................3
Article 13 Plan Accounting and Investments.....................................1
13.1 Participant Accounts....................................................1
13.2 Value of Participant Accounts...........................................1
(a) Periodic Valuation.................................................1
(b) Daily valuation....................................................1
13.3 Adjustments to Participant Accounts.....................................1
(a) Distributions and forfeitures from a Participant's Account.........1
(b) Life insurance premiums and dividends..............................1
(c) Net income or loss attributable to General Trust Account...........1
(d) Net income or loss attributable to a Directed Account..............1
(e) Contributions and forfeitures allocated to a Participant's Account.2
13.4 Procedures for Determining Net Income or Loss...........................2
(a) Special allocation rules...........................................2
(b) Share or unit accounting...........................................3
(c) Suspense accounts..................................................3
13.5 Investments under the Plan..............................................3
(a) Investment options.................................................3
(b) Limitations on the investment in Qualifying Employer
Securities and Qualifying Employer Real Property.................3
(c) Participant direction of investments...............................4
Article 14 Participant Loans...................................................1
14.1 Default Loan Policy.....................................................1
<PAGE>
14.2 Administration of Loan Program..........................................1
14.3 Availability of Participant Loans.......................................1
14.4 Reasonable Interest Rate................................................2
14.5 Adequate Security.......................................................2
14.6 Periodic Repayment......................................................2
(a) Unpaid leave of absence............................................2
(b) Military leave.....................................................2
14.7 Loan Limitations........................................................2
14.8 Segregated Investment...................................................3
14.9 Spousal Consent.........................................................3
14.10 Procedures for Loan Default.............................................3
14.11 Termination of Employment...............................................4
(a) Offset of outstanding loan.........................................4
(b) Direct Rollover....................................................4
(c) Modified loan policy...............................................4
Article 15 Investment in Life Insurance........................................1
15.1 Investment in Life Insurance............................................1
15.2 Incidental Life Insurance Rules.........................................1
(a) Ordinary life insurance policies...................................1
(b) Life insurance policies other than ordinary life...................1
(c) Combination of ordinary and other life insurance policies..........1
(d) Exception for certain profit sharing and 401(k) plans..............1
15.3 Ownership of Life Insurance Policies....................................1
15.4 Evidence of Insurability................................................2
15.5 Distribution of Insurance Policies......................................2
15.6 Discontinuance of Insurance Policies....................................2
15.7 Protection of Insurer...................................................2
15.8 No Responsibility for Act of Insurer....................................2
Article 16 Top-Heavy Plan Requirements.........................................1
16.1 In General..............................................................1
16.2 Top-Heavy Plan Consequences.............................................1
(a) Minimum allocation for Non-Key Employees...........................1
(b) Special Top-Heavy Vesting Rules....................................2
16.3 Top-Heavy Definitions...................................................2
(a) Determination Date.................................................2
(b) Determination Period...............................................2
(c) Key Employee.......................................................2
(d) Permissive Aggregation Group.......................................3
(e) Present Value......................................................3
(f) Required Aggregation Group.........................................3
(g) Top-Heavy Plan.....................................................3
(h) Top-Heavy Ratio....................................................3
(i) Total Compensation.................................................4
(j) Valuation Date.....................................................4
Article 17 401(k) Plan Provisions..............................................1
17.1 Limitation on the Amount of Section 401(k) Deferrals....................1
(a) In general.........................................................1
(b) Correction of Code ss.402(g) Violation.............................1
<PAGE>
17.2 Nondiscrimination Testing of Section 401(k) Deferrals - ADP Test........2
(a) ADP Test testing methods...........................................2
(b) Special rule for first Plan Year...................................3
(c) Use of QMACs and QNECs under the ADP Test..........................3
(d) Correction of Excess Contributions.................................4
(e) Adjustment of deferral rate for Highly Compensated Employees.......5
17.3 Nondiscrimination Testing of Employer Matching Contributions and
Employee After-Tax Contributions - ACP Test........................5
(a) ACP Test testing methods...........................................5
(b) Special rule for first Plan Year...................................6
(c) Use of Section 401(k) Deferrals and QNECs under the ACP Test.......6
(d) Correction of Excess Aggregate Contributions.......................7
(e) Adjustment of contribution rate for Highly Compensated Employees...8
17.4 Multiple Use Test.......................................................8
(a) Aggregate Limit....................................................8
(b) Correction of the Multiple Use Test................................9
17.5 Special Testing Rules...................................................9
(a) Special rule for determining ADP and ACP of Highly
Compensated Employee Group.......................................9
(b) Aggregation of plans...............................................9
(c) Disaggregation of plans............................................9
(d) Special rules for the Prior Year Testing Method...................10
17.6 Safe Harbor 401(k) Plan Provisions.....................................10
(a) Safe harbor conditions............................................10
(b) Deemed compliance with ADP Test...................................12
(c) Deemed compliance with ACP Test...................................12
(d) Rules for applying the ACP Test...................................13
(e) Aggregated plans..................................................13
17.7 Definitions............................................................13
(a) ACP -- Average Contribution Percentage............................13
(b) ADP -- Average Deferral Percentage................................13
(c) Excess Aggregate Contributions....................................13
(d) Excess Contributions..............................................14
(e) Highly Compensated Employee Group.................................14
(f) Nonhighly Compensated Employee Group..............................14
(g) QMACs -Qualified Matching Contribution............................14
(h) QNECs -Qualified Nonelective Contributions........................14
(i) Testing Compensation..............................................14
Article 18 Plan Amendments and Termination.....................................1
18.1 Plan Amendments.........................................................1
(a) Amendment by the Prototype Sponsor.................................1
(b) Amendment by the Employer..........................................1
(c) Protected Benefits.................................................2
18.2 Plan Termination........................................................2
(a) Full and immediate vesting.........................................2
(b) Distribution procedures............................................2
18.3 Merger or Consolidation.................................................3
Article 19 Miscellaneous.......................................................1
19.1 Exclusive Benefit.......................................................1
19.2 Return of Employer Contributions........................................1
<PAGE>
(a) Mistake of fact....................................................1
(b) Disallowance of deduction..........................................1
(c) Failure to initially qualify.......................................1
19.3 Alienation or Assignment................................................1
19.4 Participants'Rights.....................................................1
19.5 Military Service........................................................1
19.6 Paired Plans............................................................1
19.7 Loss of Prototype Status................................................2
19.8 Governing Law...........................................................2
19.9 Waiver of Notice........................................................2
19.10 Use of Electronic Media.................................................2
19.11 Severability of Provisions..............................................2
19.12 Binding Effect..........................................................2
Article 20 SBJPA Elections and Effective Dates.................................1
20.1 SBJPA Effective Dates...................................................1
20.2 Highly Compensated Employee Definition..................................1
(a) Top-Paid Group Test................................................1
(b) Calendar Year Election.............................................1
(c) Old-Law Calendar Year Election.....................................1
20.3 Required Minimum Distributions..........................................1
20.4 $5,000 Involuntary Distribution Threshold...............................2
20.5 Repeal of Family Aggregation for Allocation Purposes....................2
20.6 ADP/ACP Testing Methods.................................................2
20.7 Safe Harbor 401(k) Plan.................................................2
Article 21 Participation by Related Employers (Co-Sponsors)....................1
21.1 Co-Sponsor Adoption Page................................................1
21.2 Participation by Employees of Co-Sponsor................................1
21.3 Allocation of Contributions and Forfeitures.............................1
21.4 Co-Sponsor No Longer a Related Employer.................................1
(a) Manner of discontinuing participation..............................1
(b) Multiple employer plan.............................................1
21.5 Special rules for Standardized Plans....................................2
(a) New Related Employer...............................................2
(b) Former Related Employer............................................2
Article 22 Plan Definitions....................................................1
22.1 Account.................................................................1
22.2 Account Balance.........................................................1
22.3 Accrued Benefit.........................................................1
22.4 ACP -- Average Contribution Percentage..................................1
22.5 ACP Test -- Actual Contribution Percentage Test.........................1
22.6 Actual Hours Crediting Method...........................................1
22.7 Adoption Agreement......................................................1
22.8 ADP -- Average Deferral Percentage......................................1
22.9 ADP Test -- Actual Deferral Percentage Test.............................1
22.10 Agreement...............................................................1
22.11 Aggregate Limit.........................................................1
22.12 Alternate Payee.........................................................2
22.13 Anniversary Year Method.................................................2
<PAGE>
22.14 Anniversary Years.......................................................2
22.15 Annual Additions........................................................2
22.16 Annual Additions Limitation.............................................2
22.17 Annuity Starting Date...................................................2
22.18 Applicable Life Expectancy..............................................2
22.19 Applicable Percentage...................................................2
22.20 Balance Forward Method..................................................2
22.21 Basic Plan Document.....................................................2
22.22 Beneficiary.............................................................2
22.23 BPD ....................................................................2
22.24 Break-in-Service - Eligibility..........................................2
22.25 Break-in-Service - Vesting..............................................2
22.26 Calendar Year Election..................................................2
22.27 Cash-Out Distribution...................................................3
22.28 Code ...................................................................3
22.29 Code ss.415 Safe Harbor Compensation....................................3
22.30 Compensation Dollar Limitation..........................................3
22.31 Co-Sponsor..............................................................3
22.32 Co-Sponsor Adoption Page................................................3
22.33 Current Year Testing Method.............................................3
22.34 Custodian...............................................................3
22.35 Defined Benefit Plan....................................................3
22.36 Defined Benefit Plan Fraction...........................................3
22.37 Defined Contribution Plan...............................................3
22.38 Defined Contribution Plan Dollar Limitation.............................3
22.39 Defined Contribution Plan Fraction......................................3
22.40 Designated Beneficiary..................................................3
22.41 Determination Date......................................................3
22.42 Determination Period....................................................4
22.43 Determination Year......................................................4
22.44 Directed Account........................................................4
22.45 Directed Trustee........................................................4
22.46 Direct Rollover.........................................................4
22.47 Disabled................................................................4
22.48 Distribution Calendar Year..............................................4
22.49 Distribution Commencement Date..........................................4
22.50 Early Retirement Age....................................................4
22.51 Earned Income...........................................................4
22.52 Effective Date..........................................................4
22.53 Elapsed Time Method.....................................................4
22.54 Elective Deferrals......................................................4
22.55 Eligibility Computation Period..........................................4
22.56 Eligible Participant....................................................5
22.57 Eligible Rollover Distribution..........................................5
22.58 Eligible Retirement Plan................................................5
22.59 Employee................................................................5
22.60 Employee After-Tax Contribution Account.................................5
22.61 Employee After-Tax Contributions........................................5
22.62 Employer................................................................5
22.63 Employer Contribution Account...........................................5
22.64 Employer Contributions..................................................5
<PAGE>
22.65 Employer Matching Contribution Account..................................5
22.66 Employer Matching Contributions.........................................5
22.67 Employer Nonelective Contributions......................................6
22.68 Employment Commencement Date............................................6
22.69 Entry Date..............................................................6
22.70 Equivalency Method......................................................6
22.71 Excess Aggregate Contributions..........................................6
22.72 Excess Amount...........................................................6
22.73 Excess Compensation.....................................................6
22.74 Excess Contributions....................................................6
22.75 Excess Deferrals........................................................6
22.76 Excluded Employee.......................................................6
22.77 Fail-Safe Coverage Provision............................................6
22.78 Favorable IRS Letter....................................................6
22.79 Five-Percent Owner......................................................6
22.80 Five-Year Forfeiture Break in Service...................................6
22.81 Former Related Employer.................................................6
22.82 Four-Step Formula.......................................................6
22.83 General Trust Account...................................................6
22.84 Hardship................................................................6
22.85 Highest Average Compensation............................................6
22.86 Highly Compensated Employee.............................................7
(a) Definition.........................................................7
(b) Other Definitions..................................................7
22.87 Highly Compensated Employee Group.......................................7
22.88 Hour of Service.........................................................7
(a) Performance of duties..............................................7
(b) Nonperformance of duties...........................................8
(c) Back pay award.....................................................8
(d) Related Employers/Leased Employees.................................8
(e) Maternity/paternity leave..........................................8
22.89 Included Compensation...................................................8
22.90 Integration Level.......................................................8
22.91 Insurer.................................................................8
22.92 Key Employee............................................................8
22.93 Leased Employee.........................................................8
22.94 Life Expectancy.........................................................8
22.95 Limitation Year.........................................................8
22.96 Lookback Year...........................................................9
22.97 Maximum Permissible Amount..............................................9
22.98 Multiple Use Test.......................................................9
22.99 Named Fiduciary.........................................................9
22.100 Net Profits.............................................................9
22.101 New Related Employer....................................................9
22.102 Nonhighly Compensated Employee..........................................9
22.103 Nonhighly Compensated Employee Group....................................9
22.104 Non-Key Employee........................................................9
22.105 Nonresident Alien Employees.............................................9
22.106 Nonstandardized Plan....................................................9
22.107 Normal Retirement Age...................................................9
22.108 Old-Law Calendar Year Election..........................................9
<PAGE>
22.109 Old-Law Required Beginning Date.........................................9
22.110 Owner-Employee..........................................................9
22.111 Paired Plans............................................................9
22.112 Participant.............................................................9
22.113 Period of Severance....................................................10
22.114 Permissive Aggregation Group...........................................10
22.115 Permitted Disparity Method.............................................10
22.116 Plan ..................................................................10
22.117 Plan Administrator.....................................................10
22.118 Plan Year..............................................................10
22.119 Pre-Age 35 Waiver......................................................10
22.120 Predecessor Employer...................................................10
22.121 Predecessor Plan.......................................................10
22.122 Present Value..........................................................10
22.123 Prior Year Testing Method..............................................10
22.124 Pro Rata Allocation Method.............................................10
22.125 Projected Annual Benefit...............................................10
22.126 Protected Benefit......................................................10
22.127 Prototype Plan.........................................................10
22.128 Prototype Sponsor......................................................10
22.129 QDRO -- Qualified Domestic Relations Order.............................10
22.130 QJSA -- Qualified Joint and Survivor Annuity...........................11
22.131 QMAC Account...........................................................11
22.132 QMACs -- Qualified Matching Contributions..............................11
22.133 QNEC Account...........................................................11
22.134 QNECs -- Qualified Nonelective Contributions...........................11
22.135 QPSA -- Qualified Preretirement Survivor Annuity.......................11
22.136 QPSA Election Period...................................................11
22.137 Qualified Election.....................................................11
22.138 Qualified Transfer.....................................................11
22.139 Qualifying Employer Real Property......................................11
22.140 Qualifying Employer Securities.........................................11
22.141 Reemployment Commencement Date.........................................11
22.142 Related Employer.......................................................11
22.143 Required Aggregation Group.............................................11
22.144 Required Beginning Date................................................11
22.145 Reverse QNEC Method....................................................11
22.146 Rollover Account.......................................................11
22.147 Rollover Contribution..................................................11
22.148 Rule of Parity Break in Service........................................11
22.149 Safe Harbor 401(k) Plan................................................11
22.150 Safe Harbor Contribution...............................................12
22.151 Safe Harbor Matching Contribution Account..............................12
22.152 Safe Harbor Matching Contributions.....................................12
22.153 Safe Harbor Nonelective Contribution Account...........................12
22.154 Safe Harbor Nonelective Contributions..................................12
22.155 Salary Reduction Agreement.............................................12
22.156 SBJPA Legislation......................................................12
22.157 Section 401(k) Deferral Account........................................12
22.158 Section 401(k) Deferrals...............................................12
22.159 Self-Employed Individual...............................................12
<PAGE>
22.160 Shareholder-Employee...................................................12
22.161 Shift-to-Plan-Year Method..............................................12
22.162 Short Plan Year........................................................12
22.163 Standardized Plan......................................................13
22.164 Successor Plan.........................................................13
22.165 Taxable Wage Base......................................................13
22.166 Testing Compensation...................................................13
22.167 Three-Percent Method...................................................13
22.168 Top-Paid Group.........................................................13
22.169 Top-Paid Group Test....................................................13
22.170 Top-Heavy Plan.........................................................13
22.171 Top-Heavy Ratio........................................................13
22.172 Total Compensation.....................................................13
(a) W-2 Wages.........................................................13
(b) Withholding Wages.................................................13
(c) Code ss.415 Safe Harbor Compensation..............................13
22.173 Transfer Account.......................................................17
22.174 Trust 17
22.175 Trustee................................................................17
22.176 Two-Step Formula.......................................................17
22.177 Union Employee.........................................................17
22.178 Valuation Date.........................................................17
22.179 Vesting Computation Period.............................................17
22.180 W-2 Wages..............................................................17
22.181 Withholding Wages......................................................17
22.182 Year of Service........................................................17
<PAGE>
Article 1
Plan Eligibility and Participation
This Article contains the rules for determining when an Employee becomes
eligible to participate in the Plan. Part 1 and Part 2 of the Agreement contain
specific elections for applying these Plan eligibility and participation rules.
Article 6 of this BPD and Part 7 of the Agreement contain special service
crediting elections to override the default provisions under this Article.
1.1 Eligibility for Plan Participation. An Employee who satisfies the Plan's
minimum age and service conditions (as elected in Part 1(a) of the Agreement) is
eligible to participate in the Plan beginning on the Entry Date selected in Part
2 of the Agreement, unless he/she is specifically excluded from participation
under Part 1(b) of the Agreement. An Employee who has satisfied the Plan's
minimum age and service conditions and is employed on his/her Entry Date is
referred to as an Eligible Participant. (See Section 1.7 below for the rules
regarding an Employee who terminates employment prior to his/her Entry Date.) An
Employee who is excluded under Part 1(b) of the Agreement is referred to as an
Excluded Employee.
1.2 Excluded Employees. Unless specifically excluded under Part 1(b) of the
Agreement, all Employees of the Employer are entitled to participate under the
Plan upon becoming an Eligible Participant. Any Employee who is excluded under
Part 1(b) of the Agreement may not participate under the Plan, unless such
Excluded Employee subsequently becomes a member of an eligible class of
Employees. (See Section 1.8(b) of this Article for rules regarding an Excluded
Employee's entry into the Plan if he/she subsequently becomes a member of an
eligible class of Employees.)
(a) Independent contractors. An individual who is an independent
contractor, or who performs services with the Employer under an
agreement which identifies the individual as an independent
contractor, is specifically excluded from the plan. In the event the
Internal Revenue Service (IRS) retroactively reclassifies such
individual as an Employee, the reclassified Employee will become an
Eligible Participant on the date the IRS issues a final determination
regarding his/her employment status (or the individual's Entry Date,
if later), unless the individual is otherwise excluded under Part 1(b)
of the Agreement. For periods prior to the date of such final
determination, the reclassified Employee will not have any rights to
accrued benefits under the Plan, except as agreed to by the Employer
and the IRS, or as set forth in an amendment adopted by the Employer.
If the Plan is a Standardized Plan, the Employer will not have
reliance on the favorable IRS letter issued to the Prototype Sponsor
for any period in which an individual is retroactively treated as an
Employee but is denied the right to accrue benefits by reason of this
paragraph.
(b) Leased Employees. If an individual is a Leased Employee, such
individual is treated as an Employee of the Employer and may
participate under the Plan upon satisfying the Plan's minimum age and
service conditions, unless the Employer elects to exclude Leased
Employees from participation under Part 1(b)(4) of the Nonstandardized
Plan Agreement.
(1) Definition of Leased Employee. A Leased Employee, as
defined in Code ss.414(n), is an individual who
performs services for the Employer on a substantially
full time basis for a period of at least one year
pursuant to an agreement between the Employer and a
leasing organization, provided such services are
performed under the primary direction or control of
the Employer.
<PAGE>
(2) Credit for benefits. If a Leased Employee receives
contributions or benefits under a plan maintained by
the leasing organization which are attributable to
services performed for the Employer, such
contributions or benefits shall be treated as
provided by the Employer.
(3) Safe harbor plan. A Leased Employee will not be
considered an Employee of the Employer if such Leased
Employee is covered by a money purchase pension plan
of the leasing organization which provides: (i) a
nonintegrated employer contribution of at least 10%
of compensation, (ii) immediate participation, and
(iii) full and immediate vesting. For this paragraph
to apply, Leased Employees must not constitute more
than 20% of the total Nonhighly Compensated Employees
of the Employer.
1.3 Employees of Related Employers. Employees of the Employer that executes the
Signature Page of the Agreement and Employees of any Related Employer that
executes a Co-Sponsor Adoption Page under the Agreement are eligible to
participate in this Plan.
(a) Nonstandardized Plans. In a Nonstandardized Plan, a Related Employer
is not required to execute a Co-Sponsor Adoption Page. However,
Employees of a Related Employer that does not execute a Co-Sponsor
Adoption Page are not eligible to participate in the Plan.
(b) Standardized Plans. In a Standardized Plan, Employees of all Related
Employers are eligible to participate under the Plan (unless otherwise
excluded under Part 1(b) of the Agreement). All Related Employers must
execute a Co-Sponsor Adoption Page under the Agreement, so that
Employees of such Related Employers are eligible to become
Participants in the Plan. See Article 21 for applicable rules if a
Related Employer does not sign the Co-Sponsor Adoption Page and the
effect of an acquisition or disposition transaction that is described
in Code ss.410(b)(6)(C).
1.4 Minimum Age and Service Conditions. Part 1(a) of the Agreement contains
specific elections as to the minimum age and service conditions which an
Employee must satisfy prior to becoming eligible to participate under the Plan.
An Employee may be required to attain a specific age or to complete a certain
amount of service with the Employer prior to commencing participation under the
Plan. If no minimum age or service conditions apply to a particular contribution
(i.e., the Employer elects "None" under Part 1(a) of the Agreement), an Employee
is treated as satisfying the Plan's eligibility requirements on the individual's
Employment Commencement Date.
Different age and service conditions may be selected under the Nonstandardized
401(k) Agreement for Section 401(k) Deferrals (including any Employee After-Tax
Contributions), Employer Matching Contributions, and Employer Nonelective
Contributions. If different conditions apply for different contributions, the
rules in this Article for determining when an Employee is an Eligible
Participant are applied separately with respect to each set of eligibility
conditions.
(a) Maximum permissible age and service conditions. Code ss.410(a)
provides limits on the maximum permissible age and service conditions
that may be required prior to Plan participation. The Employer may not
require an Employee, as a condition of Plan participation, to attain
an age older than age 21. The Employer also may not require an
Employee to complete more than one Year of Service, unless the
Employer elects full and immediate vesting under Part 6 of the
Agreement, in which case the Employer may require an Employee to
complete up to two Years of Service. (The Employer may not require an
Employee to complete more than one Year of Service to be eligible to
make Section 401(k) Deferrals under the 401(k) Agreement.)
<PAGE>
(b) Year of Service. Unless the Employer elects otherwise under Part 7 of
the Agreement, an Employee will earn one Year of Service for purposes
of applying the eligibility rules under this Article if the Employee
completes 1,000 Hours of Service with the Employer during an
Eligibility Computation Period. An Employee will receive credit for a
Year of Service, as of the end of the Eligibility Computation Period,
if the Employee completes the required Hours of Service during such
period, even if the Employee is not employed for the entire period. In
calculating an Employee's Hours of Service for purposes of applying
the eligibility rules under this Article, the Employer will use the
Actual Hours Crediting Method, unless elected otherwise under Part 7
of the Agreement. (See Article 6 of this BPD for a description of
alternative service crediting methods.)
(c) Eligibility Computation Periods. For purposes of determining Years of
Service under this Article, an Employee's initial Eligibility
Computation Period is the 12-month period beginning on the Employee's
Employment Commencement Date. If one Year of Service is required for
eligibility, and the Employee is not credited with a Year of Service
for the first Eligibility Computation Period, subsequent Eligibility
Computation Periods are calculated under the Shift-to-Plan-Year
Method, unless the Employer elects under Part 7(b)(1) of the Agreement
to use the Anniversary Year Method. If two Years of Service are
required for eligibility, subsequent Eligibility Computation Periods
are measured on the Anniversary Year Method, unless the Employer
elects under Part 7(b)(2) of the Agreement to use the
Shift-to-Plan-Year Method. In the case of a 401(k) Agreement in which
a two Years of Service eligibility condition is used for either
Employer Matching Contributions or Employer Nonelective Contributions,
the method used to determine Eligibility Computation Periods for the
two Years of Service condition will also apply to any one Year of
Service eligibility condition used with respect to any other
contributions.
(1) Shift-to-Plan-Year Method. Under the Shift-to-Plan-Year
Method, after the initial Eligibility Computation
Period, subsequent Eligibility Computation Periods are
measured using the Plan Year. In applying the
Shift-to-Plan-Year Method, the first Eligibility
Computation Period following the shift to the Plan
Year is the first Plan Year which commences after the
Employee's Employment Commencement Date. See Section
11.7 for rules that apply if there is a short Plan Year.
(2) Anniversary Year Method. Under the Anniversary Date
Method, after the initial Eligibility Computation
Period, each subsequent Eligibility Computation
Period is the 12-month period commencing with the
anniversary of the Employee's Employment Commencement
Date.
(d) Effective Date of Plan. All Employees who have satisfied the
conditions for being an Eligible Participant as of the
Effective Date of the Plan are eligible to participate in the
Plan as of the Effective Date (provided the Employee is
employed on such date and is not otherwise excluded from
participation under Part 1(b) of the Agreement). If an
Employee has satisfied all the conditions for being an
Eligible Participant, except the Employee has not yet reached
his/her Entry Date (as determined under Part 2 of the
Agreement), the Employee will become an Eligible Participant
on the appropriate Entry Date in accordance with this Article.
The Employer may modify this rule under Part 1(c) of the
Agreement. (See Section 1.9 for a discussion of special
eligibility rules.)
(e) Amendment of age and service requirements. If the Plan's
minimum age and service conditions are amended, an Employee
who is an Eligible Participant immediately prior to the
effective date of the amendment is deemed to satisfy the
amended requirements. However, Part 1(c) of the
Nonstandardized Plan Agreement can be used to modify this
rule.
<PAGE>
1.5 Entry Dates. Part 2 of the Agreement contains specific elections regarding
the Entry Dates under the Plan. An Employee's Entry Date is the date as of which
he/she is first considered an Eligible Participant. Depending on the elections
in Part 2 of the Agreement, the Entry Date may be the exact date on which an
Employee completes the Plan's age and service conditions, or it might be some
date that occurs before or after such conditions are satisfied. If an Employee
is excluded from participation under Part 1(b) of the Agreement, see the rules
under Section 1.8 of this Article.
(a) Entry Date requirements. An Employee (other than an Excluded
Employee) commences participation under the Plan (i.e.,
becomes an Eligible Participant) as of the Entry Date selected
in Part 2 of the Agreement, provided the individual is
employed by the Employer on that Entry Date. (See Section 1.7
below for the rules applicable to Employees who are not
employed on the Entry Date.) In no event may an Eligible
Participant's Entry Date be later than: (1) the first day of
the Plan Year beginning after the date on which the Eligible
Participant satisfies the maximum permissible minimum age and
service conditions, or (2) six months after the date the
Eligible Participant satisfies such age and service
conditions.
(b) Single annual Entry Date. If the Employer elects a single
annual Entry Date under Part 2(b) of the Agreement, the
maximum permissible age and service conditions described in
Section 1.4 above are reduced by one-half (1/2) year, unless:
(1) the Employer elects under Part 2(a)(2) of the Agreement to
use the Entry Date nearest the date the Employee satisfies the
Plan's minimum age and service conditions and the Entry Date
is the first day of the Plan Year or (2) the Employer elects
under Part 2(a)(3) of the Agreement to use the Entry Date
preceding the date the Employee satisfies the Plan's minimum
age and service conditions.
1.6 Eligibility Break in Service Rules. For purposes of eligibility to
participate, an Employee is credited with all Years of Service earned with the
Employer, except as provided under the following Break in Service rules. In
applying these Break in Service rules, Years of Service and Breaks in Service
(as defined in Section 22.24) are measured on the same Eligibility Computation
Period as defined in Section 1.4(c) above.
(a) Rule of Parity Break in Service. This Break in Service rule
applies only to Participants who are totally nonvested (i.e.,
0% vested) in their Employer Contribution Account and their
Employer Matching Contribution Account, if applicable. Under
this Break in Service rule, if a nonvested Participant incurs
a period of consecutive one-year Breaks in Service which
equals or exceeds the greater of five (5) or the Participant's
aggregate number of Years of Service with the Employer, all
service earned prior to the consecutive Break in Service
period will be disregarded and the Participant will be treated
as a new Employee for purposes of determining eligibility
under the Plan.
(1) Previous application of the Rule of Parity Break in
Service rule. In determining a Participant's
aggregate Years of Service for purposes of applying
the Rule of Parity Break in Service, any Years of
Service otherwise disregarded under a previous
application of this rule are disregarded.
(2) Application to the 401(k) Agreement. The Rule of
Parity Break in Service rule applies only to
determine the individual's right to resume as an
Eligible Participant with respect to his/her Employer
Contribution Account or Employer Matching
Contribution Account. In determining whether a
Participant is totally nonvested for purposes of
applying the Rule of Parity Break in Service rule,
the Participant's Section 401(k) Deferral Account,
<PAGE>
Employee After-Tax Contribution Account, QMAC
Account, QNEC Account, Safe Harbor Nonelective
Contribution Account, Safe Harbor Matching
Contribution Account, and Rollover Account are
disregarded.
(b) One-year Break in Service rule for Plans using a two Years of
Service eligibility condition. If the Employer elects to use
the two Years of Service eligibility condition under Part 1(a)
of the Agreement, any Employee who incurs a one-year Break in
Service before satisfying the two Years of Service eligibility
condition will not be credited with service earned before such
one-year Break in Service.
(c) One-year holdout Break in Service rule. The one-year holdout
Break in Service rule will not apply unless the Employer
specifically elects in Part 7 of the Nonstandardized Plan
Agreement to have it apply. If the one-year holdout Break in
Service rule is elected, an Employee who has a one-year Break
in Service will not be credited for eligibility purposes with
any Years of Service earned before such one-year Break in
Service until the Employee has completed a Year of Service
after the one-year Break in Service. (The one-year holdout
Break in Service rule does not apply under the Standardized
Plan Agreements.)
(1) Operating rules. An Employee who is precluded from
receiving Employer Contributions (other than Section
401(k) Deferrals) as a result of the one-year holdout
Break in Service rule, and who completes a Year of
Service following the Break in Service, is reinstated
as an Eligible Participant as of the first day of the
12-month measuring period (determined under Section
(2) or (3) below) during which the Employee completes
the Year of Service. Unless otherwise selected under
Part 7(e) of the Nonstandardized 401(k) Agreement,
the one-year holdout Break in Service rule does not
apply to preclude an otherwise Eligible Participant
from making Section 401(k) Deferrals to the Plan. If
the Employer elects under Part 7(e) of the
Nonstandardized 401(k) Agreement to have the one-year
holdout Break in Service rule apply to Section 401(k)
Deferrals, an Employee who is precluded from making
Section 401(k) Deferrals as a result of this Break in
Service rule is re-eligible to make Section 401(k)
Deferrals immediately upon completing 1,000 Hours of
Service with the Employer during a subsequent
measuring period (as determined under Section (2) or
(3) below). No corrective action need be taken by the
Employer as a result of the failure to retroactively
permit the Employee to make Section 401(k) Deferrals.
(2) Plans using the Shift-to-Plan-Year Method. If the
Plan uses the Shift-to-Plan-Year Method (as defined
in Section 1.4(c)(1)) for measuring Years of Service,
the period for determining whether an Employee
completes a Year of Service following the one-year
Break in Service is the 12-month period commencing on
the Employee's Reemployment Commencement Date and, if
necessary, subsequent Plan Years beginning with the
Plan Year which includes the first anniversary of the
Employee's Reemployment Commencement Date.
(3) Plans using Anniversary Date Method. If the Plan uses
the Anniversary Date Method (as defined in Section
1.4(c)(2)) for measuring Years of Service, the period
for determining whether an Employee completes a Year
of Service following the one-year Break in Service is
the 12-month period which commences on the Employee's
Reemployment Commencement Date and, if necessary,
subsequent 12-month periods beginning on
anniversaries of the Employee's Reemployment
Commencement Date.
<PAGE>
1.7 Eligibility Upon Reemployment. Subject to the Break in Service rules under
Section 1.6, a former Employee is reinstated as an Eligible Participant
immediately upon rehire if the Employee had satisfied the Plan's minimum age and
service conditions prior to termination of employment, regardless of whether the
Employee was actually employed on his/her Entry Date, unless the Employee is an
Excluded Employee upon his/her return to employment. This requirement is deemed
satisfied if a rehired Employee is permitted to commence making Section 401(k)
Deferrals as of the beginning of the first payroll period commencing after the
Employee's Reemployment Commencement Date.
If an Employee is re-employed prior to his/her Entry Date, the Employee does not
become an Eligible Participant under the Plan until such Entry Date. A rehired
Employee who had not satisfied the Plan's minimum age and service conditions
prior to termination of employment is eligible to participate in the Plan only
upon satisfaction of the eligibility requirements under this Article.
1.8 Operating Rules for Employees Excluded by Class.
(a) Eligible Participant becomes part of an excluded class of
Employees. If an Eligible Participant becomes part of an
excluded class of Employees, his/her status as an Eligible
Participant ceases. Such Employee's status as an Eligible
Participant will resume immediately upon his/her returning to
an eligible class of Employees, regardless of whether such
date is a normal Entry Date under the Plan, subject to the
application of any Break in Service rules under Section 1.6.
This requirement is deemed satisfied if the Employee is
permitted to commence making Section 401(k) Deferrals as of
the beginning of the first payroll period commencing after the
Employee becomes part of an eligible class of Employees.
(b) Excluded Employee becomes part of an eligible class of
Employees. If an Excluded Employee becomes part of an eligible
class of Employees, the following rules apply. If the Entry
Date that otherwise would have applied to such Employee
following his/her completion of the Plan's minimum age and
service conditions has already passed, then the Employee
becomes an Eligible Participant on the date he/she becomes
part of the eligible class of Employees, regardless of whether
such date is a normal Entry Date under the Plan. This
requirement is deemed satisfied if the Employee is permitted
to commence making Section 401(k) Deferrals as of the
beginning of the first payroll period commencing after the
Employee becomes part of an eligible class of Employees. If
the Entry Date that would have applied to such Employee has
not passed, then the Employee becomes an Eligible Participant
on such Entry Date.
1.9 Special Eligibility Provisions. Part 1(c) of the Agreement permits the
Employer to modify the eligibility rules for particular Employees. Under Part
1(c), the Employer may elect to treat all Employees employed on the Effective
Date of the Plan as Eligible Participants (regardless of whether such Employees
have satisfied the Plan's minimum age and service conditions). The Employer may
elect under Part 1(c)(1)(ii) of the Nonstandardized Plan Agreement to apply this
dual eligibility rule by treating all Employees employed as of a specified date
as Eligible Participants. The Employer may elect under Part 1(c)(2) of the
Nonstandardized Plan Agreement to further modify the eligibility rules under
this Article.
1.10 Relationship to Accrual of Benefits. An Eligible Participant is entitled to
accrue benefits in the Plan but will not necessarily do so in every Plan Year
that he/she is an Eligible Participant. Whether an Eligible Participant's
Account receives an allocation of Employer Contributions depends on the
requirements set forth in Part 4 of the Agreement. If an Employee is an Eligible
Participant for purposes of making Section 401(k) Deferrals under the 401(k)
Agreement, such Employee is treated as an Eligible Participant under the Plan
regardless of whether he/she actually elects to make Section 401(k) Deferrals.
<PAGE>
1.11 Waiver of Participation. Unless the Employer elects otherwise under Part
13(h) of the Nonstandardized Plan Agreement, an Eligible Participant may not
waive participation under the Plan. For this purpose, a failure to make Section
401(k) Deferrals or Employee After-Tax Contributions under a 401(k) plan is not
a waiver of participation. The Employer may elect under Part 13(h)(1) of the
Nonstandardized Plan Agreement to permit an Employee to make a one-time
irrevocable election to not participate under the Plan. Such election must be
made prior to the Employee's first becoming eligible to participate under any
plan maintained by the Employer. An Employee who makes a one-time irrevocable
election to not participate may not subsequently elect to participate under the
Plan. Alternatively, the Employer may elect under Part 13(h)(2) of the
Nonstandardized Agreement to permit an Employee to elect out of participation
under any other circumstances designated by the Employer. An Employee who elects
not to participate under this Section 1.11 is treated as a nonbenefiting
Employee for purposes of the minimum coverage requirements under Code ss.410(b).
THOMAS F. KERNEY, P.A. Defined Contribution Basic Plan Document - Article 2-11
<PAGE>
Article 2
Employer Contributions and Allocations
This Article describes how Employer Contributions are made to and allocated
under the Plan. The type of Employer Contributions which may be made under the
Plan and the method for allocating such contributions will depend on the type of
Plan involved. Section 2.2 of this BPD provides specific rules regarding
contributions and allocations under a profit sharing plan; Section 2.3 provides
the rules for a money purchase plan; and Section 2.4 provides the rules for a
401(k) plan. Part 4 of the Agreement contains the elective provisions for the
Employer to specify the amount and type of Employer Contributions it will make
under the Plan and to designate any limits on the amount it will contribute to
the Plan each year. The rules set out in this Article are subject to the special
contribution and allocation rules for Top-Heavy Plans under Article 16 and the
Annual Additions Limitation under Article 7. Employee After-Tax Contributions,
Rollover Contributions and transfers to the Plan are discussed in Article 3 and
the allocation of forfeitures is discussed in Article 5. Part 3 of the Agreement
contains elective provisions for determining an Employee's Included Compensation
for allocation purposes.
2.1 Amount of Employer Contributions. The Employer shall make Employer
Contributions to the Trust as determined under the contribution formula elected
in Part 4 of the Agreement. If this Plan is a 401(k) plan, Employer
Contributions include Section 401(k) Deferrals, Employer Nonelective
Contributions, Employer Matching Contributions, QNECs, QMACs, and Safe Harbor
Contributions, to the extent such contributions are elected under the 401(k)
Agreement. The Employer has the responsibility for determining the amount and
timing of Employer Contributions under the terms of the Plan.
(a) Limitation on Employer Contributions. Employer Contributions
are subject to the Annual Additions Limitation described in
Article 7 of this BPD. If allocations to a Participant exceed
(or will exceed) such limitation, the excess will be corrected
in accordance with the rules under Article 7.
(b) Limitation on Included Compensation. For purposes of
determining a Participant's allocation of Employer
Contributions under this Article, the Included Compensation
taken into account for any Participant for a Plan Year may not
exceed the Compensation Dollar Limitation under Section 22.30.
(c) Offset for contributions under another qualified plan
maintained by the Employer. If the Employer maintains any
other qualified plan(s) which cover any Eligible Participants
under this Plan, the Employer may elect under Part 13(f)(2) of
the Nonstandardized Plan Agreement to reduce such Eligible
Participants' allocation under this Plan to take into account
the benefits provided under the Employer's other qualified
plan(s).
2.2 Profit Sharing Plan Contribution and Allocations. This Section 2.2 applies
if the Employer has adopted the profit sharing plan Agreement. Any reference to
the Agreement under this Section 2.2 is a reference to the profit sharing plan
Agreement.
(a) Amount of Employer Contribution. The Employer must designate
under Part 4(a) of the Agreement the amount it will contribute
as an Employer Contribution under the Plan. The Employer
Contribution may be totally within the Employer's discretion
or, under the Nonstandardized Plan Agreement, may be a fixed
amount determined as a uniform percentage of each Eligible
Participant's Included Compensation or as a fixed dollar
amount for each Eligible Participant. Any Employer
Contribution under this Section will be allocated to the
Eligible Participants' Employer Contribution Account.
<PAGE>
(1) Multiple formulas. If the Employer elects more than
one Employer Contribution formula, each formula is
applied separately. The Employer's aggregate Employer
Contribution for a Plan Year will be the sum of the
Employer Contributions under all such formulas.
(2) Net Profits. If the Employer elects under Part
4(a)(4) of the Nonstandardized Plan Agreement, the
Employer Contribution may be limited to Net Profits.
Unless modified in the Agreement, Net Profits means
the Employer's net income or profits determined in
accordance with generally accepted accounting
principles, without any reduction for taxes based
upon income, or the contributions made by the
Employer under this Plan or any other qualified plan.
(b) Allocation formula for Employer Contributions. The Employer
must elect a definite allocation formula under Part 4(b) of
the Agreement which determines how much of the Employer
Contribution is allocated to each Eligible Participant. An
Eligible Participant is only entitled to an allocation if such
Participant satisfies the allocation conditions described in
Part 4(d) of the Agreement. See Section 2.5.
(1) Pro Rata Allocation Method. If the Employer elects
the Pro Rata Allocation Method, a pro rata share of
the Employer Contribution is allocated to each
Eligible Participant's Employer Contribution Account.
A Participant's pro rata share is determined based on
the ratio such Participant's Included Compensation
bears to the total of all Eligible Participants'
Included Compensation. However, if the Employer
elects under the Nonstandardized Agreement to
contribute a uniform dollar amount for each Eligible
Participant, the pro rata allocation method allocates
that uniform dollar amount to each Eligible
Participant.
In determining an Eligible Participant's allocation
under the Pro Rata Allocation Method, the
Participant's Included Compensation is determined
separately for each period designated under Part
4(c)(1)(i) of the Agreement. If the Employer elects a
period other than the Plan Year, a Participant's
allocation of Employer Contributions will be
determined separately for each period based solely on
Included Compensation for such period. The Employer
need not actually make the Employer Contribution
during the designated period, provided the total
Employer Contribution for the Plan Year is allocated
based on the proper Included Compensation.
(2) Permitted Disparity Method. If the Employer elects
the Permitted Disparity Method, the Employer
Contribution is allocated to Eligible Participants
under the Two-Step Formula or the Four-Step Formula
(as elected under the Agreement). The Permitted
Disparity Method may only apply if the Employer
elects under the Agreement to make a discretionary
contribution. The Employer may not elect a Permitted
Disparity Method under the Plan if another qualified
plan of the Employer, which covers any of the same
Employees, uses permitted disparity in determining
the allocation of contributions or the accrual of
benefits under the plan.
For purposes of applying the Permitted Disparity
Method, Excess Compensation is the portion of an
Eligible Participant's Included Compensation that
exceeds the Integration Level. The Integration Level
is the Taxable Wage Base, unless the Employer
designates a different amount under Part 4(c)(2)(ii)
of the Agreement.
<PAGE>
(i) Two-Step Formula. If the Employer elects the
Two-Step Formula, the following allocation
method applies. However, the Employer may
elect under Part 4(c)(2)(i) of the Agreement
to have the Four-Step Method, as described
in (ii) below, automatically apply for any
Plan Year in which the Plan is a Top-Heavy
Plan.
(A) Step One. The Employer Contribution
is allocated to each Eligible
Participant's Account in the ratio
that each Eligible Participant's
Included Compensation plus Excess
Compensation for the Plan Year bears
to the total Included Compensation
plus Excess Compensation of all
Eligible Participants for the Plan
Year. The allocation under this Step
One, as a percentage of each
Eligible Participant's Included
Compensation plus Excess
Compensation, may not exceed the
Applicable Percentage under the
following table:
Integration Level Applicable
(as a % of the Taxable Wage Base) Percentage
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% and not more than 80% 4.3%
20% or less 5.7%
(B) Step Two. Any Employer Contribution
remaining after Step One will be
allocated in the ratio that each
Eligible Participant's Included
Compensation for the Plan Year bears
to the total Included Compensation
of all Eligible Participants for the
Plan Year.
(ii) Four-Step Formula. If the Employer elects
the Four-Step Formula, or if the Plan is a
Top-Heavy Plan and the Employer elects under
the Agreement to have the Four-Step Formula
apply for any Plan Year that the Plan is a
Top-Heavy Plan, the following allocation
method applies.
(A) Step One. The Employer Contribution
is allocated to each Eligible
Participant's Account in the ratio
that each Eligible Participant's
Total Compensation bears to all
Eligible Participants' Total
Compensation, but not in excess of
3% of each Eligible Participant's
Total Compensation.
(B) Step Two. Any Employer Contribution
remaining after the allocation in
Step One will be allocated to each
Eligible Participant's Account in
the ratio that each Eligible
Participant's Excess Compensation
for the Plan Year bears to the
Excess Compensation of all Eligible
Participants for the Plan Year, but
not in excess of 3% of each Eligible
Participant's Included Compensation.
(C) Step Three. Any Employer
Contribution remaining after the
allocation in Step Two will be
allocated to each Eligible
Participant's Account in the ratio
that the sum of each Eligible
Participant's Included Compensation
and Excess Compensation bears to the
sum of all Eligible Participants'
<PAGE>
Included Compensation and Excess
Compensation. The allocation under
this Step Three, as a percentage of
each Eligible Participant's Included
Compensation plus Excess
Compensation, may not exceed the
Applicable Percentage under the
following table:
Integration Level Applicable
a % of the Taxable Wage Base) Percentage
100% 2.7%
More than 80% but less than 100% 2.4%
More than 20% and not more than 80% 1.3%
20% or less 2.7%
(D) Step Four. Any remaining Employer
Contribution will be allocated to
each Eligible Participant's Account
in the ratio that each Eligible
Participant's Included Compensation
for the Plan Year bears to all
Eligible Participants' Included
Compensation for that Plan Year.
(c) Special rules for determining Included Compensation.
(1) Partial period of participation. If an Employee is an
Eligible Participant for only part of a Plan Year,
the Employer Contribution formula(s) will be applied
based on such Employee's Included Compensation for
the period he/she is an Eligible Participant.
However, the Employer may elect under Part
4(c)(1)(ii) of the Agreement to base the Employer
Contribution formula(s) on the Employee's Included
Compensation for the entire Plan Year, including the
portion of the Plan Year during which the Employee is
not an Eligible Participant.
(2) Measuring period. Except as provided in (1) above,
for purposes of determining an Eligible Participant's
allocation of Employer Contributions, Included
Compensation is measured on the Plan Year, unless the
Employer elects under Part 4(c)(1)(iii) of the
Nonstandardized Plan Agreement to measure Included
Compensation on the calendar year ending in the Plan
Year. If the Employer elects to measure Included
Compensation on the calendar year ending in the Plan
Year, the Included Compensation of any Employee whose
Employment Commencement Date is less than 12 months
before the end of such calendar year must be measured
on the Plan Year or such Employee's period of
participation, as determined under (1) above.
2.3 Money Purchase Plan Contribution and Allocations. This Section 2.3 applies
if the Employer has adopted the money purchase plan Agreement. Any reference to
the Agreement under this Section 2.3 is a reference to the money purchase plan
Agreement.
(a) Employer Contributions. The Employer must elect under Part 4
of the Nonstandardized Plan Agreement to make Employer
Contributions under one of the following methods:
(1) as a uniform percentage of each Eligible
Participant's Included Compensation;
<PAGE>
(2) as a uniform dollar amount for each Eligible
Participant;
(3) under the Permitted Disparity Method (using either
the individual method or group method); or
(4) under a formula based on service with the Employer.
Under the Standardized Agreement, the Employer may only elect
to make an Employer Contribution as a uniform percentage of
Included Compensation or under the Permitted Disparity Method,
using the individual method.
(b) Allocation formula for Employer Contributions. The
contribution made by the Employer must be allocated to
Eligible Participants in a definitely determinable manner.
Except where the Employer elects under Part 4(a)(3)(ii) of the
Nonstandardized Agreement to allocate Employer Contributions
under the Permitted Disparity Method using the group method,
each Eligible Participant's allocation of the Employer
Contribution will equal the amount determined under the
contribution formula elected under the Agreement. An Eligible
Participant is only entitled to an allocation if such
Participant satisfies the allocation conditions described
under Part 4(c) of the Agreement. See Section 2.5.
If the Employer elects under Part 4(a)(1) of the Agreement to
provide an Employer Contribution equal to a uniform percentage
of each Eligible Participant's Included Compensation, the
Employer must designate under Part 4(b)(1)(i) the period to be
used in determining Included Compensation for this purpose. In
determining the amount of Employer Contribution to be
allocated to an Eligible Participant, Included Compensation is
determined separately for each period designated under Part
4(b)(1)(i). If the Employer elects a period other than the
Plan Year, a Participant's allocation of Employer
Contributions will be determined separately for each period
based solely on Included Compensation for such period. The
Employer need not actually make the Employer Contribution
during the designated period, provided the total Employer
Contribution for the Plan Year is allocated based on the
proper Included Compensation.
(c) Permitted Disparity Method. The Employer may elect under
Part 4(a) of the Nonstandardized Plan Agreement to use the
Permitted Disparity Method using either the individual method
or the group method. (The individual method is the only method
available under the Standardized Plan Agreement.) An Employer
may not elect a Permitted Disparity Method under the Plan if
another qualified plan of the Employer, which covers any of
the same Employees, uses permitted disparity in determining
the allocation of contributions or accrual of benefits under
the plan.
(1) Individual method. If the Employer elects the
Permitted Disparity Method using the individual
method, the Employer will contribute (i) a fixed
percentage of each Eligible Participant's Included
Compensation for the Plan Year plus (ii) a fixed
percentage of each Eligible Participant's Excess
Compensation. The percentage of each Eligible
Participant's Excess Compensation under (ii) may not
exceed the lesser of the percentage of total Included
Compensation contributed under (i) or the Applicable
Percentage under the following table:
<PAGE>
Integration Level Applicable
(As a percentage of the Taxable Wage Base) Percentage
100% 5.7%
More than 80% but less than 100% 5.4%
More than 20% and not more than 80% 4.3%
20% or less 5.7%
(2) Group method. If the Employer elects the Permitted
Disparity Method using the group method under the
Nonstandardized Plan Agreement, the Employer will
contribute a fixed percentage of the total Included
Compensation for the Plan Year of all Eligible
Participants. The total Employer Contribution is then
allocated among the Eligible Participants under
either the Two-Step Formula or the Four-Step Formula
described below.
(i) Two-Step Formula. If the Employer elects the
Two-Step Formula, the Employer Contribution
will be allocated in the same manner as
under Section 2.2(b)(2)(i) above. However,
the Employer may elect to have the Four-Step
Formula automatically apply for any Plan
Year in which the Plan is a Top-Heavy Plan.
(ii) Four-Step Formula. If the Employer elects
the Four-Step Formula or if the Plan is a
Top-Heavy Plan and the Employer elects to
have the Four-Step Formula apply for Plan
Years when the Plan is a Top-Heavy Plan, the
Employer Contribution will be allocated to
Eligible Participants in the same manner as
under Section 2.2(b)(2)(ii) above.
(d) Special rules for determining Included Compensation. The same
rules as discussed under Section 2.2(c)(1) apply to permit the
Employer to elect under Part 4(b)(1)(ii) of the Agreement to
take into account an Employee's Included Compensation for the
entire Plan Year, even if the Employee is an Eligible
Participant for only part of the Plan Year. If no election is
made under Part 4(b)(1)(ii) of the Agreement, only Included
Compensation for the portion of the Plan Year while an
Employee is an Eligible Participant will be taken into account
in determining an Employee's Employer Contribution under the
Plan. The Employer also may elect to take into account
Included Compensation for the calendar year ending in the Plan
Year, as provided in Section 2.2(c)(2).
(e) Limit on contribution where Employer maintains another plan in
addition to a money purchase plan. If the Employer adopts the
money purchase plan Agreement and also maintains another
qualified retirement plan, the contribution to be made under
the money purchase plan Agreement (as designated in Part 4 of
the Agreement) will not exceed the maximum amount that is
deductible under Code ss.404(a)(7), taking into account all
contributions that have been made to the plans prior to the
date a contribution is made under the money purchase plan
Agreement.
<PAGE>
2.4 401(k) Plan Contributions and Allocations. This Section 2.4 applies if the
Employer has adopted the 401(k) plan Agreement. Any reference to the Agreement
under this Section 2.4 is a reference to the 401(k) Agreement. The Employer must
designate under Part 4 of the Agreement the amount and type of Employer
Contributions it will make under the Plan. Employer Contributions under a 401(k)
plan are generally subject to special limits and nondiscrimination rules. (See
Article 17 for a discussion of the special rules that apply to the Employer
Contributions under a 401(k) plan.) The Employer may make any (or all) of the
following contributions under the 401(k) Agreement.
(a) Section 401(k) Deferrals. If so elected under Part 4A of the
Agreement, an Eligible Participant may enter into a Salary
Reduction Agreement with the Employer authorizing the Employer
to withhold a specific dollar amount or a specific percentage
from the Participant's Included Compensation and to deposit
such amount into the Participant's Section 401(k) Deferral
Account under the Plan. A Salary Reduction Agreement may only
relate to Included Compensation that is not currently
available at the time the Salary Reduction Agreement is
completed. An Employer may elect under Part 4A(d) of the
Agreement to provide a special effective date solely for
Section 401(k) Deferrals under the Plan.
An Employee's Section 401(k) Deferrals are treated as Employer
Contributions for all purposes under this Plan, except as
otherwise provided under the Code or Treasury regulations. If
the Employer adopts the Nonstandardized 401(k) Agreement and
does not elect to allow Section 401(k) Deferrals under Part 4A
of the Agreement, the only contributions an Eligible
Participant may make to the Plan are Employee After-Tax
Contributions as authorized under Article 3 of this BPD and
Part 4D of the Agreement. In either case, an Eligible
Participant may also receive Employer Nonelective
Contributions and/or Employer Matching Contributions under the
Plan, to the extent authorized under the Agreement. (The
Employer may not make After-Tax Contributions under the
Standardized 401(k) Agreement.)
(1) Change in deferral election. An Eligible Participant
may enter into a new Salary Reduction Agreement, or
may change his/her elections under an existing Salary
Reduction Agreement, at the time and in the manner
prescribed by the Plan Administrator on the Salary
Reduction Agreement form. The Salary Reduction
Agreement may also provide elections as to the
investment funds into which the Section 401(k)
Deferrals will be contributed and the time and manner
a Participant may change such elections.
(2) Automatic deferral election. If elected under Part
4A(c) of the Agreement, the Employer will
automatically withhold the amount designated under
Part 4A(c) from Eligible Participants' Included
Compensation for payroll periods starting with such
Participants' Entry Date, unless the Eligible
Participant completes a Salary Reduction Agreement
electing a different deferral amount (including a
zero deferral amount). The Employer may elect under
Part 4A(c) of the Agreement to apply the automatic
deferral election only to Employees who become
Eligible Participants after a specified date. The
Trustee will deposit all amounts withheld pursuant to
this automatic deferral election into the appropriate
Participant's Section 401(k) Deferral Account.
Prior to the time an automatic deferral election
would first go into effect, an Employee must receive
written notice concerning the effect of the automatic
deferral election and his/her right to elect a
different level of deferral under the Plan, including
the right to elect not to defer. After receiving the
notice, an Employee must have a reasonable time
before any automatic deferral election goes into
effect.
<PAGE>
(b) Employer Matching Contributions. If so elected under Part 4B
of the Agreement, the Employer will make an Employer Matching
Contribution, in accordance with the matching contribution
formula(s) selected in Part 4B(b), to Eligible Participants
who satisfy the allocation conditions under Part 4B(e) of the
Agreement. See Section 2.5. Any Employer Matching Contribution
determined under Part 4B(b) will be allocated to the Eligible
Participant's Employer Matching Contribution Account.
(1) Applicable contributions. The Employer must elect
under the Nonstandardized Plan Agreement whether the
matching contribution formula(s) applies to Section
401(k) Deferrals, Employee After-Tax Contributions,
or both. Under the Standardized Plan Agreement,
Employer Matching Contributions apply only to Section
401(k) Deferrals. The contributions which are
eligible for an Employer Matching Contribution are
referred to under this Section as "applicable
contributions." If a matching formula applies to both
Section 401(k) Deferrals and Employee After-Tax
Contributions, such contributions are aggregated to
determine the Employer Matching Contribution
allocated under the formula.
(2) Multiple formulas. If the Employer elects more than
one matching contribution formula under Part 4B(b) of
the Agreement, each formula is applied separately. An
Eligible Participant's aggregate Employer Matching
Contributions for a Plan Year will be the sum of the
Employer Matching Contributions the Participant is
entitled to under all such formulas.
(3) Applicable contributions taken into account under the
matching contribution formula. The Employer must
elect under Part 4B(c)(1) of the Agreement the period
for which the applicable contributions are taken into
account in applying the matching contribution
formula(s) and in applying any limits on the amount
of such contributions that may be taken into account
under the formula(s). In applying the matching
contribution formula(s), applicable contributions
(and Included Compensation) are determined separately
for each designated period and any limits on the
amount of applicable contributions taken into account
under the matching contribution formula(s) are
applied separately for each designated period.
(4) Partial period of participation. In applying the
matching contribution formula(s) under the Plan to an
Employee who is an Eligible Participant for only part
of the Plan Year, the Employer may elect under Part
4B(c)(2) of the Agreement to take into account
Included Compensation for the entire Plan Year or
only for the portion of the Plan Year during which
the Employee is an Eligible Participant.
Alternatively, the Employer may elect under Part
4B(c)(2)(iii) of the Agreement to take into account
Included Compensation only for the period that the
Employee actually makes applicable contributions
under the Plan. (The election under Part
4B(c)(2)(iii) is not available for purposes of
calculating the Safe Harbor Matching Contribution
under Section 17.6(a)(1)(i).)
(c) Qualified Matching Contributions (QMACs). If so elected under
Part 4B(d) of the Agreement, the Employer may treat all (or a
portion) of its Employer Matching Contributions as QMACs. If
an Employer Matching Contribution is designated as a QMAC, it
must satisfy the requirements for a QMAC (as described in
Section 17.7(g)) at the time the contribution is made to the
Plan and must be allocated to the Participant's QMAC Account.
Under Part 4B(d), the Employer may designate all Employer
Matching Contributions as QMACs or may designate only those
Employer Matching Contributions under specific matching
contribution formula(s) to be QMACs. Alternatively, the
Employer may authorize a discretionary QMAC, in addition to
the Employer Matching Contributions designated under Part
4B(b), to be allocated uniformly as a percentage of Section
401(k) Deferrals made during the Plan Year. The Employer may
elect under the Agreement to allocate the discretionary QMAC
only to Eligible Participants who are Nonhighly Compensated
Employees or to all Eligible Participants. If the Employer
elects both a discretionary Employer Matching Contribution
formula and a discretionary QMAC formula, the Employer must
designate, in writing, the nature of such contribution.
<PAGE>
(d) Employer Nonelective Contributions. If so elected under Part
4C of the Agreement, the Employer may make Employer
Nonelective Contributions on behalf of each Eligible
Participant under the Plan who has satisfied the allocation
conditions described in Part 4C(e) of the Agreement. See
Section 2.5. The Employer must designate under Part 4C(b)
of the Agreement the amount of any Employer Nonelective
Contributions it wishes to make under the Plan. The Employer
Nonelective Contributions may be totally within the
Employer's discretion or under the Nonstandardized Agreement
may be a fixed amount determined as a uniform percentage of
each Eligible Participant's Included Compensation or as a
fixed dollar amount for each Eligible Participant. Any
Employer Contribution under this Section will be allocated
to Eligible Participants' Employer Contribution Account.
The amount of the Employer Nonelective Contribution and the
method of allocating such contributions is determined in the
same manner as the Employer Contributions under a profit
sharing plan, as described in Section 2.2 of this Article. For
this purpose, any references to the Agreement under Section
2.2 should be treated as references to the comparable
provisions under Part 4C of the 401(k) Agreement.
(e) Qualified Nonelective Contributions (QNECs). The Employer may
elect under Part 4C(b) of the Agreement to permit
discretionary QNECs under the Plan. A QNEC must satisfy the
requirements for a QNEC (as described in Section 17.7(h)) at
the time the contribution is made to the Plan and must be
allocated to the Participant's QNEC Account. If the Plan
authorizes the Employer to make a discretionary QNEC, the
Employer must designate, in writing, the nature of such
contribution.
If the Employer makes a QNEC for the Plan Year, it will be
allocated to Participants' QNEC Account based on the
allocation method selected by the Employer under Part 4C(b)(5)
of the Nonstandardized Plan Agreement or Part 4C(b)(2) of the
Standardized Plan Agreement. An Eligible Participant will
receive a QNEC allocation even if he/she has not satisfied any
allocation conditions designated under Part 4C(e) of the
Agreement, unless the Employer elects otherwise under Part
4C(b)(5)(iii) of the Nonstandardized Agreement or Part
4C(b)(2)(iii) of the Standardized Agreement.
(1) Pro Rata Allocation Method. If the Employer elects
the Pro Rata Allocation Method, any Employer
Nonelective Contribution properly designated as a
QNEC will be allocated as a uniform percentage of
Included Compensation to all Eligible Participants
who are Nonhighly Compensated Employees.
(2) Reverse QNEC Method. If the Employer elects the
Reverse QNEC Method, any Employer Nonelective
Contribution properly designated as a QNEC will be
first allocated to the Eligible Participant with the
lowest Included Compensation for the Plan Year for
which the QNEC is being allocated. To receive an
allocation of the QNEC under this (2), the Eligible
Participant must be a Nonhighly Compensated Employee
for the Plan Year for which the QNEC is being
allocated.
<PAGE>
The QNEC will be allocated to the Eligible
Participant with the lowest Included Compensation
until all of the QNEC has been allocated or until the
Eligible Participant has reached his/her Annual
Additions Limitation, as described in Article 7. For
this purpose, if two or more Eligible Participants
have the same Included Compensation, the QNEC will be
allocated equally to each Eligible Participant until
all of the QNEC has been allocated, or until each
Eligible Participant has reached his/her Annual
Additions Limitation. If any QNEC remains
unallocated, this process is repeated for the
Eligible Participant(s) with the next lowest level of
Included Compensation in accordance with the
provisions under this (2), until all of the QNEC is
allocated.
(3) Alternative allocation methods. The Employer may
designate an alternative method for allocating QNECs
under Part 4C(b)(5)(iv) of the Nonstandardized
Agreement. The Employer also may use Part
4C(b)(5)(iv) to modify the allocation methods under
(1) and (2) above, including providing for an
allocation of QNECs to all Eligible Participants
under the Plan. The Employer also may modify the
allocation conditions applicable to QNECs under Part
4C(b)(5)(iv).
(f) Safe Harbor Contributions. If so elected under Part 4E of the
401(k) Agreement, the Employer may elect to treat this Plan as
a Safe Harbor 401(k) Plan. To qualify as a Safe Harbor 401(k)
Plan, the Employer must make a Safe Harbor Nonelective
Contribution or a Safe Harbor Matching Contribution under the
Plan. Such contributions are subject to special vesting and
distribution restrictions and must be allocated to the
Eligible Participants' Safe Harbor Nonelective Contribution
Account or Safe Harbor Matching Contribution Account, as
applicable. Section 17.6 describes the requirements that must
be met to qualify as a Safe Harbor 401(k) Plan and the method
for calculating the amount of the Safe Harbor Contribution
that must be made under the Plan.
(g) Prior SIMPLE 401(k) plan. If this Agreement is being used to
amend or restate a 401(k) plan which complied with the SIMPLE
401(k) plan provisions under Code ss.401(k)(11), any provision
in this Agreement which is inconsistent with the SIMPLE 401(k)
plan provisions is not effective for any Plan Year during
which the plan complied with the SIMPLE 401(k) plan
provisions.
2.5 Allocation Conditions. In order to receive an allocation of Employer
Contributions (other than Section 401(k) Deferrals and Safe Harbor
Contributions), an Eligible Participant must satisfy any allocation conditions
designated under Part 4 of the Agreement with respect to such contributions.
Under the Nonstandardized Plan Agreements, the imposition of an allocation
condition may cause the Plan to fail the minimum coverage requirements under
Code ss.410(b), unless the only allocation condition under the Plan is a safe
harbor allocation condition. (Under the Standardized Plan Agreements, the only
allocation condition permitted is a safe harbor allocation condition.)
(a) Safe harbor allocation condition. Under the safe harbor
allocation condition under Part 4 of the Agreement, the
Employer may elect to require an eligible Employee to be
employed on the last day of the Plan Year or to complete
more than 500 Hours of Service during the Plan Year to
receive an allocation of Employer Contributions (other than
Section 401(k) Deferrals or Safe Harbor Contributions) under
the Plan. Under this safe harbor allocation condition,
an Eligible Participant whose employment terminates before
he/she completes at least 501 Hours of Service is not
entitled to an allocation under this Section. However, if
an Eligible Participant completes at least 501 Hours of
Service during a Plan Year, such Participant is eligible
for an allocation under this Section, even if the
Participant's employment terminates during the Plan Year.
<PAGE>
The imposition of the safe harbor allocation condition will
not cause the Plan to fail the minimum coverage requirements
under Code ss.410(b) because Participants who are excluded
from participation solely as a result of the safe harbor
allocation condition are excluded from the coverage test.
Except as provided under (b) below, the safe allocation
condition is the only allocation condition which may be used
under the Standardized Agreement.
(b) Application of last day of employment rule in year of
termination. The Employer may elect under Part 4 of the
Nonstandardized Plan Agreement to require an Eligible
Participant to be employed on the last day of the Plan Year
to receive an allocation of Employer Matching Contributions
or Employer Contributions (other than Section 401(k)
Deferrals or Safe Harbor Contributions) under the Plan.
Regardless of whether the Employer elects to apply a last
day of employment condition under Part 4 of the Non-
standardized Plan Agreement, in any Plan Year during which
the Plan is terminated, the last day of employment condition
applies. The last day of employment condition also applies
under the Standardized Plan Agreement for the Plan Year
during which the Plan is terminated, without regard to any
minimum Hour of Service requirement. Any unallocated
forfeitures under the Plan will be allocated in accordance
with the allocation formula designated under Part 4 of the
Agreement to each Eligible Participant who completes at
least one Hour of Service during the Plan Year.
2.6 Fail-Safe Coverage Provision. If the Employer has elected to apply a last
day of the Plan Year allocation condition and/or an Hours of Service allocation
condition under a Nonstandardized Plan Agreement, the Employer may elect under
Part 13(g) of the Nonstandardized Plan Agreement to apply the Fail-Safe Coverage
Provision. Under the Fail-Safe Coverage Provision, if the Plan fails to satisfy
the ratio percentage coverage requirements under Code ss.410(b) for a Plan Year
due to the application of a last day of the Plan Year allocation condition
and/or an Hours of Service allocation condition, such allocation condition(s)
will be automatically eliminated for the Plan Year for certain otherwise
Eligible Participants, under the process described in (a) and (b) below, until
enough Eligible Participants are benefiting under the Plan so that the ratio
percentage test of Treasury Regulation ss.1.410(b)-2(b)(2) is satisfied. The
Employer may elect under Part 13(g)(2) of the Nonstandardized Agreement to
modify the Fail-Safe Coverage Provision described in this Section. Any
modification of the Fail-Safe Coverage Provision must designate the method of
correction in a manner which is definitely determinable and which precludes any
discretion by the Employer.
If the Employer elects to have the Fail-Safe Coverage Provision apply, such
provision automatically applies for any Plan Year for which the Plan does not
satisfy the ratio percentage coverage test under Code ss.410(b). (Except as
provided in the following paragraph, the Plan may not use the average benefits
test to comply with the minimum coverage requirements if the Fail-Safe Coverage
Provision is elected.) The Plan satisfies the ratio percentage test if the
percentage of the Nonhighly Compensated Employees under the Plan is at least 70%
of the percentage of the Highly Compensated Employees who benefit under the
Plan. An Employee is benefiting for this purpose only if he/she actually
receives an allocation of Employer Contributions or forfeitures or, if testing
coverage of a 401(m) arrangement (i.e., a Plan that provides for Employer
Matching Contributions and/or Employee After-Tax Contributions), the Employee
would receive an allocation of Employer Matching Contributions by making the
necessary contributions or the Employee is eligible to make Employee After-Tax
Contributions. To determine the percentage of Nonhighly Compensated Employees or
Highly Compensated Employees who are benefiting, the following Employees are
excluded for purposes of applying the ratio percentage test: (i) Employees who
have not satisfied the Plan's minimum age and service conditions under Section
1.4(a); (ii) Nonresident Alien Employees; (iii) Union Employees; and (iv)
Employees who terminate employment during the Plan Year with less than 501 Hours
of Service and do not benefit under the Plan.
Under the Fail-Safe Coverage Provision, certain otherwise Eligible Participants
who are not benefiting for the Plan Year as a result of a last day of the Plan
Year allocation condition or an Hours of Service allocation condition will
participate under the Plan based on whether such Participants are Category 1
Employees or Category 2 Employees. However, if after applying the Fail-Safe
Coverage Provision, the Plan does not satisfy the ratio percentage coverage
test, the Fail-Safe Coverage Provision does not apply, and the Plan may use any
other available method (including the average benefit test) to satisfy the
minimum coverage requirements under Code ss.410(b).
(a) Category 1 Employees - Otherwise Eligible Participants
(who are Nonhighly Compensated Employees) who are still
employed by the Employer on the last day of the Plan Year
but who failed to satisfy the Plan's Hours of Service
condition. The Plan will first eliminate the Hours of
Service allocation condition for Category 1 Employees
beginning with the Category 1 Employee(s) credited with the
most Hours of Service for the Plan Year and continuing
with the Category 1 Employee(s) with the next most Hours of
Service until the ratio percentage test is satisfied. If
two or more Category 1 Employees have the same number of
Hours of Service, the allocation condition will be
eliminated for those Category 1 Employees starting with
the Category 1 Employee(s) with the lowest Included
Compensation. If the Plan still fails to satisfy the ratio
percentage test after all Category 1 Employees receive an
allocation, the Plan proceeds to Category 2.
(b) Category 2 Employees - Otherwise Eligible Participants (who
are Nonhighly Compensated Employees) who terminated employment
during the Plan Year with more than 500 Hours of Service. The
Plan will next eliminate the last day of the Plan Year
allocation condition for Category 2 Employees beginning with
the Category 2 Employee(s) who terminated employment closest
to the last day of the Plan Year and continuing with the
Category 2 Employee(s) with a termination of employment date
that is next closest to the last day of the Plan Year until
the ratio percentage test is satisfied. If two or more
Category 2 Employees terminate employment on the same day,
the allocation condition will be eliminated for those
Category 2 Employees starting with the Category 2 Employee(s)
with the lowest Included Compensation.
<PAGE>
Article 3
Employee After-Tax Contributions, Rollovers and Transfers
This Article provides the rules regarding Employee After-Tax Contributions,
Rollover Contributions and transfers which may be made under this Plan. The
Trustee has the authority under Article 12 to accept Rollover Contributions
under this Plan and to enter into transfer agreements concerning the transfer of
assets from another qualified retirement plan to this Plan.
3.1 Employee After-Tax Contributions. The Employer may elect under Part 4D of
the Nonstandardized 401(k) Agreement to allow Eligible Participants to make
Employee After-Tax Contributions under the Plan. Employee After-Tax
Contributions may only be made under the Nonstandardized 401(k) Agreement. Any
Employee After-Tax Contributions made under this Plan are subject to the ACP
Test outlined in Section 17.3. (Nothing under this Section precludes the holding
of Employee After-Tax Contributions under a profit sharing plan or money
purchase plan which were made prior to the adoption of this Prototype Plan.)
The Employer may elect under Part 4D(a) of the Nonstandardized 401(k) Agreement
to impose a limit on the maximum amount of Included Compensation an Eligible
Participant may contribute as an Employee After-Tax Contribution. The Employer
may also elect under Part 4D(b) of the Nonstandardized 401(k) Agreement to
impose a minimum amount that an Eligible Participant may contribute to the Plan
during any payroll period.
Employee After-Tax Contributions must be held in the Participant's Employee
After-Tax Contribution Account, which is always 100% vested. A Participant may
withdraw amounts from his/her Employee After-Tax Contribution Account at any
time, in accordance with the distribution rules under Section 8.5(a), except as
prohibited under Part 10 of the Agreement.
3.2 Rollover Contributions. An Employee may make a Rollover Contribution to this
Plan from another qualified retirement plan under Code ss.401(a) or from a
"conduit IRA," if the acceptance of rollovers is permitted under Part 12 of the
Agreement or if the Plan Administrator adopts administrative procedures
regarding the acceptance of Rollover Contributions. A "conduit IRA" is an IRA
which holds only assets which have been rolled over to that IRA from a qualified
retirement plan under Code ss.401(a). Any Rollover Contribution an Employee
makes to this Plan will be held in the Employee's Rollover Contribution Account,
which is always 100% vested. A Participant may withdraw amounts from his/her
Rollover Contribution Account at any time, in accordance with the distribution
rules under Section 8.5(a), except as prohibited under Part 10 of the Agreement.
If Rollover Contributions are permitted, an Employee may make a Rollover
Contribution to the Plan even if the Employee is not an Eligible Participant
with respect to any or all other contributions under the Plan, unless otherwise
prohibited under separate administrative procedures adopted by the Plan
Administrator. An Employee who makes a Rollover Contribution to this Plan prior
to becoming an Eligible Participant shall be treated as a Participant only with
respect to such Rollover Account, but shall not be treated as an Eligible
Participant until he/she otherwise satisfies the eligibility conditions under
the Plan.
The Plan Administrator may apply different conditions for accepting Rollover
Contributions from qualified retirement plans and conduit IRAs. Any conditions
on Rollover Contributions must be applied uniformly to all Employees under the
Plan.
<PAGE>
3.3 Transfer of Assets. The Trustee may accept a transfer of assets from another
qualified retirement plan on behalf of any Employee, even if such Employee is
not eligible to receive other contributions under the Plan. If a transfer of
assets is made on behalf of an Employee prior to the Employee's becoming an
Eligible Participant, the Employee shall be treated as a Participant for all
purposes with respect to such transferred amount. Any assets transferred to this
Plan from another plan must be accompanied by written instructions designating
the name of each Employee for whose benefit such amounts are being transferred,
the current value of such assets, and the sources from which such amounts are
derived. The Trustee will deposit any transferred assets in the appropriate
Participant's Transfer Account. The Transfer Account will contain any
sub-Accounts necessary to separately track the sources of the transferred
assets. Each sub-Account will be treated in the same manner as the corresponding
Plan Account.
The Trustee also may accept a transfer of assets from another qualified plan of
the Employer in order to comply with the qualified replacement plan requirements
under Code ss.4980(d) (relating to the excise tax on reversions from a qualified
plan) without affecting the status of this Plan as a Prototype Plan. A transfer
made pursuant to Code ss.4980(d) will be allocated as Employer Contributions
either in the Plan Year in which the transfer occurs, or over a period of Plan
Years (not exceeding the maximum period permitted under Code ss.4980(d)), as
provided in the applicable transfer agreement. To the extent a transfer
described in this paragraph is not allocable in the Plan Year in which the
transfer occurs, the portion which is not allocable will be credited to a
suspense account until allocated in accordance with the transfer agreement.
(a) Protection of Protected Benefits. Except in the case of a
Qualified Transfer (as defined in Section (d) below), a
transfer of assets is initiated at the Plan level and does not
require Participant or spousal consent. If the Trustee accepts
a transfer of assets to this Plan, the Participant on whose
behalf the transfer is made retains all Protected Benefits
that applied to such transferred assets under the transferor
plan.
(b) Transferee plan. Except in the case of a Qualified Transfer
(as defined in Section (d)), if the Trustee accepts a transfer
of assets from another plan which is subject to the Joint and
Survivor Annuity requirements under Code ss.401(a)(11), the
amounts so transferred continue to be subject to such
requirements, as provided in Article 9. If this Plan is not
otherwise subject to the Joint and Survivor Annuity
requirements (as determined under Part 11(b) of the
Agreement), the Joint and Survivor Annuity requirements apply
only to the amounts under the Transfer Account which are
attributable to the amounts which were subject to the Joint
and Survivor Annuity requirements under the transferor plan.
(c) Transfers from a Defined Benefit Plan, money purchase
plan or 401(k) plan.
(1) Defined Benefit Plan. The Trustee may not accept a
transfer of assets from a Defined Benefit Plan unless
such transfer qualifies as a Qualified Transfer (as
defined in Section (d)) or the assets transferred
from the Defined Benefit Plan are in the form of
paid-up annuity contracts which protect all the
Participant's Protected Benefits under the Defined
Benefit Plan.
(2) Money purchase plan. If this Plan is a profit sharing
plan or a 401(k) plan and the Trustee accepts a
transfer of assets from a money purchase plan (other
than as a Qualified Transfer), the amounts
transferred (and any gains attributable to such
transferred amounts) continue to be subject to the
distribution restrictions applicable to money
purchase plan assets under the transferor plan. Such
amounts may not be distributed for reasons other than
death, disability, attainment of Normal Retirement
Age, or termination of employment, regardless of any
distribution provisions under this Plan that would
otherwise permit a distribution prior to such events.
<PAGE>
(3) 401(k) plan. If the Trustee accepts a transfer of
Section 401(k) Deferrals, QMACs, QNECs, or Safe
Harbor Contributions from a 401(k) plan, such amounts
retain their character under this Plan and such
amounts (including any allocable gains or losses)
remain subject to the distribution restrictions
applicable to such amounts under the Code.
(d) Qualified Transfer. A Qualified Transfer is a plan-to-plan
transfer of a Participant's benefits between plans maintained
by the Employer which satisfies the following requirements:
(1) The Participant on whose behalf benefits are being
transferred must make a voluntary, fully informed
election to transfer his/her benefits to this Plan.
(2) The Participant must be provided an opportunity to
retain the Protected Benefits under the transferor
plan. This requirement is satisfied if the
Participant is given the option to receive an annuity
that protects all Protected Benefits under the
transferor plan or the option of leaving his/her
benefits in the transferor plan.
(3) The Participant's spouse must consent to the
Qualified Transfer if the plan is subject to the
Joint and Survivor Annuity requirements under Article
9. The spouse's consent must satisfy the requirements
for a Qualified Election under Section 9.4(d).
(4) The Participant must have the right to receive an
immediate distribution of his/her benefits under the
transferor plan at the time of the Qualified
Transfer.
(5) The amount transferred must not be less than the
value of the Participant's vested benefit under the
transferor plan.
(6) The Participant must be fully vested in the
transferred benefit.
If the Trustee accepts a transfer of assets on behalf of a
Participant which qualifies as a Qualified Transfer, the
Trustee will treat such amounts as a Rollover Contribution and
will deposit such amounts in the Participant's Rollover
Account. The Plan does not have to protect any Protected
Benefits derived from the transferor plan if the transfer
qualifies as a Qualified Transfer. A Qualified Transfer may
include benefits derived from Employee After-Tax
Contributions.
<PAGE>
Article 4
Participant Vesting
This Article contains the rules for determining the vested (nonforfeitable)
amount of a Participant's Account Balance under the Plan. Part 6 of the
Agreement contains specific elections for applying these vesting rules. Part 7
of the Agreement contains special service crediting elections to override the
default provisions under this Article.
4.1 In General. A Participant's vested interest in his/her Employer Contribution
Account and Employer Matching Contribution Account is determined based on the
vesting schedule elected in Part 6 of the Agreement. A Participant is always
fully vested in his/her Section 401(k) Deferral Account, Employee After-Tax
Contribution Account, QNEC Account, QMAC Account, Safe Harbor Nonelective
Contribution Account, Safe Harbor Matching Contribution Account, and Rollover
Account.
(a) Attainment of Normal Retirement Age. Regardless of the Plan's
vesting schedule, a Participant's right to his/her Account
Balance is fully vested upon the date he/she attains Normal
Retirement Age, provided the Participant is an Employee on or
after such date.
(b) Vesting upon death, becoming Disabled, or attainment of Early
Retirement Age. If elected by the Employer in Part 6(d) of the
Agreement, a Participant will become fully vested in his/her
Account Balance if the Participant dies, becomes Disabled, or
attains Early Retirement Age while employed by the Employer.
4.2 Vesting Schedules. The Plan's vesting schedule will determine an Employee's
vested percentage in his/her Employer Contribution Account and/or Employer
Matching Contribution Account. The vested portion of a Participant's Employer
Contribution Account and/or Employer Matching Contribution Account is determined
by multiplying the Participant's vesting percentage determined under the
applicable vesting schedule by the total amount under the applicable Account.
The Employer must elect a normal vesting schedule and a Top-Heavy Plan vesting
schedule under Part 6 of the Agreement. The Top-Heavy Plan vesting schedule will
apply for any Plan Year in which the plan is a Top-Heavy Plan. If this Plan is a
401(k) plan, the Employer must elect a normal and Top-Heavy Plan vesting
schedule for both Employer Nonelective Contributions and Employer Matching
Contributions, but only to the extent such contributions are authorized under
Part 4B and/or Part 4C of the 401(k) Agreement.
The Employer may choose any of the following vesting schedules as the normal
vesting schedule under Part 6 of the Agreement. For the Top-Heavy Plan vesting,
the Employer may only choose the full and immediate, 6-year graded, 3-year
cliff, or modified vesting schedule, as described below.
(a) Full and immediate vesting schedule. Under the full and
immediate vesting schedule, the Participant is always 100%
vested in his/her Account Balance.
(b) 7-year graded vesting schedule. Under the 7-year graded
vesting schedule, an Employee vests in his/her Employer
Contribution Account and/or Employer Matching Contribution
Account in the following manner:
After 3 Years of Service - 20% vesting
After 4 Years of Service - 40% vesting
After 5 Years of Service - 60% vesting
After 6 Years of Service - 80% vesting
After 7 Years of Service - 100% vesting
<PAGE>
(c) 6-year graded vesting schedule. Under the 6-year graded
vesting schedule, an Employee vests in his/her Employer
Contribution Account and/or Employer Matching Contribution
Account in the following manner:
After 2 Years of Service - 20% vesting
After 3 Years of Service - 40% vesting
After 4 Years of Service - 60% vesting
After 5 Years of Service - 80% vesting
After 6 Years of Service - 100% vesting
(d) 5-year cliff vesting schedule. Under the 5-year cliff
vesting schedule, an Employee is 100% vested after 5 Years
of Service. Prior to the fifth Year of Service, the vesting
percentage is zero.
(e) 3-year cliff vesting schedule. Under the 3-year cliff vesting
schedule, an Employee is 100% vested after 3 Years of
Service. Prior to the third Year of Service, the vesting
percentage is zero.
(f) Modified vesting schedule. For the normal vesting schedule,
the Employer may elect a modified vesting schedule under which
the vesting percentage for each Year of Service is not less
than the percentage that would be required for each Year of
Service under the 7-year graded vesting schedule, unless 100%
vesting occurs after no more than 5 Years of Service. For the
Top-Heavy Plan vesting schedule, the Employer may elect a
modified vesting schedule under which the vesting percentage
for each Year of Service is not less than the percentage that
would be required for each Year of Service under the 6-year
graded vesting schedule, unless 100% vesting occurs after no
more than 3 Years of Service.
4.3 Shift to/from Top-Heavy Vesting Schedule. For a Plan Year in which the Plan
is a Top-Heavy Plan, the Plan automatically shifts to the Top-Heavy Plan vesting
schedule. Once a Plan uses a Top-Heavy Plan vesting schedule, that schedule will
continue to apply for all subsequent Plan Years, unless the Employer elects
under Part 6(b)(5) of the Agreement to switch back to the normal vesting
schedule for Plan Years after the Plan ceases to be a Top-Heavy Plan. The rules
under Section 4.7 will apply when a Plan shifts to or from a Top-Heavy Plan
vesting schedule.
4.4 Vesting Computation Period. For purposes of computing a Participant's vested
interest in his/her Employer Contribution Account and/or Employer Matching
Contribution Account, an Employee's Vesting Computation Period is the 12-month
period measured on a Plan Year basis, unless the Employer elects under Part 7(d)
of the Agreement to measure Vesting Computation Periods using Anniversary Years.
(a) Anniversary Years. If the Employer elects to measure Vesting
Computation Periods using Anniversary Years, the Vesting
Computation Period is the 12-month period commencing on the
Employee's Employment Commencement Date (or Reemployment
Commencement Date) and each subsequent 12-month period
commencing on the anniversary of such date.
(b) Measurement on same Vesting Computation Period. The Plan will
measure Years of Service and Breaks in Service (if applicable)
for purposes of vesting on the same Vesting Computation
Period.
<PAGE>
4.5 Crediting Years of Service for Vesting Purposes. Unless the Employer elects
otherwise under Part 7(c)(1) of the Agreement, an Employee will earn one Year of
Service for purposes of applying the vesting rules if the Employee completes
1,000 Hours of Service with the Employer during a Vesting Computation Period. An
Employee will receive credit for a Year of Service as of the end of the Vesting
Computation Period, if the Employee completes the required Hours of Service
during such period, even if the Employee is not employed for the entire period.
(a) Calculating Hours of Service. In calculating an Employee's
Hours of Service for purposes of applying the vesting rules
under this Article, the Employer will use the Actual Hours
Crediting Method, unless the Employer elects otherwise under
Part 7(c) of the Agreement. (See Article 6 of this Plan for a
description of the alternative service crediting methods.)
(b) Excluded service. Unless the Employer elects to exclude
certain service with the Employer under Part 6(c) of the
Agreement, all service with the Employer is counted for
vesting purposes.
(1) Service before the Effective Date of the Plan. Under
Part 6(c)(1) of the Agreement, the Employer may elect
to exclude service during any period for which the
Employer did not maintain the Plan or a Predecessor
Plan. For this purpose, a Predecessor Plan is a plan
that is terminated within the 5-year period
immediately preceding or following the establishment
of this Plan. A Participant's service under a
Predecessor Plan must be counted for purposes of
determining the Participant's vested percentage under
this Plan.
(2) Service before a certain age. Under Part 6(c)(2) of
the Agreement, the Employer may elect to exclude
service before an Employee attains a certain age. For
this purpose, the Employer may not designate an age
greater than 18. An Employee will be credited with a
Year of Service for the Vesting Computation Period
during which the Employee attains the requisite age,
provided the Employee satisfies all other conditions
required for a Year of Service.
(3) Other service exclusions. The Employer may elect
under Part 6(e) of the Nonstandardized Plan Agreement
to exclude other service as allowed under the Code.
4.6 Vesting Break in Service Rules. Except as provided under Section 4.5(b), in
determining a Participant's vested percentage, a Participant is credited with
all Years of Service earned with the Employer, subject to the following Break in
Service rules. In applying these Break in Service rules, Years of Service and
Breaks in Service (as defined in Section 22.25) are measured on the same Vesting
Computation Period as defined in Section 4.4 above.
(a) One-year holdout Break in Service. The one-year holdout Break
in Service rule will not apply unless the Employer
specifically elects in Part 7(e)(2) of the Nonstandardized
Plan Agreement to have it apply. If the one-year holdout Break
in Service rule is elected, an Employee who has a one-year
Break in Service will not be credited for vesting purposes
with any Years of Service earned before such one-year Break in
Service until the Employee has completed a Year of Service
after the one-year Break in Service.
(b) Five-Year Forfeiture Break in Service. In the case of a
Participant who has five (5) consecutive one-year Breaks in
Service, all Years of Service after such Breaks in Service
will be disregarded for the purpose of vesting in the portion
of the Participant's Employer Contribution Account and/or
Employer Matching Contribution Account that accrued before
such Breaks in Service, but both pre-break and post-break
service will count for the purposes of vesting in the portion
of such Accounts that accrues after such breaks. The
Participant will forfeit the nonvested portion of his/her
Employer Contribution Account and/or Employer Matching
Contribution Account accrued prior to incurring five
consecutive Breaks in Service, in accordance with Section
5.3(b).
In the case of a Participant who does not have five
consecutive one-year Breaks in Service, all Years of Service
will count in vesting both the pre-break and post-break
Account Balance derived from Employer Contributions.
<PAGE>
(c) Rule of Parity Break in Service. This Break in Service rule
applies only to Participants who are totally nonvested
(i.e., 0% vested) in their Employer Contribution Account and
Employer Matching Contribution Account. If an Employee
is vested in any portion of his/her Employer Contribution
Account or Employer Matching Contribution Account, the
Rule of Parity does not apply. Under this Break in Service
rule, if a nonvested Participant incurs a period of
consecutive one-year Breaks in Service which equals or
exceeds the greater of five (5) or the Participant's
aggregate number of Years of Service with the Employer, all
service earned prior to the consecutive Break in Service
period will be disregarded and the Participant will be
treated as a new Employee for purposes of determining
vesting under the Plan.
(1) Previous application of the Rule of Parity Break in
Service rule. In determining a Participant's
aggregate Years of Service for purposes of applying
the Rule of Parity Break in Service rule, any Years
of Service otherwise disregarded under a previous
application of this rule are not counted.
(2) Application to the 401(k) Agreement. The Rule of
Parity Break in Service rule applies only to
determine the individual's vesting rights with
respect to his/her Employer Contribution Account and
Employer Matching Contribution Account. In
determining whether a Participant is totally
nonvested for purposes of applying the Rule of Parity
Break in Service rule, the Participant's Section
401(k) Deferral Account, Employee After-Tax
Contribution Account, QMAC Account, QNEC Account,
Safe Harbor Nonelective Contribution Account, Safe
Harbor Matching Contribution Account, and Rollover
Account are disregarded.
4.7 Amendment of Vesting Schedule. If the Plan's vesting schedule is amended (or
is deemed amended by an automatic change to or from a Top-Heavy Plan vesting
schedule), each Participant with at least three (3) Years of Service with the
Employer, as of the end of the election period described in the following
paragraph, may elect to have his/her vested interest computed under the Plan
without regard to such amendment or change. For this purpose, a Plan amendment
which in any way directly or indirectly affects the computation of the
Participant's vested interest is considered an amendment to the vesting
schedule. However, the new vesting schedule will apply automatically to an
Employee, and no election will be provided, if the new vesting schedule is at
least as favorable to such Employee, in all circumstances, as the prior vesting
schedule.
The period during which the election may be made shall commence with the date
the amendment is adopted or is deemed to be made and shall end on the latest of:
(a) 60 days after the amendment is adopted;
(b) 60 days after the amendment becomes effective; or
(c) 60 days after the Participant is issued written notice of the
amendment by the Employer or Plan Administrator.
<PAGE>
Furthermore, if the vesting schedule of the Plan is amended, in the case of an
Employee who is a Participant as of the later of the date such amendment is
adopted or effective, the vested percentage of such Employee's Account Balance
derived from Employer Contributions (determined as of such date) will not be
less than the percentage computed under the Plan without regard to such
amendment.
4.8 Special Vesting Rule - In-Service Distribution When Account Balance Less
than 100% Vested. If amounts are distributed from a Participant's Employer
Contribution Account or Employer Matching Contribution Account at a time when
the Participant's vested percentage in such amounts is less than 100% and the
Participant may increase the vested percentage in the Account Balance:
(a) A separate Account will be established for the Participant's
interest in the Plan as of the time of the distribution, and
(b) At any relevant time the Participant's vested portion of the
separate Account will be equal to an amount ("X") determined
by the formula:
X = P (AB + D) - D
Where:
P is the vested percentage at the relevant time;
AB is the Account Balance at the relevant time; and
D is the amount of the distribution.
<PAGE>
Article 5
Forfeitures
This Article contains the rules relating to the timing and disposition of
forfeitures of the nonvested portion of a Participant's Account Balance. Part 8
of the Agreement provides elections on the allocation of forfeitures. The rules
for determining the vested portion of a Participant's Account Balance are
contained in Article 4 of this BPD.
5.1 In General. The Plan Administrator has the responsibility to determine the
amount of a Participant's forfeiture based on the application of the vesting
provisions of Article 4. Until an amount is forfeited pursuant to this Article,
nonvested amounts will be held in the Account of the Participant and will share
in gains and losses of the Trust (as determined under Article 13).
5.2 Timing of forfeiture. The forfeiture of all or a portion of a Participant's
nonvested Account Balance occurs upon any of the events listed below:
(a) Cash-Out Distribution. The date the Participant receives a
total Cash-Out Distribution as defined in Section 5.3(a).
(b) Five-Year Forfeiture Break in Service. The last day of the
Vesting Computation Period in which the Participant incurs a
Five-Year Forfeiture Break in Service as defined in Section
5.3(b).
(c) Lost Participant or Beneficiary. The date the Plan
Administrator determines that a Participant or Beneficiary
cannot be located to receive a distribution from the Plan. See
Section 5.3(c).
(d) Forfeiture of Employer Matching Contributions. With respect to
Employer Matching Contributions under a 401(k) plan, the date
a distribution is made as described in Section 5.3(d).
5.3 Forfeiture Events.
(a) Cash-Out Distribution. If a Participant receives a total
distribution upon termination of his/her participation in the
Plan (a "Cash-Out Distribution"), the nonvested portion (if
any) of the Participant's Account Balance is forfeited in
accordance with the provisions of this Section. If a
Participant has all (or any portion) of his/her nonvested
Account Balance forfeited as a result of a Cash-Out
Distribution, such Participant must be given the right to
"buy-back" the forfeited benefit, as provided in Section (2)
below. (See Article 8 for the rules regarding the availability
and timing of Plan distributions and the consent requirements
applicable to such distributions.)
(1) Amount of forfeiture. The rules under this Section
apply only if the Participant is less than 100%
vested in his/her Employer Contribution Account
and/or Employer Matching Contribution Account. If the
Participant is 100% vested in his/her entire Account
Balance, no forfeiture of benefits will occur under
this Section.
(i) Total Cash-Out Distribution. If a
Participant receives a Cash-Out Distribution
of his/her entire vested Account Balance,
the Participant will immediately forfeit the
entire nonvested portion of his/her Account
Balance, as of the date of the distribution
(as determined under (A) or (B) below,
whichever applies). The forfeited amounts
will be used in the manner designated under
Part 8 of the Agreement.
<PAGE>
(A) No further allocations. If the
terminated Participant is not
entitled to any further allocations
under the Plan, the Cash-Out
Distribution occurs on the day the
Participant receives a distribution
of all amounts from his/her Employer
Contribution Account and Employer
Matching Contribution Account (as
applicable). The Participant's
nonvested benefit is immediately
forfeited on such date, in
accordance with the provisions under
Section 5.5.
(B) Additional allocations. If the
terminated Participant is entitled
to an additional allocation of
Employer Contributions or Employer
Matching Contributions, a Cash-Out
Distribution is deemed to occur
when the Participant receives a
distribution of all amounts from
his/her Employer Contribution
Account and Employer Matching
Contribution Account(as
applicable), including any amounts
which are still to be allocated
under the Plan. Thus, a Participant
who is entitled to an additional
allocation of Employer
Contributions or Employer Matching
Contributions will not have a total
Cash-Out Distribution until such
additional amounts are distributed,
regardless of whether the
Participant takes a complete
distribution of his/her vested
Account Balance before receiving
the additional allocation.
(ii) Deemed Cash-Out Distribution. If a
Participant terminates employment with the
Employer with a vested Account Balance
of zero, the Participant is treated as
receiving a "deemed" Cash-Out Distribution
from the Plan. In determining whether a
Participant has an Account Balance of zero,
only the Employer Contribution Account and
Employer Matching Contribution Account are
taken into account. If the Participant
is totally nonvested in his/her Employer
Contribution Account and Employer
Matching Contribution Account
(as applicable), the Participant will
receive a deemed Cash-Out Distribution
from such Accounts upon termination of
employment, even though the Participant
is fully vested in other Accounts under
the Plan.
Upon a deemed Cash-Out, the nonvested
portion of the Participant's Account
Balance will be forfeited in accordance
with (A) or (B) below.
(A) No further allocations. If the
Participant is not entitled to any
further allocations under the Plan
for the Plan Year in which the
Participant's employment terminates,
the deemed Cash-Out Distribution is
deemed to occur on the day the
employment terminates. The
Participant's nonvested benefit is
immediately forfeited on such date,
in accordance with the provisions
under Section 5.5.
(B) Additional allocations. If the
Participant is entitled to
additional allocations under the
Plan for the Plan Year in which the
Participant's employment terminates,
the deemed Cash-Out Distribution is
deemed to occur on the last day of
the Plan Year in which the
termination occurs
(iii) Other distributions. If the Participant
receives a distribution of less than the
entire vested portion of his/her Employer
Contribution Account or Employer Matching
Contribution Account (including any
additional amounts to be allocated after
the Participant's employment terminates),
the total Cash-Out Distribution rule under
(i) above does not apply until the
Participant receives a distribution of the
remainder of the vested portion of such
Account. Until the Participant receives a
distribution of the remainder of the
vested portion of his/her Employer
Contribution Account or Employer Matching
Contribution Account, the special vesting
rule described in Section 4.8 applies to
determine the vested percentage of the
remaining balance in such Account. The
nonvested portion of such Account will not
be forfeited until the earlier of: (A) the
occurrence of a Five-Year Forfeiture Break
in Service described in Section 5.3(b) or
(B) the date the Participant receives a
total Cash-Out Distribution of the
remaining vested portion of such Account.
(2) Buy-back/restoration. If a Participant receives (or
is deemed to receive) a Cash-Out Distribution that
results in a forfeiture under this Section, and the
Participant subsequently resumes employment covered
under this Plan, the Participant may "buy-back" the
forfeited portion of his/her Account(s) by repaying
to the Plan the full amount of the Cash-Out
Distribution from such Account(s).
(i) Buy-back opportunity. A Participant may
buy-back the portion of his/her benefit
which is forfeited as a result of a Cash-Out
Distribution by repaying the amount of such
Cash-Out Distribution to the Plan before the
earlier of:
(A) five (5) years after the first date
on which the Participant is
subsequently re-employed by the
Employer, or
(B) the date a Five-Year Forfeiture
Break in Service occurs (as defined
in Section 5.3(b)).
If a Participant receives a deemed Cash-Out
Distribution pursuant to Section (1)(ii)
above, and the Participant resumes
employment covered under this Plan before
the date the Participant incurs a Five-Year
Forfeiture Break in Service, the Participant
is deemed to have repaid the Cash-Out
Distribution immediately upon his/her
reemployment.
To receive a restoration of the forfeited
portion of his/her Employer Contribution
Account and/or Employer Matching
Contribution Account, a Participant must
repay the entire Cash-Out Distribution which
was made from the Participant's Employer
Contribution Account and Employer Matching
Contribution Account, unadjusted for any
interest that might have accrued on such
amounts after the distribution date. For
this purpose, the Cash-Out Distribution is
the total value of the Participant's vested
Employer Contribution Account and Employer
Matching Contribution Account which is
distributed at any time following the
Participant's termination of employment. If
a Participant also received a distribution
from other Accounts, the Participant need
not repay such amounts to have the forfeited
portion of his/her Employer Contribution
Account and/or Employer Matching
Contribution Account restored.
<PAGE>
(ii) Restoration of forfeited benefit. Upon a
Participant's proper repayment of a Cash-Out
Distribution in accordance with Section (i)
above, the forfeited portion of the
Participant's Employer Contribution Account
and Employer Matching Contribution Account
(as applicable) will be restored, unadjusted
for any gains or losses on such amount.
The forfeited portion of the Participant's
Account(s) will be restored in the Plan Year
in which the Participant repays the Cash-Out
Distribution in accordance with Section (i)
above. Although the Plan Administrator may
permit a Participant to make a partial
repayment of a Cash-Out Distribution, no
portion of the Participant's forfeited
benefit will be restored until the
Participant repays the entire Cash-Out
Distribution in accordance with Section (i)
above. If a Participant received a deemed
Cash-Out Distribution, the Participant's
forfeited benefit will be restored in the
Plan Year in which the Participant returns
to employment with the Employer.
If a Participant's forfeited benefit is
required to be restored under this Section,
the restoration of such benefit will occur
from the following sources. If the following
sources are not sufficient to completely
restore the Participant's benefit, the
Employer must make an additional
contribution to the Plan.
(A) Any forfeitures which have not been
allocated to Participants' Accounts
for the Plan Year in which the
Participant repays the Cash-Out
Distribution in accordance with
Section (i) above.
(B) If Participants are not permitted to
self-direct investments under the
Plan, any Trust earnings which have
not been allocated to Participants'
Accounts for the Plan Year in which
the Participant repays the Cash-Out
Distribution in accordance with
Section (i) above.
(C) If the Employer makes a
discretionary contribution to the
Plan, it may designate all or any
part of such discretionary
contribution as a restoration
contribution under this Section.
(b) Five-Year Forfeiture Break in Service. In the case of a
Participant who has five (5) consecutive one-year Breaks in
Service, the nonvested portion of the Participant's Account
Balance will be forfeited as of the end of the Vesting
Computation Period in which the Participant incurs his/her
fifth consecutive Break in Service. See Section 4.6(b) for
more information on the Five-Year Forfeiture Break in Service.
(c) Lost Participant or Beneficiary.
(1) Inability to locate Participant or Beneficiary. If
the Plan Administrator, after a reasonable effort and
time, is unable to locate a Participant or a
Beneficiary in order to make a distribution otherwise
required by the Plan, the distributable amount is
forfeited, as permitted under applicable laws and
regulations. In determining what is a reasonable
effort and time, the Plan Administrator may follow
any applicable guidance provided under statute,
regulation, or other IRS guidance of general
applicability.
(2) Restoration of forfeited amounts. If, after the
distributable amount is forfeited, the Participant or
Beneficiary is located, the Plan will restore the
forfeited amount (unadjusted for gains or losses) to
such Participant or Beneficiary within a reasonable
time. The method of restoring a forfeited benefit
under Section 5.3(a)(2)(ii) applies to any
restoration required under this Section.
(d) Forfeiture of Employer Matching Contributions. This Section(d)
only applies if the Plan is a 401(k) Plan.
(1) Correction of ACP Test. If a Participant receives a
corrective distribution of Excess Aggregate
Contributions to correct the ACP Test, the portion of
such corrective distribution which relates to
nonvested Employer Matching Contributions, including
any allocable income or loss, will be forfeited (as
permitted under Section 17.3(d)(1)) in the Plan Year
in which the corrective distribution is made from the
Plan.
(2) Excess Deferrals, Excess Contributions, and Excess
Aggregate Contributions. If a Participant receives a
distribution of Excess Deferrals, Excess
Contributions, or Excess Aggregate Contributions, the
Employer will forfeit the portion of his/her Employer
Matching Contribution Account (whether vested or not)
which is attributable to such distributed amounts
(except to the extent such amount has been
distributed as Excess Contributions or Excess
Aggregate Contributions, pursuant to Article 17). A
forfeiture of Employer Matching Contributions under
this Section (2) occurs in the Plan Year in which the
Participant receives the distribution of Excess
Deferrals, Excess Contributions, and/or Excess
Aggregate Contributions.
5.4 Timing of Forfeiture Allocation. Pursuant to the elections under Part 8(a)
of the Agreement, forfeitures are allocated in either the same Plan Year in
which the forfeitures occur or in the Plan Year following the Plan Year in which
the forfeitures occur.
5.5 Method of Allocating Forfeitures. Forfeitures will be allocated in
accordance with the method chosen by the Employer under Part 8 of the Agreement.
In no event, however, will a Participant receive an allocation of forfeitures
arising from his/her own Account.
(a) Reallocation of Forfeitures. If the Employer elects to
reallocate forfeitures as additional contributions, the
forfeitures will be added to other contributions made by the
Employer (as designated under Part 8 of the Agreement) for the
Plan Year designated under Part 8(a) of the Agreement, and
such amounts will be allocated to Eligible Participants under
the allocation method chosen under Part 4 of the Agreement
with respect to such contributions.
(b) Reduction of contributions. If the Employer elects under Part
8 of the Agreement to use forfeitures to reduce contributions,
the Employer may adjust its contribution deposits in any
manner, provided the total Employer Contributions made for the
Plan Year properly take into account the forfeitures that are
to be used to reduce such contributions for that Plan Year. If
the contributions are allocated over multiple allocation
periods, the Employer may reduce its contribution for any
allocation periods within the Plan Year in which the
forfeitures are to be allocated so that the total amount
allocated for the Plan Year is proper.
(c) Payment of Plan expenses. If the Employer elects under Part
8(c) of the Agreement, forfeitures will first be used to pay
Plan expenses for the Plan Year in which the forfeitures would
otherwise be allocated. This Section applies only if the Plan
otherwise would pay such expenses as authorized under Section
11.4. If any forfeitures remain after the payment of Plan
expenses under this Section, the remaining forfeitures will be
allocated as selected under Part 8 of the Agreement.
<PAGE>
Article 6
Special Service Crediting Provisions
This Article contains special service crediting rules that apply for purposes of
determining an Employee's eligibility to participate and the vested percentage
in his/her Account Balance under the Plan. This Article 6 and Part 7 of the
Agreement permit the Employer to override the general service crediting rules
under Articles 1 and 4 with respect to eligibility and vesting to apply special
service crediting rules, such as the Equivalency Method and the Elapsed Time
Method for crediting service. Section 6.7 of this Article and Part 13(e) of the
Agreement contain special rules for crediting service with Predecessor
Employers.
6.1 Year of Service - Eligibility. Section 1.4(b) defines a Year of Service for
eligibility purposes. Generally, an Employee earns a Year of Service for
eligibility purposes upon the completion of 1,000 Hours of Service during an
Eligibility Computation Period. For this purpose, Hours of Service are
calculated using the Actual Hours Crediting Method. Part 7(a) of the Agreement
permits the Employer to modify these default provisions for determining a Year
of Service for eligibility purposes.
(a) Selection of Hours of Service. The Employer may elect under
Part 7(a)(1) of the Agreement to modify the requirement that
an Employee complete 1,000 Hours of Service during an
Eligibility Computation Period to earn a Year of Service.
Under Part 7(a)(1), the Employer may designate a specific
number of Hours of Service (which cannot exceed 1,000) which
must be completed during the Eligibility Computation Period
for an Employee to earn a Year of Service. Unless the Employer
elects to use the Equivalency Method under Part 7(a)(2) of the
Agreement, Hours of Service are determined using the Actual
Hours Crediting Method.
(b) Use of Equivalency Method. The Employer may elect under Part
7(a)(2) of the Agreement to use the Equivalency Method (as
defined in Section 6.5(a)) instead of the Actual Hours
Crediting Method in determining whether an Employee has
completed the required Hours of Service to earn a Year of
Service.
(c) Use of Elapsed Time Method. The Employer may elect under Part
7(a)(3) of the Agreement to use the Elapsed Time Method (as
defined in Section 6.5(b)) instead of counting Hours of
Service in applying the eligibility conditions under Article
1.
6.2 Eligibility Computation Period. Section 1.4(c) defines the Eligibility
Computation Period used for purposes of determining whether an Employee has
earned a Year of Service for eligibility purposes. Generally, if one Year of
Service is required for eligibility, the Eligibility Computation Period is
determined using the Shift-to-Plan-Year Method (as defined in Section
1.4(c)(1)). Part 7(b) of the Agreement permits the Employer to use the
Anniversary Year Method (as defined in Section 1.4(c)(2)) for determining
Eligibility Computation Periods under the Plan. If the Employer selects two
Years of Service eligibility condition (under Part 1(a) of the Agreement), the
Anniversary Year Method applies, unless the Employer elects to use the
Shift-to-Plan-Year Method. In the case of a 401(k) plan in which a two Years of
Service eligibility condition is used for either Employer Matching Contributions
or Employer Nonelective Contributions, the method used to determine Eligibility
Computation Periods for the two Years of Service condition will also apply to
any one Year of Service eligibility condition used with respect to any other
contributions.
6.3 Year of Service - Vesting. Section 4.5 defines a Year of Service for vesting
purposes. Generally, an Employee earns a Year of Service for vesting purposes
upon the completion of 1,000 Hours of Service during a Vesting Computation
Period. For this purpose, Hours of Service are calculated using the Actual Hours
Crediting Method. Part 7(c) of the Agreement permits the Employer to modify
these default provisions for determining a Year of Service for vesting purposes.
<PAGE>
(a) Selection of Hours of Service. The Employer may elect under
Part 7(c)(1) of the Agreement to modify the requirement that
an Employee complete 1,000 Hours of Service during a Vesting
Computation Period to earn a Year of Service. Under Part
7(c)(1), the Employer may designate a specific number of Hours
of Service (which cannot exceed 1,000) which must be completed
during the Vesting Computation Period for an Employee to earn
a Year of Service. Unless the Employer elects to use the
Equivalency Method under Part 7(c)(2) of the Agreement, Hours
of Service are determined using the Actual Hours Crediting
Method.
(b) Equivalency Method. The Employer may elect under Part 7(c)(2)
of the Agreement to use the Equivalency Method (as defined in
Section 6.5(a)) instead of the Actual Hours Crediting Method
in determining whether an Employee has completed the required
Hours of Service to earn a Year of Service.
(c) Elapsed Time Method. The Employer may elect under Part 7(c)(3)
of the Agreement to use the Elapsed Time Method (as defined in
Section 6.5(b)) instead of counting Hours of Service in
applying the vesting provisions under Article 4.
6.4 Vesting Computation Period. Section 4.4 defines the Vesting Computation
Period used for purposes of determining whether an Employee has earned a Year of
Service for vesting purposes. Generally, the Vesting Computation Period is the
Plan Year. Part 7(d) of the Agreement permits the Employer to elect to use
Anniversary Years (see Section 4.4(a)) or, under the Nonstandardized Agreement,
any other 12-consecutive month period as the Vesting Computation Period.
6.5 Definitions.
(a) Equivalency Method. Under the Equivalency Method, an Employee is credited
with 190 Hours of Service for each calendar month during the Eligibility
Computation Period or Vesting Computation Period, as applicable, for which
the Employee completes at least one Hour of Service. Instead of applying
the Equivalency Method on the basis of months worked, the Employer may
elect to apply different equivalencies under Part 7(f) of the
Nonstandardized Plan Agreement. The Employer may credit Employees with 10
Hours of Service for each day worked, 45 Hours of Service for each week
worked, or 95 Hours of Service for each semi-monthly payroll period worked
during the Eligibility Computation Period or Vesting Computation Period, as
applicable. For this purpose, an Employee will receive credit for the
appropriate Hours of Service if the Employer completes at least one Hour of
Service during the applicable period.
(b) Elapsed Time Method. Under the Elapsed Time Method, an
Employee receives credit for the aggregate of all periods of
service commencing with the Employee's Employment Commencement
Date (or Reemployment Commencement Date) and ending on the
date the Employee begins a Period of Severance (as defined in
Section (2) below) which lasts at least 12 consecutive months.
In calculating an Employee's aggregate period of service, an
Employee receives credit for any Period of Severance that
lasts less than 12 consecutive months. If an Employee's
aggregate period of service includes fractional years, such
fractional years are expressed as days.
(1) Year of Service. For purposes of determining whether
an Employee has earned a Year of Service under the
Elapsed Time Method, an Employee is credited with a
Year of Service for each 12-month period of service
the Employee completes under the above paragraph,
whether or not such period of service is consecutive.
<PAGE>
(2) Period of Severance. For purposes of applying the
Elapsed Time Method, a Period of Severance is any
continuous period of time during which the Employee
is not employed by the Employer. A Period of
Severance begins on the date the Employee retires,
quits or is discharged, or if earlier, the 12-month
anniversary of the date on which the Employee is
first absent from service for a reason other than
retirement, quit or discharge.
In the case of an Employee who is absent from work
for maternity or paternity reasons, the
12-consecutive month period beginning on the first
anniversary of the first date of such absence shall
not constitute a Period of Severance. For purposes of
this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of
the pregnancy of the Employee, (2) by reason of the
birth of a child of the Employee, (3) by reason of
the placement of a child with the Employee in
connection with the adoption of such child by the
Employee, or (4) for purposes of caring for a child
of the Employee for a period beginning immediately
following the birth or placement of such child.
(3) Break in Service rules. The Break in Service rules
described in Sections 1.6 and 4.6 also apply under
the Elapsed Time Method. For purposes of applying the
Break in Service rules under the Elapsed Time Method,
a Break in Service is any Period of Severance of at
least 12 consecutive months.
6.6 Switching Crediting Methods. The following rules apply if the service
crediting method is changed in a manner described below.
(a) Shift from crediting Hours of Service to Elapsed Time. If the
service crediting method under the Plan is changed from a
method that uses Hours of Service to a method using Elapsed
Time, each Employee's period of service under the Elapsed Time
Method is the sum of (1) and (2) below.
(1) The number of Years of Service credited under the
Hours of Service method for the period ending before
the computation period during which the change to the
Elapsed Time Method occurs.
(2) For the computation period in which the change
occurs, the greater of: (i) the period of service
that would be credited under the Elapsed Time Method
for the Employee's service from the first day of that
computation period through the date of the change, or
(ii) the service that would be taken into account
under the Hours of Service method for that
computation period through the date of the change. If
(i) applies, then subsequent periods of service are
credited under the Elapsed Time Method beginning with
the date of the change. If (ii) applies, then
subsequent periods of service are credited under the
Elapsed Time Method beginning with the first day of
the computation period that follows the computation
period in which the change occurs. If the change
occurs as of the first day of a computation period,
treat (i) as applicable for purposes of applying the
rule in this paragraph.
(b) Shift from Elapsed Time Method to an Hours of Service method.
If the service crediting method changes from the Elapsed Time
Method to an Hours of Service method, the Employee's service
as of the date of the change under the Hours of Service, the
Employee's Years of Service under the Hours of Service method
is the sum of (1) and (2) below.
<PAGE>
(1) The number of Years of Service credited under the
Elapsed Time Method as of the date of the change.
(2) For the computation period in which the change to the
Hours of Service method occurs, the portion of that
computation period in which the Elapsed Time Method
was in effect is converted into an equivalent number
of Hours of Service, using the Equivalency Method
described in Section 6.5(a). For the remainder of the
computation period, actual Hours of Service are
counted, unless the Equivalency Method has been
elected in Part 7 of the Agreement. The Hours of
Service deemed credited for the portion of the
computation period in which the Elapsed Time Method
was in effect are added to the actual Hours of
Service credited for the remaining portion of the
computation period to determine if the Employee has a
Year of Service for that computation period. If the
change to the Hours of Service method occurs as of
the first day of a computation period, then credit
for a Year of Service for the first computation
period that the change is in effect is based solely
on the Hours of Service method.
6.7 Service with Predecessor Employers. If the Employer maintains the plan of a
Predecessor Employer, any service with such Predecessor Employer is treated as
service with the Employer for purposes of applying the provisions of this Plan.
If the Employer does not maintain the plan of a Predecessor Employer, service
with such Predecessor Employer does not count under this Plan, unless the
Employer specifically designates under Part 13(e) of the Agreement to include
service with such Predecessor Employer. The Employer may designate under Part
13(e) the purpose for which it is crediting Predecessor Employer service under
this Section. If the Employer will treat service with multiple Predecessor
Employers differently, the Employer should complete an additional Part 13(e) for
each Predecessor Employer for which service is being credited differently. If
service with a Predecessor Employer is required to be credited because the
Employer is maintaining a plan of such Predecessor Employer or if the Employer
is not crediting service with any Predecessor Employers, Part 13(e) need not be
completed.
<PAGE>
Article 7
Limitation on Participant Allocations
This Article provides limitations on the amount a Participant may receive as an
allocation under the Plan for a Limitation Year. The limitation on allocations
(referred to herein as the Annual Additions Limitation) applies in the aggregate
to all plans maintained by the Employer. Part 13(b)(2) of the Agreement permits
the Employer to specify how the Plan will comply with the Annual Additions
Limitation where the Employer maintains a plan (or plans) in addition to this
Plan.
7.1 Annual Additions Limitation - No Other Plan Participation.
(a) Annual Additions Limitation. If the Participant does not
participate in, and has never participated in another
qualified retirement plan, a welfare benefit fund (as defined
under Code ss.419(e)), an individual medical account (as
defined under Code ss.415(l)(2)), or a SEP (as defined under
Code ss.408(k)) maintained by the Employer, then the amount of
Annual Additions which may be credited to the Participant's
Account for any Limitation Year will not exceed the lesser of
the Maximum Permissible Amount or any other limitation
contained in this Plan.
Generally, if an Employer Contribution that would otherwise be
contributed or allocated to a Participant's Account will cause
that Participant's Annual Additions for the Limitation Year to
exceed the Maximum Permissible Amount, the amount to be
contributed or allocated to such Participant will be reduced
so that the Annual Additions allocated to such Participant's
Account for the Limitation Year will equal the Maximum
Permissible Amount. However, if a contribution or allocation
to a Participant's Account will exceed the Maximum Permissible
Amount due to a correctable event described in (c) below, the
Excess Amount may be contributed or allocated to such
Participant and corrected in accordance with the correction
procedures outlined in (c).
(b) Using estimated Total Compensation. Prior to determining the
Participant's actual Total 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 Total Compensation for the
Limitation Year, uniformly determined for all Participants
similarly situated.
As soon as administratively feasible after the end of the
Limitation Year, the Employer will determine the Maximum
Permissible Amount for the Limitation Year on the basis of the
Participant's actual Total Compensation for the Limitation
Year.
(c) Disposition of Excess Amount. If, as a result of the use of
estimated Total Compensation, the allocation of forfeitures,
or other reasonable error in applying the Annual Additions
Limitation, an Excess Amount arises, the excess will be
disposed of as follows:
(1) Any Employee After-Tax Contributions (plus
attributable earnings), to the extent such
contributions would reduce the Excess Amount, will be
returned to the Participant. The Employer may elect
not to apply this paragraph (1) if the ACP Test (as
defined in Section 17.3) has already been performed
and the distribution of Employee After-Tax
Contributions to correct the Excess Amount will cause
the ACP Test to fail or will change the amount of
corrective distributions required under Section
17.3(d)(1) of this BPD.
<PAGE>
If Employer Matching Contributions were allocated on
Employee After-Tax Contributions for the Limitation
Year, the Employee After-Tax Contributions will be
distributed only to the extent the Employee After-Tax
Contributions, plus the Employer Matching
Contributions allocated with respect to such
After-Tax Contributions, reduce the Excess Amount.
Any Employer Matching Contributions identified under
this Section (1) will be treated as an Excess Amount
correctable under Sections (3) and (4). If Employer
Matching Contributions are allocated to both Employee
After-Tax Contributions and to Section 401(k)
Deferrals, this Section is applied by treating
Employer Matching Contributions as allocated first to
Section 401(k) Deferrals.
(2) If, after the application of paragraph (1), an Excess
Amount still exists, any Section 401(k) Deferrals
(plus attributable earnings), to the extent such
deferrals would reduce the Excess Amount, will be
distributed to the Participant. The Employer may
elect not to apply this paragraph (2) if the ADP Test
(as defined in Section 17.2) has already been
performed and the distribution of Section 401(k)
Deferrals to correct the Excess Amount will cause the
ADP Test to fail or will change the amount of
corrective distributions required under Section
17.2(d)(1) of this BPD.
If Employer Matching Contributions were allocated on
Section 401(k) Deferrals for the Limitation Year, the
Section 401(k) Deferrals will be distributed only to
the extent the Section 401(k) Deferrals, plus
Employer Matching Contributions allocated with
respect to such Section 401(k) Deferrals, reduce the
Excess Amount. Any Employer Matching Contributions
identified under this Section (2) will be treated as
an Excess Amount correctable under Sections (3) or
(4) below.
(3) If, after the application of paragraph (2), an Excess
Amount still exists, the Excess Amount is allocated
to a suspense account and is used in the next
Limitation Year (and succeeding Limitation Years, if
necessary) to reduce Employer Contributions under the
Plan. The Excess Amounts are treated as Annual
Additions for the Limitation Year in which such
amounts are allocated from the suspense account.
(4) If a suspense account is in existence at any time
during a Limitation Year pursuant to this Article 7,
such suspense account will not participate in the
allocation of investment gains and losses, unless
otherwise provided in uniform valuation procedures
established by the Plan Administrator. If a suspense
account is in existence at any time during a
particular Limitation Year, all amounts in the
suspense account must be allocated to Participants'
Accounts before the Employer makes any Employer
Contributions, or any Employee After-Tax
Contributions are made, for that Limitation Year.
7.2 Annual Additions Limitation - Participation in Another Plan.
(a) In general. This Section 7.2 applies if, in addition to this
Plan, the Participant receives an Annual Addition during any
Limitation Year from another Defined Contribution Plan, a
welfare benefit fund (as defined under Code ss.419(e)), an
individual medical account (as defined under Code
ss.415(l)(2)), or a SEP (as defined under Code ss.408(k))
maintained by the Employer. If the Employer maintains, or at
any time maintained, a Defined Benefit Plan (other than a
Paired Plan) covering any Participant in this Plan, see
Section 7.5.
<PAGE>
(b) This Plan's Annual Addition Limitation. The Annual Additions
which may be credited to a Participant's Account under this
Plan for any such Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to
a Participant's Account under any other Defined Contribution
Plan, welfare benefit fund, individual medical account, or SEP
maintained by the Employer for the same Limitation Year.
(c) Annual Additions reduction. If the Annual Additions with
respect to the Participant under any other Defined
Contribution Plan, welfare benefit fund, individual medical
account, or SEP maintained by the Employer are less than
the Maximum Permissible Amount and the Annual Additions that
would otherwise be contributed or allocated to the
Participant's Account under this Plan would exceed the Annual
Additions Limitation for the Limitation Year, the
amount contributed or allocated will be reduced so that the
Annual Additions under all such Plans and funds for the
Limitation Year will equal the Maximum Permissible Amount.
However, if a contribution or allocation to a
Participant's Account will exceed the Maximum Permissible
Amount due to a correctable event described in Section
7.1(c), the Excess Amount may be contributed or allocated to
such Participant and corrected in accordance with the
correction procedures outlined in Section 7.1(c).
(d) No Annual Additions permitted. If the Annual Additions with
respect to the Participant under such other Defined
Contribution Plan(s), welfare benefit fund(s), individual
medical account(s), or SEP(s) 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. However, if a contribution
or allocation to a Participant's Account will exceed the
Maximum Permissible Amount due to a correctable event
described in Section 7.1(c), the Excess Amount may be
contributed or allocated to such Participant and corrected in
accordance with the correction procedures outlined in Section
7.1(c).
(e) Using estimated Total Compensation. Prior to determining the
Participant's actual Total Compensation for the Limitation
Year, the Employer may determine the Maximum Permissible
Amount for a Participant in the manner described in Section
7.1(b). As soon as 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 Total Compensation for the Limitation
Year.
(f) Excess Amounts. If, as a result of the use of estimated Total
Compensation, an allocation of forfeitures, or other
reasonable error in applying the Annual Additions Limitation,
a Participant's Annual Additions under this Plan and such
other plans or funds 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 SEP will be deemed to have been
allocated first, followed by Annual Additions to a welfare
benefit fund or individual medical account, regardless of the
actual allocation date.
(1) Same allocation date. If an Excess Amount is
allocated to a Participant on an allocation date of
this Plan which coincides with an allocation date of
another plan, such Excess Amount will be attributed
to the following types of plan(s) in the order
listed, until the entire Excess Amount is allocated.
(i) First, to any 401(k) plan(s) maintained by
the Employer.
(ii) Then, to any profit sharing plan(s)
maintained by the Employer.
(iii) Then, to any money purchase plan(s)
maintained by the Employer.
<PAGE>
(iv) Finally, to any target benefit plan(s)
maintained by the Employer.
If an amount is allocated to the same type of Plan on
the same allocation date, the Excess Amount will be
allocated to each plan in accordance with the pro
rata allocation method outlined in the following
paragraph.
(2) Alternative methods. The Employer may elect under
Part 13(b)(2) of the Agreement to modify the default
rules under this Section (f). For example, the
Employer may elect to attribute any Excess Amount
which is allocated on the same date to this Plan and
to another plan maintained by the Employer by
designating the specific plan to which the Excess
Amount is allocated or by using a pro rata allocation
method. Under the pro rata allocation method, the
Excess Amount attributed to this Plan is the product
of:
(i) the total Excess Amount allocated as of
such date, times
(ii) the ratio of (A) the Annual Additions
allocated to the Participant for the
Limitation Year as of such date under this
Plan to (B) the total Annual Additions
allocated to the Participant for the
Limitation Year as of such date under this
and all other Defined Contribution Plans.
(g) Disposition of Excess Amounts. Any Excess Amount attributed to
this Plan will be disposed in the manner described in Section
7.1(c).
7.3 Modification of correction procedures. The Employer may elect under Part
13(b)(2) of the Agreement to modify any of the corrective provisions under
Section 7.1 or Section 7.2 of this BPD.
7.4 Definitions Relating to the Annual Additions Limitation.
(a) Annual Additions: The sum of the following amounts credited
to a Participant's Account for the Limitation Year:
(1) Employer Contributions, including Section 401(k)
Deferrals;
(2) Employee After-Tax Contributions;
(3) forfeitures;
(4) amounts allocated to an individual medical account
(as defined in Code ss.415(l)(2)), which is part of a
pension or annuity plan maintained by the Employer,
are treated as Annual Additions to a Defined
Contribution Plan. Also, 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 ss.419A(d)(3)) under a welfare
benefit fund (as defined in Code ss.419(e))
maintained by the Employer are treated as Annual
Additions to a Defined Contribution Plan; and
(5) allocations under a SEP (as defined in Code ss.408(k)).
For this purpose, any Excess Amount applied under Sections
7.1(c) or 7.2(g) in the Limitation Year to reduce Employer
Contributions will be considered Annual Additions for such
Limitation Year.
<PAGE>
(b) Defined Contribution Dollar Limitation: $30,000, as adjusted
under Code ss.415(d).
(c) Excess Amount: The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(d) Limitation Year: The Plan Year, unless the Employer elects
another 12-consecutive month period under Part 13(b)(1) of the
Agreement. All qualified retirement plans under Code ss.401(a)
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. If the first Plan Year under a new Plan is
less than a 12-months period, the Limitation Year is the
12-month period ending on the last day of that Plan Year,
unless otherwise specified in Part 13(b)(1) of the Agreement.
(e) Maximum Permissible Amount: The maximum Annual Addition that
may be contributed or allocated to a Participant's Account
under the Plan for any Limitation Year shall not exceed the
lesser of:
(1) the Defined Contribution Dollar Limitation, or
(2) 25 percent of the Participant's Total Compensation
for the Limitation Year.
The Total Compensation limitation referred to in (2) shall not
apply to any contribution for medical benefits (within the
meaning of Code ss.401(h) or ss.419A(f)(2)) which is otherwise
treated as an Annual Addition under Code ss.415(l)(1) or
ss.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 Limitation multiplied by the
following fraction:
Number of months in the short Limitation Year
12
(f) Total Compensation: The amount of compensation as defined
under Section 22.172, subject to the Employer's election under
Part 3(a) of the Agreement.
(1) Self-Employed Individuals. For a Self-Employed
Individual, Total Compensation is such individual's
Earned Income.
(2) Total Compensation actually paid or made available.
For purposes of applying the limitations of this
Article 7, Total Compensation for a Limitation Year
is the Total Compensation actually paid or made
available to an Employee during such Limitation Year.
However, the Employer may include in Total
Compensation for a Limitation Year amounts earned but
not paid in the Limitation Year because of the timing
of pay periods and pay days, but only if these
amounts are paid during the first few weeks of the
next Limitation Year, such amounts are included on a
uniform and consistent basis with respect to all
similarly-situated Employees, and no amounts are
included in Total Compensation in more than one
Limitation Year. The Employer need not make any
formal election to include accrued Total Compensation
described in the preceding sentence.
<PAGE>
(3) Disabled Participants. Total Compensation does not
include any imputed compensation for the period a
Participant is Disabled. However, the Employer may
elect under Part 3(b) of the Agreement, to include
under the definition of Total Compensation, the
amount a terminated Participant who is permanently
and totally Disabled (as defined in Section 22.47)
would have received for the Limitation Year if the
Participant had been paid at the rate of Total
Compensation paid immediately before becoming
permanently and totally Disabled.
(4) Special rule for Limitation Years beginning before
January 1, 1998. For Limitation Years beginning
before January 1, 1998, for purposes of applying the
limitations of this Article 7 and for determining the
minimum top-heavy contribution required under Section
16.2(a), Total Compensation paid or made available
during such Limitation Year shall not include any
Elective Deferrals, or any amount which is
contributed or deferred by the Employer at the
election of the Employee and which is not includible
in the gross income of the Employee by reason of Code
ss.125 or ss.457.
7.5 Participation in a Defined Benefit Plan. If the Employer maintains, or at
any time maintained, a Defined Benefit Plan (other than a Paired Plan) covering
any Participant in this Plan, the sum of the Participant's Defined Benefit
Fraction and Defined Contribution 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
Agreement.
(a) Repeal of rule. This Section 7.5 will no longer apply for
Limitation Years beginning after December 31, 1999, except as
applied in operation during the applicable remedial amendment
period in accordance with the terms of the Plan in effect
before the adoption of this document.
(b) Special definitions relating to Section 7.5.
(1) Defined Benefit Fraction: A fraction, the
numerator of which is the sum of the Participant's
Projected Annual Benefit 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
ss.ss.415(b) and (d) or 140 percent of the
Participant's Highest Average Compensation, including
any adjustments under Code ss.415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in
one or more Defined Benefit Plans maintained by the
Employer which were in existence on May 6, 1986, the
denominator of this fraction will not be less than
125 percent of the sum of the annual benefits under
such plans which the Participant had accrued as of
the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in
the terms and conditions of the plans after May 5,
1986. The preceding sentence applies only if the
Defined Benefit Plans individually and in the
aggregate satisfied the requirements of Code ss.415
for all Limitation Years beginning before January 1,
1987.
(2) Defined Contribution Fraction: 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 Employee
After-Tax Contributions to all Defined Benefit Plans,
whether or not terminated, maintained by the
Employer, and the Annual Additions attributable to
all welfare benefit funds (as defined under Code
ss.419(e)), individual medical accounts (as defined
under Code ss.415(l)(2)), and SEPs (as defined under
Code ss.408(k) 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 during which the Participant
performed service with the Employer (regardless of
whether a Defined Contribution Plan was maintained by
the Employer during such years). The maximum
aggregate amount in any Limitation Year is the lesser
of: (i) 125 percent of the Defined Contribution
Dollar Limitation in effect under Code
ss.415(c)(l)(A) for such Limitation Year or (ii) 35
percent of the Participant's Total Compensation for
such Limitation Year.
<PAGE>
If the Employee was a Participant as of the end of
the first day of the first Limitation Year beginning
after December 31, 1986, in one or more Defined
Contribution Plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of
this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment, an amount equal to the product
of (1) the excess of the sum of the fractions over
1.0 times (2) the denominator of this fraction, will
be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the
fractions as they would be computed as of the end of
the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and
conditions of the Plan made after May 5, 1986, but
using the Code ss.415 limitation applicable to the
first Limitation Year beginning on or after January
1, 1987.
The Annual Additions for any Limitation Year
beginning before January 1, 1987 shall not be
recomputed to treat all Employee After-Tax
Contributions as Annual Additions.
(3) Highest Average Compensation: The average Total
Compensation for the three consecutive years of
service with the Employer that produces the highest
average.
(4) Projected Annual Benefit: 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:
(A) the Participant will continue employment
until Normal Retirement Age under the Plan
(or current age, if later), and
(B) the Participant's Total 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.
<PAGE>
Article 8
Plan Distributions
Except as provided under Article 9 (Joint and Survivor Annuity Requirements),
this Article 8 governs all distributions to Participants under the Plan.
Sections 8.1 and 8.2 set forth the available distribution options under the Plan
and the amount available for distribution. Section 8.3 sets forth the
Participants' distribution options following termination of employment, Section
8.4 discusses the distribution options upon a Participant's death, and Sections
8.5 and 8.6 set forth the in-service distribution options under the Plan,
including the conditions for receiving a Hardship distribution. Parts 9 and 10
of the Agreement contain the elective provisions for the Employer to identify
the timing of distributions and the permitted distribution events under the
Plan.
8.1 Distribution Options. A Participant who terminates employment with the
Employer may receive a distribution of his/her vested Account Balance at the
time and in the manner designated under Part 9 of the Agreement. A Participant
may receive an in-service distribution prior to his/her termination of
employment with the Employer only to the extent permitted under Part 10 of the
Agreement.
Distributions from the Plan will be made in the form of a lump sum, a partial
distribution, installments, or other form as selected under Part 11 of the
Agreement. If the Plan is subject to the Joint and Survivor Annuity requirements
under Article 9, the Plan must make distribution in the form of a QJSA (as
defined in Section 9.4(a)) unless the Participant (and spouse, if the
Participant is married) elects an alternative distribution form in accordance
with Section 9.4(d). If the Employer elects under Part 11 of the Agreement to
permit installment payments as an optional form of distribution, the Participant
(and spouse, if applicable) may elect to receive installments in monthly,
quarterly, semi-annual, or annual payments over a period not exceeding the Life
Expectancy of the Participant and his/her Designated Beneficiary, unless
provided otherwise under Part 11 of the Agreement.
8.2 Amount Eligible for Distribution. For purposes of determining the amount a
Participant may receive as a distribution from the Plan, a Participant's Account
Balance is determined as of the Valuation Date (as specified in Part 12 of the
Agreement) which immediately precedes the date the Participant receives his/her
distribution from the Plan. For this purpose, the Participant's Account Balance
must be increased for any contributions allocated to the Participant's Account
since the most recent Valuation Date and must be reduced for any distributions
the Participant received from the Plan since the most recent Valuation Date. A
Participant does not share in any allocation of gains or losses attributable to
the period between the Valuation Date and the date of the distribution under the
Plan, unless provided otherwise under Part 12 of the Agreement or under uniform
funding and valuation procedures established by the Plan Administrator. In the
case of a Participant-directed Account, the determination of the value of the
Participant's Account for distribution purposes is subject to the funding and
valuation procedures applicable to such directed Account.
8.3 Distributions After Termination of Employment. Subject to the required
minimum distribution provisions under Article 10, a Participant whose employment
with the Employer is terminated for any reason, other than death, is entitled to
receive a distribution of his/her vested Account Balance in accordance with this
Section 8.3 as of the date selected in Part 9 of the Agreement. If a Participant
dies while employed by the Employer, or dies before distribution of his/her
vested Account Balance is completed, distribution will be made in accordance
with Section 8.4.
(a) Account Balance exceeding $5,000. If a Participant's entire
vested Account Balance exceeds $5,000 at the time of
distribution, the Participant may elect to receive a
distribution of his/her vested Account Balance in any form
permitted under Part 11 of the Agreement. The Participant must
receive proper notice and must consent in writing, in
accordance with Section 8.7, prior to receiving a distribution
from the Plan. If the Participant does not consent to a
distribution upon terminating employment with the Employer,
distribution will be made in accordance with Article 10. (Also
see Section 8.8 for additional notice requirements.)
<PAGE>
(b) Account Balance not exceeding $5,000. If a Participant's
entire vested Account Balance does not exceed $5,000 at the
time of distribution, the Plan Administrator will distribute
the Participant's entire vested Account Balance in a single
lump sum at the time indicated under Part 9(b) of the
Agreement. Although the Participant need not consent to
receive a distribution under this Section 8.3(b), the
Participant must receive the notice described in Section 8.7
(if applicable) prior to receiving the distribution from the
Plan. (Also see Section 8.8 for additional notice
requirements.)
(c) "Separation from service" under a 401(k) plan. Section 401(k)
Deferrals, QNECs, QMACs and Safe Harbor Contributions under a
401(k) plan may only be distributed if the Employee has a
"separation from service" with the Employer. For this purpose,
a separation from service occurs when an Employee terminates
employment with the Employer and does not continue to work in
the same job for a new employer as a result of a liquidation,
merger, consolidation, or other similar transaction. If an
Employee continues to work in the same job for a new employer
as a result of a sale of assets or a sale of a subsidiary, a
distribution may be made to the Employee only if one of the
following conditions is satisfied.
(1) The Employer is a corporation and the Employer sells
substantially all of the assets of a trade or
business (within the meaning of ss.409(d)(2) of the
Code) to an unrelated corporation, provided the
purchaser does not continue to maintain the Plan with
respect to the Participant after the sale and the
Participant becomes employed by the unrelated
corporation as a result of the sale. For this
purpose, an Employer is deemed to have sold
substantially all of the assets of a trade or
business if it sells 85% or more of the total assets
of such trade or business.
(2) The Employer is a corporation and the Employer sells
a subsidiary to an unrelated corporation, provided
the purchaser does not continue to maintain the Plan
with respect to the Participant after the sale and
the Participant continues to be employed by the
unrelated corporation after the sale.
(3) The event is determined to be a separation from
service, either by reason of additional exceptions
added to the Code or regulations, or by reason of a
ruling or other published guidance from the IRS.
(d) Disabled Participant. A terminated Employee who is Disabled at
the time of termination, or who becomes Disabled after
terminating employment with the Employer, generally is
entitled to a distribution in the time and manner specified in
Part 9(a) of the Agreement. However, if so elected in Part
9(c) of the Agreement, a terminated Employee who is Disabled
at the time of termination, or who becomes Disabled after
terminating employment with the Employer, is entitled to a
distribution in the time and manner specified in Part 9(c) of
the Agreement, to the extent Part 9(c) will result in an
earlier distribution than would otherwise be available under
Part 9(a) of the Agreement.
(e) Determining whether vested Account Balance exceeds $5,000.
Normally, the determination of whether a Participant's vested
Account Balance exceeds $5,000 is based on the value as of the
most recent valuation date. However, if the "lookback rule" is
applicable to a distribution to a Participant, the
Participant's vested Account Balance is deemed to exceed
$5,000 for purposes of applying the provisions under this
Article 8 and Article 9. This lookback rule is applicable if
the Participant previously received a distribution when
his/her vested Account Balance exceeded $5,000, and either (1)
or (2) applies.
<PAGE>
(1) The distribution is subject to the requirements of
Article 9.
(2) The distribution is not subject to the requirements
of Article 9, but a periodic distribution method
(e.g., an installment distribution) is currently in
effect with respect to the Participant's vested
Account Balance, at least one scheduled payment still
remains, and when the first periodic payment was made
under such election, the vested Account Balance
exceeded $5,000.
The rule described in this paragraph applies to distributions
made after March 21, 1999. For prior distributions, the
lookback rule applies to all distributions, without regard to
(1) and (2) above. However, the Plan does not fail to satisfy
the requirements of this Section if, prior to the adoption of
this Prototype Plan, the lookback rule was applied to all
distributions (without regard to the limitations described in
(1) and (2) above), or if the limitations described in (1) and
(2) above were applied to distributions made before March 22,
1999 but in a Plan Year beginning after August 5, 1997. The
lookback rule described above will not apply to any
distributions made after the effective date of any repeal of
the lookback rule that is announced in final regulations
issued by the IRS.
(f) Effective date of $5,000 vested Account Balance Rule. The
provisions under this Article 8 and Article 9 which refer to a
$5,000 vested Account Balance are effective for plan years
beginning after August 5, 1997, unless a later effective date
is specified in Part 13(d)(1) of the Agreement. For plan years
beginning prior to August 6, 1997 (or any later effective date
specified in Part 13(d)(1) of the Agreement) any reference
under this Article 8 or Article 9 to a $5,000 vested Account
Balance should be applied by replacing $5,000 with $3,500.
8.4 Distribution upon the Death of the Participant. The death benefit payable
with respect to a deceased Participant depends on whether the Participant dies
after distribution of his Account Balance has commenced (see (a) below) or
before distribution commences (see (b) below). Also, the death benefit payable
depends on whether the Joint and Survivor Annuity requirements in Article 9
apply. If a Participant commences distribution prior to death only with respect
to a portion of his/her Account Balance, then the rules in (a) apply to the
portion for which distribution has commenced and the rules in (b) apply to the
rest of the Account Balance.
(a) Post-retirement death benefit. If a Participant dies after
commencing distribution of his/her benefit under the Plan, the
death benefit is the benefit payable under the form of payment
that has commenced.
(b) Pre-retirement death benefit. If a Participant dies before
commencing distribution of his/her benefit under the Plan, the
death benefit that is payable depends on whether the Joint and
Survivor Annuity requirements of Article 9 apply.
(1) If the Joint and Survivor Annuity requirements apply.
In this case, the death benefit consists of a QPSA
death benefit (see Section 9.3) and, if the QPSA is
defined to be less than 100% of the Participant's
vested Account Balance, a non-QPSA death benefit. The
QPSA death benefit is payable in accordance with
Section 9.3, unless the Participant has waived such
death benefit under the waiver procedures described
in that Section. In the event there is a proper
waiver of the QPSA death benefit, then such portion
of the death benefit is payable in the same manner as
the non-QPSA death benefit. The non-QPSA death
benefit is payable in the form and at the time
described below in (d).
<PAGE>
(2) If the Joint and Survivor Annuity requirements do not
apply. In this case, the entire death benefit is
payable in the form and at the time described below
in (d).
(c) Determining a Participant's Beneficiary. The Participant may
designate a Beneficiary to receive the death benefits
described in this Section. Any Beneficiary designation is
subject to the rules under (1) - (4) below.
(1) Spousal consent to Beneficiary designation:
post-retirement death benefit. If a Participant is
married at the time distribution commences to the
Participant, the Beneficiary of any post-retirement
death benefit is the Participant's surviving spouse,
regardless of whether the Joint and Survivor Annuity
requirements under Article 9 apply, unless there is
no surviving spouse or the spouse has consented to
the Beneficiary designation in a manner that is
consistent with the requirements for a Qualified
Election under Section 9.4(d), or makes a valid
disclaimer of the benefit. If the Joint and Survivor
Annuity requirements apply, the spouse is determined
as of the Distribution Commencement Date for purposes
of this spousal consent requirement. If the Joint and
Survivor Annuity requirements do not apply, the
spouse is determined as of the Participant's date of
death for purposes of this spousal consent
requirement.
(2) Spousal consent to Beneficiary designation:
pre-retirement death benefit. The rules for spousal
consent depend on whether the Joint and Survivor
Annuity requirements in Article 9 apply.
(i) If the Joint and Survivor Annuity
requirements apply. In this case, the QPSA
death benefit may be payable to a non-
spouse Beneficiary only if the spouse
consents to the Beneficiary designation,
pursuant to the Qualified Election
requirements under Section 9.4(d), or makes
a valid disclaimer. The non-QPSA death
benefit, if any, is payable to the person
named in the Beneficiary designation,
without regard to whether spousal consent
is obtained for such designation.Thus, if a
spouse does not properly consent to a
Beneficiary designation, the QPSA waiver is
invalid, and the QPSA death benefit is still
payable to the spouse, but the Beneficiary
designation remains valid with respect to
any non-QPSA death benefit.
(ii) If the Joint and Survivor Annuity
requirements do not apply. In this case, the
surviving spouse (determined at the time of
the Participant's death), if any, must be
treated as the sole Beneficiary, regardless
of any contrary Beneficiary designation,
unless there is no surviving spouse, or the
spouse has consented to the Beneficiary
designation in a manner that is consistent
with the requirements for a Qualified
Election under Section 9.4(d) or makes a
valid disclaimer.
(3) Default beneficiaries. To the extent a Beneficiary
has not been named by the Participant (subject to the
spousal consent rules discussed above) and is not
designated under the terms of this Plan to receive
all or any portion of the deceased Participant's
death benefit, such amount shall be distributed to
the Participant's surviving spouse (if the
Participant was married at the time of death). If the
Participant does not have a surviving spouse at the
time of death, distribution will be made to the
Participant's estate. The Employer may modify the
default beneficiary rules described in this
subparagraph under Part 9(e) of the Nonstandardized
Plan Agreement.
<PAGE>
(4) One-year marriage rule. For purposes of applying the
provisions of this Section, an individual is not
considered the surviving spouse of the Participant if
the Participant and the surviving spouse have not
been married for the entire one-year period ending on
the date of the Participant's death.
(d) Timing and form of pre-retirement death benefit. The rules for
paying the pre-retirement death benefit depend on whether the
value of the death benefit exceeds $5,000. If there is both a
QPSA death benefit and a non-QPSA death benefit, each death
benefit is valued separately to determine whether it exceeds
$5,000. For death benefits distributed before the $5,000 rule
described in Section 8.3(f) is effective, substitute $3,500
for $5,000.
(1) Death benefit not exceeding $5,000. If the value of
the pre-retirement death benefit (including the QPSA
death benefit, if applicable) does not exceed $5,000,
it shall be paid in a single sum as soon as
administratively feasible after the Participant's
death.
(2) Death benefit that exceeds $5,000. If the value of
the pre-retirement death benefit exceeds $5,000, the
benefit is paid as follows:
(i) QPSA death benefit.If the QPSA death benefit
is payable in the QPSA form, then it shall
be paid in accordance with Article 9. If
the QPSA death benefit has not been waived,
but the spouse elects a different form of
payment, then distribution of the QPSA death
benefit is made in accordance with the form
of payment elected by the spouse. Payment
of the QPSA death benefit (in the QPSA form
or in the form elected by the spouse) will
commence as soon as administratively
feasible after the death of the
Participant. In no event will payment
commence without the consent of the
surviving spouse if the Distribution
Commencement Date is before the date the
Participant would have reached Normal
Retirement Age (or age 62, if later). If
the QPSA death benefit has been waived,
in accordance with the procedures in
Article 9, then the portion of the
Participant's vested Account Balance that
would have been payable as a QPSA death
benefit in the absence of such a waiver is
treated as a death benefit payable under
(ii).
(ii) Other death benefits. Any pre-retirement
death benefit not described in (i) is
payable under this paragraph. Such death
benefit is payable in one lump sum as soon
as administratively feasible after the
Participant's death. However, the death
benefit may be payable in a different form
if prescribed by the Participant's
Beneficiary designation, or if the
Beneficiary, before a lump sum payment of
the benefit is made, requests an election as
to the form of payment. An alternative form
of payment must be one that is available
under Section 8.1.
(3) Minimum distribution requirements. In no event will
any death benefit be paid in a manner that is
inconsistent with the minimum distribution
requirements of Section 10.2. In addition, the
Beneficiary of any pre-retirement death benefit
described above in (2) may postpone the commencement
of the death benefit to a date that is not later than
the latest commencement date permitted under Section
10.2, unless such election is prohibited in Part 9 of
the Agreement.
<PAGE>
(4) Modified rules. Alternative requirements for
distributing death benefits may be provided in Part 9
of the Agreement. Such alternative requirements may
not be inconsistent with the Joint and Survivor
Annuity requirements under Article 9 or the minimum
distribution requirements under Article 10. The
spousal consent requirements with respect to the QPSA
death benefit also may not be modified by Part 9 of
the Agreement.
8.5 Distributions Prior to Termination of Employment.
(a) Employee After-Tax Contributions, Rollover Contributions, and
transfers. A Participant may withdraw at any time, upon
written request, all or any portion of his/her Account Balance
attributable to Employee After-Tax Contributions or Rollover
Contributions. Any amounts transferred to the Plan pursuant to
a Qualified Transfer (as defined in Section 3.3(d)) also may
be withdrawn at any time pursuant to a written request. The
Employer may elect in Part 10 of the Agreement to modify the
availability of in-service withdrawals of Employee After-Tax
Contributions, Rollover Contributions, or Qualified Transfers.
Subject to the restrictions on distributions of transferred
assets under Section 3.3, a Participant may request a
distribution of all or any portion of his/her Transfer Account
as permitted under this Article with respect to contributions
of the same type as are being withdrawn.
(b) Employer Contributions. Except as provided in Section 14.10
dealing with defaulted Participant loans, a Participant may
receive a distribution of all or any portion of his/her vested
Account Balance attributable to Employer Contributions prior
to termination of employment only as permitted under Part 10
of the Agreement. If the Joint and Survivor Annuity
requirements under Article 9 apply to the Participant, the
Participant's spouse (if the Participant is married at the
time of distribution) must consent to a distribution in
accordance with Section 9.2.
If a Participant with a partially-vested benefit receives an
in-service distribution under the Plan, the special vesting
schedule under Section 4.8 must be applied to determine the
Participant's vested percentage in his/her remaining Account
Balance. This special vesting schedule will not apply if the
Employer limits the availability of in-service distributions
under Part 10 of the Agreement to Participants who are 100%
vested.
(c) Section 401(k) Deferrals, Qualified Nonelective Contributions,
Qualified Matching Contributions, and Safe Harbor
Contributions. If the Employer has adopted the 401(k)
Agreement, a Participant may receive an in-service
distribution of all or any portion of his/her Section 401(k)
Deferral Account, QMAC Account, QNEC Account, Safe Harbor
Matching Contribution Account and Safe Harbor Nonelective
Contribution Account only as permitted under Part 10 of the
Agreement. No provision in this Plan or in Part 10 of the
Agreement may be interpreted to permit a Participant to
receive a distribution of such amounts prior to the occurrence
of one of the following events:
(1) the Participant becoming Disabled;
(2) the Participant's attainment of age 59 1/2;
(3) the Participant's Hardship (as defined in Section 8.6).
<PAGE>
8.6 Hardship Distribution. To the extent permitted under Part 10 of the
Agreement, a Participant may receive an in-service distribution on account of a
Hardship. For purposes of this Section, a Hardship is an immediate and heavy
financial need, as described in (a) below, but only if the conditions in (b) are
satisfied. A Participant must provide the Plan Administrator with a written
request for a Hardship distribution and must provide documentation demonstrating
the existence of a proper Hardship event. The Plan Administrator may require
additional documentation, as it deems necessary, to sufficiently document the
existence of a proper Hardship event.
(a) Immediate and heavy financial need. To be considered an
immediate and heavy financial need, the Hardship distribution
must be made on account of one of the following events:
(1) the incurrence of medical expenses (as described in
ss.213(d) of the Code), of the Participant, the
Participant's spouse or dependents;
(2) the purchase (excluding mortgage payments) of a
principal residence for the Participant;
(3) payment of tuition and related educational fees
(including room and board) for the next 12 months of
post-secondary education for the Participant, the
Participant's spouse, children or dependents;
(4) to prevent the eviction of the Participant from, or a
foreclosure on the mortgage of, the Participant's
principal residence; or
(5) any other event which the IRS recognizes as a safe
harbor Hardship distribution event under ruling,
notice or other guidance of general applicability.
(b) Conditions for taking a Hardship withdrawal. A Participant may
receive a Hardship withdrawal only if all of the following
conditions are satisfied. The Plan Administrator may adopt
separate administrative provisions which override the
conditions under this subsection (b) for Hardship
distributions, to the extent such distributions are made from
a Participant's Employer Matching Contribution Account or
Employer Nonelective Contribution Account. The following
conditions may not be modified for Hardship distributions from
a Participant's Section 401(k) Deferral Account.
(1) The Participant has obtained all available
distributions, other than Hardship distributions, and
all nontaxable loans under the Plan and all other
qualified plans maintained by the Employer.
(2) The Participant is suspended from making any Section
401(k) Deferrals (and any Employee After-Tax
Contributions) under the Plan or any other plans
(other than welfare benefit plans) maintained by the
Employer for 12 months after the receipt of the
Hardship distribution.
(3) The distribution is not in excess of the amount of
the immediate and heavy financial need (including
amounts necessary to pay any federal, state or local
income taxes or penalties reasonably anticipated to
result from the distribution).
(4) The limitation on Elective Deferrals under Code
ss.402(g) for the Participant for the taxable year
immediately following the taxable year of the
Hardship distribution is reduced by the amount of any
Elective Deferrals the Participant made during the
taxable year of the Hardship distribution.
<PAGE>
(c) Amount available for distribution. A Participant may receive
a Hardship distribution of any portion of his/her vested
Employer Contribution Account or Employer Matching
Contribution Account (including earnings thereon), as
permitted under Part 10 of the Agreement. A Participant may
receive a Hardship distribution of any portion of his/her
Section 401(k) Deferral Account, if permitted under Part 10
of the Agreement, provided such distribution, when added to
other Hardship distributions from Section 401(k) Deferrals,
does not exceed the total Section 401(k) Deferrals the
Participant has made to the Plan (increased by income
allocable to such Section 401(k) Deferrals that was credited
by the later of December 31, 1988 or the end of the last Plan
Year ending before July 1, 1989). A Participant may not
receive a Hardship distribution from his/her QNEC Account,
QMAC Account, Safe Harbor Nonelective Account or Safe Harbor
Matching Contribution Account.
8.7 Participant Consent. If the value of a Participant's entire vested Account
Balance exceeds $5,000 (as determined in accordance with Section 8.3(e)), the
Participant must consent to any distribution of such Account Balance prior to
the date the Participant attains (or would have attained if not deceased) the
later of Normal Retirement Age or age 62. A Participant must consent in writing
to a distribution under this Section 8.7 within the 90-day period ending on the
Distribution Commencement Date (as defined in Section 22.49). If the Participant
is subject to the Joint and Survivor Annuity requirements under Article 9 of
this Plan, the Participant's spouse (if the Participant is married at the time
of the distribution) also must consent to the distribution in accordance with
Section 9.2. If the distribution is an Eligible Rollover Distribution, the
Participant must also direct the Plan Administrator as to whether he/she wants a
Direct Rollover and if so, the name of the Eligible Retirement Plan to which the
distribution will be made. (See Section 8.8 for more information regarding the
Direct Rollover rules.)
(a) Participant notice. Prior to receiving a distribution from
the Plan, the Participant must be notified of his/her right
to defer any distribution from the Plan until the Participant
attains the later of Normal Retirement Age or age 62. The
notification shall include a general description of the
material features and the relative values of the optional
forms of benefit available under the Plan (consistent with
the requirements under Codess.417(a)(3)). The notice must be
provided no less than 30 days and no more than 90 days prior
to the Participant's Distribution Commencement Date. However,
distribution may commence less than 30 days after the notice
is given, if the Participant is clearly informed of his/her
right to take 30 days after receiving the notice to decide
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and the Participant, after
receiving the notice, affirmatively elects to receive the
distribution prior to the expiration of the 30-day minimum
period. (But see Section 9.5(a) for the rules regarding the
timing of distributions when the Joint and Survivor Annuity
requirements apply.) The notice requirements described in
this paragraph may be satisfied by providing a summary of
the required information, so long as the conditions described
in applicable regulations for the provision of such a
summary are satisfied, and the full notice is also provided
(without regard to the 90-day period described in this
Section).
(b) Special rules. The consent rules under this Section 8.7 apply
to distributions made after the Participant's termination of
employment and to distributions made prior to the
Participant's termination of employment. However, the consent
of the Participant (and the Participant's spouse, if
applicable) shall not be required to the extent that a
distribution is made:
(1) to satisfy the required minimum distribution rules
under Article 10;
<PAGE>
(2) to satisfy the requirements of Code ss.415, as
described in Article 7;
(3) to correct Excess Deferrals, Excess Contributions or
Excess Aggregate Contributions, as described in
Article 17.
In addition, if distributions are being made on account of the
termination of the Plan, and an annuity option is not
available under the Plan, the Participant's Account Balance
will, without the Participant's consent, be distributed to the
Participant, without regard to the value of the Participant's
vested Account Balance, unless the Employer (or any Related
Employer) maintains another Defined Contribution Plan (other
than an employee stock ownership plan as defined in Code
ss.4975(e)(7)). If the Employer or any Related Employer
maintains another Defined Contribution Plan (other than an
employee stock ownership plan), then the Participant's Account
Balance will be transferred, without the Participant's
consent, to the other plan, if the Participant does not
consent to an immediate distribution (to the extent consent to
an immediate distribution is otherwise required under this
Section 8.7).
8.8 Direct Rollovers. This Section 8.8 applies to distributions made on or after
January 1, 1993. Notwithstanding any provision in the Plan to the contrary, a
Participant may elect to have any portion of an Eligible Rollover Distribution
paid directly to an Eligible Retirement Plan in a Direct Rollover. A Participant
may directly roll over any portion of an Eligible Rollover Distribution provided
the amount being rolled over equals or exceeds $500.
For purposes of this Section 8.8, a Participant includes a Participant or former
Participant. In addition, this Section applies to any distribution from the Plan
made to a Participant's surviving spouse or to a Participant's spouse or former
spouse who is the Alternate Payee under a qualified domestic relations order, as
defined in Code ss.414(p).
If it is reasonable to expect (at the time of the distribution) that the total
amount the Participant will receive as a distribution during the calendar year
will total less than $200, the Employer need not offer the Participant a Direct
Rollover option with respect to such distribution.
(a) Eligible Rollover Distribution. An Eligible Rollover
Distribution is any distribution of all or any portion of a
Participant's Account Balance, except for the following
distributions:
(1) any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or Life
Expectancy) of the Participant or the joint lives (or
joint Life Expectancies) of the Participant and the
Participant's Beneficiary, or for a specified period
of ten years or more;
(2) any distribution to the extent such distribution
is a required minimum distribution under Article 10;
(3) the portion of any distribution that is not
includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with
respect to Employer securities);
(4) a Hardship withdrawal of Section 401(k) Deferrals;
and
(5) a distribution made to satisfy the requirements of
Code ss.415, as described in Article 7, or a
distribution to correct Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions, as
described in Article 17.
<PAGE>
(b) Eligible Retirement Plan. An Eligible Retirement Plan is:
(1) an individual retirement account described in ss.408
(a) of the Code;
(2) an individual retirement annuity described in ss.408
(b) of the Code;
(3) an annuity plan described in ss403(a)of the Code; or
(4) a qualified plan described in ss.401(a) of the Code.
However, in the case of an Eligible Rollover Distribution to a
surviving spouse, an Eligible Retirement Plan is only an
individual retirement account or individual retirement
annuity.
(c) Direct Rollover. A Direct Rollover is a payment made directly
from the Plan to the Eligible Retirement Plan specified by the
Participant. The Plan Administrator may develop reasonable
procedures for accommodating Direct Rollover requests.
(d) Direct Rollover notice. A Participant entitled to an Eligible
Rollover Distribution must receive a written explanation of
his/her right to a Direct Rollover, the tax consequences of
not making a Direct Rollover, and, if applicable, any
available special income tax elections. The notice must be
provided within the same 30 - 90 day timeframe applicable to
the Participant consent notice under Section 8.7(a). The
Direct Rollover notice must be provided to all Participants,
unless the total amount the Participant will receives as a
distribution during the calendar year is expected to be less
than $200.
If a Participant terminates employment with a total vested
Account Balance of $5,000 or less (as determined under Section
8.3(e)) and the Participant does not respond to the Direct
Rollover notice indicating whether a Direct Rollover is
desired and the name of the Eligible Retirement Plan to which
the Direct Rollover is to be made, the Plan Administrator will
distribute the Participant's entire vested Account Balance (in
accordance with Section 8.3(b)) no earlier than 30 days and no
later than 90 days following the provision of the notice under
Section 8.7.
(e) Special rules for Hardship withdrawals of Section 401(k)
Deferrals. A Hardship withdrawal of Section 401(k) Deferrals
is not an Eligible Rollover Distribution to the extent such
withdrawal is made after December 31, 1998 or, if later, the
first day (but not later than January 1, 2000) that the Plan
Administrator begins to treat such Hardship withdrawals as
ineligible for rollover. A Hardship withdrawal of Section
401(k) Deferrals shall be treated as an Eligible Rollover
Distribution if the Participant otherwise satisfies a
non-Hardship distribution event described in Code ss.401(k)(2)
or (10) at the time of the withdrawal, regardless of whether
the Plan's procedures characterizes such distribution as a
Hardship withdrawal.
8.9 Sources of Distribution. In applying the distribution provisions under this
Article 8, a Participant may direct the Plan Administrator or Trustee as to
which Account the distribution is to be made. If a Participant does not direct
the Plan Administrator or Trustee as to which Account or Accounts the
distribution is to be made, the distribution will be made on a pro rata basis
from all Accounts from which a distribution is permitted under this Article.
Regardless of a Participant's direction as to the source of any distribution,
the tax effect of such a distribution will be governed by Code ss.72 and the
regulations thereunder.
<PAGE>
Article 9
Joint and Survivor Annuity Requirements
This Article provides rules concerning the application of the Joint and Survivor
Annuity requirements under this Plan. If the Plan is a profit sharing plan or a
401(k) plan, Part 11(b) of the Agreement permits the Employer to apply the Joint
and Survivor Annuity requirements to all Participants under the Plan. If the
Employer does not elect to apply the Joint and Survivor Annuity requirements to
all Participants, the Plan is only subject to the Joint and Survivor Annuity
requirements to the extent required under Section 9.1(b) of this Article.
9.1 Applicability. Except as provided in Section 9.6 below, this Article 9
applies to any distribution received by a Participant from a money purchase
pension plan or a target benefit plan. For a profit sharing plan or 401(k) plan,
the following rules apply.
(a) Election to have requirements apply. If this Plan is a profit
sharing plan or a 401(k) plan, and the Employer elects under
Part 11(b)(2) of the profit sharing plan or 401(k) plan
Agreement to apply the Joint and Survivor Annuity
requirements, then this Article 9 applies in the same manner
as it does to a money purchase plan or a target benefit plan.
(b) Election to have requirements not apply. If this Plan is a
profit sharing plan or a 401(k) plan, and the Employer elects
under Part 11(b)(1) of the profit sharing plan or 401(k) plan
Agreement not to apply the Joint and Survivor Annuity
requirements, this Article 9 generally will not apply to
distributions from the Plan. However, the rules of this
Article 9 will apply under the following conditions:
(1) the Participant elects to receive his/her benefit in
the form of a life annuity (if a life annuity is a
permissible distribution option under Part 11 of the
Agreement); or
(2) the Participant has received a direct or indirect
transfer of benefits (other than a Qualified Transfer
as defined in Section 3.3(d)) from a plan which was
subject to the Joint and Survivor Annuity
requirements at the time of the transfer (but only to
such transferred benefits); or
(3) the Participant's benefits under the Plan are used to
offset the benefits under another plan of the
Employer which is subject to the Joint and Survivor
Annuity requirements.
(c) Accumulated deductible employee contributions. For purposes of
applying the rules under this Section 9.1, any distribution
from a separate Account under a money purchase plan or a
target benefit which is attributable solely to accumulated
deductible employee contributions, as defined in Code
ss.72(o)(5)(B), is treated as a distribution from a profit
sharing plan or 401(k) plan for which the rules under (b)
above apply.
9.2 Qualified Joint and Survivor Annuity (QJSA). If the Joint and Survivor
Annuity requirements apply to a Participant, any distribution from the Plan to
that Participant must be in the form of a QJSA (as defined in Section 9.4(a)),
unless the Participant (and the Participant's spouse, if the Participant is
married) elects to receive the distribution in an alternative form. Any election
of an alternative form of distribution must be pursuant to a Qualified Election.
Only the Participant need consent (pursuant to Section 8.7) to the commencement
of a distribution in the form of a QJSA.
<PAGE>
9.3 Qualified Preretirement Survivor Annuity (QPSA). If the Joint and Survivor
Annuity requirements apply to a Participant who dies before the Distribution
Commencement Date, the spouse of that Participant is entitled to receive a QPSA
(as defined in Section 9.4(b)), unless the Participant and spouse have waived
the QPSA pursuant to a Qualified Election. A surviving spouse is not entitled to
a QPSA benefit if the Participant and surviving spouse were not married
throughout the one year period ending on the date of the Participant's death.
Any portion of a Participant's vested Account Balance that is not payable to the
surviving spouse as a QPSA (or other form elected by the surviving spouse)
constitutes a non-QPSA death benefit and is payable under the rules described in
Section 8.4.
9.4 Definitions.
(a) Qualified Joint and Survivor Annuity (QJSA). A QJSA is an
immediate annuity payable over the life of the Participant
with a survivor annuity payable over the life of the spouse.
If the Participant is not married as of the Distribution
Commencement Date, the QJSA is an immediate annuity payable
over the life of the Participant. The survivor annuity must
provide for payments to the surviving spouse equal to 50% of
the payments which the Participant is entitled under the
annuity during the joint lives of the Participant and the
spouse. The Employer may elect under Part 11(b)(2) of the
Agreement to make payments to the surviving spouse equal to
100% (instead of 50%) of the payments the Participant is
entitled to under the annuity.
(b) Qualified Preretirement Survivor Annuity (QPSA). A QPSA is an
annuity payable over the life of the surviving spouse which is
purchased using 50% of the Participant's vested Account
Balance as of the date of death. The Employer may elect under
Part 11(b)(2) of the Agreement to provide a QPSA equal to 100%
(instead of 50%) of the Participant's vested Account Balance).
The remaining vested Account Balance will be distributed in
accordance with the death distribution provisions under
Section 8.4. To the extent the Participant's vested Account
Balance is derived from Employee After-Tax Contributions, the
QPSA will share in the Employee After-Tax Contributions in the
same proportion as the Employee After-Tax Contributions bear
to the total vested Account Balance of the Participant.
The surviving spouse may elect to have the QPSA distributed at
any time following the Participant's death (subject to the
required minimum distribution rules under Article 10) and may
elect to receive distribution in any form permitted under
Section 8.1 of the Plan. If the surviving spouse fails to
elect distribution upon the Participant's death, the QPSA
benefit will be distributed in accordance with Section 8.4.
(c) Distribution Commencement Date. The Distribution Commencement
Date is the date an Employee commences distributions from the
Plan. If distribution is made in the form of an annuity, the
Distribution Commencement Date is the first day of the first
period for which annuity payments are made.
(d) Qualified Election. A Participant (and the Participant's
spouse) may waive the QJSA or QPSA pursuant to a Qualified
Election. If it is established to the satisfaction of a plan
representative that there is no spouse or that the spouse
cannot be located, any waiver signed by the Participant is
deemed to be a Qualified Election. For this purpose, a former
spouse of the Participant will be treated as the spouse or
surviving spouse and any current spouse will not be treated as
the spouse or surviving spouse to the extent provided under a
QDRO.
A Qualified Election is a written election signed by both the
Participant and the Participant's spouse (if applicable) which
specifically acknowledges the effect of the election. The
spouse's consent must be witnessed by a plan representative or
notary public. In the case of a waiver of the QJSA, the
election must designate an alternative form of benefit payment
which may not be changed without spousal consent (unless the
spouse expressly permits the Participant to change the form of
payment without any further spousal consent). In the case of a
waiver of the QPSA, the election must be made within the QPSA
Election Period and the election must designate a specific
alternate Beneficiary, including any class of Beneficiaries or
any contingent Beneficiaries, which may not be changed without
spousal consent (unless the spouse expressly permits the
Participant to change the Beneficiary designation without any
further spousal consent).
<PAGE>
Any consent by a spouse under a Qualified Election (or the
determination that the consent of a spouse is not required)
shall be effective only with respect to such spouse. If the
Qualified Election permits the Participant to change a payment
form or Beneficiary designation without any further consent by
the spouse, the Qualified Election must acknowledge that the
spouse has the right to limit consent to a specific form of
benefit or a specific Beneficiary, as applicable, and that the
spouse voluntarily elects to relinquish either or both of such
rights. A revocation of a prior waiver may be made by a
Participant without the consent of the spouse at any time
before the commencement of benefits. No consent obtained under
this provision shall be valid unless the Participant has
received notice as provided in Section 9.5 below.
(e) QPSA Election Period. A Participant (and the Participant's
spouse) may waive the QPSA at any time during the QPSA
Election Period. The QPSA Election Period is the period
beginning on the first day of the Plan Year in which the
Participant attains age 35 and ending on the date of the
Participant's death. If a Participant separates from service
prior to the first day of the Plan Year in which age 35 is
attained, with respect to the Account Balance as of the date
of separation, the QPSA Election Period begins on the date of
separation.
(f) Pre-Age 35 Waiver. A Participant who has not yet attained age
35 as of the end of a Plan Year may make a special Qualified
Election to waive, with spousal consent, the QPSA for the
period beginning on the date of such election and ending on
the first day of the Plan Year in which the Participant will
attain age 35. Such election is not valid unless the
Participant receives the proper notice required under Section
9.5 below. QPSA coverage is automatically reinstated as of the
first day of the Plan Year in which the Participant attains
age 35. Any new waiver on or after such date must satisfy all
the requirements for a Qualified Election.
9.5 Notice Requirements.
(a) QJSA. In the case of a QJSA, the Plan Administrator shall
provide each Participant with a written explanation of: (1)
the terms and conditions of the QJSA; (2) the Participant's
right to make and the effect of an election to waive the QJSA
form of benefit; (3) the rights of the Participant's spouse;
and (4) the right to make, and the effect of, a revocation of
a previous election to waive the QJSA. The notice must be
provided to each Participant under the Plan no less than 30
days and no more than 90 days prior to the Distribution
Commencement Date.
A Participant may commence receiving a distribution in a form
other than a QJSA less than 30 days after receipt of the
written explanation described in the preceding paragraph
provided: (1) the Participant has been provided with
information that clearly indicates that the Participant has at
least 30 days to consider whether to waive the QJSA and elect
(with spousal consent) a form of distribution other than a
QJSA; (2) the Participant is permitted to revoke any
affirmative distribution election at least until the
Distribution Commencement Date or, if later, at any time prior
to the expiration of the 7-day period that begins the day
after the explanation of the QJSA is provided to the
Participant; and (3) the Distribution Commencement Date is
after the date the written explanation was provided to the
Participant. For distributions on or after December 31, 1996,
the Distribution Commencement Date may be a date prior to the
date the written explanation is provided to the Participant if
the distribution does not commence until at least 30 days
after such written explanation is provided, subject to the
waiver of the 30-day period.
<PAGE>
(b) QPSA. In the case of a QPSA, the Plan Administrator shall provide each
Participant within the applicable period for such Participant a written
explanation of the QPSA in such terms and in such manner as would be
comparable to the explanation provided for the QJSA in Section (a) above.
The applicable period for a Participant is 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 ending after the individual becomes a
Participant; or (3) a reasonable period ending after the joint and survivor
annuity requirements first apply to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period ending after
separation from service in the case of a Participant who separates from
service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (2) and
(3) is the end of the two-year period beginning one year prior
to the date the applicable event occurs, and ending one year
after that date. In the case of a Participant who separates
from service before the Plan Year in which age 35 is attained,
notice shall be provided within the two-year period beginning
one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to
employment with the employer, the applicable period for such
Participant shall be redetermined.
9.6 Exception to the Joint and Survivor Annuity Requirements. Except as provided
in Section 9.7, this Article 9 does not apply to any Participant who has not
earned an Hour of Service with the Employer on or after August 23, 1984. In
addition, if, as of the Distribution Commencement Date, the vested Account
Balance (if the QJSA is payable) or the value of the QPSA death benefit does not
exceed $5,000, the Participant or surviving spouse, as applicable, will receive
a lump sum distribution pursuant to Section 8.4(c), in lieu of any QJSA or QPSA
benefits. If a Participant's vested Account Balance exceeds $5,000 at the time
of any distribution from the Plan, the Participant's vested Account Balance is
deemed to exceed $5,000 for purposes of determining whether the QJSA is payable.
The rule in the preceding sentences is known as the "lookback rule." The
lookback rule will not apply to the Joint and Survivor Annuity requirements
after the effective date of any repeal of the lookback rule that is announced in
final regulations issued by the IRS.
9.7 Transitional Rules. Any living Participant not receiving benefits on August
23, 1984, who would otherwise not receive the benefits prescribed under this
Article 9 must be given the opportunity to elect to have the preceding
provisions of this Article 9 apply if such Participant is credited with at least
one Hour of Service under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such Participant had at least 10
years of vesting service when he or she separated from service. The Participant
must be given the opportunity to elect to have this Article 9 apply during the
period commencing on August 23, 1984, and ending on the date benefits would
otherwise commence to such Participant. A Participant described in this
paragraph who has not elected to have this Article 9 apply is subject to the
rules in this Section 9.7 instead. Also, a Participant who does not qualify to
elect to have this Article 9 apply because such Participant does not have at
least 10 Years of Service for vesting purposes is subject to the rules of this
Section 9.7.
Any living Participant not receiving benefits on August 23, 1984, who was
credited with at least one Hour of Service under this Plan or a predecessor plan
on or after September 2, 1974, and who is not otherwise credited with any
service in a Plan Year beginning on or after January 1, 1976, must be given the
opportunity to have his/her benefits paid in accordance with the following
paragraph. The Participant must be given the opportunity to elect to have this
Section 9.7 apply (other than the first paragraph of this Section) during the
period commencing on August 23, 1984, and ending on the date benefits would
otherwise commence to such Participant.
<PAGE>
If, under either of the preceding two paragraphs, a Participant is subject to
this Section 9.7, the following rules apply.
(a) Automatic joint and survivor annuity. If benefits in the form
of a life annuity become payable to a married Participant who:
(1) begins to receive payments under the Plan on or
after Normal Retirement Age;
(2) dies on or after Normal Retirement Age while still
working for the Employer;
(3) begins to receive payments on or after the Qualified
Early Retirement Age; or
(4) separates from service on or after attaining Normal
Retirement Age (or the Qualified Early Retirement
Age) and after satisfying the eligibility
requirements for the payment of benefits under the
plan and thereafter dies before beginning to receive
such benefits;
then such benefits will be received under this plan in the
form of a QJSA, unless the Participant has elected otherwise
during the election period. For this purpose, the election
period must begin at least 6 months before the participant
attains qualified early retirement age and end not more than
90 days before the commencement of benefits. Any election
hereunder will be in writing and may be changed by the
Participant at any time.
(b) Election of early survivor annuity. A Participant who is
employed after attaining the Qualified Early Retirement Age
will be given the opportunity to elect, during the election
period, to have a survivor annuity payable on death. If the
Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have
been made to the spouse under the QJSA if the Participant had
retired on the day before his or her death. Any election
under this provision will be in writing and may be changed
by the Participant at any time. For this purpose, the
election period begins on the later of (1) the 90th day
before the Participant attains the Qualified Early Retirement
Age, or (2) the date on which participation begins, and ends
on the date the Participant terminates employment.
(c) Qualified Early Retirement Age. The Qualified Early
Retirement Age is the latest of:
(1) the earliest date, under the plan, on which the
Participant may elect to receive retirement benefits,
(2) the first day of the 120th month beginning before the
Participant reaches Normal Retirement Age, or
(3) the date the Participant begins participation under
the Plan.
<PAGE>
Article 10
Required Distributions
This Article provides for the required commencement of distributions upon
certain events. In addition, this Article places limitations on the period over
which distribution may be made to a Participant or Beneficiary. To the extent
the distribution provisions of this Plan, particularly Articles 8 and 9, are
inconsistent with the provisions of this Article 10, the provisions of this
Article control. Part 13 of the Agreement contains specific elections for
applying the rules under this Article 10.
10.1 Required Distributions Before Death.
(a) Deferred distributions. Unless a Participant elects to defer
receipt of benefits, distribution will be made to the
Participant no later than the 60th day after the latest of the
close of the Plan Year in which:
(1) the Participant attains age 65 (or Normal Retirement
Age, if earlier);
(2) occurs the 10th anniversary of the year in which the
Participant commenced participation in the Plan; or,
(3) the Participant terminates service with the Employer.
A Participant who terminates employment with the Employer
after attaining Normal Retirement Age (or age 62, if later)
and who does not elect to defer the receipt of benefits in
accordance with this Section will receive a distribution of
his/her entire vested Account Balance within an
administratively practicable time following termination of
employment, regardless of any contrary election under Part 9
of the Agreement.
A terminated Participant is deemed to defer the commencement
of benefits as required by this Section if the Participant
(and spouse, if applicable) does not consent to receive a
distribution which is subject to the Participant (and spousal)
consent requirements under Section 8.7 and Article 9.
(b) Required minimum distributions. The entire interest of a
Participant must be distributed or begin to be distributed no
later than the Participant's Required Beginning Date (as
defined in Section 10.3(a)) over one of the following periods
(or a combination thereof):
(1) the life of the Participant,
(2) the life of the Participant and a Designated
Beneficiary,
(3) a period certain not extending beyond the Life
Expectancy of the Participant, or
(4) a period certain not extending beyond the joint and
last survivor Life Expectancy of the Participant and
a Designated Beneficiary.
If the Participant's interest is to be distributed over a
period designated under (3) or (4) above, the amount required
to be distributed for each calendar year must at least equal
the quotient obtained by dividing the Participant's Benefit
(as determined under Section 10.3(g)) by the lesser of (i) the
Applicable Life Expectancy or (ii) if the Participant's
Designated Beneficiary is not his/her spouse, the minimum
distribution incidental benefit factor set forth in
regulations issued under Code ss.401(a)(9). Distributions
after the death of the Participant shall be determined using
the Applicable Life Expectancy as the relevant divisor
regardless of the Participant's Designated Beneficiary.
<PAGE>
The minimum distribution required for the Participant's first
Distribution Calendar Year must be made on or before the
Participant's Required Beginning Date. The minimum
distribution for other Distribution Calendar Years, including
the minimum distribution for the Distribution Calendar Year in
which the Participant's Required Beginning Date occurs, must
be made on or before December 31 of that Distribution Calendar
Year.
If a Participant receives a distribution in the form of an
annuity purchased from an insurance company, distributions
thereunder shall be made in accordance with the requirements
of Code ss.401(a)(9) and the regulations thereunder.
10.2 Required Distributions After Death.
(a) Distribution beginning before death. If the Participant dies
after he/she has begun receiving distributions under Section
10.1(b), the remaining portion of the Participant's vested
Account Balance shall continue to be distributed at least as
rapidly as under the method of distribution being used prior
to the Participant's death.
(b) Distribution beginning after death. Subject to the rules under
Section 8.4(b), if the Participant dies before receiving
distributions under Section 10.1(b), distribution of the
Participant's entire vested Account Balance shall be completed
by December 31 of the calendar year containing the fifth
anniversary of the Participant's death, except to the extent
an election is made to receive distributions in accordance
with (1) or (2) below.
(1) To the extent any portion of the Participant's vested
Account Balance is payable to a Designated
Beneficiary, distributions may be made over the life
of the Designated Beneficiary or over a period
certain not greater than the Life Expectancy of the
Designated Beneficiary, provided such distributions
begin on or before December 31 of the calendar year
immediately following the calendar year in which the
Participant died.
(2) If the Designated Beneficiary is the Participant's
surviving spouse, he/she may delay the distribution
under (1) until December 31 of the calendar year in
which the Participant would have attained age 70-1/2,
if such date is later than the date described in (1).
If the Participant has no Designated Beneficiary, or if the
Designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire
interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death.
For purposes of this Section 10.2(b), if the surviving spouse
dies after the Participant, but before payments to such spouse
begin, the provisions of this Section 10.2(b), with the
exception of subparagraph (2) above, shall be applied as if
the surviving spouse were the Participant.
<PAGE>
10.3 Definitions.
(a) Required Beginning Date. A Participant's Required Beginning
Date is the date designated under Section (1)(i) or (ii)
below, as applicable, unless the Employer elects under Part
13(c)(1) of the Agreement to apply the Old-Law Required
Beginning Date, as described in Section (2) below. If the
Employer does not select the Old-Law Required Beginning Date
under Part 13(c)(1), the Required Beginning Date rules under
Section (1) below apply. (But see Section 10.4 for special
rules dealing with operational compliance with the SBJPA
Legislation.)
(1) Required Beginning Date. If the Employer does not
elect to apply the Old-Law Required Beginning Date
under Part 13(c)(1) of the Agreement, a Participant's
Required Beginning Date under the Plan is:
(i) For Five-Percent Owners. April 1 that
follows the end of the calendar year in
which the Participant attains age 70 1/2.
(ii) For Participants other than Five-Percent
Owners. April 1 that follows the end of the
calendar year in which the later of the
following two events occurs:
(A) the Participant attains age 70 1/2 or
(B) the Participant retires.
If a Participant is not a Five-Percent Owner for the
Plan Year that ends with or within the calendar year
in which the Participant attains age 70-1/2, and the
Participant has not retired by the end of such
calendar year, his/her Required Beginning Date is
April 1 that follows the end of the first subsequent
calendar year in which the Participant becomes a
Five-Percent Owner or retires.
A Participant may begin in-service distributions
prior to his/her Required Beginning Date only to the
extent authorized under Article 10 and Part 9 of the
Agreement. However, if this Plan were amended to add
the Required Beginning Date rules under this Section
(1), a Participant who attained age 70 1/2 prior to
January 1, 1999 (or, if later, January 1 following
the date the Plan is first amended to contain the
Required Beginning Date rules under this Section (1))
may receive in-service minimum distributions in
accordance with the terms of the Plan in existence
prior to such amendment.
(2) Old-Law Required Beginning Date. If the Old-Law
Required Beginning Date is elected under Part 13(c)
of the Agreement, the Required Beginning Date for all
Participants will be determined under Section (1)(i)
above, without regard to the rule in Section (1)(ii).
The Required Beginning Date for all Participants
under the Plan will be April 1 of the calendar year
following attainment of age 70 1/2.
(b) Five-Percent Owner. A Participant is a Five-Percent Owner for
purposes of this Section if such Participant is a Five-Percent
Owner (as defined in Section 22.79) at any time during the
Plan Year ending with or within the calendar year in which the
Participant attains age 70 1/2. Once distributions have begun
to a Five-Percent Owner under this Article, they must continue
to be distributed, even if the Participant ceases to be a
Five-Percent Owner in a subsequent year.
(c) Designated Beneficiary. A Beneficiary designated by the
Participant (or the Plan), whose Life Expectancy may be taken
into account to calculate minimum distributions, pursuant to
Code ss.401(a)(9) and the regulations thereunder.
<PAGE>
(d) Applicable Life Expectancy. The determination of the
Applicable Life Expectancy depends on whether the term certain
method or the recalculation method is being use to adjust the
Life Expectancy in each Distribution Calendar Year. If the
term certain method is being used, the Life Expectancy
determined for the first Distribution Calendar Year is reduced
by one for each subsequent Distribution Year. If the
recalculation method is used, the following rules apply:
(1) If the Life Expectancy is the Participant's (or
surviving spouse's) single Life Expectancy, the
Applicable Life Expectancy is redetermined for each
Distribution Year based on the Participant's (or
surviving spouse's) age on his/her birthday which
falls in such year.
(2) If the Life Expectancy is a joint and last survivor
Life Expectancy based on the ages of the Participant
and the Participant's spouse, the Applicable Life
Expectancy is redetermined for each Distribution Year
based on the ages of the individuals on their
birthdays which fall in such year.
If the Designated Beneficiary is not the Participant's spouse,
the term certain method will apply to any Applicable Life
Expectancy which is based on the joint and last survivor Life
Expectancy of the Participant and the Designated Beneficiary,
or which is based on the single Life Expectancy of the
Designated Beneficiary. If the Designated Beneficiary is the
Participant's spouse, or if the Participant's (or surviving
spouse's) single life expectancy is the Applicable Life
Expectancy, the term certain method is used unless the
recalculation method is elected by the Participant (or by the
surviving spouse). An election to recalculate Life Expectancy
(or the failure to elect recalculation) shall be irrevocable
as to the Participant (or spouse) and shall apply to all
subsequent years.
(e) Life Expectancy. For purposes of determining a Participant's
required minimum distribution amount, Life Expectancy and
joint and last survivor Life Expectancy are computed using the
expected return multiples in Tables V and VI of ss.1.72-9 of
the Income Tax Regulations.
(f) Distribution Calendar Year. A calendar year for which a
minimum distribution is required. For distributions beginning
before the Participant's death, the first Distribution
Calendar Year is the calendar year immediately preceding the
calendar year which contains the Participant's Required
Beginning Date. For distributions beginning after the
Participant's death, the first Distribution Calendar Year is
the calendar year in which distributions are required to begin
pursuant to Section 10.2.
(g) Participant's Benefit. For purposes of determining a
Participant's required minimum distribution, the Participant's
Benefit is determined based on his/her Account Balance as of
the last Valuation Date in the calendar year immediately
preceding the Distribution Calendar Year increased by the
amount of any contributions or forfeitures allocated to the
Account Balance as of dates in the Distribution Calendar Year
after the valuation date and decreased by distributions made
in the Distribution Calendar Year after the Valuation Date.
If any portion of the minimum distribution for the first
Distribution Calendar Year is made in the second Distribution
Calendar Year on or before the Required Beginning Date, the
amount of the minimum distribution made in the second
Distribution Calendar Year shall be treated as if it had been
made in the immediately preceding Distribution Calendar Year.
10.4 SBJPA Elections. If this Plan is being restated to comply with the SBJPA
Legislation (as defined in Section 22.156), Part 13(c) of the Agreement permits
the Employer to designate how it operated this Plan in compliance with the
required minimum distribution rules for years prior to the date the Plan is
adopted.
<PAGE>
(a) Distributions under Old-Law Required Beginning Date rules.
Unless the Employer specifically elects to apply the Old-Law
Required Beginning Date rule under Part 13(c)(1) of the
Agreement, the Required Beginning Date rules (as described in
Section 10.3(a)(1)) apply. However, if prior to the adoption
of this Prototype Plan, the terms of the Plan reflect the
Old-Law Required Beginning Date, minimum distributions for
such years are required to be calculated in accordance with
that Old-Law Required Beginning Date, except to the extent any
operational elections described in (b) or (c) below applied.
(b) Option to postpone distributions. For calendar years beginning
after December 31, 1996 and prior to the restatement of this
Plan to comply with the SBJPA changes, the Plan may have
permitted Participants (other than Five-Percent Owners) who
would otherwise have begun receiving minimum distributions
under the terms of the Plan in effect for such years to
postpone receiving their minimum distributions until the
Required Beginning Date under Section 10.3(a)(1), even though
the terms of the Plan (prior to the restatement) did not
permit such an election. Part 13(c)(2)(i) of the Agreement
permits the Employer to specify the years during which
Participants were permitted to postpone receiving minimum
distributions under the Plan.
(c) Election to stop minimum required distributions. A
Participant (other than a Five-Percent Owner) who began
receiving minimum distributions in accordance with the
Old-Law Required Beginning Date rules under the Plan prior
to the date the Plan was amended to comply with the SBJPA
changes generally must continue to receive such minimum
distributions, even if the Participant is still employed
with the Employer. However, prior to the restatement of
this Plan to comply with the SBJPA changes, the Plan may
have permitted Participants to stop minimum distributions
if they had not reached the Required Beginning Date
described in Section 10.3(a)(1), even though the terms of
the Plan did not permit such an election. Under Part 13(c)
(2)(ii) of the Agreement, the Employer may designate the
year in which Participants were permitted to stop receiving
minimum distributions in accordance with this Section. A
Participant must recommence minimum distributions as required
under the Required Beginning Date rules applicable under this
restated Plan.
A Participant's election to stop and recommence distributions
is subject to the spousal consent requirements under Article
9, if the Plan is otherwise subject to the Joint and Survivor
Annuity requirements, and is subject to the terms of any
applicable QDRO. The manner in which the Plan must comply with
the spousal consent requirements depends on whether or not the
Employer elects under Part 13(c)(2)(iii) of the Agreement to
have the recommencement of benefit constitute a new
Distribution Commencement Date. If the Plan is not otherwise
subject to the Joint and Survivor Annuity requirements, Part
13(c)(2)(iii) need not be completed.
(1) New Distribution Commencement Date. If the Employer
elects under Part 13(c)(2)(iii)(A) of the Agreement
that recommencement of benefits will create a new
Distribution Commencement Date, no spousal consent is
required for a Participant to elect to stop
distributions, except where such distributions are
being paid in the form of a QJSA. Where such
distributions are being paid in the form of a QJSA,
in order to comply with this Section (1), the person
who was the Participant's spouse on the original
Distribution Commencement Date must consent to the
election to stop distributions and the spouse's
consent must acknowledge the effect of the election.
Because there is a new Distribution Commencement Date
upon recommencement of benefits, the Plan, in order
to satisfy this Section (1), must comply with all of
the requirements of Article 9 upon such
recommencement, including payment of a QPSA (as
defined in Section 9.4(b)) if the Participant dies
before the new Distribution Commencement Date.
<PAGE>
(2) No new Distribution Commencement Date. If the
Employer elects under Part 13(c)(2)(iii)(B) of the
Agreement that recommencement of benefits will not
create a new Distribution Commencement Date, no
spousal consent is required for the Participant to
elect to stop required minimum distributions prior to
retirement. In addition, no spousal consent is
required when payments recommence to the Participant
if:
(i) payments recommence to the Participant with
the same Beneficiary and in a form of
benefit that is the same but for the
cessation of distributions;
(ii) the individual who was the Participant's
spouse on the Distribution Commencement Date
executed a general consent within the
meaning of ss.1.401(a)-20, A-31 of the
regulations; or
(iii) the individual who was the Participant's
spouse on the Distribution Commencement Date
executed a specific consent to waive a QJSA
within the meaning of ss.1.401(a)-20, A-31,
and the Participant is not married to that
individual when benefits recommence.
To qualify under this Section (2), consent of the
individual who was the Participant's spouse on the
Distribution Commencement Date is required prior to
recommencement of distributions if the Participant
chooses to recommence benefits in a different form
than the form in which benefits were being
distributed prior to the cessation of distributions
or with a different Beneficiary. Consent of the
Participant's spouse is also required if the original
form of distribution was a QJSA (as defined in
Section 9.4(a)) or the spouse originally executed a
specific consent to waive the QJSA within the meaning
of ss.1.401(a)-20, A-31, of the regulations, and the
Participant is still married to that individual when
benefits recommence.
10.5 Transitional Rule.
The minimum distribution requirements in Section 10.2 do not apply if
distribution of the Participant's Account Balance is subject to a TEFRA
ss.242(b)(2) election. A TEFRA ss.242(b) election overrides the minimum required
distribution rules only if the following requirements are satisfied.
(a) The distribution by the Plan is one which would not have
disqualified the Plan under ss.401(a)(9) of the Code as in
effect prior to amendment by the Deficit Reduction Act of
1984.
(b) The distribution is in accordance with a method of
distribution designated by the Participant whose interest in
the Plan is being distributed or, if the Participant is
deceased, by a Beneficiary of such Participant.
(c) Such designation was in writing, was signed by the Participant
or the Beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of December
31, 1983.
<PAGE>
(e) The method of distribution designated by the Participant or
the Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made,
and in the case of any distribution upon the Participant's
death, the Beneficiaries of the Participant listed in order of
priority.
A distribution upon death will not be covered by this transitional rule unless
the information in the designation contains the required information described
above with respect to the distributions to be made upon the death of the
Participant.
For any distribution which commences before January 1, 1984, but continues after
December 31, 1983, the Participant, or the Beneficiary, to whom such
distribution is being made, will be presumed to have designated the method of
distribution under which the distribution is being made if the method of
distribution was specified in writing and the distribution satisfies the
requirements in Sections (a) and (e) above.
If a designation is revoked any subsequent distribution must satisfy the
requirements of Code ss.401(a)(9) and the proposed regulations thereunder. If a
designation is revoked subsequent to the date distributions are required to
begin, the Plan must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not yet
distributed which would have been required to have been distributed to satisfy
Code ss.401(a)(9) and the proposed regulations thereunder, but for the TEFRA
ss.242(b)(2) election. For calendar years beginning after December 31, 1988,
such distributions must meet the minimum distribution incidental benefit
requirements in ss.1.401(a)(9)-2 of the proposed regulations (or other
applicable regulations). Any changes in the designation will be considered to be
a revocation of the designation. However, the mere substitution or addition of
another Beneficiary (one not named in the designation) under the designation
will not be considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for example, by
altering the relevant measuring life). In the case in which an amount is
transferred or rolled over from one plan to another plan, the rules in Q&As J-2
and J-3 of ss.1.401(a)(9)-1 of the proposed regulations (or other applicable
regulations) shall apply.
<PAGE>
Article 11
Plan Administration and Special Operating Rules
This Article describes the duties and responsibilities of the Plan
Administrator. In addition, this Article sets forth default QDRO procedures and
benefit claims procedures, as well as special operating rules when an Employer
is a member of a Related Employer group and when there is a Short Plan Year.
Provisions related to Plan accounting and investments are contained in Article
13.
11.1 Plan Administrator. The Employer is the Plan Administrator, unless the
Employer designates in writing another person or persons as the Plan
Administrator. The Employer may designate the Plan Administrator by name, by
reference to the person or group of persons holding a certain position, by
reference to a procedure under which the Plan Administrator is designated, or by
reference to a person or group of persons charged with the specific
responsibilities of Plan Administrator. If any Related Employer has executed a
Co-Sponsor Adoption Page, the Employer referred to in this Section is the
Employer that executes the Signature Page of the Agreement.
(a) Acceptance of responsibility by designated Plan Administrator.
If the Employer designates a Plan Administrator other than
itself, the designated Plan Administrator must accept its
responsibilities in writing. The designated Plan Administrator
will serve in a manner and for the time period as agreed upon
with the Employer. If more than one person has the
responsibility of Plan Administrator, the group shall act by
majority vote, but may designate specific persons to act on
the Plan Administrator's behalf.
(b) Resignation of designated Plan Administrator. A designated
Plan Administrator may resign by delivering a written
resignation to the Employer. The Employer may remove a
designated Plan Administrator by delivering a written notice
of removal. If a designated Plan Administrator resigns or is
removed, and no new Plan Administrator is designated, the
Employer is the Plan Administrator.
(c) Named Fiduciary. The Plan Administrator is the Plan's Named
Fiduciary, unless the Plan Administrator specifically names
another person as Named Fiduciary.
11.2 Duties and Powers of the Plan Administrator. The Plan Administrator will
administer the Plan for the exclusive benefit of the Plan Participants and
Beneficiaries, and in accordance with the terms of the Plan. To the extent the
terms of the Plan are unclear, the Plan Administrator may interpret the Plan,
provided such interpretation is consistent with the rules of ERISA and Code
ss.401 and is performed in a uniform and nondiscriminatory manner. This right to
interpret the Plan is an express grant of discretionary authority to resolve
ambiguities in the Plan document and to make discretionary decisions regarding
the interpretation of the Plan's terms, including who is eligible to participate
under the Plan, and the benefit rights of a Participant or Beneficiary. The Plan
Administrator will not be held liable for any interpretation of the Plan terms
or decision regarding the application of a Plan provision provided such
interpretation or decision is not arbitrary or capricious.
(a) Delegation of duties and powers. To the extent provided for in
an agreement with the Employer, the Plan Administrator may
delegate its duties and powers to one or more persons. Such
delegation must be in writing and accepted by the person or
persons receiving the delegation.
(b) Specific duties and powers. The Plan Administrator has the
general responsibility to control and manage the operation of
the Plan. This responsibility includes, but is not limited to,
the following:
<PAGE>
(1) To construe and enforce the terms of the Plan,
including those related to Plan eligibility, vesting
and benefits;
(2) To develop separate procedures, consistent with the
terms of the Plan, to assist in the administration of
the Plan, including the adoption of separate or
modified loan policy procedures (see Article 14),
procedures for direction of investment by
Participants (see Section 13.5(c)), procedures for
determining whether domestic relations orders are
QDROs (see Section 11.5), and procedures for the
proper determination of investment earnings to be
allocated to Participants' Accounts (see Section
13.4);
(3) To communicate with the Trustee and other responsible
persons with respect to the crediting of Plan
contributions, the disbursement of Plan distributions
and other relevant matters;
(4) To maintain all necessary records which may be
required for tax and other administration purposes;
(5) To furnish and to file all appropriate notices,
reports and other information to Participants,
Beneficiaries, the Employer, the Trustee and
government agencies (as necessary);
(6) To answer questions Participants and Beneficiaries
may have relating to the Plan and their benefits;
(7) To review and decide on claims for benefits under
the Plan;
(8) To retain the services of other persons, including
investment managers, attorneys, consultants, advisors
and others, to assist in the administration of the
plan;
(9) To correct any defect or error in the administration
of the Plan; and
(10) To establish a "funding policy and method" for the
Plan for purposes of ensuring the Plan is satisfying
its financial objectives and is able to meet its
liquidity needs.
(11) To suspend contributions, including Section 401(k)
Deferrals and/or Employee After-Tax Contributions, on
behalf of any or all Highly Compensated Employees, if
the Plan Administrator reasonably believes that such
contributions will cause the Plan to discriminate in
favor of Highly Compensated Employees. See Sections
17.2(e) and 17.3(e).
11.3 Employer Responsibilities. The Employer will provide in a timely manner all
appropriate information necessary for the Plan Administrator to perform its
duties. This information includes, but is not limited to, Participant
compensation data, Employee employment, service and termination information, and
other information the Plan Administrator may require. The Plan Administrator may
rely on the accuracy of any information and data provided by the Employer.
11.4 Plan Administration Expenses. All reasonable expenses related to plan
administration will be paid from Plan assets, except to the extent the expenses
are paid by the Employer.
<PAGE>
11.5 Qualified Domestic Relations Orders (QDROs).
(a) In general. The Plan Administrator must develop written
procedures for determining whether a domestic relations order
is a QDRO and for administering distributions under a QDRO.
For this purpose, the Plan Administrator may use the default
QDRO procedures set forth in Section (h) below or may develop
separate QDRO procedures.
(b) Qualified Domestic Relations Order (QDRO). A QDRO is a
domestic relations order that creates or recognizes the
existence of an Alternate Payee's right to receive, or assigns
to an Alternate Payee the right to receive, all or a portion
of the benefits payable with respect to a Participant under
the Plan. The QDRO must contain certain information and meet
other requirements described in this Section 11.5.
(c) Recognition as a QDRO. To be recognized as a QDRO, an order
must be a "domestic relations order" that relates to the
provision of child support, alimony payments, or marital
property rights for the benefit of an Alternate Payee. The
Plan Administrator is not required to determine whether the
court or agency issuing the domestic relations order had
jurisdiction to issue an order, whether state law is correctly
applied in the order, whether service was properly made on the
parties, or whether an individual identified in an order as an
Alternate Payee is a proper Alternate Payee under state law.
(1) Domestic relations order. A domestic relations order
is a judgment, decree, or order (including the
approval of a property settlement) that is made
pursuant to state domestic relations law (including
community property law).
(2) Alternate Payee. An Alternate Payee must be a
spouse, former spouse, child, or other dependent
of a Participant.
(d) Contents of QDRO. A QDRO must contain the following
information:
(1) the name and last known mailing address of the
Participant and each Alternate Payee;
(2) the name of each plan to which the order applies;
(3) the dollar amount or percentage (or the method of
determining the amount or percentage) of the benefit
tobe paid to the Alternate Payee; and
(4) the number of payments or time period to which the
order applies.
(e) Impermissible QDRO provisions.
(1) The order must not require the Plan to provide an
Alternate Payee or Participant with any type or form
of benefit, or any option, not otherwise provided
under the Plan;
(2) The order must not require the Plan to provide for
increased benefits (determined on the basis of
actuarial value);
(3) The order must not require the Plan to pay benefits
to an Alternate Payee that are required to be paid to
another Alternate Payee under another order
previously determined to be a QDRO; and
<PAGE>
(4) The order must not require the Plan to pay benefits
to an Alternate Payee in the form of a Qualified
Joint and Survivor Annuity for the lives of the
Alternate Payee and his or her subsequent spouse.
(f) Immediate distribution to Alternate Payee. Even if a
Participant is not eligible to receive an immediate
distribution from the Plan, an Alternate Payee may receive a
QDRO benefit immediately in a lump sum, provided such
distribution is consistent with the QDRO provisions.
(g) No fee for QDRO determination. The Plan Administrator shall
not condition the making of a QDRO determination on the
payment of a fee by a Participant or an Alternate Payee
(either directly or as a charge against the Participant's
Account).
(h) Default QDRO procedure. If the Plan Administrator chooses this
default QDRO procedure or if the Plan Administrator does not
establish a separate QDRO procedure, this Section 11.5(h) will
apply as the procedure the Plan Administrator will use to
determine whether a domestic relations order is a QDRO. This
default QDRO procedure incorporates the requirements set forth
under Sections 11.5(a) through (g).
(1) Access to information. The Plan Administrator will
provide access to Plan and Participant benefit
information sufficient for a prospective Alternate
Payee to prepare a QDRO. Such information might
include the summary plan description, other relevant
plan documents, and a statement of the Participant's
benefit entitlements. The disclosure of this
information is conditioned on the prospective
Alternate Payee providing to the Plan Administrator
information sufficient to reasonably establish that
the disclosure request is being made in connection
with a domestic relations order.
(2) Notifications to Participant and Alternate Payee. The
Plan Administrator will promptly notify the affected
Participant and each Alternate Payee named in the
domestic relations order of the receipt of the order.
The Plan Administrator will send the notification to
the address included in the domestic relations order.
Along with the notification, the Plan Administrator
will provide a copy of the Plan's procedures for
determining whether a domestic relations order is a
QDRO.
(3) Alternate Payee representative. The prospective
Alternate Payee may designate a representative to
receive copies of notices and Plan information that
are sent to the Alternate Payee with respect to the
domestic relations order.
(4) Evaluation of domestic relations order. Within a
reasonable period of time, the Plan Administrator
will evaluate the domestic relations order to
determine whether it is a QDRO. A reasonable period
will depend on the specific circumstances. The
domestic relations order must contain the information
described in Section 11.5(c). If the order is only
deficient in a minor respect, the Plan Administrator
may supplement information in the order from
information within the Plan Administrator's control
or through communication with the prospective
Alternate Payee.
(i) Separate accounting. Upon receipt of a
domestic relations order, the Plan
Administrator will separately account for
and preserve the amounts that would be
payable to an Alternate Payee until a
determination is made with respect to the
status of the order. During the period in
which the status of the order is being
determined, the Plan Administrator will
take whatever steps are necessary to ensure
that amounts that would be payable to the
Alternate Payee, if the order were a QDRO,
are not distributed to the Participant or
any other person. The separate accounting
requirement may be satisfied, at the Plan
Administrator's discretion, by a
segregation of the assets that are subject
to separate accounting.
<PAGE>
(ii) Separate accounting until the end of "18
month period." The Plan Administrator will
continue to separately account for amounts
that are payable under the QDRO until the
end of an "18-month period." The "18-month
period" will begin on the first date
following the Plan's receipt of the order
upon which a payment would be required to be
made to an Alternate Payee under the order.
If, within the "18-month period," the Plan
Administrator determines that the order is
a QDRO, the Plan Administrator must pay the
Alternate Payee in accordance with the
terms of the QDRO. If, however, the Plan
Administrator determines within the "18-
month period" that the order is not a QDRO,
or if the status of the order is not
resolved by the end of the "18-month period,
" the Plan Administrator may pay out the
amounts otherwise payable under the order
to the person or persons who would have
been entitled to such amounts if there had
been no order. If the order is later
determined to be a QDRO, the order will
apply only prospectively; that is, the
Alternate Payee will be entitled only to
amounts payable under the order after the
subsequent determination.
(iii) Preliminary review. The Plan Administrator
will perform a preliminary review of the
domestic relations order to determine if it
is a QDRO. If this preliminary review
indicates the order is deficient in some
manner, the Plan Administrator will allow
the parties to attempt to correct any
deficiency before issuing a final decision
on the domestic relations order. The ability
to correct is limited to a reasonable period
of time.
(iv) Notification of determination. The Plan
Administrator will notify in writing the
Participant and each Alternate Payee of the
Plan Administrator's decision as to whether
a domestic relations order is a QDRO. In the
case of a determination that an order is not
a QDRO, the written notice will contain the
following information:
(A) references to the Plan provisions on
which the Plan Administrator based
its decision;
(B) an explanation of any time limits
that apply to rights available to
the parties under the Plan (such as
the duration of any protective
actions the Plan Administrator will
take); and
(C) a description of any additional
material, information, or
modifications necessary for the
order to be a QDRO and an
explanation of why such material,
information, or modifications are
necessary.
(v) Treatment of Alternate Payee. If an order is
accepted as a QDRO, the Plan Administrator
will act in accordance with the terms of the
QDRO as if it were a part of the Plan. An
Alternate Payee will be considered a
Beneficiary under the Plan and be afforded
the same rights as a Beneficiary. The Plan
Administrator will provide any appropriate
disclosure information relating to the Plan
to the Alternate Payee.
<PAGE>
11.6 Claims Procedure. Unless the Plan uses the default claims procedure under
Section (e) below, the Plan Administrator shall establish a procedure for
benefit claims consistent with the requirements of ERISA Reg. ss.2560.503-1.The
Plan Administrator is authorized to conduct an examination of the relevant facts
to determine the merits of a Participant's or Beneficiary's claim for Plan
benefits. The claims procedure must incorporate the following guidelines:
(a) Filing a claim. The claims procedure will set forth a
reasonable means for a Participant or Beneficiary to file a
claim for benefits under the Plan.
(b) Notification of Plan Administrator's decision. The Plan
Administrator must provide a claimant with written
notification of the Plan Administrator's decision relating to
a claim within a reasonable period of time (not more than 90
days unless special circumstances require an extension to
process the claim) after the claim was filed. If the claim is
denied, the notification must set forth the reasons for the
denial, specific reference to pertinent Plan provisions on
which the denial is based, a description of any additional
information necessary for the claimant to perfect the claim,
and the steps the claimant must take to submit the claim for
review.
(c) Review procedure. The claims procedure will provide a claimant
a reasonable opportunity to have a full and fair review of a
denied claim. Such procedure shall allow a review upon a
written application, for the claimant to review pertinent
documents, and to allow the claimant to submit written
comments to the Plan Administrator. The procedure may
establish a limited period (not less than 60 days after the
claimant receives written notification of the denial of the
claim) for the claimant to request a review of the claim
denial.
(d) Decision on review. If a claimant requests a review, the Plan
Administrator must respond promptly to the request. Unless
special circumstances exist (such as the need for a hearing),
the Plan Administrator must respond in writing within 60 days
of date the claimant submitted the review application. The
response must explain the Plan Administrator's decision on
review.
(e) Default claims procedure. If the Plan Administrator chooses
this default claims procedure or if the Plan Administrator
does not establish a separate claims procedure, the following
will apply.
(1) A person may submit to the Plan Administrator a
written claim for benefits under the Plan. The claim
shall be submitted on a form provided by the Plan
Administrator.
(2) The Plan Administrator will evaluate the claim to
determine if benefits are payable to the Participant
or Beneficiary under the terms of the Plan. The Plan
Administrator may solicit additional information from
the claimant if necessary to evaluate the claim.
(3) If the Plan Administrator determines the claim is
valid, the Participant or Beneficiary will receive in
writing from the Plan Administrator a statement
describing the amount of benefit, the method or
methods of payment, the timing of distributions and
other information relevant to the payment of the
benefit.
(4) If the Plan Administrator denies all or any portion
of the claim, the claimant will receive, within 90
days after receipt of the claim form, a written
explanation setting forth the reasons for the denial,
specific reference to pertinent Plan provisions on
which the denial is based, a description of any
additional information necessary for the claimant to
perfect the claim, and the steps the claimant must
take to submit the claim for review.
<PAGE>
(5) The claimant has 60 days from the date the claimant
received the denial of claim to appeal the adverse
decision of the Plan Administrator. The claimant may
review pertinent documents and submit written
comments to the Plan Administrator. The Plan
Administrator will submit all relevant documentation
to the Employer. The Employer may hold a hearing or
seek additional information from the claimant and the
Plan Administrator.
(6) Within 60 days (or such longer period due to the
circumstances) of the request for review, the
Employer will render a written decision on the
claimant's appeal. The Employer shall explain the
decision, in terms that are understandable to the
claimant and by specific references to the Plan
document provisions.
11.7 Operational Rules for Short Plan Years. The following operational rules
apply if the Plan has a Short Plan Year. A Short Plan Year is any Plan Year that
is less than a 12-month period, either because of the amendment of the Plan
Year, or because the Effective Date of a new Plan is less than 12 months prior
to the end of the first Plan Year.
(a) If an Eligibility Computation Period or Vesting Computation
Period is based on the Plan Year, the applicable computation
period begins on the first day of the Short Plan Year, but
such period ends on the day which is 12 months from the first
day of such Short Plan Year. Thus, the computation period that
begins on the first day of the Short Plan Year overlaps with
the computation period that starts on the first day of the
next Plan Year. This rule applies only to an Employee who has
at least one Hour of Service during the Short Plan Year.
(b) If the Short Plan Year is an allocation period for any
Employer Contributions, any Hours of Service requirement for
an allocation of such Employer Contributions will not be
prorated unless otherwise specified in Part 4 of the
Agreement.
(c) If the Permitted Disparity Method is used to allocate any
Employer Contributions made for a Short Plan Year, the
Integration Level will be prorated to reflect the number of
months (or partial months) included in the Short Plan Year.
(d) The Compensation Dollar Limitation, as defined in Section
22.30, will be prorated to reflect the number of months (or
partial months) included in the Short Plan Year unless the
compensation used for such Short Plan Year is a period of 12
months.
In all other respects, the Plan shall be operated for the Short Plan Year in the
same manner as for a 12-month Plan Year, unless the context requires otherwise.
If the terms of the Plan are ambiguous with respect to the operation of the Plan
for a Short Plan Year, the Plan Administrator has the authority to make a final
determination on the proper interpretation of the Plan.
11.8 Operational Rules for Related Employer Groups. If an Employer has one or
more Related Employers, the Employer and such Related Employer(s) constitute a
Related Employer group. In such case, the following rules apply to the operation
of the Plan.
(a) If the term "Employer" is used in the context of
administrative functions necessary to the operation,
establishment, maintenance, or termination of the Plan, only
the Employer executing the Signature Page of the Agreement,
and any Co-Sponsor of the Plan, is treated as the Employer.
<PAGE>
(b) Hours of Service are determined by treating all members of the
Related Employer group as the Employer.
(c) The term Excluded Employee is determined by treating all
members of the Related Employer group as the Employer, except
as specifically provided in the Plan.
(d) Compensation is determined by treating all members of the
Related Employer group as the Employer, except as specifically
provided in the Plan.
(e) An Employee is not treated as separated from service or
terminated from employment if the Employee is employed by any
member of the Related Employer group.
(f) The Annual Additions Limitation described in Article 7 and the
Top-Heavy Plan rules described in Article 16 are applied by
treating all members of the Related Employer group as the
Employer.
In all other contexts, the term "Employer" generally means a reference to all
members of the Related Employer group, unless the context requires otherwise. If
the terms of the Plan are ambiguous with respect to the treatment of the Related
Employer group as the Employer, the Plan Administrator has the authority to make
a final determination on the proper interpretation of the Plan.
<PAGE>
Article 12
Trust Provisions
This Article sets forth the creation of the Plan's Trust and the duties and
responsibilities of the Trustee under the Plan. By executing the Trustee
Designation under the Agreement, the Trustee agrees to be bound by the duties,
responsibilities and liabilities imposed on the Trustee under the Plan and to
act in accordance with the terms of this Plan. The Employer may act as Trustee
under the Plan by executing the Trustee Designation.
12.1 Creation of Trust. By adopting this Plan, the Employer creates a Trust to
hold the assets of the Plan. The Trustee is the owner of the Plan assets held by
the Trust. The Trustee is to hold the Plan assets for the exclusive benefit of
Plan Participants and Beneficiaries. Plan Participants and Beneficiaries do not
have ownership interests in the assets held by the Trust.
12.2 Trustee. The Trustee identified in the Trustee Declaration under the
Agreement may act either as a Discretionary Trustee or as a Directed Trustee.
Regardless of which type of designation is selected, the Trustee will not be
liable for any actions it takes in reliance upon the written instructions or
directions of the Plan Administrator, the Employer, a properly appointed
investment manager, or other Named Fiduciary. In addition, if the Trustee
follows the proper investment direction of a Participant, the Trustee will not
be liable for any consequences of such direction, to the extent the requirements
of ERISA ss.404(c), as described in Section 13.5(c)(2), are met.
(a) Discretionary Trustee. A Discretionary Trustee has
discretionary authority with respect to the investment of Plan
assets. Notwithstanding a Trustee's designation as a
discretionary Trustee, a Trustee's discretion is limited to
the extent Participants are permitted to give investment
direction, or other third parties are given the right to
direct the Trustee under an agreement between the Plan
Administrator and the Trustee.
(b) Directed Trustee. A Directed Trustee does not have any
discretionary authority with respect to the investment of Plan
assets. The Trustee must act solely within the written
direction of the Plan Administrator, the Employer, a properly
appointed investment manager, or a Named Fiduciary. In
addition, the Trustee may follow the proper investment
direction of a Participant.
12.3 Responsibilities of Trustee. The Trustee shall be responsible for the
safekeeping of the assets of the Trust in accordance with the provisions of this
Plan. This Section outlines the Trustee's powers, rights and duties under the
Plan. In addition to the powers, rights and duties enumerated under this
Section, the Trustee has whatever powers are necessary to carry out its duties
in a prudent manner. The Trustee's powers, rights and duties may be supplemented
or limited by a separate trust agreement, investment policy, funding agreement,
or other binding document entered into between the Trustee and the Plan
Administrator which designates the Trustee's responsibilities with respect to
the Plan. A separate trust agreement must be consistent with the terms of this
Plan and must comply with all qualification requirements under the Code and
regulations. To the extent the exercise of any power, right or duty is subject
to discretion, such exercise by a Directed Trustee must be made at the direction
of the Plan Administrator, the Employer, a Participant or other Named Fiduciary.
(a) The Trustee may invest, manage and control the Plan assets in
a manner which is consistent with the Plan's funding policy
and investment objectives. The Trustee may invest in any
investment, as authorized under Section 13.5, which the
Trustee deems advisable and prudent, subject to the proper
written direction of the Plan Administrator, the Employer, a
properly appointed investment manager, a Participant or a
Named Fiduciary.
<PAGE>
(b) The Trustee will receive all contributions made under the
terms of the Plan. The Trustee is not obligated in any manner
to ensure that such contributions are correct in amount or
that such contributions comply with the terms of the Plan. In
addition, the Trustee is under no obligation to request that
the Employer make contributions to the Plan. The Trustee is
not liable for the manner in which such amounts are deposited
or the allocation between Participant's Accounts, to the
extent the Trustee follows the written direction of the Plan
Administrator.
(c) The Trustee will make distributions from the Trust in
accordance with the written directions of the Plan
Administrator or other authorized representative. To the
extent the Trustee follows such written direction, the
Trustee is not obligated in any manner to ensure a distri-
bution complies with the terms of the Plan, that a
Participant or Beneficiary is entitled to such a distri-
bution, or that the amount distributed is proper under the
terms of the Plan. If there is a dispute as to a payment from
the Trust, the Trustee may decline to make payment of
such amounts until the proper payment of such amounts is
determined by a court of competent jurisdiction, or the
Trustee has been indemnified to its satisfaction, or the Plan
Administrator directs the Trustee, in writing,
regarding the distribution of such disputed amounts.
(d) The Trustee may retain such portion of the Plan assets 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.
(e) The Trustee may collect and receive any and all monies and
other property due the Plan and to settle, compromise, or
submit to arbitration any claims, debts, or damages with
respect to the Plan, and to commence or defend on behalf of
the Plan any lawsuit, or other legal or administrative
proceedings.
(f) The Trustee may hold any securities or other property in the
name of the Trustee or in the name of the Trustee's nominee,
and may hold any investments in bearer form, provided the
books and records of the Trustee at all times show such
investment to be part of the Trust.
(g) The Trustee may exercise any of the powers of an individual
owner with respect to stocks, bonds, securities or other
property, including the right to vote upon such stocks, bonds
or securities; to give general or special proxies or powers of
attorney; to exercise or sell any conversion privileges,
subscription rights, or other options; to participate in
corporate reorganizations, mergers, consolidations, or other
changes affecting corporate securities; and to make any
incidental payments in connection with such stocks, bonds,
securities or other property.
(h) The Trustee may borrow or raise money on behalf of the Plan in
such amount, and upon such terms and conditions, as the
Trustee deems advisable. The Trustee may issue a promissory
note as Trustee to secure the repayment of such amounts and
may pledge all, or any part, of the Trust as security.
(i) The Trustee may employ agents, attorneys, accountants and
other third parties to provide counsel on behalf of the Plan,
where the Trustee deems advisable. The Trustee may reimburse
such persons from the Trust for reasonable expenses and
compensation incurred as a result of such employment. The
Trustee shall not be liable for the actions of such persons,
provided the Trustee acted prudently in the employment and
retention of such persons. In addition, the Trustee will not
be liable for any actions taken as a result of good faith
reliance on the advice of such persons.
<PAGE>
(j) The Trustee is authorized to enter into a transfer agreement
with the Trustee of another qualified retirement plan and to
accept a transfer of assets from such retirement plan on
behalf of any Employee of the Employer. The Trustee is also
authorized, upon the written direction of the Plan
Administrator, to transfer some or all of a Participant's
vested Account Balance to another qualified retirement plan on
behalf of such Participant. A transfer agreement entered into
by the Trustee does not affect the Plan's status as a
Prototype Plan.
(k) The Trustee is authorized to execute, acknowledge and deliver
all documents of transfer and conveyance, receipts, releases,
and any other instruments that the Trustee deems necessary or
appropriate to carry out its powers, rights and duties
hereunder.
(l) If the Employer maintains more than one Plan, the assets of
such Plans may be commingled for investment purposes. The
Trustee must separately account for the assets of each Plan
and the value of the Accounts of each Participant in each
Plan. A commingling of assets, as described in this paragraph,
does not cause the Trusts maintained with respect to the
Employer's Plans to be treated as a single Trust, except as
provided in a separate document authorized in the first
paragraph of this Section 12.3.
(m) The Trustee is authorized to invest Plan assets in a
common/collective trust fund, or in a group trust fund which
satisfies the requirements of IRS Revenue Ruling 81-100.
(n) If the Trustee is a bank or similar financial institution, the
Trustee is authorized to invest in any type of deposit of the
Trustee (including its own money market fund) at a reasonable
rate of interest.
(o) The Trustee will prepare and file all tax forms and returns
for which the Trustee is responsible.
(p) The Trustee must be bonded as required by applicable law.
12.4 More than One Person as Trustee. If the Plan has more than one person
acting as Trustee, the Trustees may allocate the Trustee responsibilities by
mutual agreement and Trustee decisions will be made by a majority vote (unless
otherwise agreed to by the Trustees) or as otherwise provided in a separate
trust agreement or other binding document.
12.5 Annual Valuation. The Trust assets will be valued at least on an annual
basis. The Employer may indicate its intention to value Plan assets on a more
frequent basis under Part 12(d) of the Agreement. The Trustee will follow the
direction of the Plan Administrator to value the Trust on a more frequent basis,
and will perform an interim valuation of the Trust, if requested to do so by the
Plan Administrator, pursuant to 13.2(a).
12.6 Reporting to Plan Administrator and Employer. Within a reasonable period
following the end of each Plan Year, the Trustee will report to the Plan
Administrator and Employer all receipts, disbursements and other transactions
effected by the Trustee during the Year, the net income or loss of the Trust for
the Plan Year, and such further information as the Trustee and/or Plan
Administrator deems appropriate. Upon receipt of such information, the Plan
Administrator must promptly notify the Trustee of its approval or disapproval of
the information. If the Plan Administrator does not provide a written
disapproval within ninety (90) days following the receipt of the information,
the Trustee is forever released and discharged from any liability with respect
to all matters reflected in such information.
<PAGE>
12.7 Reasonable Compensation. The Trustee shall be paid reasonable compensation
in an amount agreed upon by the Plan Administrator and Trustee. The Trustee will
also be reimbursed for any reasonable expenses or fees incurred in its function
as Trustee. An individual Trustee who is already receiving full-time pay as an
Employee of the Employer may not receive any additional compensation for
services as Trustee. The Plan will pay the reasonable compensation and expenses
incurred by the Trustee, pursuant to Section 11.4, unless the Employer pays such
compensation and expenses. Any compensation or expense paid directly by the
Employer to the Trustee is not an Employer Contribution to the Plan.
12.8 Resignation and Removal of Trustee. The Trustee may resign at any time by
delivering to the Employer a written notice of resignation at least thirty (30)
days prior to the effective date of such resignation. The Plan Administrator may
remove the Trustee at any time, with or without cause, by delivering written
notice to the Trustee at least 30 days prior to the effective date of such
removal. Upon the resignation, removal, death or incapacity of a Trustee, the
Plan Administrator may appoint a successor Trustee which, upon accepting such
appointment, will have all the powers, rights and duties conferred upon the
preceding Trustee. In the event there is a period of time following the
effective date of a Trustee's removal or resignation before a successor Trustee
is appointed, the Employer is deemed to be the Trustee. During such period, the
Trust continues to be in existence and legally enforceable, and the assets of
the Plan shall continue to be protected by the provisions of the Trust.
12.9 Indemnification of Trustee. The Employer agrees to indemnify and hold
harmless the Trustee against any and all claims, losses, damages, expenses and
liabilities for any action taken or omitted by the Trustee pursuant to the
written direction of the Plan Administrator, the Employer, a Named Fiduciary, or
other third party with authority to provide direction to the Trustee.
12.10 Appointment of Custodian. The Plan Administrator may appoint a Custodian
to hold all or any portion of the Plan assets. A Custodian has the same powers,
rights and duties as a Directed Trustee. The Custodian will be protected from
any liability with respect to actions taken pursuant to the written direction of
the Plan Administrator, the Employer, a Named Fiduciary or other third party
with authority to provide direction to the Custodian.
<PAGE>
Article 13
Plan Accounting and Investments
This Article contains the procedures for valuing Participant Accounts and
allocating net income and loss to such Accounts. Part 12 of the Agreement
permits the Employer to document its administrative procedures with respect to
the valuation of Participant Accounts. Alternatively, the Plan Administrator may
adopt separate investment procedures regarding the valuation and investment of
Participant Accounts.
13.1 Participant Accounts. The Plan Administrator will establish and maintain a
separate Account for each Participant to reflect the Participant's entire
interest under the Plan. To the extent applicable, the Plan Administrator may
establish and maintain for a Participant any (or all) of the following separate
sub-Accounts: Employer Contribution Account, Section 401(k) Deferral Account,
Employer Matching Contribution Account, QMAC Account, QNEC Account, Employee
After-Tax Contribution Account, Safe Harbor Matching Contribution Account, Safe
Harbor Nonelective Contribution Account, Rollover Account, and Transfer Account.
The Plan Administrator also may establish and maintain other sub-Accounts as it
deems appropriate.
13.2 Value of Participant Accounts. The value of a Participant's Account
consists of the fair market value of the Participant's share of the Trust
assets. A Participant's share of the Trust assets is determined as of each
Valuation Date under the Plan.
(a) Periodic valuation. The Trustee must value Plan assets at
least annually. The Employer may elect under Part 12(d)(2) of
the Agreement (or elect operationally) to value assets more
frequently than annually. The Plan Administrator may request
the Trustee to perform interim valuations, provided such
valuations do not result in discrimination in favor of Highly
Compensated Employees.
(b) Daily valuation. If the Employer elects daily valuation under
Part 12(c) of the Agreement (or, if in operation, elects to
have the Plan daily valued), the Plan Administrator may adopt
reasonable procedures for performing such valuations. Unless
otherwise set forth in the written procedures, a daily valued
Plan will have its assets valued at the end of each business
day during which the New York Stock Exchange is open. The Plan
Administrator has authority to interpret the provisions of
this Plan in the context of a daily valuation procedure. This
includes, but is not limited to, the determination of the
value of the Participant's Account for purposes of Participant
loans, distribution and consent rights, and corrective
distributions under Article 17.
13.3 Adjustments to Participant Accounts. As of each Valuation Date under the
Plan, each Participant's Account is adjusted in the following manner.
(a) Distributions and forfeitures from a Participant's Account. A
Participant's Account will be reduced by any distributions and
forfeitures from the Account since the previous Valuation
Date.
(b) Life insurance premiums and dividends. A Participant's Account
will be reduced by the amount of any life insurance premium
payments made for the benefit of the Participant since the
previous Valuation Date. The Account will be credited with any
dividends paid on any life insurance policy held by the Trust
for the benefit of the Participant. Life insurance policies
are not taken into account in making the adjustments under (c)
and (d) below.
<PAGE>
(c) Net income or loss attributable to General Trust Account. To
the extent a Participant's Account is invested as part of a
General Trust Account, such Account is adjusted for its
allocable share of net income or loss experienced by the
General Trust Account using the Balance Forward Method. Under
the Balance Forward Method, the net income or loss of the
General Trust Account is allocated on a pro rata basis to the
Participant Accounts that are invested in the General Trust
Account, based on the value of each Participant's Account as
of the prior Valuation Date, reduced for the adjustments
described in (a) and (b) above. (See Section 13.4 for
procedures for determining net income or loss.)
(d) Net income or loss attributable to a Directed Account. If
the Participant (or Beneficiary) is entitled to direct the
investment of all or part of his/her Account (see Section
13.5(c)), the Account (or the portion of the Account which
is subject to such direction) will be maintained as a
Directed Account, which reflects the value of the directed
investments as of any Valuation Date. The assets held in a
Directed Account may be (but are not required to be)
segregated from the other investments held in the Trust. Net
income or loss attributable to the investments made by
a Directed Account is allocated to such Account in a manner
that reasonably reflects the investment experience of
such Directed Account. Where a Directed Account reflects
segregated investments, the manner of allocating net income
or loss shall not result in a Participant (or Beneficiary)
being entitled to distribution from the Directed Account
that exceeds the value of such Account as of the date of
distribution. (See Section 13.4 for procedures for
determining net income or loss.)
(e) Contributions and forfeitures allocated to a Participant's
Account. A Participant's Account will be credited with any
contribution or forfeiture allocated to the Participant since
the previous Valuation Date.
13.4 Procedures for Determining Net Income or Loss. The Plan Administrator may
establish any reasonable procedures for determining net income or loss under
Section 13.3. Such procedures may be reflected in a funding agreement governing
the applicable investments under the Plan.
(a) Special allocation rules. In applying the Balance Forward
Method for allocating net income or loss under Section
13.3(c), the Employer may elect under Part 12(d)(3) of the
Agreement (or under separate administrative procedures)
to adjust each Participant's Account Balance (as of the prior
Valuation Date) for the following contributions made since
the prior Valuation Date (the "valuation period") which were
not reflected in the Participant's Account on such prior
Valuation Date: (1) Section 401(k) Deferrals and Employee
After-Tax Contributions that are contributed during the
valuation period pursuant to the Participant's contribution
election, and (2) Employer Contributions (including Employer
Matching Contributions) that are contributed during the
valuation period and allocated to a Participant's Account
during the valuation period. In determining Participants'
Account Balances as of the prior Valuation Date, the Employer
may elect to apply a weighted average method, that credits
each Participant's Account with a portion of the
contributions based on the portion of the valuation period
for which such contributions were invested, or an adjusted
percentage method, that increases each Participant's Account
by a specified percentage of such contributions. The Employer
may designate under Part 12(d)(3)(iii) of the Agreement to
apply the special allocation rules to only particular types
of contributions or may designate any other reasonable method
for allocating net income and loss under the Plan.
<PAGE>
(1) Weighted average method. The Employer may elect under
Part 12(d)(3)(i) of the Agreement (or under separate
administrative procedures) to apply a weighted
average method in determining net income or loss.
Under the weighted average method, a Participant's
Account Balance as of the prior Valuation Date is
adjusted to take into account a portion of the
contributions made during the valuation period so
that the Participant may receive an allocation of net
income or loss for the portion of the valuation
period during which such contributions were invested
under the Plan. The amount of the adjustment to a
Participant's Account Balance is determined by
multiplying the contributions made to the
Participant's Account during the valuation period by
a fraction, the numerator of which is the number of
months during the valuation period that such
contributions were invested under the Plan and the
denominator is the total number of months in the
valuation period. The Plan's investment procedures
may designate the specific type(s) of contributions
eligible for a weighted allocation of net income or
loss and may designate alternative methods for
determining the weighted allocation, including the
use of a uniform weighting period other than months.
(2) Adjusted percentage method. The Employer may elect
under Part 12(d)(3)(ii) of the Agreement (or under
separate investment procedures) to apply an adjusted
percentage method of allocating net income or loss.
Under the adjusted percentage method, a Participant's
Account Balance as of the prior Valuation Date is
increased by a percentage of the contributions made
to the Participant's Account during the valuation
period. The Plan's investment procedures may
designate the specific type(s) of contributions
eligible for an adjusted percentage allocation and
may designate alternative procedures for determining
the amount of the adjusted percentage allocation.
(b) Share or unit accounting. The Plan's investment procedures may
provide for share or unit accounting to reflect the value of
Accounts, if such method is appropriate for the investments
allocable to such Accounts.
(c) Suspense accounts. The Plan's investment procedures also may
provide for special valuation procedures for suspense accounts
that are properly established under the Plan.
13.5 Investments under the Plan.
(a) Investment options. The Trustee or other person(s) responsible
for the investment of Plan assets is authorized to invest
Plan assets in any prudent investment consistent with the
funding policy of the Plan and the requirements of ERISA.
Investment options include, but are not limited to, the
following: common and preferred stock (including stock bought
and sold on margin); Qualifying Employer Securities and
Qualifying Employer Real Property (to the extent permitted
under (b) below), corporate bonds; mutual funds; money market
accounts; certificates of deposit; debentures; commercial
paper; put and call options; limited partnerships; mortgages;
U.S. Government obligations, including U.S. Treasury notes
and bonds; real and personal property; life insurance
policies; commodities; savings accounts; and notes. Plan
assets may also be invested in a common/collective trust
fund, or in a group trust fund which satisfies the
requirements of IRS Revenue Ruling 81-100. (b) Limitations
on the investment in Qualifying Employer Securities and
Qualifying Employer Real Property. The Trustee may invest
in Qualifying Employer Securities and Qualifying Employer
Real Property up to certain limits.
(1) Money purchase pension plan. In the case of a money
purchase pension plan, no more than 10% of the fair
market value of Plan assets may be invested in
Qualifying Employer Securities and Qualifying
Employer Real Property.
<PAGE>
(2) Profit sharing plan other than a 401(k) plan. In the
case of a profit sharing plan other than a 401(k)
plan, no limit applies to the percentage of Plan
assets invested in Qualifying Employer Securities and
Qualifying Employer Real Property, except as provided
in a funding policy, statement of investment policy,
or other separate procedures or documents governing
the investment of Plan assets.
(3) 401(k) plan. For Plan Years beginning after December
31, 1998, with respect to the portion of the Plan
consisting of amounts attributable to Section 401(k)
Deferrals, no more than 10% of the fair market value
of Plan assets attributable to Section 401(k)
Deferrals may be invested in Qualifying Employer
Securities and Qualifying Employer Real Property if
the Employer, the Trustee, or a person other than the
Participant requires any portion of the Section
401(k) Deferrals and attributable earnings to be
invested in Qualifying Employer Securities or
Qualifying Employer Real Property.
(i) Exceptions to Limitation. The limitation in
(3) shall not apply if any one of the
conditions in (A), (B) or (C) applies.
(A) Investment of Section 401(k)
Deferrals in Qualifying Employer
Securities or Qualifying Real
Property is solely at the discretion
of the Participant.
(B) As of the last day of the preceding
Plan Year, the fair market value of
assets of all profit sharing plans
and 401(k) plans of the Employer was
not more than 10% of the fair market
value of all assets under pension
plans maintained by the Employer.
(C) The portion of a Participant's
Section 401(k) Deferrals required to
be invested in Qualifying Employer
Securities and Qualifying Employer
Real Property for the Plan Year does
not exceed 1% of such Participant's
Included Compensation.
(ii) Plan Years Beginning Prior to January 1,
1999. For Plan Years beginning before
January 1, 1999, the limitations in this
Section (3) do not apply and a 401(k) Plan
is treated like any other profit sharing
plan.
(iii) No application to other contributions. The
limitation in this Section (3) has no
application to Employer Matching
Contributions or Employer Nonelective
Contributions. Instead, the rules under
Section (2) above apply for such
contributions.
(c) Participant direction of investments. If the Plan (by election
in Part 12 of the Agreement or by the Plan Administrator's
administrative election) permits Participant direction of
investments, the Plan Administrator must adopt an investment
procedure for such direction. The investment procedure is
incorporated by reference into the Plan. The Employer may
elect under Part 12 of the Agreement or under the investment
procedures to limit Participant direction of investment to
specific types of contributions. The investment procedure
adopted by the Plan Administrator may (but need not) allow
Beneficiaries under the Plan to direct investments. (See
Section 13.3(d) for rules regarding allocation of net income
or loss to a Directed Account.)
<PAGE>
(1) Trustee to follow Participant direction. To the
extent the Plan allows Participant direction of
investment, the Trustee is authorized to follow the
Participant's written direction. The Trustee will
maintain a Directed Account for the portion of the
Participant's Account which is subject to Participant
direction of investment. The Trustee may decline to
follow a Participant's investment direction to the
extent such direction would: (i) result in a
prohibited transaction; (ii) cause the assets of the
Plan to be maintained outside the jurisdiction of the
U.S. courts; (iii) jeopardize the Plan's tax
qualification; (iv) be contrary to the Plan's
governing documents; (v) generate unrelated business
taxable income; or (vi) result (or could result) in a
loss exceeding the value of the Participant's
Account.
(2) ERISA ss.404(c) protection. If the Plan (by Employer
election under Part 12(d) of the Agreement or
pursuant to the Plan's investment procedures) is
intended to comply with ERISA ss.404(c), the
Participant investment direction program adopted by
the Plan Administrator should meet the following
requirements. (Compliance with ERISA ss.404(c) is not
required for plan qualification purposes. The
following information is provided solely as guidance
to assist the Plan Administrator in meeting the
requirements of ERISA ss.404(c). Failure to meet any
of the following requirements does not impose any
liability on the Plan Administrator (or any other
fiduciary under the Plan) for investment decisions
made by Participants.
(i) Disclosure requirements.
(A) Mandatory disclosures. The
Participants must receive certain
mandatory disclosures, including(I)
an explanation that the Plan is
intended to be an ERISAss.404(c)
plan; (II)a description of the
investment options under the Plan;
(III) the identity of any design-
ated investment managers that may
be selected by the Participant;(IV)
any restrictions on investment
selection or transfers among
investment vehicles; (V) an
explanation of the fees and expenses
that may be charged in connection
with the investment transactions;
(VI) the materials relating to
voting rights or other rights
incidental to the holding of an
investment; (VII) the most recent
prospectus for an investment option
which is subject to the Securities
Act of 1933.
(B) Disclosures upon request. In
addition, a Participant must be able
to receive upon request (I) the
current value of the Participant's
interest in an investment option;
(II) the value and investment
performance of investment
alternatives available under the
Plan; (III) the annual operating
expenses of a designated investment
alternative; and (IV) copies of any
prospectuses, or other material,
relating to available investment
options.
(ii) Diversified investment options. The
investment procedure must provide at least
three diversified investment options that
offer a broad range of investment
opportunity. Each of the investment
opportunities must have materially different
risk and return characteristics. The
procedure may allow investment under a
segregated brokerage account.
<PAGE>
(iii) Frequency of investment instructions. The
investment procedure must provide the
Participant with the opportunity to give
investment instructions as frequently as is
appropriate to the volatility of the
investment. For each investment option, the
frequency can be no less than quarterly.
<PAGE>
Article 14
Participant Loans
This Article contains rules for providing loans to Participants under the Plan.
This Article applies if: (1) the Employer elects under Part 12 of the Agreement
to provide loans to Participants or (2) if Part 12 does not specify whether
Participant loans are available, the Plan Administrator decides to implement a
Participant loan program. Any Participant loans will be made pursuant to the
default loan policy prescribed by this Article 14 unless the Plan Administrator
adopts a separate written loan policy or modifies the default loan policy in
this Article 14 by adopting modified loan provisions. If the Employer adopts a
separate written loan policy or written modifications to the default loan
program in this Article, the terms of such loan policy or written modifications
will control over the terms of this Plan with respect to the administration of
any Participant loans.
14.1 Default Loan Policy. Loans are available under this Article only if such
loans:
(a) are available to Participants on a reasonably equivalent
basis (see Section 14.3);
(b) are not available to Highly Compensated Employees in an amount
greater than the amount that is available to other
Participants;
(c) bear a reasonable rate of interest (as determined under
Section 14.4) and are adequately secured (as determined under
Section 14.5);
(d) provide for periodic repayment within a specified period of
time (as determined under Section 14.6); and
(e) do not exceed, for any Participant, the amount designated
under Section 14.7.
A separate written loan policy may not modify the requirements under (a) through
(e) above, except as permitted in the referenced Sections of this Article.
14.2 Administration of Loan Program. A Participant loan is available under this
Article only if the Participant makes a request for such a loan in accordance
with the provisions of this Article or in accordance with a separate written
loan policy. To receive a Participant loan, a Participant must sign a promissory
note along with a pledge or assignment of the portion of the Account Balance
used for security on the loan. Except as provided in a separate loan policy or
in a written modification to the default loan policy in this Article, any
reference under this Article 14 to a Participant means a Participant or
Beneficiary who is a party in interest (as defined in ERISA ss.3(14)).
In the case of a restated Plan, if any provision of this Article 14 is more
restrictive than the terms of the Plan (or a separate written loan policy) in
effect prior to the adoption of this Prototype Plan, such provision shall apply
prospectively, even if the restated Effective Date indicated in the Agreement
predates the date the Agreement.
14.3 Availability of Participant Loans. Participant loans must be made available
to Participants in a reasonably equivalent manner. The Plan Administrator may
refuse to make a loan to any Participant who is determined to be not
creditworthy. For this purpose, a Participant is not creditworthy if, based on
the facts and circumstances, it is reasonable to believe that the Participant
will not repay the loan. A Participant who has defaulted on a previous loan from
the Plan and has not repaid such loan (with accrued interest) at the time of any
subsequent loan will not be treated as creditworthy until such time as the
Participant repays the defaulted loan (with accrued interest). A separate
written loan policy or written modification to this loan policy may prescribe
different rules for determining creditworthiness and to what extent
creditworthiness must be determined.
<PAGE>
No Participant loan will be made to any Shareholder-Employee or Owner-Employee
unless a prohibited transaction exemption for such loan is obtained from the
Department of Labor or the prohibition against loans to such individuals is
formally withdrawn by statute or by action of the Treasury or the Department of
Labor. The prohibition against loans to Shareholder-Employees and
Owner-Employees outlined in this paragraph may not be modified by a separate
written loan policy.
14.4 Reasonable Interest Rate. A Participant must be charged a reasonable rate
of interest for any loan he/she receives. For this purpose, the interest rate
charged on a Participant loan must be commensurate with the interest rates
charged by persons in the business of lending money for loans under similar
circumstances. The Plan Administrator will determine a reasonable rate of
interest by reviewing the interest rates charged by a sample of third party
lenders in the same geographical region as the Employer. The Plan Administrator
must periodically review its interest rate assumptions to ensure the interest
rate charged on Participant loans is reasonable. A separate written loan policy
or written modifications to this loan policy may prescribe an alternative means
of establishing a reasonable interest rate.
14.5 Adequate Security. All Participant loans must be adequately secured. The
Participant's vested Account Balance may be used as security for a Participant
loan provided the outstanding balance of all Participant loans made to such
Participant does not exceed 50% of the Participant's vested Account Balance,
determined immediately after the origination of each loan, and if applicable,
the spousal consent requirements described in Section 14.9 have been satisfied.
The Plan Administrator may require a Participant to provide additional
collateral to receive a Participant loan if the Plan Administrator determines
such additional collateral is required to protect the interests of Plan
Participants. A separate loan policy or written modifications to this loan
policy may prescribe alternative rules for obtaining adequate security. However,
the 50% rule in this paragraph may not be replaced with a greater percentage.
14.6 Periodic Repayment. A Participant loan must provide for level amortization
with payments to be made not less frequently than quarterly. A Participant loan
must be payable within a period not exceeding five (5) years from the date the
Participant receives the loan from the Plan, unless the loan is for the purchase
of the Participant's principal residence, in which case the loan must be payable
within a reasonable time commensurate with the repayment period permitted by
commercial lenders for similar loans. Loan repayments must be made through
payroll withholding, except to the extent the Plan Administrator determines
payroll withholding is not practical given the level of a Participant's wages,
the frequency with which the Participant is paid, or other circumstances.
(a) Unpaid leave of absence. A Participant with an outstanding
Participant loan may suspend loan payments to the Plan for up
to 12 months for any period during which the Participant is on
an unpaid leave of absence. Upon the Participant's return to
employment (or after the end of the 12-month period, if
earlier), the Participant's outstanding loan will be
reamortized over the remaining period of such loan to make up
for the missed payments. The reamortized loan may extend
beyond the original loan term so long as the loan is paid in
full by whichever of the following dates comes first: (1) the
date which is five (5) years from the original date of the
loan (or the end of the suspension, if sooner), or (2) the
original loan repayment deadline (or the end of the
suspension period, if later) plus the length of the
suspension period.
<PAGE>
(b) Military leave. A Participant with an outstanding Participant
loan also may suspend loan payments for any period such
Participant is on military leave, in accordance with Code
ss.414(u)(4). Upon the Participant's return from military
leave (or the expiration of five years from the date the
Participant began his/her military leave, if earlier), the
Participant may begin making loan payments under the
amortization schedule in effect prior to his/her military
leave, without regard to the five-year maximum loan repayment
period.
A separate loan policy or written modification to this loan policy may (1)
modify the time period for repaying Participant loans, provided Participant
loans are required to be repaid over a period that is not longer than the
periods described in this Section; (2) specify the frequency of Participant loan
repayments, provided the payments are required at least quarterly; (3) modify
the requirement that loans be repaid through payroll withholding; or (4) modify
or eliminate the leave of absence and/or military leave rules under this
Section.
14.7 Loan Limitations. A Participant loan may not be made to the extent such
loan (when added to the outstanding balance of all other loans made to the
Participant) exceeds the lesser of:
(a) $50,000 (reduced by the excess, if any, of the Participant's
highest outstanding balance of loans from the Plan during the
one-year period ending on the day before the date on which
such loan is made, over the Participant's outstanding balance
of loans from the Plan as of the date such loan is made) or
(b) one-half (1/2) of the Participant's vested Account Balance,
determined as of the Valuation Date coinciding with or
immediately preceding such loan, adjusted for any
contributions or distributions made since such Valuation Date.
A Participant may not receive a Participant loan of less than $1,000 nor may a
Participant have more than one Participant loan outstanding at any time.
In applying the limitations under this Section, all plans maintained by the
Employer are aggregated and treated as a single plan. In addition, any
assignment or pledge of any portion of the Participant's interest in the Plan
and any loan, pledge, or assignment with respect to any insurance contract
purchased under the Plan will be treated as loan under this Section.
A separate written loan policy or written modifications to this loan policy may
(1) modify the limitations on the amount of a Participant loan; (2) modify or
eliminate the minimum loan amount requirement; (3) permit a Participant to have
more than one loan outstanding at a time; (4) prescribe limitations on the
purposes for which loans may be required; or (5) prescribe rules for
reamortization, consolidation, renegotiation, or refinancing of loans.
14.8 Segregated Investment. A Participant loan is treated as a segregated
investment on behalf of the individual Participant for whom the loan is made.
The Plan Administrator may adopt separate administrative procedures for
determining which type or types of contributions (and the amount of each type of
contribution) being used to provide the Participant loan. If the Plan
Administrator does not adopt procedures designating the type of contributions
from which the Participant loan will be made, such loan is deemed to be made on
a proportionate basis from each type of contribution.
Unless requested otherwise on the Participant's loan application, a Participant
loan will be made equally from all investment funds in which the applicable
contributions are held. A Participant or Beneficiary may direct the Trustee, on
his/her loan application, to withdraw the Participant loan amounts from a
specific investment fund or funds. A Participant loan will not violate the
requirements of this default loan policy merely because the Plan Administrator
does not permit the Participant to designate the contributions or funds from
which the Participant loan will be made. Each payment of principal and interest
paid by a Participant on his/her Participant loan shall be credited
proportionately to such Participant's Account(s) and to the investment funds
within such Account(s).
<PAGE>
A separate loan policy or written modifications to this loan policy may modify
the rules of this Section without limitation.
14.9 Spousal Consent. If this Plan is subject to the Joint and Survivor Annuity
requirements under Article 9, a Participant may not use his/her Account Balance
as security for a Participant loan unless the Participant's spouse, if any,
consents to the use of such Account Balance as security for the loan. The
spousal consent must be made within the 90-day period ending on the date the
Participant's Account Balance is to be used as security for the loan. Spousal
consent is not required, however, if the value of the Participant's total vested
Account Balance (as determined under Section 8.3(e)) does not exceed $5,000
($3,500 for loans made before the time the $5,000 rules becomes effective under
Section 8.3). If the Plan is not subject to the Joint and Survivor Annuity
requirements under Article 9, a spouse's consent is not required to use a
Participant's Account Balance as security for a Participant loan, regardless of
the value of the Participant's Account Balance.
Any spousal consent required under this Section must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a plan
representative or notary public. Any such consent to use the Participant's
Account Balance as security for a Participant loan is binding with respect to
the consenting spouse and with respect to any subsequent spouse as it applies to
such loan. A new spousal consent will be required if the Account Balance is
subsequently used as security for a renegotiation, extension, renewal, or other
revision of the loan. A new spousal consent will also be required only if any
portion of the Participant's Account Balance will be used as security for a
subsequent Participant loan.
A separate loan policy or written modifications to this loan policy may not
eliminate the spousal consent requirement where it would be required under this
Section, but may impose spousal consent requirements that are not prescribed by
this Section.
14.10 Procedures for Loan Default. A Participant will be considered to be in
default with respect to a loan if any scheduled repayment with respect to such
loan is not made by the end of the calendar quarter following the calendar
quarter in which the missed payment was due.
If a Participant defaults on a Participant loan, the Plan may not offset the
Participant's Account Balance until the Participant is otherwise entitled to an
immediate distribution of the portion of the Account Balance which will be
offset and such amount being offset is available as security on the loan,
pursuant to Section 14.5. For this purpose, a loan default is treated as an
immediate distribution event to the extent the law does not prohibit an actual
distribution of the type of contributions which would be offset as a result of
the loan default (determined without regard to the consent requirements under
Articles 8 and 9, so long as spousal consent was properly obtained at the time
of the loan, if required under Section 14.9). The Participant may repay the
outstanding balance of a defaulted loan (including accrued interest through the
date of repayment) at any time.
Pending the offset of a Participant's Account Balance following a defaulted
loan, the following rules apply to the amount in default.
(a) Interest continues to accrue on the amount in default until
the time of the loan offset or, if earlier, the date the loan
repayments are made current or the amount is satisfied with
other collateral.
<PAGE>
(b) A subsequent offset of the amount in default is not reported
as a taxable distribution, except to the extent the taxable
portion of the default amount was not previously reported by
the Plan as a taxable distribution.
(c) The post-default accrued interest included in the loan offset
is not reported as a taxable distribution at the time of the
offset.
A separate loan policy or written modifications to this loan policy may
prescribe different rules for determining the source of a loan with respect to
contribution types and investment funds. The procedures for default may also be
modified.
14.11 Termination of Employment.
(a) Offset of outstanding loan. A Participant loan becomes due and
payable in full immediately upon the Participant's termination
of employment. Upon a Participant's termination, the
Participant may repay the entire outstanding balance of the
loan (including any accrued interest). If the Participant does
not repay the entire outstanding loan balance, the
Participant's vested Account Balance will be reduced by the
remaining outstanding balance of the loan, to the extent such
Account Balance is available as security on the loan, pursuant
to Section 14.5, and the remaining vested Account Balance will
be distributed in accordance with the distribution provisions
under Article 8.
(b) Direct Rollover. Upon termination of employment, a Participant
may request a Direct Rollover of the loan note (provided the
distribution is an Eligible Rollover Distribution as defined
in Section 8.8(a)) to another qualified plan which agrees to
accept a Direct Rollover of the loan note. A Participant may
not engage in a Direct Rollover of a loan to the extent the
Participant has already received a deemed distribution with
respect to such loan. (See the rules regarding deemed
distributions upon a loan default under Section 14.10.)
(c) Modified loan policy. A separate loan policy or written
modifications to this loan policy may modify this Section
14.11, including, but not limited to: (1) a provision to
permit loan repayments to continue beyond termination of
employment; (2) to prohibit the Direct Rollover of a loan
note; and (3) to provide for other events that may accelerate
the Participant's repayment obligation under the loan.
<PAGE>
Article 15
Investment in Life Insurance
This Article provides special rules for Plans that permit investment in life
insurance on the life of the Participant, the Participant's spouse, or other
family members. The Employer may elect in Part 12 of the Agreement to permit
life insurance investments in the Plan, or life insurance investments may be
permitted, prohibited, or restricted under the Plan through separate investment
procedures or a separate funding policy. If the Plan prohibits investments in
life insurance, this Article does not apply.
15.1 Investment in Life Insurance. A group or individual life insurance policy
purchased by the Plan may be issued on the life of a Participant, a
Participant's spouse, a Participant's child or children, a family member of the
Participant, or any other individual with an insurable interest. For this
purpose, a life insurance policy includes any type of policy, including a
second-to-die policy, provided that the holding of a particular type of policy
is not prohibited under rules applicable to qualified plans.
Any premiums on life insurance held for the benefit of a Participant will be
charged against such Participant's vested Account Balance. Unless directed
otherwise, the Trustee will reduce each of the Participant's Accounts under the
Plan equally to pay premiums on life insurance held for such Participant's
benefit. Any premiums paid for life insurance policies must satisfy the
incidental life insurance rules under Section 15.2.
15.2 Incidental Life Insurance Rules. Any life insurance purchased under
the Plan must meet the following requirements:
(a) Ordinary life insurance policies. The aggregate premiums paid
for ordinary life insurance policies (i.e., policies with both
nondecreasing death benefits and nonincreasing premiums) for
the benefit of a Participant shall not at any time exceed 49%
of the aggregate amount of Employer Contributions (including
Section 401(k) Deferrals) and forfeitures which have been
allocated to the Account of such Participant.
(b) Life insurance policies other than ordinary life. The
aggregate premiums paid for term, universal or other life
insurance policies (other than ordinary life insurance
policies) for the benefit of a Participant shall not at any
time exceed 25% of the aggregate amount of Employer
Contributions (including Section 401(k) Deferrals) and
forfeitures which have been allocated to the Account of such
Participant.
(c) Combination of ordinary and other life insurance policies. The
sum of one-half (1/2) of the aggregate premiums paid for
ordinary life insurance policies plus all the aggregate
premiums paid for any other life insurance policies for the
benefit of a Participant shall not at any time exceed 25% of
the aggregate amount of Employer Contributions (including
Section 401(k) Deferrals) and forfeitures which have been
allocated to the Account of such Participant.
(d) Exception for certain profit sharing and 401(k) plans. If the
Plan is a profit sharing plan or a 401(k) plan, the
limitations in this Section do not apply to the extent life
insurance premiums are paid only with Employer Contributions
and forfeitures that have been accumulated in the
Participant's Account for at least two years. For purposes of
applying this special limitation, Employer Contributions do
not include any Section 401(k) Deferrals, QMACs, QNECs or
Safe-Harbor Contributions under a 401(k) plan.
The Trustee also may invest, with the Participant's consent,
any portion of the Participant's Employee After-Tax
Contribution Account or Rollover Account in a group or
individual life insurance policy for the benefit of such
Participant, without regard to the incidental life insurance
rules under this Section.
15.3 Ownership of Life Insurance Policies. The Trustee is the owner of any life
insurance policies purchased under the Plan in accordance with the provisions of
this Article 15. Any life insurance policy purchased under the Plan must
designate the Trustee as owner and beneficiary under the policy. The Trustee
will pay all proceeds of any life insurance policies to the Beneficiary of the
Participant for whom such policy is held in accordance with the distribution
provisions under Article 8. In no event shall the Trustee retain any part of the
proceeds from any life insurance policies for the benefit of the Plan.
<PAGE>
15.4 Evidence of Insurability. Prior to purchasing a life insurance policy, the
Trustee may require the individual whose life is being insured to provide
evidence of insurability, such as a physical examination, as may be required by
the Insurer.
15.5 Distribution of Insurance Policies. Life insurance policies under the Plan
which are held on behalf of a Participant must be distributed to the Participant
or converted to cash upon the later of the Participant's Distribution
Commencement Date (as defined in Section 22.49) or termination of employment.
Any life insurance policies that are held on behalf of a terminated Participant
must continue to satisfy the incidental life insurance rules under Section 15.2.
15.6 Discontinuance of Insurance Policies. Investments in life insurance may be
discontinued at any time, either at the direction of the Trustee or other
fiduciary responsible for making investment decisions. If the Plan provides for
Participant direction of investments, life insurance as an investment option may
be eliminated at any time by the Plan Administrator. Where life insurance
investment options are being discontinued, the Plan Administrator, in its sole
discretion, may offer the sale of the insurance policies to the Participant, or
to another person, provided that the prohibited transaction exemption
requirements prescribed by the Department of Labor are satisfied.
15.7 Protection of Insurer. An Insurer that issues a life insurance policy under
the terms of this Section, shall not be responsible for the validity of this
Plan and shall be protected and held harmless for any actions taken or not taken
by the Trustee or any actions taken in accordance with written directions from
the Trustee or the Employer (or any duly authorized representatives of the
Trustee or Employer). An Insurer shall have no obligation to determine the
propriety of any premium payments or to guarantee the proper application of any
payments made by the insurance company to the Trustee.
The Insurer is not and shall not be considered a party to this Agreement and is
not a fiduciary with respect to the Plan solely as a result of the issuance of
life insurance policies under this Article 15.
15.8 No Responsibility for Act of Insurer. Neither the Employer, the Plan
Administrator nor the Trustee shall be responsible for the validity of the
provisions under a life insurance policy issued under this Article 15 or for the
failure or refusal by the Insurer to provide benefits under such policy. The
Employer, the Plan Administrator and the Trustee are also not responsible for
any action or failure to act by the Insurer or any other person which results in
the delay of a payment under the life insurance policy or which renders the
policy invalid or unenforceable in whole or in part.
<PAGE>
Article 16
Top-Heavy Plan Requirements
This Article contains the rules for determining whether the Plan is a Top-Heavy
Plan and the consequences of having a Top-Heavy Plan. Part 6 of the Agreement
provides for elections relating to the vesting schedule for a Top-Heavy Plan.
Part 13 of the Agreement allows the Employer to elect to satisfy the Top-Heavy
Plan allocation requirements under another plan.
16.1 In General. If the Plan is or becomes a Top-Heavy Plan in any Plan Year,
the provisions of this Article 16 will supersede any conflicting provisions in
the Plan or Agreement. However, this Article 16 will no longer apply if Code
ss.416 is repealed.
16.2 Top-Heavy Plan Consequences.
(a) Minimum allocation for Non-Key Employees. If the Plan is a
Top-Heavy Plan for any Plan Year, except as otherwise provided
in (4) and (5) below, the Employer Contributions and
forfeitures allocated for the Plan Year on behalf of any
Eligible Participant who is a Non-Key Employee must not be
less than a minimum percentage of the Participant's Total
Compensation (as defined in Section 16.3(i)).
(1) Determining the minimum percentage. The minimum
percentage that must be allocated under (a) above is
the lesser of: (i) three (3) percent or (ii) the
highest contribution rate for any Key Employee for
the Plan Year. The highest contribution rate for a
Key Employee is determined by taking into account the
total Employer Contributions and forfeitures
allocated to each Key Employee for the Plan Year, as
a percentage of the Key Employee's Total
Compensation. A Key Employee's contribution rate
includes Section 401(k) Deferrals made by the Key
Employee for the Plan Year (except as provided by
regulation or statute). If this Plan is aggregated
with a Defined Benefit Plan to satisfy the
requirements of Code ss.401(a)(4) or Code ss.410(b),
the minimum percentage is three (3) percent, without
regard to the highest Key Employee contribution rate.
(2) Determining whether the Non-Key Employee's allocation
satisfies the minimum percentage. To determine if a
Non-Key Employee's allocation of Employer
Contributions and forfeitures is at least equal to
the minimum percentage, the Employee's Section 401(k)
Deferrals for the Plan Year are disregarded. In
addition, Matching Contributions allocated to the
Employee's Account for the Plan Year are disregarded,
unless: (i) the Plan is a Nonstandardized Plan and
the Plan Administrator elects to take all or a
portion of the Matching Contributions into account,
or (ii) Matching Contributions are taken into account
by statute or regulation. The rule in (i) does not
apply unless the Matching Contributions so taken into
account could satisfy the nondiscrimination testing
requirements under Code ss.401(a)(4) if tested
separately. Any Employer Matching Contributions used
to satisfy the Top-Heavy Plan minimum allocation may
not be used in the ACP Test (as defined in Section
17.3), except to the extent permitted under statute,
regulation or other guidance of general
applicability.
(3) Certain allocation conditions inapplicable. The
Top-Heavy Plan minimum allocation shall be made even
though, under other Plan provisions, the Eligible
Participant would not otherwise be entitled to
receive an allocation, or would have received a
lesser allocation for the Plan Year because of:
<PAGE>
(i) the Participant's failure to complete 1,000
Hours of Service (or any equivalent provided
in the Plan),
(ii) the Participant's failure to make
mandatory Employee After-Tax Contributions
to the Plan, or
(iii) Total Compensation is less than a
stated amount.
The minimum allocation also is determined without
regard to any Social Security contribution or whether
an Eligible Participant fails to make Section 401(k)
Deferrals for a Plan Year in which the Plan includes
a 401(k) feature.
(4) Participants not employed on the last day of the Plan
Year. The minimum allocation requirement described in
(a) above does not apply to an Eligible Participant
who was not employed by the Employer on the last day
of the applicable Plan Year.
(5) Top-heavy allocation provided in another plan. The
minimum allocation requirement described in (a) above
does not apply to an Eligible Participant who is
covered under another plan maintained by the Employer
if, pursuant to Part 13(f)(1) of the Agreement, the
other Plan will satisfy the minimum allocation
requirement.
(6) No forfeiture for certain events. The minimum
top-heavy allocation (to the extent required to be
nonforfeitable under Code ss.416(b)) may not be
forfeited under the suspension of benefit rules of
Code ss.411(a)(3)(B) or the withdrawal of mandatory
contribution rules of Code ss.411(a)(3)(D).
(b) Special Top-Heavy Vesting Rules.
(1) Minimum vesting schedules. For any Plan Year in which
this Plan is a Top-Heavy Plan, the Top-Heavy Plan
vesting schedule elected in Part 6(b) of the
Agreement will automatically apply to the Plan. No
decrease in a Participant's nonforfeitable percentage
may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year. However,
this Section does not apply to the Account Balance of
any Employee who does not have an Hour of Service
after a Top-Heavy Plan vesting schedule becomes
effective.
(2) Shifting Top-Heavy Plan status. If the vesting
schedule under the Plan shifts in or out of the
Top-Heavy Plan vesting schedule for any Plan Year
because of a change in Top-Heavy Plan status, such
shift is an amendment to the vesting schedule and the
election in Section 4.7 of the Plan applies.
16.3 Top-Heavy Definitions.
(a) Determination Date: For any Plan Year subsequent to the first
Plan Year, the Determination Date is the last day of the
preceding Plan Year. For the first Plan Year of the Plan, the
Determination Date is the last day of that first Plan Year.
(b) Determination Period: The Plan Year containing the
Determination Date and the four (4) preceding Plan Years.
<PAGE>
(c) Key Employee: Any Employee or former Employee (and the
Beneficiaries of such Employee) is a Key Employee for a Plan
Year if, at any time during the Determination Period, the
individual was:
(1) an officer of the Employer with annual Total
Compensation in excess of 50 percent of the dollar
limitation
under Code ss.415(b)(1)(A),
(2) an owner (or considered an owner under Code ss.318)
of one of the ten largest interests in the Employer
with annual Total Compensation in excess of 100
percent of the dollar limitation under Code
ss.415(c)(1)(A);
(3) a Five-Percent Owner (as defined in Section 22.79),
(4) a more than 1-percent owner of the Employer with an
annual Total Compensation of more than $150,000.
The Key Employee determination will be made in accordance with
Code ss.416(i)(1) and the regulations thereunder.
(d) Permissive Aggregation Group: The Required Aggregation Group
of plans plus any other plan or plans of the Employer which,
when considered as a group with the Required Aggregation
Group, would continue to satisfy the requirements of Code
ss.ss.401(a)(4) and 410.
(e) Present Value: The present value based on the interest and
mortality rates specified in the relevant Defined Benefit
Plan. In the event that more than one Defined Benefit Plan is
included in a Required Aggregation Group or Permissive
Aggregation Group, a uniform set of actuarial assumptions must
be applied to determine present value.
(f) Required Aggregation Group:
(1) Each qualified plan of the Employer in which at least
one Key Employee participates or participated at any
time during the Determination Period (regardless of
whether the plan has terminated), and
(2) any other qualified plan of the Employer which
enables a plan described in (l) to meet the coverage
or nondiscrimination requirements of Code
ss.ss.410(b) or 401(a)(4).
(g) Top-Heavy Plan: For any Plan Year, this Plan is a Top-Heavy
Plan if any of the following conditions exist:
(1) The Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans, and
the Top-Heavy Ratio for the Plan exceeds 60 percent.
(2) The Plan is part of a Required Aggregation Group of
plans, but not part of a Permissive Aggregation
Group, and the Top-Heavy Ratio for the Required
Aggregation Group of plans exceeds 60 percent.
(3) The Plan is part of a Required Aggregation Group and
part of a Permissive Aggregation Group of plans, and
the Top-Heavy Ratio for the Permissive Aggregation
exceeds 60 percent.
<PAGE>
(h) Top-Heavy Ratio:
(1) Defined Contribution Plans only. This paragraph
applies if the Employer maintains one or more Defined
Contribution Plans (including any SEP described under
Code ss.408(k)) and the Employer has not maintained
any Defined Benefit Plan which during the
Determination Period has or has had Accrued Benefits.
The Top-Heavy Ratio for this Plan alone, or for the
Required or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is
the sum of the Account Balances of all Key Employees
as of the Determination Date(s) and the denominator
of which is the sum of all Account Balances, both
computed in accordance with Code ss.416 and the
regulations thereunder.
(2) Defined Contribution Plan and Defined Benefit Plan.
This paragraph applies if the Employer maintains one
or more Defined Contribution Plans (including a SEP
described under Code ss.408(k)) and the Employer
maintains or has maintained one or more Defined
Benefit Plans which during the Determination Period
has or has had any Accrued Benefits, The Top-Heavy
Ratio for any Required or Permissive Aggregation
Group, as appropriate, is a fraction, the numerator
of which is the sum of Account Balances under the
aggregated Defined Contribution Plan(s) for all Key
Employees, and the Present Value of Accrued Benefits
under the aggregated Defined Benefit Plan(s) for all
Key Employees as of the Determination Date(s), and
the denominator of which is the sum of the Account
Balances under the aggregated Defined Contribution
Plan(s) for all Participants and the Present Value of
Accrued Benefits under the Defined Benefit Plan(s)
for all Participants as of the Determination Date(s),
all determined in accordance with Code ss.416 and the
regulations thereunder.
(3) Applicable Valuation Dates. For purposes of (1) and
(2) above, the value of Account Balances and the
Present Value of Accrued Benefits will 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 ss.416
and the regulations thereunder for the first and
second Plan Years of a Defined Benefit Plan. When
aggregating plans, the value of Account Balances and
Accrued Benefits will be calculated with reference to
the Determination Dates that fall within the same
calendar year.
(4) Valuation of benefits. Determining a Participant's
Account Balance or Accrued Benefit. The calculation
of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken
into account will be made in accordance with Code
ss.416 and the regulations thereunder. For purposes
of (1) and (2) above, the Account Balance and/or
Accrued Benefit of each Participant is adjusted as
provided under (i) and (ii) below.
(i) Increase for prior distributions. In
applying the Top-Heavy Ratio, a
Participant's Account Balance and/or Accrued
Benefit is increased for any distributions
made from the Plan during the Determination
Period.
(ii) Increase for future contributions. Both the
numerator and denominator of the Top-Heavy
Ratio are increased to reflect any
contribution to a Defined Contribution Plan
not actually made as of the Determination
Date, but which is required to be taken into
account on that date under Code ss.416 and
the regulations thereunder.
<PAGE>
(iii) Exclusion of certain benefits. The Account
Balance and/or Accrued Benefit of a
Participant (and any distribution during the
Determination Period with respect to such
Participant's Account Balance or Accrued
Benefit) is disregarded from the Top-Heavy
Ratio if: (A) the Participant is a Non-Key
Employee who was a Key Employee in a prior
year, or (B) the Participant has not been
credited with at least one Hour of Service
during the Determination Period. The
calculation of the Top-Heavy Ratio, and the
extent to which distributions, rollovers,
and transfers are taken into account will be
made in accordance with Code ss.416 and the
regulations thereunder.
(iv) Calculation of Accrued Benefit. The Accrued
Benefit of a Participant other than a Key
Employee shall be determined under: (A) the
method, if any, that uniformly applies for
accrual purposes under all Defined Benefit
Plans maintained by the Employer; or (B) if
there is no such method, as if such benefit
accrued not more rapidly than the slowest
accrual rate permitted under the fractional
rule of Code ss.411(b)(1)(C).
(i) Total Compensation. For purposes of determining the minimum
top-heavy contribution under 16.2(a), Total Compensation is
determined using the definition under Section 7.4(f),
including the special rule under Section 7.4(f)(4) for years
beginning before January 1, 1998. For this purpose, Total
Compensation is subject to the Compensation Dollar Limitation
as defined in Section 22.30.
(j) Valuation Date: The date as of which Account Balances are
valued for purposes of calculating the Top-Heavy Ratio.
<PAGE>
Article 17
401(k) Plan Provisions
This Article sets forth the special testing rules applicable to Section 401(k)
Deferrals, Employer Matching Contributions, and Employee After-Tax Contributions
that may be made under the 401(k) Agreement and the requirements to qualify as a
Safe Harbor 401(k) Plan. Section 17.1 provides limits on the amount of Elective
Deferrals an Employee may defer into the Plan during a calendar year. Sections
17.2 and 17.3 set forth the rules for running the ADP Test and ACP Test with
respect to contributions under the 401(k) plan and Section 17.4 discusses the
requirements for applying the Multiple Use Test. Section 17.5 prescribes special
testing rules for performing the ADP Test and the ACP Test. Section 17.6 sets
forth the requirements that must be met to qualify as a Safe Harbor 401(k) Plan.
Unless otherwise stated, any reference to the Agreement under this Article 17 is
a reference to the 401(k) Agreement.
17.1 Limitation on the Amount of Section 401(k) Deferrals.
(a) In general. An Eligible Participant's total Section 401(k)
Deferrals under this Plan for any calendar year may not
exceed the lesser of:
(1) the percentage of Included Compensation designated
under Part 4A(a) of the Agreement;
(2) the dollar limitation under Code ss.402(g); or
(3) the amount permitted under the Annual Additions
Limitation described in Article 7.
If no maximum percentage is designated under Part 4A(a) of the
Agreement, the only limit on a Participant's Section 401(k)
Deferrals under this Plan is the dollar limitation under Code
ss.402(g) and the Annual Additions Limitation. The dollar
limitation under Code ss.402(g) applicable to a Participant's
Section 401(k) Deferrals under this Plan is reduced by any
Elective Deferrals the Participant makes under any other plan
maintained by the Employer.
(b) Correction of Code ss.402(g) Violation.
(1) Suspension of Section 401(k) Deferrals. The Employer
may suspend a Participant's Section 401(k) Deferrals
under the Plan for the remainder of the calendar year
when the Participant's Section 401(k) Deferrals under
this Plan, in combination with any Elective Deferrals
the Participant makes during the calendar year under
any other plan maintained by the Employer, equal or
exceed the dollar limitation under Code ss.402(g).
(2) Distribution of Excess Deferrals. If a Participant
makes Section 401(k) Deferrals under this Plan during
a calendar year which exceed the dollar limitation
under Code ss.402(g), the Participant will receive a
corrective distribution from the Plan of the Excess
Deferrals (plus allocable income) no later than April
15 of the following calendar year. The amount which
must be distributed as a correction of Excess
Deferrals for a calendar year equals the amount of
Elective Deferrals the Participant contributes in
excess of the dollar limitation under Code ss.402(g)
during the calendar year to this Plan, and any other
plan maintained by the Employer, reduced by any
corrective distribution of Excess Deferrals the
Participant receives during the calendar year from
this Plan or other plan(s) maintained by the
Employer. Excess Deferrals that are distributed after
April 15 are includible in the Participant's gross
income in both the taxable year in which deferred and
the taxable year in which distributed.
<PAGE>
(i) Allocable gain or loss. A corrective
distribution of Excess Deferrals must
include any allocable gain or loss for the
calendar year in which the Excess Deferrals
are made. For this purpose, allocable gain
or loss on Excess Deferrals may be
determined in any reasonable manner,
provided the manner used to determine
allocable gain or loss is applied uniformly
and in a manner that is reasonably
reflective of the method used by the Plan
for allocating income to Participants'
Accounts.
(ii) Coordination with other provisions. A
corrective distribution of Excess Deferrals
made by April 15 of the following calendar
year may be made without consent of the
Participant or the Participant's spouse, and
without regard to any distribution
restrictions applicable under Article 8 or
Article 9. A corrective distribution of
Excess Deferrals made by the appropriate
April 15 also is not treated as a
distribution for purposes of applying the
minimum required distribution rules under
Article 10.
(iii) Coordination with corrective distribution of
Excess Contributions. If a Participant for
whom a corrective distribution of Excess
Deferrals is being made received a previous
corrective distribution of Excess
Contributions to correct the ADP Test for
the Plan Year beginning with or within the
calendar year for which the Participant
made the Excess Deferrals, the previous
corrective distribution of Excess
Contributions is treated first as a
corrective distribution of Excess Deferrals
to the extent necessary to eliminate the
Excess Deferral violation. The amount of
the corrective distribution of Excess
Contributions which is required to correct
the ADP Test failure is reduced by the
amount treated as a corrective distribution
of Excess Deferrals.
(3) Correction of Excess Deferrals under plans not
maintained by the Employer. The correction provisions
under this Section (b) apply only if a Participant
makes Excess Deferrals under plans maintained by the
Employer. However, if a Participant has Excess
Deferrals because the total Elective Deferrals for a
calendar year under all plans in which he/she
participates, including plans that are not maintained
by the Employer, exceed the dollar limitation under
Code ss.402(g), the Participant may assign to this
Plan any portion of the Excess Deferrals made during
the calendar year. The Participant must notify the
Plan Administrator in writing on or before March 1 of
the following calendar year of the amount of the
Excess Deferrals to be assigned to this Plan. Upon
receipt of a timely notification, the Excess
Deferrals assigned to this Plan will be distributed
(along with any allocable income or loss) to the
Participant in accordance with the corrective
distribution provisions under (2) above.
17.2 Nondiscrimination Testing of Section 401(k) Deferrals - ADP Test. Except as
provided under Section 17.6 for Safe Harbor 401(k) Plans, the Section 401(k)
Deferrals made by Highly Compensated Employees must satisfy the Actual Deferral
Percentage Test ("ADP Test") for each Plan Year. The Plan Administrator shall
maintain records sufficient to demonstrate satisfaction of the ADP Test,
including the amount of any QNECs or QMACs included in such test, pursuant to
Section (c) below. If the Plan fails the ADP Test for any Plan Year, the
corrective provisions under Section (d) below will apply.
(a) ADP Test testing methods. For Plan Years beginning on or after
January 1, 1997, the ADP Test will be performed using the
Prior Year Testing Method or Current Year Testing Method, as
selected under Part 4F of the Agreement. If the Employer does
not select a testing method under Part 4F, the Plan will use
the Current Year Testing Method. Unless specifically precluded
under statute, regulations or other IRS guidance, the Employer
may amend the testing method designated under Part 4F for a
particular Plan Year (subject to the requirements under (2)
below) at any time through the end of the 12-month period
following the Plan Year for which the amendment is effective.
(For Plan Years beginning before January 1, 1997, the Current
Year Testing Method is deemed to have been in effect.)
<PAGE>
(1) Prior Year Testing Method. Under the Prior Year
Testing Method, the Average Deferral Percentage
("ADP") of the Highly Compensated Employee Group (as
defined in Section 17.7(e)) for the current Plan Year
is compared with the ADP of the Nonhighly Compensated
Employee Group (as defined in Section 17.7(f)) for
the prior Plan Year. If the Employer elects to use
the Prior Year Testing Method under Part 4F of the
Agreement, the Plan must satisfy one of the following
tests for each Plan Year:
(i) The ADP of the Highly Compensated Employee
Group for the current Plan Year may not
exceed 1.25 times the ADP of the Nonhighly
Compensated Employee Group for the prior
Plan Year.
(ii) The ADP of the Highly Compensated Employee
Group for the current Plan Year may not
exceed the percentage (whichever is less)
determined by (A) adding 2 percentage points
to the ADP of the Nonhighly Compensated
Employee Group for the prior Plan Year or
(B) multiplying the ADP of the Nonhighly
Compensated Employee Group for the prior
Plan Year by 2.
(2) Current Year Testing Method. Under the Current Year
Testing Method, the ADP of the Highly Compensated
Employee Group for the current Plan Year is compared
to the ADP of the Nonhighly Compensated Employee
Group for the current Plan Year. If the Employer
elects to use the Current Year Testing Method under
Part 4F of the Agreement, the Plan must satisfy the
ADP Test, as described in (1) above, for each Plan
Year, but using the ADP of the Nonhighly Compensated
Employee Group for the current Plan Year instead of
for the prior Plan Year. If the Employer elects to
use the Current Year Testing Method, it may switch to
the Prior Year Testing Method only if the Plan
satisfies the requirements for changing to the Prior
Year Testing Method as set forth in IRS Notice 98-1
(or superseding guidance).
(b) Special rule for first Plan Year. For the first Plan Year that
the Plan permits Section 401(k) Deferrals, if the Prior Year
Testing Method is in effect, the ADP for the Nonhighly
Compensated Employee Group is deemed to be 3%, unless the
Employer elects in Part 4F of the Agreement to use the actual
data for the Nonhighly Compensated Employee Group in the first
Plan Year. This first Plan Year rule does not apply if this
Plan is a successor to a plan (as described in IRS Notice 98-1
or subsequent guidance) that included a 401(k) arrangement or
the Plan is aggregated for purposes of applying the ADP Test
with another plan that included a 401(k) arrangement in the
prior Plan Year.
(c) Use of QMACs and QNECs under the ADP Test. The Plan
Administrator may take into account all or any portion of
QMACs and QNECs (see Sections 17.7(g) and (h)) for purposes of
applying the ADP Test. QMACs and QNECs may not be included in
the ADP Test to the extent such amounts are included in the
ACP Test for such Plan Year. QMACs and QNECs made to another
qualified plan maintained by the Employer may also be taken
into account, so long as the other plan has the same Plan Year
as this Plan. To include QNECs under the ADP Test, all
Employer Nonelective Contributions, including the QNECs, must
satisfy Code ss.401(a)(4). In addition, the Employer
Nonelective Contributions, excluding any QNECs used in the ADP
Test or ACP Test, must also satisfy Code ss.401(a)(4).
<PAGE>
(1) Timing of contributions. In order to be used in the
ADP Test for a given Plan Year, QNECs and QMACs must
be made before the end of the 12-month period
immediately following the Plan Year for which they
are allocated. If the Employer is using the Prior
Year Testing Method (as described in (a)(1) above),
QMACs and QNECs taken into account for the Nonhighly
Compensated Employee Group must be allocated for the
prior Plan Year, and must be made no later than the
end of the 12-month period immediately following the
end of such prior Plan Year.
(2) Double-counting limits. This paragraph applies if, in
any Plan Year beginning after December 31, 1998, the
Prior Year Testing Method is used to run the ADP Test
and, in the prior Plan Year, the Current Year Testing
Method was used to run the ADP Test. If this
paragraph applies, the following contributions are
disregarded in calculating the ADP of the Nonhighly
Compensated Employee Group for the prior Plan Year:
(i) All QNECs that were included in either
the ADP Test or ACP Test for the prior Plan
Year.
(ii) All QMACs, regardless of how used for
testing purposes in the prior Plan Year.
(iii) Any Section 401(k) Deferrals that were
included in the ACP Test for the prior Plan
Year.
For purposes of applying the double-counting limits,
if actual data of the Nonhighly Compensated Employee
Group is used for a first Plan Year described in
Section (b) above, the Plan is still considered to be
using the Prior Year Testing Method for that first
Plan Year. Thus, the double-counting limits do not
apply if the Prior Year Testing Method is used for
the next Plan Year.
(3) Testing flexibility. The Plan Administrator is
expressly granted the full flexibility permitted by
applicable Treasury regulations to determine the
amount of QMACs and QNECs used in the ADP Test. QMACs
and QNECs taken into account under the ADP Test do
not have to be uniformly determined for each Eligible
Participant, and may represent all or any portion of
the QMACs and QNECs allocated to each Eligible
Participant, provided the conditions described above
are satisfied.
(d) Correction of Excess Contributions. If the Plan fails the ADP
Test for a Plan Year, the Plan Administrator may use any
combination of the correction methods under this Section to
correct the Excess Contributions under the Plan.(See Section
17.7(d) for the definition of Excess Contributions.)
(1) Corrective distribution of Excess Contributions. If
the Plan fails the ADP Test for a Plan Year, the Plan
Administrator may, in its discretion, distribute
Excess Contributions (including any allocable income
or loss) no later than the last day of the following
Plan Year to correct the ADP Test violation. If the
Excess Contributions are distributed more than 2 1/2
months after the last day of the Plan Year in which
such excess amounts arose, a 10-percent excise tax
will be imposed on the Employer with respect to such
amounts.
<PAGE>
(i) Amount to be distributed. In determining
the amount of Excess Contributions to be
distributed to a Highly Compensated Employee
Employee under this Section, Excess
Contributions are first allocated equally
to the Highly Compensated Employee(s) with
the largest dollar amount of contributions
taken into account under the ADP Test for
the Plan Year in which the excess occurs.
The Excess Contributions allocated to such
Highly Compensated Employee(s) reduce the
dollar amount of the contributions taken
into account under the ADP Test for such
Highly Compensated Employee(s) until all
of the Excess Contributions are allocated
or until the dollar amount of such
contributions for the Highly Compensated
Employee(s) is reduced to the next highest
dollar amount of such contributions for any
other Highly Compensated Employee(s). If
there are Excess Contributions remaining,
the Excess Contributions continue to be
allocated in this manner until all of the
Excess Contributions are allocated.
(ii) Allocable gain or loss. A corrective
distribution of Excess Contributions must
include any allocable gain or loss for the
Plan Year in which the excess occurs. For
this purpose, allocable gain or loss on
Excess Contributions may be determined in
any reasonable manner, provided the manner
used is applied uniformly and in a manner
that is reasonably reflective of the method
used by the Plan for allocating income to
Participants' Accounts.
(iii) Coordination with other provisions. A
corrective distribution of Excess
Contributions made by the end of the Plan
Year following the Plan Year in which the
excess occurs may be made without consent of
the Participant or the Participant's spouse,
and without regard to any distribution
restrictions applicable under Article 8 or
Article 9. Excess Contributions are treated
as Annual Additions for purposes of Code
ss.415 even if distributed from the Plan. A
corrective distribution of Excess
Contributions is not treated as a
distribution for purposes of applying the
minimum required distribution rules under
Article 10.
If a Participant has Excess Deferrals for
the calendar year ending with or within the
Plan Year for which the Participant receives
a corrective distribution of Excess
Contributions, the corrective distribution
of Excess Contributions is treated first as
a corrective distribution of Excess
Deferrals. The amount of the corrective
distribution of Excess Contributions that
must be distributed to correct an ADP Test
failure for a Plan Year is reduced by any
amount distributed as a corrective
distribution of Excess Deferrals for the
calendar year ending with or within such
Plan Year.
(iv) Accounting for Excess Contributions. Excess
Contributions are distributed from the
following sources and in the following
priority:
(A) Section 401(k) Deferrals that are
not matched;
(B) proportionately from Section 401(k)
Deferrals not distributed under (A)
and related QMACs that are included
in the ADP Test;
(C) QMACs included in the ADP Test that
are not distributed under (B); and
<PAGE>
(D) QNECs included in the ADP Test.
(2) Making QMACs or QNECs. To the extent authorized under
Part 4B(d) or 4C(b) of the Agreement, the Employer
may make additional QMACs or QNECs to the Plan on
behalf of the Nonhighly Compensated Employees in
order to correct an ADP Test violation. Any QMACs or
QNECs contributed under this Section will be
allocated to Eligible Participants in accordance with
the provisions under Section 2.4(c) or (e), as
applicable.
(e) Adjustment of deferral rate for Highly Compensated Employees.
The Employer may suspend (or automatically reduce the rate of)
Section 401(k) Deferrals for the Highly Compensated Employee
Group, to the extent necessary to satisfy the ADP Test or to
reduce the margin of failure. A suspension or reduction shall
not affect Section 401(k) Deferrals already contributed by the
Highly Compensated Employees for the Plan Year. As of the
first day of the subsequent Plan Year, Section 401(k)
Deferrals shall resume at the levels stated in the Salary
Reduction Agreements of the Highly Compensated Employees.
17.3 Nondiscrimination Testing of Employer Matching Contributions and Employee
After-Tax Contributions - ACP Test. Except as provided under Section 17.6 for
Safe Harbor 401(k) Plans, if the Employer elects to provide Employer Matching
Contributions under Part 4B of the Agreement or to permit Employee After-Tax
Contributions under Part 4D of the Agreement, the Employer Matching
Contributions (including QMACs that are not included in the ADP Test) and/or
Employee After-Tax Contributions made for Highly Compensated Employees must
satisfy the Actual Contribution Percentage Test ("ACP Test") for each Plan Year.
The Plan Administrator shall maintain records sufficient to demonstrate
satisfaction of the ACP Test, including the amount of any Section 401(k)
Deferrals or QNECs included in such test, pursuant to Section (c) below. If the
Plan fails the ACP Test for any Plan Year, the correction provisions under
Section (d) below will apply.
(a) ACP Test testing methods. For Plan Years beginning on or after
January 1, 1997, the ACP Test will be performed using the
Prior Year Testing Method or the Current Year Testing Method,
as selected under Part 4F of the Agreement. If the Employer
does not select a testing method under Part 4F(a), the Plan
will be deemed to use the Current Year Testing Method. For
Plan Years beginning before January 1, 1997, the Current Year
Testing Method is deemed to have been in effect.
(1) Prior Year Testing Method. Under the Prior Year
Testing Method, the Average Contribution Percentage
("ACP") of the Highly Compensated Employee Group (as
defined in Section 17.7(e)) for the current Plan Year
is compared with the ACP of the Nonhighly Compensated
Employee Group (as defined in Section 17.7(f)) for
the prior Plan Year. If the Employer elects to use
the Prior Year Testing Method under Part 4F of the
Agreement, the Plan must satisfy one of the following
tests for each Plan Year:
(i) The ACP of the Highly Compensated Employee
Group for the current Plan Year may not
exceed 1.25 times the ACP of the Nonhighly
Compensated Employee Group for the prior
Plan Year.
(ii) The ACP of the Highly Compensated Employee
Group for the current Plan Year may not
exceed the percentage (whichever is less)
determined by (A) adding 2 percentage points
to the ACP of the Nonhighly Compensated
Employee Group for the prior Plan Year or
(B) multiplying the ACP of the Nonhighly
Compensated Employee Group for the prior
Plan Year by 2.
<PAGE>
(2) Current Year Testing Method. Under the Current Year
Testing Method, the ACP of the Highly Compensated
Employee Group for the current Plan Year is compared
to the ACP of the Nonhighly Compensated Employee
Group for the current Plan Year. If the Employer
elects to use the Current Year Testing Method under
Part 4F of the Agreement, the Plan must satisfy the
ACP Test, as described in (1) above, for each Plan
Year, but using the ACP of the Nonhighly Compensated
Employee Group for the current Plan Year instead of
for the prior Plan Year. If the Employer elects to
use the Current Year Testing Method, it may switch to
the Prior Year Testing Method only if the Plan
satisfies the requirements for changing to the Prior
Year Testing Method as set forth in IRS Notice 98-1
(or superseding guidance).
(b) Special rule for first Plan Year. For the first Plan Year that
the Plan includes either an Employer Matching Contribution
formula or permits Employee After-Tax Contributions, if the
Prior Year Testing Method is in effect, the ACP for the
Nonhighly Compensated Employee Group is deemed to be 3%,
unless the Employer elects in Part 4F of the Agreement to use
the actual data for the Nonhighly Compensated Employee Group
in the first Plan Year. This first Plan Year rule does not
apply if this Plan is a successor to a plan that was subject
to the ACP Test or if the Plan is aggregated for purposes of
applying the ACP Test with another plan that was subject to
the ACP test in the prior Plan Year.
(c) Use of Section 401(k) Deferrals and QNECs under the ACP Test.
The Plan Administrator may take into account all or any
portion of Section 401(k) Deferrals and QNECs (see Section
17.7(h)) made to this Plan, or to another qualified plan
maintained by the Employer, for purposes of applying
the ACP Test. QNECs may not be included in the ACP Test to
the extent such amounts are included in the ADP Test
for such Plan Year. Section 401(k) Deferrals and QNECs made
to another qualified plan maintained by the Employer
may also be taken into account, so long as the other plan has
the same Plan Year as this Plan. To include Section
401(k) Deferrals under the ACP Test, the Plan must satisfy
the ADP Test taking into account all Section 401(k)
Deferrals, including those used under the ACP Test, and
taking into account only those Section 401(k) Deferrals
not included in the ACP Test. To include QNECs under the ACP
Test, all Employer Nonelective Contributions,
including the QNECs, must satisfy Codess.401(a)(4). In
addition, the Employer Nonelective Contributions,
excluding any QNECs used in the ADP Test or ACP Test, must
also satisfy Codess.401(a)(4).
(1) Timing of contributions. In order to be used in the
ACP Test for a given Plan Year, QNECs must be made
before the end of the 12-month period immediately
following the Plan Year for which they are allocated.
If the Employer is using the Prior Year Testing
Method (as described in (a)(1) above), QNECs taken
into account for the Nonhighly Compensated Employee
Group must be allocated for the prior Plan Year, and
must be made no later than the end of the 12-month
period immediately following such Plan Year.
(2) Double-counting limits. This paragraph applies if, in
any Plan Year beginning after December 31, 1998, the
Prior Year Testing Method is used to run the ACP Test
and, in the prior Plan Year, the Current Year Testing
Method was used to run the ACP Test. If this
paragraph applies, the following contributions are
disregarded in calculating the ACP of the Nonhighly
Compensated Employee Group for the prior Plan Year:
<PAGE>
(i) All QNECs that were included in either
the ADP Test or ACP Test for the prior Plan
Year.
(ii) All Section 401(k) Deferrals, regardless of
how used for testing purposes in the prior
Plan Year.
(iii) Any QMACs that were included in the ADP
Test for the prior Plan Year.
For purposes of applying the double-counting limits,
if actual data of the Nonhighly Compensated Employee
Group is used for a first Plan Year described in
Section (b) above, the Plan is still considered to be
using the Prior Year Testing Method for that first
Plan Year. Thus, the double-counting limits do not
apply if the Prior Year Testing Method is used for
the next Plan Year.
(3) Testing flexibility. The Plan Administrator is
expressly granted the full flexibility permitted by
applicable Treasury regulations to determine the
amount of Section 401(k) Deferrals and QNECs used in
the ACP Test. Section 401(k) Deferrals and QNECs
taken into account under the ACP Test do not have to
be uniformly determined for each Eligible
Participant, and may represent all or any portion of
the Section 401(k) Deferrals and QNECs allocated to
each Eligible Participant, provided the conditions
described above are satisfied.
(d) Correction of Excess Aggregate Contributions. If the Plan
fails the ACP Test for a Plan Year, the Plan Administrator may
use any combination of the correction methods under this
Section to correct the Excess Aggregate Contributions under
the Plan. (See Section 17.7(c) for the definition of Excess
Aggregate Contributions.)
(1) Corrective distribution of Excess Aggregate
Contributions. If the Plan fails the ACP Test for a
Plan Year, the Plan Administrator may, in its
discretion, distribute Excess Aggregate Contributions
(including any allocable income or loss) no later
than the last day of the following Plan Year to
correct the ACP Test violation. Excess Aggregate
Contributions will be distributed only to the extent
they are vested under Article 4, determined as of the
last day of the Plan Year for which the contributions
are made to the Plan. To the extent Excess Aggregate
Contributions are not vested, the Excess Aggregate
Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited in accordance
with Section 5.3(d)(1). If the Excess Aggregate
Contributions are distributed more than 2 1/2 months
after the last day of the Plan Year in which such
excess amounts arose, a 10-percent excise tax will be
imposed on the Employer with respect to such amounts.
(i) Amount to be distributed. In determining the
amount of Excess Aggregate Contributions to
be distributed to a Highly Compensated
Employee under this Section, Excess
Aggregate Contributions are first allocated
equally to the Highly Compensated
Employee(s) with the largest dollar amount
of contributions taken into account under
the ACP Test for the Plan Year in which the
excess occurs. The Excess Aggregate
Contributions allocated to such Highly
Compensated Employee(s) reduce the dollar
amount of the contributions taken into
account under the ACP Test for such Highly
Compensated Employee(s) until all of the
Excess Aggregate Contributions are allocated
or until the dollar amount of such
contributions for the Highly Compensated
Employee(s) is reduced to the next highest
dollar amount of such contributions for any
other Highly Compensated Employee(s). If
there are Excess Aggregate Contributions
remaining, the Excess Aggregate
Contributions continue to be allocated in
this manner until all of the Excess
Aggregate Contributions are allocated.
<PAGE>
(ii) Allocable gain or loss. A corrective
distribution of Excess Aggregate
Contributions must include any allocable
gain or loss for the Plan Year in which the
excess occurs. For this purpose, allocable
gain or loss on Excess Aggregate
Contributions may be determined in any
reasonable manner, provided the manner used
is applied uniformly and in a manner that is
reasonably reflective of the method used by
the Plan for allocating income to
Participants' Accounts.
(iii) Coordination with other provisions. A
corrective distribution of Excess Aggregate
Contributions made by the end of the Plan
Year following the Plan Year in which the
excess occurs may be made without consent of
the Participant or the Participant's spouse,
and without regard to any distribution
restrictions applicable under Article 8 or
Article 9. Excess Aggregate Contributions
are treated as Annual Additions for purposes
of Code ss.415 even if distributed from the
Plan. A corrective distribution of Excess
Aggregate Contributions is not treated as a
distribution for purposes of applying the
minimum required distribution rules under
Article 10.
(iv) Accounting for Excess Aggregate
Contributions. Excess Aggregate
Contributions are distributed from the
following sources and in the following
priority:
(A) Employee After-Tax Contributions
that are not matched;
(B) proportionately from Employee
After-Tax Contributions not
distributed under (A) and related
Employer Matching Contributions that
are included in the ACP Test;
(C) Employer Matching Contributions
included in the ACP Test that are
not distributed under (B);
(D) Section 401(k) Deferrals included in
the ACP Test that are not matched;
(E) proportionately from Section 401(k)
Deferrals included in the ACP Test
that are not distributed under (D)
and related Employer Matching
Contributions that are included in
the ACP Test and not distributed
under (B) or (C); and
(F) QNECs included in the ACP Test.
(2) Making QMACs or QNECs. To the extent authorized under
Part 4B(d) or 4C(b) of the Agreement, the Employer
may make additional QMACs or QNECs to the Plan on
behalf of the Nonhighly Compensated Employees in
order to correct an ACP Test violation to the extent
such amounts are not used in the ADP Test. Any QMACs
or QNECs contributed under this Section will be
allocated to Participants in accordance with the
provisions under Section 2.4(c) or (e), as
applicable.
<PAGE>
(e) Adjustment of contribution rate for Highly Compensated
Employees. The Employer may suspend (or automatically reduce
the rate of) Employee After-Tax Contributions for the Highly
Compensated Employee Group, to the extent necessary to satisfy
the ACP Test or to reduce the margin of failure. A suspension
or reduction shall not affect Employee After-Tax Contributions
already contributed by the Highly Compensated Employees for
the Plan Year. As of the first day of the subsequent Plan
Year, Employee After-Tax Contributions shall resume at the
levels elected by the Highly Compensated Employees.
17.4 Multiple Use Test. If both an ADP Test and an ACP Test are run for the Plan
Year, and the Plan does not pass the 1.25 test under either the ADP Test or the
ACP Test, the Plan must satisfy a special Multiple Use Test.
(a) Aggregate Limit. Under the Multiple Use Test, the sum of the
ADP and the ACP for the Highly Compensated Employee Group may
not exceed the Plan's Aggregate Limit. For this purpose, the
Plan's Aggregate Limit is the sum of (1) and (2):
(1) 1.25 times the greater of: (i) the ADP of the
Nonhighly Compensated Employee Group or (ii) the ACP
of the Nonhighly Compensated Employee Group; and
(2) the lesser of 2 times or 2 plus the lesser of: (i)
the ADP of the Nonhighly Compensated Employee Group
or (ii) the ACP of the Nonhighly Compensated Employee
Group.
Alternatively, if it results in a larger amount, the Aggregate
imit is the sum of (3) and (4):
(3) 1.25 times the lesser of: (i) the ADP of the
Nonhighly Compensated Employee Group or (ii) the ACP
of the Nonhighly Compensated Employee Group; and
(4) the lesser of 2 times or 2 plus the greater of: (i)
the ADP of the Nonhighly Compensated Employee Group
or (ii) the ACP of the Nonhighly Compensated Employee
Group.
The Aggregate Limit is calculated using the ADP and ACP of the
Nonhighly Compensated Employee Group that is used in
performing the ADP Test and ACP Test for the Plan Year. Thus,
if the Prior Year Testing Method is being used, the Aggregate
Limit is calculated by using the applicable percentage of the
Nonhighly Compensated Employee Group for the prior Plan Year.
If the Current Year Testing Method is being used, the
Aggregate Limit is calculated by using the applicable
percentage of the Nonhighly Compensated Employee Group for the
current Plan Year.
(b) Correction of the Multiple Use Test. If the Multiple Use Test
is not passed, the following corrective action will be taken.
(1) Corrective distributions. The Plan will make
corrective distributions (or additional corrective
distributions, if corrective distributions are
already being made to correct a violation of the ADP
Test or ACP Test), to the extent other corrective
action is not taken or such other action is not
sufficient to completely eliminate the Multiple Use
Test violation. Such corrective distributions may be
determined as if they were being made to correct a
violation of the ADP Test or a violation of the ACP
Test, or a combination of both, as determined by the
Plan Administrator. Any corrective distribution that
is treated as if it were correcting a violation of
the ADP Test will be determined under the rules
described in Section 17.2(d). Any corrective
distribution that is treated as if it were correcting
a violation of the ACP Test will be determined under
the rules described in Section 17.3(d).
<PAGE>
(2) Making QMACs or QNECs. The Employer, to the extent
authorized under Part 4B or Part 4C of the Agreement,
may make additional QMACs or QNECs, so that the
resulting ADP and/or ACP of the Nonhighly Compensated
Employee Group is increased to the extent necessary
to satisfy the Multiple Use Test.
17.5 Special Testing Rules. This Section describes special testing rules that
apply to the ADP Test or the ACP Test. In some cases, the special testing rule
is optional, in which case, the election to use such rule is solely within the
discretion of the Plan Administrator.
(a) Special rule for determining ADP and ACP of Highly Compensated
Employee Group. When calculating the ADP or ACP of the Highly
Compensated Employee Group for any Plan Year, a Highly
Compensated Employee's Section 401(k) Deferrals, Employee
After-Tax Contributions, and Employer Matching Contributions
under all qualified plans maintained by the Employer are taken
into account as if such contributions were made to a single
plan. If the plans have different Plan Years, the
contributions made in all Plan Years that end in the same
calendar year are aggregated under this paragraph. This
aggregation rule does not apply to plans that are required to
be disaggregated under Code ss.410(b).
(b) Aggregation of plans. When calculating the ADP Test and the
ACP Test, plans that are permissively aggregated for coverage
and nondiscrimination testing purposes are treated as a single
plan. This aggregation rule applies to determine the ADP or
ACP of both the Highly Compensated Employee Group and the
Nonhighly Compensated Employee Group. Aggregation described in
this paragraph is not permitted unless all plans being
aggregated have the same Plan Year and use the same testing
method for the applicable test.
(c) Disaggregation of plans.
(1) Plans covering Union Employees and non-Union
Employees. If the Plan covers Union Employees and
non-Union Employees, the Plan is mandatorily
disaggregated for purposes of applying the ADP Test
and the ACP Test into two separate plans, one
covering the Union Employees and one covering the
non-Union Employees. A separate ADP Test must be
applied for each disaggregated portion of the Plan in
accordance with applicable Treasury regulations. A
separate ACP Test must be applied to the
disaggregated portion of the Plan that covers the
non-Union Employees. The disaggregated portion of the
Plan that includes the Union Employees is deemed to
pass the ACP Test.
(2) Otherwise excludible Employees. If the minimum
coverage test under Code ss.410(b) is performed by
disaggregating "otherwise excludable Employees"
(i.e., Employees who have not satisfied the maximum
age 21 and one Year of Service eligibility conditions
permitted under Code ss.410(a)), then the Plan is
treated as two separate plans, one benefiting the
otherwise excludible Employees and the other
benefiting Employees who have satisfied the maximum
age and service eligibility conditions. If such
disaggregation applies, the following operating rules
apply to the ADP Test and the ACP Test.
<PAGE>
(i) For Plan Years beginning before January 1,
1999, the ADP Test and the ACP Test are
applied separately for each disaggregated
plan. If there are no Highly Compensated
Employees benefiting under a disaggregated
plan, then no ADP Test or ACP Test is
required for such plan.
(ii) For Plan Years beginning after December 31,
1998, instead of the rule under (i), only
the disaggregated plan that benefits the
Employees who have satisfied the maximum age
and service eligibility conditions permitted
under Code ss.410(a) is subject to the ADP
Test and the ACP Test. However, any Highly
Compensated Employee who is benefiting under
the disaggregated plan that includes the
otherwise excludable Employees is taken into
account in such tests. The Employer may
elect to apply the rule in (i) instead.
(3) Corrective action for disaggregated plans. Any
corrective action authorized by this Article may be
determined separately with respect to each
disaggregated portion of the Plan. A corrective
action taken with respect to a disaggregated portion
of the Plan need not be consistent with the method of
correction (if any) used for another disaggregated
portion of the Plan. In the case of a Nonstandardized
Plan, to the extent the Agreement authorizes the
Employer to make discretionary QNECs or discretionary
QMACs, the Employer is expressly permitted to
designate such QNECs or QMACs as allocable only to
Eligible Participants in a particular disaggregated
portion of the Plan.
(d) Special rules for the Prior Year Testing Method. If the Plan
uses the Prior Year Testing Method, and an election made under
(b) or (c) above is inconsistent with the election made in the
prior Plan Year, the plan coverage change rules described in
IRS Notice 98-1 (or other successor guidance) will apply in
determining the ADP and ACP for the Nonhighly Compensated
Employee Group.
17.6 Safe Harbor 401(k) Plan Provisions. For Plan Years beginning after December
31, 1998, the ADP Test described in Section 17.2 is deemed to be satisfied for
any Plan Year in which the Plan qualifies as a Safe Harbor 401(k) Plan. In
addition, if Employer Matching Contributions are made for such Plan Year, the
ACP Test is deemed satisfied with respect to such contributions if the
conditions of subsection (c) below are satisfied. This Section contains the
rules that must be met for the Plan to qualify as a Safe Harbor 401(k) Plan.
Part 4E of the Agreement allows the Employer to designate the manner in which it
will comply with the safe harbor requirements. If the Employer wishes to
designate the Plan as a Safe Harbor 401(k) Plan, it should complete Part 4E of
the Agreement. The safe harbor provisions described in this Section are not
applicable unless the Plan is identified as a Safe Harbor 401(k) Plan under Part
4E. The election under Part 4E to be a Safe Harbor 401(k) Plan is effective for
all Plan Years beginning with the Effective Date of the Plan (or January 1,
1999, if later) unless the Employer elects otherwise under Part 4E(d) of the
Agreement. See Section 20.7 for rules regarding the application of the Safe
Harbor 401(k) Plan provisions for Plan Years beginning before the date this Plan
is adopted.
(a) Safe harbor conditions. To qualify as a Safe Harbor 401(k)
Plan, the Plan must satisfy the requirements under Sections
(1), (2), (3) and (4) below.
(1) Safe Harbor Contribution. The Employer must provide a
Safe Harbor Employer Matching Contribution or a Safe
Harbor Employer Nonelective Contribution under the
Plan. The Employer must designate the type and amount
of the Safe Harbor Contribution under Part 4E of the
Agreement. The Employer may elect under Part 4E(d) to
provide the Safe Harbor Contribution to all Eligible
Participants or only to Eligible Participants who are
Nonhighly Compensated Employees. The Safe Harbor
Contribution must be made to the Plan no later than
12 months following the close of the Plan Year for
which it is being used to qualify the Plan as a Safe
Harbor 401(k) Plan.
<PAGE>
The eligibility conditions applicable to Section
401(k) Deferrals under Part 1 of the Agreement also
apply in determining who is an Eligible Participant
for purposes of the Safe Harbor Contribution.
However, the Employer may elect under Part 4E(d)(3)
to apply a one Year of Service (as defined in Section
1.4(b)) and an age 21 eligibility condition for the
Safe Harbor Contribution, regardless of the
eligibility conditions selected for Section 401(k)
Deferrals under Part 1 of the Agreement. The Employer
may further modify the eligibility conditions
applicable to Safe Harbor Contributions under Part
1(a)(6) of the Nonstandardized Plan Agreement so that
the Safe Harbor Contribution is provided only under a
properly disaggregated portion of the Plan, as
described in Section 17.5(c).
(i) Safe Harbor Employer Matching Contribution.
The Employer may elect under Part 4E(a) of
the Agreement to make the Safe Harbor
Employer Matching Contribution under a basic
formula or an enhanced formula. The basic
formula under Part 4E(a)(1) provides an
Employer Matching Contribution that equals:
(A) 100% of the amount of a
Participant's Section 401(k)
Deferrals that do not exceed 3% of
the Participant's Included
Compensation, plus
(B) 50% of the amount of a Participant's
Section 401(k) Deferrals that exceed
3%, but do not exceed 5%, of the
Participant's Included Compensation.
The enhanced formula under Part 4E(a)(2)
provides an Employer Matching Contribution
that is not less, at each level of Section
401(k) Deferrals, than the amount required
under the basic formula. Under the enhanced
formula, the rate of Employer Matching
Contributions may not increase as an
Employee's rate of Section 401(k) Deferrals
increase.
The Plan will not fail to be a Safe Harbor
401(k) Plan merely because Highly
Compensated Employees also receive a
contribution under the Plan. However, an
Employer Matching Contribution will not
satisfy this Section if any Highly
Compensated Employee is eligible for a
higher rate of Employer Matching
Contribution than is provided for any
Nonhighly Compensated Employee who has the
same rate of Section 401(k) Deferrals.
In addition to the Safe Harbor Matching
Contribution, an Employer may elect under
Part 4B of the Agreement to make Employer
Matching Contributions which are subject to
the normal vesting schedule and distribution
rules applicable to Employer Matching
Contributions. See Section (c) below for a
discussion of the effect of such additional
Employer Matching Contributions on the ACP
Test.
<PAGE>
(ii) Safe Harbor Employer Nonelective
Contribution. The Employer may elect under
Part 4E(b) of the Agreement to make a Safe
Harbor Employer Nonelective Contribution of
at least 3% of Included Compensation. The
Employer may retain discretion to increase
the amount of the Safe Harbor Employer
Nonelective Contribution in excess of the
percentage designated under Part 4E(b).
In addition, the Employer may provide for
additional discretionary Employer
Nonelective Contributions under Part 4C of
the Agreement (in addition to the Safe
Harbor Contribution under this Section)
which are subject to the normal vesting
schedule and distribution rules applicable
to Employer Nonelective Contributions.
The Employer may elect under Part 4E(b)(2)
of the Agreement to provide the Employer
Nonelective Contribution under another
Defined Contribution Plan maintained by the
Employer. The Employer Nonelective
Contribution under such other plan must
satisfy the conditions under this Section
17.6 for this Plan to qualify as a Safe
Harbor 401(k) Plan.
(2) Full and immediate vesting. The Safe Harbor
Contribution under (1) above must be 100% vested,
regardless of the Employee's length of service, at
the time the contribution is made to the Plan. Any
additional amounts contributed under the Plan may be
subject to a vesting schedule.
(3) Distribution restrictions. Distributions of the Safe
Harbor Contribution under (1) must be restricted in
the same manner as Section 401(k) Deferrals under
Article 8, except that such contributions may not be
distributed upon Hardship. See Section 8.6(c).
(4) Annual notice. Each Eligible Participant under the
Plan must receive a written notice describing the
Participant's rights and obligations under the Plan,
including a description of: (i) the Safe Harbor
Contribution formula being used under the Plan; (ii)
any other contributions under the Plan; (iii) the
plan to which the Safe Harbor Contributions will be
made (if different from this Plan); (iv) the type and
amount of Included Compensation that may be deferred
under the Plan; (v) the administrative requirements
for making and changing Section 401(k) Deferral
elections; and (vi) the withdrawal and vesting
provisions under the Plan. For any Plan Year that
begins in 1999, the notice requirements described in
this paragraph are deemed satisfied if the notice
provided satisfied a reasonable, good faith
interpretation of the notice requirements under Code
ss.401(k)(12).
Each Eligible Participant must receive the annual
notice within a reasonable period before the
beginning of the Plan Year (or within a reasonable
period before an Employee becomes an Eligible
Participant, if later). For this purpose, an Employee
will be deemed to have received the notice in a
timely manner if the Employee receives such notice at
least 30 days and no more than 90 days before the
beginning of the Plan Year. For an Employee who
becomes an Eligible Participant during a Plan Year,
the notice will be deemed timely if it is provided no
more than 90 days prior to the date the Employee
becomes an Eligible Participant. For Plan Years that
begin on or before April 1, 1999, the notice
requirement under this Section will be satisfied if
the notice is provided by March 1, 1999.
<PAGE>
(b) Deemed compliance with ADP Test. If the Plan satisfies all the
conditions under (a) above to qualify as a Safe Harbor 401(k)
Plan, the Plan is deemed to satisfy the ADP Test for the Plan
Year. This Plan will not be deemed to satisfy the ADP Test for
a Plan Year if an Eligible Participant is covered under
another Safe Harbor 401(k) Plan maintained by the Employer
which uses the provisions under this Section to comply with
the ADP Test.
(c) Deemed compliance with ACP Test. If the Plan satisfies all the
conditions under (a) above to qualify as a Safe Harbor 401(k)
Plan, the Plan is deemed to satisfy the ACP Test for the Plan
Year with respect to Employer Matching Contributions
(including Employer Matching Contributions that are not used
to qualify as a Safe Harbor 401(k) Plan), provided the
following conditions are satisfied. (The ACP Test is not
deemed to be satisfied with respect to any Employee After-Tax
Contributions.) If the only Employer Matching Contribution
formula provided under the Plan is a safe harbor formula under
Part 4E of the Agreement, the conditions described below are
automatically satisfied.
(1) Limit on contributions eligible for Employer Matching
Contributions. Any Employer Matching Contributions
provided under the Plan (whether or not such Employer
Matching Contributions are provided under a Safe
Harbor Matching Contribution formula) must be
determined by disregarding Section 401(k) Deferrals
and Employee After-Tax Contributions that exceed 6%
of Included Compensation. If an Employer Matching
Contribution formula applies to both Section 401(k)
Deferrals and Employee After-Tax Contributions, then
the sum of such contributions that exceed 6% of
Included Compensation must be disregarded under the
formula.
(2) Limit on discretionary Employer Matching
Contributions. For Plan Years beginning after
December 31, 1999, the Plan will not satisfy the ACP
Safe Harbor if the Employer elects to provide
discretionary Employer Matching Contributions in
addition to the Safe Harbor Matching Contribution,
unless the Employer limits the aggregate amount of
such discretionary Employer Matching Contributions
under Part 4B(b)(2)(i) to no more than 4 percent of
the Employee's Included Compensation.
(3) Rate of Employer Matching Contribution may not
increase. The Employer Matching Contribution formula
may not provide a higher rate of match at higher
levels of Section 401(k) Deferrals or Employee
After-Tax Contributions.
(4) Limit on Employer Matching Contributions for Highly
Compensated Employees. The Employer Matching
Contributions made for any Highly Compensated
Employee at any rate of Section 401(k) Deferrals
and/or Employee After-Tax Contributions cannot be
greater than the Employer Matching Contributions
provided for any Nonhighly Compensated Employee at
the same rate of Section 401(k) Deferrals and/or
Employee After-Tax Contributions.
(d) Rules for applying the ACP Test. If the ACP Test must be
performed under a Safe Harbor 401(k) Plan, either because
there are Employee After-Tax Contributions, or because the
Employer Matching Contributions do not satisfy the conditions
described in (c) above, the Current Year Testing Method must
be used to perform such test, even if the Agreement specifies
that the Prior Year Testing Method applies. In addition, the
testing rules provided in IRS Notice 98-52 (or any successor
guidance) are applicable in applying the ACP Test.
(e) Aggregated plans. If the Plan is aggregated with another plan
under Section 17.5(a) or (b), then the Plan is not a Safe
Harbor 401(k) Plan unless the conditions of this Section are
satisfied on an aggregated basis.
<PAGE>
17.7 Definitions. The following definitions apply for purposes of applying the
provisions of this Article 17.
(a) ACP -- Average Contribution Percentage. The ACP for a group is
the average of the contribution percentages calculated
separately for each Eligible Participant in the group. An
Eligible Participant's contribution percentage is the ratio of
the contributions made on behalf of the Participant which are
included under the ACP Test, expressed as a percentage of the
Participant's Testing Compensation for the Plan Year. For this
purpose, the contributions included under the ACP Test are the
sum of the Employee After-Tax Contributions, Employer Matching
Contributions, and QMACs (to the extent not taken into account
for purposes of the ADP test) made under the Plan on behalf of
theParticipant for the Plan Year. The ACP may also include
other contributions as provided in Section 17.3(c), if
applicable.
(b) ADP -- Average Deferral Percentage. The ADP for a group is the
average of the deferral percentages calculated separately for
each Eligible Participant in the group. A Participant's
deferral percentage is the ratio of the Participant's deferral
contributions expressed as a percentage of the Participant's
Testing Compensation for the Plan Year. For this purpose, a
Participant's deferral contributions include any Section
401(k) Deferrals made pursuant to the Participant's deferral
election, including Excess Deferrals of Highly Compensated
Employees (but excluding Excess Deferrals of Nonhighly
Compensated Employees). The ADP may also include other
contributions as provided in Section 17.2(c), if applicable.
(c) Excess Aggregate Contributions. Excess Aggregate Contributions
for a Plan Year are the amounts contributed on behalf of the
Highly Compensated Employees which exceed the maximum amount
permitted under the ACP Test for such Plan Year. The total
dollar amount of Excess Aggregate Contributions for a Plan
Year is determined by calculating the amount that would have
to be distributed to the Highly Compensated Employees if the
distributions were made first to the Highly Compensated
Employee(s) with the highest contribution percentage until
either:
(1) the adjusted ACP for the Highly Compensated Employee
Group would reach a percentage that satisfies the ACP
Test, or
(2) the contribution percentage of the Highly Compensated
Employee(s) with the next highest contribution
percentage would be reached.
This process is repeated until the adjusted ACP for the Highly
Compensated Employee Group would satisfy the ACP Test. The
total dollar amount so determined is then divided among the
Highly Compensated Employee Group in the manner described in
Section 17.3(d)(1) to determine the actual corrective
distributions to be made.
(d) Excess Contributions. Excess Contributions for a Plan Year are
the amounts taken into account in computing the ADP of the
Highly Compensated Employees which exceed the maximum amount
permitted under the ADP Test for such Plan Year. The total
dollar amount of Excess Contributions for a Plan Year is
determined by calculating the amount that would have to be
distributed to the Highly Compensated Employees if the
distributions were made first to the Highly Compensated
Employee(s) with the highest deferral percentage until either:
(1) the adjusted ADP for the Highly Compensated Employee
Group would reach a percentage that satisfies the ADP
Test, or
<PAGE>
(2) the deferral percentage of the Highly Compensated
Employee(s) with the next highest deferral percentage
would be reached. This process is repeated until the
adjusted ADP for the Highly Compensated Employee
Group would satisfy the ADP test. The total dollar
amount so determined is then divided among the Highly
Compensated Employee Group in the manner described in
Section 17.2(d)(1) to determine the actual corrective
distributions to be made.
(e) Highly Compensated Employee Group. The Highly Compensated
Employee Group is the group of Eligible Participants who are
Highly Compensated Employees for the current Plan Year. An
Employee who makes a one-time irrevocable election not to
participate in accordance with Section 1.11 (if authorized
under Part 13(h)(1) of a Nonstandardized Plan Agreement) will
not be treated as an Eligible Participant.
(f) Nonhighly Compensated Employee Group. The Nonhighly
Compensated Employee Group is the group of Eligible
Participants who are Nonhighly Compensated Employees for the
applicable Plan Year. If the Prior Year Testing Method is
selected under Part 4F of the Agreement, the Nonhighly
Compensated Employee Group is the group of Eligible
Participants in the prior Plan Year who were Nonhighly
Compensated Employees for that year. If the Current Year
Testing Method is selected under Part 4F of the Agreement,
the Nonhighly Compensated Employee Group is the group of
Eligible Participants who are Nonhighly Compensated Employees
for the current Plan Year. An Employee who makes a one-time
irrevocable election not to participate in accordance with
Section 1.11 (if authorized under Part 13(h)(1) of a
Nonstandardized Plan Agreement) will not be treated as an
Eligible Participant.
(g) QMACs - Qualified Matching Contribution. To the extent
authorized under Part 4B(d) of the Agreement, QMACs are
Employer Matching Contributions which are 100% vested when
contributed to the Plan and are subject to the distribution
restrictions applicable to Section 401(k) Deferrals under
Article 8, except that no portion of a Participant's QMAC
Account may be distributed from the Plan on account of
Hardship. See Section 8.6(c).
(h) QNECs - Qualified Nonelective Contributions. To the extent
authorized under Part 4C(b) of the Agreement, QNECs are
Employer Nonelective Contributions which are 100% vested when
contributed to the Plan and are subject to the distribution
restrictions applicable to Section 401(k) Deferrals under
Article 8, except that no portion of a Participant's QNEC
Account may be distributed from the Plan on account of
Hardship. See Section 8.6(c).
(i) Testing Compensation. In determining the Testing Compensation
used for purposes of applying the ADP Test, the ACP Test, and
the Multiple Use Test, the Plan Administrator is not bound by
any elections made under Part 3 of the Agreement with respect
to Total Compensation or Included Compensation under the Plan.
The Plan Administrator may determine on an annual basis (and
within its discretion) the components of Testing Compensation
for purposes of applying the ADP Test, the ACP Test and the
Multiple Use Test. Testing Compensation must qualify as a
nondiscriminatory definition of compensation under Code
ss.414(s) and the regulations thereunder and must be applied
consistently to all Participants. Testing Compensation may be
determined over the Plan Year for which the applicable
test is being performed or the calendar year ending within
such Plan Year. In determining Testing Compensation, the
Plan Administrator may take into consideration only the
compensation received while the Employee is an Eligible
Participant. In no event may Testing Compensation for any
Participant exceed the Compensation Dollar Limitation
defined in Section 22.30.
<PAGE>
Article 18
Plan Amendments and Termination
This Article contains the rules regarding the ability of the Prototype Sponsor
or Employer to make Plan amendments and the effect of such amendments on the
Plan. This Article also contains the rules for administering the Plan upon
termination and the effect of Plan termination on Participants' benefits and
distribution rights.
18.1 Plan Amendments.
(a) Amendment by the Prototype Sponsor. The Prototype Sponsor may
amend the Prototype Plan on behalf of each adopting Employer
who is maintaining a Plan under the Prototype Plan at the time
of the amendment.An amendment by the Prototype Sponsor to the
Basic Plan Document does not require consent of the adopting
Employers, nor does an adopting Employer have to reexecute its
Agreement with respect to such an amendment. The Prototype
Sponsor will provide each adopting Employer a copy of the
amended Basic Plan Document (either by providing substitute or
additional pages, or by providing a restated Basic Plan
Document). An amendment by the Prototype Sponsor to any
Agreement offered under the Prototype Plan is not effective
with respect to an Employer's Plan unless the Employer
reexecutes the amended Agreement.
(b) Amendment by the Employer. The Employer shall have the right
at any time to amend the Agreement in the following manner
without affecting the Plan's status as a Prototype Plan. (The
ability to amend the Plan as authorized under this Section
applies only to the Employer that executes the Signature Page
of the Agreement. Any amendment to the Plan under this Section
also applies to any Related Employer that participates under
the Plan as a Co-Sponsor.)
(1) The Employer may change any optional selections under
the Agreement.
(2) The Employer may add additional language where
authorized under the Agreement, including language
necessary to satisfy Code ss.415 or Code ss.416 due
to the aggregation of multiple plans.
(3) The Employer may change the administrative selections
under Part 12 of the Agreement by replacing the
appropriate page(s) within the Agreement. Such
amendment does not require reexecution of the
Signature Page of the Agreement.
(4) The Employer may add any model amendments published
by the IRS which specifically provide that their
adoption will not cause the Plan to be treated as an
individually designed plan.
(5) The Employer may adopt any amendments that it deems
necessary to satisfy the requirements for resolving
qualification failures under the IRS' compliance
resolution programs.
(6) The Employer may adopt an amendment to cure a
coverage or nondiscrimination testing failure, as
permitted under applicable Treasury regulations.
The Employer may amend the Plan at any time for any other
reason, including a waiver of the minimum funding requirement
under Code ss.412(d). However, such an amendment may cause the
Plan to lose its status as a Prototype Plan and become an
individually designed plan.
<PAGE>
The Employer's amendment of the Plan from one type of Defined
Contribution Plan (e.g., a money purchase plan) into another
type of Defined Contribution Plan (e.g., a profit sharing
plan) will not result in a partial termination or any other
event that would require full vesting of some or all Plan
Participants.
Any amendment which affects the rights, duties or
responsibilities of the Trustee or Plan Administrator may only
be made with the Trustee's or Plan Administrator's written
consent. Any amendment to the Plan must be in writing and a
copy of the resolution setting forth such amendment (with the
applicable effective date of such amendment) must be delivered
to the Trustee.
No amendment may authorize or permit any portion of the assets
held under the Plan to be used for or diverted to a purpose
other than the exclusive benefit of Participants or their
Beneficiaries, except to the extent such assets are used to
pay taxes or administrative expenses of the Plan. An amendment
also may not cause or permit any portion of the assets held
under the Plan to revert to or become property of the
Employer.
(c) Protected Benefits. Except as permitted under statute (such as
Code ss.412(c)(8)), regulations (such as Treas. Reg.
ss.1.411(d)-4), or other IRS guidance of general
applicability, no Plan amendment (or other transaction having
the effect of a Plan amendment, such as a merger, acquisition,
plan transfer, or similar transaction) may reduce a
Participant's Account Balance or eliminate or reduce a
Protected Benefit to the extent such Protected Benefit relates
to amounts accrued prior to the adoption date (or effective
date, if later) of the Plan amendment. For this purpose,
Protected Benefits include any early retirement benefits,
retirement-type subsidies, and optional forms of benefit (as
defined under the regulations).
18.2 Plan Termination. The Employer may terminate this Plan at any time by
delivering to the Trustee and Plan Administrator written notice of such
termination.
(a) Full and immediate vesting. Upon a full or partial termination
of the Plan (or in the case of a profit sharing plan, the
complete discontinuance of contributions), all amounts
credited to an affected Participant's Account become 100%
vested, regardless of the Participant's vested percentage
determined under Article 4.
(b) Distribution procedures. Upon the termination of the Plan, the
Employer shall direct the distribution of Plan assets to
Participants in accordance with the provisions under Article
8. For this purpose, distribution shall be made to
Participants with vested Account Balances of $5,000 or less in
lump sum as soon as administratively feasible following the
Plan termination, regardless of any contrary election under
Part 9(b) of the Agreement. For Participants with vested
Account Balances in excess of $5,000, distribution will be
made through the purchase of deferred annuity contracts
(which protect all Protected Benefits under the Plan) unless
a Participant elects to receive an immediate distribution in
any form of payment permitted under the Plan. If an immediate
distribution is elected in a form other than a lump sum, the
distribution will be satisfied through the purchase of an
immediate annuity contract. Distributions will be made as soon
as administratively feasible following the Plan termination,
regardless of any contrary election under Part 9(a) of the
Agreement. The references in this paragraph to $5,000 shall be
deemed to mean $3,500, prior to the time the $5,000 threshold
becomes effective under the Plan (as determined in Section
8.3(f)).
<PAGE>
(1) Special rule for certain profit sharing plans. If
this Plan is a profit sharing plan, distribution will
be made to all Participants, without consent, as soon
as administratively feasible following the
termination of the Plan, without regard to the value
of the Participants' vested Account Balance. This
special rule applies only if the Plan does not
provide for an annuity option under Part 11 of the
Agreement and the Employer does not maintain any
other Defined Contribution Plan (other than an ESOP)
at any time between the termination of the Plan and
the distribution.
(2) Special rule for 401(k) plans. Section 401(k)
Deferrals, QMACs, QNECs, Safe Harbor Matching
Contributions and Safe Harbor Nonelective
Contributions under a 401(k) plan (as well as
transferred assets (see Section 3.3(c)(3)) which are
subject to the distribution restrictions applicable
to Section 401(k) Deferrals) may be distributed upon
Plan termination only if the Employer does not
maintain a Successor Plan at any time during the
period beginning on the date of termination and
ending 12 months after the final distribution of all
Plan assets. For this purpose, a Successor Plan is
any Defined Contribution Plan, other than an ESOP,
SEP or SIMPLE IRA. A plan will not be considered a
Successor Plan, if at all times during the 24-month
period beginning 12 months before the Plan
termination, fewer than 2% of the Eligible
Participants under the 401(k) plan are eligible under
such plan. A distribution these contributions may be
made to the extent another distribution event permits
distribution of such amounts.
(3) Plan termination not distribution event if assets are
transferred to another Plan. If, pursuant to the
termination of the Plan, the Employer enters into a
transfer agreement to transfer the assets of the
terminated Plan to another plan maintained by the
Employer (or by a successor employer in a transaction
involving the acquisition of the Employer's stock or
assets, or other similar transaction), the
termination of the Plan is not a distribution event
and the distribution procedures above do not apply.
Prior to the transfer of the assets, distribution of
a Participant's Account Balance may be made from the
terminated Plan only to a Participant (or
Beneficiary, if applicable) who is otherwise eligible
for distribution without regard to the Plan's
termination. Otherwise, benefits will be distributed
from the transferee plan in accordance with the terms
of that plan (subject to the protection of any
Protected Benefits that must be continued with
respect to the transferred assets).
18.3 Merger or Consolidation. In the event the Plan is merged or consolidated
with another plan, each Participant must be entitled to a benefit immediately
after such merger or consolidation that is at least equal to the benefit the
Participant would have been entitled to had the Plan terminated immediately
before such merger or consolidation. The Trustee is authorized to enter into a
merger agreement with the Trustee of another plan, provided the Trustee
reasonably believes such plan is qualified under Code ss.401(a). A merger
agreement entered into by the Trustee is not part of this Plan and does not
affect the Plan's status as a Prototype Plan.
<PAGE>
Article 19
Miscellaneous
This Article contains miscellaneous provisions concerning the Employer's and
Participants' rights and responsibilities under the Plan.
19.1 Exclusive Benefit. Except as provided under Section 19.2, no part of the
Plan assets may revert to the Employer prior to the satisfaction of all
liabilities under the Plan nor will such Plan assets be used for, or diverted
to, a purpose other than the exclusive benefit of Participants or their
Beneficiaries.
19.2 Return of Employer Contributions. Upon written request by the Employer, the
Trustee must return any Employer Contributions provided that the circumstances
and the time frames described below are satisfied. The Trustee may request the
Employer to provide additional information to ensure the amounts may be properly
returned.
(a) Mistake of fact. Any Employer Contributions made because of a
mistake of fact must be returned to the Employer within one
year of the contribution.
(b) Disallowance of deduction. Employer Contributions to the Trust
are made with the understanding that they are deductible. In
the event the deduction of an Employer Contribution is
disallowed by the IRS, such contribution (to the extent
disallowed) must be returned to the Employer within one year
of the disallowance of the deduction.
(c) Failure to initially qualify. Employer Contributions to the
Plan are made with the understanding, in the case of a new
Plan, that the Plan satisfies the qualification requirements
of Code ss.401(a) as of the Plan's Effective Date. In the
event that the Internal Revenue Service determines that the
Plan is not initially qualified under the Code, any Employer
Contributions (and allocable earnings) made incident to that
initial qualification must be returned to the Employer within
one year after the date the initial qualification is denied,
but only if the application for the qualification is made by
the time prescribed by law for filing the employer's return
for the taxable year in which the plan is adopted, or such
later date as the Secretary of the Treasury may prescribe.
19.3 Alienation or Assignment. Except as permitted under applicable statute or
regulation, a Participant or Beneficiary may not assign, alienate, transfer or
sell any right or claim to a benefit or distribution from the Plan, and any
attempt to assign, alienate, transfer or sell such a right or claim shall be
void, except as permitted by statute or regulation. Any such right or claim
under the Plan shall not be subject to attachment, execution, garnishment,
sequestration, or other legal or equitable process. This prohibition against
alienation or assignment also applies to the creation, assignment, or
recognition of a right to a benefit payable with respect to a Participant
pursuant to a domestic relations order, unless such order is determined to be a
QDRO pursuant to Section 11.5.
19.4 Participants' Rights. The adoption of this Plan by the Employer does not
give any Participant, Beneficiary, or Employee a right to continued employment
with the Employer and does not affect the Employer's right to discharge an
Employee or Participant at any time. This Plan also does not create any legal or
equitable rights in favor of any Participant, Beneficiary, or Employee against
the Employer, Plan Administrator or Trustee. Unless the context indicates
otherwise, any amendment to this Plan is not applicable to determine the
benefits accrued (and the extent to which such benefits are vested) by a
Participant or former Employee whose employment terminated before the effective
date of such amendment, except where application of such amendment to the
terminated Participant or former Employee is required by statute, regulation or
other guidance of general applicability. Where the provisions of the Plan are
ambiguous as to the application of an amendment to a terminated Participant or
former Employee, the Plan Administrator has the authority to make a final
determination on the proper interpretation of the Plan.
<PAGE>
19.5 Military Service. To the extent required under Code ss.414(u), an Employee
who returns to employment with the Employer following a period of qualified
military service will receive any contributions, benefits and service credit
required under Code ss.414(u), provided the Employee satisfies all applicable
requirements under the Code and regulations.
19.6 Paired Plans. If the Employer adopts more than one Standardized Plan
Agreement, each of the Standardized Plan Agreements are considered to be Paired
Plans, provided the Employer completes Parts 13(b)(2) and 13(f)(1) of the
Agreement in a manner which ensures the plans together comply with the Annual
Additions Limitation, as described in Article 7, and the Top-Heavy Plan rules,
as described in Article 16.
19.7 Loss of Prototype Status. If the Plan as adopted by the Employer fails to
attain or retain qualification, such Plan will no longer qualify as a Prototype
Plan and will be considered an individually-designed plan.
19.8 Governing Law. The provisions of this Plan shall be construed,
administered, and enforced in accordance with the provisions of applicable
Federal Law and, to the extent applicable, the laws of the state in which the
Employer has its principal place of business.
19.9 Waiver of Notice. Any person entitled to a notice under the Plan may waive
the right to receive such notice, to the extent such a waiver is not prohibited
by law, regulation or other pronouncement.
19.10 Use of Electronic Media. The Plan Administrator may use telephonic or
electronic media to satisfy any notice requirements required by this Plan, to
the extent permissible under regulations (or other generally applicable
guidance). In addition, a Participant's consent to immediate distribution, as
required by Article 8, may be provided through telephonic or electronic means,
to the extent permissible under regulations (or other generally applicable
guidance).
19.11 Severability of Provisions. In the event that any provision of this Plan
shall be held to be illegal, invalid or unenforceable for any reason, the
remaining provisions under the Plan shall be construed as if the illegal,
invalid or unenforceable provisions had never been included in the Plan.
19.12 Binding Effect. The Plan, and all actions and decisions made thereunder,
shall be binding upon all applicable parties, and their heirs, executors,
administrators, successors and assigns.
<PAGE>
Article 20
SBJPA Elections and Effective Dates
The provisions of this Plan are generally effective as of the Effective Date
designated on the Signature Page of the Agreement. The Signature Page also
allows for special effective dates for specified provisions of the Plan, which
override the general Effective Date under the Agreement. Section 22.156 refers
to a series of laws that have been enacted since 1994 as the SBJPA Legislation,
for which extended time (known as the remedial amendment period) was provided to
Employers to conform their plan documents to such laws. This Article prescribes
special effective date rules for conforming plans to the SBJPA Legislation.
20.1 SBJPA Effective Dates. If the Agreement is adopted within the remedial
amendment period for the SBJPA Legislation, and the Plan has not previously been
restated to comply with the SBJPA Legislation, then special effective dates
apply to certain provisions. These special effective dates apply to the
appropriate provisions of the Plan, even if such special effective dates are
earlier than the Effective Date identified on the Signature Page of the
Agreement. The Employer may specify in elections provided in Parts 4E and 4F of
the 401(k) Agreement, and in Parts 9 and 13 of all the Agreements, how the Plan
was operated to comply with the SBJPA Legislation. These elections need only be
completed if the Employer operated this Plan in a manner that is different from
the default provisions contained in this Plan or the elective choices made under
the Agreement. In addition, these elections need not be completed if this Plan
is not being restated for the first time to comply with the SBJPA Legislation,
and prior amendments or restatements of the Plan satisfied the requirement to
amend timely to comply with the SBJPA Legislation.
20.2 Highly Compensated Employee Definition. The definition of Highly
Compensated Employee under Section 22.86 is modified effective for Plan Years
beginning after December 31, 1996. Under the current definition of Highly
Compensated Employee (as amended by SBJPA), the Employer must designate under
the Plan whether it is using the Top-Paid Group Test and whether it is using the
Calendar Year Election or, for the 1997 Plan Year, whether it used the Old-Law
Calendar Year Election.
(a) Top-Paid Group Test. In determining whether an Employee is a
Highly Compensated Employee, the Top-Paid Group Test under
Section 22.86(b)(4) does not apply unless the Employer
specifically elects under Part 13(a)(1) to have the Top-Paid
Group Test apply. The Employer's election to use or not use
the Top-Paid Group Test generally applies for all years
beginning with the Effective Date of the Plan (or the first
Plan Year beginning after December 31, 1996, if later).
However, because the Employer may not have operated the Plan
consistent with this Top-Paid Group Test election for all
years prior to the date this Plan restatement is adopted, Part
13(a) of the Agreement also permits the Employer to override
the Top-Paid Group Test election under this Plan for specified
Plan Years beginning after December 31, 1996, and before the
date this Plan restatement is adopted.
(b) Calendar Year Election. In determining whether an Employee is
a Highly Compensated Employee, the Calendar Year Election
under Section 22.86(b)(5) does not apply unless the Employer
specifically elects under Part 13(a)(2) to have the Calendar
Year Election apply. The Employer's election to use or not use
the Calendar Year Election is generally effective for all
years beginning with the Effective Date of this Plan (or the
first Plan Year beginning after December 31, 1996, if later).
However, because the Employer may not have operated the Plan
consistent with this Calendar Year Election for all years
prior to the date this Plan restatement is adopted, Part 13(a)
of the Agreement permits the Employer to override the Calendar
Year Election under this Plan for specified Plan Years
beginning after December 31, 1996, and before the date this
Plan restatement is adopted.
<PAGE>
(c) Old-Law Calendar Year Election. In determining whether an
Employee was a Highly Compensated Employee for the Plan Year
beginning in 1997, a special Old-Law Calendar Year Election
was available. (See Section 22.86(b)(6) for the definition of
the Old-Law Calendar Year Election.) Part 13(a)(3) of the
Agreement permits the Employer to designate whether it used
the Old-Law Calendar Year Election for the 1997 Plan Year. If
the Employer did not use the Old-Law Calendar Year Election,
the election in Part 13(a)(3) need not be completed.
20.3 Required Minimum Distributions. Part 13(c)(2) of the Agreement permits the
Employer to designate how it complied with the SBJPA changes to the required
minimum distribution rules. Section 10.4 describes the application of the SBJPA
changes to the required minimum distribution rules.
20.4 $5,000 Involuntary Distribution Threshold. For Plan Years beginning on or
after August 5, 1997, a Participant (and spouse, if the Joint and Survivor
Annuity rules apply under Article 9) must consent to a distribution from the
Plan if the Participant's vested Account Balance exceeds $5,000. (See Section
8.3(e) for the applicable rules for determining the value of a Participant's
vested Account Balance.) For Plan Years beginning before August 5, 1997, the
consent threshold was $3,500 instead of $5,000.
The increase in the consent threshold to $5,000 is generally effective for Plan
Years beginning on or after August 5, 1997. However, because the Employer may
not have operated the Plan consistent with the $5,000 threshold for all years
prior to the date this Plan restatement was adopted, Part 13(d)(1) of the
Agreement permits the Employer to designate the Plan Year during which it began
applying the higher $5,000 consent threshold. If the Employer began applying the
$5,000 consent threshold for Plan Years beginning on or after August 5, 1997,
Part 13(d)(1) need not be completed. If the Employer did not begin using the
$5,000 consent threshold until some later date, the Employer must designate the
appropriate date in Part 13(d)(1).
20.5 Repeal of Family Aggregation for Allocation Purposes. For Plan Years
beginning on or after January 1, 1997, the family aggregation rules were
repealed. For Plan Years beginning before January 1, 1997, the family
aggregation rules required that family members of a Five-Percent Owner or one of
the 10 Employees with the highest ownership interest in the Employer were
aggregated as a single Highly Compensated Employee for purposes of determining
such individuals' share of any contributions under the Plan. In determining the
allocation for such aggregated individuals, the Compensation Dollar Limitation
(as defined in Section 22.30) was applied on an aggregated basis with respect to
the Five-Percent Owner or top-10 owner, his/her spouse, and his/her minor
children (under the age of 19).
The family aggregation rules were repealed effective for Plan Years beginning on
or after January 1, 1997. However, because the Employer may not have operated
the Plan consistent with the repeal of family aggregation for all years prior to
the date this Plan restatement is adopted, Part 13(d)(2) of the Agreement
permits the Employer to designate the Plan Year during which it repealed family
aggregation for allocation purposes. If the Employer implemented the repeal of
family aggregation for Plan Years beginning on or after January 1, 1997, Part
13(d)(2) need not be completed. If the Employer did not implement the repeal of
family aggregation until some later date, the Employer must designate the
appropriate date in Part 13(d)(2).
20.6 ADP/ACP Testing Methods. The SBJPA Legislation modified the
nondiscrimination testing rules for Section 401(k) Deferrals, Employer Matching
Contributions, and Employee After-Tax Contributions, effective for Plan Years
beginning after December 31, 1996. Under the current ADP and ACP
nondiscrimination tests, the Plan must designate the testing methodology used
for each Plan Year. (See Article 17 for the definition of the ADP Test and the
ACP Test and the applicable testing methodology.)
<PAGE>
Part 4F of the 401(k) Agreement contains elective provisions for the Employer to
designate the testing methodology it will use in performing the ADP Test and the
ACP Test. Part 4F of the 401(k) Agreement also contains elective provisions for
the Employer to designate the testing methodology it used for Plan Years that
began before the adoption of the Agreement.
20.7 Safe Harbor 401(k) Plan. Effective for Plan Years beginning after December
31, 1998, the Employer may elect under Part 4E of the 401(k) Agreement to apply
the Safe Harbor 401(k) Plan provisions. To qualify as a Safe Harbor 401(k) Plan
for a Plan Year, the Plan must be identified as a Safe Harbor 401(k) Plan for
such year.
If the Employer elects under Part 4E to apply the Safe Harbor 401(k) Plan
provisions, the Plan generally will be considered a Safe Harbor Plan for all
Plan Years beginning with the Effective Date of the Plan (or January 1, 1999, if
later). Likewise, if the Employer does not elect to apply the Safe Harbor 401(k)
provisions, the Plan generally will not be considered a Safe Harbor Plan for
such year. However, because the Employer may not have operated the Plan
consistent with its election under Part 4E to apply (or to not apply) the Safe
Harbor 401(k) Plan provisions for all years prior to the date this Plan
restatement is adopted, Part 4E(e) of the 401(k) Agreement permits the Employer
to designate any Plan Year in which the Plan was (or was not) a Safe Harbor
401(k) Plan. Part 4E(e) should only be completed if the Employer operated this
Plan prior to date it was actually adopted in a manner that is inconsistent with
the election made under Part 4E of the Agreement.
If the Employer elects under Part 4E of the Agreement to apply the Safe Harbor
401(k) Plan provisions for any Plan Year beginning prior to the date this Plan
is adopted, the Plan must have complied with the requirements under Section 17.6
for such year. The type and amount of the Safe Harbor Contribution for such Plan
Year(s) is the type and amount of contribution described in the Participant
notice issued pursuant to Section 17.6(a)(4) for such Plan Year.
<PAGE>
Article 21
Participation by Related Employers (Co-Sponsors)
21.1 Co-Sponsor Adoption Page. A Related Employer may elect to participate under
this Plan by executing a Co-Sponsor Adoption Page under the Agreement. By
executing a Co-Sponsor Adoption Page, the Co-Sponsor adopts all the provisions
of the Plan, including the elective choices made by the Employer under the
Agreement. The Co-Sponsor is also bound by any amendments made to the Plan in
accordance with Article 18. The Co-Sponsor agrees to use the same Trustee as is
designated on the Trustee Declaration under the Agreement, except as provided in
a separate trust agreement authorized under Article 12.
21.2 Participation by Employees of Co-Sponsor. A Related Employer may not
contribute to this Plan unless it executes the Co-Sponsor Adoption Page. (See
Section 1.3 for a discussion of the eligibility rules as they apply to Employees
of Related Employers who do not execute a Co-Sponsor Adoption Page.) However, in
applying the provisions of this Plan, Total Compensation (as defined in Section
22.172) includes amounts earned with a Related Employer, regardless of whether
such Related Employer executes a Co-Sponsor Adoption Page. If this Plan is a
Nonstandardized Plan, the Employer may elect under Part 3(b)(2)(vi) of the
Agreement to exclude amounts earned with a Related Employer that does not
execute a Co-Sponsor Page for purposes of determining an Employee's Included
Compensation under the Plan.
21.3 Allocation of Contributions and Forfeitures. Unless selected otherwise
under the Co-Sponsor Adoption Page, any contributions made by a Co-Sponsor (and
any forfeitures relating to such contributions) will be allocated to all
Eligible Participants employed by the Employer and Co-Sponsors in accordance
with the provisions under this Plan. Under a Nonstandardized Plan, a Co-Sponsor
may elect under the Co-Sponsor Page to allocate its contributions (and
forfeitures relating to such contributions) only to the Eligible Participants
employed by the Co-Sponsor making such contributions. If so elected, Employees
of the Co-Sponsor will not share in an allocation of contributions (or
forfeitures relating to such contributions) made by any other Related Employer
(except in such individual's capacity as an Employee of that other Related
Employer). Where contributions are allocated only to the Employees of a
contributing Co-Sponsor, the Plan Administrator will maintain a separate
accounting of an Employee's Account Balance attributable to the contributions of
a particular Co-Sponsor. This separate accounting is necessary only for
contributions that are not 100% vested, so that the allocation of forfeitures
attributable to such contributions can be allocated for the benefit of the
appropriate Employees.
21.4 Co-Sponsor No Longer a Related Employer. If a Co-Sponsor becomes a Former
Related Employer because of an acquisition or disposition of stock or assets, a
merger, or similar transaction, the Co-Sponsor must cease to participate in the
Plan as soon as administratively feasible. If the transition rule under Code
ss.410(b)(6)(C) applies, this requirement to cease participation in the Plan as
soon as administratively feasible is deemed satisfied if necessary action is
taken by the end of the transition period described in Code ss.410(b)(6)(C).
(a) Manner of discontinuing participation. A Former Related
Employer discontinues participation as follows: (1) a
resolution is adopted by the Former Related Employer that
formally terminates active participation in the Plan as of
a specified date, (2) the Employer that has executed the
Signature Page of the Agreement reexecutes such page,
indicating an amendment by page substitution through the
deletion of the Co-Sponsor Adoption Page executed by the
Former Related Employer, and (3) the Former Related Employer
provides any notices to its Employees that are required
by law. Discontinuance of participation means that no further
benefits accrue after the effective date of such
discontinuance with respect to employment with the Former
Related Employer. The portion of the Plan attributable to
the Former Related Employer may continue as a separate plan,
under which benefits may continue to accrue, through the
adoption by the Former Related Employer of a successor plan
(which may be created through the execution of a separate
Agreement by the Former Related Employer) or by spin-off of
that portion of the Plan followed by a merger or transfer into
another existing plan, as specified in a merger or transfer
agreement.
<PAGE>
(b) Multiple employer plan. If, after a Co-Sponsor becomes a
Former Related Employer, its Employees continue to accrue
benefits under this Plan, the Plan will be treated as a
multiple employer plan to the extent required by law. So long
as the discontinuance procedures of this Section are
satisfied, such treatment as a multiple employer plan will not
affect reliance on the favorable IRS letter issued to the
Prototype Sponsor or any determination letter issued on the
Plan.
21.5 Special rules for Standardized Plans. As stated in Section 1.3(b) of this
BPD, under a Standardized Plan each Related Employer is required to execute a
Co-Sponsor Adoption Page. If a Related Employer fails to execute a Co-Sponsor
Adoption Page, the Plan will be treated as an individually-designed plan, except
as provided in paragraphs (a) and (b) of this Section. Nothing in this Plan
shall be construed to treat a Related Employer as participating in the Plan in
the absence of a Co-Sponsor Adoption Page executed by that Related Employer.
(a) New Related Employer. If an organization becomes a New Related
Employer after the Effective Date of the Agreement by reason
of an acquisition or disposition of stock or assets, a merger,
or similar transaction, the New Related Employer must execute
a Co-Sponsor Page no later than the end of the transition
period described in Code ss.410(b)(6)(C). Participation of the
New Related Employer must be effective no later than the first
day of the Plan Year that begins after such transition period
ends. If the transition period in Code ss.410(b)(6)(C) is not
applicable, the effective date of the New Related Employer's
participation in the Plan must be no later than the date it
became a Related Employer.
(b) Former Related Employer. If an organization ceases to be a
Related Employer (Former Related Employer), the provisions of
Section 21.4, relating to discontinuance of participation,
apply.
If the rules of (a) or (b) of this Section are followed, the
Standardized Plan may continue to rely on the favorable IRS
letter issued to the Prototype Sponsor during any period in
which a New Related Employer is not participating in the Plan
or a Former Related Employer continues to participate in the
Plan. If the rules of (a) or (b) are not followed, the
Standardized Plan is treated as an individually-designed plan
for any period of such noncompliance.
<PAGE>
Article 22
Plan Definitions
This Article contains definitions for common terms that are used throughout the
Plan. All capitalized terms under the Plan are defined in this Article. Where
applicable, this Article will refer to other Sections of the Plan where the term
is defined.
22.1 Account. The separate Account maintained for each Participant under the
Plan. To the extent applicable, a Participant may have any (or all) of the
following separate sub-Accounts within his/her Account: Employer Contribution
Account, Section 401(k) Deferral Account, Employer Matching Contribution
Account, Employer Contribution Account, QMAC Account, QNEC Account, Employee
After-Tax Contribution Account, Safe Harbor Matching Contribution Account, Safe
Harbor Nonelective Contribution Account, Rollover Account, and Transfer Account.
The Transfer Account also may have any (or all) of the sub-Accounts listed
above. The Plan Administrator may maintain other sub-Accounts, if necessary, for
proper administration of the Plan.
22.2 Account Balance. A Participant's Account Balance is the total value of all
Accounts (whether vested or not) maintained for the Participant. A Participant's
vested Account Balance includes only those amounts for which the Participant has
a vested interest in accordance with the provisions under Article 4 and Part 6
of the Agreement. A Participant's Section 401(k) Deferral Account, QMAC Account,
QNEC Account, Employee After-Tax Contribution Account, Safe Harbor Matching
Contribution Account, Safe Harbor Nonelective Contribution Account, and Rollover
Account are always 100% vested.
22.3 Accrued Benefit. If referred to in the context of a Defined Contribution
Plan, the Accrued Benefit is the Account Balance. If referred to in the context
of a Defined Benefit Plan, the Accrued Benefit is the benefit accrued under the
benefit formula prescribed by the Defined Benefit Plan.
22.4 ACP -- Average Contribution Percentage. The average of the contribution
percentages for the Highly Compensated Employee Group and the Nonhighly
Compensated Employee Group, which are tested for nondiscrimination under the ACP
Test. See Section 17.7(a).
22.5 ACP Test -- Actual Contribution Percentage Test. The special
nondiscrimination test that applies to Employer Matching Contributions and/or
Employee After-Tax Contributions under the 401(k) Agreement. See Section 17.3.
22.6 Actual Hours Crediting Method. The Actual Hours Crediting Method is a
method for counting service for purposes of Plan eligibility and vesting. Under
the Actual Hours Crediting Method, an Employee is credited with the actual Hours
of Service the Employee completes with the Employer.
22.7 Adoption Agreement. See the definition for Agreement.
22.8 ADP -- Average Deferral Percentage. The average of the deferral percentages
for the Highly Compensated Employee Group and the Nonhighly Compensated Employee
Group, which are tested for nondiscrimination under the ADP Test. See Section
17.7(b).
22.9 ADP Test -- Actual Deferral Percentage Test. The special nondiscrimination
test that applies to Section 401(k) Deferrals under the 401(k) Agreement. See
Section 17.2.
<PAGE>
22.10 Agreement. The Agreement (sometimes referred to as the "Adoption
Agreement") contains the elective provisions under the Plan which an Employer
completes to supplement or modify the provisions under the BPD. Each Employer
that adopts this Plan must complete and execute the appropriate Agreement. An
Employer may adopt more than one Agreement under this Prototype Plan. Each
executed Agreement is treated as a separate Plan and Trust. For example, if an
Employer executes a profit sharing plan Agreement and a money purchase plan
Agreement, the Employer is treated as maintaining two separate Plans under this
Prototype Plan document. An Agreement is treated as a single Plan, even if there
is one or more executed Co-Sponsor Adoption Pages associated with the Agreement.
22.11 Aggregate Limit. The limit imposed under the Multiple Use Test on amounts
subject to both the ADP Test and the ACP Test. See Section 17.4(a).
22.12 Alternate Payee. A person designated to receive all or a portion of the
Participant's benefit pursuant to a QDRO. See Section 11.5.
22.13 Anniversary Year Method. A method for determining Eligibility Computation
Periods after an Employee's initial computation period. See Section 1.4(c)(2)
for more detailed discussion of the Anniversary Year Method.
22.14 Anniversary Years. An alternative period for measuring Vesting
Computation Periods. See Section 4.4.
22.15 Annual Additions. The amounts taken into account under a Defined
Contribution Plan for purposes of applying the limitation on allocations under
Code ss.415. See Section 7.4(a) for the definition of Annual Additions.
22.16 Annual Additions Limitation. The limit on the amount of Annual
Additions a Participant may receive under the Plan during a Limitation Year.
See Article 7.
22.17 Annuity Starting Date. This Plan does not use the term Annuity Starting
Date. To determine whether the notice and consent requirements in Articles 8 and
9 are satisfied, the Distribution Commencement Date (see Section 22.49) is used,
even for a distribution that is made in the form of an annuity. However, the
payment made on the Distribution Commencement Date under an annuity form of
payment may reflect annuity payments that are calculated with reference to an
"annuity starting date" that occurs prior to the Distribution Commencement Date
(e.g., the first day of the month in which the Distribution Commencement Date
falls).
22.18 Applicable Life Expectancy. The Life Expectancy used to determine a
Participant's required minimum distribution under Article 10. See Section
10.3(d).
22.19 Applicable Percentage. The maximum percentage of Excess Compensation
that may be allocated to Eligible Participants under the Permitted Disparity
Method. See Article 2.
22.20 Balance Forward Method. A method for allocating net income or loss to
Participants' Accounts based on the Account Balance as of the most recent
Valuation Date under the Plan. See Section 13.3(c).
22.21 Basic Plan Document. See the definition for BPD.
22.22 Beneficiary. A person designated by the Participant to receive a benefit
under the Plan upon the death of the Participant. See Section 8.4(c) for the
applicable rules for determining a Participant's Beneficiaries under the Plan.
<PAGE>
22.23 BPD. The BPD (sometimes referred to as the "Basic Plan Document") is the
portion of the Plan that contains the non-elective provisions. The provisions
under the BPD may be supplemented or modified by elections the Employer makes
under the Agreement or by separate governing documents that are expressly
authorized by the BPD.
22.24 Break-in-Service - Eligibility. Generally, an Employee incurs a
Break-in-Service for eligibility purposes for each Eligibility Computation
Period during which the Employee does not complete more than 500 Hours of
Service with the Employer. However, if the Employer elects under Part 7(a)(1) of
the Agreement to require less than 1,000 Hours of Service to earn a Year of
Service for eligibility purposes, a Break in Service will occur for any
Eligibility Computation Period during which the Employee does not complete more
than one-half (1/2) of the Hours of Service required to earn a Year of Service.
(See Section 1.6 for a discussion of the eligibility Break-in-Service rules.
Also see Section 6.5(b) for rules applicable to the determination of a Break in
Service when the Elapsed Time Method is used.)
22.25 Break-in-Service - Vesting. Generally, an Employee incurs a
Break-in-Service for vesting purposes for each Vesting Computation Period during
which the Employee does not complete more than 500 Hours of Service with the
Employer. However, if the Employer elects under Part 7(c)(1) of the Agreement to
require less than 1,000 Hours of Service to earn a Year of Service for vesting
purposes, a Break in Service will occur for any Vesting Computation Period
during which the Employee does not complete more than one-half (1/2) of the
Hours of Service required to earn a Year of Service. (See Section 4.6 for a
discussion of the vesting Break-in-Service rules. Also see Section 6.5(b) for
rules applicable to the determination of a Break in Service when the Elapsed
Time Method is used.)
22.26 Calendar Year Election. A special election used for determining the
Lookback Year in applying the Highly Compensated Employee test under Section
22.86.
22.27 Cash-Out Distribution. A total distribution made to a partially vested
Participant upon termination of participation under the Plan. See Section 5.3(a)
for the rules regarding the forfeiture of nonvested benefits upon a Cash-Out
Distribution from the Plan.
22.28 Code. The Internal Revenue Code of 1986, as amended.
22.29 Code ss.415 Safe Harbor Compensation. An optional definition of
compensation which is used to determine Total Compensation. This definition may
be selected under Part 3(a) of the Agreement. See Section 22.172(c) for the
definition of Code ss.415 Safe Harbor Compensation.
22.30 Compensation Dollar Limitation. The maximum amount of compensation that
can be taken into account for any Plan Year for purposes of determining a
Participant's Included Compensation (see Section 22.89) or Testing Compensation
(see Section 22.166). For Plan Years beginning on or after January 1, 1994, the
Compensation Dollar Limitation is $150,000, as adjusted for increases in the
cost-of-living in accordance with Code ss.401(a)(17)(B).
In determining the Compensation Dollar Limitation for any applicable period for
which Included Compensation or Testing Compensation is being determined (the
"determination period"), the cost-of-living adjustment in effect for a calendar
year applies to any determination period beginning with or within such calendar
year. If a determination period consists of fewer than 12 months, the
Compensation Dollar Limitation for such period is an amount equal to the
otherwise applicable Compensation Dollar Limitation multiplied by a fraction,
the numerator of which is the number of months in the short determination
period, and the denominator of which is 12. A determination period will not be
considered to be less than 12 months merely because compensation is taken into
account only for the period the Employee is an Eligible Participant. If Section
401(k) Deferrals, Employer Matching Contributions, or Employee After-Tax
Contributions are separately determined for each pay period, no proration of the
Compensation Dollar Limitation is required with respect to such pay periods.
<PAGE>
22.31 Co-Sponsor. A Related Employer that adopts this Plan by executing the
Co-Sponsor Adoption Page under the Agreement. See Article 21 for the rules
applicable to contributions and deductions for contributions made by a
Co-Sponsor.
22.32 Co-Sponsor Adoption Page. The execution page under the Agreement which
permits a Related Employer to adopt this Plan as a Co-Sponsor. See Article 21.
22.33 Current Year Testing Method. A method for applying the ADP Test and/or the
ACP Test. See Section 17.2(a)(2) for a discussion of the Current Year Testing
Method under the ADP Test and 17.3(a)(2) for a discussion of the Current Year
Testing Method under the ACP Test.
22.34 Custodian. An organization that has custody of all or any portion of the
Plan assets. See Section 12.10.
22.35 Defined Benefit Plan. A plan under which a Participant's benefit is based
solely on the Plan's benefit formula without the establishment of separate
Accounts for Participants.
22.36 Defined Benefit Plan Fraction. A component of the combined limitation test
under Code ss.415(e) for Employers that maintain or ever maintained both a
Defined Contribution and a Defined Benefit Plan. See Section 7.5 (b)(1).
22.37 Defined Contribution Plan. A plan that provides for individual Accounts
for each Participant to which all contributions, forfeitures, income, expenses,
gains and losses under the Plan are credited or deducted. A Participant's
benefit under a Defined Contribution Plan is based solely on the fair market
value of his/her vested Account Balance.
22.38 Defined Contribution Plan Dollar Limitation. The maximum dollar amount of
Annual Additions an Employee may receive under the Plan. See Section 7.4(b).
22.39 Defined Contribution Plan Fraction. A component of the combined limitation
test under Code ss.415(e) for Employers that maintain or ever maintained both a
Defined Contribution and a Defined Benefit Plan. See Section 7.5(b)(2).
22.40 Designated Beneficiary. A Beneficiary who is designated by the Participant
(or by the Plan) and whose Life Expectancy may be taken into account in
determining minimum distributions under Code ss.401(a)(9). See Article 10.
22.41 Determination Date. The date as of which the Plan is tested to determine
whether it is a Top-Heavy Plan. See Section 16.3(a).
22.42 Determination Period. The period during which contributions to the Plan
are tested to determine if the Plan is a Top-Heavy
Plan. See Section 16.3(b).
22.43 Determination Year. The Plan Year for which an Employee's status as a
Highly Compensated Employee is being determined. See Section 22.86(b)(1).
22.44 Directed Account. The Plan assets under a Trust which are held for the
benefit of a specific Participant. See Section 13.3(d).
<PAGE>
22.45 Directed Trustee. A Trustee who makes investments solely at the discretion
of another person. See Section 12.2(b).
22.46 Direct Rollover. A rollover, at the Participant's direction, of all or a
portion of the Participant's vested Account Balance directly to an Eligible
Retirement Plan. See Section 8.8.
22.47 Disabled. An individual is considered Disabled for purposes of applying
the provisions of this Plan if the individual is unable to engage in any
substantial gainful activity by reason of a 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
permanence and degree of such impairment shall be supported by medical evidence.
22.48 Distribution Calendar Year. A calendar year for which a minimum
distribution is required. See Section 10.3(f).
22.49 Distribution Commencement Date. The date an Employee commences
distribution from the Plan. If distribution is made in the form of an annuity,
the Distribution Commencement Date may be treated as the first day of the first
period for which annuity payments are made.
22.50 Early Retirement Age. The age and/or Years of Service requirement
prescribed by Part 5(b) of the Agreement. Early Retirement Age may be used to
determine distribution rights and/or vesting rights. The Plan is not required to
have an Early Retirement Age.
22.51 Earned Income. Earned Income is the net earnings from self-employment in
the trade or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing factor. Net
earnings will be determined without regard to items not included in gross income
and the deductions allocable to such items. Net earnings are reduced by
contributions by the Employer to a qualified plan to the extent deductible under
Code ss.404. Net earnings shall be determined with regard to the deduction
allowed to the taxpayer by Code ss.164(f). If Included Compensation is defined
to exclude any items of Compensation (other than Elective Deferrals), then for
purposes of determining the Included Compensation of a Self-Employed Individual,
Earned Income shall be adjusted by multiplying Earned Income by the percentage
of Total Compensation that is included for the Eligible Participants who are
Nonhighly Compensated Employees. The percentage is determined by calculating the
percentage of each Nonhighly Compensated Eligible Participant's Total
Compensation that is included in the definition of Included Compensation and
averaging those percentages.
22.52 Effective Date. The date this Plan, including any restatement or amendment
of this Plan, is effective. Where the Plan is restated or amended, a reference
to Effective Date is the effective date of the restatement or amendment, except
where the context indicates a reference to an earlier Effective Date. If this
Plan is retroactively effective, the Plan may not operate to reduce a
Participant's Protected Benefits. The Employer may designate special effective
dates for individual provisions under the Plan where provided in the Agreement
or on the Signature Page of the Agreement. See Section 20.1 for certain special
effective date provisions.
22.53 Elapsed Time Method. The Elapsed Time Method is a special method for
crediting service for eligibility or vesting purposes. To apply, the Employer
must elect the Elapsed Time Method under Part 7(a)(3) or Part 7(c)(3) of the
Agreement. (See Section 6.5(b) for more information on the Elapsed Time Method
of crediting service.)
<PAGE>
22.54 Elective Deferrals. Section 401(k) Deferrals, salary reduction
contributions to a SEP described in Code ss.408(k)(6) (sometimes referred to as
a SARSEP), contributions made pursuant to a Salary Reduction Agreement to a
contract, custodial account or other arrangement described in Code ss.403(b),
and elective contributions made to a SIMPLE-IRA plan, as described in Code
ss.408(p).
22.55 Eligibility Computation Period. The 12-consecutive month period used for
measuring whether an Employee completes a Year of Service for eligibility
purposes. An Employee's initial Eligibility Computation Period always begins on
the Employee's Employment Commencement Date. Subsequent Eligibility Computation
Periods are measured under the Shift-to-Plan-Year Method or the Anniversary Year
Method. See Section 1.4(c).
22.56 Eligible Participant. Any Employee (other than an Excluded Employee) who
has satisfied the Plan's minimum age and service conditions designated in Part 1
of the Agreement. An Employee becomes an Eligible Participant on the appropriate
Entry Date selected under Part 2 of the Agreement. See Article 1 for the rules
regarding participation under the Plan.
For purposes of the 401(k) Agreement, an Eligible Participant is any Employee
(other than an Excluded Employee) who has satisfied the Plan's minimum age and
service conditions designated in Part 1 of the Agreement with respect to a
particular contribution. With respect to Section 401(k) Deferrals or Employee
After-Tax Contributions, an Employee who has satisfied the eligibility
conditions under Part 1 of the Agreement for making Section 401(k) Deferrals or
Employee After-Tax Contribution is an Eligible Participant with respect to such
contributions, even if the Employee chooses not to actually make any such
contributions. With respect to Employer Matching Contributions, an Employee who
has satisfied the eligibility conditions under Part 1 of the Agreement for
receiving such contributions is an Eligible Participant with respect to such
contributions, even if the Employee does not receive an Employer Matching
Contribution (including forfeitures) because of the Employee's failure to make
Section 401(k) Deferrals or Employee After-Tax Contributions, as applicable.
22.57 Eligible Rollover Distribution. An amount distributed from the Plan that
is eligible for rollover to an Eligible Retirement Plan. See Section 8.8(a)
22.58 Eligible Retirement Plan. A qualified retirement plan or IRA that may
receive a rollover contribution. See Section 8.8(b).
22.59 Employee. An Employee is any individual employed by the Employer
(including any Related Employers). An independent contractor is not an Employee.
An Employee is not eligible to participate under the Plan if the individual is
an Excluded Employee under Section 1.2. (See Section 1.3 for rules regarding
coverage of Employees of Related Employers.) For purposes of applying the
provisions under this Plan, a Self-Employed Individual is treated as an
Employee. A Leased Employee is also treated as an Employee of the recipient
organization, as provided in Section 1.2(b).
22.60 Employee After-Tax Contribution Account. The portion of the Participant's
Account attributable to Employee After-Tax Contributions.
22.61 Employee After-Tax Contributions. Employee After-Tax Contributions are
contributions made to the Plan by or on behalf of a Participant that is included
in the Participant's gross income in the year in which made and that is
maintained under a separate Employee After-Tax Contribution Account to which
earnings and losses are allocated. Employee After-Tax Contributions may only be
made under the Nonstandardized 401(k) Agreement. See Section 3.1.
<PAGE>
22.62 Employer. Except as otherwise provided, Employer means the Employer
(including a Co-Sponsor) that adopts this Plan and any Related Employer. (See
Section 1.3 for rules regarding coverage of Employees of Related Employers. Also
see Section 11.8 for operating rules when the Employer is a member of a Related
Employer group, and Article 21 for rules that apply to Related Employers that
execute a Co-Sponsor Adoption Page under the Agreement.)
22.63 Employer Contribution Account. If this Plan is a profit sharing plan
(other than a 401(k) plan), a money purchase plan, or a target benefit plan, the
Employer Contribution Account is the portion of the Participant's Account
attributable to contributions made by the Employer. If this is a 401(k) plan,
the Employer Contribution Account is the portion of the Participant's Account
attributable to Employer Nonelective Contributions, other than QNECs or Safe
Harbor Employer Contributions.
22.64 Employer Contributions. If this Plan is a profit sharing plan (other than
a 401(k) plan), a money purchase plan, or a target benefit plan, Employer
Contributions are any contributions the Employer makes pursuant to Part 4 of to
the Agreement. If this Plan is a 401(k) plan, Employer Contributions include
Employer Nonelective Contributions and Employer Matching Contributions,
including QNECs, QMACs and Safe Harbor Contributions which the Employer makes
under the Plan. Employer Contributions also include any Section 401(k) Deferrals
an Employee makes under the Plan, unless the Plan expressly provides for
different treatment of Section 401(k) Deferrals.
22.65 Employer Matching Contribution Account. The portion of the Participant's
Account attributable to Employer Matching Contributions, other than QMACs or
Safe Harbor Matching Contributions.
22.66 Employer Matching Contributions. Employer Matching Contributions are
contributions made by the Employer on behalf of a Participant on account of
Section 401(k) Deferrals or Employee After-Tax Contributions made by such
Participant, as designated under Parts 4B(b) of the 401(k) Agreement. Employer
Matching Contributions may only be made under the 401(k) Agreement. Employer
Matching Contributions also include any QMACs the Employer makes pursuant to
Part 4B(d) of the 401(k) Agreement and any Safe Harbor Matching Contributions
the Employer makes pursuant to Part 4E of the 401(k) Agreement.
22.67 Employer Nonelective Contributions. Employer Nonelective Contributions are
contributions made by the Employer on behalf of Eligible Participants under the
401(k) Plan, as designated under Part 4C(b) of the 401(k) Agreement. Employer
Nonelective Contributions also include any QNECs the Employer makes pursuant to
Part 4C(b) of the 401(k) Agreement and any Safe Harbor Nonelective Contributions
the Employer makes pursuant to Part 4E of the 401(k) Agreement. See Section
2.4(d).
22.68 Employment Commencement Date. The date the Employee first performs an Hour
of Service for the Employer.
22.69 Entry Date. The date on which an Employee becomes an Eligible Participant
upon satisfying the Plan's minimum age and service conditions. See Section 1.5.
22.70 Equivalency Method. An alternative method for crediting Hours of Service
for purposes of eligibility and vesting. To apply, the Employer must elect the
Equivalency Method under Part 7(a)(2) or Part 7(c)(2) of the Agreement. See
Section 6.5(a) for a more detailed discussion of the Equivalency Method.
22.71 Excess Aggregate Contributions. Amounts which are distributed to correct
the ACP Test. See Section 17.7(c).
22.72 Excess Amount. Amounts which exceed the Annual Additions Limitation. See
Section 7.4(c).
<PAGE>
22.73 Excess Compensation. The amount of Included Compensation which exceeds the
Integration Level. Excess Compensation is used for purposes of applying the
Permitted Disparity allocation formula under Article 2.
22.74 Excess Contributions. Amounts which are distributed to correct the ADP
Test. See Section 17.7(d).
22.75 Excess Deferrals. Elective Deferrals that are includible in a
Participant's gross income because they exceed the dollar limitation under Code
ss.402(g). Excess Deferrals made to this Plan shall be treated as Annual
Additions under the Plan, unless such amounts are distributed no later than the
first April 15 following the close of the Participant's taxable year for which
the Excess Deferrals are made. See Section 17.1.
22.76 Excluded Employee. An Employee who is excluded under Part 1(b) of the
Agreement. See Section 1.2.
22.77 Fail-Safe Coverage Provision. A correction provision which permits the
Plan to automatically correct a coverage violation resulting from the
application of a last day of employment or Hours of Service allocation
condition. See Section 2.6.
22.78 Favorable IRS Letter. A notification letter or opinion letter issued by
the IRS to a Prototype Sponsor as to the qualified status of a Prototype Plan. A
separate Favorable IRS Letter is issued with respect to each Agreement offered
under the Prototype Plan. If the term is used to refer to a letter issued to an
Employer with respect to its adoption of this Prototype Plan, such letter is a
determination letter issued by the IRS.
22.79 Five-Percent Owner. An individual who owns (or is considered as owning
within the meaning of Code ss.318) more than 5 percent of the outstanding stock
of the Employer or stock possessing more than 5 percent of the total combined
voting power of all stock of the Employer. If the Employer is not a corporation,
a Five-Percent Owner is an individual who owns more than 5 percent of the
capital or profits interest of the Employer.
22.80 Five-Year Forfeiture Break in Service. A Break in Service rule under which
a Participant's nonvested benefit may be forfeited. See Section 4.6(b).
22.81 Former Related Employer. A Related Employer (as defined in Section 22.142)
that ceases to be a Related Employer because of an acquisition or disposition of
stock or assets, a merger, or similar transaction. See Section 21.4 for the
effect when a Co-Sponsor becomes a Former Related Employer.
22.82 Four-Step Formula. A method for allocating certain Employer Contributions
under the Permitted Disparity Method. See Section
2.2(b)(2)(ii).
22.83 General Trust Account. The Plan assets under a Trust with are held for the
benefit of all Plan Participants as a pooled investment. See Section 13.3(c).
22.84 Hardship. A heavy and immediate financial need which meets the
requirements of Section 8.6.
22.85 Highest Average Compensation. A term used to apply the combined plan limit
under Codess.415(e). See Section 7.5(b)(3).
22.86 Highly Compensated Employee. The definition of Highly Compensated Employee
under this Section is effective for Plan Years beginning after December 31,
1996. For Plan Years beginning before January 1, 1997, Highly Compensated
Employees are determined under Code ss.414(q) as in effect at that time.
<PAGE>
(a) Definition. An Employee is a Highly Compensated Employee for a
Plan Year if he/she:
(1) is a Five-Percent Owner (as defined in Section 22.79)
at any time during the Determination Year or the
Lookback Year; or
(2) has Total Compensation from the Employer for the
Lookback Year in excess of $80,000 (as adjusted) and,
if elected under Part 13(a)(1) of the Agreement, is
in the Top-Paid Group for the Lookback Year. If the
Employer does not specifically elect to apply the Top
Paid Group Test under Part 13(a)(1), the Highly
Compensated Employee definition will be applied
without regard to whether an Employee is in the
Top-Paid Group.
(b) Other Definitions. The following definitions apply for
purposes of determining Highly Compensated Employee status
under this Section 22.86.
(1) Determination Year. The Determination Year is the
Plan Year for which the Highly Compensated Employee
determination is being made.
(2) Lookback Year. Unless the Calendar Year Election (or
Old-Law Calendar Year Election) applies, the Lookback
Year is the 12-month period immediately preceding the
Determination Year.
(3) Total Compensation. Total Compensation as defined
under Section 22.172.
(4) Top-Paid Group. An Employee is in the Top-Paid Group
for purposes of applying the Top-Paid Group Test if
the Employee is one of the top 20% of Employees
ranked by Total Compensation. In determining the
Top-Paid Group, any reasonable method of rounding or
tie-breaking is permitted. For purposes of
determining the number of Employees in the Top-Paid
Group for any year, Employees described in Code
ss.414(q)(5) or applicable regulations are excluded.
(5) Calendar Year Election. If the Plan Year elected
under the Agreement is not the calendar year, for
purposes of applying the Highly Compensated Employee
test under paragraph (a)(2) of this Section, the
Employer may elect under Part 13(a)(2) of the
Agreement to substitute for the Lookback Year the
calendar year that begins in the Lookback Year. The
Calendar Year Election does not apply for purposes of
applying the Five-Percent Owner test under paragraph
(a)(1) of this Section. If the Employer does not
specifically elect to apply the Calendar Year
Election under Part 13(a)(2), the Calendar Year
Election does not apply. Part 13(a)(2) should not be
selected if the Plan is using a calendar Plan Year.
(6) Old-Law Calendar Year Election. A special election
available only for the Plan Year beginning in 1997
which permitted the Employer to substitute the
calendar year beginning with or within the Plan Year
for the Lookback Year in applying paragraphs (a)(1)
and (a)(2) of this Section. If the 1997 Plan Year was
a calendar year, the effect of the Old-Law Calendar
Year Election was to treat the Determination Year and
the Lookback Year as the same 12-month period. The
Employer may elect to apply the Old-Law Calendar Year
Election under Part 13(a)(3)(iii) of the Agreement.
See Section 20.2(c).
<PAGE>
22.87 Highly Compensated Employee Group. The group of Highly Compensated
Employees who are included in the ADP Test and/or the ACP Test. See Section
17.7(e).
22.88 Hour of Service.
(a) Performance of duties. Hours of Service include each hour for
which an Employee is paid, or entitled to payment, for the
performance of duties for the Employer. These hours will be
credited to the Employee for the computation period in which
the duties are performed.
(b) Nonperformance of duties. Hours of Service include each hour
for which an Employee is paid, or entitled to payment, by the
Employer on account of a period of time during which no duties
are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. No more than 501 hours of
service will be credited under this paragraph for any single
continuous period (whether or not such period occurs in a
single computation period). Hours under this paragraph will be
calculated and credited pursuant to ss.2530.200b-2 of the
Department of Labor Regulations which is incorporated herein
by this reference.
(c) Back pay award. Hours of Service include each hour for which
back pay, irrespective of mitigation of damages, is either
awarded or agreed to by the Employer. The same Hours of
Service will not be credited both under paragraph (a) or
paragraph (b), as the case may be, and under this paragraph
(c). These hours will be credited to the employee for the
computation period or periods to which the award or agreement
pertains rather than the computation period in which the
award, agreement or payment is made.
(d) Related Employers/Leased Employees. For purposes of crediting
Hours of Service, all Related Employers are treated as a
single Employer. Hours of Service also include hours credited
as a Leased Employee for a recipient organization.
(e) Maternity/paternity leave. Solely for purposes of determining
whether a Break in Service has occurred in a computation
period, an individual who is absent from work for maternity or
paternity reasons will receive credit for the Hours of Service
which would otherwise have been credited to such individual
but for such absence, or in any case in which such hours
cannot be determined, 8 Hours of Service per day of such
absence. For purposes of this paragraph, an absence from work
for maternity or paternity reasons means an absence (1) by
reason of the pregnancy of the individual, (2) by reason of a
birth of a child of the individual, (3) by reason of the
placement of a child with the individual in connection with
the adoption of such child by such individual, or (4) for
purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of
Service credited under this paragraph will be credited (1) in
the computation period in which the absence begins if the
crediting is necessary to prevent a Break in Service in that
period, or (2) in all other cases, in the following
computation period.
22.89 Included Compensation. Included Compensation is Total Compensation, as
modified under Part 3(b) of the Agreement, used to determine allocations of
contributions and forfeitures. If the Plan is a Nonstandardized Plan, Included
Compensation generally includes amounts an Employee earns with a Related
Employer that has not executed a Co-Sponsor Adoption Page under the Agreement.
However, the Employer may elect under Part 3(b) of the Nonstandardized Agreement
to exclude all amounts earned with a Related Employer that has not executed a
Co-Sponsor Adoption Page. If the Plan is a Standardized Plan, Included
Compensation always includes all compensation earned with all Related Employers,
without regard to whether the Related Employer executes the Co-Sponsor Adoption
Page. (See Section 21.5.) In no case may Included Compensation for any
Participant exceed the Compensation Dollar Limitation as defined in Section
22.30.
<PAGE>
22.90 Integration Level. The amount above which Included Compensation qualifies
as Excess Compensation for purposes of applying the Permitted Disparity Method
allocation formula. The Integration Level is the Taxable Wage Base, unless the
Employer designates a different amount under Part 4 of the Agreement.
22.91 Insurer. An insurance company that issues a life insurance policy on
behalf of a Participant under the Plan in accordance with the requirements under
Article 15.
22.92 Key Employee. Employees who are taken into account for purposes of
determining whether the Plan is a Top-Heavy Plan. See
Section 16.3(c).
22.93 Leased Employee. An individual who performs services for the Employer
pursuant to an agreement between the Employer and a leasing organization, and
who satisfies the definition of a Leased Employee under Code ss.414(n). See
Section 1.2(b) for rules regarding the treatment of a Leased Employee as an
Employee of the Employer.
22.94 Life Expectancy. A Participant's and/or Designated Beneficiary's life
expectancy used for purposes of determining required minimum distributions under
the Plan. See Section 10.3(e).
22.95 Limitation Year. The measuring period for determining whether the Plan
satisfies the Annual Additions Limitation under Section 7.4(d).
22.96 Lookback Year. The 12-month period immediately preceding the current Plan
Year during which an Employee's status as Highly Compensated Employee is
determined. See Section 22.86(b)(2).
22.97 Maximum Permissible Amount. The maximum amount that may be allocated to a
Participant's Account within the Annual Additions Limitation. See Section
7.4(e).
22.98 Multiple Use Test. A special nondiscrimination test that applies when the
Plan must perform both the ADP Test and the ACP Test in the same Plan Year. See
Section 17.4.
22.99 Named Fiduciary. The Plan Administrator or other fiduciary named by the
Plan Administrator to control and manage the operation and administration of the
Plan. To the extent authorized by the Plan Administrator, a Named Fiduciary may
delegate its responsibilities to a third party or parties.
22.100 Net Profits. The Employer's net income or profits which may be used
to limit the amount of Employer Contributions made under
the Plan. See Section 2.2(a)(2).
22.101 New Related Employer. An organization that becomes a Related Employer (as
defined in Section 22.142) with the Employer by reason of an acquisition or
disposition of stock or assets, a merger, or similar transaction. See Section
21.5 for special procedures under a Standardized Plan when there is a New
Related Employer.
22.102 Nonhighly Compensated Employee. Any Employee who is not a Highly
Compensated Employee. See Section 22.86 for the definition of Highly Compensated
Employee.
22.103 Nonhighly Compensated Employee Group. The group of Nonhighly Compensated
Employees included in the ADP Test and/or the ACP
Test. See Section 17.7(f).
<PAGE>
22.104 Non-Key Employee. Any Employee who is not a Key Employee.
22.105 Nonresident Alien Employees. An Employee who is neither a citizen of the
United States nor a resident of the United States for U.S. tax purposes (as
defined in Code ss.7701(b)), and who does not have any earned income (as defined
in Code ss.911) from the Employer that constitutes U.S. source income (within
the meaning of Code ss.861). If a Nonresident Alien Employee has U.S. source
income, he/she is treated as satisfying this definition if all of his/her U.S.
source income from the Employer is exempt from U.S.
income tax under an applicable income tax treaty.
22.106 Nonstandardized Plan. A Prototype Plan under which an adopting Employer
may not rely on a Favorable IRS Letter issued to the Prototype Sponsor. In order
to have reliance from the IRS that the form of the Plan as adopted by the
Employer is qualified, the Employer must request a determination letter on the
Plan.
22.107 Normal Retirement Age. The age selected under Part 5 of the Agreement. If
a Participant's Normal Retirement Age is determined wholly or partly with
reference to an anniversary of the date the Participant commenced participation
in the Plan and/or the Participant's Years of Service, Normal Retirement Age is
the Participant's age when such requirements are satisfied. If the Employer
enforces a mandatory retirement age, the Normal Retirement Age is the lesser of
that mandatory age or the age specified in the Agreement.
22.108 Old-Law Calendar Year Election. A special election for determining the
Lookback Year under the Highly Compensated Employee test that was available only
for the 1997 Plan Year. See Section 22.86(b)(6).
22.109 Old-Law Required Beginning Date. If so elected under Part 13(c)(1), the
date by which minimum distributions must commence under the Plan, as determined
under Section 10.3(a)(2).
22.110 Owner-Employee. A Self-Employed Individual (as defined in Section 22.159)
who is a sole proprietor, or who is a partner owning more than 10 percent of
either the capital or profits interest of the partnership.
22.111 Paired Plans. Two or more Standardized Plans that are designated as
Paired Plans. See Section 19.6.
22.112 Participant. A Participant is an Employee or former Employee who has
satisfied the conditions for participating under the Plan. A Participant also
includes any Employee or former Employee who has an Account Balance under the
Plan, including an Account Balance derived from a rollover or transfer from
another qualified plan or IRA. A Participant is entitled to share in an
allocation of contributions or forfeitures under the Plan for a given year only
if the Participant is an Eligible Participant as defined in Section 1.1, and
satisfies the accrual requirements set forth in Part 4 of the Agreement.
22.113 Period of Severance. A continuous period of time during which the
Employee is not employed by the Employer and which is used to determine an
Employee's credited service under the Elapsed Time Method. See Section
6.5(b)(2).
22.114 Permissive Aggregation Group. Plans that are not required to be
aggregated to determine whether the Plan is a Top-Heavy Plan. See Section
16.3(d).
22.115 Permitted Disparity Method. A method for allocating certain Employer
Contributions to Eligible Participants as designated under Part 4 of the
Agreement.
<PAGE>
22.116 Plan. The Plan is the retirement plan established or continued by the
Employer for the benefit of its Employees under this Prototype Plan document.
The Plan consists of the BPD and the elections made under the Agreement. If the
Employer adopts more than one Agreement offered under this Prototype Plan, then
each executed Agreement represents a separate Plan, unless the Agreement
restates a previously executed Agreement.
22.117 Plan Administrator. The Plan Administrator is the person designated to be
responsible for the administration and operation of the Plan. Unless otherwise
designated by the Employer, the Plan Administrator is the Employer. If any
Related Employer has executed a Co-Sponsor Adoption Page, the Employer referred
to in this Section is the Employer that executes the Signature Page of the
Agreement.
22.118 Plan Year. The 12-consecutive month period for administering the Plan, on
which the records of the Plan are maintained. The Employer must designate the
Plan Year applicable to the Plan under the Agreement. If the Plan Year is
amended, a Plan Year of less than 12 months may be created. If this is a new
Plan, the first Plan Year begins on the Effective Date of the Plan. If the
amendment of the Plan Year or the Effective Date of a new Plan creates a Plan
Year that is less than 12 months long, there is a Short Plan Year. See Section
11.7 for operating rules that apply to Short Plan Years.
22.119 Pre-Age 35 Waiver. A waiver of the QPSA before a Participant reaches age
35. See Section 9.4(f).
22.120 Predecessor Employer. An employer that previously employed the Employees
of the Employer prior to a merger, acquisition, or other similar transaction.
See Section 6.7 for the rules regarding the crediting of service with a
Predecessor Employer.
22.121 Predecessor Plan. A qualified plan maintained by the Employer that
existed within the 5-year period before or after the establishment of this Plan.
A Participant's service under a Predecessor Plan must be counted for purposes of
determining the Participant's vested percentage under the Plan. See Section
4.5(b)(1).
22.122 Present Value. The current single-sum value of an Accrued Benefit under a
Defined Benefit Plan.
22.123 Prior Year Testing Method. A method for applying the ADP Test and/or the
ACP Test. See Section 17.2(a)(1) for a discussion of the Prior Year Testing
Method under the ADP Test and Section 17.3(a)(1) for a discussion of the Prior
Year Testing Method under the ACP Test.
22.124 Pro Rata Allocation Method. A method for allocating certain Employer
Contributions to Eligible Participants under the Plan.
See Article 2.
22.125 Projected Annual Benefit. An amount used in the numerator of the Defined
Benefit Fraction. See Section 7.5(b)(4).
22.126 Protected Benefit. A Participant's benefits which may not be eliminated
by Plan amendment. Protected Benefits include early retirement benefits,
retirement-type subsidies, and optional forms of benefit (as defined under the
regulations). See Section 18.1(c).
22.127 Prototype Plan. A plan the form of which is the subject of a Favorable
IRS Letter from the Internal Revenue Service which is made up of a Basic Plan
Document and an Adoption Agreement. An Employer may establish or continue a plan
by executing an Adoption Agreement under this Prototype Plan.
<PAGE>
22.128 Prototype Sponsor. The Prototype Sponsor is the entity which maintains
the Prototype Plan for adoption by Employers. See Section 18.1(a) for the
ability of the Prototype Sponsor to amend this Plan.
22.129 QDRO -- Qualified Domestic Relations Order. A domestic relations order
that provides for the payment of all or a portion of the Participant's benefits
to an Alternate Payee and satisfies the requirements under Code ss.414(p). See
Section 11.5.
22.130 QJSA -- Qualified Joint and Survivor Annuity. A QJSA is an immediate
annuity payable over the life of the Participant with a survivor annuity payable
over the life of the spouse. If the Participant is not married as of the
Distribution Commencement Date, the QJSA is an immediate annuity payable over
the life of the Participant. See Section 9.2.
22.131 QMAC Account. The portion of a Participant's Account attributable to
QMACs.
22.132 QMACs -- Qualified Matching Contributions. An Employer Matching
Contribution made by the Employer which satisfies the requirements under Section
17.7(g).
22.133 QNEC Account. The portion of a Participant's Account attributable to
QNECs.
22.134 QNECs -- Qualified Nonelective Contributions. An Employer Nonelective
Contribution made by the Employer which satisfies the requirements under Section
17.7(h).
22.135 QPSA -- Qualified Preretirement Survivor Annuity. A QPSA is an annuity
payable over the life of the surviving spouse which is purchased using 50% of
the Participant's vested Account Balance as of the date of death. See Section
9.3.
22.136 QPSA Election Period. The period during which a Participant (and the
Participant's spouse) may waive the QPSA under the Plan. See Section 9.4(e).
22.137 Qualified Election. An election to waive the QJSA or QPSA under the Plan.
See Section 9.4(d).
22.138 Qualified Transfer. A plan-to-plan transfer which meets the requirements
under Section 3.3(d).
22.139 Qualifying Employer Real Property. Real property of the Employer which
meets the requirements under ERISA ss.407(d)(4). See Section 13.5(b) for
limitations on the ability of the Plan to invest in Qualifying Employer Real
Property.
22.140 Qualifying Employer Securities. An Employer security which is stock, a
marketable obligation, or interest in a publicly traded partnership as described
in ERISA ss.407(d)(5). See Section 13.5(b) for limitations on the ability of the
Plan to invest in Qualifying Employer Securities.
22.141 Reemployment Commencement Date. The first date upon which an Employee is
credited with an Hour of Service following a Break in Service (or Period of
Severance, if the Plan is using the Elapsed Time Method of crediting service).
22.142 Related Employer. A Related Employer includes all members of a controlled
group of corporations (as defined in Code ss.414(b)), all commonly controlled
trades or businesses (as defined in Code ss.414(c)) or affiliated service groups
(as defined in Code ss.414(m)) of which the adopting Employer is a part, and any
other entity required to be aggregated with the Employer pursuant to regulations
under Code ss.414(o). For purposes of applying the provisions under this Plan,
the Employer and any Related Employers are treated as a single Employer, unless
specifically stated otherwise. See Section 11.8 for operating rules that apply
when the Employer is a member of a Related Employer group.
<PAGE>
22.143 Required Aggregation Group. Plans which must be aggregated for purposes
of determining whether the Plan is a Top-Heavy Plan.
See Section 16.3(f).
22.144 Required Beginning Date. The date by which minimum distributions must
commence under the Plan. See Section 10.3(a).
22.145 Reverse QNEC Method. A method for allocating QNECs under the Plan. See
Section 2.4(e)(2).
22.146 Rollover Account. The portion of the Participant's Account attributable
to a Rollover Contribution from another qualified plan or IRA.
22.147 Rollover Contribution. A contribution made by an Employee to the Plan
attributable to an Eligible Rollover Distribution from another qualified plan or
IRA. See Section 8.8(a) for the definition of an Eligible Rollover Distribution.
22.148 Rule of Parity Break in Service. A Break in Service rule used to
determine an Employee's credited service under the Plan. See Section 1.6(a) for
the effect of the Rule of Parity Break in Service on eligibility to participate
under the Plan and see Section 4.6(c) for the application for the effect of the
Rule of Parity Break in Service Rule on vesting.
22.149 Safe Harbor 401(k) Plan. A 401(k) plan that satisfies the conditions
under Section 17.6
22.150 Safe Harbor Contribution. A contribution authorized under Part 4E of the
401(k) Agreement which allows the Plan to qualify as a Safe Harbor 401(k) Plan.
A Safe Harbor Contribution may be a Safe Harbor Matching Contribution or a Safe
Harbor Nonelective Contribution.
22.151 Safe Harbor Matching Contribution Account. The portion of a Participant's
Account attributable to Safe Harbor Matching Contributions.
22.152 Safe Harbor Matching Contributions. An Employer Matching Contribution
that satisfies the requirements under Section 17.6(a)(1)(i).
22.153 Safe Harbor Nonelective Contribution Account. The portion of a
Participant's Account attributable to Safe Harbor Nonelective Contributions.
22.154 Safe Harbor Nonelective Contributions. An Employer Nonelective
Contribution that satisfies the requirements under Section 17.6(a)(1)(ii).
22.155 Salary Reduction Agreement. A Salary Reduction Agreement is a written
agreement between an Eligible Participant and the Employer, whereby the Eligible
Participant elects to reduce his/her Included Compensation by a specific dollar
amount or percentage and the Employer agrees to contribute such amount into the
401(k) Plan. A Salary Reduction Agreement may require that an election be stated
in specific percentage increments (not greater than 1% increments) or in
specific dollar amount increments (not greater than dollar increments that could
exceed 1% of Included Compensation).
A Salary Reduction Agreement may not be effective prior to the later of: (a) the
date the Employee becomes an Eligible Participant; (b) the date the Eligible
Participant executes the Salary Reduction Agreement; or (c) the date the 401(k)
plan is adopted or effective. A Salary Reduction Agreement is valid even though
it is executed by an Employee before he/she actually has qualified as an
Eligible Participant, so long as the Salary Reduction Agreement is not effective
before the date the Employee is an Eligible Participant. A Salary Reduction
Agreement may only apply to Included Compensation that becomes currently
available to the Employee after the effective date of the Salary Reduction
Agreement.
<PAGE>
A Salary Reduction Agreement must designate a uniform period during which an
Employee may change or terminate his/her deferral election under the Salary
Reduction Agreement. An Eligible Participant's right to change or terminate a
Salary Reduction Agreement may not be available on a less frequent basis than
once per Plan Year.
22.156 SBJPA Legislation. SBJPA Legislation refers to the Small Business Job
Protection Act of 1996 (SBJPA), the Taxpayer Relief Act of 1997 (TRA `97), the
Uruguay Round Agreements Act (GATT) and the Uniformed Services Employment and
Reemployment Rights Act of 1994 (USERRA). See Article 20 for special rules for
demonstrating compliance with the qualification changes under the SBJPA
Legislation.
22.157 Section 401(k) Deferral Account. The portion of a Participant's Account
attributable to Section 401(k) Deferrals.
22.158 Section 401(k) Deferrals. Amounts contributed to the Plan at the election
of the Participant, in lieu of cash compensation, which are made pursuant to a
Salary Reduction Agreement or other deferral mechanism. Section 401(k) Deferrals
do not include any deferrals properly distributed as excess Annual Additions
pursuant to Section 7.1(c)(2).
22.159 Self-Employed Individual. An individual who has Earned Income (as defined
in Section 22.51) for the taxable year from the trade or business for which the
Plan is established, or 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.
22.160 Shareholder-Employee. A Shareholder-Employee means an Employee or officer
of a subchapter S corporation who owns (or is considered as owning within the
meaning of Code ss.318(a)(1)), on any day during the taxable year of such
corporation, more than 5% of the outstanding stock of the corporation.
22.161 Shift-to-Plan-Year Method. The Shift-to-Plan-Year Method is a method for
determining Eligibility Computation Periods, after an Employee's initial
computation period. See Section 1.4(c)(1).
22.162 Short Plan Year. Any Plan Year that is less than 12 months long, either
because of the amendment of the Plan Year, or because the Effective Date of a
new Plan is less than 12 months prior to the end of the first Plan Year. See
Section 11.7 for the operational rules that apply if the Plan has a Short Plan
Year.
22.163 Standardized Plan. A Prototype Plan that permits the adopting Employer to
rely under certain circumstances on the Favorable IRS Letter issued to the
Prototype Sponsor without the need for the Employer to obtain a determination
letter.
22.164 Successor Plan. A Successor Plan is any Defined Contribution Plan, other
than an ESOP, SEP, or SIMPLE-IRA plan, maintained by the Employer which prevents
the Employer from making a distribution to Participants upon the termination of
a 401(k) plan. See Section 18.2(b)(2).
22.165 Taxable Wage Base. The maximum amount of wages that are considered for
Social Security purposes. The Taxable Wage Base is used to determine a
Participant's allocation under the Permitted Disparity Method allocation
formula. See Article 2.
<PAGE>
22.166 Testing Compensation. The compensation used for purposes of the ADP
Test, the ACP Test, and the Multiple Use Test. See Section 17.7(i).
22.167 Three-Percent Method. A method for applying the ADP Test or the ACP Test
for a new 401(k) Plan that is using the Prior Year Testing Method. See Section
17.2(b) for a discussion of the ADP Test for new plans and Section 17.3(b) for a
discussion of the ACP Test for new plans.
22.168 Top-Paid Group. The top 20% of Employees ranked by Total Compensation
for purposes of applying the Top-Paid Group Test. See Section 22.86(b)(4).
22.169 Top-Paid Group Test. An optional test the Employer may apply when
determining its Highly Compensated Employees. See Section 22.86(a)(2).
22.170 Top-Heavy Plan. A Plan which satisfies the conditions under Section
16.3(g). A Top-Heavy Plan must provide special accelerated vesting and minimum
benefits to Non-Key Employees. See Section 16.2.
22.171 Top-Heavy Ratio. The ratio used to determine whether the Plan is a
Top-Heavy Plan. See Section 16.3(h).
22.172 Total Compensation. Total Compensation is either W-2 Wages, Withholding
Wages, or Code ss.415 Safe Harbor Compensation, as designated under Part 3(a) of
the Agreement. For a Self-Employed Individual, each definition of Total
Compensation means Earned Income. Except as otherwise provided under Sections
7.4(f)(4) and 16.3(i), each definition of Total Compensation (included Earned
Income for Self-Employed Individuals) is increased to include Elective Deferrals
(as defined in Section 22.54) and elective contributions to a cafeteria plan
under Code ss.125 and to an eligible deferred compensation plan under Code
ss.457. If so elected under Part 3(b)(2) of the Agreement, Total Compensation
also includes imputed compensation of Disabled Employees (see Section
7.4(f)(3)).
(a) W-2 Wages. Wages within the meaning of Code ss.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 ss.ss.6041(d), 6051(a)(3), and 6052,
determined without regard to any rules under Code ss.3401(a)
that limit the remuneration included in wages based on the
nature or location of the employment or the services
performed.
(b) Withholding Wages. Wages within the meaning of Code ss.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.
(c) Code ss.415 Safe Harbor Compensation. A Participant's wages,
salaries, fees for professional services and other amounts
received for personal services actually rendered in the course
of employment with the Employer (without regard to whether or
not such amounts are paid in cash) to the extent that the
amounts are includible in gross income. Such amounts include,
but are not limited to, commissions, compensation for services
on the basis of a percentage of profits, tips, bonuses, fringe
benefits, and reimbursements or other expense allowances under
a nonaccountable plan (as described in Treas. Reg.
ss.1.62-2(c)), and excluding the following:
<PAGE>
(1) Employer contributions (other than Elective Deferrals
and elective contributions to a deferred compensation
plan under Code ss.457 or a cafeteria plan under Code
ss.125) 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 (other than Elective Deferrals) under a
SEP (as described in Code ss.408(k), or any
distributions from a plan of deferred compensation;
(2) Amounts realized from the exercise of a non-qualified
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 (other than
Elective Deferrals) towards the purchase of an
annuity contract described in Code ss.403(b) (whether
or not the contributions are actually excludable from
the gross income of the employee).
22.173 Transfer Account. The portion of a Participant's Account attributable to
a direct transfer of assets or liabilities from another qualified retirement
plan. See Section 3.3 for the rules regarding the acceptance of a transfer of
assets under this Plan.
22.174 Trust. The Trust is the separate funding vehicle under the Plan.
22.175 Trustee. The Trustee is the person or persons named in the Trustee
Declaration under the Agreement. The Trustee may be a Discretionary Trustee or a
Directed Trustee. See Article 12 for the rights and duties of a Trustee under
this Plan.
22.176 Two-Step Formula. A method of allocating certain Employer Contributions
under the Permitted Disparity Method. See Section
2.2(b)(2)(i).
22.177 Union Employee. An Employee who is included in a unit of Employees
covered by a collective bargaining agreement and whose retirement benefits are
subject to good faith bargaining.
22.178 Valuation Date. The date or dates selected under Part 12 of the Agreement
upon which Plan assets are valued. If the Employer does not select a Valuation
Date under Part 12, Plan assets will be valued as of the last day of each Plan
Year.
22.179 Vesting Computation Period. The 12-consecutive month period used for
measuring whether an Employee completes a Year of Service for vesting purposes.
See Section 4.4.
22.180 W-2 Wages. An optional definition of Total Compensation which the
Employer may select under Part 3(a) of the Agreement. See Section 22.172(a) for
the definition of W-2 Wages.
22.181 Withholding Wages. An optional definition of Total Compensation which the
Employer may select under Part 3(a) of the Agreement. See Section 22.172(b) for
the definition of Withholding Wages.
22.182 Year of Service. A 12-consecutive month period (computation period)
during which the Employee completes at least 1,000 Hours of Service, unless the
Employer designates a different number of hours under Part 7 of the Agreement.
<PAGE>
NONSTANDARDIZED 401(k) PLAN
By executing this 401(k) plan Adoption Agreement (the "Agreement") under the
Thomas F. Kerney, P.A. Prototype Plan, the Employer agrees to establish or
continue a 40 1 (k) plan for its Employees. The 40 1 (k) plan adopted by the
Employer consists of the Basic Plan Document #01 (the "BPD") and the elections
made under this Agreement (collectively referred to as the "Plan"). A Related
Employer may jointly co-sponsor the Plan by signing a Co-Sponsor Adoption Page,
which is attached to this Agreement. (See Section 22.142 of the BPD for the
definition of a Related Employer.) This Plan is effective as of the Effective
Date identified on the Signature Page of this Agreement.
Employer Information
Name of Employer executing the Signature Page of this Agreement: International
Assets Advisory Corporation .
Employer Identification Number (EIN) for the Employer: 59-2189015,
Business entity of Employer (optional): C-Corporation.
Last day of Employer's taxable year (optional): September 30
Does the Employer have any Related Employers? |X| Yes |_| No
If yes, list the Related Employers (optional):
Plan Information
Name of Plan: International Assets Advisory Corporation 401 (k) Profit Sharing
Plan.
Plan number (as identified on the Form 5500 series filing for the Plan): 001
Trust identification number (optional): 59-6993257,
Plan Year: [Check box (1), (2) or (3).]
|X| (1) The calendar year.
|_| (2) The 12-consecutive-month period ending _____________________.
|_| (3) (Describe) _________________________________________________.
<PAGE>
- ------------------------------------------------------------------------------
Types Of Contributions
- ------------------------------------------------------------------------------
The following types of contributions are authorized under this Plan. The
selections made below should correspond with the selections made under Parts 4A,
4B, 4C, 4D, and 4E of this Agreement.
[X] (1) Section 401(k) Defferrals (see Part 4A)
[X] (2) Employer Matching Contributions (see Part 4B)
[X] (3) Employer Nonelective Contributions (see Part 4C)
|_| (4) Employee After-Tax Contributions (see 4D)
|_| (5) Safe Harbor Contributions (see Part 4E)
<PAGE>
Part 1
Eligibility Conditions
(see Article 1 of the BPD)
(a) Minumum age and service conditions for becoming an Eligible Participant.
[Check the appropriate box(es) for those contributions the Employer elects to
make under Part 4 of this Agreement.]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferals Match Nonelective
|_| |_| |_| (1) None (conditions are met on
Employment Commencement Date).
[X] [X] [X] (2) Age 21 (cannot exceed age 21).
[X] [X] [X] (3) One Year of Service.
|_| |_| |_| (4) ____________ months (not more than
12) elapsed from the Employment
Commencement Date (no minimum Hours
of Service required).
N/A |_| |_| (5) Two Years of Service. [Full and
immediate vesting must be selected
under Part 6 of this Agreement.]
|_| |_| |_| (6) (Describe) _____________________
</TABLE>
(b) Excluded Employees. [Check box (1) or any combination of boxes (20-(5)
for those contributions the Employer elects to make under Part 4 of
this Agreement.]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferals Match Nonelective
|_| |_| |_| (1) No excluded categories of Employees.
[X] [X] [X] (2) Union Employees (see Section 22.177
of the BPD).
[X] [X] [X] (3) Nonresident Alien Employees (see
Section 22.105 of the BPD).
|_| |_| |_| (4) Leased Employees (see Section
1.2(b) of the BPD).
|_| |_| |_| (5) (Describe) ______________________
</TABLE>
<PAGE>
Part 1 - Eligibility Conditions
|_| (c) Special eligibility provisions.
|_| (1) Dual eligibility. The eligibility requirements under (a)
above are deemed satisfied by an Employee (other than an
Excluded Employee) who is employed:
|_| (i) on the Effective Date of this Plan.
|_| (ii) on __________________.
|_| (2) (Describe) _______________________________________.
<PAGE>
Part 2
- ------------------------------------------------------------------------------
Commencement of participation
(See Section 1.5 of the BPD)
(a) Entry Date upon which participation begins after completing minimum age and
service conditions. [Check one of the following boxes for those contributions
the Employer elects to make under Part 4 of this Agreement.]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferals Match Nonelective
[X] [X] [X] (1) The next following Entry Date (as
defined in (b) below).
N/A |_| |_| (2) The nearest Entry Date (as defined
in (b) below).
N/A |_| |_| (3) The preceding Entry Date (as defmed
in (b) below).
|_| |_| |_| (4) The date the conditions in Part 1
(a) are satisfied.
|_| |_| |_| (5) (Describe) _______________________
</TABLE>
(b) Definition of Entry Date. [Check one of the following boxes for those
contributions the Employer elects to make under Part 4 of this Agreement. Do not
check-for a particular contribution if (a)(4) above is checked for that type of
contribution.]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferals Match Nonelective
[X] [X] [X] (1) The first day of the Plan Year and
the first day of the 7th month of
the Plan Year.
|_| |_| |_| (2) The first day of each quarter of
the Plan Year.
|_| |_| |_| (3) The first day of the Plan Year.[If
box (1) under (a) above is also
checked for the same type of
contribution as checked here, see
the restrictions in Section 1.
5(b) of the BPD.]
|_| |_| |_| (4) (Identify dates) ________________.
</TABLE>
<PAGE>
Part 3
- ------------------------------------------------------------------------------
Compensation Definitions
(See Sections 22.89 and 22.172 of the BPD)
(a) Definition of Total Compensation:
[X] (1) W-2 Wages
|_| (2) Withholding Wages
|_| (3) Code ss.415 Safe Harbor Compensation.
[Note: Each of the above definitions is increased for Elective
Deferrals (as defined in Section22.54 of the BPD) and pre-tax
contributions to a cafeteria plan or a Code ss.457plan.]
(b) Definition of Included Compensation for allocation of contributions
or forfeitures: [Check the appropriate box(es) for those contributions
the Employer elects under Part 4 of this Agreement I
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferals Match Nonelective
|_| |_| |_| (1) Total Compensation, as determined
in (a) above.
[X] [X] [X] (2) Total Compensation, as defined in
(a) above, with the following
modifications: [Check any
combination of boxes (i) - (vii).]
N/A |_| |_| (i.) Elective Deferrals and any
pre-tax contributions to a
cafeteria plan or a Code
ss.457 plan are excluded.
[X] [X] [X] (ii) Fringe benefits, expense
reimbursements, deferred
compensation, and welfare
benefits are excluded.
|_| |_| |_| (iii) Bonuses are excluded.
|_| |_| |_| (iv) Commissions are excluded.
|_| |_| |_| (v) Overtime is excluded.
|_| |_| |_| (vi) Amounts paid for services
performed for a Related
Employer that does not
execute the Co-Sponsor
Adoption Page under this
Agreement are excluded.
|_| |_| |_| (vii) (Describe)________________.
[Note: Any exclusions selected
under (iii) - (vii) above do
not apply to Nonhighly
Compensated Employees in
determining allocations
under the Permitted
Disparity Method under
Part 4C(c).]
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
Part 3 - Compensation Definitions
- ------------------------------------------------------------------------------
|_| (c) Highly Compensated Employees only. Any modifications to Total
Compensation elected in (b)(2)(iii) through (b)(2)(vii) above
will apply only to Highly Compensated Employees.
- ------------------------------------------------------------------------------
<PAGE>
Part 4A
- ------------------------------------------------------------------------------
Section 401(k) Deferrals
(See Section 2.4(a) of the BPD)
[X] Check this box and complete the applicable sections of this Part 4A to
allow for Section 401(k) Deferrals under the Plan.
[X] (a) Section 401(k) Deferral limit. 15% of Included Compensation
for: [If this box (a) is not checked, the limits described in
Section 17.1 andarticle 7 of the BPD still apply.]
[X] (1) the Plan Year.
|_| (2) the portion of the Plan Year in which the Employee
is an Eligible Participant.
|_| (3) each separate Payroll Period during which the
Employee is an Eligible Participant.
|_| (b) Minimum deferral rate: [If this box (b) is not checked, no
minimum deferral rate applies to Section 401 (k) Deferrals
designated under Part 4E of this 4greement. ]
|_| (1) _____________ % of Included Compensation for a
Payroll Period.
|_| (2) $____________ for a Payroll Period
|_| (c) Automatic deferral election. (See Section 2.4(a)(2) of the
BPD.) An Eligible Participant will automatically defer % of
Included Compensation for each Payroll Period, unless the
Eligible Participant makes a contrary Salary Reduction
Agreement election. This automatic deferral election will
apply to:
|_| (1) all Eligible Participants.
|_| (2) only those Employees who become Eligible Participants
on or after the following date:_______________.
|_| (d) Effective Date. If this Plan is being adopted as a new 40 1
(k) plan or to add a 401 (k)feature to an existing plan,
Eligible Participants may begin making Section 401(k)
Deferrals as of- --------------------------.
<PAGE>
Part 4B
- -------------------------------------------------------------------------------
Employer Matching Contributions
(See Sections 2.4(b) and (c) of the BPD)
[X] Check this box and complete this Part 4B to allow for Employer Matching
Contributions. Each formula allows for Employer Matching Contributions to be
allocated to Section 401 (k) Deferrals antilor Employee After-Tax Contributions
(referred to under this Part as "applicable contributions'). If a matching
formula applies to both types of contributions, such contributions are
aggregated to determine the Employer Matching Contribution allocated under the
formula If any formula applies to Employee After-Tax Contributions, Part 4D must
be completed.
(a) Matching Contribution formulas: [Check one or both.
[X] (1) The formula designated in (b) below. [Complete the remainder
of this Part 4B
|_| (2) The Safe Harbor 401(k) Plan matching formula under Part 4E
below. [The elections under (b) - (e) below do not apply
to any Safe Harbor Matching Contributions. If the only
Employer Matching Contributions that will be made under
this Plan are Safe Harbor Matching Contributions, do not
complete the remainder of this Part 4B. See Part 4Efor
applicable elections. ]
(b) Employer Matching Contribution formula(s): [See the operating rules
under (c) below.]
ss.401 (k) Employee
Deferrals After-Tax
|_| |_| (1)Fixed Matching Contribution. __________% of each
Eligible Participant's applicable contributions. The
Employer Matching Contribution does not apply to
applicable contributions that exceed:
|_| (i) _________% of Included Compensation.
|_| (ii) $_____________.
[Note: If neither box (i) nor box (ii) is checked, all
applicable contributions are eligible for the Employer
Matching Contribution under this formula.]
[X] |_| (2) Discretionary Matching Contribution. A uniform percentage,
as determined by the Employer, of each Eligible
Participant's applicable contributions. The Employer
Matching Contribution does not apply to applicable
contributions that exceed:
[X] (i) ___________% of Included Compensation
|_| (ii) $____________.
<PAGE>
Part 4B - Employer Matching Contributions
- ------------------------------------------------------------------------------
|_| (iii) a dollar amount or percentage of Included
Compensation that is uniformly determined by the
Employer for all Eligible Participants.
[Note: If none of the boxes (i) - (iii) is checked, all
applicable contributions are eligiblefor the Employer
Matching Contribution under thisformula.]
ss.401 (k) Employee
Deferrals After-Tax
|_| |_| (3)Tiered Matching Contribution. A unifon-n percentage of
each tier of each Eligible Participant's applicable
contributions, determined as follows:
Tiers of Contributions Matching Percentage
First $_______or _____% ______%
Next $_______or _____% ______%
Next $_______or _____% ______%
Next $_______or _____% ______%
[Note: Fill in only percentages or dollar amounts, but not
both. If percentages are used, each tier represents the
amount of the Participant's applicable contributions
that equals the specified percentage of the Participant's
Included Compensation.]
|_| |_| (4)Discretionary Tiered Matching Contribution. The Employer
will determine a matching percentage for each tier of
each Eligible Participant's applicable contributions.
Tiers aredetermined in increments of-
|_| (i) __________% of Included Compensation.
|_| (ii)$___________.
|_| (iii)As determined by the Employer.
|_| |_| (5)Year-of-Service Matching Contribution. A uniform
percentage of each Eligible Participant's applicable
contributions based on Years of Service with the
Employer, determined as follows:
Years of Service Matchinig Percentage
------------- -------%
------------- -------%
------------- -------%
<PAGE>
Part 4B - Employer Matching Contributions
- ------------------------------------------------------------------------------
|_| (i) In applying the Year-of-Service Matching
Contribution formula, a Year of Service is:
[If not checked, a Year of Service is 1,000
Hours of Service during the Plan Year.]
|_| (A) as defined for purposes of
eligibility under Part 7.
|_| (B) as defined for purposes of vesting
under Part 7.
|_| (C) (Describe) _______________________.
|_| (ii) Special limits on Employer Matching
Contributions under the Year-of-Service
formula:
|_| (A) Employer Matching Contributions may
not exceed of Included Compensation.
|_| (B) Employer Matching Contributions will
apply only to a Participant's
applicable contributions that do not
exceed:
|_| (I) _________% of Included
Compensation
|_| (II) $____________.
|_| |_| (6) (Describe)_______________________________.
|_| |_| (7) Net Profits. Any Employer Matching
Contributions made in accordance with the
elections under this (b) are limited to Net
Profits. The definition of Net Profits, as
defined in Section 2.2(a)(2) of the BPD, is
modified asfollows: [Enter NIA if there are
nomodifications. ]
(c) Operating rules for applying the Matching Contribution formulas:
(1) Applicable contributions taken into account: (See Section 2.4(b)(3)
of the BPD.) The Matching Contribution fonnula(s) elected in (b) above (and any
limitations on the amount of a Participant's applicable contributions considered
under such formula(s)) are applied separately for each:
[X] (i) Plan Year.
|_| (ii) Plan Year quarter.
|_| (iii) calendar month.
<PAGE>
Part 4B - Employer Matching Contributions
- ------------------------------------------------------------------------------
|_| (iv) Payroll Period
|_| (v) (Describe)___________________________________.
(2) Special rule for partial period of participation. If an Employee is
an Eligible Participant for only part of a Plan Year, Included
Compensation is taken into account for:
[X] (i) the entire Plan Year, including the portion of
the Plan Year during which the Employee is not an
Eligible Participant.
|_| (ii)the portion of the Plan Year in which the
Employee is an Eligible Participant.
|_| (iii)the portion of the Plan Year during which
the Employee's election to make the applicable
contributions is in effect.
[X] (d) Qualified Matching Contributions (QMACs): (See Section 2.4(c)
of the BPD.)
|_| (1) All Employer Matching Contributions are designated
as QNMCS
.
|_| (2) Only Employer Matching Contributions described in
box(es)__________ under (b)above are designated as
QMACS.
[X] (3) In addition to any Employer Matching Contribution
provided under (b) above, the Employer may make a
discretionary QMAC which is allocated equally
as a percentage of Section 401(k) Deferrals made
during the Plan Year. The Employer may allocate
QMACs only on Section 401(k) Deferrals that do
not exceed a specific dollar amount or percentage
of Included Compensation that is uniformly
determined by the Employer. QMACs will be allocated
to:
[X] (i) eligible Participants who are Nonhighly
Compensated Employees,
|_| (ii) all Eligible Participants
(e) Allocation conditions an Eligible Participant must satisfy for an Employer
Matching Contribution:
|_| (1) None.
|_| (2) Must be employed by the Employer on the last day of the Plan
Year OR have more than 500 Hours of Service for the Plan
Year.
[X] (3) Must be employed with the Employer on the last day of the Plan
Year.
[X] (4) Must be credited with at least I000 Hours of Service (may not
exceed 1,000) during the Plan Year.
<PAGE>
Part 4B - Employer Matching Contributions
- -------------------------------------------------------------------------------
|_| (5) (Describe) ________________________________________________.
[X] (6) The above allocation condition(s) will not apply if-
[X] (I) the Participant dies during the Plan Year
[X] (ii) the Participant is Disabled.
[X] (iii) the Participant, by the end of the Plan Year, has
reached:
[X] (A) Normal Retirement Age.
|_| (B) Early Retirement Age.
- ------------------------------------------------------------------------------
<PAGE>
Part 4C
Employer Nonelective Contributions
(See Sections 2.4(d) and (e) of the BPD)
[X] Check this box and complete this Part 4C to allow for Employer
Non-elective Contributions
(a) Nonelective Contribution formula(s): [Check one or both.]
[X] (1) The formula designated in (b) below. [Complete the remainder of
this Part 4C]
|_| (2) The Safe-Harbor 40 1 (k) Plan Nonelective Contribution formula
under Part 4E. [The elections under (b) - (e) below do not apply
to any Safe Harbor Nonelective Contributions. If the only Employer
Nonelective Contributions that will be made under this Plan are
Safe Harbor Nonelective Contributions, do not complete the
remainder of this Part 4C. See Part 4E for applicable elections.]
(b) Employer Nonelective Contribution:
[X] (1) Discretionary. Discretionary with the Employer.
|_| (2) Fixed uniform percentage. ________% of each Eligible
Participant's Included Compensation.
|_| (3) Uniform dollar amount.
|_| (i) A uniform discretionary dollar amount for each
Eligible Participant.
|_| (ii) for each Eligible Participant.
|_| (4) Net Profits. Check this box if the contribution selected above
is limited to Net Profits. The definition of Net Profits, as
defined in Section 2.2(a)(2) of the BPD, is modified as
follows: [Enter NI,4 if there are no modifications.]
|_| (5) Qualifled Nonelective Contribution (QNEC). The Employer may
make a discretionary QNEC which is allocated under the
following method:
|_| (i) Pro Rata Allocation Method. The QNEC will be
allocated as a uniform percentage of Included
Compensation to all Eligible Participants who are
Nonhighly Compensated Employees. (See Section 2.4
(e)(1) of the BPD.)
|_| (ii) Reverse QNEC Method. The QNEC will be allocated to
Eligible Participants who are Nonhighly Compensated
Employees in reverse order of Included Compensation.
(See Section 2.4(e)(2) of the BPD.)
<PAGE>
Part 4C - Employer Nonelective Contributions
- ------------------------------------------------------------------------------
|_| (iii) Application of allocation conditions. If
this box is checked, QNECs will be allocated
only to Eligible Participants who have
satisfied the allocation conditions under (e)
below.[If this box is not checked, QNECs will
be allocated without regard to the allocation
conditions under (e) below.]
|_| (iv) (Describe)_________________________________.
(c) Allocation formula for Employer Nonelective Contributions
(other than QNECS):(See Section 2.4(d) of the BPD.)
[X] (1) Pro Rata Allocation Method. The allocation for each
Eligible Participant is a uniform percentage of
Included Compensation (or a uniform dollar amount if
(b)(3)is selected). [Also complete (d)(1)(i) below.]
|_| (2) Permitted Disparity Method. The allocation for each
Eligible Participant is determined under the
following formula: [Box (b) (1) above must also be
checked. ]
|_| (i) Two-Step Formula.
|_| (ii) Four-Step Formula.
[X] (d) Operating rules for determining amount of Employer Nonelective
Contributions.
[X] (1) Special rules regarding Included Compensation.
[X] (i) Applicable period for determining Included
Compensation. In determining the Employer
Contributions to be allocated under the
Pro Rata Allocation Method under (c)(1)
above, Included Compensation is determined
separately for each:
[X] (A) Plan Year.
|_| (B) Plan Year quarter
|_| (C) (Describe)
|_| (ii) Special rule for partial period of
participation. If an Employee is an
Eligible Participant for only part of a
Plan Year, Included Compensation is
taken into account for the entire Plan Year
including the portion of the Plan Year
during which the Employee is not an Eligible
Participant. [If this box is not checked,
Included Compensation is taken into account
only for the portion of the Plan Year during
which the Employee is an Eligible
Participant.]
|_| (iii) Measurement period (see the operating rules
under Section 2.2(c)(2) of the BPD). For
purposes of allocating Employer Nonelective
Contributions, Included Compensation is
determined for the calendar year ending in
the Plan Year. [If this box is not checked,
the measurementperiod is the plan Year.]
<PAGE>
Part 4C - Employer Nonelective Contributions
- ------------------------------------------------------------------------------
|_| (2) Special rules for applying the Permitted Disparity
Method. [Complete this (2)only if box (c)(2) above is
checked.]
|_| (i) Application of Four-Step Formula for Top-
Heavy Plans. If checked, the Four-Step
Formula applies instead of the Two-Step
Formula for any Plan Year in which the Plan
is a Top Heavy Plan.
|_| (ii) Excess Compensation under the Permitted
Disparity Method is the amount of Included
Compensation that exceeds: [If not checked,
Excess Compensation is the amount of
lncluded Compensation that exceeds the
Taxable Wage Base.]
|_| (A) _______% (may not exceed I 00%)
of the Taxable Wage Base.
|_| (I) The amount determined under
(A) is not rounded,
|_| (II) The amount determined under (A)
is rounded (but not above the
Taxable Wage Base) to the next
higher:
|_| (1) $1
|_| (2) $1,000
|_| (3) $100.
|_| (B) (may not exceed the Taxable Wage
Base).
(e) Allocation conditions an Eligible Participant must satisfy for
an Employer Nonelective Contribution
|_| (1) None.
|_| (2) Must be employed by the Employer on the last day of
the Plan Year OR must have more than 500 Hours of
Service for the Plan Year.
[X] (3) Must be employed with the Employer on the last day of
the Plan Year.
[X] (4) Must be credited with at least I 000 Hours of Service
(may not exceed 1,000) during the Plan Year.
| | (5) (Describe)__________________________________.
[X] (6) The above allocation condition(s) will not apply if-
[X] (i) the Participant dies during the Plan Year.
[X] (ii) the Participant is Disabled.
<PAGE>
Part 4C - Employer Nonelective Contributions
- ------------------------------------------------------------------------------
[X] (iii) the Participant, by the end of the Plan
Year, has reached:
[X] (A) Normal Retirement Age.
|_| (B) Early Retirement Age.
<PAGE>
Part 4D
- ------------------------------------------------------------------------------
Employee After-Tax Contributions
(See Section 3.1 of the BPD)
|_| Check this box to allow for Employee After-Tax Contributions.
The eligibility conditions for making Employee After-Tax
Contributions are listed in Part I of this Agreement under
"ss.401(k) Deferrals. "
|_| (a) Maximum _________% of Included Compensation for:
|_| (1) the entire Plan Year.
|_| (2) the portion of the Plan Year during which the
Employee is an Eligible Participant.
|_| (3) each separate Payroll Period during which the
Employee is an Eligible Participant
[Note: If this box (a) is not checked, the only limit on Employee
After-Tax Contributions is the Annual Additions Limitation under
article 7 of the BPD.)
|_| (b) Minimum. For any Payroll Period, no less than
|_| (1) ________% of Included Compensation.
|_| (2) $ _____________
<PAGE>
Part 4E
- ------------------------------------------------------------------------------
Safe Harbor 40.1(k) Plan Election
(See Section 17.6 of the BPD)
|_| Check this box and complete this Part 4E if the Plan is
designed to be a Safe Harbor 401(k)Plan
|_| (a) Safe Harbor Matching Contribution:
|_| (1) Basic formula: 100% of Section 401 (k) Deferrals up
to the first 3% of Included Compensation, plus 50%
of Section 401 (k) Deferrals up to the next 2% of
Included Compensation.
|_| (2) Enhanced formula:
|_| (i) I00% of Section 401 (k) Deferrals up to
__________% of Included Compensation (not
less than 4% and not more than 6%).
|_| (ii) The sum of.[The first percentage in (B) may
not be greater than the first percentage in
(A). In addition, the sum of the second
percentages in (A)and(B) may not exceed 6%]
|_| (A) ______% of Section 401 (k)
Deferrals up to the first _________%
of Included Compensation, plus
|_| (B) ______% of Section 401(k) Deferrals
up to the next_________%of Included
Compensation.
[Note: The contributions under (ii) must not be less
than the contributions that would be calculated
under (i) at each level of Section 401(k) Deferrals]
|_| (b) Safe Harbor Nonelective Contribution: __________% (no less
than 3%) of Included Compensation
|_| (1) Check this box to provide the Employer with the
discretion to increase the percentage designated in
(b) to a higher percentage.
|_| (2) Check this box if the Safe Harbor Nonelective
Contribution will be made under another plan
maintained by the Employer and identify the plan:
|_| (3) Check this box if the Safe Harbor Nonelective
Contribution offsets the allocation that would
otherwise be made to the Participant under Part
4C(c). If the Permitted Disparity Method is elected
under Part 4C(c)(2), this offset applies only to the
second step of the Two-Step Formula or the fourth
step of the Four-Step Formula.
<PAGE>
Part 4E - Safe Harbor 401 (k) Plan Election
- ------------------------------------------------------------------------------
|_| (c) Special rule for partial period of participation. If an
Employee is an Eligible Participant for only part of a Plan
Year, Included Compensation is taken into account for the
entire Plan Year, including the portion of the Plan Year
during which the Employee is not an Eligible Participant. [If
this box is not checked, Included Compensation is taken into
account only for the potion ofthe Plan Year, in which the
Employee is an Eligible Participant.]
|_| (d) Eligible Participant. For purposes of the Safe Harbor
Contributions elected above,"Eligible Participant" means:
|_| (1) All Eligible Participants (as determined for Section
401(k) Deferrals)
|_| (2) All Nonhighly Compensated Employees who are Eligible
Participants (as determined for Section 401(k)
Deferrals).
|_| (3) Check this box if (1) or (2), whichever is elected,
applies only to Employees who would be Eligible
Participants for any portion of the Plan Year if
eligibility conditions for Section 401(k) Deferrals
in Part I (a) were one Year of Service and age 2 1.
(See Section 17.6(a)(1) of the BPD.)
|_| (e) SBJPA operational compliance. Check here if, prior to the
adoption of this Agreement, the Plan was operated in
accordance with these Safe Harbor 401(k) Plan Provisions, and
the Agreement is conforming the document to such operational
compliance for the period prior to the adoption of this
Agreement. [ This box should be checked only if this
Agreement is executed within the remedial amendment period
applicable to the SBJPA Legislation. See Article 20 of the
BPD.]
|_| (1) SBJPA Effective Date. The provisions under this Part
4E are effective for the Plan Year beginning
___________________(may not be earlier than the first
Plan Year beginning on or after January 1, 1999).
|_| (2) Modifications to Part 4E. Describe here, if
applicable, any Safe Harbor 40 1 (k) Plan provisions
applied in operation that are not described or are
inconsistent with the selections under this Part 4E:
---------------------------------------------------.
[The provisions under this Part 4E will apply for all
Plan Years beginning with the SBJPA Effective Date
designated under (1) above unless specifically
modified under this (2.)]
<PAGE>
Part 4F
- -----------------------------------------------------------------------------
Special 401(k) Plan Elections
(See Article 17 of the BPD)
(a) ADP/ACP Testing Method. In performing the ADP and ACP tests, the
Employer will use the following method: (See Sections 17.2 and 17.3 of the BPD
for an explanation of the ADP/ACP Testing Methods.)
[X] (1) Prior Year Testing Method.
|_| (2) Current Year Testing Method
|_| (b) First Plan Year for Section 401(k) Deferrals. Check this box
if this Agreement covers the first Plan Year that the Plan
permits Section 401 (k) Deferrals and the Prior Year Testing
Method applies for the first Plan Year. If checked, specify
the ADP for the Nonhighly Compensated Employee Group for the
first Plan Year: (See Section 17.2(b) of the BPD.)
|_| (1) 3%.
|_| (2) the actual deferral percentage for the first Plan
Year.
|_| (c) First Plan Year for Employer Matching Contributions or
Employee After-Tax Contributions. Check this box if this
Agreement covers the first Plan Year that the Plan includes
either an Employer Matching Contribution formula or permits
Employee After-Tax Contributions. If checked, specify the ACP
for the Nonhighly Compensated Employee Group for the first
Plan Year: (See Section 17.3(b) of the BPD.)
|_| (I) 3%.
|_| (2) the actual contribution percentage for the first Plan
Year.
|_| (d) Testing methods during SBJPA remedial amendment period. Check this box
if, in any Plan Year beginning after December 31, 1996, but before the adoption
of this Agreement, the ADP Test or ACP Test was performed using a different
testing method than the one selected under (a)(1) or (a)(2) above and specify
the Plan Year(s) in which the other testing method was used:
|_| (1) ADP Test: _____________________.
|_| (2) ACP Test: __________________.
<PAGE>
Part 5
- ------------------------------------------------------------------------------
Retirement Ages
(See Sections 22.50 and 22.107 of the BPD)
(a) Normal Retirement Age:
[X] (1) Age 65 (not to exceed 65).
|_| (2) The later of age _________ (not to exceed 65)
or the ___________(not to exceed 5 th) anniverary
of the date the Employe commenced participation in
the Plan.
|_| (3) (Describe) _______________(may not be later than the
maximum age permitted under (2)).
(b) Early Retirement Age: [Check box (1)or box (2)and/or box (3).]
[X] (1) Not applicable
|_| (2) Age ____________.
|_| (3) Completion of _________ Years of Service, determined
as follows:
|_| (i) Same as for eligibility.
|_| (ii) Same as for vesting.
|_| (iii) (Describe) ______________________________.
<PAGE>
Part 6
- ------------------------------------------------------------------------------
Vesting Rules
(See Article 4 of the BPD)
o Complele this Part only if the Employer has elected to make Employer
Matching Contributions under Part 4B(a)(1) or Employer Nonelective Contributions
under Part 4C(a)(1). (Section 401(k) Deferrals, Employee After-Tax
Contributions, QMACS, QNECS, Safe Harbor Contributions, and Rollover
Contributions are always 100% vested.)
(a) Normal vesting schedule: (See Section 4.2 of the BPD for the
definitions of the various vesting schedules.)
Employer Employer
Match Nonelective
|_| |_| (1) Full and immediate vesting.
[X] [X] (2) 7-year graded vesting schedule.
|_| |_| (3) 6-year graded vesting schedule.
|_| |_| (4) 5-year cliff vesting schedule.
|_| |_| (5) 3-year cliff vesting schedule.
|_| |_| (6) Modified vesting schedule:
________ % after __________Years of Service,
________% after ___________Years of Service,
________% after ___________Years of Service,
________% after ___________Years of Service,
________% after __________Years of Service,
________% after __________Years of Service,
and
100% after 7 Years of Service.
[Note: The percentages selected under the
modified vesting schedule must not be less
than the percentages that would be
required under the 7-year graded vesting
schedule, unless 100% vesting occurs
after no more than 5 Years of Service.]
<PAGE>
Part 6 - Vesting Rules
- ------------------------------------------------------------------------------
(b) Vesting schedule when Plan is top heavy: [Check one of the
boxes (1)-(4) for those contributions the Employer elects to
make under Part 4 of this Agreement. Box (5) may be checked in
addition to boxes
(1) - (4).]
Employer Employer
Match Nonelective
|_| |_| (1) Full and immediate vesting.
[X] [X] (2) 6-year graded vesting schedule.
|_| |_| (3) 3-year cliff vesting schedule.
|_| |_| (4) Modified vesting schedule:
__________% after _______Years of Service,
__________% after _______ Years of Service,
__________% after _________Years of Service,
__________% after ________ Years of Service,
__________% after ________Years of Service,
and
100% after 6 Years of Service.
[Note: The percentages selected under the modifed
vesting schedule must not be less than the
percentages which would be required for the 6-year
graded vesting schedule, unless 100% vesting
occurs after no more than 3 Years of Service.)
|_| |_| (5) Switch to normal vesting schedule when Plan ceases to
be top heavy.(See Section 4.3 of the BPD.) [If this
box is not checked, the top-heavy vesting schedule
selected under this Part (b) will continue to apply
for Plan Years after the Plan ceases to be a Top
Heavy Plan.]
|_| (c) Service excluded under the above vesting schedule(s):
|_| (1) Service before the original Effective Date of this
Plan. (See Section 4.5(b)(1) of the BPD for rules
that require service under a Predecessor Plan to be
counted.)
|_| (2) Years of Service completed before the Employee's
___________ birthday (cannot exceed the 18th
birthday).
<PAGE>
Part 6 - Vesting Rules
- ------------------------------------------------------------------------------
[X] (d) Special 100% vesting. An Employee's vesting percentage
increases to 100% if, while employed with the Employer, the
Employee:
[X] (1) dies.
[X] (2) becomes Disabled (as defined in Section 22.47 of the
BPD).
|_| (3) reaches Early Retirement Age (see Part 5 of this
Agreement).
|_| (e) (Describe any other special vesting provisions) _____________
___________.
<PAGE>
Part 7
- ------------------------------------------------------------------------------
Special Service Crediting Rules
(See Article 6 of the BPD)
If no age and no service requirements were chosen under Part ](a) of this
Agreement and all contributions are 100% vested under Part 6, skip this Part Z
* Year of Service - Eligibility. 1,000 Hours of Service during
an Eligibility Computation Period. Hours of Service are
calculated using the Actual Hours Crediting Method.[To modify,
complete (a) below.]
* Eligibility Computation Period. If one Year of Service is
required for eligibility, the Shift-to-Plan-Year Method is
used. If two Years of Service are required for eligibility,
the Anniversary Year Method is used. [To modify, complete
(b) below.]
* Year of Service - Vesting. 1,000 Hours of Service during a
Vesting Computation Period. Hours of Service are calculated
using the Actual Hours Crediting Method. [To modify, complete
(c) below.]
* Vesting Computation Period. The Plan Year.[To modify, complete
(d) below.
* Break in Service Rules. The one-year holdout Break in Service
rule is NOT used for eligibility or vesting. [To modify,
complete (e) below.]
|_| (a) Alternative definition of Year of Service for eligibility.
|_| (1) A Year of Service is ____________ Hours of Service
(may not exceed 1,000) during an Eligibility
Computation Period.
|_| (2) Use the Equivalency Method to count Hours of Service.
(See Section 6.5(a) of the BPD.)
|_| (3) Use the Elapsed Time Method instead of counting Hours
of Service. (See Section 6.5(b) of the BPD.)
|_| (b) Alternative method for determining Eligibility Computation
Periods. (See Section 1.4(c) of the BPD.)
|_| (1) One Year of Service eligibility. Eligibility
Computation Periods are determined using the
Anniversary Year Method instead of the Shift-to-Plan
Year Method.
|_| (2) Two Years of Service eligibility. Eligibility
Computation Periods are determined using the Shift-
to-Plan-Year Method instead of the Anniversary Year
Method.
<PAGE>
Part 7 - Special Service Crediting Rules
- ------------------------------------------------------------------------------
|_| (c) Alternative deflnition of Year of Service for vesting.
|_| (1) A Year of Service is____________. Hours of Service
(may not exceed 1,000) during a Vesting Computation
Period.
|_| (2) Use the Equivalency Method to count Hours of Service.
(See Section 6.5(a) of the BPD.)
|_| (3) Use the Elapsed Tiine Method instead of counting
Hours of Service. (See Section 6.5(b) of the BPD.)
|_| (d) Alternative method for determining Vesting Computation
Periods. Instead of Plan Years, use:
|_| (1) Anniversary Years. (See Section 4.4 of the BPD.)
|_| (2) (Describe) _________________________________________.
|_| (e) One-year holdout Break in Service rule.
|_| (1) Applies to determine eligibility for: [Check one or
both.]
(i) Employer Contributions (other than Section
401 (k) Deferrals).
|_| (ii) Section 401(k) Deferrals. (See Section
1.6(c) of the BPD.)
|_| (2) Applies to determine vesting. (See Section 4.6(a) of
the BPD.)
|_| (f) Special operating rules relating to service crediting:
___________________.
<PAGE>
Part 8
- -----------------------------------------------------------------------------
Allocation of Forfeitures
(See Article 5 of the BPD)
|_| Check this box if ALL contributions under the Plan are 100% vested and
skip this Part S.
(a) Timing of forfeiture allocations:
Employer Employer
Match Nonelective
[X] [X] (1) In the same Plan Year in which the
forfeitures occur.
|_| |_| (2) In the Plan Year following the Plan
Year in which the forfeitures occur
(b) Method of allocating forfeitures: (See the operating rules in
Section 5.5 of the BPD.)
Employer Employer
Match Nonelective
|_| [X] (1) Reallocate as additional Employer
Nonelective Contributions using
the allocation method specified in
Part 4C(c) of this Agreement. If no
allocation method is specified, use
the Pro Rata Allocation Method
under Part 4C(c)(1).
|X| |_| (2) Reallocate as additional Employer
Matching Contributions using the
discretionary allocation method
under Part 4B(b)(2) of this
Agreement.
[ ] |_| (3) Reduce the: [Check one or both
[ ] (i) Employer Matching
Contributions
|_| (ii) Employer Nonelective
Contributions
the Employer would otherwise make
for the Plan Year in which the
forfeitures are allocated.
|_| |_| (4) (Describe) _______________________.
|_| (c) Payment of Plan expenses. Forfeitures are first used to pay
Plan expenses for the Plan Year in which the forfeitures are
to be allocated. (See Section 5.5(c) of the BPD.) Any
remaining forfeitures are allocated as provided in (b) above.
|_| (d) Special operating rules. The operating rules in Article 5 of
the BPD are modified as follows:
--------------------------------------------------.
Part 9
- ------------------------------------------------------------------------------
Distributions After Termination of Employment
(See Section 8.3 of the BPD)
The election in this Part 9 are subject to the operating rules in Articles 8 and
9 of the BPD.
(a) Vested account balances in excess of $5,000. Distribution is first
available as soon as administratively feasible following:
[X] (1) the Participant's employment termination date.
|_| (2) the end of the Plan Year that contains the
Participant's employment termination date.
|_| (3) the Participant's Normal Retirement Age (or Early
Retirement Age, if applicable) or, if later, the
Participant's employment termination date.
|_| (4) (Describe) ________________________________________.
(b) Vested account balances of $5,000 or less. Distribution will
be made in a lump sum as soon as administratively feasible
following:
[X] (1) the Participant's employment termination date.
|_| (2) the end of the Plan Year that contains the
Participant's employment termination date.
|_| (3) (Describe) ________________________________________.
[X] (c) Disabled Participant. A Disabled Participant (as defined in
Section 22.47 of the BPD)may request a distribution (if
earlier than otherwise permitted under (a) above) as soon as
administratively feasible following:
[X] (1) the date the Participant becomes Disabled.
|_| (2) the end of the Plan Year in which the Participant
becomes Disabled.
|_| (3) (Describe) _____________________________________.
|_| (d) Hardship withdrawals following termination of employment. A
terminated Participant may request a Hardship withdrawal (as
defined in Section 8.6 of the BPD) before the date selected in
(a) or (b) above, as applicable.
|_| (e) Special operating rules: See Attachment
<PAGE>
Attachment to
International Assets Advisory Corporation 401(k) Profit Sharing Plan
Adoption Agreement
Page 29, Part 9(e) Special operating rules:
As an exception to the distribution date chosen for Part 9, subsections
(a), (b) and (c) above, effective for terminations after December 31, 1998,
Employer Shares Accounts will be distributed as soon as administratively
feasible following the end of the Plan Year: (1) that contains the Participant's
employment termination date, or (2) in which the Participant becomes Disabled.
<PAGE>
Part 10
- -------------------------------------------------------------------------------
In-Service Distributions
(See Section 8.5 of the BPD)
The elections in this Part 1O are subject to the operating rules in Articles 8
and 9 of the BPD.
(a) Permitted in-service distribution events: [Elections under the
ss.401(k-) Deferrals column also applyto any QNECS, QMACS, or
Safe Harbor Contributions unless otherwise specified in box
(7).]
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ss.401(k) Employer Employer
Deferrals Match Nonelective
|_| |_| |_| (1) In-service distributions are not
available.
|_| |_| |_| (2) After age _______. [If earlier
than age 59 1/2, age is deemed to
be age 59 1/2 for Section 401(k)
Deferrals if the box is checked
under that column.]
[X] [X] [X] (3) A Hardship described in Section
8.6 of the BPD. [Note: Not
applicable to QNECS, QMACs and
Safe Harbor Contributions.]
[X] [X] [X] (4) Attainment of Normal Retirement
Age. [If earlier than age 59 1/2,
age is deemed to be 59 1/2 for
Section 401 (k-) Deferrals if the
box is checked under that column.]
N/A |_| |_| (5) Attainment of Early Retirement Age
|_| |_| |_| (6) Upon becoming Disabled. (See
Section 22.47 of the BPD.)
|_| |_| |_| (7) (Describe) _____________________.
</TABLE>
[X] (b) Limitations that apply to in-service distributions:
[X] (1) Available only if the Account which is subject to
withdrawal is 100% vested. (See Section 4.8 of the
BPD for special vesting rules if not checked.)
|_| (2) No more than _________ in-service distribution(s) in
a Plan Year,
|_| (3) (Describe) ______________________________________.
<PAGE>
Part 11
- ------------------------------------------------------------------------------
Distribution Options
(See Section 8.1 of the BPD)
(a) Optional forms of payment available:
[X] (1) Lump sum distribution of entire vested Account Balance.
[X] (2) Single sum distribution of a portion of vested Account
Balance,
[X] (3) Installments for a specified term
|_| (4) Installments for in-service required minimum
distributions only.
[X] (5) (Describe optional forms or limitations on available
forms See Attachment
(b) Application of the Qualified Joint and Survivor Annuity (QJSA) and
Qualified Preretirement Survivor Annuity (QPSA) provisions: (See
Article 9 of the BPD.)
[X] (1) Do not apply. (See Section 9.1, of the BPD.)
|_| (2) Apply, with the following modifications:
|_| (i) No modifications.
|_| (ii) Modified QJSA benefit. Instead of a 50% survivor
benefit, the normal form of the QJSA provides the
following survivor benefit to the spouse.
|_| (A) 100%
.
|_| (B) 75%.
|_| (C) 66-2/3%
|_|(iii) Modified QPSA benefit. Instead of a 50% QPSA benefit,
the QPSA benefit is 100% of the Participant's vested
Account Balance.
<PAGE>
Attachment I to
International Assets Advisory Corporation 401(k) Profit Sharing Plan
Adoption Agreement
Page 32, Part 11 (a) Optional forms of payment available:
(5) Participants who had account balances in the International Assets Advisory
Corporation Employee Stock Ownership Plan ("ESOP") as of May 1, 1999 when such
Plan was amended and restated as the International Assets Advisory Corporation
401(k) Profit Sharing Plan may elect to receive their account balances under the
Plan attributable to Employer Shares in the form of Employer common stock.
Account balances in the ESOP consisting of Employer Securities acquired with the
proceeds of an Exempt Loan will be segregated from the other Employer
contribution accounts in the Plan.
(A) Notwithstanding the fact this Plan ceases to be an employee stock
ownership plan, Employer Securities acquired with the proceeds of an Exempt Loan
will continue after the Trustee repays the loan to be subject to the provisions
of Treas. Reg. ss. ss. 54.4975 -7(b)(4), (I 0), (I 1) and (12) relating to put,
call or other options and to buy-sell or similar arrangements, except to the
extent these regulations are inconsistent with Code ss.409(h). "Employer
Securities" mean common stock issued by the Employer, or by a corporation which
is a member of the same controlled group of corporations. "Exempt Loan" means a
loan made to this Plan by a Disqualified Person, or a loan to this Plan which a
Disqualified Person guarantees, provided the loan satisfies the requirements of
Treas. Reg. ss.54.4975-7(b). "Disqualified Person" shall have the meaning
ascribed to that term under Code ss.4975(e)(2).
(B) If Employer Securities acquired with the proceeds of an Exempt Loan
cease to be publicly traded, the following provisions relating to put options
shall apply:
(B)(1) The Employer will issue a "put option" to each Participant
receiving a distribution of Employer Securities from the Trust. The put option
will permit the Participant to sell the Employer Securities to the Employer, at
any time during two option periods, at the current fair market value. The first
put option period runs for a period of at least 60 days commencing on the date
of distribution of Employer Securities to the Participant. The second put option
period runs for a period of at least 60 days commencing after the new
determination of the fair market value of Employer Securities by the Plan
Administrator and notice to the Participant of the new fair market value. If a
Participant (Beneficiary) exercises his put option, the Employer must purchase
the Employer Securities at fair market value upon the terms provided under
subparagraph (B)(4). The Employer may grant the Trust an option to assume the
Employer's rights and obligations at the time a Participant exercises an option
under this subparagraph (B)(1).
(B)(2) Except upon the prior written consent of the Employer, no
Participant (or Beneficiary) may sell, assign, give, pledge, encumber, transfer
or otherwise dispose of any Employer Securities now owned or subsequently
acquired by him without complying with these terms. If a Participant (or
Beneficiary) pledges or encumbers any Employer Securities without the required
prior written consent, any security holder's rights with respect to such
Employer Securities are subordinate and subject to the rights of the Employer.
<PAGE>
(B)(3) If any Participant (or Beneficiary) who receives Employer
Securities under this Plan desires to dispose of any of his Employer Securities
for any reason during his lifetime (whether by sale, assignment, gift or any
other method of transfer), he first must offer the Employer Securities for sale
to the Employer. The Plan Administrator may require a Participant (or
Beneficiary) entitled to a distribution of Employer Securities to execute an
appropriate stock transfer agreement (evidencing the right of first refusal)
prior to receiving a certificate for Employer Securities. In the case of an
offer by a third party, the offer to the Employer is subject to all the terms
and conditions set forth in subparagraph (B)(4), based on the price equal to the
fair market value per share and payable in accordance with the terms of
subparagraph (B)(4), unless the selling price and terms offered to the
Participant by the third party are more favorable to the Participant than the
selling price and terms of subparagraph (B)(4), in which event, the selling
price and terms of the offer of the third party apply. The Employer must give
written notice to the offering Participant of its acceptance of the
Participant's offer within 14 days after the Participant has given written
notice to the Employer or the Employer's rights under this subparagraph (B)(3)
will lapse. The Employer may grant the Trust the option to assume the Employer's
rights and obligations with respect to all or any part of the Employer
Securities offered to the Employer under this subparagraph (B)(3). The Trust is
not under any obligation to purchase at any time Employer Securities from any
holder of Employer Securities upon the happening of any event.
(B)(4) If the Employer (or the Trustee, at the direction of the Plan
Administrator) exercises an option to purchase a Participant's Employer
Securities pursuant to an offer given under subparagraph (B)(3), the
purchaser(s) must make payment in lump sum or, if the distribution to the
Participant (or to his Beneficiary) constitutes a Total Distribution, in
substantially equal installments over a period not exceeding 5 years, subject to
the Participant's election for a longer payment period than 5 years. A "Total
Distribution" to a Participant (or to a Beneficiary) is the distribution, within
one taxable year of the recipient, of the entire balance to the Participant's
credit under the Plan. In the case of a distribution which is not a Total
Distribution or which is a Total Distribution with respect to which the
purchaser(s) will make payment in lump sum, the purchaser(s) must pay the
Participant (or Beneficiary) the fair market value of the Employer Securities
repurchased no later than 30 days after the date the Participant (or
Beneficiary) exercises the put option. In the case of a Total Distribution with
respect to which the purchaser(s) will make installment payments, the
purchaser(s) must make the first installment payment no later than 30 days after
the Participant (or Beneficiary) exercises the put option. For installment
amounts not paid within 30 days of the exercise of the put option, the
purchaser(s) must evidence the balance of the purchase price by executing a
promissory note, delivered to the selling Participant at the Closing. The note
delivered at Closing must bear a reasonable rate of interest, determined as of
the Closing Date, and the purchaser(s) must provide adequate security. The note
must provide for equal annual installments with interest payable with each
installment, the first installment being due and payable one year after the
Closing Date. The note further must provide for acceleration in the event of 30
days' default of the payment on interest or principle and must grant to the
maker of the note the right to prepay the note in whole or in part at any time
or times without penalty; provided however, the purchaser(s) may not have the
right to make any prepayment during the calendar year or fiscal year of the
Participant (Beneficiary) in which the Closing Date occurs.
<PAGE>
(B)(5) A person has given Notice permitted or required herein when the
person deposits the Notice in the United States mail, first class, postage
prepaid, addressed to the person entitled to the Notice at the address currently
listed for him in the records of the Plan Administrator. Any person affected by
these provisions has the obligation of notifying the Plan Administrator of any
change of address.
(B)(6) For purposes of this paragraph (B): (a) "Fair market value"
means the value of the Employer Securities (i) determined as of the date of the
exercise of an option if the exercise is by a Disqualified Person, or (ii) in
all other cases, determined as of the most recent Valuation Date. The Plan
Administrator must determine fair market value of Employer Securities for all
purposes of the Plan by engaging the services of an independent appraiser; (b)
"Notice" means any offer, acceptance of an offer, payment or any other
communication; (c) "Beneficiary" includes the legal representative of a deceased
Participant; and (d) "Closing" means the place, date and time ("Closing Date")
to which the selling Participant (or his Beneficiary) and purchaser may agree
for purposes of a sale and purchase under this paragraph (B), provided Closing
must take place not later than 30 days after the exercise of an offer under
subparagraph (B)(1).
(C) Each Qualified Participant may direct the Trustee as to the
investment of 25% of the value of the Participant's Accrued Benefit attributable
to Employer Securities (the "Eligible Accrued Benefit") within 90 days after the
Valuation Date of each Plan Year (to the extent a direct amount exceeds the
amount to which a prior direction applies) during the Participant's Qualified
Election Period. For the last Plan Year in the Participant's Qualified Election
Period, the Trustee will substitute "50%" for "25%" in the immediately preceding
sentence. The Qualified Participant must make his direction to the Trustee in
writing, the direction may be effective no later than 180 days after the close
of the Plan Year to which the direction applies, and the direction must specify
which, if any, of the investment options the Participant selects.
A Qualified Participant may choose one of the following investment
options:
(a) The distribution of the portion of his Eligible Accrued Benefit covered
by the election. The Trustee will make the distribution within 90 days
after the last day of the period during which the Qualified Participant
may make the election. The provisions of this Plan applicable to a
distribution of Employer Securities, including the put option
requirements of paragraph (B), apply to this investment option.
(b) If this Plan permits employee-directed investment, the portion of his
Eligible Accrued Benefit covered by the election shall be subject to
the Qualified Participant's direction of Investment. If this Plan does
not permit employee-directed investment, the direct transfer
<PAGE>
of the portion of his Eligible Accrued Benefit covered by the election
to another qualified plan of the Employer which accepts such transfers, but only
if the transferee plan permits employee-directed investment and does not invest
in Employer Securities to a substantial degree. The Trustee will make the direct
transfer no later than 90 days after the last day of the period during which the
Qualified Participant may make the election.
For purposes of this paragraph (C), the following definitions apply:
(i) "Qualified Participant" means a Participant who has attained age 55
and who has completed at least 10 years of participation in the Plan. A "year of
participation" means a Plan Year in which the Participant was eligible for an
allocation of Employer contributions, irrespective of whether the Employer
actually contributed to the Plan for that Plan Year.
(ii) "Qualified Election Period" means the 6-Plan-Year period beginning
with the Plan Year in which the Participant first becomes a Qualified
Participant.
A Participant's right under this paragraph (C) to direct the investment
of his Account applies to all Employer Securities acquired by the Plan.
- ------------------------------------------------------------------------------
<PAGE>
Part 12
- ------------------------------------------------------------------------------
Administrative Elections
Use this Part 12 to identify administrative elections
authorized by the BPD. These elections may be changed without reexecuting this
agreement by substituting a replacement of this page with new elections. To the
extent this Part 12 is not completed, the default provisions in the BPD apply.
Yes No
[X] |_| (a) Are Participant loans permitted? (See Article 14 of the
BPD.)
|_| (1) Use the default loan procedures under
Article 14 of the BPD,
[X] (2) Use a separate written loan policy
[X] |_| (b) Are Participants permitted to direct investments?
(See Section 13.5(c) of the BPD.)
[X] (1) Specify Accounts: All accounts except
Employer Shares Accounts,
[X] (2) Check this box if the Plan is intended to
comply with ERISA ss.404(c). (See Section
13.5(c)(2) of the BPD.)
|_| [X] (c) Is any portion of the Plan daily valued? (See Section
13.2(b) of the BPD.) If yes, specify Accounts:
_______________________________________
[X] |_| (d) Is any portion of the Plan valued periodically (other
than daily)? (See Section 13.2(a) of the BPD.)
[X] (1) Specify Accounts: Deferred, Matching &
Employer Non-elective.
[X] (2) Specify valuation date(s): Last Day of Plan
Year.
[X] (3) The following special allocation rules
apply:
[X] (i) Weighted average method.(See Section
13.4(a)(1) of the BPD.)
|_| (ii) Adjusted percentage method, taking
into account ________ % of
contributions made during the
valuation period. (See Section
13.4(a)(2) of the BPD.)
|_| (iii) (Describe) ________________________.
<PAGE>
Part 12 - Administrative Elections
- ------------------------------------------------------------------------------
Yes No
[X] |_| (e) Does the Plan accept Rollover Contributions? (See
Section 3.2 of the BPD.)
|_| [X] (f) Are life insurance investments permifted? (See
Article 15 of the BPD.)
[X] |_| (g) Do the default QDRO procedures under Section 11.5 of
the BPD apply?
[X] |_| (h) Do the default claims procedures under Section 11.6
of the BPD apply?
<PAGE>
Part 13
- ------------------------------------------------------------------------------
Miscellaneous Elections
The following elections override certain default provisions
under the BPD and provide special rules for administering the Plan. Complete the
following elections to the extent they apply to the Plan.
[X] (a) Determination of Highly Compensated Employees.
[X] (1) The Top-Paid Group Test applies. [If this box is not
checked, the Top-Paid Group Test will not apply. See
Section 22.86(b) (4) of the BPD. ]
|_| (2) The Calendar Year Election applies. [This election
may only be chosen ifthe Plan Year is not the
calendar year. See Section 22.86(b) (5) of the BPD.]
|_| (3) SBJPA operational compliance.
|_| (i) Top-Paid Group Test. The election under (1)
above to use (or to not use) the Top-Paid
Group Test did not apply for the following
post-PIan Year(s):. (See Section 20.2(a) of
the BPD.)
|_| (ii) Calendar Year Election. The election under
(2) above to use (or to not use) the
Calendar Year Election did not apply for the
following post-1996 Plan Year(s):. (See
Section 20.2(b) of the BPD.)
|_| (iii) The Old-Law Calendar Year Election applied
for the Plan Year that began in 1997 (See
Section 20.2(c) of the BPD.)
|_| (b) Special elections for applying the annual additions limitation
under Code ss.415.
|_| (1) The Limitation Year is the 12-month period ending
________ [if not checked, the Limitation Year is the
same as the Plan Year.]
|_| (2) Operating rules. Instead of the default provisions
under Article 7 of the BPD, the following rules
apply: _____________________________________________.
|_| (c) Required Beginning Date elections.
|_| (1) Election to use Old-Law Required Beginning Date. The
Old-Law Required Beginning Date (as defined in
Section 10.3(a)(2) of the BPD) applies instead of the
Required Beginning Date rules under Section 10.3(a)
(1) of the BPD.
<PAGE>
Part 13 - Miscellaneous Elections
- -------------------------------------------------------------------------------
|_| (2) SBJPA operational compliance. (See Section 10.4 of
the BPD.)
|_| (i) Option to postpone minimum distributions.
For calendar year(s)________ the Plan
permitted Participants (other than
Five-Percent Owners) whowere still employed
with the Employer to postpone minimum
distributions in accordance with the
Required Beginning Date rules under Section
10.3(a)(1) of the BPD, even though the Plan
had not been amended to contain such rules.
|_| (ii) Election to stop minimum required
distributions. Starting in calendar year
____, a Participant (other than a Five-
Percent Owner) who had already started
receiving in-service minimum distributions
under the Old-Law Required Beginning Date
rules may stop receiving such minimum
distributions until the Participant's
Required Beginning Date under Section 10.3
(a)(1) of the BPD. [If not checked,
Participants who are receiving minimum
distributions under the Old-Law Required
Beginning Date rules must continue to
receive such minimum distributions.]
|_| (iii) Application of Joint and Survivor Annuity
rules. If Employees are permitted to stop
their required minimum distributions under
(ii) above and the Joint and Survivor
Annuity requirements apply to the Plan under
Article 9 of the BPD, the Participant:
|_| (A) will
|_| (B) will not
be treated as having a new Annuity Starting
Date when distributions recommence. (See
Section 10. 4(c) of the BPD for operating
rules.)
|_| (d) Delayed Effective Dates.
|_| (1) Involuntary distribution threshold of $5,000 is first
effective under this Plan for distributions made
after________________(no earlier than the first day
of the first Plan Year beginning on or after August5,
1997). [If not checked, the $5,000 threshold applies
to all distributions made on or after the first day
of the first Plan Year beginning on or after August
5, 1997, except as provided in an earlier restatement
or amendment of the Plan. See Section 20.4 of th
BPD. ]
|_| (2) Family aggregation is repealed for allocation
purposes for Plan Years beginning must not be earlier
than the first Plan Year beginning on or after
Januarv 1, 1997).[If not checked, family aggregation
is repealed as of the first Plan Year beginning on or
after January 1, 1997. ]
|_| (e) Service credited with Predecessor Employers: (See Section 6.7
of the BPD.
(1) (identify Predecessor Employers) ___________________
<PAGE>
Part 13 - Miscellaneous Elections
- -------------------------------------------------------------------------------
(2) Service is credited with these Predecessor Employers for
the following purposes:
|_| (i) The eligibility service requirements elected
in Part I (a) of this Agreement.
|_| (ii) The allocation requirements elected in Part
4 of this Agreement.
|_| (iii) The vesting schedule(s) elected in Part 6 of
this Agreement.
[Note: If the above crediting rules are to apply
differently to service with different Predecessor
Employers, attach separately completed elections
for this item, using the same format as above
but listing only those Predecessor Employers to
which the separate attachment relates.]
|_| (f) Special rules where Employer maintains more than one plan.
|_| (1) Top-heavy minimum contribution. If this Plan is a
Top-Heavy Plan, the Employer will provide the top-
heavy minimum contribution under the following plan
maintained by the Employer: (See Section 16.2(a)(5)
of the BPD.) ______________________________________.
|_| (2) Allocation offset An Eligible Participant's
allocation under this Plan is reduced in the
following manner for allocations under another
qualified plan(s) maintained by the Employer: (See
Section 2. 1 (c) of the BPD.)
__________________________________________________.
|_| (g) Fail-Safe Coverage Provision.
|_| (1) The Fail-Safe Coverage Provision described in
Section 2.6 of the BPD applies.
|_| (2) (Describe) ________________________________________.
|_| (h) Election not to participate (see Section 1. II of the BPD).
|_| (1) An Employee may make a one-time irrevocable election
not to participate under the Plan.
|_| (2) (Describe) _______________________________________.
<PAGE>
Signature Page
- ------------------------------------------------------------------------------
By signing this page, the Employer agrees to adopt (or amend) the Plan which
consists of BPD #01 and the provisions elected in this Agreement.
Name and title of authorized
representative(s): Signature(s): Date:
Diego J. Veitia, Chairman__________ _/s/_Diego J. Veitia_____ 11/5/99
Effective Date of this Agreement:
|_| (a) New plan. Check here if this is a new plan. Effective Date of
the Plan is: ___________.
[X] (b) Restated plan. Check here if this is a restatement of an
existing plan. Effective Date of the restatement is:
May 1, 1999.
Designate the plan(s) being amended by this restatement:
International Assets Advisory Corporation Employee Stock
Ownership Plan.
Designate the original Effective Date of this Plan (optional):
_____________________.
|_| (c) Amendment by page substitution. Check here if this is an
amendment by substitution of certain pages of this Adoption
Agreement.
Identify the page(s) being replaced: __________________
Effective Date(s) of such changes: __________________
|_| (d) Substitution of sponsor. Check this box if a successor to the
original plan sponsor is continuing this Plan as a successor
sponsor, and substitute page I to identify the successor as
the Employer.
Effective Date of the amendment is: ___________________
|_| (e) Describe any special Effective Dates: ______________________.
Important information about this Prototype Plan. A failure to properly complete
the elections in this Agreement may result in disqualification of the Plan. The
Employer may not rely on the Favorable IRS Letter issued to the Prototype
Sponsor. To rely on the qualified status of its Plan, the Employer must obtain a
determination letter from the IRS. See Section 22.106 of the BPD.
<PAGE>
- ----------------------------------------------------------------------------
Trustee Declaration
- ----------------------------------------------------------------------------
By signing this Trustee Declaration, the Trustee agrees to the duties,
responsibilities and liabilities imposed on the Trustee by the BPD #01 and this
Agreement.
Name(s) of Trustee(s): /s/_Diego Veitia_________
Diego Veitia
/s/_Stephen Saker_______
Stephen Saker
/s/_Nancey McMurtry____
Nancey McMurtry
/s/ Jerome Miceli_______
Jerome Miceli
Effective Date of this Trustee Declaration: __________11/5/99________.
The Trustee's investment powers are :
[X] (a) Discretionary. The Trustee has discretion to invest Plan
assets. This discretion is limited to the extent Participants
are permitted to give investment direction, or other third
parties are given the right to direct the Trustee under an
agreement between the Plan Administrator and the Trustee.
|_| (b) Directed only. The Trustee may only invest Plan assets as
directed by Participants or by the Plan Administrator (or its
designee).
|_| (c) Separate trust agreement. The Trustee's investment powers are
determined under a separate trust document which replaces (or
is adopted in conjunction with) the trust provisions under the
BPD.
<PAGE>
- -------------------------------------------------------------------------------
Co-Sponsor Adoption Page
- -------------------------------------------------------------------------------
* Only a Related Employer (as defined in Section 22.142 of the BPD)that
executes thisCo- Sponsor Adoption Page may adopt the Plan as a Co-Sponsor. See
Article 21 of the BPD for rules relating to the adoption of the Plan by a
Co-Sponsor. If there is more than one Co-Sponsor, each one should execute a
separate Co-Sponsor Adoption Page. Any reference to the "Employer" in this
Agreement is also a reference to the Co-Sponsor, unless otherwise noted.
Name of Co-Sponsor: Global Assets Advisors, Inc.
Employer Identification Number (EIN) for the Co-Sponsor: 59-3244522
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page I of this Agreement. The Plan
consists of the BPD #01 and the provisions elected in this Agreement.
Name and title of authorized
representative(s): Signature(s): Date:
___Diego J. Veitia, CEO_____ _/s/_Diego J. Veitia__ _11/5/99_
Effective Date of this Adoption Page: ______________________.
|_| Check here if this is the initial adoption of the Plan as an amendment or
restatement of an existing plan maintained by the Co-Sponsor, which is merging
into the Plan being adopted.
|_| Designate the plan(s) being amended by this restatement: _____________.
|_| Allocation of contributions. If this box is checked, contributions made by
the Related Employer signing this Co-Sponsor Adoption Page (and any forfeitures
relating to such contributions) will be allocated only to Participants actually
employed by the Related Employer making the contribution and Employees of the
Related Employer will not share in an allocation of contributions (or
forfeitures relating to such contributions) made by the Employer or any other
Related Employer. (See Section 21.3 of the BPD.)
|_| Describe any special Effective Dates: _______________________________
<PAGE>
Co-Sponsor Adoption Page
- -------------------------------------------------------------------------------
Name of Co-Sponsor: International Financial Products, Inc.
Employer Identification Number (EIN) for the Co-Sponsor: 59-3309701.
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page I of this Agreement. The Plan
consists of the BPD #01 and the provisions elected in this Agreement.
Name and title of authorized
representative(s): Signature(s): Date:
___Diego J. Veitia, CEO____ _/s/_Diego J. Veitia___ _11/5/99
Effective Date of this Adoption Page: ____________________.
|_| Check here if this is the initial adoption of the Plan as an amendment or
restatement of an existing plan maintained by the Co-Sponsor, which is merging
into the Plan being adopted.
|_| Designate the plan(s) being amended by this restatement:
|_| Allocation of contributions. If this box is checked, contributions made by
the Related Employer signing this Co-Sponsor Adoption Page (and any forfeitures
relating to such contributions) will be allocated only to Participants actually
employed by the Related Employer making the contribution and Employees of the
Related Employer will not share in an allocation of contributions (or
forfeitures relating to such contributions) made by the Employer or any other
Related Employer. (See Section 21.3 of the BPD.)
|_| Describe any special Effective Dates: ______________________________.
<PAGE>
Co-Sponsor Adoption Page
- -------------------------------------------------------------------------------
Name of Co-Sponsor- INTLTRADER.COM, Inc.
Employer Identification Number (EIN) for the Co-Sponsor: 59-3514167.
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page I of this Agreement. The Plan
consists of the BPD #01 and the provisions elected in this Agreement.
Name and title of authorized
representative(s): Signature(s): Date:
___Diego J. Veitia, Chairman___ _/s/_Diego J.Veitia 11/5/99
Effective Date of this Adoption Page: ______12/1/98________
|_| Check here if this is the initial adoption of the Plan as an amendment or
restatement of an existing plan maintained by the Co-Sponsor, which is merging
into the Plan being adopted.
|_| Designate the plan(s) being amended by this restatements: ___________.
|_| Allocation of contributions. If this box is checked, contributions made by
the Related Employer signing this Co-Sponsor Adoption Page (and any forfeitures
relating to such contributions) will be allocated only to Participants actually
employed by the Related Employer making the contribution and Employees of the
Related Employer will not share in an allocation of contributions (or
forfeitures relating to such contributions) made by the Employer or any other
Related Employer. (See Section 21.3 of the BPD.)
|_| Describe any special Effective Dates: _____________________________.
<PAGE>
Co-Sponsor Adoption Page
- ------------------------------------------------------------------------------
Name of Co-Sponsor- Offshoretrader.com, Ltd., a Bermuda exempted company
By signing this page, the Co-Sponsor agrees to adopt (or to continue its
participation in) the Plan identified on page I of this Agreement. The Plan
consists of the BPD #01 and the provisions elected in this Agreement.
Name and title of authorized representative(s): Signature(s): Date:
__________Diego J. Veitia, Chairman________ _/s/_Diego J.Veitia 11/5/99
Effective Date of this Adoption Page: _____11/5/99_______
|_| Check here if this is the initial adoption of the Plan as an amendment or
restatement of an existing plan maintained by the Co-Sponsor, which is merging
into the Plan being adopted.
|_| Designate the plan(s) being amended by this restatement: ____________.
Allocation of contributions. If this box is checked, contributions made
by the Related Employer signing this Co-Sponsor Adoption Page (and any
forfeitures relating to such contributions) will be allocated only to
Participants actually employed by the Related Employer making the contribution
and Employees of the Related Employer will not share in an allocation of
contributions (or forfeitures relating to such contributions) made by the
Employer or any other Related Employer. (See Section 21.3 of the BPD.)
|_| Describe any special Effective Dates: ______________________________.
INTERNATIONAL ASSETS HOLDING CORPORATION
STATEMENT OF COMPUTATION OF EARNINGS PER SHARE
For the Year Ended September 30, 1999 and 1998
1999 1998 (1)
---- --------
Basic Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 397,181 $ (217,338)
Denominator:
Weighted average number of common shares
outstanding 1,668,814 1,686,888
Basic earnings (loss) per share $ 0.24 $ (0.13)
Diluted Earnings (Loss) Per Share
Numerator:
Net income (loss) $ 397,181 $ (217,338)
Denominator:
Weighted average number of common shares
outstanding 1,668,814 1,686,888
Weighted average number of net common
shares that would be issued upon
exercise of dilutive options assuming
proceeds used to repurchase shares
pursuant to the treasury
stock method (2) 355,452 --
Weighted average number of common shares
and dilutive potential common shares
outstanding 2,024,266 1,686,888
Diluted earnings (loss) per share $ 0.20 $ (0.13)
- -----------------------------------------------------------------------------
(1) Diluted loss per share is the same as basic loss per share for 1998
because of the anti-dilutive impact of the dilutive potential common
shares due to the net loss for 1998.
(2) The treasury stock method recognizes the use of proceeds that could be
obtained upon exercise of options in computing diluted earnings per share.
It assumes exercise of options as of the beginning of the period or when
issued, if later, and that any proceeds would be used to purchase common
stock at the average market price during the period.
INTERNATIONAL ASSETS HOLDING CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Name Place of Incorporation
International Assets Advisory Corp. Florida
International Asset Management Corp. Florida
Global Assets Advisors, Inc. Florida
International Financial Products, Inc. Florida
INTLTRADER.COM, INC. Florida
Offshoretrader.com Ltd. Bermuda
<TABLE> <S> <C>
<ARTICLE> BD
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,209,004
<RECEIVABLES> 157,775
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 0
<INSTRUMENTS-OWNED> 3,585,566
<PP&E> 404,025
<TOTAL-ASSETS> 8,777,538
<SHORT-TERM> 0
<PAYABLES> 1,399,418
<REPOS-SOLD> 0
<SECURITIES-LOANED> 0
<INSTRUMENTS-SOLD> 990,482
<LONG-TERM> 0
0
0
<COMMON> 17,254
<OTHER-SE> 6,121,752
<TOTAL-LIABILITY-AND-EQUITY> 8,777,538
<TRADING-REVENUE> 3,262,671
<INTEREST-DIVIDENDS> 242,580
<COMMISSIONS> 6,194,591
<INVESTMENT-BANKING-REVENUES> 0
<FEE-REVENUE> 191,082
<INTEREST-EXPENSE> 4,829
<COMPENSATION> 5,456,630
<INCOME-PRETAX> 695,371
<INCOME-PRE-EXTRAORDINARY> 695,371
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 397,181
<EPS-BASIC> .24
<EPS-DILUTED> .20
</TABLE>
