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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------------------
FORM 10-K
-----------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 33-93124
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CYBEX COMPUTER PRODUCTS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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ALABAMA 63-0801728
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4912 RESEARCH DRIVE, HUNTSVILLE, ALABAMA 35805
(Address of Principal Executive Offices) (Zip Code)
205/430-4000
(Registrant's Telephone Number, Including Area Code)
-----------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK
$.001 Par Value
Indicate by check mark whether Cybex Computer Products Corporation (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
The aggregate market value of the voting stock held by non-affiliates of
Cybex Computer Products Corporation as of June 20, 1997, was approximately
$69,773,021.
As of June 20, 1997, the number of shares of Cybex Computer Products
Corporation Common Stock outstanding was 5,434,383.
DOCUMENTS INCORPORATED BY REFERENCE
(2) Part III incorporates by reference portions of the Cybex Computer
Products Corporation Annual Proxy Statement for the fiscal year ended March 31,
1997 (to be filed with the Commission on or about June 25, 1997).
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TABLE OF CONTENTS
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PART I
ITEM 1. BUSINESS.............................................................................................. 1
GENERAL............................................................................................... 1
RECENT DEVELOPMENTS................................................................................... 2
THE INDUSTRY.......................................................................................... 3
CYBEX SOLUTIONS....................................................................................... 4
BUSINESS STRATEGY..................................................................................... 5
PRODUCTS.............................................................................................. 6
RESEARCH AND PRODUCT DEVELOPMENT...................................................................... 8
CUSTOMERS, SALES, AND MARKETING....................................................................... 9
CUSTOMER SERVICE AND SUPPORT.......................................................................... 10
MANUFACTURING......................................................................................... 10
TRADEMARK INFORMATION................................................................................. 11
COMPETITION........................................................................................... 11
EMPLOYEES............................................................................................. 11
ITEM 2. PROPERTIES............................................................................................ 11
ITEM 3. LEGAL PROCEEDINGS..................................................................................... 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................... 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS................................................................................... 12
ITEM 6. SELECTED FINANCIAL DATA............................................................................... 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................................................................... 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........................................................... 20
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE................................................................... 20
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................... 20
ITEM 11 EXECUTIVE COMPENSATION................................................................................ 20
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................................................................ 20
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................................ 20
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K........................................................................................... 21
</TABLE>
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PART I
ITEM 1. BUSINESS.
GENERAL
Cybex Computer Products Corporation ("Cybex" or the "Company")
develops, produces, and markets keyboard, video monitor and mouse ("KVM") switch
and extension products for use in the computer industry. The Company's KVM
switch products ("KVM Switch Products"), the first of which was introduced in
1989, provide up to four users, each with a separate keyboard, video monitor and
mouse, with the capability to control up to 2,160 personal computers ("PCs"),
thereby eliminating the need for individual keyboards, video monitors or mice
("KVM Peripherals") for the controlled PCs. Elimination of separate KVM
Peripherals can provide significant cost reduction (lower initial investment and
ongoing utilities costs) and space savings as well as more efficient technical
support capabilities. The Company's KVM Switch Products allow users to control
IBM- compatible and Macintosh PCs, and many Sun, Hewlett-Packard, IBM, DEC and
Silicon Graphics workstations functioning either as stand-alone systems or as
file, communications, or print servers ("Servers") operating within a local area
network ("LAN"). The Company's KVM Switch Products are particularly useful in
networking environments where multiple computers are dedicated as Servers and in
situations where multiple computers need to be controlled from one location to
facilitate network management.
The Company's family of KVM extension products ("KVM Extension
Products"), the first product of which was introduced in 1987, allow users to
separate the keyboard, video monitor and mouse up to 600 feet from the PC. In
addition, certain KVM Extension Products allow multiple users shared access to
the same PC from different keyboards, video monitors and mice. KVM Extension
Products are particularly useful in congested work areas or where working
conditions may be hazardous to the function of the computer.
The Company's products have benefited from the dramatic growth in the
use of PCs and the accompanying growth in Servers. The Company's products solve
many of the space management, security, and maintenance problems faced by
facilities managers, network administrators, and support personnel responsible
for monitoring and servicing PCs and Servers. All of the Company's KVM Switch
and Extension Products utilize technology developed or enhanced by the Company
that allows the boosting, splitting, switching, and converting of KVM signals
over distances greater than allowed by conventional computer hardware and
cabling. Although the Company does not rely exclusively on patent protection,
the Company seeks to protect its technology through patents and nondisclosure
agreements. From Fiscal 1995 to Fiscal 1996 and from Fiscal 1996 to Fiscal 1997,
the Company's compound annual growth rates in net sales were 37.6% and 38.2%,
respectively, and in net income were 73.8% and 24.4%, respectively. In Fiscal
1997, 83.0% of net sales was attributable to KVM Switch Products, and 14.5% was
attributable to KVM Extension Products.
The Company's goal is to be the market leader in providing KVM Switch
and Extension Products to PC and Server ("PC/Server") users. The Company
believes that it offers a more comprehensive family of KVM Switch and Extension
Products than any of its competitors. The Company intends to build on its
position as an industry leader by continuing its aggressive research and
development efforts aimed at developing new and enhanced products to meet the
network management challenges faced by its customers. In this regard, the
Company introduced in February 1997, the "single wire" PC Extender(TM) SNAP-1,
which requires half as much cabling as previous versions of the same product.
The Company also introduced several new connectivity products and enhancements
to existing products, including the new AutoView KVM switch, which allows
computer selection through an on-screen menuing system. In order to concentrate
its capital resources on research and development, product design, marketing,
and customer support, the Company outsources most manufacturing functions.
The Company markets its products to a diversified group of dealers, end
users, and original equipment manufacturers ("OEMs") primarily through its
inside sales and customer support staff, advertisements in trade
<PAGE> 4
publications, and participation in major industry trade shows. The Company
intends to increase its marketing efforts by (i) expanding existing
relationships and developing new relationships with dealers, end users, and
OEMs; (ii) recruiting and training additional sales personnel; (iii) expanding
its direct mail advertising and telemarketing programs; and (iv) expanding
international sales through new and existing distributors and utilizing its
European sales, distribution, and manufacturing facility in Shannon, Ireland,
which opened in October, 1996, and its sales offices in four European countries.
RECENT DEVELOPMENTS
In September 1996, the Company formed a new subsidiary, Cybex Europe
Ltd. ("Cybex Europe"), to operate a new marketing, distribution and
manufacturing facility located in Shannon, Ireland. Situated in the Shannon Free
Trade Zone, Cybex Europe will oversee manufacturing, distribution, sales and
marketing of the Company's connectivity products in the European Community. The
Company shipped its first products from the Cybex Europe facility in November
1996. In April 1997, Cybex opened sales and support offices in London, Paris,
Brussels, Aachen, and Munich to service and support customers, distributors,
resellers and original equipment manufacturers ("OEM") located throughout the
European Community.
In April 1997 the Company announced plans to consolidate its operations
in Huntsville, Alabama into a new corporate office housing sales, marketing,
research and development, manufacturing, administration and accounting
functions. Scheduled for completion in January 1998, the new 120,000 square foot
facility will be located on an 18-acre tract owned by the Company in Cummings
Research Park in Huntsville, Alabama.
During the past fiscal year, the Company introduced several new
connectivity products as well as enhancements to existing products. In August
1996 the Company announced the new AutoView Commander(TM) switch. Available in 4
or 8 server port configurations and expandable up to 64 servers, the AutoView
Commander(TM) includes the Company's on-screen display technology allowing
computer selection through a menu system and supports hot pluggable connections.
In November 1996, Cybex introduced the Personal Commander II, an advanced KVM
switch supporting 4 PCs and expandable up to 32, which offers enhanced switching
technology at an aggressive price point.
In January 1997, the Company announced a new 6-port KVM Switch Product
designed specifically for the OEM market as well as a new version of the
AutoBoot Commander(TM) offering advanced performance and design features and
competitive pricing. During the same month, Cybex introduced the Duette
Commander(TM), a 2-port KVM switch incorporating AutoView(TM) technology
targeting the consumer market. In January 1997, the Company also introduced a
version of the AutoView Commander(TM) designed specifically to enhance the
Company's offerings in the OEM market. The Company introduced an enhanced
version of the PC Extender(TM) SNAP in February 1997, requiring half as much
cabling as previous versions of the same product.
In May 1997, Cybex announced next generation versions of its KVM Switch
and Power Control products. The new KVM Switch Product, the AutoView Pro(TM),
includes all of the features of the AutoView(TM) family of KVM Switch Products
and adds support for up to 256 servers, password security, and server power
control through use of the Cybex Power Commander(TM) attachment. The Power
Commander(TM) was designed specifically to cold-boot servers and works as a
stand-alone product or as an attachment to the AutoView Pro(TM).
The Company's AutoView Commander(TM) and AutoBoot Commander 4xP(TM)
proprietary KVM Switch Products, PC-Extender(TM) Snap extension product, and
ReBoot II(TM) power control product passed Novell Corporation's NetWare 4.1
compatibility testing requirements in January 1997. The Cybex KVM Switch
products were the first KVM Switch products to receive Novell certification and
will be marketed under the "Novell Yes(TM)" logo. In February 1997, the Company
announced that the AutoView Commander(TM) met the requirements for VCCI Class 1
certification in Japan.
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The Company's AutoView Commander(TM) and Personal Commander(TM) II received
Microsoft(R) Windows NT(TM) compatible certification in February, 1997.
Expansion of the Company's distribution channels was a major emphasis
in Fiscal 1997. In January 1997, the Company announced an agreement to market
and distribute private-label versions of the AutoView Commander(TM) and AutoBoot
Commander 4xP(TM) KVM Switch Products through a major worldwide catalog
marketer. In the same month, Cybex announced plans to supply the Company's
6-port OEM KVM Switch to Ergotron, Inc., a leading supplier of ergonomic
computer workcenters, under the private label Ergoswitch. In February 1997, the
Company entered into an OEM agreement with Realstar Solutions to market a
private-label version of the Company's OEM version of the AutoView Commander(TM)
and other products through Realstar's reseller network and through unspecified
new sales channels.
The Company entered into a marketing partnership with MicroAge Computer
Centers in February 1997 that will allow Cybex to market selected products
through MicroAge sales and distribution channels and to participate in various
MicroAge conferences, reseller pricing promotional programs, and sales training
events. In April 1997 the Company announced a trade-in program allowing users of
virtually all brands of KVM Switches to upgrade to the Company's latest KVM
Switch products at a competitive price.
Gary Johnson, formerly Vice President of Sales Channel Development, was
promoted to Vice President of Sales and Marketing in April 1997. Mr. Johnson was
given responsibility for all sales, marketing and product management in the
United States, Asia/Pacific and Americas sales areas and will provide marketing
support to Cybex Europe.
THE INDUSTRY
The computer industry has experienced dramatic changes during the past
20 years. The personal computer, introduced by IBM, has evolved from stand alone
PCs with limited application into powerful information management tools as part
of enterprise-wide networks. The evolution of computer hardware and software has
allowed PCs in many instances to replace larger and more expensive mainframe
computers as the preferred information management tool for individuals and
organizations of all types and sizes throughout the world.
In the corporate environment, enterprise computing is evolving away
from large, centralized mainframe computers to distributed network computing
through PCs interconnected using a client/server design. The typical
client/server installation consists of a LAN with multiple centralized PCs
operating as "servers" dedicated to performing specific functions, such as file
servers, communications servers, and print servers, for multiple "client" PCs
connected to the LAN. Separate LANs within a single facility or in
geographically dispersed locations often are interconnected through a wide area
network ("WAN"). Although IBM-compatible systems constitute the majority of the
LANs in operation in the United States, many corporate information systems also
include LANs comprised of Sun, Hewlett-Packard, Silicon Graphics, and Digital
Equipment Corporation workstations and servers.
The expansion of computer networks in recent years has created several
problems for corporate users. The computer hardware and peripheral devices
required to operate LANs and WANs can consume substantial physical space. Unlike
mainframe computers, which were designed for central configuration and support
of key components, PC-based systems were originally designed to operate as
stand-alone systems where each Server connected to the LAN was required to have
its own central processing unit ("CPU"), keyboard, video monitor and mouse, even
though generally only the CPU was necessary for the Server to perform its
designated function within the LAN. There are significant costs (initial
investment and ongoing utilities costs) and space requirements associated with
the KVM Peripherals dedicated to each Server. The multiple KVM Peripherals
required to operate individual servers consume valuable space and also make it
more difficult for technical staff to support the network. Currently, many
organizations
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have dealt with the space requirements by housing network servers on special
racks in dedicated rooms. While this approach has alleviated part of the
problem, the keyboards, video monitors and mice continue to take up space and
consume energy. Thus, the resulting facility space and network administration
costs required to support LANs and WANs have grown significantly.
Computer networks have also created additional access, security, and
maintenance problems. Unlike terminal-based mainframe computer systems, PC-based
network systems generally require a separate CPU, keyboard, video monitor and
mouse for each user of the network. The hardware required for each PC causes
problems in space-constrained environments, such as brokerage firm trading
areas, and creates additional equipment replacement and maintenance expenses in
harsh work environments, such as manufacturing plants, where damage to the
PCs/Servers is more likely to occur. In addition, many organizations are
concerned about the security of the system (i.e., unauthorized copying of files
or loading of unauthorized programs into the system).
Finally, increased concurrent use of Macintosh, Sun, and other systems
alonside PC-based LANs compounds the maintenance and efficiency problems faced
by facilities managers and systems administrators. Servers needed to control
separate operating systems also require space in the computer room for separate
CPUs and KVM Peripherals.
CYBEX SOLUTIONS
Cybex develops products designed to solve many of the problems faced by
facilities managers, network administrators, and support personnel responsible
for monitoring and servicing the PCs/Servers comprising network installations.
The Company's KVM Switch Products provide up to four technicians, each utilizing
one keyboard, video monitor and mouse, with the capability to monitor and
control up to 2,160 interconnected PCs and network Servers. Elimination of KVM
Peripherals for each of the connected Servers through use of the KVM Switch
Products provides significant cost reduction (lower initial investment and
ongoing utilities costs) and space savings as well as more efficient technical
support capabilities. Because the KVM Switch Products incorporate technology
that intelligently manages the boot process ("AutoBoot Technology"), these
products allow support personnel to automatically boot all connected Servers
after a power failure or other problem without operator intervention. For
instance, using the KVM Switch Products, up to four technicians can
simultaneously monitor and diagnose multiple Servers located in different areas
of a facility. With these products, users can organize, maintain, and support
banks of IBM-compatible, Macintosh, and Unix-based Servers with the same
conveniences previously available with mainframe computers controlled from a
single user console.
The Company's KVM Extension Products provide greater systems design
flexibility by allowing customers to locate keyboards, video monitors and mice
up to 600 feet away from a PC/Server. Certain KVM Extension Products also permit
the addition of one or more keyboards, monitors, and mice to a single PC/Server.
These products are particularly useful in providing access to PCs/Servers in
harsh environments such as manufacturing plants where it is not desirable to
locate PCs/Servers on the plant floor. The use of KVM Peripherals separated from
the PC/Server in this situation decreases the cost of replacing damaged
equipment because the PC/Server can be relocated to a safe area of the facility.
The products also provide advantages in work environments with limited space,
such as brokerage firm trading areas, because the PCs/Servers can be located
outside of the principal work area. In both harsh work environments and limited
space work areas, KVM Extension Products improve efficiency by allowing
maintenance and support functions to be performed from outside of the main work
areas. In addition, these products allow the PC/Server to be placed in a secure
area thereby limiting a user's ability to copy files onto transportable disks
and preventing the insertion of unauthorized programs into the network.
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BUSINESS STRATEGY
The Company's strategy is to be the market leader in developing,
producing, and marketing KVM Switch and Extension Products for the computer
industry. The key elements of this strategy are as follows:
Capitalize on Opportunities Created by Networking Trend. The Company
believes that its KVM Switch and Extension Products address many of the
challenges faced by facilities managers, network administrators, and
support personnel dealing with multiple hardware configurations and
operating platforms as a result of the growth in the PC/Server market
in recent years. The networking trend, in particular, has created
various markets for products that increase space utilization, improve
network management and maintenance functions, lower computer hardware
and operating costs, and provide security. The Company intends to
continue to develop products that enhance its customers' ability to
utilize and support standard PC/Server hardware in stand-alone and
network configurations.
Expand Market/Product Position. The Company believes that it offers a
more comprehensive family of KVM Switch and Extension Products than any
of its competitors. The Company intends to build on its position in the
KVM Switch and Extension Products markets by continuing its aggressive
research and development efforts aimed at introducing enhanced and new
products ahead of its competitors. Given the high level of competition
in and the continually evolving nature of its product markets, the
Company believes that the introduction of such products ahead of its
competitors allows for greater sales and profit potential and an
enhanced reputation in its markets. Many of the Company's new products
have been and will continue to be enhanced versions of existing KVM
Switch and Extension Products, which offer increased application of
existing or additional functions.
Increase Marketing and Sales. The Company intends to continue to
emphasize marketing and sales by (i) expanding existing relationships
and developing new relationships with OEMs, dealers, distributors, and
end users; (ii) recruiting and training additional sales personnel;
(iii) expanding its direct mail advertising and telemarketing programs;
and (iv) expanding domestic and international sales through new and
existing distributors, utilization of its European distribution and
manufacturing facility in Shannon, Ireland, and its sales offices in
four European countries. By offering multiple products addressing
similar configuration problems at different price points, the Company
believes that opportunities also exist to market its products to
discount computer wholesale and retail outlets. The Company also relies
on trade publication advertising, trade show participation, and repeat
business from existing customers to generate sales.
Continue Customer-Driven R&D. The Company's products and research and
development efforts focus on meeting the challenges encountered by
customers seeking to achieve efficient and cost-effective utilization
of computing resources. The Company intends to continue its customer-
driven research and development efforts, which focus on responding to
the needs of its customers by producing innovative, practical and
marketable products that have immediate applications in their markets.
By maintaining extensive contact with customers throughout the
installation and technical support process, the Company identifies and
tests potential design modifications and improvements as well as new
applications of existing products. This process also leads to the
development of entirely new product categories and applications based
on existing technology developed to meet specific customer needs.
Outsource Manufacturing Operations. The Company intends to continue the
outsourcing of the manufacturing of its products. Outsourcing of
manufacturing functions enables the Company to avoid the capital
investment required to establish and maintain an in-house manufacturing
capability, and thereby allows the Company to allocate more of its
resources to sales and marketing, research and development, product
design, and customer support.
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PRODUCTS
KVM Switch Products. KVM Switch Products provide multiple users, each
with a separate keyboard, video monitor and mouse, with the capability to
control up to 2,160 PCs, thereby eliminating the need for individual keyboards,
video monitors and mice for the controlled PCs. The Company's products enable
users to control multiplatform configurations, either as a stand-alone system or
as a dedicated Server operating within a LAN.
A PC/Server network utilizing the Company's products is configured so
that each PC/Server is attached to a specific channel of the KVM Switch. The
user simply selects the attached server he wishes to observe or control through
an on-screen menu system, push buttons on the front panel of the switch, or
through a keyboard hot-key sequence. The user's keyboard, video monitor and
mouse operate as though they are attached directly to the selected PC/Server.
The KVM Switch emits signals that emulate the existence of a keyboard, video
monitor and mouse, thereby causing the controlled PC/Server to operate just as
if the user's KVM Peripherals were connected directly to the PC/Server whether
or not selected. The Company's KVM Switch Products include the following:
- The AutoView Commander(TM) adds computer selection through an
on-screen menu system and adds hot pluggable operations to the
AutoBoot technology. Its higher level of integration results
in a cost reduced design. Both a four-port and an eight-port
model are available.
- The AutoView Pro(TM) adds an AC power control option into the
AutoView(TM) technology utilizing the optional Power
Commander(TM).
- The Personal Commander(TM) II utilizes AutoView(TM) technology
to control two to four IBM compatible PCs/Servers.
- The Duette Commander(TM) incorporates advanced technology to
control two PCs/Servers.
- The AutoBoot Commander 4xP(TM) adds multimedia, multiplatform,
and multiuser features (in addition to the basic AutoBoot
Commander features) providing the user with the capability to
configure up to four user consoles simultaneously managing an
array of up to 2,160 PCs/Servers located a maximum of 500 feet
from the control unit. It is hot-pluggable and can be
reconfigured while in operation without disruption of the
operation of the switch or the attached PCs/Servers.
- The AutoBoot Commander 1xP(TM) incorporates all of the
features of the AutoBoot Commander 4xP(TM) in a 4-slot
chassis.
- The Slimline Commander(TM) and the Magnum Commander(TM)
incorporate AutoBoot technology to control 8 or 16
PCs/Servers, respectively, in a housing designed for 19 inch
rack configurations, expandable up to 96 PCs/Servers located
up to 150 feet from the switch unit.
- The AutoBoot Commander(TM) was the industry's first KVM Switch
to incorporate the AutoBoot(TM) technology. It accommodates
two to eight PCs/Servers per unit and is expandable to a
maximum of 96 PCs/Servers located up to 150 feet from the
switch unit.
- The AutoBoot Commander(TM) II utilizes AutoView(TM)
technology to control two to eight PCs/Servers.
- The Personal Commander(TM) incorporates AutoBoot(TM)
technology and adds mouse support, controlling two to four
PCs/Servers located up to 150 feet away from the switch unit.
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- The Commander(TM), the Company's first switch product, allows
a single keyboard and video monitor to control up to six IBM
compatible PCs located up to 150 feet away from the user
console.
KVM Switch Products (other than the AutoBoot Commander 4xP(TM)) can be
combined with the Company's Mediator products to mix Macintosh and Sun systems
with IBM PC-compatible systems within one configuration. The AutoBoot Commander
4xP(TM) and 1xP(TM) products support multiple operating platforms without the
need for separate Mediator devices. Most of the Company's KVM Switch Products
attach to PCs/Servers using the Company's proprietary cable assemblies and many
do not require an external power source.
KVM Extension Products. KVM Extension Products allow users to separate
the keyboard, video monitor and mouse up to 600 feet from the PC without
degrading the video quality, as compared to six to eight feet allowed by
conventional cables. In addition, certain KVM Extension Products allow multiple
users shared access to the same PC from KVM Peripherals. KVM Extension Products
are particularly useful in work areas where space is constrained, where working
conditions may be hazardous to the function of the computer, or where PC/Server
security is an important consideration.
The Company's KVM Switch and Extension Products utilize the Company's
proprietary technology that allows the boosting, splitting, switching, and
converting of usable video signals over distances greater than allowed by
conventional computer hardware and cabling. The Company's KVM Extension Products
include:
- The PC Extender(TM) SNAP enables a user to separate his PC
from the KVM Peripherals by as much as 600 feet using
standard, unshielded twisted pair, Category 5 cabling commonly
installed in Ethernet networks. The Company enhanced the SNAP
product in Fiscal 1997 to provide the same functionality
through a single cable.
- The PC Extender Plus(TM)allows a user to locate the KVM
Peripherals up to 600 feet away from the PC/Server.
- The PC Companion Plus(TM) allows a user to locate the KVM
Peripherals up to 600 feet away from the PC/Server, with the
ability to have a separate KVM Peripherals attached to the
PC/Server.
- The PC Expander Plus(TM) allows a user to attach one local and
from three to seven remote KVM Peripherals to a single
PC/Server located up to 600 feet from the remote user
consoles.
- The Mediator products convert data entered through an IBM
PC-compatible keyboard and PS/2 mouse into a format compatible
with the Macintosh computer and Sun workstations. These
products can be combined with the Company's KVM Switch
Products to mix Macintosh and Sun systems with IBM
PC-compatible systems within one configuration.
Other Products. The Company's Remote Activation and Power Control
Products, the PhoneBoot(TM) and the ReBoot(TM), allow PCs/Servers and other
AC-powered devices to be turned on or off by means of a telephone call
incorporating selective password protection. The PhoneBoot(TM) product is
designed to power up a Server for users requiring access outside of regular
working hours. When the user dials the correct phone number and activates the
PhoneBoot(TM), the power to the attached device is turned on and stays on until
the modem or other device is disconnected or goes off-hook. When a user
activates the ReBoot(TM) device through a telephone call, the ReBoot(TM) product
turns off the power to the attached device for forty-five seconds and then turns
the power back on. The ReBoot(TM) product is designed to restart file servers
and communications servers that have locked up due to software problems or
telephone line interference. The Key-View product is designed to provide
telephone line access to
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keyboard and video signals of PCs/Servers with VGA video resolution. It is
commonly used in conjunction with the Company's KVM Switch Products. The Power
Commander(TM) adds AC power control for controlling one to four PCs/Servers.
RESEARCH AND PRODUCT DEVELOPMENT
The Company believes that the continued, timely development of new
products and enhancements to its existing products is essential to maintaining
its competitive position. The Company's research and development efforts focus
on responding to the needs of its customers by producing innovative, practical
and marketable products that have immediate applications in their markets. By
maintaining extensive contact with customers throughout the installation and
technical support process, the Company is able to identify and test potential
design modifications and improvements as well as new applications and extensions
for existing products. This process also leads to the development of entirely
new product categories and applications based on existing technology developed
to meet specific customer needs. The Company believes that product development
activities directed toward solving the practical needs of its customers provides
a competitive advantage in introducing new and enhanced products ahead of its
competitors. In Fiscal 1995, Fiscal 1996, and Fiscal 1997, the Company's
research and development operating expenditures were $1.6 million, $1.7 million,
and $2.4 million, respectively (8.8%, 6.7% and 6.9% of net sales, respectively).
As of June 1, 1997, the Company's research and development staff consisted of 32
full-time employees.
The Company's products utilize components manufactured by third parties
that are generally available to the Company's competitors and potential
competitors. The Company's success in the future will depend in part upon its
ability to continue to apply such commercially available components to the
development of new products and new product categories and enhancement of
existing products designed to meet technological changes and customer needs in a
cost-effective manner. By emphasizing customer-driven research and development,
the Company has been able to develop innovative, practical and marketable
products that have had immediate application and acceptance in its markets. The
failure by the Company to respond timely to technological changes or customer
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations.
To meet the challenges of the rapidly changing technology in the
computer industry, the Company expects to make substantial investments in
research and development in the future. The Company's primary product
development efforts emphasize new or enhanced versions of its KVM Switch and
Extension Products or related products. There can be no assurance that these new
or enhanced versions or any other product development efforts of the Company
will lead to commercially viable products, will be completed on a timely basis,
or will include the features required to achieve market acceptance.
CUSTOMERS, SALES, AND MARKETING
The Company's principal customers include a diversified group of
dealers (82.1% of net sales in Fiscal 1997), end users (15.4% of net sales in
Fiscal 1997), and OEMs (2.5% of net sales in Fiscal 1997). The Company believes
that its broad range of products sold at different price points offers the
Company the opportunity to market its products to customers of all sizes, in
different industries, and with varying degrees of technical sophistication. In
Fiscal 1996 and Fiscal 1997, no single customer accounted for more than 3.3% and
4.3% respectively of the Company's net sales, and the loss of any customer would
not have a material adverse effect on the Company's business, financial
condition, or results of operations.
The Company markets its products primarily through an internal sales
and customer support staff, advertising in trade publications, and participating
in major industry trade shows. The Company's staff of inside sales and customer
support personnel process written and telephonic orders, service existing
customers, and respond to information
8
<PAGE> 11
inquiries. The Company devotes a substantial portion of its marketing efforts to
developing, monitoring, and enhancing its relationships with its network of
independent dealers, distributors, end users, and OEMs. The sales personnel are
supported by the Company's engineering department and its customer service
representatives who provide "hot line" technical support and advice to
customers. While the Company continues to emphasize its traditional marketing
efforts, it has also increased its sales and customer support personnel staff
and increased its direct mail advertising, telemarketing, publicity programs and
enhanced its home page on the World Wide Web. In addition to enhancing its
relationships with its existing customer base, the Company is seeking to
establish relationships with additional OEMs, distributors and systems
integrators. As of June 1, 1997, the Company's sales and customer support staff
consisted of 28 employees.
The Company's international sales accounted for approximately 20% and
21% of net sales in Fiscal 1996 and Fiscal 1997, respectively, and are placed
primarily through distributors located in Europe, Canada, and other foreign
countries. To facilitate its plans to expand international sales within the
European community, the Company established a facility in Shannon, Ireland in
October 1996.
CUSTOMER SERVICE AND SUPPORT
The Company emphasizes customer service and support by developing
quality products, encouraging customer feedback through extensive contact with
key customers, maintaining extensive documentation of technical support requests
and customer profiles, and providing a customer hot-line that offers technical
support for the life of its products. Any problems that cannot be solved by the
technical support personnel are referred to the Company's engineering
department. The Company offers a 30-day money back guarantee for all of its
products, a one year limited warranty on parts and service, and incidental
repairs. The Company seeks to respond quickly to customers' requests for
technical support and service, including overnight exchange of defective parts
or products. The Company has not experienced significant product returns.
MANUFACTURING
The Company does not manufacture any of its products in their entirety.
In order to avoid the capital investment required to establish and maintain
in-house manufacturing capabilities, the Company relies on subcontractors for
assembly of printed circuit board assemblies, subassemblies, chassis, and
equipment enclosures. The Company believes that such assembly can typically be
done by subcontractors at a lower cost than if the Company assembled such items
internally. Outsourcing manufacturing operations allows the Company to
concentrate its resources on marketing, research and development, product
design, quality assurance and customer support. The Company does, however,
subject all of the components and products to automated testing, equipment
burn-in procedures, comprehensive quality audits, functional testing, and
regulatory screening to assure quality and reliability.
The Company outsources substantially all capital intensive
manufacturing functions and intends to continue to use third-party manufacturers
to control more effectively the unit cost of the Company's products. This
reliance on third party subcontractors for the assembly of its products involves
several risks, including reduced control over product quality, delivery
schedules, manufacturing yields, and costs. The Company attempts to diversify
and currently believes that it has diversified its outsourced manufacturing
operations and has an adequate supply of alternative subcontractors.
The Company purchases industry-standard parts and components for the
assembly of its products from multiple vendors and suppliers through a
world-wide sourcing program. Custom molded cables procured from outside sources
have significant delivery times (10 to 12 weeks), and failure to obtain adequate
supplies could adversely affect product deliveries. In the past, the Company has
experienced delays in the receipt of certain of its components, which have
resulted in delays in related product deliveries. The Company attempts to manage
such risks through developing alternative sources and maintaining relationships
and close personal contact with each of its suppliers. There can be
9
<PAGE> 12
no assurance, however, that delays in component and product deliveries will not
occur in the future. The inability to obtain sufficient components or to develop
alternative sources if and as required in the future, could result in delays or
reductions in product shipments, which, in turn, could have a material adverse
effect on the Company's business, financial condition, and results of
operations. The Company believes that there are adequate alternative sources for
its components.
A substantial portion of the Company's shipments in any fiscal period
relate to orders received in that period. To meet this demand, the Company
maintains a substantial level of inventory. The Company believes that because a
substantial portion of customer orders are filled within the fiscal quarter of
receipt, the Company's backlog is not a meaningful indicator of actual sales for
any succeeding period.
TRADEMARK INFORMATION
Various trademarks, service marks, and trade names to which reference
is made in this Report are the property of owners other than the Company. Such
owners have all applicable rights with respect to their respective trademarks,
service marks, and trade names.
COMPETITION
The market for the Company's new products is highly competitive, and
the Company expects competition to increase in the future. The Company believes
that its primary competitors are other manufacturers of keyboard, video monitor
and mouse access devices, such as Apex PC Solutions, Inc., Raritan Computer,
Inc. and Rose Electronics. Large OEM server manufacturers, such as
Hewlett-Packard Company and Compaq Computer Corporation, offer switch products
supplied by the Company's competitors. Some of the Company's competitors have
greater name recognition; more extensive engineering, manufacturing and
marketing capabilities; and significantly greater financial, technological, and
personnel resources than the Company. The Company competes for customers on the
basis of performance in relation to price, product features, adherence to
standards, quality, reliability, development capabilities, product availability,
and support. The Company's future success will depend to a significant degree
upon its ability to remain competitive in the areas of marketing, research and
development, technology and distribution. Price has not historically been a
factor in the market for the Company's products, however, the Company is
beginning to experience increased price competition and as the Company's
channels of distribution expand, the Company expects that pricing pressures will
increase in the future. Increased competition could result in price reductions
and loss of market share which would adversely affect the Company's business,
financial condition, and results of operations.
EMPLOYEES
As of June 1, 1997, the Company had 159 full-time employees working in
the United States. Of the Company's total domestic employees, 34 were in
marketing, sales, and customer support; 32 were in research and development; 75
were in manufacturing and operations; and 18 were in administration. As of June
1, 1997, there were 31 employees working in the Shannon, Ireland facility. None
of the Company's employees are represented by a collective bargaining agreement,
nor has the Company ever experienced any work stoppage. Management believes that
the Company's relationship with its employees is good.
ITEM 2. PROPERTIES.
The Company's headquarters, administrative, engineering, and
manufacturing facilities are located in two adjacent leased buildings with a
total of approximately 54,000 square feet in Huntsville, Alabama. The leases
provide for annual rent of approximately $288,000. The Company intends to
construct a new 120,000 square foot headquarters facility in Huntsville, Alabama
to house its complete operations. In fiscal 1997, the Company purchased
approximately
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<PAGE> 13
18.0 acres of land adjacent to the current facilities for construction of the
new facilities. The purchase price of the land was approximately $700,000,
including all costs and fees associated with the closing. Construction of the
new facility commenced in May 1997, and is expected to be completed in early
1998.
In July 1996, the Company entered into a month-to-month lease with the
Shannon Development Authority for a 12,500 square foot facility in the Shannon
Trade Free Zone, Shannon, Ireland. This facility, which opened in October 1996,
conducts manufacturing, marketing and distribution functions in the European
community.
ITEM 3. LEGAL PROCEEDINGS.
The Company has been involved from time to time in litigation in the
normal course of its business. The Company is not aware of any pending or
threatened litigation matters that will have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of its security
holders during the fourth quarter of its fiscal year ended March 31, 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded in the over-the-counter market and
is quoted on the NASDAQ National Market System under the symbol CBXC. The
following table sets forth, for the fiscal periods indicated, the reported high
and low sale prices:
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW
---- ---
<S> <C> <C>
Quarter ended September 30, 1995.....................................$26 $22 1/2
Quarter ended December 31, 1995......................................$25 $12
Quarter ended March 31, 1996.........................................$15 $10 1/2
FISCAL 1997 HIGH LOW
---- ---
Quarter ended June 30, 1996..........................................$19 $14 1/4
Quarter ended September 30, 1996.....................................$17 3/4 $14
Quarter ended December 31, 1996......................................$18 $13 1/4
Quarter ended March 31, 1997.........................................$20 3/4 $12 3/8
FISCAL 1998
Quarter ended June 30, 1997 (through June 20)........................$18 3/4 $14 1/4
--- ---
</TABLE>
On June 20, 1997, the closing sale price for the Company's Common Stock
was $18 1/8 per share. As of June 23, 1997, there were 153 holders of record of
the Company's Common Stock.
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<PAGE> 14
The Company paid no dividends to its shareholders during the last two
fiscal years. Future dividends will be dependent upon the Company's earnings,
financial requirements, and other relevant factors.
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data as of and for each
of the fiscal years in the five-year period ended March 31, 1997, has been
derived from the audited financial statements of the Company.
This data should be read in conjunction with the Consolidated Financial
Statements, the notes thereto and Management's Discussion and Analysis of
Results of Operations and Financial Condition included elsewhere in this
document.
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
---------------------------
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net Sales 8,548 $12,812 $18,182 $25,010 $34,568
Cost of Sales 4,175 6,039 8,040 11,152 16,408
Gross Profit 4,373 6,773 10,142 13,858 18,160
Research and development expenses 770 1,150 1,600 1,686 2,374
Selling, general and administrative 2,282 3,388 4,492 6,096 8,455
expenses
Operating income 1,321 2,235 4,050 6,076 7,331
Interest income (expense), net 3 (13) 52 1,157 1,611
Other -- -- -- 52 291
Income before income taxes 1,324 2,222 4,102 7,285 9,233
Provision for income taxes 399 811 1,402 2,592 3,393
Net income 925 1,411 2,700 4,693 5,840
Net income per common and common equivalent
share:
Primary .28 .44 .82 .92 1.04
Fully diluted .28 .43 .73 .92 1.04
Weighted average common and common equivalent
shares outstanding:
Primary 3,259 3,227 3,285 5,094 5,594
Fully diluted 3,259 3,273 3,781 5,094 5,594
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
March 31,
1993 1994 1995 1996 1997
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $1,497 $2,524 $4,580 $39,394 $40,220
Total assets 3,023 4,475 7,498 47,418 56,527
Total debt 20 -- -- 5,000 8,000
Shareholders' equity 1,806 3,040 5,720 40,621 44,987
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company develops, produces and markets keyboard, video monitor and
mouse ("KVM") switch and extension products for use in the computer industry.
The Company's KVM switch products ("KVM Switch Products"), the first of which
was introduced in 1989, provide up to four users, each with a separate keyboard,
video monitor and mouse, with the capability to control up to 2,160 personal
computers ("PCs"), thereby eliminating the need for individual keyboards, video
monitors or mice ("KVM Peripherals") for the controlled PCs. Elimination of KVM
Peripherals can provide significant cost reduction (lower initial investment and
ongoing utility costs) and space savings as well as more efficient technical
support capabilities. The Company's KVM Switch Products allow users to control
IBM-compatible and Macintosh PCs, and many Sun, Hewlett-Packard, IBM, Digital
Equipment Corporation and Silicon Graphics workstations functioning either as
stand-alone systems or as file, communications or print servers ("Servers")
operating within a local area network ("LAN"). During Fiscal year 1997, the
Company designed computer interfaces for its AutoBoot Commander 4xP(TM)/1xP(TM),
which operate with models of IBM RS/6000, Hewlett Packard, DEC's Alpha, and
Silicon Graphics' Indigo workstations. The Company introduced the AutoView
Commander(TM) in August 1996, which utilizes a cost reduced design. This new
design was the basis for all new KVM Switch Product introductions made during
the year: AutoView Commander(TM), Personal Commander(TM) II, AutoBoot
Commander(TM) II, a six-port switch for original equipment manufacturers (OEM),
and Duette Commander(TM). Certain KVM Switch Products were certified by Novell
Corporation for use with its network operating system software NetwareTM 4.1.
The Company's KVM Switch Products are particularly useful in networking
environments where multiple computers are dedicated as Servers and in situations
where multiple computers need to be controlled from one location to facilitate
network management.
The Company's family of KVM extension products ("KVM Extension
Products"), the first of which was introduced in 1987, allow users to separate
the keyboard, video monitor and mouse up to 600 feet from the PC. In addition,
certain KVM Extension Products allow multiple users shared access to the same PC
from different KVM Peripherals. The Company introduced an enhanced version of
the PC Extender(TM) SNAP in February 1997. The latest version, which reduces
cabling costs by half, utilizes standard Category 5 UTP cabling, a commonly
installed cable in Ethernet networks. KVM Extension Products are particularly
useful in congested work areas or where working conditions may be hazardous to
the function of the computer.
The Company's net sales have increased in each fiscal year due
primarily to increases in the number of units sold to both new and existing
customers. These annual net sales increases reflect the Company's strategy of
increasing unit volume and market share through the introduction of new products
as well as increasingly enhanced generations of already accepted products with
increased functionality and yet are price competitive as compared to prior
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<PAGE> 16
generations of the Company's products and to the products of competitors. As a
part of this strategy, the Company seeks to be price competitive and to be the
high quality provider of products in its markets. This strategy has enabled the
Company to sell succeeding generations of products to existing customers as well
as to increase its market share by selling products to new customers.
The Company has broadened its marketing strategy of expanding channels
of distribution by increased penetration in the OEM market and the worldwide
catalog market. The Company recently announced its first products designed
specifically for the OEM market. These products are intended to expand the
Company's share of sales in the OEM marketplace. Also the Company recently began
shipping certain KVM Switch Products to a major worldwide catalog marketer under
private label. This broadened channel distribution strategy is expected to
expand the Company's distribution channels and increase market share.
The Company contracts with third parties to provide completed
subassemblies of its products. The Company outsources entire products (turnkey)
for certain stable high volume products. The Company believes that outsourcing
manufacturing generally enables the Company to control product costs more
effectively.
The Company continually evaluates new product opportunities and engages
in substantial research and product development efforts. The Company expenses
all product research and development costs as incurred. Additionally, the
Company also incurs substantial expenses related to advertising and
participation in trade shows.
Another important part of the Company's strategy is to emphasize
customer service and support. The Company offers a 30-day money back guarantee
for all of its products plus a one year limited warranty on parts. The Company
has not incurred significant sales and warranty returns expense to date. The
Company also offers sales discounts to its customers based on the level of sales
to the customers. Such discounts have historically not had a significant impact
on the Company's results of operations.
The Company believes that increasing its international sales will be an
important aspect of future revenue growth. International sales comprised 15%,
20% and 21% of the Company's total sales in Fiscal 1995, Fiscal 1996 and Fiscal
1997, respectively. All international sales are made in US dollars.
On July 28, 1995, the Company completed an initial public offering of
Common Stock, receiving net proceeds of $32,578,262 from the sale of 2,096,725
shares of Common Stock. The Company has used and expects to continue to use the
net proceeds for working capital and other general corporate purposes, including
(i) product development activities to enhance its existing products and to
develop new products (ii) expansion of sales and marketing activities (iii)
construction of additional manufacturing and administrative facilities and (iv)
establishment of an offshore facility in the European Community.
On July 9, 1996, the Company formally established operations in Shannon
Ireland, through its newly-formed subsidiary Cybex Europe Ltd. (the Subsidiary).
The Company reached an agreement in principle with The Shannon Development
Authority for long-term leased facilities to be located in the Shannon Free
Trade Zone (SFTZ). The definitive agreement is subject to final negotiations and
execution.
In July 1996, the Company subsequently entered into a month to month
lease with the Shannon Development Authority for temporary startup facilities
located within the SFTZ. The lease is for a 12,500 square foot facility, which
will expire when the Subsidiary occupies the long-term lease facility. The
Subsidiary became operational late in the third quarter with the first products
being shipped in December 1996.
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<PAGE> 17
RESULTS OF OPERATIONS
The following table presents selected financial information derived
from the Company's statements of income expressed as a percentage of net sales
for the fiscal years indicated:
<TABLE>
<CAPTION>
YEARS ENDED
MARCH 31,
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Cost of Sales.......................................... 44.2 44.6 47.5
----- ----- -----
Gross profit.............................................. 55.8 55.4 52.5
Research and development expenses...................... 8.8 6.7 6.9
Selling, general and administrative
expenses............................................... 24.7 24.4 24.4
----- ----- -----
Operating income.......................................... 22.3 24.3 21.2
Other income.............................................. 0.3 4.8 5.5
----- ----- -----
Income before income taxes................................ 22.6 29.1 26.7
Provision for income taxes................................ 7.7 10.3 9.8
----- ----- -----
Net income................................................ 14.9% 18.8% 16.9%
===== ===== =====
</TABLE>
15
<PAGE> 18
Fiscal 1997 Compared to Fiscal 1996
Net sales increased 38.2% to $34.6 million in Fiscal 1997 from $25.0
million in Fiscal 1996. The increased sales resulted from increased sales volume
to existing customers and from an increase in sales volume to new customers of
the Company's KVM Switch and Extension Products. Sales of KVM Switch Products
increased 45.8% to $28.7 million in Fiscal 1997 from $19.7 million in Fiscal
1996 primarily due to sales of newer, higher end switches: the Slimline
Commander(TM), the Magnum Commander(TM), and the AutoBoot Commander 4xP(TM) and
1xP(TM). Also, a portion of the sales increase can be attributed to products
introduced in Fiscal 1997: the AutoView Commander(TM) and other products based
on its cost reduced design. Sales of KVM Extension Products increased 14.2% to
$5.0 million in Fiscal 1997 from $4.4 million in Fiscal 1996, primarily due to
sales of Key-View, PC Extender(TM) SNAP, and Power Control Products which had
limited sales during Fiscal year 1996. As a percentage of net sales, the
Company's KVM Switch Products increased to 83.0% from 78.7% and KVM Extension
Products declined to 14.5% from 17.5% in Fiscal 1997 as compared to Fiscal 1996.
Management anticipates that sales of KVM Extension Products will continue to be
a substantial portion of the Company's net sales.
The Company's international sales volume continued to increase in
Fiscal 1997, causing international sales as a percentage of net sales to
increase to 20.6% as compared to 20.4% in Fiscal 1996. International sales
increased 39.2% to $7.1 million in Fiscal 1997 from $5.1 million in Fiscal 1996.
European sales accounted for approximately 59% of international sales. Over 88%
of fourth quarter European sales were shipped by the Subsidiary.
Gross profit increased 31.0% to $18.2 million in Fiscal 1997 from $13.9
million in Fiscal 1996. Gross profit as a percentage of net sales declined to
52.5% from 55.4% during the same period. The decline in gross profit was
attributed in part to the start-up and incremental costs incurred by the new
Subsidiary, and also due to an overall increase in the mix of newer KVM Switch
Products, with overall lower margins.
Selling, general and administrative expenses increased 38.7% to $8.5
million (24.4% of net sales) in Fiscal 1997 from $6.1 million (24.4% of net
sales) in Fiscal 1996. This increase in dollars spent reflects the increased
level
16
<PAGE> 19
of expenditures in administration, sales, customer support, channel development,
and marketing activities required to support the Company's expanded sales base.
The increase also reflects the added selling, general and administrative costs
of the new Subsidiary. Management anticipates that the dollar amount of selling,
general and administrative expense will continue to increase, however, the
anticipated expanding sales volume should cause the expenses to remain
relatively constant as a percentage of net sales.
For Fiscal 1997, total costs for research and development were $2.4
million (6.9% of net sales), compared to $1.7 million (6.7% of net sales) in
Fiscal 1996, representing a 40.8% increase in dollars. The Company anticipates
that expenses for research and development will continue to increase above the
level in Fiscal year 1997.
As a result of the factors discussed above, operating income increased
20.7% to $7.3 million (21.2% of net sales) in Fiscal 1997, from $6.1 million
(24.3% of net sales) in Fiscal 1996.
Interest and other income amounted to $1.9 million (5.5% of net sales)
in Fiscal 1997, compared to $1.2 million (4.8% of net sales) in Fiscal 1996.
This increase related primarily to interest income from the investment of cash
reserves and the proceeds from the initial public offering completed July 28,
1995. Realized gains on the sale of certain investments also contributed to the
increase in other income.
Net income increased 24.4% to $5.8 million (16.9% of net sales) in
Fiscal 1997, from $4.7 million (18.8% of net sales) in Fiscal 1996, as a result
of the factors discussed above.
Fiscal 1996 Compared to Fiscal 1995
Net sales increased 37.6% to $25.0 million in Fiscal 1996 from $18.2
million in Fiscal 1995. The increased sales resulted from increased sales volume
to existing customers and from an increase in sales volume to new customers of
the Company's KVM Switch Products. Sales of KVM Switch Products increased 50.4%
to $19.7 million in Fiscal 1996 from $13.1 million in Fiscal 1995. The Company's
international sales volume for all products continued to increase in Fiscal
1996, causing international sales as a percentage of net sales to increase to
20.4% as compared to 15.4% in Fiscal 1995.
Sales of KVM Extension Products remained flat at $4.4 million in Fiscal
1996 and Fiscal 1995. As a percentage of net sales, the Company's KVM Switch
Products increased to 78.7% from 72.0% and KVM Extension Products declined to
17.5% from 24.0% in Fiscal 1996 as compared to Fiscal 1995. International sales
increased 85.1% to $5.1 million in Fiscal 1996 from $2.8 million in Fiscal 1995.
Gross profit increased 36.6% to $13.9 million in Fiscal 1996 from $10.1
million in Fiscal 1995. Gross profit as a percentage of net sales declined to
55.4% from 55.8% during the same period. The decrease reflected an overall
increased sales volume of newer KVM Switch and Extension Products, which yielded
overall lower margins than the more mature products. Sales of newer KVM Switch
products in Fiscal 1996 were a significant part of the mix of that product
segment. Newer Switch products accounted for $5.4 million and 21.7% of Fiscal
1996 net sales, as compared to $.3 million and 1.6% of Fiscal 1995 net sales.
Initial sales of new KVM Extension Products had lower margins due to the low
volume of these products.
Selling, general and administrative ( S G & A) expenses increased 35.7%
to $6.1 million (24.4% of net sales) in Fiscal 1996 from $4.5 million (24.7% of
net sales) in Fiscal 1995. This increase in dollars spent reflected the
increased level of expenditures in administration, sales, customer support,
advertising, and marketing activities required to support the Company's expanded
sales base.
17
<PAGE> 20
For Fiscal 1996, total costs for research and development were $1.7
million (6.7% of net sales), compared to $1.6 million (8.8% of net sales) in
Fiscal 1995, representing a 5.4% increase in dollars.
As a result of the factors discussed above, operating income increased
50.0% to $6.1 million (24.3% of net sales) in Fiscal 1996, from $4.1 million
(22.3% of net sales) in Fiscal 1995.
Other income amounted to $1.2 million (4.8% of net sales) in Fiscal
1996, compared to $52,000 (0.3% of net sales) in Fiscal 1995. This increase
related primarily to interest income from the investment of the proceeds from
the initial public offering completed July 28, 1995.
Net income increased 73.8% to $4.7 million (18.8% of net sales) in
Fiscal 1996, from $2.7 million (14.9% of net sales) in Fiscal 1995, as a result
of the factors discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering in July 1995, the Company financed
its operations primarily through cash flow from operations, supplemented with
borrowings under its line of credit as needed. As of March 31, 1997, the Company
had an available line of credit of $2.5 million with no outstanding borrowings.
A short term note in the amount of $8.0 million was outstanding on March 31,
1997. The Company repaid the note during the first week of April, 1997.
The Company's working capital position improved from $39,394,062 as of
March 31, 1996 to $42,416,140 (adjusted to include $2,196,218 of long
term-investments) as of March 31, 1997. This improvement in the Company's
working capital position was due primarily to increased earnings.
Cash provided from operating activities increased from $1.0 million to
$4.3 million for the years ended March 31, 1996, and March 31, 1997,
respectively. This increase was caused primarily by an increase in net income,
accounts payable and accrued expenses, which is offset by smaller increases in
accounts receivable and inventory than in the prior fiscal year. The increase in
accounts payable may be attributed to timing of payments for current
liabilities, while the increase in other current liabilities related primarily
to the deferred recognition of employment grants associated with the Subsidiary.
The decline in inventory growth rate was due to an improved inventory turnover
rate and the increased level of turnkey products, which reduced the level of raw
components needed for production.
Capital expenditures totaled approximately $1.7 million during Fiscal
1997. The expenditures included the purchase of 18 acres of land adjacent to the
existing Corporate facility for approximately $700,000. Approximately $400,000
in capital expenditures related to equipment purchases for the Subsidiary. The
remaining amounts were used to purchase equipment to support the Company's
continued domestic growth.
The Company expects to begin construction of a new facility in
Huntsville, Alabama during the first quarter of FY 1998 on the land purchased
during FY 1997. The new facility will approximate 120,000 square feet with space
for future expansion. The facility is designed to house the Company's sales,
marketing, research and development, manufacturing and administrative functions.
Occupancy is expected during the fourth quarter of FY 1998. Although the total
cost of the project is not definite, it is expected to approximate $6.5 million.
Proceeds from the initial public offering will be used to fund the construction
of the facility.
During Fiscal 1997, the Company purchased 97,500 shares of its common
stock for $1.4 million (at prices ranging from $14.38 to $15.13 per share). The
shares were purchased under a stock repurchase program authorized in the third
quarter of Fiscal 1996 by the Company's Board of Directors. The program allows
for the purchase of up
18
<PAGE> 21
to 500,000 shares of common stock on the open market at market price. To date
the Company has purchased 331,500 shares of common stock under the repurchase
program.
The Company believes that its current financial position and existing
cash and investments along with earnings and amounts available under its line of
credit will be sufficient to meet the Company's cash requirements over the next
twelve months.
FINANCIAL ACCOUNTING DEVELOPMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 128, Earnings Per Share.
SFAS No.128, which supersedes existing generally accepted accounting principles
relative to the calculation of earnings per share, is effective for years ending
after December 15, 1997, and requires restatement of all prior period earnings
per share information upon adoption. Generally, SFAS No.128 requires a
calculation of basic earnings per share, which takes into consideration income
(loss) available to common shareholders and the weighted average of common
shares outstanding. SFAS No. 128 also requires the calculation of a diluted
earnings per share, which takes into effect the impact of all additional common
shares that would have been outstanding if all dilutive potential common shares
relating to options, warrants, and convertible securities had been issued, as
long as their effect is dilutive, with a related adjustment of income available
for common shareholders, as appropriate. SFAS No. 128 requires dual presentation
of basic and diluted earnings per share on the face of the statement of
operations and requires a reconciliation of the numerator and denominator of the
basic earnings per share computation. The Company does not expect the effect of
its adoption of SFAS No. 128 to be material.
FORWARD LOOKING STATEMENTS
When used in this Form 10-K , the words "believe," "anticipate,"
"think," "intend," "will be," and similar expressions identify forward looking
statements. Such statements are subject to certain risks and uncertainties which
could cause actual results to differ materially from those projected. Readers
are cautioned not to place undue reliance on these forward looking statements
which speak only as of the date hereof. Readers are also urged to carefully
review and consider the various disclosures made by the Company which attempt to
advise interested parties of the factors which affect the Company's business,
including the disclosures made in other periodic reports on Forms 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission.
YEAR 2000 COMPLIANCE
The Company has and will continue to make certain investments in
its software systems and applications to ensure the Company is year 2000
compliant. The financial impact has not been and is not anticipated to be
material to its financial position or results of operations in any given year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Reference is made to the Financial Statements contained in Part IV
hereof and to the Index to Consolidated Financial Statements on Page F-1.
19
<PAGE> 22
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and officers of the
Company set forth under the captions "Nominees" and "Officers," on pages 3 and 4
of the Company's Proxy Statement relating to the Annual Meeting of Shareholders
to be held on July 29, 1997, is incorporated herein by reference.
ITEM 11 EXECUTIVE COMPENSATION.
The information set forth under the caption "Executive
Compensation" set forth on pages 7 through 9 in the Company's Proxy Statement
relating to the Annual Meeting of Shareholders to be held on July 29, 1997, is
incorporated herein by reference. The Compensation Committee Report and the
Comparative Performance Graph also included at pages 10 and 13, respectively of
the Proxy Statement, are expressly not incorporated by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information under the captions "Security Ownership of Certain
Beneficial Owners and Management" set forth on pages 6 through 7 in the
Company's Proxy Statement relating to the Annual Meeting of Shareholders to be
held on July 29, 1997, is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There were no such transactions in Fiscal 1997.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
(1) FINANCIAL STATEMENTS
The following consolidated financial statements of Cybex
Computer Products Corporation are filed as a part of this
Annual Report on Form 10-K:
- Report of Independent Public Accountants
- Consolidated Balance Sheets as of March 31, 1996 and 1997
- Consolidated Statements of Income for the years ended
March 31, 1995, 1996, and 1997
20
<PAGE> 23
- Consolidated Statements of Changes in Shareholders'
Equity for the years ended March 31, 1995, 1996, and 1997
- Consolidated Statements of Cash Flows for the years ended
March 31, 1995, 1996, and 1997
- Notes to Consolidated Financial Statements
(2) SCHEDULES TO FINANCIAL STATEMENTS
- Report of Independent Public Accountants
- Schedule II - Valuation and Qualifying Accounts
(3) EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------ ----------- -----------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the Company,
incorporated by reference (pursuant to the provisions of Rule
12(b)-32) to Exhibit No. 3.1 to Amendment No. 1 to Registration
Statement No. 33-93124.
3.2 Amended and Restated By-Laws of the Company, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 3.2 to Amendment No. 1 to Registration Statement No. 33-93124.
4.1 Specimen of Common Stock Certificate of the Company, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 4 to Amendment No. 1 to Registration Statement No.
33-93124.
10.1 Revolving Line of Credit Agreement by and between the Company and
First Commercial Bank, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 10.1 to Registration
Statement No. 33-93124.
10.2 Restated 1989 Employee Incentive Stock Option Plan, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.2 to Registration Statement No. 33-93124, and
Amendment to 1989 Employee Incentive Stock Option Plan,
incorporated by reference (pursuant to the provisions of Rule
12(b)- 32) to Exhibit No. 10.13 to Amendment No. 1 to Registration
Statement No. 33- 93124.
10.3 1995 Employee Stock Option Plan, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No. 10.3
to Registration Statement No. 33-93124.
10.4 1995 Outside Directors Stock Option Plan, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.4 to Registration Statement No. 33-93124.
</TABLE>
21
<PAGE> 24
<TABLE>
<S> <C>
10.5 Lease Agreement dated May 19, 1993, by and among the Company,
Harold L. Eskew and Fred A. Beam, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No. 10.5
to Registration Statement No. 33-93124.
10.6 Smith Barney Shearson Flexible Prototype Nonstandardized
401(k) Plan Adoption Agreement #007 and Smith Barney Shearson
Prototype Defined Contribution Plan Document #005 and Trust
Agreement.
10.7 Employment and Noncompetition Agreement by and between the
Company and Stephen F. Thornton, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.7 to Registration Statement No. 33-93124.
10.8 Employment and Noncompetition Agreement by and between the
Company and Remigius G. Shatas, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.8 to Registration Statement No. 33-93124.
10.9 Employment and Noncompetition Agreement by and between the
Company and Robert R. Asprey, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.9 to Registration Statement No. 33-93124.
10.10 Employment and Noncompetition Agreement by and between the
Company and Doyle C. Weeks, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.10 to Registration Statement No. 33-93124.
10.11 Employment and Noncompetition Agreement by and between the
Company and R. Byron Driver, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.11 to Registration Statement No. 33-93124.
11 Statement of Computation of Per Share Earnings.
13 Cybex Computer Products Corporation Annual Report to Shareholders
for the Fiscal Year Ended March 31, 1997. Such Annual Report shall
not be deemed to be filed with the Securities and Exchange
Commission as a part of this Form 10- K Annual Report or otherwise
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended.
23.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule (for SEC use only).
</TABLE>
The Company agrees to furnish to the Securities and Exchange Commission,
upon request, a copy of each instrument defining the rights of holders of the
Company's long-term debt.
22
<PAGE> 25
THE COMPANY WILL FURNISH TO EACH SHAREHOLDER, UPON WRITTEN REQUEST, COPIES
OF THE EXHIBITS REFERRED TO ABOVE AT A COST OF TEN CENTS PER PAGE. REQUESTS
SHOULD BE ADDRESSED TO: DOYLE C. WEEKS, CHIEF FINANCIAL OFFICER, CYBEX
COMPUTER PRODUCTS CORPORATION, 4912 RESEARCH DRIVE, HUNTSVILLE, ALABAMA
35805.
(b) No Form 8-K was filed by the Company during the last quarter of
the fiscal year ended March 31, 1997.
(c) Exhibits. See Item 14(a)(3) above and the separate Exhibit Index
attached hereto.
(d) Financial Statement Schedules. See Item 14(a)(2) above.
23
<PAGE> 26
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CYBEX COMPUTER PRODUCTS CORPORATION
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheets as of March 31, 1996 and 1997................................................. F-3
Consolidated Statements of Income for the years ended March 31, 1995, 1996 and 1997....................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the years ended March 31,
1995, 1996 and 1997..................................................................................... F-5
Consolidated Statements of Cash Flows for the years ended March 31, 1995, 1996
and 1997................................................................................................ F-6
Notes to Consolidated Financial Statements................................................................ F-8
</TABLE>
F-1
<PAGE> 27
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Cybex Computer Products Corporation
Huntsville, Alabama
We have audited the accompanying consolidated balance sheets of Cybex Computer
Products Corporation (the Company) as of March 31, 1996 and 1997, and the
related consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended March 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cybex Computer
Products Corporation as of March 31, 1996 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended March 31, 1997, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
BIRMINGHAM, ALABAMA
APRIL 22, 1997
F-2
<PAGE> 28
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and 1997
<TABLE>
<CAPTION>
1996 1997
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 862,878 $ 2,424,385
Short-term investments 36,907,899 38,688,836
Accounts receivable - trade, less allowance for doubtful accounts of
$131,383 and $350,837 in 1996 and 1997, respectively 4,276,640 5,409,706
Income tax refund receivable 118,651
Inventories 3,487,043 3,835,356
Other current assets 59,029 698,163
Deferred income taxes 393,639 623,000
----------- -----------
Total current assets 46,105,779 51,679,446
Long-term investments, net of unrealized loss 2,196,218
Property and equipment, net of accumulated depreciation 1,109,918 2,422,292
Other assets 202,065 228,757
----------- -----------
$47,417,762 $56,526,713
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable $ 5,000,000 $ 8,000,000
Accounts payable and accrued expenses 1,478,593 2,151,371
Income taxes payable 158,734
Other current liabilities 233,124 1,149,419
----------- -----------
Total current liabilities 6,711,717 11,459,524
Deferred Income taxes 85,024 80,000
----------- -----------
Total liabilities 6,796,741 11,539,524
----------- -----------
Shareholders' equity:
Preferred stock, par value $.001 per share; 5,000,000 shares
authorized, no shares issued
Common stock, par value $.001 per share; 25,000,000 shares authorized; 1996 -
6,068,008 shares issued, 5,504,383 shares outstanding
1997 - 6,090,508 shares issued, 5,429,383 shares outstanding 6,069 6,091
Additional paid-in capital 34,079,719 34,119,697
Unrealized loss on investments (77,669)
Retained earnings 10,370,114 16,209,614
Treasury stock, at cost; 1996 - 563,625 shares, 1997 - 661,125 shares
(3,834,881) (5,270,544)
----------- -----------
Total shareholders' equity 40,621,021 44,987,189
----------- -----------
$47,417,762 $56,526,713
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 29
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
for the years ended March 31, 1995, 1996, and 1997
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Net sales $ 18,181,579 $ 25,009,762 $ 34,568,465
Cost of sales 8,040,118 11,151,343 16,408,703
----------------- ---------------- ----------------
Gross profit 10,141,461 13,858,419 18,159,762
Research and development expenses 1,599,941 1,686,448 2,374,174
Selling, general, and administrative expenses 4,491,476 6,095,891 8,454,735
----------------- ---------------- ----------------
Operating income 4,050,044 6,076,080 7,330,853
Interest income, net 51,908 1,156,597 1,611,064
Other income, net 52,232 290,583
----------------- ---------------- ----------------
Income before provision for income taxes 4,101,952 7,284,909 9,232,500
Provision for income taxes 1,401,785 2,591,624 3,393,000
----------------- ---------------- ----------------
Net income $ 2,700,167 $ 4,693,285 $ 5,839,500
================= ================ ================
Net income per common and common equivalent share:
Primary $ .82 $ .92 $ 1.04
================= ================ ================
Fully diluted $ .73 $ .92 $ 1.04
================= ================ ================
Weighted average common and common equivalent shares outstanding:
Primary 3,284,881 5,094,459 5,593,524
================= ================ ================
Fully diluted 3,717,903 5,094,459 5,593,524
================= ================ ================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 30
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended March 31, 1995, 1996, and 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL UNREALIZED
-------------------------- PAID-IN LOSS ON
SHARES AMOUNT CAPITAL INVESTMENTS
------------ ------------ ------------ -------------
<S> <C> <C> <C> <C>
Balance, March 31, 1994 3,138,783 $3,139 $ 374,317
Issuance of
common stock 151,875 152 219,418
Purchase of 90,000
shares of treasury stock
Net Income
----------- ------ ----------
Balance, March 31, 1995 3,290,658 3,291 593,735
Issuance of common stock 680,625 681 909,819
Issuance of common stock
through initial public
offering, net of offering
costs 2,096,725 2,097 32,576,165
Purchase of 234,000 shares
of treasury stock
Net income
----------- ------ -----------
Balance, March 31, 1996 6,068,008 6,069 34,079,719
Issuance of common stock 22,500 22 39,978
Purchase of 97,500 shares
of treasury stock
Unrealized loss on $(77,669)
investments
Net income
----------- ------ ----------- --------
Balance, March 31, 1997 6,090,508 $6,091 $34,119,697 $(77,669)
=========== ====== =========== ========
<CAPTION>
RETAINED TREASURY
EARNINGS STOCK TOTAL
------------ ------------- -----------
<S> <C> <C> <C>
Balance, March 31, 1994 $ 2,976,662 $ (314,000) $ 3,040,118
Issuance of
common stock 219,570
Purchase of 90,000
shares of treasury stock (240,000) (240,000)
Net Income 2,700,167 2,700,167
----------- ----------- -----------
Balance, March 31, 1995 5,676,829 (554,000) 5,719,855
Issuance of common stock 910,500
Issuance of common stock
through initial public
offering, net of offering
costs 32,578,262
Purchase of 234,000 shares
of treasury stock (3,280,881) (3,280,881)
Net income 4,693,285 4,693,285
----------- ----------- -----------
Balance, March 31, 1996 10,370,114 (3,834,881) 40,621,021
Issuance of common stock 40,000
Purchase of 97,500 shares
of treasury stock (1,435,663) (1,435,663)
Unrealized loss on (77,669)
investments
Net income 5,839,500 5,839,500
----------- ----------- -----------
Balance, March 31, 1997 $16,209,614 $(5,270,544) $44,987,189
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 31
CYBEX COMPUTER PRODUCTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended March 31, 1995, 1996, and 1997
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,700,167 $ 4,693,285 $ 5,839,500
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 137,824 235,138 355,996
Amortization of discount on investments (8,803) (538,810) (1,149,879)
Provision for losses on accounts receivable 190,950 11,074 416,000
Gain on sale of investments (4,038) (277,047)
Deferred income taxes (109,663) (9,856) (234,385)
Changes in operating assets and liabilities:
Accounts receivable - trade (994,371) (1,731,352) (1,549,066)
Inventories (724,742) (1,450,199) (348,313)
Accounts payable and accrued expenses 633,221 (173,715) 672,778
Other (106,521) (21,861) 250,469
Income taxes payable/receivable (176,590) (5,217) 277,385
----------- ------------ ------------
Net cash provided by operating activities 1,537,434 1,008,487 4,253,438
----------- ------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (511,203) (550,763) (1,668,370)
Purchases of investments available for sale (1,935,679) (73,855,402) (67,852,690)
Proceeds from sale of investments 304,975 18,973,858 5,551,134
Proceeds from maturities of investments 280,000 19,876,000 59,673,658
----------- ------------ ------------
Net cash used in investing activities (1,861,907) (35,556,307) (4,296,268)
----------- ------------ ------------
Cash flows from financing activities:
Proceeds from note payable and line of credit 250,000 6,100,000 8,000,000
Repayment of note payable and line of credit (250,000) (1,100,000) (5,000,000)
Proceeds from initial public offering 32,578,262
Proceeds from issuance of common stock 219,570 910,500 40,000
Purchase of treasury stock (240,000) (3,280,881) (1,435,663)
----------- ------------ ------------
Net cash provided by (used in) financing activities (20,430) 35,207,881 1,604,337
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents (344,903) 660,061 1,561,507
Cash and cash equivalents, beginning of year 547,720 202,817 862,878
----------- ------------ ------------
Cash and cash equivalents, end of year $ 202,817 $ 862,878 $ 2,424,385
=========== ============ ============
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 1,074 $ 3,579 $ 8,021
=========== ============ ============
</TABLE>
F-6
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
Cash paid during the year for income taxes,
net of refunds received $ 1,691,520 $ 2,606,693 $ 3,350,000
=========== ============ ============
</TABLE>
Noncash transactions:
During the 1997 fiscal year the Company recorded $77,669 of unrealized losses
related to its available-for- sale investments. The unrealized losses were
recorded as non-cash reductions of long-term investments and shareholders'
equity.
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 33
CYBEX COMPUTER PRODUCTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Cybex Computer Products Corporation (the Company) develops, produces
and markets computer keyboard, video monitor and mouse switch and
extension products. The Company sells its products to dealers,
end-users and original equipment manufacturers in the United States,
Canada, and Europe as well as in other foreign markets. The Company has
manufacturing facilities located in Huntsville, Alabama and Shannon,
Ireland (see Note 3). In addition, the Company has a wholly owned
subsidiary, Cybex International Corporation (CIC), to facilitate sales
in certain overseas markets and obtain more favorable U.S. income tax
treatment on those sales. International sales, principally to customers
in European countries, accounted for approximately 15%, 20%, and 21% of
the Company's net sales for the years ended March 31, 1995, 1996, and
1997, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies of the Company are as follows:
PRINCIPLES OF CONSOLIDATION - The Company's consolidated financial
statements include the Company and its two wholly owned subsidiaries,
CIC and Cybex Europe Ltd. All significant intercompany amounts and
transactions have been eliminated in consolidation.
CASH EQUIVALENTS - The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less
to be cash equivalents.
INVENTORIES - Raw materials, work in process, and finished goods are
recorded using the lower of standard cost, which approximates average
cost, or market.
FINANCIAL INSTRUMENTS - The carrying amounts reported in the balance
sheets for cash and cash equivalents, accounts receivable, accounts
payable, and the note payable approximate fair value because of the
immediate or short-term maturity of these financial instruments.
The Company's investments are composed of U.S. treasury bills, common
stock, and corporate bonds. Debt securities that the Company has the
positive intent and ability to hold to maturity are classified as
held-to-maturity securities and reported at amortized cost. Debt and
equity securities that are bought and held principally for the purpose
of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses included
in earnings. Debt and equity securities not classified as either
held-to-maturity securities or trading securities are classified as
available-for-sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported in a
separate component of shareholders' equity. All of the Company's
investments at March 31, 1996 and 1997 have been classified as
available-for-sale (see Note 8).
Realized gains or losses on the Company's investments are computed
using the specific identification method.
PROPERTY AND EQUIPMENT - Property and equipment are carried at cost,
less accumulated depreciation, and include expenditures that
substantially increase the useful lives of existing assets. Maintenance
and repairs are charged to current operations as incurred. Upon sale,
retirement, or other disposition of these assets, the cost and related
accumulated depreciation are removed from the respective accounts, and
any gain or loss on the disposition is included in net income.
F-8
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Provisions for depreciation are computed using the straight-line method
over the estimated useful lives of the assets which generally range
from 5 to 7 years.
LONG-LIVED ASSETS - The Company recognizes impairment losses on
long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by
those assets are less then the assets' carrying values. There were no
such losses recognized during 1995, 1996, or 1997.
LIABILITY FOR SALES AND WARRANTY RETURNS - The Company's sales
generally include a one-month unconditional return policy and a
twelve-month limited warranty for product defects. The liability for
sales and warranty returns, which totaled approximately $200,000 and
$345,000 at March 31, 1996 and 1997, respectively, is management's
estimate of the Company's liability for such sales returns (at gross
profit foregone) and warranty returns (at cost to repair or replace
products) on sales made by the Company. This liability is included in
other current liabilities in the consolidated balance sheets.
INCOME TAXES - The Company accounts for income taxes using the asset
and liability method. The Company provides for income taxes currently
payable and, in addition, provides deferred income taxes for temporary
differences between the tax bases of assets and liabilities and their
reported amounts in the financial statements. Temporary differences
relate principally to the allowance for doubtful accounts, liability
for sales and warranty returns, accrued vacation, accumulated
depreciation, and inventory. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected to be
realized.
FOREIGN CURRENCY - The Company records transactions denominated in
foreign currency on a monthly basis, using the average monthly exchange
rate. Bank accounts denominated in foreign currency are translated as
of the ending balance sheet dates using the current exchange rates.
Substantially all bank accounts are denominated in United States
currency.
REVENUE RECOGNITION - The Company records sales upon shipment of the
related products, net of any discounts.
GOVERNMENT GRANTS - The Company records government grants received in
connection with its Ireland operations (see Note 3) as reductions of
the corresponding expense in the consolidated statements of income.
Proceeds from the rent reduction grant are recognized as reductions to
rent expense as the related rent expense is incurred. Proceeds from the
employment grant, which are received in multiple installments, are
amortized as reductions of expense over a twelve month period from the
creation of the related job. Grants recognized during fiscal year 1997
as a reduction of related expenses totaled $168,000. Accounts
receivable of $410,500 and deferred revenue of $352,000 related to the
grants were included in the balance sheet at March 31, 1997.
RESEARCH AND DEVELOPMENT EXPENSE - Research and development expenses
for Company- sponsored projects are expensed as incurred.
ADVERTISING EXPENSE - Advertising costs are expensed as incurred.
Advertising expense totaled approximately $1,674,000, $2,239,000, and
$2,180,000 for the years ended March 31, 1995, 1996, and 1997,
respectively.
NET INCOME PER SHARE - Net income per common and common equivalent
share is based on the weighted average number of shares of common stock
outstanding during each period and the assumed exercise of dilutive
stock options (less the number of treasury shares assumed to be
purchased from the proceeds using the estimated market price [average
market price during the
F-9
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
year for primary net income per share and the higher of average market
price during the year or year-end market price for fully diluted net
income per share] of the Company's common stock).
USE OF ESTIMATES - The preparation of the Company's consolidated
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the dates of the financial
statements and reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
RECENTLY ISSUED ACCOUNTING STANDARDS - In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128 supersedes
existing generally accepted accounting principles relative to the
calculation of earnings per share, is effective for years ending after
December 15, 1997 and requires restatement of all prior period earnings
per share information upon adoption. Generally, SFAS No. 128 requires a
calculation of basic earnings per share, which takes into consideration
income (loss) available to common shareholders and the weighted average
of common shares outstanding. SFAS No. 128 also requires the
calculation of a diluted earnings per share, which takes into effect
the impact of all additional common shares that would have been
outstanding if all dilutive potential common shares relating to
options, warrants, and convertible securities had been issued, as long
as their effect is dilutive, with a related adjustment of income
available for common shareholders, as appropriate. SFAS No. 128
requires dual presentation of basic and diluted earnings per share on
the face of the statement of income and requires a reconciliation of
the numerator and denominator of the basic earnings per share
computation. The Company does not expect the effect of its adoption of
SFAS No. 128 to be material.
3. EUROPEAN OPERATIONS
On July 9, 1996, the Company formally established operations in
Shannon, Ireland through its newly-formed subsidiary, Cybex Europe Ltd.
(Cybex-Europe).
Cybex-Europe executed an agreement with the Shannon Free Airport
Development Company Limited (Shannon Development) under which
Cybex-Europe will receive grant monies related to salary and rent
expense. The maximum amount attainable under the agreement is
approximately $1.6 million. The grant monies would be repayable, in
whole or in part, should (1) Cybex-Europe fail to meet certain business
related objectives established under the agreement which are to be
achieved over a three-year implementation period and/or (2) the Company
discontinues operations in Ireland prior to the termination of the
agreement. The agreement terminates five years from the date the last
claim is made by the Company for grant monies paid by Shannon
Development.
4. INITIAL PUBLIC OFFERING
On July 28, 1995, the Company completed an initial public offering
(IPO) of its common stock, receiving net proceeds (after deductions of
underwriting discounts and other offering expenses) of $32,578,262 from
the sale of 2,096,725 shares of common stock at the IPO price of $17
per share. The Company has used and expects to continue to use the
proceeds for working capital and other general corporate purposes,
including product development activities to enhance its existing
products and develop new products, expansion of sales and marketing
activities, expansion of the Company's current facilities and
construction of additional facilities.
5. RECAPITALIZATION AND STOCK SPLIT
F-10
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On July 10, 1995, the Company's shareholders approved a
recapitalization plan for the Company whereby all of the Company's $.01
par value common stock was exchanged for $.001 par value common stock,
the number of authorized shares of common stock was increased to
25,000,000 from 10,000,000, and 5,000,000 shares of preferred stock
were authorized for issuance at later dates at amounts and dividend
rates that will be determined by the Board of Directors when any shares
of preferred stock are issued. Following approval by the shareholders,
the Company declared a 2.25 for 1 stock split. All capital stock and
stock option information included in the consolidated financial
statements and notes thereto gives retroactive effect to these
transactions.
6. STOCK REPURCHASE PLAN
The Board of Directors approved a stock repurchase plan during December
1995 to purchase up to 500,000 shares of Company stock on the open
market. During the 1996 fiscal year, the Company purchased 234,000
shares of treasury stock at prices ranging from $12.50 to $14.75 per
share. During the 1997 fiscal year, the Company purchased 97,500 shares
of treasury stock at prices ranging from $14.38 to $15.13 per share.
7. INVENTORIES
A summary of inventories at March 31, 1996 and 1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Raw materials $2,035,335 2,358,877
Work in process 903,883 888,089
Finished goods 547,825 588,390
---------- ----------
$3,487,043 $3,835,356
========== ==========
</TABLE>
8. INVESTMENTS
The cost and approximate market values of available-for-sale securities
at March 31, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUES
----------------- ----------------- -------------------- -------------------
<S> <C> <C> <C> <C>
1996
U.S. Treasury bills $ 36,907,899 $ 36,907,899
================= ===================
1997
U.S. Treasury bills $ 38,688,836 $ 38,688,836
Marketable equity securities 2,227,887 $ 58,327 $ (135,996) 2,150,218
Corporate bonds 46,000 46,000
----------------- ----------------- -------------------- -------------------
$ 40,962,723 $ 58,327 $ (135,996) 40,885,054
================= ================= ==================== ===================
</TABLE>
F-11
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The amortized cost and market values of debt instruments with fixed maturities
at March 31, by expected maturity, are shown as follows:
<TABLE>
<CAPTION>
1996 1997
---------------------------------------------- ----------------------------------------
AMORTIZED MARKET AMORTIZED MARKET
COST VALUE COST VALUE
----------------------- -------------------- ------------------- ------------------
<S> <C> <C> <C> <C>
Due in one year or less $ 36,907,899 $ 36,907,899 $ 38,688,836 $ 38,688,836
Due after one year
through five years 46,000 46,000
----------------------- -------------------- ------------------- ------------------
$ 36,907,899 $ 36,907,899 $ 38,734,836 $ 38,734,836
======================= ==================== =================== ==================
</TABLE>
Gross gains on the sale of investments available for sale were approximately
$4,000 and $492,000 in Fiscal 1995 and Fiscal 1997, respectively. Gross losses
were approximately $215,000 in Fiscal 1997. There were no realized gains or
losses in Fiscal 1996.
F-12
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at March 31, 1996 and
1997:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Land $ 709,625
Engineering and testing equipment $ 63,308 168,892
Production equipment 206,799 574,565
Marketing fixtures and equipment 100,960 105,185
Office furniture and equipment 224,126 408,702
Computer software and equipment 967,582 1,260,473
Automotive equipment 2,200 17,124
Leasehold improvements 24,745 45,282
Construction in progress 49,781 3,750
------------------ ------------------
1,639,501 3,293,598
Less accumulated depreciation (529,583) (871,306)
------------------ ------------------
$ 1,109,918 $ 2,422,292
================== ==================
</TABLE>
10. SHORT-TERM BORROWINGS
At March 31, 1996 and 1997, the Company had $5,000,000 and $8,000,000,
respectively, outstanding under short-term note payables bearing
interest at the bank's prime rate (8.25% and 8.50% at March 31, 1996
and 1997, respectively). The amounts outstanding at March 31, 1996 and
1997 were repaid on April 4, 1996 and April 3, 1997, respectively.
The Company has a bank line of credit which provides for borrowings up
to $2,500,000. Interest on outstanding advances is payable monthly at
the bank's prime rate which was 8.25% and 8.50% at March 31, 1996 and
1997, respectively. The line of credit is collateralized by the
Company's accounts receivable, inventories, and certain intangible
assets and is due on demand. The line of credit expires July 1, 1997.
The Company had no amounts outstanding on the line of credit at March
31, 1996 or 1997.
F-13
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
11. INCOME TAXES
The provision (benefit) for income taxes for the years ended March 31,
1995, 1996, and 1997 is comprised of the following:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Current:
Federal $1,361,474 $2,377,923 $3,263,747
State 149,974 223,557 363,638
---------- ---------- ----------
1,511,448 2,601,480 3,627,385
Deferred:
Federal (99,298) (8,952) (185,747)
State (10,365) (904) (20,638)
Ireland (28,000)
---------- ---------- ----------
(109,663) (9,856) (234,385)
---------- ---------- ----------
Total provision $1,401,785 $2,591,624 $3,393,000
========== ========== ==========
</TABLE>
The provision for federal income taxes differs from the amount computed by
applying the statutory rate to taxable income as follows:
<TABLE>
<CAPTION>
1995 1996 1997
<S> <C> <C> <C>
Computed "expected" federal income tax expense $1,394,664 $2,476,869 $3,139,050
Add (deduct):
Research and development credit (61,965) (4,523) (9,231)
CIC foreign sales corporation income (11,397) (20,289) (10,821)
State income tax deduction (50,394) (75,702) (116,620)
Other (8,732) (7,384) 75,622
---------- ---------- ----------
$1,262,176 $2,368,971 $3,078,000
========== ========== ==========
</TABLE>
The components of the deferred income tax assets and liabilities at March 31,
1996 and 1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Current deferred income tax asset:
Allowance for doubtful accounts $ 47,587 $127,500
Liability for sales and warranty returns 72,440 114,800
Accrued vacation 37,187 32,400
Inventory 236,425 348,300
-------- --------
Current deferred income tax asset
$393,639 $623,000
======== ========
Net noncurrent deferred income tax liability:
Accumulated depreciation $ 85,024 $108,000
Foreign subsidiary net operating loss carryforwards (28,000)
-------- --------
Net noncurrent deferred income tax liability $ 85,024 $ 80,000
======== ========
</TABLE>
12. COMMITMENTS
F-14
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The Company leases the buildings containing its offices and
manufacturing facilities and certain equipment under various operating
leases. Rent expense under these leases totaled approximately $203,000,
$259,000, and $312,000 for the years ended March 31, 1995, 1996, and
1997, respectively. Minimum future rental payments under the
noncancelable operating leases are approximately as follows:
<TABLE>
YEAR ENDING MARCH 31:
<S> <C>
1998 $296,000
1999 120,500
2000 17,000
2001 16,700
2002 6,800
--------
$457,000
========
</TABLE>
The Company's lease for certain of its offices and manufacturing
facilities expires July 31, 1998, but may be renewed for an additional
five-year term. The Company has the option to purchase the facilities
at any time during the lease term for $1,800,000 less $40,000 per year
for each year that the Company leases the facilities.
Shannon Development is currently constructing a permanent facility to
be leased, under an operating lease, by Cybex-Europe for a period of 25
years. The lease agreement has not been finalized. In the interim,
Cybex Europe is leasing a temporary facility from Shannon Development
until the permanent facility is completed.
13. STOCK OPTIONS
In 1989 the Company adopted an Employee Incentive Stock Option Plan
(the 1989 Plan) whereby the Board of Directors may, from time to time,
grant stock options to officers and key employees of the Company. The
Company set aside 787,500 shares of common stock for the 1989 plan. The
options granted under this plan are not exercisable during the first
two years following the grant date and expire five years from the date
of grant. The plan provides that the exercise price be equal to the
fair market value of the common stock, as defined in the plan, at the
date of grant, except for options issued to persons who own more than
10% of the Company's outstanding common stock whose exercise price is
equal to 110% of the fair market value of the common stock at the date
of grant. On July 10, 1995, the Company's shareholders approved changes
to the Company's stock option plans whereby the 1989 Plan was
terminated and replaced by the 1995 Employee Stock Option Plan (the
1995 Plan). Under the 1995 Plan, options vest and are exercisable in
twenty percent increments beginning one year from the date of grant and
expire ten years from the date of grant. The Company set aside 281,250
shares of common stock for the 1995 Plan.
The Company's stockholders also approved options for 181,125 shares of
common stock for the directors who are not employees of the Company
under the Company's Directors' Compensation Equity Program (the
Program). During 1995, the Company's shareholders approved changes to
the Company's stock option plans whereby the Program was terminated
and replaced by the 1995 Outside Directors Stock Option Plan (the 1995
Directors Plan). Under the 1995 Directors Plan, options vest and are
immediately exercisable on date of grant and expire ninety days after
the time the Participant ceases to be a Director if the Director is
terminated for cause or three years after the date of termination if
such termination is due to retirement, permanent disability, or death.
The Company has set aside 56,250 shares of common stock for the 1995
Directors Plan.
F-15
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Pertinent information regarding the plans are as follows:
<TABLE>
<CAPTION>
WEIGHTED
RANGE OF AVERAGE
NUMBER OF EXERCISE EXERCISE VESTING
OPTIONS PRICES PRICE PROVISIONS
----------------- ------------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Options outstanding, March 31, 1994 839,250 $.67 - $2.56 $ 1.35 Various
Options granted 33,750 $2.67 $ 2.67 100%/year
Options granted 67,500 $2.67 $ 2.67 20%/year
Options exercised (136,125) $.67 - $2.67 $ 1.61 Various
---------
Options outstanding, March 31, 1995 804,375 $.67 - $2.67 $ 1.48 Various
Options granted 7,500 $17.00 - $24.00 $ 19.33 100%/year
Options granted 85,125 $13.75 - $20.00 $ 16.63 20%/year
Options exercised (680,625) $.67 - $2.56 $ 1.34 Various
---------
Options outstanding, March 31, 1996 216,375 $1.78 - $24.00 $ 8.48 Various
Options granted 12,500 $16.50 - $17.00 $ 16.70 100%/year
Options granted 95,000 $13.25 - $18.15 $ 16.79 20%/year
Options exercised (22,500) $1.78 $ 1.78 20%/year
---------
Options outstanding, March 31, 1997 301,375 $1.78 - $24.00 $ 11.94 Various
=========
</TABLE>
The following table summarizes information about stock options outstanding at
March 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------------ -----------------------------------
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------------------- --------------- --------------- ------------------ --------------- -----------------
<S> <C> <C> <C> <C> <C>
$1.78 39,375 0.71 $ 1.78 39,375 $ 1.78
$2.67 61,875 2.47 $ 2.67 36,000 $ 2.67
$13.25 - $16.50 85,500 8.61 $ 15.24 14,500 $ 15.26
$17.00 - $18.15 87,000 8.54 $ 17.23 15,000 $ 17.00
$20.00 - $24.00 27,625 8.09 $ 20.36 7,525 $ 21.33
--------------- ---------------
301,375 112,400
=============== ===============
</TABLE>
The options above were issued at exercise prices which approximate fair
market value at the date of grant. At March 31, 1997, 138,275 shares
are available for grant under the plans.
The Company applies Accounting Principles Board Opinion 25 and related
Interpretations in accounting for its stock plans. Accordingly, no
compensation cost has been recognized related to stock options. Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under
those plans consistent with the method prescribed in SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's net income and
earnings per share would have been reduced to the pro forma amounts
indicated below:
F-16
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
1996 1997
<S> <C> <C>
Net income - as reported $4,693,285 $5,839,500
Net income - pro forma $4,607,184 $5,559,083
Earnings per share - as reported $ .92 $ 1.04
Earnings per share - pro forma $ .90 $ 1.00
</TABLE>
The pro forma amounts reflected above are not representative of the
effects on reported net income in future years because, in general, the
options granted typically do not vest for several years and additional
awards are made each year. The fair value of each option grant is
estimated on the grant date using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
<TABLE>
<CAPTION>
1996 1997
<S> <C> <C>
Dividend yield 0 0
Expected life (years) 3 - 5 3 - 5
Expected volatility 45.7% 45.7%
Rick-free interest rate (range) 5.77% - 5.88% 6.16% - 6.35%
</TABLE>
14. RETIREMENT PLAN
The Company established a 401(k) savings and profit sharing plan, the
Cybex Computer Products Corporation Retirement Plan, covering
substantially all employees effective April 1, 1993. The Company will
match 25% of an employee's contributions up to 6% of the employee's
compensation. The Company's expense for matching contributions totaled
approximately $32,000, $32,000, and $53,000 for the years ended March
31, 1995, 1996, and 1997, respectively. The Company may also elect to
make discretionary contributions as determined by its Board of
Directors. The Company elected to make discretionary contributions of
approximately $229,000 for the year ended March 31, 1995. The Company
did not make discretionary contributions during the fiscal years ended
March 31, 1996 or 1997.
15. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents unaudited quarterly operating results for
each of the Company's last eight fiscal quarters. This information has
been prepared by the Company on a basis consistent with the Company's
audited financial statements and includes all adjustments, consisting
only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of the data.
F-17
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
(In Thousands, Except for Per Share Amounts)
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1995 1995 1995 1996
------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net sales $ 5,653 $ 6,001 $ 6,488 $ 6,868
Gross profit $ 3,169 $ 3,297 $ 3,485 $ 3,907
Operating income $ 1,349 $ 1,393 $ 1,552 $ 1,782
Net income $ 872 $ 1,152 $ 1,334 $ 1,335
Net income per share (1):
Primary $ .24 $ .22 $ .23 $ .24
Fully diluted $ .24 $ .22 $ .23 $ .24
<CAPTION>
THREE MONTHS ENDED
(In Thousands, Except for Per Share Amounts)
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1996 1996 1996 1997
------------- ------------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net sales $ 7,428 $ 8,050 $ 8,917 $ 10,173
Gross profit $ 3,941 $ 4,279 $ 4,695 $ 5,245
Operating income $ 1,543 $ 1,840 $ 1,846 $ 2,102
Net income $ 1,231 $ 1,473 $ 1,533 $ 1,603
Net income per share (1):
Primary $ .22 $ .26 $ .27 $ .29
Fully diluted $ .22 $ .26 $ .27 $ .29
</TABLE>
(1)The net income per share for each quarter within a fiscal year does not
necessarily equal the total net income per share for that particular fiscal
year due to variations in the estimated value of the Company's common stock
during the year and the effect these variations had on the fully diluted
shares outstanding calculation.
F-18
<PAGE> 44
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Cybex Computer Products Corporation has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
CYBEX COMPUTER PRODUCTS CORPORATION
By: /s/ Stephen F. Thornton
---------------------------------
Stephen F. Thornton, Chairman of
the Board of Directors, President
and Chief Executive Officer
(Principal Executive Officer)
DATED: June 26, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of Cybex
Computer Products Corporation and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Stephen F. Thornton Chairman of the Board of June 26, 1997
- ------------------------ Directors, President and Chief
Stephen F. Thornton Executive Officer
(Principal Executive Officer)
/s/ Doyle C. Weeks Senior Vice President - Finance, June 26, 1997
- ------------------------ Chief Financial Officer, and
Doyle C. Weeks Treasurer (Principal Financial
and Accounting Officer)
/s/ Remigius G. Shatas Senior Vice President, June 26, 1997
- ------------------------ Chief Technical Officer,
Remigius G. Shatas Secretary and Director
/s/ Oscar L. Pierce Director June 26, 1997
- ------------------------
Oscar L. Pierce
/s/ David S. Butler Director June 26, 1997
- ------------------------
David S. Butler
/s/ Douglas E. Pritchett Director June 26, 1997
- ------------------------
Douglas E. Pritchett
</TABLE>
<PAGE> 45
[COOPERS & LYBRAND LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Cybex Computer Products Corporation
Huntsville, Alabama
Our report on the consolidated financial statements of Cybex Computer Products
Corporation has been included on page F-2 of this Form 10-K. In connection
with our audit of such financial statements, we have also audited the related
financial statement schedule listed in the index on page 21 of this Form 10-K.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
April 22, 1997
<PAGE> 46
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
for the years ended March 31, 1995, 1996, and 1997
<TABLE>
<CAPTION>
Charged Charged
Beginning to to Ending
Balance Expenses Accounts Deductions (1) Balance
------- -------- -------- -------------- -------
<S> <C> <C> <C> <C> <C>
Year ended March 31, 1995:
Allowance for doubtful accounts $ 90,896 $190,950 $ - $(147,860) $134,076
Allowance for inventory obsolescence $ - $150,000 $ - $ - $150,000
Year ended March 31, 1996:
Allowance for doubtful accounts $134,076 $ 11,074 $ - $ (13,767) $131,383
Allowance for inventory obsolescence $150,000 $103,000 $ - $ - $253,000
Year ended March 31, 1997:
Allowance for doubtful accounts $131,383 $416,000 $ - $(196,546) $350,837
Allowance for inventory obsolescence $253,000 $244,840 $ - $ - $497,840
</TABLE>
(1) Deductions consist of specific accounts receivable written off against the
allowance for doubtful accounts
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------ ----------- -----------
<S> <C> <C>
3.1 Amended and Restated Articles of Incorporation of the Company,
incorporated by reference (pursuant to the provisions of Rule
12(b)-32) to Exhibit No. 3.1 to Amendment No. 1 to Registration
Statement No. 33-93124.
3.2 Amended and Restated By-Laws of the Company, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 3.2 to Amendment No. 1 to Registration Statement No. 33-93124.
4.1 Specimen of Common Stock Certificate of the Company, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 4 to Amendment No. 1 to Registration Statement No.
33-93124.
10.1 Revolving Line of Credit Agreement by and between the Company and
First Commercial Bank, incorporated by reference (pursuant to the
provisions of Rule 12(b)-32) to Exhibit No. 10.1 to Registration
Statement No. 33-93124.
10.2 Restated 1989 Employee Incentive Stock Option Plan, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.2 to Registration Statement No. 33-93124, and
Amendment to 1989 Employee Incentive Stock Option Plan,
incorporated by reference (pursuant to the provisions of Rule
12(b)- 32) to Exhibit No. 10.13 to Amendment No. 1 to Registration
Statement No. 33- 93124.
10.3 1995 Employee Stock Option Plan, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No. 10.3
to Registration Statement No. 33-93124.
10.4 1995 Outside Directors Stock Option Plan, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.4 to Registration Statement No. 33-93124.
10.5 Lease Agreement dated May 19, 1993, by and among the Company,
Harold L. Eskew and Fred A. Beam, incorporated by reference
(pursuant to the provisions of Rule 12(b)-32) to Exhibit No. 10.5
to Registration Statement No. 33-93124.
10.6 Smith Barney Shearson Flexible Prototype Nonstandardized
401(k) Plan Adoption Agreement #007 and Smith Barney Shearson
Prototype Defined Contribution Plan Document #005 and Trust
Agreement.
10.7 Employment and Noncompetition Agreement by and between the
Company and Stephen F. Thornton, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.7 to Registration Statement No. 33-93124.
10.8 Employment and Noncompetition Agreement by and between the
Company and Remigius G. Shatas, dated June 1, 1995, incorporated
by reference (pursuant to the provisions of Rule 12(b)-32) to
Exhibit No. 10.8 to Registration Statement No. 33-93124.
10.9 Employment and Noncompetition Agreement by and between the
Company and Robert R. Asprey, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.9 to Registration Statement No. 33-93124.
10.10 Employment and Noncompetition Agreement by and between the
Company and Doyle C. Weeks, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.10 to Registration Statement No. 33-93124.
10.11 Employment and Noncompetition Agreement by and between the
Company and R. Byron Driver, dated June 1, 1995, incorporated by
reference (pursuant to the provisions of Rule 12(b)-32) to Exhibit
No. 10.11 to Registration Statement No. 33-93124.
11 Statement of Computation of Per Share Earnings.
13 Cybex Computer Products Corporation Annual Report to Shareholders
for the Fiscal Year Ended March 31, 1997. Such Annual Report shall
not be deemed to be filed with the Securities and Exchange
Commission as a part of this Form 10- K Annual Report or otherwise
subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, as amended.
23.1 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule (for SEC use only).
</TABLE>
<PAGE> 1
EXHIBIT 10.6
SMITH BARNEY SHEARSON
PROTOTYPE DEFINED CONTRIBUTION
PLAN DOCUMENT #05
AND
TRUST AGREEMENT
ADOPTION OF A QUALIFIED PLAN HAS IMPORTANT LEGAL AND TAX IMPLICATIONS. EMPLOYERS
SHOULD CONSULT WITH THEIR COUNSEL CONCERNING THE ADOPTION OF THIS PLAN.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PART 1
<S> <C> <C>
SECTION 1. INTRODUCTION AND CONSTRUCTION........................................................ 1
1.1 Introduction......................................................................... 1
1.2 Controlling Laws..................................................................... 1
1.3 Construction......................................................................... 1
1.4 TRA 86 Amendments.................................................................... 2
SECTION 2. DEFINITIONS.......................................................................... 2
2.1 Account.............................................................................. 2
2.2 Active Participant................................................................... 2
2.2(a) Standard Option............................................................. 2
2.2(a)(1) Standardized Plans......................................... 2
2.2(a)(2) Nonstandardized Plans...................................... 2
2.2(b) Alternative................................................................. 2
2.2(c) Minimum Coverage Requirement................................................ 3
2.2(d) Special Elapsed Time Equivalency Rule....................................... 4
2.2(d)(1) Standard Option............................................ 4
2.2(d)(2) Alternative................................................ 4
2.3 Adoption Agreement................................................................... 4
2.4 Affiliate............................................................................ 4
2.5 Allocation Date...................................................................... 4
2.6 Average Annual Compensation.......................................................... 4
2.7 Beneficiary.......................................................................... 4
2.8 Board................................................................................ 5
2.9 Code................................................................................. 5
2.10 Compensation......................................................................... 5
2.10(a) Common Law Employees........................................................ 5
2.10(a)(1) Standard Option............................................ 5
2.10(a)(2) Alternative................................................ 5
2.10(b) Self-Employed............................................................... 6
2.10(c) Leased Employees............................................................ 6
2.10(d) Determination Period........................................................ 6
2.10(d)(1) Standard Option............................................ 6
2.10(d)(2) Alternative................................................ 6
2.10(e) Limitation.................................................................. 6
2.10(f) Salary Reductions........................................................... 6
2.10(f)(1) Standard Option............................................ 6
2.10(f)(2) Alternative................................................ 7
2.10(g) Special Rules............................................................... 7
2.11 Covered Compensation................................................................. 7
2.12 Disability or Disabled............................................................... 8
2.13 Early Retirement Age................................................................. 8
2.13(a) Standard Option............................................................. 8
2.13(b) Alternative................................................................. 8
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2.14 Earned Income........................................................................ 8
2.15 Effective Date....................................................................... 8
2.16 Election Form........................................................................ 8
2.17 Elective Deferral.................................................................... 8
2.18 Elective Deferral Account............................................................ 8
2.19(b) Alternative................................................................. 9
2.20 Employee............................................................................. 9
2.21 Employee Account..................................................................... 9
2.22 Employee Contribution................................................................ 9
2.23 Employer ............................................................................ 10
2.24 Employer Account..................................................................... 10
2.25 Employer Contribution................................................................ 10
2.26 Entry Date........................................................................... 10
2.26(a) Standard Option............................................................. 10
2.26(b) Alternative................................................................. 10
2.27 ERISA................................................................................ 10
2.28 Family Members....................................................................... 10
2.29 Final Compliance Date................................................................ 10
2.30 Forfeiture........................................................................... 10
2.31 401(k) Plan.......................................................................... 10
2.32 Fund................................................................................. 10
2.33 Fund Earnings........................................................................ 10
2.34 Highly Compensated Employee.......................................................... 10
2.35 Integration Level.................................................................... 10
2.36 Leased Employee...................................................................... 11
2.37 Matching Account..................................................................... 11
2.38 Matching Contribution................................................................ 11
2.39 Maximum Disparity Rate............................................................... 11
2.39(a) Standard Option............................................................. 11
2.39(b) Alternative................................................................. 11
2.40 Money Purchase Pension Plan.......................................................... 12
2.41 Net Profits.......................................................................... 12
2.41(a) Standard Option............................................................. 12
2.41(b) Alternative................................................................. 12
2.42 Nonhighly Compensated Employee....................................................... 12
2.43 Normal Retirement Age................................................................ 12
2.43(a) General..................................................................... 12
2.43(a)(1) Standard Option............................................ 12
2.43(a)(2) Alternative................................................ 12
2.43(b) Special Rules............................................................... 12
2.43(b)(1) Mandatory Retirement Age................................... 12
2.43(b)(2) Transitional Rule.......................................... 12
2.44 Owner-Employee....................................................................... 13
2.45 Paired Plans......................................................................... 13
2.46 Participant.......................................................................... 13
2.47 Participating Affiliate.............................................................. 13
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2.48 Participation Requirement............................................................ 13
2.48(a) Standard Option............................................................. 13
2.48(b) Alternative................................................................. 13
2.49 Plan................................................................................. 14
2.50 Plan Administrator................................................................... 14
2.50(a) Standard Option............................................................. 14
2.50(b) Alternative................................................................. 14
2.51 Plan Year............................................................................ 14
2.52 Preexisting Plan..................................................................... 14
2.53 Profit Sharing Plan.................................................................. 14
2.54 Prototype Sponsor.................................................................... 14
2.55 Qualified Matching Contribution...................................................... 14
2.56 Qualified Matching Account........................................................... 14
2.57 Qualified Nonelective Contribution................................................... 14
2.58 Qualified Nonelective Account........................................................ 14
2.59 Rollover Account..................................................................... 14
2.60 Rollover Contribution................................................................ 14
2.61 Self-Employed Individual............................................................. 15
2.62 Spouse............................................................................... 15
2.63 Target Benefit Pension Plan.......................................................... 15
2.64 Taxable Wage Base.................................................................... 15
2.65 TRA 86............................................................................... 15
2.66 Trust Agreement...................................................................... 15
2.67 Trustee.............................................................................. 15
2.68 Valuation Date....................................................................... 15
SECTION 3. SERVICE DEFINITIONS AND RULES........................................................ 15
3.1 Hour of Service Method (Standard Option)............................................. 15
3.1(a) Break in Service............................................................ 16
3.1(a)(1) General.................................................... 16
3.1(a)(2) Maternity/Paternity Rule................................... 16
3.1(b) Computation Period.......................................................... 16
3.1(b)(1) General.................................................... 16
3.1(b)(2) Vesting.................................................... 16
3.1(b)(3) Participation.............................................. 16
3.1(b)(4) Change in Computation Period............................... 17
3.1(c) Hour of Service............................................................. 17
3.1(c)(1) General.................................................... 17
3.1(c)(2) Determination.............................................. 18
3.1(d) Year of Service............................................................. 18
3.1(d)(1) Standard Option............................................ 18
3.1(d)(2) Alternative................................................ 19
3.1(e) Change in Service Calculation Method........................................ 19
3.2 Elapsed Time Method (Alternative).................................................... 19
3.2(a) Break in Service............................................................ 19
3.2(a)(1) General.................................................... 19
3.2(a)(2) Maternity/Paternity Rule................................... 19
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3.2(b) Hour of Service............................................................. 20
3.2(c) Period of Severance......................................................... 20
3.2(d) Period of Service........................................................... 20
3.2(d)(1) General.................................................... 20
3.2(d)(2) Aggregation................................................ 20
3.2(e) Year of Service............................................................. 20
3.2(f) Change in Service Calculation Method........................................ 20
3.3 Service Before Effective Date........................................................ 21
3.4 Service with Predecessor Employer.................................................... 21
3.4(a) Standard Option............................................................. 21
3.4(b) Alternative................................................................. 21
3.5 Leased Employees..................................................................... 21
3.6 Service with Affiliates.............................................................. 21
3.7 Special Break in Service Rules....................................................... 21
3.7(a) Standard Option............................................................. 21
3.7(b) Alternative................................................................. 21
3.7(b)(1) One Year Hold-Out Rule..................................... 21
3.7(b)(2) Pre-Participation Rule..................................... 22
3.7(b)(3) Rule of Parity............................................. 22
3.7(b)(4) Alternative Maternity/Paternity Rule....................... 23
3.7(c) Vesting on Reemployment After Break in Service.............................. 23
3.8 Service Exclusions for Vesting Purposes.............................................. 23
3.8(a) Standard Option............................................................. 23
3.8(b) Alternative................................................................. 24
SECTION 4. PARTICIPATION........................................................................ 24
General Rule......................................................................... 24
4.1 Special Rules........................................................................ 24
4.1(a) Preexisting Plan............................................................ 24
4.1(b) Reemployment Before Satisfying Participation Requirements................... 24
4.1(c) Reemployment After Satisfying Participation Requirement..................... 24
4.1(d) Status Change............................................................... 24
4.2 Participant Information.............................................................. 24
4.3 No Employment Rights................................................................. 24
SECTION 5. CONTRIBUTIONS........................................................................ 25
5.1 Profit Sharing Plan.................................................................. 25
5.1(a) Standard Option............................................................. 25
5.1(b) Alternative................................................................. 25
5.2 Money Purchase Pension Plan.......................................................... 25
5.2(b) Alternative................................................................. 25
5.3 401(k) Plan.......................................................................... 25
5.3(a) General..................................................................... 25
5.3(a)(1) Standard Option............................................ 25
5.3(a)(2) Alternative................................................ 25
5.3(b) Matching Contributions...................................................... 25
5.3(c) Qualified Matching Contributions............................................ 26
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5.3(d) Qualified Nonelective Contribution.......................................... 26
5.3(e) Discretionary Employer Contribution......................................... 27
5.3(f) Elective Deferrals.......................................................... 27
5.3(g) Employee Contributions...................................................... 27
5.3(h) Election Rules and Limitations.............................................. 27
5.3(h)(1) General.................................................... 27
5.3(h)(2) Commencement of Election................................... 28
5.3(h)(3) Revision of Election....................................... 28
5.3(h)(4) Termination of Election.................................... 28
5.3(h)(5) Resumption after Termination............................... 28
5.3(h)(6) Effective Dates of Elections............................... 28
5.3(i) Application of Forfeitures.................................................. 29
5.3(i)(1) Standard Option............................................ 29
5.3(i)(2) Alternative................................................ 29
5.4 Target Benefit Pension Plan.......................................................... 29
5.4(a) General..................................................................... 29
5.4(a)(1) Step 1..................................................... 29
5.4(a)(2) Step 2..................................................... 30
5.4(a)(3) Step 3..................................................... 30
5.4(b) Theoretical Reserve......................................................... 30
5.4(c) Past Service Credits........................................................ 31
5.4(d) TRA 86 Amendment............................................................ 31
5.4(e) Special Definitions and Rules............................................... 31
5.4(e)(1) Cumulative Disparity Limit................................. 31
5.4(e)(2) Cumulative Disparity Reduction............................. 31
5.4(e)(3) Current Stated Benefit..................................... 32
5.4(e)(4) Fresh-Start Date........................................... 33
5.4(e)(5) Frozen Accrued Stated Benefit.............................. 33
5.4(e)(6) Maximum Excess Allowance................................... 34
5.4(e)(7) Overall Permitted Disparity Limit.......................... 34
5.4(e)(8) Prior Safe Harbor Plan..................................... 34
5.4(e)(9) Year of Participation...................................... 34
5.4(e)(10) Years of Projected Participation........................... 35
5.5 Rollover Contributions............................................................... 35
5.5(a) Standard Option............................................................. 35
5.5(b) Alternative................................................................. 35
5.6 No Employee or Matching Contributions................................................ 35
5.7 No Deductible Voluntary Employee Contributions....................................... 35
5.8 General Rules Applicable to All Contributions........................................ 35
5.8(a) Limitations on Contributions................................................ 35
5.8(b) Codess.415.................................................................. 36
5.8(c) Codess.416.................................................................. 36
5.8(d) Leased Employees............................................................ 36
5.8(e) Owner-Employees............................................................. 36
5.8(e)(1) General.................................................... 36
5.8(e)(2) Control.................................................... 37
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SECTION 6. ALLOCATIONS TO ACCOUNTS.............................................................. 37
6.1 Establishment and Maintenance of Accounts............................................ 37
6.2 Allocation of Fund Earnings.......................................................... 37
6.2(a) General..................................................................... 37
6.2(b) Allocation Procedures....................................................... 37
6.3 Allocation of Contributions and Forfeitures.......................................... 37
6.3(a) Profit Sharing Plan......................................................... 38
6.3(a)(1) Nonintegrated.............................................. 38
6.3(a)(2) Integrated................................................. 38
6.3(b) Money Purchase Pension Plan................................................. 39
6.3(c) 401(k) Plan................................................................. 39
6.3(c)(1) Elective Deferrals and Employer Contributions.............. 39
6.3(c)(2) Matching Contributions and Qualified Matching
Contributions.............................................. 39
6.3(c)(3) Qualified Nonelective Contributions........................ 40
6.3(c)(4) Discretionary Employer Contribution........................ 40
6.3(d) Target Benefit Pension Plan................................................. 41
6.3(e) Top-Heavy Minimum Allocation................................................ 41
6.3(f) Rollover Contributions...................................................... 41
6.4 Allocation Report.................................................................... 41
6.5 Allocation Corrections............................................................... 41
SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS................................................. 42
7.1 Effective Date....................................................................... 42
7.2 Limitations on annual Additions Under Codess.415..................................... 42
7.2(a) Special Definitions......................................................... 42
7.2(a)(1) Annual Additions........................................... 42
7.2(a)(2) Compensation............................................... 42
7.2(a)(3) Defined Benefit Fraction................................... 43
7.2(a)(4) Defined Contribution Dollar Limitation..................... 44
7.2(a)(5) Defined Contribution Fraction.............................. 44
7.2(a)(6) Employer................................................... 45
7.2(a)(7) Excess Amount.............................................. 45
7.2(a)(8) Highest Average Compensation............................... 45
7.2(a)(9) Limitation Year............................................ 45
7.2(a)(10) Master or Prototype Plan................................... 45
7.2(a)(11) Maximum Aggregate Amount................................... 45
7.2(a)(12) Maximum Permissible Amount................................. 45
7.2(a)(13) Projected Annual Benefit................................... 46
7.2(b) Limitation If No Other Plans................................................ 46
7.2(b)(1) Profit Sharing Plan........................................ 46
7.2(b)(2) Money Purchase Pension Plan or Target Benefit Pension
Plan....................................................... 46
7.2(b)(3) 401(k) Plan................................................ 47
7.2(b)(4) Suspense Account........................................... 47
7.2(c) Limitation If Other Defined Contribution Master or Prototype Plan........... 47
7.2(d) Limitation If Other Defined Contribution Plan............................... 49
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7.2(d)(1) Standard Option............................................ 49
7.2(d)(2) Alternative................................................ 49
7.2(e) Limitation If Other Defined Benefit Plan.................................... 49
7.2(f) Compensation for Determination of Maximum Permissible Amount................ 49
7.3 Individual Limitation on Elective Deferrals Under Codess.402(g)...................... 50
7.3(a) General..................................................................... 50
7.3(b) Elective Deferrals.......................................................... 50
7.3(c) Excess Elective Deferrals................................................... 50
7.3(d) Distribution of Excess Elective Deferrals................................... 50
7.3(e) Determination of Income or Loss............................................. 50
7.3(f) Claims Procedure............................................................ 50
7.3(f)(2) Deemed Claim............................................... 51
7.4 Limitations on Elective Deferrals for Highly Compensated Employees under
Code ss. 401(k)...................................................................... 51
7.4(a) Special Definitions......................................................... 51
7.4(a)(1) Actual Deferral Percentage................................. 51
7.4(a)(2) ADP (or Average Actual Deferral Percentage)................ 51
7.4(a)(3) Employer Contributions..................................... 51
7.4(a)(4) Excess Contributions....................................... 52
7.4(a)(5) Highly Compensated Employee................................ 52
7.4(b) ADP Limit................................................................... 53
7.4(c) Special Rules............................................................... 53
7.4(c)(1) Other Plans................................................ 53
7.4(c)(2) Aggregation................................................ 53
7.4(c)(3) Family Members............................................. 54
7.4(c)(4) Timing..................................................... 54
7.4(c)(6) Other Requirements......................................... 54
7.4(d) Distribution of Excess Contributions........................................ 54
7.4(d)(1) General.................................................... 54
7.4(d)(2) Determination of Income or Loss............................ 54
7.4(d)(3) Order for Determining Excess Contributions................. 55
7.4(d)(4) Accounting for Excess Contributions........................ 55
7.4(e) Recharacterization.......................................................... 55
7.5 Limitations on Employee Contributions and Matching Contributions under Code
ss. 401(m)........................................................................... 56
7.5(a) Special Definitions......................................................... 56
7.5(a)(1) Aggregate Limit............................................ 56
7.5(a)(2) ACP (or Average Contribution Percentage)................... 56
7.5(a)(3) Contribution Percentage.................................... 56
7.5(a)(4) Contribution Percentage Amount............................. 56
7.5(a)(5) Employee Contribution...................................... 57
7.5(a)(6) Excess Aggregate Contribution.............................. 57
7.5(a)(7) Matching Contributions..................................... 57
7.5(b) ACP Limit................................................................... 57
7.5(c) Special Rules............................................................... 58
7.5(c)(1) Multiple Use............................................... 58
7.5(c)(2) Other Plans................................................ 58
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7.5(c)(3) Aggregation................................................ 58
7.5(c)(4) Family Members............................................. 59
7.5(c)(5) Timing..................................................... 59
7.5(c)(6) Records.................................................... 59
7.5(c)(7) Other Requirements......................................... 59
7.5(d) Distribution of Excess Aggregate Contributions.............................. 59
7.5(d)(1) General.................................................... 59
7.5(d)(2) Determination of Income or Loss............................ 59
7.5(d)(3) Order for Determining Excess Aggregate
Contributions.............................................. 60
7.5(d)(4) Account in for Excess Aggregate Contributions.............. 60
7.5(d)(5) Allocation of Forfeitures.................................. 60
SECTION 8. VESTING AND FORFEITURES.............................................................. 60
8.1 Determination of Nonforfeitable Percentage........................................... 60
8.1(a) Fully Vested Accounts....................................................... 60
8.1(b) Death, Disability and Retirement............................................ 60
8.1(c) Other Separation From Service............................................... 61
8.1(d) Employee Contribution Withdrawals........................................... 61
8.2 Forfeiture and Special Reemployment Rules............................................ 61
8.2(a) Buy Back Rule (Standard Option)............................................. 61
8.2(a)(1) Forfeiture................................................. 61
8.2(a)(2) Reemployment............................................... 62
8.2(b) Automatic Restoration (Alternative)......................................... 62
8.2(b)(1) Forfeiture................................................. 62
8.2(b)(2) Reemployment............................................... 62
8.2(c) Deemed Distribution......................................................... 63
8.2(d) Restoration Sources......................................................... 63
8.2(e) Date Forfeitures Applied or Allocated....................................... 64
8.2(f) In-service Distributions.................................................... 64
SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES................................................. 64
9.1 After Separation From Service........................................................ 64
9.1(a) Timing...................................................................... 64
9.1(a)(1) Standard Option............................................ 64
9.1(a)(2) Alternative................................................ 64
9.1(b) Reemployment................................................................ 64
9.1(c) $3,500 Cashout.............................................................. 65
9.1(d) Claim....................................................................... 65
9.1(e) Election to Defer Payment................................................... 65
9.1(e)(1) Standard Option............................................ 65
9.1(e)(2) Alternative................................................ 65
9.1(f) Early Retirement Age........................................................ 66
9.1(g) Death....................................................................... 66
9.2 Before Separation From Service....................................................... 66
9.2(a) Money Purchase Pension Plan or Target Benefit Pension Plan.................. 66
9.2(a)(1) Standard Option............................................ 66
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9.2(a)(2) Alternative................................................ 66
9.2(b) 401(k) Plan................................................................. 66
9.2(b)(1) Distribution Restrictions.................................. 66
9.2(b)(2) Termination of Plan or Disposition of Assets or
Subsidiary................................................. 66
9.2(b)(3) Hardship Distribution...................................... 67
9.2(b)(4) Distributions on or after Age 59-1/2....................... 69
9.2(b)(5) Employer Account and Matching Account...................... 69
9.2(c) Profit Sharing Plan......................................................... 69
9.2(d) Withdrawals from Employee Account........................................... 69
9.2(d)(1) Standard Option............................................ 69
9.2(d)(2) Alternative................................................ 69
9.2(e) Plan Termination............................................................ 70
9.3 Consent.............................................................................. 70
9.3(a) General..................................................................... 70
9.3(b) Exceptions.................................................................. 70
9.3(c) Immediately Distributable................................................... 70
9.3(d) Accumulated Deductible Employee Contributions............................... 70
9.4 Form of Distribution................................................................. 71
9.5 Minimum Distributions................................................................ 71
9.6 Missing Person....................................................................... 71
9.7 No Estoppel of Plan.................................................................. 71
9.8 Administration....................................................................... 71
SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY
REQUIREMENTS......................................................................... 72
10.1 Application and Special Definitions.................................................. 72
10.1(a) Annuity Starting Date....................................................... 72
10.1(b) Earliest Retirement Age..................................................... 72
10.1(c) Election Period............................................................. 72
10.1(d) Life Annuity................................................................ 72
10.1(e) Qualified Election.......................................................... 73
10.1(f) Qualified Joint and Survivor Annuity........................................ 73
10.1(f)(1) Standard Option............................................ 73
10.1(f)(2) Alternative................................................ 73
10.1(g) Qualified Preretirement Survivor Annuity.................................... 73
10.1(g)(1) Standard Option............................................ 74
10.1(g)(2) Alternative................................................ 74
10.1(h) Vested Account Balance...................................................... 74
10.2 Distribution to Participant.......................................................... 74
10.3 Distribution to Surviving Spouse..................................................... 74
10.4 Notice Requirements.................................................................. 74
10.4(a) Qualified Joint and Survivor Annuity and Life Annuity....................... 74
10.4(b) Qualified Preretirement Survivor Annuity.................................... 75
10.5 Safe Harbor Rules.................................................................... 75
10.5(a) Application................................................................. 75
10.5(b) Conditions.................................................................. 75
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10.5(c) Surviving Spouse............................................................ 76
10.5(d) Waiver of Spousal Benefit................................................... 76
10.5(e) Vested Account Balance...................................................... 76
10.6 Option Forms......................................................................... 76
10.6(a) General..................................................................... 76
10.6(b) Before Separation From Service.............................................. 76
10.6(c) After Separation From Service............................................... 76
10.6(c)(1) Standard Option............................................ 76
10.6(c)(2) Alternative................................................ 76
10.6(d) No Method Selected.......................................................... 77
10.6(e) Single Sum.................................................................. 77
10.6(f) In Kind Distributions....................................................... 77
10.8 Transitional Rules................................................................... 77
10.9 Direct Rollovers............................................................ 79
10.9(a) General..................................................................... 79
10.9(b) Definitions................................................................. 79
10.9(b)(1) Eligible Rollover Distribution............................. 79
10.9(b)(2) Eligible Retirement Plan................................... 79
10.9(b)(3) Distributee................................................ 79
SECTION 11. MINIMUM DISTRIBUTION REQUIREMENTS.................................................... 80
11.1 General.............................................................................. 80
11.2 Special Definitions.................................................................. 80
11.2(a) Applicable Calendar Year.................................................... 80
11.2(b) Applicable Life Expectancy.................................................. 80
11.2(c) Designated Beneficiary...................................................... 80
11.2(d) Distribution Calendar Year.................................................. 80
11.2(e) Life Expectancy............................................................. 80
11.2(f) Participant's Benefit....................................................... 80
11.2(g) Required Beginning Date..................................................... 81
11.2(g)(1) General Rule............................................... 81
11.2(g)(2) Age 70 1/2Before 1988...................................... 81
11.2(g)(3) Age 70 1/2During 1988...................................... 81
11.2(g)(4) 5% Owner................................................... 81
11.3 Required Beginning Date.............................................................. 81
11.4 Limits on Distribution Periods....................................................... 82
11.5 Determination of Amount to be Distributed Each Year.................................. 82
11.5(a) Individual Account.......................................................... 82
11.5(a)(1) General.................................................... 82
11.5(a)(2) Incidental Death Benefit Rules............................. 82
11.5(a)(3) Timing..................................................... 83
11.5(b) Annuity Contracts........................................................... 83
11.6 Death Distribution Provisions........................................................ 83
11.6(a) Distribution Beginning Before Death......................................... 83
11.6(b) Distribution Beginning After Death.......................................... 83
11.6(c) Special Rules............................................................... 84
11.7 Special Pre-TEFRA Distribution Election.............................................. 84
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11.7(a) General Rule................................................................ 84
11.7(b) Special Pre-TEFRA Distribution Election..................................... 84
11.7(c) Current Distributions....................................................... 84
11.7(d) Revocation.................................................................. 85
SECTION 12. TOP-HEAVY PLAN RULES................................................................. 85
12.1 Application.......................................................................... 85
12.2 Special Definitions.................................................................. 85
12.2(a) Determination Date.......................................................... 85
12.2(b) Key Employee................................................................ 85
12.2(c) Permissive Aggregation Group................................................ 86
12.2(d) Required Aggregation Group.................................................. 86
12.2(e) Top-Heavy Plan.............................................................. 86
12.2(f) Top-Heavy Ratio............................................................. 87
12.2(g) Top-Heavy Ratio Date........................................................ 88
12.2(g)(1) Standard Option............................................ 88
12.2(g)(2) Alternative................................................ 88
12.3 Minimum Allocation................................................................... 88
12.3(a) General..................................................................... 88
12.3(b) Defined Benefit Paired Plan................................................. 89
12.3(c) Defined Contribution Paired Plan............................................ 89
12.3(c)(1) Standard Option............................................ 89
12.3(c)(2) Alternative................................................ 89
12.3(d) Participants Entitled to Allocation......................................... 89
12.3(e) Nonforfeitability........................................................... 90
12.3(f) Compensation................................................................ 90
12.3(g) Multiple Plans.............................................................. 90
12.3(h) Integrated Plans............................................................ 90
12.3(h)(1) Profit Sharing Plan........................................ 90
12.3(h)(2) Money Purchase Pension Plan................................ 91
12.3(h)(3) Special Definitions........................................ 91
12.4 Vesting Schedule..................................................................... 91
12.5 401(k) Plan.......................................................................... 91
SECTION 13. INSURANCE, INDIVIDUALLY DIRECTED INVESTMENTS AND
PARTICIPANT LOANS.................................................................... 92
13.1 Insurance Contracts.................................................................. 92
13.1(a) Elections and Existing Life Insurance Contracts............................. 92
13.1(a)(1) Standard Option............................................ 92
13.1(a)(2) Alternative................................................ 92
13.1(b) Premiums.................................................................... 92
13.1(c) Ordinary Life............................................................... 92
13.1(c)(1) Term and Universal Life.................................... 92
13.1(c)(2) Combination................................................ 92
13.1(d) Owner and Beneficiary....................................................... 93
13.1(e) Allocations................................................................. 93
13.1(f) Distribution to Participant................................................. 93
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13.1(g) Termination of Insurance Election........................................... 93
13.2 Individually Directed Investments.................................................... 94
13.2(a) General..................................................................... 94
13.2(a)(1) Standard Option............................................ 94
13.2(a)(2) Alternative................................................ 94
13.2(b) Election Rules.............................................................. 94
13.2(c) No Election................................................................. 94
13.3 Participant Loans.................................................................... 94
13.3(a) Administration and Procedures............................................... 94
13.3(b) No Loans to Certain Owners and Family members............................... 95
13.3(c) General Conditions.......................................................... 95
13.3(d) Other Conditions............................................................ 95
13.3(e) Crediting of Loan Payments.................................................. 96
13.3(e)(1) Account Asset (Standard Option)............................ 96
13.3(e)(2) Fund Asset (Alternative)................................... 97
13.3(f) Limitations on Amounts...................................................... 97
13.3(f)(1) Dollar Limit ...............................................97
13.3(f)(2) Account Limit.............................................. 97
13.3(g) Failure to Repay............................................................ 97
13.3(h) Distributions............................................................... 98
SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND CONVERSION,
MERGER, ASSET TRANSFERS AND TERMINATION.............................................. 98
14.1 Adoption............................................................................. 98
14.1(a) General..................................................................... 98
14.1(b) Preexisting Plan............................................................ 98
14.1(c) Participating Affiliates.................................................... 99
14.2 Amendment............................................................................ 99
14.2(a) Prototype Sponsor........................................................... 99
14.2(b) Employer.................................................................... 99
14.3 Certain Amendment Restrictions....................................................... 99
14.3(a) General..................................................................... 99
14.3(b) Change in Service Calculation Method........................................ 99
14.3(c) Change in Vesting Schedule.................................................. 99
14.4 Withdrawal as a Prototype and Conversion to Individually Designed Plan...............100
14.4(a) Voluntary Conversion........................................................100
14.4(b) Involuntary Conversion......................................................100
14.4(c) Effect of Withdrawal and Conversion.........................................101
14.5 Merger, Consolidation or Asset Transfers.............................................101
14.5(a) General.....................................................................101
14.5(b) Authorization...............................................................101
14.5(c) Separate Account............................................................101
14.5(d) Codess.411(d)(6) Protected Benefits.........................................101
14.6 Termination..........................................................................102
14.6(a) Right to Terminate..........................................................102
14.6(b) Full Vesting Upon Termination...............................................102
</TABLE>
xii
<PAGE> 14
<TABLE>
<S> <C> <C>
SECTION 15. ADMINISTRATION.......................................................................102
15.1 Named Fiduciaries....................................................................102
15.2 Administrative Powers and Duties.....................................................103
15.3 Agent for Service of Process.........................................................103
15.4 Reporting and Disclosure.............................................................103
SECTION 16. MISCELLANEOUS........................................................................103
16.1 Spendthrift Clause and Qualified Domestic Relations Orders...........................103
16.2 Benefits Supported Only by Trust Fund................................................104
16.3 Discrimination.......................................................................104
16.4 Claims...............................................................................104
16.5 Nonreversion.........................................................................104
16.6 Exclusive Benefit....................................................................105
16.7 Expenses.............................................................................105
16.8 Section 16 of Securities Exchange Act of 1934........................................105
16.9 Arbitration..........................................................................105
SECTION 1. INTRODUCTION AND CONSTRUCTION........................................................107
1.1 Introduction.........................................................................107
1.2 Definitions..........................................................................107
1.3 Controlling Laws.....................................................................107
1.4 Construction.........................................................................107
SECTION 2. GENERAL..............................................................................108
SECTION 3. CONTRIBUTIONS AND TRUST FUND.........................................................108
SECTION 4. MANAGEMENT OF TRUST FUND.............................................................109
4.1 Plan Administrator...................................................................109
4.2 Trustee..............................................................................109
4.2(a) ............................................................................109
4.2(b) ............................................................................109
4.2(c) ............................................................................109
4.2(d) ............................................................................109
4.2(e) ............................................................................109
4.2(f) ............................................................................110
4.2(g) ............................................................................110
4.2(h) ............................................................................110
4.2(i) ............................................................................110
4.3 Investment Manager...................................................................112
4.4 Plan Administrator or Employer Investment Directions.................................112
4.5 Participant Investment Directions....................................................113
4.6 Custodian............................................................................113
4.7 Multiple Trustees....................................................................113
4.8 Communications.......................................................................113
4.9 Prototype Sponsor....................................................................114
4.10 Voting of Proxies....................................................................114
</TABLE>
xiii
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<TABLE>
<S> <C> <C>
SECTION 5. BENEFIT PAYMENTS.....................................................................114
SECTION 6. VALUATION AND ACCOUNTING BY TRUSTEE..................................................115
SECTION 7. EXPENSES.............................................................................116
SECTION 10. SINGLE TRUST - SEPARATE FUNDS........................................................117
SECTION 11. NAMED FIDUCIARIES AND ADMINISTRATION.................................................117
SECTION 12. MISCELLANEOUS .......................................................................118
12.1 Spendthrift Clause and Qualified Domestic Relations Orders...........................118
12.2 Benefits Supported Only by the Trust Fund............................................118
12.3 Claims...............................................................................118
12.4 Nonreversion.........................................................................119
12.4(a) ............................................................................119
12.4(b) ............................................................................119
12.4(c) ............................................................................119
12.5 Exclusive Benefit....................................................................119
</TABLE>
xiv
<PAGE> 16
PART 1
SMITH BARNEY SHEARSON
PROTOTYPE DEFINED CONTRIBUTION
PLAN DOCUMENT #05
<PAGE> 17
SMITH BARNEY SHEARSON
PLAN DOCUMENT
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 INTRODUCTION. This Smith Barney Shearson Prototype Defined
Contribution Plan is established and maintained as a prototype plan by the
Prototype Sponsor for its customers and the customers of its subsidiaries and
affiliates. This Plan shall be adopted as a prototype plan only with the
consent of the Prototype Sponsor or one of its subsidiaries or affiliates as
set forth in the related Adoption Agreements and shall be maintained as a
prototype plan only in accordance with the terms and conditions set forth in
this Plan.
1.2 CONTROLLING LAWS. To the extent such laws are not preempted by
federal law, this Plan and the related Adoption Agreement and Trust Agreement
shall be construed and interpreted under the laws of the state fled in the
Adoption Agreement; provided, if Smith Barney Shearson Trust Company has been
appointed as Trustee, the Trust Agreement shall be governed by and construed in
accordance with the laws of the State of [Delaware].
1.3 CONSTRUCTION. The headings and subheadings in this Plan have been
inserted for convenience of reference only and are to be ignored in the
construction of its provisions. Wherever appropriate, the masculine shall be
read as the feminine, the plural as the singular, and the singular as the
plural. References in this Plan to a section (Section) shall be to a section
in this Plan unless otherwise indicated. References in this Plan to a section
of the Code, ERISA or any other federal law shall also refer to the regulations
issued under such section. Unless an alternative option is specified in the
Adoption Agreement, the option identified as the "Standard Option" will
control.
The Employer intends that this Plan and the related Trust Agreement and
Adoption Agreement which are part of this Plan satisfy the requirements for tax
exempt status under Code Section 401(a), Code Section 501 (a) and related
Code sections and that the provisions of this Plan, the Trust Agreement and the
Adoption Agreement be construed and interpreted in accordance with the
requirements of the Code and the regulations under the Code.
Further, except as expressly stated otherwise, no provision of this Plan or the
related Trust Agreement or Adoption Agreement is intended to nor shall grant
any rights to Participants or beneficiaries or any interest in the Fund in
addition to those minimum rights or interests required to be provided under
ERISA and the Code and the regulations under ERISA and the Code.
Nothing in this Plan or the related Trust Agreement or Adoption Agreement shall
be construed to prohibit the adoption or the maintenance of this Plan or the
Trust Agreement as an individually designed plan, but in such even, the
Employer may not rely on the opinion letter issued to the Prototype Sponsor and
the Prototype Sponsor shall have absolutely no responsibility for such
individually designed plan, but in such event, the Employer may not rely on the
opinion letter issued to the Prototype Sponsor and the Prototype Sponsor shall
have absolutely no responsibility for such an individually designed plan.
Finally, in the event of any conflict between the terms of this Plan and the
terms of the Trust Agreement the Adoption Agreement the terms of this Plan
shall control.
<PAGE> 18
1.4 TRA 86 AMENDMENTS. If this Plan is adopted as an amendment to a
Preexisting Plan in order to satisfy the requirements of TRA 86, the
retroactive effective date of any provision required under TRA 86 is intended
solely to comply with the Code and is not intended to grant any substantive
rights under ERISA to the extent that such provision is different from the
Preexisting Plan as in effect between the applicable effective date in the
final regulations ("transition years").
SECTION 2. DEFINITIONS
The capitalized terms in this Plan and the related Adoption Agreement and Trust
Agreement shall have the meanings shown opposite those terms in this Section 2
and in Section 3 for purposes of this Plan.
2.1 ACCOUNT means the bookkeeping account maintained under this Plan to
show as of any Valuation Date a Participant's interest in the Fund attributable
to the contributions made by or on behalf of such Participant and the Fund
Earnings on such contributions, and an Account shall cease to exist when
exhausted through forfeiture or distributions made in accordance with this
Plan.
2.2 ACTIVE PARTICIPANT means for purposes of eligibility to receive or
allocation of the Employer Contribution or Forfeitures for each Plan Year, each
Participant who is an Eligible Employee at any time during the Plan Year and
who satisfies the following conditions:
2.2(a) STANDARD OPTION.
2.2(a)(1) STANDARDIZED PLANS. If this Plan is adopted
as a standardized Plan, such Participant (i) is employed as
an Eligible Employee (or on an authorized leave of absence
as an Eligible Employee) on the last day of such Plan Year,
(ii) terminated employment as an Eligible Employee during
such Plan Year on or after Normal Retirement Age or Early
Retirement Age or by reason of death or Disability or (iii)
such Participant is not employed on the last day of such
Plan Year but completed more than 500 Hours of Service
during such Plan Year (or the equivalent period described
in Section 2.2(d) if the "Elapsed Time" method is
specified in the Adoption Agreement). Notwithstanding the
foregoing, if the "Hours of Service" method is specified in
the Adoption Agreement for a Plan Year beginning before the
Final Compliance Date, Section 2.2(a)(1)(iii) shall not
apply and a Participant who satisfies the requirements of
Section 2.2(a)(1)(i) shall not be eligible to receive an
allocation of the Employer Contribution or Forfeitures for
such Plan Year unless such Participant also is credited
with at least 1.000 Hours of Service in such Plan Year.
2.2(a)(2) NONSTANDARDIZED PLANS. If this Plan is
adopted as a nonstandardized Plan, such Participant (i) is
employed as an Eligible Employee (or on an authorized leave
of absence as an Eligible Employee) on the last day of such
Plan Year and, if "Hours of Service" method is specified in
the Adoption Agreement, is credited with at least 1,000
Hours of Service in such Plan Year, or (ii) terminated
employment as an Eligible Employee during such Plan Year on
or after Normal Retirement Age or Early Retirement Age or
by reason of death or Disability.
2.2(b) ALTERNATIVE. Such Participant satisfies the alternative
conditions specified in the Adoption Agreement.
2
<PAGE> 19
2.2(c) MINIMUM COVERAGE REQUIREMENT. If this Plan is adopted as a
nonstandardized Plan and fails to satisfy the minimum coverage and
participation requirements of Code Section 401(a)(26) and Section
410(b) for any Plan Year beginning on and after the Final Compliance
Date as a result of the minimum hours or last day employment
requirements in this Section 2.2, such minimum participation and
coverage requirements shall be retroactively amended by executing a
new Adoption Agreement within the applicable retroactive correction
period in the regulations or, if no such amendment is made, shall be
satisfied as follows:
2.2(c)(1) If the Plan utilizes both the minimum hours
and last day employment requirements:
2.2(c)(1)(i) STEP 1. Each Participant who
completes at least 1,000 Hours of Service without
regard to whether such Participant is employed on the
last day of the Plan Year shall be deemed to be an
Active Participant for such Plan Year.
2.2(c)(1)(ii) STEP 2. If the minimum
participation and coverage requirements are not
satisfied after the application of Step 1, then each
Participant who completes more than 500 Hours of
Service and who is employed on the last day of the
Plan Year shall be deemed to be an Active Participant
for such Plan Year.
2.2(c)(1)(iii) STEP 3. If the minimum
participation and coverage requirements are not
satisfied after the application of Step 1 and Step 2,
then each Participant who is not employed on the last
day of the Plan Year but who complete more than 500
Hours of Service in such Plan Year also be deemed to
be an Active Participant.
2.2(c)(1)(iv)(ii)STEP 4. If the minimum
participation and coverage requirements are not
satisfied after the application of Steps 1 through 3,
then each Participant who satisfies the last day of
employment requirement also shall be deemed to be an
Active Participant without regard to the number of
Hours of Service actually completed by such
Participant during such Plan Year.
2.2(c)(2) If the Plan utilizes only the last day
employment requirement, each Participant who is not
employed on the last day of the Plan Year but who completed
more than 500 Hours of Service in such Plan Year (or the
equivalent period described in Section 2.2(d) if the
"Elapsed Time" method is specified in the Adoption
Agreement) also shall be deemed to be an Active
Participant.
2.2(c)(3) If the Plan utilizes only the minimum hours
requirement:
2.2(c)(3)(i) STEP 1. Each Participant who
completes more than 500 Hours of Service without
regard to whether such Participant is employed on the
last day of the Plan Year shall be deemed to be an
Active Participant.
2.2(c)(3)(ii) STEP 2. If the minimum
participation and coverage requirements are not
satisfied after the application of Step 1, then each
Participant who is
3
<PAGE> 20
employed on the last day of the Plan Year shall
be deemed to be an Active Participant.
2.2(d) SPECIAL ELAPSED TIME EQUIVALENCY RULE. If the "Elapsed
Time" method is specified in the Adoption Agreement, a Participant
shall be treated as completing more than 500 Hours of Service during
such Plan Year for purposes of this Section 2.2 if, during such Plan
year, the Participant completes more than
2.2(d)(1) STANDARD OPTION. 91 consecutive calendar
days of employment, or
2.2(d)(2) ALTERNATIVE. if so specified in the Adoption
Agreement, 3 consecutive calendar months of employment.
2.3 ADOPTION AGREEMENT means the agreement by which the Employer adopts
this Plan.
2.4 AFFILIATE means at any time (a) any parent, subsidiary or sister
corporation which at such time is a member of a controlled group of
corporations (as defined in Code Section 414(b)) with the Employer, (b) any
trade or business, whether or not incorporated, which at such time is
considered to be under common control (as defined in Code Section 414(c)) with
the Employer, (c) any person or organization which at such time is a member of
an affiliated service group (as defined in Code Section 414(m)) with the
Employer, and (d) any other organization which at such time is required to be
aggregated with the Employer under Code Section 414(o).
2.5 ALLOCATION DATE means for a 401(k) Plan the respective dates specified
in the Adoption Agreement as of which Matching Contributions, Qualified
Matching Contributions and Qualified Nonelective Contributions, as applicable,
are made.
2.6 AVERAGE ANNUAL COMPENSATION means for a Target Benefit Plan the
average of an Employee's Compensation for the consecutive Plan Year period
specified in the Adoption Agreement during which such average is the highest,
or if such Employee's entire period of participation in the Plan is less than
the number of Plan Years so specified, the Employee's Average Annual
Compensation shall be determined by averaging (on an annual basis) the
Employee's Compensation for his or her actual period of participation. For
purposes of determining a Participant's Average Annual Compensation for any
Plan Year beginning after the Final Compliance Date, the annual Compensation
taken into account for any prior Plan Year shall not exceed (a) for Plan Years
beginning before January 1, 1990, $200,000 and (b) for Plan Years beginning on
or after January 1, 1990, the annual Compensation limit described in Section
2.10(e) in effect for such prior Plan Year.
2.7 BENEFICIARY means for each Participant the person or persons so
designated in writing by the Participant on a properly completed Election Form.
However, if no such designation is made, if no person so designated survives
the Participant or if after checking the last known mailing address the
whereabouts of the person so designated is unknown and no death benefit claim
is submitted to the Plan Administrator by such person within one year after the
Participant's date of death, the Beneficiary shall be deemed to be (a) the
Participant's surviving Spouse, or if there is no surviving Spouse, (b) the
personal representative of such Participant in his or her fiduciary capacity,
if any has qualified within one year from the date of the Participant's death,
or if no personal representative has so qualified or remains so qualified, (c)
any person determined by a court of competent jurisdiction to be the
Participant's
4
<PAGE> 21
Beneficiary for this purpose. If a Beneficiary is not identified and located
within 3 years of the Participant's date of death, Section 9.6, MISSING
PERSON, shall control the distribution of the Participant's Account.
2.8 BOARD means (a) for any Employer which is a corporation, the Board of
Directors of such Employer and (b) for any Employer which is not a corporation,
the person or persons duly authorized to act on belief of such Employer.
2.9 CODE means the Internal Revenue Code, as amended.
2.10 COMPENSATION.
2.10(a) COMMON LAW EMPLOYEES. For an Employee who is not a
Self-Employed Individual or a Leased Employee, the term "Compensation"
means for any determination period
2.10(a)(1) STANDARD OPTION the total compensation which
is actually paid (in cash or other benefits) by the
Employer or any Participating Affiliate to such Employee
for such period and to the Internal Revenue Service on Form
W-2 as wages within the meaning of Code Section 3401(a)
and all other payments of compensation to such Employee
from the Employer or Participating Affiliate (in the course
of its trade or business) for which a written statement is
required to be furnished to the Employee under Code Section
6041(d), Code Section 6051(a)(3) and Code Section 6052.
Such Compensation shall be determined without regard to any
rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or
location of the employment or the services performed (such
as the exception for agricultural labor in Code Section
3401(a)(2)), or
2.10(a)(2) ALTERNATIVE. if so specified in the Adoption
Agreement the total compensation which is actually paid (in
cash or other benefits) by the Employer or any
Participating Affiliate to such Employee for such period
and which is
2.10(a)(2)(i) considered as wages within the meaning
of Code Section 3401(a) for the purposes of federal
income tax withholding at the source but determined
without regard to any rules under Code Section
3401(a) that limit the remuneration included in wages
based on the nature or location of the employment or
the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)),
2.10(a)(2)(ii) considered as compensation within the
meaning of Code Section 415(c)(3) as described in
Section 7.2(a)(2)(ii)(B),
2.10(a)(2)(iii) for a nonintegrated nonstandardized
Plan (other than a Target Benefit Pension Plan),
compensation identified on the payroll records of the
Employer or Participating Affiliate as regular or
base salary or wages (whether hourly, weekly, monthly
annually or otherwise) and, if so specified in the
Adoption Agreement, overtime, bonuses, commissions,
and/or other specific compensation, or
5
<PAGE> 22
2.10(a)(2)(iv) compensation as described in Section
2.10(a)(1), Section 2.10(a)(2)(i) or Section
2.10(a)(2)(ii), reduced by all of the following items
(even if includable in gross income): reimbursements
or other expense allowances, fringe benefits (cash
and noncash), moving expenses, deferred compensation
and welfare benefits, or
2.10(b) SELF-EMPLOYED. For an Employee who is a Self-Employed
Individual, the term "Compensation" means the Employee Participant's
Earned Income for such period.
2.10(c) LEASED EMPLOYEES. All compensation paid by a leasing
organization to a Leased Employee for personal services rendered to
the Employer or a Participant Affiliate for such period shall be
treated as Compensation to the extent required under Code Section
414(n).
2.10(d) DETERMINATION PERIOD. For purposes of this definition and
unless otherwise specified in this Plan or the Adoption Agreement, the
phrase "determination period" means
2.10(d)(1) STANDARD OPTION - the Plan Year or
2.10(d)(2) ALTERNATIVE - the calendar year or other 12
consecutive month period ending with or within the
Plan Year specified in the Adoption Agreement.
2.10(e) LIMITATION. No more than $200,000 (as adjusted in
accordance with Code Section 401(a)(17)) shall be taken into account
under this Plan for any determination period beginning on or after
January 1, 1989. The annual Compensation limit under this Section
2.10(e) for any determination period shall be adjusted in accordance
with Code Section 401(a)(17) for the calendar year in which such
determination period begins.
If the determination period is less than 12 months as a result of a short Plan
Year, the annual Compensation limit under this Section 2.10(e) shall equal the
annual limit for such determination period multiplied by a fraction, the
numerator of which is the number of full months in such period and the
denominator of which is 12.
For Purposes of this Compensation limit, the family aggregation rules of Code
Section 414(q)(6) shall be applied by aggregating only the Participant's
spouse and lineal descendants who have not reached age 19 before the end of
such determination period. If the limit is exceeded for any determination
period as a result of the application of the family aggregation rule, the limit
shall be prorated among the individuals affected by this limit in proportion to
each such individual Participant's Compensation to for such determination
period as determined under this Section 2.10(e). However, if this Plan is
adopted as an integrated plan, the preceding sentence shall not apply for
purposes of determining the portion of Compensation which does not exceed the
Integration Level.
2.10(f) SALARY REDUCTIONS. Any amount which is contributed by the
Employer or any Participating Affiliate pursuant to a salary reduction
agreement which is not currently includable in an Employee
Participant's gross income under Code Section 125, Section
402(e)(3), Section 402(h) or Section 403(b)
2.10(f)(1) STANDARD OPTION - shall be included in an
Employee Participant's Compensation, or
6
<PAGE> 23
2.10(f)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, shall not be included in an Employee's
Compensation.
2.10(g) SPECIAL RULES.
2.10(g)(1) If so specified in the Adoption Agreement, an
Employee's Compensation shall not include Compensation
which is paid to the Employee for periods ending before the
Entry Date on which the Employee becomes a Participant.
2.10(g)(2) If this Plan is adopted as an amendment and
restatement of a Preexisting Plan, this definition shall be
effective for Plan Years beginning on or after January 1,
1989 unless a later effective date is specified in the
Adoption Agreement; provided, the $200,000 limitation of
Section 2.10(e) shall not be effective later than the first
day of the first Plan Year beginning on or after January 1,
1989 and any such later effective date specified in the
Adoption Agreement for the other provisions of this Section
2.10 shall not be later than the Final Compliance Date.
2.10(g)(3) If so specified in the Adoption Agreement for
a nonstandardized Plan, a Participant's Compensation in
excess of the dollar amount or percentage specified in the
Adoption Agreement for purposes of determining the amount
or allocation of any contributions made by or on behalf of
such Participant under this Plan.
2.10(g)(4) If so specified in the Adoption Agreement for
a nonstandardized Plan, the Compensation of a Participant
who is a Highly Compensated Employee shall not include the
specific types of Compensation specified in the Adoption
Agreement.
2.11 COVERED COMPENSATION means for each Participant for each Plan Year
beginning on or after January 1, 1989, the average (without indexing) of the
Taxable Wage Bases in effect under the Social Security Act for such calendar
year during the 35-year period ending with the last day of the calendar year in
which the Participant attains (or will attain) Social Security Retirement Age,
determined by assuming that the Taxable Wage Base for all future years shall be
the same as the Taxable Wage Base in effect as of the beginning of the Plan
Year.
A Participant's Covered Compensation for a Plan Year beginning after such
35-year period ending with the last day of the calendar year in which the
Participant attains Social Security Retirement Age is the Taxable Wage Base in
effect as of the beginning of the Plan Year. A Participant's Covered
Compensation for a Plan Year beginning after such 35-year period is the
Participant's Covered Compensation for the Plan Year during which the 35-year
period ends.
However, a Participant's Covered Compensation shall automatically be adjusted
each Plan Year and any increase in a Participant's Covered Compensation shall
not result in a decrease in the Participant's accrued benefit which would be
impermissible under Code Section 411(b)(1)(G) or Section 411(d)(6).
For purposes of this Section 2.11, Social Security Retirement Age means (a)
age 65 in the case of a Participant who was born before January 1, 1938, (b)
age 66 for a Participant who was born after December 31, 1937, but before
January 1, 1955, and (c) age 67 for a Participant who was born after December
31, 1954.
7
<PAGE> 24
2.12 DISABILITY OR DISABLED means an individual Participant's inability to
engage in any substantially gainful activity at the individual Participant's
customary level of compensation or competence and responsibility as an Employee
due to or mental impairment or impairments which may be expected to result in
death or to last for a continuous period of at lest 12 months as determined by
a qualified physician or other medical practitioner selected by the Plan
Administrator for this purpose in accordance with uniform and nondiscriminatory
standards.
2.13 EARLY RETIREMENT AGE means
2.13(a) STANDARD OPTION - the Normal Retirement Age or
2.13(b) ALTERNATIVE - the alternative Early Retirement Age
specified in the Adoption Agreement.
2.14 EARNED INCOME means for any Self-Employed Individual for any period
the net earnings from self-employment (as defined in Code Section 1402(a)) for
such period from the Employer or any Participating Affiliate for which the
personal services of such Employee are a material income-producing factor,
where such net earnings are (a) determined without regard to items not included
in gross income for purposes of Chapter 1 of the Code and the deductions
properly attributable to such items, (b) determined with regard to the
deduction allowed to the Self-Employed Individual under Code Section 164(f)
for taxable years beginning after December 31, 1989, and (c) reduced by the
contributions made on behalf of such Employee to any qualified plan (as
described in Code Section 401(a)) maintained by the Employer or any
Participating Affiliate to the extent such contributions are deductible under
Code Section 404.
2.15 EFFECTIVE DATE means the effective date of the Employees adoption or
amendment of this Plan as specified in the Adoption Agreement. However, if
this Plan is adopted as an amendment and restatement of a Preexisting Plan,
certain provisions of this Plan may be effective retroactive to Plan Years
beginning before such Effective Date or may be effective at a date later than
such Effective Date as specified in this Plan document or in the Adoption
Agreement
2.16 ELECTION FORM means the form or forms provided by or acceptable to the
Plan Administrator for making the elections and designations called for under
this Plan and no such form shall become effective unless properly completed and
timely delivered to the Plan Administrator in accordance with the terms of this
Plan and such rules as the Plan Administrator shall adopt from time to time.
2.17 ELECTIVE DEFERRAL means the nonforfeitable contribution made to the
Fund by the Employer or a Participating Affiliate on a Participant's behalf
under Section 5.3(f).
2.18 ELECTIVE DEFERRAL ACCOUNT means the subaccount established as part of
a Participant's Account to record the Participant's Elective Deferrals and the
Fund Earnings attributable to such contributions.
2.19 ELIGIBLE EMPLOYEE means
2.19(a) STANDARD OPTION - each Employee of the Employer or a
Participating Affiliate other than
8
<PAGE> 25
2.19(a)(1) an Employee who is included in a unit of
employees covered by a collective bargaining agreement between the Employer and
employee representatives which agreement does not provide for participation in
this Plan if retirement benefits under this Plan were the subject of good faith
bargaining; provided, however, that
(i) the term "employee representatives" shall not
include an organization more than half of whose
members are employees who are owners, officers or
executives of the Employer, and
(ii) an Employee shall not be treated as covered
under a collective bargaining agreement if more than
2% of the Employees covered under such agreement are
"professionals" (as defined in Section 1.410(b)-9(g)
of the Federal Income Tax Regulations); and
2.19(a)(2) an Employee who is a nonresident alien
(within the meaning of Code Section 7701(b)(1)(B) and who receives no earned
income (within the meaning of Code Section 911(d)(2)) from the Employer or
any Participating Affiliate which constitutes income from sources within the
United States (within the meaning of Code Section 861(a)(3)).
2.19(b) ALTERNATIVE. If this Plan is adopted as a nonstandardized
Plan, the Employer may specify in the Adoption Agreement a category of
Employees who shall not be treated as Eligible Employees under this Plan.
However, the Plan must satisfy on a continuing basis the nondiscrimination
rules under Code Section 401(a)(4), the coverage rules under Code Section
410(b, and the minimum participation rules under Code Section 401(a)(26).
2.20 EMPLOYEE means each person who is treated as an employee of the
Employer or an Affiliate which is required to be aggregated with the Employer
under Code Section 414(b), Section 414(c), Section 414(m) or Section 414(o)
including (a) a common-law employee (whether full-time, part-time, regular,
temporary or otherwise), (b) a Self-Employed individual, (c) an Owner-Employee,
(d) a Leased Employee and (e) each person who is deemed to be an employee under
Code Section 414(o).
2.21 EMPLOYEE ACCOUNT means the subaccount established as part of a
Participant's Account to record (1) the Participant's Employee Contributions
under this Plan, (2) the Participant's nondeductible employee contributions, if
any, under a Preexisting Plan or a plan which is merged into this Plan under
Section 14.5, and (3) the Fund Earnings attributable to such contributions.
If a separate account was not maintained for contributions under other plans as
described in clause (2) above, the account balance attributable to such
contributions shall be the Participant's total account balance under such other
plans multiplied by a fraction, the numerator of which is the total amount of
the Participant's nondeductible employee contributions (less withdrawals) and
the denominator of which is the sum of the numerator and the total
contributions made by the Employer on behalf of the Participant (less
withdrawals). For purposes of calculating such fraction, contributed amounts
used to provide ancillary benefits shall be treated as contributions and only
amounts actually distributed to the Participant (but not amounts which reflect
the cost of any death benefits) shall be treated as withdrawals.
2.22 EMPLOYEE CONTRIBUTION means any contribution made by or on behalf of a
Participant to the Fund under Section 5.3(g) that is includable in the
Participant's gross income for the year in which made.
9
<PAGE> 26
2.23 EMPLOYER means the sole proprietorship, partnership or corporation
identified as the Employer in the Adoption Agreement and any successor in
interest to such organization.
2.24 EMPLOYER ACCOUNT means the subaccount established as part of a
Participants Account to record the Participants share of the Employer
Contributions and Forfeitures and the Fund Earnings attributable to such
amounts.
2.25 EMPLOYER CONTRIBUTION means the contributions made by the Employer and
by any Participating Affiliate to the Fund under Section 5.1, Section 5.2,
Section 5.3(e) or Section 5.4.
2.26 ENTRY DATE means
2.26(a) STANDARD OPTION. The first day of each Plan Year and the
first day of the 7th month in each Plan Year or
2.26(b) ALTERNATIVE. The alternative Entry Date specified in the
Adoption Agreement.
2.27 ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
2.28 FAMILY MEMBERS means for any year, with respect to a Highly
Compensated Employee who is a 5% owner or who is in the group consisting of the
10 Highly Compensated Employees paid the greatest Compensation during such
year, (a) such individual Participant's spouse, (b) such individual
Participant's lineal ascendant and lineal descendants and (c) the spouses of
such lineal ascendant or descendants as determined under Code Section
414(q)(6).
2.29 FINAL COMPLIANCE DATE means the first day of the first Plan Year
beginning after December 31, 1993 or such other applicable effective date of
the final nondiscrimination and other TRA 86 regulations.
2.30 FORFEITURE means the portion of an Account of a Participant which is
deducted from such Account in accordance with the terms of this Plan.
2.31 401(K) PLAN means this Plan as adopted by entering into the
Standardized 401(k) Plan Adoption Agreement or the Nonstandardized 401(k) Plan
Adoption Agreement.
2.32 FUND means the trust fund created in accordance with this Plan and the
Trust Agreement which is part of this Plan.
2.33 FUND EARNINGS means for each period ending on a Valuation Date the
investment gains and losses (whether realized or unrealized), income and
expenses (other than expenses allocable directly to a specific Account) of the
Fund for such period as determined based on the fair market value of the assets
of the Fund on such Valuation Date,
2.34 HIGHLY COMPENSATED EMPLOYEE means a highly compensated employee within
the meaning of Code Section 414(q)(as described in Section 74(a)(5)).
2.35 INTEGRATION LEVEL means the amount of Compensation specified in the
Adoption Agreement at or below which the rate of contributions or benefits
(expressed as a percentage of such Compensation)
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<PAGE> 27
Provided under the Plan is less than the rate of contributions or benefits
(expressed as a percentage of such Compensation) provided under the Plan with
respect to Compensation above such amount. The Integration Level for any Plan
shall not exceed the Taxable Wage Base in effect at the beginning of such Plan
Year.
2.36 LEASED EMPLOYEE means for each Plan Year beginning on or after January 1,
1987 each person who is not a common-law employee of the Employer or an
Affiliate, but who, pursuant to an agreement between the Employer or an
Affiliate ("recipient") and any other person ("leasing organization"), has
performed services for the recipient or the recipient and a related person (as
determined in accordance with code Section 414(n)(6) on a substantially
full-time basis for a period of at least one year, which services are of a type
historically performed by employees in the business field of the recipient or
related person by whom such services are being performed. However, subject to
the rules set forth in the regulations under Code Section 414(n), such person
shall not be treated as a Leased Employee if (a) the total number of such
persons does not constitute more than 20% of the total nonhighly compensated
work force of the recipient and (b) such person is covered by a money purchase
pension plan which is maintained by the leasing organization and which provides
for (1) a nonintegrated employer contribution rate of at least 10% of
compensation (as defined in Code Section 415(c)(3) but including amounts
contributed pursuant to a salary reduction agreement which are excludable from
the individual Participant's gross income under Code Section 125, Section
402(e)(3), Section 402(h) or Section 403(b), (2) immediate participation and
(3) full and immediate vesting.
2.37 MATCHING ACCOUNT means the subaccount established as part of a
Participant's Account to record the Matching Contributions made on the
Participant's behalf under this Plan and the Fund Earnings attributable to such
contributions.
2.38 MATCHING CONTRIBUTION means the contribution made by the Employer and
by any Participating Affiliate to the Fund under Section 5.3(b) by reason of a
Participant's Elective Deferrals or Employee Contributions.
2.39 MAXIMUM DISPARITY RATE means
2.39(a) STANDARD OPTION - if the integration Level is equal to the
Taxable Wage Base, the greater of 5.7% or the portion of the tax rate
under Code Section 3111(a) which is attributable to old-age insurance
as in effect on the first day of such Plan Year, and
2.39(b) ALTERNATIVE - if the Integration Level is less than the
Taxable Wage Base, the applicable percentage determined in accordance
with the following table, where
<TABLE>
<S> <C> <C>
X = the greater of $10,000 or 20% of the Taxable Wage Base
TWB = the Taxable Wage Base
IF THE INTEGRATION LEVEL
IS MORE THAN BUT NOT MORE THAN APPLICABLE PERCENTAGE
$0 X 5.7%
X 80% of TWB 4.3%
80% of TWB 100% of TWB 5.4%
</TABLE>
11
<PAGE> 28
or, if the portion of the tax rate under Code Section 3111(a) which
is attributable to old-age insurance as in effect on the first day of
such Plan Year is greater than 5.7%, the applicable percentage in the
table above shall be such portion of the tax rate, proportionately
reduced in the same manner as the 5.7% amount in the table above.
2.40 MONEY PURCHASE PENSION PLAN means this Plan as adopted by entering
into the Standardized Money Purchase Pension Plan Adoption Agreement or the
Nonstandardized Money Purchase Pension Plan Adoption Agreement.
2.41 NET PROFITS means
2.41(a) STANDARD OPTION - The term "Net Profits" means
2.41(a)(1) for an Employer or Participating Affiliate
other than a non-profit entity, the current or accumulated
earnings for the taxable year for which the Employer
contribution is made as determined before federal and state
taxes and contributions to this Plan or any other qualified
plan, or
2.41(a)(2) for an Employer or Participating Affiliate
which is a non-profit entity, the current or accumulated
excess of receipts over disbursements for the fiscal year
for which the Employer contribution is made.
2.41(b) ALTERNATIVE - The Employer may specify an alternative
definition of Net Profits in the Adoption Agreement.
2.42 NONHIGHLY COMPENSATED EMPLOYEE means each Employee who is neither a
Highly Compensated Employee nor a Family Member.
2.43 NORMAL RETIREMENT AGE means
2.43(a) GENERAL. The term "Normal Retirement Age" means
2.43(a)(1) STANDARD OPTION - age 64 or
2.43(a)(2) ALTERNATIVE - the alternative Normal
Retirement Age specified in the Adoption Agreement.
2.43(b) SPECIAL RULES.
2.43(b)(1) MANDATORY RETIREMENT AGE. If, consistent
with applicable age discriminate law, the Employer enforces
a mandatory retirement age, the Normal Retirement Age shall
be the earlier of (1) the date the Participant reaches such
mandatory retirement age or (2) the date the Participant
reaches age 65 or, if an alternative is specified in the
Adoption Agreement, the date the Participant reaches Normal
Retirement Age as specified in the Adoption Agreement.
2.43(b)(2) TRANSITIONAL RULE. If
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<PAGE> 29
2.43(b)(2)(i) the normal retirement age under the
terms of the Preexisting Plan as in effect for Plan
Years beginning before January 1, 19988 was
determined with reference to an anniversary of the
date on which a Participant commenced participation
in such plan ("participation commencement date"),
2.43(b)(2)(ii) such anniversary was later than the
5th anniversary of the participation commencement
date,
2.43(b)(2)(iii) the Normal Retirement Age specified
in the Adoption Agreement is determined with
reference to an anniversary of the participation
commencement date, and
2.43(b)(2)(iv) this transitional rule is
specified in the Adoption Agreement,
then the anniversary for any Participant whose
participation commencement date occurred in a Plan
Year beginning before January 1, 1988 shall be the
earlier of (A) the anniversary under the terms of the
Preexisting Plan, or (B) the 5th anniversary of the
first day of the first Plan Year beginning after
December 31, 1987.
2.44 OWNER-EMPLOYEE means such Self-Employed individual who is (1) a sole
proprietor of the Employer or a Participating Affiliate or (b) a partner owning
more than 10% of either the capital or profits interest of the Employer or a
Participating Affiliate.
2.45 PAIRED PLANS means (a) a combination of two or more standardized
defined contribution Plans under the Smith Barney Shearson Prototype Defined
Contribution Plan (Plan Document #05) or (b) a combination of one or more such
standardized defined contribution Plans with a standardized defined benefit
plan under the Smith Barney Shearson Prototype Defined Benefit Plan (Plan
Document #06). However, such Plans shall be treated as Paired Plans only if
(1) such Paired Plans have the same Plan Year, and (2) no more than one such
plan is integrated with social security.
2.46 PARTICIPANT means (a) an Eligible Employee who has satisfied the
Participation Requirement specified in the Adoption Agreement and has become a
Participant in accordance with Section 4 and (b) any individual for whom an
Account continues to exist under the Plan.
2.47 PARTICIPATING AFFILIATE means (a) if this Plan is a standardized Plan,
each Affiliate of the Employer or (b) if this Plan is a nonstandardized Plan,
each Affiliate which participates in this Plan, as set forth in Section
14.1(c) of the Plan; provided, an Affiliate automatically shall cease to be a
Participating Affiliate if, and at the time, it ceases to be an Affiliate as
set forth in Section 14.6(a).
2.48 PARTICIPATION REQUIREMENT means
2.48(a) STANDARD OPTION - attainment of age 21 and completion of a
waiting period equal to one Year of Service or
2.48(b) ALTERNATIVE - the alternative minimum age and waiting
period requirement specified in the Adoption Agreement.
13
<PAGE> 30
2.49 PLAN means this Smith Barney Shearson Prototype Defined Contribution
Plan, as adopted by the Employer in the form of a Profit Sharing Plan, a 401(k)
Plan, a Money Purchase Pension Plan or a Target Benefit Pension Plan, and as
amended from time to time in accordance with Section 14.2.
2.50 PLAN ADMINISTRATOR means
2.50(a) STANDARD OPTION - the Employer or
2.50(b) ALTERNATIVE - the person or persons designated in writing
by the Employer as the Plan Administrator for this Plan.
2.51 PLAN YEAR means the 12 consecutive month period or the 52/53 week
period which ends on the date specified in the Adoption Agreement; provided,
however, if this Plan is adopted as a new Plan, the first Plan Year shall be
the period beginning on the Effective Date and ending on the date specified in
the Adoption Agreement.
2.52 PREEXISTING PLAN means the Employer's prior defined contribution plan
and the related trust agreement or other funding which is described in the
Adoption Agreement and which is amended and restated in the form of this Plan.
2.53 PROFIT SHARING PLAN means this Plan as adopted by entering into the
Standardized Profit Sharing Plan Adoption Agreement or the Nonstandardized
Profit Sharing Plan Adoption Agreement.
2.54 PROTOTYPE SPONSOR means Smith Barney, Harris Upham & Co. Incorporated
and any successor to such corporation.
2.55 QUALIFIED MATCHING CONTRIBUTION means the contribution made by the
Employer and by any Participating Affiliate to the Fund under Section 5.3(c)
by reason of a Participant's Elective Deferrals or Employee Contributions.
2.56 QUALIFIED MATCHING ACCOUNT means the subaccount established as part of
a Participant's Account to record the Qualified Matching Contributions made on
the Participant's behalf under this Plan and the Fund Earnings attributable to
such contributions.
2.57 QUALIFIED NONELECTIVE CONTRIBUTION means the contribution (other than
Matching Contributions, Qualified Matching Contributions and Employer
Contributions) made by the Employer and by any Participating Affiliate to the
Fund under Section 5.3(d).
2.58 QUALIFIED NONELECTIVE ACCOUNT - means the subaccount established as
part of a Participant's Account to record the Qualified Nonelective
Contributions made on the Participant's behalf under this Plan and the Fund
Earnings attributable to such contributions.
2.59 ROLLOVER ACCOUNT - means the subaccount established as part of a
Participant's Account to record the Participant's Rollover Contributions and
the Fund Earnings attributable to such contributions.
2.60 ROLLOVER CONTRIBUTION means (a) a contribution of an amount, or more
than one amount, which satisfies the applicable rollover requirements under
code Section 402 or Code Section 408 made by a Participant to
14
<PAGE> 31
the Fund under Section 5.5 and (b) effective January 1, 1993, an eligible
rollover distribution which is directly transferred to the Fund on or after
such date pursuant to a Participant's election under Code Section 401(a)(31).
2.61 SELF-EMPLOYED INDIVIDUAL means an individual who is self-employed and
who receives Earned Income from the Employer or a Participating Affiliate or
who would have received such Earned Income but for the fact that the Employer
or the Participating Affiliate did not have Net Profits.
2.62 SPOUSE means the person who is lawfully married to the Participant on
the date the Participant's Account becomes payable under this Plan, or, if a
Participant dies before such date, the person who was lawfully married to such
Participant on the Participant's date of death. However, a former spouse shall
be treated as a Spouse and a current spouse shall not be treated as the Spouse
to the extent provided under a qualified domestic relations order as described
in Code Section 414(p).
2.63 TARGET BENEFIT PENSION PLAN means this Plan as adopted by entering
into the Standardized Target Benefit Pension Plan Adoption Agreement or the
Nonstandardized Target Benefit Pension Plan Adoption Agreement.
2.64 TAXABLE WAGE BASE means for any Plan Year the contribution and benefit
base in effect under Section 230 of the Social Security Act at the beginning
of such Plan year.
2.65 TRA 86 means the Tax Reform Act of 1986 ("Act") and any other
legislation and related regulations, notices or other guidance for which
amendments are required to be made at the same time as amendments for such Act.
2.66 TRUST AGREEMENT means the trust agreement between the Employer and the
Trustee which is established as part of this Plan and which is set forth in the
attached Smith Barney Shearson Prototype Defined Contribution Plan Trust
Agreement or, if so specified in the Adoption Agreement for a 401(k) Plan, the
Smith Barney Shearson Prototype Defined Contribution Plan Alternative Trust
Agreement for 401(k) Plans.
2.67 TRUSTEE means the person or persons specified in the Adoption
Agreement who serve as the trustee for the Fund under the Trust Agreement and
any successor to such person or persons.
2.68 VALUATION DATE means (a) the last day of each Plan Year and (b) each
other date, if any, agreed upon in advance by the Employer and the Trustee,
provided the selection of such other date does not result in discrimination in
favor of Highly Compensated Employees which would be prohibited under Code
Section 401(a).
SECTION 3. SERVICE DEFINITIONS AND RULES
The definitions and rules in this Section 3 shall apply for purposes of
measuring an Employee's service (a) for participation purposes - to determine
when the Employee has satisfied the Participation Requirement and (b) for
vesting purposes - to determine the nonforfeitable interest in his or her
Account.
3.1 HOUR OF SERVICE METHOD (STANDARD OPTION). The definitions and rules
in this Section 3.1 shall apply unless the "Elapsed Time" method of crediting
service is specified in the Adoption Agreement.
15
<PAGE> 32
3.1(a) BREAK IN SERVICE.
3.1(a)(1) GENERAL. The term "Break in Service" means
each Computation Period during which an Employee fails to
complete more than 500 Hours of Service.
3.1(a)(2) MATERNITY/PATERNITY RULE. Solely for
purposes of determining whether an Employee has a Break in
Service, an Employee who is absent from work for "maternity
or paternity reasons" and who timely furnishes proof of the
reason for such absence (in accordance with such
nondiscriminatory rules as may be established by the Plan
Administrator and communicated to Employees) shall be
credited with each Hour of Service for which the Employee
would otherwise have been credited but for such absence, or
if such Hours of Service cannot be determined, with 8 Hours
of Service for each day of such absence. However, the
total number of Hours of Service so credited to such
Employee shall not exceed 501 Hours of Service. The Hours
of Service so credited shall be credited to the Computation
Period in which such absence begins if such credit is
necessary to prevent a Break in Service in such Computation
Period or, if such credit is unnecessary, in the
immediately following Computation Period. For purposes of
this special maternity/paternity rule, an absence for
"maternity or paternity reasons" means an absence (i) by
reason of the pregnancy of the Employee, (ii) by reason of
the birth of a child of the Employee, (iii) by reason of
the placement of a child with the Employee in connection
with the adoption of such child by such Employee, or (iv)
for purposes of caring for such child for a period
beginning immediately following such birth or placement.
3.1(b) COMPUTATION PERIOD.
3.1(b)(1) GENERAL. The term "Computation Period" for
purposes of determining Years of Service and Breaks in
Service means the applicable period described in this
Section 3.1(b).
3.1(b)(2) VESTING. The relevant Computation Period for
measuring Years of Service and Breaks in Service for
vesting purposes shall be
3.1(b)(2)(i) STANDARD OPTION. the Plan Year or
3.1(b)(2)(ii) ALTERNATIVE. if so specified in the
Adoption Agreement, (A) the 12 consecutive month
period which begins on the date the Employee first
performs an Hour of Service ("hire date") and ends on
the date immediately preceding the first anniversary
of such hire date and (B) each consecutive month
period thereafter beginning on each anniversary of
such hire date and ending on the date immediately
preceding the next anniversary of such date.
3.1(b)(3) PARTICIPATION. The initial Computation
Period for measuring Years of Service and Breaks in Service
for participation purposes shall be the 12 consecutive
month period which begins on the first day an Employee
first performs an Hour of Service as an Employee ("hire
date") and ends on the date immediately preceding the first
anniversary of such date. Each subsequent Computation
Period shall be
16
<PAGE> 33
3.1(b)(3)(i) STANDARD OPTION. each Plan Year,
beginning with the Plan Year which begins before the
first anniversary of the Employee's hire date
(regardless of whether the Employee is credited with
1,000 Hours of Service in the Employee's initial
Computation Period). An Employee shall be credited
with two Years of Service for participation purposes
if the Employee completes 1,000 or more Hours of
Service in both the initial Computation Period and
the first Plan Year which begins within such initial
Computation Period, or
3.1(b)(3)(ii) ALTERNATIVE. if so specified in the
Adoption Agreement, the 12 consecutive month period
which begins on each anniversary of an Employee's
hire date and ends on the date immediately preceding
the next anniversary of the Employee's hire date.
For participation purposes, an Employee shall be credited
with a Year of Service
3.1(b)(3)(ii)(A) STANDARD OPTION. on
the last day of the Computation Period in
which the Employee is credited with at least
1,000 Hours of Service (or such lesser number
of hours specified in the Adoption Agreement)
or
3.1(b)(3)(ii)(B) ALTERNATIVE. on the
first date on which the Employee is credited
with at least 1,000 Hours of Service (or such
lesser number of hours specified in the
Adoption Agreement) provided the Employee
completes such specified number of
Hours of Service in one Computation Period.
Notwithstanding the foregoing, if the Participation
Requirement includes a partial Year of Service, no minimum
number of Hours of Service shall be required for such
partial year and an Employee shall be credited with such
partial Year of Service on the date on which such partial
period of service is completed.
3.1(b)(4) CHANGE IN COMPUTATION PERIOD. If an
amendment results in a change in the Computation Period,
the first Computation Period established under such
amendment shall begin before the last day of the preceding
Computation Period and each Employee to whom both such
Computation Periods apply and who completes 1,000 or more
Hours of Service in both such Computation Periods shall be
credited with one Year of Service for each such Computation
Period.
3.1(c) HOUR OF SERVICE.
3.1(c)(1) GENERAL. The term "Hour of Service" means
3.1(c)(1)(i) each hour for which an Employee is
paid, or entitled to payment, by the Employer or an
Affiliate for the performance of duties as an
Employee, which hours shall be credited to the
Employee for the relevant Computation Period in which
such duties are performed.
17
<PAGE> 34
3.1(c)(1)(ii) each hour for which an Employee is
paid, or entitled to payment, by the Employer or an
Affiliate 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; provided (A) no more than 501 hours
shall be credited under this clause (ii) for any
single continuous period during which no duties are
performed (whether or not such period covers more
than one relevant Computation Period) and (B) hours
under this clause (iii) shall be calculated and
credited pursuant to Section 2530.200b-2 of the
Department of Labor Regulations which are
incorporated as part of the Plan by this reference;
and
3.1(c)(1)(iii) each hour for which back pay,
irrespective of mitigation of damages, is either
awarded or agreed to by the Employer or an Affiliate;
provided (A) no credit shall be given for an hour
described in this clause (iii) if credit also is
given for such hour under clause (i) or clause (ii),
and (B) an hour described in this clause (iii) shall
be credited to the Employee for the relevant
Computation Period or Computation Periods to which
the award or agreement pertains rather than to the
Computation Period in which the award, agreement or
payment is made.
3.1(c)(2) DETERMINATION. The Employer shall determine
an Employee's Hours of Service.
(i) STANDARD OPTION. - by actually counting
hours and maintaining records which reflect the
actual hours work, or
(ii) ALTERNATIVE. - If so specified in the
Adoption Agreement, by crediting each such
Employee with
3.1(c)(2)()(A) 10 Hours of Service for
each day,
3.1(c)(2)()(B) 45 Hours of Service for
each week.
3.1(c)(2)()(C) 95 Hours of Service
for each semi-monthly payroll period, or
3.1(c)(2)()(D) 190 Hours of Service
for each month
during which the Employee otherwise would be
credited with at least one Hour of Service.
3.1(d) YEAR OF SERVICE. The term "Year of Service" means each
Computation Period during which an Employee completes at least
3.1(d)(1) STANDARD OPTION. - 1,000 Hours of Service or
18
<PAGE> 35
3.1(d)(2) ALTERNATIVE. - such lesser number of Hours of
Service specified in the Adoption Agreement.
Notwithstanding the foregoing, if the Participation Requirement
includes a partial Year of Service, no minimumnumber of Hours of
Service shall be required for such partial year.
3.1(e) CHANGE IN SERVICE CALCULATION METHOD. If an amendment
changes the method of crediting service from the "Elapsed Time" method
to the "Hours of Service" method, each Employee who was credited with
service under the "Elapsed Time" method shall be credit with service
3.1(e)(1) for the Employee's employment before the
Computation Period in which such amendment is adopted, as
determined on the basis that one Year of Service credited
to the Employee under the "Elapsed Time" method for such
employment shall equal one Year of Service under this
Section 3.1,
3.1(e)(2) for the Employee's employment during the
Computation Period in which such amendment is adopted, for
a number of Hours of Service determined by uniformly
applying one of the equivalencies set forth in Section
3.1(c)(2)(ii) to any fractional part of a year credited to
the Employee under the "Elapsed Time" method as of the
effective date of the amendment, and
3.1(e)(3) for the Employee's employment on and after
the effective date of the amendment, as determined under
the rules in this Section 3.1.
3.2 ELAPSED TIME METHOD (ALTERNATIVE). If the "Elapsed Time" method of
crediting service is specified in the Adoption Agreement, the definitions and
rules in this Section 3.2 shall apply in lieu of the definitions and rules in
Section 3.1.
3.2(a) BREAK IN SERVICE.
3.2(a)(1) GENERAL. The term "Break in Service" means a
Period of Severance of at least 12 consecutive months.
3.2(a)(2) MATERNITY/PATERNITY RULE. If an Employee is
absent from service for "maternity or paternity reasons"
and the Employee timely furnishes proof of the reason for
such absence (in accordance with such nondiscriminatory
rules as may be established by the Plan Administrator and
communicated to Employees), the 12 consecutive month period
beginning on the first anniversary of the first date of
such absence shall not constitute a Break in Service. Such
12 consecutive month period shall be neither a Period of
Severance nor a period of Service. For purposes of this
special maternity/paternity rule, an absence for
"maternity or paternity reasons" means an absence (i) by
reason of the pregnancy of the Employee, (ii) by reason of
the birth of a child of the Employee, (iii) by reason of
the placement of a child with the Employee in connection
with the adoption of such child by the Employee, or (iv)
for purposes of caring for such child for a period
beginning immediately following such birth or placement.
19
<PAGE> 36
3.2(b) HOUR OF SERVICE. The term "Hour of Service" means each
hour for which an Employee is paid, or entitled to payment, by the
Employer or an Affiliate for the performance of duties as an Employee
during any period of employment.
3.2(c) PERIOD OF SEVERANCE. The term "Period of Severance" means
a continuous period of time during which an Employee is not employed
by the Employer or an Affiliate beginning on the date the Employee
retires, quits or is discharged, or if earlier, the 12 month
anniversary of the date on which the Employee was otherwise first
absent from service.
3.2(d) PERIOD OF SERVICE.
3.2(d)(1) GENERAL. For participation purposes and for
vesting purposes, the term "Period of Service" means an
Employee's employment completed as an Employee of the
Employer and any Affiliate beginning on such Employee's
first day of employment or reemployment and ending on the
date a Break in Service begins. An Employee's first day of
employment or reemployment shall be the first day the
Employee performs an Hour of Service. A Period of Service
also shall include any Period of Severance of less than 12
consecutive months.
3.2(d)(2) AGGREGATION. An Employee's employment
completed in all Period of Service shall be aggregated (to
the extent that such service is not disregarded under
Section 3.7 or Section 3.8) and the number of days in
each Period of Service in excess of a whole year of
employment (or, if there is no whole year of employment in
any such period, the number of days in such period) shall
be aggregated into additional whole years of employment on
the assumption that 365 days equals one whole year of
employment.
3.2(e) YEAR OF SERVICE. The term "Year of Service" means each 12
consecutive month period of employment completed in any Period of
Service beginning the date an Employee first completes an Hour of
Service ("hire date") and ending on th date immediately preceding the
anniversary of such hire date. Subsequent Years of Service shall
begin on each anniversary of the Employee's hire date and end
on the date immediately preceding the next anniversary of such hire
date.
3.2(f) CHANGE IN SERVICE CALCULATION METHOD. If an amendment
changes the method of crediting service from "Hour of Service" method
to the "Elapsed Time" method, each Employee who had any service credit
under the "Hour of Service" method shall be credited with service
3.2(f)(1) See also for the Employee's employment before
the Computation Period in which such amendment is adopted,
as determined on the basis that one Year of Service
credited to the Employee under the "Hour of Service" method
for such employment shall equal one Year of Service under
this Section 3.2,
3.2(f)(2) for the Employee's employment during the
Computation Period in which such amendment is adopted, as
determined under the rules in this Section 3.2 or, if
greater, as determined for such period under the "Hour of
Service" method as converted to Years of Service under the
assumption that 365 days equals one Year of Service, and
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<PAGE> 37
3.2(f)(3) for the Employee's employment after the last
day of the Computation Period in which such amendment is
adopted, as determined under the rules in this Section
3.2.
3.3 SERVICE BEFORE EFFECTIVE DATE. For participation purposes all periods
of employment with the Employer or an Affiliate completed before the Employer
adopted this Plan or a predecessor plan ("pre-effective date employment") shall
be included (to the extent such service is not disregarded under Section 3.7).
For vesting purposes all periods of pre-effective date employment shall be
included unless such service is disregarded under Section 3.7 or Section 3.8.
Notwithstanding the foregoing, service credit for vesting purposes
automatically shall be granted for pre-effective date employment to the extent
required by Code Section 411(a) for periods during which the Employer or an
Affiliate maintained a predecessor plan.
3.4 SERVICE WITH PREDECESSOR EMPLOYER. All periods of employment with a
predecessor employer or employers shall be included in calculating an
Employee's service to the extent required by Code Section 414(a) if the
Employer or an Affiliate maintains a plan of such predecessor employer.
However, if the Employer or an Affiliate does not maintain a plan of such
predecessor employer, periods of employment with such predecessor employer
shall be included in calculating an Employee's service
3.4(a) STANDARD OPTION. only to the extent required under
regulations under Code Section 414(a) or
3.4(b) ALTERNATIVE. only if so specified in the Adoption
Agreement.
3.5 LEASED EMPLOYEES. A Leased Employee shall be credited with service as
an Employee of the Employer or an Affiliate in accordance with Code Section
414(n) or Section 414(o).
3.6 SERVICE WITH AFFILIATES. An Employee shall be credited with all
service with any Affiliate and any other entity which is required to be
aggregated with the Employer under Code Section 414(o).
3.7 SPECIAL BREAK IN SERVICE RULES.
3.7(a) STANDARD OPTION. Except as provided in Section 3.7(c) and
Section 8.2, an Employee who has a Break in Service shall be credited
after such Break in Service for both participation and vesting
purposes with all Years of Service completed before such Break in
Service.
3.7(b) ALTERNATIVE. In addition to the exceptions in Section
3.7(c) and Section 8.2, the Employer may specify in the Adoption
Agreement that certain service completed before a Break in Service may
be disregarded under one or more of the rules set forth in this
Section 3.7(b).
3.7(b)(1) ONE YEAR HOLD-OUT RULE. If the "One Year
Hold-Out Rule" is specified in the Adoption Agreement for a
nonstandardized Plan, an Employee who has a Break in
Service (two Breaks in Service if the Alternative
Maternity/Paternity Rule applies) shall not be credited
after such Break in Service for participation purposes or
vesting purposes with any Year of Service completed before
such Break in Service until the Employee completes a Year
of service after such Break in Service.
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<PAGE> 38
In applying this rule for participation purposes, such Year
of Service shall be measured by the Computation Period
which begins on an Employee's "reemployment commencement
date" and, if necessary, subsequent Computation Periods
beginning
3.7(b)(1)(i) with the Plan Year which includes the
first anniversary of the "reemployment commencement
date" if the standard Computation Period in Section
3.1(b)(3)(i) is specified in the Adoption Agreement,
or
3.7(b)(1)(ii) on anniversaries of the "reemployment
commencement date" if the alternative Computation
Period in Section 3.1(b)(3)(ii) is specified in the
Adoption Agreement.
The "reemployment commencement date" shall be the first day
on which the Employee is credited with an Hour of Service
for the performance of duties after the first Computation
Period in which the Employee incurs a Break in Service. If
an Employee who was a Participant before his or her Break
in Service completes a Year of Service in accordance with
this provision, such Employee's participation shall be
reinstated as of his or her reemployment commencement date.
3.7(b)(2) PRE-PARTICIPATION RULE. If the
"Pre-Participation Rule" is specified in the Adoption
Agreement, an Employee who has a Break in Service (two
Breaks in Service if the Alternative Maternity/Paternity
Rule applies) before the Employee satisfies the
Participation Requirement shall not be credited for
participation purposes with any Year of Service completed
before such Break in Service. However, this rule shall
only apply if the Participation Requirement for the Plan
requires more than one Year of Service and the vesting
schedule specified in the Adoption Agreement provides for
full and immediate vesting.
3.7(b)(3) RULE OF PARITY. If the "rule of Parity" is
specified in the Adoption agreement, the following rules
shall apply:
3.7(b)(3)(i) GENERAL. If an employee does not
have any nonforfeitable interest in the portion of
the Employee's Account which is attributable to
Employer contributions, the Employee's Years of
Service before a period of consecutive breaks in
Service shall not be taken into account in computing
service for participation or vesting purposes if the
number of consecutive Breaks in Service in such
period equals or exceeds the greater of 5 (6 if the
Alternative Maternity/Paternity Rule applies) or the
aggregate number of Years of Service completed before
such Breaks in Service ("pre-break service"). Such
pre-break service shall not include any pre-break
service disregarded under the preceding sentence by
reason of prior Breaks in Service.
3.7(b)(3)(ii) PARTICIPATION. If an Employee's
Years of Service are disregarded under this rule of
parity, the Employee shall be treated as a new
Employee for participation purposes. If the
Employee's Years of Service are not disregarded under
this rule, the Employee shall continue to participate
in the
22
<PAGE> 39
Plan, or, if the Employee separated from
service shall participate immediately upon the
Employee's reemployment.
3.7(b)(3)(iii) VESTING. If a Participant's Years
of Service are disregarded under this rule of parity,
the Participant's pre-break Years of Service shall be
disregarded, for purposes of determining the
Participant's nonforfeitable interest in the
Participant's post-break Employer Account. If a
Participant's pre-break Years of Service are not
disregarded under this rule of parity, the
Participant's pre-break Years of Service shall be
counted for purposes of determining the Participant's
nonforfeitable interest in the Participant's
post-break Employer Account.
3.7(b)(4) ALTERNATIVE MATERNITY/PATERNITY RULE. If the
"Alternative Maternity/Paternity Rule" is specified in the
Adoption Agreement, the special Maternity/Paternity rule
set forth in Section 3.1(a)(2) shall not apply and the
minimum period of consecutive Breaks in Service required to
disregard any service or to deprive any Employee of any
right under this Plan shall be increased by one as
specified in the parentheticals in this Section 3.7 and in
Section 8.2.
3.7(c) VESTING ON REEMPLOYMENT AFTER BREAK IN SERVICE. If a
Participant has 5 or more consecutive Breaks in Service (6 or more
consecutive Breaks in Service if the Alternative Maternity/Paternity
Rule applies), all Years of Service completed after such Breaks in
Service shall be disregarded for purposes of determining the
Participant's nonforfeitable interest in the Participant's Employer
Account and Matching Account that accrued before such Breaks in
Service. Accordingly, as set forth in Section 8.2, the Employer
shall not be required to restore a Forfeiture upon such reemployment.
Unless the Adoption Agreement specifies the Rule of Parity, both the
Participant's pre-break service and post-break service shall count for
purposes of determining the nonforfeitable interest in the
Participant's post-break Employer Account and Matching Account. If
the Adoption Agreement specifies the Rule of Parity and the
Participant's pre-break Years of Service are disregarded under that
rule, then the Participant's pre-break Years of Service shall not
count for purposes of determining the nonforfeitable interest in the
Participant's post-break Employer Account and Matching Account. As
provided in Section 8.2, separate accounts shall be maintained for
the Participant's pre-break and post-break Employer Account and
Matching Account and such accounts shall share in Fund Earnings.
If a Participant does not have 5 consecutive Breaks in Service (6 or
more consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies), both the Participant's pre-break
and post-break Years of Service shall count in determining the
nonforfeitable interest in both the pre-break and post-break Employer
Account and Matching Account balance. However, unless the Adoption
Agreement specifies the "Alternative to the Buy Back Rule" (as
described in Section 8.2(b)), a Participant's pre-break Employer
Account and Matching Account balance shall be zero unless the
Participant repays any distribution as provided in Section 8.2(a).
3.8 SERVICE EXCLUSIONS FOR VESTING PURPOSES.
3.8(a) STANDARD OPTION. An Employee shall be credited with all
Years of Service for vesting purposes (to the extent such service is
not disregarded under Section 3.7 and Section 8.2).
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<PAGE> 40
3.8(b) ALTERNATIVE. The Employer may specify in the Adoption
Agreement service which is expressly excluded for vesting purposes.
SECTION 4. PARTICIPATION
GENERAL RULE. Each Eligible Employee shall become a Participant in this Plan
on the Entry Date which coincides with or immediately follows the date on which
the Eligible Employee satisfies the Participation Requirement (provided he or
she is an Eligible Employee on such Entry Date).
4.1 SPECIAL RULES.
4.1(a) PREEXISTING PLAN. Any Employee who was a participant in
the Preexisting Plan on the date immediately preceding the Effective
Date or who would have become a participant in the Preexisting Plan on
the Effective Date shall become a Participant under this Plan on such
Effective Date. However, no contributions shall be made by or on
behalf of such Participant unless the Participant is otherwise
entitled to a contribution under Section 5.
4.1(b) REEMPLOYMENT BEFORE SATISFYING PARTICIPATION REQUIREMENTS.
If an Employee separates from service prior to satisfying the
Participant Requirement and is thereafter reemployed, all employment
completed by such Employee prior to such separation shall be
aggregated with such Employee's employment completed after
reemployment for purposes of satisfying the Participation Requirement
unless such prior employment is excluded under the rules set forth in
Section 3.
4.1(c) REEMPLOYMENT AFTER SATISFYING PARTICIPATION REQUIREMENT.
If any employee satisfies the Participation Requirement before he or
she separates from service and the Employee thereafter is reemployed,
the Employee shall become a Participant on the later of (1) the first
day he or she completes an Hour of Service as an Eligible Employee
upon reemployment or (2) the first Entry Date following the date on
which he or she satisfies the Participation Requirement. However, any
such Employee whose prior service is disregarded under Section 3
shall be treated as a new Employee for participation purposes.
4.1(d) STATUS CHANGE. If the status of an Eligible Employee for
whom no Account is maintained changes to that of an Employee (other
than an Eligible Employee) and such person's status thereafter changes
back to that of an Eligible Employee, such person shall become a
Participant on the later of (1) the date the status changes back to
that of an Eligible Employee or (2) the first Entry Date which
coincides with or immediately follows the date on which he or she
satisfies the Participation Requirement.
4.2 PARTICIPANT INFORMATION. Each Participant shall file with the Plan
Administrator such personal information and data as the Plan Administrator
deems necessary for the orderly administration of this Plan.
4.3 NO EMPLOYMENT RIGHTS. This Plan is not a contract of employment and
participation in this Plan shall not give any Employee or former Employee the
right to be retained in the employ of the Employer or any Affiliate or, upon
termination of such employment, to have any interest or right in the Fund other
than as expressly provided in this Plan.
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<PAGE> 41
SECTION 5. CONTRIBUTIONS
5.1 PROFIT SHARING PLAN. If this Plan is adopted as a Profit Sharing
Plan, the Employer Contribution made by the Employer and each Participating
Affiliate for each Plan Year shall equal such amount, if any, as the Board
determines in its discretion that the Employer and each Participating Affiliate
shall contribute for such year. Employer Contributions under this Section 5.1
shall be made
5.1(a) STANDARD OPTION. from Net Profits or
5.1(b) ALTERNATIVE - if so specified in the Adoption Agreement,
without regard to Net Profits. Notwithstanding any such election, the
Employer intends that this Plan shall be a "profit-sharing plan" for
purposes of the code and ERISA.
5.2 MONEY PURCHASE PENSION PLAN. If this Plan is adopted as a Money
Purchase Pension Plan, the Employer Contribution made by the Employer and each
Participating Affiliate for each Plan Year shall be an amount equal to the sum
of the contribution for each Active Participant as determined under the formula
specified in the Adoption Agreement. The Forfeitures for each Plan Year shall
be
5.2(a) STANDARD OPTION - applied to reduce the Employer
Contribution for such Plan Year or
5.2(b) ALTERNATIVE - if so specified in the Adoption Agreement,
allocated to the Employer Account of each Active Participant in
accordance with Section 6.3(b). Notwithstanding any such election,
the Employer intends that this Plan shall be a "money purchase pension
plan" for purposes of the Code and ERISA.
5.3 401(K) PLAN.
5.3(a) GENERAL. If this Plan is adopted as a 401(k) Plan, the
contributions made by the Employer and each Participating Affiliate
shall be determined in accordance with the elections made by the
Employer in the Adoption Agreement and the rules set forth in Section
5.3. Contributions made under this Section 5.3 other than Elective
Deferrals and Employee Contributions shall be made
5.3(a)(1) STANDARD OPTION - from Net Profits or
5.3(a)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, without regard to Net Profits.
Elective Deferrals and Employee Contributions shall be made without
regard to Net Profits. Notwithstanding any such election, the
Employer intends that this Plan shall be a "profit-sharing plan" for
purposes of the Code and ERISA.
5.3(b) MATCHING CONTRIBUTIONS. If the Employer specifies in the
Adoption Agreement that Matching Contributions shall be made to the
Plan, the Employer and each Participating Affiliate shall make a
Matching Contribution for each eligible Participant based on the
Employee Contributions and Elective Deferrals made by or on behalf of
such eligible Participant in such
25
<PAGE> 42
amount and as of each Allocation Date as specified in the Adoption Agreement.
Notwithstanding the foregoing,
5.3(b)(1) for Plan Years beginning on or after the
Final Compliance Date, no Matching Contribution shall be
made on account of a Participant's Elective Deferrals or
Employee Contributions which are Excess Elective Deferrals
under Section 7.3 Excess Contributions under Section 7.4
or Excess Aggregate Contributions under Section 7.5, and
5.3(b)(2) for Plan Years beginning before the Final
Compliance Date, no Matching Contribution shall be made on
account of such excess amounts unless specified in the
formula for Matching Contributions set forth in the
Adoption Agreement.
5.3(c) QUALIFIED MATCHING CONTRIBUTIONS. If the Employer specified
in the Adoption Agreement that Qualified Matching
Contributions shall be made to the Plan, the Employer and
each Participating Affiliate shall make a Qualified
Matching Contribution for each eligible Participant based
on the Employee Contributions and Elective Deferrals made
by or on behalf of such eligible Participant in such amount
and as of each Allocation Date as specified in the Adoption
Agreement. Qualified Matching Contributions shall be
subject to the following special rules:
5.3(c)(1) the Participant may not elect to receive such
contributions in cash until distributed from the Plan;
5.3(c)(2) such contributions shall be completely
nonforfeitable when made;
5.3(c)(3) such contributions shall be subject to the
same distribution and withdrawal restrictions applicable to
Elective Deferrals set forth in Section 9.2(b);
5.3(c)(4) for Plan Years beginning on and after the
Final Compliance Date, no Qualified Matching Contribution
shall be made on account of a Participant's Elective
Deferrals of employee Contributions which are Excess
Elective Deferrals under Section 7.3. Excess
Contributions under Section 7.4 or Excess Aggregate
Contributions under Section 7.5; and
5.3(c)(5) for Plan Years beginning before the Final
Compliance Date, no Qualified Matching Contribution shall
be made on account of such excess amounts unless specified
in the formula for Qualified Matching Contributions set
forth in the Adoption Agreement.
5.3(d) QUALIFIED NONELECTIVE CONTRIBUTION. If the Employee
specifies in the Adoption Agreement that Qualified Nonelective
contributions shall be made to the Plan, the Employer and each
Participating Affiliate shall make Qualified Nonelective Contributions
for each eligible Participant in such amount and as of each Allocation
Date specified in the Adoption Agreement.
In addition, in lieu of distributing Excess Contributions as provided
in Section 7.4(d) or Excess Aggregate Contributions as provided in
Section 7.5(d) the Employer and each Participating Affiliate who is a
Nonhighly Compensated Employee on the last day of each Plan Year, such
amount, if any, as the Employer and each Participating Affiliate
determine in their discretion to contribute
26
<PAGE> 43
for such Plan Year to satisfy the ADP limit of Section 4(b) or the ACD limit
of Section 7.5(b), or both, pursuant to the regulations under Code Section
401(k) and Code Section 401(m).
Qualified Nonelective Contributions shall be subject to the following special
rules:
5.3(d)(1) the Participant may not elect to receive such
contributions in cash until distributed from the Plan;
5.3(d)(2) such contributions shall be completely
nonforfeitable when made; and
5.3(d)(3) such contributions shall be subject to the
same distribution and withdrawal restrictions applicable to
Elective Deferrals set forth in Section 9.2(b).
5.3(e) DISCRETIONARY EMPLOYER CONTRIBUTION. If the Employer
specifies in the Adoption Agreement that discretionary Employer
Contributions shall be made. The Employer Contribution made by the
Employer and each Participating Affiliate for each Plan Year shall
equal such amount, if any, as the Board determines in its discretion
that the Employer and each Participating Affiliate shall contribute
for such year.
5.3(f) ELECTIVE DEFERRALS. If the Employer specifies in the
Adoption Agreement that Elective Deferrals may be made each Participant
who is an Eligible Employee may elect pursuant to a cash or deferred
election that the Employer and each Participating Affiliate make
Elective Deferrals to the Plan on the Participant's behalf in lieu of
cash compensation for each pay period ending on any date on or after
he or she becomes a Participant and on which he or she is an Eligible
Employee in such amounts as specified in the Adoption Agreement. All
Elective Deferrals shall be made exclusively through payroll
withholding and shall be transferred by the Employer or Participating
Affiliate to the Trustee as son as practicable after the date such
elective Deferrals are withheld.
5.3(g) EMPLOYEE CONTRIBUTIONS. If the Employer specifies in the
Adoption Agreement that Employee Contributions may be made, each
Participant who is an Eligible Employee may elect to make Employee
Contributions to the Plan for each pay period ending on any date on or
after he or she becomes a Participant and on which he or she is an
Eligible Employee in such amounts as specified in the Adoption
Agreement. All Employee Contributions shall be made exclusively
through payroll withholding and shall be transferred by the Employer
or Participating Affiliate to the Trustee as soon as practicable after
the date such Employee Contributions are withheld.
5.3(h) ELECTION RULES AND LIMITATIONS.
5.3(h)(1) GENERAL. The Plan Administrator from time to
time shall establish and shall communicate in writing to
Participants who are Eligible Employees such reasonable
nondiscriminatory deadlines, rules and procedures for
making the elections described in this Section 5.3 as the
Plan Administrator deems appropriate under the
circumstances for the proper administration of this Plan.
A Participant's election shall be made on an Election Form
and no election shall be effective unless such Election
Form is properly completed and timely filed in accordance
with such established
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<PAGE> 44
deadlines, rules and procedures. The Plan Administrator
shall have the right at any time unilaterally to reduce
the amount or percentage of Elective Deferrals or Employee
Contributions elected under this Section 5.3 if the Plan
Administrator determines that such reduction is necessary
to satisfy the limitations under Section 7 of the Plan.
5.3(h)(2) COMMENCEMENT OF ELECTION. A Participant's
initial election to make Elective Deferrals or Employee
Contributions under this Section 5.3 for any period of
employment may be effective as early as the Entry Date on
which he or she becomes a Participant in the Plan. If a
Participant does not make a proper election to make
Elective Deferrals or Employee Contributions as of such
Entry Date, the Participant may thereafter make an election
5.3(h)(2)(i) STANDARD OPTION. effective on
any date or
5.3(h)(2)(ii) ALTERNATIVE. effective only as of
the dates specified in the Adoption Agreement.
A Participant's election shall remain in effect until
revised or terminated in accordance with this Section
5.3(h).
5.3(h)(3) REVISION OF ELECTION. An election, once
effective, can thereafter be revised by a Participant
5.3(h)(3)(i) STANDARD OPTION. effective on
any date or
5.3(h)(3)(ii) ALTERNATIVE. effective only as of
the dates specified in the Adoption Agreement.
5.3(h)(4) TERMINATION OF ELECTION. A Participant shall
have the right to completely terminate an election under
this Section 5.3 at any time, and any such termination
shall become effective as of the first day of the first pay
period following the date he or she timely files a properly
completed Election form terminating such election. Any
Participant whose status as an Eligible Employee terminates
shall be deemed to have completely terminated his or her
election, if any, under this Section 5.3 as of the date
the Participant's status as such so terminates.
5.3(h)(5) RESUMPTION AFTER TERMINATION. A Participant
whose election terminates may thereafter elect to resume
contributions under this Section 5.3
5.3(h)(5)(i) STANDARD OPTION. Effective as of
any date, or
5.3(h)(5)(ii) ALTERNATIVE. Effective only as of
the dates specified in the Adoption Agreement.
5.3(h)(6) EFFECTIVE DATES OF ELECTIONS. A
Participant's initial, revised or resumed election shall be
effective only if he or she is an Eligible Employee on the
effective date of such elections setforth in this Section
5.3(h). Elective Deferrals and Employee
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<PAGE> 45
Contributions made pursuant to a Participant's
elections shall be withheld from Compensation which
otherwise would be paid on or after the effective date of
such election and while he or she is an Eligible Employee.
Under no circumstances shall a Participant's Elective
Deferral election apply to defer Compensation which has
been paid to the Participant or which he or she is
currently eligible to receive (in cash or otherwise) at his
or her discretion.
5.3(i) APPLICATION OF FORFEITURES. The Forfeitures attributable
to Matching Contributions and Employer Contribution shall be
5.3(i)(1) STANDARD OPTION. Applied to reduce the
Matching Contributions, Qualified Matching Contributions
and Qualified Nonelective Contributions, if any, in
accordance with Section 6.3(c)(2)(ii)(A) or
5.3(i)(2) ALTERNATIVE. If so specified in the Adoption
Agreement,
5.3(i)(2)(i) allocated to the Employer Account or
Matching Account, as applicable, of each Active
Participant in accordance with Section
6.3(c)(2)(ii)(B)(l), or
5.3(i)(2)(ii) for a nonstandardized Plan, allocated
in accordance with the formula specified in the
Adoption Agreement.
5.4 TARGET BENEFIT PENSION PLAN.
5.4(a) GENERAL. If this Plan is adopted as a Target Benefit
Pension Plan, the Employer Contribution made by the Employer and each
Participating Affiliate for each Plan Year shall be an amount equal to
the sum of the contributions required to fund each Active
Participant's "Target Benefit" specified in the Adoption Agreement.
The Forfeitures for each Plan year shall be applied to reduce the
Employer Contribution for such Plan Year. Such contribution shall be
determined as of the last day of such Plan Year. Such contribution
shall be determined as of the last day of such Plan Year under the
individual level premium funding method, using the interest rate and
mortality table specified in the Adoption Agreement, the Participant's
age on his or her last birthday and the assumption of a constant rate
of future Compensation, in accordance with the following:
5.4(a)(1) STEP 1. If the Participant has not reached
the Plan Participant's Normal Retirement Age, calculate the
present value of the "Target Benefit" specified in the
Adoption Agreement by multiplying the "Target Benefit" by
the product of (1) the applicable factor from Table l(a) or
(b), whichever is appropriate, in Exhibit A to the Adoption
Agreement and (2) the applicable factor from Table III(a)
or (b), whichever is appropriate, in Exhibit A to the
Adoption Agreement. If the Participant is at or beyond the
Plan Participant's Normal Retirement Age, calculate the
present value of the "Target Benefit" specified in the
Adoption Agreement by multiplying the "Target Benefit" by
the applicable factor from Table IV(a) or (b), whichever is
appropriate, in Exhibit A to the Adoption Agreement.
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<PAGE> 46
5.4(a)(2) STEP 2. Calculate the excess, if any, of the
amount determined in Step 1 over the theoretical reserve.
5.4(a)(3) STEP 3. Amortize the result in Step 2 by
multiplying it by the applicable factor from Table II in
Exhibit A to the Adoption Agreement. The Plan Year in
which the Participant attains Normal Retirement Age and for
subsequent Plan Years, the applicable factor is 1.0.
5.4(b) THEORETICAL RESERVE. For purposes of this Section 5.4,
the theoretical reserve is determined as follows:
5.4(b)(1) A Participant's theoretical reserve as of the
last day of the first Plan Year in which the participates
in the Plan, and as of the last day of the first Plan Year
after any Plan Year in which the Plan either did not
satisfy the safe harbor in Section 1.401(a)(4)-8(b)(3) of
the Federal Income Tax Regulations or was not a Prior Safe
Harbor Plan, is zero. In all other cases, in the first
Plan Year in which this theoretical reserve provision is
adopted or made effective, if later, as specified in the
Adoption Agreement ("year 1"), the initial theoretical
reserve is determined as follows:
5.4(b)(1)(i) Calculate as of the last day of the
Plan Year immediately preceding year 1 the present
value of the "Target Benefit", using the actuarial
assumptions, the provisions of the Plan, and the
Participant's Average Annual Compensation as of such
date; provided, however, for a Participant who is
beyond Normal Retirement Age in year 1, the straight
life annuity factor used for such determination shall
be the factor applicable for such Normal Retirement
Age.
5.4(b)(1)(ii) Calculate as of the last day
of the Plan Year immediately preceding year 1 the
present value of future Employer Contributions, i.e.,
the contributions due each Plan Year using the
actuarial assumptions, the provisions of the Plan
(disregarding those provisions of the Plan providing
for the limitations of Code Section 415 or the
minimum contributions under Code Section 416), and
the Participant's Average Annual Compensation as of
such date, beginning with year 1 through the end of
the Plan Year in which the Participant attains Normal
Retirement Age.
5.4(b)(1)(iii) Subtract the amount determined in
clause (ii) from the amount determined in clause (i).
5.4(b)(2) Accumulate the initial theoretical reserve in
Section 5.4(b)(1) and the Employer Contributions (as
limited by code Section 415, but without regard to any
required minimum contributions under Code Section 416) for
each Plan Year beginning in year l up through the last day
of the current Plan Year (excluding contributions, if any,
made for the current Plan Year) using the Plan's interest
assumption in effect for each such year. In any Plan Year
following the Plan Year in which the Participant attains
Normal Retirement Age, the accumulation is calculated
assuming an interest rate of 0%.
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<PAGE> 47
5.4(b)(3) The calculations in this Section 5.4(b)
shall be made as of the last day of each Plan 4Year, on the
basis of the Participant's age on his or her last birthday
and the interest rate in effect on the last day of the
prior Plan Year.
5.4(c) PAST SERVICE CREDITS. If the Plan is adopted as a
standardized Plan, upon initial adoption of this Plan or upon a Plan
amendment which is effective on or after the Final Compliance Date, no
more than 5 years of credit shall be granted for service completed
before the effective date of such adoption or amendment, and any such
past service credit shall be granted on a uniform basis to all
Participants in the Plan on such effective date.
5.4(d) TRA 86 AMENDMENT. A Participant's Account balance shall
not be reduced as a result of an amendment to this Plan or a
preexisting Plan to satisfy the requirements of TRA 86. To the extent
that contributions actually made on a Participant's behalf for Plan
Years beginning after December 31, 1988 exceed the contributions that
would have been required under the formula as effective for such years
as a result of the amendment of this Plan or a Preexisting Plan to
satisfy TRA 86, such excess shall be applied to offset contributions
required to such Participant's Account for Plan Years beginning after
the date such TRA 86 amendment is adopted or, if later, the date such
TRA 86 amendment is effective consistent with ERISA Section 204(h).
5.4(e) SPECIAL DEFINITIONS AND RULES. The special definitions and
rules in this Section 5.4(e) shall apply for purposes of determine
the Employer Contributions under a Target Benefit Pension Plan.
5.4(e)(1) CUMULATIVE DISPARITY LIMIT. For a Plan with
a Unit Benefit Formula, a Participant's Cumulative
Disparity Limit is equal to 35 minus (1) the number of the
Participant's Years of Participation under this Plan during
which this Plan did not satisfy the safe harbor for target
benefit plans in Section 1.401(a)(4)-8(b)(3) of the
Federal Income Tax Regulations or was not a Prior Safe
Harbor Plan, and (2) the number of years during which the
Participant participated in one or more qualified plans or
simplified employee pension plans ever maintained by the
Employer (other than years counted in clause (1) or counted
toward a Participant's total Years of Projected
Participation). The Cumulative Disparity Limit shall be
determined taking into account only those Years of
Participation in this Plan beginning after December 31,
1988 when this Plan had an integrated benefit formula and
those years of participation in such other qualified plans
and simplified employee pensions plans beginning after
December 31, 1988 during which the Participant actually
received an allocation under an integrated defined
contribution plan (other than a target benefit pension
plan), during which the Participant was eligible to receive
a benefit under an integrated defined benefit pension plan
or an integrated target benefit pension plan), or during
which the Participant received an allocation or accrued a
benefit under a plan which imputed permitted disparity
pursuant to Section 1.401(a)-7 of the Federal Income Tax
Regulations.
5.4(e)(2) CUMULATIVE DISPARITY REDUCTION. For a Plan
with a Fixed Benefit Formula, the Excess Benefit Percentage
will further be reduced as set forth in this Section
5.4(e)(2) for a Participant with more than 35 "cumulative
disparity years." A Participant's "cumulative disparity
years" consist of the sum of (1) the Participant's total
Years of Projected Participation, (2) the Participant's
Years of Participation,
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<PAGE> 48
during which this Plan did not satisfy the safe harbor for
target benefit plans in regulations Section
1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations
or was not a prior Safe Harbor Plan, and (3) the number of
years during which the Participant participated in one or
more qualified plans or simplified employee pension plans
ever maintained by the Employer (other than years in clause
(1) or (2) above); provided that the cumulative disparity
years shall be determined taking into account only those
Years of Participation in this Plan beginning after
December 31, 1988 when this Plan had an integrated benefit
formula and those years of participation in such other
qualified plans and simplified employee pension plans
beginning after December 31, 1988 during which the
Participant actually received an allocation under an
integrated defined contribution plan (other than a target
benefit pension plan), during which the Participant was
eligible to receive a benefit under an integrated defined
benefit pension plan (or an integrated target benefit
pension plan), or during which the Participant received an
allocation or accrued a benefit under a plan which imputed
permitted disparity pursuant to Section 1.401(a)-7 of the
Federal Income Tax Regulations.
If this Cumulative Disparity Reduction applies, the Excess
Benefit Percentage will be reduced as follows:
(A) Subtract the Participants Base
Benefit Percentage from the Participants
Excess Benefit Percentage (after modification
as required in the Adoption Agreement for
less than 35 Years of Projected
Participation).
(B) Multiply the results determined in
(A) by a fraction (not less than 0), the
numerator of which is 35 minus the sum of the
years in clauses (2) and (3) of this Section
5.4(e)(2), and the denominator of which is
35.
(C) The Participants Excess Benefit
Percentage is equal to the sum of the result
in (B) and the Participants Base Benefit
Percentage, as otherwise modified in the
Adoption Agreement.
5.4(e)(3) CURRENT STATED BENEFIT. Each Participants
Current Stated Benefit will be the product of (1) the
amount derived from the formula specified in the Adoption
Agreement, and (2) a fraction, the numerator of which is
the Participants number of Years of Participation from the
latest Fresh- Start Date (if any) through and including the
later of the year in which the Participant attains Normal
Retirement Age or the current Plan Year, and the
denominator of which is the Participant's total Years of
Projected Participation, if this Plan has not had a
Fresh-Start Date, such fraction will equal 1.0 for all
Participants. In any event, for those Participants who
first participated in the Plan after the latest Fresh-Start
Date, such fraction will equal 1.0. For purposes of
determining the numerator of the fraction described in
clause (2), only those current and prior years during which
a Participant was eligible to receive a contribution under
the Plan will be taken into account.
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<PAGE> 49
5.4(e)(4) FRESH-START DATE. Fresh-Start Date means the
last day of a Plan Year preceding a Plan Year for which
provisions that would affect the amount of the Current
Stated Benefit are amended. If applicable, the latest
Fresh-Start Date-Start Date of the Plan shall be designated
in the Adoption Agreement.
5.4(e)(5) FROZEN ACCRUED STATED BENEFIT. A
Participant's Frozen Accrued Stated Benefit is determined
as of the Plan's latest Fresh-Start Date as if the
Participant terminated employment with the Employer as of
that date, without regard to any amendment made to the Plan
after that date except as permitted under regulations.
A Participant's Frozen Accrued State Benefit is equal to
the amount of the Current Stated Benefit in effect on the
latest Fresh-Start Date that a Participant has accrued as
of that date, assuming that such Current Stated Benefit
accrues ratably from the year in which the Participant
first participated in this Plan (or, if later, the
immediately preceding, Fresh-Start Date under this Plan)
through and including the Plan Year in which the
Participant attains Normal Retirement Age.
The amount of the Current Stated Benefit in effect on the
latest Fresh-Start Date that a Participant is assumed to
have ratably accrued is determined by multiplying the
Plan's Current Stated Benefit in effect on that date by a
fraction, the numerator of which is the number of Years of
Participation from the later of the Participant's first
Year of Participation in this Plan or the immediately
preceding Fresh-Start Date (if any) through and including
the year that contains the latest Fresh- Start Date, and
the denominator of which is the number of Years of
Participation from the later of the Participant's first
Year of Participation in this Plan or the immediately
preceding Fresh-Start Date (if any) through and including
the later of the year in which the Participant attains
Normal Retirement Age or the current Plan Year. For
purposes of this paragraph, only those Years of
Participation during which a Participant was eligible to
receive a contribution the Plan will be taken into account.
If this Plan has a preceding Fresh-Start Date, each
Participant's Frozen Accrued Stated Benefit as of the
latest Fresh-Start Date will equal the sum of the amount of
the Current Stated Benefit in effect on the latest
Fresh-Start Date that a Participant is assumed to have
ratably accrued as of that date under the preceding
paragraph, and the Frozen Accrued Stated Benefit determined
as of the preceding Fresh-Start Date(s).
If (a) the Current Stated Benefit formula in effect on the
latest Fresh-Start Date was not expressed as a straight
life annuity for all the Participants, and/or (2) the
Normal Retirement Age for any Participant on the latest
Fresh-Start Date was greater than the Normal Retirement Age
for the Participant under the Current Stated Benefit
formula in effect after the latest Fresh-Start Date, the
Frozen Accrued Stated Benefit will be converted to an
actuarially equivalent straight life annuity commencing at
the Participant's Normal Retirement Age under the Current
Stated Benefit formula in effect after the latest
Fresh-Start Date, using the actuarial assumption in effect
under the Current Stated Benefit formula in effect on the
latest Fresh-Start Date.
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<PAGE> 50
Notwithstanding the above, if in the immediately preceding Plan Year
this Plan did not satisfy the safe harbor for target benefit plans in
Section 1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations or
was not a Prior Safe Harbor Plan, the Frozen Accrued Stated Benefit
for any Participant in the Plan, determined for the Plan Year during
which Section 1.401(a)(4)-8(b)(3) of the Federal Income Tax
Regulations is satisfied until the year following the next Fresh-Start
Date, if any, will be zero.
5.4(e)(6) MAXIMUM EXCESS ALLOWANCE. The Maximum Excess
Allowance is equal to the lesser of the Base Benefit
Percentage or
(1) for a Plan with a Unit Benefit Formula, the
Applicable Factor determined from Table A or Table B
in Exhibit B to the Adoption Agreement, and
(2) for a Plan with a Fixed Benefit Formula, 35
times the Applicable Factor determined from Table A
or Table B in Exhibit B to the Adoption Agreement.
5.4(e)(7) OVERALL PERMITTED DISPARITY LIMIT. If for
any Plan Year this Plan benefits any Participant who also
benefits under another qualified plan or simplified
employee pension plan maintained by the Employer that
provides for permitted disparity (or imputes permitted
disparity), the Current Stated Benefit for all Participants
under this Plan will be equal to the Excess Benefit
Percentage set forth in the Adoption Agreement multiplied
times
(1) for a Plan with a Unit Benefit Formula, the
Participant's total Average Annual Compensation times
the Participant's total Years of Projected
Participation under the Plan up to the maximum total
years of Projected Participation specified in the
Adoption Agreement, and
(2) for a Plan with a Fixed Benefit Formula, the
Participant's total Average Annual Compensation
(prorated for years less than 35).
If this paragraph is applicable, this Plan will have a
Fresh-Start Date on the last day of the Plan Year preceding
the Plan Year in which this paragraph is first applicable.
In addition, if in any subsequent Plan Year this Plan no
longer benefits any Participant who also benefits under
another plan of the Employer, this Plan will have a
Fresh-Start Date on the last day of the Plan Year preceding
the Plan Year in which this paragraph is no longer
applicable.
5.4(e)(8) PRIOR SAFE HARBOR PLAN. Prior Safe Harbor
Plan means a Plan adopted and in effect on September 19,
1991, that satisfied the applicable nondiscrimination
requirements for target benefit plans on that date and in
all prior periods (taking into account no amendments to the
Plan after September 19, 1991, other than amendments
necessary to satisfy Code Section 401(1).
5.4(e)(9) YEAR OF PARTICIPATION means each Year of
service (as determined in the same manner as a Year of
Service for vesting purposes) completed after the
Participant first becomes a Participant in this Plan or the
Preexisting Plan.
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<PAGE> 51
5.4(e)(10) YEARS OF PROJECTED PARTICIPATION. For
purposes of determining a Participant's Current Stated
Benefit, a Participant's total Years of Projected
Participation under the Plan is the sum of the
Participant's total number of Years of Participation under
this Plan for the years this Plan consecutively satisfies
the safe harbor for target benefit plans in Section
1.401(a)(4)-8(b)(3) of the Federal Income Tax Regulations
or was a Prior Safe Harbor Plan, if applicable, projected
through the later of the end of the Plan Year in which the
Participant attains Normal Retirement Age or the end of the
current Plan Year. For purposes of determining a
Participant's total Years of Projected Participation, only
those current and prior years during which a Participant
was eligible to receive a contribution under the Plan will
be taken into account.
5.5 ROLLOVER CONTRIBUTIONS.
5.5(a) STANDARD OPTION. An Eligible Employee may contribute on
his or her own behalf (or elect a direct transfer of) a Rollover
Contribution to the Fund, provided (1) such contribution shall be made
(or transferred) in cash or in a form which is acceptable to the
Trustee, (2) such contribution shall be made in accordance with such
rules as the Plan Administrator and the Trustee deem appropriate under
the circumstances, and (3) if so specified in the Adoption Agreement,
no Rollover Contribution may be made prior to the Entry Date on which
the Eligible Employee becomes a Participant in this Plan.
5.5(b) ALTERNATIVE. The Employer may specify in the Adoption
Agreement that no Rollover Contributions may be made.
5.6 NO EMPLOYEE OR MATCHING CONTRIBUTIONS. Unless this Plan is adopted as
a Section 401(k) Plan which permits Employee Contributions, no nondeductible
employee contributions or matching contributions (as defined in Code Section
401(m) shall be made to this Plan after the Plan year in which this Plan is
adopted by the Employer. Any nondeductible employee contributions and matching
contributions made under Preexisting Plan or under this Plan (in accordance
with the preceding sentence) for Plan Years beginning after December 31, 1986
shall be subject to the nondiscrimination limitations under Code Section
401(m) as set forth in Section 7.5.
5.7 NO DEDUCTIBLE VOLUNTARY EMPLOYEE CONTRIBUTIONS. No voluntary
deductible employee contributions shall be made to this Plan for a taxable year
beginning after December 31, 1986. Any voluntary deductible employee
contributions made under a Preexisting Plan prior to such date shall be
maintained in a separate account under this Plan. Such account shall be
nonforfeitable at all times and shall share in the Fund Earnings in the same
manner as described in Section 6.2. No part of such account shall be used to
purchase life insurance. Subject to Section 10, JOINT AND SURVIVOR ANNUITY
REQUIREMENTS (if applicable), a Participant may withdraw any part of the
Participant's voluntary deductible employee contribution account by making a
written application to the Plan Administrator.
5.8 GENERAL RULES APPLICABLE TO ALL CONTRIBUTIONS.
5.8(a) LIMITATIONS ON CONTRIBUTIONS. The contributions made under
this Section 5 and the allocation of those contributions under
Section 6 shall be subject to the limitations set forth in the
Adoption Agreement, this Section 5 and Section 7.
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<PAGE> 52
5.8(b) CODE Section 415. The contributions for any Plan year
shall not (based on the Employer's understanding of the facts at the
time the contribution is made) exceed the total amount allocable for
such year among the Accounts of all Participants in light of the
restrictions in Code Section 415 as set forth in Section 7.2. If a
suspense account as described in Section 7.2(b) is in existence at
any time during a particular Limitation Year (1) no Employer
Contribution shall be made for such Limitation Year if (based on the
Employer's understanding of the facts at the time the contribution is
made) the allocation of the amount in such suspense account would be
precluded by Code Section 415 for such Limitation Year and (2) if
this Plan is adopted as Money Purchase Pension Plan or a Target
Benefit Pension Plan, the Employer Contribution required under this
Section 5 shall be reduced by the amount in such suspense account.
5.8(c) CODE Section 416. If this Plan is a Top-Heavy Plan (as
defined in Section 12) for any Plan Year, the minimum allocation
required under Code Section 416 shall be made in accordance with
Section 12.
5.8(d) LEASED EMPLOYEES. Contributions or benefits which are
provided by a leasing organization on behalf of a Participant who is a
Leased Employee and which are attributable to services performed by
such Participant for the Employer or a Participating Affiliate shall
be credited against the contribution, if any, due to be allocated to
such Participant under this Plan in accordance with Code Section
414(n).
5.8(e) OWNER-EMPLOYEES.
5.8(e)(1) GENERAL. If this Plan provides contributions
or benefits for one or more Owner- Employees who control
the Employer or a Participating Affiliate, then
5.8(e)(1)(i) if such Owner-Employee, or
Owner-Employees, also control one or more other
trades or businesses,
5.8(e)(1)(i)(A) this Plan and the plans
established for such other trades or
businesses shall, when viewed as a single
plan, satisfy the applicable requirements of
Code Section 401(a) and Code Section 401(d)
for the employees of the Employer or the
Participating Affiliate and such other trades
or businesses, and
5.8(e)(1)(i)(B) the employees of such other
trades or businesses shall be included in a
plan which satisfies the applicable
requirements of Code Section 401(a) and Code
Section 401(d) and which provides
contributions and benefits which are at least
as favorable as those provided under this
Plan for such Owner-Employee, or
5.8(e)(1)(ii) if such Owner-Employee is covered as
an owner-employee (within the meaning of Code Section
401(c)(3)) under the plans of two or more other
trades or businesses which such Owner-Employee does
not control, then the contributions or benefits
provided under this Plan must be at least as
favorable as those provided for such Owner-Employee
under the most favorable plan of such other trade or
business.
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<PAGE> 53
5.8(e)(2) CONTROL. For purposes of this Section
5.8(e), an Owner-Employee, or two or more such
Owner-Employees, shall be considered to control a trade or
business if such Owner-Employee or such Owner-Employees
together,
5.8(e)(2)(i) own the entire interest in an
unincorporated trade or business, or
5.8(e)(2)(ii) in the case of a partnership, own
more than 50% of either the capital interest or the
profits interest in such partnership. Such
Owner-Employee, or such Owner- Employees, shall be
treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership
which is controlled by such Owner-Employee, or such
Owner- Employees, within the meaning of clause (ii).
SECTION 6. ALLOCATIONS TO ACCOUNTS
6.1 ESTABLISHMENT AND MAINTENANCE OF ACCOUNTS. An Account shall be
established and maintained for each Participant under the Plan and the Plan
Administrator shall establish reasonable and nondiscretionary procedures under
which (a) any Forfeitures, insurance premium payments, loans, withdrawals,
distributions and other charges properly allocable to such Account shall be
debited from such Account and (b) any insurance contract dividends, insurance
contract surrender proceeds, loan repayments and other amounts properly
allocable to such Account (other than amounts described in Section 6.2 and
Section 6.3) shall be credited to such Account.
6.2 ALLOCATION OF FUND EARNINGS.
6.2(a) GENERAL. As of each Valuation Date the fair market value
of the Fund and the Fund Earnings for the period which ends on such
Valuation Date shall be determined. Such Fund Earnings shall be
allocated (and posted) among all Accounts in the proportion that the
balance in each such Account (determined in accordance with Section
6.2(b)) bears to the total balance in all such Accounts in order that
each Account shall proportionately benefit from any earnings or
appreciation in the value of the Fund assets in which such Account is
invested or proportionately suffer any losses or depreciation in the
value of the Fund assets in which such Account is invested. Subject
to Section 13, each Participant shall have a ratable interest in all
assets of the Fund.
6.2(b) ALLOCATION PROCEDURES. The Plan Administrator shall
establish nondiscretionary allocation procedures for purposes of the
allocation of Fund Earnings under Section 6.2(a), which procedures
shall be set forth in writing with the records of this Plan. If so
specified in such procedures, the balance in each Account shall be
determined after adjusting for all or a portion of the contributions
and other amounts credited to or debited from such Account since the
preceding Valuation Date. Further, if so provided in such allocation
procedures, Fund Earnings shall not be allocated to any forfeiture or
to the balance in any suspense account described in Section 7.2(b).
6.3 ALLOCATION OF CONTRIBUTIONS AND FORFEITURES. Subject to the
limitations in Section 7, the Forfeitures (and any amount deemed to be a
Forfeiture under the terms of this Plan) and the contributions shall be
allocated (and posted) in accordance with the following rules:
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<PAGE> 54
6.3(a) PROFIT SHARING PLAN.
6.3(a)(1) NONINTEGRATED. If this Plan is adopted as a
Profit Sharing Plan and the nonintegrated allocation
formula is specified in the Adoption Agreement, the
Forfeitures and the Employer Contribution for each Plan
Year shall be allocated (and posted) as of the last day of
such Plan year to the Employer Account of each Active
Participant in the same ratio that each Active
Participant's Compensation for such Plan Year bears to the
total Compensation for all Active Participants for such
Plan Year.
6.3(a)(2) INTEGRATED. If this Plan is adopted as a
Profit Sharing Plan and the integrated allocation formula
is specified in the Adoption Agreement, the Forfeitures and
the Employer Contributions shall be allocated (and posted)
as of the last day of each Plan Year to the Employer
Account of each Active Participant in accordance with the
following:
6.3(a)(2)(i) STEP ONE. First, the lesser of (A)
the sum of the Employer Contribution and Forfeitures
for such Plan Year or (B) the Integration Amount for
such Plan Year shall be allocated to the Employer
Account of each Active Participant in the same ratio
that the sum of the total Compensation and Excess
Compensation of each Active Participant for such Plan
Year bears to the sum of the total Compensation and
Excess Compensation of all Active Participants in
such Plan Year.
6.3(a)(2)(ii) STEP TWO. Second, the remaining
Employer Contribution and the Forfeitures, if any,
for such Plan Year shall be allocated to the Employer
Account of each Active Participant (whether or not he
or she had Excess Compensation) in the same ratio
that each Active Participant's total Compensation for
such Plan Year bears to the total Compensation of all
Active Participants for such Plan Year.
6.3(a)(2)(iii) SPECIAL DEFINITIONS. For purposes
of this Section 6.3(a)(2),
6.3(a)(2)(iii)(A) "Integration Amount" means
the product of (1) the total Compensation and the
total Excess Compensation of all Active Participants
and (2) the Integration Percentage specified in the
Adoption Agreement, but in no event shall the
Integration Percentage exceed the Maximum Disparity
Rate for any Plan Year beginning after December 31,
1988.
6.3(a)(2)(iii)(B) "Excess Compensation" means
the amount, if any, of a Participant's Compensation
for such Plan Year which exceeds the Integration
Level for such Plan Year.
6.3(a)(2)(iv) TOP-HEAVY. If this Plan is a Top-Heavy
Plan for any Plan Year, the allocation formula in
Section 12.3(h)(1) shall apply in lieu of the
formula in this Section 6.3(a)(2) for such Plan
Year.
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<PAGE> 55
6.3(b) MONEY PURCHASE PENSION PLAN. If this Plan is adopted as a
Money Purchase Pension Plan, the Forfeitures and the Employer
Contribution made under Section 5.2 (as adjusted, if applicable, in
accordance with Section 12.3(h)(2) for a Top-Heavy Plan) shall be
allocated (and posted) as of the last day of each Plan Year to the
Employer Account of each Active Participant in accordance with the
formula specified in the Adoption Agreement. If Forfeitures are
applied to reduce the Employer Contribution and the Forfeitures
available under Section 8.2(e) for any Plan year exceed the
contribution specified in the Adoption Agreement for such Plan Year,
such excess shall be held in a separate account and shall be applied
in full as a Forfeiture to offset such contributions in the future
until such account is exhausted under this Section 6.3(b). If
Forfeitures are to be allocated to Active Participants, such
Forfeitures shall be allocated (and posted) to the Employer Account of
each Active Participant in the same ratio that such Active
Participant's Compensation for such Plan Year bears to the total
Compensation of all such Active Participants for such Plan Year.
6.3(c) 401(K) PLAN. If this Plan is adopted as a 401(k) Plan,
Forfeitures and contributions made under Section 5.3 shall be
allocated (and posted) in accordance with the following:
6.3(c)(1) ELECTIVE DEFERRALS AND EMPLOYER
CONTRIBUTIONS. Elective Deferrals made on a Participant's
behalf for the period ending on each Valuation Date shall
be credited to the Participant's Elective Deferral Account
as of such Valuation Date and the Employer Contributions
made by a Participant for such period shall be credited to
the Participant's Employee Account as of such Valuation
Date.
6.3(c)(2) MATCHING CONTRIBUTIONS AND QUALIFIED MATCHING
CONTRIBUTIONS.
6.3(c)(2)(i) ALLOCATION. Matching Contributions
and Qualified Matching Contributions made on a
Participant's behalf shall be credited to the
Participant's Matching Account and Qualified Matching
Account, respectively,
6.3(c)(2)(i)(A) STANDARD OPTION. as of the
last day of each Plan Year or
6.3(c)(2)(i)(B) ALTERNATIVE. only as of
each Allocation Date specified in the
Adoption Agreement.
6.3(c)(2)(ii) FORFEITURES. Forfeitures
attributable to Matching Accounts shall be allocated
or applied in accordance with the following rules:
provided, no Forfeitures attributable to Excess
Aggregate Contributions under Section 7.5(d) shall
be allocated to the Account of any Highly Compensated
Employee:
6.3(c)(2)(ii)(A) FORFEITURES TO REDUCE
MATCHING CONTRIBUTION (STANDARD OPTION).
Forfeitures attributable to Matching Accounts
shall be applied to reduce the Matching
Contributions for the applicable Allocation
Date (as specified in Section 8.2 and the
Adoption Agreement). If the Forfeitures
exceed the Matching Contribution specified in
the Adoption Agreement for any Allocation
Date, such excess shall be held in a separate
account and shall be applied in full as a
Forfeiture to offset
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<PAGE> 56
Matching Contributions as of the next
Allocation Date (and succeeding Valuation
Dates) until such account is exhausted under
this Section 6.3(c)(2).
6.3(c)(2)(ii)(B) FORFEITURES TO BE
ALLOCATED (ALTERNATIVE). If so specified in
the Adoption Agreement, Forfeitures
attributable to Matching Accounts shall be
allocated (and posted)
(I) as of the last day of such Plan
year to the Matching Account of
eachActive Participant in the same
ratio that such Active Participant's
Compensation for such Plan Year
bears to the total Compensation of
all such Active Participants for
such Plan Year, or
(II) in accordance with the formula
specified in the Adoption Agreement
for a nonstandardized Plan.
6.3(c)(3) QUALIFIED NONELECTIVE CONTRIBUTIONS.
Qualified Nonelective Contributions made on behalf of a
Participant shall be credited to the Participant's
Qualified Nonelective Account
(i) STANDARD OPTION. as of the last day of each
Plan Year or
(ii) ALTERNATIVE. only as of each Allocation Date
specified in the Adoption Agreement.
6.3(c)(4) DISCRETIONARY EMPLOYER CONTRIBUTION.
(i) ALLOCATION. As of the last day of each Plan
Year, the Employer Contribution, if any, for such
Plan Year shall be allocated (and posted) to the
Employer Account of each Active Participant
(A) STANDARD OPTION. in the
nonintegrated method described in Section
6.3(a)(1).
(B) ALTERNATIVE. If so specified in the
Adoption Agreement, in the integrated method
described in Section 6.3(a)(2).
(ii) FORFEITURES. Forfeitures attributable to
Employer Accounts shall be allocated or applied in
accordance with the following:
(A) STANDARD OPTION. Forfeitures
attributable to Employer Accounts shall be
allocated (and posted) as of the last day of
each Plan Year to the Employer Account of
each Active Participant in the same manner as
the Employer Contribution under Section
6.3(c)(4)(i).
(B) ALTERNATIVE. If so specified in the
Adoption Agreement, Forfeitures attributable
to Employer Accounts shall be
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<PAGE> 57
(I) applied to reduce Matching
Contributions, Qualified
Matching Contributions, and
Qualified Nonelective
Contributions, for the
applicable Allocation Date
(as specified in Section 8.2
and the Adoption Agreement)
and succeeding Allocation
Dates, if necessary, or
(II) allocated (and posted) in
accordance with the formula
specified in the Adoption
Agreement for a
nonstandardized Plan.
6.3(d) TARGET BENEFIT PENSION PLAN. If this Plan is adopted as a
Target Benefit Pension Plan, the Forfeitures and the Employer
Contribution actually made under Section 5.4 for each Plan Year shall
be allocated (and posted) as of the last day of each Plan Year to the
Employer Account of each Active Participant as specified in the
Adoption Agreement. The Forfeitures for each Plan Year shall be
applied to reduce the Employer Contribution for such Plan Year. If
Forfeitures for any Plan Year exceed the Employer Contributions
determined under Section 5.4 for such Plan Year, such excess shall be
held in a separate account and shall be applied in full to offset
Employer Contributions in the future until such account is exhausted
under this Section 6.3(d).
6.3(e) TOP-HEAVY MINIMUM ALLOCATION. If this Plan is a Top-Heavy
Plan (as defined in Section 12), the minimum allocation required to
be made under this Plan under Section 12.3, if any, shall be
allocated (and posted) as of the last day of the Plan Year (1) to the
Employer Account of each Participant who is not an Active Participant
but for whom a minimum allocation is required under Section 12.3 and
(2) to each Active Participant for whom a minimum allocation is
required to be made in this Plan under Section 12.3 to the extent
such minimum allocation is not otherwise satisfied by the allocation
under this Section 6.3. If this Plan is adopted as a Profit Sharing
Plan, the minimum allocation may be made by reallocating the Employer
Contributions and Forfeitures allocated under Section 6.3(a) in a
manner which satisfies this Section 6.3(e) or by contributing an
additional amount which will be allocated in accordance with this
Section 6.3(e). If this Plan is adopted as a Money Purchase Pension
Plan, a Target Benefit Pension Plan or a 401(k) Plan, an additional
Employer Contribution shall be made to satisfy this Section 6.3(e).
6.3(f) ROLLOVER CONTRIBUTIONS. Rollover Contributions made by a
Participant during the period ending on each Valuation Date shall be
credited to the Participant's Rollover Contribution Account as of such
Valuation Date.
6.4 ALLOCATION REPORT. The Plan Administrator shall maintain records of
the allocations and adjustments made to Accounts under this Section 6 and
shall at least annually prepare and forward to each such Participant and
Beneficiary a statement which shows the new balance in such person's Account.
6.5 ALLOCATION CORRECTIONS. If an error or omission is discovered in any
Account, then as of this first Valuation Date in the Plan Year in which the
error or omission is discovered, the Plan Administrator shall make (and post)
an adjustment to such Account as the Plan Administrator deems necessary to
remedy in an equitable manner such error or omission.
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SECTION 7. STATUTORY LIMITATIONS ON ALLOCATIONS.
7.1 EFFECTIVE DATE. Except as otherwise expressly provided, this Section
7 shall be effective retroactive to Plan Years beginning on or after January 1,
1987.
7.2 LIMITATIONS ON ANNUAL ADDITIONS UNDER CODE Section 415.
7.2(a) SPECIAL DEFINITIONS. For purposes of this Section 7.2 the
terms defined in this Section 7.2(a) shall have the meanings shown
opposite such terms.
7.2(a)(1) ANNUAL ADDITIONS means for each Participant
for any Limitation Year
(i) the sum of the employer contributions,
forfeitures, and nondeductible employee contributions
creditable (without regard to the application of this
Section 7.2) to the Participant's account under this
Plan or under any other defined contribution plan
(including Master or Prototype Plan and any defined
benefit plan which provides for employee
contributions) maintained by the Employer for such
Limitation Year; and for this purpose, any Excess
Amount allocated under Section 7.2(b), any Excess
Elective Deferrals under Section 7.3 (unless such
excess is distributed by the deadline set forth in
Section 7.3(d), any Excess Contributions under
Section 7.4 and any Excess Aggregate Contributions
under Section 7.5 shall be considered Annual
Additions for such Limitation Year;
(ii) amounts allocated on behalf of such
Participant after March 31, 1984 to an individual
medical account (as defined in Code Section
415(1)(2)) which is part of a pension or annuity plan
maintained by the Employer; and
(iii) amounts derived from contributions paid or
accrued after December 31, 1985 in taxable years
ending after such date which are attributable to
post-retirement medical benefits allocated to the
separate account of a key employee (as defined in
Code Section 419A(d)(3) under a welfare benefit fund
(as described in Code Section 419(e)) maintained by
the Employer; and
(iv) allocations under a simplified employee
pension (as defined in Code Section 408(k).
7.2(a)(2) COMPENSATION means for a Self-Employed
Individual, such individual's Earned Income, and for each
other Employee
(i) STANDARD OPTION. Compensation reportable on
Form W-2 as defined in Section 2.10(a)(1), or
(ii) ALTERNATIVE. If so specified in the Adoption
Agreement,
(A) compensation subject to withholding
as defined in Section 2.10(a)(2)(i), or
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(B) the Employee's wages, salaries, fees
for professional services and other amounts
received (without regard to whether or not an
amount t is paid in cash) for personal
services actually rendered in the course of
employment with the Employer maintaining the
Plan to the extent that the amounts are
includable in gross income during the
Limitation year (including but not limited to
commissions paid salesmen, compensation for
services on the basis of a percentage of
profits, commissions on insurance premiums,
tips, bonuses, fringe benefits and
reimbursements or other expense allowances
under a nonaccountable plan as described in
Section 1.62-2(c) of the Federal Income Tax
Regulations). Compensation shall not include
the following:
(I) Employer contributions to a
plan of deferred compensation which
are not includable in the
Participant's gross income for the
taxable year in which contributed,
or Employer contributions under any
simplified employee pension plan, or
any distributions from a plan of
deferred compensation;
(II) amounts realized from the
exercise of a non-qualified stock
option, or when restricted stock (or
property) held by the Participant
either becomes freely transferable
or is no longer subject to a
substantial risk of forfeitures;
(III) amounts realized from the sale,
exchange or other disposition of
stock acquired under a qualified
stock option; and
(IV) other amounts which receive
special tax benefits, or
contributions made by the Employer
(whether or not under a salary
reduction agreement) towards the
purchase of an annuity contract
described in Code Section 403(b)
(whether or not the contributions
are actually excludable from the
gross income of the Participant).
For purposes of applying the limitations of this Section 7.2, an Employee's
Compensation for Limitation Years beginning on and after the Final Compliance
Date shall not include any Compensation which is accrued for such Limitation
Year.
However, for purposes of applying the limitations of this Section 7.2 to a
Participant in a defined contribution plan who is permanently and totally
disabled (as defined in Code Section 22(e)(3), the term "Compensation" shall
mean the compensation such Participant would have received for the Limitation
Year if the Participant had been paid at the Participant's rate of Compensation
(as defined in this Section 7.2(a)(2) paid immediately before becoming
permanently and totally disabled, and, further, such imputed compensation for
the disabled Participant may be taken into account only if the Participant is
not a Highly Compensated Employee and contributions made on behalf of such
Participant are nonforfeitable when made.
7.2(a)(3) DEFINED BENEFIT FRACTION means a fraction,
(i) the numerator of which shall be the sum of the
Participant's Projected Annual Benefits under all defined
benefit
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plans (whether or not terminated) maintained by the
Employer, and (ii) the denominator of which shall be the
lesser of (A) 125% of the dollar limitation determined for
the Limitation Year under Code Section 415(b) and Section
415(d) or (B) 140% of the Participant's Highest Average
Compensation, including any adjustments under Code Section
415(b). However, 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 and which individually and in the aggregate
satisfied the requirements of Code Section 415 for all
Limitation Years beginning before January 1, 1987, the
denominator of such fraction shall be not less than 125% of
the sum of the annual benefits under such plans which the
Participant had accrued as of the end of the last
Limitation Year beginning before January 1, 1987
disregarding any changes in the terms and conditions in the
plan after May 5, 1986. Notwithstanding the foregoing,
"100%" shall be substituted for "125%" in any Limitation
Year for which this Plan is a Top-Heavy Plan (as defined in
Section 12) unless otherwise specified in the Adoption
Agreement.
7.2(a)(4) DEFINED CONTRIBUTION DOLLAR LIMITATION means
for each Limitation Year the greater of (i) $30,000 or (ii)
one-fourth of the defined benefit dollar limitation under
Code Section 415(b)(1) as in effect for such Limitation
Year.
7.2(a)(5) DEFINED CONTRIBUTION FRACTION means a
fraction, (i) the numerator of which shall (subject to the
adjustment rules set forth below) be the sum of the Annual
Additions credited to the Participant's accounts under all
defined contribution plans (whether or not terminated)
maintained by the Employer for the current and all prior
Limitation Years (including the Annual Additions
attributable to the Participant's nondeductible employee
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
described in Code Section 419(e) and all individual
medical accounts (as described in Code Section 415(l)(2)
maintained by the Employer and (ii) the denominator of
which shall be the sum of the Maximum Aggregate Amounts for
the current and all prior Limitation Years of service with
the Employer (without regard to whether a defined
contribution plan was maintained by the Employer). The
numerator of such fraction shall be adjusted 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 contribution plans maintained by the
Employer which were in existence on May 6, 1986 and the sum
of this fraction and the Defined Benefit Fraction would
otherwise exceed 1.0 under the terms of this Plan. The
adjustment shall be made by taking an amount equal to the
product of (A) the excess of the sum of the fractions over
1.0 times (B) the denominator of this fraction, and by
permanently subtracting such product from the numerator of
this fraction. The adjustment shall be calculated using
the fractions as they would be computed as of the end of
the last Limitation Year beginning before January 1, 1987
and disregarding any changes in the terms and conditions of
the Plan made after May 5, 1986 but using the Code Section
415 limitation applicable to the first Limitation Year
beginning on or after January 1, 1987. The Annual Addition
for any Limitation year beginning before January 1, 1987
shall not be computed to treat all employee contributions
as an Annual Addition.
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<PAGE> 61
7.2(a)(6) EMPLOYER means the Employer that adopts this
Plan and all members of a controlled group of corporations
(as defined in Code Section 414(b) as modified by Code
Section 415(h)), all commonly controlled trades or
businesses (as defined in Code Section 414(c) as modified
by Code Section 415(h) or affiliated service groups (as
defined in Code Section 414(m) of which the adopting
Employer is a part and any other entity required to be
aggregated with the Employer pursuant to the regulations
under Code Section 414(o).
7.2(a)(7) EXCESS AMOUNT means the excess of a
Participant's Annual Additions for the Limitation Year over
the Maximum Permissible Amount.
7.2(a)(8) HIGHEST AVERAGE COMPENSATION means the
Participant's average Compensation for the three
consecutive Plan Years of employment with the Employer
(without regard to whether such Plan Years were before the
Effective Date) that produces the highest average.
7.2(a)(9) LIMITATION YEAR means
7.2(a)(9)(i) STANDARD OPTION. the Plan Year or
7.2(a)(9)(ii) ALTERNATIVE. the alternative 12
consecutive month period specified in the Adoption
Agreement.
All qualified plans maintained by the Employer must use the
same Limitation Year. If the Limitation Year is amended to
a different 12 consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in
which the amendment is made.
7.2(a)(10) MASTER OR PROTOTYPE PLAN means a plan the
form of which is the subject of a favorable opinion letter
from the Internal Revenue Service.
7.2(a)(11) MAXIMUM AGGREGATE AMOUNT means for any
Limitation Year the lesser of (i) 125% of the dollar
limitation determined under Code Section 415(c)(1)(A) or
(ii) 35% of the Participant's Compensation for such year.
Notwithstanding the foregoing, "100%" shall be substituted
for 125% in any Limitation year for which this Plan is a
Top-Heavy Plan (as defined in Section 12) unless otherwise
specified in the Adoption Agreement
7.2(a)(12) MAXIMUM PERMISSIBLE AMOUNT means the lesser
of (i) the Defined Contribution Dollar Limitation or (ii)
25% of a Participant's Compensation for the Limitation
Year; provided,
(A) the compensation limitation referred
to in clause (ii) shall not apply to any
contribution for medical benefits (within the
meaning of Code Section 401(h) or Section
419A(f)(2)) which is otherwise treated as an
Annual Addition under Code Section 415(l)(l)
or Section 419(A)(d)(2); and
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(B) 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
shall not exceed the Defined Contribution
Dollar Limitation multiplied by a fraction,
the numerator of which shall be the number of
months in the short Limitation Year and the
denominator of which shall be 12.
7.2(a)(13) PROJECTED ANNUAL BENEFIT means the annual
retirement benefit (adjusted to an actuarially equivalent
straight life annuity if such benefit is expressed in a
form other than a straight life annuity or qualified joint
and survivor annuity) to which a Participant would be
entitled under the terms of a defined benefit plan assuming
(i) the Participant will continue employment
until normal retirement age under the plan (or
current age, if later), and
(ii) the Participant's Compensation for the
current Limitation Year and all other relevant
factors used to determine benefits under the plan
will remain constant for all future Limitation Years.
7.2(b) LIMITATION IF NO OTHER PLANS. If a Participant does not
participate in, and has never participated in, another qualified plan
maintained by the Employer or a welfare benefit fund (as described in
Code Section 419(e) or individual medical account (as described in
Code Section 415(l)(2) maintained by the Employer which provides an
Annual Addition sa defined in Section 7.2(a)(1) or a simplified
employee pension (as defined in Code Section 408(k)) maintained by
the Employer, the amount of Annual Additions which actually may be
credited to the Account of any Participant for any Limitation Year
shall not exceed the lesser of the Maximum Permissible Amount or any
other limitation set forth in this Plan. If the Employee Contribution
that would otherwise be credited to the Participant's Account would
cause the Annual Additions for the Limitation Year to exceed the
Maximum Permissible Amount, such amount shall be reduced so that the
Annual Additions actually credited for the Limitation Year shall equal
the Maximum Permissible Amount. If pursuant to Section 7.2(f) or as
a result of the allocation of Forfeitures a Participant's Annual
Additions under this Plan would result in an Excess Amount, such
Excess Amount shall be disposed of as follows:
7.2(b)(1) PROFIT SHARING PLAN. If this Plan is adopted
as a Profit Sharing Plan,
7.2(b)(1)(i) such Excess Amount shall be deemed a
Forfeitures which shall be allocated and reallocated
as provided in Section 6.3(a) subject to the
restrictions of this Section 7.2 among the Employer
Accounts of the remaining Active Participants until
such amount has been allocated in its entirety; and
7.2(b)(1)(ii) if the restrictions in this Section
7.2 apply before such amount has been reallocated in
its entirety, as the final allocation step, such
unallocable Excess Amount shall be transferred to a
suspense account.
7.2(b)(2) MONEY PURCHASE PENSION PLAN OR TARGET BENEFIT
PENSION PLAN. If this Plan is adopted as a Money Purchase
Pension Plan or Target Benefit Pension Plan,
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<PAGE> 63
7.2(b)(2)(i) STANDARD OPTION. such Excess Amount
shall be held unallocated in a suspense account which
shall be applied to offset future Employer
Contributions for Active Participants in the next
Limitation Year (and in each succeeding Limitation
Year, if necessary).
7.2(b)(2)(ii) ALTERNATIVE. if so specified in the
Adoption Agreement,
7.2(b)(2)(ii)(A) for any Participant
who is an Active Participant at the end of
the Limitation Year, such Excess Amount shall
be held unallocated in a suspense account
which shall be applied to offset the Employer
Contribution for such Active Participant in
the next Limitation Year (and in each
succeeding Limitation Year, if necessary);
and
7.2(b)(2)(ii)(B) for any Participant
who is not an Active Participant
at the end of such Limitation Year, such
Excess Amount shall be held unallocated in a
suspense account which shall be applied to
offset future Employer Contributions for all
remaining Active Participants in the next
Limitation Year (and in each succeeding
Limitation Year if necessary).
7.2(b)(3) 401(K) PLAN. If this Plan is adopted as a
401(k) Plan, any Elective Deferrals and Employee
Contributions made by the Participant during the Limitation
Year (and, to the extent required under regulations, gains
attributable to such Employee Contributions) shall be
refunded to the extent such refund would reduce the Excess
Amount and, if an Excess Amount still exists after such
refund,
7.2(b)(3)(i) any such Excess Amount which is
attributable to discretionary Employer Contributions
shall be disposed of in the same manner as an Excess
Amount under a Profit Sharing Plan as described in
Section 7.2(b)(1), and
7.2(b)(3)(ii) any such Excess Amount which is
attributable to a Matching Contribution, Qualified
Nonelective Contribution or Qualified Matching
Contribution shall be held unallocated in a suspense
account which shall be used to offset future Matching
Contributions, Qualified Nonelective Contributions or
Qualified Matching Contributions in the next
Limitation Year (and in each succeeding Limitation
Year if necessary).
7.2(b)(4) SUSPENSE ACCOUNT. A suspense account
established pursuant to this Section 7.2(b) shall not be
subject to any allocation of Fund Earnings under Section
6.2, and the balance of such account shall be returned to
the Employer in the event this Plan is terminated prior to
the date such account has been allocated in its entirety as
a Forfeiture. In no event shall Excess Amounts be
distributed to Participants or former Participants.
7.2(c) LIMITATION IF OTHER DEFINED CONTRIBUTION MASTER OR
PROTOTYPE PLAN. This Section 7.2(c) applies if, in addition to this
Plan, a Participant is covered under another defined contribution
Master or Prototype Plan maintained by the Employer or a welfare
benefit fund (as described in Code Section 419(c)) or an individual
medical account (as described in Code Section 415(l)(2) maintained by
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<PAGE> 64
the Employer which provides for an Annual Addition as defined in
Section 7.2(a)(1)) or a simplified employee pension (as defined in
Code Section 408(k)) maintained by the Employer during any Limitation
Year. The Annual Additions which may be credited to a Participant's
Account under this Plan for any such Limitation Year shall not exceed
the Maximum Permissible Amount reduced by the Annual Additions
credited to a Participant's account under such other defined
contribution Master or Prototype Plan and welfare benefit funds for
the same Limitation Year.
7.2(c)(1) If for any Limitation Year (1) the Employer
also maintains another defined contribution Paired Plan,
(2) the Employer does not maintain any other defined
contribution Master or Prototype Plan (other than such
Paired Plan) and (3) a Participant's Annual Additions under
such Paired Plans would result in an Excess Amount for such
Limitation Year, the allocation adjustment required to
satisfy the limitations of Code Section 415 shall be made
under such Plans in the following order:
(i) STANDARD OPTION. first, under the Profit
Sharing Plan, if any; second under the Money Purchase
Pension Plan, if any; third, under the Target Benefit
Pension Plan, if any; and finally, under the 401(k)
Plan, if any; or
(ii) ALTERNATIVE. in the alternative order
specified in the Adoption Agreement.
7.2(c)(2) If the Annual Additions with respect to any
Participant under such other defined contribution Master or
Prototype Plan (other than a defined contribution Paired
Plan) and welfare benefit funds maintained by the Employer
are less than the Maximum Permissible Amount and the
Employer Contributions that would otherwise be contributed
or allocated to the Participant's Account under this Plan
would cause the Annual Additions for the Limitation Year to
exceed this limitation, the amount contributed or allocated
shall be reduced so that the Annual Additions under all
such plans and funds for the Limitation Year shall equal
the Maximum Permissible Amount.
7.2(c)(3) If the Annual Additions with respect to the
Participant under such other defined contribution Master
and Prototype Plan (other than a defined contribution
Paired Plan) and welfare benefit funds in the aggregate are
equal to or greater than the Maximum Permissible Amount, no
amount shall be credited to the Participant's Account under
this Plan for the Limitation Year.
7.2(c)(4) If pursuant to Section 7.2(f) or as a result
of the allocation or Forfeitures a Participant's Annual
Additions under this Plan and such other defined
contribution Master or Prototype Plan (other than a Paired
Plan) and welfare benefit funds would result in an Excess
Amount for any Limitation Year,
7.2(c)(4)(i) the Excess Amount shall be deemed to
consist of the Annual Additions last allocated and
the Annual Additions attributable to a welfare
benefit fund or an individual medical account shall
be deemed to have been allocated prior to all other
Annual Additions, and
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<PAGE> 65
7.2(c)(4)(ii) if an Excess Amount was allocated to
a Participant on an allocation date of this Plan
which coincides with an allocation date of such other
Master or Prototype Plan, then the Excess Amount
attributed to this Plan shall be the product of
7.2(c)(4)(ii)(A) the total Excess
Amount allocated as of such date times
7.2(c)(4)(ii)(B) a fraction, the
numerator of which shall be the Annual
Additions allocated to the Participant for
the Limitation Year as of such date under
this Plan and the denominator of which is the
total Annual Additions allocated to the
Participant for the Limitation Year as of
such date under this and all such other
defined contribution Master or Prototype
Plans.
7.2(c)(5) Any Excess Amount attributed to this
Plan will be disposed of in the manner described in Section
7.2(b).
7.2(d) LIMITATION IF OTHER DEFINED CONTRIBUTION PLAN. If any
Participant is covered under another qualified defined contribution
plan maintained by the Employer which is not a Master or Prototype
Plan, the Annual Additions which may be credited to the Participant's
Account under this Plan for any Limitation Year shall be limited
7.2(d)(1) STANDARD OPTION. as specified in Section
7.2(c) as though the other plan was a Master or Prototype
Plan or
7.2(d)(2) ALTERNATIVE. under the alterative method
specified in the Adoption Agreement for limiting the Annual
Additions under this Plan.
7.2(e) LIMITATION IF OTHER DEFINED BENEFIT PLAN. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan
(other than a defined benefit Paired Plan) covering any Participant of
this Plan, the sum of the Participant's Defined Benefit Fraction and
Defined Contribution Fraction shall not exceed 1.0 in any Limitation
Year. The Annual Additions which may be credited to any Participant's
Account under this Plan for any Limitation Year shall be limited as
specified in the Adoption Agreement. If the Employer maintains a
defined benefit Paired Plan, any adjustments to satisfy the
requirements of Code Section 415(e) shall be made only under such
defined benefit Paired Plan.
7.2(f) COMPENSATION FOR DETERMINATION OF MAXIMUM PERMISSIBLE
AMOUNT. Prior to determining a Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a reasonable
estimation of the Participant's Compensation for the Limitation Year
and, if applicable, a reasonable estimation of the amount of elective
deferrals (within the meaning of Code Section 402(g)(3)) that the
Participant may make for the Limitation Year, uniformly determined for
all similarly situated Participants. As soon as is administratively
feasible after the end of the Limitation Year, the Maximum Permissible
Amount for the Limitation Year shall be determined on the basis of the
Participant's actual Compensation for the Limitation Year.
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7.3 INDIVIDUAL LIMITATION ON ELECTIVE DEFERRALS UNDER CODE SECTION 402(G).
7.3(a) GENERAL. A Participant's Elective Deferrals under this
Plan and all other qualified plans, contracts and arrangements
maintained by the Employer or an Affiliate during any taxable year of
the Participant shall not exceed the dollar limitation under Code
Section 402(g) in effect at the beginning of such taxable year.
7.3(b) ELECTIVE DEFERRALS. For purposes of the dollar limitation
under Code Section 402(g) and this Section 7.3, the term "Elective
Deferrals" shall include all employer contributions made on behalf of
a Participant pursuant to an election to defer under any qualified
cash or deferred arrangement as described in Code Section 401(k), any
simplified employee pension cash or deferred arrangement as described
in Code Section 402(h)(1)(B), any plan described under Code Section
501(c)(18), and any salary reduction agreement for the purchase of an
annuity contract under Code Section 403(b). However, the term shall
not include Elective Deferrals which are properly distributed to the
Participant from this Plan under Section 7.2 or such other plans or
arrangements to correct for excess annual additions.
7.3(c) EXCESS ELECTIVE DEFERRALS. For purposes of this Section
7.3, the term "Excess Elective Deferrals" means for each Participant
the Elective Deferrals that are includable in gross income under Code
Section 402(g) to the extent the Participant's Elective Deferrals for
a taxable year exceed the dollar limitations under Code Section
402(g) for such taxable year.
7.3(d) DISTRIBUTION OF EXCESS ELECTIVE DEFERRALS. Notwithstanding
any other provision of this Plan restricting the timing of
distributions, Excess Elective Deferrals, plus any income and minus
any loss allocable thereto, shall be distributed no later than April
15 of any calendar year to Participants (1) whose Excess Elective
Deferrals for the preceding taxable year were assigned to this Plan
and (2) who claim (or are deemed to have claimed) such allocable
Excess Elective Deferrals for such taxable year in accordance with the
claims procedure set forth in Section 7.3(f).
7.3(e) DETERMINATION OF INCOME OR LOSS. A corrective distribution
of Excess Elective Deferrals under this Section 7.3 shall include the
income or loss allocable to such Excess Elective Deferrals for the
Participant's taxable year in which such excess occurred and, if so
specified in the Adoption Agreement, for the period between the end of
such taxable year and the date of distribution ("gap period"). The
income or loss for such taxable year and gap period, if applicable,
shall be determined in accordance with the regulations under Code
Section 402(g). In lieu of using the safe harbor method or the
alternative method in the regulations for allocating such income or
loss, the Plan Administrator may use any reasonable method for
computing such income or loss, provided that such method does not
violate Code Section 401(a)(4), is used consistently for all
Participants and for all corrective distributions under the Plan for
the Plan Year, and is used by the Plan for allocating income or loss
to Participant's Accounts.
7.3(f) CLAIMS PROCEDURE.
7.3(f)(1) GENERAL. A Participant may assign to this
Plan any Excess Elective Deferral made during a taxable
year by filing a claim with the Plan Administrator on or
before
7.3(f)(1)(i) STANDARD OPTION. March 1 or
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7.3(f)(1)(ii) ALTERNATIVE. The alternative date
for filing such claims specified in the Adoption
Agreement.
Unless otherwise provided in administrative procedures
established by the Plan Administrator, such claim shall be
in writing, shall specify the dollar amount of the
Participant's Excess Elective Deferrals assigned to this
Plan for such taxable year, and shall be accompanied by the
Participant's written statement that such amounts, if not
distributed to such Participant, will exceed the limit
imposed on the Participant by Code Section 402(g) for the
taxable year in which the deferral occurred.
7.3(f)(2) DEEMED CLAIM. A Participant automatically
shall be deemed to have filed a claim under this Section
7.3(f) to the extent that such Excess Elective Deferrals
occurred solely as a result of Elective Deferrals under
this Plan and any other plans of the Employer and the
Affiliates, unless the Employer specifies in the Adoption
Agreement that such Excess Elective Deferrals shall be
distributed from one or more of such other plans.
7.4 LIMITATIONS ON ELECTIVE DEFERRALS FOR HIGHLY COMPENSATED EMPLOYEES
UNDER CODE SECTION 401(K).
7.4(a) SPECIAL DEFINITIONS. For purposes of this Section 7.4,
the terms defined in this Section 7.4(a) shall have the meanings
shown opposite such terms.
7.4(a)(1) ACTUAL DEFERRAL PERCENTAGE. Means for each
Plan Year for each Participant who is an Eligible Employee
at any time during such Plan Year the ratio (expressed as a
percentage and determined in accordance with Section
7.4(c)) of Employer Contributions made on behalf of such
Participant for such Plan Year to such Participant's
Compensation for such Plan Year. The Actual Deferral
Percentage of a Participant who is an Eligible Employee,
but does not make an Elective Deferral and does not receive
an allocation of a Qualified Nonelective Contribution or a
Qualified Matching Contribution, shall be zero.
7.4(a)(2) ADP (OR AVERAGE ACTUAL DEFERRAL PERCENTAGE).
Means for each Plan Year separately for the group of
Participants who are Highly Compensated Employees during
such Plan Year and for the group of Participants who are
Nonhighly Compensated Employees during such Plan Year, the
average (expressed as a percentage) of the Actual Deferral
Percentages of the Participants in each such group who are
Eligible Employees at any time during such Plan Year.
7.4(a)(3) EMPLOYER CONTRIBUTIONS. Means for purposes
of determining a Participant's Actual Deferral Percentage
for each Plan Year, the sum of (i) the Elective Deferrals
made pursuant to the Participant's deferral election,
including Excess Elective Deferrals (as defined in Section
7.3(c)) of Highly Compensated Employees, but excluding
Excess Elective Deferrals of Nonhighly Compensated
Employees that arise solely from Elective Deferrals made
under this Plan or any other plans of the Employer and the
Affiliates, and excluding Elective Deferrals that are taken
into account in the ACP test described in Section 7.5(b)
(provided the ADP test is satisfied both
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with and without exclusion of such Elective Deferrals), and
(ii) at the election of the Employer, Qualified Nonelective
Contributions and Qualified Matching Contributions.
7.4(a)(4) EXCESS CONTRIBUTIONS. Means for each Plan
Year for each Highly Compensated Employee the excess of the
aggregate amount of Employer Contributions actually taken
into account in computing the Average Deferral Percentage
of such Highly Compensated Employee for such Plan Year over
the maximum amount of such contributions permitted for such
Plan Year under the ADP limit as set forth in Section
7.4(b) (determined by reducing Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions made on behalf of Highly Compensated
Employees in order of their Actual Deferral Percentages,
beginning with the highest of such percentages).
7.4(a)(5) HIGHLY COMPENSATED EMPLOYEE. Means any
Employee who is either a "highly compensated active
employee" or a "highly compensated former employee" as
described below.
7.4(a)(5)(i) A "highly compensated active
employee" means any Employee who performs services
for the Employer or any Affiliate during the
"determination year" and who, during the "look-back
year": (A) received compensation from the Employer
or any Affiliate in excess of $75,000 (as adjusted
pursuant to Code Section 415(d)); (B) received
compensation from the Employer or any Affiliate in
excess of $50,000 (as adjusted pursuant to Code
Section 415(d)) and was a member of the "top-paid
group" for such year; or (C) was an officer of the
Employer or any Affiliate and received compensation
during such year that is greater than 50% of the
dollar limitation in effect under Code Section
415(b)(1)(A). The term "highly compensated employee"
shall also include: (I) an Employee who is both
described in the preceding sentence if the term
"determination year" is substituted for the term
"look-back year" and is one of the 100 Employees who
received the most compensation from the Employer or
any Affiliate during the determination year; and (II)
an Employee who is a 5% owner at any time during the
look-back year or determination year. If no officer
has satisfied the compensation requirement of clause
(C) above during either a determination year or
look-back year, the highest paid officer for each
such year shall be treated as a Highly Compensated
Employee.
7.4(a)(5)(ii) A "highly compensated former
employee" means any Employee who separated (or was
deemed to have separated) from service prior to the
determination year, performs no services for the
Employer or any Affiliate during the determination
year, and was a highly compensated active employee
for either the separation year or any determination
year ending on or after the Employee's 55th birthday.
7.4(a)(5)(iii) For purposes of this definition, the
"determination year" shall mean the Plan Year and the
"look-back year" shall mean the 12-month period
immediately preceding the determination year.
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7.4(a)(5)(iv) If an Employee is, during a
determination year or look-back year, a Family Member
of either a 5% owner who is an active or former
Employee or a Highly Compensated Employee who is one
of the 10 most Highly Compensated Employees ranked on
the basis of compensation paid by the Employer during
such year ("top-ten Highly Compensated Employee");
then the Family Member and the 5% owner or top-ten
Highly compensated Employee shall be treated as a
single Employee receiving compensation and Plan
contributions or benefits equal to the sum of such
compensation and contributions or benefits of the
Family Member and the 5% owner or top-ten Highly
Compensated Employee.
7.4(a)(5)(v) The determination of who is a Highly
Compensated Employee, including the determination of
the number and identity of Employees in the top-paid
group, the top 100 Employees, the number of Employees
treated as officers and the compensation that is
considered, shall be made in accordance with Code
Section 414(q) including any available operational
transition rules and any elections provided in the
regulations under Code Section 414(q) and specified
in the Adoption Agreement.
7.4(b) ADP LIMIT. The ADP for Highly Compensated Employees for
any Plan Year shall not exceed
7.4(b)(1) the ADP for Nonhighly Compensated Employees
for such Plan Year multiplied by 1.25, or
7.4(b)(2) the ADP for Nonhighly Compensated Employees
for such Plan Year multiplied by 2, provided that the ADP
for Highly Compensated Employees does not exceed the ADP
for Nonhighly Compensated Employees by more than 2
percentage points.
7.4(c) SPECIAL RULES.
7.4(c)(1) OTHER PLANS. The Actual Deferral Percentage
for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to participate in
more than one cash or deferred arrangement maintained by
the Employer or an Affiliate shall be determined by
treating all such arrangements as a single arrangement. If
a Highly Compensated Employee participates in two or more
cash or deferred arrangements that have different plan
years, all such arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, plans which are mandatorily
disaggregated under regulations under Code Section 401(k)
shall be treated as separate.
7.4(c)(2) AGGREGATION. In the event that this Plan
satisfies the requirements of Code Section 410(b) only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Code section
only if aggregated with this Plan, then this Section 7.4
shall be applied by determining the Actual Deferral
Percentages and ADP as if all such plans were a single
plan. For Plan Years beginning on and
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after the Final Compliance Date, such plans may be
aggregated only if they have the same plan years and are
not mandatorily disaggregated under regulations under Code
Section 401(k).
7.4(c)(3) FAMILY MEMBERS. For purposes of determining
the Actual Deferral Percentage of a Participant who is a 5%
owner or one of the 10 most highly paid Highly Compensated
Employees and who is an Eligible Employee at any time
during the Plan Year, the Employer Contributions and
Compensation of such Participant shall include the Employer
Contributions and Compensation of his or her Family
Members, and such Family Members shall be disregarded as
separate Participants in determining the ADP both for
Nonhighly Compensated Employees and for Highly Compensated
Employees.
7.4(c)(4) TIMING. For purposes of determining the
Actual Deferral Percentages for any Plan Year, Elective
Deferrals, Qualified Nonelective Contributions and
Qualified Matching Contributions shall be considered made
for such Plan Year only if such contributions are allocated
as of a date within such Plan Year and are actually paid to
the Fund by the last day of the 12 month period immediately
following such Plan Year.
7.4(c)(5) RECORDS. The Plan Administrator shall
maintain records which are sufficient to demonstrate that
the Plan complied with the ADP limits, including the extent
to which Qualified Nonelective Contributions and Qualified
Matching Contributions are taken into account to satisfy
such ADP limits.
7.4(c)(6) OTHER REQUIREMENTS. The determination and
treatment of the Elective Deferrals and Actual Deferral
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
7.4(d) DISTRIBUTION OF EXCESS CONTRIBUTIONS.
7.4(d)(1) GENERAL. Notwithstanding any other provision
of this Plan restricting the timing of distributions,
Excess Contributions for any Plan Year, plus any income and
minus any loss allocable thereto, shall be distributed no
later than the last day of the immediately following Plan
Year to Participants on whose behalf such Excess
Contributions were made. If such Excess Contributions are
distributed more than 2 1/2 months after the last day of
the Plan Year in which such excess occurred, a 10% excise
tax shall be imposed under Code Section 4979 on the
Employer with respect to such excess. Such distributions
shall be made to such Participants on the basis of the
respective portions of the Excess Contributions
attributable to each such Participant. Excess
Contributions shall be allocated to Participants who are
subject to the Family Member aggregation rules under Code
Section 414(q)(6) in the manner prescribed by the
regulations under Code Section 401(k).
7.4(d)(2) DETERMINATION OF INCOME OR LOSS. A
corrective distributions of Excess Contributions under this
Section 7.4 shall include the income or loss allocable to
such Excess Contributions for the Plan Year in which such
excess occurred and, if so specified in
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<PAGE> 71
the Adoption Agreement, for the period between the end of
such Plan Year and the date of distribution ("gap period").
The income or loss for such Plan Year and gap period, if
applicable, shall be determined in accordance with the
regulations under Code Section 401(k). In lieu of using
the safe harbor method or the alternative method in the
regulations for allocating such income or loss, the Plan
Administrator may use any reasonable method for computing
such income or loss, provided that such method does not
violate Code Section 401(a)(4), is used consistently for
all Participants and for all corrective distributions under
the Plan for the Plan Year, and is used by the Plan for
allocating income or loss to Participant's Accounts.
7.4(d)(3) ORDER FOR DETERMINING EXCESS CONTRIBUTIONS.
Excess Contributions shall be determined after first
determining Excess Elective Deferrals under Section 7.3.
The Excess Contributions which would otherwise be
distributed to the Participant shall be reduced, in
accordance with regulations, by the Excess Elective
Deferrals distributed to the Participant under Section
7.3.
7.4(d)(4) ACCOUNTING FOR EXCESS CONTRIBUTIONS. Excess
Contributions shall be distributed proportionately from the
Participant's Elective Deferral Account and Qualified
Matching Account in the same ratio that such Participant's
Elective Deferrals and Qualified Matching Contributions for
the Plan Year in which such Excess Contributions were made
bears to the sum of the Participant's Elective Deferrals
and Qualified Matching Contributions for such Plan Year.
Excess Contributions shall be distributed from the
Participant's Qualified Nonelective Account only to the
extent that such Excess Contributions exceed the balance in
the Participant's Elective Deferral Account and Qualified
Matching Account. Notwithstanding the foregoing Excess
Contributions may be distributed from the applicable
subaccounts in accordance with procedures established by
the Plan Administrator provided such procedures do not
result in discrimination in favor of Highly Compensated
Employees which would be prohibited under Code Section
401(a)(4).
7.4(e) RECHARACTERIZATION. If the Employer specifies in the
Adoption Agreement that Excess Contributions may be recharacterized, a
Participant may elect to treat Excess Contributions as an amount
distributed to the Participant and then contributed as an Employee
Contribution to the Plan. Any such Excess Contribution shall remain
nonforfeitable and shall thereafter be subject to the same
distribution restrictions applicable to Elective Deferrals under
Section 9.2(b). Excess Contributions shall not be recharacterized by
a Participant to the extent that such amounts, in combination with
other Employee Contributions, would exceed any limits on Employee
Contributions set forth in the Plan or in the Adoption Agreement.
Any such recharacterization must occur no later than 2 1/2 months
after the end of the Plan Year in which such Excess Contribution
occurred and shall be deemed to occur no earlier than the date on
which the last Highly Compensated Employee is informed in writing of
the amount recharacterized and the consequences of such
recharacterization. Any Excess Contributions which are so
recharacterized shall be taxable to the Participant for the taxable
year in which the Participant would have received such amount in cash
but for the deferral election.
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7.5 LIMITATIONS ON EMPLOYEE CONTRIBUTIONS AND MATCHING CONTRIBUTIONS UNDER
CODE SECTION 401(M).
7.5(a) SPECIAL DEFINITIONS. For purposes of this Section 7.5 the
terms defined in this Section 7.5(a) shall have the meanings shown
opposite such terms.
7.5(a)(1) AGGREGATE LIMIT. means the sum of
7.5(a)(1)(i) 125% of the greater (or lesser, if
it would result in a larger Aggregate Limit) of
7.5(a)(1)(i)(A) the ADP for Nonhighly
Compensated Employees under the plan subject
to Code Section 401(k) for the plan year or
7.5(a)(1)(i)(B) the ACP for Nonhighly
Compensated Employees under the plan subject
to Code Section 401(m) for the plan year
beginning with or within the plan year of the
plan which is subject to Code Section 401(k)
and
7.5(a)(1)(ii) the lesser of
7.5(a)(1)(ii)(A) 200% of such ADP or
ACP or
7.5(a)(1)(ii)(B) two plus the
lesser (or greater, if it would result in a
larger Aggregate Limit) of such ADP or ACP.
7.5(a)(2) ACP (OR AVERAGE CONTRIBUTION PERCENTAGE).
means for each Plan Year separately for the group of
Participants who are Highly Compensated Employees during
such Plan Year and for the group of Participants who are
Nonhighly Compensated Employees during such Plan Year, the
average (expressed as a percentage) of the Contribution
Percentages of the Participants in each such group who are
Eligible Employees at any time during such Plan Year.
7.5(a)(3) CONTRIBUTION PERCENTAGE. means for each Plan
Year for each Participant who is an Eligible Employee at
any time during such Plan Year, the ratio (expressed as a
percentage and determined in accordance with Section
7.5(c)) of such Participant's Contribution Percentage
Amount for such Plan Year to such Participant's
Compensation for such Plan Year. The Contribution
Percentage of a Participant who is eligible to, but does
not, make Employee Contributions or Elective Deferrals and
who, as a result of such failure to make such
contributions, does not receive an allocation of a Matching
Contribution or Qualified Matching Contribution shall be
zero.
7.5(a)(4) CONTRIBUTION PERCENTAGE AMOUNT. means for
each Plan Year for each Participant who is an Eligible
Employee at any time during such Plan Year the sum of
7.5(a)(4)(i) the Employee Contributions, Matching
Contributions and Qualified Matching Contributions
(to the extent not taken into account for
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purposes of the ADP test described in Section 7.4)
made on behalf of such Participant for such Plan
Year, other than Matching Contributions which are
forfeited either to correct Excess Aggregate
Contributions or because the contributions to which
they relate are Excess Elective Deferrals, Excess
Contributions or Excess Aggregate Contributions,
7.5(a)(4)(ii) the Forfeitures allocated to such
Participant's Account for such Plan Year which are
attributable to Matching Contributions and Excess
Aggregate Contributions,
7.5(a)(4)(iii) at the election of the Employer, the
Qualified Nonelective Contributions made on behalf of
such Participant for such Plan Year (to the extent
not taken into account for purposes of the ADP test
described in Section 7.4), and
7.5(a)(4)(iv) at the election of the Employer,
Elective Deferrals (provided the ADP limit described
in Section 7.4 is met both including and excluding
the Elective Deferrals that are used to meet the ACP
limit).
7.5(a)(5) EMPLOYEE CONTRIBUTION. Means for purposes of
determining a Participant's Contribution Percentage Amount
any contributions made by the Participant which are
included in gross income for the taxable year in which made
and which are maintained in a separate account to which
earnings and losses are allocated.
7.5(a)(6) EXCESS AGGREGATE CONTRIBUTION. Means for
each Plan Year for each Highly Compensated Employee the
excess of the aggregate Contribution Percentage Amounts
actually taken into account in computing the ACP of such
Highly Compensated Employee for such Plan Year over the
maximum Contribution Percentage Amounts permitted for such
Plan Year under the ACP limit as set forth in Section
7.5(b) (determined by reducing contributions and
Forfeitures on behalf of Highly Compensated Employees in
order of their Contribution Percentages, beginning with the
highest of such percentages).
7.5(a)(7) MATCHING CONTRIBUTIONS. Means for purposes
of determining a Participant's Contribution Percentage
Amount any Employer contribution made to this Plan or any
other defined contribution plan on account of an Employee
Contribution or Elective Deferral made by or on behalf of
the Participant under a plan maintained by the Employer.
7.5(b) ACP LIMIT. The ACP for Participants who are Highly
Compensated Employees for any Plan Year shall not exceed
7.5(b)(1) the ACP for Participants who are Nonhighly
Compensated Employees for such Plan Year multiplied by
1.25, or
7.5(b)(2) the ACP for Participants who are Nonhighly
Compensated Employees for such Plan Year multiplied by 2,
provided that the ACP for Participants who are Highly
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Compensated Employees does not exceed the ACP for
Participants who are Nonhighly Compensated Employees by
more than 2 percentage points.
7.5(c) SPECIAL RULES.
7.5(c)(1) MULTIPLE USE. For Plan Years beginning after
the Final Compliance Date, if
7.5(c)(1)(i) one or more Highly Compensated
Employees participates both in a plan with a
qualified cash or deferred arrangement which is
subject to the ADP limitations under Code Section
401(k) as described in Section 7.4 and in a plan
which is subject to the ACP limitations under Code
Section 401(m) as described in this Section 7.5,
7.5(c)(1)(ii) the sum of the ADP of the eligible
Highly Compensated Employees in the plan subject to
Code Section 401(k) and the ACP of the eligible
Highly Compensated Employees in the plan subject to
Code Section 401(m) exceeds the Aggregate Limit, and
7.5(c)(1)(iii) both the ADP and the ACP of the
eligible Highly Compensated Employees in such plans
exceed 125% of the ADP or ACP respectively of the
eligible Nonhighly Compensated Employees in such
plans.
then the Contribution Percentages of the Highly Compensated
Employees who participate in both such plans shall be
reduced (beginning with the highest of such percentages) so
that the Aggregate Limit for such plans is not exceeded.
Any such reduction shall be treated as an Excess Aggregate
Contribution. The determination of the limitations under
this special rule shall be made after any corrections
required to meet the ACP limits and the ACP limits and in
accordance with the regulations under Code Section 401(m).
7.5(c)(2) OTHER PLANS. The Contribution Percentage for
any Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to participate in more
than one plan maintained by the Employer or an Affiliate to
which "employee contributions" (within the meaning of Code
Section 401(m)) or "matching contributions" (as described
in Code Section 401(m)(4)) are made shall be determined by
treating all such plans as one plan. If a Highly
Compensated Employee participates in two or more such plans
that have different plan years, all such plans ending with
or within the same calendar year shall be treated as a
single plan. Notwithstanding the foregoing, plans which
are mandatorily disaggregated under regulations under Code
Section 401(m) shall be treated as separate.
7.5(c)(3) AGGREGATION. In the event that this Plan
satisfies the requirements of Code Section 410(b) only if
aggregated with one or more other plans, or if one or more
other plans satisfy the requirements of such Code sections
only if aggregated with this Plan, then this Section 7.5
shall be applied by determining the Contribution
Percentages and ACP as if all such plans were a single
plan. For Plan Years beginning on and after the Final
Compliance Date, such plans may be aggregated only if they
have the same
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plan years and they are not mandatorily disaggregated under
regulations under Code Section 401(m).
7.5(c)(4) FAMILY MEMBERS. For purposes of determining
the Contribution Percentage of a Participant who is a 5%
owner or one of the 10 most highly paid Highly Compensated
Employees, the Contribution Percentage Amounts and
Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation of his or
her Family Members, and such Family Members shall be
disregarded as separate Participants in determining the ACP
both for Participants who are Nonhighly Compensated
Employees and for Participants who are Highly Compensated
Employees.
7.5(c)(5) TIMING. For purposes of determining the ACP
for any Plan Year, Employee Contributions shall be
considered made in the Plan Year in which they are actually
contributed to the Fund and Matching Contributions (and, if
applicable, Qualified Matching Contributions and Qualified
Nonelective Contributions) shall be considered made for
such Plan Year only if such contributions are allocated as
of a date within such Plan Year and are actually paid to
the Fund by the last day of the 12-month period immediately
following such Plan Year.
7.5(c)(6) RECORDS. The Plan Administrator shall
maintain records which are sufficient to demonstrate that
the Plan complied with the ACP limits, including the extent
to which Elective Deferrals, Qualified Nonelective
Contributions and Qualified Matching Contributions are
taken into account to satisfy such ACP limits.
7.5(c)(7) OTHER REQUIREMENTS. The determination and
treatment of the Contribution Percentage of any Participant
shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
7.5(d) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
7.5(d)(1) GENERAL. Notwithstanding any other provision
of this Plan restricting the timing of distributions,
Excess Aggregate Contributions for any Plan Year, plus any
income and minus any loss allocable thereto, shall be
forfeited (if otherwise forfeitable under the Plan) or
distributed (if not forfeitable) from the Accounts of
Participants on whose behalf such Excess Aggregate
Contributions were made no later than the last day of the
immediately following Plan Year. If such Excess Aggregate
Contributions are distributed more than 2 1/2 months after
the last day of the Plan Year in which such excess
occurred, a 10% excise tax shall be imposed under Code
Section 4979 on the Employer with respect to such excess.
Excess Aggregate Contributions shall be allocated to
Participants who are subject to the Family Member
aggregation rules under Code Section 414(q)(6) in the
manner prescribed by the regulations under Code Section
401(m).
7.5(d)(2) DETERMINATION OF INCOME OR LOSS. A
corrective distribution of Excess Aggregate Contributions
under this Section 7.5 shall include the income or loss
allocable to such Excess Aggregate Contributions for the
Plan Year in which such excess occurred and, if so
specified in the Adoption Agreement, for the period between
the end of such
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Plan Year and the date of distribution ("gap period"). The
income or loss for such Plan Year and gap period, if
applicable, shall be determined in accordance with the
regulations under Code Section 401(m). In lieu of using
the safe harbor method or the alternative method in the
regulations for allocating such income or loss, the Plan
Administrator may use any reasonable method for computing
such income or loss, provided that such method does not
violate Code Section 401(a)(4), is used consistently for
all Participants and for all corrective distributions under
the Plan Year, and is used by the Plan for allocating
income or loss to Participant's Accounts.
7.5(d)(3) ORDER FOR DETERMINING EXCESS AGGREGATE
CONTRIBUTIONS. Excess Aggregate Contributions shall be
determined after first determining Excess Elective
Deferrals under Section 7.3 and then determining Excess
Contributions under Section 7.4.
7.5(d)(4) ACCOUNT IN FOR EXCESS AGGREGATE
CONTRIBUTIONS. Excess Aggregate Contributions shall be
forfeited (if otherwise forfeitable) or distributed (if not
forfeitable) to the Highly Compensated Employee from the
Participant's Employee Account, Matching Account, Qualified
Matching Account, Qualified Nonelective Account and
Elective Deferral Account in the same ratio that the
contributions made on the Participant's behalf to such
account (to the extent such contributions are used in the
ACP test) for the Plan Year in which such Excess Aggregate
Contributions were made bears to the total of all such
contributions. Notwithstanding the foregoing, Excess
Aggregate Contributions may be distributed from the
applicable subaccounts in accordance with procedures
established by the Plan Administrator provided such
procedures do not result in discrimination in favor of
Highly Compensated Employees which would be prohibited
under Code Section 401(a)(4).
7.5(d)(5) ALLOCATION OF FORFEITURES. Amounts forfeited
by Highly Compensated Employees under this Section 7.5
shall be allocated or applied in accordance with Section
6.3(c)(2); provided, no Forfeitures arising under this
Section 7.5 shall be allocated to the Account of any
Highly Compensated Employee.
SECTION 8. VESTING AND FORFEITURES.
8.1 DETERMINATION OF NONFORFEITABLE PERCENTAGE.
8.1(a) FULLY VESTED ACCOUNTS. Each Rollover Account, Employee
Account, Elective Deferral Account, Qualified Matching Account and
Qualified Nonelective Account shall be completed nonforfeitable at all
times.
8.1(b) DEATH, DISABILITY AND RETIREMENT. The Employer Account and
Matching Account of each Participant who reaches Early Retirement Age
or Normal Retirement Age while an Employee shall become completely
nonforfeitable on such date. The Employer Account and Matching
Account of each Participant who dies while an Employee or who becomes
Disabled while an Employee
8.1(b)(1) STANDARD OPTION. shall become completely
nonforfeitable on such date.
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8.1(b)(2) ALTERNATIVE. if so specified in the Adoption
Agreement, shall be determined in accordance with the
vesting schedule under Section 8.1(c).
8.1(c) OTHER SEPARATION FROM SERVICE. Subject to Section 12.4,
the nonforfeitable percentage of the Employer Account and Matching
Account of a Participant other than a Participant described in Section
8.1(b) shall be based on the Participant's Years of Service and on the
following vesting schedule:
8.1(c)(1) STANDARD OPTION. the full and immediate
vesting schedule.
8.1(c)(2) ALTERNATIVE. the alternative vesting
schedule specified in the Adoption Agreement.
provided, however, if the Participation Requirement (or the
requirement to receive an allocation of Employer contributions under a
401(k) Plan) consists of a minimum period of service which exceeds on
year, the full and immediate vesting schedule shall automatically
apply notwithstanding any election to the contrary in the Adoption
Agreement.
8.1(d) EMPLOYEE CONTRIBUTION WITHDRAWALS. No Forfeiture shall
occur solely as a result of a Participant's withdrawal of Employee
Contributions.
8.2 FORFEITURE AND SPECIAL REEMPLOYMENT RULES.
8.2(a) BUY BACK RULE (STANDARD OPTION).
8.2(a)(1) FORFEITURE. The forfeiture portion, if any,
of the Employer Account and Matching Account of a
Participant who separates from service shall become a
Forfeiture on the earlier of
8.2(a)(1)(i) the date as of which the Participant
receives (or is deemed to receive under Section
8.2(c)) a distribution of the Participant's entire
nonforfeiture Account balance derived from Employer
Contributions, or
8.2(a)(1)(ii) the date he or she has 5 consecutive
Breaks in Service (6 consecutive Breaks in Service if
the Alternative Maternity/Paternity Rule applies).
If a Participant elects to have distributed less than the
entire nonforfeitable balance of the Participant's Employer
Account and Matching Account, the part of such accounts
that shall be treated as a Forfeiture is the total
forfeitable portion of such Accounts multiplied by a
fraction, the numerator of which is the amount of the
distribution from the Participant's Employer Account or
Matching Account and the denominator of which shall be the
total nonforfeiture balance of the Participant's Employer
Account or Matching Account at the time of the
distribution.
Any such Forfeiture shall be allocated or applied in
accordance with Section 6 on the Valuation Date specified
in Section 8.2(e).
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8.2(a)(2) REEMPLOYMENT. If a Participant receives a
distribution and resumes employment covered under this Plan
before the Participant has 5 consecutive Breaks in Service
(6 consecutive Breaks in Service if the Alternative
Maternity/Paternity rule applies), the Employer shall
restore to the Participant's Employer Account and Matching
Account an amount equal to the dollar amount of the
Forfeitures from such accounts if the Participant repays to
the Plan an amount equal to the dollar amount of the
distributions from the Participant's Employer Account and
Matching Account in accordance with this Section 8.2(a).
Such repayment must be made before the earlier of (a) 5
years after the first date on which the Participant is
subsequently reemployed by the Employer or a Participating
Affiliate or (b) the date the Participant incurs 5
consecutive Breaks in Service (6 consecutive Breaks in
Service if the Alternative Maternity/Paternity Rules
applies) following the date of the distribution.
If a Participant whose nonforfeitable Account balance is
zero is deemed to receive a distribution under Section
8.2(c) and he or she resumes employment covered under this
Plan before he or she has 5 consecutive Breaks in Service
(6 consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies), the forfeitable portion
of the Participant's Employer Account and Matching Account
shall automatically be restored by the Employer upon the
Participant's reemployment.
Any amount restored by the Employer under this Section
8.2(a) shall be restored upon repayment from the sources
specified in Section 8.2(d). Such restored or repaid
amount shall not be treated as an Annual Addition under
Section 7.2 and shall be credited to the Participant's
Employer Account and Matching Account in the same
proportion as the distribution was made from such accounts.
8.2(b) AUTOMATIC RESTORATION (ALTERNATIVE). This Section 8.2(b)
shall apply if the Employer specifies the use of the "Alternative to
the Buy Back Rule" in the Adoption Agreement.
8.2(b)(1) FORFEITURE. The forfeitable portion, if any,
of the Employer Account and Matching Account of a
Participant who separates from service shall become a
Forfeiture on the earlier of
(i) the date as of which payment of the
nonforfeitable percentage of the Participant's
Account derived from Employer contributions begins or
is deemed to begin under Section 8.2(c) or
(ii) the date he or she has 5 consecutive Breaks
in Service (6 consecutive Breaks in Service if the
Alternative Maternity/Paternity Rule applies)
and such Forfeiture shall be allocated or applied in accordance with
Section 6 on the allocation date specified in Section 8.2(e) unless
he or she is reemployed on or before such allocation date.
8.2(b)(2) REEMPLOYMENT. If a Participant is reemployed
before the Participant incurs 5 consecutive Breaks in
Service (6 consecutive Breaks in Service if the Alternative
Maternity/Paternity Rule applies) but after the date of a
Forfeiture under Section 8.2(b)(1), the Employer shall
restore to such Participant as of the last day of the Plan
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Year in which he or she is reemployed an amount equal to
the dollar amount of such Forfeiture.
Any amount restored by the Employer under this Section Section
8.2(b) shall be restored from the sources specified in Section
8.2(d). Such restored amount shall not be treated as an Annual
Addition under Section 7.2 for such Plan Year. The restored amount,
together with any remaining balance of the nonforfeitable portion of
the Employer Account and Matching Account attributable to the
Participant's service prior to reemployment, shall be maintained
thereafter as separate special subaccounts of the Participant's
Employer Account and Matching Account (until such time as it becomes
completely nonforfeitable or again becomes a Forfeiture), and the
dollar amount of the Participant's nonforfeitable percentage in each
such special subaccount thereafter shall be determined in accordance
with Formula A unless Formula B is specified in the Adoption
Agreement:
8.2(b)(2)(i) FORMULA A (STANDARD OPTION): X = P (AB + D) -
D
8.2(b)(2)(ii) FORMULA B (ALTERNATIVE): X = P (AB + (R x D))
- (R x D)
For purposes of these formulas:
X = The current dollar amount, if any, of the
nonforfeitable percentage in the Participant's special
subaccount;
P = The Participant's current nonforfeitable percentage as
determined under Section 8.1;
AB = Such dollar amount, if any, as evidenced by the last
balance posted to the Participant's special subaccount;
D = The dollar amount previously paid to the Participant
under Section 9 from the Participant's original Employer
Account or Matching Account, as applicable; and
R = The ratio of AB to the dollar amount, if any, posted to
the Participant's Employer Account or Matching Account, as
applicable, immediately after the distribution.
8.2(c) DEEMED DISTRIBUTION. If the nonforfeitable portion of a
Participant's Account balance derived from Employer and Employee
contributions is zero, the Participant shall be deemed to have
received a distribution of the nonforfeitable portion of the
Participant's Account upon the Participant's separation from service.
A Participant's nonforfeitable Account balance derived from Employee
contributions shall not include accumulated deductible employee
contributions within the meaning of Code Section 72(o)(5)(B) for Plan
Years beginning prior to January 1, 1989.
8.2(d) RESTORATION SOURCES. Any amount restored under this
Section 8-2 shall be restored from the following sources in the
following order: first, from Forfeitures occurring in the Plan Year in
which such amounts are restored, if any; second, from Employer
Contributions for such Plan Year, if any; third, from Fund Earnings
for such Plan Year; and, finally, from additional
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Employer Contributions. However, at the election of the Employer,
such amounts shall be restored entirely from additional Employer
Contributions.
8.2(e) DATE FORFEITURES APPLIED OR ALLOCATED. Any amounts which
become a Forfeiture under this Section 8.2 shall be allocated or
applied as of the allocation date specified in Section 6 which
coincides with or immediately follows the date such Forfeiture occurs,
except that the Employer may specify in the Adoption Agreement that
Forfeitures which are applied to reduce Employer Contributions,
Matching contributions or Qualified Nonelective Contributions shall be
so applied as of the allocation date for such contributions which
immediately follows the last day of the Plan Year in which such
Forfeiture occurs.
8.2(f) IN-SERVICE DISTRIBUTIONS. The provisions of this Section
8.2(f) shall apply if the Plan permits in- service distribution under
Section 9.2.
If a distribution is made at a time when a Participant has a
nonforfeitable right to less than 100% of his or her Employer Account
or Matching Account and the Participant may increase the
nonforfeitable percentage in such Account:
8.2(f)(1) A separate special subaccount of the
Participant's Employer Account and Matching Account shall
be established to record the Participant's interest in such
accounts as of the time of the distribution; and
8.2(f)(2) At any relevant time the Participant's
nonforfeitable portion of each such special subaccount
shall be determined in accordance with the formula
specified in Section 8.2(b).
SECTION 9. ACCOUNT DISTRIBUTION - GENERAL RULES
9.1 AFTER SEPARATION FROM SERVICE. Subject to the rules in this Section
9, Section 10, Benefit Payment Forms - JOINT AND SURVIVOR ANNUITY
REQUIREMENTS, and Section 11, MINIMUM DISTRIBUTION REQUIREMENTS, the
nonforfeitable portion of each Participant's Account (as determined in
accordance with Section 8) shall not be payable to such Participant before he
or she separates from service with the Employer and all Affiliates.
9.1(a) TIMING. A Participant who has separated from service with
the Employer and all Affiliates
9.1(a)(1) STANDARD OPTION - may request a distribution
of the nonforfeitable portion of his or her Account as soon
as practicable after such separation from service.
9.1(a)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, may not request a distribution of the
nonforfeitable portion of his or her Account until Normal
Retirement Age, Early Retirement Age or Disability,
whichever is earlier.
9.1(b) REEMPLOYMENT. Except as required in Section 11, no
payment shall be made under this Section 9.1 if the Participant who
separates from service is reemployed as an Employee before payment is
made. If a Participant is reemployed as an Employee after payment of
the nonforfeitable portion of the Participant's Account has begun but
before the entire balance attributable to such
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nonforfeitable portion has been paid (or applied to purchase an
annuity), payments to the Participant from such balance shall be
terminated on the date he or she is so reemployed and no further
payments shall be made to the Participant until he or she is
subsequently entitled to such payments in accordance with the terms of
this Plan.
9.1(c) $3,500 CASHOUT. The nonforfeitable portion of a
Participant's Account shall be distributed in a single sum to such
Participant (or to the Participant's Beneficiary in the event of the
Participant's death) as soon as administratively practicable following
the Participant's separation from service with the Employer and all
Affiliates for any reason if the nonforfeitable portion of such
Account is (and at the time of any prior distribution was) $3500 or
less. Any such distributions made on or after January 1, 1993 shall
be made in accordance with an applicable rules regarding the period
for providing notices under Code Section 402(f) and for making direct
rollover elections under Code Section 401(a)(31).
9.1(d) CLAIM. Except as provided in this Section 9 and Section
11, no payment shall be made until a written claim for such payment is
filed with the Plan Administrator on an Election Form. The Plan
Administrator shall process each such claim in accordance with the
claims procedure described in the summary plan description for this
Plan. If no such claim is submitted and the Participant does not
defer payment pursuant to Section 9.1(e), payment may be made as soon
as the benefit is not immediately distributable (within the meaning of
Section 9.3) and shall, in any event, begin no later than 60 days
following the end of the Plan Year in which
9.1(d)(1) the Participant separates from service as an
Employee,
9.1(d)(2) the Participant reaches age 65 or Normal
Retirement Age, if earlier, or
9.1(d)(3) occurs the 10th anniversary of the year in
which the Participant commenced participation in the Plan,
whichever occurs last.
9.1(e) ELECTION TO DEFER PAYMENT. If a Participant has separated
from service with the Employer and all Affiliates and the
nonforfeitable portion of the Participant's Account is (or at the time
of any prior distribution was) more than $3,500, the Participant may
defer distribution of that nonforfeitable portion, but in no event
beyond
9.1(e)(1) STANDARD OPTION - the Participant's Required
Beginning Date (as defined in Section 11).
9.1(e)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, the later of the Participant's Normal Retirement
Age or age 62.
The failure of a Participant and his or her Spouse, it applicable, to
consent to a distribution or make a written request to defer payment
while a benefit is immediately distributable (within the meaning of
Section 9.3) shall be deemed to be an election to defer commencement
of payment of any benefit under this Section 9 until the benefit is
no longer immediately distributable or, if Section 9.1(e)(1) applies,
until the Required Beginning Date.
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Nothing this Section 9.1(e) shall prevent the Plan Administrator from paying
in the normal form a benefit which is not immediately distributable without
regard to whether the Participant and his or her Spouse consent to such
distribution, unless the Participant has requested a deferral pursuant to
Section 9.1(e)(2).
9.1(f) EARLY RETIREMENT AGE. If the Early Retirement Age includes
both an age and service requirement, any Participant who separates
from service before satisfying such age requirement, but after the
Participant has satisfied the service requirement, may request a
distribution of the nonforfeitable portion of his or her Account upon
satisfaction of such age requirement.
9.1(g) DEATH. In the event of the Participant's death, the
nonforfeitable portion of the Participant's Account shall be payable
to the Participant's Beneficiary as soon as administratively
practicable after the Participant's death.
9.2 BEFORE SEPARATION FROM SERVICE. Subject to the rules in this Section
9, Section 10, JOINT AND SURVIVOR ANNUITY REQUIREMENTS, and Section 11,
MINIMUM DISTRIBUTION REQUIREMENTS, the nonforfeitable portion of a
Participant's Account may be paid to the Participant before he or she separates
from service with the Employer and all Affiliates if so specified in the
Adoption Agreement or by the Board in accordance with Section 9.2(b)(2) or
Section 9.2(e).
9.2(a) MONEY PURCHASE PENSION PLAN OR TARGET BENEFIT PENSION PLAN.
If this Plan is adopted as a Money Purchase Pension Plan or a Target
Benefit Pension Plan,
9.2(a)(1) STANDARD OPTION - except as provided in
Section 9.2(d) or (e), no distributions shall be made
before a Participant separates from service with the
Employer and all Affiliates, or
9.2(a)(2) ALTERNATIVE - if so specified in the Adoption
Agreement, a Participant may request a distribution of all
or a portion of the nonforfeitable portion of the
Participant's Account on or after he or she reaches Normal
Retirement Age without regard to whether he or she has
separated from service.
9.2(b) 401(K) PLAN.
9.2(b)(1) DISTRIBUTION RESTRICTIONS. If this Plan is
adopted as a 401(k) Plan, then, except as provided in this
Section 9.2(b)(1), a Participant's Elective Deferral
Account, Qualified Nonelective Account and Qualified
Matching Account shall not be distributable to the
Participant or the Participant's Beneficiary earlier than
upon the Participant's separation from service with the
Employer and all Affiliates, death or Disability.
9.2(b)(2) TERMINATION OF PLAN OR DISPOSITION OF ASSETS
OR SUBSIDIARY. Notwithstanding Section 9.2(b)(1) and
subject to the Participant and spousal consent rules in
Section 9.3 and Section 10, the Employer may, by action
of its Board, make lump sum distributions (within the
meaning of Code Section 401(k)(10(B)(ii)) of a
Participant's Account, including the Participant's Elective
Deferral Account, Qualified Nonelective Account and
Qualified Matching Account in accordance with Code Section
401(k) by reason by
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9.2(b)(2)(i) the termination of the Plan without
the establishment of another defined contribution
plan (other than an employee stock ownership plan as
defined in Code Section 4975(e) or Code Section 409
or a simplified employee pension as defined in Code
Section 408(k));
9.2(b)(2)(ii) the disposition by the Employer or a
Participating Affiliate to an unrelated entity of
substantially all of the assets (within the meaning
of Code Section 409(d)(2)) used by the Employer or
such Participating Affiliate in a trade or business
of the Employer or a Participating Affiliate, if the
transferor continues to maintain this Plan after such
disposition, but such distributions shall be made
only with respect to a Participant who continues
employment with the entity acquiring such assets; or
9.2(b)(2)(iii) the Disposition by the Employer or a
Participating Affiliate which is a corporation to an
unrelated entity of interest in a subsidiary (within
the meaning of Code Section 409(d)(3)), if the
transferor continues to maintain this Plan after such
disposition, but such distributions shall be made
only with respect to a Participant who continues
employment with such former subsidiary.
9.2(b)(3) HARDSHIP DISTRIBUTION.
9.2(b)(3)(i) GENERAL. If the Employer specifies
in the Adoption Agreement that hardship distributions
shall be permitted, a Participant may request a
hardship distribution before he or she separates from
service from the Participant's Elective Deferral
Account (and, if applicable, from the nonforfeitable
portion of the other subaccounts of such Account
specified in the Adoption Agreement). The Plan
Administrator shall grant such request if, and to the
extent that, the Plan Administrator determines that
such distribution is "necessary" to satisfy an
"immediate and heavy financial need" of the
Participant as determined in accordance with this
Section 9.2(b)(3). Any such request shall be made in
writing, shall set forth in detail the nature of such
hardship and the amount of the distribution needed as
a result of such hardship, and shall include adequate
documentation of the type of financial need and the
amount of the need. If the Plan Administrator grants
such request, such application shall be processed and
such distribution shall be made in a single sum as
soon as administratively practicable.
9.2(b)(3)(ii) SAFE HARBOR TEST FOR FINANCIAL NEED.
An "immediate and heavy financial need" shall mean
one or more of the following, as specified in the
Adoption Agreement,
(A) expenses for medical care described
in Code Section 213(d) incurred by the
Participant or the Participant's spouse or
dependents (as defined in Code Section 152)
and amounts necessary for such individuals to
obtain such care,
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(B) the purchase of (but not the
mortgage payments for) a principal residence
of the Participant,
(C) the payment of tuition and related
educational fees for the next 12 months of
post-secondary education for the Participant
or the Participant's spouse, children or
dependents (as defined in Section 152),
(D) the prevention of the eviction of
the Participant from the Participant's
principal residence or the foreclosure on the
mortgage of the Participant's principal
residence, or
(E) such other events as the Internal
Revenue Service deems to constitute an
"immediate and heavy financial need" under
Code Section 401(k).
9.2(b)(3)(iii) SAFE HARBOR TEST FOR DISTRIBUTION
NECESSARY TO SATISFY NEED. A distribution shall be
deemed to be "necessary" to satisfy an immediate and
heavy financial need only if all of the following
requirements are satisfied:
(A) the distribution is not in excess of
the amount of such need, including any
amounts necessary to pay any federal, state
or local income taxes or penalties reasonably
anticipated to result from such withdrawal;
(B) the Participant has obtained all
distributions (other than hardship
distributions) and all nontaxable loans
currently available under this Plan and all
other plans maintained by the Employer or an
Affiliate;
(C) the Participant's Elective Deferrals
and Employee Contributions under this Plan
and elective deferrals and employee
contributions under all other plans
maintained by the Employer or an Affiliate
shall be suspended for the 12-month period
following the date of receipt of such
hardship distribution; and
(D) the Participant's Elective Deferrals
under this Plan and elective deferrals under
all other plans maintained by the Employer or
an Affiliate for the Participant's taxable
year immediately following the taxable year
in which such hardship distribution was made
shall exceed the applicable dollar limitation
under Code Section 402(g) for such following
taxable year less the amount of the
Participant's Elective Deferrals under this
Plan, and elective deferrals under all such
other plans for the taxable year in which
such hardship distribution was made.
9.2(b)(3)(iv) ACCOUNT LIMITATIONS. For Plan Years
beginning after December 31, 1988, no hardship
distribution shall be made under this Section
9.2(b)(3) to a Participant from
9.2(b)(3)(iv)(A) the Participant's
Qualified Nonelective Account,
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9.2(b)(3)(iv)(B) the Participant's
Qualified Matching Account, or
9.2(b)(3)(iv)(C) the Fund Earnings
allocated to the Participant's Elective
Deferral Account
except to the extent of amounts credited to such
Accounts as of the end of the last Plan Year ending
before July 1, 1989.
9.2(b)(4) DISTRIBUTIONS ON OR AFTER AGE 59-1/2. If the
Employer specifies in the Adoption Agreement that
distributions shall be permitted on or after age 59-1/2, a
Participant may request a distribution of all or a portion
of the nonforfeitable portion of the subaccounts of the
Participant's Account specified in the Adoption Agreement
at any time on or after he or she reaches age 59-1/2. Any
such request shall be made in writing on a Election Form
and such distribution shall be made in a single sum as soon
as practicable in accordance with such reasonable
nondiscretionary procedures as the Plan Administrator deems
appropriate under the circumstances for the proper
administration of the Plan.
9.2(b)(5) EMPLOYER ACCOUNT AND MATCHING ACCOUNT. If so
specified in the Adoption Agreement, a Participant may
request in accordance with reasonable and nondiscretionary
procedures a distribution of all or a portion of the
nonforfeitable portion of the Participant's Employer
Account and Matching Account after a fixed number of years,
the attainment of a stated age or upon the occurrence of
some prior event as specified in the Adoption Agreement.
9.2(c) PROFIT SHARING PLAN. If this Plan is adopted as a Profit
Sharing Plan, then, if so specified in the Adoption Agreement, a
Participant may request in accordance with reasonable and
nondiscriminatory procedures a distribution of all or a portion of the
nonforfeitable portion of the Participant's Account after a fixed
number of years, the attainment of a stated age or upon the occurrence
of some prior event as specified in the Adoption Agreement.
9.2(d) WITHDRAWALS FROM EMPLOYEE ACCOUNT.
9.2(d)(1) STANDARD OPTION. A Participant may request a
withdrawal of all or a portion of the Participant's
Employee Account at any time. Any such request shall be
made in writing on an Election Form and such withdrawal
shall be made in a single sum as soon as administratively
practicable in accordance with such reasonable
nondiscretionary procedures as the Plan Administrator deems
appropriate under the circumstances for the proper
administration of this Plan.
9.2(d)(2) ALTERNATIVE. The Employer may specify in the
Adoption Agreement that withdrawals from Employee Accounts
shall not be permitted before the nonforfeitable portion of
a Participant's Account otherwise becomes distributable
under this Section 9 or under Section 11 or may specify
other rules and conditions under which such withdrawals may
be made.
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Notwithstanding the foregoing, any portion of a Participant's Employee
Account which is attributable to recharacterized Excess Contributions
under Section 7.4(e) may only be withdrawn in accordance with the
rules set forth in Section 9.2(b) applicable to an Elective Deferral
Account.
9.2(e) PLAN TERMINATION. If this Plan is terminated under Section
14.6 and if the Board so specifies in its written action affecting
such termination, distribution of the nonforfeitable portion of each
Account shall be made as soon as administratively practical after the
Plan is terminated subject to the rules in Section 9.2(b) and to Code
Section 411.
9.3 CONSENT.
9.3(a) GENERAL. If the nonforfeitable portion of a Participant's
Account exceeds (or at the time of any prior distribution exceeded)
$3500, and such Account is "immediately distributable", the
Participant and the Participant's Spouse, if any, (or where the
Participant has died, the surviving Spouse, if any) must consent to
any distribution from such Account. The consent of the Participant
and the Participant's Spouse shall be obtained in writing within the
90 day period ending on the Annuity Starting Date (as defined in
Section 10.1). The Plan Administrator shall notify the Participant
and the Participant's Spouse of the right to defer any distribution
until the Participant's Account is no longer "immediately
distributable". Such notification shall include a general description
of the material features, and an explanation of the relative values
of, the optional forms of benefit available under the Plan in a manner
that would satisfy the notice requirements of Code Section 417(a)(3)
and shall be provided no less than 30 days and no more than 90 days
prior to the Annuity Starting Date.
9.3(b) EXCEPTIONS. Notwithstanding the foregoing, only the
Participant need consent to the commencement of a distribution in the
form of a Qualified Joint and Survivor Annuity while the Participant's
Account is immediately distributable. Furthermore, if payment in the
form of a Qualified Joint and Survivor Annuity is not required with
respect to the Participant pursuant to Section 10, only the
Participant need consent to the distribution from an Account that is
immediately distributable. The consent of the Participant and the
Participant's Spouse shall not be required to the extent that a
distribution is required to satisfy Code Section 401(a)(9), Section
401(k), Section 401(m), Section 402(g) or Section 415. In
addition, upon termination of this Plan if the Plan is not required to
offer an annuity option (purchased from a commercial provider), the
nonforfeitable portion of the Participant's Account shall, without the
Participant's consent, be distributed to the Participant unless the
Employer or an Affiliate maintains another defined contribution plan
(other than an employee stock ownership plan as defined in Code
Section 4975(e)(7)), in which event, the Account of a Participant who
does not consent to an immediate distribution shall be transferred to
such other plan.
9.3(c) IMMEDIATELY DISTRIBUTABLE. An Account is "immediately
distributable" if any part of the Account could be distributed to the
Participant (or the surviving Spouse) before the Participant reaches
(or would have reached if not deceased) the later of Normal Retirement
Age or age 62.
9.3(d) ACCUMULATED DEDUCTIBLE EMPLOYEE CONTRIBUTIONS. For
purposes of determining the applicability of the consent requirements
under this Section 9.3 to distributions made before the first day of
the first Plan Year beginning after December 31, 1988, the
nonforfeitable portion of the
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Participant's Account shall not include amounts attributable to
accumulated deductible employee contributions within the meaning of
Code Section 72(o)(5)(B).
9.4 FORM OF DISTRIBUTION. All distributions (including distributions
before separation from service under Section 9.2 but excluding corrective
distributions under Section 7) shall be made in the form specified in Section
10.
9.5 MINIMUM DISTRIBUTIONS. The Plan shall satisfy the minimum
distribution requirements of Code Section 401(a)(9) as set forth in Section
11.
9.6 MISSING PERSON. In the event that an Account becomes payable under
this Plan pursuant to Section 9.1(c), Section 9.1(d) or Section 9.1(e) and
the Plan Administrator is unable to locate the Participant or his or her
Beneficiary after sending written notice to the last known mailing address and
to the United States Social Security Administration, such Participant or
Beneficiary shall be presumed dead and such Account shall become a Forfeiture
on the third anniversary of the date such Account first became payable under
this Plan. However, the amount of such Forfeiture shall be paid to such
missing Participant or Beneficiary in the event that such person files a claim
for such benefit while the Plan remains in effect and demonstrates to the
satisfaction of the Plan Administrator that such person in fact is such missing
Participant or Beneficiary.
9.7 NO ESTOPPEL OF PLAN. No person is entitled to any benefit under this
Plan except and to the extent expressly provided under this Plan. The fact
that payments have been made from this Plan in connection with any claim for
benefits under this Plan does not (1) establish the validity of the claim, (2)
provide any right to have such benefits continue for any period of time, or (3)
prevent this Plan from recovering the benefits paid to the extent that the Plan
Administrator determines that there was no right to payment of the benefits
under this Plan. Thus, if a benefit is paid under this Plan and it is
thereafter determined by the Plan Administrator that such benefit should not
have been paid (whether or not attributable to an error by the Participant, the
Plan Administrator, the Employer or any other person), then the Plan
Administrator may take such action as the Plan Administrator deems necessary or
appropriate to remedy such situation, including without limitation by (1)
deducting the amount of any overpayment theretofore made to or on behalf of
such Participant from any succeeding payments to or on behalf of such
Participant under this Plan or from any amounts due or owing to such
Participant by the Employer or any Affiliate or under any other plan, program
or arrangement benefitting the employees or former employees of the Employer or
any Affiliate, (2) otherwise recovering such overpayment from whoever has
benefited from it.
If the Plan Administrator determines that an underpayment of benefits has been
made, the Plan Administrator shall take such action as it deems necessary or
appropriate to remedy such situation. However, in no event shall interest be
paid on the amount of any underpayment other than the investment gains (or
losses) credited to the Participant's Account pending payment.
9.8 ADMINISTRATION. All distributions shall be made in accordance with
such uniform and nondiscriminatory administrative and operational procedures
for Account distributions as the Plan Administrator deems appropriate under the
circumstances for the proper administration of the Plan.
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SECTION 10. BENEFIT PAYMENT FORMS - JOINT AND SURVIVOR ANNUITY REQUIREMENTS.
10.1 APPLICATION AND SPECIAL DEFINITIONS. This Section 10 shall apply to
a Participant who is vested at the time of death or at the time of a
distribution from the Participant's Account in any portion of the Participant's
Account, whether such portion is attributable to Employer contributions,
Employee contributions, or both. For purposes of this Section 10, the terms
defined in this Section 10.1 shall have the meanings shown opposite such
terms.
10.1(a) ANNUITY STARTING DATE. means the first day of the first
period for which an amount is paid as an annuity or any other form.
10.1(b) EARLIEST RETIREMENT AGE. means
10.1(b)(1) if distributions are permitted only upon
separation from service, the earliest age at which the
Participant could separate from service and receive a
distribution;
10.1(b)(2) if distributions are permitted before
separation from service, the earliest age at which such
distribution could be made; or
10.1(b)(3) if clauses (1) and (2) do not apply, the
Early Retirement Age.
10.1(c) ELECTION PERIOD. means
10.1(c)(1) for a Qualified Preretirement Survivor
Annuity, the period which begins on the earlier of (i) the
first day of the Plan Year in which the Participant attains
age 35 or (ii) the date such Participant separates from
service and ends on the date of the Participant's death and
10.1(c)(2) for a Qualified Joint and Survivor Annuity or
a Life Annuity, the 90 day period ending on the Annuity
Starting Date.
Notwithstanding the foregoing, a Participant who has not yet reached
age 35 (and who will not reach age 35 as of the end of the current
Plan Year) may make a special Qualified Election to waive the
Qualified Preretirement Survivor Annuity 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 reach age 35. Such election shall not
be valid unless the Participant receives a written explanation of the
Qualified Preretirement Survivor Annuity in such terms as are
comparable to the explanation required under Section 10.4. Qualified
Preretirement Survivor Annuity coverage shall be automatically
reinstated as of the first day of the Plan Year in which the
Participant reaches age 35. Any new waiver on or after such date
shall be subject to the full requirements of this Section 10.
10.1(d) LIFE ANNUITY. means a nontransferable immediate annuity
payable for the life of the Participant, which is the amount of
benefit which can be purchased with such Participant's Vested Account
Balance as of the Annuity Starting Date.
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10.1(e) QUALIFIED ELECTION. means a Participant's election to
waive the Qualified Joint and Survivor Annuity or the Qualified
Preretirement Survivor Annuity which election shall not be effective
unless (1) the election designates a specific Beneficiary (including
any class of Beneficiaries or any contingent Beneficiaries) and, for
an election to waive a Qualified Joint and Survivor Annuity, the
particular form of benefit payment, which designations cannot be
changed without the Spouse's consent (or the Spouse expressly permits
designations by the Participant without any further spousal consent);
(2) such Participant's Spouse consents in writing to such election on
an Election Form; (3) such consent acknowledges the effect of such
election; and (4) such consent is witnessed by a notary public;
provided,
10.1(e)(0)(i) if the Participant establishes to
the satisfaction of a Plan representative that such written
consent may not be obtained because there is no Spouse or
the Spouse cannot be located or because of such other
circumstances as may be described in the regulations under
Code Section 417, a Participant's election shall be deemed
to be a Qualified Election;
10.1(e)(0)(ii) a Spouse's written consent under
this Section 10.1(e) shall be irrevocable as to such
Spouse and shall be binding only as against such Spouse.
10.1(e)(0)(iii) no consent shall be valid unless the
Participant received notice as provided in Section 10.4;
10.1(e)(0)(iv) a consent that permits designations
by the Participant without any further spousal consent must
acknowledge that the Spouse has the right to limit consent
to a specific Beneficiary, and, if applicable, a specific
form of benefit payment, and that the Spouse voluntarily
elects to relinquish either or both of such rights; and
10.1(e)(0)(v) a Participant may revoke (without the consent
of his or her Spouse) an election to waive the Qualified
Joint and Survivor Annuity or the Qualified Preretirement
Survivor Annuity on an Election Form any time prior to the
date as of which the Participant's Account becomes payable
under Section 9.
10.1(f) QUALIFIED JOINT AND SURVIVOR ANNUITY. means a
nontransferable immediate annuity payable for the life of the
Participant which is the amount of benefit which can be purchased with
the Participant's Vested Account Balance on the Annuity Starting Date
with a survivor annuity payable for the life of the Participant's
surviving Spouse which is
10.1(f)(1) STANDARD OPTION - 50% or
10.1(f)(2) ALTERNATIVE - such greater percentage (not to
exceed 100%) specified in the Adoption Agreement
of the amount of the annuity which is payable during the joint lives
of the Participant and such Spouse.
10.1(g) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. means a
nontransferable annuity payable for the life of the surviving Spouse,
which is the amount of benefit which can be purchased with
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10.1(g)(1) STANDARD OPTION - 100% of the Participant's
Vested Account Balance as of the Annuity Starting Date or
10.1(g)(2) ALTERNATIVE - such lesser percentage (not
less than 50%) specified in the Adoption Agreement of such
Participant's Vested Account Balance (determined by
allocating the portion of such balance which is
attributable to employee contributions proportionately to
such annuity and to the remainder of such balance).
10.1(h) VESTED ACCOUNT BALANCE. means the nonforfeitable portion
of a Participant's Account derived from Employer contributions and
Employee contributions (including Rollover Contributions), whether
vested before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life and reduced, if
applicable, for outstanding loans in accordance with Section
13.3(d)(1)(iv).
10.2 DISTRIBUTION TO PARTICIPANT. Unless a Participant waives the
Qualified Joint and Survivor Annuity and elects and optional method of
distribution (as described in Section 10.6) on an Election Form pursuant to a
Qualified Election within the Election Period, any distribution of such
Participant's Vested Account Balance shall be paid in the form of (a) a
Qualified Joint and Survivor Annuity for each such married Participant and his
or her Spouse or (b) a Life Annuity for each such unmarried Participant. A
Participant may elect that such annuity be distributed upon attainment of the
Earliest Retirement Age.
10.3 DISTRIBUTION TO SURVIVING SPOUSE. Unless a Participant waives the
Qualified Preretirement Survivor Annuity and elects and optional method of
distribution (as described in Section 10.6) on an Election Form pursuant to a
Qualified Election within the Election Period, such Participant's Vested
Account Balance shall, in the event of the Participant's death before the
Participant's Annuity Starting Date, be applied to purchase a Qualified
Preretirement Survivor Annuity for the surviving Spouse. If the Qualified
Preretirement Survivor Annuity is less than 100%, the remaining portion of the
Participant's Vested Account Balance shall be payable to the Participant's
Beneficiary under Section 9. The surviving Spouse may elect that such
Qualified Preretirement Survivor Annuity be distributed to such Spouse within a
reasonable period following the death of the Participant. Notwithstanding the
foregoing, a surviving Spouse entitled to a Qualified Preretirement Survivor
Annuity may elect in writing after the Participant's death to have the
Participant's Vested Account Balance distributed in an optional form of benefit
in accordance with Section 10.6.
10.4 NOTICE REQUIREMENTS.
10.4(a) QUALIFIED JOINT AND SURVIVOR ANNUITY AND LIFE ANNUITY. The
Plan Administrator shall no less than 30 days and no more than 90 days
before the Annuity Starting Date provide each Participant with a
written explanation of the Qualified Joint and Survivor Annuity and
the Life Annuity, which explanation shall describe
10.4(a)(1) the terms and conditions of such annuity;
10.4(a)(2) the Participant's right to make a Qualified
Election to waive such annuity and the effect of such
election;
10.4(a)(3) the rights of the Participant's Spouse, if
any;
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10.4(a)(4) the right to revoke such election and the
effect of such a revocation; and
10.4(a)(5) the relative values of the various optional
forms of benefits under the Plan.
10.4(b) QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. The Plan
Administrator shall provide to each Participant within the "applicable
period" for such Participant a written explanation of the Qualified
Preretirement Survivor Annuity which includes the type of information
described in Section 10.4(a). The "applicable period" for a
Participant is
10.4(b)(1) the period beginning on the first day of the
Plan Year in which such Participant attains age 32 and
ending with the close of the Plan Year preceding the Plan
Year in which the Participant attains age 35.
10.4(b)(2) a reasonable period ending after he or she
becomes a Participant, or
10.4(b)(3) a reasonable period ending after this Section
10 applies to such Participant.
whichever period ends last. However, if a Participant separates from
service before he or she reaches age 35, such notice shall be provided
within the two year period beginning one year before the
Participant's separation from service and ending one year after such
separation and if such Participant is subsequently reemployed, the
applicable period for such Participant shall be redetermined under
Section 10.4(b)(1) through Section 10.4(b)(3). For purposes of
Section 10.4(b)(2) and Section 10.4(b)(3), a "reasonable period" is
the two year period which begins one year prior to the occurrence of
the event and ends one year after the occurrence of the event.
10.5 SAFE HARBOR RULES.
10.5(a) APPLICATION. If so specified in the Adoption Agreement,
the provisions in this Section 10.5 shall apply in lieu of Section
10.1 through Section 10.4 to (1) a Participant in a Profit Sharing
Plan or a 401(k) Plan, and (2) to any distribution made on or after
the first day of the first Plan Year beginning after December 31, 1988
from and under a separate account attributable solely to accumulated
deductible employee contributions (as defined in Code Section
72(o)(5)(B)) and maintained on behalf of a Participant in a Money
Purchase Pension Plan or Target Benefit Pension Plan provided that the
conditions specified in Section 10.5(b) are satisfied.
10.5(b) CONDITIONS. In order to fit within the safe harbor (1) the
Participant does not or cannot elect payments in the form of a Life
Annuity with respect lo the Participant's Vested Account Balance; (2)
on the death of a Participant, the Participant's Vested Account
Valance shall be paid to the Participant's surviving Spouse, or if
there is no surviving Spouse or if the surviving Spouse has consented
in a manner conforming to a Qualified Election, to the Participant's
Beneficiary; and (3) with respect to a Participant in a Profit Sharing
Plan or a 401(k) Plan, the Plan is not a direct or indirect transferee
of a defined benefit plan, the money purchase pension plan, target
benefit pension plan, stock bonus plan, or profit-sharing plan which
is subject to the survivor annuity requirements of Code Section
401(a)(11) and Code Section 417 ("Transferee Plan"), or the Plan
maintains separate bookkeeping accounts for such Participant's
Transferee Plan benefits and all other benefits of the Participant
under the Plan and gains, losses, withdrawals, contributions,
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forfeitures, and other credits or charges are allocated on a
reasonable and consistent basis between the Transferee Plan benefits
(which are subject to the survivor annuity requirements in Section
10.1 through Section 10.4) and the other Plan benefits (which are
subject to the safe harbor rule in this Section 10.5).
10.5(c) SURVIVING SPOUSE. The surviving Spouse may elect to have
distribution of the Vested Account Balance commence within the 90 day
period following the date of the Participant's death. The Vested
Account Balance shall be adjusted for Fund Earnings occurring after
the Participant's death in accordance with Section 6.2 in the same
manner that Accounts are adjusted for other types of distributions.
10.5(d) WAIVER OF SPOUSAL BENEFIT. The Participant may waive the
spousal death benefit described in this Section 10.5 at any time;
provided, no such waiver shall be effective unless it satisfies the
conditions described in Section 10.1(e) (other than the notification
requirement referred to in such section) that would apply to the
Participant's Qualified Election to waive the Qualified Preretirement
Survivor Annuity.
10.5(e) VESTED ACCOUNT BALANCE. For purposes of this Section
10.5, Vested Account Balance shall mean, (1) in the case of a Money
Purchase Pension Plan or Target Benefit Pension Plan, the
Participant's separate account balance attributable solely to
accumulated deductible contributions within the meaning of Code
Section 72(o)(5)(B) and (2) in the case of a Profit Sharing Plan or
401(k) Plan, the Participant's Vested Account Balance as defined in
Section 10.1(h), excluding the portion of such Vested Account Balance
which is attributable to Transferee Plan benefits described in Section
10.5(b).
10.6 OPTION FORMS.
10.6(a) GENERAL. If a Participant properly and timely waives the
Qualified Joint and Survivor Annuity as described in Section 10.2 or
to the extent the safe harbor rules of Section 10.5 apply to a
distribution, such distribution shall be made in the form specified in
this Section 10.6 as selected by the Participant (or his or her
Beneficiary in the event of the Participant's death).
10.6(b) BEFORE SEPARATION FROM SERVICE. Any distribution made
pursuant to Section 9.2 shall, subject to Section 10.2, be made in a
single sum.
10.6(c) AFTER SEPARATION FROM SERVICE.
10.6(c)(1) STANDARD OPTION. The optional benefit form
available to any Participant after separation from service
with the Employer and all Affiliates or to his or her
Beneficiary in the event of the Participant's death shall
be a single sum.
10.6(c)(2) ALTERNATIVE. If specified in the Adoption
Agreement, the following optional benefit forms shall be
available to any Participant (or to his or her Beneficiary
in the event of the Participant's death):
10.6(c)(2)(i) SINGLE SUM - by payment in a single
sum.
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10.6(c)(2)(ii) INSTALLMENTS - by payment in annual
installments (or more frequent installments) over a
specified period in accordance with the minimum
distribution rules in Section 11.
10.6(c)(2)(iii) ANNUITY - in the form of an annuity
contract under which the amount of benefits shall be
that which can be provided by applying the
nonforfeitable portion of such Participant's Account
to the applicable settlement option or annuity
purchase rate under such contract; or
10.6(c)(2)(iv) OTHER FORMS - under one of the
optional forms of distribution, if any, under the
Preexisting Plan or a plan described in Section 14.5
which are required to be preserved under Code Section
411(d)(6). Such optional forms shall be described in
the Adoption Agreement and, unless otherwise
specified in the Adoption Agreement, such other forms
shall apply to the Participant's entire Account
balance. Notwithstanding the foregoing, it the Plan
Administrator separately accounts for benefits under
a Preexisting Plan or a plan described under Section
14.5 or, if applicable, under Section 10.5, the
optional forms may be limited to such separate
accounts.
10.6(d) NO METHOD SELECTED. If the safe harbor rules of Section
10.5 apply to a distribution, but the Participant or the
Participant's Spouse or Beneficiary fails to specify the method of
distribution, then any distribution made to such Participant, Spouse
or Beneficiary shall be made in a single sum.
10.6(e) SINGLE SUM. A distribution made on account of a
Participant's death or separation from service with the Employer and
all Affiliates which is made in more than one payment shall be deemed
to be a single sum distribution for purposes of this Plan if the
additional payment or payments are necessary to reflect allocations
completed following the Participant's death or separation from
service.
10.6(f) IN KIND DISTRIBUTIONS. A distribution shall be made in
kind only to the extent provided in the Adoption Agreement and only to
the extent an "in kind" distribution is permissive under ERISA.
10.7 ANNUITY CONTRACTS. Any annuity contract distributed by the Plan to
Participant or a Beneficiary shall be nontransferable and the Terms of such
contract shall comply with the applicable requirements of this Plan and the
Code.
10.8 TRANSITIONAL RULES.
10.8(a) Any living Participant not receiving benefits on August 23,
1984, who would otherwise not receive the benefits prescribed by the
previous sections of this Section 10 must be given the opportunity to
elect to have such sections apply (1) if such Participant 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 (2)
such Participant had it least 10 years of vesting service when he or
she separated from service.
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10.8(b) 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 or
her benefits paid in accordance with Section 10.8(d).
10.8(c) The respective opportunities to elect (as described in
Section 10.8(a) and (b) above) must be afforded to the appropriate
Participants during the period commencing on August 23, 1984, and
ending on the date benefits would otherwise commence to such
Participants.
10.8(d) Any Participant who has elected pursuant to Section
10.8(b) and any Participant who does not elect under Section 10.8(a)
or who meets the requirements of Section 10.8(a) except that such
Participant does not have at least 10 years of vesting service when he
or she separates from serve, shall have his or her benefits
distributed in accordance with all of the following requirements if
benefits would have been payable in the form of a life annuity:
10.8(d)(1) If benefits in the form of a life annuity
become payable to a married Participant who:
10.8(d)(1)(i) begins to receive payments under the
Plan on or after Normal Retirement Age; or
10.8(d)(1)(ii) dies on or after Normal Retirement
Age while still working for the Employer; or
10.8(d)(1)(iii) begins to receive payments on or
after the "qualified early retirement age"; or
10.8(d)(1)(iv) 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
benefits to receive such benefits;
then such benefits shall be received under this Plan in the form of a
Qualified Joint and Survivor Annuity, unless the Participant has
elected otherwise during the election period. 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 such election shall be in writing and
may be changed by the Participant at any time.
10.8(d)(2) A Participant who is employed after attaining
the qualified early retirement age shall be given the
opportunity to elect, during the election period, to have a
survivor annuity payable on death. The election period
begins on the later of (i) the 90th day before the
Participant attains the "qualified early retirement age,"
or (ii) the date on which participation begins, and ends on
the date the Participant separates from service. Any such
election shall be in writing and may be changed by the
Participant at any time. If the Participant elects the
survivor annuity, payments under such annuity must not be
less than the payments which would have been made
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to the Spouse under the Qualified Joint and Survivor
Annuity if the Participant had retired on the day before
the Participant's death.
10.8(d)(3) For purposes of this Section 10.8(d),
"qualified early retirement age" means the latest of:
10.8(d)(3)(i) the earliest date under the Plan on
which the Participant may elect to receive retirement
benefits,
10.8(d)(3)(ii) the first day of the 120th month
beginning before the Participant reaches Normal
Retirement age, or
10.8(d)(3)(iii) the date the Participant begins
participation.
10.9 DIRECT ROLLOVERS.
10.9(a) GENERAL. This Section 10.9 applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the
Plan to the contrary that would otherwise limit a Distributee's
election under this Section 10, a Distributee may elect, at the time
and in the manner prescribed by the Plan Administrator, to have any
portion of an Eligible Rollover Distribution paid directly by the Plan
to an Eligible Retirement Plan specified by the Distributee in a
direct rollover in accordance with Code Section 401(a)(31).
10.9(b) DEFINITIONS.
10.9(b)(1) ELIGIBLE ROLLOVER DISTRIBUTION. An Eligible
Rollover Distribution is any distribution of all or any
portion of the balance to the credit of he Distributee,
except that an Eligible Rollover Distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of
the Distributee or the joint lives (or joint life
expectancies) of the Distributee and the Distributee's
designated beneficiary, or for a specified period of ten
years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and
the portion of any distribution that is not includable in
gross income (determined without regard to the exclusion
for net unrealized appreciation with respect to employer
securities).
10.9(b)(2) ELIGIBLE RETIREMENT PLAN. An Eligible
Retirement Plan is an individual retirement account
described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan
described in Code Section 403(a), or a qualified trust
described in Code Section 401(a), that accepts the
Distributee's Eligible Rollover Distribution. However, in
the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an
individual retirement account or individual retirement
annuity.
10.9(b)(3) DISTRIBUTEE. A Distributee includes an
Employee or former Employee. In addition, the Employee's
or former Employee's surviving spouse and the Employee's or
former spouse who is the alternate payee under a qualified
domestic
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relations order, as defined in Code Section 414(p), are
Distributees with regard to the interest of the spouse or
former spouse.
SECTION 11. MINIMUM DISTRIBUTION REQUIREMENTS
11.1 GENERAL. Subject to Section 10, BENEFIT PAYMENT FORMS - JOINT AND
SURVIVOR ANNUITY REQUIREMENTS, the requirements of this Section 11 shall apply
to any distribution of a Participant's Account and shall take precedence over
any inconsistent provisions of this Plan. Unless otherwise specified, the
provisions of this Section 11 shall apply to calendar years beginning after
December 31, 1984. All distributions required under this Section 11 shall be
determined and made in accordance with the proposed regulations under Code
Section 401(a)(9), including the minimum distribution incidental benefit
requirement of Section 1.401(a)(9)-2 of the proposed regulations.
11.2 SPECIAL DEFINITIONS.
11.2(a) APPLICABLE CALENDAR YEAR means the first Distribution
Calendar Year, and if life expectancy is being recalculated, each
succeeding calendar year.
11.2(b) APPLICABLE LIFE EXPECTANCY means the life expectancy (or
joint and last survivor expectancy) calculated using the attained age,
of the Participant (or Designated Beneficiary) as of the Participant's
(or Designated Beneficiary's) birthday in the Applicable Calendar Year
reduced by one for each calendar year which has elapsed since the date
life expectancy was first calculated. If life expectancy is being
recalculated, the Applicable Life Expectancy shall be the life
expectancy as so recalculated.
11.2(c) DESIGNATED BENEFICIARY means the individual who is
designated as the Beneficiary under this Plan in accordance with Code
Section 401(a)(9) and the regulations under such Code section.
11.2(d) DISTRIBUTION CALENDAR YEAR means a calendar year for which
a minimum distribution is required. For distributions beginning
before the Participant's death, the first Distribution Calendar Year
shall be 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 shall be the calendar year in which
distributions are required to begin pursuant to Section 11.6.
11.2(e) LIFE EXPECTANCY means the life expectancy (or joint and
last survivor expectancy) as computed by use of the expected return
multiples in Tables V and VI of Section 1.72-9 of the Federal Income
Tax Regulations. Unless otherwise elected by the Participant (or
Spouse, in the case of distributions described in Section 11.6(b)(2))
by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable as
to the Participant (or Spouse) and shall apply to all subsequent
years. The life expectancy of a nonspouse Beneficiary may not be
recalculated.
11.2(f) PARTICIPANT'S BENEFIT means the nonforfeitable portion of a
Participant's Account determined as of the last Valuation Date in the
calendar year immediately preceding the Distribution Calendar Year
("valuation calendar year") increased by the amount of any
contributions or forfeitures allocated to the Account as of dates in
the valuation calendar year after such Valuation Date and decreased by
distributions made in the valuation calendar year
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after such Valuation. 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.
11.2(g) REQUIRED BEGINNING DATE.
11.2(g)(1) GENERAL RULE. The Required Beginning Date of
a Participant who reaches age 70 1/2 after December 31,
1987 is the first day of April of the calendar year
following the calendar year in which the Participant
reaches age 70 1/2.
11.2(g)(2) AGE 70 1/2 BEFORE 1988. The Required
Beginning Date of a Participant who reaches age 70 1/2
before January 1, 1988 shall be,
11.2(g)(2)(i) for a Participant who is not a 5%
owner, the first day of April of the calendar year
following the calendar year in which occurs the later
of retirement or reaching age 70 1/2; or
11.2(g)(2)(ii) for a Participant who is a 5% owner
during any year beginning after December 31, 1979,
the first day of April following the later of:
(A) the calendar year in which the
Participant reaches age 70 1/2; or
(B) the earlier of the calendar year
with or within which ends the Plan Year in
which the Participant becomes a 5% owner, or
the calendar year in which the Participant
retires.
11.2(g)(3) AGE 70 1/2 DURING 1988. The Required
Beginning Date of a Participant who is not a 5% owner, who
reaches age 70 1/2 during 1988 and who has not retired
before January 1, 1989 shall be April 1, 1990. The
Required Beginning Date of a Participant who is a 5% owner
or who retired before January 1, 1989 and who reached age
70 1/2 during 1988 shall be determined in accordance with
Section 11.2(g)(1).
11.2(g)(4) 5% OWNER. A participant shall be treated as
a 5% owner for purposes of this Section 11.2(g) if such Participant is
a 5% owner as defined in Code Section 416(i) (determined in
accordance with Code Section 416 but without regard to whether the
Plan is top heavy) at any time during the Plan Year ending with or
within the calendar year in which such individual attaints age 66 1/2
or any subsequent Plan Year. Once distributions have begun to a 5%
owner under this Section 11, they must continue to be distributed,
even if the Participant ceases to be a 5% owner in a subsequent year.
11.3 REQUIRED BEGINNING DATE. The entire nonforfeitable interest of a
Participant must be distributed or begin to be distributed no later than the
Participant's Required Beginning Date. Such distribution shall be made
11.3(a) in the form of a Qualified Joint and Survivor Annuity as
described in Section 10.2, or
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11.3(b) if the Qualified Joint and Survivor Annuity is properly
waived or to the extent the safe harbor rules in Section 10.5 apply, in the
optional benefit form in Section 10.6 selected by the Participant.
Notwithstanding the foregoing, even if installment distributions are not
otherwise available as an optional benefit form, a Participant who has not
separated from service with the Employer and all Affiliates as of the Required
Beginning Date (or as of the end of any Distribution Calendar Year thereafter)
may elect to receive the minimum distribution amount for each such Distribution
Calendar Year as described in Section 11.5
11.4 LIMITS ON DISTRIBUTION PERIODS. As of the first Distribution Calendar
Year, distributions (if not made in a single sum) may only be made over one of
the following periods (or a combination thereof):
11.4(a) the life of the Participant,
11.4(b) the life of the Participant and a Designated Beneficiary,
11.4(c) a period certain not extending beyond the life expectancy
of the Participant or
11.4(d) a period certain not extending beyond the joint and last
survivor expectancy of the Participant and a Designated Beneficiary.
11.5 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR. If the
Participant's interest is to be distributed in other than a single sum, the
following minimum distribution rules shall apply on or after the Required
Beginning Date:
11.5(a) INDIVIDUAL ACCOUNT.
11.5(a)(1) GENERAL. If a Participant's Benefit is to be
distributed over (i) a period not extending beyond the life expectancy of the
Participant or the joint life and last survivor expectancy of the Participant
and the Participant's Designated Beneficiary or (ii) a period not extending
beyond the life expectancy of the Designated Beneficiary, the amount required
to be distributed for each calendar year, beginning with distributions for the
first Distribution Calendar Year, must at least equal the quotient obtained by
dividing the Participant's Benefit by the Applicable Life Expectancy.
11.5(a)(2) INCIDENTAL DEATH BENEFIT RULES
11.5(a)(2)(i) For calendar years beginning before
January 1, 1989, if the Participant's Spouse is not the Designated Beneficiary,
the method of distribution selected must assure that at least 50% of the
present value of the amount available for distribution is paid within the life
expectancy of the Participant.
11.5(a)(2)(ii) For calendar years beginning after
December 31, 1988, the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year, shall not be less than
the quotient obtained by dividing the Participant's Benefit by the lesser of
(A) the Applicable Life Expectancy or (B) if the Participant's Spouse is not
the Designated Beneficiary, the applicable divisor determined from the table
set forth in Q&A-4 of Section 1.40(a)(9)-2 of the proposed regulations.
Distributions after the death of the Participant shall be distributed using the
Applicable Life
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Expectancy in Section 11.5(a)(1) as the relevant divisor without regard to
Section 1.40(a)(9)-2 of the proposed regulations.
11.5(a)(3) TIMING. 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
subsequent 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.
11.5(b) ANNUITY CONTRACTS. If the Participant's Benefit is
distributed in the form of an annuity purchased from an insurance company,
distributions under such annuity shall be made in accordance with the
requirements of Code Section 401(a)(9).
11.6 DEATH DISTRIBUTION PROVISIONS.
11.6(a) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant
dies after distribution of his or her nonforfeitable interest has begun, the
remaining portion of such nonforfeitable interest shall continue to be
distributed at least as rapidly as under the method of distribution being used
prior to the Participant's death.
11.6(b) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant
dies before distribution of his or her nonforfeitable interest begins,
distribution of the Participant's entire nonforfeitable interest shall be
completed by December 31 of the calendar year containing the fifth anniversary
of the Participant's death except to the extent that an election is made to
receive distributions in accordance with (1) or (2) below:
11.6(b)(1) if any portion of the Participant's
nonforfeitable interest is payable to a Designated Beneficiary, distributions
may be made over the life or over a period certain not greater than the life
expectancy of the Designated Beneficiary and shall commence on or before
December 31 of the calendar year immediately following the calendar year in
which the Participant died;
11.6(b)(2) If the Designated Beneficiary is the
Participant's surviving Spouse, distributions may be made over the period
described in clause (1) above but the required commencement date may be
deferred until the later of (i) December 31 of the calendar year immediately
following the calendar year in which the Participant died or (ii) December 31
of the calendar year in which the Participant would have reached age 70 1/2.
If the Participant has not made an election pursuant to this Section 11.6(b)
by the time of the Participant's death, the Participant's Designated
Beneficiary must elect the method of distribution no later than the earlier of
(A) December 31 of the calendar year in which distributions would be required
to begin under this Section 11.6, or (B) December 31 of the calendar year
which contains the fifth anniversary of the date of death of the Participant.
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.
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11.6(c) SPECIAL RULES.
11.6(c)(1) For purposes of Section 11.6(b), if the
surviving Spouse dies after the Participant, but before payments to
such Spouse begin, the provisions of Section 11.6(b), with the
exception of Section 11.6(b)(2), shall be applied as if the surviving
Spouse were the Participant.
11.6(c)(2) For purposes of this Section 11.6, any
amount paid to a child of the Participant shall be treated as if it
had been paid to the surviving Spouse if the amount becomes payable to
the surviving Spouse when the child reaches the age of majority.
11.6(c)(3) For the purposes of this Section 11.6,
distribution of a Participant's interest shall be considered to begin
on the Participant's Required Beginning Date (or, if Section
11.6(c)(1) above is applicable, the date distribution is required to
begin to the surviving Spouse pursuant to Section 11.6(b)). If
distribution in the form of an annuity irrevocably commences to the
Participant before the Required Beginning Date, the date distribution
is considered to begin shall be the date distribution actually
commences.
11.7 SPECIAL PRE-TEFRA DISTRIBUTION ELECTION.
11.7(a) GENERAL RULE. Subject to Section 10, BENEFIT PAYMENT
FORMS - JOINT AND SURVIVOR ANNUITY REQUIREMENTS, the nonforfeitable percentage
of the Account of any Participant (including a "5% owner" as described in
Section 11.2(g)(4)) who has in effect a Special Pre-TEFRA Distribution
Election (as described in Section 11.7(b)) shall be paid only to the
Participant, or in the case of the Participant's death, only to his or her
beneficiary in accordance with the method of distribution specified in such
election without regard to the distribution rules set forth in Section 11.1
through Section 11.6.
11.7(b) SPECIAL PRE-TEFRA DISTRIBUTION ELECTION. For purposes of
this Section 11.7, a Special Pre-TEFRA Distribution Election means a
designation in writing, signed by the Participant or his or her beneficiary,
made before January 1, 1984 by a Participant in this Plan or a Participant in a
Preexisting Plan who had accrued a benefit under such plan as of December 31,
1983 which designation specifies
11.7(b)(1) a distribution method which was permissible
under Code Section 401(a)(9) as in effect prior to amendment by the
Deficit Reduction Act of 1984,
11.7(b)(2) the time at which such distribution will
commence,
11.7(b)(3) the period over which such distribution will
be made, and
11.7(b)(4) if such designation is to be effective for a
beneficiary, the beneficiaries of the Participant in order of
priority.
A distribution to be made upon the death of a Participant shall not be covered
under this Section 11.7(b) unless the information in the designation with
respect to such distribution satisfies the requirements of this Section
11.7(b).
11.7(c) CURRENT DISTRIBUTIONS. Any distribution which began before
January 1, 1984 and continues after such date shall be deemed to be made
pursuant to a Special Pre-TEFRA Distribution
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Election if the method of distribution was set forth in writing and such method
satisfies the requirements of Section 11.7(b)(1) through (4).
11.7(d) REVOCATION. A Participant who made a Special Pre-TEFRA
Distribution Election shall have the right to revoke such election by
completing and filing a distribution Election Form under Section 9.
Furthermore, any change (other than the mere substitution or addition of a
beneficiary not originally designated in such election which does not directly
or indirectly after the period over which distributions are to be made) to a
Special Pre-TEFRA Distribution Election shall be deemed to be a revocation of
such election. Upon revocation, any subsequent distribution shall be made in
accordance with Code Section 401(a)(9). 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 Section 401(a)(9), but
for the Special Pre-TEFRA Distribution Election. For calendar years beginning
after December 31, 1988, such distributions must meet the minimum distribution
incidental benefit requirements in Section 401(a)(9)-2 of the proposed
regulations. If an amount is transferred or rolled over from one plan to
another plan, the rules in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-1 of the
proposed regulations shall apply.
SECTION 12. TOP-HEAVY PLAN RULES
12.1 APPLICATION. The rules set forth in this Section 12 shall supersede
any provisions of this Plan or the Adoption Agreement which are inconsistent
with these rules as of the first day of the first Plan Year beginning after
December 31, 1983 during which the Plan is or becomes a Top-Heavy Plan and such
rules shall continue to supersede such provisions for so long as the Plan is a
Top-Heavy Plan unless the Code permits such rules to cease earlier or requires
them to remain in effect for a longer period.
12.2 SPECIAL DEFINITIONS. For purposes of this Section 12, the terms
defined in this Section 12.2 shall have the meanings shown opposite such
terms.
12.2(a) DETERMINATION DATE - means
12.2(a)(1) for the first Plan Year which is adopted as a
new Plan under the Adoption Agreement, the last day of such
Plan Year, and
12.2(a)(2) for any subsequent Plan Year, the last day of
the immediately preceding Plan Year, and
12.2(a)(3) for any plan year of each other qualified
plan maintained by the Employer or an Affiliate which is
part of a Permissive Aggregation Group or a Required
Aggregation Group, the date determined under this Section
12.2(a) as if the term "Plan Year" means the plan year for
each such qualified plan.
12.2(b) KEY EMPLOYEE - means any Employee or former Employee (and
the Beneficiaries of such Employee) (as determined in accordance with Code
Section 416(i)(1)) who at any time during the Plan Year or any of the 4
immediately preceding Plan Years was
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12.2(b)(1) an officer of the Employer or an Affiliate
whose compensation for such Plan Year exceeds 50% of the
dollar limitation under Code Section 415(b)(1)(A),
12.2(b)(2) an owner (or considered to be an owner within
the meaning of Code Section 318) of one of the 10 largest
interests in the Employer or an Affiliate whose
compensation for such Plan Year exceeds the 100% of the
dollar limitation under Code Section 415(c)(1)(A);
provided that the value of such Employee's ownership
interest is more than one-half of one percent,
12.2(b)(3) a 5% owner of the Employer or an Affiliate, or
12.2(b)(4) a 1% owner of the Employer or an Affiliate
whose compensation for such Plan Year exceeds $150,000.
For purposes of this Section 12.2(b), an Employee's compensation means
compensation within the meaning of Code Section 415(c)(3) (as defined in
Section 7.2(a)(2)) but including amounts contributed by the Employer or an
Affiliate pursuant to a salary reduction agreement which are excluded from
gross income under Code Section 125, Section 402(e)(3), Section 402(h) or
Section 403(b).
12.2(c) PERMISSIVE AGGREGATION GROUP - means a Required Aggregation
Group and any other qualified plan or plans (as described in Code Section
401(a)) maintained by the Employer or an Affiliate which, when considered with
the Required Aggregation Group, would continue to satisfy the requirements of
Code Section 401(a)(4) and Code Section 410.
12.2(d) REQUIRED AGGREGATION GROUP - means (1) each qualified plan
(as described in Code Section 401(a)) maintained by the Employer or an
Affiliate in which at least one Key Employee participates or participated at
any time during the 5 year period ending on the Determination Date (without
regard to whether such plan has terminated) and (2) any other qualified plan
maintained by the Employer or an Affiliate which enables any such plan to
satisfy the requirements of Code Section 401(a)(4) or Code Section 410.
12.2(e) TOP-HEAVY PLAN - means this Plan if, for any Plan Year
beginning after December 31, 1983, either
12.2(e)(1) this Plan is not part of a Required
Aggregation Group or a Permissive Aggregation Group and the
Top-Heavy Ratio for this Plan exceeds 60%;
12.2(e)(2) this Plan is part of a Required Aggregation
Group but not part of a Permissive Aggregation Group and
the Top-Heavy Ratio for the Permissive Aggregation Group
exceeds 60%; or
12.2(e)(3) this Plan is part of a Required Aggregation
Group and part of a Permissive Aggregation Group and the
Top-Heavy Ratio for the Permissive Aggregation Group
exceeds 60%.
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12.2(f) TOP-HEAVY RATIO.
12.2(f)(1) If the Employer or an Affiliate maintains one
or more defined contribution plans (including any
simplified employee pension plan) and the Employer or an
Affiliate has never maintained a defined benefit plan under
which benefits have been accrued for a Participant in this
Plan during the 5 year period ending on the Determination
Date. "Top Heavy Ratio" mans for this Plan alone or for
the Required Aggregation Group or Permissive Aggregation
Group, as appropriate, a fraction, the numerator of which
shall be the sum of the account balances of all Key
Employees as of the Determination Date under this and all
other such defined contribution plans and the denominator
of which shall be the sum of the account balances of all
employees as of the Determination Date under this and all
other such defined contribution plans.
12.2(f)(2) If the Employer or an Affiliate maintains one
or more defined contribution plans (including any
simplified employee pension plan) and the Employer or an
Affiliate maintains or has ever maintained one or more
defined benefit plans under which benefits have been
accrued for a Participant in this Plan during the 5 year
period ending on the Determination Date. "Top Heavy Ratio"
means for the Required Aggregation Group or the Permissive
Aggregation Group, as appropriate, a fraction, the
numerator of which shall be the sum of the account balances
for all Key Employees as of the Determination Date under
this and all other such defined contribution plans and the
sum of the present value of the accrued benefits for all
Key Employees as of the Determination Date under all
defined benefit plans maintained by the Employer or an
Affiliate and the denominator of which shall be the sum of
the account balances for all employees as of the
Determination Date under this and all other such defined
contribution plans and the sum of the present value of the
accrued benefits for all employees as of the Determination
Date under all defined benefit plans maintained by the
Employer or an Affiliate.
12.2(f)(3) The following rules shall apply for purposes
of calculating the Top-Heavy Ratio:
12.2(f)(3)(i) The value of any account balance and
the present value of any accrued benefit shall be
determined as of the most recent Top-Heavy Valuation
Date that falls within, or ends with, the 12 month
period ending on the Determination Date (or, if plans
are aggregated, the Determination Dates that fall
within the same calendar year), except as provided
under the regulations under Code Section 416 for the
first and second years of a defined benefit plan;
12.2(f)(3)(ii) The value of any account balance and
the present value of any accrued benefit shall
include the value of any distributions made during
the 5 year period ending on such Determination Date
and any contributions due but as yet unpaid as of the
Determination Date which are required to be taken
into account on that date under Code Section 416;
12.2(f)(3)(iii) The present value of an accrued
benefit under a defined benefit plan shall be
determined in accordance with the interest rate ad
mortality
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assumptions specified in the Adoption Agreement or,
if this Plan and such defined benefit plan are
Paired Plans, as specified in the Adoption
Agreement for such defined benefit Paired Plan;
12.2(f)(3)(iv) The account balance or accrued
benefit of a Participant who is not a Key Employee
for the current Plan Year but who was a Key Employee
in a prior Plan Year or who has not performed an Hour
of Service for the Employer or any Affiliate at any
time during the 5 year period ending on the
Determination Date shall be disregarded.
12.2(f)(3)(v) Deductible employee contributions
shall be disregarded;
12.2(f)(3)(vi) The calculation of the Top-Heavy
Ratio and the extent to which contributions,
distributions, rollovers, and transfers are taken
into account shall be determined in accordance with
Code Section 416; and
12.2(f)(3)(vii) If the Employer maintains more than
one defined benefit plan, the accrued benefit of a
Participant other than a Key Employee shall be
determined under the method, if any, that uniformly
applies for accrual purposes under all such defined
benefit plans maintained by the Employer or an
Affiliate, or 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 Section 411(b)(1)(C).
12.2(g) TOP-HEAVY RATIO DATE - means for this Plan, the last day of
each Plan Year and for each other qualified plan maintained by the Employer or
an Affiliate.
12.2(g)(1) STANDARD OPTION - the most recent valuation
date for such plan or
12.2(g)(2) ALTERNATIVE - the valuation date specified in
the Adoption Agreement.
12.3 MINIMUM ALLOCATION.
12.3(a) GENERAL. Except as otherwise provided in this Section
12.3, for any Plan Year in which this Plan is a Top-Heavy Plan, the "minimum
allocation" for each Participant who is not a Key Employee means an allocation
of Employer Contributions and Forfeitures made in accordance with Section
12.3(d) which shall not be less than the lesser of
12.3(a)(1) 3% of such Participant's Compensation for
such Plan Year or,
12.3(a)(2) if the Employer or an Affiliate has no
defined benefit plan which uses this Plan to satisfy the
requirements of Code Section 401(a)(4) or Code Section
410, the largest percentage of the Employer Contributions
and Forfeitures allocated on behalf of any Key Employee
(expressed as a percentage of the first $200,000 of
Compensation) for such Plan Year.
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12.3(b) DEFINED BENEFIT PAIRED PLAN. If this Plan is adopted in
combination with a defined benefit Paired Plan, the Employer and the
Participating Affiliates shall make a contribution under this Plan (or, if this
Plan is adopted in combination with another defined contribution Paired Plan,
under any combination of defined contribution Paired Plans) for each
Participant who is an Eligible Employee at any time during such Plan Year who
is also a Participant in the defined benefit Paired Plan equal to at least 5%
(or such greater percentage as is specified in the adoption agreement for the
defined benefit Paired Plan) of Compensation for such Plan Year unless the
Employer elects under such defined benefit Paired Plan to provide the minimum
benefit accrual under such defined benefit Paired Plan.
If this Section 12.3(b) applies and the Employer has not elected to provide
the minimum benefit accrual under the defined benefit Paired Plan, the minimum
allocation required under this Section 12.3(b) for Plan Years beginning on and
after the Final Compliance Date shall, subject to the ordering rules in Section
12.3(c), be made under this Plan without regard to whether the Participant also
benefits under the defined benefit Paired Plan. Further, it this Plan and the
defined benefit Paired Plan do not benefit the same participants for such Plan
Year, the minimum allocation described in Section 12.3(a) shall, subject to
the ordering rules in Section 12.3(c), be made under this Plan for each
Participant described in Section 12.3(d)(1) and the minimum benefit accrual
shall be made for each participant in the defined Benefit Paired Plan in
accordance with the terms of such Paired Plan.
12.3(c) DEFINED CONTRIBUTION PAIRED PLAN. If this Plan is adopted
in combination with one or more defined contribution Paired Plans, the minimum
allocation required under this Section 12.3, if any, shall be made under such
Paired Plans in the following order:
12.3(c)(1) STANDARD OPTION - First, under the Money
Purchase Pension Plan, if any; second, under the Target
Benefit Pension Plan, if any; third, under the Profit
Sharing Plan; if any; and finally, under the 401(k) Plan,
if any.
12.3(c)(2) ALTERNATIVE - in the order specified in the
Adoption Agreement.
12.3(d) PARTICIPANTS ENTITLED TO ALLOCATION. The minimum
allocation required for any Plan Year under this Section 12.3
12.3(d)(1) shall be made for each Participant who is not
a Key Employee and who is employed as an Eligible Employee
(or on an authorized leave of absence as an Eligible
Employee) on the last day of such Plan Year, without regard
to the number of Hours of Service actually completed by
such Participant in such Plan Year; and
12.3(d)(2) shall not apply to any Participant (i) who is
covered under any other plan or plans maintained by the
Employer or an Affiliate and the Employer has specified in
the Adoption Agreement that the minimum allocation or the
minimum benefit required under code Section 416 for any
Plan Year for which this Plan is a Top-Heavy Plan shall be
made under such other plan or plans or (ii) to the extent
such Participant receives such minimum allocation or
minimum benefit under this Plan or any other plans
maintained by the Employer or an Affiliate.
Notwithstanding Section 12.3(d)(2), if this Plan is adopted as a
nonstandardized Plan that intends to satisfy the safe harbor in the Code
Section 401(a)(4) regulations, the minimum allocation required under Section
12.3 for Plan
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Years beginning on and after the Final Compliance Date must be made for each
Participant described in Section 12.3(d)(1) without regard to whether the
Participant also benefits under another plan, but only to the extent that such
minimum allocation is not otherwise received under this Plan.
12.3(e) NONFORFEITABILITY. The minimum allocation required under
this Section 12.3 (to the extent required to be nonforfeitable under Code
Section 416(b)) shall not be forfeited under Code Section 411(a)(3)(B) or
Code Section 411(a)(3)(D).
12.3(f) COMPENSATION. For purposes of computing the minimum
allocation under this Section 12.3, the term "Compensation" shall mean
Compensation within the meaning of Code Section 415(c)(3) as described in
Section 7.2(a)(2).
12.3(g) MULTIPLE PLANS. If the Employer or an Affiliate also
maintains another plan, the Employer shall specify in the Adoption Agreement
how the minimum allocation, if any, required under Code Section 416 will be
satisfied and, if, the Employer or an Affiliate maintains or has maintained a
defined benefit plan, the method of satisfying Code Section 416(h).
12.3(h) INTEGRATED PLANS.
12.3(h)(1) PROFIT SHARING PLAN. If this Plan is adopted
as an integrated Profit Sharing Plan, the following
allocation formula shall apply in lieu of the formula in
Section 6.3(a)(2) for each Plan Year in which such Plan is
a Top-Heavy Plan.
The Forfeitures and the Employer Contribution shall be
allocated (and posted) as of the last day of such Plan Year
to the Employer Account of each Active Participant and each
other Participant for whom a minimum allocation is required
to be made under this Section 12.3 in accordance with the
following:
STEP ONE - First, the lesser of (A) the sum of the
Employer Contribution and Forfeitures for such Plan
Year or (B) the product of the Top-Heavy Percentage
and the total Compensation of all such Participants
shall be allocated in the same ratio that each such
Participant's total Compensation for such Plan Year
bears to the total Compensation of all such
Participants for such Plan Year.
STEP TWO - Second, the lesser of (A) the remaining
Employer Contribution and Forfeitures for such Plan
Year or (B) the product of the Top-Heavy Percentage
(or the Maximum Disparity Rate, if less) and the
total Excess Compensation of all such Participants
shall be allocated in the same ratio that each such
Participant's Excess Compensation for such Plan Year
bears to the total Excess Compensation for all such
Participants for such Plan Year.
STEP THREE - Third, the lesser of (A) the remaining
Employer Contribution and Forfeitures for such Plan
Year or (B) the Integration Amount shall be allocated
in the same ratio that the sum of the total
Compensation and Excess Compensation of each such
Participant for such Plan Year bears to the sum of
the total Compensation and Excess Compensation of all
such Participants for such Plan Year.
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STEP FOUR - Finally, the remaining Employer
Contribution and Forfeitures for such Plan Year shall
be allocated in the same ratio that each such
Participant's total Compensation for such Plan Year
bears to the total Compensation of all such
Participants for such Plan Year.
12.3(h)(2) MONEY PURCHASE PENSION PLAN. If this Plan is
adopted as an integrated Money Purchase Pension Plan, (i)
the "Base Contribution Percentage" specified in the
Adoption Agreement, if less than the Top-Heavy Percentage,
shall be increased to equal the Top-Heavy Percentage and
(ii) the Employer Contribution required under Section 5.2
(as adjusted in (i) above) shall be made for each Active
Participant and each other Participant for whom an
allocation is required to be made under this Section 12.3.
12.3(h)(3) SPECIAL DEFINITIONS. For purposes of this
Section 12.3(h),
12.3(h)(3)(i) "Excess Compensation" means the
amount, if any, of a Participant's Compensation for
such Plan Year which exceeds the Integration Level
for such Plan Year.
12.3(h)(3)(ii) "Integration Amount" means the
product of (1) the total Compensation and the total
Excess Compensation of all such Participants and (2)
the excess, if any, of the Integration Percentage
specified in the Adoption Agreement over the
Top-Heavy Percentage.
12.3(h)(3)(iii) "Top-Heavy Percentage" means 3% or
such greater percentage required under this Section
12.3 or specified in the Adoption Agreement.
12.4 VESTING SCHEDULE. For any Plan Year in which this Plan is a Top-Heavy
Plan, the Top-Heavy vesting schedule specified in the Adoption Agreement
automatically shall apply to all benefits under the Plan within the meaning of
Code Section 411(a)(7) (other than benefits which are attributable to Employee
Contributions or Rollover Contributions or other contributions which are
nonforfeitable when made), including benefits accrued before the effective date
of Code Section 416 and before this Plan became a Top-Heavy Plan, unless the
regular vesting schedule is at least as favorable as such Top-Heavy vesting
schedule. However, the provisions of this Section 12.4 shall not apply to the
Account balance of any Participant who does not complete an Hour of Service
after the Plan first becomes a Top-Heavy Plan and such Participant's Account
balance attributable to Employer contributions and Forfeitures shall be
determined without regard to this Section 12.4. Further, no change in the
vesting schedule as a result of a change in this Plan's status to a Top-Heavy
Plan or to a plan which is not a Top-Heavy Plan shall deprive a Participant of
the nonforfeitable percentage of the Participant's Account balance accrued to
the date of the change, and any such change to the vesting schedule shall be
subject to the provisions of Section 14.3(c).
12.5 401(K) PLAN. Notwithstanding any contrary provision, the following
rules shall apply if this Plan adopted as a 401(k) Plan:
12.5(a) Qualified Nonelective Contributions shall be treated as
Employer contributions for purposes of satisfying the minimum allocation under
Section 12.3.
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12.5(b) Matching Contributions allocated to the Account of a Key
Employee shall be treated as Employer contributions for purposes of determining
the amount of the minimum allocation required under Section 12.3. The Plan
may use Matching Contributions allocated on behalf of a non-Key Employee to
satisfy the minimum allocation under Section 12.3; provided, however, that for
Plan Years beginning on and after the Final Compliance Date, such contributions
shall not be treated as Matching Contributions for purposes of satisfying the
limitations of Section 7.4 and Section 7.5 but shall instead be subject to
the general nondiscrimination rules of Code Section 401(a)(4).
12.5(c) Elective Deferrals allocated to the Account of a Key
Employee shall be treated as Employer contributions for purposes of determining
the amount of the minimum allocation required under Section 12.3. However,
for Plan Years beginning on and after the Final Compliance Date, Elective
Deferrals allocated on behalf of non-Key Employees shall not be treated as
Employer contributions for purposes of satisfying the minimum allocation
required under Section 12.3.
SECTION 13. INSURANCE, INDIVIDUALLY DIRECTED INVESTMENTS AND
PARTICIPANT LOANS
13.1 INSURANCE CONTRACTS.
13.1(a) ELECTIONS AND EXISTING LIFE INSURANCE CONTRACTS.
13.1(a)(1) STANDARD OPTION. No Participant shall have
the right to elect to have the Trustee purchase an insurance contract on his or
her life for his or her Account under this Plan; however, any life insurance
contract purchased under the terms of a Preexisting Plan, which is acceptable
to the Trustee, shall continue to be held by the Trustee for the benefit of the
Participant subject to the conditions of this Section 13.1.
13.1(a)(2) ALTERNATIVE. If so specified in the Adoption
Agreement each Participant who is an Eligible Employee may elect (subject to
this Section 13.1) to have the Trustee purchase an insurance contract on his
or her life for his or her Account under the Plan by completing and filing an
Election Form with the Plan Administrator.
13.1(b) PREMIUMS. The aggregate annual premiums on any life
insurance contracts held for a Participant's Account under this Plan shall be
subject to the following limitations:
13.1(c) ORDINARY LIFE. If the life insurance contacts are ordinary
whole life insurance contracts which are contracts with both nondecreasing
death benefits and nonincreasing premiums, such premiums shall be less than
one-half of the aggregate Employer Contributions plus Forfeitures credited to
the Participant's Employer Account and Matching Account.
13.1(c)(1) TERM AND UNIVERSAL LIFE. If the life
insurance contracts are term life insurance contracts, universal life insurance
contracts and any other life insurance contracts (other than whole life), then
such premiums shall not exceed one-fourth of the aggregate Employer
Contributions plus Forfeitures credited to the Participant's Employer Account
and Matching Account.
13.1(c)(2) COMBINATION. If the life insurance contracts
either combine features of ordinary whole life and other life insurance or
consist of ordinary whole life and other life insurance
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contracts, the sum of one-half of the ordinary whole life premiums plus all
other life insurance premiums shall not exceed one-fourth of the aggregate
Employer Contributions plus Forfeitures credited to the Participant's Employer
Account and Matching Account.
13.1(d) OWNER AND BENEFICIARY. The Trustee shall apply for and be
the owner of each life insurance contract held under this Plan and also shall
be named s the beneficiary of each such life insurance contract. In the event
of the Participant's death prior to the date as of which the Participant's
Account becomes payable under the Plan, the Trustee, as beneficiary, shall pay
the entire proceeds of such life insurance contracts to the Participant's
Account which shall then be distributed to the surviving Spouse, or, if
applicable, to the Participant's Beneficiary in accordance with Section 10.
Under no circumstances shall the Fund retain any part of the proceeds of any
life insurance contracts. In the event of a conflict between the terms of the
Plan and the terms of any life insurance contracts held under this Plan, the
Plan provisions shall control.
13.1(e) ALLOCATIONS. Any dividends or credits earned on a life
insurance contract held under this Plan shall be allocated to the Account of
the Participant for whom the contract was purchased and may be applied to pay
the annual premium on such life insurance contract. The amount of the annual
premium on each such insurance contract shall be charged against the Account of
the insured Participant. The value of any such insurance contract shall be
deemed to be zero for the purposes of allocating the Employer Contribution,
Forfeitures or the Fund Earnings for any Plan Year as provided in Section 6.
13.1(f) DISTRIBUTION TO PARTICIPANT. Subject to Section 10, JOINT
AND SURVIVOR ANNUITY REQUIREMENTS, the life insurance contracts held as part of
a Participant's Account shall be distributed in kind to the Participant upon
retirement or other termination of employment as an Employee for reasons other
than death (1) if such Account is completely nonforfeitable or (2) if the cash
surrender value of such contracts is equal to or less than the nonforfeitable
portion of the Participant's Account. If neither one of these conditions is
satisfied and the Participant does not elect to purchase the life insurance
contracts under Section 13.1(f), the Trustee shall surrender such contracts,
add the proceeds to the Participant's Account and distribute the nonforfeitable
percentage of the Participant's Account in accordance with Section 10.
13.1(g) TERMINATION OF INSURANCE ELECTION. A Participant may
direct the Trustee to stop making premium payments on a life insurance contract
held as part of the Participant's Account and to surrender such contract or to
sell such contract to the Participant by completing and filing an Election Form
with the Plan Administrator. If the Participant purchases the contract, he or
she shall prepare and deliver to the Trustee all papers needed to properly
effect that purchase and shall pay to the Trustee an amount equal to the cash
surrender value of the contract at the time of the purchase. The amount paid
either by the Participant for the purchase or by the insurance company in
connection with the surrender of a contract shall be credited to the
Participant's Account as of the date payments is made to the Trustee. A
Participant automatically shall be deemed to have directed the Trustee to stop
premium payments and to surrender a life insurance contract immediately before
a premium due date if the premium due on that date would exceed the premium
payment limits in Section 13.1(b).
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13.2 INDIVIDUALLY DIRECTED INVESTMENTS.
13.2(a) GENERAL.
13.2(a)(1) STANDARD OPTION. No Participant or a
Beneficiary may direct the investment of such individual's Account.
13.2(a)(2) ALTERNATIVE. If so specified in the Adoption
Agreement, a Participant or a Beneficiary may elect how such individual's
Account shall be invested between the investment alternatives available under
the plan from time to time. The Plan Administrator shall furnish to each
Participant and Beneficiary sufficient information to make informed decisions
with regard to investment alternatives and, if this Plan is intended to satisfy
ERISA Section 404(c), information which satisfies the requirements of the
regulations under ERISA Section 404(c). An individual's investment direction
shall apply
13.2(a)(2)(i) STANDARD OPTION. to the
individual's entire Account or
13.2(a)(2)(ii) ALTERNATIVE. only to the portion of
the individual's Account specified in the Adoption Agreement.
13.2(b) ELECTION RULES. The Plan Administrator from time to time
shall establish and shall communicate in writing to such individuals such
reasonable restrictions and procedures for making individual investment
elections as the Plan Administrator deems appropriate under the circumstances
for the proper administration of this Plan. Such restrictions and procedures
shall be applied on a uniform and nondiscriminatory basis to all similarly
situated individuals and, if this Plan is intended to satisfy ERISA Section
404(c), shall be in accordance with the regulations under ERISA Section
404(c).
13.2(c) NO ELECTION. The Account of an individual for whom no
investment election is in effect under this Section 13.2, either because such
individual failed to make a proper election or terminated an election under
this Section 13.2, shall be invested as designated by the Plan Administrator.
13.3 PARTICIPANT LOANS. This Section 13.3 shall apply only if the
Employer specifies in the Adoption Agreement that loans shall be permitted.
However, if loans are not permitted in the Adoption Agreement, any outstanding
loans made under the terms of the Preexisting Plan shall be subject to this
Section 13.3.
13.3(a) ADMINISTRATION AND PROCEDURES. The Plan Administrator
shall establish objective nondiscriminatory written procedures for the
administration of the loan program under this Section 13.3 (which written
procedures, together with any written amendments to such procedures, hereby are
expressly incorporated by reference as a part of this Plan), including, but not
limited to,
13.3(a)(1) the class of Participants and Beneficiaries
who are eligible for a loan;
13.3(a)(2) the identity of the person or position
authorized to administer the loan program;
13.3(a)(3) the procedures for applying for a loan
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13.3(a)(4) the basis on which loans will be approved
or denied;
13.3(a)(5) the limitations, if any, on the types and
amounts of loans offered;
13.3(a)(6) the procedures for determining a
reasonable rate of interest;
13.3(a)(7) the types of collateral which may be used
as security for a loan; and
13.3(a)(8) the events constituting default and the steps
what will be taken to preserve Plan assets in the event of such default.
13.3(b) NO LOANS TO CERTAIN OWNERS AND FAMILY MEMBERS. No loans
shall be made under this Plan to a Participant or Beneficiary who is
13.3(b)(1) an Owner-Employee,
13.3(b)(2) an employee or officer of an Employer or an
Affiliate which is an electing small business corporation within the meaning of
Code Section 1361 ("S Corporation") who owns (or is considered to own within
the meaning of Code Section 318(a)(1)) on any day during any taxable year of
such corporation for which it is an S Corporation more than 5% of the
outstanding stock of such corporation, or
13.3(b)(3) a member of the family (as defined in Code
Section 267(c)(4)) of a Participant or Beneficiary described in clause (1) or
(2).
13.3(c) GENERAL CONDITIONS. If loans are made available after
October 18, 1989 to any Participant or Beneficiary who is a "party in interest"
(as defined in ERISA Section 3(14)) with respect to the Plan, then loans shall
be made available to all Participants and Beneficiaries who are parties in
interest with respect to the Plan. All loans which are made under this Plan
shall comply with the following requirements under Code Section 4975(d)(1) and
ERISA Section 408(b)(1):
13.3(c)(1) such loans shall be made available to
Participants and Beneficiaries who are eligible for a loan on a reasonably
equivalent basis;
13.3(c)(2) such loans shall not be made available to
Highly Compensated Employees in an amount greater than the amount made
available to other Employees;
13.3(c)(3) such loans shall be made in accordance with
specific provisions regarding such loans set forth in the
Plan and the written procedure described in Section
13.3(a);
13.3(c)(4) such loans shall bear a reasonable rate of
interest; and
13.3(c)(5) such loans shall be adequately secured.
13.3(d) OTHER CONDITIONS. All loans made under this Plan shall
be subject to the following conditions:
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13.3(d)(1) If the loan is secured by any portion of the
Participant's Account and Section 10.5 does not apply to
any portion of the Participant's Account, the Participant's
Spouse, if any, must consent in writing to the granting of
such security interest or to any increase in the amount of
security no earlier than the beginning of the 90 day period
before such loans is made; provided
13.3(d)(1)(i) such consent must be in writing
before a notary public and must acknowledge the
effect of such loan;
13.3(d)(1)(ii) such consent shall be irrevocable
and shall be binding against the person, if any,
identified as the Participant's Spouse at the time of
such consent and any individual who may subsequently
become the Participant's Spouse;
13.3(d)(1)(iii) a new consent shall be required in
the event of any renegotiation, extension, renewal,
or other revision of such a loan; and
13.3(d)(1)(iv) if a valid spousal consent has been
obtained, then, notwithstanding any other provision
of this Plan, the portion of the Participant's vested
Account balance used as a security interest held by
the Plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes
of determining (and may reduce) the amount of the
Account balance payable at the time of death or
distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the
Participant's vested Account balance (determined
without regard to the preceding sentence) is payable
to the surviving Spouse, then the vested Account
balance shall be adjusted by first reducing the
vested Account balance by the amount of the security
used as repayment of the loan, and then determining
the benefit payable to the surviving Spouse.
13.3(d)(2) The loan shall provide for the repayment of
principal and interest in substantially level installments
with payments not less frequently than quarterly over a
period of 5 years or less unless such loan is classified as
a "home loan" (as described in Code Section 72(p));
13.3(d)(3) If the loan is secured by any portion of the
Participant's Account, such Account balance shall not be
reduced as a result of a default until a distributable
event occurs under the Plan; and
13.3(d)(4) The Participant or Beneficiary shall agree to
such other terms and conditions as are required under the
written procedures described in Section 13.3(a).
13.3(e) CREDITING OF LOAN PAYMENTS.
13.3(e)(1) ACCOUNT ASSET (STANDARD OPTION). The loan to
a Participant whose loan request is granted under this
Section 13.3 shall be made from, and shall be an asset of,
the Participant's Account and all principal and interest
payments on such loan shall be credited exclusively to the
Participant's Account.
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13.3(e)(2) FUND ASSET (ALTERNATIVE). If the Employer
specifies in the Adoption Agreement that loans shall be
treated as an asset of the fund or, if any loan which was
made under a Preexisting Plan was treated as an asset of
the Fund, such loans shall be treated under this Plan as a
general Fund investment and an asset of the Fund, and all
principal and interest payments on such loan shall be
credited exclusively to the Fund as a general Fund
investment.
13.3(f) LIMITATIONS ON AMOUNTS. The principal amount of any loan
(when added to the outstanding principal balance of any outstanding loans made
under this Plan or under any other plan which is tax exempt under Code Section
401 and which is maintained by the Employer or an Affiliate) to the Participant
shall not exceed the lesser of (1) and (2) below:
13.3(f)(1) DOLLAR LIMIT - $50,000 reduced by the
excess, if any, of
(i) the highest outstanding principal balance of
previous loans to the Participant from the
Plan (and any other plan maintained by the
Employer or an Affiliate) during the one year
period ending immediately before the date
such current loans is made, over
(ii) the current outstanding principal balance of
such previous loans on the date such current loan is
made, or
13.3(f)(2) ACCOUNT LIMIT.
(i) STANDARD OPTION - 50% of the nonforfeitable
interest in the Participant's Account at the time the
loans is made, or
(ii) ALTERNATIVE - if so specified in the Adoption
Agreement, the greater of $10,000 or the amount
specified in Section 13.3(f)(2)(i), but in no event
more than the nonforfeitable interest in the
Participant's Account.
An assignment or pledge of any portion of the Participant's interest in the
Plan and a loan, pledge or assignment with respect to any insurance contract
purchased under the Plan shall be treated as a loan for purposes of the
limitations in this Section 13.3(f).
13.3(g) FAILURE TO REPAY. If (1) the terms of the loan provide
that it shall become due and payable in full if the Participant's or
Beneficiary's obligation to repay the loan has been discharged through
a bankruptcy or any other legal process or action which did not
actually result in payment in full and (2) such loan is not actually
repaid in full, such loan shall be cancelled on the Fund's books and
records and the amount otherwise distributable to such Participant or
Beneficiary under this Plan shall be reduced by the principal amount
of the loan plus accrued but unpaid interest due as determined without
regard to whether the loan had been discharged through a bankruptcy or
any other legal process or action which did not actually result in
payment in full. The Plan Administrator shall have the power to
direct the Trustee to take such action as the Plan Administrator deems
necessary or appropriate to stop the payment of an Account to or on
behalf of a Participant who fails to repay a loan (without regard to
whether the obligation to repay such
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loan had been discharged through a bankruptcy or any other
legal process or action) until the Participant's Account has been
reduced by the principal plus accrued but unpaid interest due (without
regard to such discharge) on such loan or to distribute the note which
evidences such loan in full satisfaction of that portion of such
Account which is represented by the value of such note.
Notwithstanding the foregoing, in the event of a default, foreclosure
on the note and execution of the Plan's security interest in the
Account shall not occur until a distributable event occurs under this
Plan and interest shall continue to accrue only to the extent
permissible under applicable law.
13.3(h) DISTRIBUTIONS. In the event the Participant's
Account becomes distributable before the loan is repaid in full, then
the vested Account balance shall be adjusted by first reducing the
vested Account balance by the amount of the security interest in the
Account and then determining the benefit payable. Nothing shall
preclude the Trustee from cancelling the Plan's security interest in
the Account and distributing the note in lieu of any other Plan assets
in full satisfaction of that portion of the Participant's Account
represented by the value of the outstanding balance of the loan or the
amount which would have been outstanding but for a discharge in
bankruptcy or through any other legal process.
SECTION 14. ADOPTION, AMENDMENT, WITHDRAWAL AND CONVERSION, MERGER,
ASSET TRANSFERS AND TERMINATION
14.1 ADOPTION.
14.1(a) GENERAL. Subject to the terms and conditions of this Plan,
the Trust Agreement and the Adoption Agreement, any sole
proprietorship, partnership or corporation may adopt this Plan by
completing and executing the Adoption Agreement. The Plan as adopted
by the Employer shall be effective for all purposes (other than as a
"prototype plan") as of the Effective Date. However, the status of
the Plan as a "prototype plan" shall be conditioned upon acceptance of
the Adoption Agreement by the Prototype Sponsor and, upon such
acceptance, such status as a "prototype plan" shall be effective
retroactive to the Effective Date except as provided in Section 14.4.
14.1(b) PREEXISTING PLAN. If this Plan is adopted as an amendment
and restatement of a Preexisting Plan, (1) the Trust Agreement shall
be substituted for the trust or other funding arrangement under the
Preexisting Plan, (2) the assets held under such trust or other
funding arrangement shall become assets of the Fund, (3) an Account
shall be established for each person who is a participant or
beneficiary in the Preexisting Plan, and (4) the dollar value assigned
to such participant's or beneficiary's Preexisting Plan account or
accounts shall be credited to such person's Account under this Plan
(or to one or more subaccounts under such Account). All optional
forms of benefit available under the Preexisting Plan which must be
preserved under Code Section 411(d)(6) shall be available to the
Participant under this Plan. Further, such optional forms shall be
described in the Adoption Agreement and shall apply to the
Participant's entire Account balance. Notwithstanding the foregoing,
if the Employer so specifies in the Adoption Agreement and separately
accounts for the benefits attributable to the Preexisting Plan as
described in Section 14.5(c) or, if applicable, Section 10.5, the
optional forms which must be preserved may be limited to such separate
accounts.
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14.1(c) PARTICIPATING AFFILIATES. If this Plan is adopted as a
standardized Plan, each Affiliate shall automatically become a
Participating Affiliate effective as of the later of the Effective
Date or the date such entity first becomes an Affiliate. If this Plan
is adopted as a nonstandardized Plan, an Affiliate of the Employer may
adopt the Employer's Plan effective as of any date on or after the
Effective Date. An Affiliate's execution of the Adoption Agreement
(or a separate signature page to the Adoption Agreement) shall
evidence the Participating Affiliate's adoption of the Plan and the
effective date of such adoption. In adopting this Plan, each
Participating Affiliate is deemed to have authorized the Employer to
effect all actions under this Plan on its behalf, including but not
limited to the powers reserved to the Employer under this Section 14
and the power to enter into such agreements with the Trustee or others
as may be necessary or appropriate under the Plan.
14.2 AMENDMENT.
14.2(a) PROTOTYPE SPONSOR. Subject to the restrictions of Section
14.3, the Prototype Sponsor shall have the right at any time and from
time to time to amend this Plan in any respect whatsoever in writing.
To the extent required under the procedures and rules in effect for
master and prototype plans at the time of any such amendment, notice
of such amendment shall be given to the Employer by the Prototype
Sponsor as soon as practicable under the circumstances.
14.2(b) EMPLOYER. Subject to the restrictions of Section 14.3,
the Employer shall have no right to amend this Plan except (1) by
entering into a new Adoption Agreement with the Prototype Sponsor, (2)
by adding such language to the Adoption Agreement as is necessary to
allow the Plan to continue to satisfy the requirements of Code Section
415 or Code Section 416 because of the required aggregation of
multiple plans, (3) by adopting certain model amendments published by
the Internal Revenue Service which specifically provide that such
adoption would not cause the Plan to be treated as an individually
designed plan, or (4) by withdrawing this Plan as a prototype and
converting it into an individually designed plan as provided in
Section 14.4.
14.3 CERTAIN AMENDMENT RESTRICTIONS.
14.3(a) GENERAL. No amendment to the Plan shall be made which
would (1) deprive a Participant of the nonforfeitable percentage of
his or her Account balance accrued to the later of the effective date
of the amendment or the date the amendment is adopted, or (2) decrease
a Participant's Account balance or eliminate an optional form of
benefit except to the extent permissible under Code Section
412(c)(8), Section 401(a)(4) and Section 411(d)(6) and the
regulations under those sections.
14.3(b) CHANGE IN SERVICE CALCULATION METHOD. If an amendment
changes the method of calculating service, each Employee who had any
service credit under such prior method shall be credited with any
service for any computation period during which such amendment was
effective in accordance with the rules in Section 3.
14.3(c) CHANGE IN VESTING SCHEDULE. If an amendment directly or
indirectly affects the computation of a Participant's nonforfeitable
percentage of his or her Account or it the Plan's vesting schedule
changes status as a result of change in the Plan's status as a
Top-Heavy Plan (as described in Section 12.4), each Participant with
at east 3 years of service with the Employer or an
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Affiliate may elect, within a reasonable period after the adoption of the
amendment, to have the nonforfeitable percentage of his or her Account computed
under this Plan without regard to such amendment. In the case of a Participant
who does not have at least one Hour of Service in any Plan Year beginning after
December 31, 1988, the preceding sentence shall be applied by substituting 5
years of service for 3 years of service. The period during which the election
may be made shall commence with date the amendment is adopted and shall end on
the later of
14.3(c)(1) 60 days after the amendment is adopted;
14.3(c)(2) 60 days after the amendment becomes
effective; or
14.3(c)(3) 60 days after the Participant is issued
written notice of the amendment by the Plan Administrator.
Furthermore, if an amendment changes the Plan's vesting schedule, the
nonforfeitable percentage (determined as of the later of the date the amendment
is adopted or the date it becomes effective) of the employer-derived Account
balance of each Employee who is a Participant as of such date shall not be less
than the percentage computed under the Plan without regard to such amendment.
14.4 WITHDRAWAL AS A PROTOTYPE AND CONVERSION TO INDIVIDUALLY DESIGNED
PLAN.
14.4(a) VOLUNTARY CONVERSION. The Employer may voluntarily
withdraw this Plan as a "prototype plan"' and convert it to an
individual designed plan by written notice filed with the Trustee and
the Prototype Sponsor. For purposes of this Section 14.4, such
withdrawal shall be effective with respect to the Employer's plan and
the Trustee as of the effective date of such withdrawal, but such
withdrawal shall not relieve the Employer of any responsibilities or
liabilities to the Prototype Sponsor until 60 days after the date the
Prototype Sponsor receives written notice of such withdrawal unless
the Prototype Sponsor agrees in writing to an earlier effective date
for such withdrawal.
14.4(b) INVOLUNTARY CONVERSION. The Employer shall be deemed to
have withdrawn this Plan as a "prototype plan" and converted it to an
individually designed plan effective as of the earlier of the date
14.4(b)(1) the Internal Revenue Service or a court
determines that this Plan fails to meet the requirements of
Code Section 401;
14.4(b)(2) the Trustee ceases to maintain a brokerage
account for the Plan with the Prototype Sponsor or with an
approved subsidiary of the Prototype Sponsor;
14.4(b)(3) the Prototype Sponsor notifies the Employer
in writing that the Prototype Sponsor for reasons
sufficient to the Prototype Sponsor has terminated its
sponsorship of its prototype plan program or of this Plan
for the Employer; or
14.4(b)(4) the Employer amends any Provision of this
Plan or the Adoption Agreement (other than in accordance
with Section 14.2(b)(1) through (3)) including an
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amendment because of a waiver of the minimum funding
requirement under Code Section 412(d).
14.4(c) EFFECT OF WITHDRAWAL AND CONVERSION. If this plan is
withdrawn as a prototype and converted to an individually designed
Plan under this Section 14.4, the Employer as of the effective date
of such withdrawal shall assume the right and responsibility to amend
the Plan under Section 14.2(a) and thereafter only the Employer shall
make amendments to this Plan; provided, (1) no such amendment shall
affect the Trustee's rights or duties under this Plan without the
Trustee's prior written consent and (2) any such amendment shall be
subject to the restrictions of Section 14.3.
14.5 MERGER, CONSOLIDATION OR ASSET TRANSFERS.
14.5(a) GENERAL. In the case of any Plan merger or consolidation
with, or transfer of assets or liabilities to or from, any other
employee benefit plan, each person for whom an Account then is
maintained shall be entitled to receive a benefit from such plan, if
it is then terminated, which is equal to or greater than the benefit
such person would have been entitled to receive immediately before
such merger, consolidation or transfer, if this Plan then had been
terminated.
14.5(b) AUTHORIZATION. The Plan Administrator may authorize the
Trustee to accept a transfer of assets from or transfer Fund assets to
the trustee, custodian or insurance company of any other plan which
satisfies the requirements of Code Section 401(a) in connection with
a merger or consolidation with, or other transfer of assets and
liabilities to or from any such plan, provided that the transfer will
not affect the qualification of this plan under Code Section 401(a)
and the assets to be transferred are acceptable to the Trustee.
14.5(c) SEPARATE ACCOUNT. The Plan Administrator may establish
separate bookkeeping accounts for any assets transferred to the
Trustee under this Section 14.5 and shall establish such separate
bookkeeping accounts if required under this Plan. If separate
accounts are maintained with respect to transferred assets, no
contributions or Forfeitures under this Plan shall be credited to such
separate accounts, but such accounts shall share in the Fund Earnings
on the same basis as each other Account under Section 6.2. Any
individual for whom an Account is established under this Section 14.5
shall become a Participant in this Plan as of the effective date of
the merger, consolidation or asset transfer: however, no contributions
shall be made by or on behalf of such individual under this Plan
unless such individual is otherwise entitled to such contributions
under the terms of this Plan.
14.5(d) CODE Section 411(D)(6) PROTECTED BENEFITS. All optional
forms of benefit available under the transferor plan which must be
preserved under Code Section 411(d)(6) shall be available to the
Participant under this Plan unless such transfer meets the
requirements of Code Section 414(l) and the Participant has made an
elective transfer which satisfies the requirements set forth in
Q&A-3(b) of Section 1.411(d)-4 of the Federal Income Tax Regulations.
Further, such options forms shall be described in the Adoption
Agreement and, generally, shall apply to the Participant's entire
Account balance. Notwithstanding the foregoing, if the Employer so
specifies in the Adoption Agreement and separately accounts for such
transferred assets, the optional forms which must be preserved may be
limited to such separate account.
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14.6 TERMINATION.
14.6(a) RIGHT TO TERMINATE. The Employer may terminate or
partially terminate this Plan or discontinue contributions to this
Plan at any time by written action of the Board filed with the Trustee
and the Prototype Sponsor. The Employer reserves the right to
terminate the participation in this Plan by any Participating
Affiliate at any time by written action. Furthermore, a Participating
Affiliate's participation in this Plan automatically shall terminate
if (and at such time as) its status as an Affiliate terminates for any
reason whatsoever (other than through a merger or consolidation into
another Participating Affiliate). However, a Participating
Affiliate's termination of participation in this Plan shall not be
deemed to be a termination or partial termination of the Plan except
to the extent required under the Code. Upon complete termination of
this Plan, any unallocated amounts (other than amounts in a Code
Section 415 suspense account described in Section 7.2(b)) shall be
allocated in accordance with the Plan terms but, if the Plan terms do
not address the allocation of such amounts, they shall be allocated
in a nondiscriminatory manner prior to distribution of Plan assets.
14.6(b) FULL VESTING UPON TERMINATION. If this Plan is terminated
or partially terminated under this Section 14.6 or it there is a
complete discontinuance of contributions under this Plan, the Account
of each affected Employee of the Employer or an Affiliate shall become
nonforfeitable on the effective date of such termination or partial
termination or complete discontinuance of contributions, as the case
may be. In the event of a complete termination of this Plan or a
complete discontinuance of contributions, each other Account (except
to the extent otherwise nonforfeitable under the terms of this Plan)
shall become a Forfeiture and shall be allocated as such under Section
6.3 as of the effective date of such complete termination or complete
discontinuance as if such date was the last day of a Plan Year.
SECTION 15. ADMINISTRATION
15.1 NAMED FIDUCIARIES. The Plan Administrator and the Employer (if the
Plan Administrator is not the Employer) shall be the Named Fiduciaries
responsible to the extent of their powers and responsibilities assigned in the
Plan for the control, management and administration of the Plan. The Plan
Administrator, the Employer and the Trustee (other than Smith Barney Shearson
Trust Company) shall be the Named Fiduciaries responsible to the extent of
their respective powers and responsibilities assigned to them in the Trust
Agreement for the safekeeping, control, management, investment and
administration of the assets of the Fund. Any power or responsibility for the
control, management or administration of the Plan or the Fund which is not
expressly assigned to a Named Fiduciary under the Plan or the Trust Agreement,
or with respect to which the proper assignment is in doubt, shall be deemed to
have been assigned to the Employer as a Named Fiduciary. One Named Fiduciary
shall have no responsibility to inquire into the acts and omissions of another
Named Fiduciary in the exercise of powers or the discharge of responsibilities
assigned to such other Named Fiduciary under the Plan or the Trust Agreement.
Any person may serve in more than one fiduciary capacity under the Plan or the
Trust Agreement and a fiduciary may be a Participant provided such individual
otherwise satisfies the requirements of Section 4.
A Named Fiduciary, by written instrument filed by the Plan Administrator with
the records of the Plan, may designate a person who is not a Named Fiduciary to
carry out any of its responsibilities under the Plan or Trust Agreement, other
than the responsibilities of the Trustee for the safekeeping, control,
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management, investment and administration of the assets of the Fund, except to
the extent the Trustee's responsibility for investment decisions is delegated
to the Employer, the Plan Administrator, or an investment manager.
15.2 ADMINISTRATIVE POWERS AND DUTIES. Except to the extent expressly
reserved under the Plan or the Trust Agreement to the Employer, the Board, or
the Trustee, the Plan Administrator shall have the exclusive responsibility and
complete discretionary authority to control the operation, management and
administration of the Plan, with all powers necessary to enable it properly to
carry out such responsibilities, including (but not limited to) the power to
construe the Plan, the related Adoption Agreement, and the Trust Agreement, to
determine eligibility for benefits and to resolve all interpretative, equitable
or other questions that arise under the Plan or the Trust Agreement. The
decisions of the Plan Administrator on all matters within the scope of its
authority shall be final and binding. To the extent a discretionary power or
responsibility under the Plan or Trust Agreement is expressly assigned to a
person other than the Plan Administrator, such person shall have complete
discretionary authority to carry out such power or responsibility and such
person's decisions on all matters within the scope of such person's authority
shall be final and binding.
15.3 AGENT FOR SERVICE OF PROCESS. The agent for service of process for
this Plan shall be the person who is identified as the agent for service of
process in the summary plan description for this Plan. Neither the Prototype
Sponsor nor any of its affiliates shall be the agent for service of process for
the Plan.
15.4 REPORTING AND DISCLOSURE. All records regarding the operation,
management and administration of this Plan shall be maintained by the Plan
Administrator. The Plan Administrator shall satisfy any federal or state
requirement to report and disclose any information regarding this Plan to any
federal or state department or agency, or to any Participant or Beneficiary.
SECTION 16. MISCELLANEOUS
16.1 SPENDTHRIFT CLAUSE AND QUALIFIED DOMESTIC RELATIONS ORDERS. Except
to the extent permitted by law, no Account, benefit, payment or distribution
under this Plan or Trust Agreement shall be subject to attachment, garnishment,
levy, execution or any claim or legal process of any creditor of a Participant
or Beneficiary, and no Participant or Beneficiary shall have any right to
alienate, commute, anticipate, or assign all or any part of such individual's
Account, benefit, payment or distribution under this Plan or Trust Agreement.
The preceding sentence also shall apply to the creation, alienation,
assignment, or recognition of a right to any benefit payable with respect to a
Participant pursuant to a domestic relations order unless such order is
determined to be a qualified domestic relations order ("QDRO") within the
meaning of Code Section 414(p) and such order is entered on or after January 1,
1985. The Plan Administrator shall establish uniform and nondiscriminatory
procedures regarding the determination of whether a domestic relations order
constitutes a QDRO, the timing of distributions made pursuant to a QDRO and the
treatment of any separate account established under this Plan pursuant to a
QDRO. Unless otherwise expressly specified in such procedures, (1) the Plan
Administrator shall treat a domestic relations order entered before January 1,
1985 as a QDRO in accordance with Code Section 414(p) and (2) a distribution
may be made to an alternate payee pursuant to a QDRO prior to the earliest date
that a distribution could be made to a Participant under the terms of this Plan
and prior to a Participant's "earliest retirement age" under Code Section
414(p). The determinations and the distributions made by, or at the direction
of, the Plan
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Administrator under this Section 16.1 shall be final and binding on the
Participant and on all other persons interested in such order.
16.2 BENEFITS SUPPORTED ONLY BY TRUST FUND. Any person having any claim
for any benefit under this Plan shall look solely to the assets of the Fund for
the satisfaction of that claim. In no event shall the Prototype Sponsor, the
Trustee, the Plan Administrator, the Employer or a Participating Affiliate or
any of their employees, officers, directors or their agents be liable in their
individual capacities to any person whomsoever for the payment of any benefits
under this Plan.
16.3 DISCRIMINATION. The Plan Administrator shall administer the Plan in a
manner which it deems equitable under the circumstances for all similarly
situated Employees, Participants, Spouses and Beneficiaries; provided, the Plan
Administrator shall not permit discrimination in favor of Highly Compensated
Employees of the Employer or any Participating Affiliate which would be
prohibited under Code Section 401(a).
16.4 CLAIMS. Any payment to a Participant or Beneficiary or to the legal
representative or heirs-at-law of any such person made in accordance with the
provisions of this Plan shall to the extent of such payment be in full
satisfaction of all claims under this Plan against the Trustee, Plan
Administrator, a Named Fiduciary, the Employer and any Participating Affiliate,
any of whom may require such person, such person's legal representative or
heirs-at-law, as a condition precedent to such payment to execute a receipt and
release in such form as shall be determined by the Trustee, Plan Administrator,
a Named Fiduciary, the Employer or a Participating Affiliate, as the case may
be.
16.5 NONREVERSION. Except as provided in Section 7.2(b) and in this
Section 16.5, neither the Employer nor any Participating Affiliate shall have
any present or prospective right, claim, or interest in the Fund or in any
Employer contribution made to the Trustee.
To the extent permitted by the Code and ERISA, the Employer contributions
described in this Section 16.5, less any losses on such contributions, shall
be returned by the Trustee to the Employer or to any Participating Affiliate
upon the written direction of the Plan Administrator in the event that:
16.5(a) an Employer contribution is made by a mistake of fact,
provided such return is effected within one year after the payment of
such contribution;
16.5(b) a final judicial or Internal Revenue Service determination
is made that this Plan fails to satisfy the requirements of Code
Section 401 with respect to its initial qualification (provided, if
the Employer is not entitled to rely on the Prototype Sponsor's
opinion letter, the application for the initial qualification of the
Plan is made on or before the date 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), in
which event all Employer contributions made before such judicial or
administrative determination (whichever last occurs) plus any earnings
and minus any losses shall be returned within one year after such
determination, all such contributions being hereby conditioned upon
this Plan satisfying all applicable requirements under Code Section
401 from and after its adoption; or
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16.5(c) a deduction for an Employer contribution is disallowed
under Code Section 404, in which event such contribution shall be
returned within one year after such disallowance, all such
contributions being hereby conditioned upon being deductible under
Code Section 404.
16.6 EXCLUSIVE BENEFIT. The corpus or income of the Fund shall not be
diverted to or used for any purpose other than the exclusive benefit of
Participants or Beneficiaries.
16.7 EXPENSES. Any expenses of the Fund which are properly allocable to an
individual's Account (including, but not limited to, expenses related to an
individual's investment directions, annuity contract purchases and other
transactional fees for processing distributions) may be charged directly
against such individual's Account if so provided in the administrative
procedures established by the Plan Administrator.
16.8 SECTION 16 OF SECURITIES EXCHANGE ACT OF 1934. If this Plan is
invested in employer securities and this Plan permits employees of the Employer
who are subject to the reporting requirements of Section 16 of the Securities
Act of 1934, as amended ("Act") to receive awards, then notwithstanding any
other provision of this Plan, the provisions of this Plan that set forth the
formula or formulas that determine the amount, price or timing of awards to
such persons and any other provisions of this Plan of the type referred to in
Section 1.6b-3(c)(2)(ii) of the Act shall not be amended more than once every
six months, other than to comport with changes in the Code, ERISA, or the rules
thereunder. Further, to the extent required, the employees described in the
preceding sentence shall be subject to such withdrawal, investment and other
restrictions necessary to satisfy Rule 16b-3 under the Act. This Section 16.8
is intended to and shall be effective only to the extent required by such rule
and shall be interpreted and administered in accordance with such rule.
16.9 ARBITRATION. Any claims or controversies with the Prototype Sponsor
related to this Plan are subject to arbitration in accordance with the
arbitration provisions of the Smith Barney Shearson Qualified Retirement Plan
and IRA Client Agreement or any successor to such agreement, which provisions
hereby are expressly incorporated herein by reference.
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PART 2
SMITH BARNEY SHEARSON
PROTOTYPE DEFINED CONTRIBUTION
TRUST AGREEMENT
<PAGE> 123
SMITH BARNEY SHEARSON
TRUST AGREEMENT
SECTION 1. INTRODUCTION AND CONSTRUCTION
1.1 INTRODUCTION. This Trust Agreement is a part of the Smith Barney
Shearson Prototype Defined Contribution Plan and is entered into between the
Employer and the Trustee effective as of the date the Adoption Agreement is
executed by the Employer and the Trustee. If the Plan is adopted as an
amendment and restatement of a Pre-Existing Plan, this Trust Agreement shall
amend and restate the trust agreement or other funding arrangement for the
Pre-Existing Plan.
1.2 DEFINITIONS. The terms in this Trust Agreement which begin with a
capital letter shall have the meanings set forth in Section 2 of the Plan.
For purposes of this Trust Agreement, "SBSTC" shall mean Smith Barney Shearson
Trust Company and any successor in interest to Smith Barney Shearson Trust
Company.
1.3 CONTROLLING LAWS. To the extent such laws are not preempted by
federal law, this Trust Agreement shall be construed and interpreted under the
laws of the state specified in the Adoption Agreement; provided, if SBSTC has
been appointed as Trustee, this Trust Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
1.4 CONSTRUCTION. The headings and subheadings in this Trust Agreement
have been inserted for convenience of reference only and are to be ignored in
the construction of its provisions. Wherever appropriate, the masculine shall
be read as the feminine, the plural as the singular, and the singular as the
plural. References in this Trust Agreement to a section (Section) shall be to
a section in this Trust Agreement unless otherwise indicated. References in
this Trust Agreement to a section of the Code, ERISA or any other federal law
shall also refer to the regulations issued under such section.
The Employer intends that the Plan and this Trust Agreement and the related
Adoption Agreement which are part of the Plan satisfy the requirements for tax
exempt status under Code Section 401(a), Code Section 501 (a) and related
Code sections and that the provisions of the Trust Agreement, the Plan, and the
related Adoption Agreement be construed and interpreted in accordance with the
requirements of the Code and the regulations under the Code.
Further, except as expressly stated otherwise, no provision of this Plan or
this Trust Agreement or the related Adoption Agreement is intended to nor shall
grant any rights to Participants or Beneficiaries or any interest in the Fund
in addition to those minimum rights or interests required to be provided under
ERISA and the Code and the regulations under ERISA and the Code.
Nothing in this Plan or this Trust Agreement or the related Adoption Agreement
shall be construed to prohibit the adoption or the maintenance of the Plan and
Trust Agreement as an individually designed plan and trust agreement of the
adoption of this Trust Agreement in connection with an individually designed
plan, but in such event, the Employer may not rely on the opinion letter issued
to the Prototype Sponsor and the Prototype Sponsor shall have absolutely no
responsibility for such individually designed plan and trust agreement.
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Finally, in the event of any conflict between the terms of the Plan and the
terms of this Trust Agreement or the Adoption Agreement, the terms of the Plan
shall control.
SECTION 2. GENERAL
All the Trustee's rights, power, authorities, duties and responsibilities of
any kind or description whatsoever respecting the Fund shall be solely and
exclusively as expressly stated in the Plan and in this Trust Agreement.
Except to the extent the Employer or Plan Administrator also is the Trustee for
the Plan, the Trustee shall have no responsibility whatsoever with respect to
the maintenance, operation and administration of the Plan. No right, power,
authority, duty or responsibility of any kind or description whatsoever
respecting the Fund or the maintenance, operation or administration of the Plan
shall be attributed to the Trustee on account of any ambiguity or inference
which might be interpreted by any person to exist in the terms of the Plan or
this Trust Agreement. Finally, if SBSTC is Trustee, any discretionary powers,
duties or responsibilities assigned to the Trustee in this Trust Agreement
shall be exercised or performed by SBSTC only upon the direction of the Plan
Administrator, the Employer or an Investment Manager, and SBSTC shall exercise
no discretion with respect to the investment or management of the Fund except
to the extent that Fund assets are invested in a common or collective group
trust maintained by SBSTC or an affiliate of SBSTC.
SECTION 3. CONTRIBUTIONS AND TRUST FUND
The Employer and the Trustee shall establish reasonable procedures for making
and accepting contributions to the Fund and any asset transfers pursuant to
Section 9 of this Trust Agreement. The Trustee shall accept any contributions
the Trustee reasonably believes are paid to it in accordance with such
procedures, except that the Trustee may refuse to accept any non-cash
contributions or assets which either are not acceptable to the Trustee or the
acceptance of which the Trustee reasonably believes would constitute a
prohibited transaction under ERISA or the Code. If this Trust Agreement is an
amendment and restatement of a trust agreement or other funding arrangement for
a Pre-Existing Plan, the assets held under such pre-existing trust agreement or
other funding arrangement shall (to the extent acceptable to the Trustee and
permissible under the prohibited transaction rules of ERISA and the Code) be
transferred to the Trustee pursuant to reasonable transfer procedures
established by the Trustee, the Employer and any predecessor trustee, custodian
or insurance carrier and shall become assets of the Fund. The Trustee shall
have no responsibility with respect to such transferred assets except to
receive such assets and to hold and administer the same thereafter in
accordance with this Trust Agreement. The Trustee shall not be responsible for
any act or omission of a predecessor trustee or any other person with respect
to assets that are transferred to the Trustee when the Fund is a continuation
of a trust fund or other funding arrangement under a Pre-Existing Plan and
shall not be required to make any claim or demand against any of such persons
unless the Employer requests in writing that the Trustee make such claim or
demand. The Fund shall consist of all such contributions and assets together
with the income or gains on such contributions and assets, less any payments,
distributions, transfers, assessments and losses from or on such contributions
and assets. The Fund shall be managed and controlled by the Trustee pursuant
to the terms of this Trust Agreement without distinction between principal and
income and without liability for the payment of any interest on such assets.
The Trustee shall not be responsible for the amount or the collection of any
contributions to the Fund or for the determination of the amount or frequency
of any contribution required by the Plan, ERISA or the Code and such
responsibilities shall be borne solely by
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the Employer and the Participating Affiliates. Further, the Trustee, for
investment purposes, may combine into one fund the Funds created under each
Plan maintained by the Employer and Participating Affiliates and (unless
otherwise specified) all references to the Fund in this Trust Agreement shall
be references to the combined Funds; provided that (a) the Trustee shall
maintain separate books and records of the assets, contributions, distributions
and income or losses allocable to each such Fund, and (b) no part of one Fund
shall be used to pay the expenses, benefits or liabilities attributable to any
other Fund.
SECTION 4. MANAGEMENT OF TRUST FUND
4.1 PLAN ADMINISTRATOR. With respect to the Fund, the Plan Administrator
shall have those duties and responsibilities specified in this Trust Agreement
and, additionally, shall have the duty to advise the Trustee and any other
person of such facts and issue such directions as may be required to enable the
Trustee and such other person to execute their duties and responsibilities
under this Agreement.
4.2 TRUSTEE. The Trustee shall have the sole and exclusive power (except
as otherwise provided in this Trust Agreement) in the management and control of
the Fund to do all things and execute such instruments as may be deemed
necessary or proper, including the powers described in this section, all of
which may be exercised without order of or report to any court. To the extent
the exercise of any such power would require the exercise of discretion by
SBSTC as the Trustee (other than the management and control of any assets
invested in any common or collective trust maintained by SBSTC or its
affiliates), SBSTC as Trustee shall exercise such power only in accordance with
the specific direction of the Plan Administrator, the Employer or an Investment
Manager.
4.2(a) To sell, exchange, or otherwise dispose of any property at
any time held or acquired by the Fund, at public or private sale, for
cash or on terms, without advertisement, including the right to lease
for any term notwithstanding the period of the Trust Agreement;
4.2(b) To vote in person or by proxy and corporate stock or other
security and to agree to or take, or refrain from taking, any other
action necessary or appropriate for a shareholder or owner in regard
to any reorganization, merger, consolidation, liquidation, bankruptcy
or other procedure or proceeding affecting any stock, bond, note or
other property;
4.2(c) To compromise, settle or adjust any claim or demand by or
against the Fund and to agree to any rescission or modification of any
contract or agreement affecting the Fund;
4.2(d) To borrow money, and to secure the same by mortgaging,
pledging, or conveying the property of the Fund;
4.2(e) To deposit any stock, bond or other security in any
depository or other similar institution and to register any stock,
bond or other security in the name of a nominee or in street name
provided such securities are held on behalf of the Fund by a bank or
trust company, subject to supervision by the United States or a State,
a broker or dealer registered under the Securities Exchange Act of
1934 ("Act") or a "clearing agency" as defined in the Act. or their
nominees, without the addition of words indicating that such security
is held in a fiduciary capacity, but accurate records shall be
maintained showing that such security is a Fund asset and the Trustee
shall be responsible for the acts of such nominee;
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4.2(f) To hold cash in such amounts as may be in its opinion
reasonable for the proper operation of the Fund;
4.2(g) To invest any and all monies in such stocks, bonds,
securities, investment company or trust shares or mutual funds,
including mutual funds which invest in commodities, mortgages, notes,
choses in action, real estate, improvements thereon, and other
property as the Trustee may deem appropriate, including "employer
securities" (whether or not such securities are "qualifying employer
securities") or "employer real property" (whether or not such property
is "qualifying employer real property"), as such terms are defined for
purposes of ERISA Section 407, except to the extent prohibited under
ERISA or the code;
4.2(h) To grant, sell, purchase, or exercise any option of any
kind or description whatsoever to purchase or sell any security or
other property which is a permissible investment under this Section
4(b), provided the Trustee in no event shall grant or sell any option
under which any person can require the Fund to sell any security or
other property which the Fund at the time of such grant or sale does
not hold in any amount sufficient to cover such option and any other
outstanding option granted or sold by the Trustee, and the Trustee in
no event shall dispose of any such security or other property covering
any such option until such option is exercised or otherwise expires;
4.2(i) To invest all, or any part, of the assets of the Fund in
any common, collective or group trust fund maintained under Code
Section 584 or Revenue Riling 81-100, 1981-l C.B. 326 exclusively for
the investment of the assets of tax exempt pension and profit sharing
plans, the provisions of which upon such investment shall
automatically be adopted and made a part of this Trust Agreement for
the period such investment is made in such common, collective or group
trust fund; provided, if SBSTC is the Trustee,
4.2(i)(1) the Trustee shall, upon receipt of written
investment directions, invest some or all of the Fund in
one or more collective trust funds (including, without
limitation, any collective trust fund maintained by the
Trustee or by any affiliate of the Trustee) that are exempt
from taxation under Code Section 501(a);
4.2(i)(2) any such investment shall be subject to all
the provisions of the declaration of trust creating such
collective trust fund which is adopted in its entirety as
an integral part of the Plan and of this Trust Agreement;
4.2(i)(3) the Employer, Plan Administrator or
Investment Manager shall not have any right to vote or
otherwise in any manner control the operation and
management of any such collective trust fund, the operation
of any party to any such collective trust fund, or any
beneficiary of any such collective trust fund;
4.2(i)(4) the Trustee (or its affiliate) is authorized
to utilize investment advice received from investment
advisers for any collective trust fund maintained by the
Trustee (or its affiliate) including, without limitation,
such advice received from [SLH Capital Management and SLH
Asset Management, each of which is a division of] an
affiliate of the Trustee, and to utilize the brokerage
services of the Prototype Sponsor, an affiliate Trustee;
and
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4.2(i)(5) the Employer, Plan Administrator or
Investment Manager, as applicable, shall determine, prior
to any direct either of them to invest the Fund in any such
collective trust, that the services provided to the Plan
through the collective trust fund including, without
limitation, any investment advisory services provided to
the Trustee (or its affiliate) by [SLH Capital Management
and SLH Asset Management] and brokerage services provided
by the Prototype Sponsor are (A) necessary to the operation
of the Plan, (B) furnished under a declaration of trust
which is reasonable and (C) furnished for reasonable
compensation;
4.2(j) To purchase, hold, sell, surrender or distribute any
investment contract, life insurance contract or annuity contract as
directed by a Participant or the Plan Administrator in accordance with
the Plan;
4.2(k) To make a participant loan as directed by the Plan
Administrator; and
4.2(l) To make such other investments as the Trustee in its
discretion shall deem best or if SBSTC is the Trustee or the Trustee
is subject to the direction of another person, as directed by someone
other than the Trustee, without regard to any law now or hereafter in
force (other than ERISA) limiting the investments of trustees or other
fiduciaries.
The Trustee shall not be required to make any inventory or appraisal
or report to any court, nor to secure any order of court for the
exercise of any power contained in this Trust Agreement, and shall not
be required to give bond (except as required by ERISA).
Notwithstanding the foregoing, if SBSTC is the Trustee, SBSTC shall
invest all assets of the Fund which are to be invested on an interim
basis pending reinvestment, distribution or other disbursement either
(1) in depository accounts bearing a reasonable rate of interest which
maintained by SBSTC or by any affiliate of SBSTC or (2) in commingled
short-term investment funds which are maintained by SBSTC or by any
affiliate of SBSTC, in which event the provisions of Section 4(b)(9)
of this Agreement shall apply.
Except as agreed to in writing by the Trustee and the Employer,
Trustee shall not be liable and shall be indemnified and held harmless
by the Employer for any liability, loss, damage, expense, assessment
or other cost of any kind or description whatsoever, which the Trustee
incurs as a result of or arising out of (1) any action taken at the
direction of the Employer, the Plan Administrator or an Investment
Manager, (2) any failure to act if, under the terms of this Trust
Agreement, action can be taken only after receipt from the Employer,
the Plan Administrator or an Investment Manager of specific
directions, (3) any action or failure to act based on advice of legal
counsel to the Employer or the Plan Administrator, or (4) any failure
to act pending the receipt of directions from the Employer, the Plan
Administrator or an Investment Manager, when the Trustee has made a
written request for such direction provided, such action or failure to
act is not attributable to fraud, misconduct, negligence or error by
the Trustee. Further, if SBSTC is the Trustee, SBSTC may from time to
time request the advice of counsel on any legal matter, including the
interpretation of the Plan and this Trust Agreement, and shall be
indemnified and held harmless for any and all liability, damage,
expense, assessment or other cost of any kind or description resulting
from or on account of its services as Trustee under the Plan,
including, but not limited to, any co-fiduciary liability under ERISA
Section 405 and any liability, damage, expense,
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assessment or other cost arising out of its actions in accordance with
advice of counsel. Except as agreed to in writing by the Trustee and
the Employer, the provisions of this paragraph shall survive the term
of this Trust Agreement and may not be amended by any person or entity
other than the Prototype Sponsor or terminated except with the consent
of the Trustee.
4.3 INVESTMENT MANAGER. The Plan Administrator as a Named Fiduciary at
any time may appoint in writing a person, or more than one person, including,
subject to Section 4(i) of this Trust Agreement, the Prototype Sponsor or any
of its affiliates, who either (1) is registered as an investment adviser under
the Investment Advisers Act of 1940 ("Act"), (2) is a bank as defined in the
Act, or (3) is an insurance company which, within the meaning of ERISA Section
3(38), is qualified to manage, acquire and dispose of the assets of an employee
benefit plan under the laws of more than one state, as an investment manager
pursuant to ERISA Section 3(38) ("Investment Manager") for all of the Fund or
for a specified portion of the Fund allocated by the Plan Administrator to such
Investment Manager's management account ("Management Account").
The Plan Administrator shall notify the Trustee of such appointment and of the
date such appointment becomes effective, and such investment Manager shall have
the sole responsibility and duty and the sole power, without prior consultation
with the Board, the Employer, the Plan Administrator, the Trustee, or any other
person, to manage and direct or effect the acquisition and disposition of the
assets of the Fund allocated to such Management Account from the date the
appointment as Investment Manager becomes effective. The Plan Administrators
as a Named Fiduciary also may terminate the appointment of any person as an
Investment Manager and may cause assets of the Fund to be added to or deleted
from any Management Account.
The Investment Manager may exercise his or her power through procedures as
agreed upon with the Trustee which satisfy the requirements of the securities
laws and the rules of the New York Stock Exchange (and any other exchange on
which securities are traded for such manager's Management Account), and the
Trustee shall not be liable in any respect to any person, and shall be
indemnified and held harmless by the Employer, for acting in accordance with
such procedures. Pending receipt of directions from the Investment Manager,
any cash received by the Trustee from time to time for such manager's
Management Account may be retained in the Fund in cash. If an Investment
Manager ceases to have investment responsibility for the Management Account,
the Plan Administrator or the Employer, as authorized in accordance with
Section 4(d) of this Trust Agreement, shall manage such assets in accordance
with Section 4(d) or shall appoint another Investment Manager to manage such
assets.
4.4 PLAN ADMINISTRATOR OR EMPLOYER INVESTMENT DIRECTIONS. The Board at
any time may authorize in writing the Plan Administrator or the Employer as a
Named Fiduciary to manage and direct the investment of all or any specified
portion of this assets of the Fund as determined by the board, and the Board at
any time may modify or terminate such authorization in writing. If SBSTC is
appointed as Trustee, the Employer shall automatically be deemed to be so
authorized to manage and direct the investment of the entire Fund; provided,
the Employer may specify in the Adoption Agreement that such direction shall be
made by the Plan Administrator. In the event the Plan Administrator or the
Employer is authorized to manage and direct the investment of Fund assets under
this Section 4(d), the provisions of Section 4(c) of this Trust Agreement
shall apply in all respects as if the Plan Administrator or the Employer, as
applicable, was an Investment Manager and the portion of the assets subject to
such management and direction was a Management Account.
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4.5 PARTICIPANT INVESTMENT DIRECTIONS. If the Plan permits a participant
or a Beneficiary to direct the investment of such individual's Account, the
Plan Administrator shall direct the Trustee to establish the investment
alternatives designated by the Plan Administrator and to accept directions to
invest all or any specified portion of the Participant's Account among such
alternatives. The Plan Administrator in consultation with the Trustee shall
establish such reasonable rules for effecting the investment elections as the
Plan Administrator deems necessary or appropriate and such rules shall be
applied on a uniform and nondiscriminatory basis to all similarly situated
individuals. Except as required under ERISA, neither the Plan Administrator,
the Employer nor the Trustee shall be responsible for any investment decisions
made by a Participant or a Beneficiary. If a Participant or Beneficiary fails
to direct the investment of the Account, then the Employer or Plan
Administrator (as authorized in accordance with Section 4(d) of this Trust
Agreement) shall assume the investment responsibility for such Account.
4.6 CUSTODIAN. The Trustee (including SBSTC) at any time and from time to
time may appoint one, or more than one, person, including, subject to Section
4(i) of this Trust Agreement, the Prototype Sponsor or any of its affiliates,
to perform such custodial safekeeping, record keeping, securities execution and
other nondiscretionary functions of the Trustee as the Trustee deems
appropriate, and any person who is appointed to perform a custodial safekeeping
function may (in connection with the performance of that function) hold Fund
securities in a street name, provided that the Trustee shall remain the
beneficial owner of all assets held by such person and such person in no event
shall be granted any discretionary authority in the capacity as a custodian to
manage and direct the acquisition and disposition of Fund assets.
4.7 MULTIPLE TRUSTEES. More than one person can serve at the same time as
the Trustee, including any combination of individuals and banks or similar
institutions, and in the event that more than one person does serve at the same
time as Trustee under the Plan and this Trust Agreement, the references to
"Trustee" in the Plan and this Trust Agreement wherever applicable shall be
deemed to be to "Trustees" and such Trustees may allocate among themselves by
unanimous written consent (signed by all Trustees) such specific Trustee
duties, responsibilities and functions in the management of the Fund and
otherwise under the Plan and this Trust Agreement as the Trustees deem
appropriate under the circumstances. The Trustees in all unallocated duties,
responsibilities and functions shall act by majority vote at a meeting at which
a majority of the Trustees are present or by unanimous written consent (signed
by all Trustees) in lieu of a meeting. Any person shall be entitled to rely
conclusively upon any written action signed by all Trustees or by any one or
more Trustees to whom the power to take such action has been allocated by
unanimous written consent signed by all Trustees. Finally, the provisions of
Section 8 of this Trust Agreement shall apply to the resignation or removal of
any one of the Trustees, provided that (1) all notices required in such Section
8 also shall be given to any remaining Trustees, (2) the Employer only shall be
required to appoint successor Trustees upon the resignation or removal of all
Trustees then serving, and (3) the Employer or the remaining Trustees may
demand and receive an accounting upon the resignation or removal of one or more
of the Trustees. Notwithstanding the foregoing, if SBSTC is not the sole
Trustee under the Plan, SBSTC shall serve in a nondiscretionary, custodial
capacity only subject to the directions of the Employer or the Plan
Administrator and SBSTC shall have no duties with respect to assets held by any
other person including, without limitation, any other Trustee for the Fund.
Further, the Employer hereby agrees that SBSTC shall not serve as, and shall
not be deemed to be, a co-trustee under any circumstances.
4.8 COMMUNICATIONS. The Employer, the Plan Administrator and each
Investment Manager shall establish with the Trustee such oral, written or
electronic communication procedures (or any combination
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<PAGE> 130
of such communication procedures) or such other procedures as such persons and
the Trustee deem reasonable and prudent under the circumstances for the orderly
administration of the Fund. The Trustee and each other person shall be
entitled to rely conclusively upon any and all communication from the Employer,
the Plan Administrator and each Investment Manager reasonably believed to be
communicated in accordance with such established procedures.
If the Trustee receives a direction which in the Trustee's determination is
incomplete, was not communicated in accordance with established procedures or
otherwise cannot reasonably be executed, the Trustee shall promptly inform the
person responsible for such direction and shall take no further action pending
receipt of proper directions from such person.
4.9 PROTOTYPE SPONSOR. Nothing in the Plan or this Trust Agreement shall
prevent the Prototype Sponsor or any of its affiliates from engaging in any
transaction with the Plan or the Fund, provided that such transaction does not
(in the opinion of the Prototype Sponsor) constitute a "prohibited transaction"
under ERISA Section 406 or Code Section 4975, and the Employer shall provide
such written documentation as the Prototype Sponsor deems necessary or
appropriate to determine that any such transaction would not be a "prohibited
transaction."
To the extent that ERISA or a prohibited transaction exemption requires action
by an individual independent of the Plan Sponsor and its affiliates or their
employers, officers and directors, then the Employer, the Plan Administrator,
an Investment Manager, a Participant or a Beneficiary shall have full power and
authority to take action on behalf of the Fund as necessary to satisfy ERISA or
such exemption provided such person otherwise is authorized to act under this
Trust Agreement.
4.10 VOTING OF PROXIES. Except as provided in this Section 4(j), the
person with the responsibility to manage and invest all or a portion of the
Fund shall have the exclusive authority and responsibility for voting proxies
with respect to investments held for such portion of the Fund and the Trustee
shall be obligated to vote such proxies only in accordance with the directions
of such person and shall be precluded from voting such proxies except in
accordance with such directions.
However, the Plan Administrator, as Named Fiduciary, may reserve to itself the
right to vote proxies with respect to any investments which are otherwise
subject to the management and control of an investment Manager and, in such
event, the Investment Manager shall be precluded from voting such proxies.
SECTION 5. BENEFIT PAYMENTS
No disbursement from the Fund shall be made by the Trustee for purposes of the
payment of any Plan benefit except on the written direction of the Plan
Administrator, and the Trustee shall have no duty or obligation whatsoever to
inquire as to the accuracy of such direction or its propriety in light of the
provisions of the Plan, ERISA or the Code. Upon written direction (which may
be a continuing direction) from the Plan Administrator as to the name of any
person to whom payment is to be made from the Fund and when such payment is to
be made and the amount and manner of such payment, and consistent with the
income tax withholding requirements, the Trustee shall draw checks, purchase
annuity contracts or distribute other assets from the Fund in the name of the
person designated by the Employer and deliver such checks, contracts or other
assets in such manner and in such amounts and at such times
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<PAGE> 131
as the Plan Administrator shall direct or, if appropriate, the Trustee shall
make an electronic transfer to the account of such person designated by the
Plan Administrator in such amounts and at such times as the Plan Administrator
shall direct.
If SBSTC is the Trustee, all payments to be paid by means of a check from the
Trustee shall be paid from a non-interest bearing checking account to be
maintained with an affiliate of the Trustee. Prior to executing this Trust
Agreement, the Employer shall determine that such checking account services are
(1) necessary to the operation of the Plan, (2) furnished under an arrangement
which is reasonable and (3) furnished for reasonable compensation.
In the event the Trustee shall deem it necessary to withhold any distribution
pending compliance with legal requirements with respect to probate of wills,
appointment of personal representatives, payment or provision for estate or
inheritance taxes, or for death duties or otherwise, the Trustee shall notify
the Plan Administrator and shall thereafter take no action pending receipt of
the Plan Administrator's instructions to distribute and an agreement form the
Plan Administrator, in form satisfactory to the Trustee, protecting it from any
liability arising out of noncompliance with such requirements.
The Plan Administrator may in its discretion direct, and the Trustee shall make
payment on such direction, that Plan payments be made (1) directly to an
incompetent or disabled person, whether because of minority or mental or
physical disability, (2) to the guardian or to the person having custody of
such person if a court of competent jurisdiction has appointed such guardian or
custodian, or (3) to any person designated or authorized under any state
statute to receive such payments on behalf of such incompetent or disabled
person without further liability either on the part of the Employer, the Plan
Administrator or the Trustee for the amount of such payment to the person on
whose account such payment is made.
In the case of a termination, partial termination, a complete discontinuance of
contributions or the termination of participation by a Participating Affiliate
as described in Section 14.5 of the Plan, the Plan Administrator shall direct
the Trustee precisely as to what action to take and the Trustee (subject to the
terms of this Trust Agreement and the Plan and to such terms and conditions, if
any, as agreed upon between the Plan Administrator and the Trustee) shall
follow such directions.
The Plan Administrator shall determine anticipated liquidity requirements to
meet projected benefit payments for each Plan Year and, if any adjustment from
the practices and policies agreed upon between the Plan Administrator and the
Trustee at the adoption of this Trust Agreement is deemed appropriate, notice
of such adjustment shall be communicated by the Plan Administrator in writing
as soon as practicable to the Trustee. The Trustee shall be under no duty to
make any such adjustment prior to receiving such notice.
SECTION 6. VALUATION AND ACCOUNTING BY TRUSTEE
The Trustee as of each Valuation Date shall determine the fair market value of
the assets of the Fund (or, if more than one Fund is combined for investment
purposes, of each such Fund) based upon such reasonable accounting principles,
practices and procedures as the Trustee shall adopt and consistently apply for
this purpose, which determination shall be final and binding. At such times as
agree upon between the Trustee and the Plan Administrator, the Trustee shall
file with the Plan Administrator a
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<PAGE> 132
written report setting forth such fair market value and all investments,
receipts and disbursements and other transactions of the Fund since the date of
the last such report.
Upon the execution of 90 days from the filing of the Trustee's report and
except as provided under ERISA, the Trustee shall be forever relieved and
discharged from any liability or accountability to anyone with respect to the
propriety of its actions or the transactions shown by such report except with
respect to those acts or transactions to which the Plan Administrator or the
Employer shall, within such 90 day period, have filed with the Trustee its
written disapproval, and neither the Plan Administrator nor the Employer nor
any other person shall have the right to demand or be entitled to any further
or different accounting by the Trustee.
SECTION 7. EXPENSES
All reasonable and proper expenses of the Plan and the Fund (within the meaning
of ERISA Section 403(c)(1) and Section 404(a)(1)(A)), including any taxes
which may be levied or assessed against the Trustee on account of the Fund and
the Trustee's compensation as agreed upon from time to time by the Employer and
the Trustee, shall be paid from the Fund unless (a) the payment of such expense
would constitute a "prohibited transaction" within the meaning of ERISA Section
406 or Code Section 4975 or (b) the Employer pays such expenses. Any such
expenses of the Fund which are properly allocable to an individual's Account
(including, but not limited to, expenses related to an individual's investment
directions, annuity contract, purchases and other transactional fees for
processing distributions) may be charged directly against such individual's
Account if so provided in administrative procedures established by the Plan
Administrator. No payments shall be made to a Trustee who also receives
full-time pay from the Employer or from a Participating Affiliate except for
his or her benefits, if any, from the Plan and the reimbursement of his or her
reasonable and proper expenses as a Trustee which are not reimbursed by any
other person.
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE
The Trustee may resign at any time by delivering its written resignation to the
Employer. The Employer shall within 60 days after receipt of such resignation
appoint a successor trustee in writing (acceptable for this purpose to the
Employer and the successor trustee) delivered to the Trustee and to such
successor trustee. The Employer may remove the Trustee at any time and appoint
a successor trustee or trustees upon 60 days written notice to the Trustee
unless the Trustee agrees to a shorter notice period. In either event, on the
appointment of such successor, the Trustee shall promptly turn over to such
successor all assets held by the Trustee and shall make a final accounting to
the Plan Administrator and the Employer. The successor trustee shall have no
responsibility except to receive such money and property from the Trustee and
to hold and administer the same thereafter in accordance with this Trust
Agreement and shall not be responsible for any act or omission of the Trustee,
and shall not be required to make any claim or demand against the Trustee
unless the Plan Administrator or the Employer shall in writing request the
successor trustee to make a claim or demand against the Trustee. Any such
successor trustee shall have and may exercise all the rights, powers, and
duties of the Trustee as fully and to the same extent as if it had originally
been named Trustee herein.
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<PAGE> 133
SECTION 9. MERGERS, CONSOLIDATIONS AND ASSET TRANSFERS
The Trustee upon written direction of the Plan Administrator shall transfer and
deliver Fund assets to or accept the transfer to the Fund of assets acceptable
to it from any trustee, custodian or insurance carrier maintaining any
investment medium of a pension or profit sharing plan which is tax exempt under
Code Section 401(a) into which the Plan (or any portion thereof) shall be
merged or consolidated.
In the case of any Plan merger or consolidation with, or transfer of assets or
liabilities to or from, any other employee benefit plan, each person for whom
an Account then is maintained shall be entitled to receive a benefit from such
plan, if it is then terminated, which is equal to or greater than the benefit
such person would have been entitled to receive immediately before such merger,
consolidation or transfer, if the Plan then had been terminated. The Trustee
in connection with either of the above described transfers shall have no
liability or responsibility (1) to determine whether such transfer shall be in
conformity with the provisions of the Plan, any other plan, ERISA or the Code
or (2) to determine the effect of such transfer upon any Accounts. Any
direction of the Plan Administrator respecting any of the foregoing shall
constitute a certification that the transfer so directed is in conformity with
the provisions of the Plan or any other plan, this Trust Agreement, ERISA and
the Code, and the Trustee shall act in accordance with such direction.
SECTION 10. SINGLE TRUST - SEPARATE FUNDS
The assets of the Fund (or, if more than one Fund is combined for investment
purposes, of each such Fund) shall be held, administered, invested and managed
by the Trustee (except to the extent investment responsibility is allocated to
another person under the terms of this Trust Agreement) consistent with the
terms of this Trust Agreement in all respects as a single trust even though
portions of such assets may be attributable to different employers or may be
allocable to the payment of benefits for different employee groups. The Plan
Administrator shall be responsible to maintain and determine the appropriate
portion of the Fund held in respect of any such group of employees in the event
that such maintenance or determination shall become necessary. The
determination by the Plan Administrator of the portion of the Fund held in
respect of any such employee group shall be final and conclusive upon all
persons.
SECTION 11. NAMED FIDUCIARIES AND ADMINISTRATION
The Plan Administrator and the Employer (if the Plan Administrator is not the
Employer) shall be the Named Fiduciaries responsible to the extent of their
powers and responsibilities assigned in the Plan for the control, management
and administration of the Plan. The Plan Administrator, the Employer and the
Trustee (other than SBSTC) shall be the Named Fiduciaries responsible to the
extent of their respective powers and responsibilities assigned to them in the
Trust Agreement for the safekeeping, control, management, investment and
administration of the assets of the Fund. Any power or responsibility for the
control, management or administration of the Plan or the Fund which is not
expressly assigned to a Named Fiduciary under the Plan or the Trust Agreement,
or with respect to which the proper assignment is in doubt, shall be deemed to
have been assigned to the Employer as a Named Fiduciary. One Named Fiduciary
shall have no responsibility to inquire into the acts and omissions of another
Named Fiduciary in the exercise of powers or the discharge of responsibilities
assigned to such other Named Fiduciary under the Plan or the Trust Agreement.
Any person may serve in more than one fiduciary capacity under
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<PAGE> 134
the Plan or the Trust Agreement and a fiduciary may be a Participant provided
such individual otherwise satisfied the requirements of Section 4.
A Named Fiduciary, by written instrument filed by the Plan Administrator with
the records of the Plan, may designate a person who is not a Named Fiduciary to
carry out any of its responsibilities under the Plan or Trust Agreement, other
than the responsibilities of the Trustee for the safekeeping, control,
management, investment and administration of the assets of the Fund, except to
the extent the Trustee's responsibility for investment decisions is delegated
to the Employer, the Plan Administrator, or an Investment Manager.
Except to the extent expressly reserved under the Plan or the Trust Agreement
to the Employer, the Board, or the Trustee, the Plan Administrator shall have
the exclusive responsibility and complete discretionary authority to control
the operation, management and administration of the Plan, with all powers
necessary to enable it properly to carry out such responsibilities, including
(but not limited to) the power to construe the Plan, the related Adoption
Agreement, and the Trust Agreement, to determine eligibility for benefits and
to resolve all interpretative, equitable or other questions that arise under
the Plan or the Trust Agreement. The decisions of the Plan Administrator on
all matters within the scope of its authority shall be final and binding. To
the extent a discretionary power or responsibility under the Plan or Trust
Agreement is expressly assigned to a person other than the Plan Administrator,
such person shall have complete discretionary authority to carry out such power
or responsibility and such person's decisions on all matters within the scope
of such person's authority shall be final and binding.
SECTION 12. MISCELLANEOUS
12.1 SPENDTHRIFT CLAUSE AND QUALIFIED DOMESTIC RELATIONS ORDERS. Except to
the extent permitted by law, no Account, benefit, payment or distribution under
the Plan or this Trust Agreement shall be subject to attachment, garnishment,
levy, execution, or any claim or legal process of any creditor of a Participant
or Beneficiary, and no Participant or Beneficiary shall have any right to
alienate, commute, anticipate, or assign all or any part of such individual's
Account, benefit, payment or distribution under the Plan or this Trust
Agreement. The preceding sentence also shall apply to the creation,
alienation, assignment, or recognition of a right to any benefit payable with
respect to a Participant pursuant to a domestic relations order unless such
order is determined to be a qualified domestic relations order ("QDRO") within
the meaning of code Section 414(p) and such order is entered on or after
January 1, 1985. Notwithstanding the foregoing, the Plan Administrator may
treat a domestic relations order entered before January 1, 1985 as a QDRO in
accordance with Code Section 414(p) and Section 16.1 of the Plan.
12.2 BENEFITS SUPPORTED ONLY BY THE TRUST FUND. Any person having any
claim for any benefit under the Plan shall look solely to the assets of the
Fund for the satisfaction of that claim. In no event will the Prototype
Sponsor, the Trustee, the Plan Administrator, the Employer or a Participating
Affiliate or any of their employees, officers, directors or their agents be
liable in their individual capacities to any person whomsoever for the payment
of any benefits under the Plan.
12.3 CLAIMS. Any payment to a Participant or Beneficiary, or to the legal
representative of heirs-at-law of any such person made in accordance with the
provisions of the Plan shall to the extent of such payment be in full
satisfaction of all claims under the Plan against the Trustee, Plan
Administrator, a Named Fiduciary, the Employer and any Participating Affiliate,
any of whom may require such person,
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<PAGE> 135
such person's legal representative or heirs-at-law, as a condition precedent to
such payment, to execute a receipt and release in such form as shall be
determined by the Trustee, Plan Administrator, a Named Fiduciary, the Employer
or a Participating Affiliate, as the case may be.
12.4 NONREVERSION. Except as provided in Section 12(d) of the Plan and in
this Section 12(d), neither the Employer nor any Participating Affiliate shall
have any present or prospective right, claim, or interest in the Fund or in any
Employer contribution made to the Trustee.
To the extent permitted by the Code and ERISA, the Employer contributions
described in this Section 12(d), less any losses on such contributions, shall
be returned by the Trustee to the Employer or to any Participating Affiliate
upon the written direction of the Plan Administrator in the event that:
12.4(a) an Employer contribution is made by a mistake of fact,
provided such return is effected within one year after the payment of
such contribution;
12.4(b) a final judicial or Internal Revenue Service determination is
made that the Plan fails to satisfy the requirements of Code Section
401 with respect to its initial qualification (provided, if the
Employer is not entitled to rely on the Prototype Sponsor's opinion
letter, the application for the initial qualification of the Plan 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), in which event all
Employer contributions made before such judicial or administrative
determination (whichever last occurs), plus any earnings and minus any
losses shall be returned within one year after such determination, all
such contributions being hereby conditioned upon the Plan satisfying
all applicable requirements under Code Section 401 from and after its
adoption; or
12.4(c) a deduction for an Employer contribution is disallowed under
Code Section 404, in which event such contribution shall be returned
within one year after such disallowance, all such contributions being
hereby conditioned upon being deductible under Code Section 404.
The Trustee shall have no obligation or responsibility whatsoever to determine
whether the return of any such Employer contributions is permitted by the Code
or ERISA and shall (to the extent permissible under law) be indemnified and
held harmless by the Employer for acting in accordance with written directions
given by the Plan Administrator pursuant to this Section 12(d).
12.5 EXCLUSIVE BENEFIT. The corpus or income of the Fund shall not be
diverted to or used for any purpose other than the exclusive benefit of
Participants or Beneficiaries.
119
<PAGE> 1
EXHIBIT 11
CYBEX COMPUTER PRODUCTS CORPORATION
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Fiscal years ended March 31,
-------------------------------------------
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Primary
- -------
Weighted average common shares outstanding 2,871,404 4,789,377 5,485,605
Net weighted average common stock options
outstanding under the treasury stock method 413,477 305,082 107,919
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 3,284,881 5,094,459 5,593,524
---------- ---------- ----------
Net income $2,700,167 $4,693,285 $5,839,500
---------- ---------- ----------
Net income per common and common equivalent
share $ 0.82 $ 0.92 $ 1.04
========== ========== ==========
Fully Diluted:
- -------------
Weighted average common shares outstanding 2,871,404 4,789,377 5,485,605
Net weighted average common stock options
outstanding under the treasury stock method 846,499 305,082 107,919
---------- ---------- ----------
Weighted average common and common equivalent
shares outstanding 3,717,903 5,094,459 5,593,524
---------- ---------- ----------
Net Income $2,700,167 $4,693,285 $5,839,500
---------- ---------- ----------
Net income per common and common equivalent
share $ 0.73 $ 0.92 $ 1.04
========== ========== ==========
</TABLE>
Note: All share and per share amounts were given retroactive effect to the
2.25-for-1 stock split as described in Note 5 to the Consolidated Financial
Statements included in this Report.
<PAGE> 1
EXHIBIT 23.1
[COOPERS & LYBRAND LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Cybex Computer Products Corporation on Form S-8 (File No. 333-10989) of our
reports dated April 22, 1997, on our audits of the consolidated financial
statements and financial statement schedule of Cybex Computer Products
Corporation as of March 31, 1996 and 1997, and for each of the three years in
the period ended March 31, 1997.
COOPERS & LYBRAND L.L.P.
Birmingham, Alabama
June 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CYBEX COMPUTER PRODUCTS CORPORATION FOR THE YEAR ENDED
MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0000946360
<NAME> CYBEX COMPUTER PRODUCTS CORPORATION
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,424
<SECURITIES> 40,885
<RECEIVABLES> 5,761
<ALLOWANCES> 350
<INVENTORY> 3,835
<CURRENT-ASSETS> 51,719
<PP&E> 3,294
<DEPRECIATION> 871
<TOTAL-ASSETS> 56,567
<CURRENT-LIABILITIES> 11,460
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 50,252
<TOTAL-LIABILITY-AND-EQUITY> 56,567
<SALES> 34,568
<TOTAL-REVENUES> 34,568
<CGS> 16,409
<TOTAL-COSTS> 16,409
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 219
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 9,233
<INCOME-TAX> 3,393
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,840
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
</TABLE>
