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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended September 30, 1997 or
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[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________ to _________
Commission file number 0-6508
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IEC ELECTRONICS CORP.
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Exact name of registrant as specified in its charter
Delaware 13-3458955
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State or other jurisdiction of IRS Employer ID No.
incorporation or organization
105 Norton Street, Newark, New York 14513
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Address of principal executive offices Zip Code
Registrant's telephone number, including area code: 315-331-7742
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Securities registered pursuant to Section 12(b) of the Act:
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None
Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, $.01 par value
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(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
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 [ ].
Page 1 of 163
As of December 22, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant was approximately $61,150,700.
(Assumes officers, directors, and any stockholder holding 5% of the outstanding
shares are affiliates.)
As of December 22, 1997, there were outstanding 7,557,701 shares of Common
Stock.
Documents incorporated by reference:
Portions of IEC Electronics Corp.'s Proxy Statement for the Annual Meeting
of Stockholders to be held on February 25, 1998 are incorporated into Part
III of this Form 10-K
Page 2 of 163
TABLE OF CONTENTS
PART I
PAGE
Item 1: Business..................................................... 4
Item 2: Properties................................................... 11
Item 3: Legal Proceedings............................................ 11
Item 4: Submission of Matters to a Vote of Security Holders.......... 12
Executive Officers of Registrant............................. 12
PART II
Item 5: Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 13
Item 6: Selected Consolidated Financial Data......................... 14
Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 15
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......... 21
Item 11: Executive Compensation..................................... 21
Item 12: Security Ownership of Certain Beneficial Owners and
Management................................................ 21
Item 13: Certain Relationships and Related Transactions............. 21
PART IV
Item 14: Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.............................................. 22
Page 3 of 163
PART I
ITEM 1. BUSINESS
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IEC Electronics Corp. is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. The
Company believes that it is a leader in the contract electronics manufacturing
industry based upon its state-of-the-art manufacturing facilities, volume of
production and quality of its services. Utilizing computer controlled
manufacturing and test machinery and equipment, the Company provides
manufacturing services employing surface mount technology ("SMT") and
pin-through-hole ("PTH") interconnection technologies. The Company believes
that, based upon its volume of production, it is one of the largest independent
SMT contract manufacturers in the United States. As a full-service contract
manufacturer, the Company offers it customers a wide range of manufacturing and
management services, on either a turnkey or consignment basis, including design,
material procurement and control, manufacturing and test engineering support,
statistical quality assurance, complete resource management and distribution.
The Company's strategy is to cultivate strong manufacturing relationships with
established and emerging original equipment manufacturers ("OEMs").
IEC Electronics Corp., a Delaware corporation, is the successor by merger
in 1990 to IEC Electronics Corp., a New York corporation which was organized in
1966. In June 1992, the Company acquired all of the then outstanding common
stock of Calidad Electronics, Inc. ("Calidad"), located in Edinburg, Texas. In
November 1994, the Company acquired all of the then outstanding common stock of
Accutek, Inc. ("Accutek"), located in Arab, Alabama. As used herein, "Company"
or "IEC" includes IEC Electronics Corp. and its subsidiaries, unless the context
otherwise requires.
In October 1997, IEC announced that all its locations will operate under a
unified name. IEC's headquarters and manufacturing facility in Newark, NY will
operate as IEC Newark NY Operations, Calidad will operate as IEC Edinburg Texas
Operations, and Accutek will be known as IEC Arab Alabama Operations.
The Company completed a public offering of its Common Stock in February
1993, the net proceeds from which, amounting to $29,744,573, were utilized to
reduce debt and increase working capital.
The Company has achieved world-class ISO 9002 certification and IEC
Electronics is ISO 9001 certified. This certification is an international
quality assurance standard that most OEMs consider crucial in qualifying their
contract manufacturers.
The Company has received approval from the British Approvals Board for
Telecommunication allowing it to provide manufacturing and test services to
manufacturers producing telecommunication equipment destined for shipment to the
European Common Market.
The Company's executive offices are located at 105 Norton Street, Newark,
New York 14513. The telephone number is (315) 331-7742.
Page 4 of 163
Contract Electronics Manufacturing: The Industry
The contract electronics manufacturing industry specializes in providing
the program management, technical and administrative support and manufacturing
expertise required to take a product from the early design and prototype stages
through volume production and distribution. It provides quality product,
delivered on time and at the lowest cost, to the OEM. This full range of
services gives the OEM an opportunity to avoid large capital investments in
plant, equipment and staff and allows the OEM to concentrate instead on the
areas of its greatest strength: innovation, design and marketing. Utilizing
contract electronics manufacturing services such as those provided by IEC gives
the customer an opportunity to improve return on investment with greater
flexibility in responding to market demands and exploiting new market
opportunities.
In recent years, primarily as a response to rapid technological change and
increased competition in the electronics industry, OEMs have recognized that by
utilizing domestic contract manufacturers they can improve their competitive
position, realize an improved return on investment and concentrate on areas of
their greatest expertise such as research, product design and development and
marketing. In addition, contract manufacturing allows OEMs to bring new products
to market rapidly and adjust more quickly to fluctuations in product demand;
avoid additional investment in plant, equipment and personnel; reduce inventory
and other overhead costs; and establish known unit costs over the life of a
contract. Many OEMs now consider contract manufacturers an integral part of
their business and manufacturing strategy. Accordingly, the contract electronics
manufacturing industry has experienced significant growth as OEMs have
established long-term working arrangements with contract manufacturers such as
IEC.
Two important trends have developed recently in the contract electronics
manufacturing industry. First, OEMs increasingly require contract manufacturers
to provide complete turnkey manufacturing and material handling services, rather
than working on a consignment basis in which the OEM supplies all materials and
the contract manufacturer supplies labor. Turnkey contracts involve design,
manufacturing and engineering support, the procurement of all materials, and
sophisticated in-circuit and functional testing and distribution. The
manufacturing partnership between OEMs and contract manufacturers involves an
increased use of "just-in-time" inventory management techniques which minimize
the OEM's investment in component inventories, personnel and related facilities,
thereby reducing costs.
A second trend in the industry has been the increasing shift from PTH to
SMT interconnection technologies. PTH technology involves the attachment of
electronic components to printed circuit boards with leads or pins which are
inserted into pre-drilled holes in the boards. The pins are then soldered to the
electronic circuits. The drive for increasingly greater functional density has
resulted in the emergence of SMT, which eliminates the need for holes and allows
components to be placed on both sides of a printed circuit, contributing to size
reductions of up to 50%. SMT requires expensive, highly automated assembly
equipment and significantly more expertise than PTH technology. To achieve high
yields, contract manufacturers must have extensive knowledge and experience in
solder paste, solder reflow, thermal management, metal fatigue, adhesives,
solvents, flux chemistry, surface analysis, intermetallic bonding and testing.
The shift to SMT from PTH technology has increased the use of contract
manufacturers by OEMs seeking to avoid the significant capital investment
required for development and maintenance of SMT expertise.
The Company continually evaluates emerging technology and makes these
processes available to its customers when commercial and design factors so
indicate. The next generation of interconnection technologies will include chip
scale packaging and ball grid array (BGA) assembly techniques. These techniques
achieve greater density on printed circuit assemblies. Last year the Company
mounted nearly five million BGAs. The Company's Advanced Material Technology
laboratory has been employing real time x-ray imaging to enhance process
development
Page 5 of 163
The Company's Strategy
The Company's strategy is to cultivate strong manufacturing partnerships
with established and emerging OEMs in the electronics industry. These long-term
business partnerships involve the joint development of manufacturing and support
strategies with OEM customers and promote customer satisfaction. In implementing
this strategy, the Company offers its customers a full range of manufacturing
solutions through flexibility in production, high quality and fast-turnaround
manufacturing services and computer-aided testing.
As part of its strategy, the Company recognizes the need to offer advanced
manufacturing technologies to its customers and, as a consequence, has been
actively involved with SMT since the early 1980's. During fiscal 1997, the
Company invested approximately $9.9 million in capital equipment.
The vast majority of this amount was invested to significantly upgrade equipment
and process automation projects. The Company believes that it operates one of
the largest SMT facilities in the United States. IEC believes that the high cost
of SMT assembly equipment and the increased technical capability necessary to
achieve an efficient, high yield SMT operation are significant competitive
factors in the market for electronic assembly. The Company also believes that
OEMs will increasingly contract for manufacturing on a turnkey basis as they
seek to reduce their capital and inventory costs, as manufacturing technologies
become more complex and as product life cycles shorten. Generally, turnkey
contracts result in stable, close and long-term working relationships with
customers. Since major OEMs require that contract manufacturers demonstrate the
ability to offer SMT assembly services and to manage and support large turnkey
contracts, there are significant barriers to entry in the contract manufacturing
industry.
Assembly Process
The Company generally enters into formal agreements with its significant
customers. These agreements generally provide for fixed prices for one year,
absent any customer changes which impact cost of labor or material, and rolling
twelve month forecasts of customer requirements. After establishing an OEM
relationship, the Company offers its consultation services with respect to the
manufacturability and testability of the product design. IEC often recommends
design changes to reduce manufacturing costs and to improve the quality of the
finished assemblies, and in some instances will produce original designs to the
customer's specifications.
Upon receipt, a customer's order is entered into the Company's computer
system by customer service personnel and is reviewed by all departments. The
Production Control Department generates a detailed manufacturing schedule. Bills
of material and approved vendor lists are reviewed by the Engineering
Department, which creates a detailed process to direct the flow of product
through the plant. The Material Control Department utilizes a material
requirement planning (MRP) program to generate the requisitions used by the
Purchasing Department to procure all material and components from approved
vendors in the quantities and at the time required by the production schedule.
All incoming material is inspected to ensure compliance with customer
specifications and delivered to the production floor on a "just-in-time" basis.
Material and product movement are carefully and continuously computer-monitored
throughout the assembly process to meet customer requirements. The placement and
insertion of components on circuit board assemblies are accomplished by
high-speed, vision and computer-controlled PTH or SMT machines. Any manual
operations are performed prior to passage of the assemblies through various
soldering processes. Statistical process control ("SPC") is used to provide
consistent results in all steps of the manufacturing process.
The manufactured assembly then moves into the test phase. IEC's
computer-aided testing ensures delivery of high quality products on a consistent
basis. Computer-driven in-circuit tests verify that all components have been
properly placed or inserted and that the electrical circuits are complete.
Functional tests determine if the board or system assembly is performing to
customer specifications.
Page 6 of 163
IEC assigns a program manager to each customer. The program manager
maintains regular contact with the customer to assure timely and complete flow
of information between the customer and the Company. Many products manufactured
by the Company are in the early stages of their product cycle and therefore
undergo numerous engineering changes. In addition, production quantities and
schedules of certain products must be varied to respond to changes in customers'
marketing opportunities. The Company assesses the impact of such changes on the
production process and takes the appropriate action, such as restructuring bills
of material, expediting procurement of new components and adjusting its
manufacturing and testing plans. IEC believes that its ability to provide
flexible and rapid response to customer needs is critical to its success.
Products and Services
The Company manufactures a wide range of assemblies which are incorporated
into hundreds of different products. The Company provides contract manufacturing
services primarily for micro, mini and mainframe computers; computer peripheral
equipment; industrial photography and imaging equipment; office equipment;
telecommunications equipment; measuring devices; and medical instrumentation.
During the fiscal year ended September 30, 1997 the Company provided contract
manufacturing services to 97 different customers, including Compaq Computer
Corporation ("Compaq"), Matrox Graphics, Inc. ("Matrox"), Kulicke and Soffa
Industries, Inc. ("K&S"), Stratus Corporation ("Stratus"), Symbol
Technologies,Inc. ("Symbol") and ADC Video Systems ("ADC Video"). The Company
provides its services to multiple divisions and product lines of many of its
customers and typically manufactures for a number of each customer's successive
product generations.
Materials Management
In fiscal 1997, 1996, and 1995, turnkey contracts, under which the Company
provided materials in addition to a value-added labor component, represented
95%, 85% and 64% of sales, respectively. Materials and the associated material
handling expense often represent a very substantial portion of the total
manufacturing cost of turnkey products. The Company generally procures material
only to meet specific contract requirements. In addition, the Company's
agreements with its significant customers generally provide for cancellation
charges equal to the costs which are incurred by the Company as a result of a
customer's cancellation of contracted quantities. The Company's internal systems
provide effective controls for all materials, whether purchased by the Company
or provided by the customer, through all stages of the manufacturing process,
from receiving to final shipment.
Suppliers
Materials and components used in contract manufacturing, whether supplied by
the OEM or by the Company, are available generally from a number of suppliers at
negotiated prices which are firm for the life of the purchase order. However, at
various times in the electronics industry there have been industry-wide
shortages of components which have temporarily delayed the Company's manufacture
and shipment of products. The Company's business is not dependent upon any one
supplier.
In 1997, Master distribution programs were put in place with Arrow/Schweber
Electronics and Pioneer-Standard Electronics. These alliances have the
benefit of reducing lead time on program parts, reducing the quotation process
timetable, providing competitive pricing, providing some protection during
allocation, providing better payment terms, reducing overhead cost and providing
access to global resources.
Marketing and Sales
The Company markets its services through a direct sales force of 5
individuals, 20 program managers and 10 independent manufacturers'
representatives, who currently employ approximately 40 sales people. In addition
to the sales and marketing staff, the Company's executives are closely involved
with marketing efforts. The Company conducts extensive market research to
identify industries and to target companies where the opportunity exists to
provide contract manufacturing services across a number of product lines and
product generations.
Page 7 of 163
The Company's sales effort is supported by advertising in numerous trade
media, sales literature, Internet website, video presentations, participation in
trade shows and direct mail promotions. Inquiries resulting from these
advertising and public relations activities are assigned to the manufacturers'
representative covering the customer's location. IEC's direct sales force
coordinates all such activity and monitors the performance of the manufacturers'
representatives. In addition, referrals by existing customers are an important
source of new opportunities. The Company's objective is to further diversify the
customers and industries which it serves.
Backlog
The Company's backlog as of December 22, 1997 and December 17, 1996 was
approximately $129 million and $136 million, respectively. Backlog consists of
contracts or purchase orders with delivery dates scheduled within the next 12
months. Approximately all of the current backlog is expected to be shipped
within the Company's current fiscal year. Variations in the magnitude and
duration of contracts received by the Company and customer delivery requirements
may result in substantial fluctuations in backlog from period to period. Because
customers may cancel or reschedule deliveries, backlog is not a meaningful
indicator of future financial results.
Governmental Regulation
The Company's operations are subject to certain federal, state and local
regulatory requirements relating to environmental, waste management, health and
safety matters. Management believes that the Company's business is operated in
compliance with applicable regulations promulgated by the Occupational Safety
and Health Administration and the Environmental Protection Agency and
corresponding state agencies which, respectively, pertain to health and safety
in the workplace and the use, discharge, and storage of chemicals employed in
the manufacturing process. Current costs of compliance are not material to the
Company. However, new or modified requirements, not presently anticipated, could
be adopted creating additional expense for the Company.
Employees
The Company's employees numbered approximately 3,235 at December 18, 1997,
including 146 employees engaged in engineering, 2,963 in manufacturing and 126
in administrative and marketing functions. None of the Company's employees are
covered by a collective bargaining agreement and the Company has experienced no
work stoppages. Management believes that its employee relations are good. The
Company has access to a large work force by virtue of its northeast location
midway between Rochester and Syracuse, two upstate New York industrial cities,
by virtue of its Texas location in the Rio Grande valley, and by virtue of its
Alabama location 70 miles north of Birmingham and 30 miles south of Huntsville.
Patents and Trademarks
The Company holds patents unrelated to contract manufacturing and also
employs various registered trademarks. The Company does not believe that either
patent or trademark protection is material to the operation of its business.
Page 8 of 163
Safe Harbor for Forward-looking Statements under Securities Litigation
Reform act of 1995: Certain Cautionary Statements
From time to time, the Company or its representatives have made or may make
forward-looking statements, orally or in writing. Such forward-looking
statements may be included in, but not limited to, press releases, oral
statements made with the approval of an authorized executive officer or in
various filing made by the Company with the Securities and Exchange commission.
The words or phrases "will likely result," "are expected to," "will continue,"
"is anticipated," "estimate," "project," or similar expressions are intended to
identify "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the Reform Act). The Company wishes to
ensure that such statements are accompanied by meaningful cautionary statements,
so as to maximize to the fullest extent possible the protections of the safe
harbor established in the Reform Act. Accordingly, such statements are qualified
in their entirety by reference to and are accompanied by the following
discussion of certain important factors that could cause actual results to
differ materially from such forward looking statements.
The risks included here are not exhaustive. Futhermore, reference is also made
to other sections of this report which include additional factors which could
adversely impact the Company's business and financial preformance. Moreover,
the Company operates in a very competitive and rapidly changing environment.
New risk factors emerge from time to time and it is not possible for management
to predict all of such risk factors, nor can it assess the impact of all such
risk factors on the Company's business or the extent to which any factor, or a
combination of factors may cause actual results to differ materially from those
contained in any forward-looking statements. Accordingly, forward-looking
statements should not be relied upon as a prediction of actual results.
Stockholders should be aware that while the Company does, from time to time,
communicate with securities analysts, it is against the Company's policy to
disclose to such analysts any material non-public information or other
confidential commercial information. Accordingly, stockholders should not assume
that the Company agrees with any statement or report issued by any analyst
regardless of the content of such statement or report. Accordingly, to the
extent that reports issued by a securities analyst contain any projections,
forecasts, or opinions, such reports are not the responsibility of the
company.
Customer Concentration; Dependence On the Electronics Industry
A small number of customers are currently responsible for a significant portion
of the Company's net sales. During fiscal 1997, the Company's ten largest
customers accounted for 73.2% of consolidated net sales, and in the fiscal years
1996 and 1995, the Company's ten largest customers accounted for 74.8% and
76.4%, respectively, of consolidated net sales. Compaq Computer Corporation
("Compaq"), historically the Company's largest customer accounted for 26.2%,
21.8% and 43.5%, respectively, of consolidated net sales for fiscal years 1997,
1996, and 1995. In fiscal years 1997 and 1996, respectively, Matrox Graphics
Inc. ("Matrox") accounted for 20.1% and 13% of the Company's consolidated net
sales. No customer other than Compaq accounted for over 10% of consolidated net
sales during fiscal year 1995. The Company is dependent upon continued revenues
from its top customers. The percentage of the Company's sales to its major
customers may fluctuate from period to period. Significant reductions in sales
to any of these customers could have a material adverse effect on the Company's
results of operations. The Company has no firm long-term volume purchase
commitments from its customers, and over the past few years has experienced
reduced lead-times in customer orders. In addition, customer contracts can be
canceled and volume levels can be changed or delayed. The timely replacement of
canceled, delayed or reduced contracts with new business cannot be assured.
These risks are increased because a majority of the Company's sales are to
customers in the electronics industry, which is subject to rapid technological
change and product obsolescence. The factors affecting the electronics industry,
in general, or any of the Company's major customers in particular, could have a
material adverse effect on the Company's results of operations.
Page 9 of 163
Management of Growth; Geographic Expansion
The Company has experienced substantial revenue growth over the last fiscal
years, with net sales increasing from $43.2 million in fiscal 1992 to $260.7
million in fiscal 1997. In recent years, the Company has acquired facilities in
Texas and Alabama. There can be no assurance that the Company's rate of revenue
growth will continue. There can also be no assurance that the Company will
successfully manage the integration of the Alabama and Texas acquisitions, or
any other business it may acquire in the future. As the Company manages its
existing operations and expands geographically, it may experience certain
inefficiencies as it integrates new operations and manages geographically
dispersed operations. In addition, the Company's results of operations could be
adversely affected if any new facilities do not achieve growth sufficient to
offset increased expenditures associated with geographic expansion. Should the
Company increase its expenditures in anticipation of a future level of sales
which does not materialize, its profitability would be adversely affected. On
occasion, customers may require rapid increases in production which can place an
excessive burden on the Company's resources.
Availability of Components
A substantial portion of the Company's net sales are derived from turnkey
manufacturing in which the Company provides both materials procurement and
assembly services. In turnkey manufacturing, the Company potentially bears the
risk of component price increases, which could adversely affect the Company's
gross profit margins. At various times there have been shortages of components
in the electronics industry. If significant shortages of components should
occur, the Company may be forced to delay manufacturing and shipments, which
could have a material adverse effect on the Company's results of operations.
Availability of customer-consigned parts and unforeseen shortages of components
on the world market are beyond the Company's control and could adversely affect
revenue levels and operating efficiencies.
Potential Fluctuations in Operating Results
The Company's margins and operating results are affected by a number of factors,
including product mix, additional costs associated with new projects, price
erosion within the electronics industry, capacity utilization, price
competition, the degree of automation that can be used in the assembly process,
the efficiencies that can be achieved by the Company in managing inventories and
fixed assets, the timing of orders from major customers, fluctuations in demand
for customer products, the timing of expenditures in anticipation of increased
sales, customer product delivery requirements, and increased costs and shortages
of components or labor. The Company's turnkey manufacturing, which typically
results in higher net sales and gross profits but lower gross profit margins
than consignment assembly and testing services, represents a substantial
percentage of net sales. All of these factors can cause fluctuations in the
Company's operating results over time. Because of these factors, there can be no
assurance that the Company's margins or results of operations will not fluctuate
or decrease in the future.
Competition
The electronics assembly and manufacturing industry is comprised of a large
number of domestic and off-shore companies, several of which have achieved
substantial market share. The Company also faces competition from current and
prospective customers which evaluate its capacities against the merits of
manufacturing products internally. The Company competes with different companies
depending on the type of service or geographic area. Certain of the Company's
competitors have broader geographic breadth. They also may have greater
manufacturing, financial, research and development, and marketing resources than
the Company. The Company believes that the primary basis of competition in its
targeted markets is manufacturing technology, quality, responsiveness, the
provision of value-added services, and price. To be competitive, the Company
must provide technologically advanced manufacturing services, high product
quality levels, flexible delivery schedules, and reliable delivery of finished
products on a timely and price-competitive basis. The Company currently may be
at a competitive disadvantage as to price when compared to manufacturers with
lower cost structures, particularly with respect to manufacturers with
facilities established where labor costs are lower.
Page 10 of 163
Environment Compliance
The Company is subject to a variety of environmental regulations relating to the
use, storage, discharge and disposal of hazardous chemicals used during its
manufacturing process. Any failure by the Company to comply with present or
future regulations could subject it to future liabilities or the suspension of
production which could have a material adverse effect on the Company's business.
In addition, such regulations could restrict the Company's ability to expand its
facilities or could require the Company to acquire costly equipment or to incur
other expenses to comply with environmental regulations.
Dependence on Key Personnel and Skilled Employees
The Company's continued success depends to a large extent upon the efforts and
abilities of key managerial and technical employees. The loss of services of
certain key personnel could have a material adverse effect on the Company. The
Company's business also depends upon its ability to continue to attract and
retain senior managers and skilled employees. Failure to do so could adversely
affect the Company's operations.
ITEM 2. PROPERTIES
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The Company's administrative and principal manufacturing facility, acquired
with the aid of industrial revenue bond financing (see Note 5 of Notes to
Consolidated Financial Statements), is located in Newark, New York and contains
an aggregate of approximately 250,000 square feet. The IEC Edinburg, Texas
manufacturing facility consists of approximately 87,000 square feet.
The IEC Arab, Alabama facility consists of approximately 125,000 square feet.
ITEM 3. LEGAL PROCEEDINGS
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There are no material legal proceedings pending to which the Company or any of
its subsidiaries is a party or to which any of the Company's or subsidiaries'
property is subject. To the Company's knowledge, there are no material legal
proceedings to which any director, officer or affiliate of the Company, or any
beneficial owner of more than 5 percent (5%) of Common Stock, or any associate
of any of the foregoing, is a party adverse to the Company or any of its
subsidiaries.
Page 11 of 163
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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During the fourth quarter of fiscal 1997, no matters were submitted to a
vote of security holders.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Company's executive officers as of September 30, 1997, were as follows:
Name Age Position
Russell E. Stingel 66 Chairman of the Board,
and Chief Executive Officer
David W. Fradin 51 President and Chief Operating
Officer
Timothy J. Kennedy 57 Vice President, Treasurer and
Chief Financial Officer and Secretary
Diana R. Kurty 44 Vice President, Treasurer and
Chief Financial Officer Designate
Bill R. Anderson 52 Vice President and General Manager
IEC Newark NY Operations
Edward Butka 59 Vice President and Assistant
General Manager
Russell E. Stingel has served as Chairman of the Board of Directors since
February 1997, as Chief Executive Officer since July 1996 and as a director
since October 1996. Prior thereto, he had been the President of the Company
(February 1996 -June 1997)and Executive Vice President, Secretary and General
Manager of the Company (1977 - February 1996). He was previously employed as
President of the Ward Hydraulics Division of Figgee International Holdings, Inc.
and in various management positions by General Dynamics Corporation.
David W. Fradin has served as President and Chief Operating Officer since
June 1997. He was previously employed as President and Chief Operating Officer
of Harvard Custom Manufacturing LLC (July 1996 - June 1997)and by EMD Associates
Inc. as President and Chief Executive Officer (1993 - July 1996).
Timothy J. Kennedy has served as Vice President, Treasurer and Chief
Financial Officer of the Company since 1981, as Secretary since February 1996
and in other capacities since 1979. He was previously employed by Titeflex
Corp. as Controller and by General Instrument Corp. as Chief Accountant. Mr.
Kennedy retired as an employee as of July 1997 and retired as an officer of the
Company as of September 30, 1997.
Diana R. Kurty has served as Vice President, Chief Financial Officer and
Treasurer of the Company since October 1997. She was previously employed
as Vice President and Corporate Controller as well as other management roles at
Goulds Pumps, Inc. from 1990 -1997 and prior to that by Coopers & Lybrand
as a Senior Audit Manager and various other positions (1975-1990).
Bill R. Anderson has served as Executive Vice President and as General
Manager of IEC Newark Operations since June 1997. Prior thereto he had been
Vice President of Materials since 1995. He was previously employed as Director
of Procurement and Reliability at C-Cor Electronics (1991 - 1995)
and Manager of Materials at F.L Smithe Machine Co. (1986 - 1991).
Edward Butka has served as Vice President since October 1990, as Assistant
General Manager since 1988 and in various other capacities since 1970. He was
previously employed by General Dynamics Corporation in various capacities.
Page 12 of 163
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
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RELATED STOCKHOLDER MATTERS
---------------------------
(a) Market Information.
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol IECE.
The following table sets forth, for the period stated, the high and
low closing sales prices for the Common Stock as reported on the Nasdaq National
Market.
Closing Sales Price
Period High Low
October 1, 1995 - December 31, 1995 $ 9.75 $8.625
January 1, 1996 - March 30, 1996 $10.75 $8.125
April 1, 1996 - June 30, 1996 $ 8.8125 $7.00
July 1, 1996 - September 30, 1996 $ 8.375 $6.25
October 1, 1996 - December 31, 1996 $ 8.375 $6.375
January 1, 1997 - March 30, 1997 $ 8.875 $7.625
April 1, 1997 - June 30, 1997 $14.25 $8.625
July 1, 1997 - September 30, 1997 $22.25 $13.75
The closing price of the Company's Common Stock on the Nasdaq National
Market on December 22, 1997 was $13.125.
(b) Holders.
As of December 22, 1997, there were approximately 115 holders of
record of the Company's Common Stock.
(c) Dividends.
The Company did not pay any dividends on its Common Stock during the
fiscal years ended September 30, 1997 and September 30, 1996. It is the current
policy of the Board of Directors of the Company to retain earnings for use in
the business of the Company. Certain financial covenants set forth in the
Company's current loan agreement prohibit the Company from paying cash
dividends. The Company does not plan to pay cash dividends on its Common Stock
in the foreseeable future.
Page 13 of 163
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
- -----------------------------------------------
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
Years Ended September 30
Income Statement Data 1997 1996 1995(1) 1994 1993
- ---------------------- --------------------------------------------
Net Sales $260,686 $179,707 $127,610 $130,296 $102,959
--------------------------------------------
Gross Profit $28,094 $15,219 $18,327 $27,281 $25,469
-------------------------------------------
Operating Income $12,321 $2,333 $7,603 $17,565 $16,086
-------------------------------------------
Income before extraordinary
item $6,958 $2,498 $4,688 $10,960 $9,106
------------------------------------------
Extraordinary item - early
extinguishment of debt, net
of income tax benefit of $110 - - - - $633
------------------------------------------
Net Income $6,958 $2,498 $4,688 $10,960 $8,443
-------------------------------------------
Income before extraordinary item
per common and common
equivalent share: $0.91 $0.33 $0.63 $1.51 $1.45
-------------------------------------------
Extraordinary item - - - - $0.11
-------------------------------------------
Net Income $0.91 $0.33 $0.63 $1.51 $1.34
-----------------------------------------
Common and Common
equivalent shares 7,617 7,496 7,451 7,262 6,316
------------------------------------------
Balance Sheet Data:
Working Capital $34,622 $25,959 $23,074 $20,796 $18,672
-------------------------------------------
Total Assets $152,070 $109,521 $103,014 $84,9541 $64,137
-------------------------------------------
Long-term debt, less current
maturities $6,988 $7,409 $6,857 $3,733 $3,915
-------------------------------------------
Shareholders' equity $75,461 $67,457 $64,899 $58,455 $47,145
-------------------------------------------
(1) The results of operations and financial position as of and for the years
ended September 30, 1995, include the operations of Accutek as of the
acquisition date, November 21, 1994.
Page 14 of 163
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
--------------------------
MANAGEMENT'S DISCUSSION OF OPERATIONS
The information in this Management's Discussion & Analysis should be read in
conjunction with the accompanying consolidated financial statements, the related
Notes to Financial Statements and the Five-Year Summary of Financial Data.
Forward-looking statements in this Management's Discussion and Analysis are
qualified by the cautionary statement in Item 1 of this Form 10K.
Overview
- --------
IEC Electronics had a strong year in fiscal 1997, posting record sales of $260.7
million, a 45.1% increase over last year. Net income of $7.0 million in fiscal
1997 was 178.6% higher than net income of $2.5 million in fiscal 1996. The
Company took several important steps in 1997:
o The Company's management team was further strengthened by the appointments
of a new president and COO, new executive vice president, new chief financial
officer, new leadership in the Company's operations in Texas and Alabama and
a new corporate director of procurement. This new talent is being blended
with the existing management structure to create a team which will focus on
Company growth and improved profitability.
o Master distribution programs were put in place with Arrow Electronics
and Pioneer-Standard Electronics. These alliances have the
benefit of reducing lead times on program parts, reducing the quotation
process timetable, providing competitive pricing, providing some protection
during allocation, providing better payment terms, reducing overhead cost and
providing access to global resources.
o The Company adopted a 24-hour, 7-day a week production schedule in both
the Newark and Texas operations to better meet customer demands, allow for
more efficient use of manufacturing equipment and reduce overtime costs.
Page 15 of 163
Analysis of Operations
(dollars in millions)
For Year Ended September 30, 1997 1996 Change 1995 Change
Net Sales $260.7 $179.7 45.1% $127.6 40.8%
The 45.1% increase in fiscal 1997 sales compared to fiscal year 1996 and the
40.8% increase from 1995 to 1996 were due to increased demand from existing
customers, a further shift to a greater percentage of turnkey sales and sales to
new customers. Demand in the electronics manufacturing services industry is
being driven by both growth in the electronics industry and even more
importantly, increased electronics outsourcing from OEMs. The Company has
converted to a higher percentage of turnkey sales which represented 95%, 85% and
64% of net sales in fiscal 1997, 1996, and 1995, respectively.
Gross Profit and Selling and Administrative Expenses
(as a % of Net Sales)
For Year Ended September 30,
1997 1996 1995
Gross Profit 10.8% 8.5% 14.4%
Selling and Administrative Expenses 6.1% 7.2% 8.4%
Gross profit as a percentage of sales increased over 2 percentage points to
10.8% in fiscal 1997. This increase resulted from improved utilization of
manufacturing capacity, benefits from material purchase volume, and strategic
initiatives such as the master distribution programs with Arrow Electronics
and Pioneer-Standard Electronics. The Company also established
certain criteria for new customers which included minimum size guidelines to
help reduce small-lot-size manufacturing.
Page 16 of 163
The Company's gross profit percentage decreased nearly 6 percentage points
between fiscal 1995 and 1996. The decrease was due to the higher material
content in the cost of goods sold as the turnkey sales percentage increased,
inefficiencies in the utilization of direct labor, component shortages in the
first half of fiscal 1996 and excess overhead expense caused by underutilized
manufacturing capacity. This inefficiency and underutilization was primarily
the effect of customer rescheduling which, in turn, caused small-lot-size
manufacturing, production interruption and restarts, set-up expense and
production downtime.
Selling and administrative expenses decreased to 6.1% of sales in fiscal 1997,
down from 7.2% in fiscal 1996 and 8.4% in fiscal 1995. These improvements are a
result of the Company's ability to leverage its operating expenses. Selling and
administrative expenses were $15.8 million in fiscal 1997, $12.9 million in
fiscal 1996, and $10.7 million in fiscal 1995. These increases can largely be
attributed to staff additions, increases in salaries, bonuses and related costs
and to increases in commission expense related to increased net sales.
Other Income and Expense
(dollars in millions)
For Year Ended September 30,
1997 1996 1995
Interest Expense $1.6 $1.6 $1.1
Life Insurance Proceeds --- 2.0 ---
Other Income .5 .4 .7
Interest expense remained nearly constant at $1.6 million in 1997 and 1996 but
increased $.5 million from 1995 to 1996 due to higher average borrowing levels.
Life insurance proceeds of $2.0 million were received in 1996 as a result of the
death of the Company's founder, Roger E. Main. Other income is composed
primarily of investment earnings.
Page 17 of 163
Income Taxes
For Year Ended September 30,
1997 1996 1995
Effective Tax Rate 37.9% 20.6% 34.5%
The Company's low effective tax rate of 20.6% in 1996 resulted from the
aforementioned receipt of non-taxable life insurance proceeds of $2.0 million.
The 1997 effective tax rate of 37.9% reflects a more typical rate based on the
Company's current mix of federal and state jurisdictions. The 1995 tax rate
benefited from the recognition of state investment tax credits.
Liquidity and Capital Resources
- -------------------------------
As reflected in the Consolidated Statement of Cash Flows for 1997, the $8.9
million of cash provided by operating activities and the $3.1 million provided
by financing activities were used to fund $9.6 million of net investing
activities, thus increasing cash by $2.4 million. Significant changes in
working capital items that impacted cash flow from operating activities in 1997
were a $20.8 million increase in accounts receivables largely due to overall
sales growth, in particular a record sales month of $36.7 million in September
1997, a $19.4 million increase in inventory as the result of higher operating
volumes and the Company's conversion to a higher turnkey sales percentage of 95%
in 1997 from 85% in 1996, and a $26.9 million increase in accounts payable
resulting from higher inventories and the timing of capital additions.
Capital additions were $9.9 million in 1997 and $9.1 million in 1996. These
expenditures were primarily used to upgrade the manufacturing capabilities of
the Company.
The Company maintained credit facilities with its bank as of September 30, 1997.
These facilities included a credit line of up to $13.0 million for operations,
$12.0 million for equipment purchases and $8.0 million for financial
material bearing contracts. At September 30, 1997, approximately $12.0 million
was available for borrowing under these existing lines.
In late December 1997, the Company was in the process of negotiating to increase
its credit facility to between $40.0 million and $50.0 million. The Company
had outstanding borrowings of $31.8 million at that time. The Company believes
its cash balances, funds generated from operations and its credit facilities
will be sufficient for the Company to meet its capital expenditures and working
capital needs for its operations as presently conducted. As part of its overall
business strategy, the Company may from time to time evaluate acquisition
opportunities. The funding of these future transactions, if any, may require
the Company to obtain additional sources of financing.
Page 18 of 163
Impact of Inflation
- -------------------
The impact of inflation on the Company's operations for the last three years has
been minimal due to the fact that it is able to adjust its bids to reflect any
inflationary increases in cost.
Year 2000 Conversion
- --------------------
During fiscal 1997, the Company established a team to coordinate the
identification, evaluation and implementation of changes to computer systems and
software necessary to achieve a year 2000 date conversion. The Company's
objective is to ensure that computer systems and software will recognize and
process the year 2000 and beyond with no effect on customers or disruptions to
business operations. The total cost of this effort and its effect on the
Company's future results of operations is not expected to be material.
Recently Issued Accounting Standards
- ------------------------------------
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS No.
128), "Earnings Per Share", was issued, superseding Accounting Principles Board
Opinion No. 15 (Opinion 15), "Earnings Per Share". This statement specifies the
computation, presentation and disclosure requirements for earnings per share
(EPS). This statement replaces the reporting of primary EPS with basic EPS and
changes the computation of fully diluted EPS to dilutive EPS which uses the
average share price rather than the more dilutive greater of the average or
end-of-period share price required by Opinion 15. The Company will be required
to adopt SFAS No. 128 on a prospective basis in Fiscal 1998. The Company
believes the effect of adoption will not be material.
Page 19 of 163
.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
The information required by this item is incorporated herein by reference
to pages 23 through 43 of this Form 10-K and is indexed under Item 14(a)(1) and
(2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
- ---------------------------------------------------------
ACCOUNTING AND FINANCIAL DISCLOSURE
-----------------------------------
There have been no disagreements on accounting and financial disclosure
matters.
Page 20 of 163
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------
The information required by this item is presented under the caption
entitled "Election of Directors - Nominees for Election as Directors" contained
in the definitive proxy statement issued in connection with the Annual Meeting
of Stockholders to be held February 25, 1998 and is incorporated in this report
by reference thereto. The information regarding Executive Officers of the
Registrant is found in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
- --------------------------------
The information required by this item is presented under the caption
entitled "Executive Officer Compensation" contained in the definitive proxy
statement issued in connection with the Annual Meeting of Stockholders to be
held February 25, 1998 and is incorporated in this report by reference thereto,
except, however, the sections entitled "Performance Graph" and "Report of the
Compensation Committee of the Board of Directors" are not incorporated in this
report by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
- -------------------------------------------------------------
MANAGEMENT
----------
The information required by this item is presented under the caption
entitled "Security Ownership of Certain Beneficial Owners and Management"
contained in the definitive proxy statement issued in connection with the Annual
Meeting of Stockholders to be held February 25, 1998 and is incorporated in this
report by reference thereto.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
The information required by this item is presented under the caption
"Executive Officer Compensation - Certain Transactions" contained in the
definitive proxy statement issued in connection with the Annual Meeting of
Stockholders to be held February 25, 1998 and is incorporated in this report
by reference thereto.
Page 21 of 163
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
- ----------------------------------------------------------------
FORM 8-K
--------
(a) The following documents are filed as part of this report and as
response to Item 8:
Page
(1) and (2) Financial Statements and Supplementary Schedule
Report of Independent Public Accountants...................... 26
Consolidated Balance Sheets as of
September 30, 1997 and 1996.................................. 27
Consolidated Statements of Income for the years
ended September 30, 1997, 1996 and 1995 .................... 29
Consolidated Statements of Changes in Shareholders'
Equity for the years ended September 30, 1997,
1996 and 1995................................................ 30
Consolidated Statements of Cash Flows for the years
ended September 30, 1997, 1996 and 1995...................... 31
Notes to Consolidated Financial Statements.................... 32
All other schedules are either inapplicable or the information is
included in the financial statements and, therefore, have been
omitted.
(3) Exhibits
Exhibit No. Title Page
3.1 Amended and Restated Certificate of Incorporation
of DFT Holdings Corp. (Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
3.2 Amended Bylaws of IEC Electronics Corp. (Incorporated
by reference to Exhibit 3.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended July 2, 1993)
3.3 Agreement and Plan of Merger of IEC Electronics into DFT
Holdings Corp. (Incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-1, Registration No.
33-56498)
3.4 Certificate of Merger of IEC Electronics Corp.
into DFT Holdings Corp. - New York. (Incorporated by
reference to Exhibit 3.4 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
3.5 Certificate of Ownership and Merger merging IEC
Electronics Corp. into DFT Holdings Corp. - Delaware.
(Incorporated by reference to Exhibit 3.5 to the
Company's Registration Statement on Form S-1,
Registration No. 33-56498)
3.6 Certificate of Merger of IEC Acquisition Corp. into
IEC Electronics Corp. (Incorporated by reference to
Exhibit 3.6 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
3.7 Articles of Incorporation of Calidad Electronics, Inc.
(Incorporated by reference to Exhibit 3.7 to the
Company's Registration Statement on Form S-1,
Registration No. 33-56498)
3.8 Articles of Amendments to the Articles of Incorporation
of Calidad Electronics, Inc. (Incorporated by reference to
Exhibit 3.8 to the Company's Registration Statement on
Form S-1, Registration No. 33-56498)
3.9 Statement of Change of Registered Office or Registered Agent or
both by a Profit Corporation. (Incorporated by reference to
Exhibit 3.9 to the Company's Registration Statement on Form S-1,
Registration No. 33-56498)
Page 22 OF 45
3.10 By-laws of Calidad Electronics, Inc. (Incorporated by
reference to Exhibit 3.10 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
4.1 Specimen of Certificate for Common Stock. (Incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-1, Registration No. 33-56498)
10.1 IEC Electronics Corp. Stock Option Plan, as amended.
(Incorporated by reference to Exhibit 10.1 to the Company's
Registration Statement on Form S-1, Registration
No. 33-56498)
10.2 Form of Amended and Restated Incentive Stock Option
Agreement. (Incorporated by reference to Exhibit 10.2 to
the Company's Registration Statement on Form S-1,
Registration No. 33-56498)
10.3 Form of Non-Qualified Stock Option Agreement. (Incorporated
by reference to Exhibit 10.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-56498)
10.4 Documents Executed in Connection with the Acquisition of Certain
Real Estate: (i) Agreement for Purchase of Shares, for the
Purchase of Certain Real Estate, and for Certain Other Matters
among IEC Electronics Corp., Rettel Corporation, Rodney J.
Graybill, Jacob A. Graybill and Robert M. Tyle, dated as of
August 29, 1983. (ii) Bond Purchase Agreement among IEC
Electronics Corp., Wayne County Industrial Development Agency,
Rodney J. Graybill, Robert M. Tyle and the Estate of Jacob A.
Graybill, dated as of December 1, 1983. (iii) Mortgage from the
Wayne County Industrial Development Agency to Rodney J.
Graybill, Robert M. Tyle and the Estate of Jacob A. Graybill,
dated as of December 1, 1983. (iv) Lease Agreement between the
Wayne County Industrial Development Agency and IEC Electronics
Corp., dated as of December 1, 1983. (v) Amendment to Agreement
for Purchase of Shares, for the Purchase of Certain Real Estate,
and for Certain Other Matters among IEC Electronics Corp.,
Rettel Corporation, Rodney J. Graybill, the Estate of Jacob A.
Graybill and Robert M. Tyle, dated as of December 28, 1983. (vi)
Loan Agreement between IEC Electronics Corp. and The Village of
Newark, dated as of December 28, 1983. (vii) Mortgage between
Wayne County Industrial Development Agency and IEC Electronics
Corp., as mortgagors, and Wayne County Industrial Development
Agency, as mortgagee, dated December 28, 1983. (viii) Mortgage
between Wayne County Industrial Development Agency and The
Village of Newark, dated December 28, 1983. (ix) First Agreement
of Amendment to Loan Agreement of December 28, 1983, between IEC
Electronics Corp. and The Village of Newark, dated as of
December 30, 1983. (x) Loan and Use Agreement among Wayne County
Economic Development Corp., Wayne County Industrial Development
Agency, IEC Electronics Corp. and New York Job Development
Authority, dated December 30, 1983.
(Incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1, Registration No. 33-56498)
10.5* Form of Indemnity Agreement. (Incorporated by reference to
Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q
for the quarter ended July 2, 1993)
Page 23 of 163
10.6* IEC Electronics Corp. Savings and Security Plan.
(Incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-1, Registration
No. 33-56498)
10.7* Loan Agreement between IEC Electronics Corp. and Marine Midland Bank,
N.A., dated June 30, 1993. (Incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the quarter ended
July 2, 1993
10.8 Amendment No. 1 to Loan Agreement between IEC Electronics Corp. and
Marine Midland Bank, N.A., dated as of June 9, 1995 (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995)
10.9* IEC Electronics Corp. 1993 Stock Option Plan (Incorporated
by reference to Exhibit 4.1 to the Company's Registration Statement
on Form S-8, Registration No. 33-79360)
10.10* Form of Incentive Stock Option Agreement (Incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement
on Form S-8, Registration No. 33-79360)
10.11* Form of Non-Statutory Stock Option Agreement (Incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement
on Form S-8, Registration No. 33-79360)
10.12* Form of Non-Employee Director Stock Option Agreement
(Incorporated by reference to Exhbit 4.4 to the Company's
Registration Statement on Form S-8, Registration No. 33-79360)
10.13 Stock Purchase Agreement among IEC Electronics Corp., Accutek, Inc.,
J. Darrell Cottle and Laura B. Cottle dated November 3, 1994 and
Amendment thereto dated November 21, 1994. (Incorporated by reference
to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended December 30, 1994)
10.14* Employment and Non-Competition Agreement between Accutek, Inc.
and J. Darrell Cottle dated November 21, 1994. (Incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 30, 1994)
10.15 Amendment No. 2 dated January 21, 1997 to Loan Agreement dated June
30, 1993 between IEC Electronics Corp. and Marine Midland Bank, N.A.
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 28, 1997.
10.16 Amendment No.3 dated October 27, 1997 to Loan Agreement dated June
30, 1993 between IEC Electronics Corp. and
Marine Midland Bank, N.A. 44
10.17 IEC Electronics Corp. Defined Contribution Plan effective
June 1, 1997 48
10.18* Employment Agreement between IEC Electronics Corp. and
David W. Fradin 151
11.1 Statement relating to computation of per share earnings. See Note
12 to the Notes to the Company's Consolidated Financial
Statements contained herein.
22.1 Subsidiaries of IEC Electronics Corp. 153
24.1 Consent of Arthur Andersen LLP 154
(b) Reports on Form 8-K:
None
Page 24 of 163
SIGNATURES
Pursuant to the requirement of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: December 18, 1997.
IEC Electronics Corp..
By:/s/Russel E. Stingel
-----------------------
Russell E. Stingel
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/Russell E. Stingel Chairman of the Board and
- --------------------- Chief Executive Officer
(Russell E. Stingel) (Principal Executive Officer) December XX, 1997
/s/Diana R. Kurty Vice President of Finance
- ----------------- (Principal Financial
(Diana R. Kurty) and Accounting Officer) December xx, 1997
/s/David J. Beaubien Director December xx, 1997
- --------------------
(David J. Beaubien)
/s/Thomas W. Folger Director December xx, 1997
- --------------------
(Thomas W. Folger)
/s/W. Barry Gilbert Director December xx, 1997
- -------------------
(W.Barry Gilbert)
/s/Robert P.B. Kidd Director December xx, 1997
- -------------------
(Robert P. B. Kidd)
/s/Eben S. Moulton Director December xx, 1997
- ------------------
(Eben S. Moulton)
/s/Justin L. Vigdor Director December xx, 1997
- -------------------
(Justin L. Vigdor)
Page 25 of 163
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To IEC Electronics Corp.:
We have audited the accompanying consolidated balance sheets of IEC Electronics
Corp. and subsidiaries as of September 30, 1997 and 1996, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended September 30, 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 financial position of IEC Electronics Corp. and
subsidiaries as of September 30, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1997, in conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Rochester, New York,
November 12, 1997
Page 26 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
(in thousands, except share data)
ASSETS
1997 1996
----------------------
CURRENT ASSETS:
Cash and cash equivalents $ 3,921 $ 1,482
Accounts receivable 49,045 28,211
Inventories 45,360 26,006
Income taxes receivable - 757
Deferred income taxes 1,900 702
Other current assets 98 165
----------------------
Total current assets 100,324 57,323
----------------------
PROPERTY, PLANT, AND EQUIPMENT, net 39,391 39,014
----------------------
OTHER ASSETS:
Costs in excess of net assets acquired, net 12,346 12,819
Other assets 9 365
----------------------
12,355 13,184
----------------------
$ 152,070 $ 109,521
======================
The accompanying notes to consolidated financial statements are an
integral part of these balance sheets
Page 27 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND 1996
(in thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
-------------------------
CURRENT LIABILITIES:
Short-term borrowings under lines ofCredit $ 10,530 8,530
Current portion of long-term debt 3,291 2,782
Accounts payable 43,904 16,975
Accrued payroll and related expenses 5,611 2,772
Accrued income taxes 1,887 -
Other accrued expenses 479 305
-------------------------
Total current liabilities 65,702 31,364
-------------------------
DEFERRED INCOME TAXES 3,919 3,291
-------------------------
LONG-TERM DEBT 6,988 7,409
-------------------------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.01 per
share, authorized - 500,000 shares;
issued and outstanding - none - -
Common stock, par value $.01 per
share, authorized - 15,000,000
shares; issued and outstanding -
7,552,201 and 7,415,070 shares,
respectively 75 74
Additional paid-in capital 38,430 36,974
Retained earnings 37,367 30,409
Treasury stock, at cost - 20,573 and 0 shares,
respectively (411) -
-------------------------
Total shareholders' equity 75,461 67,457
-------------------------
$ 152,070 109,521
=========================
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets
Page 28 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(in thousands, except share data)
1997 1996 1995
------------------------------
Net sales $ 260,686 $ 179,707 $ 127,610
Cost of sales 232,592 164,488 109,283
------------------------------
Gross profit 28,094 15,219 18,327
Selling and administrative expenses 15,773 12,886 10,724
------------------------------
Operating income 12,321 2,333 7,603
Interest expense 1,586 1,584 1,101
Life insurance proceeds - 2,002 -
Other income, net 472 396 653
------------------------------
Income before income taxes 11,207 3,147 7,155
Income taxes 4,249 649 2,467
------------------------------
Net income $ 6,958 $2,498 $4,688
==============================
Net income per common and
common equivalent share $ .91 $ .33 $ .63
==============================
Common and common equivalent
shares 7,617,345 7,496,420 7,450,738
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 29 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(in thousands)
Additional Total
Common Paid-In Retained Treasury Shareholders'
Stock Capital Earnings Stock Equity
--------------------------------------------
BALANCE, September 30, 1994 $ 72 $ 35,161 $ 23,233 $ - $ 58,456
Issurance of common stock for
acquisition of Accutek, Inc. 2 1,753 - - 1,755
Net income - - 4,688 - 4,688
--------------------------------------------
BALANCE, September 30, 1995 74 36,914 27,911 - 64,899
Exercise of stock options - 60 - - 60
Net income - - 2,498 - 2,498
--------------------------------------------
BALANCE, September 30, 1996 74 36,974 30,409 - 67,457
Exercise of stock options 1 1,456 - - 1,457
Purchase of treasury shares - - - (411) (411)
Net income - - 6,958 - 6,958
--------------------------------------------
BALANCE, September 30, 1997 $ 75 $ 38,430 $37,367 $ (411) $75,461
============================================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 30 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995
(in thousands)
1997 1996 1995
-------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 6,958 $ 2,498 $ 4,688
Adjustments to reconcile net income to net cash
(used in) provided
by operating activities:
Depreciation and amortization 9,252 8,271 7,128
Deferred income taxes (570) (45) 317
Gain on sale of fixed assets (53) (15) (99)
Amortization of costs in excess of
net assets acquired 474 474 454
Changes in operating assets and liabilities:
Increase in accounts receivable (20,834) (10,833) (2,123)
Increase in inventories (19,354) (1,909) (5,728)
Decrease (increase) in
income taxes receivable 757 (757) 1,366
Decrease (increase) in other current
assets 67 286 (13)
Decrease in other assets 355 - 44
Increase in accounts payable 26,929 4 5,849
Increase (decrease) in accrued
payroll and related expenses 2,839 (275) (678)
Increase (decrease) in
accrued income taxes 1,887 (1,247) 1,353
Increase in other accrued expenses 174 70 13
-------------------------
Net cash provided by (used in)
operating activities 8,881 (3,478) 12,571
-------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (9,912) (9,096)(11,188)
Merger related costs - (3) -
Purchase of Accutek, Inc., net of cash acquired - - (1,752)
Proceeds from sale of equipment 335 54 203
-------------------------
Net cash used in investing activities (9,577) (9,045)(12,737)
-------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options and warrants 1,457 60 -
Purchase of treasury stock (411) - -
Net borrowings (repayments) under line
of credit agreements 2,000 4,990 (1,015)
Proceeds from long-term debt 3,150 4,062 5,921
Principal payments on long-term debt (3,061) (3,747) (2,959)
-------------------------
Net cash provided by financing
activities 3,135 5,365 1,947
-------------------------
NET INCREASE (DECREASE) IN CASH AND CASH 2,439 (7,158) 1,781
EQUIVALENTS
CASH AND CASH EQUIVALENTS, beginning of year 1,482 8,640 6,859
-------------------------
CASH AND CASH EQUIVALENTS, end of year $ 3,921 $1,482 $8,640
=========================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (receivable) during the year for:
Interest $ 1,586 $1,584 $1,101
=========================
Income taxes, net of refunds received $ 1,769 $2,698 $ (456)
=========================
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITY:
In fiscal 1995, IEC Electronics Corp. purchased
all of the common stock of Accutek, Inc.as follow:
Fair value of assets acquired $ - $ - $6,306
Less- liabilities assumed - - (2,356)
Issuance of common stock - - (1,755)
-------------------------
Net cash paid for acquistion $ - $ - $ 2,195
=========================
The accompanying notes to consolidated financial statements are
an integral part of these statements.
Page 31 of 163
IEC ELECTRONICS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997, 1996 AND 1995
1. BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business
IEC Electronics Corp. (IEC) is an independent contract manufacturer of complex
printed circuit board assemblies and electronic products and systems. IEC offers
its customers a wide range of manufacturing and management services, on either a
turnkey or consignment basis, including material procurement and control,
manufacturing and test engineering support, statistical quality assurance, and
complete resource management.
Consolidation
The consolidated financial statements include the accounts of IEC and its
wholly-owned subsidiaries, Calidad Electronics, Inc. (Calidad) and Accutek, Inc.
(Accutek) (collectively, the Company). In October 1997, IEC announced that all
its locations will operate under a unified name. IEC's headquarters and
manufacturing facility in Newark, NY will operate as IEC Newark NY Operations,
Calidad will operate under the name IEC Edinburg Texas Operations, and Accutek
will be known as IEC Arab Alabama Operations. All significant intercompany
transactions and accounts have been eliminated.
Effective November 21, 1994, IEC acquired all of the outstanding common stock of
Accutek, a contract electronics manufacturer for approximately $4 million in
cash and common stock. The acquisition was accounted for by the purchase method
of accounting, and accordingly, Accutek's net assets and results of operations
are included in the consolidated financial statements since the date of
acquisition. The purchase price was allocated to the assets acquired and the
liabilities assumed based on estimated fair values at the date of acquisition.
Cost in excess of net assets acquired related to the acquisition is being
amortized on a straight-line basis over a period of 15 years.
Revenue Recognition
The Company recognizes revenue upon shipment of product for both turnkey and
consignment contracts.
Page 32 of 163
Cash and Cash Equivalents
Cash and cash equivalents include money market and bank account balances. The
Company's cash and cash equivalents are held and managed by institutions which
follow the Company's investment policy. The fair value of the Company's
financial instruments approximates carrying amounts due to the relatively short
maturities and variable interest rates of the instruments, which approximate
current market interest rates.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and are depreciated over
various estimated useful lives using the straight-line method.
Maintenance and repairs are charged to expense as incurred; renewals and
improvements are capitalized. At the time of retirement or other disposition of
property, plant, and equipment, the cost and accumulated depreciation are
removed from the accounts and any gain or loss is reflected in other income.
Long-Lived Assets
The Company reviews its long-lived assets and certain identifiable intangibles
to be held and used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. If such
events or changes in circumstances are present, a loss is recognized to the
extent the carrying value of the asset is in excess of the sum of the
undiscounted cash flows expected to result from the use of the asset and its
eventual disposition.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practical to estimate that
value.
Current Assets and Liabilities - The carrying amount of cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities
approximate fair value because of the short maturity of those instruments.
Debt - The fair value of the Company's debt is estimated based upon the quoted
market prices for the same or similar issues which approximates carrying amount.
Page 33 of 163
Costs in Excess of Net Assets Acquired
Costs in excess of net assets acquired of $15.9 million is being amortized on a
straight-line basis over a range of 15 to 40 years. The balance is presented net
of accumulated amortization of $3.5 million and $3.0 million at September 30,
1997 and 1996, respectively. Amortization of $474,000, $474,000, and $454,000
was charged against income for the years ended September 30, 1997, 1996, and
1995, respectively.
Net Income per Common and Common Equivalent Share
Net income per common and common equivalent share has been computed using all
common stock and common stock equivalents (stock options and warrants under the
"treasury stock" method). The number of weighted average shares of common stock
outstanding is as follows at September 30:
1997 1996 1995
---------- ---------- ---------
Average number
outstanding:
Common shares 7,441,881 7,412,226 7,358,714
Common equivalent shares 175,464 84,194 92,024
------ --------- --------- ---------
7,617,345 7,496,420 7,450,738
========== ========== =========
Fully diluted earnings per common share data are not presented as they are not
materially different from primary earnings per common share for all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates that affect the
reported amounts of assets and liabilities and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.
Reclassifications
Certain amounts presented in the prior years have been reclassified to conform
with current-year presentation.
2. INVENTORIES:
The major classifications of inventories are as follows at September 30 (in
thousands):
1997 1996
-------- --------
Raw materials $38,209 $20,915
Work-in-process 7,151 5,091
-------- --------
$45,360 $26,006
======== ========
Page 34 of 163
3. PROPERTY, PLANT, AND EQUIPMENT:
The major classifications of property, plant, and equipment are as follows at
September 30 (in thousands):
1997 1996
-------- --------
Land and land improvements $ 1,071 $ 1,071
Buildings and improvements 10,394 10,015
Machinery and Equipment 59,842 54,840
Furniture and fixtures 5,874 4,725
-------- --------
77,181 70,651
Less- Accumulated depreciation
and amortization (37,790) (31,637)
-------- --------
$ 39,391 $ 39,014
======== ========
Depreciation and amortization was $9.3 million, $8.3 million, and $7.1 million
for the years ended September 30, 1997, 1996 and 1995, respectively.
The principal depreciation and amortization lives used are as follows:
Estimated
Description Useful
Lives
- ---------------------------- ------------
Land improvements 10 years
Buildings and improvements 10 to 40 years
Machinery and equipment 3 to 10 years
Furniture and fixtures 5 to 7 years
4. FINANCING ARRANGEMENTS:
Financing arrangements are as follows:
a. A secured working capital line of credit up to $13 million available
through April 1, 1998, with interest at the prime rate, and secured
by accounts receivable and inventory. Amounts borrowed are limited to
75% and 25% of qualified accounts receivable and inventory,
respectively.
b. A secured revolving line of credit up to $12 million available
through April 1, 1998, with interest at the prime rate to be used for
equipment purchases. Amounts borrowed will be collateralized by the
related equipment and will be repayable monthly over a term of 60
months.
Page 35 of 163
c. A secured revolving line of credit up to $8 million available through
April 1, 1998, with interest at the prime rate to be used to fund
material bearing contracts into which the Company may enter. Amounts
borrowed are limited based on the value of turnkey contracts entered
into by the Company.
A facility fee of 1/4% of the average unused lines of credit is due annually.
In October 1997, the Company amended the above financing arrangements with the
bank, which effectively removed the $8 million secured revolving line of credit
to fund material bearing contracts and increased the secured working capital
line of credit to $21 million, leaving the total borrowing capability unchanged
at $33 million.
Aggregate short-term borrowings by the Company under its working capital lines
of credit for the years ended September 30 are as follows (in thousands):
1997 1996 1995
------- ------- -------
Balance outstanding at September 30 $ 10,530 $ 8,530 $ 3,540
Weighted average interest rate
at September 30 8.50% 8% 8.75%
Maximum amount outstanding
during the period $ 10,530 $ 8,530 $ 4,555
Average amount outstanding
during the period $ 9,030 $6,995 $2,828
Weighted average interest rate at
during the period 8.6% 8.6% 8.9%
These obligations and certain long-term debt contain specific affirmative and
negative covenants binding the Company, including among others, the maintenance
of certain financial covenants, as well as limitations on amounts available
under the lines of credit relating to the borrowing base, capital expenditures,
and additional debt. The more restrictive of the covenants provide that the
Company maintain a specified current ratio, debt to equity ratio, and interest
coverage ratio. At September 30, 1997, the Company was in compliance with all
covenants.
Page 36 of 163
5. LONG-TERM DEBT:
Long-term debt consists of the following at September 30 (in thousands):
1997 1996
-------- -------
Equipment Notes Payable:
Equipment notes payable obtained through revolving line
credit with interest at prime (8.5% at September 30, 1997),
through October 2002, secured by related equipment $ 9,380 $ 8,811
Mortgage Notes Payable:
Mortgage note payable with interest at 8.25%, through
January 1999 85 147
Mortgage note payable with interest at
prime, through May 2005, secured by real property 80 90
Mortgage note payable with interest at 7.0%, through
August 1998, secured by real property 40 78
Mortgage note payable with interest at 7.75%, through
July 2001, secured by real property 271 329
Mortgage note payable with interest at 6.19%, through
May 2005, secured by real property 177 194
Capital Lease Obligations:
Capital leases payable, paid in July 1997, including
interest ranging from 4.2% to 8.0% - 53
Capital leases payable with interest ranging from 4.33%
to 8.33%, through December 1997, secured by
related equipment 19 126
Capital lease payable with interest at 7.02% through
November 1998 with a balloon payment of $51,000,
secured by related equipment 102 150
Capitalized lease obligation with interest at 12%,
through January 1999 125 213
-------- -------
10,279 10,191
Less- Current portion (3,291) (2,782)
-------- -------
$ 6,988 $ 7,409
======== =======
The Prime rate at September 30, 1997 was 8.5%
Page 37 of 163
The aggregate annual maturities of long-term debt at September 30, 1997 are as
follows (in thousands):
1998 $ 3,291
1999 3,161
2000 2,080
2001 927
2002 702
Thereafter 118
-------
$ 10,279
=======
Based on borrowing rates currently available to the Company for bank loans with
similar terms and average maturities, the fair value of long-term debt
approximates its recorded value.
6. INCOME TAXES:
The provision for income taxes in fiscal 1997, 1996 and 1995 is summarized as
follows(in thousands):
1997 1996 1995
------- ------- -------
Current
Federal $4,462 $565 $1,868
State 357 129 282
Deferred (570) (45) 317
------- ------- -------
Provision for income taxes, net $4,249 $ 649 $2,467
======= ======= =======
The components of the deferred tax asset (liability) at September 30 are as
follows(in thousands):
1997 1996
---- ----
Accelerated Depreciation $(4,318) $(4,149)
New York State investment tax credits 3,102 2,970
Conpensated Balances 336 291
Inventories 1,318 380
Receivables 245 34
Alternative minimum tax credit - 558
Other - (3)
------- -------
683 81
Less- Valuation allowance (2,702) (2,670)
------- -------
$(2,019) $(2,589)
======= =======
Page 38 of 163
The Company has available approximately $4.7 million in New York State
investment tax credits through 2007. A valuation allowance has been recorded at
September 30, 1997 and 1996 to offset a majority of the deferred tax assets
generated by New York State investment tax credits since the Company anticipates
generating additional investment tax credits each year during the carryforward
period, which limits the utilization of the tax credit carryforward.
The difference between the effective tax rates and the statutory federal income
tax rate for fiscal years 1997, 1996 and 1995 is summarized as follows:
1997 1996 1995
----- ----- -----
Provision for income taxes at
statutory rates 34.0% 34.0% 34.0%
Amortization of cost in excess
of net assets acquired 1.1 3.8 1.7
Life insurance proceeds - (21.6) -
Provision for state taxes,net 2.1 4.8 (1.7)
Other 0.7 (0.4) 0.5
----- ----- -----
37.9% 20.6% 34.5%
===== ===== =====
7. SHAREHOLDERS' EQUITY:
Stock -Based Compensation Plans
In November 1993, the Company adopted the 1993 Stock Option Plan (SOP) which was
approved by the shareholders in February 1994. The SOP replaces and supersedes
the 1989 Stock Option Plan. However, any outstanding options under the 1989 Plan
remain in effect in accordance with and subject to the terms of the 1989 plan.
Under the SOP, a total of 900,000 shares, inclusive of the foregoing, were
reserved for key employees, officers, directors and consultants as of September
30, 1997. The option price for incentive options must be at least 100% of the
fair market value at date of grant, or if the holder owns more than 10% of total
common stock outstanding at the date of grant, then not less than 110% of the
fair market value at the date of grant. Stock options issued prior to 1992
terminate 10 years from date of grant, while incentive and nonqualified stock
options issued subsequent to 1991 terminate seven and five years from date of
grant, respectively.
Incentive stock options granted during November 1994 which vested in three
annual increments expired in fiscal year 1997. Incentive stock options granted
during the periods between July 1995 through September 1997 vest in increments
of 25 percent. Non-qualified stock options granted during fiscal year 1997 vest
in increments of 33 1/3 percent.
Page 39 of 163
Changes in the status of options under the SOP at September 30, are summarized
as follows:
Weighted Options
Shares Average Available
Under Exercise for
Option Price Grant Exercisable
--------- -------- -------- ----------
Balance September 30,1994 474,351 $10.45
Options granted 140,000 $10.48
Options forfeited (88,631) $12.08
---------
Balance September 30, 1995 525,720 $10.19 13,030 231,720
Options granted 15,000 $ 9.19
Options exercised (27,704) $ 2.18
Options forfeited (8,474) $14.38
---------
Balance September 30, 1996 504,542 $10.53 306,504 306,542
Options granted 376,500 $ 8.56
Options exercised (137,131) $ 7.67
Options forfeited (105,000) $11.89
---------
Balance September 30, 1997 638,911 $ 9.75 35,004 199,661
=========
The following table summarizes information about stock options outstanding as of
September 30, 1997:
Options Outstanding Options Exercisable
-------------------------------------- --------------------------
Weighted
Range Number Average Weighted Number Weighted
of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices September 30, Life Price September 30, Price
1997 1997
- -------------- ---------------- ---------- --------- ---------------- ---------
$0-1.62 23,125 2.14 $ 1.62 23,125 $ 1.62
$5.00-6.25 175,536 5.97 $ 6.08 24,536 $ 5.00
$7.625-10.825 247,500 6.02 $ 9.32 32,750 $ 8.72
$12.75-16.00 151,750 4.27 $ 13.21 95,250 $ 12.79
$19.625-20.00 41,000 3.82 $ 19.95 24,000 $ 20.00
---------------- -----------------
638,911 199,661
================ ================
Page 40 of 163
The weighted average fair value of options granted during fiscal 1997 and 1996
was $4.80 and $5.01, respectively. The fair value of options is estimated on the
date of grant using the Black-Scholes option pricing model with the following
weighted average assumptions: risk-free interest rate of 6.43% for fiscal 1997
and 5.89% for fiscal 1996; volatility of 50% for both fiscal 1997 and 1996, and
expected option life of 5.8 years for both fiscal 1997 and 1996. The dividend
yield was 0% for both fiscal 1997 and 1996. Forfeitures are recognized as they
occur.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." In fiscal 1997, the Company elected to adopt the
disclosure only provisions of Statement of Financial Accounting Standards No.
123 (SFAS No. 123), "Accounting for Stock-Based Compensation." Accordingly, no
compensation expense has been recognized for its stock-based compensation plans.
Had the Company recognized compensation cost based upon the fair value at the
date of grant for awards under its plans consistent with the methodology
prescribed by SFAS No. 123, net income and net income per common and common
equivalent share would have been as follows for years ended September 30 (in
thousands, except per share data):
1997 1996
--------------- ---------------
As Pro As Pro
Reported Forma Reported Forma
------ ------- ------- -------
Net income $6,958 $6,683 $2,498 $2,487
====== ======= ======= =======
Net income per common and
common equivalent share $0.91 $0.88 $0.33 $0.33
====== ======= ======= =======
Because the SFAS No. 123 method of accounting had not been applied to options
granted prior to October 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
Treasury Stock
On August 25, 1997, a note receivable from an officer was paid in full,
including accrued interest, by the surrender of Company stock held by the
officer. Accordingly, the Company acquired 20,573 shares at the fair market
value of $411,000.
8. LIFE INSURANCE PROCEEDS:
Due to the death of Roger E. Main, President and Chief Executive Officer in July
1996, the Company realized nontaxable income from life insurance proceeds in the
amount of $2 million, which is separately presented in the Consolidated
Statement of Income for the year ended September 30, 1996.
Page 41 of 163
9. MAJOR CUSTOMERS AND CREDIT RISK CONCENTRATIONS:
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of cash, cash equivalents, and trade accounts
receivable. The Company has concentrations of credit risk due to sales to its
major customers.
The Company's revenues are derived primarily from sales to North American
customers in the computer industry and are concentrated among specific
companies. For the fiscal year ended September 30, 1997, two customers accounted
for 26% and 20%, respectively, of the Company's net sales. For the fiscal year
ended September 30, 1996, two customers accounted for 22% and 13%, respectively,
of the Company's net sales. For the fiscal year ended September 30, 1995, one
customer accounted for 43% of the Company's net sales. At September 30, 1997,
amounts due from the two customers represented 44% and 12%, respectively, of
trade accounts receivable. At September 30, 1996, amounts due from the two
customers represented 10% and 11%, respectively, of trade accounts receivable.
The Company performs ongoing credit evaluation of its customers' financial
positions and generally does not require collateral.
Sales to foreign source customers (primarily in Europe) totaled approximately
32%, 17%, and 18% of total net sales in fiscal years 1997, 1996 and 1995,
respectively.
10. RETIREMENT PLAN:
The Company has a retirement savings plan, established pursuant to Sections
401(a) and 401(k) of the Internal Revenue Code. This plan is for the exclusive
benefit of its eligible employees and beneficiaries. Eligible employees may
elect to contribute a portion of their compensation each year to the plan. The
Company contributes an amount equal to 33% of the amount contributed by each
participant. The matching Company contributions were approximately $524,000,
$519,000, and $401,000 for the years ended September 30, 1997, 1996, and 1995,
respectively. The plan also allows the Company to make an annual discretionary
contribution determined by the Board of Directors. There were no discretionary
contributions for fiscal 1997, 1996, or 1995.
11. ACCOUNTING PRONOUNCEMENTS:
In February 1997, Statement of Financial Accounting Standards No. 128 (SFAS No.
128), "Earnings Per Share," was issued, superseding Accounting Principles Board
Opinion No. 15 (Opinion 15), "Earnings Per Share." This statement specifies the
computation, presentation and disclosure requirements for earnings per share
(EPS). This statement replaces the reporting of primary EPS with basic EPS and
changes the computation of fully diluted EPS to dilutive EPS which uses the
average share price rather than the more dilutive greater of the average or
end-of-period share price required by Opinion 15. The Company will be required
to adopt SFAS No. 128 on a prospective basis in fiscal 1998. The Company
believes the effect of adoption will not be material.
Page 42 of 163
12. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- ----------
(in thousands, except share data)
YEAR ENDED SEPTEMBER 30,1997:
Net sales $50,522 $61,103 $62,798 $86,263
Gross profit 4,708 7,088 7,904 8,394
Net income 912 1,873 1,823 2,350
Net income per common and
common equivalent share .12 .25 .24 .30
YEAR ENDED SEPTEMBER 30, 1996:
Net sales $46,982 $44,385 $43,352 $44,988
Gross profit 6,579 4,277 669 3,694
Net income (loss) 1,914 419 (1,880) 2,045
Net income (loss) per common and
common equivalent share .25 .06 (.25) .27
Page 43 of 163
EXHIBIT 10.16
IEC ELECTRONICS CORP. LOAN AGREEMENT
THIS AMENDENT NO.3, dated as of October 27, 1997, amends the Loan
Agreement dated as of June 30, 1993 between IEC ELECTRONICS CORP.,a Delaware
corporation (the "Company")and MARINE MIDLAND BANK, a bank organized under the
laws of the State of New York (the "Bank"), as previously amended by Amendment
No.1 dated as of June 9, 1995 and Amendment No.2 dated as of January 21, 1997
(collectively the "Agreement").
The Company and the Bank desire to further amend the Agreement for the
purposes of (i)increasing the amount of credit available to the company under
the Accounts/Inventory Line of Credit and (ii) eliminating the Contract Line of
Credit.
NOW THEREFORE, in consideration of the foregoing and mutual promises of the
parties contained herein, the parties hereto agree as follows:
1) DEFINED TERMS
-------------
(a) Except as otherwise provided herein, all terms used herein and
defined in the Agreement shall have the meanings ascribed to such terms in the
Agreement.
(b) The Agreement shall be amended by deleting Section 1.1 in its
entirety and substituting the following Section 1.1 in lieu thereof:
1.1 The term "Accounts/Inventory Line of Credit" shall mean the
revolving line of credit in the amount of $21,000,000 established
pursuant to Section 3 of this Agreement.
(c) The Agreement shall be amended by deleting Sections 1.13 and 1.14
in their entirety.
2) AMENDMENTS. The Agreement shall be amended as follows:
-----------
(a) by deleting Section 2 in its entirety and substituting the
following Section 2 in lieu thereof:
The Company agrees that it may borrow and the Bank agrees to lend
to the Company, after the Effective Date, in the aggregate, up to
Thirty-three Million Dollars ($33,000,000) in two separate credit
facilities, upon the terms and conditions set forth in the
Agreement, as admended.
(b) by deleting Sections 3.1, 3.2(a) and (b), and 3.7(a) and (b) in
their entirety, and substituting the following Sections 3.1, 3.2(a) and (b) and
3.7(a) and (b)in lieu thereof:
Page 44 of 163
3.1 On Effective Date of this Amendment, the Bank will
establish, and hereby does establish, for the Company, a line of
credit(inclusive of the amount of the Accounts/Inventory Line of
Credit provided for in the Agreement as orginally executed) in the
maximim principal amount of TWENTY-ONE MILLION DOLLARS ($21,000,000)
(the "Accounts/Inventory Line of Credit)
3.2 (a) Upon execution and deliver of the Amendment to the
Agreement, the Company will deliver to the Bank an Accounts/Inventory
Promissory Note in the form annexed hereto, and made a part of this
Amendment as Exhibit A-3, in the full amount of $21,000,000.
(b) Thereafter, as the Company desires to draw down
advances on the Accounts/Inventory Line of Credit, the Company shall
deliver to the bank, pursuant to procedures to be established between
the Bank and the Company, a Borrowing Base Certificate completed by
the Company in the form annexed to the Amendment, and made a part of
the Amendment as Exhibit "B-3," and the Bank shall promptly advance
the requested funds to the Company's account (up to $21,000,000
Accounts/Inventory Line of Credit limit); provided however, the Bank
shall not be obligated to lend to the Company if immediately after
giving effect to such loan the aggregate principal balance of all
loans then outstanding under the Accounts/Inventory Line of Credit
would exceed the Borrowing Base. The Company shall be required to
repay as principal only the aggregate amount of all such advances, and
shall be responsible for interest only on the unpaid balance of all
advances, as outstanding from time to time.
3.7 (a) The Accounts/Inventory Line of Credit may be utilized
by the Company in amounts as it requires from time to time provided
that the principal amount of all advances at any one time shall not
exceed the lesser of $21,000,000 (minus the aggregate undrawn face
amount of any unexpired Standby Letters of Credit then issued and
outstanding), or the amount of the Borrowing Base.
(b) Once paid off, in whole or in part, the
Accounts/Inventory Line of Credit may be reutilized by the Company to
the full amount of $21,000,000, or the amount of the Borrowing Base,
whichever is less, at any time prior to April 1, 1998.
(c) by deleting Section 5 of the Agreement in its entirety.
3). Representations and Warranties
------------------------------
(a) The Company represents and warrants to the Bank (which
representations and warranties shall survive the execution and delivery of this
Amendment) that each of the Representations and Warranties of the Company
contained in Section 7 of the Agreement is true and correct on the date hereof
-2-
Page 45 of 163
and will be true and correct on the Effective Date of the Amendment as
hereinafter defined. For Purposes of this Section 8, where a Representation and
Warranty contained in the Agreement makes reference to the Agreement, the term
"Agreement" shall be deemed to mean the Agreement as Amended by this
Amendment and where appropriate shall be deemed to be made so as to include the
execution, delivery and performance of this Amendment.
(b) The Company represents and warrants to the Bank that all
necessary action has been taken to perfect the security interests in and charges
upon the Collateral described in the Security Agreements for the benefit of the
Bank, and no filing (including without limitation, any financing statements
pursant to the Uniform Commerial Code), recording, registration, giving of
notice to other action is required in connection with this Amendment (other than
provided for herein) in order to continue in effect the security interests
described in the Security Agreements.
4. Conditions Precedent to Effectiveness Hereof. When this Amendment has
--------------------------------------------
been executed by the Bank and the Company and lodged with the Bank, this
Amendment shall be deemed to be effective(the "Effective Date"); provided that
each of the following conditions shall have been satisfied in a manner
satisfactory to the Bank:
(a) All representations and warranties contained herein or otherwise
made in writing in connection herewith shall be true and correct with the same
force and effect as though the representations and warranties had been made on
the Effective Date.
(b) No material adverse change shall have occurred in the financial
condition of the Company since June 30, 1997.
(c) There shall not exist on the Effective Date any Event of Default
as defined in Section 12 of the Agreement, or any event which with notice or
laspe of time, or both, would constitute such an Event of Default.
5. Survival of Covenants. All covenants, agreements, representations
---------------------
and warranties made herein or concurrently with the execution and delivery
hereof, and in certificates given pursant hereto, shall survive the excution and
delivery of this Amendment and the Subsidiary Documents, and shall continue in
full force and effect with respect to the date as of which they were made as
long as any indebtedness remains unpaid hereunder or under the Agreement.
6. Amendment. This Amendment may not be amended or modified except
----------
in writing signed by the Company and the Bank.
7. Successor and Assigns. This Amendment shall be binding upon and
----------------------
shall inure to the benefit of the Company, the Bank and their respective
sucessors and assigns, including each successive holder or holders of any
Promissory Note (or any interest therein).
-3-
Page 46 of 163
8. Limitation of Amendments. The amendents set forth herein are
limited precisely as written and shall not be deemed to be a consent or any
waiver of or modification of any other term or condition of the Agreement, or
any of the instruments or agreements referred to therein, or prejudice any right
or rights which the Bank may now have or may have in the future under or in
connection with the Agreement, or any of the instruments or agreements referred
to therein. Except as expressly modified hereby, the terms and provisions of
this Agreement shall continue in full force and effect. Whenever the Agreement
is referred to in the Agreement, it shall be deemed to mean the Agreement as
amended and modified hereby.
IN WITNESS WHEREOF, the parties hereto have caused this amendment to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
IEC ELECTRONICS CORP.
/S/Timothy J Kennedy
--------------------
Vice President
Marine Midland Bank
/s/Rick Ford
--------------------
Vice President
Page 47 of 163
EXHIBIT 10.17
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
DEFINED CONTRIBUTION PLAN
BASIC PLAN DOCUMENT NUMBER 03
Page 48 of 163
TABLE OF CONTENTS
SECTION CONTENTS PAGE
ARTICLE I - DEFINITIONS
1.1 Accrued Benefit........................................................1
1.2 Additional Matching Contributions......................................1
1.3 Adoption Agreement.....................................................1
1.4 Alternate Payee........................................................1
1.5 Annuity................................................................1
1.6 Annuity Contract.......................................................1
1.7 Annuity Starting Date..................................................1
1.8 Beneficiary............................................................1
1.9 Board of Directors.....................................................2
1.10 CODA...................................................................2
1.11 Code...................................................................2
1.12 Compensation...........................................................2
1.13 Considered Net Profits.................................................5
1.14 Contribution Period....................................................5
1.15 Davis-Bacon Act........................................................5
1.16 Disability.............................................................5
1.17 Disability Retirement Date.............................................6
1.18 Early Retirement Date..................................................6
1.19 Earned Income..........................................................6
1.20 Effective Date.........................................................6
1.21 Elective Deferral Contributions........................................6
1.22 Employee...............................................................7
1.23 Employee Contributions.................................................7
1.24 Employer...............................................................7
1.25 Entry Date.............................................................8
1.26 ERISA..................................................................8
1.27 Fiduciary..............................................................8
1.28 Forfeiture.............................................................8
1.29 Highly Compensated Employee............................................8
1.30 Insurance Company.....................................................11
1.31 Late Retirement Date..................................................11
1.32 Leased Employee.......................................................11
1.33 Life Annuity..........................................................12
1.34 Life Insurance Policy.................................................12
1.35 Matching Contributions................................................12
1.36 Money Purchase Pension Contributions..................................12
1.37 Named Fiduciary.......................................................12
1.38 Nonelective Contributions.............................................12
Page 49 of 163
1.39 Non-Trusteed..........................................................12
1.40 Normal Retirement Age.................................................12
1.41 Normal Retirement Date................................................13
1.42 Owner-Employee........................................................13
1.43 Participant...........................................................13
1.44 Participant's Account.................................................13
1.45 Participant's Employer Stock Account..................................14
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Page 50 of 163
1.46 Partner...............................................................14
1.47 Partnership...........................................................14
1.48 Person................................................................14
1.49 Plan..................................................................14
1.50 Plan Administrator....................................................14
1.51 Plan Year.............................................................14
1.52 Prevailing Wage Law...................................................15
1.53 Prior Employer Contributions..........................................15
1.54 Prior Required Employee Contributions.................................15
1.55 Prior Voluntary Employee Contributions................................15
1.56 QDRO. ...............................................................15
1.57 Qualified Matching Contributions......................................15
1.58 Qualified Nonelective Contributions...................................15
1.59 QVEC Contributions....................................................15
1.60 Required Employee Contributions.......................................15
1.61 Rollover Contribution.................................................15
1.62 Salary Deferral Agreement.............................................15
1.63 Self-Employed Individual..............................................16
1.64 Serious Financial Hardship............................................16
1.65 Shareholder-Employee..................................................16
1.66 Social Security Integration Level.....................................16
1.67 Social Security Taxable Wage Base.....................................16
1.68 Sponsoring Organization...............................................16
1.69 Spouse................................................................16
1.70 Straight Life Annuity.................................................16
1.71 Termination of Employment.............................................16
1.72 True-Up Contributions.................................................16
1.73 Trust.................................................................16
1.74 Trustee...............................................................17
1.75 Vested Interest.......................................................17
1.76 Vesting Percentage....................................................17
1.77 Voluntary Employee Contributions......................................18
Page 51 of 163
ARTICLE II - GENERAL PROVISIONS
2A. SERVICE
2A.1 Service...............................................................19
2A.2 Absence from Employment...............................................19
2A.3 Hour of Service.......................................................19
2A.4 1-Year Break-in-Service...............................................20
2A.5 Year(s) of Service....................................................20
2A.6 Determining Vesting Percentage........................................21
2A.7 Excluded Years of Service for Vesting.................................21
2A.8 Change in Plan Years..................................................22
2A.9 Elapsed Time..........................................................23
2A.10 Excluded Periods of Service for Vesting...............................23
2B. ELIGIBILITY, ENROLLMENT AND PARTICIPATION
2B.1 Eligibility...........................................................24
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2B.2 Enrollment............................................................24
2B.3 Reemployed Participant................................................24
2B.4 Eligible Class........................................................24
2B.5 Waiver of Participation...............................................24
2B.6 Trades or Businesses Controlled by Owner-Employees....................25
2C. CONTRIBUTIONS AND ALLOCATIONS
2C.1 Profit Sharing/Thrift Plan with 401(k) Feature........................25
2C.2 Money Purchase Pension Plan...........................................33
2C.3 Rollover Contributions................................................36
2C.4 Contributions Subject to Davis-Bacon Act..............................36
2C.5 QVEC Contributions....................................................36
Page 52 of 163
ARTICLE III - DISTRIBUTIONS
3A. TIMING AND FORM OF BENEFITS
3A.1 Payment of Benefits...................................................37
3A.2 Commencement of Benefits..............................................39
3A.3 From Life Insurance Policies..........................................40
3A.4 Nontransferable.......................................................40
3A.5 Alternate Payee Special Distribution..................................40
3B. MINIMUM DISTRIBUTION REQUIREMENTS
3B.1 Definitions...........................................................40
3B.2 Distribution Requirements.............................................42
3B.3 Death Distribution Provisions.........................................43
3B.4 Transitional Rule.....................................................44
3C. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
3C.1 Applicability. ......................................................45
3C.2 Definitions...........................................................45
3C.3 Qualified Joint and Survivor Annuity..................................46
3C.4 Qualified Preretirement Survivor Annuity..............................46
3C.5 Notice Requirements...................................................47
3C.6 Safe Harbor Rules.....................................................48
3C.7 Transitional Rules....................................................48
3D. TERMINATION OF EMPLOYMENT
3D.1 Distribution..........................................................50
3D.2 Repayment of Prior Distribution.......................................51
3D.3 Life Insurance Policy.................................................52
3D.4 No Further Rights or Interest.........................................52
3D.5 Forfeiture............................................................52
3D.6 Lost Participant......................................................52
3D.7 Deferral of Distribution..............................................53
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Page 53 of 163
3E. WITHDRAWALS
3E.1 Withdrawal - Employee Contributions...................................53
3E.2 Withdrawal - Elective Deferral Contributions..........................54
3E.3 Withdrawal - Employer Contributions...................................54
3E.4 Withdrawal for Serious Financial Hardship of Contributions Other than
Elective Deferral Contributions.......................................54
3E.5 Withdrawal for Serious Financial Hardship of Elective Deferral
Contributions.........................................................54
3E.6 Withdrawal - QVEC Contributions and Rollover Contributions............56
3E.7 Notification..........................................................56
3E.8 Vesting Continuation..................................................57
3E.9 Withdrawal - Participant's Employer Stock Account.....................57
3E.10 Withdrawal by Terminated Participants.................................57
3F. DIRECT ROLLOVERS
3F.1 Definitions...........................................................57
3F.2 Direct Rollovers......................................................57
ARTICLE IV - LEGAL LIMITATIONS ON CONTRIBUTIONS
4A. NONDISCRIMINATION TESTS
4A.1 Definitions...........................................................58
4A.2 Actual Deferral Percentage Test.......................................59
4A.3 Special Rules - ADP Test..............................................59
4A.4 Actual Contribution Percentage Test...................................60
4A.5 Special Rules - ADP/ACP Tests.........................................61
Page 54 of 163
4B. LIMITATIONS ON ALLOCATIONS
4B.1 Definitions...........................................................62
4B.2 Basic Limitation......................................................66
4B.3 Estimated Maximum Permissible Amount..................................66
4B.4 Actual Maximum Permissible Amount.....................................66
4B.5 Participants Covered by Another Prototype Defined
Contribution Plan.....................................................67
4B.6 Participants Covered by Non-Prototype Defined Contribution Plan.......68
4B.7 Participants Covered by Defined Benefit Plan..........................68
4C. TREATMENT OF EXCESSES
4C.1 Definitions...........................................................68
4C.2 Excess Elective Deferral Contributions................................68
4C.3 Excess Annual Additions...............................................69
4C.4 Excess Contributions..................................................70
4C.5 Excess Aggregate Contributions........................................71
- iv -
ARTICLE V - PARTICIPANT PROVISIONS
5A. ANNUITY CONTRACT AND PARTICIPANT'S ACCOUNT
5A.1 Participant's Account.................................................72
5A.2 Investment Transfers..................................................72
5A.3 Participant's Account Valuation.......................................72
5B. LIFE INSURANCE POLICIES
5B.1 Optional Purchase of Life Insurance...................................73
5B.2 Premiums on Life Insurance Policies...................................73
5B.3 Limitations on Premiums...............................................73
5B.4 Disposal..............................................................73
5B.5 Rights under Policies.................................................74
5B.6 Loans.................................................................74
5B.7 Conditions of Coverage................................................74
5B.8 Policy Not Yet in Force...............................................74
5B.9 Value of Policy.......................................................74
5B.10 Dividends.............................................................74
5B.11 Distribution..........................................................74
5B.12 Application...........................................................74
Page 55 of 163
5C. LOANS
5C.1 Loans to Participants.................................................75
5C.2 Loan Procedures.......................................................76
5D. PARTICIPANTS' RIGHTS
5D.1 General Rights of Participants and Beneficiaries......................76
5D.2 Filing a Claim for Benefits...........................................76
5D.3 Denial of Claim.......................................................76
5D.4 Remedies Available to Participants....................................76
5D.5 Limitation of Rights..................................................77
5D.6 100% Vested Contributions.............................................77
5D.7 Reinstatement of Benefit..............................................77
5D.8 Non-Alienation........................................................77
ARTICLE VI - OVERSEER PROVISIONS
6A. FIDUCIARY DUTIES AND RESPONSIBILITIES
6A.1 General Fiduciary Standard of Conduct.................................78
6A.2 Service in Multiple Capacities........................................78
6A.3 Limitations on Fiduciary Liability....................................78
6A.4 Investment Manager....................................................78
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Page 56 of 163
6B. THE PLAN ADMINISTRATOR
6B.1 Designation and Acceptance............................................78
6B.2 Duties and Responsibility.............................................78
6B.3 Special Duties........................................................79
6B.4 Expenses and Compensation.............................................79
6B.5 Information from Employer.............................................79
6B.6 Administrative Committee; Multiple Signatures.........................79
6B.7 Resignation and Removal; Appointment of Successor.....................79
6B.8 Investment Manager....................................................80
6B.9 Delegation of Duties..................................................80
6C. TRUST AGREEMENT
6C.1 Creation and Acceptance of Trust......................................80
6C.2 Trustee Capacity; Co-Trustees.........................................80
6C.3 Resignation and Removal; Appointment of Successor Trustee.............80
6C.4 Taxes, Expenses and Compensation of Trustee...........................81
6C.5 Trustee Entitled to Consultation......................................81
6C.6 Rights, Powers and Duties of Trustee..................................81
6C.7 Evidence of Trustee Action............................................83
6C.8 Investment Policy.....................................................83
6C.9 Period of the Trust...................................................83
6D. THE INSURANCE COMPANY
6D.1 Duties and Responsibilities...........................................83
6D.2 Relation to Employer, Plan Administrator and Participants.............83
6D.3 Relation to Trustee...................................................84
6E. ADOPTING EMPLOYER
6E.1 Election to Become Adopting Employer..................................84
6E.2 Definition............................................................84
6E.3 Effective Date of Plan................................................84
6E.4 Forfeitures...........................................................84
6E.5 Contributions.........................................................84
6E.6 Expenses..............................................................84
6E.7 Substitution of Plans.................................................84
6E.8 Termination of Plans..................................................85
6E.9 Amendment.............................................................85
6E.10 Plan Administrator's Authority........................................85
Page 57 of 163
ARTICLE VII - SPECIAL CIRCUMSTANCES WHICH MAY AFFECT THE PLAN
7A. TOP-HEAVY PROVISIONS
7A.1 Definitions...........................................................86
7A.2 Minimum Allocation....................................................88
7A.3 Minimum Vesting Schedule..............................................89
- vi -
7B. AMENDMENT, TERMINATION OR MERGER OF THE PLAN
7B.1 Amendment of Elections under Adoption Agreement by Employer...........89
7B.2 Amendment of Plan, Trust, and Form of Adoption Agreement..............90
7B.3 Conditions of Amendment...............................................90
7B.4 Termination of the Plan...............................................90
7B.5 Full Vesting..........................................................91
7B.6 Application of Forfeitures............................................91
7B.7 Merger with Other Plan................................................91
7B.8 Transfer from Other Plans.............................................91
7B.9 Transfer to Other Plans...............................................92
7B.10 Approval by the Internal Revenue Service..............................92
7B.11 Subsequent Unfavorable Determination..................................92
7C. SUBSTITUTION OF PLANS
7C.1 Substitution of Plans.................................................92
7C.2 Transfer of Assets....................................................92
7C.3 Substitution for Pre-Existing Master or Prototype Plan................93
7C.4 Partial Substitution or Partial Transfer of the Plan or Assets........93
ARTICLE VIII - MISCELLANEOUS
8.1 Nonreversion.........................................................94
8.2 Gender and Number....................................................94
8.3 Reference to the Internal Revenue Code and ERISA.....................94
8.4 Governing Law........................................................94
8.5 Compliance with the Internal Revenue Code and ERISA..................94
8.6 Contribution Recapture...............................................94
- vii -
Page 58 of 163
CONNECTICUT GENERAL LIFE INSURANCE COMPANY
DEFINED CONTRIBUTION PLAN
BASIC PLAN DOCUMENT NUMBER 03
The Plan set forth herein may be adopted by an Employer and accepted by the Plan
Administrator and, if applicable, the Trustee by executing an Adoption
Agreement, which together shall constitute the Employer's Plan, for the
exclusive benefit of its eligible Employees and their Beneficiaries, as fully as
if set forth in said Adoption Agreement; provided, however, no Employer may
adopt this Plan except with the consent of Connecticut General Life Insurance
Company.
ARTICLE I - DEFINITIONS
1.1 ACCRUED BENEFIT. The term Accrued Benefit means the value of the
Participant's Account on any applicable date.
1.2 ADDITIONAL MATCHING CONTRIBUTIONS. The term Additional Matching
Contributions means additional discretionary Matching Contributions
made to the Plan by the Employer, as authorized by its Board of
Directors by resolution. Additional Matching Contributions shall be
treated as Matching Contributions for nondiscrimination testing and
allocation purposes.
1.3 ADOPTION AGREEMENT. The term Adoption Agreement means the prescribed
agreement by which the Employer adopts this Plan, and which sets forth
the elective provisions of this Plan as specified by the Employer.
1.4 ALTERNATE PAYEE. The term Alternate Payee means a person, other than
the Participant, identified under a QDRO to be a recipient of part or
all of the Participant's benefit under the Plan.
1.5 ANNUITY. The term Annuity means a series of payments made over a
specified period of time.
1.6 ANNUITY CONTRACT. The term Annuity Contract means the group annuity
contract form issued by the Insurance Company to fund the benefits
provided under this Plan, as such contract may be amended from time to
time in accordance with the terms thereof. The Employer will specify
and communicate to its Employees the types of investments available
under this Plan and Annuity Contract.
1.7 ANNUITY STARTING DATE. The term Annuity Starting Date means the first
day of the first period for which an amount is paid as an Annuity or
any other form.
1.8 BENEFICIARY. The term Beneficiary means the beneficiary or
beneficiaries entitled to any benefits under a Participant's Account
hereunder upon the death of a Participant, Beneficiary or Alternate
Payee pursuant to a QDRO. If any Life Insurance Policy is purchased on
the life of a Participant hereunder, the Beneficiary under such Policy
shall be designated separately therein. However, any such Beneficiary
designation shall be subject to the terms of Section 3C.
A Participant's Beneficiary shall be his Spouse, if any, unless the
Participant designates a person or persons other than his Spouse as
Beneficiary with his Spouse's written consent. A Participant may
designate a Beneficiary on the form approved by the Plan Administrator.
If any distribution is made to a Beneficiary in the form of an Annuity,
and if such Annuity provides for a death benefit, then such Beneficiary
shall also have a right to designate a beneficiary and to change that
beneficiary from time to time. As an alternative to receiving the
benefit in the form of an Annuity, the Beneficiary may elect to receive
a single cash payment or any other form of payment provided by the
Employer's election in the Adoption Agreement.
Article I - Definitions -1- August 29, 1997
Page 59 of 163
If no Beneficiary has been designated pursuant to the provisions of
this Section, or if no Beneficiary survives the Participant and he has
no surviving Spouse, then the Beneficiary under the Plan shall be the
deceased Participant's surviving children in equal shares or, if there
are no surviving children, the Participant's estate. If a Beneficiary
dies after becoming entitled to receive a distribution under the Plan
but before distribution is made to him in full, and if no other
Beneficiary has been designated to receive the balance of the
distribution in that event, the estate of the deceased Beneficiary
shall be the Beneficiary for the balance of the distribution.
If the Employer so elects in the Adoption Agreement, an Alternate Payee
and/or Beneficiary shall be allowed to direct the investment of his
segregated portion of the Participant's Account, pursuant to Section
5A. An individual who is designated as an Alternate Payee in a QDRO
relating to a Participant's benefits under this Plan shall be treated
as a Beneficiary hereunder, to the extent provided by such order.
1.9 BOARD OF DIRECTORS. The term Board of Directors means the Employer's
board of directors or other comparable governing body.
1.10 CODA. The term CODA means cash or deferred arrangement as described in
Code section 401(k) and the regulations thereunder.
1.11 CODE. The term Code means the Internal Revenue Code of 1986, as
amended from time to time.
1.12 COMPENSATION. The term Compensation means Compensation as defined
below. For any Self-Employed Individual covered under the Plan,
Compensation shall mean Earned Income. Compensation shall include only
that Compensation which is actually paid to the Participant during the
applicable Determination Period. Except as provided elsewhere in this
Plan, the Determination Period shall be the period elected by the
Employer in the Adoption Agreement. If the Employer makes no election,
the Determination Period shall be the Plan Year.
An Employer may elect in the Adoption Agreement to use one of the
following definitions of Compensation for purposes of allocating all
contributions:
(a) Wages, Tips, and Other Compensation Box on Form W-2.
(Information required to be reported under Code sections 6041,
6051 and 6052). Wages within the meaning of Code section 3401(a)
and all other payments of compensation to an Employee by the
Employer (in the course of the Employer's trade or business) for
which the Employer is required to furnish the Employee a written
statement under Code sections 6041(d), 6051(a)(3), and 6052.
Compensation must be determined without regard to any rules under
Code section 3401(a) that limit the remuneration included in
wages based on the nature or location of the employment or the
services performed (such as the exception for agricultural labor
in Code section 3401(a)(2)).
(b) Section 3401(a) wages. Wages as defined in Code section
3401(a) for the purposes of income tax withholding at the source
but determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of
the employment or the services performed (such as the exception
for agricultural labor in Code section 3401(a)(2)).
Article I - Definitions -2- August 29, 1997
Page 60 of 163
(c) 415 safe-harbor compensation. Wages, salaries, and fees for
professional services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan to the extent that the amounts are includable
in gross income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a percentage of
profits, commissions on insurance premiums, tips, bonuses,
fringe benefits, and reimbursements or other expense allowances
under a nonaccountable plan as described in Code section 1.62-2(c)),
and excluding the following:
(1) Employer contributions to a plan of deferred
compensation which are not includable in the Employee's
gross income for the taxable year in which contributed, or
Employer contributions under a simplified employee pension
plan to the extent such contributions are deductible by the
Employee, or any distributions from a plan of deferred
compensation;
(2) Amounts realized from the exercise of a
non-qualified stock option, or when restricted stock (or
property) held by the Employee either becomes freely
transferable or is no longer subject to a substantial risk
of forfeiture;
(3) Amounts realized from the sale, exchange or
other disposition of stock acquired under a qualified stock
option; and
(4) Other amounts which received special tax
benefits, or contributions made by the Employer (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 Employee).
(d) Modified Wages, Tips, and Other Compensation Box on Form
W-2. Compensation as defined in subsection (a) above, but
reduced by all of the following items (even if includable in
gross income): reimbursements or other expense allowances, fringe
benefits (cash or noncash), moving expenses, deferred
compensation, and welfare benefits. This definition may not be
used by standardized plans or plans using a contribution or
allocation formula that is integrated with Social Security.
(e) Modified Section 3401(a) wages. Compensation as defined in
subsection (b) above, but reduced by all of the following items
(even if includable in gross income): reimbursements or other
expense allowances, fringe benefits (cash or noncash), moving
expenses, deferred compensation, and welfare benefits. This
definition may not be used by standardized plans or plans using a
contribution or allocation formula that is integrated with Social
Security.
(f) Modified 415 safe-harbor compensation. Compensation as
defined in subsection (c) above, but reduced by all of the
following items (even if includable in gross income):
reimbursements or other expense allowances, fringe benefits (cash
or noncash), moving expenses, deferred compensation, and welfare
benefits. This definition may not be used by standardized plans
or plans using a contribution or allocation formula that is
integrated with Social Security.
(g) Regular or base salary or wages. Regular or base salary or
wages (excluding overtime and bonuses) received during the
applicable period by the Employee from the Employer. This
definition may not be used by standardized plans or plans using a
contribution or allocation formula that is integrated with Social
Security.
Article I - Definitions -3- August 29, 1997
Page 61 of 163
(h) Regular or base salary wages plus overtime and/or bonuses.
Regular or base salary or wages, plus either or both overtime
and/or bonuses, as elected by the Employer in the Adoption
Agreement, received during the applicable period by the Employee
from the Employer. This definition may not be used by
standardized plans or plans using a contribution or allocation
formula that is integrated with Social Security.
(i) A reasonable alternative definition of Compensation, as that term
is used in Code section 414(s)(3) and the regulations thereunder,
provided that the definition does not favor Highly Compensated
Employees and satisfies the nondiscrimination requirements under
Code section 414(s). This definition may not be used by
standardized plans or plans using a contribution or allocation
formula that is integrated with Social Security.
Notwithstanding the above, if elected by the Employer in the Adoption
Agreement, Compensation shall include any amount which is contributed
by the Employer pursuant to a salary reduction agreement and which is
not includable in the gross income of the Employee under Code sections
125, 402(e)(3), 402(h)(1)(B) or 403(b).
For years beginning on or after January 1, 1989, and before January 1,
1994, the annual Compensation of each Participant taken into account
for determining all benefits provided under the Plan for any Plan Year
shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Code section
415(d) (unless a lesser amount is elected by the Employer in the
Adoption Agreement), except that the dollar increase in effect on
January 1 of any calendar year is effective for Plan Years beginning in
such calendar year and the first adjustment to the $200,000 limitation
is effective on January 1, 1990.
For Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Participant taken into account for determining all
benefits provided under the Plan for any Plan Year shall not exceed
$150,000, as adjusted for increases in the cost-of-living in accordance
with Code section 401(a)(17)(B). The cost-of-living adjustment in
effect for a calendar year applies to any Determination Period
beginning in such calendar year.
If a Determination Period consists of fewer than 12 calendar months,
then the annual compensation limit is an amount equal to the annual
compensation limit for the calendar year in which the compensation
period begins, multiplied by the ratio obtained by dividing the number
of full months in the period by 12.
In determining the Compensation of a Participant for purposes of this
limit, the rules of Code section 414(q)(6) shall apply, except in
applying such rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the Participant who have
not attained age 19 before the close of the year. If, as a result of
the application of such rules, the adjusted annual Compensation limit
is exceeded, then (except for purposes of determining the portion of
Compensation up to the integration level if this Plan uses a
contribution or allocation formula that is integrated with Social
Security), the limit shall be prorated among the affected individuals
in proportion to each such individual's Compensation as determined
under this Section prior to the application of this limit.
If Compensation for any prior Determination Period is taken into
account in determining an Employee's contributions or benefits for the
current year, the Compensation for such prior Determination Period is
subject to the applicable annual compensation limit in effect for that
prior period. For this purpose, in determining allocations in Plan
Years beginning on or before January 1, 1989, the annual compensation
limit in effect for Determination Periods before that date is
$200,000. In addition, in determining allocations in Plan Years
beginning on or after January 1, 1994, the annual compensation limit in
effect for Determination Periods beginning before that date is $150,000.
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1.13 CONSIDERED NET PROFITS. The term Considered Net Profits means the
entire amount of the accumulated or current operating profits
(excluding capital gains from the sale or involuntary conversion of
capital or business assets) of the Employer after all expenses and
charges other than (1) the Employer contribution to this and any other
qualified plan, and (2) federal, state or local taxes based upon or
measured by income, as determined by the Employer, either on an
estimated basis or a final basis, in accordance with the generally
accepted accounting principles used by the Employer. When, for any
Plan Year, the amount of Considered Net Profits has been determined by
the Employer, and the Employer contribution made on the basis of such
determination, such determination and contribution shall be final and
conclusive and shall not be subject to change because of any
adjustments in income or expense which may be required by the Internal
Revenue Service or otherwise. Such determination and contribution
shall not be open to question by any Participant either before or after
the Employer contribution has been made.
In the case of an Employer that is a non-profit entity, the term
Considered Net Profits means the entire amount of the accumulated or
current operating surplus (excluding capital gains from the sale or
involuntary conversion of capital or business assets) of the Employer
after all expenses and charges other than (1) the contribution made by
the Employer to the Plan, and (2) federal, state or local taxes based
upon or measured by income, in accordance with the generally accepted
accounting principles used by the Employer.
1.14 CONTRIBUTION PERIOD. The term Contribution Period means that regular
period, specified by the Employer in its Adoption Agreement, for which
the Employer shall make Employer contributions, if any, and that
regular period specified by the Employer in its Adoption Agreement, for
which Participants may make Employee Contributions, if any, and
Elective Deferral Contributions, if any. The first Contribution Period
may be an irregular period, not longer than one month, commencing not
prior to the Effective Date. However, the first Contribution Period
for Elective Deferral Contributions may not commence before the later
of the Plan's Effective Date or adoption date.
1.15 DAVIS-BACON ACT. The term Davis-Bacon Act means the Davis-Bacon Act
(40 U.S.C. section 276(a) et seq., as amended from time to time), which
guarantees minimum wages to laborers and mechanics employed on Federal
government contracts for the construction, alteration, or repair of
public buildings or works. The minimums are the amounts found by the
Secretary of Labor to be prevailing for similar workers in the area in
which the work is to be done.
The term wages as used in the Davis-Bacon Act includes, in addition
to the basic hourly rate of pay, contributions irrevocably made to
trustees for pension benefits for laborers and mechanics employed on
Federal government contracts and the cost of other fringe benefits.
However, overtime pay is to be computed only on the basis of the basic
hourly rate of pay.
1.16 DISABILITY. The term Disability means a Participant's incapacity to
engage in any substantial gainful activity because of a medically
determinable physical or mental impairment which can be expected to
result in death, or which has lasted or can be expected to last for a
continuous period of not less than 12 months. The performance and
degree of such impairment shall be supported by medical evidence. All
Participants in similar circumstances shall be treated alike.
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If elected by the Employer in the Adoption Agreement, nonforfeitable
contributions will be made to the Plan on behalf of each disabled
Participant who is not a Highly Compensated Employee (within the
meaning of Section 1.29 of the Plan).
1.17 DISABILITY RETIREMENT DATE. The term Disability Retirement Date means
the first day of the month after the Plan Administrator has determined
that a Participant's incapacity is a Disability. A Participant who
retires from the Service of the Employer as of his Disability
Retirement Date shall have a Vesting Percentage of 100% and shall be
entitled to receive a distribution of the entire value of his
Participant's Account and any Life Insurance Policies, or the values
thereof, as of his Disability Retirement Date, subject to the
provisions of Section 3A and Section 3C.
1.18 EARLY RETIREMENT DATE. If the Employer has specified in its Adoption
Agreement that Early Retirement is permitted, then the term Early
Retirement Date means the first day of the month coinciding with or
next following the date a Participant is separated from Service with
the Employer for any reason other than death or Disability, provided
that on such date the Participant has attained the conditions specified
by the Employer in its Adoption Agreement and has not attained his
Normal Retirement Age. A Participant who retires from the Service of
the Employer on his Early Retirement Date shall have a Vesting
Percentage of 100% and shall be entitled to receive a distribution of
the entire value of his Participant's Account and any Life Insurance
Policies, or the values thereof, as of his Early Retirement Date,
subject to the provisions of Section 3A and Section 3C.
If a Participant separates from Service before satisfying the age
requirement for Early Retirement, but has satisfied the Service
requirement, the Participant shall be 100% vested as of his Termination
of Employment date, but he will not be eligible for a distribution of
the entire value of his Participant's Account until satisfying such
age requirement.
1.19 EARNED INCOME. The term Earned Income means the net earnings from
self-employment in the trade or business with respect to which the Plan
is established, and for which the personal services of the individual
are a material income-producing factor. Net earnings will be
determined without regard to items not included in gross income and the
deductions allocable to such items. Net earnings are reduced by
contributions made by the Employer to a qualified plan to the extent
deductible under Code section 404.
Net earnings shall be determined with regard to the deductions allowed
to the taxpayer by Code section 164(f) for taxable years beginning
after December 31, 1989.
1.20 EFFECTIVE DATE. The term Effective Date means the date specified by
the Employer in its Adoption Agreement as the Effective Date of the
Plan.
1.21 ELECTIVE DEFERRAL CONTRIBUTIONS. The term Elective Deferral
Contributions means contributions made by the Employer to the Plan at
the election of the Participant, in lieu of cash compensation, and
shall include contributions made pursuant to a Salary Deferral
Agreement or other deferral mechanism.
With respect to any taxable year, a Participant's elective deferral is
the sum of all Employer contributions made on behalf of such
Participant pursuant to an election to defer under any CODA, any
simplified employee pension cash or deferred arrangement as described
in section 402(h)(1)(B), any eligible deferred compensation plan as
described in section 457, any plan described in section 501(c)(18), and
any Employer contributions made on the behalf of a Participant for the
purchase of an annuity contract under section 403(b) pursuant to a
salary reduction agreement.
Elective Deferral Contributions shall not include those contributions
properly distributed as Excess Annual Additions, as defined in Section
4C.1(b).
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1.22 EMPLOYEE. The term Employee means any employee of the Employer
maintaining the Plan or any other employer required to be aggregated
with such Employer under Code sections 414(b), (c), (m), or (o).
The term Employee also includes any Leased Employee deemed to be an
Employee of the Employer in accordance with Code sections 414(n) or (o).
1.23 EMPLOYEE CONTRIBUTIONS. The term Employee Contributions means
contributions to this Plan or any other plan, that are designated or
treated at the time of contribution as after-tax contributions made by
the Employee and are allocated to a separate account to which
attributable earnings and losses are allocated. Such term includes
Required Employee Contributions, Voluntary Employee Contributions,
Prior Required Employee Contributions, and Prior Voluntary Employee
Contributions.
1.24 EMPLOYER. The term Employer means the employer that adopts this Plan.
In the case of a group of Employers that constitutes a controlled group
of corporations (as defined in Code section 414(b)) or that constitutes
trades or businesses (whether or not incorporated) that are under
common control (as defined in section 414(c)) or that constitutes an
affiliated service group (as defined in section 414(m)), Service with
all such employers shall be considered Service with the Employer for
purposes of eligibility and vesting. The term Employer shall also mean
any Adopting Employer as defined in Section 6E.2.
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A state or local government or political subdivision thereof, or any
agency or instrumentality thereof, or any organization exempt from tax
under Subtitle A of the code, may not elect a 401(k) option (CODA) in
the Adoption Agreement.
1.25 ENTRY DATE. The term Entry Date means either the Effective Date or
each applicable date thereafter as specified by the Employer in its
Adoption Agreement, when an Employee who has fulfilled the eligibility
requirements commences participation in the Plan.
If an Employee is not in the active Service of the Employer as of his
initial Entry Date, his subsequent Entry Date shall be the date he
returns to the active Service of the Employer, provided he still meets
the eligibility requirements. If an Employee does not enroll as a
Participant as of his initial Entry Date, his subsequent Entry Date
shall be the applicable Entry Date as specified by the Employer in the
Adoption Agreement when the Employee actually enrolls as a Participant.
1.26 ERISA. The term ERISA means the Employee Retirement Income Security
Act of 1974 (PL93-406) as it may be amended from time to time, and any
regulations issued pursuant thereto as such Act and such regulations
affect this Plan and Trust.
1.27 FIDUCIARY. The term Fiduciary means any or all of the following, as
applicable:
(a) Any Person who exercises any discretionary authority or
control respecting the management of the Plan or its assets;
(b) Any Person who renders investment advice for a fee or other
compensation, direct or indirect, respecting any monies or other
property of the Plan or has authority or responsibility to do so;
(c) Any Person who has discretionary authority or
responsibility in the administration of the Plan;
(d) Any Person who has been designated by a Named Fiduciary
pursuant to authority granted by the Plan, who acts to carry out
a fiduciary responsibility, subject to any exceptions granted
directly or indirectly by ERISA.
1.28 FORFEITURE. The term Forfeiture means the amount, if any, by which the
value of a Participant's Account exceeds his Vested Interest upon the
occurrence of an immediate Break-in-Service, a 1-Year Break-in-Service
or 5 consecutive 1-Year Breaks-in-Service, as elected by the Employer
in its Adoption Agreement pursuant to Section 3D.5, following such
Participant's Termination of Employment.
1.29 HIGHLY COMPENSATED EMPLOYEE. The term Highly Compensated Employee
includes both Highly Compensated Active Employees and Highly
Compensated Former Employees.
As elected by the Employer in the Adoption Agreement, the method to
determine Highly Compensated Employees shall be:
(a) Traditional Method: A Highly Compensated Active Employee
includes any Employee who performs service for the Employer
during the Determination Year and who, during the Look-Back Year;
(1) Received Compensation from the Employer in excess of
$75,000 (as adjusted pursuant to Code section 415(d)); or
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(2) Received Compensation from the Employer 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
(3) Was an officer of the Employer and received Compensation
during such year that is greater than 50 percent of the
dollar limitation in effect under Code section 415(b)(1)(A).
The term Highly Compensated Employee also includes: (1) Employees
who are described in the preceding sentence if the term
"Determination Year" is substituted for the term "Look-Back Year"
and who are one of the 100 employees who received the most
Compensation from the Employer during the Determination Year; and
(2) Employees who are 5-percent owners at any time during the
Look-Back Year or Determination Year.
If no officer has satisfied the Compensation requirement of (3)
above during either a Determination Year or Look-Back Year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
For this purpose, the Determination Year shall be the Plan Year.
The Look-Back Year shall be the period elected by the Employer in
the Adoption Agreement.
A "Highly Compensated Former Employee" includes any Employee who
separated from Service (or was deemed to have separated) prior to
the Determination Year, performs no service for the Employer
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.
If an Employee is, during a Determination Year or Look-Back Year,
a family member of either a 5-percent 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 (a "Top 10
Highly Compensated Employee"), then the family member and the
5-percent owner or Top 10 Highly Compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner
or Top 10 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 5-percent owner or Top 10
Highly Compensated Employee. For purposes of this Section, the
term family member includes the Spouse, lineal ascendants and
descendants of the Employee or former Employee and the spouses of
such lineal ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of the
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation that
is considered, will be made in accordance with Code section
414(q) and the regulations thereunder.
For purposes of this definition, Compensation shall mean
compensation as defined in Code section 415(c)(3) except that
elective or salary reduction contributions to a cafeteria plan,
CODA or tax-sheltered annuity shall be included in Compensation.
Article I - Definitions -9- August 29, 1997
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(b) Simplified Method For Employers In More than One Geographic Area: If
elected by the Employer in the Adoption Agreement, the Traditional
Method above will be modified by substituting $50,000 for $75,000 in
(1) and by disregarding (2). This simplified definition of Highly
Compensated Employee will apply to Employers that maintain significant
business activities (and employ Employees) in at least two
significant, separate geographic areas.
(c) Alternative Simplified Method: If elected by the Employer in the
Adoption Agreement, Highly Compensated Employees shall be determined
as follows: A Highly Compensated Active Employee includes any Employee
who performs service for the Employer during the Determination Year
and who:
(1) Is a 5-percent owner; or
(2) Received Compensation from the Employer in excess of
$75,000 (as adjusted pursuant to Code section 415(d)); or
(3) Received Compensation from the Employer 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
(4) Was an officer of the Employer and received Compensation
during such year that is greater than 50 percent of the
dollar limitation in effect under Code section 415(b)(1)(A).
Under this simplified definition, the look-back provisions of
Code section 414(q) do not apply.
(d) Alternative Simplified Method With Snapshot: If the Alternative
Simplified Method of determining Highly Compensated Employees is
selected by the Employer, the Employer may elect in the Adoption
Agreement to substantiate that the Plan complies with the
nondiscrimination requirements on the basis of the Employer's
work force on a single day during the Plan Year, provided that
day is reasonably representative of the Employer's work force and
the Plan's coverage throughout the Plan Year. The day elected by
the Employer and indicated on the Adoption Agreement shall be the
"Snapshot Day."
To apply the Alternative Simplified Method on a snapshot basis:
(1) The Employer determines who is a Highly Compensated
Employee on the basis of the data as of the Snapshot Day,
except as provided in (3) below.
(2) If the determination of who is a Highly Compensated
Employee is made earlier than the last day of the Plan
Year, the Employee's Compensation that is used to determine
an Employee's status must be projected for the Plan Year
under a reasonable method established by the Employer.
(3) If there are Employees not employed on the Snapshot Day who
are taken into account in testing, they must be determined
to be either Highly Compensated Employees or non-Highly
Compensated Employees. In addition to those Employees who
are determined to be Highly Compensated Employees on the
Plan's Snapshot Day, the Employer must treat as a Highly
Compensated Employee any eligible Employee for the Plan
Year who:
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(a) Terminated employment prior to the Snapshot Day and
was a Highly Compensated Employee in the prior Plan
Year;
(b) Terminated employment prior to the Snapshot Day and
(i) was a 5-percent owner, or (ii) has Compensation
for the Plan Year greater than or equal to the
projected Compensation of any Employee who is treated
as a Highly Compensated Employee on the Snapshot Day
(except for Employees who are Highly Compensated
Employees solely because they are 5-percent owners or
officers), or (iii) was an officer and has
Compensation greater than or equal to the projected
Compensation of any other officer who is a Highly
Compensated Employee on the Snapshot Day solely
because that person is an officer; or
(c) Becomes employed after the Snapshot Day and (i) is a
5-percent owner, or (ii) has Compensation for the
Plan Year greater than or equal to the projected
Compensation of any Employee who is treated as a
Highly Compensated Employee on the Snapshot Day
(except for Employees who are Highly Compensated
Employees solely because they are 5-percent owners or
officers), or (iii) is an officer and has
Compensation greater than or equal to the projected
Compensation of any officer who is a Highly
Compensated Employee on the Snapshot Day solely
because that person is an officer.
1.30 INSURANCE COMPANY. The term Insurance Company means Connecticut
General Life Insurance Company, a legal reserve life insurance company
of Hartford, Connecticut. If any company other than Connecticut
General Life Insurance Company has issued any Life Insurance Policy
held by the Trustee under the Plan, then with respect to such Policy
only and matters pertaining directly thereto, the term Insurance
Company shall be deemed to refer to such other issuing company.
1.31 LATE RETIREMENT DATE. The term Late Retirement Date means the first
day of the month coinciding with or next following the date a
Participant is separated from Service with the Employer after his
Normal Retirement Age, for any reason other than death.
1.32 LEASED EMPLOYEE. The term Leased Employee means any person (other than
an Employee of the recipient Employer) who, pursuant to an agreement
between the recipient Employer and any other person ("leasing
organization"), has performed services for the recipient Employer (or
for the recipient Employer and related persons determined in accordance
with Code section 414(n)(6)) on a substantially full-time basis for a
period of at least one year, and such services are of a type
historically performed by employees in the business field of the
recipient Employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to services
performed for the recipient Employer shall be treated as provided by
the recipient Employer.
A Leased Employee shall not be considered an Employee of the recipient
Employer if: such employee is covered by a money purchase pension
plan of the leasing organization providing: (a) a nonintegrated
employer contribution rate of at least 10 percent of compensation, as
defined in Code section 415(c)(3), but including amounts contributed by
the employer pursuant to a salary reduction agreement which are
excludable from the Leased Employee's gross income under Code section
125, section 402(e)(3), section 402(h)(1)(B) or section 403(b),
(b) immediate participation, and (c) full and immediate vesting; and
Leased Employees do not constitute more than 20 percent of the
recipient's non-highly compensated work force.
Article I - Definitions -11- August 29, 1997
Page 69 of 163
1.33 LIFE ANNUITY. The term Life Annuity means an Annuity payable
over the life or life expectancy of one or more individuals.
1.34 LIFE INSURANCE POLICY. The term Life Insurance Policy (or Policy)
means a policy of individual life insurance purchased from the
Insurance Company on the life of any Participant.
1.35 MATCHING CONTRIBUTIONS. The term Matching Contributions means
contributions made by the Employer to the Plan for a Participant on
account of either Elective Deferral Contributions or Required Employee
Contributions. In addition, any Forfeiture reallocated as a Matching
Contribution shall be considered a Matching Contribution for purposes
of this Plan. If elected by the Employer in the Adoption Agreement,
Matching Contributions shall be made out of Considered Net Profits in
an amount specified by the Employer in its Adoption Agreement for each
$1.00 contributed as either an Elective Deferral Contribution or a
Required Employee Contribution, as further specified by the Employer in
its Adoption Agreement. The term Matching Contributions shall include
Additional Matching Contributions.
Should there be insufficient Considered Net Profits of the Employer for
such Employer contribution, the amount of such Matching Contributions
may be diminished to the amount that can be made from the Employer's
Considered Net Profits.
The Employer may designate at the time of contribution that all or a
portion of such Matching Contributions be treated as Qualified Matching
Contributions.
If elected by the Employer in the Adoption Agreement, Partners shall
not be entitled to receive Matching Contributions. If Partners are
entitled to receive Matching Contributions, such Contributions shall be
considered Elective Deferral Contributions for all purposes under this
Plan.
1.36 MONEY PURCHASE PENSION CONTRIBUTIONS. The term Money Purchase Pension
Contributions means contributions made to the Plan by the Employer in
accordance with a definite formula as specified in the Adoption
Agreement.
1.37 NAMED FIDUCIARY. The term Named Fiduciary means the Administrator and
any other Fiduciary designated by the Employer, and any successor
thereto.
1.38 NONELECTIVE CONTRIBUTIONS. The term Nonelective Contributions means
contributions made to the Plan by the Employer in accordance with a
definite formula as specified in the Adoption Agreement. The Employer
may designate at the time of contribution that the Nonelective
Contribution shall be treated as a Qualified Nonelective Contribution.
1.39 NON-TRUSTEED. The term Non-Trusteed means that the Employer has
specified in the Adoption Agreement that there will not be a Trust as a
part of the Plan. Contributions under a Non-Trusteed plan will be made
directly to the Insurance Company. If the Employer specifies in the
Adoption Agreement that the Plan is Non-Trusteed, then the terms and
provisions of this Plan relating to the Trust shall be of no force or
effect.
1.40 NORMAL RETIREMENT AGE. The term Normal Retirement Age means the age
selected in the Adoption Agreement. If the Employer enforces a
mandatory retirement age, the Normal Retirement Age is the lesser of
that mandatory age or the age specified in the Adoption Agreement.
Notwithstanding the vesting schedule elected by the Employer in the
Adoption Agreement, an Employee's right to his or her account balance
shall be nonforfeitable upon the attainment of Normal Retirement Age.
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Page 70 of 163
1.41 NORMAL RETIREMENT DATE. The term Normal Retirement Date means
the first day of the month coinciding with or next following the date a
Participant attains his Normal Retirement Age. If a Participant
retires from the Service of the Employer on his Normal Retirement Date,
he shall receive a distribution of the entire value of his
Participant's Account, as of his Normal Retirement Date, subject to the
provisions of Section 3A and Section 3C.
1.42 OWNER-EMPLOYEE. The term Owner-Employee means an individual who is a
sole proprietor, or who is a Partner owning more than 10 percent of
either the capital or profits interest of the Partnership.
1.43 PARTICIPANT. The term Participant means any person who has a
Participant's Account in the Plan and/or Trust.
If elected by the Employer in the Adoption Agreement, for purposes of
the investment of contributions as described in Section 5A, the term
Participant shall include former Participants, Beneficiaries, and
Alternate Payees. Former Participants shall include those Participants
who upon Termination of Employment elected to defer distribution in
accordance with Section 3A of the Plan.
1.44 PARTICIPANT'S ACCOUNT. The term Participant's Account means the sum of
the following sub-accounts maintained on behalf of each Participant.
(a) Money Purchase Pension Contributions, if any, plus any
income and minus any loss thereon;
(b) Nonelective Contributions, if any, plus any income and
minus any loss thereon;
(c) Matching Contributions, if any, plus any income and minus any
loss thereon;
(d) Qualified Nonelective Contributions, if any, plus any
income and minus any loss thereon;
(e) Qualified Matching Contributions, if any, plus any income
and minus any loss thereon;
(f) Prior Employer Contributions, if any, plus any income and
minus any loss thereon;
(g) Elective Deferral Contributions, if any, plus any income
and minus any loss thereon;
(h) Employee Contributions, if any, plus any income and minus
any loss thereon;
(i) QVEC Contributions, if any, plus any income and minus any
loss thereon.
(j) Rollover Contributions, if any, plus any income and minus
any loss thereon;
A Participant's Account shall be invested in accordance with rules
established by the Plan Administrator that shall be applied in a
consistent and nondiscriminatory manner.
1.45 PARTICIPANT'S EMPLOYER STOCK ACCOUNT. The term Participant's Employer
Stock Account means that portion, if any, of the Participant's Account
which is invested in shares of the Employer's stock. Such
Participant's Employer Stock Account shall be credited with dividends
paid, if any. Such Participant's Employer Stock Account will be valued
on each day that the public exchange, over which the Employer's stock
is traded, is open for unrestricted trading.
Amounts that are invested in the Participant's Employer Stock Account
may be invested in any short term account prior to actual investment in
the Participant's Employer Stock Account.
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As elected by the Employer in the Adoption Agreement:
(a) The Trustee will vote the shares of the Employer's stock
invested in the Participant's Employer Stock Account; or
(b) The Trustee will vote the shares of the Employer's stock in
accordance with any instructions received by the Trustee from the
Participant. The Trustee may request voting instructions from
the Participants provided this is done in a consistent and
nondiscriminatory manner.
The ability of a Participant who is subject to the reporting
requirements of section 16(a) of the Securities Exchange Act of 1934
(the "Act") to make withdrawals or investment changes involving the
Participant's Employer Stock Account may be restricted by the Plan
Administrator to comply with the rules under section 16(b) of the Act.
A money purchase pension plan making an initial investment in shares of
the Employer's stock after December 31, 1974, may not acquire shares to
the extent that the aggregate fair market value of the Employer's stock
held by the Plan will exceed 10 percent of the fair market value of the
assets of the Plan.
1.46 PARTNER. The term Partner means a member of a Partnership.
1.47 PARTNERSHIP. The term Partnership means a partnership as defined in
Code section 7701(a)(2) and the regulations thereunder and includes a
syndicate, group, pool, joint venture, or other unincorporated
organization through or by means of which any business, financial
operation, or venture is carried on, and which is not a corporation or
a trust or estate within the meaning of the Code. A joint undertaking
merely to share expenses is not a Partnership. In addition, mere
co-ownership of property which is maintained, kept in repair, and
rented or leased does not constitute a Partnership.
1.48 PERSON. The term Person means any natural person, partnership,
corporation, trust or estate.
1.49 PLAN. The term Plan means this Connecticut General Life Insurance
Company Defined Contribution Plan and the Adoption Agreement as adopted
by the Employer and as both may be amended from time to time.
1.50 PLAN ADMINISTRATOR. The term Plan Administrator means the Person or
Persons designated by the Employer in its Adoption Agreement and any
successor(s) thereto. If more than one Person shall be designated, the
committee thus formed shall be known as the Administrative Committee
and all references in the Plan to the Plan Administrator shall be
deemed to apply to the Administrative Committee. The Plan
Administrator shall signify in writing his acceptance of his
responsibility as a Named Fiduciary.
1.51 PLAN YEAR. The term Plan Year means the 12-consecutive month period
specified by the Employer in the Adoption Agreement.
If the Plan Year changes to a different 12-consecutive month period,
the first new Plan Year shall begin before the end of the last old Plan
Year. In this event, the period beginning on the first day of the last
old Plan Year and ending on the day before the first day of the first
new Plan Year shall be treated as a short Plan Year for purposes of
determining Highly Compensated Employees, performing the
Nondiscrimination Tests set forth in Section 4A, and applying the
Top-Heavy provisions of Section 7A. However, Service will be credited
in accordance with the provisions of Section 2A.8.
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Page 72 of 163
1.52 PREVAILING WAGE LAW. The term Prevailing Wage Law means any
statute or ordinance that requires the Employer to pay its Employees
working on public contracts at wage rates not less than those
determined pursuant to that statute classes of workers in the
geographical area where the contract is performed, including the
Davis-Bacon Act and similar Federal, state, or municipal prevailing
wage statutes.
1.53 PRIOR EMPLOYER CONTRIBUTIONS. The term Prior Employer Contributions
means contributions made by the Employer prior to the date indicated on
the Adoption Agreement.
1.54 PRIOR REQUIRED EMPLOYEE CONTRIBUTIONS. The term Prior Required
Employee Contributions means Employee post-tax contributions that the
Employer required as either a condition of participation, or for
receiving an Employer contribution, prior to the date indicated on the
Adoption Agreement.
1.55 PRIOR VOLUNTARY EMPLOYEE CONTRIBUTIONS. The term Prior Voluntary
Employee Contributions means post-tax contributions made voluntarily by
an Employee prior to the date indicated on the Adoption Agreement.
1.56 QDRO. The term QDRO means a Qualified Domestic Relations Order as
determined in accordance with Code section 414(p) and regulations
thereunder.
1.57 QUALIFIED MATCHING CONTRIBUTIONS. The term Qualified Matching
Contributions means Matching Contributions which are subject to the
distribution and nonforfeitability requirements of Code section 401(k)
when made.
1.58 QUALIFIED NONELECTIVE CONTRIBUTIONS. The term Qualified Nonelective
Contributions means Nonelective Contributions made by the Employer and
allocated to Participants' accounts that the Participants may not elect
to receive in cash until distributed from the Plan; that are
nonforfeitable when made; and that are distributable only in accordance
with the distribution provisions that are applicable to Elective
Deferral Contributions and Qualified Matching Contributions.
1.59 QVEC CONTRIBUTIONS. The term QVEC Contributions means voluntary
amounts contributed by the Participant prior to January 1, 1987, which
the Participant designated in writing were eligible for a tax deduction
under Code section 219(a).
QVEC Contributions will be maintained in a separate account, which will
be nonforfeitable (i.e., 100% vested) at all times. The account will
share in the gains and losses under the Plan in the same manner as
described in Section 5A.3 of the Plan.
1.60 REQUIRED EMPLOYEE CONTRIBUTIONS. The term Required Employee
Contributions means Employee post-tax contributions that the Employer
requires either as a condition of participation or for receipt of an
Employer contribution.
1.61 ROLLOVER CONTRIBUTION. The term Rollover Contribution means an amount
representing all or part of a distribution from a pension or profit
sharing plan meeting the requirements of Code section 401(a), which is
eligible for rollover to this Plan in accordance with the requirements
set forth in Code section 402 (including Direct Rollovers) or Code
section 408(d)(3), whichever is applicable.
1.62 SALARY DEFERRAL AGREEMENT. The term Salary Deferral Agreement means an
agreement between a Participant and the Employer to defer receipt of a
portion of the Participant's Compensation by making Elective Deferral
Contributions to the Plan.
Article I - Definitions -15- August 29, 1997
Page 73 of 163
1.63 SELF-EMPLOYED INDIVIDUAL. The term Self-Employed Individual means an
individual who has Earned Income for the taxable year from the trade or
business for which the Plan is established; also, an individual who would
have Earned Income but for the fact that the trade or business had no net
profits for the taxable year.
1.64 SERIOUS FINANCIAL HARDSHIP. The term Serious Financial Hardship means
an immediate and heavy financial need of the Participant where such
Participant lacks the available resources to meet the hardship. The
Plan Administrator shall make a determination of whether a Serious
Financial Hardship exists in accordance with the applicable provisions
of Section 3E.
1.65 SHAREHOLDER-EMPLOYEE. The term Shareholder-Employee means an Employee
or officer of an electing small business S corporation who owns (or is
considered as owning within the meaning of Code section 318(a)(1)), on
any day during the taxable year of such corporation, more than 5% of
the outstanding stock of the corporation.
1.66 SOCIAL SECURITY INTEGRATION LEVEL. The term Social Security
Integration Level means the Social Security Taxable Wage Base or such
lesser amount specified by the Employer in the Adoption Agreement. If
the Social Security Taxable Wage Base is amended, the Social Security
Integration Level will be deemed to have been amended.
1.67 SOCIAL SECURITY TAXABLE WAGE BASE. The term Social Security Taxable
Wage Base means the contribution and benefit base in effect under
section 230 of the Social Security Act at the beginning of the Plan
Year.
1.68 SPONSORING ORGANIZATION. The term Sponsoring Organization means
Connecticut General Life Insurance Company, a legal reserve life
insurance company of Hartford, Connecticut.
1.69 SPOUSE. The term Spouse means the lawful wife of a male Participant,
or the lawful husband of a female Participant. However, a former
Spouse will be treated as the Spouse or surviving Spouse and a current
Spouse will not be treated as the Spouse or surviving Spouse to the
extent provided under a QDRO.
1.70 STRAIGHT LIFE ANNUITY. The term Straight Life Annuity means an annuity
payable in equal installments for the life of the Participant, and that
terminates upon the Participant's death.
1.71 TERMINATION OF EMPLOYMENT. The term Termination of Employment means a
severance of the Employer-Employee relationship which occurs prior to a
Participant's Normal Retirement Age for any reason other than Early
Retirement, Disability, or death.
1.72 TRUE-UP CONTRIBUTIONS. The term True-Up Contributions means Additional
Matching Contributions made to the Plan by the Employer so that total
Matching Contributions for each Participant are calculated on an annual
basis rather than on the basis selected by the Employer in the Adoption
Agreement.
1.73 TRUST. The term Trust means the Trust Agreement if the Employer
specifies in the Adoption Agreement that the Plan is Trusteed. The
Trust Agreement is entered into by the Employer, the Plan Administrator
and the Trustee by completing and signing the Adoption Agreement, which
Trust Agreement forms a part of, and implements the provisions of the
Plan as it applies to the Employer. If the Employer specifies in the
Adoption Agreement that the Plan is Non-Trusteed, then the terms and
provisions of this Plan relating to the Trust shall be of no force and
effect.
Article I - Definitions -16- August 29, 1997
Page 74 of 163
1.74 TRUSTEE. The term Trustee means the trustee(s) designated by the
Employer in its Adoption Agreement, if applicable, and any successor(s)
thereto.
1.75 VESTED INTEREST. The term Vested Interest means the nonforfeitable
right to an immediate or deferred benefit on any date in the amount
which is equal to the sum of (a), (b) and (c) below:
(a) The value on that date of that portion of the Participant's
Account that is attributable to and derived from Employee
Contributions, if any;
(b) The value on that date of the portion of the Participant's
Account attributable to Elective Deferral Contributions, if any;
Qualified Nonelective Contributions, if any; QVEC Contributions,
if any; Rollover Contributions, if any; and Qualified Matching
Contributions, if any;
(c) The value on that date of that portion of the Participant's
Account that is attributable to and derived from contributions
made by the Employer (and Forfeitures, if any), multiplied by his
Vesting Percentage determined on the date applicable.
Employer contributions described in subsection (c), plus the earnings
thereon, shall be, at any relevant time, a part of the Participant's
Vested Interest equal to an amount ( X ) determined by the following
formula:
X = P (AB + D) - D
For purposes of applying this formula:
P = The Participant's Vesting Percentage at the relevant time.
AB = The account balance attributable to such contributions,
plus the earnings thereon, at the relevant time.
D = The amount of any distribution.
1.76 VESTING PERCENTAGE. The term Vesting Percentage means the
Participant's nonforfeitable interest in Money Purchase Pension
Contributions, Matching Contributions, Nonelective Contributions, or
Prior Employer Contributions credited to his Participant's Account,
plus any income and minus any loss thereon. The Vesting Percentage for
each such Employer contribution is computed in accordance with one of
the schedules listed below, based on Years of Service with the
Employer, as specified by the Employer in its Adoption Agreement:
(a) 100% full and immediate;
(b) 100% after 3 Years of Service;
(c) 20% per Year of Service, 100% at 5 Years of Service;
(d) 20% after 3 Years of Service, 20% per Year of Service
thereafter, 100% at 7 Years of Service;
(e) 20% after 2 Years of Service, 20% per Year of Service
thereafter, 100% at 6 Years of Service;
(f) 100% after 5 Years of Service;
(g) 25% after 1 Year of Service, 100% after 4 Years of Service;
(h) Other.
Article I - Definitions -17- August 29, 1997
Page 75 of 163
However, if a Participant dies prior to attaining his Normal Retirement
Age, his Vesting Percentage shall be 100%.
1.77 VOLUNTARY EMPLOYEE CONTRIBUTIONS. The term Voluntary Employee
Contributions means post-tax contributions made voluntarily by an
Employee.
Article I - Definitions -18- August 29, 1997
Page 76 of 163
ARTICLE II - GENERAL PROVISIONS
2A. SERVICE
2A.1 SERVICE. The term Service means active employment with the Employer
as an Employee.
2A.2 ABSENCE FROM EMPLOYMENT. Absence from employment on account of a leave
of absence authorized by the Employer pursuant to the Employer's
established leave policy will be counted as employment with the
Employer provided that such leave of absence is of not more than two
years' duration. Absence from employment on account of active duty
with the Armed Forces of the United States will be counted as
employment with the Employer. If the Employee does not return to
active employment with the Employer, his Service will be deemed to have
ceased on the date the Plan Administrator receives notice that the
Employee will not return. The Employer's leave policy shall be applied
in a uniform and nondiscriminatory manner to all Participants under
similar circumstances.
For purposes of determining an Employee's eligibility and vesting
status for periods while the Employee is absent from work for reasons
covered under the Family and Medical Leave Act, Service will be
credited in accordance with and to the extent required by the
provisions of the Family and Medical Leave Act.
If the Employer has elected in the Adoption Agreement to determine Service
based upon 1,000 Hours, then the following Sections 2A.3 through 2A.8 shall
apply.
2A.3 HOUR OF SERVICE. The term Hour of Service means:
(a) Each hour for which an Employee is directly or indirectly
paid, or entitled to payment, by the Employer for the performance
of duties. These hours shall be credited to the Employee for the
Computation Period or Periods, as defined in Section 2A.5, in
which the duties were performed; and
(b) Each hour for which an Employee is paid or entitled to
payment, by the Employer on account of a period of time during
which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday,
illness, incapacity (including disability), layoff, jury duty,
military duty or leave of absence. No more than 501 Hours of
Service will be credited under this paragraph for a single
Computation Period (whether or not the period occurs in a single
Computation Period). Hours under this paragraph will be
calculated and credited pursuant to section 2530.200b-2 of the
Department of Labor regulations which are incorporated herein by
this reference; and
(c) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer.
The same Hours of Service will not be credited under subsection
(a) or subsection (b), as the case may be, and under this
subsection (c). These hours shall be credited to the Employee
for the Computation Period or periods to which the award or
agreement pertains rather than the Computation Period in which
the award, agreement or payment is made; and Hours of Service
will be credited for employment with other members of an
affiliated service group (under Code section 414(m)), a
controlled group of corporations (under Code section 414(b)), or
a group of trades or businesses under common control (under Code
section 414(c)), of which the adopting Employer is a member, and
any other entity required to be aggregated with the Employer
pursuant to Code section 414(o).
Article II - General Provisions -19- October 29, 1996
Page 77 of 163
Hours of Service will also be credited for any individual considered an
Employee for purposes of this Plan under Code sections 414(n) or 414(o).
Solely for purposes of determining whether a 1-Year Break-in-Service,
as defined in Section 2A.4, for participation and vesting purposes has
occurred in a Computation Period, an individual who is absent from work
for maternity or paternity reasons shall receive credit for the Hours
of Service which would otherwise have been credited to such individual
but for such absence, or in any case in which such hours cannot be
determined, eight (8) Hours of Service per day of such absence. For
purposes of this paragraph, an absence from work for maternity or
paternity reasons means an absence (1) by reason of the pregnancy of
the individual, (2) by reason of a birth of a child of the individual,
(3) by reason of the placement of a child with the individual in
connection with the adoption of such child by such individual, or (4)
for purposes of caring for such child for a period beginning
immediately following such birth or placement. The Hours of Service
credited under this paragraph shall be credited (1) in the Computation
Period in which the absence begins if the crediting is necessary to
prevent a Break-in-Service in that period, or (2) in all other cases,
in the following Computation Period.
Service shall be determined on the basis of the method selected in the
Adoption Agreement.
2A.4 1-YEAR BREAK-IN-SERVICE. The term 1-Year Break-in-Service means any
Computation Period during which an Employee fails to complete more than
500 Hours of Service.
2A.5 YEAR(S) OF SERVICE. The term Year(s) of Service means a 12-consecutive
month period ( Computation Period ) during which an Employee has
completed at least 1,000 Hours of Service.
(a) Eligibility Computation Period. For purposes of
determining Years of Service and Breaks-in-Service for
eligibility, the 12-consecutive month period shall begin with the
date on which the Employee first performs an Hour of Service for
the Employer and, where additional periods are necessary,
succeeding anniversaries of his employment commencement date.
The employment commencement date is the date on which the
Employee first performs an Hour of Service for the Employer
maintaining the Plan.
(b) Vesting Computation Period. As elected by the Employer in
the Adoption Agreement, for computing Years of Service and
Breaks-in-Service for vesting, the 12-consecutive month period:
(1) Shall be the Plan Year; or
(2) Shall begin with the date on which the Employee first
performs an Hour of Service for the Employer and, where
additional periods are necessary, succeeding anniversaries
of that date.
However, active participation as of the last day of the Plan Year
is not required in order for a Participant to be credited with a
Year of Service for vesting purposes.
(c) Contribution Computation Period. If the Employer specifies
an annual Contribution Period in its Adoption Agreement for the
purpose of determining a Participant's eligibility to receive a
contribution, the 12-consecutive month period shall be any Plan
Year during which the Participant is credited with at least 1,000
Hours of Service. However, when an Employee first becomes a
Participant or resumes active participation in the Plan following
a 1-Year Break-in-Service on a date other than the first day of
the Plan Year, all Hours of Service credited to the Participant
during that Plan Year, including those Hours credited prior to
the date the Employee enrolls (or reenrolls) as an Participant in
the Plan shall be counted. Furthermore, the Employer may require
in its Adoption Agreement that a Participant be a Participant as
of the last day of the Plan Year in order to be eligible to
receive a contribution for a Plan Year.
Article II - General Provisions -20- October 29, 1996
Page 78 of 163
(d) If in its Adoption Agreement the Employer permits Early
Retirement, the 12-consecutive month period for determining Early
Retirement shall be the Plan Year. However, active participation
as of the last day of the Plan Year is not required in order for
a Participant to be credited with a Year of Service.
Service with a predecessor organization of the Employer shall be
treated as Service with the Employer for the purposes of subsections
(a), (b) and (d) above in any case in which the Employer maintains the
plan of such predecessor organization. In addition, if elected by the
Employer in the Adoption Agreement, service with a predecessor
organization of the Employer shall be treated as Service with the
Employer, even if the Employer does not maintain the plan of such
predecessor organization.
If elected in the Adoption Agreement, service with a subsidiary or
affiliate of the Employer that is not related to the Employer under the
provisions of Code sections 414(b), (c) or (m) shall be treated as
Service with the Employer for purposes of (a), (b) and (d) above.
2A.6 DETERMINING VESTING PERCENTAGE. Vesting credit shall be given for each
Year of Service except those periods specifically excluded in the
Adoption Agreement.
If a Participant completes less than 1,000 Hours of Service during a
Plan Year while remaining in the service of the Employer, his Vesting
Percentage shall not be increased for such Plan Year. However, at such
time as the Participant again completes at least 1,000 Hours of Service
in any subsequent Plan Year, his Vesting Percentage shall then take
into account all Years of Service with the Employer except those
specifically excluded in the Adoption Agreement.
If an individual who ceases to be an Employee and is subsequently
rehired as an Employee enrolls (or reenrolls) in the Plan, upon his
participation (or reparticipation) his Vesting Percentage shall then
take into account all Years of Service except those specifically
excluded in the Adoption Agreement.
In the case of a Participant who has 5 consecutive 1-Year
Breaks-in-Service, all Years of Service after such Breaks-in-Service
will be disregarded for the purpose of vesting the Employer-derived
account balance that accrued before such breaks. However, both
pre-break and post-break Service will count for the purpose of vesting
the Employer-derived account balance that accrues after such
Breaks-in-Service. Both accounts will share in the earnings and losses
of the fund. In the case of a Participant who does not have
5-consecutive 1-Year Breaks-in-Service, both the pre-break and
post-break Service will count in vesting both the pre-break and
post-break Employer-derived account balance.
2A.7 EXCLUDED YEARS OF SERVICE FOR VESTING. In determining the Vesting
Percentage of an Employee, all Years of Service with the Employer(s)
maintaining the Plan shall be taken into account, except that the
following periods may be excluded, as specified by the Employer in its
Adoption Agreement:
(a) Years of Service prior to the time a Participant attained
age 18;
(b) Years of Service during which the Employer did not maintain
the Plan or a predecessor plan;
Article II - General Provisions -21- October 29, 1996
Page 79 of 163
(c) Years of Service during a period for which the Employee
made no Required Employee Contributions;
(d) Years of Service prior to any 1-Year Break-in-Service,
until the Employee completes one Year of Service following such
1-Year Break-in-Service.
(e) In the case of an Employee who has no Vested Interest in
Employer contributions, Years of Service before any period of
consecutive 1-Year Breaks-in-Service if the number of such
consecutive 1-Year Breaks-in-Service equals or exceeds the
greater of (i) 5, or (ii) the total number of Years of Service
before such break.
For the purposes of this Section, a predecessor plan shall mean a plan
of the Employer that was terminated within five years preceding or
following the Effective Date of this Plan.
2A.8 CHANGE IN PLAN YEARS. If the Plan Year is changed, the following
special rules shall apply.
(a) Vesting Computation Periods. If the Vesting Computation
Period is the Plan Year, Years of Service and 1-Year
Breaks-in-Service shall be measured over two overlapping
12-consecutive month periods. The first such period shall begin
on the first day of the last old Plan Year and the second such
period shall begin on the first day of the first new Plan Year,
thereby creating an overlap. All Hours of Service performed
during the overlap period must be counted in both Vesting
Computation Periods. A Participant who completes at least 1,000
Hours of Service during each such period shall be credited with
two Years of Service for Vesting.
(b) Contribution Computation Periods. To determine a
Participant's eligibility to receive a contribution for a short
Plan Year, the 1,000 Hours of Service requirement shall be
prorated by multiplying by a fraction, the numerator of which is
the number of full months in the short Plan Year and the
denominator of which is 12.
If the Employer has elected in the Adoption Agreement to determine Service
based upon Elapsed Time, then the following Sections 2A.9 and 2A.10 shall
apply.
2A.9 ELAPSED TIME. If the Employer has selected an eligibility requirement
in the Adoption Agreement that is or includes a fractional Year(s) of
Service requirement, the provisions of this Section shall apply.
(a) For purposes of determining an Employee's initial or
continued eligibility to participate in the Plan, or the
Participant's Vested Interest in Employer contributions, an
Employee will receive credit for the aggregate of all time
period(s) commencing with the Employee's first day of employment
or reemployment and ending on the date a Break-in-Service (as
defined in this Section) begins. The first day of employment or
reemployment is the first day the Employee performs an Hour of
Service. An Employee will also receive credit for any Period of
Severance of less than 12-consecutive months. Fractional periods
of a year will be expressed in terms of days.
(b) For purposes of this Section, "Hour of Service" shall mean
each hour for which an Employee is paid or entitled to payment
for the performance of duties for the Employer.
(c) For purposes of this Section, a "Break-in-Service" is a
Period of Severance of at least 12 consecutive months.
Article II - General Provisions -22- October 29, 1996
Page 80 of 163
(d) A "Period of Severance" is a continuous period of time
during which the Employee is not employed by the Employer. Such
period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12-month anniversary of the date
on which the Employee was otherwise first absent from Service.
(e) In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first day of such
absence shall not constitute a Break-in-Service. For purposes of
this paragraph, an absence from work for maternity or paternity
reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of the birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
Each Employee will share in Employer contributions for the period
beginning on the date the Employee commences participation under
the Plan and ending on the date on which such Employee severs
employment with the Employer or is no longer a member of an
eligible class of Employees.
(f) If the Employer is a member of an affiliated service group
(under Code section 414(m)), a controlled group of corporations
(under Code section 414(b)), a group of trades or businesses
under common control (under Code section 414(c)) or any other
entity required to be aggregated with the Employer pursuant to
Code section 414(o), Service will be credited for any employment
for any period of time for any other member of such group.
Service will also be credited for any individual required under
Code section 414(n) or Code section 414(o) to be considered an
Employee of any Employer aggregated under Code sections 414(b),
(c), or (m) of such group.
2A.10 EXCLUDED PERIODS OF SERVICE FOR VESTING. In determining the Vesting
Percentage of an Employee, all Periods of Service with the Employer(s)
maintaining the Plan shall be taken into account, except that the
following periods may be excluded, as specified by the Employer in its
Adoption Agreement:
(a) Periods of Service prior to the time a Participant attained
age 18;
(b) Periods of Service during which the Employer did not
maintain the Plan or a predecessor plan;
(c) Periods of Service during which the Employee made no
Required Employee Contributions;
(d) Periods of Service prior to any one-year Period of
Severance, until the Employee completes a one-year period of
Service following such Period of Severance;
(e) In the case of an Employee who has no Vested Interest in
Employer contributions, Periods of Service before any Period of
Severance if the number of consecutive one-year Periods of
Severance equals or exceeds the greater of (i) 5, or (ii) the
total number of one-year Periods of Service before such Period of
Severance.
For the purposes of this Section, a predecessor plan shall mean a plan
of the Employer that was terminated within five years preceding or
following the Effective Date of this Plan.
Article II - General Provisions -23- October 29, 1996
Page 81 of 163
2B.1 ELIGIBILITY. Each Employee shall be eligible to participate in the Plan
and receive an appropriate allocation of Employer contributions as of
the Entry Date following the day he meets the following requirements,
if any, specified by the Employer in its Adoption Agreement, relating to:
(a) Required service;
(b) Minimum attained age;
(c) Job class requirements.
In addition to the eligibility conditions stated above, the Employer
may specify in the Adoption Agreement certain groups of Employees who
are not eligible to participate in the Plan.
Notwithstanding the foregoing, if the Employer's Plan as set forth
herein replaces or amends a preceding plan, then those Employees
participating under the Plan as written prior to such replacement or
amendment shall be eligible to be Participants hereunder without regard
to length of Service or minimum attained age otherwise required herein.
2B.2 ENROLLMENT. Each eligible Employee may enroll as of his Entry Date by
completing and delivering to the Plan Administrator an enrollment form
and, if applicable, a payroll deduction authorization and/or a Salary
Deferral Agreement.
2B.3 REEMPLOYED PARTICIPANT. In the case of an individual who ceases to be
an Employee and is subsequently rehired as an Employee, the following
provisions shall apply in determining eligibility to again participate
in the Plan:
(a) If the Employee had met the eligibility requirements as
specified in Section 2B.1, such Employee will become a
Participant in the Plan in accordance with Section 2B.2 as of the
date he is reemployed as an Employee.
(b) If the Employee had not formerly met the eligibility
requirements specified in Section 2B.1, such Employee will become
a Participant in the Plan after meeting the requirements of
Section 2B.1 in accordance with Section 2B.2.
2B.4 ELIGIBLE CLASS. If a Participant becomes ineligible to participate
because he is no longer a member of an eligible class of Employees,
such Employee shall participate immediately upon his return to an
eligible class of Employees. If such Participant incurs a
Break-in-Service, eligibility will be determined under the
Break-in-Service rules of the Plan.
If an Employee who is not a member of the eligible class of Employees
becomes a member of the eligible class, such Employee shall participate
immediately if such Employee has satisfied the minimum age and Service
requirements and would have previously become a Participant had he been
in the eligible class. If such Participant incurs a Break-in-Service,
eligibility will be determined under the Break-in-Service rules of the
Plan.
2B.5 WAIVER OF PARTICIPATION. Notwithstanding any provision of the Plan to
the contrary, if Required Employee Contributions are elected by the
Employer in the Adoption Agreement, any Employee in accordance with the
rules of the Plan may decline to become a Participant or cease to be a
Participant by filing a written waiver of participation with the Plan
Administrator in the manner prescribed. Such waiver must be filed
prior to the date such Employee is eligible to become a Participant, or
in the case of a current Participant, in the last month of the Plan
Year immediately preceding the Plan Year for which he wishes to cease
being a Participant.
Article II - General Provisions -24- October 29, 1996
Page 82 of 163
Any Employee who files such a waiver shall not become a Participant, or
if a current Participant, shall elect to cease to be such as of the
first day of the succeeding Plan Year; and such Employee shall not
receive any additional Compensation or other sums by reason of his
waiver of participation.
Any such waiver may be rescinded by an Employee who is not a Partner
effective on the first day of the first Plan Year following one or more
Plan Years commencing after the filing of such waiver in which he was
not a Participant, in which event he shall become a Participant, or
again become a Participant, as the case may be, effective as of such
date. A Partner may make a one-time irrevocable waiver of
participation upon the later of his commencement of employment with the
Employer or the date he is first eligible to participate in the Plan.
No Employee who is eligible to participate in a standardized plan may
waive participation or voluntarily reduce his or her Compensation for
purposes of this Plan.
2B.6 TRADES OR BUSINESSES CONTROLLED BY OWNER-EMPLOYEES. If this Plan
provides contributions or benefits for one or more Owner-Employees who
control both the business for which this Plan is established and one or
more other trades or businesses, this Plan and any plans established
for other trades or businesses must, when looked at as a single plan,
satisfy Code sections 401(a) and (d) for the Employees of this and all
other trades or businesses. If the Plan provides contributions or
benefits for one or more Owner-Employees who control one or more other
trades or businesses, the employees of the other trades or businesses
must be included in a plan which satisfies Code sections 401(a) and (d)
and which provides contributions and benefits not less favorable than
those provided for Owner-Employees under this Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which he does not control and the
individual controls a trade or business, then the contributions or
benefits of the Employees under the plan of the trades or businesses
which he does control must be as favorable as those provided for him
under the most favorable plan of the trade or business which he does
not control.
For purposes of the preceding paragraphs, an Owner-Employee or two or
more Owner-Employees will be considered to control a trade or business
if the Owner-Employee or two or more Owner-Employees together:
(1) own the entire interest in an unincorporated trade or
business, or
(2) in the case of a partnership, own more than 50 percent of
either the capital interest or the profits interest in the
partnership.
For purposes of the preceding sentence, an Owner-Employee or two or
more Owner-Employees shall be treated as owning any interest in a
Partnership that is owned, directly or indirectly, by a Partnership
which such Owner-Employee or such two or more Owner-Employees are
considered to control within the meaning of the preceding sentence.
2C. CONTRIBUTIONS AND ALLOCATIONS2C.1 PROFIT SHARING/THRIFT PLAN WITH
401(k) FEATURE.
(a) Contributions - Employer.
For each Plan Year, as specified in the Adoption Agreement,
the Employer shall make one or more of the following
contributions.
Article II - General Provisions -25- October 29, 1996
Page 83 of 163
(1) Elective Deferral Contributions.
(2) Matching Contributions.
(3) Nonelective Contributions.
(b) Contributions - Participant.
For each Plan Year, as specified in the Adoption Agreement,
each Participant may make periodic Required Employee
Contributions or Voluntary Employee Contributions.
For Plans that contain a CODA, a Participant may elect to make a
Voluntary Employee Contribution in a lump sum. Such lump sum
Voluntary Employee Contribution may be made (1) as of the
Effective Date, or (2) as elected by the Employer in the Adoption
Agreement. Voluntary Employee Contributions shall be subject to
the terms of Section 4B.
(c) Fail-Safe Contribution.
The Employer reserves the right to make a discretionary
Nonelective Contribution to the Plan for any Plan Year, if the
Employer determines that such a contribution is necessary to
ensure the Actual Deferral Percentage test or the Actual
Contribution Percentage test will be satisfied for that Plan
Year. Such amount shall be designated by the Employer at the
time of contribution as a Qualified Nonelective Contribution and
shall be known as a Fail-Safe Contribution.
The Fail-Safe Contribution shall be made on behalf of all
eligible non-Highly Compensated Employees who are Participants
and who are considered under the Actual Deferral Percentage test
or, if applicable, the Actual Contribution Percentage test, and
shall be allocated to the Participant's Account of each such
Participant in an amount equal to a fixed percentage of such
Participant's Compensation. The fixed percentage shall be equal
to the minimum fixed percentage necessary to be contributed by
the Employer on behalf of each eligible non-Highly Compensated
Employee who is a Participant so that the Actual Deferral
Percentage test or, if applicable, the Actual Contribution
Percentage test, is satisfied.
(d) Contributions - Changes.
For each Plan Year, a Participant may change the amount of
his Required Employee Contributions, Voluntary Employee
Contributions, or Elective Deferral Contributions as often as the
Plan Administrator allows (on a consistent and nondiscriminatory
basis), on certain dates prescribed by the Plan Administrator.
(e) Contributions - Timing.
(1) Elective Deferral Contributions shall be paid
by the Employer to the Trust or the Insurance Company,
as elected by the Employer in the Adoption Agreement,
but never later than 90 days following the date of deferral.
(2) Matching Contributions made on other than an
annual basis shall be paid to the Trust or Insurance
Company, as elected by the Employer in the Adoption
Agreement. Matching Contributions, including Additional
Matching Contributions, made on an annual basis shall be
paid to the Trust or the Insurance Company, as applicable,
at the end of the Plan Year, or as soon as possible on or
after the last day of such Plan Year, but in no event later
than the date prescribed by law for filing the Employer's
income tax return, including any extension thereof. To the
extent that Matching Contributions are used to purchase
Life Insurance Policies, then such contributions for any
Plan Year may be paid to the Trust when premiums for such
Policies are due during the Plan Year.
Article II - General Provisions -26- October 29, 1996
Page 84 of 163
(3) Nonelective Contributions made on other than an
annual basis shall be paid to the Trust or Insurance
Company, as applicable, as elected by the Employer in the
Adoption Agreement. Nonelective Contributions made on an
annual basis shall be paid to the Trust or the Insurance
Company, as applicable, at the end of the Plan Year, or as
soon as possible on or after the last day of such Plan
Year, but in any event not later than the date prescribed
by law for filing the Employer's income tax return,
including any extension thereof. To the extent that
Nonelective Contributions are used to purchase Life
Insurance Policies, then such contributions for any Plan
Year may be paid to the Trust when premiums for such
Policies are due during the Plan Year.
(4) Employee Contributions shall be transferred by
the Employer to the Trust or the Insurance Company, as
elected by the Employer in the Adoption Agreement, but
never later than 90 days following the date such
contributions are made by the Employee.
(5) The Fail-Safe Contribution for any Plan Year as
determined above shall be paid to the Insurance Company at
the end of the Plan Year, or as soon as possible on or
after the last day of such Plan Year, but in no event later
than the date which is prescribed by law for filing the
Employer's income tax return, including any extensions
thereof.
(f) Contributions - Allocations.
The allocation of Nonelective Contributions shall be made
in accordance with (1), (2), (3) or (4) below, as specified by
the Employer in the Adoption Agreement.
(1) Formula A: Compensation Ratio - Not Integrated
with Social Security.
The allocation to each Participant shall be made in the
proportion that the Compensation paid to each Participant
eligible to receive an allocation bears to the Compensation
paid to all Participants eligible to receive an allocation.
(2) Formula B: Integrated with Social Security -
Step Rate Method.
Base Contribution: An amount equal to a
percentage (as specified in the Adoption Agreement) of the
Compensation of each Participant up to the Social Security
Integration Level;
Excess Contribution: In addition, an amount equal to a
percentage (as specified in the Adoption Agreement) of the
Participant's Compensation which is in excess of the Social
Security Integration Level, subject to the Limitations on
Allocations in accordance with Section 4B. This Excess
Contribution percentage shall not exceed the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
Article II - General Provisions -27- October 29, 1996
Page 85 of 163
(i) the old age insurance
portion of the Old Age Survivor Disability
(OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption
Agreement to use a Social Security Integration Level that
in any Plan Year is the greater of $10,000 or 20% but less
than 100% of the Social Security Taxable Wage Base, then
the 5.7% limitation specified in 2C.1(f)(2)(B)(ii) shall be
adjusted in accordance with the following table:
-----------------------------------------------------
If the Social
Security Integration Adjust
Level 5.7% to
---------------------------------------------
is more but not more
than than
-----------------------------------------------------
the greater of 80% of the Social 4.3%
$10,000 or Security Taxable Wage
20% of the Social Base
Security Taxable Wage
Base
80% of the Social 100% of the Social 5.4%
Security Taxable Wage Security Taxable Wage
Base Base
-----------------------------------------------------
In the case of any Participant who has exceeded the
Cumulative Permitted Disparity Limit described in Section
2C.1(g), Nonelective Contributions shall be allocated in an
amount equal to the Excess Contribution percentage of two
times such Participant's total Compensation for the Plan Year.
Any remaining Nonelective Contributions or Forfeitures will
be allocated to each Participant's Account in the ratio
that each Participant's total Compensation for the Plan
Year bears to all Participants' total Compensation for that
Plan Year.
(3) Formula B: Integrated with Social Security -
Maximum Disparity Method.
Subject to the Limitations on Allocations
specified in Section 4B, for each Plan Year the allocation
to each Participant shall be made in accordance with the
following:
(A) An amount equal to 5.7% of the sum of each Participant's
total Compensation plus Compensation that is in excess of
the Social Security Integration Level shall be allocated to
each Participant's Account. If the Employer does not
contribute such amount for all Participants, an amount shall
be allocated to each Participant's Account equal to the same
proportion that each Participant's total Compensation plus
Compensation that is in excess of the Social Security
Integration Level bears to the total Compensation plus
Compensation in excess of the Social Security Integration
Level of all Participants in the Plan. In the case of any
Participant who has exceeded the Cumulative Permitted
Disparity Limit described in Section 2C.1(g), two times such
Participant's total Compensation for the Plan Year will be
taken into account.
Article II - General Provisions -28- October 29, 1996
Page 86 of 163
If the Employer has elected in the Adoption Agreement
to use a Social Security Integration Level that in
any Plan Year is the greater of $10,000 or 20% but
less than 100% of the Social Security Taxable Wage
Base, then the 5.7% limitation specified in this
subsection shall be adjusted in accordance with the
following table:
------------------------------------------------------------
If the Social Security Integration Level
Adjust
5.7% to
---------------------------------------------
is more but not more
than than
------------------------------------------------------------
the greater of 80% of the Social 4.3%
$10,000 or Security Taxable Wage
20% of the Social Base
Security Taxable Wage Base
80% of the Social 100% of the Social 5.4%
Security Taxable Wage Security Taxable Wage
Base Base
------------------------------------------------------------
(B) The balance of the Nonelective
Contribution (if any), shall be allocated to the
Participant's Account in the proportion that each
Participant's Compensation bears to the total
Compensation of all Participants.
(4) Formula C: Flat Dollar Amount.
The allocation to each Participant shall be a
flat dollar amount as elected by the Employer in the
Adoption Agreement. Formula C may not be elected under a
standardized plan.
(g) Allocation Requirements.
Employer contributions shall be allocated to the accounts
of Participants in accordance with the allocation requirement as
specified by the Employer in its Adoption Agreement. If the
Employer has adopted a standardized plan, the allocation of any
nonannual contribution made by the Employer shall be made to each
Participant who is a Participant on any day of the Contribution
Period regardless of Hours of Service.
Annual Overall Permitted Disparity Limit. Notwithstanding the
preceding paragraph, for any Plan Year this Plan benefits any
Participant who benefits under another qualified plan or
simplified employee pension plan, as defined in Code section
408(k), maintained by the Employer that provides for permitted
disparity (or imputes disparity), Employer contributions and
Forfeitures will be allocated to the account of each Participant
who either completes more than 500 Hours of Service during the
Plan Year or who is employed as of the last day of the Plan Year
in the ratio that such Participant's total Compensation bears to
the total Compensation of all Participants.
Cumulative Permitted Disparity Limit. Effective for Plan Years
beginning on or after January 1, 1995, the Cumulative Permitted
Disparity Limit for a Participant is 35 total cumulative
permitted disparity years. Total cumulative permitted years mean
the number of years credited to the Participant for allocation or
accrual purposes under this Plan, any other qualified plan or
simplified employee pension plan (whether or not terminated) ever
maintained by the Employer. For purposes of determining the
Participant's Cumulative Permitted Disparity Limit, all years
ending in the same calendar year are treated as the same year.
If the Participant has not benefitted under a defined benefit or
target benefit plan for any year beginning on or after January 1,
1994, the Participant has no Cumulative Permitted Disparity Limit.
Article II - General Provisions -29- October 29, 1996
Page 87 of 163
(h) Forfeitures.
Forfeitures will be used in the manner elected in the
Adoption Agreement as follows:
(1) To reduce Employer contributions or pay Plan
expenses; or
(2) Allocated in accordance with the allocation
formula elected in the Adoption Agreement; or
(3) First, to reduce Employer contributions or pay
Plan expenses, with any remaining Forfeitures allocated in
accordance with the allocation formula elected in the
Adoption Agreement.
(i) Expenses.
The Employer may contribute to the Plan the amount
necessary to pay any reasonable expenses of administering the
Plan. In lieu of the Employer contributing the amount necessary
to pay such charges, these expenses may be paid from Plan assets.
(j) Special Rules - Elective Deferral Contributions.
(1) Each Participant may elect to defer his
Compensation in an amount specified in the Adoption
Agreement, subject to the limitations of this Section. A
Salary Deferral Agreement (or modification of an earlier
Salary Deferral Agreement) may not be made with respect to
Compensation which is currently available on or before the
date the Participant executed such election, or if later,
the later of the date the Employer adopts this CODA, or the
date such arrangement first becomes effective. Any
elections made pursuant to this Section shall become
effective as soon as administratively feasible.
(2) If elected by the Employer in the Adoption
Agreement, each Participant may elect to defer and have
allocated for a Plan Year all or a portion of any cash
bonus paid during the Plan Year. A deferral election may
not be made with respect to cash bonuses which are
currently available on or before the date the Participant
executed such election.
(3) Elective Deferral Contributions will be
allocated to the Participant's Account and shall be 100
percent vested and nonforfeitable at all times.
(4) During any taxable year, no Participant shall
be permitted to have Elective Deferral Contributions made
under this Plan, or any other qualified plan maintained by
the Employer, in excess of the dollar limitation contained
in Code section 402(g) in effect at the beginning of such
taxable year. If a Participant takes a withdrawal of
Elective Deferral Contributions due to a Serious Financial
Hardship, as provided in Section 3E.5, his Elective
Deferral Contributions for his taxable year immediately
following the taxable year of such distribution may not
exceed the Code section 402(g) limit for such taxable year
less the amount of Elective Deferral Contributions made for
the Participant in the taxable year of the distribution.
Article II - General Provisions -30- October 29, 1996
Page 88 of 163
(5) Elective Deferral Contributions that are not in
excess of the limits described in subsection (4) above
shall be subject to the Limitations on Allocations in
accordance with Section 4B.
Elective Deferral Contributions that are in
excess of the limits described in (4) above shall also be
subject to the Section 4B limitations, as further provided
in Section 4C.2.
(6) An Employee's eligibility to make Elective
Deferral Contributions under a CODA may not be conditioned
upon the completion of more than one (1) Year-of-Service or
the attainment of more than age twenty-one (21).
(7) A Participant may modify the amount of Elective
Deferral Contributions such Participant makes to the Plan
as often as the Plan Administrator allows, as specified in
the Adoption Agreement, but in no event not less frequently
than once per calendar year. Such modification may be made
by filing a written notice with the Plan Administrator
within the time period prescribed by the Plan Administrator.
(k) Suspension of Contributions.
(1) Elective Deferral Contributions. The following
provisions shall apply with respect to suspension of
Elective Deferral Contributions.
(A) Voluntary Suspension. A Participant may elect to suspend
his Salary Deferral Agreement for Elective Deferral
Contributions by filing a written notice thereof with the
Plan Administrator. Such Contributions shall be suspended
on the date specified in such notice, which date must
be at least 15 days after such notice is filed. The
notice shall specify the period for which such
suspension shall be effective.
(B) Suspension for Leave. A
Participant who is absent from employment on account
of an authorized unpaid leave of absence or military
leave shall have his Salary Deferral Agreement
suspended during such leave. Such suspension of
contributions shall be effective on the date payment
of Compensation by the Employer to him ceases, and
shall remain in effect until payment of Compensation
resumes.
(C) Withdrawal Suspension. A Participant who elects a
withdrawal in accordance with Section 3E may have his
Elective Deferral Contributions suspended on the date such
election becomes effective. Such suspension shall remain
in effect for the number of months specified therein.
(D) Non-Elective Suspension. A Participant who ceases to meet
the eligibility requirements as specified in Section 2B.1
but who remains in the employ of the Employer shall have
his Elective Deferral Contributions suspended, effective
as of the date he ceases to meet the eligibility
requirements. Such suspension shall remain in effect until
he again meets such eligibility requirements.
The Participant may elect to reactivate his Salary Deferral
Agreement for Elective Deferral Contributions by filing a written
notice thereof with the Plan Administrator. The Salary Deferral
Agreement shall be reactivated following the expiration of the
suspension period described above.
Article II - General Provisions -31- October 29, 1996
Page 89 of 163
(2) Required Employee Contributions. The following provisions shall
apply with respect to suspension of Required Employee
Contributions by Participants. In the event that a Participant
suspends his Required Employee Contributions, he shall
automatically have his Voluntary Employee Contributions suspended
for the same period of time.
(A) Voluntary Suspension. A Participant may elect to
suspend his payroll deduction authorization for his
Required Employee Contributions by filing a written notice
thereof with the Plan Administrator. Such notice shall be
effective, and his applicable contributions shall be
suspended, on the date specified in such notice, which date
must be at least 15 days after such notice is filed. The
notice shall specify the period for which such suspension
shall be effective. Such period must be a minimum of one
month and may extend indefinitely.
(B) Suspension for Leave. A Participant who is
absent from employment on account of an authorized unpaid
leave of absence or military leave shall have his payroll
deduction authorization for Required Employee Contributions
suspended during such leave. Such suspension of
contributions shall be effective on the date payment of
Compensation by the Employer to him ceases, and shall
remain in effect until payment of Compensation resumes.
(C) Withdrawal Suspension. A Participant who
elects a withdrawal in accordance with Section 3E may have
his Required Employee Contributions suspended on the date
such election becomes effective. Such suspension shall
remain in effect for the number of months specified under
the provisions of Section 3E.
(D) Involuntary Suspension. A Participant who
ceases to meet the eligibility requirements as specified in
Section 2B.1 but who remains in the employ of the Employer
shall have his Required Employee Contributions suspended,
effective as of the date he ceases to meet the eligibility
requirements. Such suspension shall remain in effect until
he again meets such eligibility requirements.
The Participant may elect to reactivate his payroll
deduction authorization by filing a written notice thereof with
the Plan Administrator. The payroll deduction authorization
shall be reactivated following the expiration of the suspension
period described above.
(3) Voluntary Employee Contributions. The following provisions
apply with respect to suspension of Voluntary Employee
Contributions by Participants.
(A) Voluntary Suspension. A Participant may elect
to suspend his payroll deduction authorization for his
Voluntary Employee Contributions by filing a written notice
thereof with the Plan Administrator. Such notice shall be
effective, and his applicable contributions shall be
suspended, on the date specified in such notice, which date
must be at least 15 days after such notice is filed. The
notice shall specify the period for which such suspension
shall be effective.
(B) Suspension for Leave. A Participant who is absent
from employment on account of an authorized unpaid leave of
absence or military leave shall have his payroll deduction
order for Voluntary Employee Contributions suspended during
such leave. Such suspension of contributions shall be
effective on the date payment of Compensation by the
Employer to him ceases, and shall remain in effect until
payment of Compensation resumes.
Article II - General Provisions -32- October 29, 1996
Page 90 of 163
(C) Withdrawal Suspension. A Participant who
elects a withdrawal in accordance with Section 3E may have
his Voluntary Employee Contributions suspended on the date
such election becomes effective. Such suspension shall
remain in effect for the number of months specified therein.
(D) Involuntary Suspension. A Participant who
ceases to meet the eligibility requirements as specified in
Section 2B.1 but who remains in the employ of the Employer
shall have his Voluntary Employee Contributions suspended,
effective as of the date he ceases to meet the eligibility
requirements. Such suspension shall remain in effect until
he again meets such eligibility requirements.
The Participant may elect to reactivate his payroll
deduction authorization by filing a written notice thereof with
the Plan Administrator. The payroll deduction authorization
shall be reactivated following the expiration of the suspension
period described above.
2C.2 MONEY PURCHASE PENSION PLAN.
(a) Contributions - Employer. As specified in the Adoption
Agreement, the Employer shall contribute an amount equal to a
fixed percentage of each Participant's Compensation, a flat
dollar amount, or an amount integrated with Social Security in
accordance with (1), (2) or (3) below:
(1) Formula A: Not Integrated with Social
Security. An amount equal to a percentage from l% to 25%
of the Compensation of each Participant, as elected by the
Employer in the Adoption Agreement, subject to the
Limitations on Allocations in accordance with Section 4B.
(2) Formula B: Flat Dollar Amount. An amount, as
elected by the Employer in the Adoption Agreement. Formula
B may not be elected under a standardized plan.
(3) Formula C: Integrated with Social Security.
Base Contribution: An amount equal to a
percentage (as specified in the Adoption Agreement) of
Compensation of each Participant up to the Social Security
Integration Level;
Excess Contribution: In addition, an amount
equal to a percentage (as specified in the Adoption
Agreement) of the Participant's Compensation which is in
excess of the Social Security Integration Level, subject to
the Limitations on Allocations in accordance with Section
4B. This Excess Contribution percentage shall not exceed
the lesser of:
(A) twice the Base Contribution or
(B) the Base Contribution plus the greater of:
(i) old age insurance portion of the Old Age Survivor
Disability (OASDI) tax rate; or
(ii) 5.7%.
If the Employer has elected in the Adoption Agreement
to use a Social Security Integration Level that in any Plan
Year is the greater of $10,000 or 20% but less than 100% of
the Social Security Taxable Wage Base, then the 5.7%
limitation specified in 2C.2(a)(3)(B)(ii) shall be adjusted
in accordance with the following table:
Article II - General Provisions -33- October 29, 1996
Page 91 of 163
-----------------------------------------------------
If the Social
Security Integration Adjust
Level 5.7% to
---------------------------------------------
is more but not more
than than
-----------------------------------------------------
the greater of 80% of the Social 4.3%
$10,000 or Security Taxable
20% of the Social Wage Base
Security Taxable Wage
Base
80% of the Social 100% of the Social 5.4%
Security Taxable Wage Security Taxable
Base Wage Base
-----------------------------------------------------
However, in the case of any Participant who has exceeded
the Cumulative Permitted Disparity Limit described below,
the Employer will contribute for each Participant who
either completes more than 500 Hours of Service during the
Plan Year or is employed on the last day of the Plan Year,
an amount equal to the Excess Contribution percentage
multiplied by the Participant's total Compensation.
Annual Overall Permitted Disparity Limit. Notwithstanding the
preceding provisions of this Section 2C.2(a), for any Plan Year
this Plan benefits any Participant who benefits under another
qualified plan or simplified employee pension plan, as defined in
Code section 408(k), maintained by the Employer that provides for
permitted disparity (or imputes disparity), Employer
contributions and Forfeitures will be allocated to the account of
each Participant who either completes more than 500 Hours of
Service during the Plan Year or who is employed as of the last
day of the Plan Year in the ratio that such Participant's total
Compensation bears to the total Compensation of all Participants.
Cumulative Permitted Disparity Limit. Effective for Plan Years
beginning on or after January 1, 1995, the Cumulative Permitted
Disparity Limit for a Participant is 35 total cumulative
permitted disparity years. Total cumulative permitted years mean
the number of years credited to the Participant for allocation or
accrual purposes under this Plan, any other qualified plan or
simplified employee pension plan (whether or not terminated) ever
maintained by the Employer. For purposes of determining the
Participant's Cumulative Permitted Disparity Limit, all years
ending in the same calendar year are treated as the same year.
If the Participant has not benefitted under a defined benefit or
target benefit plan for any year beginning on or after January 1,
1994, the Participant has no Cumulative Permitted Disparity Limit.
Article II - General Provisions -34- October 29, 1996
Page 92 of 163
(b) Contributions - Participant.
The Plan Administrator will not accept Required Employee
Contributions or Voluntary Employee Contributions that are made
for Plan Years beginning after the Plan Year in which this
document is being adopted by the Employer. Required Employee
Contributions and Voluntary Employee Contributions for Plan Years
beginning after December 31, 1986, but before the Plan Year in
which this document is adopted, will be limited so as to meet the
nondiscrimination test of Code section 401(m) as provided in
Section 4A.4.
(c) Contributions - Timing.
Contributions made on other than an annual basis shall be
paid to the Trust or Insurance Company, as applicable, not less
frequently than monthly or every four weeks. Contributions made
on an annual basis shall be paid to the Trust or the Insurance
Company, as applicable, at the end of the Plan Year, or as soon
as possible on or after the last day of such Plan Year, but in
any event not later than the date prescribed by law for filing
the Employer's income tax return, including any extension
thereof. To the extent that contributions are used to purchase
Life Insurance Policies, such contributions for any Plan Year may
be paid to the Trust when premiums for such Policies are due
during the Plan Year.
(d) Contributions - Allocation.
Employer Contributions shall be allocated to the
Participants' Account in accordance with the allocation
requirements as specified by the Employer in the Adoption
Agreement. If the Employer has adopted a standardized plan, the
allocation of any nonannual contribution made by the Employer
shall be made for each Participant who is a Participant on any
day of the Contribution Period regardless of Hours of Service.
(e) Forfeitures.
Forfeitures will be used in the manner elected in the
Adoption Agreement as follows:
(1) To reduce Employer contributions or pay Plan
expenses; or
(2) Allocated in the same manner elected in the
Adoption Agreement for the allocation of Employer
contributions; or
(3) First, to reduce Employer contributions or pay
Plan expenses, with any remaining Forfeitures allocated in
the same manner elected in the Adoption Agreement for the
allocation of Employer contributions.
(f) Expenses.
The Employer may contribute to the Plan the amount
necessary to pay any applicable expense charges and
administration charges. In lieu of the Employer contributing the
amount necessary to pay such charges, these expenses may be paid
from Plan assets.
Article II - General Provisions -35- October 29, 1996
Page 93 of 163
2C.3 ROLLOVER CONTRIBUTIONS.
If elected by the Employer in the Adoption Agreement, and without
regard to the limitations imposed under Section 4B, the Plan may
receive Rollover Contributions on behalf of an Employee, if the
Employee is so entitled under Code sections 402(c), 403(a)(4), or
408(d)(3)(A). Contributions may be rolled over either directly or
indirectly, in the form of cash, and may be all or a portion of the
funds eligible for rollover. Receipt of Rollover Contributions shall
be subject to the approval of the Plan Administrator. Before approving
the receipt of a Rollover Contribution, the Plan Administrator may
request any documents or other information from an Employee or opinions
of counsel which the Plan Administrator deems necessary to establish
that such amount is a Rollover Contribution.
If Rollover Contributions are elected by the Employer in the Adoption
Agreement, they may be received from an Employee who is not otherwise
eligible to participate in the Plan. Rollover Contributions may be
withdrawn by such Employee pursuant to the provisions of the Adoption
Agreement and Section 3E. In addition, such Employee may direct the
investment and transfer of amounts in his Participant's Account
pursuant to the terms of Section 5A. Upon Termination of Employment,
such Employee shall be entitled to a distribution of his Participant's
Account.
2C.4 CONTRIBUTIONS SUBJECT TO DAVIS-BACON ACT.
If the Employer designates under the Adoption Agreement that Employer
contributions are to be made in different amounts for different
contracts subject to the Davis-Bacon Act or other Prevailing Wage Law,
the Employer shall file with the Plan Administrator an irrevocable
written designation for each Prevailing Wage Law project, stating the
hourly contribution rate to be contributed to the Plan by the Employer
for each class of Employees working on the project in order to comply
with the Prevailing Wage Law applicable to the project. The
contribution rate designation shall be irrevocable with respect to work
on that project, although the hourly contribution rate may be increased
prospectively by the filing of a new written contribution rate
designation with the Plan Administrator.
2C.5 QVEC CONTRIBUTIONS.
The Plan Administrator will not accept QVEC Contributions which are
made for a taxable year beginning after December 31, 1986.
Contributions made prior to that date will be maintained in a separate
account that will be nonforfeitable at all times. The account will
share in the gains and losses under the Plan in the same manner as
described in Section 5A.3 of the Plan. No part of the QVEC
Contributions portion of the Participant's Account will be used to
purchase Life Insurance Policies. No part of the QVEC Contributions
portion of the Participant's Account will be available for loans.
Subject to Section 3C, Joint and Survivor Annuity Requirements (if
applicable), the Participant may withdraw any part of his QVEC
Contributions by making a written application to the Plan Administrator.
Article II - General Provisions -36- October 29, 1996
Page 94 of 163
ARTICLE III - DISTRIBUTIONS
3A. TIMING AND FORM OF BENEFITS
3A.1 PAYMENT OF BENEFITS. The rules and procedures for electing the timing and
form of distribution effective for each Participant or Beneficiary shall be
formulated and administered by the Plan Administrator in a consistent
manner for all Participants in similar circumstances. For money purchase
and target benefit plans, the normal form of distribution shall be a Life
Annuity. For a profit sharing plan, the normal form of distribution shall
be cash. For any plan, the distribution shall be made within an
administratively reasonable time following the date the application for
distribution is filed with the Plan Administrator.
If elected by the Employer in the Adoption Agreement, a Participant, or
his Beneficiary as the case may be, may elect to receive distribution
of all or a portion of his Vested Interest in one or a combination of
the following forms of payment:
(a) Single sum cash payment;
(b) Life Annuity;
(c) Installment Payments (i.e., a series of periodic single-sum cash
payments over time, with no life contingency);
(d) Installment Refund Annuity (i.e., an Annuity that provides for
fixed monthly payments for a period certain of not less than 3
nor more than 15 years. If a Participant dies before the period
certain expires, the Annuity will be paid to the Participant's
Beneficiary for the remainder of the period certain. The period
certain shall be chosen by the Participant at the time the
Annuity is purchased with the Participant's Vested Interest. The
Installment Refund Annuity is not a Life Annuity and in no event
shall the period certain extend to a period which equals or
exceeds the life expectancy of the Participant);
(e) Employer stock, to the extent the Participant is invested therein.
All distributions are subject to the provisions of Section 3C, Joint
and Survivor Annuity Requirements.
If the value of a Participant's Vested Interest has never exceeded
$3,500 at anytime, the Employer shall indicate in the Adoption
Agreement whether a distribution shall be made in the form of a single
sum cash payment upon such Participant's Termination of Employment and
may not be deferred or the Participant may elect to defer distribution
until the April 1 following the calendar year in which he reaches age
70-1/2. If the Employer permits Participants to defer such
distributions, failure to make an election will be deemed to be an
election to defer to the April 1 following the calendar year in which
the Participant reaches age 70-1/2.
If the Participant's Vested Interest exceeds (or at the time of any
prior distribution exceeded) $3,500, and such amount is immediately
distributable, the Participant and the Participant's Spouse, if
required, (or where either the Participant or the Spouse has died, the
survivor) must consent to any distribution of such account balance.
The consent of the Participant and the Participant's Spouse, if
required, shall be obtained in writing within the 90-day period ending
on the Annuity Starting Date. The "Annuity Starting Date" is the first
day of the first period for which an amount is paid as an Annuity or
any other form.
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An account balance is considered immediately distributable if any part
of the account balance could be distributed to the Participant (or
surviving Spouse) before the Participant attains (or would have
attained if not deceased) the later of Normal Retirement Age or age 62.
Instead of consenting to a distribution, the Participant may elect to
defer the distribution until the April 1 following the calendar year in
which he reaches age 70-1/2. Failure to make an election will be
deemed to be an election to defer to the April 1 following the calendar
year in which he reaches age 70-1/2.
The Plan Administrator shall notify the Participant and the
Participant's Spouse of the right to defer any distribution. 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.
If the distribution is one to which Code sections 401(a)(11) and 417 do
not apply, such distribution may commence less than 30 days after the
notice required under Code regulation section 1.411(a)-11(c) is given,
provided that:
(a) The Plan Administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not
to elect a distribution (and, if applicable, a particular
distribution option); and
(b) The Participant, after receiving the notice, affirmatively elects
a distribution.
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 account balance 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 3C.6 of the Plan, only the Participant
need consent to the distribution of an account balance that is
immediately distributable. Neither the consent of the Participant nor
the Participant's Spouse shall be required to the extent that a
distribution is required to satisfy Code section 401(a)(9) or section
415. In addition, upon termination of this Plan, if the Plan does not
offer an annuity option (purchased from a commercial provider) and if
the Employer or any entity within the same controlled group as the
Employer does not maintain another defined contribution plan (other
than an employee stock ownership plan as defined in Code section
4975(e)(7)), the Participant's account balance will, without the
Participant's consent, be distributed to the Participant. However, if
any entity within the same controlled group as the Employer maintains
another defined contribution plan (other than an employee stock
ownership plan as defined in Code section 4975(e)(7), then the
Participant's account balance will be transferred without the
Participant's consent to the other plan if the Participant does not
consent to an immediate distribution.
For purposes of determining the applicability of the foregoing consent
requirements to distributions made before the first day of the first
Plan Year beginning after December 31, 1988, the Participant's vested
account balance shall not include amounts attributable to QVEC
Contributions made between December 31, 1981 and January 1, 1987, plus
gains and minus losses thereon ("accumulated QVEC Contributions").
The terms of any annuity contract purchased and distributed by the Plan
to a Participant or Spouse shall comply with the requirements of this
Plan.
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A Participant who terminates employment and does not consent to an
immediate distribution shall have his distribution deferred. Such a
distribution shall commence no later than the April 1 following the
date the Participant attains age of 70-1/2. Loans may not be initiated
for Participants covered by this paragraph except if, after his
Termination of Employment, the Participant is still a party-in-interest
(as defined in ERISA). A Participant who continues to maintain an
account balance under the Plan may elect to withdraw an amount which is
equal to any whole percentage (not to exceed 100%) from his
Participant's Account. Such an election shall be made in accordance
with Section 3E. Such Participant as described herein shall have the
authority to direct the transfer of his Vested Interest in accordance
with Section 5A.2. The election to defer distribution may be revoked
at any time by submitting a written request to the Plan Administrator.
Any Forfeiture attributable to withdrawals shall be subject to the
requirements of Sections 3D.1 and 3E.8 of the Plan. A Participant
whose Termination of Employment is on or after his Early Retirement
Date may elect to defer the distribution subject to the requirements of
Section 3B.
3A.2 COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise,
distribution of benefits will begin no later than the 60th day after
the latest of the close of the Plan Year in which:
(a) The Participant attains age 65 (or Normal Retirement Age,
if earlier);
(b) The 10th anniversary of the year in which the Participant
commenced participation in the Plan occurs; or,
(c) The Participant terminates Service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse
to consent to a distribution, if required, while a benefit is
immediately distributable within the meaning of Section 3A.1 of the
Plan, shall be deemed to be an election to defer distribution to the
date the Participant attains age 70-1/2.
However, in no event shall distribution of that portion of a
Participant's Account attributable to Elective Deferral Contributions,
Qualified Matching Contributions, and Qualified Nonelective
Contributions be made prior to the earliest of the Participant's
Retirement, death, Disability, separation from Service, attainment of
age 59-1/2, or, with respect to Elective Deferral Contributions only,
due to Serious Financial Hardship, unless such distribution is made on
account of:
(a) The Employer's sale, to an unrelated entity, of its
interest in a subsidiary (within the meaning of Code section
409(d)(3)), where the Employer continues to maintain this Plan
and the Participant continues employment with the subsidiary; or
(b) The Employer's sale, to an unrelated corporation, of
substantially all assets (within the meaning of Code section
409(d)(2)) used in its trade or business, where the Employer
continues to maintain this Plan and the Participant continues
employment with the employer acquiring such assets; or
(c) The termination of the Plan, as provided in Section 7B,
without the establishment of another defined contribution plan,
other than an employee stock ownership plan (as defined in Code
sections 4975(e) or 409) or a simplified employee pension plan as
defined in Code section 408(k).
All distributions that may be made in accordance with one or more of
the preceding distributable events are subject to the spousal and
Participant consent requirements (if applicable) of Code sections
401(a)(11) and 417. In addition, distributions made after March 31,
1988, which are triggered by any of the events described in the
immediately preceding paragraphs (a), (b), or (c), must be made in a
lump sum.
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3A.3 FROM LIFE INSURANCE POLICIES. The Trustee shall arrange with the
Insurance Company any distribution due to any Participant during his
lifetime from any Life Insurance Policy or Policies on his life. The
manner of distribution shall be a transfer of the values of said Policy
or Policies to the Participant's Account for distribution as a portion
thereof in accordance with this Section.
Subject to Section 3C, Joint and Survivor Annuity Requirements, the
Policies on a Participant's life will be converted to cash or an
Annuity or distributed to the Participant upon commencement of benefits.
In the event of any conflict between the terms of this Plan and the
terms of any Life Insurance Policy purchased hereunder, the Plan
provisions shall control.
3A.4 NONTRANSFERABLE. Any Annuity Contract distributed herefrom must be
nontransferable.
3A.5 ALTERNATE PAYEE SPECIAL DISTRIBUTION. Distributions pursuant to
Section 5D.8 may be made without regard to the age or employment status
of the Participant.
3B. MINIMUM DISTRIBUTION REQUIREMENTS
3B.1 DEFINITIONS.
(a) APPLICABLE LIFE EXPECTANCY. The term 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 so recalculated. The applicable
calendar year shall be the first Distribution Calendar Year, and
if Life Expectancy is being recalculated, such succeeding
calendar year.
(b) DESIGNATED BENEFICIARY. The term Designated Beneficiary
means the individual who is designated as the Beneficiary under
the Plan in accordance with Code section 401(a)(9) and the
regulations thereunder. If a Participant's Beneficiary, as
determined in accordance with Section 1.8, is his estate, such
Participant shall be treated as having no Designated Beneficiary.
(c) DISTRIBUTION CALENDAR YEAR. The term 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 is the calendar year
immediately preceding the calendar year which contains the
Participant's Required Beginning Date. For distributions
beginning after the Participant's death, the first Distribution
Calendar Year is the calendar year in which distributions are
required to begin pursuant to Section 3B.3 below.
(d) 5-PERCENT OWNER. For purposes of this Section, the term
5-Percent Owner means a 5-percent owner as defined in Code
section 416(i) (determined in accordance with 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 Employee attains age 66-1/2 or any later Plan Year.
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(e) LIFE EXPECTANCY. The term Life Expectancy means life
expectancy and joint and last survivor expectancy as computed by
use of the expected return multiples in Table V and VI of section
1.72-9 of the Income Tax Regulations.
Unless otherwise elected by the Participant (or Spouse, in
the case of distributions described in Section 3B.3(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 non-Spouse Beneficiary may not
be recalculated.
(f) PARTICIPANT'S BENEFIT. The term Participant's Benefit
means:
(1) The Participant's Vested Interest 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 Participant's
Account as of dates in the Valuation Calendar Year after
the valuation date and decreased by distributions made in
the Valuation Calendar Year after the valuation date.
(2) Exception for second Distribution Calendar
Year. For purposes of paragraph (1) above, if any portion
of the minimum distribution for the first Distribution
Calendar Year is made in the second Distribution Calendar
Year on or before the Required Beginning Date, the amount
of the minimum distribution made in the second Distribution
Calendar Year shall be treated as if it had been made in
the immediately preceding Distribution Calendar Year.
(g) REQUIRED BEGINNING DATE. The term Required Beginning Date
means:
(1) General Rule. The first Required Beginning
Date of a Participant is the first day of April of the
calendar year following the calendar year in which the
Participant attains age 70-1/2.
(2) Transitional Rules. The Required Beginning
Date of a Participant who attains age 70-1/2 before January
1, 1988, shall be determined in accordance with (A) or (B)
below:
(A) Non-5-Percent Owners. The Required
Beginning Date of a Participant who is not a
5-Percent Owner is the first day of April of the
calendar year following the calendar year in which
the later of retirement or attainment of age 70-1/2
occurs.
(B) 5-Percent Owners. The Required
Beginning Date of a Participant who is a 5-Percent
Owner during any year beginning after December 31,
1979 is the first day of April following the later of:
(i) The calendar year in
which the Participant attains age 70-1/2; or
(ii) The earlier of the
calendar year which ends with or within the
Plan Year in which the Participant becomes a
5-Percent Owner, or the calendar year in which
the Participant retires.
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The Required Beginning Date of a Participant who is
not a 5-Percent Owner who attained age 70-1/2 during
1988 and who has not retired as of January 1, 1989
is April 1, 1990.
(3) Once distributions have begun to a 5-Percent Owner under
this Section, they must continue to be distributed, even if
the Participant ceases to be a 5-Percent Owner in a later
year.
3B.2 DISTRIBUTION REQUIREMENTS.
(a) Except as otherwise provided in Section 3C, Joint and
Survivor Annuity Requirements, the requirements of this Section
3B shall apply to any distribution of a Participant's Accrued
Benefit and will take precedence over any inconsistent provisions
of this Plan. Unless otherwise specified, the provisions of this
Section apply to calendar years beginning after December 31, 1984.
(b) All distributions required under this Section 3B shall be
determined and made in accordance with regulations under section
401(a)(9), including the minimum distribution incidental benefit
requirement of regulations section 1.401(a)(9)-2.
A Participant's entire Vested Interest must be distributed or
begin to be distributed no later than the Participant's Required
Beginning Date.
(c) 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):
(1) The life of the Participant;
(2) The life of the Participant and a Designated
Beneficiary;
(3) A period certain not extending beyond the Life
Expectancy of the Participant; or
(4) A period certain not extending beyond the joint
and last survivor expectancy of the Participant and a
Designated Beneficiary.
(d) Determination of amount to be distributed each year. If the
Participant's Vested 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:
(1) If the Participant's entire Vested Interest is to be
distributed over (1 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 (2) a period not
extending beyond the Life Expectancy of the Designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first
Distribution Calendar Year, must at least equal the
quotient obtained by dividing the Participant's benefit by
the Applicable Life Expectancy.
(2) 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.
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(3) 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 (1) the
Applicable Life Expectancy or (2) if the Participant's
Spouse is not the Designated Beneficiary, the applicable
divisor determined from the table set forth in regulations
section 1.401(a)(9)-2, Q&A-4. Distributions after the
death of the Participant shall be distributed using the
Applicable Life Expectancy in Section 3B.2(d)(1) above, as
the relevant divisor without regard to regulations section
1.401(a)(9)-2.
(4) The minimum distribution required for the
Participant's first Distribution Calendar Year must be made
on or before the Participant's Required Beginning Date.
The minimum distribution for other calendar years,
including the minimum distribution for the Distribution
Calendar Year in which the Employee's Required Beginning
Date occurs, must be made on or before December 31 of that
Distribution Calendar Year.
(e) Other Forms. If the Participant's benefit is distributed
in the form of an Annuity purchased from an Insurance Company,
distributions thereunder shall be made in accordance with the
requirements of Code section 401(a)(9) and the regulations
thereunder.
3B.3 DEATH DISTRIBUTION PROVISIONS. Upon the death of the Participant, the
following distribution provisions shall take effect:
(a) Distributions Beginning Before Death. If the Participant
dies after distribution of his entire Vested Interest has begun,
the remaining portion of such entire Vested Interest will
continue to be distributed at least as rapidly as under the
method of distribution being used prior to the Participant's
death.
(b) Distributions Beginning After Death. If the Participant
dies before distribution of his entire Vested Interest begins,
distribution of the Participant's entire Vested 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:
(1) If any portion of the Participant's entire
Vested Interest is payable to a Designated Beneficiary,
distributions may be made over the Life Expectancy of the
Designated Beneficiary commencing on or before December 31
of the calendar year immediately following the calendar
year in which the Participant died;
(2) If the Designated Beneficiary is the
Participant's surviving Spouse, the date distributions are
required to begin in accordance with (1) above shall not be
earlier than the later of (i) December 31 of the calendar
year immediately following the calendar year in which the
Participant died and (ii) December 31 of the calendar year
in which the Participant would have attained age 70-1/2.
If the Participant has not made an election pursuant to
this Section 3B.3(b) by the time of his or her death, the
Participant's Designated Beneficiary must elect the method of
distribution no later than the earlier of (1) December 31 of the
calendar year in which distributions would be required to begin
under this Section, or (2) December 31 of the calendar year which
contains the fifth anniversary of the Participant's date of
death. 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 Vested
Interest must be completed by December 31 of the calendar year
containing the fifth anniversary of the Participant's death and
will be paid in the form of a single sum cash payment.
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(c) For purposes of Section 3B.3(b) above, if the surviving
Spouse dies after the Participant, but before payments to such
Spouse begin, the provisions of this Section, with the exception
of paragraph (b)(2) therein, shall be applied as if the surviving
Spouse were the Participant.
(d) For purposes of this Section, distribution of a
Participant's entire Vested Interest pursuant to Section 3B.3(b)
is considered to begin on the Participant's Required Beginning
Date (or, if paragraph (c) above is applicable, the date
distribution is required to begin to the Surviving Spouse). 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 is the date distribution
actually commences.
3B.4 TRANSITIONAL RULE.
(a) Notwithstanding the other requirements of this Section 3B
and subject to the requirements of Section 3C, Joint and Survivor
Annuity Requirements, distribution on behalf of any Employee,
including a 5-Percent Owner, may be made in accordance with all
of the following requirements (regardless of when such
distribution commences):
(1) The distribution by the Plan is one which would not have
disqualified such Plan under Code section 401(a)(9) as in
effect prior to amendment by the Deficit Reduction Act of 1984.
(2) The distribution is in accordance with a method
of distribution designated by the Employee whose entire
Vested Interest in the Plan is being distributed or, if the
Employee is deceased, by a Beneficiary of such Employee.
(3) Such designation was in writing, was signed by the Employee or
the Beneficiary, and was made before January 1, 1984.
(4) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(5) The method of distribution designated by the Employee or the
Beneficiary specifies the time at which distribution will
commence, the period over which distributions will be made,
and in the case of any distribution upon the Employee's death,
the Beneficiaries of the Employee listed in order of priority.
(b) A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with respect to
the distribution to be made upon the death of the Employee.
(c) For any distribution that commences before January 1, 1984,
but continues after December 31, 1983, the Employee or the
Beneficiary, to whom such distribution is being made, will be
presumed to have designated the method of distribution under
which the distribution is being made if the method of
distribution was specified in writing and the distribution
satisfies the requirements in subsections (a)(1) and (5).
(d) If a designation is revoked, any subsequent distribution must
satisfy the requirements of Code section 401(a)(9) and related
regulations. 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) and related regulations, except for the TEFRA
section 242(b)(2) election. For calendar years beginning after
December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in regulations
section 1.401(a)(9)-2. Any changes in the designation will be
considered to be a revocation of the designation. However, the
mere substitution or addition of another Beneficiary (one not
named in the designation) under the designation will not be
considered to be a revocation of the designation, so long as such
substitution or addition does not alter the period over which
distributions are to be made under the designation, directly or
indirectly (for example, by altering the relevant measuring
life). In the case in which an amount is transferred or rolled
from one plan to another plan, the rules in Q&A J-2 and Q&A J-3
shall apply.
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3C. JOINT AND SURVIVOR ANNUITY REQUIREMENTS
3C.1 APPLICABILITY. Except as provided in Section 3C.6, the provisions of
this Section 3C shall apply to any Participant who is credited with at
least one Hour of Service with the Employer on or after August 23, 1984,
and such other Participants as provided in Section 3C.7.
3C.2 DEFINITIONS. The following definitions shall apply to this Section 3C.
(a) EARLIEST RETIREMENT AGE. The term Earliest Retirement Age means
the earliest date on which, under the Plan, the Participant could
elect to receive retirement benefits.
(b) ELECTION PERIOD. The term Election Period means the period
which begins on the first day of the Plan Year in which the
Participant attains age 35 and ends on the date of the
Participant's death. If a Participant separates from service
prior to the first day of the Plan Year in which he attains age
35, with respect to the Vested Account Balance as of the date of
separation, the election period shall begin on the date of
separation.
Pre-age 35 waiver: A Participant who will not yet attain
age 35 as of the end of any 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 attain 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 3C.5(a). Except as
provided in Section 3C.6, Qualified Preretirement Survivor
coverage will be automatically reinstated as of the first day of
the Plan Year in which the Participant attains age 35. Any new
waiver on or after such date shall be subject to the full
requirements of this Section 3C.
(c) QUALIFIED ELECTION. The term Qualified Election means a
waiver of a Qualified Joint and Survivor Annuity or a Qualified
Preretirement Survivor Annuity. Any waiver of a Qualified Joint
and Survivor Annuity or a Qualified Preretirement Survivor
Annuity shall not be effective unless: (a) the Participant's
Spouse consents in writing to the election; (b) the election
designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal
consent); (c) the Spouse's consent acknowledges the effect of the
election; and (d) the Spouse's consent is witnessed by a Plan
representative or notary public.
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Additionally, a Participant's waiver of the Qualified Joint
and Survivor Annuity shall not be effective unless the election
designates a form of benefit payment which may not be changed
without spousal consent (or the Spouse expressly permits
designations by the Participant without any further spousal
consent). If it is established to the satisfaction of a Plan
representative that there is no Spouse or that the Spouse cannot
be located, a waiver will be deemed a Qualified Election.
Any consent by a Spouse obtained under this provision (or
establishment that the consent of a Spouse may not be obtained)
shall be effective only with respect to such Spouse. A consent
that permits designations by the Participant without any
requirement of further consent by such Spouse must acknowledge
that the Spouse has the right to limit consent to a specific
Beneficiary, and a specific form of benefit where applicable, and
that the Spouse voluntarily elects to relinquish either or both
of such rights. A revocation of a prior waiver may be made by a
Participant without the consent of the Spouse at any time before
the commencement of benefits. The number of revocations shall
not be limited. No consent obtained under this provision shall
be valid unless the Participant has received notice as provided
in Section 3C.5 below.
(d) QUALIFIED JOINT AND SURVIVOR ANNUITY. The term Qualified
Joint and Survivor Annuity means an immediate Annuity for the
life of the Participant with a survivor Annuity for the life of
the Spouse which is not less than 50 percent and not more than
100 percent of the amount of the Annuity which is payable during
the joint lives of the Participant and the Spouse and which is
the amount of benefit which can be purchased with the
Participant's Vested Account Balance. The percentage of the
survivor annuity under the Plan shall be 50 percent (unless a
different percentage is elected by the Participant).
(e) VESTED ACCOUNT BALANCE. The term Vested Account Balance
means the aggregate value of the Participant's vested account
balances derived from contributions made by both the Participant
and Employer, whether vested before or upon death, including the
proceeds of insurance contracts, if any, on the Participant's
life and Rollover Contributions. The provisions of this Section
3C shall apply to a Participant who is vested in amounts
attributable to Employer contributions, Employee Contributions
(or both) made under this Plan at the time of death or distribution.
3C.3 QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of
benefit is selected pursuant to a Qualified Election within the 90-day
period ending on the Annuity Starting Date, a married Participant's
Vested Account Balance will be paid in the form of a Qualified Joint
and Survivor Annuity and an unmarried Participant's Vested Account
Balance will be paid in the form of a Life Annuity. The Participant
may elect to have such Annuity distributed upon attainment of the
Earliest Retirement Age under the Plan.
3C.4 QUALIFIED PRERETIREMENT SURVIVOR ANNUITY. Unless an optional form of
benefit has been selected within the Election Period pursuant to a
Qualified Election, if a Participant dies before the Annuity Starting
Date, then no less than 50 percent (or 100 percent if so elected in the
Adoption Agreement) of the Participant's Vested Account Balance shall
be applied toward the purchase of an Annuity for the life of the
surviving Spouse. If less than 100 percent is selected, then the
remaining portion of the Vested Account Balance shall be paid to the
Participant's Beneficiary. If less than 100 percent of the Vested
Account Balance is paid to the surviving Spouse, the amount of Employee
Contributions allocated to the surviving Spouse will be in the same
proportion as the Employee Contributions bears to the total Vested
Account Balance of the Participant. The surviving Spouse may elect to
have such Annuity distributed within a reasonable period after the
Participant's death.
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Page 104 of 163
3C.5 NOTICE REQUIREMENTS.
(a) In the case of a Qualified Joint and Survivor Annuity, the
Plan Administrator shall no less than 30 days and no more than 90
days prior to the Annuity Starting Date provide each Participant
with a written explanation of: (i) the terms and conditions of a
Qualified Joint and Survivor Annuity; (ii) the Participant's
right to make and the effect of an election to waive the
Qualified Joint and Survivor Annuity form of benefit; (iii) the
rights of a Participant's Spouse; and (iv) the right to make, and
the effect of, a revocation of a previous election to waive the
Qualified Joint and Survivor Annuity.
(b) In the case of a Qualified Preretirement Survivor Annuity,
the Plan Administrator shall provide each Participant within the
applicable period (described in subsection (c) below) for such
Participant a written explanation of the Qualified Preretirement
Survivor Annuity in such terms and in such manner as would be
comparable to the explanation provided for meeting the
requirements of Section 3C.5(a) applicable to a Qualified Joint
and Survivor Annuity.
(c) The "applicable period" for a Participant is whichever of
the following periods ends last: (i) the period beginning with
the first day of the Plan Year in which the Participant attains
age 32 and ending with the close of the Plan Year preceding the
Plan Year in which the Participant attains age 35; (ii) a
reasonable period ending after the individual becomes a
Participant; (iii) a reasonable period ending after the Qualified
Joint and Survivor Annuity is no longer fully subsidized; (iv) a
reasonable period ending after this Section 3C first applies to
the Participant. Notwithstanding the foregoing, notice must be
provided within a reasonable period ending after separation from
Service before attaining age 35.
For purposes of applying the preceding paragraph, a reasonable
period ending after the enumerated events described in (ii),
(iii) and (iv) is the end of the two-year period beginning one
year prior to the date the applicable event occurs, and ending
one year after that date. In the case of a Participant who
separates from Service before the Plan Year in which he attains
age 35, notice shall be provided within the two-year period
beginning one year prior to separation and ending one year after
separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
Participant shall be redetermined.
(d) Notwithstanding the other requirements of this Section, the
respective notices prescribed by this Section need not be given
to a Participant if (1) the Plan "fully subsidizes" the costs of
a Qualified Joint and Survivor Annuity or Qualified Preretirement
Survivor Annuity, and (2) the Plan does not allow the Participant
to waive the Qualified Joint and Survivor Annuity or Qualified
Preretirement Survivor Annuity and does not allow a married
Participant to designate a nonspouse Beneficiary. For purposes
of this Section 3C.5(d), a Plan fully subsidizes the costs of a
benefit if no increase in cost or decrease in benefits to the
Participant may result from the Participant's failure to elect
another benefit.
Article III - Distributions -47- October 29, 1996
Page 105 of 163
3C.6 SAFE HARBOR RULES.
(a) This Section shall apply to a Participant in a profit sharing
plan, and to any distribution made on or after the first day of the
first Plan Year beginning after December 31, 1988, from or under a
separate account attributable solely to accumulated QVEC Contributions
(as described in Section 3A.1), and maintained on behalf of a
Participant in a money purchase pension plan (including a target
benefit plan), if the following conditions are met:(1) the Participant
does not or cannot elect payments in the form of a Life Annuity; and
(2) on the death of a Participant, the Participant's Vested Account
Balance will be paid to the Participant's surviving Spouse, but if
there is no surviving Spouse, or if the surviving Spouse has consented
in a manner conforming to a Qualified Election, then to the
Participant's designated Beneficiary.
(b) 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 account
balance shall be adjusted for gains or losses occurring after the
Participant's death in accordance with the provisions of the Plan
governing the adjustment of account balances for other types of
distributions.
(c) The Participant may waive the spousal death benefit
described in this Section 3C.6 at any time provided that no such
waiver shall be effective unless it satisfies the conditions of
Section 3C.2(c) (other than the notification requirement referred
to therein) that would apply to the Participant's waiver of the
Qualified Preretirement Survivor Annuity.
(d) If this Section 3C.6 is operative, then the other
provisions of this Section 3C, other than Section 3C.7, shall be
inoperative.
This Section 3C.6 shall not be operative with respect to a
Participant in a profit sharing plan if the plan is a direct or
indirect transferee of a defined benefit plan, money purchase
plan, a target benefit plan, stock bonus, or profit sharing plan
that is subject to the survivor annuity requirements of Code
sections 401(a)(11) and 417.
(e) For purposes of this Section 3C.6, the term Vested Account
Balance shall mean, in the case of a money purchase pension plan
or a target benefit plan, the Participant's separate account
balance attributable solely to accumulated QVEC Contributions (as
described in Section 3A.1). In the case of a profit sharing
plan, the term Vested Account Balance shall have the same meaning
as provided in Section 3C.2(e).
3C.7 TRANSITIONAL RULES.
(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 3C must be given the
opportunity to elect to have the prior Sections of this Section
3C apply if such Participant is credited with at least one Hour
of Service under this Plan or a predecessor plan in a Plan Year
beginning on or after January 1, 1976, and such Participant had
at least 10 years of vesting Service when he separated from
Service.
(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 benefits paid in accordance with Section
3C.7(d).
(c) The respective opportunities to elect (as described in
Sections 3C.7(a) and 3C.7(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 said Participants.
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Page 106 of 163
(d) Any Participant who has elected pursuant to Section
3C.7(b), and any Participant who does not elect under Section
3C.7(a), or who meets the requirements of Section 3C.7(a), except
that such Participant does not have at least 10 years of vesting
Service when he separates from Service, shall have his benefits
distributed in accordance with all of the following requirements
if benefits would have been payable in the form of a Life Annuity:
(1) Automatic Joint and Survivor Annuity. If
benefits in the form of a Life Annuity become payable to a
married Participant who:
(A) Begins to receive payments under
the Plan on or after Normal Retirement Age; or
(B) Dies on or after Normal Retirement
Age while still working for the Employer; or
(C) Begins to receive payments on or
after the Qualified Early Retirement Age; or
(D) Separates from Service on or after attaining
Normal Retirement Age (or the Qualified Early
Retirement Age) and after satisfying the eligibility
requirements for the payment of benefits under the
Plan and thereafter dies before beginning to receive
such benefits;
then such benefits will be received under this
Plan in the form of a 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 election hereunder will be
in writing and may be changed by the Participant at any
time.
(2) Election of Early Survivor Annuity. A
Participant who is employed after attaining the Qualified
Early Retirement Age will be given the opportunity to
elect, during the Election Period, to have a survivor
Annuity payable on death. If the Participant elects the
survivor Annuity, payments under such Annuity must not be
less than the payments which would have been made to the
Spouse under the Qualified Joint and Survivor Annuity if
the Participant had retired on the day before his or her
death. Any election under this provision will be in
writing and may be changed by the Participant at any time.
The Election Period begins on the later of (1) the 90th day
before the Participant attains the Qualified Early
Retirement Age, or (2) the date on which participation
begins, and ends on the date the Participant terminates
employment.
(3) For purposes of this Section 3C.7(d):
(A) Qualified Early Retirement Age is
the latest of:
(i) The earliest date,
under the Plan, on which the Participant may
elect to receive retirement benefits;
(ii) The first day of the
120th month beginning before the Participant
reaches Normal Retirement Age; or
Article III - Distributions -49- October 29, 1996
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(iii) The date the Participant begins participation.
(B) Qualified Joint and Survivor
Annuity is an Annuity for the life of the Participant
with a survivor Annuity for the life of the Spouse as
described in Section 3C.2(d).
3D. TERMINATION OF EMPLOYMENT
3D.1 DISTRIBUTION. A Participant who terminates employment shall be entitled to
receive a distribution of his entire Vested Interest. Such distribution
shall be further subject to the terms and conditions of Section 3C. The
method used, as elected by the Employer in the Adoption Agreement, is one
of the following:
(a) Immediate (Cash-Out Method).
If at the time of his Termination of Employment the
Participant is not 100% vested and does not take a distribution
from the portion of his Vested Interest that is attributable to
contributions made by the Employer, the non-vested portion of his
Participant's Account will become a Forfeiture upon the date such
terminated Participant incurs 5 consecutive 1-Year
Breaks-in-Service.
However, if at the time of his Termination of Employment
the Participant is not 100% vested and does take a distribution
from the portion of his Vested Interest that is attributable to
contributions made by the Employer, or if the Participant is 0%
vested, the non-vested portion of his Participant's Account will
become a Forfeiture immediately upon the Participant's
Termination of Employment date.
If a Participant whose non-vested portion of his Participant's
Account became a Forfeiture in accordance with the terms of the
preceding paragraph is later rehired by the Employer and
re-enrolls in the Plan before incurring 5 consecutive 1-Year
Breaks-in-Service, then the amount of the Forfeiture shall be
restored to the Participant's Account by the Employer in
accordance with the repayment provision elected by the Employer
in the Adoption Agreement and described in Section 3D.2.
(b) 1-Year Break-in-Service (Cash-Out Method).
If at the time of his Termination of Employment the
Participant is not 100% vested and does not take a distribution
from the portion of his Vested Interest that is attributable to
contributions made by the Employer, the non-vested portion of his
Participant's Account will become a Forfeiture upon the date such
terminated Participant incurs 5 consecutive 1-Year
Breaks-in-Service.
However, if at the time of his Termination of Employment
the Participant is not 100% vested and does take a distribution
from the portion of his Vested Interest that is attributable to
contributions made by the Employer, or if the Participant is 0%
vested, the non-vested portion of his Participant's Account will
become a Forfeiture upon the date such terminated Participant
incurs a 1-Year Break-in-Service.
If a terminated Participant, whose non-vested portion of
his Participant's Account became a Forfeiture in accordance with
the terms of the preceding paragraph, is later rehired by the
Employer and re-enrolls in the Plan before incurring 5
consecutive 1-Year Breaks-in-Service, then the amount of the
Forfeiture shall be restored to the Participant's Account by the
Employer in accordance with the repayment provision elected by
the Employer in the Adoption Agreement and described in Section
3D.2.
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Page 108 of 163
(c) 5 Consecutive 1-Year Breaks-in-Service.
If at the time of his Termination of Employment the
Participant is not 100% vested, the non-vested portion of his
Participant's Account will become a Forfeiture upon the date the
terminated Participant incurs 5 consecutive 1-Year
Breaks-in-Service.
3D.2 REPAYMENT OF PRIOR DISTRIBUTION.
If a terminated Participant is later rehired by the Employer and
re-enrolls in the Plan, the following Optional Payback or Required
Payback provisions, as elected by the Employer in the Adoption
Agreement, will apply:
(a) Optional Payback:
(1) If the Participant was 0% vested at his Termination of
Employment and did not incur 5 consecutive 1-Year
Breaks-in-Service after such date, the amount which became
a Forfeiture, if any, shall be restored by the Employer at
the time such Participant re-enrolls in the Plan.
(2) If the Participant was vested but not 100% vested at his
Termination of Employment and did not incur 5 consecutive
1-Year Breaks-in-Service after such date, the amount which
became a Forfeiture, if any, shall be restored by the
Employer at the time such Participant re-enrolls in the
Plan. In addition, the Participant may repay the full
amount of the distribution attributable to Employer
contributions, if any, made at his Termination of
Employment. Such repayment of Employer contributions,
however, must be made before the Participant has incurred 5
consecutive 1-Year Breaks-in-Service following the date he
received the distribution or five years after the
Participant is rehired by the Employer, whichever is
earlier.
(3) If the Participant had incurred 5 consecutive 1-Year
Breaks-in-Service after his termination of Employment, the
amount of the Participant's Account that became a
Forfeiture shall remain a Forfeiture and such Participant
shall be prohibited from repaying a distribution made at
his Termination of Employment.
(b) Required Payback:
(1) If the Participant was 0% vested at his Termination of
Employment and did not incur 5 consecutive 1-Year
Breaks-in-Service after such date, the amount which became
a Forfeiture, if any, shall be restored by the Employer at
the time such Participant re-enrolls in the Plan.
(2) If the Participant was vested but not 100% vested at his
Termination of Employment and did not incur 5 consecutive
1-Year Breaks-in-Service after such date, the Participant
shall be required to repay the full amount of the
distribution attributable to Employer contributions, if
any, made at his Termination of Employment. Such repayment
of Employer contributions, however, must be made before the
Participant has incurred 5 consecutive 1-Year
Breaks-in-Service following the date he received the
distribution or five years after the Participant is rehired
by the Employer, whichever is earlier.
When the Participant makes such repayment, the amount which
became a Forfeiture, if any, shall be restored by the
Employer at the same time such repayment is made. However,
if the Participant does not repay the distribution made in
accordance with this Section 3D within the period of time
specified above, that Forfeiture shall remain a Forfeiture.
Article III - Distributions -51- October 29, 1996
Page 109 of 163
(3) If the Participant had incurred 5 consecutive 1-Year
Breaks-in-Service after his Termination of Employment, the
amount of the Participant's Account that became a
Forfeiture shall remain a Forfeiture and such Participant
shall be prohibited from repaying the distribution made at
his Termination of Employment.
3D.3 LIFE INSURANCE POLICY. If all or any portion of the value of any Life
Insurance Policy on the Participant's life will become a Forfeiture,
the Participant shall have the right to buy such policy from the
Trustee for the then value of such policy less the value of any Vested
Interest therein, within 30 days after written notice from the Trustee
is mailed to his last known address.
3D.4 NO FURTHER RIGHTS OR INTEREST. A Participant shall have no further
interest in or any rights to any portion of his Participant's Account
that becomes a Forfeiture due to his Termination of Employment once the
Participant incurs 5 consecutive 1-Year Breaks-in-Service in accordance
with Section 2A.4.
3D.5 FORFEITURE. Any Forfeiture arising in accordance with the provisions
of Section 3D.1 shall be treated as follows:
Any amount of Forfeitures shall be used in accordance with (a), (b), or
(c) below, in the manner set forth in Section 2C.
(a) Employer Credit. Forfeitures shall be used by the Employer
to reduce and in lieu of the Employer contribution next due under
Section 2C, or to pay Plan expenses, at the earliest opportunity
after such Forfeiture becomes available.
(b) Reallocation. Forfeitures shall be allocated in accordance
with the allocation formula of the contributions from which they
arose.
(c) Employer Credit and Reallocation of Remainder. Forfeitures
shall first be used to reduce and in lieu of the Employer
contribution next due under Section 2C, or to pay Plan expenses,
at the earliest opportunity after such Forfeiture becomes
available. Any Forfeitures remaining following use as an
Employer credit shall be allocated in accordance with the
allocation formula of the contributions from which they arose.
Notwithstanding anything above to the contrary, if Forfeitures are
generated immediately or upon the occurrence of a 1-Year
Break-in-Service, and a former Participant returns to employment with
the Employer after Forfeitures are generated but prior to the
occurrence of 5 consecutive 1-Year Breaks-in-Service, Forfeitures, if
any, will first be used to make whole the nonvested account of such
Participant, equal to the value of the nonvested account at the time
the Participant terminated employment with the Employer in accordance
with the applicable provisions of Section 3D.2. In the event that the
available Forfeitures are not sufficient to make whole the nonvested
account, the Employer will make an additional contribution sufficient
to make the nonvested account whole.
3D.6 LOST PARTICIPANT. If a benefit is forfeited because the Participant or
Beneficiary cannot be found, as discussed in Section 5D.7, such benefit
will be reinstated if a claim is made by the Participant or Beneficiary.
Article III - Distributions -52- October 29, 1996
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3D.7 DEFERRAL OF DISTRIBUTION. If elected by the Employer, and as discussed
in Section 3A.1, a Participant who terminates employment and does not
consent to an immediate distribution shall have his distribution
deferred (and may be responsible for all fees and expenses associated
with maintaining his account in a deferred status).
3E. WITHDRAWALS
3E.1 WITHDRAWAL - EMPLOYEE CONTRIBUTIONS.
(a) Required Employee Contributions. If the Employer has
elected in its Adoption Agreement to allow for a withdrawal of
Required Employee Contributions and earnings thereon, then a
Participant may elect to withdraw from his Participant's Account
an amount equal to any whole percentage (not exceeding 100%) of
his entire Vested Interest in his Participant's Account
attributable to Required Employee Contributions plus any income
and minus any loss thereon. On the date the election becomes
effective, the Participant shall be suspended from making any
further contributions to the Plan, and from having any Matching
Contributions made on his behalf for a period, as elected by the
Employer in its Adoption Agreement.
(b) Voluntary Employee Contributions. If the Employer has
elected in its Adoption Agreement to allow for withdrawal of
Voluntary Employee Contributions and earnings thereon, then a
Participant may elect to withdraw from his Participant's Account
an amount which is equal to any whole percentage (not exceeding
100%) of the entire Vested Interest in his Participant's Account
attributable to Voluntary Employee Contributions plus any income
and minus any loss thereon.
(c) Prior Required Employee Contributions. If the Employer has
elected in its Adoption Agreement to allow for a withdrawal of
Prior Required Employee Contributions and earnings thereon, then
a Participant may elect to withdraw from his Participant's
Account an amount equal to any whole percentage (not exceeding
100%) of his entire Vested Interest in his Participant's Account
attributable to Prior Required Employee Contributions plus any
income and minus any loss thereon.
(d) Prior Voluntary Employee Contributions. If the Employer
has elected in its Adoption Agreement to allow for withdrawal of
Prior Voluntary Employee Contributions and earnings thereon, then
a Participant may elect to withdraw from his Participant's
Account an amount which is equal to any whole percentage (not
exceeding 100%) of the entire Vested Interest in his
Participant's Account attributable to Prior Voluntary Employee
Contributions plus any income and minus any loss thereon.
If a Participant elects a withdrawal under the provisions of this
Section, he may not elect another withdrawal under this Section for an
additional period specified by the Employer in its Adoption Agreement.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
No Forfeitures will occur solely as a result of an Employee's
withdrawal of Employee Contributions.
Article III - Distributions -53- October 29, 1996
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3E.2 WITHDRAWAL - ELECTIVE DEFERRAL CONTRIBUTIONS. If the Participant has
attained age 59-1/2, and if selected by the Employer in its Adoption
Agreement, the Participant may elect to withdraw from his Participant's
Account an amount which is equal to any whole percentage (not exceeding
100%) of his Vested Interest in his Participant's Account attributable
to his Elective Deferral Contributions and earnings thereon.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
3E.3 WITHDRAWAL - EMPLOYER CONTRIBUTIONS. If the Employer has specified in
its Adoption Agreement that withdrawals of Matching Contributions,
Nonelective Contributions, or Prior Employer Contributions, if applicable,
are permitted, a Participant, who has been a Participant for at least 60
consecutive months, may elect to withdraw from his Participant's Account
an amount equal to a whole percentage (not to exceed 100%) of his Vested
Interest in his Participant's Account attributable to Matching
Contributions (and reallocated Forfeitures, if applicable), Nonelective
Contributions, (and reallocated Forfeitures, if applicable), or Prior
Employer Contributions (and reallocated Forfeitures, if applicable), along
with earnings. On the date the election becomes effective, the Participant
may be suspended from making Employee Contributions and Elective Deferral
Contributions, if any, and from having Employer contributions made on his
behalf for a period of time, as selected by the Employer in its Adoption
Agreement. In lieu of or in addition to the 60-months of participation
requirement, the Employer may specify in the Adoption Agreement that
withdrawal of Employer contributions, to the extent vested, shall be
available upon or following the attainment of age 59-1/2.
In the event a Participant's suspension period occurs during a year (or
years) when no Employer contributions are made, such suspension shall
be taken into account when the next Employer contribution(s) is made.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
3E.4 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF CONTRIBUTIONS OTHER THAN
ELECTIVE DEFERRAL CONTRIBUTIONS. Except as provided in Sections 7B.1
and 7B.7(e), if the Plan is a profit sharing plan or a thrift plan, and
if the Employer has elected in its Adoption Agreement to permit
withdrawals due to the occurrence of events that constitute Serious
Financial Hardships to a Participant, such Participant may withdraw all
or a portion of his Vested Interest (excluding Elective Deferral
Contributions, Qualified Nonelective Contributions, Qualified Matching
Contributions, and earnings on these contributions). Such Serious
Financial Hardship must be shown by positive evidence submitted to the
Plan Administrator that the hardship is of sufficient magnitude to
impair the Participant's financial security. Withdrawals shall be
determined in a consistent and nondiscriminatory manner, and shall not
affect the Participant's rights under the Plan to make additional
withdrawals or to continue to be a Participant.
3E.5 WITHDRAWAL FOR SERIOUS FINANCIAL HARDSHIP OF ELECTIVE DEFERRAL
CONTRIBUTIONS. If the Employer has selected in its Adoption Agreement,
a distribution may be made on account of Serious Financial Hardship if
subparagraphs (a) and (b) of this Section are satisfied. The funds
available for withdrawal shall be the portion of a Participant's
Account attributable to Elective Deferral Contributions, including any
earnings credited to such contributions as of the end of the last Plan
Year ending before July 1, 1989 ("pre-1989 earnings"), and if
applicable, Qualified Matching Contributions credited to the
Participant's Account as of the end of the last Plan Year ending before
July 1, 1989, Qualified Nonelective Contributions credited to the
Participant's Account as of the end of the last Plan Year ending before
July 1, 1989, and any pre-1989 earnings attributable to Qualified
Matching Contributions, or Qualified Nonelective Contributions.
Qualified Matching Contributions credited to the Participant's Account
after the end of the last Plan Year ending before July 1, 1989,
Qualified Nonelective Contributions credited to the Participant's
Account after the end of the last Plan Year ending before July 1, 1989,
and earnings on Elective Deferral Contributions, Qualified Matching
Contributions, and Qualified Nonelective Contributions credited after
the end of the last Plan Year ending before July 1, 1989 shall not be
eligible for withdrawal under this Section. For purposes of this
Section, a distribution may be made on account of a hardship only if
the distribution is made on account of an immediate and heavy financial
need of the Employee where such Employee lacks other available resources.
Article III - Distributions -54- October 29, 1996
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(a) The following are the only financial needs considered
immediate and heavy for purposes of this Section:
(i) Expenses for medical care described in Code
section 213(d) previously incurred by the Employee, the
Employee's Spouse, or any dependents of the Employee (as
defined in Code section 152) or necessary for these persons
to obtain medical care described in Code section 213(d);
(ii) Costs directly related to the purchase of a
principal residence for the Employee (excluding mortgage
payments);
(iii) Payments necessary to prevent the eviction of
the Employee from the Employee's principal residence or
foreclosure on the mortgage on that residence; or
Article III - Distributions -55- October 29, 1996
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(iv) Tuition payments, related educational fees and
amounts distributed for the payment of room-and-board
expenses for the next 12 months of post-secondary education
for the Employee, his or her Spouse, or any of his or her
dependents.
(b) To the extent the amount of distribution requested does not
exceed the amount required to relieve the Participant's financial
need, such distribution will be considered as necessary to
satisfy an immediate and heavy financial need of the Employee
only if:
(i) The Employee has obtained all distributions,
other than hardship distributions, and all nontaxable loans
under all plans maintained by the Employer;
(ii) All plans maintained by the Employer provide
that the Employee's Elective Deferral Contributions and if
applicable, Employee Contributions, will be suspended for
12 months after the receipt of the hardship distribution;
(iii) The distribution is not in excess of the amount of the
immediate and heavy financial need (including amounts
necessary to pay any federal, state, or local income taxes
or penalties reasonably anticipated to result from the
distribution); and
(iv) All plans maintained by the Employer provide
that the Employee may not make Elective Deferral
Contributions for the Employee's taxable year immediately
following the taxable year of the hardship distribution in
excess of the applicable limit under Code section 402(g)
for such taxable year less the amount of such Employee's
Elective Deferral Contributions for the taxable year of the
hardship distribution.
3E.6 WITHDRAWAL - QVEC CONTRIBUTIONS and ROLLOVER CONTRIBUTIONS. If
selected by the Employer in its Adoption Agreement, a Participant may
elect to withdraw from his Participant's Account as often during each
Plan Year as elected by the Employer in the Adoption Agreement, any
amount up to 100% of his entire Vested Interest in his Participant's
Account attributable to his QVEC Contributions or Rollover
Contributions along with earnings thereon.
The Participant shall notify the Plan Administrator in writing of his
election to make a withdrawal under this Section. Any such election
shall be effective as of the date specified in such notice, which date
must be at least 15 days after notice is filed.
3E.7 NOTIFICATION. The Participant shall notify the Plan Administrator in
writing of his election to make a withdrawal under Section 3E. Any
such election shall be effective as of the date specified in such
notice, which date must be at least 15 days after such notice is
filed. Payment of the withdrawal shall be subject to the terms and
conditions of Section 3A. All withdrawals made under the provisions of
Section 3E shall be subject to the spousal consent requirements of
Section 3C, as applicable.
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3E.8 VESTING CONTINUATION. In the event a partially vested Participant
takes a withdrawal of less than 100% of his Vested Interest in
accordance with Section 3E.3 or 3E.4 or 3E.5, the remaining portion of
his Participant's Account attributable to Employer contributions shall
vest according to the formula as set forth in Section 1.75.
3E.9 WITHDRAWAL - PARTICIPANT'S EMPLOYER STOCK ACCOUNT. The ability of a
Participant who is subject to the reporting requirements of section
16(a) of the Securities Exchange Act of 1934 (the "Act") to make
withdrawals or investment changes involving the Participant's Employer
Stock Account may be restricted by the Plan Administrator to comply
with the rules under section 16(b) of the Act.
3E.10 WITHDRAWAL BY TERMINATED PARTICIPANTS. Terminated Participants who
have deferred distribution of their benefit may make withdrawals from
the Plan in the same manner as selected by the Employer in its Adoption
Agreement for withdrawals preceding termination.
3F. DIRECT ROLLOVERS
3F.1 DEFINITIONS.
(a) DIRECT ROLLOVER. The term Direct Rollover means a payment
by the Plan to the Eligible Retirement Plan specified by the
Distributee.
(b) DISTRIBUTEE. The term Distributee means an Employee or
former Employee. In addition, the Employee's or former
Employee's surviving Spouse and the Employee's or former
Employee's Spouse who is the Alternate Payee under a QDRO, are
Distributees with regard to the interest of the Spouse or former
Spouse.
(c) ELIGIBLE RETIREMENT PLAN. The term Eligible Retirement
Plan means 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 plan 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 an individual retirement annuity.
(d) ELIGIBLE ROLLOVER DISTRIBUTION. The term Eligible Rollover
Distribution means any distribution of all or any portion of the
balance to the credit of the Distributee, except that an Eligible
Rollover Distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or Life
Expectancy) of the Distributee or the joint lives (or joint life
expectancies) 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); and any other distribution(s) that is
reasonably expected to total less than $200 during a year.
3F.2 DIRECT ROLLOVERS. This Section applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan to
the contrary that would otherwise limit a Distributee's election under
this Section, a Distributee may elect, at the time and in the manner
prescribed by the Plan Administrator, to have any portion of an
Eligible Rollover Distribution that is equal to at least $500 paid
directly to an Eligible Retirement Plan specified by the Distributee in
a Direct Rollover.
Article III - Distributions -57- October 29, 1996
Page 115 of 163
ARTICLE IV - LEGAL LIMITATIONS ON CONTRIBUTIONS
4A. NONDISCRIMINATION TESTS
4A.1 DEFINITIONS.
(a) ACTUAL CONTRIBUTION PERCENTAGE. The term Actual Contribution
Percentage (ACP) means the average of the Actual Contribution
Ratios of the Eligible Participants in a group.
(b) ACTUAL CONTRIBUTION RATIO. The term Actual Contribution Ratio
means the ratio (expressed as a percentage) of a Participant's
Contribution Percentage Amounts to that Participant's
Compensation for the Plan Year (whether or not the Employee was a
Participant for the entire Plan Year).
(c) ACTUAL DEFERRAL PERCENTAGE. The term Actual Deferral Percentage
(ADP) means the average of the Actual Deferral Ratios for a
specified group of Participants.
(d) ACTUAL DEFERRAL RATIO. The term Actual Deferral Ratio
means the ratio (expressed as a percentage) of a Participant's
Deferral Percentage Amounts to that Participant's Compensation
for such Plan Year. The Actual Deferral Ratio for an Employee
who is eligible to be a Participant but fails to make Elective
Deferral Contributions shall be zero.
(e) AGGREGATE LIMIT. The term Aggregate Limit means the sum of: (i)
125 percent of the greater of the ADP of the non-Highly
Compensated Employees for the Plan Year or the ACP of non-Highly
Compensated Employees under the plan subject to Code section
401(m) for the Plan Year beginning with or within the Plan Year
of the CODA and (ii) the lesser of 200% or two plus the lesser of
such ADP or ACP. "Lesser" is substituted for "greater" in "(i)",
above, and "greater" is substituted for "lesser" after "two plus
the" in "(ii)" if it would result in a larger Aggregate Limit.
(f) CONTRIBUTION PERCENTAGE AMOUNTS. The term Contribution
Percentage Amounts means the sum of the Employee Contributions,
Matching Contributions, Qualified Matching Contributions (to the
extent not taken into account for purposes of the ADP test) and
Qualified Nonelective Contributions (to the extent not taken into
account for purposes of the ADP test) made under the Plan on
behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that
are forfeited either to correct Excess Aggregate Contributions or
because the contributions to which they relate are Excess
Elective Deferral Contributions, Excess Contributions, or Excess
Aggregate Contributions. The Employer may elect to use Elective
Deferrals in the Contribution Percentage Amounts as long as the
ADP test (as described in Section 4A.2) is met before the
Elective Deferrals are used in the ACP test (as described in
Section 4A.4) and the ADP test continues to be met following the
exclusion of those Elective Deferrals that are used to meet the
ACP test.
(g) DEFERRAL PERCENTAGE AMOUNTS. The term Deferral Percentage
Amounts means any Elective Deferral Contributions made pursuant
to the Participant's deferral election, including Excess Elective
Deferral Contributions of Highly Compensated Employees, but
excluding Elective Deferral Contributions that are taken into
account in the ACP test (provided the ADP test is satisfied both
with and without exclusion of these Elective Deferral
Contributions). In addition, the Employer may choose to make
Qualified Nonelective Contributions and Qualified Matching
Contributions.
Article IV - Legal Limitations -58- October 29, 1996
Page 116 of 163
(h) ELIGIBLE PARTICIPANT. The term Eligible Participant means any
Employee who is eligible to make an Employee Contribution or
Elective Deferral Contribution (if the Employer takes such
contributions into account in the calculation of the Actual
Contribution Ratio), or to receive a Matching Contribution
(including Forfeitures) or a Qualified Matching Contribution. If
an Employee Contribution is required as a condition of
participation in the Plan, any Employee who would be a
Participant in the Plan if such Employee made the Required
Employee Contribution shall be treated as an Eligible Participant
on behalf of whom no Employee Contributions are made.
If the Employer has elected in its Adoption Agreement to provide for Elective
Deferral Contributions, then Sections 4A.2 through 4A.5 shall apply.
4A.2 ACTUAL DEFERRAL PERCENTAGE TEST. The ADP for Participants who are
Highly Compensated Employees for each Plan Year and the ADP for
Participants who are non-Highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(a) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are non-Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees does not exceed
the ADP for Participants who are non-Highly Compensated Employees
by more than two (2) percentage points.
4A.3 SPECIAL RULES - ADP TEST.
(a) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Elective
Deferral Contributions (and Qualified Nonelective Contributions
or Qualified Matching Contributions, or both, if treated as
Elective Deferrals for purposes of the ADP test) allocated to his
accounts under two or more CODAs maintained by the Employer,
shall be determined as if such Elective Deferral Contributions
(and, if applicable, such Qualified Nonelective Contributions or
Qualified Matching Contributions, or both) were made under a
single CODA. If a Highly Compensated Employee participates in
two or more CODAs that have different Plan Years, such CODAs are
treated as a single CODA with respect to the Plan Years ending
with or within the same calendar year. Notwithstanding the
foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Code section
401(k).
(b) If this Plan satisfies the requirements of Code sections
401(k), 401(a)(4), or 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 shall be applied by determining the ADP
of Employees as if all such plans were a single plan. For Plan
Years beginning after December 31, 1989, plans may be aggregated
in order to satisfy Code section 401(k) only if they have the
same Plan Year.
(c) If a Highly Compensated Employee is subject to the family
aggregation rules of section 414(q)(6) because that Participant
is either a 5-percent owner or one of the top 10 Highly
Compensated Employees, the combined Actual Deferral Ratio for the
family group (which is treated as one Highly Compensated
Employee) must be determined by combining the Elective Deferral
Contributions (and Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, if treated as Elective
Deferral Contributions for purposes of the ADP test), and
Compensation for the Plan Year of all the family members (as
defined in section 414(q)(6)). Such family members shall be
disregarded as separate Employees in determining the ADP for both
Highly Compensated Employees and non-Highly Compensated Employees.
Article IV - Legal Limitations -59- October 29, 1996
Page 117 of 163
(d) For purposes of determining the ADP test, Elective Deferral
Contributions, Qualified Nonelective Contributions and Qualified
Matching Contributions must be made before the last day of the
12-month period immediately following the Plan Year to which such
contributions relate.
(e) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in such test.
(f) The determination and treatment of the Deferral Percentage
Amounts of any Participant shall satisfy such other requirements
as may be prescribed by the Secretary of the Treasury.
(g) If the Employer determines before the end of the Plan Year
that the Plan may not satisfy the ADP test for the Plan Year, the
Employer may require that the amounts of Elective Deferral
Contributions being allocated to the accounts of Highly
Compensated Employees be reduced to the extent necessary to
prevent Excess Contributions from being made to the Plan.
Although the Employer may reduce the amounts of Elective
Deferral Contributions that may be allocated to the Participant's
Accounts of Highly Compensated Employees, the affected Employees
shall continue to participate in the Plan. When the situation
that resulted in the reduction of Elective Deferral Contributions
ceases to exist, the Employer shall reinstate the amounts of
Elective Deferral Contributions elected by the affected
Participants in their Salary Deferral Agreement to the fullest
extent possible.
If the Employer has elected in its Adoption Agreement, to provide for
Employee Contributions and/or Matching Contributions required to be tested
under Code section 401(m), then Sections 4A.4 and 4A.5 shall apply.
4A.4 ACTUAL CONTRIBUTION PERCENTAGE TEST. The ACP for Participants who are
Highly Compensated Employees for each Plan Year and the ACP for
Participants who are non-Highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(a) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(b) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are non-Highly Compensated Employees for the
same Plan Year multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees does not exceed
the ACP for Participants who are non-Highly Compensated Employees
by more than two (2) percentage points.
Article IV - Legal Limitations -60- October 29, 1996
Page 118 of 163
4A.5 SPECIAL RULES - ADP/ACP TESTS.
(a) Multiple Use: If one or more Highly Compensated Employees
participates in both a CODA and a plan subject to the ACP test
maintained by the Employer, and the sum of the ADP and ACP of
those Highly Compensated Employees subject to either or both
tests exceeds the Aggregate Limit, then the ACP of those Highly
Compensated Employees who also participate in a CODA will be
reduced (beginning with such Highly Compensated Employee whose
Actual Contribution Ratio is the highest) so that the limit is
not exceeded. The amount by which each Highly Compensated
Employee's Contribution Percentage Amounts are reduced shall be
treated as an Excess Aggregate Contribution. The ADP and ACP of
the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use
does not occur if both the ADP and ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of
the non-Highly Compensated Employees.
(b) For purposes of this Section, the Actual Contribution Ratio
for any Participant who is a Highly Compensated Employee and who
is eligible to have Contribution Percentage Amounts allocated to
his account under two or more plans described in Code section
401(a), or CODAs that are maintained by the Employer, shall be
determined as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly Compensated
Employee participates in two or more CODAs that have different
Plan Years, all CODAs ending with or within the same calendar
year are treated as a single CODA. Notwithstanding the
foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Code section
401(m).
(c) If this Plan satisfies the requirements of Code sections
401(m), 401(a)(4) or 410(b) only if aggregated with one or more
other plans, or if one or more other plans satisfy the
requirements of such sections of the Code only if aggregated with
this Plan, then this Section shall be applied by determining the
Actual Contribution Ratio of Employees as if all such plans were
a single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy Code section 401(m)
only if they have the same Plan Year.
(d) For purposes of determining the Actual Contribution Ratio
of a Participant who is a 5-percent owner or one of the Top 10
Highly Compensated Employees, the Contribution Percentage Amounts
and Compensation for such Participant shall include the
Contribution Percentage Amounts and Compensation for the Plan
Year of family members (as defined in Code section 414(q)(6)).
Such family members shall be disregarded as separate Employees in
determining the ACP for Highly Compensated Employees and
non-Highly Compensated Employees.
(e) For purposes of determining the ACP test, Employee Contributions
are considered to have been made in the Plan Year in which
contributed to the Plan. Qualified Matching Contributions and
Qualified Nonelective Contributions are considered made for a
Plan Year if made no later than the end of the 12-month period
beginning on the day after the close of the Plan Year.
(f) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in such test.
Article IV - Legal Limitations -61- October 29, 1996
Page 119 of 163
(g) The determination and treatment of the Contribution
Percentage Amounts of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the
Treasury.
4B. LIMITATIONS ON ALLOCATIONS
4B.1 DEFINITIONS. The following definitions apply for purposes of Section 4B.
(a) ANNUAL ADDITIONS. The term Annual Additions means the sum
of the following amounts credited to a Participant's Account for
the Limitation Year:
(1) All contributions made by the Employer which
shall include:
Elective Deferral Contributions;
Money Purchase Pension Contributions
Matching Contributions;
Nonelective Contributions;
Qualified Nonelective Contributions;
Qualified Matching Contributions;
Prior Employer Contributions;
(2) Employee Contributions;
(3) Forfeitures; and
(4) Amounts allocated after March 31, 1984 to an individual
medical account, as defined in Code section 415(l)(2),
which is part of a pension or annuity plan maintained by
the Employer, are treated as Annual Additions to a defined
contribution plan. Also, amounts derived from
contributions paid or accrued after December 31, 1985 in
taxable years ending after such date, which are
attributable to post-retirement medical benefits allocated
to the separate account of a Key Employee as defined in
Code section 419A(d)(3), under a welfare benefit fund as
defined in Code section 419(e), maintained by the Employer,
are treated as Annual Additions to a defined contribution
plan; and
(5) Allocations under a simplified employee pension plan.
For this purpose, any Excess Annual Additions applied under
Sections 4C.3 or 4B.5(f) in the Limitation Year to reduce
Employer contributions will be considered Annual Additions for
such Limitation Year.
(b) COMPENSATION. As elected by the Employer in the Adoption
Agreement, the term Compensation means all of a Participant's:
(1) Wages, Tips, and Other Compensation Box on Form
W-2. (Information required to be reported under Code
sections 6041, 6051 and 6052). Wages within the meaning of
Code section 3401(a) and all other payments of compensation
to an Employee by the Employer (in the course of the
Employer's trade or business) for which the Employer is
required to furnish the Employee a written statement under
Code sections 6041(d), 6051(a)(3), and 6052. Compensation
must be determined without regard to any rules under Code
section 3401(a) that limit the remuneration included in
wages based on the nature or location of the employment or
the services performed (such as the exception for
agricultural labor in Code section 3401(a)(2)).
Article IV - Legal Limitations -62- October 29, 1996
Page 120 of 163
(2) Section 3401(a) wages. Wages as defined in Code section
3401(a) for the purposes of income tax withholding at the
source but determined without regard to any rules that limit
the remuneration included in wages based on the nature or
location of the employment or the services performed
(such as the exception for agricultural labor in
Code section 3401(a)(2)).
(3) 415 safe-harbor compensation. Wages, salaries,
and fees for professional services and other amounts
received (without regard to whether or not an amount is
paid in cash) for personal services actually rendered in
the course of employment with the Employer maintaining the
Plan to the extent that the amounts are includable in gross
income (including, but not limited to, commissions paid
salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums,
tips, bonuses, fringe benefits, and reimbursements or other
expense allowances under a nonaccountable plan as described
in Code section 1.62-2(c)), and excluding the following:
(A) Employer contributions to a plan of
deferred compensation which are not includable in the
Employee's gross income for the taxable year in which
contributed, or Employer contributions under a
simplified employee pension plan to the extent such
contributions are deductible by the Employee, or any
distributions from a plan of deferred compensation;
(B) Amounts realized from the exercise
of a non-qualified stock option, or when restricted
stock (or property) held by the Employee either
becomes freely transferable or is no longer subject
to a substantial risk of forfeiture;
(C) Amounts realized from the sale,
exchange or other disposition of stock acquired under
a qualified stock option; and
(D) Other amounts which received
special tax benefits, or contributions made by the
Employer (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 Employee).
For any Self-Employed Individual, Compensation means Earned Income.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of this Section 4B,
Compensation for a Limitation Year is the Compensation actually
paid or includable in gross income during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution plan who is permanently and
totally disabled (as defined in Code section 22(e)(3)) is the
Compensation such Participant would have received for the
Limitation Year if the Participant had been paid at the rate of
Compensation paid immediately before becoming permanently and
totally disabled; such imputed Compensation for the disabled
Participant may be taken into account only if the Participant is
not a Highly Compensated Employee and contributions made on
behalf of such Participant are nonforfeitable when made.
Article IV - Legal Limitations -63- October 29, 1996
Page 121 of 163
(c) DEFINED BENEFIT FRACTION. The term Defined Benefit
Fraction means a fraction, the numerator of which is the sum of
the Participant's Projected Annual Benefits under all the defined
benefit plans (whether or not terminated) maintained by the
Employer, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation
Year under Code sections 415(b) and (d), or 140 percent of the
Highest Average Compensation including any adjustments under Code
section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the Limitation Year beginning
after December 31, 1986 in one or more defined benefit plans
maintained by the Employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than 125
percent of the sum of the annual benefits under such plans which
the Participant had accrued as of the later of the close of the
last Limitation Year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the Plan
after May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate satisfied
the requirements of Code section 415 for all Limitation Years
beginning before January 1, 1987.
Notwithstanding the foregoing, for any Top-Heavy Plan Year,
100 shall be substituted for 125 unless the extra minimum
allocation is being made pursuant to the Employer's election in
the Adoption Agreement. However, for any Plan Year in which this
Plan is a Super Top-Heavy Plan, 100 shall be substituted for 125
in any event.
(d) DEFINED CONTRIBUTION DOLLAR LIMITATION. The term Defined
Contribution Dollar Limitation means $30,000 or if greater,
one-fourth of the defined benefit dollar limitation set forth in
Code section 415(b)(1) as in effect for the Limitation Year.
(e) DEFINED CONTRIBUTION FRACTION. The term Defined
Contribution Fraction means a fraction, the numerator of which is
the sum of the Annual Additions to the Participant's accounts
under all the defined contribution plans (whether or not
terminated) maintained by the Employer for the current and all
prior Limitation Years (including the Annual Additions
attributable to the Participant's nondeductible 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 defined in Code
section 419(e), individual medical accounts, as defined in Code
section 415(l)(2), and simplified employee pension plans, as
defined in Code section 408(k), maintained by the Employer), and
the denominator of which is the sum of the maximum aggregate
amounts for the current and all prior Limitation Years of service
with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate
amount in any Limitation Year is the lesser of 125 percent of the
dollar limitation determined under Code sections 415(b) and (d)
in effect under Code section 415(c)(1)(A) or 35 percent of the
Participant's Compensation for such year.
If the Employee was a Participant as of the end of the
first day of the first Limitation Year beginning after December
31, 1986, in one or more defined contribution plans maintained by
the Employer which were in existence on May 6, 1986, the
numerator of this fraction will be adjusted if the sum of this
fraction and the Defined Benefit Fraction would otherwise exceed
1.0 under the terms of this Plan. Under the adjustment, an
amount equal to the product of (1) the excess of the sum of the
fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last Limitation Year
beginning before January 1, 1987, and disregarding any changes in
the terms and conditions of the Plan made after May 5, 1986, but
using the section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
Article IV - Legal Limitations -64- October 29, 1996
Page 122 of 163
Notwithstanding the foregoing, for any Top-Heavy Plan Year,
100 shall be substituted for 125 unless the extra minimum
allocation is being made pursuant to the Employer's election in
the Adoption Agreement. However, for any Plan Year in which this
Plan is a Super Top-Heavy Plan, 100 shall be substituted for 125
in any event.
The Annual Additions for any Limitation Year beginning before
January 1, 1987 shall not be recomputed to treat all Employee
Contributions as Annual Additions.
(f) EMPLOYER. For purposes of this Section 4B, the term
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 section 415(h)), a group of
commonly controlled trades or businesses (as defined in Code
section 414(c) as modified by 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 regulations under Code
section 414(o).
(g) HIGHEST AVERAGE COMPENSATION. The term Highest Average
Compensation means the average Compensation for the three
consecutive Years of Service with the Employer that produces the
highest average. A Year of Service with the Employer is the
12-consecutive month period defined in Section 2A.5.
(h) LIMITATION YEAR. The term Limitation Year means a calendar
year, or the 12-consecutive month period elected by the Employer
in the Limitation Year section of 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.
(i) MASTER OR PROTOTYPE PLAN. The term Master or Prototype
Plan means a plan the form of which is the subject of a
favorable opinion letter from the national office of the Internal
Revenue Service.
(j) MAXIMUM PERMISSIBLE AMOUNT. The term Maximum Permissible
Amount means the maximum Annual Additions that may be contributed
or allocated to a Participant's Account under the Plan for any
Limitation Year, which shall not exceed the lesser of:
(1) The Defined Contribution Dollar Limitation, or
(2) 25 percent of the Participant's Compensation
for the Limitation Year.
The Compensation limitation referred to in (2) above, shall
not apply to any contribution for medical benefits (within the
meaning of Code section 401(h) or 419A(f)(2)) which is otherwise
treated as Annual Additions under Code sections 415(l)(1) or
419A(d)(2).
Article IV - Legal Limitations -65- October 29, 1996
Page 123 of 163
If a short Limitation Year is created because of an amendment
changing the Limitation Year to a different 12-consecutive month
period, the Maximum Permissible Amount will not exceed the
Defined Contribution Dollar Limitation multiplied by the
following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
(k) PROJECTED ANNUAL BENEFIT. The term Projected Annual
Benefit means the annual retirement benefit (adjusted to an
actuarially equivalent Straight Life Annuity if such benefit is
expressed in a form other than a Straight Life Annuity or
Qualified Joint and Survivor Annuity) to which the Participant
would be entitled under the terms of the Plan assuming:
(1) The Participant will continue employment until
Normal Retirement Age under the Plan (or current age, if
later); and
(2) 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.
4B.2 BASIC LIMITATION. If the Participant does not participate in, and has
never participated in another qualified plan or welfare benefit fund
maintained by the Employer, as defined in Code section 419(e), or an
individual medical account, as defined in Code section 415(l)(2),
maintained by the Employer, or a simplified employee pension, as
defined in Code section 408(k), maintained by the Employer, which
provides Annual Additions as defined in Section 4B.1(a), the amount of
Annual Additions which may be credited to the Participant's Account for
any Limitation Year will not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If
the Employer contributions that would otherwise be contributed or
allocated to the Participant's Account would cause the Annual Additions
for the Limitation Year to exceed the Maximum Permissible Amount, the
amount contributed or allocated will be reduced so that the Annual
Additions for the Limitation Year will equal the Maximum Permissible
Amount.
4B.3 ESTIMATED MAXIMUM PERMISSIBLE AMOUNT. Prior to determining the
Participant's actual Compensation for the Limitation Year, the Employer
may determine the Maximum Permissible Amount for a Participant on the
basis of a reasonable estimation of the Participant's Compensation for
the Limitation Year, uniformly determined for all Participants
similarly situated.
4B.4 ACTUAL MAXIMUM PERMISSIBLE AMOUNT. As soon as administratively feasible
after the end of the Limitation Year, the Maximum Permissible Amount for
the Limitation Year will be determined on the basis of the Participant's
actual Compensation for the Limitation Year.
Article IV - Legal Limitations -66- October 29, 1996
Page 124 of 163
4B.5 PARTICIPANTS COVERED BY ANOTHER PROTOTYPE DEFINED CONTRIBUTION PLAN.
(a) This Section applies if, in addition to this Plan, the
Participant is covered under another qualified Master or
Prototype defined contribution Plan maintained by the Employer,
or a welfare benefit fund, as defined in Code section 419(e),
maintained by the Employer, or an individual medical account as
defined in Code section 415(l)(2), maintained by the Employer, or
a simplified employee pension plan, as defined in Code section
408(k), that provides Annual Additions as defined in Section
4B.1(a), during any Limitation Year. The Annual Additions which
may be credited to a Participant's Account under this Plan for
any such Limitation Year will not exceed the Maximum Permissible
Amount reduced by the Annual Additions credited to a
Participant's account under the other qualified Master and
Prototype defined contribution Plans, welfare benefit funds,
individual medical accounts, and simplified employee pension
plans for the same Limitation Year. If the Annual Additions
with respect to the Participant under other qualified Master and
Prototype defined contribution Plans, welfare benefit funds,
individual medical accounts, and simplified employee pension
plans 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 will be reduced so that the Annual Additions under
all such plans and funds for the Limitation Year will equal the
Maximum Permissible Amount. If the Annual Additions with respect
to the Participant under such other qualified master and
prototype defined contribution plans, welfare benefit funds,
individual medical accounts, and simplified employee pension
plans, in the aggregate are equal to or greater than the Maximum
Permissible Amount, no amount will be contributed or allocated to
the Participant's Account under this Plan for the Limitation Year.
(b) Prior to determining the Participant's actual Compensation
for the Limitation Year, the Employer may determine the estimated
Maximum Permissible Amount for a Participant in the manner
described in Section 4B.3.
(c) As soon as is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the
Participant's actual Compensation for the Limitation Year.
(d) If, pursuant to Section 4B.5(c), or as a result of the
allocation of Forfeitures, a Participant's Annual Additions under
this Plan and such other plans would result in Excess Annual
Additions as defined in Section 4C.1(b) for a Limitation Year,
the Excess Annual Additions will be deemed to consist of the
Annual Additions last allocated, except that Annual Additions
attributable to a simplified employee pension plan will be deemed
to have been allocated first, followed by Annual Additions to a
welfare benefit fund or individual medical account, regardless of
the actual allocation date.
(e) If Excess Annual Additions were allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Annual Additions attributed to
this Plan will be the product of:
(1) The total Excess Annual Additions allocated as
of such date, multiplied by
(2) The ratio of (i) the Annual Additions allocated
to the Participant for the Limitation Year as of such date
under this Plan to (ii) the total Annual Additions
allocated to the Participant for the Limitation Year as of
such date under this and all the other qualified Master or
Prototype defined contribution Plans.
(f) Any Excess Annual Additions attributed to this Plan will be
disposed of in the manner described in Section 4C.3.
Article IV - Legal Limitations -67- October 29, 1996
Page 125 of 163
4B.6 PARTICIPANTS COVERED BY NON-PROTOTYPE DEFINED CONTRIBUTION PLAN. If
the Participant is covered under another qualified defined contribution
plan maintained by the Employer which is not a Master or Prototype
Plan, Annual Additions which may be credited to the Participant's
Account under this Plan for any Limitation Year will be limited in
accordance with Section 4B.5 as though the other plan were a Master or
Prototype Plan, unless the Employer provides other limitations in the
Limitations on Allocations section of the Adoption Agreement.
4B.7 PARTICIPANTS COVERED BY DEFINED BENEFIT PLAN. If the Employer
maintains, or at any time maintained, a qualified defined benefit plan
covering any Participant in this Plan, the sum of the Participant's
Defined Benefit Plan Fraction and Defined Contribution Plan Fraction
will not exceed 1.0 in any Limitation Year. The Annual Additions which
may be credited to the Participant's Account under this Plan for any
Limitation Year will be limited in accordance with the Limitations on
Allocations section of the Adoption Agreement.
4C. TREATMENT OF EXCESSES
4C.1 DEFINITIONS.
(a) EXCESS AGGREGATE CONTRIBUTIONS. The term Excess Aggregate
Contributions means, with respect to any Plan Year, the excess of:
(1) The aggregate Contribution Percentage Amounts taken
into account in computing the ACP of Highly Compensated
Employees for such Plan Year, over
(2) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing the Contribution
Percentage Amounts made on behalf of Highly Compensated
Employees in order of their Actual Contribution Ratios
beginning with the highest of such ratios). Such
determination shall be made after first determining Excess
Elective Deferral Contributions, pursuant to Section
4C.2(a) and then determining Excess Contributions pursuant
to Section 4C.4.
(b) EXCESS ANNUAL ADDITIONS. The term Excess Annual Additions
means the excess of the Participant's Annual Additions for the
Limitation Year over the Maximum Permissible Amount.
(c) EXCESS CONTRIBUTIONS. The term Excess Contributions means, with
respect to any Plan Year, the excess of:
(1) The aggregate Deferral Percentage Amounts taken into
account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(2) The maximum Deferral Percentage Amounts permitted by
the ADP test (determined by reducing the Deferral
Percentage Amounts made on behalf of Highly Compensated
Employees in order of their Actual Deferral Ratios,
beginning with the highest of such ratios).
(d) EXCESS ELECTIVE DEFERRAL CONTRIBUTIONS. The term Excess Elective
Deferral Contributions means those Elective Deferral
Contributions that are includable in a Participant's gross income
under Code section 402(g) to the extent such Participant's
Elective Deferral Contributions for a taxable year exceed the
dollar limitation under such Code section. Excess Elective
Deferral Contributions shall be treated as Annual Additions under
the Plan pursuant to Section 4B, unless such amounts are
distributed in accordance with the provisions of Section 4C.2(a),
below.
Article IV - Legal Limitations -68- October 29, 1996
Page 126 of 163
4C.2 EXCESS ELECTIVE DEFERRAL CONTRIBUTIONS.
(a) In the event that Elective Deferral Contributions made
during a calendar year exceed the limit specified in Section
2C.1(j)(4), then the Excess Elective Deferral Contributions, plus
any income and minus any loss allocable thereto, shall be
distributed to the Participant by the April 15 following the
calendar year in which such amount was contributed, provided that
the Participant notifies the Plan Administrator no later than 30
days in advance of his intent to withdraw such Excess Elective
Deferral Contributions, or is deemed to notify the Plan
Administrator. A Participant is deemed to notify the Plan
Administrator of any Excess Elective Deferral Contributions that
arise by taking into account only those Elective Deferrals made
to this Plan and any other plans of this Employer. The spousal
consent provisions of Section 3C shall not apply to any
distribution of Excess Elective Deferral Contributions.
(b) Excess Elective Deferral Contributions shall be adjusted
for any income or loss for the Employee's tax year. The income
or loss allocable to excess Elective Deferral Contributions is an
amount determined by multiplying the sum of the income or loss
allocable to the Participant's Elective Deferral Contribution
account for the taxable year by a fraction, the numerator of
which is such Participant's Excess Elective Deferral
Contributions for the taxable year, and the denominator of which
is equal to the sum of the Participant's Account balance
attributable to Elective Deferral Contributions as of the
beginning of the taxable year plus the Participant's Elective
Deferral Contributions for the taxable year. Income for the gap
period (the period from the end of the taxable year to the date
of distribution) shall not be allocated to Excess Elective
Deferral Contributions.
(c) Matching Contributions, as defined in Section 1.35, that
are attributable to Excess Elective Deferral Contributions shall
be forfeited, and as such, shall be applied to reduce Employer
contributions or pay Plan expenses.
4C.3 EXCESS ANNUAL ADDITIONS. If, pursuant to Section 4B.4 or as a result
of the allocation of Forfeitures, there are Excess Annual Additions,
the excess will be disposed of using any of the following methods:
(a) Employee Contributions or Elective Deferral Contributions
or both, to the extent they would reduce the Excess Annual
Additions, will be returned to the Participant. The
Contributions returned in accordance with the preceding shall
include any gains or losses attributable to such Contributions.
Employee Contributions so returned will be disregarded with
respect to the ACP test. Elective Deferral Contributions so
returned will be disregarded with respect to the Elective
Deferral limitation described in Section 2C.1(j)(4) of the Plan
and the ADP test.
(b) If, after the application of paragraph (a), Excess Annual
Additions still exist and the Participant is covered by the Plan
at the end of the Limitation Year, the Excess Annual Additions in
the Participant's Account, other than Employee Contributions and
Elective Deferral Contributions, will be used to reduce Employer
contributions (including any allocation of Forfeitures) for such
Participant in the next Limitation Year, and each succeeding
Limitation Year, if necessary.
(c) If, after the application of paragraph (a), Excess Annual
Additions still exist and the Participant is not covered by the
Plan at the end of a Limitation Year, the Excess Annual Additions
will be held unallocated in a suspense account. The suspense
account will be applied to reduce future Employer contributions
(including allocation of any Forfeiture) for all remaining
Participants in the next Limitation Year, and each succeeding
Limitation Year if necessary.
Article IV - Legal Limitations -69- October 29, 1996
Page 127 of 163
(d) If a suspense account is in existence at any time during the
Limitation Year pursuant to this Section, it will not participate
in the allocation of the Trust or Insurance Company's gains and
losses. If a suspense account is in existence at any time during
a particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to the Participants' Account
before any Employer or Employee Contributions may be made to the
Plan for that Limitation Year. Except as provided in Section
4C.3(a), Excess Annual Additions may not be distributed to
Participants or former Participants.
4C.4 EXCESS CONTRIBUTIONS.
(a) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to Participants to whose Participants' Accounts such
Excess Contributions were allocated for the preceding Plan Year.
If such excess amounts are distributed more than 2-1/2 months
after the last day of the Plan Year in which such excess amounts
arose, a ten percent excise tax will be imposed on the Employer
maintaining the Plan with respect to such amounts.
Such distributions shall be made to Highly Compensated Employees
on the basis of the respective portions of the Excess
Contributions attributable to each of such Employees.
The distribution of Excess Contributions made to the family
members of a family group that was combined for purposes of
determining a Highly Compensated Employee's Actual Deferral Ratio
shall be allocated among the family members in proportion to the
Deferral Percentage Amounts (including any amounts required to be
taken into account under Sections 4A.3(a) and (b) of the Plan) of
each family member that is combined to determine the Actual
Deferral Ratio.
(b) Excess Contributions shall be treated as Annual Additions,
as defined in Section 4B.1, under the Plan in the Limitation Year
in which they arose.
(c) Excess Contributions shall be adjusted for any income or
loss for the Plan Year. The income or loss allocable to Excess
Contributions is an amount determined by multiplying the sum of
the income or loss allocable to the Participant's Account for
Deferral Percentage Amounts for the Plan Year, by a fraction, the
numerator of which is such Participant's Excess Contributions for
the Plan Year and the denominator of which is equal to the sum of
the Participant's Account balance attributable to Deferral
Percentage Amounts as of the beginning of the Plan Year plus the
Participant's Deferral Percentage Amounts for the Plan Year.
Income for the gap period (the period from the end of the Plan
Year to the date of distribution) shall not be allocated to
Excess Contributions.
(d) Excess Contributions shall be distributed from the
Participant's Account for Elective Contributions and Qualified
Matching Contributions (if applicable) in proportion to the
Participant's Elective Deferral Contributions and Qualified
Matching Contributions (to the extent used in the ADP test) for
the Plan Year. Excess Contributions shall be distributed from
the Participant's Qualified Nonelective Contribution Account only
to the extent that such Excess Contributions exceed the balance
in the Participant's Account for Elective Contributions and
Qualified Matching Contributions.
Article IV - Legal Limitations -70- October 29, 1996
Page 128 of 163
(e) Matching Contributions, as defined in Section 1.35, that
are attributable to Excess Contributions, shall be forfeited, and
as such, shall be applied to reduce Employer contributions or pay
Plan expenses.
4C.5 EXCESS AGGREGATE CONTRIBUTIONS.
(a) Notwithstanding any other provision of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable, or if not
forfeitable, distributed no later than the last day of each Plan
Year to Participants to whose Participants' Accounts such Excess
Aggregate Contributions were allocated for the preceding 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 amounts arose, a ten percent excise tax will be
imposed on the Employer maintaining the Plan with respect to
those amounts.
The distribution of Excess Aggregate Contributions made to
the family members of a family group that was combined for
purposes of determining a Highly Compensated Employee's Actual
Contribution Ratio shall be allocated among the family members in
proportion to the Contribution Percentage Amounts (including any
amounts required to be taken into account under Sections 4A.5 (a)
and (b) of the Plan) of each family member that is combined to
determine the Actual Contribution Ratio.
(b) Excess Aggregate Contributions shall be treated as Annual
Additions, as defined in Section 4B.1, in the Limitation Year in
which they arose.
(c) Excess Aggregate Contributions shall be adjusted for any
income or loss for the Plan Year. The income or loss allocable
to Excess Aggregate Contributions is an amount determined by
multiplying the sum of the income or loss allocable to the
Participant's Account for Contribution Percentage Amounts for the
Plan Year by a fraction, the numerator of which is such
Participant's Excess Aggregate Contributions for the Plan Year,
and the denominator of which is equal to the sum of the
Participant's Account balance attributable to Contribution
Percentage Amounts as of the beginning of the Plan Year plus the
Participant's Contribution Percentage Amounts for the Plan Year.
Income for the gap period (the period from the end of the Plan
Year to the date of distribution) shall not be allocated to
Excess Aggregate Contributions.
(d) Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a pro-rata basis from the
Participant's Account for Employee Contributions, Matching
Contributions, and Qualified Matching Contributions (and, if
applicable, the Participant's Qualified Nonelective Contributions
or Elective Deferral Contributions, or both).
(e) Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions or pay Plan expenses.
(f) Matching Contributions as defined in Section 1.35 that are
attributable to Excess Aggregate Contributions shall be
forfeited, and as such, shall be applied to reduce Employer
contributions or pay Plan expenses.
Article IV - Legal Limitations -71- October 29, 1996
Page 129 of 163
ARTICLE V - PARTICIPANT PROVISIONS
5A. ANNUITY CONTRACT AND PARTICIPANT'S ACCOUNT
5A.1 PARTICIPANT'S ACCOUNT. A Participant's Account shall be maintained on
behalf of each Participant until such Account is distributed in
accordance with the terms of this Plan.
Each Participant shall have the exclusive authority to direct the
investment of Employee Contributions, Elective Deferral Contributions,
QVEC Contributions and Rollover Contributions, if applicable, from
among the investment options selected by the Employer.
If selected by the Employer in its Adoption Agreement, the Participant,
Beneficiary and/or Alternate Payee additionally shall have the
exclusive authority to direct the investment of contributions made by
the Employer from among the investment choices selected by the Employer.
5A.2 INVESTMENT TRANSFERS. Each Participant, Beneficiary, and/or Alternate
Payee shall have the exclusive authority to direct the transfer of
amounts between the investment funds designated by the Employer,
attributable to his Employee Contributions, Elective Deferral
Contributions, QVEC Contributions and Rollover Contributions, if
applicable.
If the Employer selects in its Adoption Agreement to grant the
Participant exclusive authority to direct the investment of
contributions made by the Employer, the Participant, Beneficiary,
and/or Alternate Payee shall also have the exclusive authority to
transfer contributions made by the Employer from among the investment
choices selected by the Employer.
The transfer of amounts between investment funds shall be subject to
the rules of the investment funds in which the Participant's Account is
invested or is to be invested.
The Plan Administrator or the Participant, Beneficiary, and/or
Alternate Payee as the case may be, may change such amounts as often as
the Plan Administrator may allow in accordance with the terms of the
investment funds in which the Participant's Account is being invested.
The ability of a Participant who is subject to the reporting
requirements of section 16(a) of the Securities and Exchange Act of
1934 (the "Act") to make withdrawals or investment changes involving
the Participant's Employer Stock Account may be restricted by the Plan
Administrator to comply with rules under section 16(b) of the Act.
5A.3 PARTICIPANT'S ACCOUNT VALUATION. A Participant's Account shall be
maintained on behalf of each Participant until such Account is
distributed in accordance with the terms of this Plan. At least once
per year, as of the last day of the Plan Year, each Participant's
Account shall be adjusted, in the ratio that the Participant's Account
balance bears to all account balances invested into the same investment
vehicle, for any earnings, gains, losses, contributions, withdrawals,
expenses, and loans attributable to such Plan Year, in order to obtain
a new valuation of the Participant's Account. The assets of the Plan
will be valued annually at fair market value as of the last day of each
Plan Year.
Article V - Participant Provisions -72- October 29, 1996
Page 130 of 163
5B. LIFE INSURANCE POLICIES
5B.1 OPTIONAL PURCHASE OF LIFE INSURANCE. If the Employer in its Adoption
Agreement shall permit the purchase of life insurance on the lives of some
or all Participants hereunder, each eligible Participant may elect that a
portion of the Contribution made on his behalf shall be applied to the
purchase of a Life Insurance Policy or Policies on his life. The
application for each Policy shall be signed by the Participant and by the
Trustee and shall conform to the requirements of the Insurance Company,
including any requested evidence of insurability, and the requirements of
this Section. All Life Insurance Policies shall be issued so as to permit a
common billing date. Any Policy on the life of a Participant who can
qualify for waiver of premium thereunder and participant account
contribution disability benefits thereunder may include such benefits if
applied for by the Participant. The Plan Administrator may adopt reasonable
rules regarding the purchase of Life Insurance Policies provided such rules
are administered in a consistent and nondiscriminatory manner. No
application shall be made hereunder for any Life Insurance Policy on the
life of a Participant acceptable to the Insurance Company at standard
premium rates for a face amount of less that $1,000 for the first, or any
additional Policy issued on the Participant's life.
5B.2 PREMIUMS ON LIFE INSURANCE POLICIES. The premiums on all Life
Insurance Policies on the life of a Participant shall be paid from the
portion of his Participant's Account attributable to contributions made
by the Employer, to the extent sufficient therefor, otherwise in one of
the following manners:
(a) By a loan against the Participant's Policy or Policies,
under the automatic premium loan provision thereof, or
(b) By payment out of his Participant's Account.
If the Participant is not acceptable to the Insurance Company as a
standard risk at standard rates, a Policy with the same premium but a
lesser death benefit may be purchased.
5B.3 LIMITATIONS ON PREMIUMS. In no case shall the cumulative total
premiums paid on all Policies held on the life of a Participant
hereunder exceed an amount equal to the applicable percentage set forth
below of all Contributions (other than Employee Contributions) and
Forfeitures theretofore allocated or currently due on his behalf:
(a) 49% in the case of ordinary life insurance or similar
policies.
(b) 25% in the case of term insurance policies or a combination
of policies, with premiums on ordinary life insurance or similar
policies being given half weight.
If such cumulative total premiums would otherwise exceed this amount,
the necessary steps to avoid this result shall be taken by reduction of
the Participant's life insurance coverage by changing all or a portion
of his coverage to paid-up life insurance or by selling the excess
portion to the Participant.
5B.4 DISPOSAL. A Participant who no longer wishes to have any part of his
allocable share of Contributions used to pay the premiums for any Life
Insurance Policy or Policies may withdraw a prior election by written
notice to the Trustee to that effect. Any Policy shall be disposed of
in accordance with its provisions as the Trustee shall direct.
5B.5 RIGHTS UNDER POLICIES. Each Policy shall provide that the Trustee
shall have the right to receive any or all payments that may be due
during the Participant's lifetime. Any death benefit shall be payable
directly to the Beneficiary named in the Policy and the Participant
shall have the right, subject to the terms of Section 3C, either
directly or through the Trustee, to change the Beneficiary from time to
time and to elect settlement options under the policy for the benefit
of the Beneficiary. The Trustee shall have the right to exercise all
other options and privileges contained in the policy and shall exercise
such rights and privileges in a manner consistent with the terms of the
Plan.
Article V - Participant Provisions -73- October 29, 1996
Page 131 of 163
5B.6 LOANS. No loans shall be made against any of the Policies hereunder
either from the Insurance Company or any other source unless such loans
are made in order to pay amounts then due as premiums thereon.
5B.7 CONDITIONS OF COVERAGE. Except as may be otherwise provided in any
conditional or binding receipt issued by the Insurance Company, there
shall be no coverage and no death benefit payable under any Policy to
be purchased from the Insurance Company until such Policy shall have
been delivered and the premium therefor shall have been paid to the
Insurance Company as a premium for that Policy. Neither the Employer
nor the Trustee shall have any responsibility as to the effectiveness
of any Life Insurance Policy purchased from the Insurance Company
hereunder nor be under any liability or obligation to pay any amount to
any Participant or his Beneficiary by reason of any failure or refusal
by the Insurance Company to make such payment.
5B.8 POLICY NOT YET IN FORCE. If at the death of any Participant, the
Trustee shall be holding any amount intended for the purchase of any
Life Insurance Policy on the Participant's life, but coverage under
such Policy shall not yet be in force, the Trustee shall credit such
amount to the Participant's Account to be disposed of as a portion
thereof.
5B.9 VALUE OF POLICY. The value of any Policy on the life of a living
Participant for any purpose under this Plan shall be that amount which
the Insurance Company would pay upon surrender of such Policy in
accordance with its usual rules and practices.
5B.10 DIVIDENDS. If dividends are allowed on any Life Insurance Policy, they
shall be used to provide additional benefits under the Policy.
5B.11 DISTRIBUTION. No life insurance protection shall continue in force
under the Plan subsequent to a Participant's retirement or Termination
of Employment, whichever occurs first. As of such date, any Life
Insurance Policy shall be distributed to the Participant in accordance
with its terms and the terms of Section 3C.3.
5B.12 APPLICATION. The Trustee, if the Plan is trusteed, or custodian, if
the Plan has a custodial account, shall apply for and will be the owner
of any Life Insurance Policy purchased under the terms of this Plan.
The Life Insurance Policy(ies) must provide that proceeds will be
payable to the Trustee (or custodian, if applicable). However, the
Trustee (or custodian) shall be required to pay over all proceeds of
the Life Insurance Policy(ies) to the Participant's designated
Beneficiary in accordance with the distribution provisions of this
Plan. A Participant's Spouse will be the designated Beneficiary of the
proceeds in all circumstances unless a Qualified Election has been made
in accordance with Section 3C.2(c), Joint and Survivor Annuity
Requirements, if applicable. Under no circumstances shall the Trust
(or custodial account) retain any part of the proceeds.
In the event of any conflict between the provisions of this Plan and
any Life Insurance Policies or annuity contracts issued pursuant to the
Plan, the Plan provisions shall control.
Article V - Participant Provisions -74- October 29, 1996
Page 132 of 163
5C. LOANS
5C.1 LOANS TO PARTICIPANTS. If the Employer has specified in its Adoption
Agreement that loans are permitted, then the Plan Administrator may make a
bona fide loan to a Participant, in an amount which, when added to the
outstanding balance of all other loans to the Participant from all
qualified plans of the Employer, does not exceed the lesser of $50,000
reduced by the excess of the Participant's highest outstanding loan balance
during the 12 months preceding the date on which the loan is made over the
outstanding loan balance on the date the new loan is made, or 50% of the
Participant's Vested Interest in his Participant's Account excluding
amounts attributable to QVEC Contributions. Notwithstanding any provision
in this paragraph to the contrary, loans may not exceed a Participant's
Vested Interest attributable to such contributions.
In the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the Plan.
No loans will be made to any Shareholder-Employee or Owner-Employee or
to family members of Shareholder-Employees or Owner-Employees, as
defined in Code section 267(c)(4).
The loan shall be made under such terms, security interest, and
conditions as the Plan Administrator deems appropriate, provided,
however, that:
(a) Loans shall be made available to all Participants and
parties-in-interest (as defined in ERISA and including Employees
and Beneficiaries), on a reasonably equivalent basis.
(b) Loans shall not be made available to Highly Compensated
Employees on a basis greater than the basis made available to
other Employees.
(c) Loans must bear a reasonable rate of interest.
(d) Loans are adequately secured.
(e) Unless the provisions of Section 3C.6 apply to a
Participant, loans may be made only after a Participant obtains
the consent of his Spouse, if any, to use his Participant's
Account as security for the loan. Spousal consent shall be
obtained no earlier than the beginning of the 90-day period that
ends on the date on which the loan is to be so secured. The
consent must be in writing, must acknowledge the effect of the
loan, and must be witnessed by a Plan representative or notary
public. Such consent shall thereafter be binding with respect to
the consenting Spouse or any subsequent Spouse with respect to
that loan. A new consent shall be required if the Participant's
Account is used for renegotiation, extension, renewal or other
revision of the loan.
(f) Loans must be made in accordance with and subject to all of
the provisions of this Section 5C.
If a valid spousal consent has been obtained in accordance with (e),
then, notwithstanding any other provision of this Plan, the portion of
the Participant's Vested Interest 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 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 Interest in his Participant's Account
(determined without regard to the preceding sentence) is payable to the
surviving Spouse, then the Participant's Account shall be adjusted by
first reducing the Vested Interest by the amount of the security used
as repayment of the loan, and then determining the benefit payable to
the surviving Spouse.
Article V - Participant Provisions -75- October 29, 1996
Page 133 of 163
5C.2 LOAN PROCEDURES. The Plan Administrator shall establish a written set of
procedures, set forth in the summary plan description or any other
established set of procedures, which becomes a part of such Plan by which
all loans will be administered. Such rules, which are incorporated herein
by reference, will include, but not be limited to the following:
(a) The person or persons authorized to administer the loan
program, identified by name or position;
(b) The loan application procedure;
(c) The basis for approving or denying loans;
(d) Any limits on the types of loans permitted;
(e) The procedure for determining a "reasonable" interest rate;
(f) Acceptable collateral;
(g) Default conditions; and
(h) Steps which will be taken to preserve Plan assets in the
event of default.
5D. PARTICIPANTS' RIGHTS
5D.1 GENERAL RIGHTS OF PARTICIPANTS AND BENEFICIARIES. The Plan is established
and the Plan or Trust assets are held for the exclusive purpose of
providing benefits for such Employees and their Beneficiaries as have
qualified to participate under the terms of the Plan.
5D.2 FILING A CLAIM FOR BENEFITS. A Participant or Beneficiary, or the
Employer acting in his behalf, shall notify the Plan Administrator of a
claim of benefits under the Plan. Such request shall be in writing to
the Plan Administrator and shall set forth the basis of such claim and
shall authorize the Plan Administrator to conduct such examinations as
may be necessary to determine the validity of the claim and to take
such steps as may be necessary to facilitate the payment of any
benefits to which the Participant or Beneficiary may be entitled under
the terms of the Plan.
5D.3 DENIAL OF CLAIM. Whenever a claim for benefits by any Participant or
Beneficiary has been denied by a Plan Administrator, a written notice,
prepared in a manner calculated to be understood by the Participant,
must be provided, setting forth (1) the specific reasons for the
denial; (2) the specific reference to pertinent Plan provisions on
which the denial is based; (3) a description of any additional material
or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary; and (4)
an explanation of the Plan's claim review procedure.
5D.4 REMEDIES AVAILABLE TO PARTICIPANTS. A Participant or Beneficiary (1)
may request a review by a Named Fiduciary, other than the Plan
Administrator, upon written application to the Plan; (2) may review
writing to a Named Fiduciary. A Participant or Beneficiary shall have
60 days after receipt by the claimant of written notification of a
denial of a claim to request a review of a denied claim.
A decision by a Named Fiduciary shall be made promptly and not later
than 60 days after the Named Fiduciary's receipt of a request for
review, unless special circumstances require an extension of the time
for processing in which case a decision shall be rendered as soon as
possible, but not later than 120 days after receipt of a request for
review. The decision on review by a Named Fiduciary shall be in
writing and shall include specific reasons for the decision, written in
a manner calculated to be understood by the claimant, and specific
references to the pertinent Plan provisions on which the decision is
based.
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Page 134 of 163
A Participant or Beneficiary shall be entitled, either in his own name
or in conjunction with any other interested parties, to bring such
actions in law or equity or to undertake such administrative actions or
to seek such relief as may be necessary or appropriate to compel the
disclosure of any required information, to enforce or protect his
rights, to recover present benefits due to him or to clarify his rights
to future benefits under the Plan.
5D.5 LIMITATION OF RIGHTS. Participation hereunder shall not grant any
Participant the right to be retained in the Service of the Employer or
any other rights or interest in the Plan or Trust fund other than those
specifically herein set forth.
5D.6 100% VESTED CONTRIBUTIONS. Each Participant, regardless of his length
of Service with the Employer, shall be fully vested (100%) at all times
in any portion of his Participant's Account attributable to the
following contributions, as applicable:
(a) Employee Contributions and earnings thereon;
(b) Elective Deferral Contributions and earnings thereon;
(c) Qualified Matching Contributions and earnings thereon;
(d) Qualified Nonelective Contributions and earnings thereon;
(e) Rollover Contributions and earnings thereon;
(f) QVEC Contributions and earnings thereon.
5D.7 REINSTATEMENT OF BENEFIT. In the event any portion of a benefit which
is payable to a Participant or a Beneficiary shall remain unpaid on
account of the inability of the Plan Administrator, after diligent
effort, to locate such Participant or Beneficiary, the amount so
distributable shall be treated as a Forfeiture under Section 3D. If a
claim is made by the Participant or Beneficiary for any benefit
forfeited under this Section, such benefit must be reinstated by the
Employer.
5D.8 NON-ALIENATION. It is a condition of the Plan, and all rights of each
Participant shall be subject thereto, that no right or interest of any
Participant in the Plan shall be assignable or transferable in whole or
in part, either directly or by operation of law or otherwise,
including, but without limitation, execution, levy, garnishment,
attachment, pledge, bankruptcy or in any other manner, and no right or
interest of any Participant in the Plan shall be liable for or subject
to any obligation or liability of such Participant. The preceding
sentence shall not preclude the enforcement of a federal tax levy made
pursuant to Code section 6331 or the collection by the United States on
a judgement resulting from an unpaid tax assessment.
The preceding paragraph shall also apply to the creation, 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 QDRO. A domestic relations order entered before
January 1, 1985 will be treated as a QDRO if payment of benefits
pursuant to the order has commenced as of such date, and may be treated
as a QDRO if payment of benefits has not commenced as of such date,
even though the order does not satisfy the requirements of Code section
414(p).
Article V - Participant Provisions -77- October 29, 1996
Page 135 of 163
ARTICLE VI - OVERSEER PROVISIONS
6A. FIDUCIARY DUTIES AND RESPONSIBILITIES
6A.1 GENERAL FIDUCIARY STANDARD OF CONDUCT. Each Fiduciary of the Plan shall
discharge his duties hereunder solely in the interest of the Participants
and their Beneficiaries and for the exclusive purpose of providing
benefits to Participants and their Beneficiaries and defraying reasonable
expenses of administering the Plan. Each Fiduciary shall act with the
care, skill, prudence and diligence under the circumstances that a prudent
man acting in a like capacity and familiar with such matters would use in
conducting an enterprise of like character and with like aims, in
accordance with the documents and instruments governing this Plan, insofar
as such documents and instruments are consistent with this standard.
6A.2 SERVICE IN MULTIPLE CAPACITIES. Any Person or group of Persons may
serve in more than one Fiduciary capacity with respect to this Plan,
specifically including service both as Trustee and Plan Administrator.
6A.3 LIMITATIONS ON FIDUCIARY LIABILITY. Nothing in this Plan shall be
construed to prevent any Fiduciary from receiving any benefit to which
he may be entitled as a Participant or Beneficiary in this Plan, so
long as the benefit is computed and paid on a basis which is consistent
with the terms of this Plan as applied to all other Participants and
Beneficiaries. Nor shall this Plan be interpreted to prevent any
Fiduciary from receiving any reasonable compensation for services
rendered, or for the reimbursement of expenses properly and actually
incurred in the performance of his duties with the Plan; except that no
Person so serving who already receives full-time pay from an Employer
shall receive compensation from this Plan, except for reimbursement of
expenses properly and actually incurred.
6A.4 INVESTMENT MANAGER. If an Investment Manager has been appointed
pursuant to Section 6B.7 of this Plan, he is required to acknowledge in
writing that he has undertaken a Fiduciary responsibility with respect
to the Plan. The Insurance Company's liability as a Fiduciary is
limited to that arising from its management of any assets of the Plan
held by the Insurance Company in its separate accounts.
6B. THE PLAN ADMINISTRATOR
6B.1 DESIGNATION AND ACCEPTANCE. The Employer shall designate a Person or
Persons to serve as Plan Administrator under the Plan and such Persons, by
joining in the execution of the Adoption Agreement, accepts such
appointment and agrees to act in accordance with the terms of the Plan.
6B.2 DUTIES AND RESPONSIBILITY. The Plan Administrator shall administer the
Plan for the exclusive benefit of the Participants and their
Beneficiaries in a nondiscriminatory manner subject to the specific
terms of the Plan. The Plan Administrator shall perform all such
duties as are necessary to operate, administer, and manage the Plan in
accordance with the terms thereof. This shall include notification to
the Insurance Company of any adjustment made to a Participant's Account
as a result of Excess Annual Additions as defined in Section 4C.1(b).
The Plan Administrator shall comply with the regulatory provisions of
ERISA and shall furnish to each Participant (a) a summary plan
description, (b) upon written request, a statement of his total
benefits accrued and his vested benefits if any and (c) the information
necessary to elect the benefits available under the Plan. The Plan
Administrator shall also file the appropriate annual reports and any
other data which may be required by appropriate regulatory agencies.
Furthermore, the Plan Administrator shall take the necessary steps to
notify the appropriate interested parties whenever an application is
made to the Secretary of the Treasury for a determination letter in
accordance with Code section 7476 as amended.
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Page 136 of 163
6B.3 SPECIAL DUTIES. If the Employer that adopts this Plan is not the Plan
Administrator, and the Plan provides for either Employee Contributions
or Matching Contributions to be made, the Plan Administrator shall:
(a) Maintain records that enable it to monitor the adopting
Employer's compliance with the requirements of Code section
401(m);
(b) Perform the ACP test, as described in Section 4A.4, for
the Employer on an annual basis; and
(c) Notify the Employer if it is required to correct Excess
Aggregate Contributions.
6B.4 EXPENSES AND COMPENSATION. The expenses necessary to administer the
Plan shall be taken from Participants' Accounts unless paid by the
Employer, including but not limited to those involved in retaining
necessary professional assistance from an attorney, an accountant, an
actuary, or an investment advisor. Nothing shall prevent the Plan
Administrator from receiving reasonable compensation for services
rendered in administering this Plan, provided the Plan Administrator is
not a full-time Employee of any Employer adopting this Plan.
6B.5 INFORMATION FROM EMPLOYER. To enable the Plan Administrator to perform
his functions, the Employer shall supply full and timely information to
the Plan Administrator on all matters relating to this Plan as the Plan
Administrator may require.
6B.6 ADMINISTRATIVE COMMITTEE; MULTIPLE SIGNATURES. In the event that more
than one Person has been duly nominated to serve on the Administrative
Committee and has signified in writing the acceptance of such
designation, the signature(s) of one or more Persons may be accepted by
an interested party as conclusive evidence that the Administrative
Committee has duly authorized the action therein set forth and as
representing the will of and binding upon the whole Administrative
Committee. No Person receiving such documents or written instructions
and acting in good faith and in reliance thereon shall be obliged to
ascertain the validity of such action under the terms of this Plan.
The Administrative Committee shall act by a majority of its members at
the time in office, and such action may be taken either by a vote at a
meeting or in writing without a meeting.
6B.7 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR. The Plan
Administrator, or any member of the Administrative Committee, may
resign at any time by delivering to the Employer a written notice of
resignation, to take effect at a date specified therein, which shall
not be less than 30 days after the delivery thereof, unless such notice
shall be waived.
The Plan Administrator may be removed with or without cause by the
Employer by delivery of written notice of removal, to take effect at a
date specified therein, which shall be not less than thirty (30) days
after delivery thereof, unless such notice shall be waived.
The Employer, upon receipt of or giving notice of the resignation or
removal of the Plan Administrator, shall promptly designate a successor
Plan Administrator who must signify acceptance of this position in
writing. In the event no successor is appointed, the Board of
Directors of the Employer will function as the Administrative Committee
until a new Plan Administrator has been appointed and has accepted such
appointment.
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Page 137 of 163
6B.8 INVESTMENT MANAGER. The Plan Administrator may appoint, in writing, an
Investment Manager or Managers to whom is delegated the authority to manage,
acquire, invest or dispose of all or any part of the Plan or Trust assets.
With regard to the assets entrusted to his care, the Investment Manager shall
provide written instructions and directions to the Employer or Trustee, as
applicable, who shall in turn be entitled to rely upon such written
direction. This appointment and delegation shall be evidenced by a signed
written agreement.
6B.9 DELEGATION OF DUTIES. The Plan Administrator shall have the power, to
the extent permitted by law, to delegate the performance of such
Fiduciary and non-Fiduciary duties, responsibilities and functions as
the Plan Administrator shall deem advisable for the proper management
and administration of the Plan in the best interests of the
Participants and their Beneficiaries.
6C. TRUST AGREEMENT
This agreement entered into by and among the Employer, the Plan Administrator
and the Trustee pursuant to the Adoption Agreement completed and signed by the
Employer, the Plan Administrator and Trustee, hereby establishes the Trust with
the following provisions to form a part of and implement the provisions of the
Plan:
6C.1 CREATION AND ACCEPTANCE OF TRUST. The Trustee, by joining in the execution
of the Adoption Agreement, accepts the Trust hereby created and agrees to
act in accordance with the express terms and conditions herein stated.
6C.2 TRUSTEE CAPACITY; CO-TRUSTEES. The Trustee may be a Bank, Trust
Company or other corporation possessing trust powers under applicable
State or Federal law or one or more individuals or any combination
thereof.
When two or more persons serve as Trustee, they are specifically
authorized, by a written agreement between themselves, to allocate
specific responsibilities, obligations or duties among themselves. An
original copy of such written agreement is to be delivered to the Plan
Administrator.
6C.3 RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR TRUSTEE. Any Trustee
may resign at any time by delivering to the Plan Administrator a
written notice of resignation, to take effect at a date specified
therein, which shall not be less than 30 days after the delivery
thereof, unless such notice shall be waived.
The Trustee may be removed with or without cause by the Board of
Directors by delivery of a written notice of removal, to take effect at
a date specified therein, which shall not be less than 30 days after
delivery thereof, unless such notice shall be waived.
In the case of the resignation or removal of a Trustee, the Trustee
shall have the right to a settlement of its account, which may be made,
at the option of the Trustee, either (1) by judicial settlement in an
action instituted by the Trustee in a court of competent jurisdiction,
or (2) by written agreement of settlement between the Trustee and the
Plan Administrator.
Upon such settlement, all right, title and interest of such Trustee in
the assets of the Trust and all rights and privileges under this
Agreement theretofore vested in such Trustee shall vest in the
successor Trustee, and thereupon all future liability of such Trustee
shall terminate; provided, however, that the Trustee shall execute,
acknowledge and deliver all documents and written instruments which are
necessary to transfer and convey the right, title and interest in the
Trust assets, and all rights and privileges to the successor Trustee.
The Board of Directors, upon receipt of notice of the resignation or
removal of the Trustee, shall promptly designate a successor Trustee,
whose appointment is subject to acceptance of this Trust in writing and
shall notify the Insurance Company in writing of such successor Trustee.
Article VI - Overseer Provisions -80- October 29, 1996
Page 138 of 163
6C.4 TAXES, EXPENSES AND COMPENSATION OF TRUSTEE. The Trustee shall deduct
from and charge against the Trust fund any taxes paid by it which may
be imposed upon the Trust fund or the income thereof or which the
Trustee is required to pay with respect to the interest of any person
therein.
The Employer shall pay the Trustee annually its expenses in
administering the Trust and a reasonable compensation for its service
as Trustee hereunder if the Trustee is not an Employee of the Plan, at
a rate to be agreed upon from time to time. The reasonable
compensation shall include that for any extraordinary services.
6C.5 TRUSTEE ENTITLED TO CONSULTATION. The Trustee shall be entitled to
advice of counsel, which may be counsel for the Plan or the Employer,
in any case in which the Trustee shall deem such advice necessary.
With the exception of those powers and duties specifically allocated to
the Trustee by the express terms of this Plan, it shall not be the
responsibility of the Trustee to interpret the terms of the Plan or
Trust and the Trustee may request, and is entitled to receive guidance
and written direction from the Plan Administrator on any point
requiring construction or interpretation of the Plan documents.
6C.6 RIGHTS, POWERS AND DUTIES OF TRUSTEE. The Trustee shall have the
following rights, powers, and duties:
(a) The Trustee shall be responsible for the safekeeping and
administering of the assets of this Plan and Trust in accordance
with the provisions of this Agreement and any amendments
thereto. The duties of the Trustee under this Agreement shall be
determined solely by the express provisions of this Agreement and
no other further duties or responsibilities shall be implied.
Subject to the terms of this Plan and Trust, the Trustee shall be
fully protected and shall incur no liability in acting in
reliance upon the written instructions or directions of the Plan
Administrator or a duly designated Investment Manager or any
other Named Fiduciary.
(b) The Trustee shall have all powers necessary or convenient
for the orderly and efficient performance of its duties
hereunder, including but not limited to those specified in this
Section. The Trustee may appoint one or more administrative
agents or contract for the performance of such administrative and
service functions as it may deem necessary for the effective
installation and operation of the Plan and Trust.
(c) The Trustee shall have the power to collect and receive any and
all monies and other property due hereunder and to give full
discharge and acquittance therefor; to settle, compromise or
submit to arbitration any claims, debts or damages due or owing
to or from the Trust; to commence or defend suits or legal
proceedings wherever, in its judgment, any interest of the Trust
requires it; and to represent the Trust in all suits or legal
proceedings in any court of law or equity or before any other
body or tribunal. It shall have the power generally to do all
acts, whether or not expressly authorized, which the Trustee in
the exercise of its Fiduciary responsibility may deem necessary
or desirable for the protection of the Trust and the assets
thereof.
(d) The Trustee shall make application to the Insurance Company
for the Annuity Contract required hereunder and shall take all
necessary steps to obtain any Life Insurance Policies elected on
the lives of Participants hereunder. In applying for the Annuity
Contract, the Trustee may indicate that, unless it directs the
Insurance Company otherwise, it shall be entitled to receive all
cash payments for further distribution to Participants and
Beneficiaries.
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Page 139 of 163
(e) The Trustee may temporarily hold cash balances and shall be
entitled to deposit any such funds received in a bank account or
bank accounts in the name of the Trust in any bank or banks
selected by the Trustee, including the banking department of the
Trustee, pending disposition of such funds in accordance with the
Trust. Any such deposit may be made with or without interest.
(f) The Trustee shall obtain and deal with any Life Insurance
Policies or other assets of this Trust held or received under
this Plan only in accordance with the written directions from the
Plan Administrator. The Trustee shall be under no duty to
determine any facts or the propriety of any action taken or
omitted by it in good faith pursuant to instructions from the
Plan Administrator.
(g) All contributions made to the Trust fund under this Plan
shall be paid by the Trustee to the Insurance Company under the
Annuity Contract within 30 days after the date such contributions
were due under the Plan. However, in lieu of holding any
contributions made to the Trust fund, the Trustee may direct that
all such contributions be made directly to the Insurance Company
under the Annuity Contract or any Life Insurance Policy. The
Employer shall keep the Trustee informed of all contributions
made directly to the Insurance Company in accordance with the
Trustee's instructions.
(h) If the whole or any part of the Trust shall become liable
for the payment of any estate, inheritance, income or other tax
which the Trustee shall be required to pay, the Trustee shall
have full power and authority to pay such tax out of any monies
or other property in its hands for the account of the person
whose interest hereunder is so liable. Prior to making any
payment, the Trustee may require such releases or other documents
from any lawful taxing authority as it shall deem necessary. The
Trustee shall not be liable for any nonpayment of tax when it
distributes an interest hereunder on instructions from the Plan
Administrator.
(i) The Trustee shall keep a full, accurate and detailed record
of all transactions of the Trust which the Plan Administrator
shall have the right to examine at any time during the Trustee's
regular business hours. Following the close of the fiscal year
of the Trust, or as soon as practical thereafter, the Trustee
shall furnish the Plan Administrator with a statement of
account. This account shall set forth all receipts,
disbursements and other transactions effected by the Trustee
during said year.
The Plan Administrator shall promptly notify the Trustee in
writing of its approval or disapproval of the account. The Plan
Administrator's failure to disapprove the account within 60 days
after receipt shall be considered an approval. The approval by
the Plan Administrator shall be binding as to all matters
embraced in any statement to the same extent as if the account of
the Trustee had been settled by judgment or decree of a court of
competent jurisdiction under which the Trustee, Plan
Administrator, Employer and all persons having or claiming any
interest in the Trust were parties; provided, however, that the
Trustee may have its account judicially settled if it so desires.
(j) If, at any time, there shall be a dispute as to the person
to whom payment or delivery of monies or property should be made
by the Trustee, or regarding any action to be taken by the
Trustee, the Trustee may postpone such payment, delivery or
action, retaining the funds or property involved, until such
dispute shall have been resolved in a court of competent
jurisdiction or the Trustee shall have been indemnified to its
satisfaction or until it has received written direction from the
Plan Administrator.
Article VI - Overseer Provisions -82- October 29, 1996
Page 140 of 163
(k) Anything in this instrument to the contrary
notwithstanding, it shall be understood that the Trustee shall
have no duty or responsibility with respect to the determination
of matters pertaining to the eligibility of any Employee to
become or remain a Participant hereunder, the amount of benefit
to which any Participant or Beneficiary shall be entitled
hereunder, all such responsibilities being vested in the Plan
Administrator. The Trustee shall have no duty to collect any
contribution from the Employer and shall not be concerned with
the amount of any contribution nor the application of any
contribution formula.
6C.7 EVIDENCE OF TRUSTEE ACTION. In the event that the Trustee comprises
two or more Trustees, then those Trustees may designate one such
Trustee to transmit all decisions of the Trustee and to sign all
necessary notices and other reports on behalf of the Trustee. All
notices and other reports bearing the signature of the individual
Trustee so designated shall be deemed to bear the signatures of all the
individual Trustees and all parties dealing with the Trustee are
entitled to rely on any such notices and other reports as authentic and
as representing the action of the Trustee.
6C.8 INVESTMENT POLICY. This Plan has been established for the sole purpose
of providing benefits to the Participants and their Beneficiaries. In
determining its investments hereunder, the Trustee shall take account
of the advice provided by the Plan Administrator as to funding policy
and the short and long-range needs of the Plan based on the evident and
probable requirements of the Plan as to the time benefits shall be
payable and the requirements therefor.
6C.9 PERIOD OF THE TRUST. If it shall be determined that the applicable
State law requires a limitation on the period during which the
Employer's Trust shall continue, then such Trust shall not continue for
a period longer than 21 years following the death of the last of those
Participants including future Participants who are living at the
Effective Date hereof. At least 180 days prior to the end of the
twenty-first year as described in the first sentence of this Section
the Employer, the Plan Administrator and the Trustee shall provide for
the establishment of a successor trust and transfer of Plan assets to
the Trustee. If applicable State law requires no such limitation, then
this Section shall not be operative.
6D. THE INSURANCE COMPANY
6D.1 DUTIES AND RESPONSIBILITIES. The Insurance Company shall issue the Annuity
Contract and any Policies hereunder and thereby assumes all the duties and
responsibilities set forth therein. The terms of the Annuity Contract may
be changed as provided therein without amending this Plan, provided such
changes shall conform (1) to the requirements for qualification under Code
section 401(a), as amended from time to time and (2) to ERISA, as amended
from time to time.
6D.2 RELATION TO EMPLOYER, PLAN ADMINISTRATOR AND PARTICIPANTS. The
Insurance Company may receive the statement of the Plan Administrator
or, if the Plan Administrator so designates, the Employer or the
Trustee, as conclusive evidence of any of the matters decided in the
Plan, and the Insurance Company shall be fully protected in taking or
permitting any action on the basis thereof and shall incur no liability
or responsibility for so doing. The Insurance Company shall not be
required to look into the terms of the Plan, to question any action by
the Employer or the Plan Administrator or any Participant nor to
determine that such action is properly taken under the Plan. The
Insurance Company shall be fully discharged from any and all liability
with respect to any payment to any Participant hereunder in accordance
with the terms of the Annuity Contract or of any Policies under the
Plan. The Insurance Company shall not be required to take any action
contrary to its normal rules and practices.
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Page 141 of 163
6D.3 RELATION TO TRUSTEE. The Insurance Company shall not be required to
look into the terms of the Plan or question any action of the Trustee,
and the Insurance Company shall not be responsible for seeing that any
action of the Trustee is authorized by the terms hereof. The Insurance
Company shall be under no obligation to take notice of any change in
Trustee until evidence of such change satisfactory to the Insurance
Company shall have been given to the Insurance Company in writing at
its home office.
6E. ADOPTING EMPLOYER
6E.1 ELECTION TO BECOME ADOPTING EMPLOYER. With the consent of the Employer and
Trustee, if any, any employer, which along with the Employer is included
in a group of employers which constitute a controlled group of
corporations(as defined in Code section 414(b))or which constitutes trade
or businesses (whether or not incorporated) which are under common control
(as defined in section 414(c))or which constitutes an affiliated service
group as defined in section 414(m)and is identified as an Adopting
Employer in the Adoption Agreement, may adopt this Plan and all of its
provisions.
6E.2 DEFINITION. Any employer eligible to adopt this Plan under the
provisions of Section 6E.1 and which adopts this Plan and all of its
provisions, shall be known as an Adopting Employer and shall be
included within the term Employer, as defined in Section 1.24.
6E.3 EFFECTIVE DATE OF PLAN. The effective date of the Plan for an Adopting
Employer on other than the date specified in the Adoption Agreement
shall be the first day of the Plan Year in which such Adopting Employer
adopts this Plan.
6E.4 FORFEITURES. Forfeitures of any nonvested portion of a Participant's
Account, as selected by the Employer in the Adoption Agreement, shall
be allocated only to other Participants who are employed by the
Adopting Employer who made the contributions to such Participant's
Account, or shall be used as a credit only for such Adopting Employer.
6E.5 CONTRIBUTIONS. All contributions made by an Adopting Employer shall be
determined separately by each Adopting Employer and shall be paid to
and held by the Plan for the exclusive benefit of the Employees of such
Adopting Employer and the Beneficiaries of such Employees, subject to
all the terms and conditions of this Plan. The Plan Administrator
shall keep separate books and records concerning the affairs of each
Adopting Employer and as to the accounts and credits of the Employees
of each Adopting Employer.
6E.6 EXPENSES. Subject to Section 6B.3, the expenses necessary to
administer the Plan of any Adopting Employer shall be taken from
accounts of Participants who are Employees of such Adopting Employer
unless paid for by such Adopting Employer. The expenses necessary to
administer the Plan for each Adopting Employer shall be determined by
the ratio of the value of all Participants' Accounts of such Adopting
Employers to the total value of all Participants' Accounts of each
Adopting Employer.
6E.7 SUBSTITUTION OF PLANS. Subject to the provisions of Section 7C, any
Adopting Employer shall be permitted to withdraw from its participation
in this Plan. The consent of the Employer or any other Adopting
Employer shall not be required.
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Page 142 of 163
6E.8 TERMINATION OF PLANS. If any Adopting Employer elects to terminate its Plan
pursuant to Sections 7B.4, 7B.5 and 7B.6, such termination shall in no way
affect the Plan of any other Adopting Employer.
6E.9 AMENDMENT. Amendment of this Plan by the Employer or any Adopting
Employer shall only be by the written consent of the Employer and each
and every Adopting Employer and with the consent of the Trustee, if
any, where such consent is necessary in accordance with the terms of
this Plan.
6E.10 PLAN ADMINISTRATOR'S AUTHORITY. The Plan Administrator shall have
authority to make any and all necessary rules or regulations, binding
upon all Adopting Employers and all Participants, to effectuate the
purpose of this Section 6E.
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Page 143 of 163
ARTICLE VII - SPECIAL CIRCUMSTANCES WHICH MAY AFFECT THE PLAN
7A. TOP-HEAVY PROVISIONS
7A.1 DEFINITIONS.
(a) ANNUAL COMPENSATION. The term Annual Compensation means
Compensation as defined in the Compensation section of the
Adoption Agreement, but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are
excludable from the Employee's gross income under Code section
125, section 402(e)(3), section 402(h)(1)(B) or section 403(b).
(b) DETERMINATION DATE. The term Determination Date means for
any Plan Year subsequent to the first Plan Year, the last day of
the preceding Plan Year. For the first Plan Year of the Plan, it
means the last day of that year.
(c) DETERMINATION PERIOD. The term Determination Period means the
Plan Year containing the Determination Date and the four
preceding Plan Years.
(d) KEY EMPLOYEE. The term Key Employee means any Employee or
former Employee (and the Beneficiaries of such Employee) who at
any time during the Determination Period was:
(1) An officer of the Employer if such individual's
Annual Compensation exceeds 50 percent of the dollar
limitation under Code section 415(b)(1)(A); or
(2) An owner (or considered an owner under Code
section 318) of one of the ten largest interests in the
Employer if such individual's Annual Compensation exceeds
100 percent of the dollar limitation under Code section
415(c)(1)(A); or
(3) A 5-percent owner of the Employer; or
(4) A 1-percent owner of the Employer who has
Annual Compensation of more than $150,000.
The determination of who is a Key Employee will be made in
accordance with Code section 416(I)(1) and related regulations.
(e) PERMISSIVE AGGREGATION GROUP. The term Permissive
Aggregation Group means the Required Aggregation Group of plans
plus any other plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Code sections 401(a)(4)
and 410.
(f) PRESENT VALUE. Present Value shall be based only on the
interest and mortality rates specified in the Adoption Agreement.
(g) REQUIRED AGGREGATION GROUP. The term Required Aggregation
Group means (1) each qualified plan of the Employer in which at
least one Key Employee participates or participated at any time
during the Determination Period (regardless of whether the plan
has terminated), and (2) any other qualified plan of the Employer
which enables a plan described in (1) to meet the requirements of
Code sections 401(a)(4) or 410.
(h) TOP-HEAVY PLAN. For any Plan Year beginning after December
31, 1983, this Plan is Top-Heavy if any of the following
conditions exists:
Article VII - Special Circumstances -86- October 29, 1996
Page 144 of 163
(1) If the Top-Heavy Ratio for this Plan exceeds 60
percent and this Plan is not part of any Required
Aggregation Group or Permissive Aggregation Group of plans.
(2) If this Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive
Aggregation Group and the Top-Heavy Ratio for the group of
plans exceeds 60 percent.
(3) If this Plan is a part of a Required
Aggregation Group and part of a Permissive Aggregation
Group of plans and the Top-Heavy Ratio for the Permissive
Aggregation Group exceeds 60 percent.
(i) TOP-HEAVY RATIO. The term Top-Heavy Ratio means:
(1) If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plan) and the Employer has not maintained any
defined benefit plan which during the 5-year period ending
on the Determination Date(s) has or has had accrued
benefits, the Top-Heavy Ratio for this Plan alone or for
the Required or Permissive Aggregation Group, as
appropriate, is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of the
Determination Date(s) (including any part of any account
balance distributed in the 5-year period ending on the
Determination Date(s)), and the denominator of which is the
sum of all account balances (including any part of any
account balance distributed in the 5-year period ending on
the Determination Date(s)), both computed in accordance
with Code section 416 and related regulations. Both the
numerator and denominator of the Top-Heavy Ratio are
increased to reflect any contribution not actually made as
of the Determination Date, but which is required to be
taken into account on that date under Code section 416 and
related regulations.
(2) If the Employer maintains one or more defined
contribution plans (including any simplified employee
pension plans as defined in Code section 408(k)) and the
Employer maintains or has maintained one or more defined
benefit plans, which during the 5-year period ending on the
Determination Date(s) has or has had any accrued benefits,
the Top-Heavy Ratio for any Required or Permissive
Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances under the
aggregated defined contribution plan or plans for all Key
Employees, determined in accordance with (1) above, and the
Present Value of accrued benefits under the aggregated
defined benefit plan or plans for all Key Employees as of
the Determination Date(s), and the denominator of which is
the sum of the account balances under the aggregated
defined contribution plan or plans for all Participants,
determined in accordance with (1) above, and the Present
Value of accrued benefits under the defined benefit plan or
plans for all Participants as of the Determination Date(s),
all determined in accordance with Code section 416 and
related regulations. The accrued benefits under a defined
benefit plan in both the numerator and denominator of the
Top-Heavy Ratio are increased for any distribution of an
accrued benefit made in the 5-year period ending on the
Determination Date.
Article VII - Special Circumstances -87- October 29, 1996
Page 145 of 163
(3) For purposes of (1) and (2) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent Valuation Date that falls
within or ends with the 12-month period ending on the
Determination Date, except as provided in Code section 416
and the regulations thereunder for the first and second
plan years of a defined benefit plan. The account balances
and accrued benefits of a Participant (I) who is not a Key
Employee but who was a Key Employee in a prior year, or
(ii) who has not been credited with at least one Hour of
Service with any Employer maintaining the Plan at any time
during the 5-year period ending on the Determination Date
shall be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers,
and transfers are taken into account, will be made in
accordance with Code section 416 and the regulations
thereunder. QVEC Contributions will not be taken into
account for purposes of computing the Top-Heavy Ratio.
When aggregating plans, the value of account balances and
accrued benefits will be calculated with reference to the
Determination Dates that fall within the same calendar
year. The accrued benefit of a Participant other than a
Key Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer, or (b) if
there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under
the fractional rule of Code section 411(b)(1)(C).
(j) VALUATION DATE. The term Valuation Date means the date
specified in the Top-Heavy Provisions section of the Adoption
Agreement as of which account balances or accrued benefit are
valued for purposes of calculating the Top-Heavy Ratio.
7A.2 MINIMUM ALLOCATION. For any Plan Year in which the Plan is Top-Heavy,
the following will apply:
(a) Except as otherwise provided in (c) and (d) below, the
Employer contributions and Forfeitures allocated on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of three percent of such Participant's Compensation or in
the case where the Employer has no defined benefit plan which
designates this Plan to satisfy Code section 401, the largest
percentage of Employer contributions and Forfeitures, as limited
by Code section 401(a)(17), allocated on behalf of any Key
Employee for that year. The Minimum Allocation is determined
without regard to any Social Security contribution. This Minimum
Allocation shall be made even though, under other Plan
provisions, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation
for the year because of (1) the Participant's failure to complete
1,000 Hours of Service (or any equivalent provided in the Plan),
or (2) the Participant's failure to make Required Employee
Contributions to the Plan, or (3) Compensation less than a stated
amount.
(b) For purposes of computing the Minimum Allocation,
Compensation shall mean Compensation as defined in the
Compensation section of the Adoption Agreement as limited by Code
section 401(a)(17).
Notwithstanding the above, if elected by the Employer in
the Adoption Agreement, Compensation shall include any amount
which is contributed by the Employer pursuant to a salary
reduction agreement and which is not includable in the Employee's
gross income under Code sections 125, 401(a)(8), 402(h) or 403(b).
(c) The provision in (a) above shall not apply to any
Participant who was not employed by the Employer on the last day
of the Plan Year.
(d) The provision in (a) above shall not apply to any
Participant to the extent the Participant is covered under any
other plan or plans of the Employer and the Employer has provided
in the Top-Heavy Provisions section of the Adoption Agreement
that the Minimum Allocation or benefit requirement applicable to
Top-Heavy plans will be met in the other plan or plans.
Article VII - Special Circumstances -88- October 29, 1996
Page 146 of 163
(e) The Minimum Allocation required (to the extent required to
be nonforfeitable under Code section 416(b)) may not be forfeited
under Code sections 411(a)(3)(B) or 411(a)(3)(D).
(f) Neither Elective Deferral Contributions nor Matching
Contributions may be taken into account for the purpose of
satisfying this Minimum Allocation Requirement.
7A.3 MINIMUM VESTING SCHEDULE. For any Plan Year in which this Plan is
Top-Heavy, one of the minimum vesting schedules as elected by the
Employer in the Adoption Agreement will automatically apply to the
Plan. The minimum vesting schedule applies to all benefits within the
meaning of Code section 411(a)(7) except those attributable to Employee
Contributions, Elective Deferral Contributions, QVEC Contributions and
Rollover Contributions including benefits accrued before the effective
date of Code section 416 and benefits accrued before the Plan became
Top-Heavy. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as Top-Heavy
changes for any Plan Year. However, this Section does not apply to the
account balances of any Employee who does not have an Hour of Service
after the Plan has initially become Top-Heavy. Such Employee's account
balance attributable to Employer contributions and Forfeitures will be
determined without regard to this Section.
7B. AMENDMENT, TERMINATION OR MERGER OF THE PLAN
7B.1 AMENDMENT OF ELECTIONS UNDER ADOPTION AGREEMENT BY EMPLOYER. The party
elected by the Employer in the Adoption Agreement shall have the right from
time to time to change the elections under its Adoption Agreement in a
manner consistent with the Plan, provided that such amendment or
modification shall be in accordance with the Board of Director's
resolution, if applicable, that describes the amendment procedure and
provided further that the written amendment or modification is signed by
the party elected by the Employer in the Adoption Agreement. The amendment
must be accepted by the Sponsoring Organization. Upon any such change in
the Elections under the Adoption Agreement, the Plan Administrator, the
Trustee and the Sponsoring Organization shall be furnished a copy thereof.
If the Plan's vesting schedule is amended, or the Plan is amended in any
way that directly or indirectly affects the computation of the
Participant's nonforfeitable percentage or if the Plan is deemed amended by
an automatic change to a top-heavy vesting schedule, each Participant with
at least 3 years of Service with the Employer may elect, in writing, within
a reasonable period after the adoption of the amendment or change, to have
the nonforfeitable percentage computed under the Plan without regard to
such amendment or change. For Participants who do not have at least l 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" where such language appears.
The period during which the election must be made by the Participant
shall begin no later than the date the Plan amendment is adopted and
end no later than after the latest of the following dates:
(a) The date which is 60 days after the day the amendment is adopted;
Article VII - Special Circumstances -89- October 29, 1996
Page 147 of 163
(b) The date which is 60 days after the day the amendment
becomes effective; or
(c) The date which is 60 days after the day the Participant is
issued written notice of the amendment by the Employer or Plan
Administrator.
Such written election by a Participant shall be made to the Plan
Administrator, who shall then give written notice to the Insurance
Company.
No amendment to the Plan shall be effective to the extent that it has
the effect of decreasing a Participant's Accrued Benefit.
Notwithstanding the preceding sentence, a Participant's Account balance
may be reduced to the extent permitted under Code section 412(c)(8).
For purposes of this paragraph, a Plan amendment which has the effect
of decreasing a Participant's Account balance or eliminating an
optional form of benefit, with respect to benefits attributable to
service before the amendment, shall be treated as reducing an Accrued
Benefit. Furthermore, if the vesting schedule of a Plan is amended, in
the case of an Employee who is a Participant as of the later of the
date such amendment is adopted or the date it becomes effective, the
nonforfeitable percentage (determined as of such date) of such
Employee's Employer-derived Accrued Benefit will not be less than the
percentage computed under the Plan without regard to such amendment.
In the event of an amendment to a money purchase pension plan
(including a target benefit plan) to convert it to a profit sharing
plan (including a thrift plan or plan with a 401(k) feature), the
resulting plan shall separately account in each affected Participant's
Account for amounts attributable to coverage under the money purchase
plan, including future earnings on such amounts. On and after the date
of such amendment, these money purchase plan amounts shall remain
subject to the money purchase plan restrictions on distribution.
The Employer may (1) change the choice of options in the Adoption
Agreement, (2) add overriding language in the Adoption Agreement when
such language is necessary to satisfy Code sections 415 or 416 because
of the required aggregation of multiple plans, and (3) add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as individually designed. An Employer that amends the Plan for
any other reason, including a waiver of the minimum funding
requirements under Code section 412(d), will no longer participate in
this prototype plan and will be considered to have an individually
designed plan.
7B.2 AMENDMENT OF PLAN, TRUST, AND FORM OF ADOPTION AGREEMENT. The
Sponsoring Organization may amend this Plan and Trust, and the form of
the Adoption Agreement, and the Employer in adopting this Plan and the
Plan Administrator and the Trustee in accepting appointment as Plan
Administrator and as Trustee, shall be deemed to have consented to any
such amendment by executing the Adoption Agreement, provided that the
written consent of the Trustee and the Plan Administrator to any change
affecting their duties or responsibilities shall first be obtained.
Upon any such amendment by the Sponsoring Organization, the Plan
Administrator, the Employer and the Trustee shall be furnished with a
copy thereof.
7B.3 CONDITIONS OF AMENDMENT. Neither the Sponsoring Organization nor the
Employer shall make any amendment which would cause the Plan to lose
its status as a qualified plan within the meaning of Code section
401(a).
7B.4 TERMINATION OF THE PLAN. The Employer intends to continue the Plan
indefinitely for the benefit of its Employees, but reserves the right
to terminate the Plan at any time by resolution of its Board of
Directors. Upon such termination, the liability of the Employer to
make Employer contributions hereunder shall terminate. The Plan shall
terminate automatically upon complete discontinuance of Employer
contributions hereunder, if the Plan is a profit sharing plan or a
thrift plan.
Article VII - Special Circumstances -90- October 29, 1996
Page 148 of 163
7B.5 FULL VESTING. Upon the termination or partial termination of the Plan,
or upon complete discontinuance of Employer contributions, the rights
of all affected Participants in and to the amounts credited to each
such Participant's Account and to any Policies on each Participant's
life shall be 100% vested and nonforfeitable. Thereupon, each
Participant shall receive a total distribution of his Participant's
Account (including any amounts in the Forfeiture Account allocated in
accordance with Section 7B.6) in accordance with the terms and
conditions of Section 2A. If the Plan terminates, the assets will be
distributed from the Trust as soon as administratively feasible.
7B.6 APPLICATION OF FORFEITURES. Upon the termination of the Plan, any
amount in the Forfeiture account which has not been applied as of such
termination to reduce the Employer contribution, or has not been
allocated as of such termination, shall be credited on a pro-rata basis
to each Participant's Account in the same manner as the last Employer
contribution made under the Plan.
7B.7 MERGER WITH OTHER PLAN. In the case of any merger with or transfer of
assets or liabilities to any other qualified plan after September 2,
1974:
(a) The sum of the account balances in each plan shall equal
the fair market value (determined as of the date of the merger or
transfer as if the plan had then terminated) of the entire plan
assets.
(b) The assets or liabilities of each plan shall be combined to
form the assets of the plan as merged (or transferred), and each
Participant in the plan merged (or transferred) shall have an
account balance equal to the sum of the account balances the
Participant had in the plans immediately prior to the merger (or
transfer).
(c) Immediately after the merger (or transfer), each
Participant in the plan merged (or transferred) shall have an
account balance equal to the sum of the account balances the
Participant had in the plans immediately prior to the merger (or
transfer).
(d) Immediately after the merger (or transfer), each
Participant in the plan merged (or transferred) shall be entitled
to the same optional benefit forms as they were entitled to
immediately prior to the merger (or transfer).
(e) In the event of a merger (or transfer) of a money purchase
pension plan (including a target benefit plan) and a profit
sharing plan (including a thrift plan or plan with a 401(k)
feature), the resulting plan shall separately account in each
affected Participant's Account for amounts attributable to
coverage under the money purchase plan, including future earnings
on such amounts. On and after the date of such merger (or
transfer), these money purchase plan amounts shall remain subject
to the money purchase plan restrictions on distribution.
7B.8 TRANSFER FROM OTHER PLANS. If elected in the Adoption Agreement, the
Employer may cause all or any of the assets held in another qualified
pension or profit sharing plan meeting the requirements of Code section
401(a) to be transferred to the Plan pursuant to a merger or
consolidation of this Plan with such other plan or for any other
allowable purpose. Upon receipt of such assets, the Plan shall
separately account for such amounts in each affected Participant's
Account. Such transfer shall be made without regard to the Limitations
on Allocations imposed in Section 4B.
Article VII - Special Circumstances -91- October 29, 1996
Page 149 of 163
7B.9 TRANSFER TO OTHER PLANS. Upon written direction from the Employer, the
Plan shall transfer some or all of the assets held under this Plan to
another qualified pension or profit sharing plan meeting the requirements
of Code section 401(a) and sponsored by the Employer.
7B.10 APPROVAL BY THE INTERNAL REVENUE SERVICE. Notwithstanding any other
provisions of this Plan, the Employer's adoption of this Plan is
subject to the condition precedent that the Employer's Plan shall be
approved and qualified by the Internal Revenue Service as meeting the
requirements of Code section 401(a) and, if applicable, that the Trust
established hereunder shall be entitled to exemption under the
provisions of Code section 501(a). In the event the Plan initially
fails to qualify and the Internal Revenue Service issues a final ruling
that the Employer's Plan or Trust fails to so qualify as of the
Effective Date, all liability of the Employer to make further Employer
contributions hereunder shall cease. The Insurance Company, Plan
Administrator, Trustee and any other Named Fiduciary shall be notified
immediately by the Employer, in writing, of such failure to qualify.
Upon such notification, the value of the Participants' Accounts,
including the then value of any Life Insurance Policies, shall be
distributed in cash subject to the terms and conditions of Section 5B.
That portion of such distribution which is attributable to
Participant's Employee Contributions, if any, shall be paid to the
Participant, and the balance of such distribution shall be paid to the
Employer. Upon the death of any Participant prior to the actual
surrender of a Life Insurance Policy or Policies on his life, the death
benefit shall be payable to the Participant's Beneficiary.
If the Employer's Plan fails to attain or retain qualification, such
Plan will no longer participate in this prototype plan and will be
considered an individually designed plan.
7B.11 SUBSEQUENT UNFAVORABLE DETERMINATION. If the Employer is notified
subsequent to initial favorable qualification that the Plan is no
longer qualified within the meaning of Code section 401(a) or, if
applicable, that the Trust is no longer entitled to exemption under the
provisions of Code section 501(a), and if the Employer shall fail
within a reasonable time to make any necessary changes in order that
the Plan shall so qualify, the Participants' Accounts, including any
Life Insurance Policies or the values thereof, shall be fully vested
and nonforfeitable and shall be disposed of in the manner set forth in
Sections 7B.5 and 7B.6 above.
7C. SUBSTITUTION OF PLANS
7C.1 SUBSTITUTION OF PLANS. Subject to the provisions of Section 7B.7, the
Employer may substitute an individually designed plan or a master or
another prototype plan for this Plan without terminating this Plan as
embodied herein, and this shall be deemed to constitute an amendment and
restatement in its entirety of this Plan as heretofore adopted by the
Employer; provided, however that the Employer shall have certified to the
Insurance Company and the Trustee, if applicable, that this Plan is being
continued on a restated basis which meets the requirements of Code section
401(a) and ERISA.
Any such changes shall be subject to the provisions of Sections 7B.1
and 7B.2 of the Plan.
7C.2 TRANSFER OF ASSETS. Upon 90 days' written notification from the
Employer and the Trustee (unless the Insurance Company shall accept a
shorter period of notification) that a different plan meeting the
requirements set forth in Section 7C.1 above has been executed and
entered into by the Plan Administrator and the Employer, and after the
Insurance Company and the Trustee have been furnished the Employer's
certification in writing that the Employer intends to continue the Plan
as a qualified plan under Code section 401(a) and ERISA, the Insurance
Company shall transfer the value of all Participants' Accounts under
the Annuity Contract to the Trustee or such person or persons as may be
entitled to receive the same, in accordance with the terms of the
Annuity Contract. The Trustee shall likewise make a similar transfer,
including all Life Insurance Policies, or the values thereof, to such
person or persons as may be entitled to receive same. The Insurance
Company and the Trustee may rely fully on the representations or
directions of the Employer with respect to any such transfer and shall
be fully protected and discharged with respect to any such transfer
made in accordance with such representations, instructions, or
directions.
Article VII - Special Circumstances -92- October 29, 1996
Page 150 of 163
7C.3 SUBSTITUTION FOR PRE-EXISTING MASTER OR PROTOTYPE PLAN. This Plan is
designed:
(a) For adoption by an Employer not previously covered under a
master or prototype plan sponsored by Connecticut General Life
Insurance Company; or
(b) For adoption by an Employer in substitution for a
pre-existing master or prototype plan sponsored by Connecticut
General Life Insurance Company.
If this Plan is adopted in substitution for such a pre-existing master
or prototype plan, it shall be deemed to amend the Employer's prior
Plan in its entirety effective as of the date specified in the
Employer's Adoption Agreement. The Employer's Plan as so amended shall
continue in full force and effect and no termination thereof shall be
deemed to have occurred.
7C.4 PARTIAL SUBSTITUTION OR PARTIAL TRANSFER OF THE PLAN OR ASSETS. In the
event this Plan is adopted as the result of a partial substitution or
partial transfer of the Plan or the assets under the prior Plan as a
result of a merger, spinoff, consolidation or any other allowable
purpose, the Plan and all transactions allowable under it are subject
to the rules established by the Employer to address the orderly
transition of the Plan or assets.
Article VII - Special Circumstances -93- October 29, 1996
Page 151 of 163
ARTICLE VIII - MISCELLANEOUS
8.1 NONREVERSION. This Plan has been adopted by the Employer for the exclusive
benefit of the Participants and their Beneficiaries. Except as otherwise
provided in Section 7B.10 and Section 8.6, under no circumstances shall
any funds contributed hereunder at any time revert to or be used by the
Employer, nor shall any such funds or assets of any kind be used other
than for the benefit of the Participants or their Beneficiaries.
8.2 GENDER AND NUMBER. When necessary to the meaning hereof, and except
when otherwise indicated by the context, either the masculine or the
neuter pronoun shall be deemed to include the masculine, the feminine,
and the neuter, and the singular shall be deemed to include the plural.
8.3 REFERENCE TO THE INTERNAL REVENUE CODE AND ERISA. Any reference herein
to any section of the Internal Revenue Code, ERISA, or to any other
statute or law shall be deemed to include any successor law of similar
import.
8.4 GOVERNING LAW. The Plan and Trust, if applicable, shall be governed
and construed in accordance with the laws of the state where the
Employer or Trustee has its principal office in the United States.
8.5 COMPLIANCE WITH THE INTERNAL REVENUE CODE AND ERISA. This Plan is
intended to comply with all requirements for qualification under the
Internal Revenue Code and ERISA, and if any provision hereof is subject
to more than one interpretation or any term used herein is subject to
more than one construction, such ambiguity shall be resolved in favor
of that interpretation or construction which is consistent with the
Plan being so qualified. If any provision of the Plan is held invalid
or unenforceable, such invalidity or unenforceability shall not affect
any other provisions, and this Plan shall be construed and enforced as
if such provision had not been included.
8.6 CONTRIBUTION RECAPTURE. Notwithstanding any other provisions of this
Plan, (1) in the case of a contribution which is made by an Employer by
a mistake of fact, Section 8.1 shall not prohibit the return of such
contribution to the Employer within one year after the payment of the
contribution, and (2) if a contribution is conditioned upon the
deductibility of the contribution under Code section 404, then, to the
extent the deduction is disallowed, Section 8.1 shall not prohibit the
return to the Employer of such contribution (to the extent disallowed)
within one year after the disallowance of the deduction. The amount
which may be returned to the Employer is the excess of (1) the amount
contributed over (2) the amount that would have been contributed had
there not occurred a mistake of fact or a mistake in determining the
deduction. Earnings attributable to the excess contribution may not be
returned to the Employer, but losses attributable thereto must reduce
the amount to be so returned. Furthermore, if the withdrawal of the
amount attributable to the mistaken contribution would cause the
balance of any Participant's Account to be reduced to less than the
balance which would have been in the Participant's Account had the
mistaken amount not been contributed, then the amount to be returned to
the Employer would have to be limited so as to avoid such reduction.
In the event that the Commissioner of the Internal Revenue determines
that the Plan is not initially qualified under the Internal Revenue
Code, any contribution made incident to that initial qualification by
the Employer must be returned to the Employer within one year after the
date the initial qualification is denied, but only if the application
for the qualification is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan is
adopted, or such later date as the Secretary of the Treasury may
prescribe.
Article VIII - Miscellaneouses -94- October 29, 1996
Page 152 of 163
Notwithstanding the above, any excess or returned contribution shall
not be returned to the Employer if the Employer has taken Davis-Bacon
Act credit for such contribution. These excess or mistaken
contributions shall be paid to the Employee for whom such credit is
taken.
Article VIII - Miscellaneous -95- October 29, 1996
Page 153 of 163
EXHIBIT 10.17
June 10, 1997
Mr. David W. Fradin
81 Forest Oaks Court
Winona, MN 55987
Dear David:
On behalf of the Board of Directors of IEC Electronics Corp. ("IEC"), I
am pleased to offer you the position of President and Chief Operating Officer
of IEC upon the following terms and conditions:
1. Compensation.
--------------
(a) Base Salary. For all services rendered to IEC in any
------------
capacity, IEC shall pay you a salary at the annual rate $175,000 ("Base
Salary"). The Base Salary shall be payable in accordance with the customary
payroll practices of IEC, subject to such deductions and withholdings as may
be required by law or agreed to by you.
(b) Hiring Bonus. IEC shall pay you, within 30 days after the
--------------
commencement of your employment, a hiring bonus in the amount of $25,000.
(c) Performance Bonus. Beginning with the fiscal year
-------------------
commencing October 1, 1997, you will be paid a performance bonus if IEC
achieves or exceeds certain performance measures based upon earnings and
return on average assets. Such performance measures will be similar to
those utilized in IEC's current bonus plans and will be developed by you and
the Board of Directors.
Page 154 of 163
2. Benefits.
-----------
You will be entitled to the following benefits:
a. General. You will be entitled to all benefits of full time
--------
employees or officers as set forth in IEC's Policy Manual as to which you
meet the eligibility requirements universally applicable to all employees and
such other benefits as may be accorded to executives from time to time.
b. Insurance. So long as you are employed by IEC, IEC will
----------
pay the premiums on term life insurance on your life in the face amount of
$525,000. IEC will have no interest in or claim to such life insurance
policy and you will have the sole right to designate the beneficiaries.
c. Vacations. After July 1, 1997 you will be immediately
----------
entitled to ten days of vacation. Commencing July 1, 1998, you will be
entitled to vacation time as set forth in IEC's Policy Manual.
3. Stock Options.
--------------
IEC will grant you an incentive stock option for 50,000 shares of
IEC common stock pursuant to the terms and provisions of IEC's 1993 Stock
Option Plan. Said option will be granted as of the date on which you begin
employment at IEC, at an exercise price equal to the fair market value of
IEC's common stock on that date. The option will vest in 25% increments
beginning one year from the date of grant and will expire seven years from
the date of grant.
If your employment is terminated by IEC for any reason other than
Cause (as hereinafter defined), or death or disability, or if you terminate
your employment with the Company for "Good Reason" (as hereinafter defined),
the option will become fully vested and exercisable. In addition, in the
event of a merger or consolidation in which IEC is not the surviving company
or a sale or exchange of all or substantially all of IEC's assets, if such
surviving or acquiring company does not assume the option upon the same terms
and conditions, then the option shall become fully vested and exercisable
immediately prior to such event.
4. Relocation Assistance.
-----------------------
a. In connection with your relocation to New York State, IEC
will reimburse you for the following:
Page 155 of 163
(i) Usual and customary expenses incurred in selling your
home; however, reimbursement for the broker's commission (if you utilize the
services of a broker) may not exceed a 6 percent (6%) broker's commission on
the sale of the property.
(ii) Reasonable expenses incurred in moving furniture,
normal household goods and personal belongings to the new location. You must
obtain three (3) estimates.
(iii) Reasonable expenses incurred in transporting your
immediate family to the new location.
(iv) Reasonable and customary closing costs incurred in
buying your new home (but not including any mortgage "points" or prepaid
interest); however, the amount to be reimbursed shall not exceed $1,500.
(v) Reasonable temporary living expenses incurred while
awaiting occupancy in your new home. Until you obtain permanent housing in
the Newark, New York area, IEC will provide you with a monthly payment of
$1,250 for a period not to exceed 12 months from the date of hire. The
amount to be paid shall not exceed $15,000.
(vi) Incidental expenses related to a move; however, the
amount to be reimbursed shall not exceed $5,000.
b. Since some or all of the foregoing relocation payments may
be taxable to you, IEC will pay or reimburse you the amount of any income
taxes you incur in connection with such relocation payments.
c. In consideration of the substantial expenses incurred by
IEC in conjunction with your relocation, you agree that, should you resign
your employment with IEC, except for Good Reason (as hereinafter defined), at
any time prior to 36 months following the commencement of your employment,
you will reimburse IEC on the last day worked for a portion of the relocation
expenses. The expenses will be prorated over 36 months, and the portion for
which you must reimburse IEC will be payable in full on the last day of
employment.
Page 156 of 163
Example: If the total relocation expenses were equal
to $30,000 and you were to resign your position after only
sixteen (16) months, the sum of $16,672 would be due and
payable to IEC on the last day worked. ($30,000 divided by
36 months = $833. $833 x 16 = $13,328. $30,000 - $13,328
= $16,672).
5. Severance. In the event of the termination of your employment
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(a) by IEC for any reason other than Cause (as hereinafter defined), death or
disability or (b) by you for Good Reason (as hereinafter defined), IEC will
pay you for a period of one year following such termination an amount equal
to your Base Salary at the annual rate then in effect. Such amount shall be
payable bi-weekly. In addition, IEC will provide you with such benefits, if
any, as may be applicable pursuant to IEC's Policy Manual. All payments made
to you hereunder will be subject to all applicable employment and withholding
taxes.
6. Confidentiality and Non-Competition. As a condition of
------------------------------------
employment and in consideration of the expenses to be incurred by IEC in
conjunction with your relocation, you will be expected to execute prior to
the commencement of your employment a Confidentiality and Non-Compete
Agreement in the form attached hereto as Exhibit A.
7. Right to Employment. Nothing contained herein confers upon you
--------------------
any right to be continued in the employ of IEC or interferes in any way with
the right of IEC to terminate your employment at any time for any reason.
You acknowledge that you will be an employee-at-will of IEC, terminable with
or without cause.
8. Certain Definitions.
--------------------
(a) Cause. Cause shall mean the existence or occurrence of any
------
of the following with respect to you:
(i) the failure or refusal to perform such services as may
reasonably be delegated or assigned to you consistent with your position, by
the Chief Executive Officer or by the Board of Directors, (ii) gross
negligence in connection with the performance of your duties, (iii) the
commission of acts involving dishonesty, willful misconduct, breach of
fiduciary duty, fraud, or any similar offense which materially affects your
ability to perform your duties for IEC or may materially adversely affect
IEC, (iv) the conviction of a felony, or (v) the violation or breach in any
respect of any material term, covenant, or condition contained in this Letter
or in the Confidentiality and Non-Compete Agreement.
Page 157 of 163
(b) Good Reason. Good Reason shall mean the occurrence or
------------
existence of any of the following with respect to you:
(i) your annual rate of salary is reduced from the annual
rate then currently in effect or your other employee benefits are in the
aggregate materially reduced from those then currently in effect (unless such
reduction of employee benefits applies to employees of IEC generally), or
(ii) your place of employment, without your approval, is moved more than 50
miles from Newark, New York, or (iii) you are assigned duties that are
demeaning or are otherwise materially inconsistent with the duties of a
President and Chief Operating Officer.
Before you may terminate your employment for Good Reason,
you must notify IEC in writing of your intention to terminate and IEC shall
have 15 days after receiving such written notice to remedy the situation, if
possible.
I look forward to your acceptance of this offer and to your success at
IEC.
Very truly yours,
IEC ELECTRONICS CORP.
By: /s/ Russell E. Stingel
Russell E. Stingel
Chief Executive Officer
I accept your offer of employment.
/s/ David W. Fradin 13 June 97
(Signature) (Date)
Page 158 of 163
EXHIBIT A
CONFIDENTIALITY AND NON-COMPETE AGREEMENT
This Agreement is made as of the 13th day of June, 1997 by and between
IEC Electronics Corp., a Delaware corporation ("IEC" or the "Company") and
David W. Fradin ("Employee").
RECITALS
Employee entered an employment relationship with IEC on even day
herewith (the "Letter Agreement");
In the course of such employment, Employee will gain experience,
knowledge and Confidential Information (as defined below) relating to the
plans and operations of the Company.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained in this Agreement and in the Letter Agreement, the
parties agree as follows:
1. Confidential Information. Employee acknowledges and agrees that he
-------------------------
will likely be exposed to Confidential Information, knowledge or data as
described below and Employee further acknowledges and agrees that such
Confidential Information, knowledge or data is proprietary to and a valuable
trade secret of the Company and that any disclosure or unauthorized use
thereof will cause irreparable harm and loss to the Company. Employee
understands that the Company has invested large sums in developing these
materials and it would be difficult for him to develop these same materials
from any independent sources without expenditure of large sums of money and
effort. Employee furthermore acknowledges that his employment with the
Company will being him into contact with these materials. Employee
understands that the Company, in large part, is relying on his promise not to
disclose this information as a condition of his employment. Employee also
acknowledges that any use of the Company's materials other than in the scope
of his employment with the Company would constitute an unlawful use and
taking of the materials from the Company for which the Company would have
remedies against him.
Employee will not either during his employment by the Company or by any
parent or subsidiary of the Company or at any time thereafter disclose or
authorize anyone else to disclose or use or make known for his or another's
benefit any Confidential Information, knowledge, or data of the Company
whether or not patentable or copyrightable, in any way acquired by him during
his employment by the Company or by any parent or subsidiary of the Company.
Confidential Information, knowledge or data of the Company shall, for
purposes of this Agreement, include but not be limited to matters not readily
available to the public which are:
(a) of a technical nature such as but not limited to methods,
know-how, formulae, compositions, drawings, blueprints, compounds, processes,
discoveries, machines, inventions, computer programs, and similar items;
(b) of a business nature such as but not limited to information
about sales or lists of customers, prices, costs, purchasing, profits,
markets, product strengths and weaknesses;
(c) pertaining to future developments such as but not limited to
research and development, or future marketing or merchandising plans or ideas.
Immediately upon termination of Employee's employment, Employee will
deliver to the Company all copies of data, information and knowledge,
including without limitation all documents, correspondence, specifications,
blueprints, notebooks, reports, sketches, formulae, computer programs, sales
and other manuals, price lists, customer lists, samples, and all other
materials and copies thereof relating to the business of the Company obtained
by him during the period of his employment with the Company or by any parent
or subsidiary of the Company which are in his possession or under his control.
Page 159 of 163
2. Covenant Not to Compete.
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A. During the period of employment and during the Non-Compete
Period (as hereinafter defined) the Employee will not, directly or indirectly
(a) own, manage, operate, control or participate in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director or otherwise with, or have any financial interest in, or
aid or assist any other person in the conduct of, any entity or business
which competes with any business, venture or activity being conducted or
proposed to be conducted on the date of cessation of the Employee's
employment of any group, division or affiliate of the Company, in any
geographic area where such business is being conducted or is proposed to be
conducted at the date of cessation of the Employee's employment, or (b)
recruit or otherwise induce any employees of the Company to terminate their
employment or violate any agreement with or duty to the Company. For
purposes of this Agreement, "Non-Compete Period" shall mean the period
commencing on the date of cessation of the Employee's employment for any
reason whatsoever and ending 12 months after the date on which the Employee's
employment ceases.
In connection with the foregoing provisions of this paragraph 2,
the Employee represents that his experience, capabilities and circumstances
are such that such provisions will not unreasonably prevent him from earning
a livelihood and that the limitations set forth herein are reasonable and
properly required for the adequate protection of the Company and its
affiliates.
B. If Employee in any way breaches the obligations specified in
this paragraph 2, the Company shall have the right, in addition to any other
remedies available to it, to terminate the further payment of any amounts
due, any compensation, any severance payments, or any benefits.
C. If the geographic or time restriction contained in this
paragraph shall be determined by an arbitrator or court of law or equity to
be unreasonable, the arbitrator or court may amend this paragraph to provide
a reasonable geographic or time restriction which shall then be binding upon
the Company and the Employee.
3. Injunctive Relief. Employee agrees that any breach or threatened
------------------
breach by him of any of the provisions contained in paragraphs 1 and 2 cannot
be remedied solely by the recovering of damages and the Company shall be
entitled to an injunction against such breach or threatened breach. Nothing
herein, however, shall be construed as prohibiting the Company from pursuing,
in conjunction with an injunction or otherwise, any other remedies available
at law or in equity for any such breach or threatened breach, including the
recovery of damages.
4. Severability. If any provision hereof is found to be unreasonably
-------------
broad, it shall nevertheless be enforceable to the extent reasonably
necessary for the protection of the Company. The invalidity of any provision
shall not affect the validity of any other provision.
5. Waiver. Any waiver of a breach of any of the terms of this
------
Agreement shall not operate as a waiver of any other breach of such terms or
of any other terms, nor shall failure to enforce any term hereof operate as a
waiver of any such term or of any other term.
6. Governing Law; Venue. This Agreement shall be construed and
---------------------
enforced in accordance with and governed by the internal laws of the State of
New York, without reference to conflict of law principles or the domicile or
residence of any individual party if other than New York. The parties
consent to the exclusive jurisdiction of the Supreme Court of New York,
Monroe County or of the United States District Court for the Western District
of New York for any legal action instituted by any party against any other
with respect to the subject matter hereof.
Page 160 of 163
7. No Right to Employment. Nothing contained herein shall give
-----------------------
Employee any right to be continued in the employment of the Company or any
parent or subsidiary of the Company or interfere in any way with the right of
the Company to terminate Employee at any time for any cause.
8. Amendments. No supplement, modification, amendment or waiver of
-----------
the terms of this Agreement shall be binding on the parties hereto unless
executed in writing by the party to be bound thereby.
9. Successors in Interest. This Agreement shall be binding upon and
-----------------------
shall inure to the benefit of the successors, assigns, heirs and legal
representatives of the parties hereto.
10. Notices. All notices given in connection with this Agreement shall
-------
be in writing and shall be delivered either by personal delivery, by
telegram, telex, telecopy or similar facsimile means, by certified or
registered mail, return receipt requested, or by express courier or delivery
service, addressed to the parties hereto at the addresses set forth below or
at such other address as any party shall have previously designated by
written notice given to the other parties in the manner hereinabove set
forth. Notice shall be deemed given when received, if sent by telegraph,
telex, telecopy or similar facsimile means (conformation of such receipt by
confirmed facsimile transmission being deemed receipt of communications set
by telex, telecopy or other facsimile means); and when delivered and
receipted for (or upon the date of attempted delivery where delivery is
refused), if hand-delivered, sent by express courier or delivery service, or
sent by certified or registered mail, return receipt requested.
To Employee: To IEC:
David W. Fradin IEC Electronics Corp.
105 Norton Street
P. O. Box 271
Newark, NY 14513
Attention: Chairman of the Board
IN WITNESS WHEREOF, Employee has executed this Agreement and the Company
has caused this Agreement to be executed as of the date set forth above.
IEC ELECTRONICS CORP.
By: /s/ Russell E. Stingel
Russell E. Stingel
Chief Executive Officer
/s/ David W. Fradin
David W. Fradin
Employee
Page 161 of 163
EXHIBIT 22.1
Subsidiaries of IEC Electronics Corp.
IEC Edinburg Texas Operations, an Texas corporation, wholly-owned by IEC
Electronics Corp.
IEC Arab Alabama Operations, an Alabama corporation, wholly-owned by IEC
Electronics Corp.
Page 162 of 163
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 File Nos. 33-63816, 33-79360 and 333-4634.
/s/ Arthur Andersen, LLP
Rochester, New York,
December 30, 1997
Page 163 of 163