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SHOPSMITH, INC.
10-K REPORT
FOR THE
YEAR ENDED April 5, 1997
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended April 5, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________________ to __________________
Commission file number 0-9318
SHOPSMITH, INC.____________________
(Exact name of registrant as specified in its charter)
Ohio____________ ____31-0811466______
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
____6530 Poe Avenue, Dayton, Ohio________ __45414____
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:_(937) 898-6070_
Securities registered pursuant to Section 12(b) of the Act:
_Title of Each Class_ Name of Each Exchange on
None _____which registered_____
None
Securities registered pursuant to Section 12(g) of the Act:
__Common Shares___
(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. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 4, 1997 was $5,493,116
Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of June 4, 1997. Common Shares, without par value:
2,663,975 shares.
Index to Exhibits appears beginning on page 17 of this Report.
DOCUMENTS INCORPORATED BY REFERENCE
Shopsmith, Inc. Annual Report to Shareholders for the year ended
April 5, 1997 -- Only such portions of the Annual Report as are specifically
incorporated by reference under Part I and II of this Report shall be deemed
filed as part of this Report.
Shopsmith, Inc. Proxy Statement for its Annual Meeting of Share-
holders to be held July 30, 1997 -- Definitive copies of the Proxy Statement
will be filed with the Commission within 120 days after the end of the
Company's fiscal year. Only such portions of the Proxy Statement as are
specifically incorporated by reference under Parts II and III of this Report
shall be deemed filed as part of this Report.
PART I
ITEM 1. Business
Shopsmith, Inc., an Ohio corporation organized in 1972 (the Company"),
is engaged in the production and marketing of power woodworking tools designed
primarily for the home workshop. The principal line of power tools marketed
under the name "Shopsmith," a registered trademark, dates back to 1946 and was
purchased by the Company in 1972.
The line is built around the Shopsmith MARK V, a multi-purpose tool,
and includes separate function special purpose tools which may be mounted on
the MARK V or used independently. The Company distributes these tools
directly to consumers through demonstration programs (at which orders are
solicited by sales representatives), telephone sales solicitation and mail
order. During the fiscal year ended April 5, 1997, Shopsmith branded products
accounted for substantially all of the net sales of the Company. The majority
of products sold (as measured by sales dollar volume)are manufactured by the
Company.
Shopsmith MARK V, Special Purpose Tools and Major Accessories
The Shopsmith MARK V is a compact power woodworking tool which
performs the functions of five separate tools: a table saw, a wood lathe, a
disc sander, a horizontal boring machine, and a vertical drill press. The
engineering of the MARK V is such that special purpose tools may be mounted on
and powered by the MARK V. The special purpose tools, a jointer, a
beltsander, a bandsaw, a planer, a scroll saw, and a strip sander, may also be
operated as free standing tools with a stand and power system.
Other major accessories include MARK V accessories such as a lathe
duplicator, which allows a woodworker to duplicate original turnings and a
dust collector that, when used with the appropriate fixtures for the MARK V
510 and other Shopsmith products, provides for virtually dust-free
woodworking.
The Company also offers a line of accessories to its power tool line.
These accessories, only a few of which are manufactured by the Company,
include casters, custom saw blades, and molding attachments. Shopsmith
accessories are sold directly to the consumer through the same marketing
channels used for the Shopsmith power tool line.
Seasonality and Working Capital
The Company's business is seasonal, with the rate of incoming orders
being lowest during the summer months. As a result, working capital needs are
higher during this period of the fiscal year and the Company generally
experiences a tightening of its liquidity position.
Raw Materials and Components
The principal components and materials used by the Company in the
production of its products include aluminum die castings, iron sand castings,
metal stampings, screw machine products, plastics and electric motors. The
Company relies on sole sources of supply for some of its components and
materials. To reduce costs, the Company uses foreign producers as sources for
some parts and products.
Competition
The power woodworking equipment business is highly competitive and
the MARK V and the Company's other products must compete against the single
purpose tools sold by Delta, Power Matic, Black and Decker, Sears, and other
domestic and foreign corporations.
The Company considers quality, customer service, method of marketing,
price and value to be the principal bases of competition in the power
woodworking equipment industry.
Research and Development
From time to time, the Company engages in limited research and
development programs to develop new products, and to improve existing products
and current operating methods. Research and development costs were not
material in 1997, 1996 and 1995.
Employees
The total number of persons employed by the Company (both full and
part time) as of June 3, 1997 was 104. The Company considers its employee
relations to be satisfactory, and to date the Company has not experienced a
work stoppage due to a labor dispute. The Company has no collective
bargaining contracts.
Environmental Compliance
The Company believes that it materially complies with all statutory
and administrative requirements related to the environment and pollution
control. For a discussion of certain environmental related contingencies to
which the Company is subject, reference is made to Note 9 to the Consolidated
Financial Statements which are incorporated into this Report pursuant to Item
8 below.
ITEM 2. Properties
Information concerning the principal facility of the Company, which
is leased, is set forth below.
Location Use Approximate Expiration Renewal
Square Date of Options
feet Lease
Dayton, Ohio Manufacturing, 115,000 August 1999 1- 5 year
Headquarters,
Distribution
and Retail Store
The building and the Company's machinery and equipment are well
maintained. The Company's production facility currently operates one shift
per day.
ITEM 3. Legal Proceedings
The Company is not a party to any legal proceedings other than
litigation which, under the instructions to this item, need not be described.
For a discussion of certain environmental related contingencies to which the
Company is subject, reference is made to Note 9 to the Consolidated Financial
Statements which are incorporated into this Report pursuant to Item 8 below.
ITEM 4. Submission of Matters to a Vote of Security Holders
None.
EXECUTIVE OFFICERS OF THE COMPANY
Officers are elected annually by the Board of Directors. The
executive officers of the Company are as follows:
Name Age Position
John R. Folkerth 64 Chairman of the Board, President,
Chief Executive Officer and Director
William C. Becker 48 Vice President of Finance, Treasurer
and Chief Financial Officer
Robert L. Folkerth 40 Vice President of Field Sales
John R. Folkerth is the founder of the Company and has been a
director and the Chief Executive Officer of the Company since 1972.
William C. Becker has been Vice President of Finance and Chief Financial
Officer since October 1982.
Robert L. Folkerth was named Vice President of Field Sales in April
1996. Prior to accepting that position with the Company, Mr. Folkerth was
Vice President of Finance of Digitron, a manufacturer of automotive
components, from 1991 until 1996.
PART II
ITEM 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
The market and shareholder information required by Item 5 is set forth
under the heading "Shareholders' Information" (p. 23) in the Company's Annual
Report to Shareholders for the year ended April 5, 1997 (which report is
included as Exhibit 13.1 to this Report). Such information is incorporated
herein by reference.
There are certain debt covenant requirements described in Note 3 of
the Company's Annual Report for the year ended April 5, 1997. The Company
paid no dividends in the fiscal years ended April 5, 1997 and March 30, 1996.
ITEM 6. Selected Financial Data
The information required by Item 6 is set forth under the heading
"Selected Financial Data" (p. 22) in the Company's Annual Report to
Shareholders for the year ended April 5, 1997 and is incorporated herein by
reference.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information required by Item 7 is set forth under the heading
"Management's Discussion and Analysis" (p. 20) of the Company's Annual Report
to Shareholders for the year ended April 5, 1997 and is incorporated herein by
reference.
ITEM 8. Financial Statements and Supplementary Data
The information required by Item 8 is set forth at pages 3 through 11
and under the heading "Selected Financial Data" p. 22 of the Company's Annual
Report to Shareholders for the year ended April 5, 1997 and is incorporated
herein by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
ITEM 10. Directors and Executive Officers of the Registrant
The information required by Item 10 is incorporated herein by
reference from the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held July 30, 1997, except for certain information
concerning the executive officers of the Company which is set forth in Part I
of this Report.
ITEM 11. Executive Compensation
The information required by Item 11 is incorporated herein by
reference from the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held July 30, 1997.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
The information required by Item 12 is incorporated herein by
reference from the Company's Proxy Statement for its Annual Meeting of
Shareholders to be held July 30, 1997.
ITEM 13. Certain Relationships and Related Transactions
The information required by item 13 is incorporated herein by reference
from the Company's Proxy Statement for its Annual Meeting of Shareholders to
be held July 30, 1997.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
The following consolidated financial statements of Shopsmith,
Inc. and its subsidiaries are incorporated by reference as part
of this Report at Item 8 hereof.
Report of Independent Accountants.
Consolidated Balance Sheets as of April 5, 1997 and
March 30, 1996.
Consolidated Statements of Operations for the years
ended April 5, 1997, March 30, 1996, and April 1, 1995.
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the years ended April 5, 1997, March 30,
1996, and April 1, 1995.
Consolidated Statements of Cash Flows for the years ended
April 5, 1997, March 30, 1996, and April 1, 1995.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules
The following Financial Statement Schedules for the years ended
April 5, 1997, March 30, 1996, and April 1, 1995 are included in
this report.
Report of Independent Auditor
Schedule II- Valuation and Qualifying Accounts
Other schedules are omitted because of the absence of conditions
under which they are required or because the required
information is given in the financial statements or notes
thereto.
Individual financial statements of the registrant have been
omitted since the registrant is primarily an operating company
and all consolidated subsidiaries are wholly-owned.
3. Exhibits
The Exhibits which are filed with this Report are listed in the
Exhibit Index. All management contracts or compensatory plans
or arrangements are indicated on the Exhibit Index.
(b) Reports on Form 8-K
During the quarter ended April 5, 1997, the Company did not
file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements 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.
SHOPSMITH, INC.
By/s/ John R. Folkerth
John R. Folkerth
Chairman of the Board
and Chief Executive Officer
June 10, 1997____________
Date
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.
/s/ John R. Folkerth_________ /s/ Edward A. Nicholson_________
John R. Folkerth Edward A. Nicholson
Chairman of the Board, Director
Chief Executive Officer and June 10, 1997___________________
Director (Principal Executive Date
Officer)
June 10, 1997________________
Date /s/ John L. Schaefer____________
John L. Schaefer
Director
/s/ Robert L. Folkerth_______ June 10, 1997___________________
Robert L. Folkerth Date
Vice President of Field Sales
and Director
June 10, 1997________________ /s/ Brady L. Skinner____________
Date Brady L. Skinner
Director
June 10, 1997___________________
/s/ William C. Becker________ Date
William C. Becker
Vice President of Finance
(Principal Financial and /s/ Richard L. Snell____________
Accounting Officer) Richard L. Snell
June 10, 1997________________ Director
Date June 10, 1997___________________
Date
/s/ J. Michael Herr__________
J. Michael Herr
Director
June 10, 1997________________
Date
CROWE CHIZEK
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Shopsmith, Inc.
Dayton, Ohio
We have audited the financial statements of Shopsmith, Inc. and
Subsidiaries as of April 5, 1997 and March 30, 1996 and for the years
ended April 5, 1997, March 30, 1996 and April 1, 1995, and have issued our
report thereon dated June 3, 1997. The financial statements and report
are included in your 1996 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of Shopsmith, Inc. and Subsidiaries listed in Item 14.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our
audit.
In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
June 3, 1997
SHOPSMITH INC. AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED April 5, 1997, March 30, 1996 AND April 1, 1995
CAPTION
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE CHARGED
AT TO COST DEDUCTIONS BALANCE
BEGINNING AND FROM AT END
DESCRIPTION OF YEAR EXPENSES RESERVE OF YEAR
Reserves deducted
from assets to
which they apply:
YEAR ENDED
April 5, 1997
Allowance for
doubtful accounts
receivable $ 235,007 $ 135,122 $ 27,512 $ 342,617
YEAR ENDED
March 30, 1996
Allowance for
doubtful accounts
receivable $ 94,728 $ 263,445 $ 123,166 $ 235,007
YEAR ENDED
April 1, 1995
Allowance for
doubtful accounts
receivable $ 241,736 $ 156,791 $ 303,799 $ 94,728
Reserve for excess
and obsolete
inventory $ 555,076 - $ 555,076 -
SHOPSMITH, INC.
INDEX TO EXHIBITS
Exhibit No. and Document
(3) Articles of Incorporation and By-laws
3.1 Amended Articles of Incorporation of Shopsmith, Inc., filed as
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(Reg. No. 33-26463). *
3.2 Amended Code of Regulations of Shopsmith, Inc., filed as Exhibit
4.2 to the Company's Registration Statement on Form S-8 (Reg.
No. 33-26463). *
(4) Instruments Defining the Rights of Security Holders, Including
Indentures
4.1 Loan and Security Agreement, dated as of September 1, 1989 among
Shopsmith, Inc., Shopsmith Woodworking Promotions, Inc.,
Shopsmith Canada Inc., and Huntington National Bank, including
the form of the Revolving Note issued in connection therewith.
Filed as Exhibit 4.1 to the Company's Annual Report on Form 10-K
for the year ended March 31, 1990. *
4.2 First Amendment to Loan and Security Agreement, dated July 11,
1990 among Shopsmith, Inc., Shopsmith Woodworking Promotions,
Inc., Shopsmith Canada, Inc., Shopsmith Woodworking Centers Ltd.
Co., and Huntington National Bank, including the form of the
Revolving Note issued in connection therewith. Filed as Exhibit
4.2 to the Company's Annual Report on Form 10-K for the year
ended March 31, 1991. *
4.3 Second Amendment to Loan and Security Agreement, dated April 23,
1991 among Shopsmith, Inc., Shopsmith Woodworking Promotions,
Inc., Shopsmith Canada Inc., Shopsmith Woodworking Centers Ltd.
Co. and Huntington National Bank, including the form of the
Revolving Note issued in connection therewith. Filed as Exhibit
4.3 to the Company's Annual Report on Form 10-K for the year
ended March 31, 1991. *
4.4 Third Amendment to Loan and Security Agreement, dated June 21,
1993 among Shopsmith, Inc., Shopsmith Woodworking Promotions,
Inc., Shopsmith Canada Inc., Shopsmith Woodworking Centers Ltd.
Co., and Huntington National Bank, including the form of the
Revolving Note issued in connection therewith. Filed as exhibit
4.4 to the Company's Annual Report on Form 10-K for the year
ended April 3, 1993. *
4.5 Note Modification Agreement, dated as of June 21, 1993 among
Shopsmith, Inc., Shopsmith Woodworking Promotions, Inc.,
Shopsmith Canada Inc., Shopsmith Woodworking Centers Ltd. Co.
and the Huntington National Bank. Filed as exhibit 4.5 to the
Company's Annual Report on Form 10-K for the year ended April
3, 1993. *
4.6 Fourth Amendment to Loan and Security Agreement dated October
5, 1993 among Shopsmith, Inc., Shopsmith Woodworking
Promotions, Inc., Shopsmith Canada Inc., Shopsmith Woodworking
Centers Ltd. Co., and Huntington National Bank. Filed as
Exhibit 4.6 to the Company's Current Report on Form 8-K dated
November 1, 1993. *
4.7 Letter agreement dated April 26, 1994 between Huntington
National Bank and Shopsmith, Inc., Shopsmith Woodworking
Promotions, Inc., Shopsmith Canada Inc., and Shopsmith
Woodworking Centers Ltd. Co. Filed as exhibit 4.9 to the
Company's Annual Report on Form 10-K for the year ended April
2, 1994. *
4.8 Fifth Amendment to Loan and Security Agreement dated June 30,
1995 between Huntington National Bank and Shopsmith, Inc.
Filed as exhibit 4.12 to the Company's quarterly report on Form
10-Q for the quarter ended July 1, 1995. *
4.9 Sixth Amendment to Loan and Security Agreement dated July 1,
1996 between Huntington National Bank and Shopsmith, Inc.
Filed as exhibit 4.12 to the Company's quarterly report on Form
10-Q for the quarter ended September 28, 1996. *
(10) Material Contracts
Management Contracts and Compensatory Plans or Arrangements
10.1 Plan for Providing Tax Return Preparation for Chief Executive
Officer, as adopted by the Company's Board of Directors on
February 14, 1985. Filed as exhibit 10.3 to the Company's
Annual Report on Form 10-K for the year ended April 3, 1993. *
10.2 1984 Stock Option Plan, as amended on February 9, 1987 and
June 11, 1992. Filed as exhibit 10.8 to the Company's Annual
Report on Form 10-K for the year ended March 31, 1991. *
10.3 Shopsmith, Inc. 1988 Director Option Plan, effective September
1, 1988, as amended on July 29, 1989, June 11, 1992 and July
31, 1996. **
10.4 Disability Plan for Executive Officers, as adopted by the
Company's Board of Directors on November 5, 1991. Filed as
Exhibit 10.13 to the Company's Annual Report on Form 10-K for
the year ended March 31, 1992. *
10.5 Nonstatutory Stock Option granted by the Company on June 21,
1993 to John R. Folkerth for the purchase, for a period of 10
years from the date of grant of 20,000 Common Shares of the
Company at a purchase price of $3.00 per share. Filed as
Exhibit 10.7.1 to the Company's Annual Report on Form 10-K for
the year ended April 2, 1994. *
10.6 Incentive compensation plan in effect for the fiscal year ended
April 1, 1995 (A substantially identical plan was adopted for
the fiscal years to end March 30, 1996, April 5, 1997 and April
4, 1998.). Filed as Exhibit 10.7.2 to the Company's Annual
Report on Form 10-K for the year ended April 1, 1995. *
10.7 1995 Stock Option Plan. Filed as exhibit 4.3 to the Company's
Registration Statement on Form S-8 (Reg. No. 33-64663). *
10.8 Amendment to Shopsmith, Inc. 1984 Stock Option Plan dated
November 5, 1996. **
10.9 Amendment to Shopsmith, Inc. 1995 Stock Option Plan dated
November 5, 1996. **
Other Material Contracts
10.10 Agreement of Lease, dated August 15, 1987 between Angeles
Partners XIV and the Company relating to 6530 Poe Avenue,
Dayton, Ohio property, as amended on September 28, 1990. Filed
as Exhibit 10.2 to the Company's Annual Report on Form 10-K for
the year ended March 31 1991. *
10.11 Shopsmith Inc. Savings Plan, effective April 1, 1997. Filed as
exhibit 10.11 to the Company's annual report on Form 10-K for
the year ended April 5, 1997. **
(11) Statement Re Computation of Per Share Earnings
11.1 Computation of Consolidated Earnings Per Common Share for the
Three Years Ended April 5, 1997, March 30, 1996 and April 1,
1995. **
(13) Annual Report to Security Holders
13.1 Shopsmith, Inc. Annual Report to Shareholders for the year ended
April 5, 1997. Only such portions of the Annual Report as are
specifically incorporated by reference under Parts I, II, and
IV of this Report shall be deemed filed as part of this Report.
**
(21) Subsidiaries of the Registrant
21.1 Subsidiaries of the Registrant. **
(23) Consents of Experts and Counsel
23.1 Consent of Crowe, Chizek and Company L.L.P. Independent Public
Accountants to incorporation by reference. **
(27) Financial Data Schedule
27.1 Financial Data Schedule **
(99) Additional Exhibits
99.1 Shopsmith, Inc. Employee Stock Purchase Plan. Filed as Exhibit
99.1 to the Company's Current Report on Form 8-K dated August
26, 1993. *
99.2 Creditor's Composition Agreement and Disclosure Document dated
May 19, 1994 and approved in June 1994. Filed as exhibit 99.2
to the Company's Annual Report on Form 10-K for the year ended
April 1, 1995 *
* Previously filed
** Filed herewith
SHOPSMITH, INC. EXHIBIT 10.3
1988 DIRECTOR OPTION PLAN
(As Amended July 31, 1996)
PART 1. PLAN ADMINISTRATION AND ELIGIBILITY
I. PURPOSE
The purpose of the 1988 Director Option Plan (the "Plan") of Shopsmith,
Inc. (the "Company") is to encourage ownership in the Company by outside
directors of the Company whose continued services are considered important to
the Company's progress and thus to provide them with a further incentive to
continue as directors of the Company.
II. ADMINISTRATION
The Plan shall be administered by a committee (the "Committee") of the
Board of Directors of the Company. All questions of interpretation of the
Plan or of any options issued under it shall be determined by the Committee
and such determination shall be final and binding upon all persons having an
interest in the Plan.
III. PARTICIPATION IN THE PLAN
All directors of the Company who are not employees of the Company or any
subsidiary of the Company shall be eligible to participate in the Plan.
IV. SHARES SUBJECT TO THE PLAN
A. CLASS. The shares that are to be made the subject of awards granted
under the Plan shall be the Company's authorized but unissued Common Shares or
treasury Common Shares ("Common Shares" or "Shares"). In connection with the
issuance of Common Shares under the Plan, the Company may repurchase Shares in
the open market or otherwise.
B. AGGREGATE AMOUNT.
(1) The total number of Shares issuable under the Plan shall not
exceed 52,500 Shares (subject to adjustment under Section XII).
(2) If any outstanding Option under the Plan expires or is
terminated for any reason, then the Common Shares allocable to the unexercised
Option shall not be charged against the limitation of Section IV(B)(1) and may
again become the subject of an Option granted under the Plan.
PART 2. OPTIONS
V. NON-STATUTORY STOCK OPTIONS
All Options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended to date and as may be amended from time to time.
VI. TERMS, CONDITIONS AND FORM OF OPTIONS
Each Option granted under this Plan shall be evidenced by a written
agreement in such form as the Committee shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
A. OPTION GRANT DATES. Options shall be granted automatically on
January 2 (or if January 2 is not a business day, on the next succeeding
business day) of the year to any eligible director who, on or prior to June 30
of the year preceding the grant date, files with the Committee or its
designate an irrevocable election to receive an Option in lieu of retainer
fees to be earned in the following year beginning January 1 and ending
December 31 ("Plan Year").
B. OPTION FORMULA. The number of Option Shares granted to any eligible
director shall be equal to the nearest number of whole Shares determined as of
the date of grant in accordance with the following formula:
Annual Retainer Number
----------------------------- = of
Fair Market Value minus $1.00 Shares
"Annual Retainer" shall mean the amount that the director will be entitled to
receive for serving as a director in the relevant Plan Year, but shall not
include fees associated with service on any committee of the Board of
Directors nor with any other services to be provided to the Company. "Fair
Market Value" shall mean the fair market value of a Common Share and shall
equal the mean between the closing bid and asked prices on the date such value
is being determined (or, if there are not quotations on such date, the last
preceding date on which there were quotations).
C. OPTIONS NON-TRANSFERABLE. Each Option granted under the Plan by
its terms shall not be transferable by the director otherwise than by will, by
the laws of descent and distribution, or pursuant to a Qualified Domestic
Relations Order (as hereinafter defined) and shall be exercised during the
lifetime of the director only by him or his transferee under a Qualified
Domestic Relations Order. As used herein, Qualified Domestic Relations Order
shall mean a qualified domestic relations order as defined in the Internal
Revenue Code of 1986, as amended, or Title I of the Employee Retirement Income
Security Act, or the rules thereunder. Except as otherwise provided herein, no
Option or interest therein may be transferred, assigned, pledged or
hypothecated by the director during his lifetime, whether by operation of law
or otherwise, or be made subject to execution, attachment or similar process.
D. PERIOD OF OPTION. Options become exercisable on the first
anniversary of the date upon which they were granted; provided, however, that
any Option granted pursuant to the Plan shall become exercisable in full upon
the death of the director or retirement because of age in accordance with
Company policy or retirement because of total and permanent disability.
Options shall terminate upon the expiration of ten years from the date upon
which such Options were granted (subject to prior termination as hereinafter
provided).
E. EXERCISE OF OPTIONS. Options may be exercised (in full or in part)
only by written notice to the Company at its principal office accompanied by
payment, in cash, of the full consideration for the Shares as to which they
are exercised.
F. TERMINATION OF OPTIONS. All rights of a director or his transferee
under a Qualified Domestic Relations Order in any Option that is currently
exercisable shall expire three months after the date of the director's
termination as a director for any reason including the removal, resignation or
retirement of the director; provided, however, that in the event of death of
the director, the provisions of the following paragraph shall govern. In the
event a director ceases to be a director for any reason other than the death
of the director or retirement because of age in accordance with Company policy
or retirement because of total and permanent disability, all rights of the
director or his transferee under a Qualified Domestic Relations Order in any
Option that is not currently exercisable shall expire to the extent that any
portion of such Option is attributable to a portion of the director's Annual
Retainer that was not earned due to termination.
G. DEATH OF DIRECTOR. Any Option granted to the director under the
Plan and outstanding on the date of his death may be exercised by the personal
representative of the director's estate or by the person or persons to whom
the Option is transferred pursuant to the director's will, in accordance with
the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order, at any time prior to the specified expiration date of such
Option or the first anniversary of the director's death, whichever is the
first to occur. Upon the occurrence of the earlier event, the Option shall
then terminate.
H. CANCELLATION OF OPTIONS. In the event any Acquisition Transaction
(as hereinafter defined) is authorized or approved by either the Board or the
shareholders of the Company, the Committee shall have the authority in its
sole discretion to cancel, effective upon not less than 30 days' notice, any
Option granted under the Plan. Promptly after such cancellation, the Company
shall pay in cash to the holder of each canceled Option an amount equal to the
excess of the aggregate Fair Market Value on the effective date of such
cancellation of the Shares then subject to the Option (whether or not the
Option is then fully exercisable) over the aggregate Option price of such
Shares. As used herein, "Acquisition Transaction" means (1) any sale or
disposition of a majority of the assets of the Company, (2) any merger or
consolidation to which the Company is a party and in which either the Company
is not the surviving corporation or the Shares are reclassified or
recapitalized, (3) any sale or other disposition, in a single transaction or a
series of related transactions, of 90% or more of the outstanding shares of
the Company, or (4) the liquidation of the Company.
VII. OPTION PRICE
The Option price per share for the Shares covered by each Option shall be
$1.00.
PART 3. GENERAL PROVISIONS
VIII. PAYMENT OF BROKERAGE FEES
Upon the request of a director, the Company shall pay all brokerage fees
associated with the director's sale of Shares that were acquired upon the
exercise of an Option.
IX. ASSIGNABILITY
The rights and benefits under this Plan shall not be assignable or
transferable by the director other than by will, by the laws of descent and
distribution or pursuant to a Qualified Domestic Relations Order, and during
the lifetime of the director Options granted under the Plan shall be
exercisable only by him or his transferee under a Qualified Domestic Relations
Order.
X. TIME FOR GRANTING OPTIONS
No Options may be granted under this Plan after September 1, 1998 (or if
September 1, 1998 is not a business day, after the next succeeding business
day).
XI. LIMITATION OF RIGHTS
A. NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan, nor the
granting of an Option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or
implied, that the Company will retain a director for any period of time, or at
any particular rate of compensation.
B. NO SHAREHOLDERS' RIGHTS FOR OPTIONS. A director shall have no
rights as a shareholder with respect to the Shares covered by his Options
until the date of the issuance to him of a share certificate therefor, and no
adjustment will be made for dividends or other rights for which the record
date is prior to the date such certificate is issued.
XII. ADJUSTMENTS TO SHARE
In the event any change is made to the Common Shares subject to the Plan
or subject to any outstanding award granted under the Plan (whether by reason
of merger, consolidation, reorganization, recapitalization, stock dividend,
stock split, combination of shares, exchange of shares, change in corporate
structure or otherwise), then appropriate adjustments shall be made to the
maximum number of Shares subject to the Plan and the number of Shares and
price per Share subject to outstanding Options.
XIII. EFFECTIVE DATE OF THE PLAN
The Plan shall take effect ten days after the date of adoption by the
shareholders of the Company.
XIV. AMENDMENT OF THE PLAN
The Board of Directors of the Company may suspend or discontinue the Plan
or revise or amend it in any respect whatsoever; provided, however, that
without approval of the shareholders no revision or amendment shall change the
number of Shares subject to the Plan (except as provided in Section XII),
change the designation of the class of directors eligible to receive Options,
materially increase the benefits accruing to participants under the Plan or
alter or impair any rights or obligations of any Option previously granted
without the consent of the director holding such Option.
XV. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Ohio and construed accordingly.
1988 DIRECTOR OPTION PLAN
AMENDMENT TO EXHIBIT 10.8
SHOPSMITH, INC.
1984 STOCK OPTION PLAN
The undersigned, J. Michael Herr, Secretary of Shopsmith, Inc., an
Ohio corporation (the "Company"), hereby certifies that the following are the
amendments made to the Company's 1984 Stock Option Plan (the "Plan"), as
authorized by the Board of Directors of the Company on November 5, 1996:
1. The following definitions are added to Section 2 of the Plan:
(l) "Family Members" means children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including
half-brothers and -sisters), nephews, nieces and in-laws.
(m) "Grantee" means the person who received the option and any
related Stock Appreciation Right from the Company.
(n) "Holder" means the person(s) or entity who owns the option and
any related Stock Appreciation Right, whether the Grantee, Transferee,
heir or other beneficiary.
(o) "Transferee" means the person who received the option and any
related Stock Appreciation Right from the Grantee during the Grantee's
lifetime in accordance with the Plan.
2. The first paragraph of Section 4 of the Plan is amended in its
entirety to read as follows:
"The Plan shall be administered by a Committee of the Board."
3. The references in Section 6(b) to the "optionee" are amended to
be references to the "Grantee."
4. The first sentence of Section 7 is amended in its entirety to
read as follows:
"An option granted under the Plan may be exercised by the Holder
giving written notice of exercise to the Committee or to an officer of
the Company designated by the Committee."
5. The word "optionee" in the fourth sentence of Section 7 is
deleted and replaced with the word "Holder."
6. The references in Section 8(a) to the "optionee" are amended to
be references to the "Holder." The last sentence of Section 8(a) is
deleted in its entirety.
7. Section 8(b) of the Plan is amended in its entirety to read as
follows:
"(b) Restriction on Exercise. A Stock Appreciation Right shall be
exercisable only at such times as the related option is exercisable (and
to the extent that the related option is then exercisable) and only at
such times that the Fair Market Value of a Share exceeds the Option Price
under the related option."
8. The references in Section 8(c) and Section 8(d) to the
"optionee" are amended to be references to the "Holder."
9. Section 9 of the Plan is amended in its entirety to read as
follows:
"Section 9. Transferability.
"(a) General Rule. Except as otherwise provided in this Section 9,
options and Stock Appreciation Rights may not be sold, pledged, assigned,
hypothecated or transferred other than by will or the laws of descent and
distribution upon the Holder's death, and may be exercised during the
lifetime of the Grantee only by such Grantee or by his guardian or legal
representative. All grants under the Plan, with the exception of
Incentive Stock Options and any Stock Appreciation Rights relating
thereto, may be transferred pursuant to a Qualified Domestic Relations
Order.
"(b) Permitted Transfers. Subject to this Section 9 and except as
the Committee may otherwise prescribe from time to time, the Committee
may act to permit the transfer or assignment of an option (together with
any related Stock Appreciation Right) by a Grantee for no consideration
to the Grantee's Family Members, trusts for the sole benefit of the
Grantee's Family Members or partnerships whose only partners are Family
Members of the Grantee; provided, however, that any such permitted
transfer or assignment shall not apply to an option that is an Incentive
Stock Option (but only if nontransferability is necessary in order for
the option to qualify as an Incentive Stock Option) and to any Stock
Appreciation Rights related to an Incentive Stock Option. Any permitted
transfer or assignment of an option and any Stock Appreciation Right
related thereto shall only be effective upon receipt by the Committee or
an officer of the Company designated by the Committee of an instrument
acceptable in form and substance to the Committee that effects the
transfer or assignment and that contains an agreement by the Transferee
to accept and comply with all the terms and conditions of the stock
option award and this Plan. A Transferee shall possess all the same
rights and obligations as the Grantee under the Plan, except that the
Transferee can subsequently transfer such option and any related Stock
Appreciation Rights only by (i) will or the laws of descent and
distribution, or (ii) a transfer to a beneficiary or partner if the
Transferee is a trust or partnership, respectively.
"Unless the Committee otherwise prescribes, upon the exercise of a
Nonstatutory Option or its related Stock Appreciation Rights by a
Transferee, when and as permitted in accordance with this Section 9, the
Grantee is required to satisfy the applicable withholding tax obligations
by paying cash to the Company with respect to any income recognized by
the Grantee upon the exercise of such option or Stock Appreciation Right
by the Transferee. If the Grantee does not satisfy the applicable
withholding tax obligations on the exercise date of the option or related
Stock Appreciation Right, the Company shall, in the case of the exercise
of an option, retain from the Shares to be issued to the Transferee upon
the exercise of the option a number of Shares having a Fair Market Value
on the exercise date equal to the mandatory withholding tax payable by
the Grantee or, in the case of the exercise of a Stock Appreciation
Right, deduct from the cash to be delivered to the Transferee such amount
as is equal to the mandatory withholding taxes payable by the Grantee."
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the 5th day of November, 1996.
______________________________
J. Michael Herr
Secretary
1984 Stock Option Plan Amendment
AMENDMENT TO EXHIBIT 10.9
SHOPSMITH, INC.
1995 STOCK OPTION PLAN
The undersigned, J. Michael Herr, Secretary of Shopsmith, Inc., an
Ohio corporation (the "Company"), hereby certifies that the following are the
amendments made to the Company's 1995 Stock Option Plan (the "Plan"), as
authorized by the Board of Directors of the Company on November 5, 1996:
1. The following definitions are added to Section 2 of the Plan:
(p) "Family Members" means children, stepchildren, grandchildren,
parents, stepparents, grandparents, spouse, siblings (including
half-brothers and -sisters), nephews, nieces and in-laws.
(q) "Grantee" means the person who received the option and any
related Stock Appreciation Right from the Company.
(r) "Holder" means the person(s) or entity who owns the option and
any related Stock Appreciation Right, whether the Grantee, Transferee,
heir or other beneficiary.
(s) "Transferee" means the person who received the option and any
related Stock Appreciation Right from the Grantee during the Grantee's
lifetime in accordance with the Plan.
2. The first paragraph of Section 4 of the Plan is amended in its
entirety to read as follows:
"The Plan shall be administered by a Committee of the Board."
3. The reference in Section 6(b)(4) to the "optionee" is amended to
be a reference to the "Grantee."
4. Section 6(b)(5) of the Plan is amended in its entirety to read
as follows:
"At the time an option is granted, or at such other time as the
Committee may determine, the Committee may provide that, if the Grantee
ceases to be employed by the Company for any reason (including retirement
or disability) other than death, the option will continue to be
exercisable by the Holder for such additional period (not to exceed the
remaining term of the option) after such termination of employment as the
Committee may provide."
5. Section 6(b)(6) of the Plan is amended in its entirety to read
as follows:
"At the time an option is granted, or at such other time as the
Committee may determine, the Committee may provide that, if the Grantee
dies while employed by the Company or while the Holder is entitled to the
benefits of any additional exercise period established by the Committee
with respect to Section 6(b)(5), then the option will continue to be
exercisable (to the extent it was exercisable on the date of death) by the
person or persons (including the Grantee's estate) to whom the Grantee's
rights with respect to such option have passed by will or by the laws of
descent and distribution or, if applicable, by any other Holder permitted
by Section 11, for such additional period after death (not to exceed the
remaining term of such option) as the Committee may provide."
6. Section 6(b)(7) of the Plan is amended by capitalizing the word
"holder."
7. Section 6(b)(10)(ii) of the Plan is amended in its entirety to
read as follows:
"(ii) if the amendment would adversely affect the rights of the
Holder, the consent of the Holder to such amendment must be obtained."
8. The first sentence of Section 8 is amended in its entirety to
read as follows:
"An option granted under the Plan may be exercised by the Holder
giving written notice of exercise to the Committee or to an officer of the
Company designated by the Committee."
9. The word "optionee" in the fourth sentence of Section 8 is
deleted and replaced with the word "Holder."
10. The references in Section 9 to "holder" or "holder of the
option" are amended to be references to the "Grantee."
11. The references in Section 10(a) to the "optionee" are amended
to be references to the "Holder." The last sentence of Section 10(a) is
deleted in its entirety.
12. Section 10(b) of the Plan is amended in its entirety to read as
follows:
"(b) Restriction on Exercise. A Stock Appreciation Right shall be
exercisable only at such times as the related option is exercisable (and
to the extent that the related option is then exercisable) and only at
such times that the Fair Market Value of a Share exceeds the Option Price
under the related option."
13. The references in Section 10(c) and Section 10(d) to the
"optionee" are amended to be references to the "Holder."
14. Section 11 of the Plan is amended in its entirety to read as
follows:
"Section 11. Transferability.
"(a) General Rule. Except as otherwise provided in this Section
11, options and Stock Appreciation Rights may not be sold, pledged,
assigned, hypothecated or transferred other than by will or the laws of
descent and distribution upon the Holder's death, and may be exercised
during the lifetime of the Grantee only by such Grantee or by his guardian
or legal representative. All grants under the Plan, with the exception of
Incentive Stock Options and any Stock Appreciation Rights relating
thereto, may be transferred pursuant to a Qualified Domestic Relations
Order.
"(b) Permitted Transfers. Subject to this Section 11 and except as
the Committee may otherwise prescribe from time to time, the Committee may
act to permit the transfer or assignment of an option (together with any
related Stock Appreciation Right) by a Grantee for no consideration to the
Grantee's Family Members, trusts for the sole benefit of the Grantee's
Family Members or partnerships whose only partners are Family Members of
the Grantee; provided, however, that any such permitted transfer or
assignment shall not apply to an option that is an Incentive Stock Option
(but only if nontransferability is necessary in order for the option to
qualify as an Incentive Stock Option) and to any Stock Appreciation Rights
related to an Incentive Stock Option. Any permitted transfer or
assignment of an option and any Stock Appreciation Right related thereto
shall only be effective upon receipt by the Committee or an officer of the
Company designated by the Committee of an instrument acceptable in form
and substance to the Committee that effects the transfer or assignment and
that contains an agreement by the Transferee to accept and comply with all
the terms and conditions of the stock option award and this Plan. A
Transferee shall possess all the same rights and obligations as the
Grantee under the Plan, except that the Transferee can subsequently
transfer such option and any related Stock Appreciation Rights only by (i)
will or the laws of descent and distribution, or (ii) a transfer to a
beneficiary or partner if the Transferee is a trust or partnership,
respectively.
"Unless the Committee otherwise prescribes, upon the exercise of a
Nonstatutory Option or its related Stock Appreciation Rights by a
Transferee, when and as permitted in accordance with this Section 11, the
Grantee is required to satisfy the applicable withholding tax obligations
by paying cash to the Company with respect to any income recognized by the
Grantee upon the exercise of such option or Stock Appreciation Right by
the Transferee. If the Grantee does not satisfy the applicable
withholding tax obligations on the exercise date of the option or related
Stock Appreciation Right, the Company shall, in the case of the exercise
of an option, retain from the Shares to be issued to the Transferee upon
the exercise of the option a number of Shares having a Fair Market Value
on the exercise date equal to the mandatory withholding tax payable by the
Grantee or, in the case of the exercise of a Stock Appreciation Right,
deduct from the cash to be delivered to the Transferee such amount as is
equal to the mandatory withholding taxes payable by the Grantee."
IN WITNESS WHEREOF, the undersigned has executed this instrument as
of the 5th day of November, 1996.
______________________________
J. Michael Herr
Secretary
1995 Stock Option Plan Amendment
EXHIBIT 10.11
TABLE OF CONTENTS
1. Adoption Agreement
2. Summary Plan Description
3. Basic Plan Document
4. IRS Determination Letter
5. Action of the Board of Directors
6. Funding Policy and Proprietary Funds Letter
7. Loan Policy
8. Service Agreement
9. Specimen Signatures
10. Notice to Interested Parties
03/24/95
Basic Plan Document # 05
Plan # 002
IRS Letter Serial No.: D363689a
PRISM (registered trademark) PROTOTYPE RETIREMENT PLAN & TRUST
401(k) Profit Sharing Plan
(Nonstandardized)
Adoption Agreement1
The Employer(2), designated below, hereby establishes a profit-sharing
plan (optionally including a cash or deferred arrangement (as defined in
401(k) of the Internal Revenue Code)) for all Eligible Employees as defined
in this Adoption Agreement pursuant to the terms of the PRISM(registered
trademark) Prototype Retirement Plan & Trust Basic Plan Document # 05.
A. Employer Information:
1. Name: Shopsmith Inc.
2. Address: 6530 Poe Avenue
3. Address: Dayton, Ohio 45414
4. Attention: Chuck Hofmann Telephone: (937) 898-6070
5. Employer Taxpayer Identification Number(3): 31-0811366
B. Basic Plan Provisions:
1. Plan Name (select one):
a. [ ] This plan is established effective ,
19 , (the "Effective Date") as a profit
sharing plan and trust (optionally with a
"cash or deferred arrangement" as defined in
Code 401(k)) to be known as Plan and
Trust (the "Plan") in the form of the PRISM
(registered trademark) Prototype Retirement
Plan & Trust.
- -----------
1 Footnotes in this Adoption Agreement are not to be construed as part of
the Plan provisions but are explanatory only. To the extent a footnote
is inconsistent with the provisions of the Basic Plan Document or
applicable law, the provisions of the Plan shall be construed in
conformity with the Basic Plan Document or law.
2 Terms that are capitalized are defined in the PRISM (registered
trademark) Prototype Retirement Plan & Trust Basic Plan Document.
3 The Plan will have an individual TIN, distinct from the Employer TIN.
b. [X] This plan is an amendment and restatement in the form of
the PRISM(registered trademark) Prototype Retirement Plan
& Trust, effective April 1, 1997, (the "Effective Date")
of the Shopsmith Inc. Savings Plan and Trust (the "Plan"),
originally effective as of April 1, 1984 (the "Original
Effective Date").
2. Employer's Three Digit Plan Number: 002
3. Committee Members(4):
John R. Folkerth Sr., Willam C. Becker, Chuck Hofmann
4. Definitions:
a. Compensation for allocation purposes:
i Will be determined over the following applicable period
(select only one):
(a) [ ] the Plan Year
(b) [X] the period of Plan participation during the
Plan Year
(c) [ ] a consecutive 12 month period commencing on
and ending with, or within, the Plan Year.
ii [X] If selected, Compensation will include Employer
contributions made pursuant to a Salary Reduction
Agreement, or other arrangement, which are not includible
in the gross income of the Employee under 125, 402(e)(3),
402(h)(1)(B) or 403(b) of the Internal Revenue Code.
iii Shall not include (select as many as desired):
(a) [ ] Bonuses
(b) [ ] Commissions
(c) [ ] Taxable fringe benefits identified below:
(d) [ ] Other items of remuneration identified below:
iv Shall be limited to $ , which shall be the maximum
amount of compensation considered for plan allocation
purposes (but not for testing purposes), and may not be
an amount in excess of the Internal Revenue Code
- ---------
4 Committee members direct the day to day operation of the Plan.
Committee members serve at the pleasure of the Employer. See 11.4 for
changes in Committee membership. If no Committee members are specified,
the Employer shall assume responsibility for the operations of the Plan.
401(a)(17) limit in effect for the Plan Year(5). If no
amount is specified, Compensation shall be limited to the
Internal Revenue Code 401(a)(17) amount, as adjusted by
the Secretary of the Treasury from time to time.
b. Early Retirement Date:
i [X] is not applicable to this Plan
ii [ ] is the latter of the date on which the Participant
attains age (not less than 55) and the date on
which the Participant completes Years of
Service.
c. Hour of Service shall be determined on the basis of the method
selected below. Only one method may be selected. The method
shall be applied to all Employees covered under the Plan as
follows (select only one):
i [X] On the basis of actual hours for which an
Employee is paid, or entitled to be paid.
ii [ ] On the basis of days worked. An Employee shall be
credited with ten (10) Hours of Service if under
1.1(U) of the Plan such Employee would be credited
with at least one (1) Hour of Service during the
day.
iii [ ] On the basis of weeks worked. An Employee shall
be credited with forty- five (45) Hours of
Service if under 1.1(U) of the Plan such Employee
would be credited with at least one (1) Hour of
Service during the week.
iv [ ] On the basis of semi-monthly payroll periods. An
Employee shall be credited with ninety-five (95)
Hours of Service if under 1.1(U) of the Plan
such Employee would be credited with at least one
(1) Hour of Service during the semi- monthly
payroll period.
v [ ] On the basis of months worked. An Employee shall
be credited with one hundred ninety (190) Hours
of Service if under 1.1(U) of the Plan such
Employee would be credited with at least one (1)
Hour of Service during the month.
d. Limitation Year shall mean the 12 month period
commencing on April 1 and ending on March 31.
- ----------
5 If no amount is specified, the maximum amount of Compensation allowed
under Code 401(a)(17)(the "$150,000 limit"("$200,000 limit" prior to the
Plan Year beginning before January 1, 1994)), as adjusted from time to
time, shall be used.
e. Normal Retirement Date for each Participant shall
mean (select one):
i [X] the date the Participant attains age: 60
(not to exceed 65)
ii [ ] the latter of the date the Participant attains
age (not to exceed 65) or the (not to
exceed 5th) anniversary of the participation
commencement date. If for the Plan Years
beginning before January 1, 1988, Normal
Retirement Date was determined with reference to
the anniversary of the participation commencement
date (more than 5 but not to exceed 10 years),
the anniversary date for Participants who first
commenced participation under the Plan before
the first Plan Year be ginning on or after
January 1, 1988 shall be the earlier of (A)
the tenth anniversary of the date the
Participant commenced participation in the Plan
(or such anniversary as had been elected by the
employer, if less than 10) or (B) the fifth
anniversary of the first day of the first Plan
Year beginning on or after January 1, 1988.
Notwithstanding any other provisions of the
Plan, the participant commencement date is
the first day of the first Plan Year in which
the Participant commenced participation in
the Plan.
f. Permitted Disparity Level, for purposes of allocating Employer
Contributions, shall mean (select only one):
i [X] Not applicable - the Plan does not use permitted
disparity.
ii [ ] The Taxable Wage Base, which is the contribution
and benefit base under section 230 of the Social
Security Act at the beginning of the year.
iii [ ] % (not greater than 100%) of the Taxable Wage
Base as defined in B(4)(f)(ii) above.
iv [ ] $ , provided that the amount does not
exceed the Taxable Wage Base as defined in
B(4)(f)(ii) above.
g. Plan Year shall mean (select and complete only one of the
following):
i [X] the 12-consecutive month period which coincides
with the Limitation Year. The first Plan Year
shall be the period commencing on the Effective
Date and ending on the last day of the Limitation
Year.
ii [ ] the 12-consecutive month period commencing on
, 19 , and each annual anniversary thereof.
iii [ ] the calendar year (January 1 through December 31).
h. Qualified Distribution Date, for purposes of making
distributions under the provisions of a Qualified Domestic
Relations Order (as defined in Internal Revenue Code 414(p)),
shall shall not be the date the order is determined to be
qualified. If shall is selected, the Alternate Payee will be
entitled to an immediate distribution of benefits as directed by
the Qualified Domestic Relations Order. If shall not is
selected, the Alternate Payee may only take a distribution on
the earliest date that the Participant is entitled to a
distribution.
i. Spouse:
[ ] If selected, Spouse shall mean only that person who has
actually been the Participant's spouse for at least one
year.
j. Year of Service shall mean:
i For eligibility purposes (select one of the following):
(a) [X] the 12 consecutive months during which an
Employee is credited with 1000 (not more than 1000)
Hours of Service.
(b) [ ] a Period of Service (using the elapsed time method
of counting Service, as described in 1.1(N)(3) of
the Plan).
ii For allocation accrual purposes (select one of the
following):
(a) [X] the 12 consecutive months during which an Employee
is credited with 1000 (not more than 1000) Hours
of Service.
(b) [ ] a Period of Service (using the elapsed time
method of counting Service, as described in
1.1(N)(3) of the Plan).
iii For vesting service purposes (select one of the
following):
(a) [X] the 12 consecutive months during which an Employee
is credited with 1000 (not more than 1000) Hours
of Service.
(b) [ ] a Period of Service (using the elapsed time
method of counting Service, as described in
1.1(N)(3) of the Plan).
iv For purpose of computing Years of Service in plans where
Year of Service is defined in terms of Hours of Service),
the consecutive 12 month period shall be:
(a) For eligibility purposes, the first Year of Service
shall be computed using the 12 month period
commencing on the Employee's date of hire and ending
on the first annual anniversary of the Employee's
date of hire (the "Initial Computation Period"). In
the event an employee does not complete an
eligibility Year of Service during this initial
computation period, the computation period shall be
(select only one):
(1) [ ] the period commencing on each annual
anniversary of the Employee's date of hire and
ending on the next annual anniversary of the
Employee's date of hire.
(2) [X] the Plan Year, commencing with the Plan Year
in which the Initial Computation Period ends.
(b) For vesting purposes, Years of Service shall be
computed on the basis of:
(1) [ ] the period commencing on each annual
anniversary of the Employee's date of hire and
ending on the next annual anniversary of the
Employee's date of hire.
(2) [X] the Plan Year, commencing with the first Plan
Year an Employee completes an Hour of Service.
(c) For allocation accrual purposes, Year of Service shall
be computed on the basis of the Plan Year.
v [ ] For eligibility purposes, Years of Service with the
following Predecessor Employers shall count in fulfilling
the eligibility requirements for this Plan:
vi [ ] For vesting purposes, Years of Service with the
following Predecessor Employers shall count for
purposes of determining the nonforfeitable amount of a
Participant's account:
5. Coverage:
This Plan is extended by the Employer to the following Employees
who have met the eligibility requirements (select as many as
appropriate):
i [ ] All Employees
ii [ ] Salaried Employees
iii [ ] Sales Employees
iv [ ] Hourly Employees
v [ ] Leased Employees
vi [X] All Employees except (select as applicable):
(a) [X] those who are members of a unit of Employees covered
by a collective bargaining agreement between the
Employer and Employee representatives, if retirement
benefits were the subject of good faith bargaining and
if two percent or less of the Employees who are
covered pursuant to that agreement are professionals
as defined in Section 1.410(b)-9 of the Regulations.
For this purpose, the term "Employee representative"
does not include any organization more than half of
whose members are Employees who are owners, officers,
or executives of the Employer.
(b) [X] those who are nonresident aliens (within the meaning
of Internal Revenue Code 7701(b)(1)(B)) and who receive
no earned income (within the meaning of Internal
Revenue Code 911(d)(2)) from the Employer which
constitutes income from sources within the United
States (within the meaning of Internal Revenue Code
861(a)(3)).
vii [ ] Union Employees (who are members of the following
unions or union affiliates:
viii [ ] Other Employees, described as follows:
6. Eligibility:
An Employee covered by the Plan may become a Participant upon
completion of the following eligibility requirements:
a. Service(6):
i [ ] There shall be no minimum service requirement for an
Employee to become a Participant.
- ----------
6 If a fractional year is elected, the elapsed time method of computing
service shall be used fro the fractional year. Eligibility provisions
for optional cash or deferred arrangements are contained in Item C of
this Adoption Agreement.
ii [X] The Employee must complete 1 of Service (not more than
2 years) to be a Participant for purposes of receiving
allocations of Employer Profit Sharing Contributions.
b. Age:
i [ ] There shall be no minimum age requirement for an
Employee to become a Participant.
ii [X] The Employee must attain age 21 (not more than 21) to be
a Participant in the Plan.
c. Waiver of Age and Service Requirements:
i [X] Notwithstanding the provisions of Items B(6)(a) and (b),
Employees who have not satisfied the age and service
requirements, but would otherwise be eligible to
participate in the plan, shall be eligible to
participate on the Effective Date.
ii [ ] For new Plans, notwithstanding the provisions of
Items B(6)(a) and (b), Employees who have not satisfied
the age and service requirements, but would otherwise
be eligible to participate in the plan, shall be
eligible to participate on the Effective Date.
d. Entry Dates:
Upon completion of the eligibility requirements, an Employee
shall commence participation in the Plan (select only one):
i [ ] As soon as practicable under the payroll practices
utilized by the Employer, and consistently applied
to all Employees, or if earlier, the first day of the
Plan Year7.
ii [ ] As of the first day of the month following the
completion of the eligibility requirements.
iii[X] As of the earliest of the first day of the Plan Year,
fourth, seventh or tenth month of the Plan Year
next following completion of the eligibility requirements.
iv [ ] As of the earliest of the first day of the Plan Year or
seventh month of the Plan Year next following completion
of the eligibility requirements.
v [ ] As of the first day of the Plan Year next following
completion of the eligibility requirements (may only
be selected if the eligibility year of service
requirement is 6 months or less).
- ----------
7 Notwithstanding the foregoing, an Employee who has met the eligibility
requirements may not enter the Plan later than six months following the
date on which the Employee first completes the eligibility requirements.
7. Vesting:
a. The percentage of a Participant's Employer Contribution
Account (attributable to Employer Profit Sharing
Contributions) to be vested in him or her upon termination
of employment prior to attainment of the Plan's Normal
Retirement Date shall be(8):
Completed Years of Service
1 2 3 4 5 6 7
i [ ] 100%
ii [ ] 100%
iii [ ] 20% 40% 60% 80% 100%
iv [ ] 20% 40% 60% 80% 100%
v [ ] 10% 20% 30% 40% 60% 80% 100%
vi [X] 20% 40% 60% 80% 100%
vii [ ] 100%
vii [ ] Full and immediate vesting upon entry into the Plan(9)
Notwithstanding anything to the contrary in the Plan, the amount
inserted in the blanks above shall not exceed the limits
specified in Code 411(a)(2).
b. For purposes of computing a Participant's vested account
balance, Years of Service for vesting purposes [X] shall
[ ] shall not include Years of Service before the Employer
maintained this Plan or any predecessor plan, and [X] shall
[ ] shall not include Years of Service before the Employee
attained age 18.
c. Notwithstanding the provisions of this Item B(7)(c) of the
Adoption Agreement, a Participant shall become fully vested in
his Participant's Em ployer Contribution if:(10)
i [ ] the Participant's job is eliminated without the
Participant being offered a comparable position elsewhere
with the Employer.
ii [ ] for such reason as is described below:
- ----------
8 Notwithstanding the selection made in this Item B(7)(a), a Participant
shall be fully vested in his or her Employer Contribution Accounts if the
Participant dies or becomes Disabled while in the employ of the Employer.
9 If more than one Year of Service is an eligibility requirement, Item viii
must be selected
10 The provision of this section will be administered by the Employer on a
consistent and nondiscriminatory basis.
8. Employer Profit Sharing Contributions:
a. Contributions:
i [X] In its discretion, the Employer may contribute
Employer Profit Sharing Contributions to the Plan.
ii [ ] The Employer shall contribute Employer Profit Sharing
Contributions to the Plan in the amount of % of
the Compensation of all Eligible Participants under the
Plan.
iii [X] If selected, the Employer may make Employer Profit
Sharing Contributions without regard to current or
accumulated Net Profits of the Employer for the
taxable year ending with, or within the Plan Year.
iv [ ] If selected, the Employer may designate all or any
part of the Employer Profit Sharing Contributions as
Qualified Nonelective Contributions, provided, however,
that contributions so designated will be subject to the
same vesting, distribution, and withdrawal
restrictions as Before Tax Contributions(11).
b. Allocations:
Employer Profit Sharing Contributions shall be allocated to the
accounts of eligible Participants according to the following
selected allocation formula:
i [X] The Employer Profit Sharing Contributions shall be
allocated to each eligible Participant's account in
the ratio which the Participant's
Compensation bears to the Compensation of all
eligible Participants. Employer Profit Sharing Plan
Contributions, shall be allocated to the accounts of
Par ticipants who have completed a Year of Service12
(select one):
(a) [ ] as of the last day of the month preceding
the month in which the contribution
was made.
(b) [ ] as of the last day of the Plan quarter
preceding the quarter in which the
contribution was made.
(c) [X] as of the last day of the Plan Year.
- ----------
11 Amounts designated as Qualified Nonelective Contributions will be
allocated pursuant to 3.1(A)(14) of the Basic Plan Document.
12 In the event contributions are allocated on a basis other than a full
plan year, the Year of Service shall be based on the elapsed time
method of calculation, and a Participant shall be deemed to have
completed an appropriate Period of Service for allocation purposes
if Participant has completed a pro-rata Period of Service corresponding
to the interval on which contributions are allocated.
ii [ ] The Employer Profit Sharing Contributions shall be
allocated in accordance with the following formula:
(a) If the Plan is Top-Heavy, the contribution shall
be first credited to each eligible
Participant's Account in the ratio which
the Participant's Compensation bears to the
total Compensation of all eligible
Participants, up to 3% of each Participant's
Compensation.
(b) If the Plan is Top-Heavy, any Employer Profit
Sharing Contribution remaining after the
allocation in (a) above shall be credited to
each eligible Participant's account in the ratio
which the Participant's Excess Compensation(13)
bears to the total Excess Compensation of all
eligible Participants, up to 3% of each
eligible Participant's Excess Compensation.
(c) Any contributions remaining after the allocation
in (b) above shall be credited to each
eligible Participant's account in the ratio
which the sum of the Participant's to tal
Compensation and Excess Compensation bears to
the sum of the total Compensation and Excess
Compen sation of all eligible Participants, up
to an amount equal to the maximum Excess
Percentage times the sum of the Participant's
Compensation and Excess Compensation. If the Plan
is Top-Heavy, the maximum Excess
Percentage is % (insert percentage). If the
Plan is not Top-Heavy, the maximum Excess
Percentage is % (insert percentage, which shall
not exceed the prior Excess Percentage
limitation specified by more than 3).
Note: If the Permitted Disparity Level defined
at Item B(4)(f) is the Taxable Wage Base
(which is the contribution and benefit base
under section 230 of the Social Security Act at
the beginning of the year), then the maximum
Excess Percentage should be 2.7% if the Plan is
Top- Heavy and 5.7% if the Plan is not Top- Heavy.
If the Permitted Disparity Level defined at
Item B(4)(f) is greater than 80% but less than
100% of the Taxable Wage Base, then the
maximum Excess Percentage should be 2.4% if the
Plan is Top-Heavy and 5.4% if the Plan is not
Top-Heavy.
- ---------
13 Excess Compensation means a Participant's Compensation in excess of the
Permitted Disparity Level specified in the Definitions section of this
Adoption Agreement.
If the Permitted Disparity Level defined at
Item B(4)(f) is greater than the greater of
$10,000 or 20% of the Taxable Wage Base, but not
more than 80%, then the maximum Excess
Percentage should be 1.3% if the Plan is
Top-Heavy and 4.3% if the Plan is not Top-Heavy.
(d) Any remaining Employer Profit Sharing
Contribution shall be allocated among
eligible Partici pants' accounts in the ratio
which the Participant's Compensation bears to
the total Compensation of all Participants.
iii [X] If selected, and the Employer has elected to allocate
Employer Profit Sharing Plan Contributions as of
the last day of the Plan Year, a Participant must be
employed by the Employer on the last day of the Plan
Year in order to re ceive an allocation(14).
iv [X] A Participant who terminates before the end of the
period for which contributions are allocated shall
share in the allocation of Employer Profit Sharing
Contributions if termination of employment was the
result of (select all that apply):
(a) [X] retirement
(b) [X] disability
(c) [X] death
(d) [ ] other, as specified below:
9. Rollover & Transfer Contributions (select one):
a. [X] Subject to policies, applied in a consistent and
nondiscriminatory manner, adopted by the Committee, each
Employee, who would otherwise be eligible to participate
in the Plan except that such Employee has not yet met
the eligibility requirements, and each Participant
may make a Rollover Contribution as described in
Internal Revenue Code 402(a)(5), 403(a)(4) or 408(d)(3).
b. Subject to policies, applied in a consistent and
nondiscriminatory manner, adopted by the Committee,
each Participant may make a Rollover Contribution as
described in Internal Revenue Code 402(a)(5),
403(a)(4) or 408(d)(3).
c. No Employee shall make Rollover Contributions to the Plan.
10. Distributions:
- ----------
14 This option shall only be effective if Item 8(b)(i)(c) has been selected.
Even if this Item is selected, the provisions of 4.8 of the Basic Plan
Document may supersede this requirement if necessary to satisfy Code
Sections 401(a)(26) and 410(b).
a. Distributions Upon Separation from Service:
The Normal Form of Benefit under the Plan shall be a single lump
sum distribution, made [X] (if selected) as soon as
administratively practical after receipt of a distribution
request from a Participant entitled to a distribution or
[ ] (if selected) upon the Participant's attainment of the Plan's
Early Retirement Date or the Plan's Normal Retirement Date,
whichever is earlier.
In addition to the Normal Form of Benefit, the Participant
shall be entitled to select from among the following optional
forms of benefit specified by the employer (select as many as
apply):
i [ ] Installment payments
ii [X] Such other forms as may be specified below:
To the extent that a Participant's Account
is invested in Investment Funds, the assets of
which are distributable in- kind by the Trustee,
a Participant may elect to receive payment of
benefits in the form of an in-kind distribution
of assets held in an Investment Fund.
b. In-Service Distributions (select as may be appropriate):
i [ ] There shall be no in-service distribution of
Participant account bal ances derived from
Employer Profit Sharing Contributions.
ii [X] Participants may request an in- service
distribution of their account balance attributable
to Employer Profit Sharing Contributions, for the
following reasons:
(a) [X] For purposes of satisfying a financial
hardship, as deter mined in accordance
with the uniform nondiscriminatory
policy of the Committee;
(b) [X] Attainment of age 59 1/2 by the
Participant; or
(c) [X] Attainment of the Plan's Normal Retirement
Date by the Participant.
11. Forfeitures:
a. Forfeitures of amounts attributable to Employer Profit
Sharing Contributions shall be reallocated as of:
i [X] the last day of the Plan Year in which the
Forfeiture occurred.
ii [ ] the last day of the Plan Year following the
Plan Year in which the Forfeiture occurred.
iii [ ] the last day of the Plan Year in
which the Participant suffering the Forfeiture
has incurred five consecutive One Year Breaks in
Service.
b. Forfeitures of Employer Profit Sharing Contributions shall be
reallocated as follows:
i [ ] Not applicable as Employer Profit Sharing
Contributions are always 100% vested and
nonforfeitable.
ii [ ] Used first to pay the expenses of administering
the Plan, and then allocated pursuant to
one of the following two options15:
iii [ ] Forfeitures shall be allocated to Participant's
accounts in the same manner as Employer
Profit Sharing Contributions, Employer
Matching Contributions, Qualified Nonelective
Contributions or Qualified Matching Contributions,
in the discretion of the Employer, for the year in
which the Forfeiture arose.
iv [X] Forfeitures shall be applied to reduce the
Employer Profit Sharing Contributions, Employer
Matching Contributions, Qualified Nonelective
Contributions or Qualified Matching Contributions,
in the discretion of the Employer, for the
Plan Year following the Plan Year in which the
Forfeiture arose.
12. Limitations on Allocations:
If the Employer maintains or ever maintained another qualified
retirement plan in which any Participant in this Plan is (or was)
a participant, or could possibly become a participant, the
Employer must complete the following:
a. If the Participant is covered under another qualified
defined contribution plan maintained by the Employer other
than a Master or Prototype Plan:
i [X] The provisions of this Plan shall apply as if the
other plan were a Master or Prototype plan; or,
ii [ ] The following provisions will be effective to
limit the total Annual Additions to the Maximum
Permissible Amount, and will properly reduce any
Excess Amounts, in a manner that precludes
Employer discretion:
- ----------
15 If this option is selected, iii or iv must be selected to reallocate
Forfeitures of Employer Profit Sharing Contributions remaining after
expenses of administering the plan have been paid.0
b. If the Participant is or ever has been a participant
in a qualified defined benefit plan maintained by the
Employer, the following provisions will be effective to
satisfy the 1.0 limitation of Internal Revenue Code 415(e),
in a manner that precludes Employer discretion:
13. Internal Revenue Code 411(d)(6) Protected Benefits:
[ ] If selected, the Plan has Internal Revenue Code
411(d)(6) Protected Benefits from a prior plan
that this Plan amends, that must be protected.
14. Top-Heavy Plan Provisions:
For each Plan Year in which the Plan is a Top-Heavy
Plan the following provisions will apply:
a. The percentage of a Participant's Employer Contribution
Account to be vested in him upon termination of
employment prior to retirement shall be:
i [ ] a percentage determined in accordance with the
following schedule:
Years of Service Percentage
Less than two 0
Two but less than three 20
Three but less than four 40
Four but less than five 60
Five but less than six 80
Six or more 100;
ii [ ] 100% vesting after (not to exceed 3) Years of
Service; provided, however, that Years of Service may
not exceed two (2) if the service requirement for
eli gibility exceeds 1 year; or
iii [ ] computed in accordance with the vesting schedule
selected by the Em ployer in Items B(7)(a) or
C(4)(d), as long as the benefits under the vesting
schedule in Items B(7)(a) or C(4)(d) vest at
least as rapidly as the two options specified in
this Item B(14)(a), above.
If the vesting schedule under the Plan shifts in or out of
the schedules above for any Plan Year because of the Plan's
Top-Heavy status, such shift is an amendment to the vesting
schedule and the election in 2.2 of the Basic Plan
Document applies.
b. For purposes of minimum Top-Heavy allocations,
contributions and forfeitures equal to 3 % (not less than
3%) of each Non-key Employee's Compensation will be
allocated to each Participant's Contribution Account when
the Plan is a Top-Heavy Plan, except as otherwise provided in
the Basic Plan Document.This Item 14 will not apply to any
Participant to the extent the Participant is covered under
any other plan or plans of the Employer and the Employer
completes the following: (Insert the name of the plan or
plans which will meet the minimum allocation or benefit
requirement applicable to Top-Heavy plans.)
c. The Valuation Date as of which account balances or accrued
benefits are valued for purposes of computing the
Top-Heavy Ratio shall be the last day of each Plan Year.
d. If the Employer maintains or has ever maintained one or more
defined benefit plans which have covered or could cover a
Participant in this Plan, complete the following:
Present Value: For purposes of establishing Present Value
to compute the Top-Heavy Ratio, any benefit shall be discounted
only for mortality and interest based on the following:
Interest rate % Mortality table
15. Investments:
a. Investments made pursuant to the investment direction
provisions of the Basic Plan Document shall be made into any
appropriate Investment Fund as selected by the Employer.
In addition, investment of Plan assets is expressly authorized,
as required by Revenue Ruling 81-100, in each of the following
common or collective funds sponsored by the Trustee, or an
affiliate of the Trustee(16):
KEY TRUST COMPANY EB MANAGED GUARANTEED INCOME CONTRACT FUND,
THE KEY TRUST COMPANY MULTIPLE INVESTMENT TRUST FOR EMPLOYEE
BENEFIT TRUSTS, AND OTHER COLLECTIVE TRUSTS EXEMPT FROM
TAX UNDER IRC 501 AND AS DESCRIBED IN REV. RUL. 81- 100.
b. [ ] If selected, an Employer Stock Fund shall be available as
an Investment Fund pursuant to the terms of the Basic Plan
Document.
[ ] If selected, and an Employer Stock Fund is available
as an Investment Fund, Participants will have the
right, notwithstanding any other provisions of the
Plan, to direct that a portion of the Plan assets held
for their benefit and invested in the Employer Stock
- ----------
16 This Item is for use in identifying collective trust funds, which,
pursuant to Revenue Ruling 81-100 must be specifically referenced in
the Plan. Actual Investment Funds are referenced on the Investment
Fund Designation form attached to this Adoption Agreement.
Fund be diversified pursuant to the provisions of 10.7(F)
of the Basic Plan Document.
c. Participants may make changes of existing account balances
and future contributions from among the Investment Funds
offered:
i [X] Once during each business day that the Trustee and
the New York Stock Exchange are open.
ii [ ] Once during each calendar month.
iii [ ] Once during each quarter of the Plan Year.
iv [ ] Once during each rolling day period.
d. [ ] If selected, the Participant shall be restricted in
making changes of existing account balances from any
Investment Fund, as specified in the terms or conditions
of such Investment Fund, and the Employer shall
attach an addendum specifying such restriction.
e. The Participant will designate into which Investment
Funds all contributions to their accounts are made,
except the following:
i [X] Employer Profit Sharing Contributions
ii [ ] Employer Mandatory Matching Contributions
iii [X] Employer Discretionary Matching Contributions
iv [X] Qualified Matching Contributions
v [X] Qualified Nonelective Contributions
f. [ ] If selected, and to the extent a selection is made above,
the Employer shall attach an Investment Direction
Addendum specifying how the contributions so specified
shall be invested among the Investment Fund.
g. [X] If selected, the Participant shall be restricted in
the use of the Employer Stock Fund as an Investment
Fund for designating the investment of contributions
in the Participant's account, as follows:
i [X] The Participant may not direct the investment of
Plan assets held in their account into the
Employer Stock Fund.
ii [ ] The Participant may direct % of the following
contributions into the Employer Stock Fund:
(a) [ ] Employer Profit Sharing Contributions
(b) [ ] Employer Mandatory Matching
Contributions
(c) [ ] Employer Discretionary Matching
Contributions
(d) [ ] Qualified Matching Contributions
(e) [ ] Qualified Nonelective Contributions
iii [ ] % of the following contributions
will be invested into the Employer Stock Fund,
with the balance invested among:
(a) [ ] the other Investment Funds,
including the Employer Stock Fund
(b) [ ] the other Investment Funds, not
including the Employer Stock Fund
16. Loans (select one):
a. [X] Loans may be made from the Plan in accordance with
the Basic Plan Document and such policies and procedures
as the Committee may adopt and apply on a consistent
and nondiscriminatory basis(17).
b. [ ] No loans shall be made from the Plan.
17. Trustee:
The Trustee of this Plan shall be Key Trust Company of Ohio, N.A.
(a bank or trust company affiliated with KeyCorp within the
meaning of Internal Revenue Code 1504).
18. Effective Date Addendum:
[ ] If selected, the following provisions shall
have the specified effective dates (which are
different from the date specified in Item
B(1)):
- ----------
17 If this option is selected, the Employer must establish appropriate
procedures for implementation of the Plan's loan program.
C. 401(k) Plan Provisions:
1. Service:
An Eligible Employee shall be required to fulfill the following
eligibility service requirements in order to participate in the
Plan through a salary reduction agreement and for purposes of
receiving an allocation of Employer Matching Contributions:
a. [X] The Employee must complete 1 of Service (not more
than 1 year) to be a Participant for purposes of
receiving allocations of Employer Matching Contributions.
b. [X] The Employee must complete 1 of Service (not more than
1 year) to be a Participant for purposes of entering
into a Salary Reduction Agreement and having Employee
Before Tax Contributions or Employee After Tax
Contributions contributed to the Plan on the Employee's
behalf.
2. Employee Salary Deferrals:
a. [X] Participants shall be entitled to enter into a Salary
Reduction Agreement providing for Before Tax
Contributions to be made to the Plan.
i The minimum Before Tax Contribution shall be 1 % of
the Participant's Compensation.
ii The maximum Before Tax Contribution shall be 15 % of
the Participant's Compensation.
b. [ ] Participants shall be entitled to enter into a Salary
Reduction Agreement providing for After Tax Contributions
to be made to the Plan.
i The minimum After Tax Contribution shall be %
of the Participant's Compensation.
ii The maximum After Tax Contribution shall be %
of the Participant's Compensation.
iii [ ] If selected, notwithstanding the above, a
Participant shall not be able to enter into
a Salary Reduction Agreement providing for After
Tax Contributions to be made to the Plan unless
the Participant has entered into a Salary
Reduction Agreement that provides for Before Tax
Contributions to be made to the Plan in an
amount of at least % of the
Participant's Compensation.
c. [ ] If selected, a Participant shall be entitled to
enter into a Salary Reduction Agreement providing that
any extraordinary item of compensation, not yet
payable (including bonuses), be withheld from the
Participant's Compensation and contributed to the Plan as
either a Before Tax Contribution, or After Tax
Contribution (provided such contributions are
authorized above, and to the extent that such
contribution, when aggregated with either the
Participants other Before Tax Contributions or After Tax
Contri butions do not exceed the limitations
specified above, on an annual basis).
3. Contribution Changes:
a. Participants may increase or decrease the amount
of contributions made to the Plan pursuant to a Salary
Reduction Agreement once each:
i [ ] Plan Year
ii [ ] Semi-annual period, based on the Plan Year
iii [X] Quarter, based on the Plan Year
iv [ ] Month
v [ ] Other, as specified below (provided that
it is at least once per year):
b. Claims for returns of Excess Before Tax
Contributions for the Participant's preceding taxable
year must be made in writing, and submitted to the
Committee by March 1 (specify a date between March 1 and April
15).(18)
4. Employer Matching Contributions(19):
a. Mandatory Matching Contributions:
The Employer shall make contributions to the Plan, in an amount
as specified below:
i [ ] An amount, equal to % of each Participant's
Before Tax Contributions, however, no match shall
be made on Participant's Before Tax Contributions
in excess of % (or $ ) of the Participant's
Compensation.
ii [ ] An amount, equal to % of each Participant's
After Tax Contributions, but not to exceed %
of the Par ticipant's Compensation, or $ .
iii [ ] An amount, equal to % of each Participant's
contributions made pursuant to a Salary Reduction
Agreement (including both Before Tax Contributions and
After Tax Contributions), but only if the Participant
has entered into a Salary Reduction Agreement
providing for Before Tax Contributions of at least %
of the Participant's Com pensation, but not to
exceed % of the Participant's Compensation, or $ .
iv [ ] An amount equal to the sum of the following:
(a) % of the first % of the
Participant's Compensation deferred pursuant
to a Salary Reduction Agreement; plus,
(b) % of the next % of the
Participant's Compensation deferred pursuant
to a Salary Reduction Agreement; plus,
(c) % of the next % of the
Participant's Compensation deferred pursuant
to a Salary Reduction Agreement, but not to
exceed % of the Participant's Compensation, or
$ .
v [ ] An amount equal to $ , for each Participant who
enters into a Salary Reduction Agreement providing
for Before Tax Contributions, After Tax
Contributions, or either Before Tax Contributions or
After Tax Contributions (or a combination of both)
equal to or exceeding % of the Participant's
Compensation. Such contributions shall be made and
allocated:
(a) [ ] only during the first Plan Year the Plan
is in effect, or if a restatement, for
the first Plan Year beginning with, or
containing the re statement Effective
Date.
(b) [ ] each Plan Year that a Participant has
in force a Salary Reduction Agreement
meeting the criteria specified above.
(c) [ ] during the first Plan Year that the
Participant participates through a Salary
Reduction Agreement meeting the criteria
specified above.
b. Discretionary Matching Contributions:
[X] The Employer shall make contributions to the Plan, in
an amount determined by resolution of the Board of
Directors on an annual basis. The Board resolution shall
provide for the percentage and/or amount of Before
Tax Contributions and/or After Tax Contributions to be
matched and the maximum percentage and/or amount of
Before Tax Contributions and/or After Tax Contributions
eligible for matching.
c. Allocation of Matching Contributions:
Employer Matching Contributions shall be allocated
pursuant to the terms of the Basic Plan Document,
notwithstanding the foregoing:
i [X] A Participant who terminates before the end of
the period for which contributions are allocated
shall share in the allocation of Employer Matching
Contributions if termination of employment was
the result of (select all that apply):
(a) [X] retirement
(b) [X] disability
(c) [X] death
(d) [ ] other, as specified below:
ii [X] Employer Matching Contributions shall be allocated
to the accounts of Participants (select one):
(a) [ ] as of each pay period for which a
contribution was made pursuant to a Salary
Reduction Agreement.
(b) [ ] semi-monthly.
(c) [ ] as of the last day of the month preceding
the month in which the contribution was
made.
(d) [ ] as of the last day of the Plan quarter
preceding the quarter in which the
contribution was made.
(e) [X] as of the last day of the Plan year.
iii [X] If selected, the Employer may make Employer Matching
Contributions without regard to current or
accumulated Net Profits of the Employer for the
taxable year ending with, or within the Plan
Year(20).
d. The percentage of a Participant's Employer Matching
Contribution Account(21) (attributable to Employer Matching
Contributions) to be vested in him or her upon termination of
employment prior to attainment of the Plan's Normal
Retirement Date shall be(22):
Completed Years of Service
1 2 3 4 5 6 7
i [ ] 100%
ii [ ] 100%
iii [ ] 20% 40% 60% 80% 100%
iv [ ] 20% 40% 60% 80% 100%
v [ ] 10% 20% 30% 40% 60% 80% 100%
vi [X] 20% 40% 60% 80% 100%
vii [ ] 100%
vii [ ] Full and immediate vesting upon entry into the Plan
Notwithstanding anything to the contrary in the Plan, the amount
inserted in the blanks above shall not exceed the limits specified
in Code 411(a)(2).
e. Notwithstanding the provisions of this Item C(4)(e) of
the Adoption Agreement, a Participant shall become fully vested
in his Participant's Employer Matching Contribution Account
if(23):
i [ ] the Participant's job is eliminated without the
Participant being offered a comparable position
elsewhere with the Employer.
ii [ ] for such reason as is described below:
- ----------
20 Net Profits will never be required for the contribution of Before Tax
Contributions, After Tax Contributions, Qualified Nonelective
Contributions or Qualified Matching Contributions.
21 Notwithstanding anything in the Adoption Agreement to the contrary,
amounts in a Participant's account attributable to Before Tax
Contributions, Qualified Nonelective Contributions, and Qualified
Matching Contributions shall be 100% vested and nonforfeitable at all
time.
22 Notwithstanding the selection made in this Item B(7)(b), a Participant
shall be fully vested in his or her Employer Contribution Accounts if the
participant dies or becomes Disabled while in the employ of the employer.
23 The provisions of this section will be administered by the Employer on a
consistent and nondiscriminatory basis.
f. Corrective Contributions:
i [X] If selected, the Employer shall be authorized to
make Qualified Matching Contributions, subject to the
terms of the Basic Plan Document, in an amount
determined by resolution of the Board of
Directors on an annual basis.
ii [X] If selected, the Employer shall be authorized to
make Qualified Nonelective Contributions, subject to
the terms of the Basic Plan Document, in an amount
determined by resolution of the Board of Directors on
an annual basis.
5. Gap Earnings:
[ ] If selected, Gap Earnings, as defined in 3.2(G)(1)
of the Basic Plan Document, will be calculated for Excess
Elective Deferrals, Excess Contributions and Excess
Aggregate Contributions, and refunded to the Participant as
provided for in Article III of the Basic Plan Document.
6. Forfeitures:
a. Forfeitures of amounts attributable to Employer Matching
Contributions shall be reallocated as of:
i [X] the last day of the Plan Year in which the
Forfeiture occurred.
ii [ ] the last day of the Plan Year following the Plan
Year in which the Forfeiture occurred.
iii [ ] the last day of the Plan Year in which the
Participant suffering the Forfeiture has incurred
the fifth consecutive One Year Break in Service.
b. Forfeitures of Employer Matching Contributions shall be
reallocated as follows:
i [ ] Not applicable as Employer Matching Contributions are
always 100% vested and nonforfeitable.
ii [ ] Used first to pay the expenses of administering
the Plan, and then allocated pursuant to one
of the following two options:
iii [ ] Forfeitures shall be allocated to Participant's
accounts in the same manner as Employer
Profit Sharing Contributions, Employer Matching
Contributions, Qualified Nonelective Contributions
or Qualified Matching Contributions, in the discretion
of the Employer, for the year in which the
Forfeiture arose.
iv [X] Forfeitures shall be applied to reduce the
Employer Profit Sharing Contributions, Employer
Matching Contributions, Qualified Nonelective
Contributions or Qualified Matching Contributions, in
the discretion of the Employer, for the Plan Year
following the Plan Year in which the Forfeiture
arose.
c. Forfeitures of Excess Aggregate Contributions shall be:
i [X] Applied to reduce Employer contributions for
the Plan Year in which the excess arose, but
allocated as below, to the extent the excess exceeds
Employer contributions for the Plan Year, or the
Employer has already contributed for such Plan Year.
ii [ ] Allocated after all other forfeitures under the Plan:
(a) [X] to the Matching Contribution account of
each Non-highly Compensated Participant who
made Before Tax Contributions or After Tax
Contributions in the ratio which each such
Participant's Compensation for the Plan Year
bears to the total Compensation of all such
Participants for the Plan Year; or,
(b) [ ] to the Matching Contribution account of
each Non-highly Compensated Eligible
Participant in the ratio which each Eligible
Participant's Compensation for the Plan Year
bears to the total Compensation of all
Eligible Participants for the Plan Year.
7. In-Service Distributions (select as may be appropriate):
a. [ ] There shall be no in-service distribution of Participant
account balances derived from Before Tax Contributions
(including Qualified Nonelective Contributions and
Qualified Matching Contributions treated as Before Tax
Contributions under the terms of the Basic Plan
Document), or Employer Matching Contributions.
b. [X] Participants may request an in-service distribution of
their account balance attributable to Employer
Matching Contributions, for the following reasons:
i [X] For purposes of satisfying a financial hardship,
as determined in accordance with the uniform
nondiscriminatory policy of the Committee;
ii [X] Attainment of age 59 1/2 by the Participant; or
iii [X] Attainment of the Plan's Normal Retirement Date
by the Participant.
c. [X] Participants may request an in-service distribution of their
account balance attributable to Employee Before Tax
Contributions, for the following reasons:
i [ ] For purposes of satisfying a financial hardship,
as determined by the facts and circumstances of
an Employee's situation, in accordance with the
provisions of 3.9 of the Basic Plan Document;
ii [X] For purposes of satisfying a financial hardship,
using the "safe harbor" provisions of 3.9 of the
Basic Plan Document.
iii [X] Attainment of age 59 1/2 by the Participant; or
iv [X] Attainment of the Plan's Normal Retirement Date
by the Participant.
NOTICE: The adopting Employer may not rely on an opinion letter issued by
the National Office of the Internal Revenue Service as evidence that the Plan
is qualified under the provisions of 401 of the Internal Revenue Code. In
order to obtain reliance with respect to the Plan's qualification, the
Employer must apply to the Key District Office of the Internal Revenue
Service for a determination letter.
This Adoption Agreement may only be used in conjunction with Basic Plan
Document # 05.
This Plan document may only be used under the express authority of KeyCorp,
its subsidiaries and affiliates, and is not effective as completed until
executed by a duly authorized officer of KeyCorp, one of its subsidiaries
or affiliates, and approved by KeyCorp's counsel.
KeyCorp, as sponsor, may amend or discontinue this prototype plan document
upon proper notification to all adopting Employers pursuant to Revenue
Ruling 89-13.
Failure to properly fill out an Adoption Agreement may result in
disqualification of the Plan, and adverse tax consequences to the Employer and
Plan Participants.
This Plan is sponsored by:
KeyCorp, on behalf of its operating subsidiaries, banking and trust
company affiliates
127 Public Square
Cleveland, Ohio 44114
(800) 982-3811
In Witness Whereof, the Employer and the Trustee, by their respective
duly authorized officers, have caused this Adoption Agreement to be executed
on this day of , 1997.
Employer: Shopsmith Inc.
By: /s/William Becker
Title: William C. Becker - V.P. Finance
Trustee: Key Trust Company of Ohio, N.A.
By: /s/Brian J. Vallo
Title: Brian J. Vallo, Trust Officer
and
By: /s/Angela K Davis
Title: Angela K. Davis, Vice President
Approved on Behalf of Trustee:
Initials: Date:
INVESTMENT FUND DESIGNATION
Shopsmith Inc. (the "Named Fiduciary"), as an independent fiduciary with
respect to the Shopsmith Inc. Savings Plan (the "Plan"), an employee benefit
pension plan covered by the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and its employees who
participate therein (the "Participants"), hereby acknowledges, confirms and
directs that the following actions shall be taken in connection with the
assets held in trust for the benefit of the Participants under the plan. The
plan assets are currently invested in the funds more fully described below
("Existing Funds"). The Named Fiduciary directs that the Existing Funds
shall be liquidated and forwarded to the Trustee of the Plan for reinvestment
as follows. The Named Fiduciary has received and examined the various
available Investment Funds and designates the following investment funds from
among the investment fund options available for adopting employers of the
PRISM(registered trademark) PROTOTYPE RETIREMENT PLAN & TRUST (as defined in
10.7 of the Plan) to be available for selection by Participants for the
investment of Plan assets held for their benefit ("PRISM(registered trademark)
Funds"). The Named Fiduciary further designates that assets held in each of
the Existing Funds by the Plan prior to liquidation and transfer to the
Trustee shall be reinvested in the corresponding PRISM(registered trademark)
Fund as specified below:
Existing Funds: PRISM(registered trademark) Funds:
(a) Merrill Lynch Ready Asset (a) Victory Financial Reserves
(b) Merrill Lynch Corporate Bond (b) Fidelity Advisor Intermediate Bond
(c) Merrill Lynch Capital (c) George Putnam Fund of Boston
(d) Merrill Lynch Basic Value (d) Putnam Fund for Growth and Income
(e) (e) Victory Diversified Stock
(f) (f) Franklin Mutual Beacon
(g) (g) Templeton World
(h) (h) KeyChoice Income and Growth
(i) (i) KeyChoice Moderate Growth
(j) (j) KeyChoice Growth
(k) Shopsmith Inc. (k) Shopsmith Inc.
[X] In addition, if selected, an Employer Stock Fund will also be
available.
In making the selection of Investment Funds, and in designating the PRISM
(registered trademark) Funds into which the liquidated assets from each of the
Existing Funds will be invested in, the Named Fiduciary hereby confirms and
acknowledges that:
The Named Fiduciary has had made available to it copies of the
prospectuses (to the extent required under applicable federal
securities law and regulation) for each investment fund available for
selection by adopting employers of the PRISM (registered trademark)
PROTOTYPE RETIREMENT PLAN & TRUST, and has received copies of each such
prospectus for the Investment Funds selected;
The Named Fiduciary acknowledges that the Trustee of the Plan may
receive certain fees for services provide to, or on behalf of an
Investment Fund, or the sponsors or distributors thereof, pursuant
to plans of distribution adopted by the fund under the provisions of
Rule 12b-1 of the Investment Company Act of 1940, and further
acknowl edges that (i) such fee, if paid, is appropriate for
services rendered to the fund, and when aggregated with other fees
for service payable to the Trustee constitutes reasonable
compensation for the Trustee's services to the Plan; and (ii) the
Plan will be able to redeem its interest in any such Investment
Fund on reasonably short notice without penalty; The Named Fiduciary
further acknowledges that it has selected the Investment Funds, and
designated the PRISM(registered trademark) Funds into which the
liquidated assets from each of the Existing Funds will be
invested in, in its sole determination, after due inquiry, that
the Investment Funds are appropriate vehicles for the investment of
Plan assets pursuant to the terms of the Plan, considering all
relevant facts and circumstances, including but not limited to
(i) the investment policy and philosophy of the Named Fiduciary
developed pursuant to ERISA 404; (ii) the ability of Participants,
using an appropriate mix of Investment Funds, to diversify the
investment of Plan assets held for their benefit; and, (iii)
the ability of Participants to, utilizing an appropriate mix of
Investment Funds, structure an investment portfolio within their
account in the Plan with risk and return characteristics within
the normal range of risk and return characteristics for
individuals with similar in vestment backgrounds, experience and
expectations, and that the investment of assets which will be
liquidated from the Existing Funds in the specified PRISM(registered
trademark) Funds is appropriate considering the above described
criteria; and,
The Named Fiduciary acknowledges that it has not relied on any
representations or recommendations from the Trustee or any of its
employees in selecting the Investment Funds, or in specifying which of
the selected PRISM(registered trademark) Funds into which the
liquidated assets from each of the Existing Funds will be invested.
The Trustee agrees to follow the Named Fiduciary's direction with respect to
offering the Investment Funds available for selection by the Participants in
the Plan for the investment of Plan assets held for their benefit:
In WITNESS WHEREOF, the Employer, by its duly authorized representative,
has executed this document in connection with adoption of the Plan utilizing
the PRISM(registered trademark) PROTOTYPE RETIREMENT PLAN & TRUST documents,
as provided by the Trustee.
NAMED FIDUCIARY:
Shopsmith Inc.
By: /s/ William C Becker
William C. Becker, Vice President,Finance
Seen and accepted by the Trustee, who shall provide the
Investment Funds selected by the Employer pursuant to the terms of this
document, and pursuant to the Plan.
TRUSTEE:
Key Trust Company of Ohio, N.A.
By: /s/ Brian J Vallo
Brian J. Vallo, Trust Officer
PRISM(registered trademark) PROTOTYPE RETIREMENT PLAN AND TRUST
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. Unless the context indicates otherwise, the following
terms, when used herein with initial capital letters, shall have the
meanings set forth below:
(A) ACCOUNTING DATE: The date which is the last business day of each
month of the Employer's Plan Year or such other date as may be
agreed upon between the Employer and the Trustee, but only if the
Employer has specifically requested the Trustee to prepare an
accounting on or before such date. Notwithstanding the foregoing,
the Trustee shall value the assets held in the Trust on each
business day that the Trustee and the New York Stock Exchange are
open for business.
(B) ADOPTION AGREEMENT: The Adoption Agreement adopting this Plan which
has been executed by the Employer and accepted by the Trustee,
including any amendment thereof, which is incorporated herein by
reference.
(C) BASIC PLAN DOCUMENT: This document, which, in connection with the
Adoption Agreement forms the Plan.
(D) BENEFICIARY: The person or persons to whom a deceased Participant's
benefits are payable under the Plan.
(E) BREAK IN SERVICE: A 12-consecutive month period during which the
Participant does not complete more than one-half of the Hours of
Service with the Employer required for a Year of Service, as elected
in the Adoption Agreement. For eligibility purposes, the initial
12-consecutive month period is the period beginning on the Employees
date of hire. Subsequent 12-consecutive month periods for
eligibility purposes will be either the period ending on the annual
anniversary of the Employee's date of hire or the Plan Year, as
selected in the Adoption Agreement. For all other purposes, the
12-consecutive month period shall be the Plan Year, or other
computation period as selected in the Adoption Agreement. If the
elapsed time method of crediting service is elected in the Adoption
Agreement, "Break In Service" will mean a Period of Severance of at
least 12 consecutive months.
(F) CODE: The Internal Revenue Code of 1986, and
amendments thereto.
(G) COMMITTEE: The Committee provided for in Article XI, which shall be
a Named Fiduciary as defined in the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). To the extent that the
Employer does not appoint a Committee, the Employer shall have the
duty of the day to day administration of the Plan and shall be the
Named Fiduciary for that purpose.
(H) COMPENSATION: Compensation shall have the following various
definitions, as may be appropriate within the context of the Plan:
(1) Compensation as that term is defined in Section 6.6(A) of the
Plan. For any Self- Employed Individual covered under the Plan,
Compensation will mean Earned Income. Compensation shall include
only that compensation which is actually paid to the Participant
during the 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.
For purposes of allocations of Employer Profit Sharing or
Matching Contributions, the definition of Compensation in
Section 6.6(A)(2)(a) shall be used, as modified in the Adoption
Agreement.
Notwithstanding the above, if elected by the Employer in the
Adoption Agreement, Compensation for allocation purposes shall
include any amount which is contributed by the Employer pursuant
to a salary reduction agreement and which is not includible in
the gross income of the employee under Sections 125, 402(e)(3),
402(h)(1)(B) or 403(b) of the Code.
(2) For years beginning after December 31, 1988, and prior to
January 1, 1994, the annual Compensation of each Participant
taken into account for determining all benefits provided under
the Plan for any determination period shall not exceed $200,000.
This limitation shall be adjusted by the Secretary at the same
time and in the same manner as under Section 415(d) of the Code
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. After December 31,
1993, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan for
any determination period shall not exceed $150,000, or such
other lesser amount as may be specified in the Adoption
Agreement. This limitation shall be adjusted by the Secretary
at the same time and in the same manner as under Section 415(d)
of the Code. If a Plan determines Compensation on a period of
time that contains 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 a 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 limitation, the rules of Section 414(q)(6) of the Code
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 limitation is
exceeded, then (except for purposes of determining the portion
of Compensation up to the integration level if this Plan
provides for permitted disparity), the limitation shall be
prorated among the affected individuals in proportion to each
such individual's Compensation as determined under this Section
prior to the application of this limitation.
If compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for
the current determination period, the compensation for such
prior year is subject to the applicable annual
compensation limit in effect for that prior year. For this
purpose, for years beginning before January 1, 1990, the
applicable compensation limit 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.
(I) DISABILITY: The inability to engage in any substantial gainful
activity by reason of any 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 twelve (12) months. The permanence and degree of such
impairment shall be supported by medical evidence. The Employer
shall determine the existence of a Disability based on its current
disability policy, applied on a uniform and nondiscriminatory basis.
(J) EARNED INCOME: The net earnings from self- employment in the trade
or business with respect to which the Plan is established, for which
personal services of the individual are a material income-producing
factor. Net earnings will be determined without regard to items not
included in gross income and the deductions allocable to such items.
Net earnings are reduced by contributions by the Employer to a
qualified Plan to the extent deductible under Section 404 of the
Code. Net earnings shall be determined with regard to the deduction
allowed to the taxpayer by Section 164(f) of the Code for taxable
years beginning after December 31, 1989.
(K) EARLY RETIREMENT DATE: The date specified in the Adoption Agreement
at which a participating Employee may receive an early retirement
benefit.
(L) EFFECTIVE DATE: The date specified in the Adoption Agreement which
shall be the effective date of the provisions of this Plan, unless
modified in Item B(18) of the Adoption Agreement. If the Plan is a
restatement of an existing Plan, the original effective date of the
Plan shall be as specified in the Adoption Agreement.
(M) ELIGIBLE EMPLOYEE: Any Employee who is eligible to receive an
Employer contribution (including forfeitures), as defined in Item
B(6) of the Adoption Agreement.
(N) ELIGIBILITY COMPUTATION PERIOD: For purposes of determining Years
of Service and Breaks in Service for purposes of eligibility, the
initial Eligibility Computation Period is the 12- consecutive month
period beginning on the Employee's Employment Commencement Date.
(1) For plans in which the Eligibility Computation Periods commence
on the 12- consecutive month anniversary of the Employee's
Employment Commencement Date, the succeeding 12-consecutive
month periods commence with the first anniversary of the
Employee's Employment Commencement Date.
(2) For plans in which the Eligibility Computation Period shifts to
the Plan Year, the succeeding 12-consecutive month periods
commence with the first Plan Year which commences prior to the
first anniversary of the Employee's Employment Commencement
Date regardless of whether the Employee is entitled to be
credited with number of Hours of Service specified in the
Adoption Agreement during the initial Eligibility Computation
Period. An Employee who is credited with number of Hours of
Service specified in the Adoption Agreement in both the initial
Eligibility Computation Period and the first Plan Year which
commences prior to the first anniversary of the Employee's
initial Eligibility Computation Period will be credited with
two Years of Service for purposes of eligibility to
participate.
Years of Service and Breaks in Service will be measured on the
same Eligibility Computation Period.
(3) Notwithstanding any other provisions of this section, if the
elapsed time method of crediting service is elected in the
Adoption Agreement for purposes of eligibility, an Employee
will receive credit for the aggregate of all time periods
completed (as may be elected in the Adoption Agreement)
beginning with the Employee's Employment Commencement Date or
Reemployment Commencement Date and ending on the date a Break
In Service begins. The Employee will receive credit for any
Period of Severance of less than 12 consecutive months.
(O) EMPLOYEE: Any employee, including any Self Employed Individual, of
the Employer maintaining the Plan or of any other employer required
to be aggregated with such Employer under Sections 414(b), (c), (m)
or (o) of the Code.
The term Employee shall also include any Leased Employee deemed to
be an Employee of any Employer described in the previous paragraph
as provided in Sections 414(n) or (o) of the Code.
(P) EMPLOYER: The Employer specified in the Adoption Agreement and any
successor to the business of the Employer establishing the Plan,
which shall be the Plan Administrator for purposes of Section 3(16)
of ERISA, a Named Fiduciary as defined in ERISA, and which may
delegate all or any part of its powers, duties and authorities in
such capacity without ceasing to be such Plan Administrator.
(Q) EMPLOYMENT COMMENCEMENT DATE: The date on which an Employee first
performs an Hour of Service for the Employer.
(R) ENTRY DATE: The date selected by the Employer in Item B(6)(d) of
the Adoption Agreement, which shall be:
(1) The Effective Date of the Plan, for any Employee who has
satisfied the eligibility requirements set forth in the
Adoption Agreement;
(2) The first day of the month which coincides with or immediately
follows the date on which the Employee satisfies the
eligibility requirements set forth in the Adoption Agreement;
(3) The first day of the Plan Year or the fourth, seventh, or tenth
month of the Plan Year which coincides with or immediately
follows the date on which the Employee satisfies such
eligibility requirements;
(4) The first day of the Plan Year or the seventh month of the Plan
Year which coincides with or immediately follows the date on
which the Employee satisfies such eligibility requirements;
(5) The first day of the Plan Year, but only if the eligibility
service requirements specified in Item B(6)(d) are six months
or less; or,
(6) As soon as practicable after the Employee satisfies such
eligibility requirements specified in the Adoption Agreement,
but in no event beyond the date which would be six months
following the date on which the Employee first completes the
eligibility requirements specified in the Adoption Agreement.
(S) ERISA: The Employee Retirement Income Security Act of 1974, as
amended.
(T) HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated Employee
includes highly compensated active employees and highly compensated
former employees.
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: (i) received Compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code); (ii) received Compensation from the Employer in excess
of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and
was a member of the top-paid group for such year; or (iii) 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 section 415(b)(1)(A) of the Code. The term Highly Compensated
Employee also includes: (i) Employees who are both described in the
preceding sentence if the term "determination year" is substituted
for the term "look-back year" and the Employee is one of the 100
Employees who receive the most compensation from the Employer during
the determination year; and (ii) 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 (iii)
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 twelve-month period immediately preceding
the determination year. 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, then the family member and the 5
percent owner or top-ten Highly Compensated Employee shall be
aggregated. In such case, the family member and 5 percent owner or
top-ten Highly Compensated Employee shall be treated as a single
employee receiving Compensation and Plan contributions or benefits
equal to the sum of such Compensation and contributions or benefits
of the family member and 5 percent owner or top-ten Highly
Compensated Employee.
For purposes of this Section, 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 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 Section 414(q) of the Code and the
regulations thereunder.
(U) HOUR OF SERVICE:
(1) Each hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer. These
hours shall be credited to the Employee for the computation
period in which the duties are performed; and
(2) 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 shall be credited under this paragraph for
any single continuous period (whether or not such period occurs
in a single computation period). Hours under this paragraph
shall be calculated and credited pursuant to Section
2530.200b-2 of the Department of Labor Regulations which are
incorporated herein by reference; and
(3) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours of Service shall not be credited both under
subparagraph (1) or subparagraph (2), as the case may be, and
under this subparagraph (3). These hours shall be credited to
the Employee for the computation period or periods to which the
award or agreement pertains rather than for the computation
period in which the award, agreement or payment is made.
Hours of Service will be credited for employment with other
members of an affiliated service group (under Section 414(m)),
a controlled group of corporations (under Section 414(b)), or a
group of trades or businesses under common control (under
Section 414(c)) of which the adopting Employer is a member, and
any other entity required to be aggregated with the Employer
pursuant to Section 414(o).
Hours of Service will also be credited for any individual
considered an Employee for purposes of this Plan under Sections
414(n) or 414(o).
(4) Where the Employer maintains the Plan of a predecessor employer,
service for such predecessor employer shall be treated as
service for the Employer. If the Employer does not maintain the
Plan of a predecessor employer, the Plan does not credit service
with the predecessor employer, unless the Employer identifies
the predecessor in its Adoption Agreement and specifies the
purposes for which the Plan will credit service with that
predecessor employer.
(5) Solely for purposes of determining whether a Break-in-Service,
as defined in Section 1.1(E), 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, 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.
(6) Hours of Service will be determined on the basis of the method
selected in the Adoption Agreement.
(V) INVESTMENT FUND: One of the funds provided for in Section 10.7, and
as selected by the Employer, as a Named Fiduciary, on the Investment
Fund Designation portion of the Adoption Agreement.
(W) LEASED EMPLOYEE: Any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Section 414(n)(6) of the Code) on a substantially
full time basis for a period of at least one year, and such services
are of a type historically performed by employees in the business
field of the recipient employer. Contributions or benefits provided
a leased employee by the leasing organization which are attributable
to services performed for the recipient employer shall be treated as
provided by the recipient employer.
A leased employee shall not be considered an employee of the
recipient if: (i) such employee is covered by a money purchase
pension Plan providing: (1) a nonintegrated employer contribution
rate of at least 10 percent of compensation, as defined in Section
415(c)(3) of the Code, but including amounts contributed pursuant to
a salary reduction agreement which are excludable from the employee's
gross income under Section 125, Section 402(e)(3), Section
402(h)(1)(B) or Section 403(b) of the Code, (2) immediate
participation, and (3) full and immediate vesting; and (ii) leased
employees do not constitute more than 20 percent of the recipient's
nonhighly compensated workforce.
(X) NET PROFITS: Current and accumulated earnings of the Employer
before Federal and state taxes and contributions to this and any
other qualified Plan, determined by the Employer in accordance with
generally accepted accounting principles.
(Y) NONHIGHLY COMPENSATED EMPLOYEE: An Employee of the Employer who is
neither a Highly Compensated Employee nor a Family Member.
(Z) NORMAL RETIREMENT DATE: The date specified in the Adoption
Agreement at which a participant shall become fully vested in his
account balances, as provided for in this document.
(AA) OWNER-EMPLOYEE: 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.
(BB) PAIRED PLANS: The Employer has adopted Plan #001 and Plan # 003,
both using this basic Plan document, which constitutes a set of
"paired plans" as defined by the Internal Revenue Service in Revenue
Procedure 89-9, or any successor thereto.
(CC) PARTICIPANT: A person who becomes eligible to participate in
accordance with the provisions of Article II, and whose
participation has not been terminated.
(DD) PERMITTED DISPARITY LEVEL: The level selected in the Adoption
Agreement, not to exceed the Taxable Wage Base in effect at the
beginning of the Plan Year. The Taxable Wage Base is the
contribution and benefit base under section 230 of the Social
Security Act at the beginning of the year.
(EE) PERIOD OF SERVICE: The period beginning on the Employee's
Employment Commencement Date or Reemployment Commencement Date, and
ending on the date a Period of Severance begins. The Employee will
receive credit for any Period of Service of less than 12 consecutive
months. Fractional periods of a year will be expressed in days.
(FF) PERIOD OF SEVERANCE: A continuous period of time during which the
Employee is not employed by the Employer. A Period of Severance
begins on the date the Employee retires, quits, or is discharged, or
dies, or if earlier, the twelve month anniversary of the date on
which the Employee was first absent from work for any other reason;
provided, that if an Employee is absent from work for any other
reason and retires, quits, is discharged, or dies within 12 months,
the Period of Severance begins on the day the Employee quits,
retires, is discharged, or dies.
(GG) PLAN: This Plan established by the Employer as embodied in this
agreement and in the Adoption Agreement, and all subsequent
amendments thereto.
(HH) PLAN YEAR: The 12-consecutive month period designated by the
Employer in the Adoption Agreement. In the event that the original
Effective Date is not the first day of the Plan Year, the first Plan
Year shall be a short Plan Year, beginning on the original Effective
Date, and ending on the last day of the Plan Year as specified in
the Adoption Agreement.
(II) QUALIFIED DISTRIBUTION DATE: For purposes of Section 7.13, the
Qualified Distribution Date, if selected in the Adoption Agreement,
shall be the earliest retirement date specified in Code Section
414(p) and shall operate to allow a distribution to an Alternate
Payee at the time a domestic relations order is determined to be
qualified.
(JJ) REEMPLOYMENT COMMENCEMENT DATE: The date on which an Employee
completes an Hour of Service with the Employer after a Break In
Service or a Period of Severance.
(KK) RELATED EMPLOYERS: Any employer related to the Employer as a
controlled group of corporations (as defined in Section 414(b) of the
Code), a group of trades or businesses (whether or not incorporated)
which are under common control (as defined in Section 414(c)) or an
affiliated service group (as defined in Section 414(m) or in Section
414(o) of the Code). If the Employer is a member of a related group,
the term "Employer" includes the related group members for purposes
of crediting Hours of Service, determining Years of Service and
Breaks in Service under Article II, applying participation and
coverage testing, applying the limitations on allocations in Section
6.6, applying the top heavy rules and the minimum allocation
requirements of Article IX, the definitions of Employee, Highly
Compensated Employee, Compensation and Leased Employee, and for any
other purpose required by the applicable Code section or by a Plan
provision. However, an Employer may contribute to the Plan only by
signing the Adoption Agreement or a Participation Agreement to the
Employer's Adoption Agreement. If one or more of the Employer's
related group members become Participating Employers by executing a
Participation Agreement to the Employer's Adoption Agreement, the
term "Employer" includes the participating related group members for
all purposes of the Plan, and "Plan Administrator" means the Employer
that is the signatory to the Adoption Agreement.
If the Employer's Plan is a standardized Plan, all Employees of the
Employer or of any member of the Employer's related group, are
eligible to participate in the Plan, irrespective of whether the
related group member directly employing the Employee is a
Participating Employer. If the Employer's Plan is a nonstandardized
Plan, the Employer must specify in Item B(5) of its Adoption
Agreement, whether the Employees of related group members that are
not Participating Employers are eligible to participate in the Plan.
Under a nonstandardized Plan, the Employer may elect to exclude from
the definition of "Compensation" for allocation purposes any
Compensation received from a related employer that has not executed a
Participation Agreement and whose Employees are not eligible to
participate in the Plan.
(LL) SELF-EMPLOYED INDIVIDUAL: 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 had Earned Income but
for the fact that the trade or business had no Net Profits for the
taxable year.
(MM) SPOUSE: The person to whom the Participant is legally married at
the relevant time. Notwithstanding the foregoing, if selected in the
Adoption Agreement, Spouse shall only refer to an individual to whom
a Participant has been married to for a period of at least one year,
ending at the relevant time.
(NN) STOCKHOLDER-EMPLOYEE: An employee or officer of an electing small
business (Subchapter S) corporation who owns (or is considered as
owning within the meaning of Section 318(a)(1) of the Code), on any
day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
(OO) TERMINATION DATE: The date on which a Participant's employment is
terminated as provided in Section 5.1.
(PP) TRUSTEE: The entity specified in Item B(17) of the Adoption
Agreement, which shall be any bank or trust company which is
affiliated with KeyCorp. within the meaning of Section 1504 of the
Code, each of which with full trust powers, and its successors by
merger or reorganization.
(QQ) TRUST FUND: All assets held under the Plan by the Trustee.
(RR) VALUATION DATE. The date on which the assets of the Trust shall be
valued, as provided for herein, with earning or losses since the
previous Valuation Date being credited, as appropriate to Participant
accounts. Notwithstanding anything to the contrary in the Plan, the
Valuation date shall be each business day that the Trustee and the
New York Stock Exchange are each open for business, provided,
however, that the Trustee shall not be obligated to value the Trust
in the event, through circumstances beyond its control, appropriate
prices may not be obtained for the assets held in the Investment
Funds.
(SS) VESTING COMPUTATION PERIOD. The Vesting Computation Period shall be
the 12-consecutive month period selected by the Employer in the
Adoption Agreement.
(TT) YEAR OF PARTICIPATION: For purposes of vesting, a twelve (12) month
period in which an Employee has a balance in an account established
under a 401(k)/401(m) arrangement regardless of whether the Employee
is currently making contributions under the arrangement.
(UU) YEAR OF SERVICE: (i) If the elapsed time method of crediting
service is elected in the Adoption Agreement, a Year of Service will
mean a one-year Period of Service. If the actual hours method of
crediting service is elected in the Adoption Agreement, a Year of
Service will mean a 12-consecutive month period as specified in the
Adoption Agreement during which the Employee completes the number of
Hours of Service (not to exceed 1000) specified in the Adoption
Agreement.
1.2 GENDER AND NUMBER. Unless the context indicates otherwise, the masculine
shall include the feminine, and the use of any words herein in the
singular shall include the plural and vice versa.
1.3 CONTROL OF TRADES OR BUSINESSES BY OWNER-EMPLOYEE. 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 the Plan established for other trades
or businesses must, when looked at as a single Plan, satisfy 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 Sections 401(a) and (d) and which provides contributions
and benefits not less favorable than 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 are not controlled 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 are controlled
must be as favorable as those provided for him under the most favorable
Plan of the trade or business which is not controlled.
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
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 which is owned, directly or indirectly, by a partnership
which such Owner-Employee, or such two or more Owner-Employees, are
considered to control within the meaning of the preceding sentence.
ARTICLE II
ELIGIBILITY AND VESTING
2.1 ELIGIBILITY.
(A) PARTICIPATION. Every Employee who meets the eligibility
requirements specified by the Employer in the Adoption Agreement
shall become eligible to commence participation in this Plan.
(B) COMMENCEMENT OF PARTICIPATION.
(1) For purposes of Money Purchase Pension Plans, Profit Sharing
Plans and 401(k) Plans with Profit Sharing Contributions, each
Eligible Employee shall commence participation on the Entry
Date.
(2) For purposes of 401(k) and 401(m) arrangements, an Eligible
Employee may, but is not required to, enroll as a Participant
as of the Entry Date on which such Employee is initially
eligible by filing with the Committee before such date, an
enrollment form prescribed by the Committee. The time period
for filing an enrollment form shall be determined by the
Committee. The form shall include an authorization and request
to the Employer to deduct from such Participant's Compensation
in each pay period the designated After Tax Contributions,
and/or to reduce such Participant's Compensation in each pay
period by the amount of the designated Before Tax
Contributions.
(C) YEARS OF SERVICE COUNTED TOWARDS ELIGIBILITY. All Years of Service
with the Employer are counted toward eligibility except the
following:
(1) In a Plan which (a) requires an Employee to complete more than
one Year of Service as an eligibility requirement and (b)
provides immediate 100% vesting in a Participant's Employer
Contribution Account after not more than two (2) Years of
Service, if an Employee has a 1-year Break in Service before
satisfying the Plan's requirement for eligibility, service
before such break will not be taken into account.
(2) In the case of a Participant who does not have any
nonforfeitable right to the account balance derived from
Employer contributions, Years of Service before a period of
consecutive 1-year Breaks in Service will not be taken into
account in computing eligibility service if the number of
consecutive 1-year Breaks in Service in such period equals or
exceeds the greater of 5 or the aggregate number of Years of
Service. Such aggregate number of Years of Service will not
include any Years of Service disregarded under the preceding
sentence by reason of prior Breaks in Service.
(3) If a Participant's Years of Service are disregarded pursuant to
the preceding paragraph, such Participant will be treated as a
new Employee for eligibility purposes. If a Participant's Years
of Service may not be disregarded pursuant to the preceding
paragraph, such Participant shall continue to participate in
the Plan, or, if terminated, shall participate immediately upon
reemployment.
(D) ELIGIBILITY BREAK IN SERVICE, ONE YEAR HOLD-OUT RULE. If the Plan
is a nonstandardized Plan, then:
(1) In the case of any Participant who has a 1- year Break in
Service or Severance, years of eligibility service before such
break will not be taken into account until the Employee has
completed a Year of Service after returning to employment.
(2) For plans in which the eligibility computation is measured with
reference to the Employment Commencement Date, such Year of
Service will be measured beginning on the Employee's
Reemployment Commencement Date and, if necessary, subsequent
12-consecutive month periods beginning on anniversaries of the
Reemployment Commencement Date.
(3) For plans which shift the Eligibility Computation Period to the
Plan Year, such Year of Service will be measured by the 12-
consecutive month period beginning on the Employee's
Reemployment Commencement Date and, if necessary, Plan Years
beginning with the Plan Year which includes the first
anniversary of the Reemployment Commencement Date.
(4) If a Participant completes a Year of Service in accordance with
this provision, his or her participation will be reinstated as
a Participant as of the Reemployment Commencement Date.
(E) PARTICIPATION UPON RETURN TO ELIGIBLE CLASS.
(1) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has
not incurred a Break In Service, such Employee shall participate
immediately upon returning 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.
(2) In the event an Employee who is not a member of an eligible
class of Employees becomes a member of an eligible class, such
Employee will participate immediately if such Employee has
satisfied the minimum age and service requirements and would
have otherwise previously become a Participant.
2.2 VESTING.
(A) VESTING SCHEDULE. In the case of an Employee who terminates
participation under this Plan for any reason other than death,
Disability, or employment at the Normal Retirement Date, such
Participant, as of the last day of his participation under this Plan,
shall have a vested interest in his Employer Contribution Account
pursuant to the formula specified by the Employer in the Adoption
Agreement.
(B) VESTING UPON NORMAL RETIREMENT DATE. Notwithstanding the vesting
schedule elected by the Employer in Items B(7)(a) or C(4)(d) of the
Adoption Agreement, an Employee's right to his or her Employer
Contribution balance shall be nonforfeitable at the Employee's
Normal Retirement Date.
(C) VESTING BREAK IN SERVICE - 1 YEAR HOLDOUT. In the case of any
Participant who has incurred a 1-year Break in Service, Years of
Service before such break will not be taken into account until the
Participant has completed a Year of Service after such Break in
Service.
(D) VESTING FOR PRE-BREAK AND POST-BREAK ACCOUNT. In the case of a
Participant who has 5 or more consecutive 1-year Breaks in Service,
all service after such Breaks in Service will be disregarded for the
purpose of vesting the employer-derived account balance that accrued
before such Breaks in Service. Such Participant's pre-break service
will count in vesting the post-break employer- derived account
balance only if either:
(1) such Participant has any nonforfeitable interest in the account
balance attributable to employer contributions at the time of
separation from service; or
(2) upon returning to service the number of consecutive 1-year
Breaks in Service is less than the number of Years of Service.
Separate accounts will be maintained for the Participant's
pre-break and post-break Employer Contribution Account balance.
Both accounts will share in the earnings and losses of the Trust
Fund.
(E) AMENDMENT OF VESTING SCHEDULE. 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 or from a top-
heavy vesting schedule, each Participant with at least three (3) Years of
Service with the Employer may elect within a reasonable period after the
adoption of the amendment or change, to have the nonforfeitable percentage
computed under this Plan without regard to such amendment or change. For
Participants who do not have at least 1 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.
This period during which the election may be made shall commence with the
date the amendment is adopted or deemed to be made and shall end on the
latest of:
(1) Sixty (60) days after the amendment is adopted;
(2) Sixty (60) days after the amendment becomes effective; or
(3) Sixty (60) days after the Participant is issued written notice
of the amendment by the Employer or Committee.
(F) AMENDMENT AFFECTING VESTED AND/OR ACCRUED BENEFITS. 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 Section 412(c)(8) of the Code. 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.
ARTICLE III
CODE 401(k) AND CODE 401(m) ARRANGEMENTS
3.1 PROVISION RELATING TO BOTH BEFORE TAX CONTRIBUTIONS AND AFTER TAX
CONTRIBUTIONS.
(A) DEFINITIONS: The following definitions are applicable to this
Article of the Plan.
(1) ACTUAL DEFERRAL PERCENTAGE OR ADP: for a specified group of
Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in such group) of
(1) the amount of Employer contributions actually paid over to
the trust on behalf of such Participant for the Plan Year to (2)
the Participant's Compensation for such Plan Year (whether or
not the Employee was a Participant for the entire Plan Year, but
limited to that portion of the Plan Year in which the Employee
was an Eligible Participant if the Employer so elects for such
Plan Year to so limit Compensation for all Eligible Employees).
Employer contributions on behalf of any Participant shall
include (1) any Before Tax Contributions made pursuant to the
Participant's deferral election, including Excess Before Tax
Contributions, but excluding Before Tax Contributions that are
taken into account in the Contribution Percentage test (provided
the ADP test is satisfied both with and without exclusion of
these Before Tax Contributions); and (2) at the election of the
Employer, Qualified Non- elective Contributions and Qualified
Matching Contributions. For purposes of computing Actual
Deferral Percentages, an Employee who would be a Participant but
for the failure to make Before Tax Contributions shall be
treated as a participant on whose behalf no Before Tax
Contributions are made.
(2) AFTER TAX CONTRIBUTIONS ("EMPLOYEE CONTRIBUTIONS"): Any
contribution made to the Plan by or on behalf of a Participant
that is included in the Participant's gross income in the year
in which made and that is maintained under a separate account
to which earnings and losses are allocated.
(3) AGGREGATE LIMIT: 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 cash or deferred arrangement
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.
(4) AVERAGE CONTRIBUTION PERCENTAGE OR ACP: the average (expressed
as a percentage) of the Contribution Percentages of the
Eligible Participants in a group.
(5) BEFORE TAX CONTRIBUTIONS ("ELECTIVE DEFERRALS"): Employer
contributions made to the Plan at the election of the
Participant, in lieu of cash compensation, which shall include
contributions made pursuant to a salary reduction agreement or
other deferral mechanism. With respect to any taxable year, a
Participant's Before Tax Contributions are the sum of all
Employer contributions made on behalf of such Participant
pursuant to an election to defer under any qualified cash or
deferred arrangement as described in Section 401(k) of the Code,
any simplified employee pension cash or deferred arrangement as
described in Code Section 402(h)(1)(B), any eligible deferred
compensation Plan under Code Section 457, any Plan as described
under Code Section 457, any Plan as described under Code Section
501(c)(18), and any Employer contributions made on behalf of a
Participant for the purchase of an annuity contract under Code
Section 403(b) pursuant to a salary reduction agreement.
(6) CONTRIBUTION PERCENTAGE: The ratio (expressed as a percentage)
of the Participant's Contribution Percentage Amounts to the
Participant's Compensation for the Plan Year (whether or not
the Employee was a Participant for the entire Plan Year, but
limited to that portion of the Plan Year in which the Employee
was an Eligible Participant if the Employer so elects for such
Plan Year to so limit Compensation for all Eligible Employees).
(7) CONTRIBUTION PERCENTAGE AMOUNTS: The sum of the After Tax
Contributions, Matching Contributions, and Qualified Matching
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 Before
Tax Contributions, Excess Contributions or Excess Aggregate
Contributions. If so elected in the Adoption Agreement the
Employer may include Qualified Non-elective Contributions in the
Contribution Percentage Amounts. The Employer also may elect to
use Before Tax Contributions in the Contribution Percentage
Amounts so long as the ADP test is met before the Before Tax
Contributions are used in the ACP test and continues to be met
following the exclusion of those Before Tax Contributions that
are used to meet the ACP test.
(8) ELIGIBLE PARTICIPANT: Any Employee who is eligible to make an
After Tax Contribution or a Before Tax Contribution (if the
Employer takes such contributions into account in the
calculation of the Contribution Percentage), or to receive a
Matching Contribution (including forfeitures) or a Qualified
Matching Contribution. If an After Tax 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 such a
contribution shall be treated as an eligible Employee on behalf
of whom no After Tax Contributions are made.
(9) EXCESS AGGREGATE CONTRIBUTIONS: With respect to any Plan Year,
the excess of:
(a) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated
Employees for such Plan Year, over
(b) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing contributions made on
behalf of Highly Compensated Employees in order of their
Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining
Excess Before Tax Contributions pursuant to Section 3.2(D)
and (E) and then determining Excess Contributions pursuant
to section 3.2(F), (G) and (H).
(10) EXCESS BEFORE TAX CONTRIBUTIONS ("EXCESS ELECTIVE DEFERRALS"):
Those Before Tax Contributions that are includible in a
Participant's gross income under Section 402(g) of the Code to
the extent such Participant's Before Tax Contributions for a
taxable year exceed the dollar limitation under such Code
section. Excess Before Tax Contributions shall be treated as
Annual Additions under the Plan, unless such amounts are
distributed no later than the first April 15 following the close
of the Participants taxable year. Excess Before Tax
Contributions shall be adjusted for income or loss up to the end
of the taxable year of the Employee, and if elected in the
Adoption Agreement, for the income or loss attributable to the
period from the end of the Employee's taxable year to the date
of distribution (the "Gap Period"). The income or loss
allocable to Excess Before Tax Contributions is (1) the income
or loss allocable to the Participant's Before Tax Contribution
Account for the taxable year multiplied by a fraction, the
numerator of which is such Participant's Excess Before Tax
Contributions for the year and the denominator is the
Participant's account balance attributable to Before Tax
Contributions without regard to any income or loss occurring
during such taxable year plus, (2) if Gap Period income or loss
applies, ten percent of the amount determined under (1)
multiplied by the number of whole calendar months between the
end of the Participant's taxable year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of such month.
(11) EXCESS CONTRIBUTIONS: With respect to any Plan Year, the
excess of:
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly
Compensated Employee for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on
behalf of Highly Compensated Employee in order of the
ADPs, beginning with the highest of such percentages).
(12) MATCHING CONTRIBUTIONS: An Employer contribution made to this
or any other defined contribution Plan on behalf of a
Participant on account of an After Tax Contribution made by
such Participant, or on account of a Participant's Before Tax
Contribution, under a Plan maintained by the Employer.
(13) QUALIFIED MATCHING CONTRIBUTIONS: Matching Contributions which
are subject to the distribution and nonforfeitability
requirements under Section 401(k) of the Code when made.
Qualified Matching Contributions shall be allocated, in the
discretion of Employer, to the accounts of all Employees, or
only to the accounts of Non-highly Compensated Employees.
(14) QUALIFIED NON-ELECTIVE CONTRIBUTIONS: Contributions (other than
Matching Contributions or Qualified Matching 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 Before Tax
Contributions and Qualified Matching Contributions. Qualified
Non- elective Contributions shall be allocated, in the
discretion of Employer, to the accounts of all Employees, or
only to the accounts of Non-highly Compensated Employees.
(B) NONFORFEITABILITY AND VESTING. The Participant's accrued benefits
derived from Before Tax Contributions and After Tax Contributions
are nonforfeitable and fully vested.
(C) NOTICE TO COMMITTEE. The Committee shall set the time period during
which a Participant may provide written notice to increase, decrease
or terminate Before Tax Contributions and After Tax Contributions.
(D) SUSPENSION AFTER RECEIPT OF HARDSHIP DISTRIBUTION. If the Employer
has elected in the Adoption Agreement to have the "safe harbor"
hardship rules apply, an Employee's Before Tax Contributions and
After Tax Contributions shall be suspended for twelve months after
the receipt by such Employee of a Hardship distribution (as defined
in Section 3.9) from this Plan or any other Plan maintained by the
Employer.
(E) SEPARATE ACCOUNTS. Separate accounts for Before Tax Contributions
and After Tax Contributions will be maintained for each Participant.
Each account will be credited with the applicable contributions and
earnings thereon.
3.2 BEFORE TAX CONTRIBUTIONS. (ELECTIVE DEFERRALS).
(A) ALLOCATION OF BEFORE TAX CONTRIBUTIONS. If the Employer selects
Item C(2) in the Adoption Agreement, for each Plan Year the Employer
will contribute and allocate to each Participant's Before Tax
Contribution Account an amount equal to the amount of the
Participant's Before Tax Contributions. The provisions of the cash
or deferred arrangement may be made effective as of the first day of
the Plan Year in which the cash or deferred option is adopted,
however, under no circumstances may a salary reduction agreement or
other deferral mechanism be adopted retroactively. Before Tax
Contributions must be contributed and allocated to the Plan no later
than thirty (30) days after the close of the Plan Year for which the
contributions are deemed to be made, or such other time as provided
in applicable regulations under the Code.
(B) BEFORE TAX CONTRIBUTIONS PURSUANT TO A SALARY REDUCTION AGREEMENT.
To the extent provided in the Adoption Agreement, a Participant may
elect to have Before Tax Contributions made under this Plan. Before
Tax Contributions shall be continuing contributions through payroll
deduction made pursuant to a salary reduction agreement.
(1) COMMENCEMENT OF BEFORE TAX CONTRIBUTIONS. An Employee may
elect to commence Before Tax Contributions as of his or her
Entry Date as described in Section 2.1(B). Such election shall
not become effective before the Entry Date. Such election may
not be made retroactively.
(2) MODIFICATION AND TERMINATION OF BEFORE TAX CONTRIBUTIONS. A
Participant's election to commence Before Tax Contributions
shall remain in effect until modified or terminated. A
Participant may increase or decrease his or her Before Tax
Contributions as of any date as selected by the Employer in
Item C(3) of the Adoption Agreement upon notice to the
Committee. A Participant may terminate his or her election to
make Before Tax Contributions as of the Participant's next wage
payment date upon notice to the Committee. Any Participant who
terminates Before Tax Contributions may elect to recommence
making Before Tax Contributions as of the date selected by the
Employer in Item C(3) of the Adoption Agreement following his
or her suspension of contributions.
(C) CASH BONUSES. If Item C(2)(c) of the Adoption Agreement is
selected, a Participant may also enter into a salary reduction
agreement on cash bonuses that, directing that the amount of such
salary reduction be contributed to the Plan as a Before Tax
Contribution, or received by the Participant in cash. A Participant
shall be afforded a reasonable period to elect to defer amounts
described in this Section 3.2 to the Plan. Such election shall not
become effective before the Participant's Entry Date.
(D) MAXIMUM AMOUNT OF BEFORE TAX CONTRIBUTIONS. A Participant's Before
Tax Contributions are subject to any limitations imposed in Item
C(2) of the Adoption Agreement, calculated on an annual basis, and
any further limitations under the Plan. No Participant shall be
permitted to have Before Tax Contributions made under this Plan, or
any other qualified Plan maintained by the Employer, during any
taxable year in excess of the dollar limitation contained in Code
Section 402(g) in effect at the beginning of such taxable year.
Furthermore, if an Employee receives a Hardship distribution (as
defined in Section 3.9, utilizing the "safe harbor" rules) from this
Plan or any other Plan maintained by the Employer, the Employee may
not make Before Tax Contributions for the Employee's taxable year
immediately following the taxable year of the Hardship distribution
in excess of the applicable limit under Section 402(g) of the Code
for such taxable year less the amount of the Employee's Before Tax
Contributions for the taxable year of the Hardship distribution.
(E) DISTRIBUTION OF EXCESS BEFORE TAX CONTRIBUTIONS. If a Participant
makes Before Tax Contributions to this Plan and to another Plan, and
the Participant has made Excess Before Tax Contributions to one or
more of the plans, the Participant may assign the amount of any such
Excess Before Tax Contributions among the plans under which such
Before Tax Contributions were made. The Participant may assign to
this Plan any Excess Before Tax Contributions made during a taxable
year of the Participant to this Plan by notifying the Committee on
or before the date specified in the Adoption Agreement of the amount
of the Excess Before Tax Contributions to be assigned to the Plan.
A Participant is deemed to notify the Committee of any Excess Before
Tax Contributions that arise by taking into account only those
Before Tax Contributions made under the Plan or Plans of this
Employer.
Notwithstanding any other provision of the Plan, Excess Before Tax
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any Participant to
whose account Excess Before Tax Contributions were assigned for the
preceding year and who claims Excess Before Tax Contributions for
such taxable year.
The Participant's claim shall be in writing; shall be submitted to
the Committee not later than the date elected in Item CC of the
Adoption Agreement; shall specify the amount of the Participant's
Excess Before Tax Contribution for the preceding calendar year; and
shall be accompanied by the Participant's written statement that if
such amounts are not distributed, such Excess Before Tax
Contributions, when added to amounts deferred under other plans or
arrangements described in Sections 401(k), 408(k), or 403(b) of the
Code, will exceed the limit imposed on the Participant by Section
402(g) of the Code for the year in which the deferral occurred.
(F) ACTUAL DEFERRAL PERCENTAGE. The ADP for Participants who are Highly
Compensated Employees for each Plan Year and the ADP for Non-highly
Compensated Employees for the same Plan Year must satisfy one of the
following tests:
(1) 1.25 LIMIT. 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
(2) 2.0 LIMIT. 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.
(3) SPECIAL RULES.
(a) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have
Before Tax Contributions (and Qualified Non- elective
Contributions, or Qualified Matching Contributions, or
both, if treated as Elective Deferrals for purposes of the
ADP test) allocated to his or her accounts under two or
more arrangements described in Section 401(k) of the Code,
that are maintained by the Employer, shall be determined
as if such Before Tax Contributions (and, if applicable,
such Qualified Non-elective Contributions or Qualified
Matching Contributions, or both,) were made under a single
arrangement. If a Highly Compensated Employee
participates in two or more cash or deferred arrangements
that have different Plan Years, all cash or deferred
arrangements ending with or within the same calendar year
shall be treated as a single arrangement.
(b) In the event that this Plan satisfies the requirements of
Sections 401(k), 401(a)(4), or 410(b) of the Code 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 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 Section 401(k) of the Code
only if they have the same Plan Year.
(c) For purposes of determining the ADP of a Participant who
is a 5-percent owner or one of the ten most highly-paid
Highly Compensated Employees, the Before Tax Contributions
(and Qualified Non- elective Contributions or Qualified
Matching Contributions, or both, if treated as Before Tax
Contributions for purposes of the ADP test) and
Compensation of such Participant shall include the Before
Tax Contributions (and, if applicable, Qualified Non-
elective Contributions) and Compensation for the Plan Year
of Family Members (as defined in Section 414(q)(6) of the
Code). Family Members, with respect to such Highly
Compensated Employees, shall be disregarded as separate
employees in determining the ADP both for Participants who
are Non-highly Compensated Employees and for Participants
who are Highly Compensated Employees.
(d) For purposes of determining the ADP test, Before Tax
Contributions if treated as Before Tax Contributions and
Qualified Non-elective Contributions must be made before
the last day of the twelve-month period immediately
following the Plan Year to which contributions relate.
(e) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Non-elective Contributions used in such test.
(f) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
(G) DISTRIBUTION OF EXCESS CONTRIBUTIONS. Notwithstanding any other
provision of the 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 accounts
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
(10) 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. Excess Contributions of Participants who are subject to
the Family Member aggregation rules shall be allocated among the
Family Members in proportion to the Before Tax Contributions (and
amounts treated as Before Tax Contributions) of each Family Member
that is combined to determine the combined ADP.
Excess Contributions (including the amounts recharacterized) shall
be treated as Annual Additions under the Plan.
(1) DETERMINATION OF INCOME OR LOSS. The Excess Contributions
shall be adjusted for income or loss up to the date of
distribution. The income or loss allocable to Excess
Contributions is (1) the income or loss allocable to the
Participant's Before Tax Contribution Account (and, if
applicable, the Qualified Non-elective Contribution Account or
the Qualified Matching Contribution Account or both) multiplied
by a fraction, the numerator of which is such Participant's
Excess Contribution for the year and the denominator is the
Participant's account balance attributable to Before Tax
Contributions (and Qualified Non-Elective Contributions or
Qualified Matching Contributions or both, if any of such
contributions are included in the ADP test) without regard to
any income or loss occurring during such taxable year, plus,
(2) if Gap Period income or loss applies, as elected in the
Adoption Agreement, ten percent of the amount determined under
(1) multiplied by the number of whole calendar months between
the end of the Plan Year and the date of distribution, counting
the month of distribution if distribution occurs after the 15th
of such month.
(2) ACCOUNTING FOR EXCESS CONTRIBUTIONS. Excess Contributions
shall be distributed from the Participant's Before Tax
Contribution Account and Qualified Matching Contribution
Account (if applicable) in proportion to the Participant's
Before Tax 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 Non-elective Contribution Account only to the extent
that such Excess Contributions exceed the balance in the
Participant's Before Tax Contribution Account.
(H) RECHARACTERIZATION. If the Plan permits After Tax Contributions
(Employee Contributions), Excess Contributions may be
recharacterized pursuant to this subsection. Recharacterized
amounts may be used in the Plan from which Excess Contributions
arose or in another Plan of the employer with the same Plan Year.
(1) TREATMENT OF AMOUNTS RECHARACTERIZED. A Participant may treat
his or her Excess Contributions as an amount distributed to the
Participant and then contributed by the Participant to the
Plan. Recharacterized amounts will remain nonforfeitable and
subject to the same distribution requirements as Before Tax
Contributions. Amounts may not be recharacterized by a Highly
Compensated Employee to the extent that such amount in
combination with other After Tax Contributions made by that
Employee would exceed any stated limit under the Plan on After
Tax Contributions.
(2) TIMING OF RECHARACTERIZATION. Recharacterization must occur no
later than two and one-half months after the last day of the
Plan Year in which such Excess Contributions arose and is
deemed to occur no earlier than the date the last Highly
Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized
amounts will be taxable to the Participant for the
Participant's tax year in which the Participant would have
received them in cash.
(I) ADJUSTMENTS TO BEFORE TAX CONTRIBUTION Percentages. Anything to the
contrary in this Article III notwithstanding, the Committee shall
have the right to reduce the percentages designated pursuant to
Section 3.2(B), of any one or more Highly Compensated Employees in a
manner prescribed or approved by the Committee to the extent
necessary or convenient to ensure that at least one of the ADP tests
set forth in Section 3.2(F) is satisfied, but in no event shall such
reduction result in a percentage less than zero. Any such reduction
shall be effected quarterly, or more frequently as the Committee may
determine and each affected Highly Compensated Employee shall be
deemed to have elected the permissible percentage determined by the
Committee. The Committee may, on a prospective basis, and subject to
the percentage limits of Section 3.3 below, treat amounts contributed
to the Plan pursuant to a salary reduction agreement as After Tax
Contributions by each affected Highly Compensated Employee; provided
that if any such reduction cannot be so treated because of the said
percentage limits or because of the nondiscrimination requirements of
Code Section 401(m) or otherwise, then the amount of such reduction
(and any income allocable thereto) shall be distributed to each
affected Highly Compensated Employee pursuant to Code Section
401(k)(8) or Code Section 401(m)(6), if applicable, not later than
the close of the first 2-1/2 months of the Plan Year following the
Plan Year in which the contribution was made.
3.3 AFTER TAX CONTRIBUTIONS. (EMPLOYEE CONTRIBUTIONS).
(A) ALLOCATION OF AFTER TAX CONTRIBUTIONS. If the Employer selects Item
C(2)(b) in the Adoption Agreement, the Employer will deduct from the
Participant's pay and allocate to each Participant's After Tax
Contribution Account an amount equal to the percentage of
Compensation authorized by the Participant as an After Tax
Contribution. The Employer shall transmit After Tax Contributions to
the Trustee within thirty (30) days after the month end in which such
deductions are made.
(B) EMPLOYEE AUTHORIZES AFTER TAX CONTRIBUTIONS. To the extent provided
in the Adoption Agreement, a Participant may elect to make After Tax
Contributions under the Plan.
(1) ELECTION TO MAKE AFTER TAX CONTRIBUTIONS. An Employee may
elect to make After Tax Contributions as of his or her Entry
Date as described in Section 2.1(B). Such election will not
become effective before the Entry Date.
(2) MODIFICATION AND TERMINATION OF AFTER TAX CONTRIBUTIONS. A
Participant's election to commence After Tax Contributions shall
remain in effect until modified or terminated. A Participant
may increase or decrease his or her After Tax Contributions as
selected by the Employer in Item C(3) of the Adoption Agreement
upon written notice to the Committee. A Participant may
terminate his or her election to make After Tax Contributions at
any time as of the Participant's next wage payment date upon
written notice to the Committee. Any Participant who terminates
After Tax Contributions may elect to recommence making After Tax
Contributions as of the date selected by the Employer in Item
C(3) of the Adoption Agreement following his or her suspension
of contributions.
(C) MAXIMUM AMOUNT OF AFTER TAX CONTRIBUTIONS. A Participant's After
Tax Contributions are subject to any limitations imposed in Item
C(3) of the Adoption Agreement, calculated on an annual basis, and
any further limitations under the Plan.
(D) CASH BONUSES. If Item C(2)(c) of the Adoption Agreement is
selected, a Participant may also enter into a salary reduction
agreement on cash bonuses, directing that the amount of such salary
reduction be contributed to the Plan as an After Tax Contribution,
or received by the Participant in cash. A Participant shall be
afforded a reasonable period to elect to defer amounts described in
this Section 3.3 to the Plan. Such election shall not become
effective before the Participant's Entry Date.
3.4 EMPLOYER CONTRIBUTIONS.
(A) MATCHING CONTRIBUTIONS. If elected by the Employer in the Adoption
Agreement, the Employer will or may make Matching Contributions to
the Plan. The amount of such Matching Contributions shall be
calculated by reference to the Participants' Before Tax
Contributions and/or After Tax Contributions as specified by the
Employer in the Adoption Agreement.
(B) QUALIFIED MATCHING CONTRIBUTIONS. If elected by the Employer in the
Adoption Agreement, the Employer may make Qualified Matching
Contributions to the Plan.
In addition, in lieu of distributing Excess Contributions as
provided in Section 3.2(G) of the Plan, or Excess Aggregate
Contributions as provided in Section 3.5(C) of the Plan, the
Employer may make Qualified Matching Contributions on behalf of
Employees that are sufficient to satisfy either the Actual Deferral
Percentage or the Average Contribution Percentage test, or both,
pursuant to regulations under the Code.
(C) QUALIFIED NON-ELECTIVE CONTRIBUTIONS. If elected by the Employer in
the Adoption Agreement, the Employer may make Qualified Non-elective
Contributions to the Plan.
In addition, in lieu of distributing Excess Contributions as provided
in Section 3.2(G) of the Plan, or Excess Aggregate Contributions as
provided in Section 3.5(C) of the Plan, the Employer may make
Qualified Non-elective Contributions on behalf of Employees that are
sufficient to satisfy either the Actual Deferral Percentage or the
Average Contribution Percentage test, or both, pursuant to
regulations under the Code.
(D) SEPARATE ACCOUNTS. An Employer Matching Account shall be maintained
for a Participant's accrued benefit attributable to Matching
Contributions. A Qualified Matching Contribution Account shall be
maintained for a Participant's accrued benefit attributable to
Qualified Matching Contributions. A Qualified Non-elective
Contribution Account shall be maintained for a Participant's accrued
benefit attributable to Qualified Non-elective Contributions. Such
accounts shall be credited with the applicable contributions,
earnings and losses, distributions, and other adjustments.
(E) VESTING. Matching Contributions will be vested in accordance with
the Employer's election in Items C(4)(d) and C(4)(e) of the Adoption
Agreement. In any event, Matching Contributions shall be fully
vested at Normal Retirement Date, upon the complete or partial
termination of the Plan, or upon the complete discontinuance of
Matching Contributions, as applicable. Qualified Non- elective
Contributions and Qualified Matching Contributions are nonforfeitable
when made.
(F) FORFEITURES. Forfeitures of Matching Contributions shall be used to
reduce such contributions, or shall be allocated to Participants, in
accordance with the Employer's election in Item C(6) of the Adoption
Agreement.
(G) ALLOCATION OF DISCRETIONARY MATCHING CONTRIBUTIONS. If the Employer
selects Item C(4)(b) in the Adoption Agreement, any discretionary
Matching Contributions shall be allocated as of the allocation date
specified in Item C(4)(c)(ii) of the Adoption Agreement, to the
Employer Matching Account of each Participant who has made Before Tax
Contributions and/or After Tax Contributions eligible for matching.
If Item C(4)(c)(ii)(e) has been selected (imposing a last day of the
Plan Year requirement) the allocation shall be made to a Participant
who (1) if a Participant in a nonstandardized Plan, is employed or on
leave of absence on the last day of the Plan Year, and (2) if a
Participant in a standardized Plan, either completes more than 500
Hours of service during the Plan Year or is employed on the last day
of the Plan Year. The following Participants will also share in the
Matching Contributions for the year, if elected in the Adoption
Agreement: (1) Participants in a nonstandardized Plan whose
employment terminated before the end of the Plan Year because of
retirement, death, disability or as specified in the Adoption
Agreement, and (2) Participants in a standardized Plan whose
employment terminated before the end of the Plan Year because of
retirement, death, disability or as specified in the Adoption
Agreement, and completed 500 Hours of Service or less.
Notwithstanding the foregoing, if the Employer makes a contribution
prior to the end of the Plan Year, Participants shall be entitled to
an allocation of that contribution when made, without regard to any
end of the Plan Year requirement.
(H) LIMITATION ON EMPLOYER CONTRIBUTIONS. The Employer's contributions
for any Plan Year shall not exceed the maximum amount which the
Employer may deduct pursuant to Section 404 of the Code.
3.5 LIMITATIONS ON AFTER TAX CONTRIBUTIONS (EMPLOYEE CONTRIBUTIONS) AND
MATCHING CONTRIBUTIONS.
(A) CONTRIBUTION PERCENTAGE. 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:
(1) 1.25 LIMIT. 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 by 1.25, or
(2) 2.0 LIMIT. 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.
(B) SPECIAL RULES.
(1) MULTIPLE USE. If one or more Highly Compensated Employees
participate in both a cash or deferred arrangement 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 cash or deferred arrangement will be reduced (beginning
with such Highly Compensated Employee whose ACP is the highest)
so that the limit is not exceeded. The amount by which each
Highly Compensated Employee's Contribution Percentage amounts is
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 either 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.
(2) AGGREGATION OF CONTRIBUTION PERCENTAGES. For purposes of this
section, the Contribution Percentage for any Participant who is
a Highly Compensated Employee and who is eligible to have
Contribution Percentage Amounts allocated to his or her accounts
under two or more plans described in Section 401(a) of the Code,
or arrangements described in Section 401(k) of the Code, 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 cash or deferred arrangements that have different Plan
years all cash or deferred arrangements ending with or within
the same calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated as
separate if mandated to be disaggregated under regulations under
Section 401(m) of the Code.
(3) AGGREGATION OF PLANS. In the event that this Plan satisfies the
requirements of Sections 401(m), 401(a)(4) or 410(b) of the Code
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 Contribution Percentage 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 Section 401(m) of the Code only if they have
the same Plan Year.
(4) FAMILY AGGREGATION. For purposes of determining the
Contribution Percentage of a Participant who is a five-percent
owner or one of the ten most highly-paid Highly Compensated
Employees, the Contribution Percentage Amounts and Compensation
of such Employee shall include the Contribution Percentage
Amounts and Compensation for the Plan Year of Family Members, as
defined in Section 414(q)(6) of the Code. Family Members, with
respect to Highly Compensated Employees, shall be disregarded as
separate employees in determining the Contribution Percentage
both for Participants who are Non- highly Compensated Employees
and for Participants who are Highly Compensated Employees.
(5) TIME OF CONTRIBUTIONS. For purposes of determining the
Contribution Percentage test, After Tax Contributions are
considered to have been made in the Plan Year in which
contributed to the Trust. Matching Contributions and Qualified
Non-elective Contributions will be considered made for a Plan
Year if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
(6) RECORDS. The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Non- elective Contributions or Qualified Matching
Contributions, or both, used in such test.
(7) REGULATIONS. The determination and treatment of the
Contribution Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
(C) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS.
(1) GENERAL RULE. 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 accounts Excess
Aggregate Contributions were allocated for the preceding Plan
Year. Excess Aggregate Contributions of Participants who are
subject to the Family Member aggregation rules shall be
allocated among the Family Members in proportion to the After
Tax and Matching Contributions (or amounts treated as Matching
Contributions) of each Family Member that is combined to
determine the combined ACP. 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 (10) percent excise tax will be imposed on the Employer
maintaining the Plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as Annual Additions
under the Plan.
(2) DETERMINATION OF INCOME OR LOSS. Excess Aggregate Contributions
shall be adjusted for income or loss up to the date of
distribution. The income or loss allocable to Excess Aggregate
Contributions is the sum of: (1) income or loss allocable to the
Participant's After Tax Contribution Account, Matching
Contribution Account, Qualified Matching Contribution Account,
(if any, and if all amounts therein are not used in the ADP
test) and, if applicable, the Qualified Non-elective
Contribution Account and Before Tax Contribution Account for the
Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Aggregate Contributions for the year
and the denominator is the Participant's account balance(s)
attributable to Contribution Percentage Amounts without regard
to any income or loss occurring during such Plan Year; and (2)
ten percent of the amount determined under (1) multiplied by the
number of whole calendar months between the end of the Plan Year
and the date of distribution, counting the month of distribution
if distribution occurs after the 15th of such month.
(3) FORFEITURES OF EXCESS AGGREGATE CONTRIBUTIONS. Forfeitures of
Excess Aggregate Contributions may either be reallocated to the
accounts of Non-Highly Compensated Employees or applied to
reduce Employer Contributions, as elected by the Employer in
Item C(6)(c) of the Adoption Agreement.
(4) ACCOUNTING FOR EXCESS AGGREGATE CONTRIBUTIONS. Excess Aggregate
Contributions shall be forfeited, if forfeitable, or
distributed on a pro-rata basis from the Participant's After
Tax Contribution Account and Matching Contribution Account and
Qualified Matching Contribution Account (and, if applicable,
the Participant's Qualified Non-elective Contribution Account
and Before Tax Contribution Account, or both).
3.6 NET PROFITS NOT REQUIRED IF SO ELECTED IN ADOPTION AGREEMENT. If the
Employer elects, Matching Contributions may be made without regard to Net
Profits in accordance with Item C(4)(c)(iii) of the Adoption Agreement. If
the Plan is a profit-sharing Plan, the Plan shall continue to be designed
to qualify as a profit-sharing Plan for purposes of Sections 401(a), 402,
412, and 417 of the Code. Net Profits shall not be required for Before
Tax Contributions or After Tax Contributions to be made to the Plan.
3.7 FORM, PAYMENT AND ALLOCATION OF CONTRIBUTIONS. All contributions under
this Article III made for a Plan Year shall be made in cash, and shall be
delivered to the Trustee at such time or times as shall be agreed upon
between the Committee and the Trustee. The Committee shall instruct the
Trustee as to the allocation of contributions to the Participant's
accounts.
3.8 DISTRIBUTION REQUIREMENTS FOR BEFORE TAX CONTRIBUTION ACCOUNT. Before Tax
Contributions, Qualified Non- elective Contributions and Qualified
Matching Contributions, and income allocable to each are not distributable
to a Participant or his or her Beneficiary or Beneficiaries, in accordance
with such Participant's, Beneficiary's or Beneficiaries' election, earlier
than upon separation from service, death, disability, or as selected in
the Adoption Agreement. Such amounts may not be distributed unless in
accordance with the Participant's election made pursuant to rules
established by the Committee as authorized in the Adoption Agreement, and
upon:
(A) Termination of the Plan without the establishment of another defined
contribution Plan, other than an employee stock ownership Plan (as
defined in Section 4975(e) or Section 409 of the Code) or a
simplified employee pension Plan as defined in Section 408(k).
(B) The disposition by a corporation to an unrelated corporation of
substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of such
corporation if such corporation continues to maintain this Plan
after the disposition, but only with respect to Employees who
continue employment with the corporation acquiring such assets.
(C) The disposition by a corporation to an unrelated entity of such
corporation's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code) if such corporation continues to
maintain this Plan, but only with respect to Employees who continue
employment with such subsidiary.
(D) The attainment of age 59-1/2 in the case of a profit-sharing Plan,
or the attainment of the Plan's Normal Retirement Date, if either or
both are selected in the Adoption Agreement.
(E) The Hardship of the Participant as described in Section 3.9, if
selected in the Adoption Agreement.
All distributions that may be made pursuant to one or more of the
foregoing distributable events are subject to the spousal and
Participant consent requirements (if applicable) contained in
Sections 411(a)(11) and 417 of the Code. In addition, distributions
after March 31, 1988, that are triggered by any of the first three
events above, in Sections 3.8(A), (B) and (C) must be made in a lump
sum.
3.9 HARDSHIP DISTRIBUTION.
(A) AMOUNT AVAILABLE FOR WITHDRAWAL. Upon the written request of a
Participant received and approved by the Committee, a Participant may
withdraw, in cash, up to one hundred per cent (100%) of the amount of
such Participant's Before Tax Contributions (and any earnings
credited to a Participant's account as of the end of the last Plan
Year ending before July 1, 1989) or such lesser amount as the
Committee may approve, in the event of Hardship. For purposes of
this Section, Hardship is defined as immediate and heavy financial
need of the Employee where such Employee lacks other available
resources. Hardship distributions are subject to the spousal consent
requirements contained in Sections 411(a)(11) and 417 of the Code.
The Committee is authorized to and shall request from the Participant
making such a request such evidence as the Committee deems necessary
and appropriate to substantiate a Hardship, the amount of expenses
resulting from such Hardship and the other resources of the
Participant reasonably available to meet such expenses.
(B) SPECIAL RULES:
(1) IMMEDIATE AND HEAVY NEED. The following are the only financial
needs considered immediate and heavy: expenses incurred or
necessary for medical care, described in Section 213(d) of the
Code, of the Employee, the Employee's Spouse or dependents; the
purchase (excluding mortgage payments) of a principal residence
for the Employee; payment of tuition and related educational
fees for the next twelve months of post-secondary education for
the Employee, the Employee's Spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a
foreclosure on the mortgage of, the Employee's principal
residence.
(2) SATISFACTION OF NEED. A distribution will be considered as
necessary to satisfy an immediate and heavy financial need of
the Employee only if:
(a) The Employee has obtained all distributions, other than
Hardship distributions, and all nontaxable loans under
all plans maintained by the Employer;
(b) All plans maintained by the Employer provide that the
Employee's Before Tax Contributions (and After Tax
Contributions) will be suspended for twelve months after
the receipt of the Hardship distribution;
(c) The distribution is not in excess of an 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
(d) All plans maintained by the Employer provide that the
Employee may not make Before Tax Contributions for the
Employee's taxable year immediately following the taxable
year of the Hardship distribution in excess of the
applicable limit under Section 402(g) of the Code for such
taxable year less the amount of such Employee's Before Tax
Contributions for the taxable year of the Hardship
distribution.
(3) TAXES AND PENALTIES. The amount of an immediate and heavy
financial need may include any amounts necessary to pay any
federal, state or local income taxes or penalties reasonably
anticipated to result from the distribution.
3.10 WITHDRAWAL OF AFTER TAX CONTRIBUTIONS. Subject to the provisions of the
Plan, in accordance with rules for giving notice as determined by the
Committee, a Participant may withdraw as of the first Accounting Date
subsequent to receipt by the Committee of such notice:
(A) MAXIMUM AMOUNT. An amount equal to not more than 100% of the
Participant's After Tax Contribution Account determined as of such
Accounting Date. No Participant who has made any withdrawal of
After Tax Contributions in the twelve (12) months preceding the
giving of such notice may make a withdrawal under this Section. A
Participant who makes a withdrawal of After Tax Contributions shall
be required to suspend After Tax Contributions for a period of six
(6) months, commencing with the effective date of such withdrawal.
A Participant may, pursuant to Article III, elect to commence After
Tax Contributions as of the first day of the first payroll period of
the month following the conclusion of such suspension period, or the
first payroll period of any month thereafter, upon advance written
notice to the Committee.
(B) MINIMUM AMOUNT. Notwithstanding anything to the contrary in this
Section 3.10, any withdrawal made pursuant to Section 3.10(A) shall
be for a minimum whole dollar amount not less than Five Hundred
Dollars ($500.00); except that if the amount available for
withdrawal is less than Five Hundred Dollars ($500.00) then the
minimum amount of the withdrawal shall be the amount available.
(C) FORFEITURES. No forfeitures will occur solely as a result of an
Employee's withdrawal of After Tax Contributions.
(D) LOAN SECURITY. Notwithstanding anything to the contrary in this
Section 3.10, a Participant may not make a withdrawal pursuant to
this Section of any portion of the Participants vested interest
which has been assigned to secure repayment of a loan in accordance
with Section 11.10, below, until such time as the Committee shall
have released said portion so assigned.
3.11. WITHDRAWAL OF MATCHING CONTRIBUTIONS. Subject to the provisions of
the Plan, in accordance with rules for giving notice as determined by
the Committee, and as elected in the Adoption Agreement, a Participant
may withdraw as of the first Accounting Date subsequent to receipt by
the Committee of such notice:
(A) MAXIMUM AMOUNT. An amount equal to not more than 100% of the vested
amounts in the Participant's Matching Contribution Account
determined as of such Accounting Date. No Participant who has made
any withdrawal of Matching Contributions in the twelve (12) months
preceding the giving of such notice may make a withdrawal under this
Section.
(B) MINIMUM AMOUNT. Notwithstanding anything to the contrary in this
Section 3.11, any withdrawal made pursuant to Section 3.11(A) shall
be for a minimum whole dollar amount not less than Five Hundred
Dollars ($500.00); except that if the amount available for
withdrawal is less than Five Hundred Dollars ($500.00) then the
minimum amount of the withdrawal shall be the amount available.
(C) FORFEITURES. No forfeitures will occur solely as a result of an
Employee's withdrawal of Matching Contributions.
(D) LOAN SECURITY. Notwithstanding anything to the contrary in this
Section 3.11, a Participant may not make a withdrawal, pursuant to
this Section of any portion of the Participant's vested interest
which has been assigned to secure repayment of a loan in accordance
with Section 11.10, below, until such time as the Committee shall
have released said portion so assigned.
ARTICLE IV
OTHER CONTRIBUTIONS
4.1 EMPLOYER CONTRIBUTIONS.
(A) MONEY PURCHASE PENSION PLANS ONLY. As elected by the Employer in
the Adoption Agreement, the Employer shall make contributions to the
Plan.
(B) PROFIT SHARING PLANS AND 401(K) PLANS ONLY.
(1) EMPLOYER CONTRIBUTIONS. For each Plan Year, the Employer,
shall or may make contributions to the Plan in an amount as
selected in the Adoption Agreement or determined by Resolution
of the Board of Directors of the Employer.
(2) NET PROFITS NOT REQUIRED IF SO ELECTED IN ADOPTION AGREEMENT.
If the Employer elects, Employer Contributions under a profit
sharing Plan may be made without regard to Net Profits in
accordance with Item B(8)(a)(iii) of the Adoption Agreement.
The Plan shall continue to be designed to qualify as a
profit-sharing Plan for purposes of Sections 401(a), 402, 412,
and 417 of the Code.
4.2 SEPARATE ACCOUNTS. An Employer Contribution Account shall be maintained
for each Participant to which will be credited the employer pension or
profit sharing contributions ("Employer Contributions"). Such accounts
shall be credited with the applicable contributions, earnings and losses,
distributions, and other adjustments.
4.3 VESTING. Employer Contributions will be vested in accordance with the
Employer's election in Item B(7), as applicable, of the Adoption
Agreement. In any event, Employer Contributions shall be fully vested at
Normal Retirement Date, upon the complete or partial termination of the
Plan, and, in profit sharing plans, upon the complete discontinuance of
Employer Contributions.
4.4 LIMITATION ON EMPLOYER CONTRIBUTIONS. The Employer's Contribution for
any Plan Year shall not exceed the maximum amount which the Employer may
deduct pursuant to Section 404 of the Code. The Employer Contributions
shall be payable not later than the time for filing the Employer's
federal income tax return, including extensions.
4.5 EMPLOYEE CONTRIBUTIONS.
(A) DISTRIBUTIONS FROM QUALIFIED PLANS - ROLLOVERS.
(1) If the Employer selects Item B(9) in the Adoption Agreement, an
Employee who is entitled to make a rollover contribution
described in Section 402(a)(5), Section 403(a)(4) or Section
408(d)(3) of the Code ("Rollover Contribution"), may elect,
with the approval of the Committee, to make such a Rollover
Contribution to the Plan. The Employee shall deliver or cause
to be delivered, to the Trustee the cash which constitutes such
Rollover Contribution at such time or times and in such manner
as shall be specified by the Committee. As of the date of
receipt of such property by the Trustee, a Rollover Account
shall be established in the name of the Employee who has made a
Rollover Contribution as provided in this Section 4.5 and shall
be credited with such assets on such date. A Rollover
Contribution shall not be deemed to be a contribution of such
Employee for any purpose of this Agreement. All Rollover
Contributions and the earnings on these contributions shall be
immediately fully vested and nonforfeitable.
(2) Subject to the provisions of the Plan, on advance notice given
to the Committee in accordance with rules established by the
Committee a Participant in a profit sharing Plan or 401(k)
profit sharing Plan may withdraw all or any part (in any whole
dollar amount specified by the Participant) of the value of any
Rollover Account, provided no Participant who has made any
withdrawal under Section 4.5(A) during the calendar year in
which such notice is given may make an additional withdrawal
under this Section 4.5(A) during the remainder of such year.
(B) NONDEDUCTIBLE EMPLOYEE CONTRIBUTIONS AND MATCHING CONTRIBUTIONS NO
LONGER ACCEPTED.
(1) This Plan will not accept nondeductible employee contributions
and matching contributions except pursuant to a 401(m)
arrangement described in Article III. Employee contributions for
Plan Years beginning after December 31, 1986, together with any
matching contributions as defined in Section 401(m) of the Code,
will be limited so as to meet the nondiscrimination test of
Section 401(m).
(2) A separate account will be maintained by the Trustee for the
previously made nondeductible employee contributions of each
Participant.
(3) Employee contributions and earnings thereon will be
nonforfeitable at all times. No forfeitures will occur solely
as a result of an Employee's withdrawal of Employee
contributions.
(C) DEDUCTIBLE EMPLOYEE CONTRIBUTIONS NO LONGER ACCEPTED. The Committee
will not accept deductible Employee 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 which
will be nonforfeitable at all times. The account will share in the
gains and losses of the Trust Fund in the same manner as described in
Article VI of the Plan. No part of the deductible voluntary
contribution account will be used to purchase life insurance. Subject
to Section 7.10, Joint and survivor annuity requirements (if
applicable), the Participant may withdraw any part of the deductible
voluntary contribution account by making a written application to the
Committee.
4.6 EXCLUSIVE BENEFIT. Except as provided in the Plan, the Employer has no
beneficial interest in the Trust Fund, and no part of the Trust Fund shall
revert or be repaid to the Employer, directly or indirectly, or diverted
to purposes other than for the exclusive benefit of Participants and their
Beneficiaries, except that (1) any contribution made by the Employer
because of a mistake of fact must be returned to the Employer within one
year of the contribution; (2) in the event the deduction of a contribution
made by the Employer is disallowed under Section 404 of the Code, such
contribution (to the extent disallowed) must be returned to the Employer
within one year of the disallowance of the deduction; and (3) in the event
that the Commissioner of 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.
4.7 FORM, PAYMENT AND ALLOCATION OF CONTRIBUTIONS. Contributions made for a
Plan Year shall be made in cash; provided, however, that if the Plan has
an Employer Stock Fund, contributions for the Employer Stock Fund may be
made in Employer Stock. Contributions shall be delivered to the Trustee at
such time or times as shall be agreed upon between the Committee and the
Trustee. The Committee shall instruct the Trustee as to the allocation of
contributions to the Participant's accounts pursuant to the elections made
in the Adoption Agreement. Employer Stock contributed to the Plan shall
be valued at fair market value at the time of its transfer to the Plan.
4.8 SAFE HARBOR ALLOCATION. Notwithstanding anything to the contrary in the
Adoption Agreement, in the event the requirements of Code Sections
401(a)(26) or 410(b) are not met during the Plan Year, Employer
Contributions will be allocated to Eligible Employees in the following
order until the applicable requirements are met:
(A) Eligible Employees employed by the Employer on the last day of the
Plan Year and who have completed more than 750 Hours of Service
during the Plan Year;
(B) Eligible Employees employed by the Employer on the last day of the
Plan Year and who have completed more than 500 but less than 750
Hours of Service during the Plan Year;
(C) Eligible Employees employed by the Employer on the last day of the
Plan Year and who have completed 500 or fewer Hours of Service
during the Plan Year;
(D) Eligible Employees who have completed 750 or more Hours of Service
during the Plan Year;
(E) Eligible Employees who have completed more than 500 but less than
750 Hours of Service during the Plan Year.
In no event will Employees who have terminated employment with the
Employer during the Plan Year and who have completed 500 or fewer
Hours of Service during the Plan Year receive any allocation of
Employer Profit Sharing Contributions.
ARTICLE V
PERIOD OF PARTICIPATION
5.1 TERMINATION DATES. A Participant's Termination Date will be the date on
which his employment with the Employer is terminated because of the first
to occur of the following events:
(A) NORMAL RETIREMENT. The Participant retires from the employ of the
Employer upon attaining the Normal Retirement Date selected in the
Adoption Agreement. If the Employer enforces a mandatory retirement
age the Normal Retirement Date is the date the Participant attains
the lesser of that mandatory age or the age specified in the Adoption
Agreement.
(B) EARLY RETIREMENT. The Participant retires from the employ of the
Employer upon attaining the Early Retirement Date selected in the
Adoption Agreement. If a Participant terminates employment prior to
meeting any minimum age specified in the Adoption Agreement but after
having completed the specified minimum service requirement, the
terminated Participant shall be entitled to an early retirement
benefit upon attaining the minimum age required.
(C) LATE RETIREMENT. The Participant retires from the employ of the
Employer after the Normal Retirement Date. A Participant who
continues to work beyond the Normal Retirement Date shall continue
participation in the Plan on the same basis as the other
Participants.
(D) DISABILITY RETIREMENT. The Participant is terminated from the
employ of the Employer because of Disability, as determined by the
Committee, as defined in Section 1.1(I), irrespective of his age.
(E) DEATH. The Participant's death.
(F) OTHER TERMINATION. The Participant terminates employment before
Normal, Early, Late or Disability Retirement.
If a Participant continues in the employ of the Employer but no
longer is a member of a class of Employees to which the Plan has
been and continues to be extended by the Employer, the Participant's
Termination Date nevertheless will be as stated above and his or her
accounts will be held as stated in Section 5.2.
5.2 RESTRICTED PARTICIPATION. When distribution of part or all of the
benefits to which a Participant is entitled under the Plan is deferred
beyond or cannot be made until after the Participant's Termination Date,
or during any period that a Participant continues in the employ of the
Employer but no longer is a member of a class of Employees to which the
Plan has been and continues to be extended by the Employer, the
Participant, or in the event of his or her death such Participant's
Beneficiary, will be considered and treated as a Participant for all
purposes of the Plan, except that no share of contributions or forfeitures
will be credited to his or her Accounts (a) for any period such
Participant continues in the employ of the Employer but no longer is a
member of a class of Employees to which the Plan has been and continues to
be extended by the Employer, or (b) after the Participant's Termination
Date.
ARTICLE VI
ACCOUNTING
6.1 ACCOUNTS ESTABLISHED. There shall be established and maintained for each
Participant such accounts as are applicable, to reflect such Participant's
interest in each Investment Fund.
All income, expenses, gains and losses attributable to each account shall
be separately accounted for. The interest of each Participant in the
Trust Fund at any time shall consist of the amount credited to his or her
accounts as of the last preceding Valuation Date plus credits and minus
debits to such accounts since that date.
6.2 EMPLOYER CONTRIBUTIONS CONSIDERED MADE ON LAST DAY OF PLAN YEAR. Unless
otherwise elected in the Adoption Agreement, for purposes of this Article
VI, the Employer's Contribution under Article IV will be considered to
have been made on the last day of the Plan Year for which contributed.
6.3 ACCOUNTING STEPS. As of each Valuation Date, the Trustee shall:
(A) Charge to the prior account balances all previously uncharged
payments or distributions made from Participants' accounts since the
last preceding Valuation Date.
(B) Adjust the net credit balances in Participants' accounts upward or
downward, pro rata, so that the total of such net credit balances
will equal the then adjusted net worth of the Trust Fund;
(C) Allocate and credit Employer Contributions and any forfeitures (as
described in Section 7.3) that are to be allocated and credited as
of that date in accordance with Sections 6.5 and 6.6.
Notwithstanding the preceding, the Trustee shall be authorized to
utilize such other method of accounting for the gains or losses
experience by the Trust as may accurately reflect each Participant's
interest therein.
6.4 ALLOCATION OF EMPLOYER CONTRIBUTIONS.
(A) DISCRETIONARY PROFIT SHARING CONTRIBUTIONS.
(1) NONSTANDARDIZED PLANS. If the Plan is a nonstandardized Plan,
Employer Contributions for the Plan Year shall be allocated
among and credited to the Employer Contribution Accounts of
each Participant, including a Participant on leave of absence,
who is entitled to receive a contribution as elected by the
Employer in the Adoption Agreement, pursuant to the formula
elected by the Employer in Item B(8)(b) of the Adoption
Agreement If elected in the Adoption Agreement, Participants
whose employment terminated because of retirement, death or
disability before the end of the Plan Year will share in the
contributions for the year if elected in the Adoption
Agreement.
(2) STANDARDIZED PLANS. Employer Contributions for the Plan Year
shall be allocated among and credited to the Employer
Contribution Account of each Participant who either completes
more than 500 Hours of Service during the Plan Year (or such
lesser number of Hours of Service as may be specified in the
Adoption Agreement) or is employed on the last day of the Plan
Year pursuant to the formula elected by the Employer in Item
B(8)(b) of the Adoption Agreement. If elected in the Adoption
Agreement, Participants whose employment terminated before the
end of the Plan Year because of retirement, death or disability
will share in the contributions for the year if elected in the
Adoption Agreement.
(B) MONEY PURCHASE PENSION PLANS. Employer Contributions will be made
and allocated to the Employer Contribution Accounts of Participants
for the Plan Year as elected in the Adoption Agreement. Sections
6.4(A)(1) and (2) above also apply to the Money Purchase Pension
Plans.
(C) PAIRED PLANS. Notwithstanding anything in the Plan to the contrary,
if the Employer maintains two plans which are Paired Plans, only one
may contain an allocation, as elected in the Adoption Agreement,
utilizing permitted disparity as defined in Code Section 401(l).
6.5 ALLOCATION OF FORFEITURES. As elected in Items B(11) and/or C(6) of the
Adoption Agreement, as of the last day of the Plan Year, any forfeitures
which arose under the Plan during that year shall be used to: (i) pay the
expenses of the Plan; (ii) reduce Employer Contributions; or, (iii) be
allocated to Participants accounts, as may be selected in the Adoption
Agreement. Forfeitures under (iii) shall be allocated as provided in
Section 6.4.
6.6 LIMITATION ON ALLOCATIONS.
(A) DEFINITIONS: For purposes of limiting allocations pursuant to this
section, the following definitions shall apply:
(1) ANNUAL ADDITIONS: The sum of the following amounts credited to
a Participant's account for the Limitation Year:
(a) Employer Contributions;
(b) Employee Contributions;
(c) forfeitures;
(d) amounts allocated, after March 31, 1984, to an individual
medical account, as defined in Section 415 (l)(2) of the
Code, 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 Section 419A(d)(3) of the Code, under a welfare
benefit fund, as defined in Section 419(e) of the Code,
maintained by the Employer are treated as Annual
Additions to a defined contribution Plan; and,
(e) allocations under a simplified employee pension.
For this purpose, any Excess Amount applied under Sections
6.6(B)(4) or 6.6(C)(6) in the Limitation Year to reduce
Employer Contributions will be considered Annual Additions for
such Limitation Year.
(2) COMPENSATION: Compensation as described below, interpreted
consistently with the provisions of Code Section 414(s) and the
regulations issued thereunder, as may be selected by the
Employer, and uniformly applied for testing purpose:
(A) W-2 COMPENSATION (WAGES, TIPS, AND OTHER COMPENSATION
REQUIRED TO BE REPORTED UNDER SECTIONS 6041, 6051, AND 6052
OF THE CODE, AS REPORTED ON FORM W-2). Compensation is
defined as wages within the meaning of 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 Sections 6041(d),
6051(a)(3) and 6052 of the Code. Compensation must be
determined without regard to any rules under Section
3401(a) that limit the remuneration included in wages based
on the nature or location of the employment or the services
performed (such as the exception for agricultural labor in
Section 3401(a)(2).
(B) WITHHOLDING COMPENSATION (3401(A)). Compensation is
defined as wages within the meaning of 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 Section
3401(a)(2)).
(C) SECTION 415 SAFE-HARBOR COMPENSATION. Compensation is
defined as wages, salaries, and fees for professional
services and other amounts received (without regard to
whether or not an amount is paid in cash) for personal
services actually rendered in the course of employment
with the Employer maintaining the Plan to the extent that
the amounts are includible in gross income (including, but
not limited to, commissions paid salesman, 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 1.62-2(c)),
and excluding the following:
(i) Employer contributions to a Plan of deferred
compensation which are not includible in the
Employee's gross income for the taxable year in which
contributed, or Employer contributions under a
simplified employee pension Plan to the extent such
contributions are deductible by the Employee, or any
distributions from a Plan of deferred compensation;
(ii) amounts realized from the exercise of a
non-qualified stock option, or when restricted stock
(or property) held by an Employee becomes freely
transferable or is no longer subject to a substantial
risk of forfeiture;
(iii) amounts realized from the sale, exchange or
other disposition of stock acquired under a
qualified stock option; and
(iv) other amounts which received special tax benefits,
or contributions made by the Employer (whether or not
under a salary reduction agreement) towards the
purchase of an annuity contract described in Section
403(b) of the Code (whether or not the contributions
are actually excludable from the gross income of the
Employee).
Notwithstanding anything in the definitions of Compensation
preceding, at the discretion of the Employer, uniformly applied,
Compensation shall, for purposes of ADP and ACP testing as
provided for in Article III, include amounts not currently
includible in income pursuant to Code Sections 125, 402(a)(8),
402(h) and 403(b). For allocation purposes, such amounts shall
be includible as elected in the Adoption Agreement.
For any self-employed Individual, Compensation will mean Earned
Income.
For Limitation Years beginning after December 31, 1991, for
purposes of applying the limitations of Section 6.6,
Compensation for a Limitation Year is the compensation actually
paid or made available during such Limitation Year.
Notwithstanding the preceding sentence, Compensation for a
Participant in a defined contribution Plan who is permanently
and totally disabled (as defined in Section 22(e)(3) of the
Code) is the Compensation such Participant would have received
for the Limitation Year if the Participant had been paid at the
rate of Compensation paid immediately before becoming
permanently and totally disabled; such imputed compensation for
the disabled Participant may be taken into account only if the
Participant is not a Highly Compensated Employee, (as defined in
Section 414(q) of the Code), and contributions made on behalf of
such Participant are nonforfeitable when made.
(3) DEFINED BENEFIT FRACTION: 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 Sections 415(b) and (d) of the Code or
140 percent of the Participant's Highest Average Compensation,
including any adjustments under Section 415(b) of the Code.
Notwithstanding the above if the Participant was a participant
as of the first day of the first Limitation Year beginning after
December 31, 1986, in one or more defined benefit plans
maintained by the Employer which were in existence on May 6,
1986, the denominator of this fraction will not be less than 125
per cent of the sum of the annual benefits under such plans
which the Participant had accrued as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the Plan after May
5, 1986. The preceding sentence applies only if the defined
benefit plans individually and in the aggregate satisfied the
requirements of Section 415 for all Limitation Years beginning
before January 1, 1987.
(4) DEFINED CONTRIBUTION DOLLAR LIMITATION: For purposes of
calculating the Maximum Permissible Amount: $30,000 or, if
greater, one-fourth of the defined benefit dollar limitation
set forth in Section 415(b)(1) of the Code as in effect for the
Limitation Year.
(5) DEFINED CONTRIBUTION FRACTION: 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 Section 419(e) of the Code, individual medical accounts, as
defined in Section 415(l)(2) of the Code, and simplified
employee pension, 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 Sections
415(b) and (d) of the Code in effect under Section 415(c)(1)(A)
of the Code 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.
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all Employee
contributions as Annual Additions.
(6) EMPLOYER: For purposes of this Section 6.6: the Employer that
adopts this Plan, and all members of a controlled group of
corporations (as defined in section 414(b) of the Code as
modified by Section 415(h), all commonly controlled trades or
businesses (as defined in Section 414(c) as modified by Section
415(h)) or affiliated service groups (as defined in 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 Section 414(o) of the Code.
(7) EXCESS AMOUNT: The excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible
Amount.
(8) HIGHEST AVERAGE COMPENSATION: For purposes of calculating the
Defined Benefit Fraction, the average compensation for the
three (3) consecutive Years of Service with the Employer that
produces the highest average. A Year of Service with the
Employer is the twelve-consecutive month period defined in Item
B(4)(j) of the Adoption Agreement.
(9) LIMITATION YEAR: A calendar year or any other 12 consecutive
month period elected in Item B(4)(d) 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.
(10) MASTER OR PROTOTYPE PLAN: A Plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue
Service.
(11) MAXIMUM PERMISSIBLE AMOUNT: The maximum Annual Addition that
may be contributed or allocated to a Participant's account
under the Plan for any Limitation Year shall not exceed the
lesser of:
(a) the Defined Contribution Dollar Limitation, or
(b) 25 percent of the Participant's Compensation for the
Limitation Year.
The Compensation limitation referred to in (b) shall not
apply to any contribution for medical benefits (within the
meaning of Section 401(h) or Section 419A(f)(2) of the
Code) which is otherwise treated as an Annual Addition
under Section 415(l)(1) or 419A(d)(2) of the Code.
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
(12) PROJECTED ANNUAL BENEFIT: For purposes of calculating the
Defined Benefit Fraction: 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 Date 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.
(B) ANNUAL ADDITION LIMITATIONS:
(1) If the Participant does not participate in, and has never
participated in another qualified Plan or welfare benefit fund,
as defined in Section 419(e) of the Code maintained by the
Employer, or an individual medical account, as defined in
Section 415(l)(2) of the Code, maintained by the Employer, or a
simplified employee pension, as defined in Section 408(K) of
the Code, maintained by the Employer which provides an Annual
Addition as defined in Section 6.6(E), 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 Contribution 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.
(2) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant on the basis of a
reasonable estimation of the Participant's Compensation for the
Limitation Year, uniformly determined for all Participants
similarly situated.
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the
Participant's actual Compensation for the Limitation Year.
(4) If pursuant to Section 6.6(B)(3) or as result of the allocation
of forfeitures, there is an Excess Amount, the excess will be
disposed of as follows:
(a) Any nondeductible voluntary employee contributions, to the
extent they would reduce the Excess Amount, will be
returned to the Participant.
(b) If after the application of paragraph (a) an Excess Amount
still exists and the Participant is covered by the Plan at
the end of the Limitation Year, the Excess Amount in the
Participant's account will be used to reduce Employer
Contributions (including any allocation of forfeitures)
for such Participant in the next Limitation year, and each
succeeding Limitation Year, if necessary.
(c) If after the application of paragraph (a) an Excess Amount
still exists, and the Participant is not covered by the
Plan at the end of a Limitation Year, the Excess Amount
will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer
Contributions (including allocation of any forfeitures)
for all remaining Participants in the next Limitation Year
and each succeeding Limitation Year, if necessary.
(d) If a suspense account is in existence at any time during a
Limitation Year pursuant to this Section 6.6(A), it will
not participate in the allocation of the trust's
investment gains and losses. If a suspense account is in
existence at any time during a particular Limitation Year,
all amounts in the suspense account must be allocated and
reallocated to Participants' accounts before any Employer
Contributions or any Employee contributions may be made to
the Plan for that Limitation Year. Excess Amounts may not
be distributed to Participants or former Participants.
(C) MULTIPLE PLAN LIMITATION.
(1) This Section 6.6(C) applies if, in addition to this Plan, the
Participant is covered under another qualified Master or
Prototype defined contribution Plan maintained by the Employer,
a welfare benefit fund, as defined in Section 419(e) of the
Code maintained by the Employer, or an individual medical
account, as defined in Section 415(l)(2) of the Code,
maintained by the Employer, or a simplified employee pension
maintained by the employer which provides an Annual Addition as
defined in Section 6.6(A) during any Limitation Year. The
Annual Additions which may be credited to a Participant's
accounts under this Plan for any such Limitation Year shall not
exceed the Maximum Permissible Amount reduced by the Annual
Additions credited to a Participant's accounts under the other
qualified master and prototype defined contribution plans,
welfare benefit funds, individual medical accounts, and
simplified employee pensions for the same Limitation Year. If
the Annual Additions with respect to the Participant under
other qualified master and prototype defined contribution plans
and welfare benefit funds, individual medical accounts, and
simplified employee pension, maintained by the Employer are
less than the Maximum Permissible Amount and the contributions
that would otherwise be contributed or allocated to the
Participant's Employer Contribution 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, in the
aggregate are equal to or greater than the Maximum Permissible
Amount, no amount will be contributed or allocated to the
Participant's Employer Contribution Account under this Plan for
the Limitation Year.
(2) Prior to determining the Participant's actual Compensation for
the Limitation Year, the Employer may determine the Maximum
Permissible Amount for a Participant in the manner described in
Section 6.6(B)(2).
(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for the
Limitation Year will be determined on the basis of the
Participant's actual Compensation for the Limitation Year.
(4) If, pursuant to Section 6.6(C)(3) or as a result of the
allocation of forfeitures, a Participant's Annual Additions
under this Plan and all other plans result in an Excess Amount
for a Limitation Year, the Excess Amount shall be deemed to
consist of the amounts last allocated, except that Annual
Additions attributable to a simplified employee pension 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.
(5) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another Plan, the Excess Amount attributed to this Plan
will be the product of:
(a) the total Excess Amount allocated as of such date, times
(b) 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 other qualified Master or Prototype
defined contribution plans.
(6) Any Excess Amount attributed to this Plan should be disposed of
as provided in Section 6.6(C)(4).
(D) 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 accounts under this Plan for any Limitation Year will
be limited in accordance with Section 6.6(C) (1-6) as though the
Plan were a Master or Prototype Plan unless the Employer provides
other limitations in Item B(12) of the Adoption Agreement.
(E) 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 accounts under this Plan for any Limitation Year will
be limited in accordance with Item B(12) of the Adoption Agreement.
6.7 REPORTS TO PARTICIPANTS. The Committee shall cause reports to be made at
least annually to each Participant and to the Beneficiary of each
deceased Participant as to the value of each such Participant's accounts,
as of an appropriate preceding Valuation Date.
ARTICLE VII
PAYMENT OF ACCOUNT BALANCES
7.1 TERMINATION OF EMPLOYMENT UPON DISABILITY OR DEATH. A Participant shall
become fully vested in his or her Employer Contribution Accounts if the
Participant becomes Disabled under Sections 5.1(A), (B), (C) or (D) or
dies while still employed. The accounts of a Participant who retires
becomes Disabled or dies will become distributable to the Participant or
to his or her Spouse or Beneficiary. If distributed immediately, subject
to Section 7.4, the distributable balance, after adjustments, will be
determined as soon as practicable following the receipt by the Trustee of
written notice of the Participant's termination from the Committee.
7.2 TIMING FOR DETERMINING ACCOUNT BALANCE UPON TERMINATION OF EMPLOYMENT
PRIOR TO RETIREMENT, DISABILITY OR DEATH. If a Participant terminates
employment with the Employer before retirement under Sections 5.1(F) the
vested portion of the Participant's Employer Contribution Account and/or
Matching Account shall be determined and such Participant's accounts will
be distributable to the Participant. If distributed immediately, subject
to Section 7.4, the distributable balance, after adjustments, will be
determined as soon as practicable following receipt by the Trustee of
written notice of the Participant's termination from the Committee. The
account balance shall be distributable at such time as elected in the
Adoption Agreement, but in no event shall an account balance not be
distributable later than the Participant's Normal Retirement Date.
7.3 VESTING ON DISTRIBUTION BEFORE BREAK-IN-SERVICE; CASH-OUTS.
(A) If an Employee terminates service, and the value of the Employee's
vested account balance derived from Employer and Employee
contributions is not greater than $3,500, the Employee will receive
a distribution of the value of the entire vested portion of such
account balances, and Rollover Account balance, if any. The
nonvested portion will be treated as a forfeiture. For purposes of
this Section 7.3, if the value of an Employee's vested account
balance is zero, the Employee shall be deemed to have received a
distribution of such vested account balance. A Participant's vested
account balance shall not include accumulated deductible employee
contributions within the meaning of Section 72(o)(5)(B) of the Code
for Plan Years beginning prior to January 1, 1989.
(B) If an Employee terminates service, and elects, in accordance with
the requirements of Section 7.4, to receive the value of the
Employee's vested account balance, the nonvested portion will be
treated as a forfeiture. If the Employee elects to have distributed
less than the entire vested portion of the balance in the Employer
Contribution Account, the part of the nonvested portion that will be
treated as a forfeiture is the total nonvested portion multiplied by
a fraction, the numerator of which is the amount of the distribution
attributable to Employer Contributions and the denominator of which
is the total value of the vested balance in the Employer
Contribution Account.
(C) If an Employee receives a distribution pursuant to this Section 7.3
and the Employee resumes employment covered under this Plan, the
Employee's Employer Contribution Account and/or Matching Account
balance will be restored to the amount on the date of distribution
if the Employee repays to the Plan the full amount of the
distribution attributable to Employer contributions before the
earlier of 5 years after the first date on which the Participant is
subsequently reemployed by the Employer, or the date the Participant
incurs five (5) consecutive one (1) year Breaks in Service following
the date of the distribution. If an Employee is deemed to receive a
distribution pursuant to this Section 7.3, and the Employee resumes
employment covered under this Plan before the date the Participant
incurs five (5) consecutive one (1) year Breaks in Service, upon the
reemployment of such Employee, the Employer Contribution Account
balance and/or Matching Account balance of the Employee will be
restored to the amount on the date of such deemed distribution.
7.4 RESTRICTIONS ON IMMEDIATE DISTRIBUTIONS.
(A) If the value of a Participant's vested account balance derived from
Employer and Employee contributions exceeds (or at the time of any
prior distribution exceeded) $3,500, and the account balance is
immediately distributable, the Participant and the Participant's
Spouse (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 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. The Committee shall notify the Participant and the
Participant's Spouse of the right to defer any distribution until the
Participant's account balance is no longer immediately distributable.
Such notification shall include a general description of the material
features, and an explanation of the relative values of, the optional
forms of benefit available under the Plan in a manner that would
satisfy the notice requirements of 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. However, distribution may commence less than
30 days after the notice described in the preceding sentence is
given, provided the distribution is one to which sections 401(a)(11)
and 417 of the Internal Revenue Code do not apply, 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 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 7.10 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 Section 401(a)(9)
or Section 415 of the Code. 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 Section 4975(e)(7) of the Code), 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 Section 4975(e)(7) of the Code) 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.
An account balance is 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 the Normal Retirement Date or age 62.
(B) 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 accumulated deductible employee contributions within
the meaning of Section 72(o)(5)(B) of the Code.
7.5 COMMENCEMENT OF BENEFITS. Unless the Participant elects otherwise,
payments will be made or commence to a Participant by the Trustee, as
directed by the Committee, no later than the sixtieth (60th) day after
the latest of the close of the Plan Year in which (1) the Participant
attains age sixty-five (65) (or Normal Retirement Date; if earlier); (2)
occurs the tenth (10th) anniversary of the year in which the Participant
commenced participation in the Plan; or (3) the Participant terminates
his or her service with the Employer.
Notwithstanding the foregoing, the failure of a Participant and Spouse to
consent to a distribution while a benefit is immediately distributable,
within the meaning of Section 7.4 of the Plan, shall be deemed to be an
election to defer commencement of payment of any benefit sufficient to
satisfy this section.
7.6 TIMING AND MODES OF DISTRIBUTION.
(A) GENERAL RULES.
(1) Subject to Section 7.10, Joint and Survivor Annuity
Requirements, the requirements of this Section 7.6 shall apply
to any distribution of a Participant's interest and will take
precedence over any inconsistent provisions of this Plan.
Unless otherwise specified, the provisions of this Section 7.6
apply to calendar years beginning after December 31, 1984.
(2) All distributions required under this Section 7.6 shall be
determined and made in accordance with the Income Tax
Regulations under Section 401(a)(9), including the minimum
distribution incidental benefit requirement of Section
1.401(a)(9)-2 of the regulations.
(3) The normal form of payment for a profit- sharing Plan
satisfying the requirements of Section 7.10(F) hereof shall be
a single sum with no option for annuity payments; provided,
however, that distributions may be made:
(a) In installment payments, if the Employer has elected
installment payments in Item B(10)(a) of the Adoption
Agreement;
(b) Through such other form of benefit as may be identified in
Item B(10)(a) of the Adoption Agreement, which shall be
available to Participants as an optional form of benefit
payment, and shall preclude Employer discretion;
(c) Through such other form of benefits as may be required to
be protected as Section 411(d)(6) protected benefits.
(B) REQUIRED BEGINNING DATE. The entire interest of a Participant 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 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) INDIVIDUAL ACCOUNT.
(a) If a Participant's benefit is to be distributed over:
(i) a period not extending beyond the life expectancy of
the participant or the joint life and last survivor
expectancy of the Participant and the Participant's
designated Beneficiary; or
(ii) a period not extending beyond the life expectancy of
the designated Beneficiary, the amount required to be
distributed for each calendar year, beginning with
distributions for the first distribution calendar
year, must at least equal the quotient obtained by
dividing the Participant's benefit by the applicable
life expectancy.
(b) 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.
(c) 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 Q&A-4 of
Section 1.401(a)(9)-2 of the Income Tax Regulations.
Distributions after the death of the Participant shall be
distributed using the applicable life expectancy in Section
(1)(a) above as the relevant divisor without regard to
Regulations Section 1.401(a)(9)-2.
(d) 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.
(2) 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 Section 401(a)(9) of the Code and the
regulations thereunder.
(E) DEATH DISTRIBUTION PROVISIONS
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant dies
after distribution of his or her interest has begun, the
remaining portion of such interest will continue to be
distributed at least as rapidly as under the method of
distribution being used prior to the Participant's death.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant dies
before distribution of his or her interest begins, distribution
of the Participant's entire 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 (a) or (b) below:
(a) if any portion of the Participant's interest is payable to
a designated Beneficiary, distributions may be made over
the life or over a period certain not greater than the
life expectancy of the designated Beneficiary commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Participant died;
(b) if the designated Beneficiary is the Participant's
surviving Spouse, the date distributions are required to
begin in accordance with (a) above shall not be earlier
than the later of (1) December 31 of the calendar year
immediately following the calendar year in which the
Participant died and (2) 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 7.6(E)(2) 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 in which contains the
fifth anniversary of the date of death of the
Participant. If the Participant has no designated
Beneficiary, or if the designated Beneficiary does not
elect a method of distribution, distribution of the
Participant's entire interest must be completed by
December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
(3) SURVIVING SPOUSE'S DEATH. For purposes of Section (E)(2)
above, if the surviving Spouse dies after the Participant, but
before payments to such Spouse begin, the provisions of Section
(E)(2) with the exception of paragraph (b) therein, shall be
applied as if the surviving Spouse were the Participant.
(4) MINOR BENEFICIARY. For purposes of this Section (E), any
amount paid to a child of the Participant will be treated as if
it had been paid to the surviving Spouse if the amount becomes
payable to the surviving Spouse when the child reaches the age
of majority.
(5) DISTRIBUTION CONSIDERED TO BEGIN ON REQUIRED BEGINNING DATE.
For the purposes of this Section (E), distribution of a
Participant's interest is considered to begin on the
Participant's required beginning date (or, if Section (E)(3)
above is applicable, the date distribution is required to begin
to the surviving Spouse pursuant to Section (E)(2) above). 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.
(F) DEFINITIONS.
(1) APPLICABLE LIFE EXPECTANCY: The life expectancy (or joint and
last survivor expectancy) calculated using the attained age of
the Participant (or designated Beneficiary) as of the
Participant's (or designated Beneficiary's) birthday in the
applicable calendar year reduced by one for each calendar year
which has elapsed since the date life expectancy was first
calculated. If life expectancy is being recalculated, the
applicable life expectancy shall be the life expectancy as so
recalculated. The applicable calendar year shall be the first
distribution calendar year, and if life expectancy is being
recalculated such succeeding calendar year.
(2) DESIGNATED BENEFICIARY: The individual who is designated as
the Beneficiary under the Plan in accordance with Section
401(a)(9) and the proposed regulations thereunder.
(3) DISTRIBUTION CALENDAR YEAR: A calendar year for which a
minimum distribution is required. For distributions beginning
before the Participant's death, the first distribution calendar
year is the calendar year immediately preceding the calendar
year which contains the Participant's required beginning date.
For distributions beginning after the Participant's death, the
first distribution calendar year is the calendar year in which
distributions are required to begin pursuant to Section (E)
above.
(4) LIFE EXPECTANCY: Life expectancy and joint and last survivor
expectancy are computed by use of the expected return multiples
in Tables 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 (E)(2)(b) above) 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.
(5) PARTICIPANT'S BENEFIT:
(a) The account balance as of the last valuation date in the
calendar year immediately preceding the distribution
calendar year (valuation calendar year) increased by the
amount of any contributions or forfeitures allocated to
the account balance 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.
(b) Exception for second distribution calendar year. For
purposes of paragraph (a) 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.
(6) REQUIRED BEGINNING DATE:
(A) GENERAL RULE. The 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.
(B) 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 (1) or (2)
below:
(i) 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.
(ii) 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:
(a) the calendar year in which the participant
attains age 70- 1/2, or
(b) the earlier of the calendar year with or within
which ends the Plan Year in which the
Participant becomes a 5- percent owner, or the
calendar year in which the Participant retires.
The required beginning date of a Participant who is not a
5-percent owner who attains age 70-1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1, 1990.
(C) 5-PERCENT OWNER. A Participant is treated as a 5-percent
owner for purposes of this Section if such Participant is
a 5-percent owner as defined in Section 416(i) of the Code
(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 owner attains age 66-1/2 or any
subsequent Plan Year.
(d) 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
subsequent year.
(G) TRANSITIONAL RULE.
(1) DISTRIBUTIONS TO 5-PERCENT OWNERS. Notwithstanding the other
requirements of this Section 7.6 and subject to the
requirements of Section 7.10, Joint and Survivor Annuity
Requirements, distributions 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):
(a) The distribution by the plan is one which would not have
disqualified such plan under Section 401(a)(9) of the
Internal Revenue Code as in effect prior to amendment by
the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of
distribution designated by the Employee whose interest in
the plan is being distributed or, if the Employee is
deceased, by a Beneficiary of such Employee.
(c) Such designation was in writing, was signed by the
Employee or the Beneficiary, and was made before January
1, 1984.
(d) The Employee had accrued a benefit under the Plan as of
December 31, 1983.
(e) 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.
(2) DISTRIBUTION ON DEATH. A distribution upon death will not be
covered by this transitional rule unless the information in the
designation contains the required information described above
with respect to the distributions to be made upon the death of
the Employee.
(3) DESIGNATION OF DISTRIBUTION METHOD. For any distribution which
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 (G)(1)(a) and (e).
(4) REVOCATION OF DESIGNATIONS. If a designation is revoked any
subsequent distribution must satisfy the requirements of
Section 401(a)(9) of the Code and the regulations thereunder.
If a designation is revoked subsequent to the date
distributions are required to begin, the plan must distribute
by the end of the calendar year following the calendar year in
which the revocation occurs the total amount not yet
distributed which would have been required to have been
distributed to satisfy Section 401(a)(9) of the Code and the
regulations thereunder, but for the Section 242(b)(2) election.
For calendar years beginning after December 31, 1988, such
distributions must meet the minimum distribution incidental
benefit requirements in Section 1.401(a)(9)-2 of the Income Tax
Regulations. Any changes in the designation will be considered
to be a revocation of the designation. However, the mere
substitution or addition of another Beneficiary (one not named
in the designation) under the designation will not be
considered to be a revocation of the designation, so long as
such substitution or addition does not alter the period over
which distributions are to be made under the designation,
directly or indirectly (for example, by altering the relevant
measuring life). In the case in which an amount is transferred
or rolled over from one Plan to another Plan, the rules in Q&A
J-2 and Q&A J-3 shall apply.
7.7 DESIGNATION OF BENEFICIARY.
(A) DEFAULT BENEFICIARY. In the case of a Participant who is married,
the Participant's Beneficiary shall be the Participant's Spouse, but
if the Participant's Spouse consents as provided in this Section
7.7, or if the Participant is not married, then the Participant
shall have the right to designate that after such Participant's
death such Participant's accounts shall be distributed to a
designated Beneficiary or Beneficiaries.
(B) SPOUSAL CONSENT. Any consent of a spouse given pursuant to this
Section must be in writing and given prior to the death of the
Participant. Such consent must acknowledge the effect of the
Participant's Beneficiary designation, the identity of any
non-Spouse Beneficiary, including any class of Beneficiaries and
contingent Beneficiaries, and the consent must be witnessed by a
Plan representative or a Notary Public. The Participant may not
subsequently change the designation of his or her Beneficiary unless
his Spouse consents to the new designation in accordance with the
requirements set forth in the preceding sentence. The consent of a
Participant's Spouse shall not be required if the Participant
establishes to the satisfaction of the Committee that consent may
not be obtained because there is no Spouse, the Spouse cannot be
located or because of such other circumstances as the Secretary of
the Treasury may prescribe by regulations. A Spouse's consent shall
be irrevocable. Any consent by a Spouse, or establishment that the
consent of the Spouse may not be obtained, shall be effective only
with respect to that Spouse.
(C) CHANGING BENEFICIARIES. Subject to Subparagraphs (A) and (B) above,
the Participant's designation of Beneficiary may be made, changed or
revoked by the Participant at any time by a written instrument, in
form satisfactory to the Committee, and shall become effective only
when executed by such Participant (and, if applicable, consented to
by the Participant's Spouse as set forth in Section 7.7(B)) and
filed with the Committee prior to such Participant's death. If all
of the Beneficiaries named in such designation shall have
predeceased such Participant, or die prior to complete distribution
of the Participant's accounts, or if such Participant fails to
execute and file a designation and is not survived by a Spouse the
payment of such Participant's accounts shall be made pursuant to the
Plan and to such Beneficiaries as required by state law. Neither the
Employer, the Committee, nor the Trustee, shall have any duty to see
that such Participant, any Spouse or any Beneficiary executes and
files any such designation with the Committee.
7.8 OPTIONAL FORMS OF BENEFIT. The optional forms of benefit provided by
this Plan are not subject to Employer discretion and are made available
to all Participants on a nondiscriminatory basis. The optional forms of
benefit are described in Articles III and VII, as may be selected in the
Adoption Agreement. If selected in Item B(13) of the Adoption Agreement,
the Employer may attach to the Plan a list of the Section "411(d)(6)
protected benefits" that must be preserved from a individually designed
Plan or other prototype Plan which this Plan amends.
7.9 DISTRIBUTION UPON DISABILITY. In the event of the Disability of the
Participant, the Trustee, following receipt of notification of such
Disability from the Committee, shall make distributions from the Account.
7.10 JOINT AND SURVIVOR ANNUITY REQUIREMENTS.
(A) APPLICATION. The provisions of this Section 7.10 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 7.10(G).
(B) QUALIFIED JOINT AND SURVIVOR ANNUITY. Unless an optional form of
benefit is selected pursuant to a Qualified Election within the
ninety-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.
(C) QUALIFIED PRE-RETIREMENT 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 the Participant's Vested Account Balance shall be
applied toward the purchase of an annuity for the life of the
surviving Spouse. The surviving Spouse may elect to have such
annuity distributed within a reasonable period after the
Participant's death.
(D) DEFINITIONS.
(1) ELECTION PERIOD: 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 age 35 is attained, with respect to the 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 7.10(E).
Qualified Preretirement Survivor Annuity 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 7.10.
(2) EARLIEST RETIREMENT AGE: The earliest date on which, under the
Plan, the Participant could elect to receive retirement
benefits.
(3) QUALIFIED ELECTION: 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.
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 Paragraph (E) below.
(4) QUALIFIED JOINT AND SURVIVOR ANNUITY: 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%.
(5) SPOUSE (SURVIVING SPOUSE): the Spouse or surviving Spouse of
the Participant, provided that a former Spouse will be treated
as the Spouse or surviving Spouse and the current Spouse will
not be treated as the Spouse or surviving Spouse to the extent
provided under a qualified domestic relations order as
described in Section 414(p) of the Code.
(6) ANNUITY STARTING DATE: The first day of the first period for
which an amount is payable as an annuity or any other form.
(7) VESTED ACCOUNT BALANCE: The aggregate value of the
Participant's vested account balances derived from Employer and
Employee contributions (including rollovers), whether vested
before or upon death. The provisions of this Section 7.10
shall apply to a Participant who is vested in amounts
attributable to Employer contributions, Employee contributions
(or both) at the time of death or distribution.
(E) NOTICE REQUIREMENTS.
(1) QUALIFIED JOINT AND SURVIVOR ANNUITY. In the case of a
Qualified Joint and Survivor Annuity as described in Section
7.10(B), the Committee shall no less than 30 days and no more
than 90 days prior to the Annuity Starting Date provide each
Participant 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.
(2) QUALIFIED PRE-RETIREMENT SURVIVOR ANNUITY. In the case of a
Qualified Pre-Retirement Survivor Annuity as described in
Section 7.10(C), the Committee shall provide each Participant
within the applicable period for such Participant a written
explanation of the Qualified Pre-Retirement Survivor Annuity in
such terms and in such manner as would be comparable to the
explanation provided for meeting the requirements of Section
7.10(E) applicable to a Qualified Joint and Survivor Annuity.
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 preceding the Plan Year in which the
Participant attains age thirty-two (32) and ending with the
close of the Plan Year in which the Participant attains age
thirty-five (35); (ii) a reasonable period ending after the
individual becomes a Participant; (iii) a reasonable period
ending after Section 7.10(E)(3) ceases to apply to the
Participant; and (iv) a reasonable period ending after Section
7.10 first applies to the Participant. Notwithstanding the
foregoing, notice must be provided within a reasonable period
ending after separation from service in the case of a
Participant who separates from service before attaining age
thirty-five (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 age 35 is
attained, notice shall be provided within the two-year period
beginning one-year prior to separation and ending one year after
separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for such
participant shall be redetermined.
(3) SUBSIDIZED ANNUITY DISTRIBUTIONS. Notwithstanding the other
requirements of this Section 7.10(E), the respective notices
prescribed by this Section 7.10(E) need not be given to a
Participant if (1) the Plan "fully subsidizes" the cost of a
Qualified Joint and Survivor Annuity or Qualified Pre-
Retirement 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 non-Spouse Beneficiary. For
purposes of this Section 7.10(E), a Plan fully subsidizes the
cost 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.
(F) SAFE HARBOR RULES.
(1) APPLICATION. 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 deductible employee contributions, as defined in
Section 72(o)(5)(B) of the Code, and maintained on behalf of a
Participant in a money purchase pension Plan, (including a
target benefit Plan) if the following conditions are satisfied:
(1) the Participant does not or cannot elect payments in the
form of a life annuity, and (2) on the death of the 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 already consented in a
manner conforming to a Qualified Election, then to the
Participant's designated Beneficiary. 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.
This Section 7.10(F) 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
which is subject to the survivor annuity requirements of Section
401(a)(11) and Section 417 of the Code. If this Section 7.10(F)
is operative, then the provisions of this Section 7.10, other
than in Section 7.10(G), shall be inoperative.
(2) WAIVER. The Participant may waive the spousal death benefit
described in this section at any time provided that no such
waiver shall be effective unless it satisfies the conditions of
Section 7.10(D)(3) (other than the notification requirement
referred to therein) that would apply to the Participant's
waiver of the Qualified Preretirement Survivor Annuity.
(3) VESTED ACCOUNT BALANCE. For purposes of this Section 7.10(F),
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 deductible employee contributions within the
meaning of Section 72(o)(5) (B) of the Code. In the case of a
profit-sharing Plan, vested account balance shall have the same
meaning as provided in Section 7.10(D)(7).
(G) TRANSITIONAL RULES.
(1) 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 7.10 must be given the
opportunity to elect to have the prior sections of this Section
7.10 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 ten (10) years of vesting service when
he or she separated from service.
(2) Any living Participant not receiving benefits on August 23,
1984 who was credited with at least one Hour of Service under
this Plan or predecessor Plan on or after September 2, 1974,
and who is not otherwise credited with any service in a Plan
Year beginning on or after January 1, 1976 must be given the
opportunity to have his or her benefits paid in accordance with
Section 7.10(G)(4).
(3) The respective opportunities to elect (as described in Section
7.10(G)(1) and (2) 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
these Participants.
(4) Any Participant who has elected pursuant to Section 7.10(G)(2)
and any Participant who does not elect under Section 7.10(G)(1)
or who meets the requirements of Section 7.10(G)(1) except that
such Participant does not have at least ten (10) years of
vesting service when he or she separates from service, shall
have his or her benefits distributed in accordance with all of
the following requirements of benefits would have been payable
in the form of a life annuity:
a) Automatic joint and survivor annuity. If benefits in the
form of a life annuity become payable to a married
participant who:
(i) begins to receive payments under the Plan on or after
Normal Retirement Date; or
(ii) dies on or after Normal Retirement Date while still
working for the Employer; or
(iii) begins to receive payments on or after the
Qualified Early Retirement Age; or
(iv) separates from service on or after attaining Normal
Retirement Date (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.
b) Election of early survivor annuity. A Participant who is
employed after attaining the Qualified Early Retirement
Age will be given the opportunity to elect, during the
election period, to have a survivor annuity payable on
death. If the Participant elects the survivor annuity,
payments under such annuity must not be less than the
payments which would have been made to the Spouse under
the 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.
c) For purposes of this Section 7.10(G)(4):
(i) 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
Date, or (iii) the date the Participant begins
participation.
(ii) 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 7.10(D)(4).
(H) NONTRANSFERABILITY. Any annuity distributed from the Plan must be
nontransferable.
(I) INCORPORATION OF TERMS. 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.
7.11 DISTRIBUTIONS TO QUALIFIED PLANS. In the event a former Employee whose
accounts have not been fully distributed becomes an active participant in
a Plan qualified under Section 401(a) of the Code, the Committee may
direct the Trustee to transfer the amount in such Participant's
account(s) to any such Plan provided the Plan to receive such transfers
authorizes accepting the transfer, provides that assets transferred shall
be held in a separate account and requires that the assets transferred
shall not be subject to any forfeiture provisions.
7.12 PROFIT SHARING PLANS AND 401(K) PROFIT SHARING PLANS ONLY - WITHDRAWAL OF
EMPLOYER CONTRIBUTIONS. Subject to the provisions of the Plan, in
accordance with rules for giving notice as determined by the Committee,
and as elected in the Adoption Agreement, a Participant may withdraw as
of the first Accounting Date subsequent to receipt by the Committee of
such notice:
(A) An amount equal to not more than 100% of the Participant's Employer
Contribution Account determined as of such Accounting Date. No
Participant who has made any withdrawal of Employer Contributions in
the twelve (12) months preceding the giving of such notice may make
a withdrawal under this Section.
(B) Notwithstanding anything to the contrary in this Section 7.12, any
withdrawal made pursuant to Section 7.12(A) shall be for a minimum
whole dollar amount not less than Five Hundred Dollars ($500.00);
except that if the amount available for withdrawal is less than Five
Hundred Dollars ($500.00) then the minimum amount of the withdrawal
shall be the amount available.
(C) No forfeitures will occur solely as a result of an Employee's
withdrawal of Employer Contributions.
(D) Notwithstanding anything to the contrary in this Section 7.12, a
Participant may not make a withdrawal, pursuant to this Section of
any portion of the Participant's vested interest which has been
assigned to secure repayment of a loan in accordance with Section
10.10, below, until such time as the Committee shall have released
said portion so assigned.
7.13. PROHIBITION AGAINST ALIENATION.
(A) Except as provided in Sections 401(a)(13) and 414(p) of the Code, no
benefit or interest available under this Plan will be subject to
assignment or alienation, either voluntarily or involuntarily.
(B) The preceding sentence 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 the
Committee determines that such order is a qualified domestic
relations order, as defined in Section 414(p) of the Code, or any
domestic relations order entered before January 1, 1985.
(C) All rights and benefits, including elections, provided to a
Participant in this Plan shall be subject to the rights afforded to
any "alternate payee" under a "qualified domestic relations order."
Furthermore, an immediate distribution to an "alternate payee" shall
be permitted if such distribution is authorized by a "qualified
domestic relations order," even if the affected Participant has not
reached the "earliest retirement age" under the Plan, provided that
in no event will any such distribution accelerate the repayment of
any loan made to the affected Participant under the Plan, unless
such Participant consents thereto in writing. For purposes of this
Section 7.13, "alternate payee," "qualified domestic relations
order" and "earliest retirement age" shall have the meaning set
forth under Code Section 414(p), unless a Qualified Distribution
Date has been selected in the Adoption Agreement, in which case the
earliest retirement age shall be the date on which the domestic
relations order is determined to be qualified.
7.14 MISSING PARTICIPANT OR BENEFICIARY. Each Participant and/or each
Beneficiary must file with the Committee from time to time in writing his
or her post office address and each change of post office address. Any
communication, statement or notice addressed to a Participant and/or
Beneficiary at such last post office address filed with the Committee or
if no address is filed with the Committee then at the last post office
address as shown on the Employer's records, will be binding on the
Participant and/or Beneficiary for all purposes of the Plan. Neither the
Committee nor the Trustee shall be required to search for or locate a
Participant or Beneficiary.
Any other provision of the Plan to the contrary notwithstanding, if any
application for a benefit has not been filed by a Participant otherwise
eligible therefor within ninety (90) days after the Plan Year in which
occurred his or her termination date, the Committee shall mail to such
Participant and/or Beneficiary at his or her last known address an
application for benefit and a reminder that he or she is eligible for such
benefit. If such application is not filed with the Committee in accordance
with the provisions of the Plan within ninety (90) days after it is so
mailed to such Participant or his or her termination date, whichever is
later, the benefit shall be forfeited and shall be used to reduce future
Employer Contributions as though the Participant were not vested in his or
her accounts as of the end of said ninety (90) day period. Upon the
subsequent filing of an application therefor by the Participant and/or his
Beneficiary, such accounts shall be immediately reinstated pursuant to
this provision as though the Participant were 100% vested in his or her
accounts in an amount equal to the cash value of the accounts on the date
forfeited. To the extent forfeited amounts are not available, the Employer
shall contribute the amount required to reinstate the Participant's
account balance.
7.15 LIMITATION ON CERTAIN DISTRIBUTIONS. Notwithstanding anything contained
herein to the contrary, the Trustee may, in its discretion, delay
satisfying requests for distributions for up to one year where
distributions require amounts to be withdrawn from the Guaranteed
Investment Contract Fund; provided, however, that in no event shall the
Trustee delay distributions to a Participant beyond the legally required
time for distribution as set forth in Section 7.5.
7.16 FORM OF DISTRIBUTIONS AND WITHDRAWALS. The Trustee shall make all
distributions and withdrawals under the Plan, including Hardship
withdrawals, other withdrawals while the Participant is still employed,
and distributions upon retirement, disability, death and separation from
service, pro rata, from all accounts and Investment Funds, as follows:
(A) In a Plan with no Employer Stock Fund, all withdrawals and
distributions under the Plan shall be made in cash.
(B) In a Plan with an Employer Stock Fund:
(1) Withdrawals and distributions under the Plan from the other
Investment Fund(s) shall be made in cash.
(2) Withdrawals and distributions under the Plan from the Employer
Stock Fund may be made in cash or in full shares of Employer
Stock, with any fractional share paid in cash, as elected by
the Participant. For the cash portion of any distribution or
withdrawal, the Participant will receive the cash proceeds from
the sale of shares of Employer Stock as of the sale date.
ARTICLE VIII
DIRECT ROLLOVERS
8.1 GENERAL. This Article 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 Article, a
distributee may elect, at the time and in the manner prescribed by the
Plan administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement Plan specified by
the distributee in a direct rollover.
8.2 DEFINITIONS.
(A) ELIGIBLE ROLLOVER DISTRIBUTION: An eligible rollover distribution
is 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 section 401(a)(9) of the
Code; and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(B) ELIGIBLE RETIREMENT PLAN: An eligible retirement Plan is an
individual retirement account described in section 408(a) of the
Code, an individual retirement annuity described in section 408(b)
of the Code, an annuity Plan described in section 403(a) of the
Code, or a qualified trust described in section 401(a) of the Code,
that accepts the distributee's eligible rollover distribution.
However, in the case of an eligible rollover distribution to the
surviving spouse, an eligible retirement Plan is an individual
retirement account or individual retirement annuity.
(C) DISTRIBUTEE: A distributee includes an Employee or former Employee.
In addition, the Employee's or former Employee's surviving Spouse
and the Employee's or former Employee's Spouse or former Spouse who
is the alternate payee under a qualified domestic relations order,
as defined in section 414(p) of the Code, are distributees with
regard to the interest of the Spouse or former Spouse.
(D) DIRECT ROLLOVER: A direct rollover is a payment by the Plan to the
eligible retirement Plan specified by the distributee.
(E) WAIVER OF NOTICE. If a distribution is one to which Sections
401(a)(11) and 417 of the Internal Revenue Code do not apply, such
distribution may commence less than 30 days after the notice required
under Section 1.411(a)-(11)(c) of the Income Tax Regulations is
given, provided that: (1) the plan administrator clearly informs the
Participant that the Participant has a right to a period of at least
30 days after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if applicable, a
particular distribution option), and (2) the Participant, after
receiving the notice, affirmatively elects a distribution.
ARTICLE IX
TOP-HEAVY PROVISIONS
9.1 USE OF TOP-HEAVY PROVISIONS. If the Plan becomes a Top- Heavy Plan in
any Plan Year after December 31, 1983, the provisions of this Article IX
will supersede any conflicting provision in the Plan or the Adoption
Agreement. The Committee has sole responsibility to make the
determination as to the top-heavy status of the Plan.
9.2 TOP-HEAVY DEFINITIONS.
(A) KEY EMPLOYEE: Any Employee or former Employee (and the
Beneficiaries of such Employee) who at any time during the
determination period was an officer of the Employer if such
individual's annual Compensation exceeds 50% of the dollar
limitation under Section 415(b)(1)(A) of the Code, an owner (or
considered an owner under Section 318 of the Code) of one of the ten
largest interests in the Employer if such individual's Compensation
exceeds 100% of the dollar limitation under Section 415(c)(1)(A) of
the Code, a 5 per cent owner of the Employer, or a 1 per cent owner
of the Employer who has an annual Compensation of more than
$150,000. Annual compensation means compensation as defined in Item
B(4)(a) 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 Section 125,
Section 402(e)(3), Section 402(h)(1)(B) or Section 403(b) of the
Code. The determination period is the Plan Year containing the
Determination Date and the 4 preceding Plan Years.
The determination of who is Key Employee will made by the Committee
in accordance with Section 416(i)(1) of the Code and the regulations
thereunder.
(B) TOP-HEAVY PLAN: This Plan, for any Plan Year beginning after
December 31, 1983, if any of the following conditions exists:
(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.
(C) TOP-HEAVY RATIO: For purposes of determining if the Plan is a
Top-Heavy Plan:
(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 Section
416 of the Code and the regulations thereunder. 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 Section 416 of the Code and the
regulations thereunder.
(2) If the Employer maintains one or more defined contribution
plans (including any Simplified Employee Pension Plan) 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 Section 416 of the
Code and regulations thereunder. 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 five-year period ending on the
Determination Date.
(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 Section 416 of the
Code 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 (a) who is not a Key Employee
but who was a Key Employee in a prior year, or (b) who has not
been credited with at least one Hour of Service with any
Employer maintaining the Plan at any time during the five-year
period ending on the Determination Date will 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 Section 416 of the Code and the
regulations thereunder. Voluntary deductible employee
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 Section
411(b)(1)(C) of the Code.
(D) PERMISSIVE AGGREGATION GROUP: The Required Aggregation Group of
plans plus any other Plan or plans of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Section 401(a)(4) and
Section 410 of the Code.
(E) REQUIRED AGGREGATION GROUP: (1) Each qualified Plan of the Employer
in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the
Plan has terminated), and (2) any other qualified Plan of Employer
which enables a Plan described in (1) to meet the requirements of
Section 401(a)(4) or Section 410 of the Code.
(F) DETERMINATION DATE: For purposes of determining if there is a Key
Employee and for calculating the Top-Heavy Ratio: 1) for any Plan
Year subsequent to the first Plan Year, the last day of the
preceding Plan Year, and 2) for the first Plan Year of the Plan, the
last day of that year.
(G) VALUATION DATE: The date specified in Item B(14)(c) of the Adoption
Agreement as of which account balances or accrued benefits are
valued for purposes of calculating the Top-Heavy Ratio.
(H) PRESENT VALUE: Present Value shall be based only on the interest
and mortality rates specified in the Adoption Agreement.
9.3 MINIMUM ALLOCATION.
(A) Except as otherwise provided in Section 9.3(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 per cent (3%) of such Participant's Compensation or
in the case where the Employer has no defined benefit Plan which
designates this Plan to satisfy Section 401 of the Code, the largest
percentage of Employer contributions and forfeitures, as a
percentage of the Key Employee's Compensation, as limited by Section
401(a)(17) of the Code, 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 (i) such
Participants failure to complete 1,000 Hours of Service (or any
other equivalent provided in the Plan) or (ii) the Employee's
failure to make mandatory contributions or (iii) Compensation less
than a stated amount.
(B) For purposes of computing the minimum allocation, Compensation shall
mean Compensation as defined in Section 6.6(A) as limited by Section
401(a)(17) of the Code.
(C) Section 9.3(A) shall not apply to any Participant who was not
employed by the Employer on the last day of the Plan Year.
(D) Section 9.3(A) 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 Item B(14) 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.
(E) The minimum allocation required (to the extent required to be
nonforfeitable under Section 416(b) of the Code) may not be
forfeited under Section 411(a)(3)(B) or Section 411(a)(3)(D) of the
Code.
(F) For each Plan Year in which the Paired Plans are Top-Heavy, the
Top-Heavy requirements set forth in Article VIII of the Plan and
Item B(14) of the Adoption Agreement shall apply.
(G) Neither Before Tax Contributions nor Matching Contributions may be
taken into account for the purpose of satisfying the minimum
Top-Heavy contribution requirements.
9.4 MINIMUM VESTING SCHEDULES. For any Plan Year in which this Plan is a
Top-Heavy Plan, the vesting schedule elected by the Employer in Item B(14)
and/or C(4)(d) of the Adoption Agreement will automatically apply to the
Plan. The minimum vesting schedule applies to all benefits within the
meaning of Section 411(a)(7) of the Code except those attributable to
Employee contributions, including benefits accrued before the effective
date of Section 416 and benefits accrued before the Plan became a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan
changes for any Plan Year. However, this Section 9.4 does not apply to
the account balance of any Employee who does not have an Hour of Service
after the Plan has initially become a Top-Heavy Plan and such Employee's
account balance attributable to employer contributions and forfeitures
will be determined without regard to this Section 9.4.
ARTICLE X
TRUSTEE
10.1 TRUSTEE. The Trustee shall receive, hold, invest, administer and
distribute the Trust Fund in accordance with the provisions of the Plan
as herein set forth.
10.2 RECORDS AND ACCOUNTS OF TRUSTEE. The Trustee shall maintain accurate and
detailed records and accounts of all its transactions of the Trust Fund,
which shall be available at all reasonable times for inspection or audit
by any person designated by the Employer and by any other person or
entity to the extent required by law.
10.3 REPORTS TO EMPLOYER. As soon as practicable following the close of each
accounting period and following the effective date of the termination of
the Plan, the Trustee shall file a written report with the Employer. The
report shall set forth all transactions with respect to the Trust Fund
during the period listing the Trust Fund assets with their market value as
of the close of the period covered by the report.
10.4 POWERS OF TRUSTEE. The Trustee shall administer the Trust Fund as a
nondiscretionary Trustee, and the Trustee shall not have any discretion or
authority with regard to the investment of the Trust Fund and shall act
solely as a directed Trustee of the fund contributed to it. The Trustee,
as a nondiscretionary Trustee, as may be directed by the Employer (or the
Participants to the extent provided herein) is authorized and empowered,
by way of limitation, with the following powers, rights and duties, each
of which the Trustee shall exercise in a nondiscretionary manner as
directed in accordance with the direction of the Employer (or the
Participants) as a Named Fiduciary (except to the extent that Plan assets
are subject to the control and management of a properly appointed
Investment Manager):
(A) At the direction of the Named Fiduciary, to sell, write options on,
convey or transfer, invest and reinvest any part thereof in each and
every kind of property, whether real, personal or mixed, tangible or
intangible, whether income or non- income producing and wherever
situated, including, but not limited to, time deposits (including
time deposits in the Trustee or its affiliates, or any successor
thereto, if the deposits bear a reasonable rate of interest), fee
simple, leasehold or lesser estates in real estate, shares of common
and preferred stock, mortgages, bonds, leases, notes, debentures,
equipment or collateral trust certificates, rights, warrants,
convertible or exchangeable, and other corporate, individual or
government securities or obligations, annuity, retirement or other
insurance contracts, mutual funds (including funds for which the
Trustee or its affiliates serve as investment advisor), units of
group or collective trusts established to permit the pooling of funds
of separate pension and profit sharing trusts, provided the Internal
Revenue Service has ruled such group trust to be qualified under Code
Section 401(a) and exempt under Code Section 501(a) (or the
applicable corresponding provision of any other Revenue Act) or in
units of any other common, collective or commingled trust fund
heretofore or hereafter established and maintained by the Trustee or
its affiliates; as long as the Trustee holds any units hereunder, the
instrument establishing such common trust fund (including all
amendments thereto) shall be deemed to have been adopted and made a
part of this Plan, and such other investments as the Named Fiduciary
shall direct the Trustee to invest Plan assets or hold as an
Investment Fund for the investment of Plan assets pursuant to
Participant direction.
(B) At the direction of the Named Fiduciary, to sell, convert, redeem,
exchange, grant options for the purchase or exchange of, or
otherwise dispose of any property held hereunder, at public or
private sale, for cash or upon credit with or without security,
without obligation on the part of any person dealing with the
Trustee to see to the application of the proceeds of or to inquire
into the validity, expediency, or propriety of any such disposal;
(C) At the direction of the Named Fiduciary, to manage, operate, repair,
partition and improve and mortgage or lease (with or without an
option to purchase) for any length of time any property held in the
Trust Fund; to renew or extend any mortgage or lease, upon such
terms as the Trustee may deem expedient; to agree to reduction of
the rate of interest on any mortgage; to agree to any modification
in the terms of any lease or mortgage, or of any guarantee
pertaining to either of them; to exercise and enforce any right of
foreclosure; to bid in property on foreclosure; to take a deed in
lieu of foreclosure with or without paying consideration therefor
and in connection therewith to release the obligation on the bond
secured by the mortgage; and to exercise and enforce in any action,
suit or proceeding at law or in equity any rights, covenants,
conditions, or remedies with respect to any lease or mortgage or to
any guarantee pertaining to either of them or to waive any default
in the performance thereof;
(D) In accordance with the direction of a Named Fiduciary, to vote,
personally or by general or limited proxy, any shares of stock or
other securities held in the Trust Fund, provided that all voting
rights pertaining to shares of any financial institution in the
state where the Trustee is located shall be exercised by the trustee
only if and as directed in writing by the Committee; provided
further, that the Trustee and the Employer may agree in writing that
such voting rights be passed through to the Participant's in
proportion to their interest in the Investment Funds, to delegate
discretionary voting power to the trustees of a voting trust for any
period of time; and to exercise or sell, personally or by power of
attorney, any conversion or subscription or other rights appurtenant
to any securities or other property held in the Trust Fund;
(E) As may be directed by the Named Fiduciary, to join in or oppose any
reorganization, recapitalization, consolidation, merger or
liquidation, or any Plan therefor, or any lease (with or without an
option to purchase), mortgage or sale of the property of any
organization the securities of which are held in the Trust Fund; to
pay from the Trust Fund any assessments, charges, or compensation
specified in any Plan of reorganization, recapitalization,
consolidation, merger or liquidation; to deposit any property with
any committee or depository; and to retain any property allotted to
the Trust Fund in any reorganization, recapitalization,
consolidation, merger or liquidation;
(F) In accordance with the written instructions of a Named Fiduciary, to
settle, compromise or commit to arbitration any claim, debt or
obligation of or against the Trust Fund; to enforce or abstain from
enforcing any right, claim, debt, or obligation; and to abandon any
property determined by it to be worthless;
(G) As may be directed by the Named Fiduciary, to continue to hold any
property of the Trust Fund, whether or not productive of income; to
reserve from investment and keep unproductive of income, without
liability for interest, such cash as it deems advisable and,
consistent with its obligations as Trustee hereunder, to hold such
cash in a demand deposit in the Trustee bank, its affiliates, or any
successor thereto;
(H) To hold property of the Trust Fund in its own name, or in the name
of nominee, without disclosure of this trust, or in bearer form so
that it may pass by delivery, and to deposit property with any
depository, but no such holding or depositing shall relieve the
Trustee of its responsibility for the safe custody and disposition of
the Trust Fund in accordance with the provisions of this agreement as
may be directed by the Named Fiduciary, and the Trustee's records
shall at all times show that such property is part of the Trust Fund;
(I) As directed by the Named Fiduciary, to make, execute and deliver, as
Trustee, any deeds, conveyances, leases (with or without option to
purchase), mortgages, options, contracts, waivers, or other
instruments that the Trustee shall deem necessary or desirable in the
exercise of its powers under this agreement;
(J) To employ, at the expense of the Employer or the Trust Fund, agents
and delegate to them such duties as the Trustee sees fit; the
Trustee shall not be responsible for any loss occasioned by any such
agents selected by it with reasonable care; the Trustee may consult
with legal counsel (who may be counsel for the Employer) concerning
any questions which may arise with reference to its power or duties
under this Plan, and the written opinion of such counsel shall be
full and complete protection with respect to any action taken or not
taken by the Trustee in good faith and in accordance with the
written opinion of such counsel;
(K) To pay out of the Trust Fund any taxes imposed or levied with
respect to the Trust Fund and may contest the validity or amount of
any tax, assessment, penalty, claim or demand respecting the Trust
Fund; however, unless the Trustee shall have first been indemnified
to its satisfaction, it shall not be required to contest the
validity of any tax, or to institute, maintain or defend against any
other action or proceeding either at law or in equity;
(L) To make loans to Participants in accordance with policies
established by the Committee and in accordance with the terms of the
Plan and the and to segregate or otherwise identify property of the
Trust Fund as directed by the Committee for such purpose including
providing collateral for loans made pursuant to the Plan.
10.5 TRUSTEE'S FEES AND EXPENSES. The Trustee shall be entitled to receive
reasonable fees for its services hereunder in accordance with its schedule
of fees then in effect and shall be entitled to receive reimbursement for
all reasonable expenses incurred by it in the administration of this Plan.
Except to the extent that the Employer shall pay such fees and expenses,
they shall be charged to and collected by the Trustee from each
Participant's accounts. The Trustee's fees and expenses for extraordinary
services in connection with any Participant's accounts may be charged to
and collected by the Trustee from such accounts.
10.6 TRUSTEE MAY RESIGN OR BE REMOVED. The Trustee may resign by written
notice to the Employer which shall be effective sixty (60) days after
delivery unless the Trustee and the Employer agree to an earlier
effective date. The Trustee may be removed by the Employer by written
notice to the Trustee which shall be effective sixty (60) days after
delivery unless the Trustee and the Employer agree to an earlier
effective date. Prior to the effective date of such resignation or
removal, the Employer shall amend its Plan to eliminate any reference to
the PRISM(registered trademark) Prototype Retirement Plan and Trust, and
appoint a new trustee. The Trustee shall deliver the Trust Fund to its
successor on the effective date of resignation or removal, or as soon
after such effective date as practicable. However, the Trustee may first
subtract any amounts owed it from the Trust Fund for compensation,
expenses and taxes due.
If the Employer fails to so amend the Plan and appoint a successor
trustee within the sixty (60) days, or longer period as the Trustee
permits in writing, the Trustee shall apply to a court of competent
jurisdiction for appointment of a successor trustee.
10.7 SEPARATE INVESTMENT FUNDS.
(A) The assets of the Trust Fund shall be held in such number of
Investment Funds as the Employer and the Trustee may agree, plus an
Employer Stock Fund if selected by the Employer in the Adoption
Agreement, as the Employer shall designate in writing on the
Investment Fund Designation form affixed to the Adoption Agreement.
Such Investment Funds shall be selected by the Employer from among
the funds offered by the Trustee for use as Investment Funds in the
PRISM(REGISTERED TRADEMARK) PROTOTYPE RETIREMENT PLAN & TRUST. The
Trustee reserves the right to change the funds available for use as
Investment Funds in the PRISM(REGISTERED TRADEMARK) PROTOTYPE
RETIREMENT PLAN & TRUST, from time to time, and the Employer agrees
to execute an amended Investment Fund Designation form to reflect
any such changes as may impact the Investment Funds available to the
Employer's Plan. The Employer hereby acknowledges that, available
as Investment Funds are interests in registered investment companies
(i.e. mutual funds) for which the sponsoring organization, its
parent, affiliates or successors may serve as investment advisor and
receive compensation from the registered investment company for its
services as investment advisor. The Employer acknowledges that it,
as Named Fiduciary, has the sole responsibility for selection of the
Investment Funds offered under the Plan, and it has done so on the
basis of the Employer's determination, after due inquiry, of the
appropriateness of the selected Investment Funds as vehicles for the
investment of Plan assets pursuant to the terms of the Plan,
considering all relevant facts and circumstances, including but not
limited to (i) the investment policy and philosophy of the Employer
developed pursuant to ERISA 402(b)(1); (ii) the Participants,
including average level of investment experience and sophistication;
(iii) the ability of Participants, using an appropriate mix of
Investment Funds, to diversify the investment of Plan assets held
for their benefit; (iv) the ability of Participants to, utilizing an
appropriate mix of Investment Funds, to structure an investment
portfolio within their account in the Plan with risk and return
characteristics within the normal range of risk and return
characteristics for individuals with similar investment backgrounds,
experience and expectations; and, (v) in making the selection of
Investment Funds, the Employer did not rely on any representations
or recommendations from the Trustee or any of its employees, except
as may have been provided through written materials, including
marketing materials provided by the various sponsors or distributors
of the Investment Funds, and that the Investment Fund selection has
not be influenced, approved, or encouraged through the actions of
the Trustee or its employees.
For purposes of the Plan, "Employer Stock" shall mean common stock
listed on a recognized securities exchange issued by an Employer of
Employees covered by the Plan or by an affiliate of such Employer
and which shall be a "qualifying employer security" as defined in
ERISA. The Employer Stock Fund shall be invested and reinvested in
shares of Employer Stock, which stock shall be purchased by the
Trustee to the extent not contributed to the Plan by the Employer,
except for amounts which may reasonably be expected to be necessary
to satisfy distributions to be made in cash. No Employer Stock shall
be acquired or held in any Investment Fund other than the Employer
Stock Fund. Up to 100% of the assets of the Trust Fund may be
invested in Employer Stock.
All contributions shall be allocated by the Trustee to the Plan's
Investment Funds specified by the Employer. Dividends, interest and
other distributions shall be reinvested in the same Investment Fund
from which received.
Employers sponsoring 401(k) profit sharing plans may elect to
determine the Investment Funds, including an Employer Stock Fund, if
applicable, into which Matching Contributions and/or Employer
Contributions will be invested and/or into which Participants may not
direct contributions. By making these designations, the Employer
shall be deemed to have advised the Trustee in writing regarding the
retention of investment powers.
Notwithstanding the foregoing provisions of this Section 10.7(A), the
Trustee may, in its discretion, accept certain investments which have
been, and are, held as part of the Trust Fund prior to the date the
Employer adopted this Plan. Such investments shall be considered
investments directed by the Employer or an Investment Committee for
the Plan ("Investment Committee"), if one is acting. The Trustee
shall hold, administer and dispose of such investments in accordance
with directions to the Trustee contained in a written notice from the
Employer or Investment Committee. Any such notice shall advise the
Trustee regarding the retention of investment powers by the Employer
or the Investment Committee and shall be of a continuing nature or
otherwise, and may be revoked in writing by the Employer or
Investment Committee.
The Trustee shall not be liable but shall be fully protected by
reason of its taking or refraining from taking any action at the
direction of the Employer or Investment Committee, nor shall the
Trustee be liable but shall be fully protected by reason of its
refraining from taking any action because of the failure of the
Employer or the Investment Committee to give a direction or order.
The Trustee shall be under no duty to question or make inquiry as to
any direction, notification or order or failure to give a direction,
notification or order by the Employer or the Investment Committee.
The Trustee shall be under no duty to make any review of investments
directed by the Employer or Investment Committee acquired for the
Trust Fund and under no duty at any time to make any recommendation
with respect to disposing of or continuing to retain any such
investments. While the Employer may direct the Trustee with respect
to Plan investments, the Employer may not (1) borrow from the Fund or
pledge any assets of the Fund as security for a loan; (2) buy
property or assets from or sell property or assets to the Fund; (3)
charge any fee for services rendered to the Fund; or (4) receive any
services from the Fund on a preferential basis.
The Employer hereby indemnifies and holds the Trustee or its nominee
harmless from any and all actions, claims, demands, liabilities,
losses, damages or reasonable expenses of whatsoever kind and nature
in connection with or arising out of (1) any action taken or omitted
in good faith or any investment or disbursement of any part of the
Trust Fund made by the Trustee in accordance with the directions of
the Employer or the Investment Committee or any inaction with respect
to any Employer or Investment Committee directed investment or with
respect to any investment previously made at the direction of the
Employer or Investment Committee in the absence of directions from
the Employer or Investment Committee therefor, or (2) any failure by
the Trustee to pay for any property purchased by the Employer or the
Investment Committee for the Trust Fund by reason of the
insufficiency of funds in the Trust Fund.
Anything hereinabove to the contrary notwithstanding, the Employer
shall have no responsibility to the Trustee under the foregoing
indemnification if the Trustee knowingly participated in or knowingly
concealed any act or omission of the Employer or Investment Committee
knowing that such act or omission constituted a breach of fiduciary
responsibility, or if the Trustee fails to perform any of the duties
undertaken by it under the provisions of this Plan, or if the Trustee
fails to act in conformity with the directions of an authorized
representative of the Employer or the Investment Committee.
(B) Each Participant shall by such mechanism as may be agreed upon
between the Trustee and Employer, direct that the contributions made
to his or her accounts for which the Participant may direct
investments, as selected by the Employer in the Adoption Agreement,
be invested in one or more of the Investment Funds, including the
Employer Stock Fund, if applicable. At the time an Employee becomes
eligible for the Plan, he or she shall specify the percentage of his
or her accounts (expressed in percentage increments as may be agreed
to between the Employer and the Trustee) to be invested pro-rata in
each such Investment Fund.
(C) Upon prior written notice to the Trustee, or other form of notice
acceptable to the Trustee, a Participant may change an investment
direction with respect to future contributions. Through acceptable
notice to the Trustee, the Participant may elect to transfer all or a
portion of such Participant's interest in each Investment Fund (based
on the value of such interest on the Valuation Date immediately
preceding such election), including an Employer Stock Fund, if
applicable, to any other of the Investment Funds selected by the
Employer so that the Participant's interest in the said Investment
Funds immediately after the transfer is allocated in percentage
increments as may be agreed to by the Employer and the Trustee.
Notwithstanding any Participant's election to change Investment
Funds, the Trustee may, in its discretion, delay satisfaction of
requests to change from a guaranteed investment contract fund for up
to one year, or delay satisfaction of changes in Investment Funds
pending settlement of prior changes in Investment Funds.
(D) The Employer will be responsible when transmitting Employer and
Employee contributions to show the dollar amount to be credited to
each Investment Fund for each Employee.
(E) Except as otherwise provided in the Plan, neither the Trustee, nor
the Employer, nor any fiduciary of the Plan shall be liable to the
Participant or any of his or her beneficiaries for any loss
resulting from action taken at the direction of the Participant.
(F) In a 401(k) profit sharing Plan where the Employer has elected to
invest a portion or all of the Matching Contributions and/or Employer
Contributions in the Employer Stock Fund, then the following shall
apply:
If selected by the Employer in the Adoption Agreement, a Participant
who is fifty-five (55) years of age or older and who is 100% vested
in his Matching Contribution account and/or Employer Contribution
account may elect to have the Employer Stock (and any earnings
thereon) attributable to such Matching Contributions and/or Employer
Contributions diversified in the other Investment Funds under the
Plan in accordance with the following rules and limitations. The
amount of Employer Stock which may be diversified each Plan Year
shall be determined in accordance with the following schedule:
then the percent of the number of
whole shares (rounded to the nearest
whole number) credited to the
Participants' Matching Account and/or
If the age attained by the Employer Contribution Account on the
Participant during the Plan last day of the preceding Plan Year
which may be diversified pursuant to the
rules below may not exceed
55 25%
56 25%
57 30%
58 40%
59 50%
60 60%
61 70%
62 80%
63 90%
64 100%
The election to diversify may only be made once each Plan Year. The
election may be made in any month by providing notice to the
Committee in accordance with the frequency selected by the Employer
for other Investment Fund changes under the Plan. Each election to
make a transfer pursuant to this Section shall specify the Investment
Fund(s) into which the shares subject to diversification will be
reinvested so that the Participant's interest in the said Investment
Fund(s), immediately after the transfer, is allocated in increments
as may be allowed by the Trustee. Thereafter, the Participant's
interest in said Investment Fund(s) shall be subject to transfer in
accordance with this Section.
(G) Forfeitures arising under the Plan will be invested in an Investment
Fund as may be selected in the discretion of the Employer.
(H) In the event the Trust holds life insurance, the following
restrictions shall apply:
(1) Limitations on Premium Payments
(a) If ordinary or whole life insurance contracts are
purchased on the life of a Participant, less than one-half
of the insured Participant's current allocation of
contributions will be used to pay premiums attributable to
such insurance. Ordinary or whole life insurance contracts
are those with both nondecreasing benefits and
nonincreasing premiums.
(b) If term or universal life insurance contracts are
purchased, no more than one-quarter of the insured
Participant's current allocation of contributions will be
used to pay premiums attributable to such insurance.
(c) If a combination of ordinary or whole life insurance
contracts and term or universal life insurance contracts
are purchased, the sum of one-half of the ordinary life
insurance premiums and all other life insurance premiums
will not exceed one-fourth of the aggregate employer
contributions allocated to any participant.
(2) The Plan Administrator will direct the Trustee to convert the
entire value of any life insurance contract at or before the
Participant's actual retirement or distribution on termination
of employment, but not later than the Participant's Required
Beginning Date to provide cash values or retirement annuity
income, or, subject to the Joint and Survivor Annuity waiver
requirements of Section 7.10, the Plan Administrator may direct
the Trustee to distribute the insurance contract directly to
the Participant. (3) The Trustee, at the direction of the
Employer shall be entitled to exercise all rights and options
with respect to any such life insurance contracts held by the
Plan.
10.8 REGISTRATION, DISTRIBUTION AND VOTING OF EMPLOYER STOCK AND PROCEDURES
REGARDING TENDER OFFERS.
(A) All voting rights on shares of Employer Stock held in the Employer
Stock Fund shall be exercised by the Trustee only as directed by the
Participants acting in their capacity as "Named Fiduciaries" (as
defined in Section 402 of the Act) in accordance with the following
provisions of this Section 10.8(A):
(1) As soon as practicable before each annual or special
shareholders' meeting of the Employer, the Trustee shall
furnish to each Participant sufficient copies of the proxy
solicitation material sent generally to shareholders, together
with a form requesting confidential instructions on how the
shares of Employer Stock allocated to such Participant's
account, and, separately, such shares of Employer Stock as may
be unallocated ("Unallocated Shares") or allocated to
Participant accounts but for which the Trustee does not receive
timely voting instruction from the Participant ("Non- Directed
Shares"), (including fractional shares to 1/1000th of a share)
are to be voted. The direction with respect to Non- Directed
Shares and Unallocated Shares shall apply to such number of
votes equal to the total number of votes attributable to Non-
Directed Shares and Unallocated Shares multiplied by a
fraction, the numerator of which is the number of shares of
Employer Stock credited to the Participant's account and the
denominator of which is the total number of shares credited to
the accounts of all such Participants who have timely provided
directions to the Trustee with respect to Non-Directed Shares
and Unallocated Shares under this Section 10.8(A)(1). The
Employer and the Committee will cooperate with the Trustee to
ensure that Participants receive the requisite information in a
timely manner. The materials furnished to the Participants
shall include a notice from the Trustee that the Trustee will
vote any shares for which timely instructions are not received
by the Trustee as may be directed by those voting Participants,
acting in their capacity as Named Fiduciaries of the Plan as
provided above. Upon timely receipt of such instructions, the
Trustee shall vote the shares as instructed. The instructions
received by the Trustee from Participants or Beneficiaries
shall be held by the Trustee in strict confidence and shall not
be divulged or released to any person including directors,
officers or employees of the Employer, or of any other company,
except as otherwise required by law.
(2) With respect to all corporate matters submitted to
shareholders, all shares of Employer Stock shall be voted only
in accordance with the directions of such Participants as Named
Fiduciaries as given to the Trustee as provided in Section
10.8(A)(1). With respect to shares of Employer Stock allocated
to the account of a deceased Participant, such Participant's
Beneficiary, as Named Fiduciary, shall be entitled to direct
the voting of shares of Employer Sock as if such Beneficiary
were the Participant.
(B) All tender or exchange decisions with respect to Employer Stock held
in the Employer Stock Fund shall be made only by the Participants
acting in their capacity as Named Fiduciaries with respect to the
Employer Stock allocated to their accounts in accordance with the
following provisions of this Section 10.8(B):
(1) In the event an offer shall be received by the Trustee
(including a tender offer for shares of Employer Stock subject
to Section 14(d)(1) of the Securities Exchange Act of 1934 or
subject to Rule 13e-4 promulgated under that Act, as those
provisions may from time to time be amended) to purchase or
exchange any shares of Employer Stock held by the Trust, the
Trustee will advise each Participant who has shares of Employer
Stock credited to such Participant's account in writing of the
terms of the offer as soon as practicable after its commencement
and will furnish each Participant with a form by which he may
instruct the Trustee confidentially whether or not to tender or
exchange shares allocated to such Participant's account, and,
separately, Unallocated Shares and Non- Directed Shares
(including fractional shares to 1/1000th of a share). The
directions with respect to Non-Directed Shares and Unallocated
Shares shall apply to such number of Non-Directed Shares and
Unallocated Shares equal to the total number of Non-Directed
Shares and Unallocated Shares multiplied by a fraction, the
numerator of which is the number of shares of Employer Stock
credited to the Participant's account and the denominator of
which is the total number of shares credited to the accounts of
all such Participants who have timely provided directions to the
Trustee with respect to Non- Directed Shares and Unallocated
Shares under this Section 10.8(B). The materials furnished to
the Participants shall include (i) a notice from the Trustee
that, except as provided in this Section 10.8(B), the Trustee
will not tender or exchange any shares for which timely
instructions are not received by the Trustee and (ii) such
related documents as are prepared by any person and provided to
the shareholders of the Employer pursuant to the Securities
Exchange Act of 1934. The Committee and the Trustee may also
provide Participants with such other material concerning the
tender or exchange offer as the Trustee or the Committee in its
discretion determines to be appropriate; provided, however, that
prior to any distribution of materials by the Committee, the
Trustee shall be furnished with sufficient numbers of complete
copies of all such materials. The Employer and the Committee
will cooperate with the Trustee to ensure that Participants
receive the requisite information in a timely manner.
(2) The Trustee shall tender or not tender shares or exchange
shares of Employer Stock (including fractional shares to
1/1000th of a share) only as and to the extent instructed by
the Participants as Named Fiduciaries as provided in Section
10.8(B)(1). With respect to shares of Employer Stock allocated
to the account of a deceased Participant, such Participant's
Beneficiary, as a Named Fiduciary, shall be entitled to direct
the Trustee whether or not to tender or exchange such shares as
if such Beneficiary were the Participant. If tender or exchange
instructions for shares of Employer Stock allocated to the
account of any Participant are not timely received by the
Trustee, the Trustee will treat the non-receipt as a direction
not to tender or exchange such shares. The instructions
received by the Trustee from Participants or Beneficiaries
shall be held by the Trustee in strict confidence and shall not
be divulged or released to any person, including directors,
officers or employees of the Employer, or of any other company,
except as otherwise required by law.
(3) In the event, under the terms of a tender offer or otherwise,
any shares of Employer Stock tendered for sale, exchange or
transfer pursuant to such offer may be withdrawn from such
offer, the Trustee shall follow such instructions respecting
the withdrawal of such securities from such offer in the same
manner and the same proportion as shall be timely received by
the Trustee from the Participants, as Named Fiduciaries,
entitled under this Section 10.8(B) to give instructions as to
the sale, exchange or transfer of securities pursuant to such
offer.
(4) In the event an offer shall be received by the Trustee and
instructions shall be solicited from Participants pursuant to
Section 10.8(B)(1-3) regarding such offer, and prior to
termination of such offer, another offer is received by the
Trustee for the securities subject to the first offer, the
Trustee shall use its best efforts under the circumstances to
solicit instructions from the Participants to the Trustee (i)
with respect to securities tendered for sale, exchange or
transfer pursuant to the first offer, whether to withdraw such
tender, if possible, and, if withdrawn, whether to tender any
securities so withdrawn for sale, exchange or transfer pursuant
to the second offer and (ii) with respect to securities not
tendered for sale, exchange or transfer pursuant to the first
offer, whether to tender or not to tender such securities for
sale, exchange or transfer pursuant to the second offer. The
Trustee shall follow all such instructions received in a timely
manner from Participants in the same manner and in the same
proportion as provided in Section 10.8(B)(1-3). With respect to
any further offer for any Employer Stock received by the Trustee
and subject to any earlier offer (including successive offers
from one or more existing offerors), the Trustee shall act in
the same manner as described above.
(5) A Participant's instructions to the Trustee to tender or
exchange shares of Employer Stock will not be deemed a
withdrawal or suspension from the Plan or a forfeiture of any
portion of the Participant's interest in the Plan. Funds
received in exchange for tendered shares will be credited to the
account of the Participant whose shares were tendered and will
be used by the Trustee to purchase Employer Stock, as soon as
practicable. In the interim, the Trustee will invest such funds
in short-term investments permitted under the Plan, and in the
same manner in which forfeited amounts are invested.
(6) In the event the Employer initiates a tender or exchange offer,
the Trustee may, in its sole discretion, enter into an
agreement with the Employer not to tender or exchange any
shares of Employer Stock in such offer, in which event, the
foregoing provisions of this Section 10.8(B) shall have no
effect with respect to such offer and the Trustee shall not
tender or exchange any shares of Employer Stock in such offer.
(C) The Trustee acting with respect to the Employer Stock Fund may with
the consent of the Committee designate any Employee or other Trustee
as agent to solicit the instructions to vote provided for in
Subsection (A) of this Section, and shall be held harmless in
relying upon such agent's written advice as to how shares are to be
voted, and said Trustee may, with the consent of the Committee,
designate any Employee as agent to solicit instructions from
Participants regarding such a tender offer, as required under
Subsection (B) above, and shall be held harmless in relying upon
such agent's written advice as to whether shares of Employer Stock
are to be tendered.
(D) The Employer shall be responsible for complying with applicable
federal and state securities laws and regulations.
10.9 VALUATION OF INVESTMENT FUNDS AND ACCOUNTS.
(A) As of each Valuation Date, the Trustee shall determine the fair
market value of each Investment Fund, including an Employer Stock
Fund, if any, being administered by the Trustee. With respect to
each such Investment Fund, the Trustee shall determine (a) the change
in value between the current Valuation Date and the then last
preceding Valuation Date, (b) the net gain or loss resulting from
expenses paid (including fees and expenses, if any, which are to be
charged to such Fund) and (c) realized and unrealized gains and
losses.
The transfer of funds to or from an Investment Fund pursuant to
Section 10.7(C) and payments, distributions and withdrawals from an
Investment Fund to provide benefits under the Plan for Participants
or Beneficiaries shall not be deemed to be gains, expenses or losses
of an Investment Fund.
After each Valuation Date, the Trustee shall allocate the net gain or
loss of each Investment Fund as of such Valuation Date to the
accounts of Participants participating in such Investment Fund on
such Valuation Date. Contributions, forfeitures and rollovers
received and credited to Participants' accounts as of such Valuation
Date, or as of any earlier date since the last preceding Valuation
Date shall not be considered in allocating gains or losses allocated
to Participants' accounts.
(B) The reasonable and equitable decision of the Trustee as to the value
of each Investment Fund, including an Employer Stock Fund, if any,
and of any account as of each Valuation Date shall be conclusive and
binding upon all persons having any interest, direct or indirect, in
the Investment Funds or in any account.
ARTICLE XI
ADMINISTRATION
11.1 COMMITTEE MEMBERSHIP. The Employer shall appoint a Committee which shall
consist of at least one member. The Committee members will be named in
the Adoption Agreement and may be, but are not required to be, Employees
of the Employer. All members of the Committee shall serve at the
pleasure of the Employer. In the event that the Committee has more than
one member, one member shall serve as Chairman and one as Secretary. Any
member of the Committee may resign by notice in writing to the Employer.
Any vacancy in the Committee shall be filled by the Employer as soon as
practicable after a vacancy. If the Employer does not designate a
Committee, the Employer shall assume all of the duties of the Committee.
11.2 POWERS AND DUTIES OF COMMITTEE. The Committee shall have all powers and
duties and only the powers and duties as are specifically conferred upon
it by this Plan or as the Employer may delegate to or impose upon it
consistent with the provisions of this Plan, ERISA and the Code. Without
limiting the generality of the foregoing, the Committee shall have the
following powers and duties:
(A) to interpret and construe the terms and provisions of this Plan and
to decide any questions which may arise hereunder, including but not
limited to --
(1) the amount of a Participant's Compensation,
(2) a Participant's Years of Service,
(3) the age of any person who might be entitled to receive benefits,
(4) the right of any person to receive benefits,
(5) the amount of any benefits to be paid to any persons;
(B) to cause to be maintained all necessary records and accounts under
this Plan and to keep in convenient form any data as may be
necessary for valuation of the assets and liabilities;
(C) to rely upon the records of the Employer or upon any certificate,
statement or other representation made to it by a Participant, a
Beneficiary, the authorized representative of the Participant or
Beneficiary, or the Trustee concerning any fact required to be
determined under any of the provisions of this Plan, and the
Committee shall not be required to make inquiry into the propriety
of any action by the Employer or the Trustee;
(D) to give written notice to a Participant, a Beneficiary, or the
authorized representative of the Participant or Beneficiary, of the
amount of benefits payable under this Plan;
(E) to make and enforce any rules, not inconsistent with this Plan, as
it shall deem necessary or proper for the efficient administration
of this Plan;
(F) to have and exercise such other authority as it deems necessary to
carry out the purposes and provisions of this Plan, provided that
any act of discretion permitted shall be exercised in a uniform
non-discriminatory manner with respect to individuals in like or
similar circumstances;
(G) to adopt rules and guidelines for the administration of this Plan,
provided that they are not inconsistent with the terms of this Plan
and are uniformly applicable to all persons similarly situated and
to delegate in accordance with Section 11.8 such functions and
duties as the Committee deems advisable;
(H) to establish a funding policy and investment objectives consistent
with the purposes of the Plan and the requirements of law;
(I) to employ such attorneys, accountants and agents as it shall
determine to assist it in carrying out its duties hereunder.
Except as otherwise provided in this Plan or determined by the Employer,
any action or determination taken or made by the Committee or any
interpretation or construction made by the Committee shall be final and
shall be binding upon all persons. The Committee shall at all times
exercise the power and authority given to it under this Plan in a fair,
reasonable and non- discriminatory manner.
11.3 ACTIONS OF THE COMMITTEE. Any act authorized or required to be taken by
the Committee shall be taken by a decision of the majority of the members
acting at the time. Any decision of the Committee may be expressed by a
vote at a Committee meeting or in writing, signed by all members of the
Committee, without a meeting. All allocation statements, notices,
directions, approvals, instructions and all other communications required
or authorized to be given by the Committee under this Plan shall be in
writing and signed by a majority of the members of the Committee. The
Committee may, however, by an instrument in writing signed by all the
members and filed with the Trustee, designate one or more if its members
as having the authority to sign all such communications on behalf of the
Committee. Until notified in writing to the contrary, the Trustee shall
be fully protected in acting in accordance with all communications which
it considers genuine and to have been signed on behalf of the Committee
by the members authorized to sign communications. If at any time for any
reason the Committee shall be unable to act with respect to any matter,
the Employer shall act with respect to that matter and its action shall
be final and it shall be binding upon all persons.
11.4 RESIGNATION, REMOVAL AND DESIGNATION OF SUCCESSORS. Any member of the
Committee may resign at any time and any member may be removed by the
Employer with or without cause. In case of resignation, death, removal
or inability or failure for any cause of any member of the Committee to
serve or to continue to serve, a successor shall be appointed by the
Employer. The Committee shall promptly notify the Trustee of any change
in its membership.
11.5 COMMITTEE REVIEW. If any Participant, Spouse, Beneficiary, or other
authorized representative of a Participant, Spouse or Beneficiary shall
file an application with the Committee for benefits under the Plan and
the application is denied, in whole or in part, such applicant shall be
notified of the denial in writing within ninety (90) days of receipt of
the claim. The notice to the applicant shall state that the Committee
has denied the application pursuant to the exercise of its discretionary
powers. This notice shall set forth the specific reasons for the denial,
specific reference to pertinent Plan provisions upon which the denial is
based, a description of any additional information needed to perfect the
claim with an explanation of why it is necessary and an explanation of
procedure for appeal.
Any Participant, Spouse, Beneficiary, or other authorized representative
of the Participant, Spouse or Beneficiary whose application for benefits
has been denied may, within sixty (60) days after receiving the
notification, make a written application to the Committee to review the
denial. The applicant may request that the review be made by written
statements submitted by the applicant and the Committee, at a hearing, or
by both. Any hearing shall be held in the main offices of the Employer on
a date and time as the Employer shall designate with at least seven (7)
days notice to the applicant unless the applicant accepts shorter notice.
Within sixty (60) days after the review has been completed, the Employer
shall render a written decision and shall send a copy to the applicant.
This decision shall include specific reasons for the decision, as well as
specific references to the pertinent Plan provisions upon which the
decision is based.
If the Participant, Spouse, Beneficiary, or other authorized
representative of a Participant, Spouse or Beneficiary does not file
written notice with the Employer at the times set forth above, the
individual shall have waived all benefits under this Plan other than as
set forth in the notice from the Committee.
11.6 RECORDS. The Committee shall keep or cause to be kept records of all
meetings, proceedings and actions held, undertaken or performed by it and
shall furnish to the Employer reports as the Employer may request.
11.7 COMPENSATION. The members of the Committee shall serve without
compensation for services as such, but all reasonably incurred fees and
expenses shall be paid by the Employer.
11.8 DESIGNATION OF NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY AMONG
FIDUCIARIES. The Employer, the Committee and the Trustee shall be "Named
Fiduciaries" with respect to this Plan as that term is defined in ERISA.
The Named Fiduciaries shall have only those specific powers, duties,
responsibilities and obligations as are given to them under this Plan. The
Named Fiduciaries may designate any person or persons as a fiduciary and
may delegate to such person or persons any one or more of their powers,
functions, duties and responsibilities with respect to the Plan as set
forth in this Plan, authorizing or providing for such direction,
information or action. Any such designation shall be made in writing and
shall become effective upon written acceptance. No such designation or
delegation by the Employer or the Committee of any of its powers,
authority or responsibilities to the Trustee shall become effective unless
such designation or delegation shall first be accepted by the Trustee in a
writing signed by it and delivered to the Employer or the Committee, as
applicable. Furthermore, each Named Fiduciary may rely upon any such
direction, information or action of another Named Fiduciary as being
proper under this Plan and is not required to inquire into the propriety
of any such direction, information or action. It is intended that under
this Plan each Named Fiduciary shall be responsible for the proper
exercise of its own powers, duties, responsibilities and obligations and
shall not be responsible for act or failure to act of another fiduciary.
11.9 NOTICE BY COMMITTEE OR EMPLOYER. Any communication or notice to any
person by the Committee or the Employer shall be in writing and may be
given by delivery to the person or by first class mail with postage
prepaid addressed to the person at the last address on file with the
Committee or the Employer. Any notice delivered as provided above shall
be deemed to have been given when delivered, and any notice mailed as
provided above shall be deemed to have been given when mailed.
11.10 LOANS TO PARTICIPANTS.
(A) (1) In accordance with Section 11.8 above, the Committee is
hereby designated as the named fiduciary with sole authority
and responsibility to approve or deny loans and, except as
provided in subsections (G) and (H) of this Section, collect
unpaid loans, in accordance with the provisions of this Section
11.10. This Section 11.10 shall apply if the Employer is
eligible to and elects Item B(16) of the Adoption Agreement.
(2) Subject to the consent of the Committee, loans may be made upon
approval of the written application of a Participant or
Beneficiary submitted to the Committee. Such application shall
be submitted during a specified period established by the
Committee prior to the date the loan is to be made. The
Committee shall notify the Participant or Beneficiary whether
the loan has been approved or denied. Loans shall be made
available to all Participants and Beneficiaries on a reasonably
equivalent basis, except that no loans will be made to any
Stockholder-Employee or Owner-Employee and no loan shall be made
to any Participant which the Committee, upon reviewing the
Participant's written application determines may be reasonably
expected to be unable to repay the loan. Loans shall not be made
available to Highly Compensated Employees (as defined in Section
414(q) of the Code) in an amount greater than the amount made
available to other Employees. Except for loans made prior to the
date this Plan is adopted, a Participant or Beneficiary shall
have no more than five loans outstanding at any given time.
(3) All loans will be adequately secured and will bear a reasonable
rate of interest. Rates of interest will be determined daily
by the Trustee for Plan loans. The Committee will determine
the minimum loan amount for the Plan.
(B) In reviewing and approving or denying loan applications hereunder,
the Committee shall bear sole responsibility for ensuring compliance
with all applicable federal or state laws and regulations, including
the federal Truth In Lending Act (15 U.S.C. 1601 et seq.), and Equal
Credit Opportunity Act (15 U.S.C. 1691 et seq.). The Committee
shall upon request supply the Trustee with evidence that it has
complied with such federal or state law.
(C) Notwithstanding Section 7.13 above, each loan made hereunder shall
be secured by a written assignment, in favor of the Plan, of that
portion of the Participant's accounts which the Committee determines
to be necessary to adequately secure repayment of the loan.
(D) A Participant must obtain the consent of his or her Spouse, if any,
to use the account balance as security for the loan. Spousal
consent shall be obtained no earlier than the beginning of the
ninety (90) day period that ends on the date the loan is to be so
secured. The consent must be in writing 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 account balance is used for renegotiation, extension, renewal,
or other revision of the loan.
Notwithstanding the preceding paragraph, no spousal consent is
required for the use of the account balance as security for a Plan
loan to the Participant under a safe-harbor profit sharing Plan as
described in Section 7.10(F).
(E) No loan shall be approved by the Committee to any Participant or
Beneficiary in any amount which exceeds the lesser of
(1) $50,000, reduced by the excess (if any) of -
(a) the highest outstanding balance of loans from the Plan
during the one-year period ending on the day before the
date on which such loan was made, over,
(b) the outstanding balance of loans from the Plan on the
date on which such loan was made, or
(2) fifty percent (50%) of the present value of the Participant's
nonforfeitable accrued benefit.
For purposes of the above limitation, all loans from all plans of
the Employer and other members of a group of employers described in
Sections 414(b), (c), (m) and (o) of the Code are aggregated.
The term of the loan shall be determined by the Committee.
Furthermore, any loan shall, by its terms require that repayment
(principal and interest) be amortized in level payments, not less
frequently than quarterly over a period not extending beyond five
years from the date of the loan, except that the Committee, in its
discretion, may permit a repayment period in excess of five years
for loans made to a Participant or Beneficiary used to acquire a
dwelling unit which, within a reasonable time (determined at the
time the loan is made) will be used as a principal residence of the
borrower.
An assignment or pledge of any portion of the participant's interest
in the Plan will be treated as a loan under this paragraph.
(F) Each loan hereunder shall be made pro rata from the borrowing
Participant's available accounts and Investment Funds. Loan
repayments shall generally be made via payroll deduction, except
that the repayment of outstanding principal at maturity, in the
event the loan is called, or in the event the Participant chooses to
prepay the loan shall be made in such manner as the Committee shall
determine. Loan repayments and interest thereon shall be credited
to the Investment Funds and accounts in accordance with current
elections. No loan shall be considered a general investment of the
Trust Fund. Each loan shall be evidenced by a written agreement,
evidencing the Participant's obligation to repay the borrowed amount
to the Plan, in such form and with such provisions consistent with
this Section 11.10 as is acceptable to the Trustee. All loan
agreements shall be deposited with the Trustee.
(G) In the event a Participant does not repay the principal of such loan
or interest thereon at such times as are required by the terms of
the loan or if the Participant ceases to be an Employee while such
Participant has a loan made hereunder which is outstanding, the
Committee, in its discretion, may direct the Trustee to take such
action as the Committee may reasonably determine, including:
(1) demand repayment of the loan and, subject to Section 10.4(K),
institute legal action against the Participant to enforce
collection of any balance due from the Participant, or
(2) demand repayment of the loan, and charge the total amount of
the unpaid loan and unpaid interest against the balance credited
to the Participant's vested account balance which was assigned
as security for the loan and reduce any payment or distribution
from the Trust Fund to which the Participant or the
Participant's Beneficiary may become entitled to the extent
necessary to discharge the obligation on the loan.
Notwithstanding the foregoing provisions of this Paragraph (G), in
the event of default, foreclosure on the note and attachment of
security will not occur until a distributable event occurs in the
Plan.
(H) In the event the Committee fails or refuses for any reason to direct
the Trustee as provided in Paragraph (G) above or if the Trustee
otherwise reasonably concludes that the collectibility of a loan
hereunder is in jeopardy, the Trustee is authorized to take such
action as it may reasonably determine to enforce repayment and
satisfaction of the loan. The Employer shall be responsible for
costs and expenses incurred in collecting any loan balance.
(I) In the event that the amount of any payment or distribution from the
Trust Fund is insufficient to repay the balance due on any loan, the
Participant shall be liable for and continue to make repayments on
such balance.
(J) If a valid spousal consent has been obtained in accordance with
Paragraph (D), then, notwithstanding any other provision of this
Plan, the portion of the Participant's vested account balance used
as a security interest held by the Plan by reason of a loan
outstanding to the Participant shall be taken into account for
purposes of determining the amount of the account balance payable at
the time of death or distribution, but only if the reduction is used
as repayment of the loan. If less than 100% of the Participant's
vested account balance (determined without regard to the preceding
sentence) is payable to the surviving Spouse, then the account
balance shall be adjusted by first reducing the vested account
balance by the amount of the security used as repayment of the loan,
and then determining the benefit payable to the surviving Spouse.
ARTICLE XII
FAILURE TO ATTAIN OR RETAIN QUALIFIED STATUS
12.1 FAILURE TO QUALIFY AS A PROTOTYPE. This Plan is established with the
intent that it shall qualify under Section 401 of the Code and that it
shall comply with ERISA and all other applicable laws, regulations and
rulings. It may be modified and amended retroactively, if necessary, to
secure such qualification. Should the Internal Revenue Service determine
that this Plan does not qualify under the Code or any statute of similar
import, or fails or refuses to issue an opinion, and if the Plan is not
amended, as required to qualify, before the time allowed by law for the
Employer to file its corporate federal tax return for the taxable year in
which the Effective Date occurs, the Plan shall be considered to be
rescinded and of no force and effect. Any assets attributable to
contributions made by the Employer shall be returned to the Employer by
the Trustee as soon as administratively feasible. The Employer shall
refund to the Participant any contributions made by the Participant to
the Plan.
12.2 FAILURE OF EMPLOYER TO ATTAIN OR RETAIN QUALIFICATION. 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.
ARTICLE XIII
MISCELLANEOUS
13.1 EMPLOYER ACTION. Except as may be specifically provided herein, any
action required or permitted to be taken by the Employer may be taken on
behalf of the Employer by any officer of the Employer.
13.2 NO GUARANTEE OF INTERESTS. Neither the Trustee, the Employer nor any
other named fiduciary in any way guarantees the Trust Fund from loss or
depreciation, nor do they guarantee any payment to any person. The
liability of the Trustee, the Employer and a named fiduciary to make any
payments hereunder is limited to the available assets of the Trust Fund.
13.3 EMPLOYMENT RIGHTS. The Plan is not a contract of employment.
Participation in the Plan will not give any Participant the right to be
retained in the Employer's employ, nor any right or claim to any benefit
under the Plan, unless the right or claim has specifically accrued under
the Plan.
13.4 INTERPRETATIONS AND ADJUSTMENTS. To the extent permitted by law, an
interpretation of the Plan and a decision on any matter within a named
fiduciary's discretion made in good faith is binding on all persons. A
misstatement or other mistake of fact shall be corrected when it becomes
known and the person responsible shall make such adjustment on account
thereof as he or she considers equitable and practicable.
13.5 UNIFORM RULES. In the administration of the Plan, uniform rules will be
applied to all Participants similarly situated.
13.6 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person
acting on it considers pertinent and reliable and signed, made or
presented by the proper party or parties.
13.7 WAIVER OF NOTICE. Any notice required under the Plan may be waived by
the person entitled to notice.
13.8 CONTROLLING LAW. The law of the state where the Trustee is located shall
be the controlling state law in all matters relating to the Plan and
shall apply to the extent that it is not preempted by the laws of the
United States of America.
13.9 TAX EXEMPTION OF TRUST. The trust herein created is designated as
constituting a part of a Plan intended to qualify under Sections 401(a)
of the Code and to be tax- exempt under Section 501(a) of the Code.
13.10 COUNTERPARTS. The Plan may be executed in two or more counterparts, any
one of which will be an original without reference to the others.
13.11 ANNUAL STATEMENT OF ACCOUNT. The assets of the Trust Fund will be
valued annually at fair market as of the last day of each Plan Year. On
such date the earning and losses of the Trust Fund will be allocated to
each Participant's accounts in the ratio that such account balance bears
to all account balances. The Trustee will deliver to the Employer a
statement of each Participant's account balances as of the last day of
Plan Year.
13.12 NO DUTY TO INQUIRE. No person shall have any duty to make any inquiry
as to the application or use of the Trust Fund, or any part thereof, or
to inquire into the validity, expediency or propriety of any matter or
thing done or proposed to be done by the Trustee.
13.13 INVALIDITY. In case any provisions of this Plan shall be invalid, this
fact shall not affect the validity of any other provision.
13.14 TITLES. Titles to Articles and Sections are for convenience only and
shall have no bearing upon the construction or interpretation of this
Plan.
13.15 NO DUTY OF TRUSTEE TO COLLECT CONTRIBUTIONS. The Trustee shall be
accountable for all contributions received but shall have no duty to
require any contributions to be delivered or to determine if the
contributions received comply with the Plan or with any Board of
Directors resolution of the Employer providing for contributions.
13.16 TRUSTEE DISTRIBUTES BY COMMITTEE DIRECTION. The Trustee shall make
distributions only through Committee direction. The Trustee shall have
no responsibility to see how distributions are applied or to ascertain
whether the Committee's directions comply with the Plan. Notwithstanding
anything in the Plan to the contrary, payments made in accordance with
these provisions will continue only so long as amounts remain in the
Participant's accounts.
ARTICLE XIV
AMENDMENT OR TERMINATION
14.1 AMENDMENT BY THE SPONSOR. Society National Bank, the sponsoring
organization, reserves the right without being required to obtain the
approval of the Employer to amend any part of the Plan from time to time,
subject to the provisions of Article XII, Section 14.2 and the following:
(A) Except as provided in Section 14.1(B) and (C), no amendment shall
become effective until at least thirty (30) days' prior written
notice (unless the Employer agrees to shorter notice) has been given
to the Employer, nor shall any such amendment reduce Participants'
benefits to less than the benefits to which they would have been
entitled if they had resigned from the employ of the Employer on the
effective date of the amendment;
(B) An amendment of the Plan and Trust which the sponsor deems necessary
to enable the Plan and Trust to meet the requirements of Section
401(a) of the Code may be made effective as of the date the Plan and
Trust was established by the sponsor or as of any subsequent date;
(C) An amendment of the Plan and Trust to conform the Plan and Trust to
any change in the law, regulations or rulings of the United States
may take effect as of the date such amendment is required to be
effective. Any amendment executed pursuant to the provisions of this
Section 14.1 shall be executed by an authorized officer of the
sponsor, or its successor. For purposes of this Section 14.1, the
Employer shall be deemed to have been furnished a copy of any
amendment on the business day next following the mailing by the
sponsor or the Trustee.
14.2 AMENDMENT BY ADOPTING EMPLOYER. 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 Section 415
or Section 416 of the Code 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 requirement under Section 412(d) of the Code, will no longer
participate in this Master or Prototype Plan and will be considered to
have an individually designed Plan.
14.3 VESTING - PLAN TERMINATION. In the event of termination or partial
termination of the Plan, the account balance of each affected Participant
will be nonforfeitable.
14.4 VESTING - COMPLETE DISCONTINUANCE OF CONTRIBUTIONS. In the event of a
complete discontinuance of contributions under the Plan, the account
balance of each affected Participant will be nonforfeitable.
14.5 PLAN MERGER - MAINTENANCE OF BENEFIT. In the event of a merger or
consolidation with, or transfer of assets to any other Plan, each
Participant will receive a benefit immediately after the merger,
consolidation or transfer (if the Plan then terminated) which is at least
equal to the benefit the Participant was entitled to immediately before
such merger, consolidation or transfer (if the Plan had then terminated).
14.6 DIRECT TRANSFER. In its discretion, the Trustee may accept the direct
transfer of Plan assets from the trustee of other retirement plans
described in Code Section 401(a). If the Plan receives a direct transfer
of elective deferrals (or amounts treated as elective deferrals) under a
Plan with a Code Section 401(k) arrangement, the distribution restrictions
of Code Sections 401(k)(2) and (10) continue to apply to those transferred
elective deferrals.
14.7 TERMINATION OF PARTICIPATION BY EMPLOYER. The Employer expects to
continue its participation in this Plan indefinitely but reserves the
right to terminate this Plan as to its Employees at any time by written
instrument filed with the Trustee. In the event of such termination,
partial termination or complete discontinuance of contributions, or
termination as provided in Section 13.3, the account balance of each
affected Participant will be nonforfeitable. Distribution to Participants
who have theretofore become entitled to the payment of any benefits
hereunder or to Spouses or Beneficiaries of deceased Participants shall be
made in the same manner as if the Employer's participation had not
terminated or contributions had not been discontinued.
The account(s) of each such Participant, in the event of payment in other
than a single sum, need not be converted into cash, but may continue to
remain in the trust, with a right and obligation thereafter to participate
in the net earnings, losses, taxes and expenses of the trust.
If any Participant shall die after the termination of the Employer's
participation and before all of said Participant's interest has been paid,
then, upon the written direction of Employer, the entire undistributed
portion shall be paid in a single sum to the Participant's Beneficiary.
In the event of complete discontinuance of contributions, the Employer
shall terminate this Plan as to its Employees and each Participant's
interest shall be distributed to such Participant.
14.8 NOTICE OF AMENDMENT, TERMINATION OR PARTIAL TERMINATION. The Committee
will notify affected Participants of an amendment, termination or partial
termination of the Plan within a reasonable time.
14.9 SUBSTITUTION OF TRUSTEE. Any corporation or association into which the
Trustee may be converted, merged or with which it may be consolidated, or
any corporation or association resulting from any conversion, merger,
reorganization or consolidation to which the Trustee may be a party, shall
be the successor of the Trustee hereunder without the execution or filing
of any instrument or the performance of any further act.
ARTICLE XV
DISCHARGE OF DUTIES BY FIDUCIARIES
15.1 DISCHARGE OF DUTIES. Subject to the provisions of Articles IX and X, the
Named Fiduciaries and any other fiduciary shall discharge their respective
duties set forth in the Plan solely in the interest of the Participants
and their Spouses and Beneficiaries and:
(A) for the exclusive purpose of:
(1) providing benefits to Participants and their Spouses and
Beneficiaries; and
(2) defraying reasonable expenses of administering the Plan;
(B) with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in a like capacity and
familiar with such matters would use in the conduct of an enterprise
of a like character and with like aims; and
(C) by diversifying the investments of the Plan so as to minimize the
risk of large losses, unless under the circumstances it is clearly
prudent not to do so.
ARTICLE XVI
AMENDMENT AND CONTINUATION OF ORIGINAL PLAN
16.1 AMENDMENT AND CONTINUATION. Notwithstanding any of the foregoing
provisions of the Plan to the contrary, an Employer which has previously
established a profit sharing Plan and trust or money purchase pension Plan
and trust, as applicable, (the "Original Plan") may, in accordance with
the provisions of the Original Plan, amend and continue that Plan in the
form of this Plan and Trust and become an Employer hereunder, subject to
the following:
(A) Subject to the conditions and limitations of the Plan, each person
who is a Participant or former Participant under the Original Plan
immediately prior to the Effective Date of the amendment and
continuation thereof in the form of this Plan will continue as a
Participant under this Plan;
(B) The words "Original Plan" shall be substituted for the word "Plan"
where the word appears in Section 2.2 of the Plan;
(C) No election may be made in the Adoption Agreement if such election
will reduce the benefits of a Participant under the Original Plan to
less than the benefits to which he would have been entitled if he had
resigned from the employ of the Employer on the date of the amendment
and continuation of the Original Plan in the form of this Plan;
(D) The amounts, if any, credited to a Participant's or former
Participant's accounts, immediately prior to the Effective Date of
the amendment and continuation of the Original Plan in the form of
this Plan shall constitute the opening balances in his or her
accounts, as appropriate, under this Plan and Trust;
(E) Amounts being paid to a former Participant or Beneficiary in
accordance with the provisions of the Original Plan shall continue
to be paid in accordance with such provisions; and
(F) Any Beneficiary designation in effect under the Original Plan
immediately before its amendment and continuation in the form of
this Plan shall be deemed to be a valid Beneficiary designation
filed with the Employer under Section 7.7 of this Plan, to the
extent consistent with the provisions of this Plan, unless and until
the Participant or former Participant revokes such Beneficiary
designation or makes a new Beneficiary designation under this Plan.
IN WITNESS WHEREOF, Society National Bank has established this prototype
Plan as of the 24th day of March, 1995.
SOCIETY NATIONAL BANK
By:
Title: Senior Vice President and General Counsel
FUNDING POLICY
This Funding Policy, adopted by the Employer for the Plan hereinabove named,
has been established and delivered to the Trustee of the Plan for the express
purpose of conforming to the Employee Retirement Income Security Act of
1974, and to establish and identify certain corporate decisions and policies
of the Employer respecting the source of Plan funding, the funding mechanisms,
and broad investment considerations for the information of all parties in
interest and for the information and guidance of the Trustee.
A. Source of Funding: The Employer intends to fund the
Plan by making periodic contributions to the Plan and
Trust pursuant to a specified allocation formula.
B. Funding Mechanisms: The Employer, having considered
various alternative funding mechanisms has determined
that this Plan shall be fully Trusted.
C. Composition Of Contribution: The Employer intends to
fund this Plan with deposits of cash.
D. Investment Considerations: Pursuant to the provisions
of the Plan, the Employer has selected from one to ten
investment vehicles offered by the Trustee (which may
include registered open-end investment companies/mutual
funds) from which the participants will be able to
direct the investment of funds in their accounts held
by the Trustee of the Plan. The Employer shall
periodically review the selection of funds offered for
participant investment options and may direct the
Trustee, from time to time, consistent with the terms
of the Plan to add, eliminate, or substitute other such
funds as may be appropriate for purposes of assuring
the safety of principal and to accomplish plan goals.
E. Review Of Funding Policy: The Employer will review
with the Trustee the provisions of this policy, the
objectives and characteristics of the Plan, and the
statement of investment policy, of the Trustee at least
annually prior to each Employer contribution to the
Plan.
The requirements for benefit payments under this Plan being
affected directly by various unpredictable factors, creating
the need for lump sum payments, from time to time,
investments shall be limited to readily marketable
securities and such investments shall be amply diversified
to minimize risk and better provide for an attractive,
reliable investment yield.
Advance notice of predictable benefit payment requirements
shall be communicated to the Trustee to better permit
conversion of securities to provide cash for such purposes.
Plan Sponsor: Shopsmith Inc.
By:
Date William C. Becker, Vice President, Finance
Trustee: Key Trust Company of Ohio, N.A.
3-12-97 /s/ Brian J Vallo
Date Brian J. Vallo, Trust Officer
DIRECTED ACCOUNT PROPRIETARY FUNDS LETTER
FUND LEVEL FEES (NON-DISCRETIONARY)
To: Key Trust Company of Ohio, N.A., a KeyCorp Affiliate, KeyBank National
Association("Key"), KeyCorp Mutual Fund Advisers, Inc. ("Key Advisers").
I am aware that The Victory Portfolios ("Victory Portfolios") for which Key
Advisers, a subsidiary of KeyBank National Association, a KeyCorp Bank, is
currently the investment advisor, is a registered, open-end management
investment company, commonly called a mutual fund, that offers investors a
selection of various portfolios. The Distributor, Sponsor and Administrator
of the Victory Portfolios are as described in the prospectuses provided with
this letter. The Plan identified below (the "Account") is not managed by
any KeyCorp Bank, Key, Key Advisers, or their affiliates.
The undersigned is the named fiduciary authorized to make investment decisions
on behalf of the Account and has received and read prospectuses for the
Victory Portfolios, including the portions of the prospectuses describing
investment advisory fees which may be paid to Key Advisers, or its affiliates
by the Victory Portfolios and the additional fees described in the prospectuses
under the sections entitled "Summary of Fund Expenses" and "Fund Organization
and Fees" including the subheadings "Shareholder Servicing Agent" and
"Custodian". Key or its affiliates may receive fees for services from The
Victory Portfolios as disclosed in the prospectuses. While no charges will be
assessed to the Account for redeeming shares in any of the Victory
Portfolios and commission (load) charges will be waived, the investment
advisory and other fees described in the prospectuses which Key Advisers,
Key, or their affiliates will receive as a result of monies from the
Account being invested in any of the Victory Portfolios, will be paid by
the Victory Portfolios as described in the prospectuses and will not be
credited back to the Account. In addition, other fees will continue to be
charged to the Account according to the current fee schedule for the Account.
The Victory Portfolios provide all the benefits of mutual fund investing. These
benefits include: daily valuation; listing of fund performance in most
newspapers; portability of funds by plan participants through retention or
direct transfer of shares to a successor plan; consistent and accurate
performance reporting as required by law; frequent and detailed information
about the Victory Portfolios through annual reports, semi-annual reports and
prospectuses.
Shares of the Victory Portfolios are not insured by the FDIC, are not deposits
or other obligations of, or guaranteed by, any KeyCorp Bank or KeyCorp Mutual
Fund Advisers, Inc. ("Key Advisers"), and are subject to investment risk,
including possible loss of the principal amount invested.
Shares of The Victory Portfolios are not insured or guaranteed by the U.S.
Government, or any government agency, or government-sponsored agency of the
Federal Government, or of any state.
NAME OF PLAN
Shopsmith Inc. Savings Plan
After reading the above and the accompanying prospectuses
for the Victory Portfolios, the undersigned directs the
investment of the Account in shares of the Victory
Portfolios listed below. The undersigned understands and
agrees that the investment advisory and the additional fees
described in the prospectuses under the sections entitled
"Summary of Fund Expenses" and "Fund Organization and Fees"
including the subheadings "Shareholder Servicing Agent" and
"Custodian" will be paid by the Victory Portfolios in
addition to the other regular fees charged to the Account
under the current fee schedule for the Account. This
direction supplements our current agreement and shall
continue in full force and effect until it is revoked in
writing or by telephone to the Account's administrative
officer, followed within five business days with written
notice.
3/18/97 /s/ William Becker
Date By: William C. Becker, Vice President, Finance
List of the Funds in The Victory Portfolios to be selected:
Victory Financial Reserves
Victory Diversified Stock
KeyChoice Income and Growth
KeyChoice Moderate Growth
KeyChoice Growth
Key Advisers, a subsidiary of KeyBank National Association,
a KeyCorp Bank, is the investment advisor to The Victory
Portfolios. The Victory Portfolios are distributed by BISYS
Fund Services, which is not affiliated with KeyCorp or any
of its affiliates. Key Advisers, KeyBank National
Association, or their affiliates, receive fees for their
services from The Victory Portfolios, as disclosed in the
prospectuses.
LOAN POLICY
For administrative convenience, in accordance with 11.10 of
Shopsmith Inc. Savings Plan ("Plan"), the Committee adopts
the following policies to govern the administration of loans
to Participants from the Plan. All capitalized terms in
this policy statement shall have the meaning given to them
in the Plan.
1. Applications. Applications from Participants shall be
made in writing on a form supplied by the Committee,
must be signed by the Participant and be submitted to
the Committee or its designee no later than the 15th day
prior to the date the loan is to be made. The
application of a married Participant for a loan shall
include the written consent of his or her spouse to use
the account balances of the Participant as security for
the loan. Spousal consent shall be obtained no earlier
than the beginning of the ninety (90) day period that
ends on the date the loan is to be made. Consent must
be made in writing and must be witnessed by a member of
the Committee or its designee, or be notarized.
2. Review and Approval. Application for loans will be
reviewed as soon as practicable by the Committee.
Incomplete applications, including those which do not
evidence spousal consent, will be denied. Complete
applications will be approved and the loan will be
granted under such terms and conditions as the Committee
deems reasonable, in the best interests of the Plan and
its Participants, and subject to such conditions as the
Committee believes necessary to protect the Plan's
interests and obtain repayment of the loan, if under all
the facts and circumstances, it appears to the Committee
that the Participant has the ability to timely satisfy
his or her obligation to repay the loan to the Plan.
3. Loan Terms. Notwithstanding any other provision of this
policy statement, all loans granted from the Plan shall
be subject to the following:
a. No loan shall be granted in an amount less than $1,000, nor greater than
the limit specified in 11.10 (E) of the Plan;
b. All loans will be secured by an assignment, pledge or other security
interest in the Participant's vested account balances and such other
security as the Committee may deem necessary to adequately protect the
interests of the Plan as may be agreed to by the Trustee. Each loan
granted from the Plan shall contain terms that allow the Committee to
demand additional security for a loan in the event the original security
is deemed by the Committee, in its sole and absolute discretion, to be
insufficient to protect the interests of the Plan;
c. A Participant may have no more than one loan outstanding at any given
time, as determined by the Committee;
d. Loans shall bear a reasonable rate of interest as determined
by the Trustee at the time of granting the loan. The Trustee shall
determine an interest rate commensurate with interest rates charged by
the Trustee or any affiliate of the Trustee in the business of lending
money, for loans which would be made under similar circumstances;
e. Loans made to Participants who are employed by the Employer
shall be repaid by automatic payroll deduction, in equal per pay
installments, consisting of principal and interest, over a term
determined by the Committee not to exceed five years with the exception
of loans for the purpose of purchasing a principal residence of
a Participant, which shall be for a term not to exceed 15 years.
Loans made to Participants who are not employed by the Employer
shall be repaid in equal monthly installments consisting of principal
and interest over a term determined by the Committee, not to exceed
five years;
f. No loan shall be made to any Participant until the Participant
has been provided with the appropriate disclosure documents required
under the Federal Truth-in-Lending Act (15 U.S.C. 1601 et. seq.)
and Regulation Z promulgated thereunder, and the Participant
acknowledges in writing receipt of all such disclosure documents;
g. All loans will be evidenced by a promissory note or such other
appropriate documents, which shall contain such provisions as the
Trustee deems advisable to protect the interests of the Plan and its
Participants. Notwithstanding the foregoing, in the event of any
default which the Trustee, pursuant to the provisions of the Plan,
attempts to collect through legal action, the Trustee in its sole
discretion as a fiduciary of the Plan may elect to waive any
provision in the loan documents. All original loan documents shall
be assets of the Trust and shall be held by the Trustee until such
time as the loan obligation is satisfied in whole;
h. Notwithstanding anything to the contrary in this policy
statement, any Participant shall have the right to prepay any loan
from the Plan in whole or in part at any time by remitting such
prepayment to the Trustee.
4. Default. Default shall be defined as the failure of any
Participant to comply with the terms of any loan from the Plan which
shall continue uncollected for a period of thirty (30) days, or such
longer period of time as the Committee may specify, based on the facts and
circumstances of each such case, as may be necessary to cure any default
and is in the best interest of the Plan and its Participants. Upon
default the Committee shall:
a. Direct the Trustee to commence appropriate action to collect
the entire balance of the defaulted loan, including but not limited
to seeking legal recourse and executing against any security or
collateral securing the loan which is not a Plan asset;
b. Direct the Trustee to deem the defaulted loan and any interest
accruing thereon a distribution to the Participant, to the extent
allowed by law;
c. Direct the Trustee to withhold from any distribution due to
the defaulting Participant the amount necessary to satisfy the
defaulted obligation, including accrued interest; and
d. Take such other steps as the Committee may deem appropriate to
protect the interest of the Plan and its Participants.
Nothing contained in this policy statement shall be construed to
modify any provision of the Plan. In administration of the loan
program the Committee shall treat similarly situated Participants in
as similar a manner as possible, subject to the creditworthiness of
the applying Participants.
In Witness Whereof, the Committee hereby adopts this policy this
12 day of March, 1997.
Key Trust Company of Ohio, N.A. Shopsmith Inc.
/s/ Brian J. Vallo /s/ William Becker
Brian J. Vallo William C. Becker
Trust Officer Vice President, Finance
SERVICE AGREEMENT
ENROLLMENT SERVICES
N/A Travel and expenses
N/A Customized enrollment package -- quoted fee
[X] An Administrative Services manual will be provided at no cost
ADDITIONAL ENROLLMENT SERVICES AND UNDERSTANDINGS
ADMINISTRATIVE SERVICES
All administrative service fees will be guaranteed for 2 year
from the effective date of the plan. The following services will
be provided at $33 per participant or a minimum fee of $4,000 and
set-up fee (for Prototype Plans) of $1,000.
[X] Complete trustee services
[X] Daily fund and account valuation
[X] Daily fund transfers
[X] Daily fund distributions
[X] Daily participant telephone inquiry and transaction processing
[X] Monthly employer transaction and asset reports, referred to as
"Flash Reports"
[X] Annual certified trustee reports, referred to as the "R-040"
[X] Quarterly newsletter mailed with participant statements within 20
business days of the quarter end
[X] Quarterly Investment Return Information and Economic Review
[X] Compliance testing - See Addendum
[X] Continuous tracking of deferral limits
[X] Up to ten investment options from eligible fund families including
three lifestyle funds
[X] Publicly traded company stock may be the eleventh investment option
[X] Preparation and mailing of IRS Form 945 and magnetic filing of IRS
Form 1099 to participants receiving distributions
[X] Forfeiture processing
[X] Maintenance of PRISM(registered trademark) Prototype Plan Documents
[X] Conversion of existing recordkeeping data when in good order
N/A Telephone Enrollment
Additional administrative services and understandings
Additional PRISM(registered trademark) Services Include:
-Additional ADP/ACP testing $500.00 each additional test
-Leveling of failed ADP/ACP test $25.00 per refund check
-Current GIC's held to maturity $500.00 annually for each contract held
-Custom Enrollment Package quoted fee
-Non-electronic contribution processing $2.00 per participant
-Company Stock 25 basis points
-Annual proxy solicitation $2.00 per participant
-Investment offerings in excess of $1,000 per extra fund set-up charge
ten mutual funds $500.00 per year per extra fund offered
-Processing of payroll tapes in $50.00 per excess tape
excess of 8 per month
-One outstanding loan per participant $50.00 set-up fee
-Other services requested by the $80.00 per hour
prospect not detailed here
Additional services and understandings
This is not complete but only highlights the services that will be provided
to the Plan and it's Participants.
ACCEPTED BY ACCEPTED BY
KEYCORP SHOPSMITH INC.
02-10-97 /s/ Brian Vallo 02-10-97 /s/ Chuck Hofmann
Date Brian J. Vallo Date Chuck Hofmann
Trust Officer Treasurer
ADDENDUM
COMPLIANCE
[X] ADP/ACP Testing
Semi-annual ADP/ACP Testing will be performed at mid-year and
year-end for all clients. (See fee schedule for charges to
Level III accounts)
[X] Top-Heavy (Sec. 416) Testing
This test will be performed annually for those clients not
maintaining any other plans that must be aggregated with the
PRISM(registered trademark) plan. (Appropriate data will
be provided to the Plan Sponsor or to the other service provider
to complete this test when multiple plans are valued.)
[X] Determination Letters
For standardized prototype plans, only a Notice to Interested Parties
is required to be prepared. (The PRISM(registered trademark)
standardized prototype plan may only be used if the sponsor
currently does not or never maintained a defined benefit plan.)
For non-standardized prototype plans, determination letter
applications will be prepared, as required by IRS.
Determination letter applications will not be filed for
individually drafted plans.
[X] Summary Plan Descriptions
will be prepared for all PRISM(registered trademark) prototype plans
[X] IRS Form 5500
IRS Form 5500 will be prepared for all clients (in cooperation with the
plan's auditors, where appropriate)
[X] 410(b) Coverage Testing
[X] 401 (a)(26) Minimum Participation
SPECIMEN SIGNATURES
CERTIFIED SIGNATURES OF THOSE WHO HAVE AUTHORITY TO COMMUNICATE
INSTRUCTIONS TO KEY TRUST COMPANY OF OHIO, N.A. AS TRUSTEE FOR THE
Shopsmith Inc. Savings Plan
TYPE NAME AND TITLE SIGNATURE
1. NAME John R. Folkerth, Sr. 1. /s/ John R. Folkerth
TITLE President
2. NAME William C. Becker 2. /s/ William Becker
TITLE Vice President, Finance
3. NAME Chuck Hofmann 3. /s/ Chuck Hofmann
TITLE Treasurer
4. NAME 4.
TITLE
EXHIBIT 11.1
SHOPSMITH, INC. AND SUBSIDIARIES
COMPUTATION OF CONSOLIDATED OPERATIONS PER COMMON SHARE FOR THE THREE
YEARS ENDED April 5, 1997, March 30, 1996, AND April 1, 1995
1997 1996 1995
Net income applicable to shares $ 1,802,558 $ 3,027,714 $ 1,420,747
Weighted average number of
common shares outstanding 2,743,314 2,677,826 2,558,182
Income per common share $ 0.66 $ 1.13 $ 0.56
NOTE: The difference between fully diluted and primary
earnings is not material.
EXHIBIT 13.1
Shopsmith, Inc.
Annual Report to Shareholders
For the Year Ended
April 5, 1997
SHOPSMITH, INC. AND SUBSIDIARIES
Financial Highlights: ..Fiscal Years Ended..
April 5, March 30, April 1,
1997 1996 1995
Results of operations
Net sales $ 18,469,161 $ 17,409,832 $ 17,728,890
Income before income taxes and
extraordinary item 1,802,558 1,513,890 1,420,747
Income tax benefit - 743,000 -
Income before extraordinary item 1,802,558 2,256,890 1,420,747
Extraordinary item - 770,824 -
Net income 1,802,558 3,027,714 1,420,747
Per share of Common Stock:
Income before income taxes and
extraordinary item $ 0.66 $ 0.57 $ 0.56
Income before extraordinary item 0.66 0.84 0.56
Extraordinary item - 0.29 -
Net income 0.66 1.13 0.56
Shareholders' equity (deficit) 1.32 0.68 (0.46)
Dividends - - -
Financial position:
Working capital $ 2,507,407 $ 634,742 $ (917,834)
Total assets 6,548,821 5,024,214 4,415,344
Long-term debt - - 923,024
Shareholders' equity (deficit) 3,620,746 1,809,480 (1,224,699)
Current ratio 1.86 1.20 0.81
Total debt to equity ratio 0.81 1.78 N/A
Common shares outstanding 2,663,675 2,659,175 2,654,566
Contents
Letter to Shareholders 3
Reporting responsibility 5
Report of Independent Auditors 6
Consolidated Financial Statements 7
Notes to Consolidated Financial Statements 12
Management's Discussion and Analysis 20
Selected Financial Data 22
Shareholders' Information 23
Directors and Officers 24
Corporate Profile
Headquartered in Dayton, Ohio, Shopsmith, Inc. is recognized as a leader in
the production and marketing of quality woodworking tools. The Company
distributes these tools and other woodworking products directly to consum- ers
through demonstration and mail selling channels. The name "Shopsmith" is a
registered trademark which the Company applies to the majority of the products
it produces. The Company's common shares are traded in the over- the-counter
market.
To Our Shareholders:
I am very pleased to report that our fiscal 1997 was a year of increased
success for Shopsmith. Earnings before taxes and extraordinary items was
$1,803,000 or $.66 per share in the year ended April 5, 1997 compared to
$1,514,000 or $.57 per share last year. In fiscal 1996, we realized an
extraordinary gain of $771,000 or $.29 per share from an early debt repay- ment
and an income tax benefit of $743,000 or $.27 per share because of a reduction
in the deferred tax valuation allowance in accordance with cur- rent
accounting rules. These two items moved net income last year to $3,028,000 or
$1.13 per share against net income of $1,803,000 or $.66 per share in the
current year.
Revenues increased by 6% in fiscal 1997 to $18,469,000 from $17,410,000 last
year. Equally important, our gross margin rate climbed from 52% in fiscal 1996
to 55% in the current year. The increased sales and the im- proved margin rate
combined to increase gross margin by $1,091,000 or 12% in the current year when
compared to last year. The demonstration sales effort was primarily
responsible for these improvements which it achieved by reinvesting a portion
of the enhanced margins in increased advertising effort.
We continued during the year to focus on our core selling effort, the dem-
onstration sales of our multi-purpose woodworking tool. To enhance this
effort's effectiveness we:
* Developed improved methods for identifying promising selling venues.
* Refined the placement of television advertising and that of other media.
* Developed improved sales representative training and coaching.
* Increased the number of demonstration sales events, most particularly in
areas of our market that have not recently been visited by our selling staff.
In addition to the improvements in our demonstration sales efforts, we ini-
tiated a telephone sales solicitation program which has begun to show suc-
cess. Telephone sales representatives contact potential customers who have
responded to mail, television or other forms of advertising. Our mail sales
and factory showroom efforts also performed well this year. Strong sales
results were coupled with continued improvements in quality and pro- ductivity
as we further refined our production and administrative efforts.
Profitable operations in fiscal 1997 caused net worth to increase to more than
$3.6 million. This net worth level allows Shopsmith to meet one of the
requirements (net worth in excess of $3 million) for quotation on the NASDAQ
SmallCap market (an automated system established to serve the needs of smaller
firms and their shareholders). The remaining requirement that the Company
needs to attain is for our stock bid price to exceed $3 for at least 30 days
prior to listing.
The positive cash flow provided by our operations beyond that needed for
equipment repair and replacement, has permitted the Company to begin look- ing
at investment opportunities. We have begun delivering the first new product
developed since our 1994 turnaround. This item, an oscillating drum sander
attachment for the Mark V, allows the woodworker to sand curved edges much more
effectively and with less chance of burning the wood than does a fixed drum
sander.
Longer term, we are exploring alternatives for using the cash-generating
capacity of our core demonstration sales business as a base for expansion into
related fields. Our intent is to experiment with several opportuni- ties on a
small scale and then to more fully exploit those that have proven successful.
We are delighted that fiscal 1997 was such a successful year for our Com-
pany. We are investing in the future of the business to hopefully continue
the trend of increasing profits that we have enjoyed for the past three
years. We remain focused on providing our owners with an attractive return
and a positive future. I thank all those who have helped us progress in-
cluding our associates, vendors, customers and lenders.
John R. Folkerth
Chairman of the Board
Chief Executive Officer
REPORTING RESPONSIBILITY
Shopsmith's management is responsible for the preparation and integrity of the
consolidated financial statements presented in this Annual Report. These
statements have been prepared in conformity with generally accepted accounting
principles using the best estimates and judgments of management.
Management believes that the Company's accounting control systems provide
reasonable assurance that assets are safeguarded and that financial infor-
mation is reliable.
Independent public accountants are selected annually by the Board of Direc-
tors, subject to approval by shareholders, to audit the financial state-
ments. Their audit included a review of the internal control structure to the
extent they considered necessary and selective tests of transactions to
support their report which follows.
The Audit Committee, comprised of outside directors, meets regularly with
management and the independent public accountants to review financial re-
porting, internal accounting controls, and audit results.
William C. Becker,
Vice President of Finance
Chief Financial Officer
John R. Folkerth,
Chairman of the Board
Chief Executive Officer
Crowe Chizek
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Shopsmith, Inc.
Dayton, Ohio
We have audited the accompanying consolidated balance sheets of Shopsmith,
Inc. and Subsidiaries as of April 5, 1997 and March 30, 1996 and the related
statements of operations, changes in shareholders' equity (deficit), and cash
flows for the years ended April 5, 1997, March 30, 1996 and April 1, 1995.
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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Shopsmith, Inc. and Subsidiaries as of April 5, 1997 and March 30, 1996 and
the consolidated results of their operations and their cash flows for the
years ending April 5, 1997, March 30, 1996 and April 1, 1995, in conformity
with generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
June 3, 1997
SHOPSMITH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
..Fiscal Years Ended..
April 5, March 30, April 1,
1997 1996 1995
Net sales $ 18,469,161 $ 17,409,832 $ 17,728,890
Cost of products sold 8,395,103 8,426,553 9,352,210
Gross margin 10,074,058 8,983,279 8,376,680
Selling expenses 5,729,345 4,770,037 4,415,639
Administrative expenses 2,671,917 2,723,534 2,504,835
Total operating expenses 8,401,262 7,493,571 6,920,474
Income from operations 1,672,796 1,489,708 1,456,206
Interest income 72,676 30,893 18,351
Interest expense (614) (32,678) (118,904)
Other income, net 57,700 25,967 65,094
Income before income taxes and
extraordinary item 1,802,558 1,513,890 1,420,747
Income tax benefit (Note 8) - 743,000 -
Income before extraordinary item 1,802,558 2,256,890 1,420,747
Extraordinary item- gain from
extinguishment of debt
(Notes 4 and 6) - 770,824 -
Net income $ 1,802,558 $ 3,027,714 $ 1,420,747
Income per common share:
Before extraordinary item $ 0.66 $ 0.84 $ 0.56
Extraordinary item - 0.29 -
Net income $ 0.66 $ 1.13 $ 0.56
See notes to consolidated financial statements
SHOPSMITH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 5, March 30,
1997 1996
ASSETS (Notes 1 and 3)
Current Assets:
Cash (Note 2) $ 1,106,873 $ 560,201
Restricted cash (Note 2) 114,151 314,635
Short-term investments (Note 2) 1,513,397 740,871
Accounts receivable:
Trade, less allowance for doubtful accounts:
$342,617 in 1997 and $235,007 in 1996 419,101 292,694
Inventories (Note 2):
Finished products 562,346 594,487
Raw materials and work in process 1,105,712 916,472
Total inventories 1,668,058 1,510,959
Deferred income taxes (Note 8) 284,000 253,000
Prepaid expenses 329,902 177,116
Total current assets 5,435,482 3,849,476
Properties (Notes 2 and 6):
Machinery, equipment and tooling 6,841,126 6,762,942
Leasehold improvements 190,835 190,835
Total cost 7,031,961 6,953,777
Less accumulated depreciation and
amortization 6,507,780 6,345,197
Net properties 524,181 608,580
Deferred income taxes (Note 8) 587,000 563,000
Other assets 2,158 3,158
Total assets $ 6,548,821 $ 5,024,214
Continued
SHOPSMITH INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 5, March 30,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,179,261 $ 847,750
Capital lease obligations-current - 4,881
Customer advances 58,940 53,921
Accrued liabilities:
Compensation, employee benefits and
payroll taxes 860,994 812,299
Sales tax payable 148,703 152,632
Accrued recourse liability 145,511 352,872
Accrued expenses 413,648 806,036
Other 121,018 184,343
Total current liabilities 2,928,075 3,214,734
Contingencies (Note 9)
Shareholders' Equity (Notes 1 and 7):
Preferred shares- without par value;
authorized 500,000, none issued - -
Common shares- without par value;
authorized 5,000,000; issued and
outstanding 2,663,675 in 1997 and
2,659,175 in 1996 2,993,633 2,984,925
Retained earnings (deficit) 627,113 (1,175,445)
Total shareholders' equity 3,620,746 1,809,480
Total Liabilities and Shareholders' Equity $ 6,548,821 $ 5,024,214
See notes to consolidated financial statements.
SHOPSMITH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS'
EQUITY (DEFICIT)
Retained
Common shares Earnings
Number Amount (Deficit) Total
Balance, April 2, 1994 2,398,244 $ 2,821,097 $ (5,623,906) $ (2,802,809)
Net income for fiscal 1995 1,420,747 1,420,747
Common shares issued
under employee stock
purchase plan (Note 7) 205,600 129,184 129,184
Common shares issued
to employee benefit plans 50,722 28,179 28,179
Balance April 1, 1995 2,654,566 2,978,460 (4,203,159) (1,224,699)
Net income for fiscal 1996 3,027,714 3,027,714
Common shares issued
under employee stock
purchase plan (Note 7) 3,800 6,465 6,465
Stock options exercised (Note 7) 809 - -
Balance March 30, 1996 2,659,175 2,984,925 (1,175,445) 1,809,480
Net income for fiscal 1997 1,802,558 1,802,558
Common shares issued
under employee stock
purchase plan (Note 7) 4,500 8,708 8,708
Balance April 5, 1997 2,663,675 $ 2,993,633 $ 627,113 $ 3,620,746
See notes to consolidated financial statements
SHOPSMITH INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Fiscal Years Ended
April 5 March 30, April 1,
1997 1996 1995
Cash flows from operating activities:
Net income $1,802,558 $3,027,714 $1,420,747
Adjustments to reconcile net income to
cash provided from operating activities:
Depreciation and amortization 212,203 212,663 309,490
Provision for doubtful accounts 135,122 263,445 156,791
(Gain) loss on disposal of properties (9,911) - 29,353
Decrease in reserve for excess inventory - - (555,076)
Decrease in restructuring reserve - (294,229) (1,471,227)
Deferred income taxes (55,000) (816,000) -
Gain on extinguishment of debt - (770,824) -
Cash provided from (required for) changes
in assets and liabilities
Restricted cash 200,484 35,614 (350,249)
Accounts receivable (261,529) 138,964 13,886
Inventories (157,099) 223,208 2,951,232
Other current assets (152,786) (16,883) 395,976
Other assets 1,000 - 38,410
Accounts payable and customer advances 336,530 (997,807) (263,922)
Other current liabilities (618,308) 227,512 (634,249)
Cash provided from operating activities 1,433,264 1,233,377 2,041,162
Cash flows from investing activities:
Maturity of short-term investments 750,000 750,000 -
Purchase of short-term investments (1,522,526) (748,912) (741,959)
Property additions (127,804) (208,242) (287,935)
Proceeds from sale of property 9,911 - 3,500
Cash used in investing activities (890,419) (207,154) (1,026,394)
Cash flows from financing activities:
Common shares issued 8,708 6,465 157,363
Decrease in term loan - (323,310) (354,404)
Decrease in accounts payable long-term - (496,649) (1,147,402)
Decrease in capital lease obligations (4,881) (13,443) (58,663)
Cash provided from (used in) financing activities 3,827 (826,937) (1,403,106)
Net increase (decrease) in cash 546,672 199,286 (388,338)
Cash:
At beginning of year 560,201 360,915 749,253
At end of year $1,106,873 $ 560,201 $ 360,915
See notes to consolidated financial statements
SHOPSMITH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION
The Company's sole business activity is the marketing and selling of
quality woodworking products in the United States through demonstration,
telephone solicitation and mail-order selling channels and, to a limited
degree, through dealers in the United States, Canada and the United
Kingdom. Shopsmith branded products account for substantially all of net
sales. The majority of these products (as measured by dollar value) are
manufactured by the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its subsidiaries, after elimination of significant
intercompany balances and transactions.
STATEMENT OF CASH FLOWS
Following is supplementary information relating to the consolidated
statement of cash flows:
Cash paid for the following items: 1997 1996 1995
Interest $ 614 $ 32,678 $ 149,627
Income taxes (net of refunds) 52,116 50,000 (98,230)
Following is supplementary information of non-cash investing and finance
activities:
Capital lease obligations of $36,266 were incurred in fiscal 1995 when
the Company entered into leases for new computer equipment and software.
CASH
Depository transactions and disbursements are handled primarily by one
local financial institution. Approximately $114,000 and $315,000 was
maintained at April 5, 1997 and March 30, 1996, respectively in an account
restricted for use in funding the Company's recourse obligations should the
Company be unable to do so itself through its normal operations. Cash and
cash equivalents include highly liquid debt instruments purchased with a
maturity of three months or less.
SHORT-TERM INVESTMENTS
The Company determines the appropriate classification for its short-term
in- vestments, which, at April 5, 1997, consist only of U.S. Government or
Government backed debt securities, at the time of purchase and reevaluates
this determination at each balance sheet date. The Company classifies
investments with maturities of less than six months as held to maturity and
values them at amortized cost. The fair value of such investments at April
5, 1997 approximates their amortized cost.
Investments with a maturity greater than six months are classified as
avail- able for sale and recorded at fair value. At April 5, 1997 the
Company had approximately $1 million of available for sale securities
maturing from March 1998 to February 1999. The fair value of these
securities at April 5, 1997 approximates their cost. By policy of the
Board of Directors, the Company's short-term investments may consist only
of U.S. government backed debt securities or corporate obligations rated
not less than A1 or A+.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market.
PROPERTIES
Properties are stated at cost. Depreciation and amortization are provided
primarily using the straight line method over estimated useful lives which
range as follows:
Machinery, equipment and tooling 3 to 12 years
Leasehold improvements 3 to 10 years
Maintenance and repairs are charged to expense, unless they significantly
lengthen useful economic lives of the property. When an asset is retired or
sold, its cost and related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recognized.
INCOME TAXES
The Company accounts for income taxes using the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the year in which the differences are expected to
reverse.
INSTALLMENT CONTRACTS
Retail installment contracts sold to financial institutions were $10.7
million in fiscal 1997, $9.7 million in fiscal 1996 and $8.5 million in
fiscal 1995. Of these contracts, $9.0 million, $7.5 million and $7.1 million
were sold without recourse in fiscal 1997, 1996 and 1995, respectively. At
April 5, 1997 approximately $1.2 million of installment contracts sold to a
financial institution with a recourse provision were still outstanding.
PRODUCT WARRANTIES
Products are warranted against defects in material and workmanship for one
year. Estimated costs are accrued for warranties presently in force.
Research and Development Costs Research and development costs were not
material in 1997, 1996 and 1995.
INCOME PER COMMON SHARE
Income per common share is computed using the weighted average number of
common and common equivalent shares outstanding during the year, amounting
to 2,743,945 shares in fiscal 1997, 2,677,826 shares in fiscal 1996 and
2,558,182 shares in fiscal 1995.
ENVIRONMENTAL REMEDIATION COSTS
Costs incurred to investigate and remediate contaminated sites are expensed.
Liabilities for these expenditures are recorded when it is probable that
obligations have been incurred and the amounts can be reasonably estimated.
ESTIMATES
In preparing financial statements, management must make estimates and
assumptions. These estimates and assumptions affect the amounts reported
for assets, liabilities, revenue and expenses, as well as affecting the
disclosures provided. Future results could differ from the current
estimates. Areas involving the use of management's estimates and
assumptions include the allowance for doubtful accounts, inventory cost,
depreciation of property and equipment, deferred income tax valuation
allowances, product warranty accruals and other accrued liabilities.
FISCAL YEAR
Shopsmith's fiscal year follows a 52/53 week pattern consistent with its
fiscal year for tax purposes. The year ended April 5, 1997 was a 53 week
year while the years ended March 30, 1996 and April 1, 1995 were 52 week
years.
3. BANK LINE OF CREDIT
As of April 5, 1997 a revolving credit agreement provided for maximum
short-term borrowing of $500,000 subject to certain limitations based upon
inventory levels. Interest is charged at the bank's prime rate plus 0.75
percent. No amounts were outstanding under this arrangement at April 5,
1997. The agreement requires compliance with certain minimum net worth,
working capital, financial leverage and other miscellaneous covenants and
expires June 30, 1997. Substantially all tangible assets are pledged as
collateral.
4. ACCOUNTS PAYABLE RESTRUCTURING
In June 1995, the Company paid about $860,000 in satisfaction of about
$1,473,000 in debt under a voluntary payment plan that was agreed with
creditors in May 1994. The resultant $613,000 gain was recorded in fiscal
1996 as an extraordinary item.
5. EMPLOYEE BENEFIT PLANS
Shopsmith maintains a defined contribution employee benefit plan covering
substantially all employees. Until April 1994, the Company matched employee
contributions of up to four percent of compensation at rates of 25 or 50
percent, depending on amounts contributed by employees. The Company
discontinued the matching contributions in April 1994 and resumed matching
contributions at the above-mentioned rates on January 1, 1995. The Company
contributed $36,500, $26,400 and $8,100 to this plan in fiscal 1997, 1996
and 1995, respectively. The Company provides certain health care and life
insurance benefits to substantially all employees. These benefits are
provided through a combination of insurance and self-insurance deductibles.
6. LEASES
Leases on real estate (manufacturing, storage, office and retail store
premises) and equipment expire through fiscal 2000.
In October 1995, the Company paid about $294,000 in satisfaction of about
$452,000 in debt under an early lease cancellation agreement that was
reached in December 1994. The resultant $158,000 gain was recorded in
fiscal 1996 as an extraordinary item.
The lease on the Company's manufacturing and headquarters building expires
during fiscal 2000.
Operating lease obligations for listed Operating
future fiscal years are: Leases
1998 $ 515,183
1999 500,687
2000 239,702
2001 19,407
Total minimum lease obligations $ 1,274,979
Rent expense was $422,700 in fiscal 1997, $379,100 in fiscal 1996 and
$399,400 in fiscal 1995.
7. STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE PLAN
In July, 1988, the shareholders approved the 1988 Director Option Plan which
provides for granting options for up to 52,500 shares. Under the plan, an
outside director of the Company could choose individually to be compensated
for services by payment of a cash retainer or by being awarded stock options
with values at time of issuance approximately equal to the cash retainer.
Op- tions are exercisable over ten years beginning one year from the date of
grant. The plan originally included stock appreciation rights. These
rights were surrendered by affected participants in December 1996.
The Company also has a stock option plan approved in 1984 that permits the
granting of options to employees to purchase stock at the market value on
the date of grant. Options are for a term of either five or ten years and
become exercisable in annual installments beginning one year from the date
of grant. The 1984 Option Plan provides for granting options for up to
112,500 shares. No remaining stock option under the 1984 plan has stock
appreciation rights.
In June 1993, the Company granted a non-qualified stock option, outside the
1988 and 1984 plans, for 20,000 shares to an employee to purchase stock at
$3.00 per share. The option becomes exercisable in annual installments
beginning one year from the date of grant and expires on June 20, 2003.
In August 1993, the Company adopted an employee stock purchase plan which
permits eligible employees and directors of Shopsmith to purchase from time
to time up to 250,000 Shopsmith common shares directly from the Company
without payment of brokerage fees. The purchase price of the shares
purchased under the plan is the market price of the shares (based upon a
five-day average closing price at the time of purchase). 4,500, 3,800 and
205,600 shares were purchased under the plan during fiscal 1997, 1996 and
1995, respectively.
In March 1994, the Company granted an option for 35,000 shares at the then-
current market price of $1.92 per share to the lessor of its headquarters
and manufacturing buildings in exchange for an agreement to reduce the space
leased. The option expires five years from the date of grant.
In July 1995, the shareholders approved the 1995 option plan which provides
for granting options for up to 250,000 shares. Also in July 1995, the
shareholders ratified the grant of options, which are contingent upon the
achievement of certain pre-tax income thresholds in fiscal 1995, 1996 and
1997, for 220,000 shares at $1.91 per share to a group of employees under
this plan. In any of those years in which the Company's pre-tax income
equals or exceeds the threshold, one third of the options will become
exercisable 75 days after that year's end. In any of those years where the
Company's pre-tax income is less than the established thresholds, one third
of the options will terminate. Fiscal 1995, 1996 and 1997 pre-tax income
exceeded the applicable thresholds and thus all of the options granted will
become exercisable in accordance with the plan.
Additional information relating to the option plans is as follows:
1995 Plan 1988 Directors' Option Plan 1984 Plan
1997 1996 1995 1997 1996 1995 1997 1996 1995
Granted 70,000 - 230,000 - - - - - -
Cancelled 42,000 51,191 - - - 1,557 1,250 10,500 38,000
Expired - - - - -
Available 43,191 71,191 20,000 1,557 1,557 1,557 - - -
Exercised - 809 - - - - - - -
Average
exercise price $ - $ 1.91 $ - $ - $ - $ - $ - - -
Exercisable
at year end 90,667 59,333 47,514 47,514 47,514 21,250 22,500 23,500
Outstanding
at year end 206,000 178,000 230,000 47,514 47,514 47,514 21,250 22,500 33,000
Average
option price $ 1.84 $ 1.91 $ 1.91 $ 0.93 $ 0.93 $ 0.93 $ 3.98 $ 4.17 $ 4.04
Except for outstanding options, the plans terminate in ten years.
In accordance with the provisions of Statement of Financial Accounting
Standard No. 123, "Accounting for Stock-Based Compensation" (SFAS 123),
the Company applies APB Opinion 25 and related Interpretations in
accounting for its stock option plans and, accordingly, does not recognize
compensation cost. If the Company had elected to recognize compensation
cost based on the fair value of the options granted at grant date as
prescribed by SFAS 123, 1997 net in- come and earnings per share would have
been reduced to the proforma amounts indicated in the table below.
Net income- as reported $ 1,802,558
Net income- pro forma 1,777,675
Earnings per share- as reported $ 0.66
Earnings per share- pro forma $ 0.65
The fair value of each options grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following
assumptions:
Expected dividend yield 0%
Expected stock price volatility 12%
Risk-free interest rate 6.4%
Expected life of options 5 years
The effects of applying SFAS 123 in this proforma disclosure are not
indicative of future amounts. Because no options were granted in 1996
there are no proforma amounts to report for 1996. SFAS 123 does not apply
to periods prior to 1996.
8. INCOME TAXES
The income tax provision (benefit) reflected in the consolidated statements
of operations is comprised of the following:
1997 1996 1995
Current
Federal $ 55,000 $ 50,000 $ -
State and local 23,000 -
Deferred 587,000 517,000 403,000
Provision for income taxes before
effect of adjustment of
valuation allowance 642,000 590,000 403,000
Effect of adjustment of
valuation allowance (642,000) (1,333,000) (403,000)
Income tax benefit $ - $(743,000) $ -
The income tax provision attributable to the 1996 extraordinary item is
$262,000 and is completely offset by the change in the valuation
adjustment.
The change in the valuation allowance in 1997, 1996 and 1995 represents the
realization of tax benefits of temporary differences and net operating loss
carryforwards which reversed during the respective periods. In 1996,
$816,000 of the change also represents the Company's reevaluation of the
realizability of future tax benefits because of its continued
profitability. Deferred in- come taxes reflect the impact of temporary
differences between the amount of assets and liabilities recorded for
financial reporting purposes and such amounts as measured by tax laws and
regulations.
The components of deferred tax assets and liabilities included in the
balance sheet are as follows:
1997 1996 1995
Expense accruals not currently
deductible $ 371,000 $ 565,000 $ 507,000
Inventory valuation 17,000 14,000 37,000
Allowance for doubtful accounts 116,000 80,000 32,000
Less valuation allowance (220,000) (406,000) (576,000)
Current 284,000 253,000 -
Tax loss carryforwards 714,000 1,201,000 1,847,000
Tax credit carryforwards 237,000 237,000 237,000
Accumulated depreciation (14,000) (16,000) (12,000)
Alternative minimum tax payments 103,000 50,000 -
Less valuation allowance (454,000) (909,000) (2,072,000)
Noncurrent 586,000 563,000 -
Total $ 870,000 $ 816,000 $ -
The Company's effective tax rate differs from the U.S. statutory federal
tax rate as follows:
1997 1996 1995
Federal statutory rate 34.0% 34.0% 34.0%
Nondeductible expenses
principally meals and entertainment 1.4% 0.9% 0.5%
Valuation allowance -35.6% -88.1% -28.4%
Other, net 0.2% 4.1% -6.1%
0.0% -49.1% 0.0%
The Company's net operating losses and tax credits expire as follows:
Net Operating Tax
Losses Credits
1999 $ 34,000
2000 148,000
2004 4,000
2005 23,000
2006 18,000
2007 10,000
2009 $ 92,000
2010 2,008,000
$ 2,100,000 $ 237,000
9. CONTINGENCIES
The Company is involved in various legal proceedings incidental to its
business. Certain claims, suits and complaints arising in the ordinary
course of business have been filed or are pending against the Company.
Many of these matters are covered in whole or in part by insurance.
Management believes that any liability which may result would not have a
material effect on the consolidated financial position or results of
operations of the Company.
Additionally, the Company is involved with certain environmental issues:
The Company was identified by the Illinois Environmental Protection
Agency (IEPA) as one of approximately 300 potentially responsible
parties (PRP's) for the clean up of an abandoned hazardous waste
treatment, storage and disposal facility in East St. Louis, Illinois.
The PRP's formed the Wastex Joint Steering Committee (WJSC) to perform
the government-mandated removal action. The Illinois Circuit Court for
St. Clair County entered a "Partial Consent Order" terminating IEPA's
administrative proceedings against members of the WJSC. Barring
unforeseen environmental concerns, the Company's liability with
respect to the site should be concluded.
The Company and over 500 other PRP's were ordered by the Environmental
Protection Agency (EPA), under the federal "Superfund" legislation, to
take action to secure a landfill in Huber Heights, Ohio. The extent and
nature of the contamination, insurance coverage available to the
Company, and the participation by additional PRP's in the clean up of
this site are not fully known at this time. The EPA has been focusing
on the top 104 PRP's which sent over 1,000 yards of waste to the site.
The Company is number 62 in the volumetric list of generators.
However, there is no evidence that the Company sent hazardous
substances to the site and no allocation of responsibility has been
made. It has been preliminarily esti- mated that the clean-up of the
site will cost approximately $20 million.
The Company received notice of a potential claim for environmental li-
abilities associated with soil and groundwater contamination at a
Jefferson City, Missouri facility previously operated by a Company
subsidiary. The current owner of the property has notified previous
owners and operators of the site that they are liable for the costs
of its investigation and cleanup of volatile organic compound
contamination to soil and groundwater at the site. The current owner
estimates the cost of cleanup to exceed one million dollars. Company
records indicate that all its hazardous waste shipments from this
facility were sent to the East St. Louis site discussed above. The
Company, therefore, believes that the contamination was caused by
previous owners of the site and that it is not responsible for clean-up
costs. In a related matter, the Company's predecessor at the site
claims that the Company is contractually obligated to indemnify the
predecessor with respect to any cleanup costs imposed upon the
predecessor. The Company denies any such obligation and has notified
the predecessor that it is the Company's position that the
predecessor is contractually obligated to indemnify the Company with
respect to any such cleanup costs. At this point, the ultimate
allocation of responsibility with respect to this site is unknown
Based on available information, the Company believes its share of the
estimated costs associated with the ultimate resolution of these
matters will not be material to the results of operations or the
financial position of the Company.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Income before taxes and extraordinary items was $1,803,000 or $.66 per share
on net sales of $18,469,000 for the year ended April 5, 1997 compared with
$1,514,000 or $.57 per share on net sales of $17,410,000 earned last year.
Last year, extraordinary gains of $771,000 or $.29 per share were realized
from extinguishment of debt as well as an income tax benefit of $743,000 or
$.27 per share from a reduction in deferred tax valuation reserves. These
items moved fiscal 1996 income to $3,028,000 or $1.13 per share compared to
net income of $1,803,000 or $.66 per share in fiscal 1997. Net income was
$1,421,000 or $.56 per share on net sales of $17,729,000 in fiscal 1995.
The Shopsmith MARK V is the Company's core product and most of the Company's
other current products serve as accessories to the MARK V. The number of
Shopsmith MARK V units sold in fiscal 1997 was 2.9% greater than in fiscal
1996. This combined with sales price increases in the Mark V and its accesso-
ries produced a 12.1% increase in gross margin dollars generated in fiscal
1997 as compared to fiscal 1996. Mark V unit sales in fiscal 1996 were 6.1%
lower than in fiscal 1995.
With the Company's continued focus during fiscal 1997, 1996 and 1995 on its
high-margin core Shopsmith product line and with sales price increases
effected during those years, the overall gross margin percentage increased
from 47.2% of net sales in fiscal 1995 to 51.6% in fiscal 1996 and 54.5% in
fiscal 1997. Selling and administrative costs in fiscal 1997 increased to
$8,401,000 or 45.4% of net sales from $7,494,000 or 43.0% of net sales in
fiscal 1996 and $6,920,000 or 39.0% of net sales in fiscal 1995 mainly because
of the decision to invest part of the margin dollars yielded by sales price
increases in more extensive advertising.
In 1994, a deferred income tax valuation allowance of $3,051,000 was estab-
lished because of the uncertainty that the Company's net deferred tax assets
including its net operating loss and tax credit carryforwards would be able to
generate future tax benefits. The changes (see Note 8) to the deferred income
tax valuation allowance for fiscal 1997, 1996 and 1995 represent the realiza-
tion of tax benefits of temporary differences which reversed during the re-
spective periods. In addition, in 1996, because of the Company's continued
profitability, the valuation allowance was reduced an additional $816,000 as
management believed it was then more likely than not that this portion of the
deferred tax asset would be realized.
As discussed in Notes 4 and 6 to the Consolidated Financial Statements in-
cluded herein, the Company availed itself during fiscal 1996 of early-payment
discount features of both a voluntary payment plan that was approved by af-
fected creditors in June 1994 and an early lease cancellation agreement that
was reached in December 1994. The discounts amounted to $613,000 or $.23 per
share and $158,000 or $.06 per share, respectively, and were recorded as ex-
traordinary items.
Liquidity and Capital
Cash of $1,433,000, $1,233,000 and $2,041,000 was provided by operations in
fiscal 1997, 1996 and 1995, respectively, primarily from net income adjusted
for non-cash items and, in fiscal 1996 and 1995, from asset liquidations some-
what offset by reductions in current liabilities.
Net income moved shareholders' equity, to $3,621,000 at April 5, 1997 from
$1,809,000 at March 30, 1996. The ratio of debt to equity at April 5, 1997
was 0.81 compared to 1.78 at March 30, 1996.
Net income was primarily responsible for causing working capital to improve to
$2,507,000 at April 5, 1997 from $635,000 at March 30, 1996. For the same
reasons, the current ratio improved to 1.86 at April 5, 1997 from 1.20 at
March 30, 1996.
A revolving credit agreement provides for maximum short-term borrowing of
$500,000 subject to certain limitations based on inventory levels. See Note 3
to the Consolidated financial statements for further discussion regarding this
credit facility. Management believes financial resources to be sufficient to
meet operating needs.
For a discussion of certain environmental related contingencies to which the
Company is subject, reference is made to Note 9 to the Consolidated Financial
Statements.
Capital Expenditures
Fiscal 1997 capital expenditures related primarily to upgrades of computer
equipment and replacement tooling and machinery. In fiscal 1996, capital ad-
ditions were focused on the development of promotional video programs and on
tooling and die replacement. Fiscal 1995 capital additions consisted mainly of
computer equipment acquired to service the Company's direct mail and direct
sales operations and replacement tooling.
SHOPSMITH INC. AND SUBSIDIARIES
Selected Financial Data
Five-Year Review of Performance
(Dollars in thousands, except per share)
1997 1996 1995 1994 1993
Summary of operations:
Net sales $ 18,469 $ 17,410 $ 17,728 $ 48,039 $ 51,041
Interest (income) expense (72) 2 101 414 223
Income (loss) before income
taxes and extraordinary item 1,803 1,514 1,421 (8,675) (1,574)
Income taxes - (743) - - (185)
Income (loss) before
extraordinary item 1,803 2,257 1,421 (8,675) (1,389)
Extraordinary item - 771 - - -
Net income (loss) 1,803 3,028 1,421 (8,675) (1,389)
Financial position:
Working capital $ 2,507 $ 635 $ (918)$ (2,133)$ 3,132
Property- net 524 609 613 933 4,162
Total assets 6,549 5,024 4,415 7,033 16,380
Long-term debt - - 923 1,644 1,742
Shareholders' equity 3,621 1,809 (1,225) (2,803) 5,743
Per share information:
Income (loss) per share:
Before extraordinary item $ 0.66 $ 0.84 $ 0.56 $ (3.58)$ (0.59)
Extraordinary item - 0.29 - - -
Net income 0.66 1.13 0.56 (3.58) (0.59)
Shareholders' equity per share 1.32 0.68 (0.46) (1.16) 2.43
Performance indicators:
Return on sales (%) 9.8 17.4 8.0 (18.0) (2.7)
Return on average shareholders'
equity (%) 66.4 1,035.5 N/A (588.7) (21.8)
Return on average total
assets (%) 31.2 64.1 24.8 (73.9) (8.5)
Current ratio 1.86 1.20 0.81 0.74 1.35
Ratio of total debt to equity 0.81 1.78 N/A N/A 1.83
Other information:
Number of employees at year end:
Full time 98 93 103 169 326
Part time 9 14 19 120 211
107 107 122 289 537
Average shares outstanding (000's) 2,744 2,678 2,558 2,415 2,356
SHOPSMITH, INC. AND SUBSIDIARIES
Shareholders' information
Stock Quotations (Bid Prices)
Quarter ended High Low
July 1, 1995 $1.94 $1.00
September 30, 1995 1.75 1.44
December 30, 1995 2.13 1.50
March 30, 1996 2.13 1.50
June 29, 1996 2.12 1.31
September 28, 1996 2.50 2.12
December 28, 1996 2.56 2.19
April 5, 1997 2.56 2.25
The common shares of the Company are traded in the over-the-counter market.
The above stock quotations were obtained from daily broker quotation ("Pink")
sheets and reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions. The Transfer Agent's
records showed 1,380 shareholders of record of the Company's common shares on
June 4, 1997.
Per Share Information
Shareholders'
Income (loss) Dividends Equity (Deficit)
1997 $ .66 -- $ 1.32
1996 1.13 -- .68
1995 .56 -- (.46)
1994 (3.58) -- (1.16)
1993 (.59) -- 2.43
Shopsmith Market Makers
William V. Frankel & Co. Hill, Thompson, Magid
Troster Singer Corp. Sharpe Capital
Wedbush, Morgan Securities Knight Securities
Mayer & Schweitzer Fidelity Capital Markets
Nash Weiss & Co. Paragon Capital
Herzog, Heine & Geduld
Annual meeting
Shopsmith's Annual Shareholders' Meeting will be held at 9:30 a.m. on
Wednesday, July 30, 1997 at the Company's office and manufacturing fa-
cility located at 6530 Poe Avenue, Dayton, Ohio.
Corporate contact
Shareholders desiring a copy of the Shopsmith Inc. annual report on Form
10-K or other information on the Company should direct a request to:
William C. Becker, Vice President of Finance Shopsmith, Inc. 6530 Poe
Avenue Dayton, Ohio 45414 937-898-6070 Extension 700
SHOPSMITH INC. AND SUBSIDIARIES
Directors and Officers
Board of Directors
John R. Folkerth, Chairman of the Board, President and Chief Executive
Officer, Shopsmith, Inc., Dayton, Ohio
Robert L. Folkerth, Vice President of Field Sales, Shopsmith, Inc.,
Dayton, Ohio
J. Michael Herr, Thompson, Hine and Flory, Attorneys-at-Law, Dayton,
Ohio
Edward A. Nicholson, President, Robert Morris College, Coraopolis,
Pennsylvania
John L. Schaefer, Vice President (retired), The James River Corporation,
Dayton, Ohio
Brady L. Skinner, Audit Partner, Brady, Ware & Schoenfeld Inc. Dayton,
Ohio
Richard L. Snell, Chief Executive Officer, Tipp Machine and Tool, Inc.,
Tipp City, Ohio
Audit Committee of the Board of Directors
John L. Schaefer, Brady L. Skinner and Richard L. Snell
Corporate Vice Presidents
William C. Becker, Vice President of Finance and Chief Financial Officer
Robert L. Folkerth, Vice President of Field Sales
General Information
Transfer agent and registrar:
The Huntington National Bank, Columbus, Ohio
Independent Accountants:
Crowe-Chizek and Company LLP, Columbus, Ohio
General Counsel:
Thompson, Hine and Flory, Dayton, Ohio
Equal Employment Opportunity Statement: It is the policy of Shopsmith, Inc.
to give equal opportunity to all qualified persons without regard to race,
color, sex, age, marital status, handicap, religion or national origin.
EXHIBIT 21.1
SUBSIDIARIES
OF
SHOPSMITH, INC.
Name of Subsidiary
and Name Under Which
Subsidiary Does State of
Business____________ Incorporation
1. Shopsmith Woodworking
Promotions, Inc. Ohio
2. Jefferson City Tool
Company Ohio
3. Shopsmith Canada, Inc. Ontario, Canada
4. Shopsmith Woodworking Centers
Ltd. Co. Ohio
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the registration
statements of Shopsmith, Inc. and Subsidiaries on Form S-8
(Registration No. 33-26463, 33-64663, 33-67898 and 333-17437) of our
report on our audits of the consolidated financial statements and
financial statement schedule of Shopsmith, Inc. and Subsidiaries as
of April 5, 1997 and March 30, 1996 and for the years ended April 5,
1997, March 30, 1996 and April 1, 1995, which report is included in
the Annual Report on Form 10-K.
/s/Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
June 3, 1997