UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1995 or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-9860
BARR LABORATORIES, INC.
(Exact name of Registrant as specified in its charter)
New York 22-1927534
(State or Other Jurisdiction of (I.R.S. - Employer
Incorporation or Organization) Identification No.)
Two Quaker Road, P. O. Box 2900, Pomona, New York 10970-0519
(Address of principal executive offices)
914-362-1100
(Registrant's telephone number)
Securities registered Name of each
pursuant to Section exchange on
12(b) of the Act: which registered:
Title of each class
Common Stock, Par Value American Stock
$0.01 Exchange
Securities registered pursuant to Section 12(g) of the Act: None
(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. [X]
The aggregate market value of the voting stock of the Registrant
held by nonaffiliates was approximately $60,035,909 as of June
30, 1995 (assuming solely for purposes of this calculation that
all Directors and Officers of the Registrant are "affiliates").
Number of shares of Common Stock, Par Value $.01, outstanding as
of August 17, 1995: 9,354,513.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Business
Barr Laboratories, Inc. ("Barr" or the "Company") is a
leading independent developer, manufacturer and marketer of high
quality generic pharmaceuticals. Founded in 1970, the Company
ranks among the top ten independent companies in the U.S. generic
pharmaceutical business as measured by net sales and market
capitalization. Barr, which is listed on the American Stock
Exchange (AMEX-BRL), also ranks among the top 50 pharmaceutical
companies in the U.S. in terms of overall sales.
Barr manufactures, markets and distributes a wide range of
prescription drug products equivalent to branded pharmaceuticals
that are not patent protected. Since November 1993, the Company
also serves as a distributor of a patented cancer agent,
Tamoxifen Citrate ("Tamoxifen"), under an agreement with the
company holding the product's patent ("the Innovator"). Barr's
current product line is primarily focused in the following
therapeutic categories:
- treatments for cancer (oncologicals);
- medicines for hypertension and heart disease
(cardiovascular agents);
- antibiotics and medicine to combat infections (anti-
infectives); and
- treatments for anxiety, depression and other similar
disorders (psychotherapeutics).
These products are manufactured in tablet, capsule and
powder form.
Generic pharmaceuticals, such as those made and sold by
Barr, represent an increasing proportion of medicines dispensed
in the U.S. In calendar 1994, the generic pharmaceutical
industry had total U.S. sales of approximately $4 billion, more
than 150% of sales reported just five years ago. Although generic
pharmaceuticals must meet the same standards as branded
pharmaceuticals, these equivalent medicines are sold at prices
that are typically lower than the branded product. The Company
believes that the industry will benefit from the increasing
efforts by government (both state and federal), employers, third-
party payers, and consumers to control health care costs, as well
as from the more than 100 major branded pharmaceutical products
that will come off-patent within the next ten years.
Company Background
The Company was founded in 1970 by Mr. Edwin A. Cohen and a
partner, and commenced active business in 1972 as a manufacturer
of generic drug products. The Company has two non-operating
subsidiaries, the activities of which are not significant.
Current Products
Currently, the Company is marketing approximately 37 drug
products, representing various dosage strengths of 21 chemical
entities. However, Barr has approved Abbreviated New Drug
Applications ("ANDAs") from the U.S. Food & Drug Administration
("FDA") for approximately 247 drug products, representing various
dosage strengths of approximately 95 chemical entities. This
reservoir of approved products can be brought back to the
marketplace as economic and market forces create favorable
opportunities, further complementing the Company's existing
product line.
<PAGE>
Key among the Company's current products is Tamoxifen.
Prescribed by the physician and dispensed as tablets by the
pharmacist, Tamoxifen is a non-steroidal anti-estrogen. The drug
is used to treat advanced breast cancer, as well as to delay the
recurrence of the cancer following surgery.
Patent protected until 2002, the total current annual market
for Tamoxifen is approximately $300 million. Sales of Tamoxifen
accounted for approximately 72% and 49% of total fiscal year 1995
and 1994 sales, respectively.
Barr distributes Tamoxifen (which is sold under the Barr
label) under an agreement with the Innovator holding the
product's patent. In 1993, as a result of a settlement of a
patent challenge against the Innovator of Tamoxifen, Barr entered
into a non-exclusive Supply and Distribution Agreement
("Agreement"). Under the terms of the Agreement, Barr purchases
its Tamoxifen directly from the Innovator at a discount from the
Innovator's average wholesale customer price.
Product Development
Barr's long-term growth is expected to be driven by its
ability to be the first or second to market with new generic
versions of select, branded pharmaceuticals, and its ability to
offer the highest level of service possible to its customers.
Barr has made a significant investment in processes and
equipment that enable it to develop and manufacture difficult or
toxic compounds into profitable therapies. This investment, a
significant barrier to entry for potential competitors, offers a
distinctive advantage for Barr.
Research and development efforts are focused on bringing new
products to market in Barr's current product categories
(cardiovascular agents, oncologicals, anti-infectives,
psychotherapeutics), as well as adding additional categories such
as hormonals and narcotic analgesics. For the fiscal years ended
June 30, 1995, 1994, and 1993, total research and development
expenditures were approximately $10 million, $7 million and $5
million, respectively. Management anticipates that research and
development expenditures in fiscal 1996 will exceed comparable
expenditures in fiscal 1995. See Item 7. "Management's
Discussion and Analysis of Financial Conditions and Results of
Operations."
Today, Barr enjoys a cooperative relationship with the FDA,
following the conclusion of a three-year dispute that resulted
in a delay of new and supplemental product approvals. Since
resolving the dispute in November 1994, the Company has received
three new product approvals, a number of supplemental approvals,
and has filed five new product applications and anticipates
filing an additional four to six ANDAs during the remainder of
the calendar year.
Marketing and Customers
The Company sells its products to customers in the United
States and Puerto Rico through an integrated sales and marketing
force. This sales force is supplemented by customer service
representatives who inform the Company's customers of new Company
products, order status and current pricing.
<PAGE>
The Company markets its drug products to drug store chains,
wholesalers, distributors and repackagers. The Company's
products are sold under the Barr label as well as the customers'
own private labels.
The Company has approximately 300 direct customers. In
fiscal 1995, approximately 10% of net sales were generated by
sales to Cardinal Health, Inc. In 1994 and 1993, McKesson Drug
Company accounted for approximately 11% and 14% of net sales,
respectively. No other customer accounted for greater than 10% of
sales in any of the last three fiscal years.
Competition
The Company competes in varying degrees with numerous other
manufacturers of pharmaceutical products (both branded and
generic). These competitors include the generic divisions of
proprietary pharmaceutical companies (either marketing units or
other generic manufacturers), large independent generic
manufacturers/distributors that seek to provide "one stop
shopping" by offering a full line of products, and generic
manufacturers that have targeted select therapeutic categories
and market niches.
The principal competitive factors in the generic
pharmaceutical industry are:
- the ability to introduce generic versions of branded
products promptly after the expiration of market exclusivity;
- maintenance of sufficient inventories to ensure timely
deliveries;
- price;
- quality; and
- customer service.
Many of the Company's competitors have greater financial and
other resources, and are therefore able to devote more resources
than the Company in such areas as marketing and product
development. In order to ensure its ability to compete
effectively, the Company has:
- targeted its product development in areas of historical
strength or competitive advantage;
- sought innovative ways to partner so as to strengthen
the distribution of its products; and
- invested in plant and equipment to give it a
competitive edge in manufacturing.
These factors, when combined with the Company's investment in new
product development and its focus on select therapeutic
categories, provide the basis for its belief that it will
continue to remain a leading independent generic pharmaceutical
company.
Raw Materials
The active chemical raw materials essential to the Company's
business are bulk pharmaceutical chemicals which are purchased
from numerous manufacturers in the U.S. and throughout the world.
All purchases are made in United States dollars, and therefore,
while currency fluctuations do not have an immediate impact on
prices the Company pays, such fluctuations may, over time, have
an effect on prices to the Company. In addition, because prior
<PAGE>
FDA approval of raw material suppliers is required, if raw
materials from an approved supplier were to become unavailable,
the required FDA approval of a new supplier could cause a
significant delay in the manufacture of the drug product
affected. However, in some cases, the Company has an FDA
approved alternate supplier which would mitigate substantially
the effect of any such delay. To date, the Company has not
experienced any significant delays from lack of raw material
availability. However, there can be no assurance that significant
delays will not occur in the future.
Employees
As of June 30, 1995, the Company had approximately 350 full-
time employees. Of these, approximately one-third are
represented by a union which has a collective bargaining
agreement with the Company. The Company's current collective
bargaining agreement with its employees, who are represented by
Local 8-149 of the Oil, Chemical and Atomic Workers International
Union ("OCAW"), expires on March 31, 1996.
Government Regulation
All pharmaceutical manufacturers, including the Company, are
subject to extensive regulation by the federal government,
principally by the FDA, and, to a lesser extent, by the U.S. Drug
Enforcement Administration ("DEA") and state governments. The
Federal Food, Drug and Cosmetic Act, the Controlled Substances
Act and other federal statutes and regulations govern or
influence the testing, manufacturing, safety, labeling, storage,
record keeping, approval, pricing, advertising and promotion of
the Company's products. Non-compliance with applicable
requirements can result in fines, recalls and seizure of
products. Under certain circumstances, the FDA also has the
authority to revoke drug approvals previously granted.
FDA
FDA approval is required before any new drug or a generic
equivalent to a previously approved drug can be marketed. The
Company generally receives approval for products by submitting an
ANDA to the FDA. When processing an ANDA, the FDA waives the
requirement of conducting complete clinical studies, although it
may require bioavailability and/or bioequivalence studies.
"Biovailability" indicates the rate and extent of absorption and
levels of concentration of a drug product in the blood stream
needed to produce a therapeutic effect. "Bioequivalence"
compares the bioavailability of one drug product with another,
and when established, indicates that the rate of absorption and
levels of concentration of a generic drug in the body are
substantially equivalent to the previously approved drug. An ANDA
may be submitted for a drug on the basis that it is the
equivalent to a previously approved drug. Although antibiotic
drugs are classified separately for purposes of FDA approval, the
approval procedure for such drugs substantially conforms to the
foregoing outline.
Among the requirements for drug approval by the FDA is that
the Company's manufacturing procedures and operations conform to
current Good Manufacturing Practices ("cGMP"), as defined in the
U.S. Code of Federal Regulations. The cGMP regulations must be
followed at all times during the manufacture of pharmaceutical
products. In complying with the standards set forth in the cGMP
regulations, the Company must continue to expend time, money and
effort in the areas of production and quality control to ensure
full technical compliance.
<PAGE>
If the FDA believes a company is not in compliance with
cGMP, certain sanctions are imposed upon that company including
(i) withholding from the company new drug approvals as well as
approvals for supplemental changes to existing applications; (ii)
preventing the company from receiving the necessary export
licenses to export its products; and (iii) classifying the
company as an "unacceptable supplier" and thereby disqualifying
the company from selling products to federal agencies. These
sanctions remain in effect until the compliance issues are
resolved. From approximately October of 1991 to September 1994,
the Company was determined by the FDA not to be in compliance
with cGMP regulations and imposed these sanctions upon the
Company. Since September 1994, the Company has maintained its
cGMP compliance status.
In May of 1992, the Generic Drug Enforcement Act of 1992
(the "Act") was enacted. This Act, a result of the legislative
hearings and investigations into the generic drug approval
process, allows the FDA to impose debarment and other penalties
on individuals and companies that commit certain illegal acts
relating to the generic drug approval process. In some
situations, the Act requires the FDA to debar (i.e., not accept
or review for a period of time ANDAs) a company or an individual
that has committed certain violations. It also provides for
temporary denial of approval of applications during the
investigation of certain violations that could lead to debarment
and also, in more limited circumstances, provides for the
suspension of the marketing of approved drugs by the affected
company. Lastly, this Act allows for civil penalties and
withdrawal of previously approved applications. Neither the
Company nor any of its employees was or is currently affected by
the provisions of this Act.
DEA
Because the Company may reintroduce to market a wide range
of controlled substances in its analgesic and psychotherapeutic
product lines, it must meet the requirements of the Controlled
Substances Act and the regulations issued thereunder and
administered by the DEA. These regulations include stringent
requirements for manufacturing controls and security to prevent
diversion of or unauthorized access to the drugs in each stage of
the production and distribution process. The DEA monitors
allocation to the Company of raw materials used in the production
of controlled substances based on historical sales data. The
Company believes it is currently in compliance with all
applicable DEA requirements.
Patents
The Process Patent Amendments Act of 1988 provides that the
use or sale within the United States, or importation into the
United States, of a product that was made either domestically or
abroad by a process covered by a United States patent,
constitutes infringement of the process patent. After proper
notice, this legislation could subject the Company to potential
patent infringement claims if a supplier of an active ingredient
to the Company were to infringe a United States process patent in
the manufacture of such ingredient. The Company has received no
such notice.
<PAGE>
Medicaid
In November 1990, a law regarding reimbursement for
prescribed Medicaid drugs was passed as part of the Congressional
Omnibus Budget Reconciliation Act of 1990. This law basically
required drug manufacturers to enter into a rebate contract with
the Federal Government. All generic pharmaceutical
manufacturers, whose products are covered by the Medicaid
program, are required to rebate to each state a percentage
(currently 11% in the case of products manufactured by the
Company and 15% for Tamoxifen sold by the Company) of their
average net sales price for the products in question. The Company
provides an accrual for future estimated rebates in its
consolidated financial statements.
Effect of the General Agreement on Tariffs and Trade ("GATT")
With the signing of the GATT accord in December 1994, one of
the provisions called for harmonization of patent life throughout
GATT countries. U.S. enabling legislation had provisions which
in effect offer a limited extension of the period of monopoly
protection for intellectual property including patents. While a
number of patented drugs will receive extended patent protection
(the maximum extension being 36 months) as a result of this
enabling legislation, the patent extensions resulting from the
implementation of GATT are not expected to materially impact any
of the product candidates in Barr's current pipeline.
Other
The Company is also governed by federal, state and local
laws of general applicability, such as laws regulating working
conditions, equal employment opportunity, and environmental
protection.
Item 2. Properties
Barr's operations are located a short distance north of the
New York Metropolitan region, in Rockland County, New York and
Bergen County, New Jersey.
The Company's analytical and product development
laboratories and certain production facilities are located in
Pomona, New York. Barr operates two facilities totaling
approximately 81,000 square feet on 40 acres. The Company owns
these facilities and the land.
The first building consists of a 33,000 square foot facility
devoted to the analytical and product development laboratories as
well as the equipment used in the research and development of new
dosage forms. This facility houses one of Barr's two enclosed-
manufacturing suites. With these suites, which include
sophisticated air-handling systems that eliminate the dangers of
handling toxic chemicals, Barr can effectively pursue oncology as
well as other product candidates whose manufacture demands that
such facilities be in place. The second building on the Pomona
site provides approximately 48,000 square feet of office and
manufacturing space. This building houses the R&D administrative
staff and pharmacy operations team, as well as additional
manufacturing and warehousing capabilities.
Northvale, New Jersey, about 15 miles from the Pomona site,
is headquarters for the Company's main production facilities.
Three buildings serve as Barr's main manufacturing, packaging and
<PAGE>
shipping operations. Primary manufacturing is located in a 28,000
square foot building which the Company purchased in 1984 with the
aid of funding through the New Jersey Economic Development
Authority. This facility includes pharmaceutical manufacturing
equipment, as well as the Company's second enclosed-manufacturing
suite. The building also has the necessary vaults, permits, etc.
to support the Company's narcotic analgesic development plans. In
1991, the Company purchased an additional parcel of land in
Northvale for future use.
Across from the main manufacturing facility, Barr leases a
40,000 square foot building that houses manufacturing support
staff offices as well as the Company's automated packaging
operations. The lease on this building expires on June 30, 1998.
The Company's third building in Northvale, a 50,000 square foot
leased facility, serves as the Company's primary warehousing and
distribution facility. This lease expires in July 1999. The
Company can extend this lease for an additional five years.
The Company's executive, administrative and sales and
marketing operations are located in two sub-leased facilities of
approximately 38,000 square feet in Blauvelt, New York. This
location is approximately 7 miles from both Pomona and Northvale.
The leases on these facilities expire in May 1999.
The Company is currently evaluating several alternatives to
handle anticipated increases in manufacturing requirements from
new products.
Item 3. Legal Proceedings
AZT Patent Challenge
The Company announced on February 27, 1995, that it received
FDA approval to manufacture and market the generic equivalent of
AZT. The FDA approval will become effective with Barr's success
in challenging Burroughs Wellcome Co.'s ("BW&Co.") patents for
Zidovudine, the generic versions of the AIDS treatment AZT, or
upon expiration of the patent in 2005, whichever comes first.
The Company had challenged BW&Co.'s patents on AZT on the
grounds that the patents failed to list as co-inventors two
scientists from the National Institutes of Health ("NIH"). If
the NIH scientists were found to be co-inventors, BW&Co.'s
exclusivity to market AZT would be broken. The Company would
then be authorized to manufacture and market AZT under a license
granted to it by the NIH.
During a jury trial in July 1993, in the Company's patent
lawsuit with BW&Co., the Court granted judgment as a matter of
law in favor of BW&Co. On November 22, 1994, the Court of
Appeals for the Federal Circuit in Washington, DC, substantially
affirmed the district court's decision. The Court upheld five of
BW&Co.'s patents for AZT and remanded the case to the district
court to consider the validity of the sixth patent on the
product.
In March 1995, Barr filed a petition asking the Supreme
Court to overturn the November 1994 ruling by the Court of
Appeals and in June 1995 the Supreme Court asked the U.S. Justice
Department to render its opinion on the case. The Company
petitioned the Court to consider whether "one can be the inventor
of a patentable pharmaceutical method of treatment (in this
instance, the use of AZT to treat AIDS) when one has no reason to
believe that such a method will work." The Company believes the
request for comment by the Justice Department is a positive
development in its challenge and expects comment by the Justice
Department before the end of calendar year 1995.
BW&Co. has made a claim of an unspecified amount for
recovery of its attorney fees from the Company on the grounds
that the Company willfully infringed BW&Co.'s patents and that
the Company's conduct renders the case "exceptional" under the
patent law. If a finding of "exceptional case" were made and
sustained on appeal, the Company would be liable for at least a
portion of BW&Co.'s substantial attorney fees in this matter.
The Company believes that this action is not well-founded, and
accordingly, no liability has been recorded at this time.
Ciprofloxacin Patent Challenge
On January 6, 1995, the Company received FDA approval to
manufacture and market ciprofloxacin tablets, the generic
equivalent of Miles, Inc.'s CIPRO. A broad spectrum antibacterial
agent, Ciprofloxacin is used to treat lower respiratory, skin,
bone and joint, and urinary tract infections. U.S. sales for
Ciprofloxacin totaled in excess of $500 million for the year
ended December 31, 1994.
The Company is currently challenging the validity of certain
patents held by Bayer AG and Miles Inc. for Ciprofloxacin. The
FDA approval will become effective with the Company's success in
its patent challenge, or upon expiration of the patents in 2002,
whichever occurs first. The Company expects to expend
significant resources during fiscal 1996 and 1997, to prepare for
a trial on the merits of this patent challenge.
Miscellaneous
As of June 30, 1995, the Company was involved, as plaintiff and
defendant, in other lawsuits incidental to its business.
Management of the Company, based on the advice of legal counsel,
believes that the disposition of such litigation will not have
any significant adverse effect on the Company's consolidated
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders
during the fourth quarter of 1995.
<PAGE>
PART II
<TABLE>
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
(a) Market Information
The Company's common stock is listed and traded on the
American Stock Exchange. The following table sets forth the high
and low prices of the Company's common stock for each full
quarterly period for the Company's two most recent fiscal years.
Low High
<S> <C> <C>
Calendar 1993
Third Quarter $14.25 $26.13
Fourth Quarter 18.00 26.25
Calendar 1994
First Quarter 15.25 23.00
Second Quarter 14.88 19.75
Third Quarter 18.38 24.00
Fourth Quarter 22.50 26.75
Calendar 1995
First Quarter 19.38 25.63
Second Quarter 17.00 22.38
</TABLE>
(b) Holders
As of June 30, 1995, there were approximately 718 record
holders of the common stock. The Company believes that a
significant number of beneficial owners hold their shares in
street names.
(c) Dividends
During its two most recent fiscal years, the Company paid no
cash dividends.
<PAGE>
<TABLE>
Item 6. Selected Financial Data
(in thousands of dollars, except per share amounts)
<CAPTION>
Year Ended June 30,
Statements of
Operations 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $199,720 $109,133 $58,047 $100,790 $93,984
Earnings (loss)
before income
taxes,
extraordinary loss
and cumulative
effect of
accounting change 10,222 3,745 12,827(1) (3,464) 7,056
Income tax expense 3,852(5) 1,461 5,040 (1,555) 2,531
(benefit)
Earnings (loss)
before
extraordinary loss
and cumulative
effect of
accounting change 6,370 2,284 7,787 (1,909) 4,525
Net earnings (loss) $6,225(5) 2,658 7,787 (1,909) 4,525
Earnings (loss)
before
extraordinary loss
and cumulative
effect of
accounting change
per common and
common equivalent
share: 0.71 0.26 0.90 (0.23) 0.57
Earnings (loss) per
common and common
equivalent share 0.70(5) 0.30(6) 0.90 (0.23) 0.57
Earnings (loss) per
common share
assuming full
dilution 0.70(5) 0.30(6) 0.90 (0.23) 0.56
Balance Sheet Data 1995 1994 1993 1992 1991
Working capital (2) 58,364 53,227 51,371 12,168 46,885
Total Assets 155,953 125,907 94,283 88,467 96,112
Long-term Debt (2)(3) 20,371 30,433 30,498 543 30,719
Shareholders'Equity(4) 71,853 54,984 51,498 42,844 41,907
<FN>
(1) Included in fiscal 1993 is $21,690 of pre-tax income that
resulted from lawsuit settlements. (See Note 10 to the
Consolidated Financial Statements).
(2) Includes effects of reclassification of $30,000 of debt to
long-term debt in 1993 and $30,000 of debt to current
liabilities in 1992.
(3) Excludes current installments (See Note 4 to Consolidated
Financial Statements).
(4) The Company has not paid a cash dividend in any of the above
years.
(5) Fiscal 1995 includes the effect of a $145 ($0.01 per share)
extraordinary loss (net of tax of $92) on early extinguishment
of debt. (See Note 4 to the Consolidated Financial
Statements).
(6) Includes the effect of a $374 ($0.04 per share) gain from the
cumulative effect of an accounting change. (See Note 6 to the
Consolidated Financial Statements).
</TABLE>
<PAGE>
BARR LABORATORIES, INC. AND SUBSIDIARIES
Item 7.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Fiscal 1995 to Fiscal 1994 (thousands of dollars)
Net sales increased approximately 83% to $199,720 from
$109,133. This increase is primarily attributable to continued
increase in demand for Tamoxifen, the breast cancer treatment
manufactured by the Innovator and distributed by the Company.
During the fiscal year ended June 30, 1995, sales of
Tamoxifen accounted for approximately $143,000 or 72% of net
sales compared to approximately $53,000 or 49% of net sales in
fiscal 1994. The growth in Tamoxifen sales is primarily
attributable to increases in the Company's market share.
Additionally, fiscal 1995 sales reflect the inclusion of a full
year of Tamoxifen revenues as compared to 8 months of sales in
1994 as the Company began distributing Tamoxifen in November
1993. While the Company expects that Tamoxifen revenues will
increase in fiscal 1996, it does not expect to maintain the
growth obtained between fiscal 1995 and 1994. Tamoxifen is a
patented product manufactured for the Company by the Innovator
and distributed by the Company under a non-exclusive license
agreement with the Innovator. Currently Tamoxifen only competes
against the Innovator's product, which is sold under a brand
name.
Net sales of Barr-manufactured products increased by
approximately 1%. An overall increase of 16% in shipments of
Barr-manufactured products helped to offset significant sales
discounts and allowances, particularly reduced prices on certain
products. Methotrexate accounted for approximately 14% of the
Company's net sales in 1995 as compared to 25% in 1994. No other
product accounted for more than 10% of net sales in either year.
Gross profit increased to $40,222 from $31,112 due to
increased sales volume. However, gross margin as a percentage of
net sales decreased to 20.1% from 28.5%. This decrease is
primarily attributable to the lower gross margins earned from the
distribution of Tamoxifen compared to margins earned on
manufactured products, price competition on certain of the
Company's manufactured products and, to a lesser extent, to
higher manufacturing overhead costs.
Due to the nature of the generic pharmaceutical industry, as
the product line matures and competition from other manufacturers
intensifies, selling prices and the related margins on those
products typically decline. The Company's future operating
results are dependent on several factors including its ability to
introduce new products to its product line, customer purchasing
practices and changes in the amount of competition affecting the
Company's products. In addition, the ability to receive
sufficient quantities of raw materials to maintain its production
is critical. While the Company has not experienced any
interruption in sales due to the lack of raw materials, the
Company is in the process of developing alternate raw material
suppliers in the event raw material shortages were to occur.
Selling, general and administrative expenses decreased
slightly to $19,014 from $19,170 and declined as a percentage of
net sales to 9.5% from 17.6%. The percentage decrease in such
expenses was largely attributed to the overall growth in the
Company's sales exceeding the rate of growth in operating
expenses. The net decrease in fiscal 1995 occurred despite
increases in personnel costs and costs resulting from the
implementation of a new core computer system. These increases
were offset primarily by decreases in legal expenses, reductions
in sales commissions as a result of the re-negotiation of an
outside sales representative's contract in the third quarter of
fiscal 1994, and reductions in the Company's provision for bad
debts.
Research and development expenses increased 54% to $10,443
from $6,778. This increase reflects the Company's renewed
commitment to its research and development efforts. Increased
spending with outside laboratories to conduct biostudies of
products such as conjugated estrogens as well as increased
personnel costs were the main areas of increased spending. The
Company plans to maintain its commitment to investment in
research and development in the future.
Interest income increased to $1,874 from $689 due to an
increase in the average short-term investments balance as well as
an increase in the rate of return earned on those investments.
In 1995, the Company incurred an extraordinary loss
resulting primarily from the write-off of deferred financing
costs associated with the early extinguishment of the 10.05%
Convertible Subordinated Notes which were converted into common
stock in February 1995. (See Note 4 to the Consolidated
Financial Statements).
The tax provisions for fiscal year ended June 30, 1995, and
1994 were calculated at an effective tax rate of 37.7% and 39.0%,
respectively. Additionally, effective July 1, 1993, the Company
adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." The cumulative effect of this
accounting change, a one-time gain of $374 or $.04 per share, was
recorded during fiscal 1994.
Results of Operations
Fiscal 1994 to Fiscal 1993
Net sales increased approximately 88% to $109,133 from
$58,047. This increase was primarily attributable to sales of
Tamoxifen and, to a lesser extent, re-introductions by the
Company of certain suspended products for which the Company held
approved abbreviated new drug applications. The Company began
distributing Tamoxifen in November 1993.
Gross profit increased to $31,112 from $22,134 due to
increased sales volume. However, the gross margin percentage
decreased to 28.5% from 38.1%. This decrease was primarily
attributed to the lower gross margins earned from the
distribution of Tamoxifen as compared to margins earned on
manufactured products. This decrease in the gross margin
percentage would have been larger had it not been for a $2,800
higher inventory provision recorded in fiscal 1993 as compared to
fiscal 1994. A portion of this provision was for certain
products suspended in connection with the Company's dispute with
the FDA. (See Note 11 to the Consolidated Financial Statements).
Selling, general and administrative expenses decreased to
$19,170 from $23,554 and declined as a percentage of net sales to
17.6% from 40.6%. This decrease of 18.6% was primarily due to a
<PAGE>
reduction in legal expenses incurred by the Company in connection
with its dispute with the FDA and its lawsuit challenging the
validity of the patent on AZT. These declines in fiscal 1994
were partially offset by increases in the provision for bad debts
and bonus expense.
Research and development expenses increased 26% to $6,778
from $5,370. This increase reflected the Company's expansion of
its research and development efforts. The Company hired
additional personnel and purchased raw materials for the research
and development of new products.
Interest income increased to $689 from $345 due to an
increase in the average short-term investments balance as well as
an increase in the rate of return earned on those investments.
Other income was $575 in 1994 compared to $21,771 in 1993.
In 1994, other income primarily represented the gain from the
sale of property held for investment purposes. In 1993, the
Company received income of $21,690 in connection with two lawsuit
settlements. (See Note 10 to the Consolidated Financial
Statements).
The effective tax rate for 1994 was 39.0% compared 39.3% for
1993. Additionally, effective July 1, 1993, the Company adopted
Statement of Financial Accounting Standard No. 109, "Accounting
for Income Taxes." The cumulative effect of this accounting
change was a one-time gain of $374 or $.04 per share.
Liquidity and Capital Resources
The Company had cash and cash equivalents of $52,987 at June
30,1995, compared to $36,499 at June 30, 1994, an increase of
$16,488. This increase resulted primarily from cash provided by
operations, slightly offset by capital expenditures. At June 30,
1995 and 1994, $41,143 and $17,368, respectively, of the
Company's cash was held in a cash collateral account to secure
credit extended to the Company by the Innovator of Tamoxifen.
Cash provided from operating activities was $21,894 for the
year ended June 30, 1995, which included net earnings of $6,225.
Favorable increases in accounts payable and accrued liabilities
of $23,303 were partially offset by increases in inventories of
$6,540 and accounts receivables of $5,674, as well as higher
levels of tax payments in the current year. The increases in
accounts payable, inventories and accounts receivable were
primarily due to increased purchases and sales of Tamoxifen.
During fiscal 1995, the Company invested approximately
$6,328 in capital assets to upgrade the Company's core computer
system, acquire new equipment and improve the Company's
laboratories and manufacturing facilities. The Company expects
that its capital expenditures will increase significantly during
fiscal 1996. This increase will be primarily attributed to the
expansion of its current manufacturing facilities, anticipated
construction or purchase of a new multi-purpose facility and the
purchase of related machinery and equipment. The Company is
currently evaluating alternatives for financing the construction
of this facility.
In February 1995, the Company issued 510,358 shares of
common stock upon conversion of its $10 million 10.05%
Convertible Subordinated Notes.
<PAGE>
The Company is presently evaluating alternatives to reduce
the restrictions associated with the cash collateral account.
Such alternatives include negotiating a revolving credit facility
which would provide standby letters of credit to secure future
Tamoxifen purchases rather that using cash to secure this
payable. The Company believes that such a line will allow the
Company to utilize its existing escrow funds to help fund
operations and capital expenditures.
Management believes that existing capital resources, along
with the Company's ability to obtain additional capital, if
required, will be adequate to meet its needs for the foreseeable
future.
Environmental Matters
The Company has obligations for environmental safety and
clean-up under various state, local and federal laws, including
the Comprehensive Environmental Response, Compensation and
Liability Act, commonly known as Superfund. Based on information
currently available, environmental expenditures have not had, and
are not anticipated to have, any material effect on the Company's
consolidated financial statements.
Effects of Inflation
Inflation has had only a minimal impact on the operations of
the Company in recent years.
Item 8. Financial Statements and Financial Statement Schedule
See pages 31 to 52 after Signature Page.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
As previously disclosed in the Company's Annual Report on
Form 10-K for the year ended June 30, 1994, on March 21, 1994,
the Company dismissed KPMG Peat Marwick ("Peat Marwick") LLP as
principal accountants for the Company and its consolidated
subsidiaries.
The reports of Peat Marwick on the Company's consolidated
financial statements for the then two most recent fiscal years
did not contain an adverse opinion or a disclaimer of opinion and
were not qualified or modified as to scope or accounting
principles; however, one report included an explanatory paragraph
as to an uncertainty. The auditors' report for the fiscal year
ended June 30, 1992 stated that the matters referred to therein
raised substantial doubt about the Company's ability to continue
as a going concern. Those matters were the failure of the
Company to be in compliance with certain covenants in its debt
agreements, the Company's anticipation that it might need
additional capital to finance operations and the Company's
ongoing litigation with the Food and Drug Administration. In
addition, the auditors' reports for each of the then two most
recent fiscal years stated that no provision had been made in the
accompanying consolidated financial statements for any liability
which might result from a pending shareholder action against the
Company.
<PAGE>
During the Company's then two most recent fiscal years and
the subsequent interim period of the fiscal year ended June 30,
1994, there were no disagreements between the Company and Peat
Marwick on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of Peat
Marwick, would have caused it to make reference to the subject
matter of the disagreements in connection with its reports on the
Company's financial statements.
Effective March 21, 1994, the Company engaged Deloitte &
Touche LLP ("Deloitte") as its independent auditors to audit the
Company's consolidated financial statements. Before confirming
the engagement, neither the Company nor anyone acting on its
behalf consulted Deloitte about the application of accounting
principles to a specific completed or contemplated transaction,
or the type of audit opinion Deloitte might render on the
Company's financial statements.
The Company's Board of Directors approved the decisions to
discharge Peat Marwick and to engage Deloitte, based on the
recommendations of its Audit Committee and senior management of
the Company. The Board approved these recommendations on March
21, 1994. The recommendations of the Audit Committee and senior
management were made after they had received presentations from
four accounting firms of recognized national standing, including
Peat Marwick and Deloitte, with regard to the auditing and
related services which each would provide to the Company if it
were selected to be the Company's independent auditors.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The Company's directors and executive officers, all of whom
are elected annually to serve until the next annual meeting or
until their successors have been elected and qualified are as
follows.
NAME AGE POSITION
Bruce L. Downey 47 Chairman of the Board, Chief
Executive Officer and President
Gerald F. Price 48 Executive Vice President
Ezzeldin A. Hamza 44 Senior Vice President-Research and
Development
Catherine F. Higgins 43 Vice President-Human Resources
Paul M. Bisaro 34 Chief Financial Officer, General
Counsel and Secretary
Bruce W. Hooey 33 Chief Information Officer
William T. McKee* 34 Director of Finance and Treasurer
Timothy P. Catlett* 40 Vice President, Sales and Marketing
Mary E. Petit* 46 Vice President, Quality
Peter J. Finnerty 53 Corporate Controller
Edwin A. Cohen 63 Vice Chairman of the Board
Robert J. Bolger 73 Director
Michael F. Florence 58 Director
Wilson L. Harrell 76 Director
Bernard C. Sherman 53 Director
George P. Stephan 62 Director
Jacob (Jack) M. Kay** 54 Director
[FN]
* Named officers of the Company since December 1994.
** Elected to the Board of Directors in December 1994.
<PAGE>
Bruce L. Downey became the Company's President, Chief
Operating Officer and a member of the Board of Directors in
January 1993 and was elected Chairman of the Board and Chief
Executive Officer in February of 1994. Prior to assuming these
positions, from 1981 to 1993, Mr. Downey was a partner in the
law firm of Winston & Strawn and a predecessor firm of Bishop,
Cook, Purcell and Reynolds. Mr. Downey served as the Company's
lead attorney throughout its legal proceedings with the FDA.
Gerald F. Price was employed by the Company in January 1990
as Executive Vice President. He was elected an officer of the
Company in January 1990. Prior to assuming these positions, he
served as Group Vice President-Operations of Del Laboratories.
He also served as Vice President-Manufacturing for L'Oreal
Corporation, Director of Manufacturing for Amway Corporation and
was associated with The Procter & Gamble Company in a variety of
manufacturing positions.
Ezzeldin A. Hamza was employed by the Company in July 1984
as Director of Quality Control and thereafter, from August 1987,
served as Director of Scientific Affairs. In December 1988, Mr.
Hamza was elected to the position of Vice President-Technical
Affairs. In 1993, he was elected Senior Vice President-Research
and Development.
Catherine F. Higgins was employed by the Company in December
1991 as Vice President-Human Resources and was elected an officer
in September 1992. From June 1985 to December 1991, Ms. Higgins
served as Vice President-Human Resources for Inspiration
Resources Corporation. From August 1979 to May 1985, Ms. Higgins
was employed by Continental Grain Company as Director-Human
Resources.
Paul M. Bisaro was employed by the Company as General
Counsel in July 1992. He was acting General Counsel to the
Company since January 1992. Mr. Bisaro was elected Secretary of
the Company in September 1992 and elected a Vice President in
1993. In August 1994, Mr. Bisaro was elected to the position of
Chief Financial Officer. Prior to assuming these positions with
the Company, he was associated from 1989 to 1992 with the law
firm of Winston & Strawn and a predecessor firm, Bishop, Cook,
Purcell and Reynolds, in Washington, D.C. Prior to that, Mr.
Bisaro was a Consultant with Arthur Andersen & Co.
Bruce W. Hooey was employed by the Company in December 1993
as Chief Information Officer. He was elected an officer of the
Company in December of 1994. Mr. Hooey served as a Principal
with Deloitte & Touche Management Consultants from August 1985
until joining Barr.
William T. McKee was employed by the Company in January 1995
as Director of Finance and was appointed Treasurer in March 1995.
Prior to joining the Company, Mr. McKee served as Vice President-
Finance for Absolute Entertainment. From January 1990 through
June 1993, Mr. McKee was a Senior Manager for Gramkow &
Carnevale, CPAs, and from September 1983 through January 1990 was
employed by Deloitte & Touche.
Timothy P. Catlett was employed by the Company in February
1995 as Vice President, Sales and Marketing. Since 1978, Mr.
Catlett held a number of positions with the Lederle Laboratories
division of American Cyanamid Company. Since 1993 he served as
Vice President, Cardiovascular Marketing.
<PAGE>
Mary E. Petit, Pharm. D., was employed by the Company in
January 1995 as Vice President, Quality. From June 1992 to
January 1995, Dr. Petit was Vice President, Quality Management
with the Lederle Laboratories division of American Cyanamid. Dr.
Petit held positions of increasing responsibility during her 12
year tenure with Lederle. Prior to Lederle, she held a variety of
academic appointments at the University of Utah Colleges of
Pharmacy and Medicine. She has authored over 20 scientific
publications and presented nationally.
Peter J. Finnerty was employed by the Company in September
1988 as Corporate Controller, and elected an officer of the
Company in December 1991. Prior to Barr Laboratories, Inc., he
served as a Divisional Group Controller of Sanofi, Inc., and
Controller for Germaine Monteil Corporation.
Edwin A. Cohen, RPh, founded the Company in 1970. Mr. Cohen
served as President, Chairman of the Board and Chief Executive
Officer until 1994. In February of 1994, he was elected to the
position of Vice Chairman of the Board and became a Consultant to
the Company.
Robert J. Bolger was elected a Director of the Company in
February 1988. Mr. Bolger has been President of Robert J. Bolger
Associates, a marketing consulting company since January 1988.
From 1962 through 1987, he served as President of the National
Association of Chain Drug Stores, a major trade association. Mr.
Bolger is also a Director of General Computer Corporation.
Michael F. Florence, CFA, was elected a Director of the
Company in February 1988. Mr. Florence is President of Sherfam,
Inc. and has been since 1989. He is also President of Citadel
Gold Mines, Ltd., Vice President of Apotex, Inc. and Vice
President of Sherman Delaware, Inc. From January 1964 through
April 1989, Mr. Florence was a partner in Wm. Eisenberg & Co.,
Canadian Chartered Accountants. He is a Director of Citadel
Gold Mines, Inc. (NASDAQ) and was previously a Director of
Kinesis, Inc. Mr. Florence and Dr. Sherman are brothers-in-law.
Wilson L. Harrell was elected a Director of the Company in
February of 1988. Since July 1990, Mr. Harrell has been a
columnist, consultant and speaker. He is author of the book, For
Entrepreneurs Only. From 1987 to July 1990, he was publisher of
INC. magazine. Mr. Harrell is also a Director of Harrell
International (NASDAQ).
Bernard C. Sherman, PhD, was Chairman of the Board of the
Company from July 1981 to January 1993. He remains a Director of
the Company. Dr. Sherman is President and Chief Executive
Officer of Apotex, Inc., a Canadian manufacturer of generic and
brand name drugs. He is also President of Sherman Delaware, Inc.
and a Director of Citadel Gold Mines, Inc. (NASDAQ). In July
1994, Dr. Sherman and Shermfin Corp. consented to the issuance of
an Order of the Securities and Exchange Commission (the
"Commission") that they cease and desist from violations of
certain reporting and anti-fraud provisions of the Securities
Exchange Act of 1934. Dr. Shermin and Shermfin Corp. consented
to this Order without admitting or denying the findings of the
Commission that they had failed to file reports of beneficial
ownership of the common stock of Kinesis, Inc. with the
Commission on Form 3 and Schedule 13G. The Company has no
relationship with Kinesis, Inc.
<PAGE>
George P. Stephan was elected a Director of the Company in
February 1988. Since July 1993, Mr. Stephan has been a business
consultant and private investor. From December 1991 to July
1993, Mr. Stephan was of counsel to Murtha, Cullina, Richter and
Pinney in Hartford, Connecticut and a business consultant,
specializing in international business. From January 1991 to
November 1991, he served as Chairman of the Board and Interim
Chief Executive Officer of Kollmorgen Corporation, a diversified
technology company, and was a consultant to Kollmorgen
Corporation from April 1990 to January 1991. Mr. Stephan was
Vice Chairman of Kollmorgen from 1988 to 1990.
Jacob ("Jack") M. Kay was elected a Director of the Company
in December 1994.
Mr. Kay is Executive Vice President of Apotex, Inc., and also
serves as Vice Chairman of the Canadian Drug Manufacturers
Association. He is also a member of the Sectoral Advisory Group
on International Trade.
<PAGE>
<TABLE>
Item 11. Executive Compensation
The following table sets forth as to the Chairman and Chief
Executive Officer, and the four other executive officers earning
the highest aggregate compensation in the fiscal year ended June
30, 1995, the compensation earned, awarded or paid for services
rendered to the Company in all capacities during each of the
three fiscal years ended June 30, 1995, in which each such person
served as an officer.
Summary Compensation Table
Name & Principal Stock All Other
Position Year Salary($) Bonus($) Other($) Options(#) Compensation
(1) ($)(2)
<S> <C> <C> <C> <C> <C>
Bruce L. Downey 1995 349,231 200,000 1,132 40,000 14,607
Chairman, Chief 1994 299,712 187,500 53,072(3) - 14,757
Executive Officer 1993 132,211 - 22,852(3) 100,000 10,316
& President
Gerald F. Price 1995 194,846 50,000 15,121(6) 15,000 11,536
Executive Vice 1994 185,000 55,500 29,996(4) 10,000 11,710
President 1993 181,243 10,000 85,098(4) - 8,761
Ezzeldin A. Hamza 1995 169,846 50,000 13,718(5) 6,500 12,422
Sr. Vice 1994 160,000 48,000 11,262(5) 750 12,265
President 1993 145,111 47,000 40,000(5) 44,000 13,817
Research &
Development
Paul M. Bisaro 1995 149,461 50,000 236 15,000 13,346
Chief Financial 1994 111,635 46,000 - 5,000 12,501
Officer, General 1993 89,316 10,000 54,373(4) 10,000 9,740
Counsel and
Secretary
Bruce W. Hooey 1995 114,923 40,000 20,806(4) 5,000 10,814
Chief Information 1994 - - - - -
Officer 1993 - - - - -
<FN>
(1) Includes amounts deferred under the Company's Savings and
Retirement Plan.
(2) The amounts shown in this column represent the Company's
annual contributions to its Savings and Retirement Plan.
(3) Mr. Downey was elected an officer of the Company on January 5,
1993. Amounts represent relocation expenses paid pursuant to
his employment agreement. See "Executive Agreements."
(4) Amounts represent reimbursement of relocation expenses.
(5) Amounts accrued in order to fund deferred compensation
payable pursuant to agreement. See "Executive Agreements".
(6) Amount represents reimbursement of interest.
</TABLE>
<PAGE>
<TABLE>
Option Grants
The following table shows all stock options that were
granted to the officers named in the preceding Summary
Compensation Table during the fiscal year ended June 30, 1995.
The exercise price of all such options was the fair market value
on the date of the grant.
Option Grants in the Last Fiscal Year
Individual Grants (1)
Potential Realizable
Number of % of Total Value at Assumed Annual
Shares Options Rates of Stock Price
Underlying Granted to Per Share Appreciation for Option
Options Employees Excercise Expiration Term
Name Granted (#) Fiscal Year Base PriceDate 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C>
Bruce L. Downey 40,000 21% $21.69 08/17/04 545,629 1,382,731
Gerald F. Price 15,000 8% 21.69 08/17/04 204,611 518,524
Ezzeldin A. Hamza 6,500 3% 21.69 08/17/04 88,665 224,694
Paul M. Bisaro 15,000 8% 21.69 08/17/04 204,611 518,524
Bruce W. Hooey 5,000 3% 21.69 08/17/04 68,204 172,841
All Shareholders(2) 26,239,581 319,915,883
<FN>
(1) Consists of options granted under the Company's stock
option plan approved by shareholders in 1993. This plan
permits the Compensation Committee in its discretion to cancel
any option granted under such plan and re-grant it at a lower
price, however, no such action was taken during the fiscal
year.
(2) Total dollar gains on assumed rates of appreciation shown
here calculated on 9,282,427 outstanding shares as of June 30,
1995 and the market price on that date ($21.625)
Note: The dollar amounts under the 5% and 10% columns in the
table above are the result of calculations required by the
Securities and Exchange Commission's rules and therefore are not
intended to forecast possible future appreciation of the stock
price of the Company. Although permitted by the SEC's rules, the
Company did not use an alternate formula for a grant date
valuation because the Company is not aware of any formula which
will determine with reasonable accuracy a present value based on
future unknown or volatile factors. As shown in the % column
above, no gain to the named officers is possible without
appreciation in the price of the Company's common stock, which
will benefit all shareowners.
</TABLE>
<PAGE>
<TABLE>
Option Exercises and Option Values
The following table provides information as to the value of
options exercised and options held by Officers named in the
preceding Summary Compensation Table at fiscal year end measured
in terms of the closing price of the Company's common stock (see
Notes 1 and 2 below).
Aggregated Option Exercises and Fiscal Year-End June 30, 1995
Option Values
Number of Shares Subject Value of Unexercised
Shares to Unexercised Options In-the-Money Options
Acquired on Value at Year-End at Year-End(2)
Name Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Bruce L.
Downey - - 40,000 100,000 $455,000 $682,500
Gerald F.
Price - - 36,000 20,000 405,000 23,125
Ezzledin
A. Hamza - - 32,875 40,875 395,759 396,984
Paul M.
Bisaro - - 12,500 17,500 125,313 11,563
Bruce W.
Hooey - - 2,500 7,500 3,438 3,438
<FN>
(1) Valued at the difference between the fair market value of the
shares at the time of exercise and the options' grant price.
(2) Valued at the difference between the fair market value of the
shares at June 30, 1995 ($21.625) and the options' grant price.
Compensation to Directors
Directors, excluding Dr. Sherman and Mr. Downey, receive an
annual retainer of $12,500 and a fee of $500 for attendance at
each meeting of the Board and at each Committee meeting. In
addition, Messrs. Bolger, Cohen and Harrell were reimbursed for
certain expenses which they incurred on behalf of the Company.
Under the Company's 1993 Stock Option Plan for Non-Employee
Directors, each Director who is not an employee of the Company
(other than a Director who owns 40% or more of the Common Stock)
receives an annual option grant to purchase 3,000 shares at an
option price equal to 100% of the fair market of the common stock
on the date of grant, except that, in the case of the first grant
(the date of the 1993 Annual Meeting of Shareholders), the number
of shares covered by each grant was 12,000. Each option has a
ten-year term and becomes exercisable on the date of the first
annual shareholders' meeting immediately following the date of
the grant. On December 7, 1994, each participating director
received a grant of an option to purchase 3,000 shares at an
exercise price of $25.63 per share.
</TABLE>
<PAGE>
Executive Agreements
In January 1994, the Company entered into a consulting
agreement with Mr. Cohen for a term ending June 30, 2002. From
January 31, 1994, when the agreement commenced, and through June
30, 1995, Mr. Cohen provided consulting services related to
certain business development projects and received compensation
at the rate of $250,000 per annum. The consulting agreement was
amended in June 1995 and indicates that beginning July 1, 1995,
Mr. Cohen's duties will, among other things, include consulting
and advising with regard to products and process development and
attendance at industry associations and technology groups for up
to 120 days during the twelve months ending June 30, 1996 and up
to 80 days during each fiscal year until June 30, 2002. For the
fiscal year ending June 30, 1996, Mr. Cohen will be compensated
at the rate of $150,000 per annum and $100,000 during each of the
six subsequent years. During each of the next seven years, Mr.
Cohen will also receive an additional fee equal to one percent of
the Company's pre-tax earnings between $5 million and $15 million
for each such year. In the event of Mr. Cohen's death during the
term of the agreement, all amounts which would otherwise have
been payable thereafter will be paid at the times provided in the
agreement to his designated beneficiary or his estate. In
addition, during the term of the agreement, Mr. Cohen is entitled
to receive the same compensation as other non-employee Directors
of the Company for his services as a Director, to exercise any
outstanding non-qualified stock options granted to him prior to
January 21, 1994 and to be provided with medical and dental
benefits equivalent to those which the Company provides for its
senior officers from time to time on the same terms and
conditions. At commencement of the term of the agreement, the
Company transferred to Mr. Cohen title to the automobile which
the Company was then providing to him for use in its business.
On January 4, 1993, the Company employed Mr. Downey as
President and Chief Operating Officer. The Agreement, initially
for three years, and year-to-year thereafter unless terminated by
either party, provides for (i) a base annual salary of
approximately $350,000 (as of July 1, 1994) which may be
increased by the Company; (ii) participation in the executive
incentive plan with the opportunity to receive an annual bonus of
up to 50% of the then base salary; (iii) grant of options to
purchase 100,000 shares of common stock; and (iv) financial
assistance in relocating, including indemnification of up to
$30,000 of any loss sustained on the sale of his present
residence. If the Agreement is terminated by the Company without
cause or by Mr. Downey for good reason (as defined therein), Mr.
Downey will be entitled to a lump sum payment equal to 18 months
base salary.
On August 9, 1989 the Company entered into an Agreement with
Mr. Hamza in order to induce him to remain as an employee until
at least August 9, 1993 at which time the benefits accrued
pursuant to the Agreement vested. The Agreement provides for
deferred payments to Mr. Hamza annually from 1997 to 2004, both
inclusive, in order to coincide with the higher education
requirements of his three children. The total amount payable is
$300,000, of which $25,000 is payable in each of four of the
eight years and $50,000 is payable in each of the other four
years. Such obligation is recorded at its present value and is
included as part of Other Liabilities in the consolidated balance
sheets.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
The following table sets forth information regarding the
beneficial ownership of the Company's voting securities on June
30, 1995 by (i) each person who beneficially owns more than 5% of
the Company's voting securities; (ii) each Director of the
Company; (iii) each officer of the Company named in the preceding
Item 11; and (iv) all Directors and Officers of the Company as a
group.
Name and Address of Beneficial Number of Percent of
Owner Shares Class
Bernard C. Sherman (1) 6,108,634(2) 63.2%
159 Signet Drive
Weston, Ontario, Canada M9L 1T9
FMR and Edward C. Johnson, 3rd 799,800(4) 8.3%
82 Devonshire Street
Boston, MA 02109
Edwin A. Cohen (1) 466,953(3) 4.8%
Bruce L. Downey (1) 61,944(3) *
George P. Stephan (1) 32,000(3) *
Robert J. Bolger (1) 22,000(3) *
Wilson L. Harrell (1) 22,000(3) *
Michael F. Florence (1) 12,200(3) *
Jacob M. Kay(1) 5,000(1) *
Gerald F. Price 53,359(3) *
Ezzeldin A. Hamza 45,521(3) *
Paul M. Bisaro 23,126(3) *
Bruce W. Hooey 5,658(3) *
All directors and 6,896,404 71.3%
officers as a group (17 Persons)
[FN]_________________________________________
* Less than 1%
(1) A Director of the Company
<PAGE>
(2) Consists of 5,888,276 common shares held of record by
Sherman Delaware, Inc. ("SDI") and 220,358 common
shares held of record by Glastex Investments, Inc.
(3) Includes shares of common stock which directors and
officers have currently exercisable rights to acquire
through the exercise of incentive and non-qualified
options, in the amount of 60,000 shares for Mr. Downey,
91,954 shares for Mr.Cohen, 28,500 shares for Mr.
Stephan, 22,000 shares each for Mr. Harrell and Mr.
Bolger, 12,000 shares for Mr. Florence, 48,500 shares
for Mr. Price, 45,000 shares for Mr. Hamza, 22,500
shares for Mr. Bisaro, 5,000 for Mr. Hooey, and
390,204 shares for all Directors and officers as a
group.
(4) Reflects shares beneficially owned as of December 31,
1994 according to a statement on Schedule 13G filed
with the Securities and Exchange Commission. Fidelity
Management & Research Corp. ("Fidelity"), a wholly-
owned subsidiary of FMR Corp. and an investment adviser
registered Investment Advisers Act of 1940, is the
beneficial owner of the shares shown as a result of
acting as investment adviser to several investment
companies ("the Funds") registered under the Investment
Company Act of 1940.
Edward C. Johnson 3rd, FMR Corp. (through its control
of Fidelity) and the Funds each has sole power to
dispose of the 799,800 shares owned by the Funds.
Neither FMR Corp. nor Edward C. Johnson 3rd has the
sole power to vote or direct the voting of the shares
owned directly by the Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out
the voting of the shares under written guidelines
established by the Funds' Boards of Trustees.
Various persons have the right to receive or the power
to direct the receipt of dividends from, or the
proceeds from the sale of, the shares shown. The
interest of one person, Fidelity Convertible Securities
Fund, an investment company registered under the
Investment Act of 1940, amounted to 761,200 shares or
7.9% of the class.
Changes in Control
All of the shares held of record by Sherman Delaware,
("SDI") have been pledged to a bank to secure a guaranty made by
SDI. A change in control of the Company could result in the
event SDI were to default in its guaranty obligation.
Item 13. Certain Relationships and Related Transactions
During the fiscal year ended June 30, 1995 the Company sold
certain of its pharmaceutical products and bulk pharmaceutical
materials to four other companies owned by Dr. Bernard Sherman, a
Director of the Company. The Company was paid an aggregate of
approximately $2,585,000 upon such sales. The Company also
purchased bulk pharmaceutical materials from a company owned by
Dr. Sherman in the amount of $435,000. The Company believes the
amounts of such transactions would approximate the amounts of
similar transactions with unaffiliated third parties.
The Company has purchased a directors' and officers'
liability insurance policy from the National Union Fire Insurance
Company of Pittsburgh, Pennsylvania that insures the Company for
certain obligations incurred in the indemnification of its
directors and officers under New York law and insures directors
and officers where such indemnification is not provided by the
Company. The one-year cost of the current policy is $165,000.
<PAGE>
The Company has also purchased an insurance policy from
National Union Fire Insurance Company of Pittsburgh,
Pennsylvania, that provides coverage for employees (including
officers) who are fiduciaries of the Company's employee benefit
plans against expenses and defense costs incurred as a result of
alleged breaches of fiduciary duty as defined in ERISA. The one-
year cost of the current policy is $6,975.
In June 1992, a shareholder action was filed against the
Company and Edwin A. Cohen, then President of the Company, and
Louis J. Guerci, who was a Vice President of the Company. In
November 1994, the Company agreed to settle this matter.
Management strongly believed that the case was without merit, but
determined that it was in the Company's best interest to settle
rather than participate in continued litigation. In December
1994, the court approved the settlement. In connection with this
action, the Company had separately agreed to indemnify Mr. Guerci
in connection therewith. In the three years ended June 30, 1995,
the Company made advances of approximately $288,000 and $35,000
in legal fees and expenses to legal counsel on behalf of Mr.
Guerci and Mr. Cohen, respectively.
<PAGE>
Item 14.
Exhibits, Financial Statement Schedule and Reports on Form 8-K
(a) (1) (2) See Index to Financial Statements after
Signature Page.
(b) Exhibits
The following exhibits are filed as part of this
report.
Exhibit Number Exhibits
3.1 Certificate of Incorporation of Registrant (1)
3.2 By-Laws of the Registrant (2)
10.1 Stock Option Plan (3)
10.2 Savings and Retirement Plan
10.3 Economic Development Bond Financing Agreement, dated
December 19, 1984, relating to 265 Livingston Street (2)
10.4 Note Purchase Agreement dated June 28, 1991 -
$20,000,000 - 10.15% Senior Secured Notes dated June 28, 2001 (4)
10.5 Not used.
10.6 Collective Bargaining Agreement, effective May 1993 (4)
10.7 Agreement with Bruce L. Downey (4)
10.8 Agreement with Ezzeldin A. Hamza (4)
10.9 Distribution and Supply Agreement for Tamoxifen Citrate
dated March 8, 1993 (4)
10.10 1993 Stock Incentive Plan (5)
10.11 1993 Employee Stock Purchase Plan (6)
10.12 1993 Stock Option Plan for Non-Employee Directors (7)
10.13 Agreement with Edwin A. Cohen and Amendment thereto
11.0 Statement Re: Computation of Per Share Earnings
21.0 Subsidiaries of the Company (1)
<PAGE>
Exhibit Number Exhibits
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
(1) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's Annual
Report on Form 10-K for the year ended June 30,
1988 and incorporated herein by reference.
(2) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1986 and
incorporated herein by reference.
(3) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's
Registration Statement on Form S-1 No. 33-13472 and
incorporated herein by reference.
(4) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's Annual
Report on Form 10-K for the year ended June 30, 1993 and
incorporated herein by reference.
(5) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's
Registration Statement on Form S-8 No. 33-73696 and
incorporated herein by reference.
(6) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's
Registration Statement on Form S-8 No. 33-73700 and
incorporated herein by reference.
(7) Previously filed with the Securities and Exchange
Commission as an Exhibit to the Registrant's
Registration Statement on Form S-8 No. 33-73698 and
incorporated herein by reference.
(c) Reports on Form 8-K
None.
<PAGE>
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.
BARR LABORATORIES, INC.
Signature Title Date
BY BRUCE L. DOWNEY Chairman of the Board, Chief September 22, 1995
(Bruce L. Downey) Executive Officer & President
BY PAUL M. BISARO Chief Financial Officer, September 22, 1995
(Paul M. Bisaro) General Counsel & Secretary
BY PETER J. FINNERTY Corporate Controller September 22, 1995
(Peter J.Finnerty)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
BRUCE L. DOWNEY Chairman of the Board, Chief September 22, 1995
(Bruce L. Downey) Executive Officer & President
EDWIN A. COHEN Vice Chairman of the Board September 22, 1995
(Edwin A. Cohen)
ROBERT J. BOLGER Director September 22, 1995
(Robert J. Bolger)
MICHAEL F. FLORENCE Director September 22, 1995
(Michael F. Florence)
WILSON L. HARRELL Director September 22, 1995
(Wilson L. Harrell)
BERNARD C. SHERMAN Director September 22, 1995
(Bernard C. Sherman)
GEORGE P. STEPHAN Director September 22, 1995
(George P. Stephan)
JACOB M. KAY Director September 22, 1995
(Jacob M. Kay)
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Independent Auditors' Reports 32-33
Consolidated Balance Sheets - June 30, 1995 and 1994 34
Consolidated Statements of Operations - Years ended 35
June 30, 1995, 1994 and 1993
Consolidated Statements of Shareholders' Equity - Years ended 36
June 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended 37
June 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements 38-51
Schedule II- Valuation and Qualifying Accounts - Years ended 52
June 30, 1995, 1994 and 1993
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or notes.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Barr Laboratories, Inc.:
We have audited the accompanying consolidated balance sheets of
Barr Laboratories, Inc. and subsidiaries (the "Company") as of
June 30, 1995 and 1994, and the related consolidated statements
of operations, shareholders' equity and cash flows for each of
the years then ended. Our audits also included the financial
statement schedule as of June 30, 1995 and 1994, listed in the
Index at Item 14. These consolidated financial statements and
financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement
schedule 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 present
fairly, in all material respects, the financial position of Barr
Laboratories, Inc. and subsidiaries as of June 30, 1995 and 1994,
and the results of their operations and their cash flows for each
of the years then ended in conformity with generally accepted
accounting principles. Also, in our opinion, the financial
statement schedule as of June 30, 1995 and 1994, when considered
in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 6 to the consolidated financial statements,
effective July 1, 1993, the Company changed its method of
accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
August 22, 1995
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Barr Laboratories, Inc.:
We have audited the consolidated financial statements of Barr
Laboratories, Inc., and subsidiaries as listed in the
accompanying index insofar as they relate to the year ended June
30, 1993. In connection with our audit of the consolidated
financial statements, we also have audited the financial
statement schedule as listed in the accompanying index insofar as
it relates to the year ended June 30, 1993. These consolidated
financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audit.
We conducted our audit 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, the 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 audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the results of
operations and the cash flows of Barr Laboratories, Inc. and
subsidiaries for the year ended June 30, 1993 in conformity with
generally accepted accounting principles. Also in our opinion,
the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as
a whole, presents fairly, in all material respects, the
information set forth therein.
/s/ KPMG PEAT MARWICK LLP
KPMG Peat Marwick LLP
Short Hills, New Jersey
September 17, 1993,
except as to the first four sentences of the
second paragraph of note 5 and the fifth paragraph
of note 11 which are as of August 22, 1995
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
June 30, 1995 and 1994 (in thousands of dollars, except share amounts)
<CAPTION>
1995 1994
<S> ASSETS <C> <C>
Current assets:
Cash and cash equivalents $ 52,987 $ 36,499
Accounts receivable (including
receivables from related parties of
$925 in 1995 and $1,766 in 1994) less
allowances
of $2,100 and $2,000 in 1995 and
1994, respectively 27,307 21,633
Inventories 35,890 29,350
Deferred income taxes 3,601 3,578
Prepaid expenses 678 643
Total current assets 120,463 91,703
Property, plant and equipment, net 34,799 33,127
Other assets 691 1,077
Total assets $155,953 $125,907
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable (including
payable to a related
party of $250 in 1995) $ 55,355 $ 32,735
Accrued liabilities 5,495 4,812
Income taxes payable 1,249 929
Total current liabilities 62,099 38,476
Long-term debt 20,371 30,433
Other liabilities 253 253
Deferred income taxes 1,377 1,761
Commitments & contingencies
Shareholders' Equity:
Cumulative convertible preferred
stock, Series A, $1 par value
per share; authorized 2,000,000
shares: none issued Common stock,
$.01 par value Per share;
authorized 30,000,000 shares; issued
9,334,852 and 8,783,737 in 1995
and 1994, respectively 93 88
Additional paid-in capital 42,230 31,591
Retained earnings 29,543 23,318
71,866 54,997
Treasury stock at cost; 52,425
shares in 1995 and 1994 (13) (13)
Total shareholders' equity 71,853 54,984
Total liabilities and shareholders'
equity $155,953 $125,907
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993
(thousands of dollars, except share amounts)
1995 1994 1993
<S> <C> <C> <C>
Net sales (including sales to related
parties of $2,585 in 1995, $1,850 in 1994
and $661 in 1993) $ 199,720 $ 109,133 $ 58,047
Cost of sales 159,498 78,021 35,913
Gross Profit 40,222 31,112 22,134
Costs and expenses:
Selling, general and administrative 19,014 19,170 23,554
Research and development 10,443 6,778 5,370
Earnings (loss) from operations 10,765 5,164 (6,790)
Interest income 1,874 689 345
Interest expense (2,535) (2,683) (2,499)
Other income 118 575 21,771
Earnings before income taxes, extrordinary
loss and cumulative effect of accounting
change 10,222 3,745 12,827
Income tax expense 3,852 1,461 5,040
Earnings before extraordinary loss and
cumulative effect of accounting change 6,370 2,284 7,787
Extraordinary loss on early extinguishment
of debt, net of taxes (145) - -
Earnings before cumulative effect of 6,225 2,284 7,787
accounting change
Cumulative effect of accounting change - 374 -
Net earnings $ 6,225 $ 2,658 $ 7,787
PER COMMON SHARE:
Earnings before extraordinary loss and
cumulative effect of accounting change $ 0.71 $ 0.26 $ 0.90
Extraordinary loss on early extinguishment
of debt, net of taxes (0.01) - -
Earnings before cumulative effect of 0.70 0.26 0.90
accounting change
Cumulative effect of accounting change - 0.04 -
Net earnings $ 0.70 $ 0.30 $ 0.90
Weighted average number of common shares
and common share equivalents 8,944,692 8,887,919 8,629,872
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 1995, 1994 AND 1993 (in
thousands of dollars, except share amounts)
<CAPTION>
Common Additional Common Stock Total
Stock Paid-in Retained in Treasury Shareholder's
Shares Amount capital Earnings Shares Amount Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1992 8,662,695 $87 $29,898 $12,873 52,425 $ (13) $42,845
Net earnings 7,787 7,787
Issuance of common
stock for exercised
stock options and
employee's stock
purchase plans 27,542 - 175 175
Contributions related to
exercise of options by
directors 691 691
Balance, June 30, 1993 8,690,237 87 30,764 20,660 52,425 (13) 51,498
Net earnings 2,658 2,658
Issuance of common
stock for exercised
stock options and
employee's stock
purchase plan 93,50 1 827 828
Balance, June 30, 1994 8,783,737 88 31,591 23,318 52,425 (13) 54,984
Net earnings 6,225 6,225
Issuance of common
stock for exercised
stock options and
employee's stock
purchase plan 40,757 - 661 661
Issuance of common
stock upon conversion
of convertible
subordinated notes 510,358 5 9,978 9,983
Balance, June 30, 1995 9,334,852 $93 $42,230 $29,543 52,425 $(13) $71,853
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BARR LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended June 30, 1995, 1994
and 1993
(thousands of dollars, except share
information)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING
ACTIVITIES:
Net earnings $ 6,225 $ 2,658 $ 7,787
Adjustments to reconcile net earnings
to net cash provided by (used in) operating activities:
Depreciation and amortization 4,429 3,613 3,256
Deferred income tax (benefit) expense (407) 523 2,326
Cumulative effect of accounting change - (374) -
Write-off of deferred financing fees associated
with early extinquishment of debt 188 - -
(Gain) loss on disposal of equipment (113) 24 (56)
Gain on disposal of investment property - (548) -
Write-off of discontinued capital projects - 53 1,199
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (5,674) (13,049) 1,847
Inventories (6,540) (7,050) 3,177
Prepaid expenses (35) (329) 206
Other assets 198 (55) 373
Increase (decrease) in:
Accounts payable and accrued liabilities 23,303 28,584 (1,797)
Income taxes payable 320 534 (986)
Net cash provided by operating activities 21,894 14,584 17,332
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,328) (4,752) (4,375)
Proceeds from sale of investment property - 900 -
Proceeds from sale of property, plant and equipment 340 36 213
Net cash used in investing activities (5,988) (3,816) (4,162)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Principal payments on long-term debt (62) (145) (98)
Fees associated with conversion of debt to equity (17) - -
Proceeds from exercise of stock options
and employee stock purchases 661 828 238
Net cash provided by financing activities 582 683 140
Increase in cash and cash equivalents 16,488 11,451 13,310
Cash and cash equivalents at beginning of year 36,499 25,048 11,738
Cash and cash equivalents at end of year $52,987 $36,499 $25,048
Supplemental cash flow data-Cash paid during the year:
Interest, net of portion capitalized $ 2,541 $ 3,072 $ 3,087
Income taxes 3,766 705 3,211
Supplemental disclosure of non-cash financing activity:
Issuance of 510,358 shares of common stock upon conversion
of $10,000 Convertible Subordinated Notes $10,000 - -
See accompanying notes to the consolidated financial statements.
</TABLE>
<PAGE>
BARR LABORATORIES, INC.
Notes to the Consolidated Financial Statements
(in thousands of dollars, except share amounts)
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation and Other Matters
The consolidated financial statements include the
accounts of Barr Laboratories, Inc. (the "Company") and
its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been
eliminated in consolidation.
Sherman Delaware, Inc., and affiliated companies owned
65.4% of the common stock of the Company at June 30,
1995. Dr. Bernard C. Sherman is a principal
stockholder of Sherman Delaware, Inc. and a Director of
Barr Laboratories, Inc.
(b) Inventories
Inventories are stated at the lower of cost, determined
on a first-in, first-out (FIFO) basis, or market.
(c) Property, Plant and Equipment
Property, Plant and Equipment is recorded at cost.
Depreciation is provided for on a straight-line basis
over the estimated useful lives of the related assets.
Leasehold improvements are amortized on a straight-line
basis over the shorter of their useful lives or the
terms of the respective leases. The estimated useful
lives of the major classification of depreciable assets
are:
Years
-----
Buildings 45
Building Improvements 10
Machinery and Equipment 3-10
Leasehold Improvements 3-10
Automobiles and Trucks 3-5
Maintenance and repairs are charged to operations as
incurred; renewals and betterments are capitalized.
(d) Income Taxes
In 1995 and 1994, income taxes are accounted for under
Statement of Financial Accounting Standards ("SFAS")
No. 109, Accounting for Income Taxes ("SFAS No. 109").
Under SFAS No. 109, deferred tax assets and liabilities
are recognized for the differences between the
financial statement carrying amounts of existing assets
and liabilities and their respective tax bases.
<PAGE>
Under Accounting Principles Board Opinion No. 11, which
was applied in fiscal 1993, a provision was made for
deferred income taxes resulting from differences
between the time transactions were recorded for
financial statement purposes and the time they affected
taxable income.
(e) Research and Development
Research and development costs, which consist
principally of product development costs, are charged
to operations as incurred.
(f) Earnings Per Share
Earnings per common share in 1995 and 1993 is computed
by dividing earnings by the weighted average number of
shares outstanding during the period. In 1995, the
effects of stock options outstanding resulted in less
than 3% dilution. In 1993, the inclusion of dilutive
common equivalent shares and other potentially dilutive
securities was either anti-dilutive or resulted in less
than 3% dilution. Earnings per common share in 1994 was
computed using the weighted average number of common
and dilutive common equivalent shares outstanding
during the year. The inclusion of other potentially
dilutive securities was anti-dilutive. The fully
diluted per share amounts are not presented in 1995,
1994 and 1993 because any dilutive effect was either
not material or was anti-dilutive.
(g) Concentration of Credit Risk
The Company is engaged in the manufacture, sale and
distribution of generic pharmaceutical products. The
Company's manufacturing plants are located in New
Jersey and New York and its products are sold
throughout the United States. The Company performs
ongoing credit evaluations of its customers' financial
condition and generally requires no collateral from its
customers.
(h) Cash and Cash Equivalents
Cash equivalents consist of those securities with
maturities of three months or less when purchased. As
of June 30, 1995 and 1994, $41,143 and $17,368,
respectively, of the Company's cash was held in a cash
collateral account to secure extension of credit to it
by the Innovator of Tamoxifen Citrate in accordance
with the Distribution and Supply Agreement between the
Company and the Innovator.
(i) Deferred Financing Fees
All costs associated with the issuance of debt are
being amortized on a straight-line basis over the life
of the related debt which matures in 2001. The
unamortized amounts of $357 and $625 at June 30, 1995
and 1994, respectively, are included in Other assets in
the Consolidated Balance Sheets.
<PAGE>
In connection with the early extinguishment of the
10.05% convertible subordinated notes, the Company
wrote off $188 in deferred financing fees in February
1995. See Note (4) Long-Term Debt.
(j) Financial Instruments
The following is a summary of the carrying value and
estimated fair value as of June 30, 1995, of the
Company's financial instruments reportable pursuant to
SFAS No. 107, "Disclosures about Fair Value of
Financial Instruments:"
Cash, Accounts Receivable and Accounts Payable - The
carrying amounts of these items are a reasonable
estimate of their fair value.
Long-Term Debt - Long-term debt is primarily comprised
of the 10.15% $20 million Senior Secured Notes due June
2001. The fair value of this debt at June 30, 1995 is
estimated at $21 million. This estimate was determined
by discounting the future cash flows using rates
currently available to the Company.
The fair value estimates presented herein are based on
pertinent information available to management as of
June 30, 1995. Although management is not aware of any
factors that would significantly affect the estimated
fair value amounts, such amounts have not been
comprehensively revalued for purposes of these
financial statements since that date, and current
estimates of fair value may differ significantly from
the amounts presented herein.
(k) Revenue Recognition
The Company recognizes revenue when goods are shipped.
(l) Reclassifications
Certain amounts in prior year financial statements
have been reclassified to conform with the current year
presentation.
<PAGE>
(2) Inventories
A summary of inventories is as follows:
June 30,
--------------------
1995 1994
Raw Materials and
Supplies $17,470 $18,064
Work-in-Process 4,520 5,093
Finished Goods 13,900 6,193
------- -------
$35,890 $29,350
======= =======
Tamoxifen Citrate, purchased as a finished product,
accounted for $9,966 and $1,992 of finished goods inventory
as of June 30, 1995 and 1994, respectively.
(3) Property, Plant and Equipment
A summary of property, plant and equipment is as follows:
June 30,
--------------------
1995 1994
Land $ 1,814 $ 1,814
Buildings and
Improvements 19,109 18,425
Machinery and
Equipment 35,243 31,081
Leasehold
Improvements 1,659 1,358
Automobiles and
Trucks 81 140
Construction in
Progress 2,460 1,780
------- -------
60,366 54,598
Less: Accumulated
Depreciation &
Amortization 25,567 21,471
------- -------
$34,799 $33,127
For the years ended June 30, 1995, 1994 and 1993, $176, $388
and $588 of interest was capitalized, respectively.
<PAGE>
(4) Long-Term Debt
A summary of long-term debt is as follows:
June 30,
---------------------
1995 1994
New Jersey Economic
Development
Authority Bond (a) $ 414 $ 458
10.15% Senior Secured Notes
Due June
28, 2001 (b)
10.05% Convertible 20,000 20,000
Subordinated Notes (c) - 10,000
Other - 42
------- -------
20,414 30,500
Less Current Installments of
Long-Term
Debt (included in Accrued
Liabilities) 43 67
------- -------
Total Long-Term Debt $20,371 $30,433
======= =======
(a) The New Jersey Economic Development Authority Bond is
payable to a bank. Such loan is secured by a first
mortgage on land, building and improvements on the
facility located at 265 Livingston Street. Interest
is charged at 75% of the bank's prime rate. The prime
rate was 9% and 7-1/4% at June 30, 1995 and 1994, respectively.
Monthly installments are $3.6 plus interest, through December
1999. Upon maturity in January 2000, there will be a
final installment equal to the then remaining principal
balance of $220.
(b) In June 1991, the Company entered into a note purchase
agreement and issued $20,000 of senior secured notes
bearing interest at a rate of 10.15%, payable
semiannually. Principal payments of $4,000 per year
are due beginning in June 1997 through the maturity
date of June 28, 2001. These notes are collateralized
by a first mortgage on the Pomona, New York facility
and all machinery and equipment.
(c) In June 1991, the Company entered into a note purchase
agreement and issued 10,000 of convertible subordinated
notes bearing interest at the rate of 10.05%, payable
semiannually. In February 1995, these notes were
converted into 510,358 shares of common stock and the
Company incurred an extraordinary loss resulting primarily
from the write-off of deferred financing costs. This
extraordinary loss from early extinguishment of debt,
net of taxes of $92, was $145 or $0.01 per share.
The senior notes contain certain financial covenants
including but not limited to:
- Fixed interest coverage of 150% of senior note interest.
- Maintenance of consolidated tangible net worth of not less
than $25 million plus 25% of net earnings subsequent to June 30,
1991.
<PAGE>
- Senior debt limitations of not more than 45% of total
capitalization and a total debt limitation of not more than 55%
of total capitalization.
- Restriction of dividend payments not to exceed $5 million
plus 50% of net earnings subsequent to July 1, 1991.
The Company was in compliance with such covenants as of and
for the year ended June 30, 1995.
The note purchase agreement permits the Company to repay
these notes prior to their scheduled maturity. However, as
this would require a substantial prepayment penalty,
refinancing such notes currently is considered prohibitive.
Principal maturities of existing long-term debt for the next
five years and thereafter are as follows:
Year Ending
June 30,
1996 $ 43
1997 4,043
1998 4,043
1999 4,043
2000 4,242
Thereafter 4,000
(5) Related-Party Transactions
The Company's related party transactions were with
affiliated companies of Dr. Bernard C. Sherman. During the
years ended June 30, 1995, 1994, and 1993, the Company
purchased $435, $124 and $63, respectively, of bulk
pharmaceutical material from such companies.
In June 1992, a shareholder action was filed against the
Company and Edwin A. Cohen, then President of the Company,
and Louis J. Guerci, who was a Vice President of the
Company. In November 1994, the Company agreed to settle
this matter. Management strongly believed that the case was
without merit, but determined that it was in the Company's
best interest to settle rather than participate in continued
litigation. In December 1994, the court approved the
settlement. In connection with this action, the Company has
separately agreed to indemnify Mr. Guerci in connection
therewith. In the three years ended June 30, 1995, the
Company made advances of approximately $288 and $35 in legal
fees and expenses to legal counsel on behalf of Mr. Guerci
and Mr. Cohen, respectively.
During the years ended June 30, 1995 and 1994, the Company
paid one of its Directors $250 and $83, respectively, under
a consulting agreement.
<PAGE>
(6) Income Taxes
Effective July 1, 1993, the Company adopted SFAS 109. The
cumulative effect of this accounting change was a one-time
gain of $374 or $.04 per share which is reported separately
in the Consolidated Statement of Operations for fiscal 1994.
A summary of the components of income tax expense is as
follows:
Year Ended June 30,
1995 1994 1993
Federal:
Current $3,680 $ 821 $2,364
Deferred (242) 412 1,966
3,438 1,233 4,330
State:
Current 487 117 350
Deferred (165) 111 360
322 228 710
$3,760 $1,461 $5,040
Income tax expense for the year ended June 30, 1995 is
included in the financial statements as follows:
Continuing operations $3,852
Extraordinary loss on early
extinguishment of debt (92)
------
$3,760
======
The provision for income taxes differs from amounts computed
by applying the statutory federal income tax rate to income
before taxes due to the following:
Year Ended June 30
1995 1994 1993
Federal Income Taxes at
Statutory Rate $3,475 $1,274 $4,361
State Income Taxes,
Net of Federal Income
Tax Effect 212 151 470
Other, Net 73 36 209
------ ------ ------
$3,760 $1,461 $5,040
====== ====== ======
<PAGE>
The temporary differences that give rise to deferred tax
assets and liabilities as of June 30, 1995 and 1994 are as
follows:
1995 1994
Deferred Tax Assets:
Receivable Reserves $1,036 $952
Inventory Reserves 848 1,083
Inventory Capitalization 593 478
Other Operating Reserves 1,124 1,065
Reserves ------ ------
3,601 3,578
Deferred Tax
Liability:
Plant and
Equipment (1,377) (1,761)
Net Deferred Tax
Asset $2,224 $1,817
====== ======
The deferred income tax expense for the fiscal year ended
June 30, 1993 is attributable to the following timing
differences:
Inventory Reserves $1,475
Inventory 101
Capitalization
Receivable Reserves 232
Other Operating 83
Reserves
Tax Over Book 43
Depreciation
Write-Off of Joint
Venture 392
------
$2,326
======
(7) Shareholders' Equity
Preferred Stock
The cumulative convertible preferred stock, Series A has
voting rights equal to the number of shares of common stock
of the Company into which each share may be converted (with
a conversion basis of one share of common stock for each
share of preferred stock). As of June 30, 1995, none have
been issued.
Employee Stock Option Plans
The Company has stock option plans, which were approved by
the shareholders and which authorize the granting of options
to officers and certain key employees to purchase the
Company's common stock at a price equal to the market price
on the date of grant.
During fiscal 1994, the shareholders ratified the adoption
by the Board of Directors of the 1993 Stock Incentive Plan
("the 1993 Option Plan") in order to ensure, among other
things, that the Company would continue to have an adequate
number of shares of common stock available for grants of
incentive and unqualified stock options.
The Company's other option plan was approved by the
shareholders in 1986 ("the 1986 Option Plan").
<PAGE>
All options granted to date under the 1993 Option Plan and
1986 Option Plan are exercisable between one and two years
from the date of grant and expire ten years after the date
of grant except in cases of death or termination of
employment as defined in each Plan. Also, to date, no
option has been granted under either the 1993 Option Plan or
the 1986 Option Plan at a price below the current market
price of the Company's common stock on the date of grant.
The following is a summary of the combined activity of the
1986 Option Plan and the 1993 Option Plan for the three
fiscal years ended June 30, 1995:
No. of Option
Shares Price
Outstanding at 6/30/92 320,350 $4.38-17.50
Granted 234,500 7.50-13.50
Cancelled (19,300) 8.38-17.50
Exercised (15,750) 4.38-8.88
Outstanding at 6/30/93 519,800 4.38-17.50
Granted 75,250 17.00-20.25
Cancelled (33,296) 9.00-17.25
Exercised (93,500) 4.38-17.25
Outstanding at 6/30/94 468,254 4.38-20.25
Granted 192,500 21.69-25.31
Cancelled (9,500) 9.00-21.69
Exercised (18,000) 4.38-17.25
Outstanding at 6/30/95 633,254 4.38-25.31
=======
Exercised to date through 254,250
6/30/95 =======
Available for Grant
(1,350,000 authorized) 462,496
=======
Exercisable at 6/30/95 318,129 $4.38-21.69
=======
<PAGE>
Non-Employee Directors' Stock Option Plan
During fiscal year 1994, the shareholders ratified the
adoption by the Board of Directors of the 1993 Stock Option
Plan for Non-Employee Directors (the "Directors' Plan"). An
aggregate of 150,000 shares of common stock were available
under the Directors' Plan. This formula plan, among other
things, enhances the Company's ability to attract and retain
experienced directors. Each eligible non-employee director
on any grant date is optioned 3,000 shares except in the
case of the first grant date (which was the date of the 1993
Annual Meeting) where each eligible director was optioned
12,000 shares.
All options granted under the Directors' Plan have ten-year
terms and are exercisable at an option exercise price equal
to the market price of common stock on the date of grant.
Each option is exercisable on the date of the first annual
shareholders' meeting immediately following the date of
grant of the option, provided there has been no interruption
of the optionee's service on the Board before that date. In
December 1993, four non-employee members of the Board of
Directors were granted a total of 48,000 non-qualified
options to purchase common stock at $20.63 per share
(average market price at date of grant). As of June 30,
1995, none have been exercised. The following is a summary
of the activity for the fiscal year ended June 30, 1995:
No. of Option Price
Shares
Outstanding at
6/30/94 48,000 $20.63
Granted 18,000 25.63
------
Outstanding at
6/30/95 66,000 20.63-25.63
Available for Grant
(150,000 authorized) 84,000
======
Exercisable at
6/30/95 48,000 $20.63
======
Employee Stock Purchase Plan
During fiscal 1994, the shareholders ratified the adoption
by the Board of Directors of the 1993 Employee Stock
Purchase Plan (the "Purchase Plan") to offer employees an
inducement to acquire an ownership interest in the Company.
The Purchase Plan permits eligible employees to purchase,
through regular payroll deductions, an aggregate of 200,000
shares of common stock at approximately 85% of the fair
market value of such shares. During fiscal 1995, the
initial year of the plan, 22,757 shares were purchased under
the plan.
<PAGE>
(8) Business Segment and Other Matters
The Company operates in one industry segment (the
manufacture and distribution of generic pharmaceutical
products). In fiscal 1995, approximately 10% of net sales
were generated by sales to Cardinal Health, Inc. In 1994
and 1993, McKesson Drug Company accounted for approximately
11% and 14% of net sales, respectively. No other customer
accounted for greater than 10% of sales in any of the last
three fiscal years.
(9) Savings and Retirement Plan
The Company has a savings and retirement plan (the "401(K)
Plan") which is intended to qualify under Section 401(K) of
the Internal Revenue Code. Employees are eligible to
participate in the 401(K) Plan in the first month following
the month of hire. Prior to June 30, 1995, under the terms
of the 401(K) Plan, participating employees may contribute
up to a maximum of 15% of their earnings (9% of their
earnings before taxes and up to 6% of after-tax earnings).
Beginning in July 1, 1995, participating employees may
contribute up to a maximum of 12% of their earnings before
or after taxes. The Company is required, pursuant to the
terms of its union contract, to contribute to each union
employee's account an amount equal to the 2% minimum
contribution made by such employee. The Company may, at its
discretion, contribute a percentage of the amount
contributed by an employee to the 401(K) Plan up to a
maximum of 10% of such employee's compensation. Participants
are always fully vested with respect to their own salary and
cash contributions and any profits arising therefrom.
Participants become vested with respect to 20% of the
Company's contributions to their accounts and any profits
arising therefrom for each full year of employment with the
Company and thus become fully vested after five full years
of employment.
The Company's discretionary contributions to the 401(K) Plan
were $1,173, $945, and $789 for the years ended June 30,
1995, 1994 and 1993, respectively.
In January 1994, after an extensive review of certain
administrative aspects of the 401(K) Plan, the Company
submitted an application to the Internal Revenue Service
(IRS) under the Voluntary Compliance Review (VCR) program.
The Company has taken those actions necessary to ensure that
the 401(K) Plan is administered in accordance with
applicable rules and regulations. On September 14, 1995, the
Company received a Compliance Statement from the IRS
indicating that the IRS would not pursue the sanction of
plan disqualification provided that the Company's proposed
corrective actions, which were included in the VCR
application, are completed by December 13, 1995. The
Company believes that any expenses resulting from this
matter will not have a material affect on the Company's
consolidated financial statements.
<PAGE>
(10) Other Income
A summary of other income is as follows:
Year Ended June 30,
_____________________________________________
1995 1994 1993
ICI Lawsuit -- -- $21,000
Settlement (a)
Circa Lawsuit -- -- 690
Settlement(b)
Gain on Sale of $113 $ 548 --
Property (c)
Other 5 27 81
---- ---- -------
Other Income $118 $575 $21,771
==== ==== =======
(a) In March 1993, the Company and the Innovator of Tamoxifen
Citrate reached an out-of-court settlement of a patent
dispute involving the United States patent on Tamoxifen
Citrate. Under the terms of the settlement, a total cash
payment of $21 million (excluding interest) was made to the
Company; the Company entered into a non-exclusive
Distribution and Supply Agreement with the Innovator; and
the Company began marketing Tamoxifen Citrate on November 1,
1993.
(b) In June 1993, under the terms of the settlement with Circa
Pharmaceuticals, Inc., the Company received a total cash
payment of $690.
(c) The Company sold unused manufacturing equipment in 1995 and
undeveloped investment property in 1994 and recognized gains
of $113 and $548, respectively, from such sales.
(11) Commitments and Contingencies
The Company is party to various operating leases which relate to
the rental of office and plant facilities and of equipment. All
building leases can be extended at the option of the Company.
Rent expense charged to operations was $1,217, $1,007 and $955 in
1995, 1994 and 1993, respectively. Future minimum rental
payments, exclusive of taxes, insurance and other costs under
noncancellable long-term operating lease commitments, are as
follows:
Minimum
Year Ending Rental
June 30, Payments
1996 $ 980
1997 929
1998 934
1999 624
2000 29
Thereafter 0
Joint Venture Litigation
As a result of the Company's inability to reach an agreement
with its partner in a joint venture in a fermentation plant,
the Company and an affiliated company have filed an action
to recover the $1,000 deposit which was paid in escrow in
furtherance of the
<PAGE>
possible joint venture. A counterclaim
has been filed against the Company and its co-plaintiff for
damages of $10,000 for breach of contract and $5,000 for
punitive damages. Although the Company believes its claim
is meritorious and the defendant's counterclaim is without
merit, the Company is uncertain of its ability to collect
any judgment in the case. Accordingly, the Company wrote
off the $1,000 investment in the fourth quarter of fiscal
1992.
Product Liability
The Company maintains product liability insurance coverage
in the amount of $5,000. No significant product liability
suit has ever been filed against the Company, however, if
one were filed and such a case were successful against the
Company, it could have a material adverse effect upon the
business and financial condition of the Company to the
extent such judgment was not covered by insurance or
exceeded the policy limits.
Food and Drug Administration (FDA) Litigation
On November 7, 1994, the United States District Court, for
the District of New Jersey, issued an order (the "Final
Order") that resolved the two-year legal dispute between
Barr Laboratories, Inc. and the U.S. Food & Drug
Administration ("FDA") over manufacturing practices. The
Final Order, which was negotiated between Barr and the FDA,
simultaneously concluded the FDA's case against Barr, and
Barr's counter-suit against the FDA. The Final Order brings
to closure all significant cGMP issues between Barr and the
FDA.
Shareholder Action
On November 16, 1994, the Company agreed to settle a 1992
shareholder action, filed against the Company and two former
officers, which alleged the violation of certain SEC
regulations. In December 1994, the Court approved the
settlement.
Management strongly believed that the case was without
merit, but determined that it was in the Company's best
interest to settle rather than participate in continued
litigation. The total settlement, valued at approximately
$1.8 million, will be shared equally by the Company and its
insurers. A provision for the Company's estimated share of
the cost of the action had been previously included in
the Company's 1994 consolidated financial statements, and
therefore the settlement is not expected to have any
significant adverse effect on the Company's future
operations.
Other Litigation
As of June 1995, the Company was involved with other
lawsuits incidental to its business, including patent
infringement actions. Management of the Company, based on
the advice of legal counsel, believes that the ultimate
disposition of such other lawsuits will not have any
significant adverse effect on the Company's consolidated
financial statements.
<PAGE>
<TABLE>
(12) Quarterly Data (Unaudited)
A summary of the quarterly results of operations is as
follows:
<CAPTION>
(in thousands of dollars,
except per share amounts)
Three-Month Period Ended
Sept. 30 Dec. 31 Mar. 31 June 30
<S> <C> <C> <C> <C>
1995:
Net sales $44,047 $50,878 $49,286 $55,509
Gross profit 9,944 11,021 9,727 9,530
Earnings before
extraordinary loss on
early extinguishment of
debt 1,845 2,248 1,041 1,236
Net earnings 1,845 2,248 896 1,236
Earnings before
extraordinary loss on
early extinguishment of
debt per common share
and common share
equivalent $ 0.21 $ 0.25 $ 0.12 $ 0.13
Net earnings per common
share and common
equivalent share* $ 0.21 $ 0.25 $ 0.10 $ 0.13
======= ======== ======== ========
Net earnings assuming
full dilution* $ 0.21 $ 0.25 $ 0.10 $ 0.13
======== ======== ======== ========
1994:
Net sales $13,197 $25,621 $29,675 $40,640
Gross Profit 6,641 6,909 7,837 9,725
Earnings before
cumulative effect of
accounting change 14 144 609 1,517
Net earnings 388 144 609 1,517
Earnings before
cumulative effect of
accounting change per
common share and common
share equivalent $ - $ 0.02 $ 0.07 $ 0.17
Net earnings per common
share and common
equivalent share $ 0.04 $ 0.02 $ 0.07 $ 0.17
======== ======== ======== ========
Net earnings assuming
full dilution $ 0.04 $ 0.02 $ 0.07 $ 0.17
======== ======== ======== ========
* The sum of the individual quarters may not equal the full year
amounts due to the effects of the market prices in the
application of the treasury stock method.
</TABLE>
<PAGE>
Schedule II
Barr Laboratories, Inc.
Valuation and Qualifying Accounts
Years ended June 30, 1995, 1994, and 1993
Balance at Additions, Recovery Deduct-
Beginning costs and against tions Balance
of Year and expense write- write- at end of
offs offs Year
Allowance for
doubtful accounts:
Year ended June 30, 1993 $500 (20) 5 85 400
Year ended June 30, 1994 400 400 20 20 800
Year ended June 30, 1995 800 - - 400 400
Reserve for returns
and allowances:
Year ended June 30, 1993 1,200 2,035 - 2,235 1,000
Year ended June 30, 1994 1,000 2,021 - 1,821 1,200
Year ended June 30, 1995 1,200 4,813 - 4,313 1,700
Inventory reserves:
Year ended June 30, 1993 10,400 6,238 - 9,991 6,647
Year ended June 30, 1994 6,647 3,447 - 4,351 5,743
Year ended June 30, 1995 5,743 2,345 - 4,538 3,550
[ARTICLE] 5
Exhibit 10.2
BARR LABORATORIES, INC.
EMPLOYEES SAVINGS & RETIREMENT PLAN (401(k))
(Restated and Amended Effective January 1, 1989)
ARTICLE I 1
DEFINITIONS 1
1.1 "Act" 1
1.2 "Administrator" 1
1.3 "Aggregate Account" 1
1.4 "Beneficiary" 1
1.5 "Code" 1
1.6 "Compensation" 1
1.7 "Elective Contribution 1
1.8 "Eligible Employee" 2
1.9 "Employee" 2
1.10 "Employer" 2
1.11 "Excessive Aggregate Contributions" 2
1.12 "Excessive Elective Allocations" 2
1.13 "Excessive Contributions" 2
1.14 "Fiduciary" 2
1.15 "Forfeiture" 2
1.16 "Former Participant" 2
1.17 "Highly Compensated Employee" 2
1.18 "Hour of Service" 3
1.19 "Key Employee" 4
1.20 "Non-Elective Contribution 4
1.21 "Non-Key Employee" 4
1.22 "Normal Retirement Date" 4
1.23 "Break in Service" 4
1.24 "Participant" 4
1.25 "Participant's Employer Contribution Account" 4
1.26 "Participant's Elective Contribution Account" 4
1.27 "Plan" 5
1.28 "Plan Year" 5
1.29 "Regulation" 5
1.30 "Pre-Retirement Survivor Annuity" 5
1.31 "Retired Participant" 5
1.32 "Retirement Date" 5
1.33 "Severance from Service Date" 5
1.34 "Suspense Account" 5
1.35 "Terminated Participant" 5
1.36 "Top Heavy Plan Year" 5
1.37 "Total and Permanent Disability" 5
1.38 "Trustee" 5
1.39 "Trust Fund" 6
1.40 "Valuation Date" 6
1.41 "Voluntary Contribution Account" 6
1.42 "Voluntary Contributions" 6
1.43 "Years of Service" 6
ARTICLE II 7
ADMINISTRATION 7
2.1 Powers and Responsibilities of the Employer 7
2.2 Assignment and Designation of
Administrative Authority 7
2.3 Allocation and Delegation of Responsibilities 7
2.4 Powers, Duties and Responsibilities 8
2.5 Records and Reports 9
2.6 Appointment of Advisors 9
2.7 Information From Employer 9
2.8 Payment of Expenses 9
2.9 Majority Actions 10
2.10 Claims Procedure 10
2.11 Claims Review Procedure 10
ARTICLE III 11
ELIGIBILITY 11
3.1 Conditions of Eligibility 11
3.2 Authorization for Elective Contributions & Voluntary
Contributions 11
3.3 Determination of Eligibility 11
3.4 Termination of Eligibility 11
3.5 Omission of Eligible Employee 11
3.6 Inclusion of Ineligible Employee 12
ARTICLE IV 13
CONTRIBUTION AND ALLOCATION 13
4.1 Formula for Determining Employer's
Non-Elective Contributions 13
4.2 Participant's Elective Contributions 13
4.3 Amount of Employer's Contribution 14
4.3.1Special Provisions for Union Employees 14
4.4 Time of Payment of Non-Elective Contribution 14
4.5 Time of Payment of Elective Contribution 14
4.6 Allocation of Contribution, Earnings
and Forfeitures 14
4.7 Limitation on Deferred Compensation Elections 16
4.8 Correction of Excessive Allocations 17
4.9 Correction of Excessive Elective Contributions 17
4.10 Recharacterization of Excessive Contributions 18
4.11 Limitation on Employer Matching Contribution
and Voluntary Contributions 19
4.12 Correction of Excess Aggregate Contributions 20
4.13 Special Rule for Family Members 21
4.14 Maximum Annual Additions 22
4.15 Adjustment for Excessive Annual Additions 24
4.16 Transfers from Qualified Plans 24
4.17 Voluntary Contributions 25
ARTICLE V 26
ACCOUNTING & VALUATIONS 26
5.1 Accounting 26
5.2 Valuations 26
ARTICLE VI 27
DETERMINATION AND DISTRIBUTION OF BENEFITS 27
6.1 Determination of Benefits Upon Retirement 27
6.2 Determination of Benefits Upon Death 27
6.3 Determination of Benefits in Event of Disability 28
6.4 Determination of Benefits Upon Termination 28
6.5 Distribution of Benefits 30
6.6 Distribution of Benefits Upon Death 33
6.7 Time of Segregation or Distribution 35
6.8 Distribution for Minor Beneficiary 36
6.9 Location of Participant or Beneficiary Unknown 36
6.10 Advance Distribution for Hardship 36
6.11 Advance Distributions for Loans to Participants 38
6.12 Limitations on Benefits and Distributions 39
6.13 Direct Transfer 39
ARTICLE VII 41
TOP HEAVY RULES 41
7.1 Top Heavy Plan Requirements 41
7.2 Determination of Top Heavy Status 41
7.3 Minimum Allocations 44
ARTICLE VIII 46
TRUSTEE 46
ARTICLE IX 48
AMENDMENT, TERMINATION AND MERGERS 48
9.1 Amendment 48
9.2 Termination 48
9.3 Merger or Consolidation 48
ARTICLE X 50
MISCELLANEOUS 50
10.1 Participant's Rights 50
10.2 Alienation 50
10.3 Construction of Plan 51
10.4 Gender and Number 51
10.5 Legal Action 51
10.6 Prohibition Against Diversion of Funds 51
10.7 Bonding 52
10.8 Receipt and Release For Payments 52
10.9 Action By The Employer 52
10.10 Named Fiduciaries and Allocation
of Responsibility 52
10.11 Uniformity 53
10.12 Headings 53
ARTICLE XI 54
PARTICIPATING EMPLOYERS 54
11.1 Adoption By Other Employers 54
11.2 Requirements of Participating Employers 54
11.3 Designation of Agent 55
11.4 Employee Transfers 55
11.5 Participating Employers Contributions 55
11.6 Amendment 55
11.7 Discontinuance of Participation 55
11.8 Administrator's Authority 56
11.9 Participating Employer Contribution for Affiliate56
Barr Laboratories, Inc.
Employees Savings & Retirement Plan (401(k))
THIS AGREEMENT is by and between BARR LABORATORIES, INC. (the
"Employer") and THE TRUSTEES OF THE BARR LABORATORIES, INC.,
Profit-Sharing Plan and Trust.
The parties hereto agree as follows:
WHEREAS, the Board of Directors of the Employer authorized the
adoption of the Barr Laboratories, Inc. Profit-Sharing Plan and
Trust (the "Plan") having an original effective date of July 1,
1983; and
WHEREAS, the Board of Directors of the Employer wishes to restate
and amend the terms of the Plan to conform with the requirements
of the Tax Reform Act of 1986 and other subsequent legislation;
and
WHEREAS, the Board of Directors of the Employer restated and
amended the Plan effective April 1, 1985, and the parties hereto
agreed that the Plan would be renamed as the Barr Laboratories,
Inc. Employees Savings & Retirement Plan; and
NOW, THEREFORE, effective January 1, 1989, the parties hereto
agree to the terms of the Plan as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of
1974, as it may be amended from time to time.
1.2 "Administrator" means the person or persons designated by
the Employer or its Board of Directors pursuant to Section
2.2 to administer the Plan on behalf of the Employer. If no
such person is designated, the Employer shall be the
Administrator.
1.3 "Aggregate Account" means, with respect to each Participant,
the value of all accounts maintained on behalf of a
Participant, whether attributable to Employer or Employee
contributions.
1.4 "Beneficiary" means the person to whom the share of a
deceased Participant's total account is payable, subject to
the restrictions of Section 6.2 and 6.6.
1.5 "Code" means the Internal Revenue Code of 1986, as amended
or replaced from time to time.
1.6 "Compensation" with respect to any Participant means the
total compensation paid by the Employer including base pay,
overtime pay, bonuses and commissions. Amounts contributed
by the Employer under the Plan and any taxable and non-
taxable fringe benefits, director's fees, annual service
awards and expense reimbursements shall not be considered as
compensation. That portion of an Employee's Compensation
that is deferred pursuant to Section 4.2 shall be considered
as Compensation for all Plan purposes.
The annual amount of Compensation taken into account for a
Participant shall not exceed $200,000 (as adjusted for cost-
of-living increases (pursuant to Code Section 401(a)(17))
for Plan Years beginning prior to July 1st, 1994 and
$150,000 (as adjusted for cost of living increases pursuant
to Code Section 401(a)(17) for Plan Years beginning on and
after July 1st, 1994. In determining Compensation of a
Participant for purposes of this limitation, the rules of
Code Section 414(q)(6) shall apply except in applying such
rules, the term "family" shall include only the spouse of
the Participant and any lineal descendants of the
Participant who have not attained age 19 before the end of
the Plan Year. If, as a result of the application of such
rules, the adjusted Compensation limitation is exceeded,
then 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. The determination of a
Participant's Compensation will be in accordance with the
records maintained by the Employer and shall be conclusive.
1.7 "Elective Contribution" means contributions to the Plan that
are made pursuant to the Participant's deferral election
provided in Section 4.2.
1.8 "Eligible Employee" means any Employee who has satisfied the
provisions of Section 3.1 other than leased employees who
are included in the definition of Employee in Section 1.9.
1.9 "Employee" means any person who is employed by the Employer,
but excludes any person who is employed as an independent
contractor. The term Employee shall include leased
employees as that term is defined in Code Section 414(n)
except leased employees shall not be deemed employees for
any purpose if leased employees are (i) covered by a plan
described in Code Section 414(n); and (ii) leased employees
do not constitute more than 20% of the Employer's nonhighly
compensated workforce.
1.10"Employer" means Barr Laboratories, Inc., and any
Participating Employer (as defined in Section 11.1) which
shall adopt this Plan; any successor which shall maintain
this Plan; and any predecessor which has maintained this
Plan. For purposes of the controlled group rules under Code
Section 414 and all Code Sections referred to therein, the
term "Employer" shall refer to any corporation, partnership
or other entity which is related to Barr Laboratories, Inc.
within the meaning of Code Sections 414(b), (c), (m), (n)
and (o).
1.11"Excessive Aggregate Contributions" means the amount
described under Code Section 401(m)(6)(B).
1.12"Excessive Allocations" means salary reduction elections of
a Participant in excess of the limitation under Code Section
402(g).
1.13"Excessive Elective Contributions" means the amount
described under Code Section 401(k)(8).
1.14"Fiduciary" means any person who (a) exercises any
discretionary authority or discretionary control respecting
management of the Plan or exercises any authority or control
respecting management or disposition of assets, (b) renders
investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of
the Plan or has any authority or responsibility to do so, or
(c) has any discretionary authority or discretionary
responsibility in the administration of the Plan, including
but not limited to, the Trustee, the Employer and the
Administrator.
1.15"Forfeiture" means that portion of a Participant's Account
that is not vested and occurs with respect to a Participant
who has terminated employment at the end of a One-Year Break
in Service.
1.16"Former Participant" means a person who has been a
Participant, but who has ceased to be a Participant for any
reason.
1.17"Highly Compensated Employee" means an Employee who at any
time during the Plan Year or preceding Plan year is an
employee described in Code Section 414(q)(1); including both
Highly Compensated active Employees and Highly Compensated
former Employees. A Highly Compensated active Employee
includes any Employee who performs services for the Employer
during the determination year and who, during the look-back
year (a) received Compensation in excess of $75,000 (as
adjusted pursuant to Code Section 415(d); (b) received
Compensation from the Employer in excess of $50,000 (as
adjusted pursuant to Code Section 415(d) and was a member of
the top-paid group for such year; or (c) was an officer of
the Employer and received Compensation during such year that
is greater than 150 percent of the defined contribution
dollar limitation. The term Highly Compensated active
Employee also includes: (a) an Employee who is both (i)
described in the preceding sentence if the term
"determination year" is substituted for the term "look-back
year" and (ii) is one of the 100 Employees who received the
most Compensation from the Employer during the look-back
year or determination year. If no officer has Compensation
in excess of 150 percent of the defined contribution
limitation, during either a determination year or a look-
back year, the highest paid officer for each such year shall
be treated as a Highly Compensated Employee. The
determination of who is a Highly Compensated Employee,
including the determination of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the Compensation
that is considered will be made in accordance with Code
Section 414(q) and in accordance with Treasury Regulation
Section 1.414(q)-IT.
1.18"Hour of Service" means (1) each hour for which an Employee
is directly or indirectly compensated or entitled to
Compensation by the Employer for the performance of duties
during the applicable computation period; (2) each hour for
which an Employee is directly or indirectly compensated or
entitled to Compensation by the Employer (irrespective of
whether the employment relationship has terminated) for
reasons other than performance of duties (such as vacation,
holidays, sickness, jury duty, disability, lay-off, military
duty or leave of absence) during the applicable computation
period; (3) each hour for which back pay is awarded or
agreed to by the Employer without regard to mitigation of
damages.
Notwithstanding the above, no more than 501 Hours of Service
are required to be credited to an Employee on account of any
single continuous period during which the Employee performs
no duties (whether or not such period occurs in a single
computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on
account of a period during which no duties are performed is
not required to be credited to the Employee if such payment
is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation,
or unemployment compensation or disability insurance laws;
and (iii) Hours of Service are not required to be credited
for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the
Employee.
For purposes of this Section, a payment shall be deemed to
be made by or due from the Employer regardless of whether
such payment is made by or due from the Employer directly,
or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premium
and regardless of whether contributions made or due to the
trust fund, insurer or other entity are for the benefit of
particular Employees or are on behalf of the group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of
determining a Year of Service, a Break in Service and
employment commencement date (or reemployment
commencement date). The provisions of Department of
Labor Regulations 2530.200b-2(b) and (c) are
incorporated herein by reference.
1.19"Key Employee" means those Employees defined in Code Section
416(i) and the Regulations thereunder.
1.20"Non-Elective Contribution" means the Employer's
contributions to the Plan provided for in Section 4.1(a) and
(b).
1.21"Non-Key Employee" means any Employee or former Employee
(and his Beneficiaries) who is not a Key Employee.
1.22"Normal Retirement Date" means the date the Participant
attains age 65.
1.23"Break in Service" means a 12-consecutive month period
beginning on a Severance From Service date and ending on the
anniversary of such date during which an Employee has not
completed an Hour of Service. Solely for the purpose of
determining whether a Participant has incurred a Break in
Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity
leaves of absence".
"An authorized leave of absence" means an unpaid, temporary
cessation from active employment with the Employer pursuant
to an established nondiscriminatory policy, whether
occasioned by illness, military service or any other reason.
A "maternity or paternity leave of absence" shall mean, for
Plan Years beginning after December 31, 1984, an absence
from work for any period by reason of the Employee's
pregnancy, birth of the Employee's child, placement of a
child with the Employee in connection with the adoption of
such child, or any absence for the purpose of caring for
such child for a period immediately following such birth or
placement. For purposes of determining whether a Break in
Service has occurred, the first year of a maternity or
paternity absence shall be deemed to be a Year of Service
and the second year of a maternity or paternity absence
shall be considered neither a Year of Service nor a Break in
Service.
1.24"Participant" shall mean any Eligible Employee who satisfies
the provision of Section 3.1 and who has not for any reason
become ineligible to participate further in the Plan.
1.25"Participant's Employer Contribution Account" shall mean the
account established and maintained by the Administrator for
each Participant with respect to his total interest in the
Plan and Trust resulting from the Employer's Non-Elective
Contributions, and includes the Participant's balance in his
Employee's Account under the prior provisions of the Plan.
1.26"Participant's Elective Contribution Account" shall mean the
account established and maintained by the Administrator for
each Participant with respect to his total interest in the
Plan and Trust resulting from Elective Contributions.
1.27"Plan" shall mean this instrument Barr Laboratories, Inc.
Employees Savings & Retirement Plan (401(k)) including all
amendments thereto.
1.28"Plan Year" means the Plan's accounting year of twelve (12)
months commencing on July 1st of each year and ending the
following June 30th.
1.29"Regulation" means the income Tax Regulations as promulgated
by the Secretary of the Treasury or his delegate, and as
amended from time to time.
1.30"Pre-Retirement Survivor Annuity" means an annuity for the
life of the Participant's spouse the payments under which
must be equal to the amount of benefit which can be
purchased with the accounts of a Participant used to provide
the death benefit under the Plan.
1.31"Retired Participant" means a person who has been a
Participant but who has become entitled to retirement
benefits under the Plan.
1.32"Retirement Date" means the date as of which a Participant
retires on a Normal Retirement Date.
1.33 "Severance from Service Date" means the earlier of:
(i) the date on which an Employee quits, retires, is
discharged or dies; or
(ii) the first anniversary of the date in which an
Employee is absent from service for any other reason.
1.34"Suspense Account" means the total forfeitable portion of
all Former Participant's Accounts which has not yet become a
Forfeiture during any Plan Year.
1.35"Terminated Participant" means a person who has been a
Participant, but whose employment has been terminated other
than by death, Total and Permanent Disability or retirement.
1.36"Top Heavy Plan Year" means that, for a particular Plan Year
commencing after December 31, 1983, the Plan is a Top Heavy
Plan.
1.37"Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury,
disease or mental disorder which renders him incapable of
continuing his usual and customary employment with the
Employer. The disability of a Participant shall be
determined by a licensed physician chosen by the
Administrator. The determination shall be applied uniformly
to all Participants.
1.38"Trustee" means the person or entity named as trustee herein
or in any separate trust forming a part of this Plan, and
any successors.
1.39"Trust Fund" means the assets of the Plan and Trust as the
same shall exist from time to time.
1.40"Valuation Date" means the last day of each calendar month
and such other date at the discretion of the Administrator.
1.41"Voluntary Contribution Account" means the account
established and maintained by the Administrator for each
Participant with respect to his total interest in the Plan
resulting from the Participant's Voluntary Contributions
made pursuant to Section 4.17 of the Plan, and includes the
Participant's balance in his Employee's Account under the
prior provisions of the Plan.
1.42"Voluntary Contributions" mean the Participant's non-
deductible voluntary contributions made pursuant to Section
4.17 of the Plan.
1.43"Years of Service" means the aggregate number of years and
months of service beginning on the date the Employee first
performs an Hour of Service and ending on the Participant's
Severance from Service Date.
Years of Service with any corporation, trade or business
which is a member of a controlled group of corporations or
under common control [as defined by Code Section 414(b) and
Section 414(c)] or is a member of an affiliated service
group [as defined by Code Section 414(m)], or is an entity
required to be aggregated with the Employer pursuant to
regulations under Code Section 414(o) shall be recognized.
In determining Years of Service, Years of Service prior to
the vesting computation period in which an Employee attained
his eighteenth birthday shall be excluded.
ARTICLE II
ADMINISTRATION
2.1 Powers and Responsibilities of the Employer
(a)The Employer or its Board of Directors shall be
empowered to appoint and remove the Trustee and the
Administrator from time to time as it deems necessary
for the proper administration of the Plan to assure
that the Plan is being operated for the exclusive
benefit of the Participants and their Beneficiaries in
accordance with the terms of the Plan, the Code and the
Act.
(b)The Employer shall periodically review the
performance of any Fiduciary or other person to whom
duties have been delegated or allocated by it under the
provisions of this Plan or pursuant to procedures
established hereunder. This requirement may be
satisfied by formal periodic review by the Employer or
by a qualified person specifically designated by the
Employer, through day-to-day conduct and evaluation, or
through other appropriate ways.
(c)The Employer may to the extent permitted by law
agree in writing to indemnify all persons to whom the
Employer has delegated fiduciary duties, except any
consultant or other person or organization hired to
render services in connection with the administration
of the Plan, against any and all claims, loss, damages,
expense and liability arising from their
responsibilities in connection with the Plan, unless
the same is determined to be due to a breach of
fiduciary obligation.
2.2 Assignment and Designation of Administrative Authority
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the
Employer, shall be eligible to serve as an Administrator.
Any person so appointed shall signify his acceptance by
filing written acceptance with the Employer. An
Administrator may resign by delivering his written
resignation to the Employer or be removed by the Employer by
delivery of written notice of removal, to take effect at a
date specified therein, or upon delivery to the
Administrator if no date is specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a
successor to this position. If the Employer does not
appoint an Administrator, the Employer will function as the
Administrator.
2.3 Allocation and Delegation of Responsibilities
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by
the Employer and accepted in writing by each Administrator.
In the event that no such delegation is made by the
Employer, the Administrators may allocate the
responsibilities among themselves, in which event the
Administrators shall notify the Employer and the Trustee in
writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and
rely upon any documents executed by the appropriate
Administrator until such time as the Employer or the
Administrators file with the Trustee a written revocation of
such designation.
2.4 Powers, Duties and Responsibilities
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the
Participants and their Beneficiaries, subject to the
specific terms of the Plan. The Administrator shall
administer the Plan in accordance with its terms and shall
have the power to determine all questions arising in
connection with the administration, interpretation and
application of the Plan. Any such determination by the
Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures,
correct any defect, supply any information or reconcile any
inconsistency in such manner and to such extent as shall be
deemed necessary or advisable to carry out the purpose of
this Agreement; provided however, that any procedure,
discretionary act, interpretation or construction shall be
done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a
qualified plan under the terms of Code Section 401(a) and
shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all
powers necessary or appropriate to accomplish his duties
under this Plan.
The Administrator shall be charged with the duties of the
general administrator of the Plan including, but not limited
to the following:
(a)to determine all questions relating to the
eligibility of Employees to participate or remain a
Participant hereunder;
(b)to compute, certify and direct the Trustee with
respect to the amount and the kind of benefits to which
any Participant shall be entitled hereunder;
(c)to authorize and direct the Trustee with respect to
all non-discretionary or otherwise directed
disbursements from the Trust;
(d)to maintain all necessary records for the
administration of the Plan;
(e)to interpret the provisions of the Plan and to make
and publish such rules for regulation of the Plan as
are consistent with the terms hereof;
(f)to determine the size and type of any insurance
contract which may be purchased from an insurer or to
designate the insurer from which a contract shall be
purchased;
(g)to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary
or desirable to be contributed to the Trust Fund;
(h)to prepare and distribute to Employees a procedure
for notifying Participants and Beneficiaries of their
rights to elect joint and survivor annuities and Pre-
Retirement Survivor Annuities as may be required by the
Act and Regulations thereunder;
(i)to prepare and implement a procedure to notify
Eligible Employees that they may elect to have a
portion of their Compensation deferred or paid to them
in cash; and
(j)to assist any Participant regarding his rights,
benefits or elections available under the Plan.
2.5 Records and Reports
The Administrator shall keep a record of all actions taken
and shall keep all other books of account, records and other
data that may be necessary for proper administration of the
Plan and shall be responsible for supplying all information
and reports to the Internal Revenue Service, Department of
Labor, Participants, Beneficiaries and others as required by
law including, without limitation, records to establish
satisfaction of the requirements of Code Section 401(k) and
Code Section 401(m).
2.6 Appointment of Advisors
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisors
and other persons as the Administrator or the Trustee deems
necessary or desirable in connection with the administration
of this Plan.
2.7 Information From Employer
To enable the Administrator to perform his functions, the
Employer shall supply full and timely information to the
Administrator on all matters relating to the Compensation of
all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination
of employment, and such other pertinent facts as the
Administrator may require; and the Administrator shall
advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustees duties under the Plan. The
Administrator may rely upon such information as is supplied
by the Employer and shall have no duty or responsibility to
verify such information.
2.8 Payment of Expenses
All expenses of administration may be paid out of the Trust
Fund unless paid by the Employer. Such expenses shall
include any expenses incident to the functioning of the
Administrator, including but not limited to fees for
accountants, counsel and other specialists and their agents,
and other costs of administering the Plan. Until paid, the
expenses shall constitute a liability of the Trust Fund.
However, the Employer may reimburse the Trust for any
administration expense incurred.
2.9 Majority Actions
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.3, if there
shall be more than one Administrator, they shall act by a
majority of their number, but may authorize one or more of
them to sign all papers on their behalf.
2.10Claims Procedure
Claims for benefits under the Plan may be filed with the
Administrator on forms supplied by the Employer.
Written notice of the disposition of a claim shall be
furnished to the claimant within 90 days after the
application thereof is filed. In the event the claim is
denied, the reasons for the denial shall be specifically set
forth in the notice in language calculated to be understood
by the claimant, pertinent provisions of the Plan shall be
cited, and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. In
addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
2.11Claims Review Procedure
The Administrator shall establish a claims review procedure
in accordance with Section 503 of the Act.
ARTICLE III
ELIGIBILITY
3.1 Conditions of Eligibility
An Eligible Employee who has completed an Hour of Service
and attained age 18 shall be a Participant hereunder as of
the first day of the month next following the date on which
the Eligible Employee completes such requirements.
Once an Eligible Employee becomes a Participant, he shall
file with the Employer in writing, his and his beneficiary's
post office address and each change of any such address.
3.2 Authorization for Elective Contributions and Voluntary
Contributions
In order to make Elective Contributions and/or Voluntary
Contributions, each Participant must make application to the
Employer and agree to the terms regarding the contribution
of an Elective or Voluntary Contribution on forms provided
by the Employer.
3.3 Determination of Eligibility
The Administrator shall determine the eligibility of each
Eligible Employee for participation in the Plan based upon
information furnished by the Employer. Such determination
shall be conclusive and binding upon all persons, as long as
the same is made in accordance with the Plan and the Act.
Such determination shall be subject to review pursuant to
Sections 2.10 and 2.11.
3.4 Termination of Eligibility
In the event a Participant shall go from a classification of
an Eligible Employee to a non-eligible Employee, such Former
Participant shall continue to earn Years of Service for
service completed while a noneligible Employee, until such
time as his Aggregate Accounts shall be Forfeited or
distributed pursuant to the terms of the Plan.
Additionally, his interest in the Plan shall continue to
share in the earnings of the Trust Fund.
3.5 Omission of Eligible Employee
If, in any Plan Year, any Employee who should be included as
a Participant in the Plan is erroneously omitted and
discovery of such omission is not made until after
contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution with respect
to the omitted Employee in the amount which the said
Employer would have contributed with respect to him and had
he not been omitted.
3.6 Inclusion of Ineligible Employee
If, in any Plan Year, any person who should not have been
included as a Participant in the Plan is erroneously
included and discovery of such incorrect inclusion is not
made until after a contribution for the year has been made,
the Employer shall not be entitled to recover the
contribution made with respect to the ineligible person
regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount
contributed with respect to the ineligible person, if it has
not been previously distributed, shall constitute a
Forfeiture for the Plan Year in which the discovery is made.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 Formula For Determining Employer's Non-Elective
Contributions
For each Plan Year, the Employer shall contribute to the
Plan:
(a)A matching contribution equal to 100% of the
Elective Contributions and Voluntary Contributions of
all Participants eligible to share in allocations,
provided however, in determining the matching
contribution specified above, Voluntary Contributions
shall be considered only up to 1% of a Participant's
Compensation.
(b)A discretionary amount determined each year by the
Employer pursuant to Section 4.3.
(c)All contributions by the Employer shall be made in
cash or in property as is acceptable to the Trustee.
4.2 Participant's Elective Contributions
(a)Each Participant may elect to defer a whole
percentage of his Compensation of not more than 9%.
(b)The balance in each Participant's Elective
Contribution Account shall be fully Vested at all times
and shall not be subject to Forfeiture for any reason.
(c)A Participant may not make withdrawals from his
Participant's Elective Contribution Account prior to
his attaining age 59-1/2, except in the event of Total
and Permanent Disability, retirement, termination of
employment or a grant of a hardship withdrawal.
(d)The Employer and the Administrator shall adopt any
procedure necessary to implement the Elective
Contribution election provided for herein, including
procedures for amending and terminating such elections.
(e)In any case, where any of the foregoing provisions
of this Section 4.2 are not in conformity with
regulations of the Department of the Treasury that are
from time to time promulgated, the nonconforming
provision may be amended retroactively to assure
conformity.
4.3 Amount of Employer's Contribution
The Employer shall determine the amount of any contribution
to be made to the Plan. The Employer's determination of
such contribution shall be binding on all Participants, the
Employer and the Trustee. The Trustee shall have no right
or duty to inquire into the amount of the Employer's
contribution or the method used in determining the amount of
the Employer's contribution, but shall be accountable only
for funds actually received by the Trustee.
4.3.1 Special Provisions for Collective Bargained Employees
Notwithstanding any other provision of this Article IV, the
following provisions shall apply to Participants represented
by Local 8-149, Oil, Chemical and Atomic Workers Internation
Union (hereinafter called "Union Participants").
(a)A Union Participant must contribute 2% of annual
straight time wages (limited if applicable to the
Compensation limitations of Section 1.6) either as an
Elective Contribution or Voluntary Contribution (or any
combination of whole percentages thereof equalling 2%).
A Union Participant may elect to contribute up to 15%
of annual straight time wages either as an Elective
Contribution or Voluntary Contribution (or any
combination of whole percentages thereof equaling a
Union Employees election) up to the limitation
described in Code Section 402(q).
(b)The Employer shall contribute a matching
contribution equal to 100% of the first 2% of annual
straight time wages a Union Participant contributes to
the Plan.
4.4 Time Of Payment Of Non-Elective Contribution
The Employer shall pay to the Trustee its Non-Elective
Contribution to the Plan for each Plan Year within the time
prescribed by law, including extensions of time, for the
filing of the Employer's federal income tax return.
4.5 Time Of Payment Of Elective Contribution
The Employer shall pay to the Trustee its Elective
Contribution to the Plan for each Plan Year not later then
90 days (or within the time prescribed by regulations issued
by the Secretary of the Treasury) from the date such amounts
are received by the Employer from the Participant; provided,
however, Elective Contributions accumulated through payroll
deductions shall be paid to the Trustee with reasonable
promptness, and in any event will be paid by the end of the
succeeding month following such payroll deductions.
4.6 Allocation Of Contributions, Earnings and Forfeitures
(a)The Administrator shall establish and maintain an
account in the name of each Participant and which shall
include a separate account of amounts contributed under
Sections 4.1, 4.2 and 4.17 and gains and losses
attributable to each such contribution shall be
accounted for on a reasonable and consistent basis.
The establishment and maintenance of any account shall
not require the physical separation of the assets of
the Plan into individual accounts and may be individual
accounts only on the books of the Employer.
(b)The Employee shall provide the Administrator with
all information required by the Administrator to make a
proper allocation of the Employer's contribution for
each Plan Year. Within 45 days after the date of
receipt by the Administrator of such information, the
Administrator shall allocate such contribution as
follows:
1)With respect to the Employer's Non-Elective Contribution
pursuant to Section 4.1(b), to each Participant's
Account in the same proportion that each such
Participant's Compensation for the year bears to
the total Compensation of all Participant's for
such year eligible to receive an allocation.
A Participant who performs less than 1,000 Hours
of Service during a Plan Year shall not share in the
Employer's Non-Elective Contribution pursuant to
Section 4.1(b) for that year, unless required
pursuant to Section 7.3(c). In the event Hours of
Service cannot be determined from records
maintained by the Employer for reasons other than
the absence of the Employee from employment, a
Participant shall be deemed to have completed 45
Hours of Service in a one-week period. A
Participant eligible to receive an allocation of
the Section 4.1(b) Non-Elective Contributions shall
be the Participants in the active employ of the
Employer on the last day of the Plan Year.
Notwithstanding the foregoing, a Participant who
retired, died or became Totally Disabled and who
subsequently is not in the employ of the Employer
on the last day of the Plan Year in which the
Participant Retired, died or became Totally
Disabled shall be deemed to be actively employed on
the last day of such Plan year provided such
Participant had completed at least 1,000 Hours of
Service in the Plan Year.
2)With respect to the Employer's Non-Elective Contribution
pursuant to Section 4.1(a), to each Participant's
Account in the same proportion that each such
Participant's Elective Contributions and Voluntary
Contributions for the Year bears to the total
Elective Contributions and Voluntary Contributions
of all Participants for such year. In making the
matching allocation provided above, Voluntary
Contributions shall be considered only up to 1% of
a Participant's Compensation.
3)With respect to Elective Contributions made pursuant
to the Section 4.2, to each Participant's Elective
Account in an amount equal to each such
Participant's Elective Contributions for the Plan
Year.
(c)As of each Valuation Date, any earnings or losses
(net appreciation or net depreciation) of the Trust
Fund shall be allocated in the same proportion that
each Participant's and Former Participant's accounts
bear to the total of all Participants' and former
Participants' accounts as of such date.
(d)For each Valuation date prior to January 1, 1994,
any amounts which became Forfeitures since the last
Valuation Date shall first be made available to
reinstate previously forfeited account balances of
Former Participants, if any, in accordance with Section
6.4(d). The remaining Forfeitures, if any, shall be
allocated among the participants' Accounts in the same
proportion that each such Participant's Compensation
for the years bears to the total Compensation of all
Participants for the year. Provided however, that in
the event the allocation of Forfeitures provided herein
shall cause the "annual addition" (as defined in
Section 4.14) to any participant's Account to exceed
the amount allowable by the Code, the excess shall be
reallocated in accordance with Section 4.15. Except
however, a Participant who performs less than a Year of
Service during any Plan Year shall not share in the
Plan Forfeitures for that year, unless required
pursuant to Section 7.3. For each Valuation Date after
January 1, 1994, forfeitures shall first be used to
reinstate any previously forfeited account balances of
Former Participants, if any, in accordance with Section
6.4(d) and any remaining forfeitures shall be used to
reduce Employer contributions in any subsequent
valuation period.
(e)If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate
accounts shall be maintained as follows:
1)one account for nonforfeitable benefits attributable
to pre-break service; and
2)one account representing his status in the Plan
attributable to post-break service.
4.7 Limitation On Deferred Compensation Elections
Notwithstanding the foregoing provisions of this Article IV,
for each Plan Year the Administrator shall limit the amount
of Elective Contributions made by Participants with respect
to each Participant who is a "Highly Compensated Employee"
to the extent necessary to insure that either of the
following tests is satisfied:
(a)the "Actual Deferral Percentage" for the group of
eligible Highly Compensated Employees is not more than
the Actual Deferral Percentage of all other Employees
multiplied by 1.25; or
(b)the excess of the Actual Deferral Percentage ("ADP")
for the group of eligible Highly Compensated Employees
over that of all other Employees is not more than two
percentage points, and the Actual Deferral Percentage
for the group of eligible Highly Compensated Employees
is not more than the Actual Deferral Percentage of all
other Employees multiplied by 2.
"Actual Deferral Percentage" for a group of
Employees for a Plan Year shall be the average of the
ratios (calculated separately for each Employee) of (i)
the amount credited to each Employee's Participant's
Elective Contribution Account for the Plan year to (ii)
the Employee's Compensation for the Plan Year.
4.8 Correction of Excessive Allocations
(a)With respect to a Participant's taxable year, if the
amount of contributions made pursuant to the
Participant's Elective Contributions election exceeds
$7,000 (as adjusted by the Secretary of the Treasury),
the Participant may notify the Administrator by the
March 1st following the end of such taxable year of the
amount of such Excessive Allocations. A Participant is
deemed to notify the Administrator of any Excessive
Allocations that arise by taking into account only
those Excessive Allocations made to this Plan and any
other plans maintained by the Employer. Not later than
the April 15th following the end of such taxable year,
the Trustee shall distribute such excess amount (and
the income attributable thereto) to the Participant.
(b)The Excessive Allocations to be distributed are
adjusted for any income or loss up to the date of
distribution. The income or loss allocable to
Excessive Allocations is the sum of:
1)income or loss allocable to the Employee's
Participant's Elective Account for the taxable year
multiplied by a fraction, the numerator of which is
such Participant's Elective Account without regard
to any income or loss occurring during such taxable
year; plus
2)ten percent (10%) 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.
(c)Excess Allocations are treated as annual additions
under the Plan unless such amounts are distributed no
later than the first April 15th following the close of
Participant's taxable year.
4.9 Correction Of Excessive Elective Contributions
(a)With respect to a Plan Year, if neither of the tests
described under Section 4.8 is satisfied, the amount of
the Excessive Elective Contributions (and any income
attributable to such contributions) shall be
distributed to the affected Participants prior to the
end of the following Plan Year.
(b)The Administrator shall undertake to distribute
Excessive Elective Contributions to Plan Participants
within 2-1/2 months after close of the Plan Year in
which the Excessive Elective Contributions occurred.
In the event that Excessive Elective Contributions are
not distributed to affected Participants within 2-1/2
months after the close of such Plan Year, the Company
shall be subject to a ten (10%) percent excise tax
under Code Section 4979.
(c)The Excessive Contributions to be distributed are
adjusted for income and losses up to the date of
distribution. The income or loss allocable to
Excessive Contributions equals the sum of:
1)income or loss allocable to the Employee's
Participant's Elective Account for the Plan Year
multiplied by a fraction, the numerator of which is
the Participant's Excessive Contributions for the
Plan Year and the denominator is the Participant's
Elective Account on the last day of the Plan Year
without regard to any income or loss occurring
during the Plan Year; plus
2)10% of the amount determined under (1) multiplied by
the number of 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 the month.
(d)Excessive Elective Contributions (including amounts
recharacterized under Section 4.10) are treated as
annual additions under Code Section 415.
(e)The Actual Deferral Percentage for any eligible
Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to have contributions
pursuant to a Deferred Compensation election under two
or more plans described in Code Section 401(a) or
arrangements described in Code Section 401(k) that are
maintained by the Employer is determined as if such
contributions were made under a single plan. If the
plans have different plan years, all plans ending
within the same calendar year are treated as a single
plan. Notwithstanding the foregoing, certain plans
shall be treated as separate if mandatorily
desegregated pursuant to regulations under Code Section
401(k).
(f)If this Plan satisfied the requirements of Code
Sections 401(a)(4), 401(k) or 410(b) only if aggregated
with one or more other plans, or if one or more other
plans satisfy the requirements of those Code Sections
only if aggregated with this Plan, then this Section
4.10(f) is applied by determining the Actual Deferral
Percentages of eligible Participants as if all the
plans were a single plan. Plans may be aggregated in
order to satisfy Code Section 401(k) only if such plans
have the same plan year.
4.10Recharacterization Of Excessive Contributions
A Participant may treat his Excessive Elective Contribution
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 contributions made pursuant to
an Elective Contribution election. Amounts may not be
recharacterized by a Highly Compensated Employee to the
extent that such amount in combination with other Voluntary
Contributions made by that Employee would exceed any stated
limit under the Plan on Voluntary Contributions.
Recharacterization must occur no later than two and one-half
months after the last day of the Plan Year in which such
Excessive Elective 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 such amounts in cash.
4.11Limitation On Employer Matching Contributions And Voluntary
Contributions
(a)Notwithstanding the foregoing provisions of this
Article IV, for each Plan Year the Administrator shall
limit the amount of contributions made by the Employer
pursuant to Section 4.1(a) and (b) and Voluntary
Contributions with respect to each Participant who is a
Highly Compensated Employee to the extent necessary to
insure that either of the following tests is satisfied:
1)the"Average Contribution Percentage" (ACP) for the
group of eligible Highly Compensated Employees is
not more than the Actual Contribution Percentage of
all other Employees for the Plan Year multiplied by
1.25; or
2)the excess of the Average Contribution Percentage for
the group of eligible Highly Compensated Employees
over that of other Employees is not more than 2
percentage points and the Average Contribution
Percentage for the group of eligible Participants
who are Highly Compensated Employees is not more
than the Average Contribution Percentage of all
other Participants who are non-Highly Compensated
Employees multiplied by 2.
"Average Contribution Percentage" for a group of
Employees for a Plan Year shall be the average of
the ratios (calculated separately for each
Employee) of (i) the sum of Employer's contribution
under Section 4.1(a) and (b) and Voluntary
Contributions made under the Plan on behalf of the
Participant for the Plan Year to (ii) the
Participant's Compensation for the Plan Year.
Such Average Contribution Percentage shall include
forfeitures of Excessive Aggregate Contributions or
Employer's Non-Elective Contributions allocated to the
Participant's account which shall be taken account in
the year in which such forfeiture is allocated.
(b)Multiple Use: If the sum of the ADP and ACP of the
Highly Compensated Employees who participate in the
Plan exceeds the "Aggregate Limit", then the ACP of
such Highly Compensated Employees shall be reduced
(beginning with such Highly Compensated Employee whose
ACP in the highest) so that the limit is not exceeded.
The amount by which each Highly Compensated Employee's
Average Contribution Percentage is reduced shall be
treated as an Excessive Aggregate Contribution. The
ADP or ACP of the Highly Compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the non-
Highly Compensated Employees.
"Aggregate Limit" shall mean 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 for the Plan Year 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.
(c)The Administrator may treat some of all of the
contributions made pursuant to the Participant's
Elective Contribution election as Employer Elective
Contributions to the extent the ADP test can be met
before the exclusion of such Elective Contributions and
continues to be met after the exclusion of such
Elective Contributions.
(d)The Contribution Percentage for any eligible
Participant who is a Highly Compensated Employee for
the Plan Year and who is eligible to receive Employer
Non-Elective Contributions under two or more plans
described in Code Section 401(a) or arrangements
described in Code Section 401(k) that are maintained by
the Employer is determined as if all Employer Non-
Elective Contributions (and Voluntary Contributions)
were made under a single plan. If the plans have
different plan years, all plans ending within the same
calendar year are treated as a single plan.
Notwithstanding the foregoing, certain plans shall be
treated as separate if mandatorily disaggregated
pursuant to regulations under Code Section 401(m).
(e)If this Plan satisfies the requirements of Code
Sections 401(a)(4), 401(m) or 410(b) only if aggregated
with one or more other plans, or if one or more other
plans satisfy the requirements of those Code Sections
only if aggregated with this Plan, then this Section
4.11(f) is applied by determining the contribution
percentage of eligible participants as if all the plans
were a single plan. In calculating contribution
percentages under this Section 4.11(f), Participant and
nonelective contributions to the other plans are
considered.
(f)The Administrator may treat one or more plans as a
single plan with the Plan whether or not the aggregated
plans satisfy Code Sections 401(a)(4) and 410(b).
However, those plans must then be treated as one plan
under Code Section 401(a)(4), 401(m) and 410(b). Plans
may be aggregated under this Section 4.11(g) only if
they have the same plan year.
(g)The determination and treatment of the contribution
percentage of any participant must satisfy such other
requirements as the Secretary of the Treasury may
prescribe.
4.12Correction Of Excess Aggregate Contributions
(a)Excessive Aggregate Contributions and income
allocable to those contributions are forfeited, if
otherwise forfeitable under this Plan, or if not
forfeitable, distributed no later than the last day of
each Plan Year, to Participants whom Employer Non-
Elective Contributions were allocated for the preceding
Plan Year. The Administrator anticipates that the
Excessive Aggregate Contributions will be distributed
to affected Participants within 2-1/2 months after the
close of the Plan Year in which the Excessive Aggregate
Contributions occurred.
(b)If the Excessive Aggregate Contributions are not
distributed to affected Participants with 2-1/2 months
after the close of the Plan Year, the Employer will be
subject to a 10% excise tax under Code Section 4979.
(c)The Excessive Aggregate Contributions to be
distributed are adjusted for income and losses up to
the date of distribution. The income or loss allocable
to Excessive Aggregate Contributions equals the sum of:
1)income or loss allocable to the Employer's
contributions under Section 4.1(b) and Voluntary
Contributions for the Plan Year multiplied by a
fraction, the numerator of which is the
Participant's Excessive Aggregate Contributions on
the last day of the Plan Year with regard to any
income or loss occurring during the Plan Year; plus
2)10%
of the amount determined under (1) above multiplied
by the number of 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 the month.
(d)Amounts forfeited by Highly Compensated Employees
under this Section 4.12(d) shall be allocated pursuant
to Section 4.6.
(e)Excess Aggregate Contributions are treated as annual
additions under Code Section 415.
4.13Special Rule For Family Members
To determine the ADP and ACP of an eligible Participant who
is a 5-percent owner or more of the ten most highly paid
Highly Compensated Employees, contributions to the
Participant's Elective Account and Employer Non-Elective
Contributions and Compensation of the Participant include
contributions to the participant's Elective Contributions
Account, Employer Non-Elective Contributions and Voluntary
Contributions and Compensation of family members [as defined
in Code Section 414(q)(6)]. Family members are disregarded
in determining the ADP and ACP of eligible Participants who
are non-Highly Compensated Employees. Family members with
respect to such Highly Compensated Employees shall be
disregarded as separate employees in determining the ADP and
ACP both for Participants who are non-Highly Compensated
Employees and Participants who are Highly Compensated
Employees.
4.14Maximum Annual Additions
(a)Notwithstanding the foregoing, the maximum "annual
additions" credited to a Participant's Accounts for any
limitation year shall equal the lesser of: (1) $30,000
or (2) twenty-five (25%) of the Participant's "415
Compensation for such Limitation Year".
(b)For purposes of applying the limitation of Code
Section 415, "annual additions" means the sum credited
to a Participant's accounts for any "limitation year"
of (1) Employer contributions, (2) Employee
contributions, (3) Forfeitures, (4) amounts allocated,
after March 31, 1984 to an individual medical account,
as defined in Code Section 415(1)(1) which is part of a
defined benefit plan maintained by the Employer and (5)
amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after
such date, which are attributable to post-retirement
medical benefits [as defined in Code Section
419A(d)(3)] allocated to the separate account of a Key
Employee under a welfare benefit plan [as defined in
Code Section 419(e)] maintained by the Employer.
(c)For purposes applying the limitations of Code
Section 415, the following are not "annual additions":
(1) transfer of funds from one qualified plan to
another; (2) rollover contributions [as defined in Code
Sections 402(a)(5), 403(a)(4), 408(d)(3) and
409(b)(3)(C)]; (3) repayments of loans made to a
Participant from the Plan; (4) repayments of
distributions received by an Employee pursuant to Code
411(a)(7)(B) (cash-outs); (5) repayments of
distributions received by an Employee pursuant to Code
Section 411(a)(3)(D) (mandatory contributions); (6)
Employee contributions to a simplified employee pension
allowed as a deduction under Code Section 219(a); and
(7) deductible Employee contributions to a qualified
plan.
(d)For purposes of applying the limitations of Code
Section 415, "415 compensation" shall mean wages within
the meaning of Code Section 3401(a) (for purposes of
income tax withholding at the source) but determined
without regard to rules that limit remuneration
included in wages based on the nature or location of
the employment or the services performed.
(e)For purposes of applying the limitations of Code
Section 415, the "limitation year" shall be the Plan
Year.
(f)The limitation stated in paragraph (a)(1) above
shall be adjusted annually as provided in Code Section
415(d) pursuant to the regulations prescribed by the
Secretary of the Treasury. The adjusted limitation is
effective as of January 1st of each calendar year and
is applicable to "limitation years" ending with or
within that calendar year.
(g)For the purpose of this Section, all qualified
defined benefit plans (whether terminated or not) ever
maintained by the Employer shall be treated as one
defined
benefit plan, and all qualified defined contribution
plans (whether terminated or not) ever maintained by
the Employer shall be treated as one defined
contribution Plan.
(h)For the purpose of this Section, if the Employer is
a member of a controlled group of corporations, trades
or businesses under common control [as defined by Code
Section 1563(a) or Code Sections 414(b) and (c) as
modified by Code Section 415(h)], is a member of an
affiliated service-group (as defined by Code Section
414(m), or Code Section 414(o), all Employees of such
Employers shall be considered to be employed by a
single Employer).
(i)For the purpose of this Section, if this Plan is a
Code Section 413(c) plan, all Employers of a
Participant who maintain this Plan will be considered
to be a single Employer.
(j) 1)If a Participant participated in more than one
defined contribution plan maintained by the Employer
which have different Anniversary Dates, the maximum
"annual additions" under this Plan shall equal the
maximum "annual additions" for the "limitation
year" minus any "annual additions" previously
credited to such Participant's accounts during the
"limitation year".
2)If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a
defined contribution plan not subject to Code
Section 412 maintained by the Employer which have
the same Anniversary Date, "annual additions" will
be credited to the Participant's accounts under the
defined contribution plan subject to Code Section
412 prior to crediting "annual additions" to the
Participant's accounts under the defined
contribution plan not subject to Code Section 412.
3) If a Participant participates in more than one
defined contribution plan not subject to Code Section
412 maintained by the Employer which have the same
Anniversary Date, the maximum "annual additions"
under this Plan shall equal the product of (A) the
maximum "annual additions" for the "limitation
year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above,
multiplied by (B) a fraction (i) the numerator of
which is the "annual additions" which would be
credited to such Participant's accounts under this
Plan without regard to the limitations of Code
Section 415 and (ii) the denominator of which is
such "annual additions" for all plans described in
this subparagraph.
(k)If an Employee is (or has been) a participant in one
or more defined benefit plans and one or more defined
contribution plans maintained by the Employer, the sum
of the defined benefit plan fraction and the defined
contribution plan fraction for any "limitation year"
may not exceed 1.0.
4.15 Adjustment For Excessive Annual Additions
(a)If as a result of the allocation of Forfeitures, a
reasonable error in estimating a Participant's
Compensation, a reasonable error in determining the
amount of Elective Contributions or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall
be applicable, the "annual additions" under this Plan
would cause the maximum "annual additions" to be
exceeded for a Participant, the Administrator shall:
(1) return any Voluntary Contributions credited for the
"limitation year" to the extent that the return would
reduce the "excess amount" in the Participant's
accounts; (2) return any Elective Contributions to the
extent that the return would reduce the "excess amount"
in the Participant's account; (3) hold any "excess
amount" remaining after the return of any Voluntary
Contributions and Elective Contributions in a suspense
account" and; (4) used to reduce future Employer Non-
Elective Contributions in the next "limitation year"
(and succeeding "limitation years" if necessary) to all
Participants in the Plan.
(b)For purposes of this Article, "excess amount" for
any Participant for a "limitation year" shall mean the
excess, if any, of (1) the "annual additions" which
would be credited to his account under the terms of the
Plan without regard to the limitations of Code Section
415 over (2) the maximum "annual additions" determined
pursuant to Section 4.9.
4.16Transfers From Qualified Plans
(a)With the consent of the Administrator, amounts may
be transferred from other qualified plans, provided
that the trust from which such funds are transferred
permits the transfer to be made and, in the opinion of
legal counsel for the Employer, the transfer will not
jeopardize the tax exempt status of the Plan or Trust
or create adverse tax consequences for the Employer.
The amounts transferred shall be set up in a separate
account herein referred to as a "Participant's Rollover
Account". Such account shall be fully vested at all
times and shall not be subject to Forfeiture for any
reason.
(b)Amounts in a Participant's Rollover Account shall be
held by the Trustee pursuant to the provisions of this
Plan, and may be withdrawn, in part or in whole, once
in any 12-month period but only if the provisions of
Section 6.10 are satisfied.
(c)The Participant's Rollover Account shall be invested
as part of the general Trust Fund and shall share in
earnings and losses.
(d)For purposes of this Section the term "amounts
transferred from another qualified plan" shall mean:
(i) amounts transferred in a trust to trust transfer to
this Plan directly from another qualified plan; (ii)
lump sum distributions received by an Employee from
another qualified plan which are eligible for tax free
rollover treatment and which are transferred by the
Employee to this Plan within sixty (60) days following
his receipt thereof; (iii) amounts transferred to this
Plan from a conduit individual retirement account
provided that the conduit individual retirement account
has no assets other than assets which (A) were
previously distributed to the Employee by another
qualified plan as a lump sum distribution, (B) were
eligible for tax free rollover into a qualified plan,
and (C) were deposited in such conduit individual
retirement account within sixty (60) days of receipt
thereof and other than earnings on said assets; (iv)
amounts distributed to the Employee from a conduit
individual retirement account meeting the requirements
of clause (iii) above, and transferred by the Employee
to this Plan within sixty (60) days of his receipt
thereof from such conduit individual retirement
account, and (v) amounts directly rolled over to this
Plan from another qualified plan pursuant to the
provisions of Code Section 401(a)(31). Prior to
accepting any transfers to which this Sections applies,
the Administrator may require the Employee to
establish that the amounts to be transferred to this
Plan meet the requirements of this Section and may also
require the Employee to provide an opinion of counsel
satisfactory to the Employer that the amounts to be
transferred meet the requirements of this Section.
(e)For purposes of this Section, the term "qualified
plan" shall mean any tax qualified plan under Code
Section 401(a).
4.17Voluntary Contributions
(a)Each Participant may elect to voluntarily contribute
up to 6% of his aggregate Compensation earned while a
Participant under this Plan. Such contributions shall
be paid to the Trustee no later than 90 days from the
date such amounts would otherwise be payable to the
Participant in cash (or such earlier time as may be
required by law. The balance in each Participant's
Voluntary Contribution Account shall be fully vested at
all times and shall not be subject to Forfeiture for
any reason.
(b)A Participant may elect, subject to the spousal
consent rules of Section 6.5 if applicable, to withdraw
his Voluntary Contributions from his Voluntary
Contribution Account and the actual earnings thereon
once in any 12-month period.
ARTICLE V
ACCOUNTING & VALUATIONS
5.1 Accounting
The Trustee shall keep detailed accounts of all transactions
and other specific records as shall be agreed upon in
writing by the Trustee and the Employer, all of which shall
be open to inspection and audit by any person or persons
designated by the Employer at reasonable times.
5.2 Valuations
Within 90 days following each July 1st and within 90 days
after his removal or resignation, the Trustee shall file
with the Employer and Administrator an account of financial
operations and status of the Trust Fund for the preceding
year, or fraction thereof in the event of removal or
resignation. The Trustee shall value stocks, bonds and
other similar securities or assets at fair market value.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 Determination Of Benefits Upon Retirement
Upon Normal Retirement Date and following a termination of
employment thereafter, all amounts credited to such
Participant's Aggregate Account shall become distributable.
Upon direction of the Participant, the Trustee shall
distribute all amounts credited to such Participant's
Aggregate Account in accordance with Section 6.5. A
Participant shall be fully vested in amounts credited to the
Aggregate Account upon attainment of Normal Retirement Date
provided the Participant is in the employ of the Employer on
such date.
6.2 Determination Of Benefits Upon Death
(a)Upon the death of a Participant before his Normal
Retirement Date or other termination of his employment,
all amounts credited to such Participant's Aggregate
Account shall become fully vested. On or before the
Valuation Date coinciding with or next following such
death, the Administrator shall direct the Trustee, in
accordance with the provisions of Section 6.6 and 6.7,
to distribute the value of the deceased Participant's
Aggregate Account to the Participant's Beneficiary.
(b)On or before the Valuation Date coinciding with or
next following the death of a Former Participant, the
Trustee in accordance with the provisions of Sections
6.6 and 6.7, shall distribute any remaining amounts
credited to the Aggregate Account of such deceased
Former participant to such Former participant's
Beneficiary.
(c)The Administrator may require such proper proof of
death and such evidence of the right of any person to
receive payment of the value of the Aggregate Account
of a deceased participant or a deceased Former
Participant as the Administrator may deem desirable.
(d)Unless otherwise elected in the manner prescribed in
Section 6.6, the Beneficiary of the death benefit shall
be the Participant's spouse, who shall receive such
benefit in the form of a Pre-Retirement Survivor
Annuity pursuant to Section 6.6; provided however, the
Participant may designate a Beneficiary other than his
spouse if:
1) the Participant and his spouse have validly waived
the Pre-Retirement Survivor Annuity in the manner
prescribed in Section 6.6, and the spouse has
waived his or her right to be the Participant's
Beneficiary in the manner prescribed in Section
6.5, or
2) the Participant has no spouse, or
3) the spouse cannot be located.
In such event, the designation of a Beneficiary
shall be made on a form satisfactory to the
Administrator. A Participant may at any time revoke
his designation of a Beneficiary or change his
Beneficiary by filing written notice of such revocation
or change with the Administrator. However, the
Participant's spouse must again consent in writing to
any such change or revocation. In the event no valid
designation Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable
to his estate.
6.3 Determination Of Benefits In Event Of Disability
In the event of a Participant's Total and Permanent
Disability prior to his Normal Retirement Date or separation
from service, all amounts credited to such Participant's
Account shall become fully vested. On or before the
Valuation Date coinciding with or next following the event
of Total and Permanent Disability, the Trustee, subject to
the $3,500 distribution rule of Section 6.5(c), in
accordance with the provisions of Sections 6.5 and 6.7,
shall distribute to such Participant all amounts credited to
such Participant's Aggregate Account as though he had
retired.
6.4 Determination Of Benefits Upon Termination
(a)On or before the Valuation Date coinciding with or
subsequent to the termination of a Participant's
employment for any reason other than death, Total and
Permanent Disability or Retirement, a Participant may
direct the distribution of a vested Aggregate Account
pursuant to the provisions below.
Distribution of the funds due to a Terminated
Participant shall be made on the occurrence of an event
which would result in the distribution had the
Terminated Participant remained in the employ of the
Employer (upon the Participant's death, Total and
Permanent Disability or Normal Retirement), or at the
Terminated Participant's request, the Administrator
shall direct the Trustee to cause the vested portion of
the Terminated Participant's Aggregate Account to be
payable to such Terminated Participant; provided
however, that notwithstanding the foregoing, a
Terminated Participant's Vested benefit may not be paid
prior to his Normal Retirement Date without his written
consent if the value of the Aggregate Account exceeds
$3,500. Further, the spouse of the Participant must
consent in writing to any such distribution. Written
consent of the Participant's spouse to the distribution
must be obtained not more than 90 days before
commencement of the distribution.
(b)The vested portion of any Participant's Employer
Contribution Account shall be a percentage of the total
amount credited to the Participant's Employer
Contribution Account determined on the basis of the
Participant's number of Years of Service according to
the following schedule:
Completed Years of Service Percentage
Less than 1 0%
2 20%
3 40%
4 60%
5 80%
6 or more 100%
(c)The computation of a Participant's nonforfeitable
percentage of his interest in the Plan shall not be
reduced as the result of any direct or indirect
amendment to this Article. In the event that the Plan
is amended to change or modify any vesting schedule, a
participant with at least three (3) Years of Service as
of the expiration date of the election period may elect
to have his nonforfeitable percentage computed under
the Plan without regard to such amendment. If a
Participant fails to make such election, then such
Participant shall be subject to the new vesting
schedule. The Participant's election period shall
commence on the adoption date of the amendment and
shall end 60 days after the latest of:
(i)the adoption date of
the amendment;
(ii)the effective date
of the amendment, or
(iii)the date the Pa
rticipant receives written notice of the
amendment from the Employer or the
Administrator.
(d) 1) If any Former Participant
shall be reemployed by the Employer before a Break
in Service occurs, he shall continue to participate
in the Plan in the same manner as if such
termination had not occurred.
2) If any Former Participant shall be
reemployed by the Employer before five (5)
consecutive years of a Break in Service, and such
Former Participant had received a distribution of
his entire vested interest prior to his
reemployment, his forfeited account shall be
reinstated only if he repays the full amount
distributed to him before the earlier of five (5)
years after the first date on which the Participant
is subsequently reemployed by the Employer, or the
date the Participant incurs five (5) consecutive
years of a Break in Service following the date of
distribution. In the event the Former Participant
does repay the full amount distributed to him, the
undistributed portion of the Participant's Account
must be restored in full, to the Valuation Date
preceding his termination.
3) If any Former Participant is reemployed
after a Break in Service has occurred, Years of
Service shall include Years of Service prior to his
Break in Service subject to the following rules:
(i)If a
Former Participant has a One Year Break in
Service, his pre-break and post-break
service shall be used for computing Years
of Service for eligibility and for vesting
purposes only after he has been employed
for one (1) Year of Service following the
date of his reemployment with the Employer;
(ii)Each non-vested
Former Participant shall lose credits
otherwise allowable under (i) above, if his
consecutive years of a Break in Service
equal or exceed five (5) years;
(iii)after five (5)
consecutive years of a Break in Service, a
Former participant's vested account balance
attributable to pre-break service shall not
be increased as a result of post-break
service;
(iv)if a Former Pa
rticipant completes one (1) Year of Service
for eligibility purposes following his
reemployment with the Employer, he shall
participate in the Plan retroactively from
his date of reemployment;
(v)if a Former Pa
rticipant completes a Year of Service (a 1-
Year Break in Service previously occurred,
but employment had not terminated), he
shall participate in the Plan retroactively
from the first day of the Plan Year during
which he completes one (1) Year of Service.
6.5 Distribution Of Benefits
(a) 1) Unless otherwise elected
as provided below, a Participant who is married on
the "annuity starting date" and who retires under
the Plan shall receive the value of his Aggregate
Account in the form of a joint and survivor
annuity. Such joint and survivor benefits
following the Participant's death shall continue to
the spouse during the spouse's lifetime at a rate
equal to sixty-six and two-thirds percent (66-2/3%)
of the rate at which such benefits were payable to
the Participant. Such married participant may
elect in writing to waive the joint and survivor
annuity subject to the spousal consent rules under
Section 6.5(a)(2).
The Participant may elect
to receive an annuity benefit with continuation of
payments to the spouse at a rate of between 50% and
100% inclusive, of the rate payable to the
Participant during his lifetime. An unmarried
Participant shall receive the value of his benefit
in the form of a life annuity. Such unmarried
Participant, however, may elect in writing to waive
the life annuity. The election must comply with
the provisions of this Section as if it were an
election to waive the joint and survivor annuity by
a married participant but without the spousal
consent requirement.
2) Any election to waive the
joint and survivor annuity must (i) be made by the
Participant in writing during the election period,
(ii) be consented to by the Participant's spouse in
writing, and (iii) designate a specific Beneficiary
which may not be changed without spousal consent.
Such spouse's written consent shall be irrevocable
and must acknowledge the effect of such election
and be witnessed by a Plan representative or a
notary public. Additionally, a Participant's
waiver of the 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. Such consent shall not be
required if it is established to the satisfaction
of the Administrator that the required consent
cannot be obtained because there is no spouse, the
spouse cannot be located, or other circumstances
that may be prescribed by Treasury regulations.
The election made by the Participant and consented
to by his spouse may be revoked by the Participant
in writing with the consent of the spouse at any
time during the election period. The number of
revocations shall not be limited. Any new election
must comply with the requirements of this
paragraph. A former spouse's waiver shall not be
binding on a new spouse. Spousal consent that is
obtained under this Section shall not be valid
unless the participant has received notice as
provided under Section 6.5(a)(5).
3) The election period to
waive the joint and survivor annuity shall be the
90 day period ending on the "annuity starting
date".
4) For purposes of this
Section, the "annuity starting date" means the
first day of the first period for which an amount
is received as an annuity (whether by reason of
retirement or disability).
5) With regard to the
election, the Administrator shall in not less than
30 days and not more than 90 days before the
"annuity starting date" provide the Participant a
written explanation of:
(i)the terms and
conditions of the joint and survivor
annuity, and
(ii)the Participant's
right to make and the effect of an election
to waive the joint and survivor annuity,
and
(iii)the right of the
Participant's spouse to consent to any
election to waive the joint and survivor
annuity, and
(iv)the right of the
Participant to revoke such election, and
the effect of such revocation, and
(v)the relative value
of the optional forms of benefit provided
under the Plan.
(b)In the event of a married Participant duly elects
pursuant to paragraph (a)(2) above not to receive the
retirement benefit in the form of a joint and survivor
annuity, or if such Participant is not married, in the
form of a life annuity, the Administrator shall direct
the Trustee to distribute to a Participant or his
Beneficiary any amount to which he is entitled under
the Plan in one or more of the following methods:
1) One lump-sum payment in
cash or in property;
2) Payments over a period
certain in monthly, quarterly, semiannual or annual
case installments, after first having (A)
segregated the aggregate amount thereof in a
separate, federally insured savings account,
certificate of deposit in a bank or savings and
loan association, money market certificate or other
liquid short-term security or (B) purchased a
nontransferable annuity contract providing for such
payment. The period over which such payment is to
be made shall not extend beyond the Participant's
life expectancy (or the life expectancy of the
Participant and his designated Beneficiary); or
3) Purchase of or providing
an annuity. However, such annuity may not be in
any form that will provide for payments over a
period extending beyond either the life of the
Participant (or the lives of the Participant and
his designated beneficiary) or the life expectancy
of the Participant (or the life expectancy of the
Participant and his designated Beneficiary).
(c)A Retired Participant's vested benefit derived from
Employer and Employee contributions may not be paid
without his written consent if the value exceeds
$3,500. Further, the spouse of a Retired Participant
must consent in writing to any such distribution. If
the value of the Retired Participant's benefit derived
from Employer and Employee contributions does not
exceed $3,500, the Administrator may immediately
distribute such benefit without such Retired
Participant's consent. No distribution may be made
under the preceding sentence after the annuity starting
date unless the Participant and the Participant's
spouse consent in writing t such distribution. Written
consent of the Participant and the Participant's spouse
to the distribution must be obtained not more than 90
days before commencement of the distribution.
(d)Distribution of a Participant's Accounts must begin
by the first day of April of the calendar year
following the calendar year in which the Participant
attains age 70-1/2 except for a Participant who attains
age 70 1/2 before January 1, 1988. Distribution of the
Account of a Participant who attains age 70 before
January 1, 1988 must begin as described below:
1) By 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 if a Participant is not a 5% owner.
2)By the first day of April following the later of:
(i)the calendar year in which the Participant
attains age 70-1/2;
or
(ii)the earlier of the calendar year with
or within which ends the Plan Year in which
the Participant becomes a 5% owner, or the
calendar year in which the Participant retires
if a Participant is a 5% owner.
3) By April 1, 1990 if a
Participant attains age 70-1/2 during 1988 and has
not retired as of January 1, 1989 and is not a 5%
owner.
A Participant is treated
as a 5% owner for purposes of this Section if such
Participant is a 5% owner as defined in Code
Section 416(i) (determined in accordance with Code
Section 416 but without regard to whether the plan
is top heavy) at any time during the Plan Year
ending with or within the calendar year in which
such owner attains age 66-1/2 or any subsequent
Plan Year.
Once distributions have
begun to a 5% owner under this section, they must
continue to be distributed, even if the Participant
ceases to be a 5% owner in a subsequent year.
4) All distributions required
under this Article VI shall be determined and made
in accordance with the Treasury Regulations under
Code Section 401(a)(9), including the minimum
distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the Regulations.
6.6 Distribution Of Benefits Upon Death
(a)Unless otherwise elected as provided below, a vested
Participant who dies before the annuity starting date
and who has a surviving spouse shall have his death
benefit made available immediately to his surviving
spouse in the form of a Pre-Retirement Survivor
Annuity.
(b)Any election to waive the Pre-Retirement Survivor
Annuity must be made by the Participant in writing
during the election period and shall require the
spouse's irrevocable consent in the same manner
provided for in Section 6.5(a)(2). Further, the
spouse's consent may acknowledge the specific non-
spouse Beneficiary or may be a general consent.
(c)The election period to waive the Pre-Retirement
Survivor Annuity shall begin on the first day of the
Plan Year in which the Participant attains age 35 and
end on the date of the Participant's death. In the
event a vested Participant separates from service prior
to the beginning of the election period, the election
period shall begin on the date of such separation from
service.
(d)With regard to this election, the Administrator
shall provide each Participant within the applicable
period, a written explanation of the Pre-Retirement
Survivor Annuity containing comparable information to
that required pursuant to Section 6.5(a)(5).
(e)The applicable period for a Participant is whichever
of the following periods ends last: (i) the period
beginning with the first day of the Plan Year in which
the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which
the Participant attains age 35; (ii) a reasonable
period ending after the individual becomes a
Participant; (iii) a reasonable period ending after
this Section 6.6 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
before attaining age 35.
(f)For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events
described in (ii) and (iii) 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.
(g)If the value of the Pre-Retirement Survivor Annuity
is less than $3,500, the Administrator shall direct the
immediate distribution of such amount to the
Participant's spouse; provided, however if such
distribution is to be made after the annuity starting
date, then such surviving spouse must consent in
writing to such distribution. If the value exceeds
$3,500, an immediate distribution of the entire amount
may be made to the surviving spouse, provided such
surviving spouse consents in writing to such
distribution.
(h) 1) In the event the death
benefit is not paid in the form of a Pre-Retirement
Survivor Annuity, it shall be paid to the
Participant's Beneficiary be either of the
following methods, as elected by such Beneficiary:
(i)One lump-sum payment
in cash or in property;
(ii)Payment in equal
monthly, quarterly, semi-annual or annual
cash installments over a period certain.
2) In the event the death
benefit payable pursuant to Section 6.2 is payable
in installments, then, upon the death of the
Participant, the Administrator shall direct the
Trustee to segregate into a separate Trust Fund(s)
the death benefit, and the Trustee shall invest
such segregated Trust Funds separately, and the
funds accumulated in such Trust Fund(s) shall be
used for the payment of the installments here in
above provided.
3) The Administrator may
direct the Trustee to (1) accelerate any
installment payment to a participant's Beneficiary
at such Beneficiary's request, or (2) at such
Beneficiary's request, purchase for the benefit of
such Beneficiary, an annuity with all monies or
property held in the segregated Trust Fund(s).
(i)If the distribution
of a Participant's benefit has begun in
accordance with a method selected in
Section 6.5 and the Participant dies before
his entire interest has been distributed to
him, the remaining portion of such interest
shall be distributed at least as rapidly as
under the method of distribution selected
pursuant to Section 6.5 as of his date of
death.
(ii)If a Participant
dies before he has begun to receive any
distributions of his interest under the
Plan, his death benefit shall be
distributed to his Beneficiaries within 5
years after his death.
(i)The 5-year distribution requirement of Section
6.6(h) shall not apply to any portion of the deceased
Participant's interest which is payable t or for the
benefit of a designated Beneficiary (or over a period
not extending beyond the life expectancy of such
designated Beneficiary (or over a period not extending
beyond the life expectancy of such designated
Beneficiary) provided such distribution begins not
later than one (1) year after the date of the
Participant's death (or such later date as may be
prescribed by Treasury regulations).
Except however, in the event the Participant's
spouse is his Beneficiary, the requirement that
distribution commence within one year of a
Participant's death shall not apply. In lieu thereof,
such distribution must commence no later than the date
on which the deceased Participant would have attained
age seventy and one-half (70-1/2). If the surviving
spouse dies before the distributions to such spouse
begin, then the 5-year distribution requirement of
Section 6.6(h) shall apply as if the spouse were the
Participant.
(j)For purposes of this section, the life expectancy of
a Participant and a Participant's spouse (other than in
the case of a life annuity) may be redetermined, but
not more frequently than annually and in accordance
with such rules as may be prescribed by Treasury
regulation. Further, life expectancy and joint and
last survivor expectancy shall be computed using the
return multiples of Regulation 1.72-9.
6.7 Time Of Segregation Or Distribution
Except as limited by Sections 6.5 and 6.6, whenever the
Trustee is to make a distribution or to commence a series of
payments on or as of a Valuation Date, the distribution or
series of payments may be made or begun on such date or as
soon thereafter as is practicable. Except however, unless a
Former Participant elects in writing to defer the receipt of
benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall
begin not later than the 60th day after the close of the
Plan Year in which the latest of the following events
occurs:
1) the date on which the Participant attains the
earlier of age 65,
2) the 5th Anniversary of the year in which the
Participant commenced participation in the Plan, or
3) the date the Participant terminates his service with
the Employer.
6.8 Distribution For Minor Beneficiary
In the event a distribution is to be made to a minor, then
the Administrator may, in the Administrator's sole
discretion, direct that such distribution be paid to the
legal guardian, or if none, to parent of such Beneficiary or
a responsible adult with whom the Beneficiary under the
Uniform Gift to Minors Act or Gift to Minors Act, if such is
permitted by the laws of the state in which said Beneficiary
resides. Such a payment to the legal guardian or parent of
a minor Beneficiary shall fully discharge the Trustee,
Employer and Plan from further liability on account thereof.
6.9 Location Of Participant Or Beneficiary Unknown
In the event that all, or any portion of the distribution
payable to a Participant or his Beneficiary hereunder shall,
at the expiration of five (5) years after it shall become
payable, remain unpaid solely by reason of the inability of
the Administrator, after sending a registered letter, return
receipt requested, to the last known address, and after
further diligent effort, to ascertain the whereabouts of
such Participant or his Beneficiary, the amount so
distributable shall be reallocated in the same manner as a
Forfeiture pursuant to this Agreement. In the event a
Participant or Beneficiary is located subsequent to his
benefit being reallocated, such benefit shall be restored.
6.10 Advance Distribution For Hardship
(a)The Administrator may direct the Trustee to
distribute to any Participant or his Beneficiary in any
one Plan Year up to 100% of the vested portion of his
Participant's Aggregate Account (including for this
purpose, the Participant's Elective Contribution
Account including income thereon as of June 30, 1989,
plus Elective Contribution made after June 30, 1989 but
no income after such date), valued as of the last
Valuation Date, in the case of proven financial
necessity as provided under Section 6.10(b).
(b)Financial necessity shall mean:
1) medical expenses incurred
by the Participant, the participant's spouse or any
dependent of the Participant, or amounts that are
necessary for the Participant, the Participant's
spouse or any dependent of the Participant to
obtain medical service;
2) the purchase (excluding
mortgage payments) of a principal residence for the
Participant;
3) the payment of tuition for
the next 12 months of post-secondary education for
the Participant, his spouse, children or
dependents;
4) the need to prevent the
eviction of the Participant from his principal
residence or the foreclosure on the mortgage of the
Participant's principal residence; or
5) any other relevant facts
and circumstance that the Administrator shall
determine creates financial necessity based on the
following criteria:
(A)the financial need is immediate and heavy;
(B)the financial need is necessary to the
physical or mental well being of the
Participant or the Participant's
immediate family;
(C)the financial need is not related to
an item or service that is connected to
recreation, convenience or pleasure;
and
(d)any other objective criteria that the
Administrator may apply and which shall
be added as an amendment to the Plan.
(c)In order to receive a hardship distribution, the
distribution must be necessary to satisfy an immediate
and heavy financial need of the participant. Such need
shall be deemed to exist if the following requirements
are satisfied:
1) the amount of the distribution does not
exceed the amount of the Participant's 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;
2) the Participant has received all
distributions (other than hardship distributions)
and nontaxable loans available under all qualified
plans maintained by the Employer;
3) all plans maintained by the Employer
(including nonqualified plans of deferred
compensation but excluding contributions made to a
health and welfare plan) provide that the
Participant may not make an Elective Contribution
election and Voluntary Contributions for at least
12 months after receipt of the hardship
distribution; and
4) all qualified plans maintained by the
Employer provide that the Participant may not make
an Elective Contribution election for the
Participant's taxable year immediately following
the taxable year of the hardship distribution in an
amount greater than the limitation under Code
Section 402(g) $7,000 as adjusted) less the amount
of the Participant's Elective Contributions for the
taxable year of the hardship distribution.
(d)No income attributable to contributions made
pursuant to a Participant's Elective Contributions
election may be withdrawn. A Participant can resume
participation as of the first day of the calendar
quarter following the expiration of the 12-month
suspension period.
(e)If applicable, a married Participant's election for
a distribution pursuant to this Section 6.10 must be
consented to by his spouse in the manner provided by
Section 6.6.
(f)The Administrator shall establish such rules and
procedures with respect to a hardship distribution
including suspension from further contributions, as it
shall from time to time determine. No forfeitures
shall occur as a result of any hardship distribution.
(g)Hardship distributions shall be limited to one
distribution in any 12 consecutive month period.
6.11 Advance Distributions For Loans To Participants
(a)The Trustee may make loans to Participants and
Beneficiaries under the following circumstances:
1) loans shall be made available to all
Participants and Beneficiaries on a reasonably
equivalent basis;
2) loans shall not be made available to
Highly Compensated Employees, as defined under Code
Section 414(q) in an amount greater than the amount
made available to other Participants and
Beneficiaries;
3) loans shall bear a reasonable rate of
interest;
4) loans shall be adequately secured; and
5) shall provide for periodic repayment
over a reasonable period of time.
(b)Loans with principal amounts and/or repayment
periods exceeding the limits set forth below shall not
be made under the Plan.
(c)Loans shall not be granted to any Participant or his
Beneficiary that provide for a repayment period
extending beyond such Participant's Normal Retirement
Date.
(d)Loans made pursuant to this Section shall be limited
to the lesser of:
(i) $50,000 reduced by the
excess (if any) of the highest outstanding balance
of loans during the one year period ending on the
day before the loan is made, over the outstanding
balance of loans from the Plan on the date the loan
is made, or
(ii) one-half (1/2) of the
present value of the vested interest of such
Participant's Combined Account maintained on behalf
of the Participant under the Plan.
(e)Loans shall provide periodic repayment over a period
not to exceed five (5) years; provided however, loans
used to acquire any dwelling unit which, within a
reasonable time, is to be used (determined at the time
the loan is made) as a principal residence of the
Participant, shall provide for periodic repayment over
a reasonable period of time that may exceed five (5)
years.
(f)For the purposes of this section all plans of the
Employer shall be considered one Plan.
(g)No loans shall be made to any owner-employee.
(h)Any loan made pursuant to this Section where the
vested account of the Participant is used to secure
such loan shall require the written consent of the
Participant's spouse. Such written consent must be
obtained within the 90 day period prior to the date the
loan is made.
6.12 Limitations On Benefits And Distributions
All rights and benefits, including election, provided to a
Participant in this Plan shall be subject to the rights
afforded to any "alternate payee" under a "qualified
domestic relations order" as those terms are defined in
Code Section 414(p).
6.13 Direct Transfer
The provisions of this Section 6.13 shall be effective for
distributions occurring on and after January 1, 1993.
(a)In the event a Participant, alternate payee under a
Qualified Domestic Relations Order described in Code
Section 414(p) or any other beneficiary entitled to
benefits under the Plan, is entitled to receive an
"eligible rollover distribution" from the Plan then
such Participant, alternate payee or beneficiary may
request that any or all of the taxable portion of the
distribution be paid directly from the Plan into an
"eligible retirement plan" specified by the
Participant, alternate payee or beneficiary in a direct
rollover, provided that if a Participant, alternate
payee or other beneficiary elects to make a direct
rollover of a portion of the taxable distribution and
to receive a distribution of the remaining balance,
then the portion of the distribution paid in a direct
rollover to an "eligible retirement plan" must be at
least $200.
Distributions which are less than $200 are not
eligible for direct rollover under this Section 6.13.
(b)For purposes of this section, the following terms
shall have the meanings stated herein:
(i) "Eligible Retirement Plan" means an
individual retirement account described in Section
408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, a
qualified trust described under Code Section 401(a)
that accepts eligible rollover distributions or a
Code Section 403(b) annuity. However, in the case
of an Eligible Rollover Distribution to a surviving
spouse, an eligible retirement plan is an
individual retirement account or individual
retirement annuity only.
(ii) "Eligible Rollover
Distribution" means any distribution of all or any
portion of the balance to the credit of the
Participant's account, except that an eligible
rollover distribution does not include: any
distribution that is one of a series of
substantially equal periodic payments for the life
or life expectancy of the Participant, alternate
payee or beneficiary whichever is applicable) or
payable for a specified period of ten or more
years; any distribution to the extent such
distribution is required under Section 8.02 of the
Plan 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).
(c)In the event a Participant, alternate payee or other
beneficiary does not elect to have the taxable portion
of a distribution paid directly to an Eligible
Retirement Plan, then such portion of the distribution
shall be subject to mandatory withholding at a rate of
20%.
(d)A Participant shall be entitled to a period of at
least 30 days and not more than 90 days to determine
whether or not a distribution shall be directly rolled
over from the date a Participant is provided notice
under Code Section 402(f); except that a Participant
may waive the 30 day requirement if the Participant is
informed of a Participant's right to a 30 day period.
A Participant will be deemed to have waived the 30-day
requirement if such Participant makes an affirmative
election to make or not make a direct rollover within
the 30-day period. A waiver under this Section (d)
shall not be deemed a waiver with respect to Code
Sections 401(a)(11) or 417.
ARTICLE VII
TOP HEAVY RULES
7.1 Top Heavy Plan Requirements
(a)For any Top Heave Plan Year the Plan shall provide
the special minimum allocation requirements of Code
Section 416(c) pursuant to Section 7.3 of the Plan.
(b)The special minimum allocation requirements under
this Section shall be in addition to any Employer
Elective Contribution.
7.2 Determination Of Top Heavy Status
(a)This Plan shall be a Top Heavy Plan for any Plan
Year commencing after December 31, 1983 in which as of
the Determination Date, (1) the Present Value of
Accrued Benefits of Key Employees, or (2) the sum of
the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group exceeds sixty
percent (60%) of the Present Value of Accrued Benefits
or, the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an
Aggregation Group.
If any Participant is a Non-Key Employee for any
Plan Year, but such Participant was a Key Employee for
any prior Plan Year, such participant's Present Value
of Accrued Benefit and/or Aggregate Account balance
shall not be taken into account for purposes of
determining whether this Plan is a Top Heavy or Super
Top Heavy Plan (or whether any Aggregation Group with
includes this Plan is a Top Heavy Group). In addition,
if a Participant or Former Participant has not
performed any services for the Employer maintaining the
Plan (other than benefits under the Plan) at any time
during the five year period ending on the Determination
Date, the Aggregate Account and/or Present Value of
Accrued Benefit for such Participant or Former
Participant shall not be taken into account for the
purposes of determining whether this Plan is a Top
Heavy or Super Top Heavy Plan.
(b)This Plan shall be a Super Top Heavy Plan for any
Plan Year commencing after December 31, 1983 in which,
as of the Determination Date, (1) the present Value of
Accrued Benefits of Key Employees, or (2) the sum of
the Aggregate Accounts of Key Employees under this Plan
and all plans of the Aggregation Group, exceeds ninety
percent (90%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key
Employees under this Plan and all plans of an
Aggregation Group.
(c)Aggregate Account: A Participant's Aggregate
Account as of the Determination Date is the sum of:
1) Participant's Combined Account balance
as of the most recent valuation occurring within a
twelve (12) months period ending on the
Determination Date;
2) an adjustment for any contributions due
as of the Determination Date. Such adjustment
shall be the amount of any contributions actually
made after the valuation date but on or before the
Determination Date, except for the first Plan Year
when such adjustment shall also reflect the amount
of any contributions made after the Determination
Date that are allocated as of a date in the first
Plan Year;
3) any Plan distributions made within the
Plan Year that includes the Determination Date or
within the four (4) preceding Plan Years. However,
in the case of distributions made after the
valuation date and prior to the Determination Date,
such distributions are not included as
distributions for top heavy purposes to the extent
that such distributions are already included in the
Participant's Aggregate Account balance as of the
valuation date. Notwithstanding anything herein to
the contrary, all distributions, including
distributions made prior to January 1, 1984 and
distributions under a terminated plan which if it
had not been terminated would have been required to
be included in an Aggregation Group, will be
counted. Further, distributions from the Plan of a
Participant's account balance because of death
shall be treated as a distribution for the purposes
of this paragraph;
4) any Voluntary Contributions;
5) with respect to unrelated rollovers and
plan-to-plan transfers (ones which are both
initiated by the Employee and made from a plan
maintained by one employer to a plan maintained by
another employer), if this Plan provides for
rollovers or plan-to-plan transfers it shall always
consider such rollover or plan-to-plan transfer as
a distribution for the purposes of this section.
If this Plan is the plan accepting such rollovers
or plan-to-plan transfers, it shall not consider
such rollovers or plan-to-plan transfers accepted
after December 31, 1983 as part of the
Participant's Aggregate Account balance. However,
rollovers or plan-to-plan transfers accepted prior
to January 1, 1984 shall be considered as part of
the Participant's Aggregate Account balance;
6) with respect to related rollovers and
plan-to-plan transfers (ones either not initiated
by the Employee or made to a plan maintained by the
same employer), if this Plan provides the rollover
or plan-to-plan transfer, it shall not be counted
as a distribution for purposes of this Section. If
this Plan is the plan accepting such rollover or
plan-to-plan transfer, it shall consider such
rollover or plan-to-plan transfer as part of the
participant's aggregate Account balance,
irrespective of the date on which such rollover or
plan-to-plan transfer is accepted; and
7) for the purposes of determining whether
two employers are to be treated as the same
employer in (5) and (6) above, all employers
aggregated under Code Sections 414(b), (c), (m) or
(o) are treated as the same employer.
(d)"Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as
hereinafter determined.
1) Required Aggregation Group: In
determining a Required Aggregation Group hereunder,
each plan of the Employer in which a Key Employee
is a Participant in the Plan Year containing the
Determination Date or any of the four preceding
Plan Years and each other plan of the Employer
which enables any plan in which a Key Employee
participates to meet the requirements of Code
Sections 401(a)(4) or 410, will be required to be
aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation
Group, each plan in the group will be considered a
Top Heavy Plan if the Required Aggregation Group is
a Top Heavy Group. No plan in the Required
Aggregation Group will be considered a Top Heavy
Plan if the Required Aggregation Group is not a Top
Heavy Group.
2) Permissive Aggregation Group: The
Employer may also include any other plan not
required to be included in the Required Aggregation
Group, provided the resulting group, taken as a
whole would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such group shall
be known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation
Group, only a plan that is part of the Required
Aggregation Group will be considered a Top Heavy
Plan if the Permissive Aggregation Group is a Top
Heavy Group. No plan in the Permissive Aggregation
Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy
Group.
3) Only those plans of the Employer in
which the Determination Dates fall within the same
calendar year shall be aggregated in order to
determine whether such plans are Top Heavy Plans.
4) An Aggregation Group shall include any
terminated plan of the Employer if it was
maintained within the last five (5) years ending on
the Determination Date.
(e)"Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first
Plan Year, the last day of such Plan year.
(f)present Value of Accrued Benefit: In the case of a
defined benefit plan a Participant's Present Value of
Accrued Benefit shall be as determined under the
provisions of the applicable defined benefit plan. The
Accrued Benefit of an Employee (other than a Key
Employee) shall be determined under the method which is
used for general purposes for all plans of the Employer
or, if there is no method so described, as if such
benefit accrued not more rapidly than the slowest
benefit accrued under Code Section 411(b)(1)(c).
(g)"Top Heavy Group" means an Aggregation group in
which, as of the Determination Date the sum of:
1) the Present Value of Accrued Benefits of
Key Employees under all defined benefit plans
included in the group, and
2) the Aggregate Accounts of Key Employees
under all defined contribution plans included in
the group exceeds sixty percent (60%) of a similar
sum determined for all Participants.
7.3 Minimum Allocations
(a)Minimum Allocation Required for Top Heavy Plan
Years: Notwithstanding the provisions of Section 4.14
for any Top Heavy Plan Year, the sum of the Employer's
contributions and Forfeitures allocated to the
Participant's Combined Account of each Non-Key Employee
shall be equal to at least three percent (3%) of such
Non-Key Employee's "415 Compensation". However, if (i)
the sum of the Employer's contributions and Forfeitures
allocated to the Participant's Combined Account of each
Key Employee for such Top Heavy Plan Year be less than
three percent (3) of each Key Employee's "415
Compensation" and (ii), this Plan is not required to be
included in an Aggregation Group to enable a defined
benefit plan to meet the requirements of Code Section
401(a)(4) or 410, the sum of the Employer's
contributions and Forfeitures allocated to the
Participant's Account of each Non-Key Employee shall be
equal to the largest percentage allocated to the
Participant's Combined Account of each Key Employee.
However, in determining whether a Non-Key Employee has
received the required minimum allocation contained
herein, any Employer contribution attributable to a
salary reduction or similar arrangement shall not be
taken into account.
Except however, no such minimum allocation shall be
required in this Plan for any Non-Key Employee who
participates in another defined contribution plan
subject to Code Section 412 included with this Plan in
a Required Aggregation Group.
(b)For purposes of the minimum allocations set forth
above, the percentage allocated to the Participant's
Account of any Key Employee shall be equal to the ratio
of the sum of the Employer's contribution and
Forfeitures allocated on behalf of such Key Employee
divided by the "415 Compensation" for such Key
Employee.
(c)For any Top Heavy Plan Year, the minimum allocations
set forth above shall be allocated to the Participant's
Account of all Non-Key Employees who are participants
and who are employed by the Employer on the last day of
the Plan year, including Non-Key Employees who have:
1) failed to complete a Year of Service and
2) declined to make mandatory contributions
(if required) to the Plan, and
3) been excluded from participation because
of their level of Compensation.
(d)In lieu of the above, in any Plan Year in which a
Non-Key Employee is a Participant in both this Plan and
a defined benefit pension plan included in a Required
Aggregation Group which is top heavy, the Employer
shall not be required to provide such Non-Key Employee
with both the full separate defined benefit plan
minimum benefit and the full separate defined
contribution plan minimum allocation.
Therefore, for any Plan Year when the Plan is a Top
Heavy Plan, Non-Key Employees who are participating in
this Plan and a defined benefit plan maintained by the
Employer shall receive a minimum monthly accrued
benefit in the defined benefit plan equal to the
product of (1) one-twelfth (1/12th) of "415
Compensation" averaged over a five (5) consecutive
"limitation years" (or actual "limitation years" if
less) which produce the highest average and (2) the
lesser of (i) two percent (2%) multiplied by Years of
Service when the Plan is top heavy or (ii) twenty
percent (20%).
(e)For the purposes of this Section "415 Compensation"
shall be as defined in Section 4.14(d) but including
amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludable from
the Employee's gross income under Code Sections 125,
402(a)(8), 402(h) or 403(b).
ARTICLE VIII
TRUSTEE
8.1 The Employer shall select an individual or individuals or
institution to serve as Trustee. The Trustee shall be a
fiduciary and shall be responsible for the control and
management of any assets of the Plan.
8.2 The Trustee shall receive, hold, invest and reinvest all
contributions and monies of the Plan. Investments shall be
limited to property of a character which is consistent with
the Code for investments under qualified plans. Such
investments shall be made from contributions and monies
directed to the Plan.
8.3 The Trustee may also:
(a)Apply for, purchase, hold and own any insurance
policies in accordance with Plan provisions;
(b)Invest in any general and separate investment
accounts maintained and administered by an insurer from
monies held in connection with qualified employee
retirement plans, and to determine the allocation of
contributions among such accounts;
(c)Invest in bonds, common and preferred stocks and
other securities including shares of open-end,
management-type investment companies or unit investment
trusts as defined by the Investment Company Act of
1940;
(d)Sell for cash or credit at public or private sales,
exercise rights, convert, redeem, exchange or otherwise
dispose of investments in the Trust Fund;
(e)Hold any part of the Trust Fund invested and deposit
same with any banking institution;
(f)Join in, dissent from or oppose any reorganization,
recapitalization, consolidation, sale or merger
affecting investments held;
(g)Vote stocks and other votable investments through
proxies or voting trusts on discretionary as well as
ministerial matters;
(h)Carry investments in the name of a nominee or
nominees or in bearer form, and
(i)Do all such acts as the Trustee may deem necessary
to administer the Trust Fund.
In making investments, the Trustee has a wide latitude in
the selection of investments and shall not be restricted to
securities or other property of a character authorized or
required by applicable law for such investments. However,
the Trustee shall exercise the judgment and care under the
circumstances then prevailing, which men of prudence,
discretion and intelligence familiar with such matters
exercise in a like situation and shall diversify such
investments so as to minimize the risk of large losses. If
two or more persons are designated as Trustee, each is
required to use reasonable care to insure that his fellow
trustees do not breach their responsibilities. The Trustee
may delegate any of his ministerial powers and duties
hereunder to his agents and other persons.
8.4 Any Trustee may resign at any time by giving 60 days notice
in writing to the Employer. The Employer may remove any
Trustee at any time upon 60 days written notice to the
Trustee. In the case of resignation or removal of any
Trustee, the Employer may appoint a successor Trustee. The
appointment of a successor Trustee shall become effective
upon his acceptance in writing addressed to the Employer,
and upon such acceptance, such Trustee shall be vested with
all the rights, powers and duties of his predecessor.
8.5 Any instrument executed by the Employer, Participant or his
Beneficiary shall be received by the Trustee as conclusive
evidence of any matters mentioned in the instrument. The
Trustee as conclusive evidence of any matters mentioned in
the instrument. The Trustee shall be fully protected in
taking, permitting or omitting any action in reliance on
the instrument and shall incur no liability or
responsibility for so doing.
8.6 If more than one person has been designated and serves as
Trustee, the signature of any one trustee may be accepted
by any interested party as conclusive evidence that the
Trustee has duly authorized the action therein set forth
and as representing the will of and binding upon all the
said trustees. No person receiving such documents or
dealing with any of the said trustees in good faith and in
reliance thereon shall be obliged to ascertain the validity
of such action under the terms of the Plan.
ARTICLE IX
AMENDMENT, TERMINATION AND MERGERS
9.1 Amendment
The Employer shall have the right at any time to amend this
Plan. However, no such amendment shall authorize or permit
any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be
used for or diverted to purposes other than for the
exclusive benefit of the Participants or their
Beneficiaries or estates; no such amendment shall cause any
reduction in the amount credited to the account of any
Participant or reduce the vested percentage of any
Participant, or cause or permit any portion of the Trust
Fund to revert to or become the property of the Employer;
and no such amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may be
made without the Trustee's and the Administrator's written
consent. Any such amendment shall become effective as
provided therein upon its execution. The Trustee shall not
be required to execute any such amendment that affects the
duties of the trustee hereunder.
For the purposes of this Section, a Plan amendment which
has the effect of eliminating an optional form of benefit
or decreasing, or eliminating any retirement benefit or
retirement subsidy (as provided in Treasury Regulations)
shall be treated as reducing the amount credited to the
account of a Participant.
9.2 Termination
The Employer shall have the right at any time to terminate
the Plan by delivering to the Trustee and Administrator
written notice of such termination. A complete
discontinuance of the Employer's contributions to the Plan
shall be deemed to constitute a termination. Upon any
termination (full or partial) or complete discontinuance of
contributions, as determined under Regulations all amounts
credited to the affected Participant's Aggregate Account
shall become 100% vested and shall not thereafter be
subject to Forfeiture. Upon such termination of the Plan,
the Employer, by written notice to the Trustee and
Administrator, shall direct complete distribution of the
assets in the Trust Fund to the Participants, in cash or in
kind, in one distribution as soon as practicable; provided
however, that any distribution made pursuant to this
Section shall be subject to the rights of consent afforded
to the Participant's spouse pursuant to Section 6.5.
9.3 Merger Or Consolidation
This Plan and Trust may be merged or consolidated with, or
its assets and/or liabilities may be transferred to any
other Plan and Trust only if the benefits which would be
received by a Participant of this Plan, in the event of a
termination of the Plan immediately after such transfer,
merger or consolidation, are at least equal to the benefits
the Participant would have received if the Plan had
terminated immediately before the transfer, merger or
consolidation.
ARTICLE X
MISCELLANEOUS
10.1 Participant's Rights
This Plan shall not be deemed to constitute a contract
between the Employer and any Participant or to be a
consideration or an inducement for the employment of any
participant or Employee. Nothing contained in this Plan
shall be deemed to give any participant or Employee the
right to be retained in the service of the Employer or to
interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the
effect which such discharge shall have upon him as a
Participant of this Plan.
10.2 Alienation
(a)Subject to the exceptions provided below, no benefit
which shall be payable out of the Trust Fund to any
person (including a Participant or his Beneficiary)
shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge,
encumbrance or charge and any attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or
charge the same shall be void; and no such benefit
shall in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of
any such person, nor shall it be subject to attachment
or legal process for or against such person and the
same shall not be recognized by the Trustee, except to
such extent as may be required by law.
(b)This provision shall not apply to the extent a
Participant or Beneficiary is indebted to the Plan for
any reason under any provision of this Agreement. At
the time a distribution is to be made to or for a
Participant's or Beneficiary's benefit, such proportion
of the amount distributed shall equal such indebtedness
shall be paid by the Trustee to the Trustee or the
Administrator, at the discretion of the Administrator,
to apply against or discharge such indebtedness. Prior
to making payment, however, the Participant or
Beneficiary must be given written notice by the
Administrator that such indebtedness is to be deducted
in whole or part from his Participant's Combined
Account. If the Participant or Beneficiary does not
agree that the indebtedness is a valid claims against
his vested Participant's Combined Account, he shall be
entitled to a review of the validity of the claim in
accordance with procedures provided in Sections 2.10
and 2.11.
(c)This provision shall not apply to a "qualified
domestic relations order" defined in Code Section
414(p) and domestic relations orders permitted to be so
treated under the provisions of the Retirement Equity
Act of 1984. The Administrator shall establish a
written procedure to determine the qualified status of
domestic relations orders and to distributions under
such qualified orders. Further, to the extent provided
under a "qualified domestic relations order", a former
spouse of a Participant shall be treated as the spouse
or surviving spouse for all purposes under the Plan.
10.3 Construction Of Plan
This Plan and Trust shall be construed under laws of the
State of New Jersey other than its laws respecting choice
of law, to the extent not preempted by the Act or other
Federal law.
10.4 Gender And Number
Wherever any words are used herein in the masculine,
feminine or neuter gender they shall be construed as though
they were also used in another gender in all cases where
they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as
though they were also used in the other form in all cases
where they would so apply.
10.5 Legal Action
In the event any claim, suit or proceeding is brought
regarding the Trust and/or Plan established hereunder and
the claim, suit or proceeding is resolved in favor of the
Trustee or Administrator they shall be entitled to be
reimbursed from the Trust Fund for any and all costs,
attorney's fees and other expenses pertaining thereto
incurred by them for which they shall have become liable.
10.6 Prohibition Against Diversion Of Funds
(a)Except as provided below and otherwise specifically
permitted by law, it shall be impossible by operation
of the Plan or of the Trust, by termination of either,
by power of revocation or amendment, by the happening
of any contingency, by collateral arrangement or by any
other means, for any part of the corpus of income of
any trust fund maintained pursuant to the Plan or any
funds contributed thereto to be used for or diverted to
purposes other than the exclusive benefit of
Participants, Retired Participants or their
Beneficiaries.
(b)In the event the Employer shall make an excessive
contribution under a mistake of fact pursuant to
Section 403(c)(2)(A) of the Act, the Employer may
demand repayment of such excessive contribution at any
time within one (1) year following the time of payment
and the Trustees shall return such amount to the
Employer may demand repayment of such excessive
contribution at any time within one (1) year period.
Earnings of the Plan attributable to the excess
contribution may not be returned to the Employer but
any losses attributable thereto must reduce the amount
so returned.
(c)All contributions shall be conditioned on
deductibility. Any contribution determined not to be
deductible can be returned to the Employer.
(d)Notwithstanding any provision to the contrary,
except Sections 3.7 and 4.1(d), any contribution by the
Employer to the Trust Fund is conditioned upon the
deductibility of the contribution by the Employer under
the Code and to the extent any such deduction is
disallowed, the Employer may within one (1) year
following a final determination of the disallowance,
whether by agreement with the Internal Revenue Service
or by final decision of a court of competent
jurisdiction, demand repayment of such disallowed
contribution and the Trustee shall return such
contribution within one (1) year following the
disallowance. Earnings of the Plan attributable to the
excess contribution may not be returned to the
Employer, but any losses attributable thereto must
reduce the amount so returned.
10.7 Bonding
Every Fiduciary, except a bank or an insurance company as
described under Section 412(a)(2) of the Act, unless
exempted by the Act and regulations thereunder, shall be
bonded in an amount not less than 10% of the amount of the
funds such Fiduciary handles; provided however, that the
minimum bond shall be $1,000 and the maximum bond $500,000.
The amount of funds handled shall be determined at the
beginning of each Plan Year by the amount of funds handled
by such person, group or class to be covered and their
predecessors, if any, during the preceding Plan Year. The
bond shall provide protection to the Plan against any loss
by reason of acts of fraud or dishonesty by the Fiduciary
alone or in connivance with others. The surety shall be a
corporate surety company (as such term is used in Section
412(a)(2) of the Act), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding
anything in the Plan to the contrary, the cost of such
bonds shall be an expense of and may, at the election of
the Administrator be paid from the Trust Fund or by the
Employer.
10.8 Receipt And Release For Payments
Any payment to any Participant, his legal representative,
Beneficiary or to any guardian or committee appointed for
such participant or Beneficiary in accordance with the
provisions of the Plan shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the
Trustee and the Employer, either of whom may require such
Participant, legal representative, Beneficiary, guardian or
committee as a condition precedent to such payment, to
execute a receipt and release thereof in such form as shall
be determined by the Trustee or Employer.
10.9 Action By The Employer
Whenever the Employer under the terms of the Plan is
permitted or required to do or perform any act or matter or
thing, it shall be done and performed by a person duly
authorized by its legally constituted authority.
10.10Named Fiduciaries And Allocation Of Responsibility
The "named Fiduciaries" of this Plan are (1) the Employer,
(2) the Administrator and (3) the Trustee. The named
Fiduciaries shall have only those specific powers, duties,
responsibilities and obligations as are specifically given
them under the Plan. In general, the Employer shall have
the sole responsibility for making the contributions
provided for under Section 4.1; and shall have the sole
authority to appoint and remove the Trustee, the
Administrator and any Investment Manager which may be
provided for under the Plan; to formulate the Plan's
"funding policy and method"; and to amend or terminate, in
whole or in part, the Plan. The Administrator shall have
the sole responsibility for the administration of the Plan,
which responsibility is specifically described in the Plan.
The Trustee shall have the sole responsibility of
management of the assets held under the Trust, except those
assets the management of which has been assigned to an
Investment Manager, who shall be solely responsible for the
management of the assets assigned to it, all as
specifically provided in the Plan. Each named Fiduciary
warrants that any directions given, information furnished
or action taken by it shall be in accordance with the
provisions of the Plan, authorizing or providing for each
direction, information or action. Furthermore, each named
Fiduciary may rely upon any such direction, information or
action of another named Fiduciary as being proper under the
Plan and is not required under the Plan to inquire into the
propriety of any such direction, information or action. It
is intended under the Plan that each named Fiduciary shall
be responsible for the proper exercise of its own powers,
duties, responsibilities and obligations under the Plan.
No named Fiduciary guarantees the Trust Fund in any manner
against investment loss or depreciation in asset value.
Any person or group may serve in more than one Fiduciary
capacity.
10.11Uniformity
All provisions of this Plan shall be interpreted and
applied in a uniform, nondiscriminatory manner.
10.12Headings
The headings and subheadings of this Plan have been
inserted for convenience of reference and are to be ignored
in any construction of the provisions hereof.
ARTICLE XI
PARTICIPATING EMPLOYERS
11.1 Adoption By Other Employers
Notwithstanding anything herein to the contrary, with
consent of the Employer and Trustee, any other corporation
or entity, whether an affiliate or subsidiary or not, may
adopt this Plan and all provisions hereof and participate
herein and be known as a Participating Employer, by a
property executed document evidencing said intent and will
of such Participating Employer.
11.2 Requirements Of Participating Employers
(a)Each such Participating Employer shall be required
to use the same Trustee as provided in this Plan.
(b)The Trustee may, but shall not be required to,
commingle, hold and invest as one Trust Fund all
contributions made by Participating Employers as well
as all increments thereof.
(c)The transfer of any Participant from or to an
Employer participating in this Plan, whether he be an
Employee of the Employer or a Participating Employer,
shall not affect such Participant's rights under the
Plan and all amounts credited to such Participant's
Account, as well as his accumulated service time with
the transferor or predecessor, and his length of
participation in the Plan shall continue to his credit.
(d)All rights and values forfeited by termination of
employment shall inure only to the benefit of the
Employee-Participants of the Participating Employer by
which the forfeiting Participant was employed, except
if the Forfeiture is for an Employee whose Employer is
a member of an affiliated or controlled group, then
said Forfeiture shall be allocated based on
Compensation t all Participant Accounts of
Participating Employers who are members of the
affiliated or controlled group. Should an Employee of
one ("First") Employer be transferred to an associated
("Second") Employer (the Employer, an affiliate or
subsidiary), such transfer shall not cause his account
balance (generated while an Employee of "First"
Employer) in any manner or by any amount to be
forfeited. Such Employee's Participant Account balance
for all purposes of the Plan, including length of
service, shall be considered as though he had always
been employed by the "Second" Employer and as such has
received contributions, forfeitures, earnings or loss
and appreciated or depreciation in value of assets
totaling amount so transferred.
(e) Any expenses of the Trust which are to be paid by
the Employer or borne by the Trust Fund shall be paid
by each Participating Employer in the same proportion
that the total amount standing to the credit of all
Participants employed by such Employer bears to the
total standing to the credit of all Participants.
11.3 Designation Of Agent
Each Participating Employer shall be deemed to be part of
this Plan; provided however, that with respect to all of
its relations with the Trustee and Administrator for the
purpose of this Plan, each Participating Employer shall be
deemed to have designated irrevocably the Employer as its
agent. Unless the context of the Plan clearly indicates
the contrary, the word "Employer" shall be deemed to
include each Participating Employer as related to its
adoption of the Plan.
11.4 Employee Transfers
It is anticipated that an Employee may be transferred
between Participating Employers and in the event of any
such transfer, the Employee involved shall carry with him,
his accumulated service and eligibility. No such transfer
shall effect a termination of employment hereunder and the
Participating Employer to which the Employee is transferred
shall thereupon become obligated hereunder with respect to
such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
11.5 Participating Employers Contributions
Any contribution or Forfeiture subject to allocation during
each Plan Year shall be allocated among all Participants of
all Participating Employers in accordance with the
provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep
separate books and records concerning the affairs of each
Participating Employer hereunder and as to the accounts and
credits of the Employees of each Participating Employer.
The Trustee may, but need not, register Contracts so as to
evidence that a particular Participating Employer is the
interested Employer hereunder, but in the event of an
Employee transfer from one Participating Employer to
another, the employing Employer shall immediately notify
the Trustee thereof.
11.6 Amendment
Amendment of this Plan by the Employer at any time when
there shall be a Participating Employer hereunder, shall
only be by the written action of each and every
participating Employer and with the consent of the Trustee
where such consent is necessary in accordance with the
terms of this Plan.
11.7 Discontinuance of Participation
Any Participating Employer shall be permitted to
discontinue or revoke its participation in the Plan. At
the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable
conditions imposed shall be delivered to the Trustee. The
Trustee shall thereafter transfer, deliver and assign
Contracts and other Trust Fund assets allocable to the
Participants of such Participating Employer to such new
Trustee as shall have been designated by such Participating
Employer, in the event it has established a separate
pension plan for its Employees. If no successor is
designated, the Trustee shall retain such assets for the
Employees of said Participating Employer pursuant to the
provisions of Article VIII hereof. In no such event shall
any part of the corpus or income of the Trust as it relates
to such Participating Employer be used for, or delivered
for purposes other than for the exclusive benefit of the
Employees of such Participating Employer.
11.8 Administrator's Authority
The Administrator shall have the authority to make any and
all necessary rules or regulations binding upon all
Participating Employers and all Participants to effectuate
the purpose of this Article.
11.9 Participating Employer Contribution For Affiliate
If any Participating Employer is prevented in whole or in
part from making a contribution to the Trust Fund which it
would otherwise have made under the Plan by reason of
having no current or accumulated earnings or profits, or
because such earnings or profits are less than the
contribution which it would otherwise have made, then
pursuant to Code Section 404(a)(3)(B) so much of the
contribution which such Participating Employer was so
prevented from making may be made for the benefit of the
participating employees of such Participating Employer, by
the other Participating Employers who are members of the
same affiliated group within the meaning of Code Section
1504 to the extent of their current or accumulated earnings
or profits, except that such contribution by each such
other Participating Employer shall be limited to the
proportion of its total current and accumulated earnings or
profits remaining after adjustment for its contribution to
the Plan made without regard to this paragraph which the
total prevented contribution bears to the total current and
accumulated earnings or profits of all the Participating
Employers remaining after adjustment for all contributions
made to the Plan without regard to this paragraph.
A Participating Employer on behalf of whose employees a
contribution is made shall not reimburse the contributing
participating Employers.
IN WITNESS WHEREOF, this Agreement has been executed on the
11 day of October, 1994.
BY /s/ Catherine F. Higgins
[ARTICLE]5
Exhibit 10.13
FIRST AMENDMENT TO
CONSULTING AGREEMENT
This is the FIRST AMENDMENT made as of June 16, 1995, to the
Consulting Agreement dated January 31, 1994 (the "Consulting
Agreement"), by and between Barr Laboratories, Inc. (the
"Company") and Edwin A. Cohen (the "Executive").
WHEREAS, the Executive has agreed, for the period of July 1,
1995 to June 30, 1996,
to make himself available to the Company to render consulting
services up to 120 days from 80 days as required in the
Consulting Agreement; and
WHEREAS, the Company has agreed to increase the Executive's
compensation for the period of July 1, 1995 to June 30, 1996; and
WHEREAS, pursuant to and consistent with the provisions of
Paragraph 5(b) of the Consulting Agreement, the parties wish to
amend the Consulting Agreement to affect these purposes;
NOW THEREFORE, in consideration of the foregoing, the
parties hereto agree as follows:
1. Paragraph 3(d)(i) is hereby amended to require the Executive
to render consulting services under the Consulting Agreement
on not more than 120 days during the period of the Term
beginning July 1, 1995 and ending June 30, 1996.
2. Paragraph 5(a)(i) is hereby amended to require the Company
to compensate the Executive at a rate per annum equal to
$150,000 during the period of the Term beginning July 1,
1995 and ending June 30, 1996.
3. Except as specifically set forth in this First Amendment to
the Consulting Agreement, all terms and conditions of the
Consulting Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
First Amendment to the Consulting Agreement as of the date first
above written.
[Seal] BARR LABORATORIES, INC.
ATTEST: By: /s/ Edwin A. Cohen
/s/ Bruce L. Downey
/s/ Cathy L. Burgess
[ARTICLE]5
[MULTIPLIER]1,000
<TABLE>
<S> <C> <C> <C>
hibit 11
BARR LABORATORIES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(Amounts in thousands, except per share amounts)
1995 1994 1993
PRIMARY
Average shares outstanding 8,945 8,690 8,630
Net effect of dilutive stock options -
based on the treasury stock method using
average market price - i 198 - i
Total 8,945 8,888 8,630
Net earnings $6,225 $2,658 $7,787
Net earnings per share $0.70 $0.30 $0.90
FULLY DILUTED
Average shares outstanding 8,945 8,690 8,630
Net effect of dilutive stock options -
based on the treasury stock method using:
average market price 224 218 -
quarter-end market price - - 207
Convertible debenture - 503 503
Total 9,169 9,411 9,340
Net earnings $6,225 $2,658 $7,787
Add convertible debt interest, deferred
finance charges, net of income tax effect - 668 668
Total $6,225 $3,326 $8,455
Net earnings per share $0.68 ii $0.35 iii 0.91 iii
i) Stock options of 208 and 101 in 1995 and 1993, respectively, are not included because
their inclusion results in less than 3% dilution.
ii) Results in less than 3% dilution.
iii) Anti-dilutive.
</TABLE>
[ARTICLE]5
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Post-
Effective Amendment to Registration Statement No. 33-13901, and
in Registration Statement Nos. 33-73696, 33-73698 and 33-73700 of
Barr Laboratories, Inc. on Form S-8 of our report dated August
22, 1995, appearing in this Annual Report on Form 10-K of Barr
Laboratories, Inc. for the year ended June 30, 1995.
/s/Deloitte & Touche LLP
________________________
Deloitte & Touche LLP
Parsippany, New Jersey
September 19,1995
[ARTICLE]5
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration
Statement Nos. 33-13901, 33-73696, 33-73698 and 33-73700 on
Forms S-8 of Barr Laboratories, Inc. of our report dated
September 17, 1993, except as to the first four sentences of the
second paragraph of Note 5 which is as of August 22, 1995,
relating to the consolidated statements of operations,
shareholders' equity, and cash flows and related financial
statement schedule for the year ended June 30, 1993, which report
appears in the June 30, 1995 annual report on Form 10-K of Barr
Laboratories, Inc.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Short Hills, New Jersey
September 19, 1995
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 52,987
<SECURITIES> 0
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<COMMON> 93
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<SALES> 199,720
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Accounts Receivable and PP&E are Net
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