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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-3252
LEXINGTON PRECISION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-1830121
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
767 THIRD AVENUE, NEW YORK, NY 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 319-4657
------------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $0.25 PAR VALUE
(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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 15, 1999, was approximately $2,055,000.
The number of shares outstanding of the registrant's common stock at March 15,
1999, was 4,263,036.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's proxy statement to be issued in connection with its
1999 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by
reference into Part III. Only those portions of the Proxy Statement which are
specifically incorporated by reference are deemed filed as part of this report
on Form 10-K.
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LEXINGTON PRECISION CORPORATION
ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
<TABLE>
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Page
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PART I
Item 1. Business............................................................... 1
Item 2. Properties............................................................. 6
Item 3. Legal Proceedings ..................................................... 6
Item 4. Submission of Matters to a Vote of Security Holders ................... 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters . 7
Item 6. Selected Financial Data ............................................... 8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. 9
Item 7A. Quantitative and Qualitative Disclosures about Market Risk ............ 21
Item 8. Financial Statements and Supplementary Data ........................... 22
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure .................................................. 48
PART III
Item 10. Directors and Executive Officers of the Registrant .................... 49
Item 11. Executive Compensation ................................................ 49
Item 12. Security Ownership of Certain Beneficial Owners and Management ........ 49
Item 13. Certain Relationships and Related Transactions ........................ 49
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K ...... 50
</TABLE>
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PART I
ITEM 1. BUSINESS
Lexington Precision Corporation (the "Company") is a Delaware
corporation that was incorporated in 1966. The Company's business is conducted
substantially in the continental United States. Through its two operating
segments, the Rubber Group and the Metals Group, the Company manufactures, to
customer specifications, rubber and metal component parts used primarily by
manufacturers of automobiles, automotive replacement parts, medical devices, and
industrial equipment. The Company has implemented a strategy of focusing each of
its manufacturing facilities on a particular product line with a well-defined
market. Operations are decentralized, with each division having a management
team that is responsible for all aspects of production, sales, and customer
service.
RUBBER GROUP
The Company's Rubber Group manufactures silicone and organic rubber
components. The Rubber Group consists of four divisions: Lexington Connector
Seals, Lexington Insulators, Lexington Medical, and Lexington Technologies. In
1998, net sales of the Rubber Group totaled $92,610,000, or 73.1% of the
Company's consolidated net sales.
LEXINGTON CONNECTOR SEALS. Lexington Connector Seals manufactures
molded rubber seals used in automotive wiring systems. The seals are designed to
ensure the electrical integrity of the many connections required throughout the
wiring systems. The Company believes that Lexington Connector Seals is the
largest manufacturer of seals for automotive wiring systems in North America,
with approximately 1.8 billion seals sold in 1998.
LEXINGTON INSULATORS. Lexington Insulators manufactures molded rubber
insulators used in ignition wire sets for automobiles and light trucks.
Insulators are used to shield the electrical connections made by the ignition
wire at the distributor and at the spark plug. In 1998, net sales of insulators
to original equipment manufacturers, or their tier-one suppliers, represented
51.4% of Lexington Insulators' net sales, and net sales of insulators to
manufacturers of aftermarket ignition wire sets represented 48.6% of Lexington
Insulators' net sales. The Company believes that Lexington Insulators is the
largest manufacturer of insulators for ignition wire sets in North America, with
approximately 300 million insulators sold by Lexington Insulators in 1998.
LEXINGTON MEDICAL. Lexington Medical manufactures molded rubber
components used in a variety of medical devices, such as drug delivery systems,
syringes, laparoscopic instruments, and catheters.
LEXINGTON TECHNOLOGIES. Lexington Technologies manufactures molds that
are sold to customers of the other divisions of the Rubber Group. The molds are
used by the Rubber Group to produce component parts. Lexington Technologies also
provides specialized engineering and design services to the other divisions of
the Rubber Group.
METALS GROUP
The Company's Metals Group manufactures aluminum, magnesium, and zinc
die castings and machines aluminum, brass, and steel components. The Metals
Group consists of three divisions: Lexington Die Casting and the Arizona and New
York Divisions of Lexington Machining. In
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1998, net sales of the Metals Group totaled $34,107,000, or 26.9% of the
Company's consolidated net sales.
LEXINGTON DIE CASTING. Lexington Die Casting manufactures aluminum,
magnesium, and zinc die castings used primarily by manufacturers of automotive
assemblies, industrial equipment, computers, and office equipment.
LEXINGTON MACHINING. Lexington Machining, through its Arizona and New
York Divisions, manufactures machined aluminum, brass, and steel components used
primarily by manufacturers of initiators and inflators for automotive airbag
systems, industrial equipment, automotive assemblies, recreational equipment,
and home appliances.
In December 1998, the Company changed the name of its machining
operation in Casa Grande, Arizona, from Lexington Safety Components to the
Arizona Division of Lexington Machining in order to reflect the broadening of
that division's focus to include customers other than manufacturers of airbag
initiators and inflators. The Company's machining operation in Rochester, New
York, which had been known as Lexington Machining, became the New York Division
of Lexington Machining.
FINANCIAL INFORMATION ABOUT THE COMPANY'S OPERATING SEGMENTS
Financial information about the Company's operating segments, including
revenues, income from operations, assets, depreciation and amortization, capital
expenditures, and certain other data is set forth in Part II, Item 7, and in
Note 10 to the consolidated financial statements in Part II, Item 8.
PRINCIPAL END USES FOR THE COMPANY'S PRODUCTS
The following table summarizes net sales of the Company during 1998,
1997, and 1996 by the type of product in which the Company's component parts
were utilized (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Automobiles and light trucks $ 103,052 81.3% $ 88,961 75.0% $ 79,832 69.5%
Medical devices 8,245 6.5 7,623 6.4 8,371 7.3
Industrial equipment 7,005 5.5 9,860 8.3 11,870 10.3
Recreational equipment and
home appliances 3,704 2.9 4,038 3.4 4,693 4.1
Computers and office equipment 3,109 2.5 5,636 4.8 6,016 5.2
Other 1,602 1.3 2,513 2.1 4,090 3.6
---------- ----- ---------- ----- ---------- -----
$ 126,717 100.0% $ 118,631 100.0% $ 114,872 100.0%
========== ===== ========== ===== ========== =====
</TABLE>
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The following table summarizes net sales of the Rubber Group and the
Metals Group during 1998, 1997, and 1996 by the type of product in which each
Group's component parts were utilized (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
1998 1997 1996
------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Rubber Group:
Automobiles and light trucks $ 84,098 90.8% $ 72,929 89.8% $ 65,420 87.1%
Medical devices 8,245 8.9 7,620 9.4 8,077 10.7
Other 267 0.3 661 0.8 1,625 2.2
--------- ----- --------- ----- --------- -----
$ 92,610 100.0% $ 81,210 100.0% $ 75,122 100.0%
========= ===== ========= ===== ========= =====
Metals Group:
Automobiles and light trucks $ 18,954 55.6% $ 16,032 42.8% $ 14,412 36.3%
Industrial equipment 7,005 20.5 9,789 26.2 11,723 29.5
Recreational equipment and
home appliances 3,704 10.9 4,038 10.8 4,693 11.8
Computers and office equipment 3,109 9.1 5,636 15.1 6,016 15.1
Other 1,335 3.9 1,926 5.1 2,906 7.3
--------- ----- --------- ----- --------- -----
$ 34,107 100.0% $ 37,421 100.0% $ 39,750 100.0%
========= ===== ========= ===== ========= =====
</TABLE>
MAJOR CUSTOMERS
The Company's largest customer is Delphi Packard Electric Systems, a
division of Delphi Automotive Systems Corporation, of which General Motors
Corporation is the majority stockholder. During 1998, 1997, and 1996, net sales
to Delphi Packard totaled $26,233,000, $26,447,000, and $25,088,000, which
represented 20.7%, 22.3%, and 21.8%, respectively, of the Company's net sales
and 28.3%, 32.6%, and 33.4%, respectively, of the Rubber Group's net sales.
During 1998, net sales to Prestolite Wire Corporation totaled $14,431,000, or
11.4% of the Company's net sales and 15.6% of the Rubber Group's net sales. No
other customer accounted for more than 10% of the Company's net sales during
1998, 1997, or 1996. Loss of a significant amount of business from Delphi
Packard, Prestolite Wire, or any of the Company's other large customers could
have a material adverse effect on the Company if such business were not
substantially replaced by additional business from existing or new customers.
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing
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costs and that a portion of the price reductions will be offset by greater
absorption of manufacturing overhead as a result of volume increases.
As a result of its performance as a supplier of rubber components to
Delphi Packard, the Company has received General Motors Corporation's "Supplier
of the Year" award for 1996, 1997, and 1998. In each of those years, fewer than
200 of the more than 30,000 suppliers to General Motors received the "Supplier
of the Year" award.
MARKETING AND SALES
The Company's marketing and sales effort is carried out by management
personnel and internal sales personnel. The Company has a sales office in
Detroit, which markets the Company's products to automotive industry customers
in that area, and a wholly-owned German subsidiary, Lexington Precision GmbH,
which primarily markets the Rubber Group's products in Europe.
RAW MATERIALS
The Company's principal raw materials are silicone and organic rubber
compounds and aluminum, steel, and brass. Each of the principal raw materials
used by the Company has been readily available at competitive prices from
several major manufacturers and the Company anticipates that such materials will
continue to be readily available at competitive prices for the foreseeable
future.
PATENTS AND TRADEMARKS
The Company does not currently hold any patents, trademarks, or
licenses that it considers to be material to the success or operation of its
business.
SEASONAL VARIATIONS
The Company's business generally is not subject to significant seasonal
variations.
BACKLOG
Sales of the Company's products are made pursuant to a variety of
purchasing arrangements and practices. Customers regularly revise release
schedules to correspond to their own production requirements, and for other
reasons. The Company believes that the aggregate value of scheduled releases
outstanding on its books at any time cannot be considered firm backlog since
they may be subject to revision at any time. The Company also believes that
increases or decreases in the aggregate value of scheduled releases are not
necessarily indicative of any trend in the Company's net sales.
COMPETITION
The Company competes for business primarily on the basis of quality,
service, engineering capability, and price. The Rubber Group and the Metals
Group encounter substantial competition from a large number of manufacturing
companies. Competitors range from small and medium-sized specialized firms to
large diversified companies, many of which have resources substantially greater
than those of the Company. Additionally, some of the Company's customers have
internal manufacturing operations that compete with the Company.
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PRODUCT LIABILITY RISKS
The Company is subject to potential product liability risks inherent in
the manufacture and sale of component parts. Although there are no claims
against the Company that the Company believes will have a material adverse
effect upon its business, financial position, or results of operations, there
can be no assurance that any existing or future claims will not have such a
material adverse effect. Although the Company maintains insurance coverage for
product liability, there can be no assurance that, in the event of a claim, such
insurance coverage would automatically apply or that, in the event of an award
arising out of a claim, the amount of such insurance coverage would be
sufficient to satisfy the award.
ENVIRONMENTAL COMPLIANCE
The Company's operations are subject to numerous laws and regulations
controlling the discharge of materials into the environment or otherwise
relating to the protection of the environment. Although the Company makes
expenditures relating to the protection of the environment, compliance with
environmental laws and regulations has not had a significant impact on the
capital spending requirements, earnings, or competitive position of the Company.
There can be no assurance that changes in environmental laws and regulations, or
in the interpretation or enforcement thereof, will not require material
expenditures by the Company in the future. (See also Part I, Item 3.)
EMPLOYEES
At December 31, 1998, the Company had 1,284 employees. The Rubber Group
and the Metals Group had 816 and 463 employees, respectively, and the Company's
corporate office had five employees. At December 31, 1998, 62 hourly workers at
one plant location within the Rubber Group were subject to a collective
bargaining agreement. The Company believes that its employee relations are
generally good.
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ITEM 2. PROPERTIES
The following table shows the location and square footage of each of
the manufacturing facilities of the Rubber Group and the Metals Group at
December 31, 1998:
<TABLE>
<CAPTION>
SQUARE
LOCATION FEET
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<S> <C> <C>
Rubber Group:
Lexington Connector Seals Vienna, OH 60,000(1)
Lexington Connector Seals LaGrange, GA 77,000(1)
Lexington Insulators Jasper, GA 101,000
Lexington Medical Rock Hill, SC 60,000(1)
Lexington Technologies North Canton, OH 41,000(1)
-----------
339,000
-----------
Metals Group:
Lexington Die Casting Lakewood, NY 91,000(1)(2)
Lexington Die Casting Manchester, NY 21,000
Lexington Machining, Arizona Division Casa Grande, AZ 64,000(1)
Lexington Machining, New York Division Rochester, NY 60,000
-----------
236,000
-----------
575,000
===========
</TABLE>
(1) Encumbered by a mortgage.
(2) Leased from an industrial development authority pursuant to a lease
that expires in 2006 and provides the Company with an option to
purchase the facility for nominal consideration.
All of the plants are general manufacturing facilities suitable for the
Company's operations. The Company believes that the facilities are adequate to
meet the Company's current operating needs.
The Company occupies, in the aggregate, 6,000 square feet of office
space for corporate executive and administrative purposes. The Company leases an
office in Cleveland, Ohio, and reimburses an affiliate for a portion of the cost
of leasing an office in New York City.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its business
activities, including actions naming the Company as one of numerous potentially
responsible parties under applicable environmental laws for restoration costs at
waste-disposal sites, as a third-party defendant in cost-recovery actions
pursuant to applicable environmental laws, and as a defendant or potential
defendant in various other matters. It is the Company's policy to record
accruals for such matters when a loss is deemed probable and the amount of such
loss can be reasonably estimated. The various actions to which the Company is or
may be a party in the future are at various stages of completion. Although there
can be no assurance as to the outcome of existing or potential litigation, in
the event such litigation were commenced, based upon the information currently
available to the Company, the Company currently believes that the outcome of
such actions would not have a material adverse effect upon its financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during
the fourth quarter of 1998.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market. At
March 12, 1999, there were approximately 980 holders of record of the Company's
common stock. Trading in shares of the Company's common stock is limited. During
1998 and 1997, trading data for the Company's stock was available on the OTC
Bulletin Board operated by the National Association of Securities Dealers, Inc.
(NASD). The following table sets forth prices at which trades in the Company's
common stock were reported on the OTC Bulletin Board:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
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1998 1997
------------------------ -----------------------
HIGH LOW HIGH LOW
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
First quarter $3.00 $2.00 $2.25 $1.875
Second quarter $2.00 $1.375 $2.125 $1.625
Third quarter $1.6875 $1.2813 $3.75 $1.9375
Fourth quarter $1.75 $1.3125 $3.625 $2.25
</TABLE>
The Company is not able to determine whether retail markups, markdowns,
or commissions were included in the above prices. The Company believes that
eleven brokerage firms currently make a market in the Company's common stock,
although both bid and asked quotations may at times be limited.
No dividends have been paid on the Company's common stock since 1979
and the Company has no current plans to reinstate the payment of dividends. The
future payment of dividends is dependent upon, among other things, (1) the
Company's earnings, (2) the Company's capital requirements, (3) compliance with
the Company's loan covenants, and (4) compliance with the terms of the Company's
preferred stock.
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial data of
the Company for each of the years in the five-year period ended December 31,
1998 (dollar amounts in thousands, except per share amounts). The financial data
has been taken from the consolidated financial statements of the Company, which
have been audited by Ernst & Young LLP, independent certified public
accountants. The information set forth below is not necessarily indicative of
the results of future operations; it should be read in conjunction with, and is
qualified by, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Part II, Item 7, and the consolidated financial
statements in Part II, Item 8.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
SUMMARY OF OPERATIONS:
<S> <C> <C> <C> <C> <C>
Net sales $ 126,717 $ 118,631 $ 114,872 $ 104,298 $ 88,532
========== ========== ========== ========== ==========
Income from operations $ 7,198 $ 7,784 $ 8,565 $ 9,657 $ 8,102
Interest expense 9,772 9,065 8,542 7,585 6,272
Other income, net - 425 - 641 536
Provision for income taxes 132 672 40 425 34
---------- ---------- ---------- ---------- ----------
Net income/(loss) $ (2,706) $ (1,528) $ (17) $ 2,288 $ 2,332
========== ========== ========== ========== ==========
Net income/(loss) per diluted common
share $ (0.65) $ (0.38) $ (0.02) $ 0.49 $ 0.51
========== ========== ========== ========== ==========
OTHER DATA:
Average number of employees 1,258 1,220 1,166 1,147 968
Depreciation and amortization $ 11,649 $ 10,009 $ 8,696 $ 6,449 $ 5,060
Capital expenditures $ 14,877 $ 15,790 $ 15,708 $ 17,902 $ 15,319
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
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1998 1997 1996 1995 1994
---- ---- ---- ---- ----
FINANCIAL POSITION:
<S> <C> <C> <C> <C> <C>
Current assets $ 32,198 $ 31,828 $ 30,845 $ 24,478 $ 22,752
Current liabilities 40,228 36,003 35,167 29,253 24,330
---------- ---------- ---------- ---------- ----------
Net working capital deficit $ (8,030) $ (4,175) $ (4,322) $ (4,775) $ (1,578)
========== ========== ========== ========== ==========
Total assets $ 108,325 $ 104,124 $ 97,030 $ 81,876 $ 67,396
Long-term debt, excluding current
portion $ 74,953 $ 72,622 $ 65,148 $ 56,033 $ 49,627
Redeemable preferred stock, at
par value $ 375 $ 420 $ 465 $ 510 $ 555
Total stockholders' deficit $ (9,451) $ (6,667) $ (5,057) $ (4,976) $ (7,215)
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Various statements in this Item 7 that are not historical facts are
"forward-looking statements" (as such term is defined in the Private Securities
Litigation Reform Act of 1995). Forward-looking statements usually can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "anticipates," "estimates," "projects," or
the negative thereof. They may include discussions of strategy, which involve
risks and uncertainties, and they typically are based upon projections and
estimates, as distinct from past or historical facts and events.
Forward-looking statements are subject to a number of risks,
uncertainties, contingencies, and other factors that could cause the actual
results or performance of the Company to be materially different from the future
results or performance expressed in or implied by such statements. Such risks
and uncertainties for the Company include (1) increases and decreases in
business awarded to the Company by its various customers, (2) unanticipated
price reductions for the Company's products as a result of competition, (3)
unanticipated operating results and cash flows, (4) increases or decreases in
capital expenditures, (5) unforeseen product liability claims, (6) changes in
economic conditions, (7) changes in the competitive environment, (8) changes in
the capital markets, (9) labor interruptions at the Company or at its customers,
(10) disruptions that may be caused by year 2000 software and/or hardware
problems, (11) the inability of the Company to obtain additional borrowings
and/or to refinance its existing indebtedness, and (12) a number of other
factors.
Because the Company operates with substantial financial leverage and
limited liquidity, the impact of any negative event may have a greater adverse
effect upon the Company than if the Company operated with lower financial
leverage and greater liquidity.
The results of operations for any particular fiscal period of the
Company are not necessarily indicative of the results to be expected for any one
or more succeeding fiscal periods. Consequently, the use of forward-looking
statements should not be regarded as a representation that any such projections
or estimates will be realized, and actual results may vary materially. There can
be no assurance that any of the forward-looking statements contained herein will
prove to be accurate.
All forward-looking statements, projections, or estimates attributable
to the Company are expressly qualified by the foregoing cautionary statements.
RESULTS OF OPERATIONS -- COMPARISON OF 1998, 1997, AND 1996
The Company manufactures, to customer specifications, component parts
through two operating segments, the Rubber Group and the Metals Group. The
Rubber Group consists of four divisions, Lexington Connector Seals, Lexington
Insulators, Lexington Medical, and Lexington Technologies. The Metals Group
consists of three divisions, Lexington Die Casting and the Arizona and New York
Divisions of Lexington Machining.
RUBBER GROUP
The Rubber Group manufactures silicone and organic rubber components.
During 1998, 1997, and 1996, automotive industry customers of the Rubber Group
represented 90.8%, 89.8%, and 87.1%,
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respectively, of the Rubber Group's net sales. Any material reduction in the
level of activity in the automotive industry may have a material adverse effect
on the results of operations of the Rubber Group and the Company.
The three largest customers of the Rubber Group accounted for 50.1%,
53.0%, and 53.4% of the Rubber Group's net sales during 1998, 1997, and 1996,
respectively. Loss of a significant amount of business from any of the Rubber
Group's large customers could have a material adverse effect upon the Rubber
Group and the Company as a whole if such business were not substantially
replaced by additional business from existing or new customers.
The following table sets forth the operating results of the Rubber
Group for 1998, 1997, and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------------------
1998 1997 1996
------------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 92,610 100.0% $ 81,210 100.0% $ 75,122 100.0%
Cost of sales 73,209 79.0 64,696 79.7 59,515 79.2
--------- ----- -------- ----- -------- -----
Gross profit 19,401 21.0 16,514 20.3 15,607 20.8
Selling and administrative expenses 6,100 6.6 5,055 6.2 4,785 6.4
--------- ----- -------- ----- -------- -----
Income from operations $ 13,301 14.4% $ 11,459 14.1% $ 10,822 14.4%
========= ===== ======== ===== ======== =====
</TABLE>
During 1998, net sales of the Rubber Group increased by $11,400,000, or
14.0%, compared to 1997. This increase was primarily due to increased unit sales
of insulators for automotive ignition wire sets and, to a lesser extent,
increased unit sales of seals for automotive wiring systems and components for
medical devices, offset, in part, by price reductions on certain automotive
components.
During 1998, income from operations totaled $13,301,000, an increase of
$1,842,000, or 16.1%, compared to 1997. Cost of sales as a percentage of net
sales decreased during 1998, primarily due to a credit of $622,000 resulting
from a special rebate from the State of Ohio Bureau of Workers' Compensation,
which represented the Company's share of a distribution of excess funds
accumulated by the Bureau.
Selling and administrative expenses as a percentage of net sales
increased during 1998 compared to 1997, primarily because of the hiring of
additional personnel, the opening, in September 1997, of a sales office in
Germany, and increased costs associated with the installation of new computer
systems.
During 1998, depreciation and amortization at the Rubber Group totaled
$7,476,000, or 8.1% of net sales, compared to $6,676,000, or 8.2% of net sales,
during 1997. Earnings before interest, taxes, depreciation, and amortization
("EBITDA") increased to $20,777,000 in 1998 from $18,135,000 in 1997. (EBITDA is
not a measure of performance under generally accepted accounting principles.
While EBITDA should not be used as a substitute for net income, cash flows from
operating activities, or other operating or cash flow statement data prepared in
accordance with generally accepted accounting principles, management believes
that it may be used by certain investors as supplemental information to evaluate
a company's financial performance, including its ability to incur and/or service
debt. In addition, the definition of EBITDA used in this Form 10-K may not be
the same as the definition of EBITDA used by other companies.)
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The Company's largest customer, Delphi Packard, is a division of Delphi
Automotive Systems Corporation, which, until recently, was a wholly-owned
subsidiary of General Motors Corporation. In February 1999, General Motors sold
to the public approximately 20% of the ownership of Delphi Automotive as a first
step in the planned sale or spinoff of Delphi Automotive. Although there can be
no assurance, the Company does not believe that the sale or spinoff of Delphi
Automotive will have a material effect on the Company.
During 1997, net sales of the Rubber Group increased by $6,088,000, or
8.1%, compared to 1996. This increase was primarily due to increased unit sales
of seals for automotive wiring systems and insulators for automotive ignition
wire sets and, to a lesser extent, increased sales of tooling, offset, in part,
by reduced sales of components for medical devices and price reductions on
certain automotive components.
During 1997, income from operations totaled $11,459,000, an increase of
$637,000, or 5.9%, compared to 1996. Cost of sales as a percentage of net sales
increased during 1997, primarily due to (1) increased depreciation and
amortization, and (2) increased indirect labor expense resulting primarily from
(a) the hiring of technical and supervisory personnel in connection with the
engineering and start-up of production of a new style of connector seal and (b)
continuing start-up expenses incurred at Lexington Technologies, the Rubber
Group's mold manufacturing and engineering operation.
Selling and administrative expenses as a percentage of net sales
decreased during 1997 compared to 1996, primarily because such expenses are
partially fixed in nature.
During 1997, depreciation and amortization at the Rubber Group totaled
$6,676,000, or 8.2% of net sales, compared to $5,596,000, or 7.5% of net sales,
during 1996. EBITDA increased to $18,135,000 in 1997 from $16,418,000 in 1996.
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing costs
and that a portion of such price reductions will be offset by greater absorption
of manufacturing overhead as a result of volume increases.
METALS GROUP
The Metals Group manufactures aluminum, magnesium, and zinc die
castings and machines aluminum, brass, and steel components. During 1998, 1997,
and 1996, net sales to automotive industry customers represented 55.6%, 42.8%,
and 36.3%, respectively, of the Metals Group's net sales. The three largest
customers of the Metals Group accounted for 35.3%, 23.5%, and 20.4% of the
Metals Group's net sales during 1998, 1997, and 1996, respectively. Loss of a
significant amount of business from any of the Metals Group's large customers
could have a material adverse effect upon the Metals Group and the
-11-
<PAGE> 14
Company as a whole if such business were not substantially replaced by
additional business from existing or new customers.
The following table sets forth the operating results of the Metals
Group for 1998, 1997, and 1996 (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------------------------------
1998 1997 1996
----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 34,107 100.0% $ 37,421 100.0% $ 39,750 100.0%
Cost of sales 35,304 103.5 34,726 92.8 35,536 89.4
-------- ----- --------- ----- --------- -----
Gross profit/(loss) (1,197) (3.5) 2,695 7.2 4,214 10.6
Selling and administrative expenses 2,877 8.4 4,275 11.4 4,433 11.2
-------- ----- --------- ----- --------- -----
Loss from operations $ (4,074) (11.9)% $ (1,580) (4.2)% $ (219) (0.6)%
======== ===== ========= ===== ========= =====
</TABLE>
During 1998, net sales of the Metals Group decreased by $3,314,000, or
8.9%, compared to 1997. This reduction resulted primarily from lower net sales
of a variety of components at Lexington Die Casting and the New York Division of
Lexington Machining caused by the Company's planned elimination of certain
customers who generated short-run production and by a decline in sales of
components to remaining customers of the Metals Group. These reductions were
offset, in part, by increased sales at the Arizona Division of Lexington
Machining.
During 1998, the Metals Group incurred a loss from operations of
$4,074,000, compared to a loss from operations of $1,580,000 during 1997. Cost
of sales as a percentage of net sales increased during 1998, primarily due to
underabsorption of fixed overhead caused by low sales levels. Despite lower
sales, manufacturing overhead expenses increased by $1,400,000 during 1998
compared to 1997, primarily because of (1) increased depreciation and
amortization, (2) increased indirect labor costs resulting from the hiring of
additional technical and supervisory personnel, and (3) a charge of $368,000 to
write down to net realizable value certain equipment held for sale. To a lesser
extent, material and direct labor costs as a percentage of net sales also
increased during 1998 compared to 1997, primarily because of changes in product
mix, lower production efficiencies resulting from the start-up of new products,
and costs related to the retention of experienced equipment operators during a
period of low sales.
Selling and administrative expenses decreased during 1998, primarily
because of reduced personnel costs, the elimination of commissions previously
paid to sales representatives who were terminated during the last quarter of
1996 and the first quarter of 1997, and the settlement of certain litigation for
less than had been previously estimated by the Company.
During 1998, depreciation and amortization at the Metals Group totaled
$3,957,000, or 11.6% of net sales, compared to $3,141,000, or 8.4% of net sales,
during 1997. EBITDA decreased to negative $117,000 in 1998 from $1,561,000 in
1997.
During 1997, net sales of the Metals Group decreased by $2,329,000, or
5.9%, compared to 1996. This reduction resulted primarily from lower net sales
of a variety of components at Lexington Die Casting and the New York Division of
Lexington Machining, caused primarily by the Company's planned elimination of
certain customers who generated short-run production and a $1,400,000 reduction
in sales to a customer who decided to manufacture internally most of the
components previously
-12-
<PAGE> 15
manufactured for it by the New York Division of Lexington Machining. These
reductions were offset, in part, by an increase in net sales of airbag
components by the Arizona Division of Lexington Machining.
During 1997, the Metals Group incurred a loss from operations of
$1,580,000, compared to a loss from operations of $219,000 during 1996. While
material and direct labor costs as a percentage of net sales decreased during
1997, manufacturing overhead as a percentage of net sales increased, primarily
due to (1) underabsorption of fixed overhead caused by reduced sales at
Lexington Die Casting and the New York Division of Lexington Machining and
lower-than-anticipated net sales at the Arizona Division of Lexington Machining,
(2) start-up expenses related to the production of new airbag components and the
installation of new metal machining equipment at the Arizona Division of
Lexington Machining, (3) increased depreciation, (4) increased indirect labor
costs resulting, in part, from the hiring of additional technical and
professional staff, and (5) the write-down of certain equipment held for sale.
Reduced selling and administrative expenses resulted primarily from a reduction
in commissions paid to sales representatives who were terminated during the last
quarter of 1996 and the first quarter of 1997, offset, in part, by increased
personnel expense and the accrual of certain litigation expenses.
During 1997, depreciation and amortization at the Metals Group totaled
$3,141,000, or 8.4% of net sales, compared to $2,638,000, or 6.6% of net sales,
during 1996. EBITDA decreased to $1,561,000 in 1997 from $2,419,000 in 1996.
During 1997 and 1998, the Company implemented a strategy to improve the
profitability and growth potential of the Metals Group by eliminating the
production of a large number of diverse, short-run components and by
repositioning productive capacity to manufacture higher-volume components in
target markets. The repositioning entails a shift to a new customer base and
requires that the Company's manufacturing facilities be structured and equipped
to run high-volume parts efficiently and accurately. The repositioning of the
Metals Group has caused the Company to experience underabsorption of fixed
overhead resulting from the cut-back in short-run business. The Metals Group has
incurred expenses for the implementation of improved quality systems, expenses
related to moving and reinstalling equipment, non-capitalized costs related to
building upgrades, costs related to establishing relationships with major new
customers, and costs resulting from inefficiencies experienced during the
rollout of new production parts. These factors and the fact that new high-volume
business is limited at this stage of the transition adversely affected the
operating profit and cash flow of the Metals Group during 1997 and 1998.
CORPORATE OFFICE
Corporate office expenses, which are consolidated with selling and
administrative expenses of the Rubber Group and the Metals Group in the
Company's consolidated financial statements, totaled $2,029,000, $2,095,000, and
$2,038,000 during 1998, 1997, and 1996, respectively.
During 1998, 1997, and 1996, depreciation at the corporate office
totaled $18,000, $21,000, and $33,000, respectively.
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<PAGE> 16
INTEREST EXPENSE
During 1998, 1997, and 1996, interest expense totaled $9,772,000,
$9,065,000, and $8,542,000, respectively. The increases in 1998 and 1997 were
caused primarily by increases in average borrowings outstanding in both years.
OTHER INCOME
In December 1997, the Company received a payment in the amount of
$425,000 in settlement of litigation.
PROVISION FOR INCOME TAXES
During 1998, the provision for income taxes consisted primarily of
state income taxes.
During 1997, the provision for income taxes consisted primarily of (1)
federal alternative minimum taxes and (2) the reversal of a tax credit that had
been recorded in 1996 based on the then-projected utilization of federal net
operating loss carryforwards in 1997.
During 1996, the provision for income taxes consisted of (1) federal
alternative minimum taxes, (2) state income taxes, (3) the reversal of a tax
credit that had been recorded in 1995 based on the then-projected utilization of
federal net operating loss carryforwards in 1996, and (4) a tax credit that had
been based on the then-projected utilization of federal net operating loss
carryforwards in 1997.
(For additional information concerning income taxes and related
matters, see Note 9 to the consolidated financial statements in Part II, Item
8.)
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
During 1998, the operating activities of the Company provided
$8,013,000 of cash.
Inventory increased by $1,139,000, primarily because the Company is
attempting to increase service levels for certain key customers. Trade accounts
payable decreased by $1,337,000, primarily because payables related to the
purchase of plant, equipment, and customer-owned tooling decreased by $1,568,000
during 1998, from $3,456,000 at December 31, 1997, to $1,888,000 at December 31,
1998.
INVESTING ACTIVITIES
During 1998, the investing activities of the Company used $15,034,000
of cash. During 1998, capital expenditures were $14,877,000 and expenditures
used to pay a portion of the cost of customer-owned tooling were $1,901,000.
-14-
<PAGE> 17
The following table sets forth capital expenditures for the Rubber
Group, the Metals Group, and the corporate office during 1998, 1997, and 1996
(dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1998 1997 1996 TOTAL
---- ---- ---- -----
<S> <C> <C> <C> <C>
Rubber Group:
Equipment $ 8,277 $ 6,632 $ 5,869 $ 20,778
Land and buildings 105 203 2,959 3,267
--------- -------- --------- ---------
8,382 6,835 8,828 24,045
--------- -------- --------- ---------
Metals Group:
Equipment 6,184 5,542 6,012 17,738
Land and buildings 238 3,393 840 4,471
--------- -------- --------- ---------
6,422 8,935 6,852 22,209
--------- -------- --------- ---------
Corporate office:
Equipment 73 20 28 121
Land and buildings - - - -
--------- -------- --------- ---------
73 20 28 121
--------- -------- --------- ---------
Total Company:
Equipment 14,534 12,194 11,909 38,637
Land and buildings 343 3,596 3,799 7,738
--------- -------- --------- ---------
$ 14,877 $ 15,790 $ 15,708 $ 46,375
========= ======== ========= =========
</TABLE>
The Company presently projects that capital expenditures will total
approximately $13,500,000 in 1999, including $13,100,000 for equipment and
$400,000 for land and buildings. Capital expenditures for the Rubber Group, the
Metals Group, and the corporate office are projected to total $9,000,000,
$4,400,000, and $100,000, respectively. The Company projects that approximately
$3,100,000 will be expended to rebuild or replace existing equipment and
buildings, approximately $3,700,000 will be expended to effect cost reductions,
and approximately $6,700,000 will be expended to expand productive capacity.
At December 31, 1998, the Company had commitments outstanding for
capital expenditures totaling approximately $2,462,000. Although no assurance
can be given, the Company anticipates that, the funds needed for capital
expenditures in 1999 will be provided by cash flows from operations, borrowings
available to the Company under existing financing agreements, and additional
borrowings that the Company believes it will be able to obtain. (See also
"Liquidity" in this Item 7.)
FINANCING ACTIVITIES
During 1998, the financing activities of the Company provided
$6,916,000 of cash.
During 1998, the Company obtained new term loans in the aggregate
amount of $5,041,000, which refinanced loans outstanding under the Company's
revolving line of credit. In addition, at December 31, 1998, $3,850,000 of loans
outstanding under the revolving line of credit were classified as long-term
borrowings because they were refinanced under long-term agreements before the
consolidated financial statements for the period were issued.
-15-
<PAGE> 18
Borrowings under the Company's revolving line of credit that were
classified as short-term debt increased by $4,155,000 during 1998, in part,
because the Company utilized the revolving line of credit to fund certain
capital expenditures that had not been refinanced by borrowings under the
Company's equipment line of credit or through other financing.
LIQUIDITY
The Company finances its operations with cash from operating activities
and a variety of financing arrangements, including term loans and loans under
the Company's revolving line of credit. The ability of the Company to borrow
under its revolving line of credit is subject to, among other things, covenant
compliance and certain availability formulas based on the levels of accounts
receivable and inventories of the Company. In January 1999, the revolving line
of credit was amended to extend the expiration date of the revolving line of
credit to April 1, 2002.
The Company operates with substantial financial leverage and limited
liquidity. As a result of increased borrowings during 1998, aggregate
indebtedness of the Company, excluding trade accounts payable, increased by
$7,043,000 to $94,545,000. During 1999, interest and scheduled principal
payments are projected to be approximately $9,400,000 and $7,500,000,
respectively.
The Company had a net working capital deficit of $8,030,000 at December
31, 1998. Loans of $12,995,000 outstanding under the revolving line of credit
were classified as short-term debt at December 31, 1998. Although the expiration
date of the revolving line of credit is April 1, 2002, these loans are
classified as current liabilities because the Company's cash receipts are
automatically used to reduce such loans on a daily basis, by means of a lock-box
sweep arrangement, and the lender has the ability to modify certain terms of the
revolving line of credit without the prior approval of the Company.
At March 26, 1999, availability under the Company's revolving line of
credit totaled $1,701,000 before outstanding checks of $705,000 were deducted.
During the first quarter of 1999, the Company obtained new term loans
in the aggregate amount of $6,542,000. Proceeds from the new term loans
refinanced $2,090,000 of existing term loans and $4,452,000 of loans outstanding
under the revolving line of credit (including $3,850,000 of such loans which
were outstanding at December 31, 1998).
In January 1999, one of the Company's lenders provided the Company with
an equipment line of credit in the amount of $5,000,000 that can be used to
finance a portion of the cost of certain equipment. During the first quarter of
1999, the Company had not borrowed under the line of credit. In March 1999,
another of the Company's lenders provided the Company with an equipment line of
credit in the amount of $1,822,000. During the first quarter of 1999, the
Company borrowed $1,222,000 under the line of credit.
Substantially all of the assets of the Company and its subsidiary
Lexington Components, Inc. ("LCI"), and the stock of LCI, are pledged as
collateral for certain of the Company's indebtedness. In addition, certain of
the Company's financing arrangements contain covenants with respect to the
maintenance of minimum levels of working capital, net worth, and cash flow
coverage. The covenants also place certain restrictions on the Company's
business and operations, including covenants relating to the incurrence or
assumption of additional debt, the level of past-due trade accounts payable, the
sale of all or substantially all of the Company's assets, the purchase of plant
and equipment, the purchase of
-16-
<PAGE> 19
common stock, the redemption of preferred stock, and the payment of cash
dividends. In addition, substantially all of the Company's financing agreements
include cross-default provisions.
From time to time, certain of the financial covenants contained in the
Company's various loan agreements have been amended in order to maintain or
otherwise ensure current or future compliance by the Company. During the first
quarter of 1998, a covenant that limited the Company's ratio of debt to tangible
net worth was amended. During the third quarter of 1998, certain net worth
covenants and the covenant that limited the Company's ratio of debt to tangible
net worth were amended. During the first quarter of 1999, a net worth covenant
was amended and the covenant that limited the Company's ratio of debt to
tangible net worth was eliminated.
Because certain of the Company's long-term indebtedness matures during
the first half of 2000, those amounts will be classified as short-term
liabilities of the Company during the first and second quarters of 1999. During
July 1998, certain covenants were amended in order to avoid any defaults that
would have been caused by such reclassification.
The Company estimates that, in addition to cash flow from operations
and borrowings under its revolving line of credit, the Company will require
approximately $10,000,000 of new borrowings during 1999 to meet its working
capital and debt service requirements and to fund projected capital
expenditures. Of the aggregate new borrowings required in 1999, the Company had
obtained new borrowings of $4,500,000 during the first quarter of 1999. The
Company currently believes, although there can be no assurance, that the
remaining new borrowings required will be available to the Company under its
equipment lines of credit or under other financing arrangements that the Company
may negotiate. Although no assurance can be given, the Company currently
believes that cash flows from operations, borrowings available to the Company
under existing financing arrangements, and additional borrowings that the
Company believes it will be able to obtain should be adequate to meet its
projected working capital and debt service requirements and to fund projected
capital expenditures through December 31, 1999. If cash flows from operations or
availability under existing and new financing agreements fall below
expectations, the Company may be forced to delay anticipated capital
expenditures, reduce operating expenses, extend trade accounts payable balances
beyond terms that the Company believes are customary in the industries in which
it operates, and/or consider other alternatives designed to improve the
Company's liquidity. Certain of such actions could have a material adverse
effect upon the Company.
As previously discussed, indebtedness totaling $38,129,000, matures
during the first and second quarters of 2000. The Company's operations will not
generate cash sufficient to satisfy such obligations at their maturities. The
Company may attempt to refinance all or a portion of these obligations (and
possibly other indebtedness that has later maturity dates) by issuing new debt
securities in the private or public market. The Company has commenced
discussions with underwriters relating to the issuance of new debt securities to
refinance substantially all of the Company's existing debt. Although there can
be no assurance, based on the discussions to date, current market conditions in
the high-yield debt markets, and the Company's historical and projected
operating results, cash flows, and capital structure, the Company believes that
it will be able to issue new debt securities with terms and interest rates
reasonably satisfactory to the Company and in sufficient amounts to refinance
substantially all of its outstanding debt securities prior to their maturity
dates. In the alternative, the Company may attempt to reach agreements to amend
the terms of its debt securities by extending the maturity dates thereof or to
exchange new debt securities that have maturity dates later than 2000 for
existing debt obligations that mature in 2000. The Company's ability to
refinance, amend, or exchange these securities on or before their maturity dates
will depend on many factors, including, but not limited to, conditions in the
high
-17-
<PAGE> 20
yield debt market. Accordingly, there can be no assurance that the Company will
be successful in refinancing, amending, or exchanging such securities. To date
the Company has not attempted to refinance, amend, or exchange the obligations
maturing in 2000. In the event that the Company is not successful in
refinancing, amending, or exchanging such obligations, defaults may occur under
the agreements relating to such obligations. If a default occurs, it may trigger
other defaults pursuant to cross-default provisions under other indebtedness of
the Company. Holders of indebtedness on which defaults exist would be entitled
to accelerate the maturity thereof, to cease making any further advances
otherwise permitted under the related credit facilities, to seek to foreclose
upon any assets securing such indebtedness, and to pursue other remedies. If any
such actions were to be taken, the Company might be required to consider
alternatives, including seeking relief from its creditors. Any such action by
creditors could have a material adverse effect upon the Company.
ACQUISITIONS
The Company is seeking to acquire assets and businesses related to its
current operations in order to expand its existing operations. Depending on the
size, terms, and other aspects of such acquisitions, the Company may be required
to obtain additional financing and, in some cases, the consents of its existing
lenders. The Company's ability to effect acquisitions may be dependent upon its
ability to obtain such financing and, to the extent applicable, consents.
INFLATION
Many customers of the Company will not accept price increases from the
Company to compensate for increases in labor and overhead expenses that result
from inflation. Fluctuations in material costs generally are passed through to
customers. In cases in which the Company commits to a fixed material cost for a
specified time period, the Company generally obtains a similar offsetting
commitment from its material supplier. To offset inflationary costs that the
Company cannot pass through to its customers and to maintain or improve its
operating margins, the Company attempts to improve its production efficiencies
and manufacturing processes.
ENVIRONMENTAL MATTERS
The Company has been named from time to time as one of numerous
potentially responsible parties or third-party defendants under applicable
environmental laws for restoration costs at waste-disposal sites, and as a
defendant or potential defendant in various other environmental law matters. It
is the Company's policy to record accruals for such matters when a loss is
deemed probable and the amount of such loss can be reasonably estimated. The
various actions to which the Company is or may be a party in the future are at
various stages of completion; although there can be no assurance as to the
outcome of existing or potential environmental litigation, in the event such
litigation were commenced, based upon the information currently available to the
Company, the Company believes that the outcome of such actions will not have a
material adverse effect upon its financial position. (For information concerning
certain other commitments and contingencies of the Company, see Note 13 to the
consolidated financial statements in Part II, Item 8.)
RECENTLY ISSUED ACCOUNTING STANDARDS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130, REPORTING
COMPREHENSIVE INCOME
During 1998, the Company adopted "Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income" ("FAS 130"). FAS 130
establishes standards for the reporting and
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<PAGE> 21
presentation of comprehensive income and its components (revenues, gains, and
losses) in a full set of general-purpose financial statements. The adoption of
FAS 130 by the Company during 1998 did not affect the results of operations or
financial position of the Company.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products, geographic areas,
and major customers. FAS 131 superseded "Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise."
FAS 131 requires financial information to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The adoption of FAS 131 by the Company during 1998 did
not affect the results of operations or financial position of the Company.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 132, EMPLOYERS'
DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("FAS 132"). FAS 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"), which is effective for all
fiscal periods beginning after June 15, 1999. The statement provides standards
for the recognition and measurement of derivative and hedging activities. The
Company believes that the adoption of FAS 133 during the first quarter of 2000
will not affect the results of operations or financial position of the Company.
YEAR 2000
Software and/or hardware failures due to processing errors potentially
arising from calculations using the year 2000 date are a known risk. The Company
recognizes the risk and, in order to ensure that its operations will not be
adversely affected by year 2000 software or hardware problems, the Company has a
year 2000 compliance plan that includes (1) a company-wide inventory of all
information technology (software and hardware) (collectively, "IT systems") and
all non-IT systems, which include embedded technology such as microprocessors
commonly found in modern manufacturing equipment, (2) an evaluation of the
readiness of major trading partners, including suppliers of materials and
services and customers, (3) documenting the year 2000 compliance of the
Company's IT and non-IT systems through appropriate testing, (4) replacement of
non-compliant systems as necessary, (5) testing replaced systems for year 2000
compliance as necessary, and (6) developing contingency plans as appropriate.
The Company's year 2000 compliance plan calls for all formal documentation and
testing of IT and non-IT systems to be completed by June 30, 1999.
-19-
<PAGE> 22
Although the Company does not have a system in place for tracking costs
related to its year 2000 compliance plan, the Company believes that costs
incurred to date by the Company to assess, modify, or replace non-compliant
systems have been approximately $50,000. Furthermore, the Company anticipates,
based on the information currently available, that future costs to modify or
replace non-compliant systems will be approximately $600,000. Such costs are
being accounted for as part of normal, ongoing operations. The Company has not
developed a specific contingency plan to address the most reasonably likely
worst case scenario for year 2000, but it may develop one after it has assessed
the year 2000 readiness of its major trading partners since the Company believes
that any such scenario would most likely result from the lack of year 2000
readiness of one or more of those major trading partners.
Based upon the Company's review of its IT and non-IT systems to date,
the Company believes that there are no material internal issues regarding its
year 2000 compliance that will not be resolved through normal equipment and
software upgrades that will be made through 1999.
The status of the Company's year 2000 readiness effort is set forth in
the table below:
YEAR 2000 DISCLOSURE CHART
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
RESOLUTION
PHASES ASSESSMENT REMEDIATION TESTING IMPLEMENTATION
----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
E Information 100% complete 70% complete Expected completion Expected completion
X technology second quarter 1999 second quarter 1999
P ----------------------------------------------------------------------------------------------------------------
O Operating 100% complete 85% complete Expected completion Expected completion
S equipment with second quarter 1999 second quarter 1999
U embedded chips
R or software
E ----------------------------------------------------------------------------------------------------------------
Products 100% complete 100% complete 100% complete Completed first
T quarter 1999
Y ----------------------------------------------------------------------------------------------------------------
P Third party 75% complete Developing Expected completion Expected completion
E contingency plans third quarter 1999 third quarter 1999
as appropriate
----------------------------------------------------------------------------------------------------------------
</TABLE>
While the Company believes its planning efforts are adequate to address
its internal year 2000 concerns, there can be no assurance that the systems of
the Company's major trading partners, on which the Company's systems and
operations rely, will be year 2000 compliant. If a significant number of the
Company's major trading partners experience failures in their computer systems
or operations due to year 2000 non-compliance, such events could have a material
adverse affect on the business and revenues of the Company. Furthermore, if, for
any reason, the Company or its major trading partners fail to complete
appropriate remediation programs or fail to complete remediation programs on a
timely basis, such failure could have a material adverse effect on the business
and revenues of the Company.
-20-
<PAGE> 23
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information about market risk, refer to "Management's Discussion
and Analysis of Financial Condition and Results of Operations - Liquidity" in
Part II, Item 7 and Note 5 to the consolidated financial statements in Part II,
Item 8.
-21-
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors.........................................................23
Consolidated Balance Sheet at December 31, 1998 and 1997...............................24
Consolidated Statement of Operations for the Years Ended
December 31, 1998, 1997, and 1996....................................................26
Consolidated Statement of Stockholders' Deficit for
the Years Ended December 31, 1998, 1997, and 1996....................................27
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1998, 1997, and 1996....................................................28
Notes to Consolidated Financial Statements.............................................29
</TABLE>
-22-
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Lexington Precision Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of
Lexington Precision Corporation and subsidiaries at December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for each of the three years in the period ended December 31,
1998. Our audits also included the financial statement schedule contained in
Part IV, Item 14, of the Company's report on Form 10-K. These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and 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 referred to above
present fairly, in all material respects, the consolidated financial position of
Lexington Precision Corporation and subsidiaries at December 31, 1998 and 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
The accompanying consolidated financial statements have been prepared
assuming that Lexington Precision Corporation will continue as a going concern.
As more fully described in Note 1, the Company has approximately $38 million of
long-term debt that becomes current in the first and second quarters of 1999.
Substantial doubt exists about the Company's ability to refinance, amend, or
exchange such obligations on or prior to their maturity dates. As a result,
there is substantial doubt about the Company's ability to continue as a going
concern. The consolidated financial statements do not include any adjustments to
the amounts or classifications of assets or liabilities to reflect this
uncertainty.
ERNST & YOUNG LLP
Cleveland, Ohio
March 30, 1999
-23-
<PAGE> 26
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1998 1997
---- ----
ASSETS:
<S> <C> <C>
Current assets:
Cash $ 103 $ 208
Accounts receivable 17,837 17,579
Inventories 10,170 9,031
Prepaid expenses and other assets 2,063 3,438
Deferred income taxes 2,025 1,572
---------- ----------
Total current assets 32,198 31,828
---------- ----------
Plant and equipment:
Land 1,549 1,533
Buildings 23,753 23,426
Equipment 90,306 78,922
---------- ----------
115,608 103,881
Accumulated depreciation 52,871 44,451
---------- ----------
Plant and equipment, net 62,737 59,430
---------- ----------
Excess of cost over net assets of businesses acquired, net 8,778 9,094
---------- ----------
Other assets, net 4,612 3,772
---------- ----------
$ 108,325 $ 104,124
========== ==========
</TABLE>
See notes to consolidated financial statements. (continued on next page)
-24-
<PAGE> 27
LEXINGTON PRECISION CORPORATION
CONSOLIDATED BALANCE SHEET (CONTINUED)
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------
1998 1997
---- ----
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Current liabilities:
Trade accounts payable $ 11,291 $ 12,628
Accrued expenses 9,345 8,495
Short-term debt 12,995 8,840
Current portion of long-term debt 6,597 6,040
---------- ----------
Total current liabilities 40,228 36,003
---------- ----------
Long-term debt, excluding current portion 74,953 72,622
---------- ----------
Deferred income taxes and other long-term liabilities 2,220 1,746
---------- ----------
Redeemable preferred stock, $100 par value, at
redemption value 750 840
Excess of redemption value over par value (375) (420)
---------- ----------
Redeemable preferred stock at par value 375 420
---------- ----------
Stockholders' deficit:
Common stock, $.25 par value, 10,000,000 shares
authorized, 4,348,951 shares issued 1,087 1,087
Additional paid-in-capital 12,235 12,313
Accumulated deficit (22,556) (19,850)
Cost of common stock in treasury, 85,915 shares (217) (217)
---------- ----------
Total stockholders' deficit (9,451) (6,667)
---------- ----------
$ 108,325 $ 104,124
========== ==========
</TABLE>
See notes to consolidated financial statements.
-25-
<PAGE> 28
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net sales $ 126,717 $ 118,631 $ 114,872
Cost of sales 108,513 99,422 95,051
---------- ---------- ----------
Gross profit 18,204 19,209 19,821
Selling and administrative expenses 11,006 11,425 11,256
---------- ---------- ----------
Income from operations 7,198 7,784 8,565
Interest expense 9,772 9,065 8,542
Other income - 425 -
---------- ---------- ----------
Income/(loss) before income taxes (2,574) (856) 23
Provision for income taxes 132 672 40
---------- ---------- ----------
Net loss (2,706) (1,528) (17)
Preferred stock dividends 33 37 41
Excess of redemption value over par value of preferred
stock redeemed during year 45 45 45
---------- ---------- ----------
Net loss attributable to common
stockholders $ (2,784) $ (1,610) $ (103)
========== ========== ==========
Net loss per common share:
Basic $ (0.65) $ (0.38) $ (0.02)
========== ========== ==========
Diluted $ (0.65) $ (0.38) $ (0.02)
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE> 29
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
Additional Total
Common Paid-in- Accumulated Treasury Stockholders'
Stock Capital Deficit Stock Deficit
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 1,087 $ 12,547 $ (18,305) $ (305) $ (4,976)
========== ========= ========== ========== ==========
Net loss - - (17) - (17)
Preferred stock dividends
and redemptions - (86) - - (86)
Issuance of common shares - (66) - 88 22
---------- --------- ---------- ---------- ----------
Balance at December 31, 1996 $ 1,087 $ 12,395 $ (18,322) $ (217) $ (5,057)
========== ========= ========== ========== ==========
Net loss - - (1,528) - (1,528)
Preferred stock dividends
and redemptions - (82) - - (82)
---------- --------- ---------- ---------- ----------
Balance at December 31, 1997 $ 1,087 $ 12,313 $ (19,850) $ (217) $ (6,667)
========== ========= ========== ========== ==========
Net loss - - (2,706) - (2,706)
Preferred stock dividends
and redemptions - (78) - - (78)
---------- --------- ---------- ---------- ----------
Balance at December 31, 1998 $ 1,087 $ 12,235 $ (22,556) $ (217) $ (9,451)
========== ========= ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
-27-
<PAGE> 30
LEXINGTON PRECISION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $ (2,706) $ (1,528) $ (17)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation 10,001 8,558 7,129
Amortization included in operating expense 1,450 1,280 1,138
Amortization included in interest expense 198 171 429
Deferred income taxes - 585 (320)
Changes in operating assets and liabilities that
provided/(used) cash:
Trade receivables (258) (759) (3,861)
Inventories (1,139) (132) (794)
Prepaid expenses and other assets 747 462 (971)
Trade accounts payable (1,337) (1,706) 3,706
Accrued expenses 850 213 1,710
Other 207 385 44
--------- ---------- ----------
Net cash provided by operating activities 8,013 7,529 8,193
--------- ---------- ----------
INVESTING ACTIVITIES:
Purchases of plant and equipment (14,877) (15,790) (15,708)
Decrease/(increase) in equipment deposits 261 (147) 37
Proceeds from sales of equipment 913 142 211
Expenditures for tooling owned by customers (1,901) (791) (949)
Other 570 (140) (851)
--------- ---------- ----------
Net cash used by investing activities (15,034) (16,726) (17,260)
--------- ---------- ----------
FINANCING ACTIVITIES:
Net increase/(decrease) in short-term debt 4,155 1,514 (196)
Proceeds from issuance of long-term debt 8,891 43,492 22,031
Repayment of long-term debt (6,003) (35,206) (12,257)
Other (127) (582) (442)
--------- ---------- ----------
Net cash provided by financing activities 6,916 9,218 9,136
--------- ---------- ----------
Net increase/(decrease) in cash (105) 21 69
Cash at beginning of year 208 187 118
--------- ---------- ----------
Cash at end of year $ 103 $ 208 $ 187
========= ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 9,567 $ 8,684 $ 8,167
Income taxes paid $ 136 $ 689 $ 381
</TABLE>
See notes to consolidated financial statements.
-28-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Lexington
Precision Corporation and its subsidiaries (collectively, the "Company"). All
significant intercompany accounts and transactions have been eliminated.
USE OF ESTIMATES
The preparation of the consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent liabilities at the date of the
consolidated financial statements, and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
CASH EQUIVALENTS
The Company considers all highly liquid investments with maturities at
the time of purchase of less than three months to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out
method) or market. Inventory levels by principal classification are set forth
below (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------
1998 1997
---- ----
<S> <C> <C>
Finished goods $ 4,272 $ 3,654
Work in process 2,834 1,658
Raw materials and purchased parts 3,064 3,719
--------- --------
$ 10,170 $ 9,031
========= ========
</TABLE>
PLANT AND EQUIPMENT
Plant and equipment are carried at cost less accumulated depreciation.
Depreciation is calculated principally on the straight-line method over the
estimated useful lives of the various assets (15 to 32 years for buildings and 3
to 8 years for equipment). When property is retired or otherwise disposed of,
the related cost and accumulated depreciation are eliminated. Maintenance and
repair expenses are charged against income as incurred, while major improvements
that increase the useful life of plant and equipment are capitalized.
Maintenance and repair expenses were $5,169,000, $3,766,000, and $3,612,000 for
1998, 1997, and 1996, respectively.
-29-
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
EXCESS OF COST OVER NET ASSETS OF BUSINESSES ACQUIRED
The excess of cost over net assets of businesses acquired (goodwill) is
amortized on the straight-line method, principally over 40 years. At December
31, 1998 and 1997, accumulated amortization of goodwill was $3,211,000 and
$2,895,000, respectively. During each of 1998, 1997, and 1996, amortization of
goodwill totaled $316,000. In accordance with "Financial Accounting Standard No.
121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to
Be Disposed of," the carrying value of goodwill and other long-lived assets is
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. Based upon such review, the
Company believes that no impairment of long-lived assets existed at December 31,
1998.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized over the lives of the related
debt instruments.
NET INCOME OR LOSS PER COMMON SHARE
During 1997, the Company adopted "Financial Accounting Standard No.
128, Earnings per Share" ("FAS 128"), which sets forth the procedures for
reporting basic and diluted income or loss per share. The recalculation of
income or loss per share data for 1996, using FAS 128 procedures, did not
require a restatement of the income or loss per share data for either of those
years.
Basic net income or loss per common share is computed using the
weighted-average number of common shares outstanding. Diluted net income or loss
per share is calculated after giving effect to all potential common shares that
were dilutive and outstanding, using the treasury stock method. Potential common
shares are securities (such as stock options, convertible debt securities, and
convertible preferred stock) that do not have a current right to participate in
earnings but could do so in the future by virtue of their option or conversion
rights. For purposes of the net income or loss per common share calculations,
net income or loss has been reduced by preferred stock dividends and the amount
by which payments made to redeem shares of preferred stock exceeded the par
value of such shares.
REVENUE RECOGNITION
Substantially all of the Company's revenues result from the sale of
rubber and metal component parts. The Company recognizes revenue from the sale
of component parts upon shipment and passage of title to customers according to
shipping schedules and terms of sale mutually agreed to by the Company and its
customers.
REPORTING COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued
"Statement of Financial Accounting Standards No. 130, Reporting Comprehensive
Income" ("FAS 130"), which is effective for fiscal periods beginning after
December 15, 1997. This statement established standards for reporting and
display of comprehensive income and its components (revenues, gains, and losses)
in a full set of general-purpose financial statements. The adoption of FAS 130
by the Company during the first quarter of 1998 did not have a material effect
on the results of operations or financial position of the Company.
-30-
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECLASSIFICATIONS
Certain amounts in the consolidated financial statements for 1996 have
been reclassified to conform to the 1998 presentation.
BASIS OF PRESENTATION
The Company's consolidated financial statements have been presented on
a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
Indebtedness totaling $38,129,000 matures during the first and second
quarters of 2000. The Company's operations will not generate cash sufficient to
satisfy such obligations at their maturities. The Company may attempt to
refinance all or a portion of these obligations (and possibly other indebtedness
that has later maturity dates) by issuing new debt securities in the private or
public market. The Company has commenced discussions with underwriters relating
to the issuance of new debt securities to refinance substantially all of the
Company's existing debt. Although there can be no assurance, based on the
discussions to date, current market conditions in the high-yield debt markets,
and the Company's historical and projected operating results, cash flows, and
capital structure, the Company believes that it will be able to issue new debt
securities with terms and interest rates reasonably satisfactory to the Company
and in sufficient amounts to refinance substantially all of its outstanding debt
securities prior to their maturity dates. In the alternative, the Company may
attempt to reach agreements to amend the terms of its debt securities by
extending the maturity dates thereof or to exchange new debt securities that
have maturity dates later than 2000 for existing debt securities that mature in
2000. The Company's ability to refinance, amend, or exchange these securities on
or before their maturity dates will depend on many factors, including, but not
limited to, conditions in the high yield debt market. Accordingly, there can be
no assurance that the Company will be successful in refinancing, amending, or
exchanging such securities. To date the Company has not attempted to refinance,
amend, or exchange the obligations maturing in 2000. In the event that the
Company is not successful in refinancing, amending, or exchanging such
obligations, defaults may occur under the agreements relating to such
obligations. If a default occurs, it may trigger other defaults pursuant to
cross-default provisions under other indebtedness of the Company. Holders of
indebtedness on which defaults exist would be entitled to accelerate the
maturity thereof, to cease making any further advances otherwise permitted under
the related credit facilities, to seek to foreclose upon any assets securing
such obligations, and to pursue other remedies. If any such actions were to be
taken, the Company might be required to consider alternatives, including seeking
relief from its creditors. Any such action by creditors could have a material
adverse effect upon the Company. The consolidated financial statements do not
include any adjustments that might result should the Company be unable to
refinance, amend, or exchange these obligations on or before their maturity
dates.
NOTE 2 -- PREPAID EXPENSES AND OTHER ASSETS
At December 31, 1998 and 1997, other current assets included $1,414,000
and $2,379,000, respectively, of tooling manufactured or purchased by the
Company pursuant to purchase orders issued by customers of the Company. Upon
customer approval of the components produced by such tooling, which normally
takes less than 90 days, the customer is obligated to pay for the tooling in
accordance with previously agreed-upon terms.
-31-
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 -- OTHER NONCURRENT ASSETS
The Company has paid for a portion of the cost of certain tooling that
was purchased by customers and is being used by the Company to produce component
parts. The payments have been recorded as a noncurrent asset and are amortized
on a straight-line basis over three years or, if shorter, the period during
which the tooling is expected to produce components. At December 31, 1998 and
1997, other noncurrent assets included $2,043,000 and $1,276,000, respectively,
representing the unamortized portion of such capitalized payments. During 1998,
1997, and 1996, the Company amortized $1,134,000, $964,000, and $822,000,
respectively, of such capitalized payments.
NOTE 4 -- ACCRUED EXPENSES
Accrued expenses at December 31, 1998 and 1997, are summarized below
(dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1998 1997
---- ----
<S> <C> <C>
Employee fringe benefits $ 3,196 $ 2,763
Interest 1,971 1,964
Salaries and wages 2,289 1,580
Taxes 989 1,040
Other 900 1,148
------- --------
$ 9,345 $ 8,495
======= ========
</TABLE>
NOTE 5 -- DEBT
At December 31, 1998 and 1997, short-term debt consisted of loans
outstanding under the Company's revolving line of credit. Except for certain
loans outstanding at December 31, 1998 in the amount of $3,850,000 that were
refinanced under long-term agreements before the consolidated financial
statements were issued, the loans outstanding under the revolving line of credit
at December 31, 1998 and 1997, have been classified as short-term debt because
the Company's cash receipts are automatically used to reduce such loans on a
daily basis, by means of a lock-box sweep agreement, and the lender has the
ability to modify certain terms of the revolving line of credit without approval
of the Company. At December 31, 1998, availability under the revolving line of
credit totaled $1,974,000, before outstanding checks of $1,402,000 were
deducted. At December 31, 1998, loans outstanding under the revolving line of
credit accrued interest at the prime rate plus 0.25% and the London Interbank
Offered Rate ("LIBOR") plus 2.75%. At December 31, 1998, 1997, and 1996, the
weighted-average interest rates on borrowings under the revolving line of credit
were 8.00%, 8.74%, and 9.04%, respectively. In January 1999, the revolving line
of credit was amended to extend the expiration date to April 1, 2002.
-32-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Long-term debt at December 31, 1998 and 1997, is set forth below
(dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Long-term secured debt:
Revolving line of credit, prime rate plus 0.25% and LIBOR plus
2.75% (8% at December 31, 1998) $ 3,850(1) $ -
Term loan payable in increasing monthly principal installments,
final maturity in 2000, 12% - 1,573
Term loan, due 2000, 12% 1,370 -
Term loans payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturities in 2001, 8.37% 2,921 3,153
Term loans payable in equal monthly principal installments, final
maturities in 2002, LIBOR plus 2.75% (8.3% at December 31,
1998) 2,584 3,330
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9.37% 1,404 1,511
Term loan payable in equal monthly principal installments based on
a 180-month amortization schedule, final maturity in 2002, 9% 2,732 2,933
Term loan, interest only until March 1, 1998, then payable in
equal monthly principal installments, final maturity in 2003, prime
rate plus 0.25% (8% at December 31, 1998) 770 468
Term loan payable in equal monthly principal installments, final
maturity in 2003, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 492(2) 613(2)
Term loan payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75%
(average of 7.81% at December 31, 1998) 1,471 1,742
Term loans payable in equal monthly principal installments, final
maturity in 2004, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 18,967(2) 22,580(2)
Term loan payable in equal monthly principal installments, final
maturity in 2005, LIBOR plus 2.75% (8.31% at December 31, 1998) 1,388 -
Term loan payable in equal monthly principal installments, final
maturity in 2005, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 1,579(2) -
Term loan payable in equal monthly principal installments, final
maturity in 2006, prime rate plus 0.25% and LIBOR plus 2.75%
(8% at December 31, 1998) 1,300(2) -
-------- ---------
Total long-term secured debt 40,828 37,903
-------- ---------
</TABLE>
(continued on next page)
-33-
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued from previous page)
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------
1998 1997
---- ----
<S> <C> <C>
Long-term unsecured debt:
10.5% senior note, due 2000 $ 7,500 $ 7,500
12.75% senior subordinated notes, due 2000 31,720 31,720
14% junior subordinated convertible notes, due 2000, convertible
into 440,000 shares of common stock 1,000 1,000
14% junior subordinated nonconvertible notes, due 2000 347 347
Other unsecured obligations 155 192
-------- ---------
Total long-term unsecured debt 40,722 40,759
-------- ---------
Total long-term debt 81,550 78,662
Less current portion 6,597 6,040
-------- ---------
Total long-term debt, excluding current portion $ 74,953 $ 72,622
======== =========
</TABLE>
(1) Refinanced under long-term agreements before the consolidated financial
statements for the period were issued. Amounts classified as secured or
unsecured and amounts reflected in current portion are based upon the terms
of the new borrowings.
(2) Maturity date can be accelerated by the lender if the Company's revolving
line of credit expires prior to the stated maturity date of the term loan.
The loans outstanding under the Company's revolving line of credit and
the secured term loans listed above are collateralized by substantially all of
the assets of the Company, including trade receivables, inventories, equipment,
certain real estate, and the stock of Lexington Components, Inc., a subsidiary
of the Company.
During the first quarter of 1999, the Company obtained new term loans
in the aggregate amount of $6,542,000. Proceeds from the new term loans
refinanced $2,090,000 of existing term loans and $4,452,000 of loans outstanding
under the revolving line of credit (including $3,850,000 of such loans which
were outstanding at December 31, 1998). The new term loans are collateralized by
substantially all of the assets of the Company, including trade receivables,
inventories, equipment, certain real estate, and the stock of Lexington
Components, Inc.
-34-
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SCHEDULED MATURITIES OF LONG-TERM DEBT
Scheduled maturities of long-term debt for the years ending December 31
are listed below (dollar amounts in thousands):
<TABLE>
<S> <C> <C>
1999 $ 6,597
2000 47,477
2001 8,872
2002 8,922
2003 and future years 9,682
--------
$ 81,550
========
</TABLE>
RESTRICTIVE COVENANTS
Certain of the Company's financing arrangements contain covenants that
set minimum levels of working capital, net worth, and cash flow coverage. The
covenants also place certain restrictions and/or limitations on the Company's
business and operations, including the incurrence or assumption of additional
debt, the level of past-due trade accounts payable, the sale of all or
substantially all of the Company's assets, the purchase of plant and equipment,
the purchase of common stock, the redemption of preferred stock, and the payment
of cash dividends. In addition, substantially all of the Company's financing
agreements include cross-default provisions
From time to time, certain of the financial covenants contained in the
Company's various loan agreements have been amended in order to maintain or
otherwise ensure current or future compliance by the Company. During the first
quarter of 1998, a covenant that limited the Company's ratio of debt to tangible
net worth was amended. During the third quarter of 1998, certain net worth
covenants and the covenant that limited the Company's ratio of debt to tangible
net worth were amended. During the first quarter of 1999, a net worth covenant
was amended and the covenant that limited the Company's ratio of debt to
tangible net worth was eliminated.
Because certain of the Company's long-term indebtedness matures in the
first half of 2000, those amounts will be classified as short-term liabilities
of the Company during the first and second quarters of 1999. During July 1998,
certain working capital and cash flow covenants were amended in order to avoid
any defaults that would have been caused by such reclassification.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes that, at December 31, 1998, the fair values of the
secured term loans and the loans outstanding under the revolving line of credit
approximately equaled the principal amounts of such loans.
Since August 1998, the Company believes that there has been minimal
trading in the Company's 12.75% senior subordinated notes, except for the
Company's repurchase in January 1999 of $3,808,000 principal amount of the notes
for $1,980,000 plus accrued interest (See Note 15 - Subsequent Event).
Notwithstanding its purchase of 12.75% senior subordinated notes in January
1999, the Company
-35-
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimates, based upon discussion with several market makers, that, as of
December 31, 1998, the 12.75% senior subordinated notes had a fair value in the
range of 75% to 85% of their principal amount. Based on the estimated fair value
of the 12.75% senior subordinated notes, the Company believes that, as of
December 31, 1998, (1) the 14% junior subordinated nonconvertible notes had a
fair value in the range of 75% to 85% of their principal amount, (2) the
14% junior subordinated convertible notes had a fair value in the range of 80%
to 110% of their principal amount, and (3) the 10.5% senior note had a fair
value approximately equal to its principal amount.
Estimates of the fair values of the Company's indebtedness are
subjective in nature and involve uncertainties and matters of judgment and
therefore cannot be determined definitively. Any change in the market for
similar indebtedness, the financial performance of the Company, or interest
rates could materially affect the fair value of all of the Company's
indebtedness.
FINANCIAL LEVERAGE AND LIQUIDITY
The Company operates with substantial financial leverage and limited
liquidity. As a result, the impact of any negative event may have a greater
adverse effect upon the Company than if the Company operated with lower
financial leverage and greater liquidity.
NOTE 6 -- PREFERRED STOCK
REDEEMABLE PREFERRED STOCK
At December 31, 1998, there were outstanding 3,750 shares of the
Company's $8 cumulative convertible redeemable preferred stock, series B, par
value $100 ("Redeemable Preferred Stock"). Each share of Redeemable Preferred
Stock is (1) entitled to one vote, (2) redeemable for $200 plus accumulated and
unpaid dividends, (3) convertible into 14.8148 shares of common stock (subject
to adjustment), and (4) entitled, upon voluntary or involuntary liquidation and
after payment of the debts and other liabilities of the Company, to a
liquidation preference of $200 plus accumulated and unpaid dividends. On
November 30, 1998, 450 shares of Redeemable Preferred Stock were redeemed for
$90,000. Further redemptions of $90,000 are scheduled on November 30 of each
year in order to retire 450 shares of Redeemable Preferred Stock annually.
Scheduled redemptions for the years 1999 through 2003 aggregate $450,000. For
accounting purposes, when Redeemable Preferred Stock is redeemed, the redeemable
preferred stock account is reduced by the $100 par value of each share redeemed,
and paid-in-capital is charged for the $100 excess of redemption value over par
value of each share redeemed. Under the terms of the Redeemable Preferred Stock,
the Company may not declare any cash dividends on its common stock if there
exists a dividend arrearage on the Redeemable Preferred Stock. During 1998, the
Company paid dividends aggregating $33,000 on the Redeemable Preferred Stock. No
dividends were in arrears at December 31, 1998.
OTHER AUTHORIZED PREFERRED STOCK
The Company's restated certificate of incorporation provides that the
Company is authorized to issue 2,500 shares of 6% cumulative convertible
preferred stock, series A, $100 par value. At December 31, 1998 and 1997, no
shares of the series A preferred stock were issued or outstanding.
The Company's restated certificate of incorporation also provides that
the Company is authorized to issue 2,500,000 shares of preferred stock having a
par value of $1 per share. At December 31, 1998 and 1997, no shares of the $1
par value preferred stock were issued or outstanding.
-36-
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 -- COMMON STOCK
COMMON STOCK, $.25 PAR VALUE
At December 31, 1998 and 1997, there were 4,263,036 shares of the
Company's common stock outstanding, 440,000 shares reserved for issuance on the
conversion of the Company's 14% junior subordinated convertible notes, 55,555
shares reserved for issuance on the conversion of the Redeemable Preferred
Stock, and 350,000 shares reserved for issuance under the Company's restricted
stock award plan.
RESTRICTED STOCK AWARD PLAN
During 1998, 1997, and 1996, no shares of restricted shares of common
stock were awarded or outstanding. Unless otherwise amended, the restricted
stock award plan will expire on December 31, 2001.
STOCK OPTION PLAN
Options to purchase shares of the Company's common stock were last
granted in 1990. At December 31, 1996, the Company's stock option plan was no
longer in effect because no options to purchase common stock were outstanding
and no options were available for future grant.
NOTE 8 -- EMPLOYEE BENEFIT PLANS
RETIREMENT AND SAVINGS PLAN
The Company maintains a retirement and savings plan (the "Plan")
pursuant to Section 401 of the Internal Revenue Code (a "401(k)" plan). All
employees of the Company are entitled to participate in the Plan after meeting
the eligibility requirements. Generally, employees may contribute up to 15% of
their annual compensation but not more than prescribed amounts as established by
the United States Secretary of the Treasury. Employee contributions, up to a
maximum of 6% of an employee's compensation, are matched 50% by the Company.
During 1998, 1997, and 1996, matching contributions made by the Company totaled
$574,000, $474,000, and $443,000, respectively. In addition, the Company has the
option to make a profit-sharing contribution to the Plan. The size of the
profit-sharing contribution is set annually at the end of each plan year by the
Company's Board of Directors and is typically paid in March of the following
year. Provisions for profit-sharing contributions totaled $650,000, $550,000,
and $489,000 during 1998, 1997, and 1996, respectively. Company contributions to
the Plan vest at a rate of 20% per year commencing in the participant's third
year of service until the participant becomes fully vested after seven years of
service.
INCENTIVE COMPENSATION PLAN
The Company has an incentive compensation plan that provides for the
payment of annual cash bonus awards to certain officers and key employees of the
Company. The Compensation Committee of the Company's Board of Directors, which
consists of two directors who are not employees of the Company, oversees the
administration of the plan and approves the cash bonus awards. Bonus awards for
eligible divisional employees are based upon the attainment of predetermined
profit targets at each division. Bonus awards for corporate officers are based
upon the attainment of predetermined
-37-
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
consolidated profit targets. The provisions for bonuses totaled $878,000,
$387,000, and $858,000 during 1998, 1997, and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
On December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 132, Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("FAS 132"). FAS 132 does not change the recognition or
measurement of pension or postretirement benefit plans, but standardizes
disclosure requirements for pensions and other postretirement benefits.
The Company maintains programs to fund certain costs related to a
prescription drug card program for retirees of one of its former divisions and
to fund insurance premiums for certain retirees of one of its divisions. At
December 31, 1998, the Company's accumulated postretirement benefit obligation
totaled $328,000. The Company is amortizing its transition obligation over the
remaining life expectancy of the participants (i.e., an annual rate of $57,000).
A reconciliation of the changes in the plan benefit obligations and a
statement of the funded status of the plan at December 31, 1998 and 1997 is set
forth below (dollar amounts in thousands):
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
1998 1997
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation at
beginning of year $ (370) $ (447)
Service cost (2) (2)
Interest cost (24) (32)
Benefits paid 38 44
Actuarial gain 30 67
------ -------
Accumulated postretirement benefit obligation at
end of year (328) (370)
Plan assets at fair market value - -
------ -------
Funded status (328) (370)
Unrecognized transition obligation 350 407
Unrecognized prior service cost - -
Unrecognized net gain (237) (230)
------ -------
Accrued benefit cost $ (215) $ (193)
====== =======
</TABLE>
-38-
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Net annual postretirement benefit costs for 1998, 1997, and 1996 are
summarized below (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost $ 2 $ 2 $ 1
Interest cost 24 32 39
Net amortization and deferral 35 39 46
------ ------ ------
Net annual postretirement benefit cost $ 61 $ 73 $ 86
====== ====== ======
</TABLE>
The weighted-average annual rate of increase in the per capita cost of
covered benefits for the prescription drug card program is assumed to be 8% in
1999 and is projected to decrease gradually thereafter until it reaches 5% in
2005. Changing the assumed rate of increase in the prescription drug cost by one
percentage point in each year would not have a significant effect on the
accumulated postretirement benefit obligation. The Company's program to fund
certain insurance premiums for retirees of one of its divisions has a defined
dollar benefit and is therefore unaffected by increases in health care costs.
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation at December 31, 1998 and 1997, was 6.75% and
7%, respectively. The change in the discount rate at December 31, 1998, reflects
lower prevailing interest rates.
NOTE 9 -- INCOME TAXES
The components of the provisions for income taxes in 1998, 1997, and
1996 are set forth below (dollar amounts in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Current:
Federal $ - $ 104 $ 255
State 132 (17) 105
------ ------ ------
132 87 360
Deferred:
Federal - 585 (320)
------ ------ ------
Provision for income taxes $ 132 $ 672 $ 40
====== ====== ======
</TABLE>
During 1998, the provision for income taxes consisted of state income
taxes.
During 1997, the provision for income taxes consisted primarily of (1)
federal alternative minimum taxes and (2) the reversal of a tax credit that had
been recorded in 1996 based on the then-projected utilization of federal net
operating loss carryforwards in 1997.
-39-
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1996, the provision for income taxes consisted of (1) federal
alternative minimum taxes, (2) state income taxes, (3) the reversal of a tax
credit that had been recorded in 1995 based on the then-projected utilization of
federal net operating loss carryforwards in 1996, and (4) a tax credit that had
been based on the then-projected utilization of federal net operating loss
carryforwards in 1997.
The difference between the Company's recorded provision for income
taxes in 1998, 1997, and 1996 and the income taxes that would have been payable
at the federal statutory rate is reconciled as follows (dollar amounts in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal statutory income tax provision $ (875) $ (291) $ 8
Change in valuation allowance 1,164 1,216 53
Amortization of nondeductible goodwill 107 107 107
State income taxes, net of federal benefit 87 (71) 105
Other (351) (289) (233)
------- -------- ------
Recorded income tax provision $ 132 $ 672 $ 40
======= ======== ======
</TABLE>
The following table sets forth the deferred tax assets and the deferred
tax liabilities of the Company at December 31, 1998 and 1997 (dollar amounts in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31
---------------------
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Tax carryforwards:
Federal net operating losses $ 4,146 $ 3,308
State net operating losses 1,419 951
Federal alternative minimum taxes 1,046 1,059
Investment tax credit 101 101
Other tax credit 81 81
-------- --------
Total tax carryforwards 6,793 5,500
Asset loss reserves 379 250
Tax inventory over book 738 642
Deferred compensation liabilities 53 65
Vacation accruals 317 265
Other accruals 236 397
Deferred financing costs and other 65 100
-------- --------
Total deferred tax assets 8,581 7,219
Valuation allowance (5,315) (4,151)
-------- --------
Net deferred tax assets 3,266 3,068
Deferred tax liabilities - tax over book depreciation 3,266 3,068
-------- --------
Net deferred taxes $ - $ -
======== ========
</TABLE>
-40-
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1998 and 1997, the Company's valuation allowance increased by
$1,164,000 and $1,216,000, respectively, primarily due to increased federal net
operating loss carryforwards that the Company fully reserved for at December 31,
1998 and 1997.
At December 31, 1998, the Company had net operating loss carryforwards
for federal income tax purposes of $12,195,000, which expire in the years 2005
through 2013, and alternative minimum tax credits of $1,046,000, which can be
used to offset future payments of regular federal income taxes, if any, without
any time limitations.
NOTE 10 -- SEGMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
At December 31, 1998, the Company adopted "Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information" ("FAS 131"). FAS 131 establishes standards for the way
public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports. FAS 131 also
establishes standards for related disclosures about products, geographic areas,
and major customers. FAS 131 superseded "Statement of Financial Accounting
Standards No. 14, Financial Reporting for Segments of a Business Enterprise."
FAS 131 requires financial information to be reported on the basis that is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The adoption of FAS 131 by the Company during 1998 did
not affect the results of operations or the financial position of the Company.
DESCRIPTION OF PRODUCTS
Lexington Precision Corporation has two operating segments, the Rubber
Group and the Metals Group. The Rubber Group consists of four divisions,
Lexington Connector Seals, Lexington Insulators, Lexington Medical, and
Lexington Technologies. The Rubber Group produces seals used in automotive
wiring systems and insulators for automotive ignition wire
sets. The Rubber Group also produces components for medical devices. Lexington
Technologies manufactures molds that are sold to customers of the other
divisions of the Rubber Group. The molds are used by the other divisions to make
components for their customers. The Metals Group consists of three divisions,
Lexington Die Casting and the Arizona and New York Divisions of Lexington
Machining. The Metals Group produces metal components for sale to automotive
suppliers, industrial equipment manufacturers, and manufacturers of computer and
office equipment. The Rubber Group and the Metals Group conduct substantially
all of their business in the continental United States.
MEASUREMENT OF SEGMENT PROFIT OR LOSS
The Company evaluates performance based on several measures, including
income from operations and earnings before interest, income taxes, depreciation,
and amortization ("EBITDA"). (EBITDA is not a measure of performance under
generally accepted accounting principles. While EBITDA should not be used as a
substitute for net income, cash flows from operating activities, or other
operating or cash flow statement data prepared in accordance with generally
accepted accounting
-41-
<PAGE> 44
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
principles, management believes that it may be used by certain investors as
supplemental information to evaluate a company's financial performance,
including its ability to incur and/or service debt. In addition, the definition
of EBITDA used in this Form 10-K may not be the same as the definition of EBITDA
used by other companies.)
The accounting policies of the Company's operating segments are the
same as those described in Note 1 --Summary of Significant Accounting Policies,
except that debt, interest expense, and income tax expense are recorded at the
parent company level and not allocated to the segments. Expenses at the parent
Company level that are not considered direct expenses of the operating segments,
are not allocated to the segments for purposes of evaluating operating
performance.
FACTORS MANAGEMENT USED TO IDENTIFY REPORTABLE SEGMENTS
Although all of the Company's production divisions are similar
manufacturing operations, selling to similar customers, the Company presents
financial data for two operating segments because of the significant difference
in financial performance between operations that manufacture components from
rubber (the "Rubber Group") and those operations that manufacture components
from metal (the "Metals Group").
INDUSTRY CONCENTRATION; RELIANCE ON LARGE CUSTOMERS
During 1998, 1997, and 1996, net sales to customers in the automotive
industry totaled $103,052,000, $88,961,000, and $79,832,000, respectively, which
represented 81.3%, 75.0%, and 69.5%, respectively, of the Company's net sales.
At December 31, 1998 and 1997, accounts receivable from automotive customers
totaled $15,047,000 and $13,649,000, respectively. The Company provides for
credit losses based upon historical experience and ongoing credit evaluations of
its customers' financial condition but does not generally require collateral
from its customers to support the extension of trade credit. At December 31,
1998 and 1997, the Company had reserves for credit losses of $197,000 and
$211,000, respectively.
During 1998, 1997, and 1996, net sales to Delphi Packard Electric
Systems, a division of Delphi Automotive Systems Corporation, of which General
Motors Corporation is the majority shareholder, totaled $26,233,000,
$26,447,000, and $25,088,000, which represented 20.7%, 22.3%, and 21.8%,
respectively, of the Company's net sales and 28.3%, 32.6%, and 33.4%,
respectively, of the Rubber Group's net sales. Also in 1998, net sales to
Prestolite Wire Corporation totaled $14,431,000, which represented 11.4% of the
Company's net sales and 15.6% of the Rubber Group's net sales. No other customer
of the Company accounted for more than 10% of the Company's net sales during
1998, 1997, or 1996. In 1998, the three largest customers of the Rubber Group,
including Delphi Packard and Prestolite Wire, accounted for 50.1% of the Rubber
Group's net sales. In 1998, the three largest customers of the Metals Group
accounted for 35.3% of the Metals Group's net sales. At December 31, 1998,
accounts receivable from the Company's three largest customers totaled
$5,769,000. The Company believes that there is limited credit risk in the
accounts receivable from its three largest customers. Loss of a significant
amount of business from Delphi Packard, Prestolite Wire, or any of the Company's
other large customers could have a severe impact on the Company if such business
were not substantially replaced by additional business from existing or new
customers.
-42-
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the first quarter of 1997, the Company and Delphi Packard
entered into an agreement that will govern, through 2001, the purchase of
substantially all of the component parts that the Company currently sells to
Delphi Packard. Under the terms of the agreement, (1) the Company agreed to sell
and Delphi Packard agreed to purchase approximately 100% of Delphi Packard's
requirements for all specified component parts, (2) the Company warranted that
the specified components will remain competitive in terms of technology, design,
and quality, (3) the selling prices of the specified components will be adjusted
to reflect increases or decreases in material costs, and (4) the selling prices
of the specified components will be reduced by certain specified amounts in each
of the five years covered by the agreement. Although no assurance can be given,
the Company currently believes that a portion of the price reductions granted to
Delphi Packard will be offset through reductions in direct manufacturing costs
and that a portion of the price reductions will be offset by greater absorption
of manufacturing overhead as a result of volume increases.
-43-
<PAGE> 46
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT FINANCIAL DATA
Information relating to the Company's operating segments and the
corporate office for 1998, 1997, and 1996 is summarized below (dollar amounts in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
----------------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
NET SALES:
Rubber Group $ 92,610 $ 81,210 $ 75,122
Metals Group 34,107 37,421 39,750
---------- ---------- ----------
Total net sales $ 126,717 $ 118,631 $ 114,872
========== ========== ==========
INCOME/(LOSS) FROM OPERATIONS:
Rubber Group $ 13,301 $ 11,459 $ 10,822
Metals Group (4,074) (1,580) (219)
---------- ---------- ----------
Subtotal 9,227 9,879 10,603
Corporate office (2,029) (2,095) (2,038)
---------- ---------- ----------
Total income from operations $ 7,198 $ 7,784 $ 8,565
========== ========== ==========
ASSETS:
Rubber Group $ 67,255 $ 64,782 $ 63,008
Metals Group 38,788 36,983 31,994
---------- ---------- ----------
Subtotal 106,043 101,765 95,002
Corporate office 2,282 2,359 2,028
---------- ---------- ----------
Total assets $ 108,325 $ 104,124 $ 97,030
========== ========== ==========
DEPRECIATION AND AMORTIZATION:
Rubber Group $ 7,476 $ 6,676 $ 5,596
Metals Group 3,957 3,141 2,638
---------- ---------- ----------
Subtotal 11,433 9,817 8,234
Corporate office 216 192 462
---------- ---------- ----------
Total depreciation and amortization $ 11,649 $ 10,009 $ 8,696
========== ========== ==========
CAPITAL EXPENDITURES:
Rubber Group $ 8,382 $ 6,835 $ 8,828
Metals Group 6,422 8,935 6,852
---------- ---------- ----------
Subtotal 14,804 15,770 15,680
Corporate office 73 20 28
---------- ---------- ----------
Total capital expenditures $ 14,877 $ 15,790 $ 15,708
========== ========== ==========
</TABLE>
-44-
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 -- OTHER INCOME
In December 1997, the Company received a payment in the amount of
$425,000 in settlement of litigation.
NOTE 12 -- NET INCOME OR LOSS PER COMMON SHARE
The calculations of basic and diluted net income or loss per common
share for 1998, 1997, and 1996 are set forth below (in thousands, except per
share amounts). Because the effect of the Company's dilutive securities (the 14%
junior subordinated convertible notes, the $8 cumulative convertible redeemable
preferred stock, series B, and in 1996, employee stock options) was antidilutive
for 1998, 1997, and 1996, such conversion was not included in the calculation of
diluted net loss per common share set forth below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net loss $ (2,706) $ (1,528) $ (17)
Preferred stock dividends (33) (37) (41)
Excess of redemption value over par value of preferred
stock redeemed during year (45) (45) (45)
--------- -------- --------
Net loss attributable to common stockholders (numerator) (2,784) (1,610) (103)
========= ======== ========
Weighted-average common shares (denominator) 4,263 4,263 4,250
========= ======== ========
Basic and diluted net loss per common share $ (0.65) $ (0.38) $ (0.02)
========= ======== ========
</TABLE>
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
PURCHASE COMMITMENTS
At December 31, 1998, the Company had commitments for the purchase of
plant and equipment totaling approximately $2,462,000.
LEASES
The Company is lessee under various operating leases relating to
storage and office space, temporary office units, and equipment. Total rent
expense under operating leases aggregated $314,000, $298,000, and $263,000 for
1998, 1997, and 1996, respectively. At December 31, 1998, future minimum lease
commitments under noncancelable operating leases were not significant for any
year or in the aggregate.
LEGAL ACTIONS
The Company is subject to various claims and legal proceedings covering
a wide range of matters that arise in the ordinary course of its business
activities, including actions naming the Company
-45-
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
as one of numerous potentially responsible parties under applicable
environmental laws for restoration costs at waste-disposal sites, as a
third-party defendant in cost-recovery actions pursuant to applicable
environmental laws, and as a defendant or potential defendant in various other
matters. It is the Company's policy to record accruals for such matters when a
loss is deemed probable and the amount of such loss can be reasonably estimated.
The various actions to which the Company is or may be a party in the future are
at various stages of completion. Although there can be no assurance as to the
outcome of existing or potential litigation, in the event such litigation were
commenced, based upon the information currently available to the Company, the
Company believes that the outcome of such actions would not have a material
adverse effect upon its financial position.
LETTERS OF CREDIT
At December 31, 1998 and 1997, the Company had outstanding irrevocable
letters of credit totaling $736,000 and $1,068,000, respectively. The letters of
credit guaranteed certain payments that may be required under the Company's
self-insured workers' compensation program.
OTHER
The Company maintains insurance coverage for certain aspects of its
business and operations. Based on the Company's evaluation of the various risks
that it may potentially be exposed to, the Company has elected to retain a
portion of the potential losses that it could experience in the future through
the use of various deductibles, limits, and retentions. These forms of
self-insurance subject the Company to possible future liability for which it is
partially or completely uninsured. Although there can be no assurance, the
Company attempts to limit future liability through, among other things, the
ongoing training and education of its employees, the use of safety programs, the
ongoing testing and evaluation of the safety and suitability of its workplace
environments, the development of sound business practices, and the exercise of
care and judgment in the negotiation of contracts.
NOTE 14 -- RELATED PARTIES
The Chairman of the Board and the President of the Company are the two
largest holders of the Company's common stock, the holders of the 14% junior
subordinated notes, and the beneficial owners of $200,000 principal amount of
the 12.75% senior subordinated notes. In addition, the Chairman of the Board and
certain of his affiliates hold an aggregate of $1,300,000 principal amount of
the 12.75% senior subordinated notes.
The Chairman of the Board and the President of the Company are partners
of an investment banking firm that is retained by the Company to provide
management and investment banking services. The annual fee for such services has
been set at $500,000 for 1999. Additionally, the firm may receive incentive
compensation tied to the Company's operating performance and other compensation
for specific transactions completed by the Company with the assistance of the
firm. The Company also has agreed to reimburse the firm for certain expenses.
During each of 1998 and 1997, the Company paid the firm fees of $400,000 and
reimbursed it for direct and indirect expenses of $200,000. During 1996, the
Company paid the firm fees of $400,000 and incentive compensation of $150,000 as
a result of the Company's operating performance during 1995 and reimbursed it
for direct and indirect expenses of $200,000.
-46-
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Secretary of the Company, who is also a member of the Company's
Board of Directors, was a stockholder of a professional corporation that was,
until December 31, 1997, a partner in a law firm that serves as general counsel
to the Company. During 1997 and 1996, the Company made payments to the law firm
for legal services in the amounts of $395,000 and $442,000, respectively.
NOTE 15 -- SUBSEQUENT EVENT
In January 1999, the Company repurchased $3,808,000 principal amount of
its 12.75% senior subordinated notes for $1,980,000 plus accrued interest. Funds
for the repurchase were provided by increased borrowings under the Company's
revolving line of credit. The Company estimates that the extraordinary gain from
the repurchase, net of estimated taxes, will total approximately $1,462,000.
-47-
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
-48-
<PAGE> 51
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 1999 Annual
Meeting of Stockholders and to be filed with the Securities and Exchange
Commission (the "Commission") not later than 120 days after December 31, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by Item 12 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 is incorporated by reference to the
Company's proxy statement to be issued in connection with its 1999 Annual
Meeting of Stockholders and to be filed with the Commission not later than 120
days after December 31, 1998.
-49-
<PAGE> 52
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The consolidated financial statements of Lexington Precision
Corporation (the "Company") and its wholly owned subsidiaries,
Lexington Components, Inc. ("LCI") and Lexington Precision
GmbH, are included in Part II, Item 8.
2. FINANCIAL STATEMENT SCHEDULE
Schedule II, Valuation and Qualifying Accounts and Reserves,
is included in this Part IV, Item 14, on page 58. All other
schedules are omitted because the required information is not
applicable, not material, or included in the consolidated
financial statements or the notes thereto.
3. EXHIBITS
3-1 Articles of Incorporation and Restatement thereof
3-2 By-Laws, as amended
3-3 Certificate of Correction dated September 21, 1976
3-4 Certificate of Ownership and Merger dated May 24,
1977
3-5 Certificate of Ownership and Merger dated May 31,
1977
3-6 Certificate of Reduction of Capital dated
December 30, 1977
3-7 Certificate of Retirement of Preferred Shares dated
December 30, 1977
3-8 Certificate of Reduction of Capital dated December 28,
1978
3-9 Certificate of Retirement of Preferred Shares dated
December 28, 1978
3-10 Certificate of Reduction of Capital dated January 9,
1979
3-11 Certificate of Reduction of Capital dated December 20,
1979
3-12 Certificate of Retirement of Preferred Shares dated
December 20, 1979
3-13 Certificate of Reduction of Capital dated December 16,
1982
3-14 Certificate of Reduction of Capital dated December 17,
1982
3-15 Certificate of Amendment of Restated Certificate of
Incorporation dated September 26, 1984
-50-
<PAGE> 53
3-16 Certificate of Retirement of Stock dated September 24,
1986
3-17 Certificate of Amendment of Restated Certificate of
Incorporation dated November 21, 1986
3-18 Certificate of Retirement of Stock dated January 15,
1987
3-19 Certificate of Retirement of Stock dated February 22,
1988
3-20 Certificate of Amendment of Restated Certificate of
Incorporation dated January 6, 1989
3-21 Certificate of Retirement of Stock dated August 17,
1989
3-22 Certificate of Retirement of Stock dated January 9,
1990
3-23 Certificate of the Designations, Preferences and
Relative Participating, Optional and Other Special
Rights of 12% Cumulative Convertible Exchangeable
Preferred Stock, Series C, and the Qualifications,
Limitations and Restrictions thereof dated January
10, 1990
3-24 Certificate of Ownership and Merger dated April 25,
1990
3-25 Certificate of Elimination of 12% Cumulative Convertible
Exchangeable Preferred Stock, Series C, dated June 4,
1990
3-26 Certificate of Retirement of Stock dated March 6,
1991
3-27 Certificate of Retirement of Stock dated April 29,
1994
3-28 Certificate of Retirement of Stock dated January 6,
1995
3-29 Certificate of Retirement of Stock dated January 5,
1996
3-30 Certificate of Retirement of Stock dated January 6,
1997
3-31 Certificate of Retirement of Stock dated January 9,
1998
3-32 Certificate of Retirement of Stock dated January 13,
1999
4-1 Certificate of Designations, Preferences, Rights and
Number of Shares of Redeemable Preferred Stock,
Series B
4-2 Purchase Agreement dated as of February 7, 1985,
between the Company and L&D Precision Limited
Partnership ("L&D Precision") and exhibits thereto
4-3 Amendment Agreement dated as of April 27, 1990,
between the Company and L&D Precision with respect to
Purchase Agreement dated as of February 7, 1985
-51-
<PAGE> 54
4-4 Recapitalization Agreement dated as of April 27,
1990, between the Company and L&D Woolens Limited
Partnership ("L&D Woolens") and exhibits thereto
4-5 Specimen of Junior Subordinated Convertible
Increasing Rate Note, due May 1, 2000
4-6 Specimen of 14% Junior Subordinated Note, due May 1,
2000
4-7 Indenture dated as of August 1, 1993, between the
Company and IBJ Schroder Bank & Trust Company, as
Trustee
4-8 Specimen of 12.75% Senior Subordinated Note, due
February 1, 2000
4-9 Note Purchase Agreement dated October 27, 1997,
between the Company and Nomura Holding America, Inc.
("Nomura")
4-10 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from the Company to Nomura
10-1 Purchase Agreement dated as of February 7, 1985,
between the Company and L&D Precision and exhibits
thereto
10-2 Amendment Agreement dated as of April 27, 1990,
between the Company and L&D Precision with respect to
Purchase Agreement dated as of February 7, 1985
10-3 *Lexington Precision Corporation Flexible
Compensation Plan, as amended
10-4 *1986 Restricted Stock Award Plan, as amended
10-5 *Lexington Precision Corporation Retirement & Savings
Plan, as amended
10-6 *Description of 1998 Compensation Arrangements with
Lubin, Delano, & Company
10-7 *Corporate Office 1998 Management Cash Bonus Plan
10-8 Consent and Amendment Letter Agreement between
Chemical Bank of New Jersey and the Company dated as
of December 29, 1993
10-9 Promissory Note dated November 30, 1988, of LCI
payable to the order of Paul H. Pennell in the
original principal amount of $3,530,000
10-10 Guaranty dated as of November 30, 1988, from the
Company to Paul H. Pennell
10-11 Amendment Agreement dated as of November 30, 1991,
between LCI and Paul H. Pennell
-52-
<PAGE> 55
10-12 Release and Notice Agreement dated as of March 31,
1993, between LCI and Paul H. Pennell
10-13 Recapitalization Agreement dated as of April 27,
1990, between the Company and L&D Woolens and
exhibits thereto
10-14 Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990, between Congress
Financial Corporation ("Congress") and the Company
10-15 Accounts Financing Agreement [Security Agreement]
dated as of January 11, 1990, between Congress and
LCI
10-16 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and the Company
10-17 Covenants Supplement to Accounts Financing Agreement
[Security Agreement] dated as of January 11, 1990,
between Congress and LCI
10-18 Letter dated April 11, 1990, from the Company and
Wise Die Casting, Inc. to Congress
10-19 Letter Agreement dated February 28, 1991, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-20 Letter Agreement dated February 28, 1991, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-21 Letter Agreement dated January 14, 1994, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-22 Letter Agreement dated January 14, 1994, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-23 Letter Agreement dated March 25, 1994, between
Congress and the Company, and consent thereto of LCI
10-24 Letter Agreement dated March 25, 1994, between
Congress and LCI, and consent thereto of the Company
10-25 Letter Agreement dated as of August 1, 1994, between
the Company and Congress amending certain financing
agreements and consent thereto of LCI
10-26 Letter Agreement dated as of August 1, 1994, between
LCI and Congress amending certain financing
agreements and consent thereto of the Company
10-27 Trade Financing Agreement Supplement to Accounts
Financing Agreement [Security Agreement] dated as of
July 19, 1994, between the Company and Congress
-53-
<PAGE> 56
10-28 Letter Agreement dated January 13, 1995, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-29 Letter Agreement dated January 31, 1995, between the
Company and Congress amending certain financing
agreements and consent thereto of LCI
10-30 Letter Agreement dated January 31, 1995, between LCI
and Congress amending certain financing agreements
and consent thereto of the Company
10-31 Amendment to Financing Agreements dated August 1,
1995, from the Company in favor of Congress
10-32 Amendment to Financing Agreements dated August
1,1995, from LCI in favor of Congress
10-33 Amendment to Financing Agreements dated January 16,
1996, from the Company in favor of Congress
10-34 Term Promissory Note dated January 16, 1996, in the
amount of $375,000 from the Company in favor of
Congress
10-35 Term Promissory Note dated January 16, 1996, in the
amount of $450,000 from the Company in favor of
Congress
10-36 Letter Agreement dated February 28, 1996, from the
Company in favor of Congress amending certain
financing agreements and consent thereto of Congress
10-37 Amendment to Financing Agreements and Consent dated
March 14, 1996, from the Company in favor of Congress
10-38 Amendment to Financing Agreements and Consent dated
March 14, 1996, from LCI in favor of Congress
10-39 Term Note dated May 31, 1996, from the Company in
favor of Congress
10-40 Amendment to Financing Agreements dated August 21,
1996, from LCI in favor of Congress
10-41 Amendment to Financing Agreements dated August 21,
1996, from the Company in favor of Congress
10-42 Amendment to Financing Agreements dated January 31,
1997, from the Company in favor of Congress
10-43 Amendment to Financing Agreements dated January 31,
1997, from LCI in favor of Congress
-54-
<PAGE> 57
10-44 Credit Facility and Security Agreement and Rider A to
Credit Facility and Security Agreement dated January
31, 1997, from the Company and LCI in favor of Bank
One, Akron, NA ("Bank One")
10-45 Promissory Note (Equipment Term Loan) dated January
31, 1997, from the Company and LCI in favor of Bank
One
10-46 Promissory Note (North Canton Term Loan) dated
January 31, 1997, from the Company and LCI in favor
of Bank One
10-47 Promissory Note (Vienna Term Loan) dated January 31,
1997, from the Company and LCI in favor of Bank One
10-48 Promissory Note (Casa Grande Note) dated January 31,
1997, from the Company and LCI in favor of Bank One
10-49 Promissory Note (LaGrange Term Loan) dated January
31, 1997, from the Company and LCI in favor of Bank
One
10-50 Promissory Note (North Canton Equipment Loan) dated
January 31, 1997, from the Company and LCI in favor
of Bank One
10-51 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from LCI in favor of Congress
10-52 Fourth Amended and Restated Promissory Note dated
March 11, 1997, from the Company in favor of Congress
10-53 Amendment to Financing Agreements dated March 11,
1997, from LCI in favor of Congress
10-54 Amendment to Financing Agreements dated March 11,
1997, from the Company in favor of Congress
10-55 Loan and Security Agreement and Rider A to Loan and
Security Agreement dated March 19, 1997, from the
Company in favor of The CIT Group/Equipment
Financing, Inc. ("CIT")
10-56 Promissory Note dated March 19, 1997, from the
Company in favor of CIT
10-57 **Additional Purchase Order Provisions Lifetime
Contract Between Delphi Packard Electric Systems and
Lexington Connector Seals
10-58 Amendment to Financing Agreements and Consent dated
April 17, 1997, between the Company and Congress
10-59 Amendment to Financing Agreements and Consent dated
April 17, 1997, between LCI and Congress
-55-
<PAGE> 58
10-60 First Amendment Agreement dated April 17, 1997,
between the Company, LCI, and Bank One
10-61 Specimen of Amended and Restated Promissory Note
dated April 17, 1997, of the Company and LCI to Bank
One
10-62 Specimen of Promissory Note dated August 29, 1997,
from the Company to CIT
10-63 Note Purchase Agreement dated October 27, 1997,
between the Company and Nomura
10-64 Specimen of 10.5% Senior Unsecured Note due February
1, 2000, from the Company to Nomura
10-65 Amendment No. 1 to Credit Facility and Security
Agreement dated December 31, 1997, between the
Company, LCI, and Bank One
10-66 Amendment No. 2 to Credit Facility and Security
Agreement dated March 20, 1998, between the Company,
LCI, and Bank One
10-67 Promissory Note dated March 31, 1998, from the
Company in favor of CIT
10-68 New Equipment Term Note dated June 26, 1998, from the
Company in favor of Congress
10-69 Second Amendment Agreement dated May 1, 1998, from
LCI in favor of Paul H. Pennell
10-70 Amendment No. 1 to Loan and Security Agreement dated
June 30, 1998, between the Company and CIT
10-71 Amendment No. 3 to Credit Facility and Security
Agreement dated June 30, 1998, between the Company,
LCI, and Bank One
10-72 Amendment to Financing Agreements and Consent dated
August 13, 1998, between the Company and Congress
10-73 Amendment to Financing Agreements and Consent dated
August 13, 1998, between LCI and Congress
10-74 Amendment to Financing Agreements and Consent dated
October 20, 1998, between the Company and Congress
10-75 Amendment to Financing Agreements and Consent dated
October 20, 1998, between LCI and Congress
10-76 Amendment No. 2 to Loan and Security Agreement dated
November 30, 1998, between the Company and CIT
-56-
<PAGE> 59
10-77 New Equipment Term Note dated December 16, 1998,
between the Company and Congress
10-78 Amendment to Financing Agreements dated January 28,
1999, between the Company and Congress
10-79 Amendment to Financing Agreements dated January 28,
1999, between LCI and Congress
10-80 Term Promissory Note dated January 28, 1999, between
LCI and Congress
10-81 Term Promissory Note dated January 28, 1999, between
LPC and Congress
10-82 Fifth Amended and Restated Promissory Note dated
January 28, 1999, between the Company and Congress
10-83 Amendment No. 6 to Credit Facility and Security
Agreement dated January 31, 1999, between the
Company, LCI, and Bank One
10-84 Fifth Amendment Agreement dated March 10, 1999,
between the Company, LCI, and Bank One
10-85 Promissory Note (Additional Equipment Term Loan)
dated March 10, 1999, between the Company, LCI, and
Bank One
10-86 Promissory Note dated March 30, 1999, between the
Company and CIT
10-87 Amendment No. 3 to Loan and Security Agreement dated
March 30, 1999, between the Company and CIT
21-1 Significant Subsidiary of Registrant
27-1 ***Financial Data Schedule
* Indicates a management contract or compensatory plan or
arrangement required to be filed as an exhibit pursuant to
Item 14(a)(3).
** This Exhibit has been filed in redacted form pursuant to an
order granting confidential treatment, issued by the
Securities and Exchange Commission (the "Commission") dated
October 6, 1997
*** Not deemed filed for purposes of Section 11 of the Securities
Act of 1933, Section 18 of the Securities Exchange Act of
1934, and Section 323 of the Trust Indenture Act of 1939, or
otherwise subject to the liabilities of such sections and not
deemed part of any regulation statement to which such exhibit
relates.
Note: Pursuant to section (b)(4)(iii) of item 601 of Regulation
S-K, the Company agrees to furnish to the Commission upon
request documents defining the rights of other holders of
long-term debt.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
December 31, 1998.
-57-
<PAGE> 60
LEXINGTON PRECISION CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND FROM AT END
OF PERIOD EXPENSES RESERVES OF PERIOD
--------- -------- -------- ---------
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
-----------------
<S> <C> <C> <C> <C>
Year ended December 31, 1998 $ 211 $ 1 $ 15 $ 197
Year ended December 31, 1997 156 57 2 211
Year ended December 31, 1996 175 21 40 156
INVENTORY RESERVE
-----------------
Year ended December 31, 1998 $ 450 $ 208 $ 67 $ 591
Year ended December 31, 1997 321 212 83 450
Year ended December 31, 1996 374 37 90 321
</TABLE>
-58-
<PAGE> 61
SIGNATURES
Pursuant to the requirements of Section 13 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.
LEXINGTON PRECISION CORPORATION
(Registrant)
By: /s/ Warren Delano
------------------------------
Warren Delano, President
March 30, 1999
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on March 30, 1999:
PRINCIPAL EXECUTIVE OFFICERS AND DIRECTORS:
/s/ Michael A. Lubin
- -----------------------------------------
Michael A. Lubin, Chairman of the Board
/s/ Warren Delano
- -----------------------------------------
Warren Delano, President and Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ Dennis J. Welhouse
- -----------------------------------------
Dennis J. Welhouse, Senior Vice President
and Chief Financial Officer
DIRECTORS:
/s/ William B. Conner
- -----------------------------------------
William B. Conner, Director
/s/ Kenneth I. Greenstein
- -----------------------------------------
Kenneth I. Greenstein, Secretary and
Director
-59-
<PAGE> 62
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Location
- ------ ------- --------
<S> <C> <C>
3-1 Articles of Incorporation and Incorporated by reference from Exhibit
Restatement thereof 3-1 Lexington Precision Corporation's
(the "Company") to the Company's Form
10-K for the year ended May 31, 1981
located under Securities and Exchange
Commission File No. 0-3252 ("1981 10-K")
3-2 By-laws, as amended Filed with this Form 10-K
3-3 Certificate of Correction dated Incorporated by reference from Exhibit
September 21, 1976 3-3 to the Company's Form 10-K for the
year ended May 31, 1983 located under
Securities and Exchange Commission File
No. 0-3252 ("1983 10-K")
3-4 Certificate of Ownership and Incorporated by reference from Exhibit
Merger dated May 24, 1977 3-4 to 1983 10-K
3-5 Certificate of Ownership and Incorporated by reference from Exhibit
Merger dated May 31, 1977 3-5 to 1983 10-K
3-6 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated December 30, 1977 3-6 to 1983 10-K
3-7 Certificate of Retirement of Incorporated by reference
Preferred Shares dated from Exhibit 3-7 to 1983
December 30, 1977 10-K
3-8 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated December 28, 3-8 to 1983 10-K
1978
3-9 Certificate of Retirement of Incorporated by reference from Exhibit
Preferred Shares dated 3-9 to 1983 10-K
December 28, 1978
3-10 Certificate of Reduction of Incorporated by reference from Exhibit
Capital dated January 9, 3-10 to 1983 10-K
1979
3-11 Certificate of Reduction of Incorporated by reference from Exhibit 3-11
Capital dated December 20, 1979 to 1983 10-K
3-12 Certificate of Retirement of Preferred Incorporated by reference from Exhibit 3-12 to 1983
Shares dated December 20, 1979 10-K
3-13 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-13 to 1983
December 16, 1982 10-K
3-14 Certificate of Reduction of Capital dated Incorporated by reference from Exhibit 3-14 to 1983
December 17, 1982 10-K
</TABLE>
<PAGE> 63
-2-
<TABLE>
<S> <C> <C>
3-15 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-15 to the
Certificate of Incorporation dated Company's Form 10-K for the year ended May 31,
September 26, 1984 1985 located under Securities and Exchange
Commission File No. 0-3252
3-16 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-3 to the
September 24, 1986 Company's Registration Statement on Form S-2
located under Securities and Exchange Commission
File No. 33-9380 ("1933 Act Registration
Statement")
3-17 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-17 to the
Certificate of Incorporation dated Company's Form 10-K for the year ended May 31,
November 21, 1986 1987 located under Securities and Exchange
Commission File No. 0-3252
3-18 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 4-5 to
January 15, 1987 Amendment No. 1 to 1933 Act Registration
Statement
3-19 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-19 to the
February 22, 1988 Company's Form 10-K for the year ended May 31,
1989 located under Securities and Exchange
Commission File No. 0-3252 ("May 31, 1989
10-K")
3-20 Certificate of Amendment of Restated Incorporated by reference from Exhibit 3-20 to
Certificate of Incorporation dated May 31, 1989 10-K
January 6, 1989
3-21 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-21 to
August 17, 1989 May 31, 1989 10-K
3-22 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-22 to the
January 9, 1990 Company's Form 10-K for the seven months ended
December 31, 1989 located under Securities and
Exchange Commission File No. 0-3252
("December 31, 1989 10-K")
3-23 Certificate of the Designations, Incorporated by reference from Exhibit 3-1 to the
Preferences and Relative Participating, Company's Form 10-Q for the quarter ended
Optional and Other Special Rights of November 30, 1989 located under Securities and
12% Cumulative Convertible Exchange Commission File No. 0-3252
Exchangeable Preferred Stock, Series C, ("November 30, 1989 10-Q")
and the Qualifications, Limitations and
Restrictions thereof dated January 10,
1990
3-24 Certificate of Ownership and Merger Incorporated by reference from Exhibit 3-24 to
dated April 25, 1990 December 31, 1989 10-K
</TABLE>
<PAGE> 64
-3-
<TABLE>
<S> <C> <C>
3-25 Certificate of Elimination of 12% Incorporated by reference from Exhibit 3-25 to the
Cumulative Convertible Exchangeable Company's Form 10-K for the year ended
Preferred Stock, Series C, dated December 31, 1990 located under Securities and
June 4, 1990 Exchange Commission File No. 0-3252 ("1990
10-K")
3-26 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-26 to 1990
March 6, 1991 10-K
3-27 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-27 to 1994
April 29, 1994 10-K
3-28 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-28 to 1994
January 6, 1995 10-K
3-29 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-29 to 1995
January 5, 1996 10-K
3-30 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-30 to 1996
January 6, 1997 10-K
3-31 Certificate of Retirement of Stock dated Incorporated by reference from Exhibit 3-31 to 1997
January 9, 1998 10-K
3-32 Certificate of Retirement of Stock dated Filed with this Form 10-K
January 13, 1999
4-1 Certificate of Designations, Preferences, Incorporated by reference from Exhibit 3-3 to 1981
Rights and Number of Shares of 10-K
Redeemable Preferred Stock, Series B
4-2 Purchase Agreement dated as of Incorporated by reference from Exhibit 4-1 to the
February 7, 1985, between the Company Company's Form 8-K dated February 7, 1985 (date
and L&D Precision Limited Partnership of earliest event reported) located under Securities
("L&D Precision") and exhibits thereto and Exchange Commission File No. 0-3252
4-3 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-2 to 1990
April 27, 1990, between the Company and 10-K
L&D Precision with respect to Purchase
Agreement dated as of February 7, 1985
4-4 Recapitalization Agreement dated as of Incorporated by reference from Exhibit 4-10 to
April 27, 1990, between the Company and December 31, 1989 10-K
L&D Woolens Limited Partnership ("L&D
Woolens") and exhibits thereto
4-5 Specimen of Junior Subordinated Incorporated by reference from Exhibit 4-11 to
Convertible Increasing Rate Note, due December 31, 1989 10-K
May 1, 2000
</TABLE>
<PAGE> 65
-4-
<TABLE>
<S> <C> <C>
4-6 Specimen of 14% Junior Subordinated Incorporated by reference from Exhibit 10-2 to the
Note, due May 1, 2000 Company's Form 8-K dated December 10,1993
(date of earliest event reported) located under
Securities and Exchange Commission File
No. 0-3252
4-7 Indenture dated as of August 1, 1993, Incorporated by reference from Exhibit 4-2 to the
between the Company and IBJ Schroder Company's Form 8-K dated January 18, 1994 (date
Bank & Trust Company, as Trustee of earliest event reported) located under Securities
and Exchange Commission File No. 0-3252
4-8 Specimen of 12.75% Senior Subordinated Included in Exhibit 4-7 hereto
Note, due February 1, 2000
4-9 Note Purchase Agreement dated Incorporated by reference from Exhibit 10-2 to the
October 27, 1997, between the Company Company's Form 10-Q for the quarter ended
and Nomura Holding America, Inc. June 30, 1997 located under Securities and
("Nomura") Exchange Commission File No. 0-3252 ("June 30,
1997 Form 10-Q")
4-10 Specimen of 10.5% Senior Unsecured Incorporated by reference from Exhibit 10-3 to
Note due February 1, 2000, from the June 30, 1997 Form 10-Q
Company to Nomura
10-1 Purchase Agreement dated as of See Exhibit 4-2 hereto
February 7, 1985, between the Company
and L&D Precision and exhibits thereto
10-2 Amendment Agreement dated as of See Exhibit 4-3 hereto
April 27, 1990, between the Company
and L&D Precision with respect to
Purchase Agreement dated as of
February 7, 1985
10-3 Lexington Precision Corporation Flexible Incorporated by reference from Exhibit 10-3 to the
Compensation Plan, as amended Company's Form 10-K for the year ended
December 31, 1991 located under Securities and
Exchange Commission File No. 0-3252 ("1991
10-K")
10-4 1986 Restricted Stock Award Plan, as Incorporated by reference from Exhibit 10-38 to
amended December 31, 1989 10-K
10-5 Lexington Precision Corporation Filed with this Form 10-K
Retirement and Savings Plan, as amended
10-6 Description of 1998 Compensation Filed with this Form 10-K
Arrangements with Lubin, Delano, &
Company
</TABLE>
<PAGE> 66
-5-
<TABLE>
<S> <C> <C>
10-7 Corporate Office 1998 Management Cash Filed with this Form 10-K
Bonus Plan
10-8 Consent and Amendment Letter Incorporated by reference from Exhibit 10-1 to the
Agreement between Chemical Bank of Company's Form 8-K dated December 30, 1993
New Jersey and the Company dated as of (date of earliest event reported) located under
December 29, 1993 Securities and Exchange Commission File No.
0-3252
10-9 Promissory Note dated November 30, Incorporated by reference from Exhibit 10-32 to
1988, of LCI payable to the order of Paul May 31, 1989 10-K
H. Pennell in the original principal
amount of $3,530,000
10-10 Guaranty dated as of November 30, Incorporated by reference from Exhibit 10-33 to
1988, from the Company to Paul H. May 31, 1989 10-K
Pennell
10-11 Amendment Agreement dated as of Incorporated by reference from Exhibit 10-28 to
November 30, 1991, between LCI and 1991 10-K
Paul H. Pennell
10-12 Release and Notice Agreement dated as Incorporated by reference from Exhibit 10-40 to the
of March 31, 1993, between LCI and Company's Form 10-K for the year ended
Paul H. Pennell December 31, 1992 located under Securities and
Exchange Commission File No. 0-3252
10-13 Recapitalization Agreement dated as of See Exhibit 4-4 hereto
April 27, 1990, between the Company
and L&D Woolens and exhibits thereto
10-14 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-2 to
Agreement] dated as of January 11, November 30, 1989 10-Q
1990, between Congress Financial
Corporation ("Congress") and the
Company
10-15 Accounts Financing Agreement [Security Incorporated by reference from Exhibit 4-3 to
Agreement] dated as of January 11, November 30, 1989 10-Q
1990, between Congress and LCI
10-16 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-49 to
Financing Agreement [Security 1990 10-K
Agreement] dated as of January 11,
1990, between Congress and the
Company
10-17 Covenants Supplement to Accounts Incorporated by reference from Exhibit 10-50 to
Financing Agreement [Security 1990 10-K
Agreement] dated as of January 11,
1990, between Congress and LCI
</TABLE>
<PAGE> 67
-6-
<TABLE>
<S> <C> <C>
10-18 Letter dated April 11, 1990, from the Incorporated by reference from Exhibit 10-51 to
Company and Wise Die Casting, Inc. to 1990 10-K
Congress
10-19 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-54 to
1991, between the Company and 1990 10-K
Congress amending certain financing
agreements and consent thereto of LCI
10-20 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-56 to
1991, between LCI and Congress 1990 10-K
amending certain financing agreements
and consent thereto of the Company
10-21 Letter Agreement dated January 14, Incorporated by reference from Exhibit 10-26 to the
1994, between the Company and Company's Form 10-K for the year ended
Congress amending certain financing December 31, 1993 located under Securities and
agreements and consent thereto of LCI Exchange Commission File No. 0-3252 ("1993
10-K")
10-22 Letter Agreement dated January 14, Incorporated by reference from Exhibit 10-27 to
1994, between LCI and Congress 1993 10-K
amending certain financing agreements
and consent thereto of the Company
10-23 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-30 to
between Congress and the Company, and 1993 10-K
consent thereto of LCI
10-24 Letter Agreement dated March 25, 1994, Incorporated by reference from Exhibit 10-31 to
between Congress and LCI, and consent 1993 10-K
thereto of the Company
10-25 Letter Agreement dated as of Incorporated by reference from Exhibit 10-1 to the
August 1, 1994, between the Company Company's Form 10-Q for the quarter ended
and Congress amending certain financing September 30, 1994 located under Securities and
agreements and consent thereto of LCI Exchange Commission File No. 0-3252
("September 30, 1994 10-Q")
10-26 Letter Agreement dated as of Incorporated by reference from Exhibit 10-2 to
August 1, 1994, between LCI and September 30, 1994 10-Q
Congress amending certain financing
agreements and consent thereto of the
Company
10-27 Trade Financing Agreement Supplement Incorporated by reference from Exhibit 10-3 to
to Accounts Financing Agreement September 30, 1994 10-Q
[Security Agreement] dated as of July 19,
1994, between the Company and
Congress
</TABLE>
<PAGE> 68
-7-
<TABLE>
<S> <C> <C>
10-28 Letter Agreement dated January 13, Incorporated by reference from Exhibit 10-32 to
1995, between LCI and Congress 1994 Form 10-K
amending certain financing agreements
and consent thereto of the Company
10-29 Letter Agreement dated January 31, Incorporated by reference from Exhibit 10-34 to
1995, between the Company and 1994 Form 10-K
Congress amending certain financing
agreements and consent thereto of LCI
10-30 Letter Agreement dated January 31, Incorporated by reference from Exhibit 10-36 to
1995, between LCI and Congress 1994 Form 10-K
amending certain financing agreements
and consent thereto of the Company
10-31 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
dated August 1, 1995, from the Company Company's Form 10-Q for the quarter ended
in favor of Congress September 30, 1995 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1995 Form 10-Q")
10-32 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-2 to
dated August 1,1995, from LCI in favor September 30, 1995 Form 10-Q
of Congress
10-33 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-49 to the
dated January 16, 1996, from the Company's Form 10-K for the year ended
Company in favor of Congress December 31, 1995 located under Securities and
Exchange Commission File No.0-3252 ("1995
Form 10-K")
10-34 Term Promissory Note dated Incorporated by reference from Exhibit 10-50 to
January 16, 1996, in the amount of 1995 Form 10-K
$375,000 from the Company in favor of
Congress
10-35 Term Promissory Note dated Incorporated by reference from Exhibit 10-51 to
January 16, 1996, in the amount of 1995 Form 10-K
$450,000 from the Company in favor of
Congress
10-36 Letter Agreement dated February 28, Incorporated by reference from Exhibit 10-62 to
1996, from the Company in favor of 1995 Form 10-K
Congress amending certain financing
agreements and consent thereto of
Congress
10-37 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-63 to
and Consent dated March 14, 1996, from 1995 Form 10-K
the Company in favor of Congress
</TABLE>
<PAGE> 69
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<TABLE>
<S> <C> <C>
10-38 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-64 to
and Consent dated March 14, 1996, from 1995 Form 10-K
LCI in favor of Congress
10-39 Term Note dated May 31, 1996, from the Incorporated by reference from Exhibit 10-1 to the
Company in favor of Congress Company's Form 10-Q for the quarter ended
June 30, 1996 located under Securities and
Exchange Commission File No. 0-3252
10-40 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-3 to the
dated August 21, 1996, from LCI in favor Company's Form 10-Q for the quarter ended
of Congress September 30, 1996 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1996 Form 10-Q")
10-41 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-4 to
dated August 21, 1996, from the September 30, 1996 Form 10-Q
Company in favor of Congress
10-42 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-42 to the
dated January 31, 1997, from the Company's Form 10-K for the year ended
Company in favor of Congress December 31, 1996 located under Securities and
Exchange Commission File No. 0-3252 ("1996
Form 10-K")
10-43 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-43 to
dated January 31, 1997, from LCI in favor 1996 Form 10-K
of Congress
10-44 Credit Facility and Security Agreement Incorporated by reference from Exhibit 10-44 to
and Rider A to Credit Facility and 1996 Form 10-K
Security Agreement dated January 31,
1997, from the Company and LCI in favor
of Bank One, Akron, NA ("Bank One")
10-45 Promissory Note (Equipment Term Loan) Incorporated by reference from Exhibit 10-45 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-46 Promissory Note (North Canton Term Incorporated by reference from Exhibit 10-46 to
Loan) dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-47 Promissory Note (Vienna Term Loan) Incorporated by reference from Exhibit 10-47 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-48 Promissory Note (Casa Grande Note) Incorporated by reference from Exhibit 10-48 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
</TABLE>
<PAGE> 70
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<TABLE>
<S> <C> <C>
10-49 Promissory Note (LaGrange Term Loan) Incorporated by reference from Exhibit 10-49 to
dated January 31, 1997, from the 1996 Form 10-K
Company and LCI in favor of Bank One
10-50 Promissory Note (North Canton Incorporated by reference from Exhibit 10-50 to
Equipment Loan) dated January 31, 1997, 1996 Form 10-K
from the Company and LCI in favor of
Bank One
10-51 Fourth Amended and Restated Promissory Incorporated by reference from Exhibit 10-51 to
Note dated March 11, 1997, from LCI in 1996 Form 10-K
favor of Congress
10-52 Fourth Amended and Restated Promissory Incorporated by reference from Exhibit 10-52 to
Note dated March 11, 1997, from the 1996 Form 10-K
Company in favor of Congress
10-53 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-53 to
dated March 11, 1997, from LCI in favor 1996 Form 10-K
of Congress
10-54 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-54 to
dated March 11, 1997, from the Company 1996 Form 10-K
in favor of Congress
10-55 Loan and Security Agreement and Rider Incorporated by reference from Exhibit 10-55 to
A to Loan and Security Agreement dated 1996 Form 10-K
March 19, 1997, from the Company in
favor of The CIT Group/Equipment
Financing, Inc. ("CIT")
10-56 Promissory Note dated March 19, 1997, Incorporated by reference from Exhibit 10-56 to
from the Company in favor of CIT 1996 Form 10-K
10-57 Additional Purchase Order Provisions Incorporated by reference in redacted form pursuant
Lifetime Contract Between Delphi to Rule 24b-2 from Exhibit 10-57 to 1996 Form
Packard Electric Systems and Lexington 10-K
Connector Seals
10-58 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-1 to the
and Consent dated April 17, 1997, Company's Form 10-Q for the quarter ended
between the Company and Congress March 31, 1997 located under Securities and
Exchange Commission File No. 0-3252 ("March 31,
1997 Form 10-Q")
10-59 Amendment to Financing Agreements Incorporated by reference from Exhibit 10-2 to
and Consent dated April 17, 1997, March 31, 1997 Form 10-Q
between LCI and Congress
</TABLE>
<PAGE> 71
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<TABLE>
<S> <C> <C>
10-60 First Amendment Agreement dated Incorporated by reference from Exhibit 10-3 to
April 17, 1997, among the Company, March 31, 1997 Form 10-Q
LCI, and Bank One
10-61 Specimen of Amended and Restated Incorporated by reference from Exhibit 10-4
Promissory Note dated April 17, 1997, of March 31, 1997 Form 10-Q
the Company and LCI to Bank One
10-62 Specimen of Promissory Note dated Incorporated by reference from Exhibit 10-1 to the
August 29, 1997, from the Company to Company's Form 10-Q for the quarter ended
CIT June 30, 1997 located under Securities and
Exchange Commission File No. 0-3252 ("June 30,
1997 Form 10-Q")
10-63 Note Purchase Agreement dated Incorporated by reference from Exhibit 10-2 to
October 27, 1997, between the Company June 30, 1997 Form 10-Q
and Nomura
10-64 Specimen of 10.5% Senior Unsecured Incorporated by reference from Exhibit 10-3 to
Note due February 1, 2000, from the June 30, 1997 Form 10-Q
Company to Nomura
10-65 Amended No. 1 to Credit Facility and Incorporated by reference from Exhibit 10-65 to the
Security Agreement dated December 31, Company's Form 10-K for the year ended
1997, between the Company, LCI, and December 31, 1997 located under Securities and
Bank One Exchange Commission File No. 0-3252 ("1997
Form 10-K")
10-66 Amendment No. 2 to Credit Facility and Incorporated by reference from Exhibit 10-66 to
Security Agreement dated March 20, 1997 Form 10-K
1998, between the Company, LCI, and
Bank One
10-67 Promissory Note dated March 31, 1998, Incorporated by reference from Exhibit 10-1 to the
from the Company in favor of CIT Company's Form 10-Q for the quarter ended
March 31, 1998 located under Securities and
Exchange Commission File No. 0-3252 ("March 31,
1998 Form 10-Q")
10-68 New Equipment Term Note dated Incorporated by reference from Exhibit 10-1 to the
June 26, 1998, from the Company in Company's Form 10-Q for the quarter ended
favor of Congress June 30, 1998 located under Securities and
Exchange Commission File No. 0-3252 ("June 30,
1998 Form 10-Q")
10-69 Second Amendment Agreement dated Incorporated by reference from Exhibit 10-2 to the
May 1, 1998, from LCI in favor of Paul Company's Form 10-Q for the quarter ended
H. Pennell June 30, 1998 located under Securities and
Exchange Commission File No. 0-3252 ("June 30,
1998 Form 10-Q")
</TABLE>
<PAGE> 72
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<TABLE>
<S> <C> <C>
10-70 Amendment No. 1 to Loan and Security Incorporated by reference from Exhibit 10-1 to the
Agreement dated June 30, 1998, between Company's Form 10-Q for the quarter ended
the Company and CIT September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-71 Amendment No. 3 to Credit Facility and Incorporated by reference from Exhibit 10-2 to the
Security Agreement dated June 30, 1998, Company's Form 10-Q for the quarter ended
between the Company, LCI, and Bank September 30, 1998 located under Securities and
One Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-72 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-3 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
the Company and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-73 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-4 to the
Consent dated August 13, 1998, between Company's Form 10-Q for the quarter ended
LCI and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-74 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-5 to the
Consent dated October 20, 1998, between Company's Form 10-Q for the quarter ended
the Company and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-75 Amendment to Financing Agreements and Incorporated by reference from Exhibit 10-6 to the
Consent dated October 20, 1998, between Company's Form 10-Q for the quarter ended
LCI and Congress September 30, 1998 located under Securities and
Exchange Commission File No. 0-3252
("September 30, 1998 Form 10-Q")
10-76 Amendment No. 2 to Loan and Security Filed with this Form 10-K
Agreement dated November 30, 1998,
between the Company and CIT
10-77 New Equipment Term Note dated Filed with this Form 10-K
December 16, 1998, between the
Company and Congress
10-78 Amendment to Financing Agreements Filed with this Form 10-K
dated January 28, 1999, between the
Company and Congress
10-79 Amendment to Financing Agreements Filed with this Form 10-K
dated January 28, 1999, between LCI and
Congress
</TABLE>
<PAGE> 73
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<TABLE>
<S> <C> <C>
10-80 Term Promissory Note dated January 28, Filed with this Form 10-K
1999, between LCI and Congress
10-81 Term Promissory Note dated January 28, Filed with this Form 10-K
1999, between LPC and Congress
10-82 Fifth Amended and Restated Promissory Filed with this Form 10-K
Note dated January 28, 1999, between
the Company and Congress
10-83 Amendment No. 6 to Credit Facility and Filed with this Form 10-K
Security Agreement dated January 31,
1999, between the Company, LCI, and
Bank One
10-84 Fifth Amendment Agreement dated Filed with this Form 10-K
March 10, 1999, between the Company,
LCI, and Bank One
10-85 Promissory Note (Additional Equipment Filed with this Form 10-K
Term Loan) dated March 10, 1999,
between the Company, LCI, and Bank
One
10-86 Promissory Note dated March 30, 1999, Filed with this Form 10-K
between the Company and CIT
10-87 Amendment No. 3 to Loan and Security Filed with this Form 10-K
Agreement dated March 30, 1999,
between the Company and CIT
21-1 Significant Subsidiary of Registrant Filed with this Form 10-K
27-1 Financial Data Schedule Filed with this Form 10-K
</TABLE>
<PAGE> 1
Exhibit 3.2
BY-LAWS, AS AMENDED, OF
LEXINGTON PRECISION CORPORATION
(As Amended Through May 13, 1998)
ARTICLE I
OFFICES
SECTION 1. The registered office of Lexington Precision Corporation, a
Delaware corporation (hereinafter referred to as the "corporation"), within the
State of Delaware is The Prentice-Hall Corporation System, Inc., 229 South State
Street, Dover, Delaware 19901, County of Kent, and the name of its registered
agent at that address is The Prentice-Hall Corporation System, Inc.
SECTION 2. The corporation may also have offices at such places,
either within or without the State of Delaware, as the board of directors may
from time to time designate or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. All meetings of the stockholders for the election of
directors or for any other purpose shall be held at such time and place, either
within or without the State of Delaware, as shall be stated in the notice of
meeting or in a duly executed waiver thereof.
SECTION 2. The annual meeting of stockholders shall be held on such
date and at such hour as shall be designated each year by the board of
directors. At such annual meeting, the stockholders shall elect a board of
directors and transact such other business as may be properly brought before the
meeting.
SECTION 3. Special meetings of stockholders for any purpose or
purposes, unless otherwise prescribed by statute or by the corporation's
certificate of incorporation, may be called by the Chairman of the Board or the
President and shall be called by the Chairman of the Board, the President or the
Secretary at the request in writing of a majority of the board of directors.
Such request shall state the purpose of purposes of the proposed meeting.
SECTION 4. Except as otherwise expressly required by statute, written
notice of each annual and special meeting of stockholders, stating the place,
date and hour of the meeting, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given to each stockholder
of record entitled to vote thereat not less than ten nor more than sixty days
before the date of the meeting. Notice shall be given personally or by mail and,
if by mail, shall be sent in a postage prepaid envelope, addressed to the
stockholder at his
<PAGE> 2
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address as it appears on the records of the corporation. Notice by mail shall be
deemed given at the time when the same shall be deposited in the United States
mail, postage prepaid. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when such person attends the meeting in
person or by proxy for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. A written waiver of notice signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Neither the business to be transacted at, nor the purpose
of, an annual or special meeting of stockholders need be specified in any
written waiver of notice. Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
SECTION 5. The officer who has charge of the stock transfer books of
the corporation shall prepare and make, at the time and in the manner required
by applicable law, a list of stockholders entitled to vote and shall make such
list available for such purposes, at such places, at such times and to such
persons as required by applicable law. The stock transfer books shall be the
only evidence as to the identity of the stockholders entitled to examine the
stock transfer books or to vote in person or by proxy at any meeting of
stockholders.
SECTION 6. The holders of a majority of the voting power of the issued
and outstanding stock of the corporation entitled to vote thereat, present in
person or represented by proxy, shall constitute a quorum for the transaction of
business at any meeting of stockholders, except as otherwise provided by statute
or by the corporation's certificate of incorporation. The stockholders present
and entitled to vote at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders entitled to vote to leave less than a quorum
then present and represented provided that the action taken (other than an
adjournment) is approved by at least a majority of the holders of stock required
to constitute a quorum. Any stockholders' meeting, annual or special, whether or
not a quorum is present or represented, may be adjourned from time to time by
the vote of the holders of a majority of the stock entitled to vote thereat, the
holders of which are either present in person or represented by proxy, or the
chairman of the meeting, but in the absence of a quorum no other business may be
transacted at such meeting. At any adjourned meeting, at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified, except for such business as
was duly transacted at any earlier meeting. If the adjournment is for more than
thirty days, or if after adjournment a new record date is set, a notice of the
adjourned meeting shall be given as in the case of an original meeting to each
stockholder of record entitled to vote at the meeting.
SECTION 7. At each meeting of stockholders, the Chairman of the Board
or, in his absence or inability to act, such other person as the board of
directors may have designated shall call to order and act as chairman of the
meeting. The Secretary or, in his absence or inability to act, the person whom
the chairman of the meeting shall appoint secretary of the meeting shall act as
secretary of the meeting and keep the minutes thereof.
SECTION 8. The order of business and the procedure at all meetings of
the stockholders shall be as determined by title chairman of the meeting, unless
otherwise prescribed by law or regulation.
<PAGE> 3
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SECTION 9. Except as otherwise provided by statute or the
corporation's certificate of incorporation, each stockholder of the corporation
shall be entitled at each meeting of stockholders to one vote for each share of
capital stock of the corporation standing in his name on the record of
stockholders of the corporation
(a) on the date fixed pursuant to the provisions of Section 7 of Article V
of these by-laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close of
business on the day next preceding the day on which notice thereof
shall be given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated in
the order of business for so delivering such proxies. When a quorum is present
at any meeting, the vote of the holders of a majority of the voting power of the
issued and outstanding stock of the corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which, by express provision
of statute or of the corporation's certificate of incorporation or of these
by-laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. On a vote by ballot,
each ballot shall be signed by the stockholder voting, or by his proxy, if
represented by proxy, and shall state the number of shares voted.
SECTION 10. The board of directors may, in advance of any meeting of
stockholders, appoint one or more inspectors to act at, and make a written
report of, such meeting or any adjournment thereof. If any of the inspectors so
appointed shall fail to appear or act, the chairman of the meeting shall, or, if
inspectors shall not have been appointed, the chairman of the meeting may,
appoint one or more inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of shares of
capital stock of the corporation outstanding and the voting power thereof, the
number of shares represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, certify their determination of the
number of shares represented at the meeting and shall receive votes or ballots,
hear, determine and retain for a reasonable period a record of the disposition
of, all challenges and questions arising in connection with the right to vote,
count and tabulate all votes or ballots, determine the results and perform such
acts as are proper to conduct the election or vote with fairness to all
stockholders. If more than one inspector has been appointed, the decision, act
or certificate of a majority of the inspectors is effective in all respects as
the decision, act or certificate of all of the inspectors. On request of the
chairman of the meeting, the inspector shall make a report in writing of any
challenge, request or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as an
<PAGE> 4
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inspector of election with respect to an election of directors. Inspectors need
not be stockholders.
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. The number of directors that shall constitute the whole
board shall be not less than three nor more than fifteen.
Notwithstanding the foregoing, whenever the holders of any preferred
stock, as provided in the certificate of incorporation or in any resolution or
resolutions of the board of directors establishing any such preferred stock,
shall have the right, voting as a single class, to elect directors at the annual
or a special meeting of stockholders, the then-authorized number of directors of
the corporation may be increased by such number as may be therein provided, and
the additional directors so provided for shall be elected and hold office as
provided therein.
SECTION 2. The business and affairs of the corporation shall be
managed by or under the direction of the board of directors. The board of
directors may exercise all such authority and powers of the corporation and do
all such lawful acts and things as are not by statute, the corporation's
certificate of incorporation or these by-laws directed or required to be
exercised or done by the stockholders.
SECTION 3. Meetings of the board of directors shall be held at such
place or places, within or without the State of Delaware, as the board of
directors may from time to time determine or as shall be specified in the notice
of any such meeting.
SECTION 4. The board of directors shall meet for the purpose of
organization, the election of officers and the transaction of other business, as
soon as practicable after each annual meeting of stockholders, on the same day
and at the same place where such annual meeting shall be held. Notice of such
meeting need not be given. In the event such annual meeting is not so held, the
annual meeting of the board of directors may be held at such other time or
place, within or without the State of Delaware, as shall be specified in a
notice thereof given as provided in Section 7 of this Article III.
SECTION 5. Regular meetings of the board of directors shall be held at
such time and place as the board of directors may fix. If any day fixed for a
regular meeting shall be a legal holiday at the place where the meeting is to be
held, then the meeting which would otherwise be held on that day shall be held
at the same hour on the next succeeding business day. Notice of regular meetings
of the board of directors need not be given.
SECTION 6. Special meetings of the board of directors may be called by
the Chairman of the Board or the President and shall be called by the Secretary
on the written request of a majority of the members of the Board of Directors.
SECTION 7. Notice of each special meeting of the board of directors
shall be given by the President or the Secretary as hereinafter provided in this
Section 7, in which notice
<PAGE> 5
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shall be stated the time and place of the meeting. Except as otherwise required
by these by-laws, such notice need not state the purpose or purposes of such
meeting. Notice of each such meeting shall be mailed, postage prepaid, to each
director, addressed to him at his residence or usual place of business, by first
class mail, at least four days before the time of the meeting, or shall be sent
addressed to him at such place by telegraph, cable, telex, telefax, telecopier
or other similar means, or be delivered to him personally or be given to him by
telephone or other similar means, at least twelve hours before the time of the
meeting. A written waiver of notice signed by a director, whether before or
after the time stated therein, shall be deemed equivalent to notice to such
director. Attendance of a director at meeting shall constitute a waiver of
notice of such meeting by such director, except when such director attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
SECTION 8. At all meetings of the board of directors, a majority of
the total number of directors shall be necessary and sufficient to constitute a
quorum for the transaction of business, and, except as otherwise expressly
required by statute or the corporation's certificate of incorporation or these
by-laws, the act of a majority of the directors present at any meeting at which
a quorum is present shall be the act of the board of directors. In the absence
of a quorum at any meeting of the board of directors, a majority of the
directors present thereat may adjourn such meeting to another time and place.
Notice of the time and place of any such adjourned meeting shall be given to all
of the directors unless such time and place were announced at the meeting at
which the adjournment was taken, in which case such notice shall only be given
to the directors who were not present thereat. At any adjourned meeting at which
a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only as
a board and the individual directors shall have no power as such.
SECTION 9. Any director of the corporation may resign at any time by
giving written notice of his resignation to the corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
tender. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 10. Each director shall receive such fees and other
compensation, along with reimbursement of expenses incurred on behalf of the
corporation or in connection with attendance at meetings, as the board of
directors may from time to time determine. No such payment of fees or other
compensation shall preclude any director from serving the corporation in any
other capacity and receiving fees or other compensation for such services.
SECTION 11. Unless restricted by the corporation's certificate of
incorporation, the board of directors may, by resolution passed by a majority of
the entire board of directors, designate one or more committees, including an
executive committee, each committee to consist of one or more of the directors
of the corporation. The board of directors may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, a member or members thereof present
at any meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously
<PAGE> 6
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appoint another member of the board of directors to act at the meeting in the
place or any such absent or disqualified member. Except to the extent restricted
by statute or the corporation's certificate of incorporation, each such
committee, to the extent-provided in the resolution creating it, shall have and
may exercise all of the powers and authority of the board of directors,
including, if such resolution so provides, the power to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to section 253 of Title 8 of the Delaware Code, and may
authorize the seal of the corporation to be affixed to all papers which require
it. Each such committee shall serve at the pleasure of the board of directors
and have such name as may be determined from time to time by resolution adopted
by the board of directors. Each committee shall keep regular minutes of its
meetings and report the same to the board of directors. Members of either
standing or special committees shall receive such fees and other compensation,
along with reimbursement of expenses incurred on behalf of the corporation or in
connection with attendance at meetings, as the board of directors may from time
to time determine. No such payment of fees or compensation shall preclude any
member of a committee from serving the corporation in any other capacity and
receiving fees or other compensation for such services.
SECTION 12. Any action required or permitted to be taken by the board
of directors or any committee thereof may be taken without a meeting if all
members of the board of directors or such committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
the proceedings of the board of directors or such committee, as the case may be.
SECTION 13. Any one or more members of the board of directors or any
committee of the board of directors may participate in a meeting of the board of
directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation by such means shall constitute
presence in person at a meeting.
SECTION 14. A director of the corporation who is present at a meeting
of the board of directors or any committee thereof at which action is taken
shall be presumed to have assented to the action taken unless his dissent or
abstention therefrom shall be entered in the minutes of the meeting or unless he
shall file a written dissent from such action with the person acting as the
secretary of the meeting before the adjournment thereof or shall forward such
dissent by registered mail to the Secretary of the corporation within five days
after the date a copy of the minutes of the meeting is received. Such right to
dissent shall not apply to a director who voted in favor of such action.
ARTICLE IV
OFFICERS
SECTION 1. The officers of the corporation shall be elected annually
by the board of directors at the first meeting of the board held after each
annual meeting of stockholders, or as soon thereafter as possible. The board of
directors shall elect from among its number a Chairman of the Board. The board
of directors shall also elect a President, one or more Vice Presidents, a
Secretary and a Treasurer, who need not be directors. If the board of directors
<PAGE> 7
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wishes, it may also elect such other officers (including one or more Assistant
Treasurers and one or more Assistant Secretaries) as may be necessary or
desirable for the business of the corporation. Any two or more offices may be
held by the same person, except the offices of President and Secretary. Each
officer shall hold office until his successor shall have been duly elected and
qualified, or until his death, resignation, or removal, as hereinafter provided.
A vacancy in any office because of death, resignation, removal, disqualification
or otherwise, shall be filled only by a majority vote of the board of directors
for the unexpired portion of the term.
SECTION 2. Any officer of the corporation may resign at any time by
giving written notice of his resignation to the corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
tender. Unless otherwise specified therein, the acceptance of any such
registration shall not be necessary to make it effective.
SECTION 3. Any officer of the corporation may be removed, either with
or without cause, at any time, by the board of directors at any meeting thereof,
but such removal shall be without prejudice to the contract rights, if any, of
the person so removed.
SECTION 4. The Chairman of the Board shall be the chief executive
officer of the corporation and shall, if present, preside at each meeting of
stockholders and of the board of directors. He shall perform all duties incident
to the office of chief executive officer and such other duties as may from time
to time be assigned to him by the board of directors.
SECTION 5. The President shall be the chief operating officer of the
corporation. He shall perform all duties incident to the office of the president
and chief operating officer and such other duties as may from time to time be
assigned to him by the board of directors or the Chairman of the Board.
SECTION 6. Each Vice President shall perform all duties incident to
his office and such other duties as from time to time may be assigned to him by
the board of directors, the Chairman of the Board or the President.
SECTION 7. The Treasurer shall
(a) be the principal financial officer and principal accounting officer of
the corporation;
(b) have charge and custody of, and be responsible for, all the funds and
securities of the corporation;
(c) keep full and accurate accounts of receipts and disbursements in books
belonging to the corporation;
(d) deposit all moneys and other valuables to the credit of the
corporation in such depositaries as may be designated by the board of
directors or pursuant to its direction;
(e) receive, and give receipts for, moneys due and payable to the
corporation from any source whatsoever;
<PAGE> 8
-8-
(f) disburse the funds of the corporation and supervise the investment of
its funds, taking proper vouchers therefor;
(g) render to the board of directors, whenever the board of directors may
require, an accounting of the financial condition of the corporation;
and
(h) in general, perform all other duties incident to the office of
Treasurer and such other duties as from time to time may be assigned
to him by the board of directors, the Chairman of the Board or the
President.
SECTION 8. Secretary. The Secretary shall
(a) keep or cause to be kept, in one or more books provided for the
purpose, the minutes of all meetings of the board of directors, the
committees of the board of directors and the stockholders;
(b) see that all notices are duly given in accordance with the provisions
of these by-laws and as required by law;
(c) be custodian of the records and the seal of the corporation and affix
and attest the seal to all certificates for shares of the corporation
(unless the seal of the corporation on such certificates shall be
facsimile, as hereinafter provided) and affix and attest the seal to
all other documents to be executed on behalf of the corporation under
its seal;
(d) see that the books, reports, statements certificates and other
documents and records required by law to be kept and filed are
properly kept and filed; and
(e) in general, perform all other duties incident to the office of
Secretary and such other duties as from time to time may be assigned
to him by the board of directors, the Chairman of the Board or the
President.
SECTION 9. The Assistant Treasurer, or if there shall be more than
one, the Assistant Treasurers in the order determined by the board of directors
(or, if there be no such determination, then in the order of their election),
shall, at the request of the Chairman of the Board or the President or the
Treasurer or in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties of the Treasurer (and when so acting, shall
have the powers of and be subject to the restrictions placed upon the Treasurer
in respect of the performance of such duties) and shall perform such other
duties as from time to time may be assigned by the board of directors, the
Chairman of the Board or the President.
SECTION 10. The Assistant Secretary or if there be more than one, the
Assistant Secretaries in the order determined by the board of directors (of, if
there be no such determination, then in the order of their election), shall, at
the request of the Chairman of the Board or the President or the Secretary or in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties of the Secretary (and when so acting, shall have the powers
of and be subject to the restrictions placed upon the Secretary in respect of
the performance of such duties) and shall perform such other duties as from time
to time may be assigned by the board of directors, the Chairman of the Board or
the President.
<PAGE> 9
-9-
SECTION 11. If required by the board of directors, any officer of the
corporation shall give a bond or other security for the faithful performance of
his duties, in such amount and with such surety as the board of directors may
require.
SECTION 12. The compensation of the officers of the corporation for
their services as such officers shall be fixed from time to time by the board of
directors. An officer of the corporation shall not be prevented from receiving
compensation by reason of the fact that he is also a director of the
corporation.
ARTICLE V
STOCK CERTIFICATES AND THEIR TRANSFER
SECTION 1. Every holder of stock in the corporation shall be entitled
to have a certificate signed by, or in the name of the corporation by the
Chairman of the Board, the President or a Vice President and by the Treasurer or
an Assistant Treasurer or the Secretary or an Assistant Secretary of the
corporation certifying the number of shares owned by him in the corporation. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preference
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth, on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
SECTION 2. Any or all of the signatures on a certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if he were
such officer, transfer agent or registrar at the date of issuance.
SECTION 3. The board of directors may direct that a new certificate or
certificates be issued in place of any certificate or certificates theretofore
issued by the corporation alleged to have been lost, stolen or destroyed. When
authorizing the issuance of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the corporation a bond or
other indemnity in such amount as it may direct sufficient to indemnify it
against any claim that may be made against the corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
<PAGE> 10
-10-
SECTION 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its records;
provided, however, that the corporation shall be entitled to recognize and
enforce any lawful restriction on transfer. Whenever any transfer of stock shall
be made for collateral security, and not absolutely, it shall be so expressed in
the entry of transfer if, when the certificates are presented to the corporation
for transfer, both the transferor and the transferee request the corporation to
do so. Persons whose stock is pledged shall be entitled to vote, unless in the
transfer by the pledgor on the books of the corporation he has expressly
empowered the pledgee to vote thereon, in which case only the pledgee, or his
proxy, may represent and vote such stock.
SECTION 5. The board of directors may appoint, or authorize any
officer or officers to appoint, one or more transfer agents and one or more
registrars.
SECTION 6. The board of directors may make such additional rules and
regulations, not inconsistent with these by-laws, as it may deem expedient
concerning the issuance, transfer and registration of certificates for shares of
stock of the corporation.
SECTION 7. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or entitled to receive payment of any dividend or other
distribution or any allotment of rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors fix a new record date for the adjourned
meeting.
SECTION 8. The corporation shall be entitled to recognize the
exclusive right of a person registered on its records as the owner of shares of
stock to receive dividends and to vote as such owner, shall be entitled to hold
liable for calls and assessments a person registered on its records as the owner
of shares of stock, and shall not be bound to recognize any equitable or other
claim to or interest in such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by the laws of Delaware.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS AND OFFICERS
SECTION 1. The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or
<PAGE> 11
-11-
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. The corporation shall indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, provided that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or agent
of the corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in Sections 1 and 2 of this
Article VI, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
SECTION 4. Any indemnification under Sections I and 2 of this
Article VI (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Sections 1 and 2.
Such determination shall be made (a) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.
SECTION 5. Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the corporation in advance of the final
disposition of such action, suit
<PAGE> 12
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or proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall be ultimately
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article VI.
SECTION 6. The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Article VI shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any law, provision of the
corporation's certificate of incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
SECTION 7. The corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the corporation would have the power to indemnify him
against such liability under the provisions of this Article VI.
SECTION 8. For purposes of this Article VI, references to "the
corporation" include all constituent corporations (including a constituent of a
constituent) absorbed in a consolidation or merger as well as the resulting or
surviving corporation so that any person who is or was a director, officer,
employee or agent of such a constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as lie would
if he had served the resulting or surviving corporation in the same capacity;
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to any employee benefit plan; and references to "serving at the request
of the corporation" shall include any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by,
such director, officer, employee or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article VI.
SECTION 9. The indemnification and advancement of expenses provided
by, or granted pursuant to, this Article VI shall continue as to a person who
has ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.
<PAGE> 13
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ARTICLE VII
GENERAL PROVISIONS
SECTION 1. Subject to the provisions of law and the corporation's
certificate of incorporation, dividends upon the shares of capital stock of the
corporation may be declared by the board of directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of the
corporation, unless otherwise provided by law or the corporation's certificate
of incorporation.
SECTION 2. The seal of the corporation shall be in such form as shall
be approved by the board of directors.
SECTION 3. The fiscal year of the corporation shall be fixed, and once
fixed, may thereafter be changed, by resolution of the board of directors. The
corporation shall be subject to an annual audit as of the end of its fiscal year
by independent public accountants appointed by and responsible to the board of
directors. The appointment of such accountants shall be subject to annual
ratification by the stockholders.
SECTION 4. All checks, notes, drafts or other orders for the payment
of money of the corporation shall be signed, endorsed or accepted in the name of
the corporation by such officer, officers, person or persons as from time to
time may be designated by the board of directors or by an officer or officers
authorized by the board of directors to make such designation.
SECTION 5. The board of directors may authorize any officer or
officers, agent or agents, in the name and on behalf of the corporation to enter
into or execute and deliver any and all deeds, bonds, mortgages, contracts and
other obligations or instruments, and such authority may be general or confined
to specific instances.
SECTION 6. Unless otherwise provided by resolution of the board of
directors, the Chairman of the Board or the President, from time to time, may
(or may appoint one or more attorneys or agents to) cast the votes which the
corporation may be entitled to cast as a stockholder or otherwise in any other
corporation, any of whose shares or securities may be held by the corporation,
at meetings of the holders of the shares or other securities of such other
corporation. In the event one or more attorneys or agents are appointed, the
Chairman of the Board or the President, may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent. The
Chairman of the Board or the President may, or may instruct the attorneys or
agents appointed to, execute or cause to be executed in the name and on behalf
of the corporation and under its seal or otherwise, such written proxies,
consents, waivers or other instruments as may be necessary or proper in the
circumstances.
<PAGE> 14
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ARTICLE VIII
AMENDMENTS
These by-laws may be amended, altered or repealed at any
regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such amendment, alteration or repeal be contained in the notice of such special
meeting, except that any amendment to Section 1 of Article III of these by-laws
shall require the affirmative vote of 75% of all outstanding shares of all
classes of capital stock of the corporation entitled to vote in elections of
directors, considered for the purposes of this Section as one class.
<PAGE> 1
EXHIBIT 3.32
CERTIFICATE OF RETIREMENT OF STOCK
LEXINGTON PRECISION CORPORATION, a corporation organized and
existing under the General Corporation Law of the State of Delaware ("the
Corporation") ,
DOES HEREBY CERTIFY:
FIRST: That the Corporation acquired an aggregate of Four Hundred
Fifty (450) shares of the Corporation's $4 - $8 Cumulative Convertible Preferred
Stock, Series B, par value $100 per share, which shares had capital applied in
connection with their acquisition and which shares upon their acquisition became
retired shares.
SECOND: That the Restated Certificate of Incorporation of the
Corporation prohibits the reissue of the shares of $4 - $8 Cumulative
Convertible Preferred Stock, Series B, when so retired; and pursuant to the
provisions of Section 243 of the General Corporation Law of the State of
Delaware, upon the effective date of the filing of this certificate as therein
provided, the Restated Certificate of Incorporation of the Corporation shall be
amended so as to effect a reduction in the authorized number of shares of the $4
- - $8 Cumulative Convertible Preferred Stock, Series B, to the extent of Four
Hundred Fifty (450) shares, being the total number of shares retired with a par
value of $100 per share, and an aggregate par value of $45,000.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Dennis J. Welhouse, its Senior Vice President and Chief Financial
Officer, and attested to by Kelly L. MacMillan, its Treasurer, this 13th day of
January, 1999.
LEXINGTON PRECISION CORPORATION
By: Dennis J. Welhouse
-------------------------------
Dennis J. Welhouse
Senior Vice President
and Chief Financial Officer
ATTEST:
By: Kelly L. Macmillan
---------------------------
Kelly L. MacMillan
Treasurer
<PAGE> 1
Exhibit 10.5
THE CORPORATE PLAN FOR RETIREMENT
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
-----------------------------------
<PAGE> 2
THE CORPORATE PLAN FOR RETIREMENT
PROFIT SHARING/401(K) PLAN
<TABLE>
<CAPTION>
<S> <C>
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment 3.03 - Cessation
or Resumption of Participation Following a Change in
Status
3.04 - Participation by Owner-Employee; Controlled Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee Contributions
4.05 - Special Rules
4.06 - Fixed/Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
</TABLE>
2
<PAGE> 3
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS
TO OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
3
<PAGE> 4
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic Relations Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14.23 - Governing Law
4
<PAGE> 5
ARTICLE 1. ADOPTION AGREEMENT.
ARTICLE 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning is clearly required by the
context:
(1) "Account" means an account established on the books of the Trust
for the purpose of recording contributions made on behalf of a
Participant and any income, expenses, gains or losses incurred
thereon.
(2) "Administrator" means the Employer adopting this Plan, or other
person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1, under which the Employer
establishes and adopts, or amends, the Plan and Trust and designates
the optional provisions selected by the Employer, and the Trustee
accepts its responsibilities under Article 14. The provisions of the
Adoption Agreement shall be an integral part of the Plan.
(4) "Annuity Starting Date" means the first day of the first period
for which an amount is payable as an annuity or in any other form.
(5) "Beneficiary" means the person or persons entitled under Section
7.04 to receive benefits under the Plan upon the death of a
Participant, provided that for purposes of Section 7.04 such term
shall be applied in accordance with Section 401(a)(9) of the Code and
the regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(7) "Compensation" shall mean
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by
the Employer in Section 1.04(a), reimbursements or other
expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but
including amounts that are not includable in the gross income
of the Participant under a salary reduction agreement by reason
of the application of Sections 125, 402(a)(8), 402(h), or
403(b) of the Code; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top-Heavy Plan Minimum Contribution),
compensation as defined in Section 5.03(e)(2).
<PAGE> 6
Compensation shall generally be based on the amount actually
paid to the Participant during the Plan Year or, for purposes of
Article 4 if so elected by the Employer in Section 1.04(b), during
that portion of the Plan Year during which the Employee is eligible
to participate. Notwithstanding the preceding sentence, compensation
for purposes of Section 5.03 (Code Section 415 Limitations) shall be
based on the amount actually paid or made available to the
Participant during the Limitation Year. Compensation for the initial
Plan Year for a new plan shall be based upon eligible Participant
Compensation, subject to Section 1.04(b), from the Effective Date
listed in Section 1.01(g)(1) through the end of the first Plan Year.
In the case of any Self-Employed Individual, Compensation shall
mean the Individual's Earned Income.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for determining
all benefits provided under the plan for any determination period
shall not exceed $200,000. This limitation shall be adjusted by the
Secretary at the same time and in the same manner as under Section
415(d) of the Code, except that the dollar increase in effect on
January 1 of any calendar year is effective for years beginning in
such calendar year and the first adjustment to the $200,000
limitation is effected on January 1, 1990. If a plan determines
Compensation on a period of time that contains fewer than 12 calendar
months, then the annual Compensation limit is the amount equal to the
annual Compensation limit for the calendar year in which the
Compensation period begins multiplied by the ratio obtained by
dividing the number of full months in the period by 12.
If Compensation for any prior determination period is taken into
account in determining an Employee's allocations or benefits for the
current determination period, the Compensation for such prior year is
subject to the applicable annual compensation limit in effect for
that prior year. For this purpose, for years beginning before
January 1, 1990, the applicable annual compensation limit is
$200,000.
In determining the Compensation of a Participant for purposes of
this limitation, the rules of Section 414(q)(6) of the Code shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of
the year. If the $200,000 limitation is exceeded as a result of the
application of these rules, 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.
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(8) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to which
the Plan is established and for which the personal services of such
individual are a material income-providing factor, excluding any
items not included in gross income and the deductions allocated to
such items, except that for taxable years beginning after
December 31, 1989 net earnings shall be determined with regard to the
deduction allowed under Section 164(f) of the Code, to the extent
applicable to the Employer. Net earnings shall be reduced by
contributions of the Employer to any qualified plan, to the extent a
deduction is allowed to the Employer for such contributions under
Section 404 of the Code.
(9) "Eligibility Computation Period" means each 12-consecutive month
period beginning with the Employment Commencement Date and each
anniversary thereof or, in the case of an Employee who, before
completing the eligibility requirements set forth in Section
1.03(a)(1), incurs a break in service for participation purposes and
thereafter returns to the employ of the Employer or Related Employer,
each 12-consecutive month period beginning with the first day of
reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does not
complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, any Self-Employed
Individual or Owner-Employee. The Employer must specify in Section
1.03(a)(3) any Employee or class of Employees not eligible to
participate in the Plan. If the Employer elects to exclude collective
bargaining employees, the exclusion applies to any employee of the
Employer included in a unit of employees covered by an agreement
which the Secretary of Labor finds to be a collective bargaining
agreement between employee representatives and one or more employers
unless the collective bargaining agreement requires the employee to
be included within the Plan. The term "employee representatives" does
not include any organization more than half the members of which are
owners, officers, or executives of the Employer.
For purposes of the Plan, an individual shall be considered to
become an Employee on the date on which he first completes an Hour of
Service and he shall be considered to have ceased to be an Employee
on the date on which he last completes an Hour of Service. The term
also includes a Leased Employee, such that contributions or benefits
provided by the leasing organization which are attributable to
services performed for the Employer shall be treated as provided by
the Employer. Notwithstanding the above, a Leased Employee shall not
be considered an Employee if Leased Employees do not constitute more
than 20 percent of the Employer's non-highly compensated work-force
(taking into account all Related Employers) and the Leased Employee
is covered by a money purchase pension plan maintained by the
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<PAGE> 8
leasing organization and providing (A) a nonintegrated employer
contribution rate of at least 10 percent of compensation, as defined
for purposes of Section 415(c)(3) of the Code, but including amounts
contributed pursuant to a salary reduction agreement which are
excludable from gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code, (B) full and immediate
vesting, and (C) immediate participation by each employee of the
leasing organization.
(11) "Employer" means the employer named in Section 1.02(a) and any
Related Employers required by this Section 2.01(a)(11). If Article 1
of the Employer's Plan is the Standardized Adoption Agreement, the
term "Employer" includes all Related Employers. If Article 1 of the
Employer's Plan is the Non-standardized Adoption Agreement, the term
"Employer" includes those Related Employers designated in Section
1.02(b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act of
1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans which is made available to plans utilizing the
CORPORATEplan for Retirement.
(15) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(16) "Highly Compensated Employee" means both highly compensated
active Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee who
performs service for the Employer during the determination year and
who, during the "look-back year," (A) received compensation from the
Employer in excess of $75,000 (as adjusted pursuant to Section 415(d)
of the Code), (B) received compensation from the Employer in excess
of $50,000 (as adjusted pursuant to Section 415(d) of the Code) and
was a member of the top-paid group for such year, or (C) was an
officer of the Employer and received compensation during such year
that is greater than 50 percent of the dollar limitation in effect
under Section 415(b)(1)(A) of the Code. The term "Highly Compensated
Employee" also includes (i) Employees who are both described in the
preceding sentence if the term "determination year" is substituted
for the term "look-back year" and the Employee is one of the 100
Employees who received the most compensation from the Employer during
the determination year, and (ii) Employees who are 5-percent owners
at any time during the look-back year or determination year.
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<PAGE> 9
If no officer has satisfied the compensation requirement of (C)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a highly
compensated Employee.
For this purpose, the determination year shall be the Plan Year.
The look-back year shall be the twelve-month period immediately
preceding the determination year. The Employer may elect to make the
look-back year calculation for a determination on the basis of the
calendar year ending with or within the applicable determination
year, as prescribed by Section 414(q) of the Code and the regulations
issued thereunder.
A highly compensated former Employee includes any Employee who
separated from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a 5-percent owner who is an active or
former Employee or a highly compensated Employee who is one of the 10
most highly compensated Employees ranked on the basis of compensation
paid by the Employer during such year, then the family member and the
5-percent owner or top-ten highly compensated Employee shall be
aggregated. In such case, the family member and 5-percent owner or
top-ten highly compensated Employee shall be treated as a single
Employee receiving compensation and plan contributions or benefits
equal to the sum of such compensation and contributions or benefits
of the family member and 5-percent owner or top-ten highly
compensated Employee. For purposes of this Section, family member
includes the spouse, lineal ascendants and descendants of the
Employee or former Employee and the spouses of such lineal ascendants
and descendants.
The determination of who is a highly compensated Employee,
including the determinations of the number and identity of Employees
in the top-paid group, the top 100 Employees, the number of Employees
treated as officers, and the compensation that is considered, will be
made in accordance with Section 414(q) of the Code and the
regulations thereunder.
(17) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, for the performance of duties for
the Employer or a Related Employer, each such hour to be
credited to the Employee for the Eligibility Computation Period
in which the duties were performed;
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<PAGE> 10
(B) Each hour for which the Employee is directly or indirectly
paid, or entitled to payment, by the Employer or Related
Employer (including payments made or due from a trust fund or
insurer to which the Employer contributes or pays premiums) on
account of a period of time during which no duties are
performed (irrespective of whether the employment relationship
has terminated) due to vacation, holiday, illness, incapacity,
disability, layoff, jury duty, military duty, or leave of
absence, each such hour to be credited to the Employee for the
Eligibility Computation Period in which such period of time
occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single
continuous period during which the Employee performs no
duties;
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made
or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws;
and
(iii) If the period during which the Employee performs no
duties falls within two or more Eligibility Computation
Periods and if the payment made on account of such period
is not calculated on the basis of units of time, the Hours
of Service credited with respect to such period shall be
allocated between not more than the first two such
Eligibility Computation Periods on any reasonable basis
consistently applied with respect to similarly situated
Employees; and
(C) Each hour not counted under paragraph (A) or (B) for which
back pay, irrespective of mitigation of damages, has been
either awarded or agreed to be paid by the Employer or a
Related Employer, shall be credited to the Employee for the
Eligibility Computation Period to which the award or agreement
pertains rather than the Eligibility Computation Period in
which the award agreement or payment is made.
For purposes of determining Hours of Service, Employees of
the Employer and of all Related Employers will be treated as
employed by a single employer. For purposes of paragraphs (B)
and (C) above, Hours of Service will be calculated in
accordance with the provisions of Section 2530.200b-2(b) of the
Department of Labor regulations, which are incorporated herein
by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a
computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for
6
<PAGE> 11
the hours of service which would otherwise have been credited
to such individual but for such absence, or in any case in
which such hours cannot be determined, 8 hours of service per
day of such absence. For purposes of this paragraph, an absence
from work for maternity or paternity reasons means an absence
(i) by reason of the pregnancy of the individual, (ii) by
reason of a birth of a child of the individual, (iii) by reason
of the placement of a child with the individual in connection
with the adoption of such child by such individual, or (iv) for
purposes of caring for such child for a period beginning
immediately following such birth or placement. The hours of
service credited under this paragraph shall be credited (a) in
the computation period in which the absence begins if the
crediting is necessary to prevent a break in service in that
period, or (b) in all other cases, in the following computation
period.
(18) "Leased Employee" means any individual who provides services to the
Employer or a Related Employer (the "recipient") but is not otherwise an
employee of the recipient if (A) such services are provided pursuant to
an agreement between the recipient and any other person (the "leasing
organization"), (B) such individual has performed services for the
recipient (or for the recipient and any related persons within the
meaning of Section 414(n)(6) of the Code) on a substantially full-time
basis for at least one year, and (C) such services are of a type
historically performed by employees in the business field of the
recipient.
(19) "Normal Retirement Age" means the normal retirement age specified in
Section 1.06(a) of the Adoption Agreement. If the Employer enforces a
mandatory retirement age, the Normal Retirement Age is the lesser of that
mandatory age or the age specified in Section 1.06(a).
(20) "Owner-Employee" means, if the Employer is a sole proprietorship,
the individual who is the sole proprietor, or if the Employer is a
partnership, a partner who owns more than 10 percent of either the
capital interest or the profits interest of the partnership.
(21) "Participant" means any Employee who participates in the Plan in
accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer in the form of the
prototype plan, as set forth herein as a new plan or as an amendment to
an existing plan, by executing the Adoption Agreement, together with any
and all amendments hereto.
(23) "Plan Year" means the 12-consecutive-month period ending on the date
designated by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research Company
or its successor.
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<PAGE> 12
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of
1940 for which Fidelity Management and Research Company serves as
investment advisor.
(26) "Related Employer" means any employer other than the Employer named
in Section 1.02(a) if the Employer and such other employer are members of
a controlled group of corporations (as defined in Section 414(b) of the
Code) or an affiliated service group (as defined in Section 414(m)), or
are trades or businesses (whether or not incorporated) which are under
common control (as defined in Section 414(c)), or such other employer is
required to be aggregated with the Employer pursuant to regulations
issued under Section 414(o).
(27) "Self-Employed Individual" means an individual who has Earned Income
for the taxable year from the Employer or who would have had Earned
Income but for the fact that the trade or business had no net profits for
the taxable year.
(28) "Trust" means the trust created by the Employer in accordance with
the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer and the
Trustee, as set forth in Article 14, under which the assets of the Plan
are held, administered, and managed.
(30) "Trust Fund" means the property held in Trust by the Trustee for the
Accounts of the Participants and their Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or its
successor.
(32) "Year of Service for Participation" means, with respect to any
Employee, an Eligibility Computation Period during which the Employee has
been credited with at least 1,000 Hours of Service. If the Plan
maintained by the Employer is the plan of a predecessor employer, an
Employee's Years of Service for Participation shall include years of
service with such predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by a predecessor
employer, service for such predecessor shall be treated as service for
the Employer, to the extent provided in Section 1.08.
(33) "Years of Service for Vesting" means, with respect to any Employee,
the number of whole years of his periods of service with the Employer or
a Related Employer (the elapsed time method to compute vesting service),
subject to any exclusions elected by the Employer in Section 1.07(b). An
Employee will receive credit for the aggregate of all time period(s)
commencing with the Employee's Employment Commencement Date and ending on
the date a break in service begins, unless any such years are excluded by
Section 1.07(b). An Employee will also receive credit for any period of
8
<PAGE> 13
severance of less than 12 consecutive months. Fractional periods of a
year will be expressed in terms of days.
In the case of a Participant who has 5 consecutive 1-year breaks in
service, all years of service after such breaks in service will be
disregarded for the purpose of vesting the Employer-derived account
balance that accrued before such breaks, but both pre-break and
post-break service will count for the purposes of vesting the
Employer-derived account balance that accrues after such breaks. Both
accounts will share in the earnings and losses of the fund.
In the case of a Participant who does not have 5 consecutive 1-year
breaks in service, both the pre-break and post-break service will count
in vesting both the pre-break and post-break employer-derived account
balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of time
during which the Employee is not employed by the Employer. Such period
begins on the date the Employee retires, quits or is discharged, or if
earlier, the 12-month anniversary of the date on which the Employee was
otherwise first absent from service.
In the case of an individual who is absent from work for maternity
or paternity reasons, the 12-consecutive month period beginning on the
first anniversary of the first date of such absence shall not constitute
a break in service. For purposes of this paragraph, an absence from work
for maternity or paternity reasons means an absence (A) by reason of the
pregnancy of the individual, (B) by reason of the birth of a child of the
individual, (C) by reason of the placement of a child with the individual
in connection with the adoption of such child by such individual, or
(D) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
If the Plan maintained by the Employer is the plan of a predecessor
employer, an Employee's Years of Service for Vesting shall include years
of service with such predecessor employer. In any case in which the Plan
maintained by the Employer is not the plan maintained by a predecessor
employer, service for such predecessor shall be treated as service for
the Employer to the extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include the
feminine gender unless the context clearly indicates otherwise.
ARTICLE 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. All Employees in the eligible class (as defined in
Section 1.03(a)(3)) who are in the service of the Employer on the Effective Date
will become Participants on the date elected by the Employer in Section 1.03(c).
Any other Employee will become a
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<PAGE> 14
Participant in the Plan as of the first Entry Date on which he first satisfies
the eligibility requirements set forth in Section 1.03(a). In the event that an
Employee who is not a member of an eligible class (as defined in Section
1.03(a)(3)) becomes a member of an eligible class, the individual shall
participate immediately if such individual had already satisfied the eligibility
requirements and would have otherwise previously become a Participant.
If an eligibility requirement other than one Year of Service is elected in
1.03(a)(1), an Employee may not be required to complete a minimum number of
Hours of Service before becoming a Participant. An otherwise eligible Employee
subject to a minimum months of service requirement shall become a Participant on
the first Entry Date following his completion of the required number of
consecutive months of employment measured from his Employment Commencement Date
to the coinciding date in the applicable following month. For purposes of
determining consecutive months of service, the Related Employer and predecessor
employer rules contained in Sections 2.01(a)(17) and 2.01(a)(32) shall apply.
3.02. RESUMPTION OF PARTICIPATION FOLLOWING REEMPLOYMENT. If a Participant
ceases to be an Employee and thereafter returns to the employ of the Employer he
will be treated as follows:
(a) he will again become a Participant on the first date on which he
completes an Hour of Service for the Employer following his reemployment
and is in the eligible class of Employees as defined in Section
1.03(a)(3), and
(b) any distribution which he is receiving under the Plan will cease
except as otherwise required under Section 8.08.
3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be a member of an eligible class as defined in Section 1.03(a)(3), the
individual shall continue to be a Participant for most purposes until the entire
amount of his benefit is distributed; however, the individual shall not be
entitled to receive an allocation of contributions or forfeitures during the
period that he is not a member of the eligible class. Such Participant shall
continue to receive credit for service completed during the period for purposes
of determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes a member of an eligible class of
Employees, the individual shall resume full participation immediately upon the
date of such change in status.
3.04. PARTICIPATION BY OWNER-EMPLOYEE; CONTROLLED BUSINESSES. If the Plan
provides contributions or benefits for one or more Owner-Employees who control
both the trade or business with respect to which the Plan is established and one
or more other trades or businesses, the Plan and any plan established with
respect to such other trades or businesses must, when looked at as a single
plan, satisfy Sections 401(a) and 401(d) of the Code with respect to the
employees of this and all such other trades or businesses. If the Plan provides
contributions or benefits for one or more Owner-Employees who control one or
more
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<PAGE> 15
other trades or businesses, the Employees of each such other trade
or business must be included in a plan which satisfies Sections 401(a) and
401(d) of the Code and which provides contributions and benefits not less
favorable than provided for Owner-Employees under the Plan.
If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
Employees under the plan of the trades or businesses which are controlled must
be as favorable as those provided for him under the most favorable plan of the
trade or business which is not controlled.
For purposes of this Section, an Owner-Employee, or two or more
Owner-Employees, shall be considered to control a trade or business if such
Owner-Employee, or such Owner-Employees together, (a) own the entire interest in
an unincorporated trade or business or (b) in the case of a partnership, own
more than 50 percent of either the capital interest or the profits interest in
such partnership. For this purpose, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership controlled by such
Owner-Employee or such Owner-Employees.
3.05. OMISSION OF ELIGIBLE EMPLOYEE. If 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 a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution, if necessary, so that the
omitted Employee receives the total amount which the said Employee would have
received had he not been omitted. For purposes of this Section 3.05, the term
"contribution" shall not include Deferral Contributions and Matching
Contributions made pursuant to Sections 4.01 and 4.03, respectively.
ARTICLE 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS.
(a) 4.01. If so provided by the Employer in Section 1.05(b), each
Participant may elect to execute a salary reduction agreement with the
Employer to reduce his Compensation by a specified percentage not
exceeding 15% per payroll period, subject to any exceptions elected by
the Employer in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole
number multiple of one (1) percent. Such agreement shall become effective
on the first day of the first payroll period for which the Employer can
reasonably process the request. The Employer shall make a Deferral
Contribution on behalf of the Participant corresponding to the amount of
said reduction, subject to the restrictions set forth below. Under no
circumstances may a salary reduction agreement be adopted retroactively.
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<PAGE> 16
(b) A Participant may elect to change or discontinue the percentage by
which his Compensation is reduced by notice to the Employer as provided
in Section 1.05(b)(1).
(c) No Participant shall be permitted to have Deferral Contributions made
under the Plan, or any other qualified plan maintained by the Employer,
during the taxable year, in excess of the dollar limitation contained in
Section 402(g) of the Code in effect at the beginning of such taxable
year.
A Participant may assign to the Plan any Excess Deferrals made during
the taxable year of the Participant by notifying the Plan Administrator
on or before March 15 following the taxable year of the amount of the
Excess Deferrals to be assigned to the Plan. A Participant is deemed to
notify the Administrator of any Excess Deferrals that arise by taking
into account only those Deferral Contributions made to the Plan and any
other plan of the Employer. Notwithstanding any other provision of the
Plan, Excess Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any Participant
to whose Account Excess Deferrals were so assigned for the preceding year
and who claims Excess Deferrals for such taxable year.
"Excess Deferrals" shall mean those Deferral Contributions that are
includable in a Participant's gross income under Section 402(g) of the
Code to the extent such Participant's Deferral Contributions for a
taxable year exceed the dollar limitation under such Code section. For
purposes of determining Excess Deferrals, the term "Deferral
Contributions" shall include the sum of all Employer Contributions made
on behalf of such Participant pursuant to an election to defer under any
qualified CODA as described in Section 401(k) of the Code, any simplified
employee pension cash or deferred arrangement as described in Section
402(h)(1)(B) of the Code, any eligible deferred compensation plan under
Section 457 of the Code, any plan as described under Section 501(c)(18)
of the Code, and any Employer Contributions made on the behalf of a
Participant for the purchase of an annuity contract under Section 403(b)
of the Code pursuant to a salary reduction agreement. Deferral
Contributions shall not include any deferrals properly distributed as
excess annual additions. Excess Deferrals shall be treated as annual
additions under the Plan, unless such amounts are distributed no later
than the first April 15 following the close of the Participant's taxable
year.
Excess Deferrals shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess Deferrals is
(1) income or loss allocable to the Participant's Deferral Contributions
Account for the taxable year multiplied by a fraction, the numerator of
which is such Participant's Excess Deferrals for the year and the
denominator is the Participant's Account balance attributable to Deferral
Contributions without regard to any income or loss occurring during such
taxable year, or (2) such other amount determined under any reasonable
method, provided that such method is used consistently for all
Participants
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<PAGE> 17
in calculating the distributions required under this Section 4.01(c)
and Sections 4.02(d) and 4.04(d) for the Plan Year, and is used by the
Plan in allocating income or loss to Participants' Accounts. Income or
loss allocable to the period between the end of the Plan Year and the
date of distribution shall be disregarded in determining income or
loss.
(d) In order for the Plan to comply with the requirements of Sections
401(k), 402(g) and 415 of the Code and the regulations promulgated
thereunder, at any time in a Plan Year the Administrator may reduce the
rate of Deferral Contributions to be made on behalf of any Participant,
or class of Participants, for the remainder of that Plan Year, or the
Administrator may require that all Deferral Contributions to be made on
behalf of a Participant be discontinued for the remainder of that Plan
Year. Upon the close of the Plan Year or such earlier date as the
Administrator may determine, any reduction or discontinuance in Deferral
Contributions shall automatically cease until the Administrator again
determines that such a reduction or discontinuance of Deferral
Contributions is required.
4.02. ADDITIONAL LIMIT ON DEFERRAL CONTRIBUTIONS.
(a) The Actual Deferral Percentage (hereinafter "ADP") for Participants
who are Highly Compensated Employees for each Plan Year and the ADP for
participants who are Non-highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
(1) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ADP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ADP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
2.0, provided that the ADP for Participants who are Highly
Compensated Employees does not exceed the ADP for Participants who
are Non-highly Compensated Employees by more than two (2) percentage
points.
(b) The following special rules apply for the purposes of this Section:
(1) The ADP for any Participant who is a Highly Compensated Employee
for the Plan Year and who is eligible to have Deferral Contributions
(and Qualified Discretionary Contributions if treated as Deferral
Contributions for purposes of the ADP test) allocated to his or her
accounts under two or more arrangements described in Section 401(k)
of the Code that are maintained by the Employer, shall be determined
as if such Deferral Contributions (and, if applicable, such Qualified
Discretionary Contributions) were made under a single arrangement. If
a
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Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(k) of the Code.
(2) In the event that this Plan satisfies the requirements of Sections
401(k), 401(a)(4), or 410(b) of the Code only if aggregated with one or
more other plans, or if one or more other plans satisfy the
requirements of such Sections of the Code only if aggregated with this
plan, then this Section shall be applied by determining the ADP of
Employees as if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in order to
satisfy section 401(k) of the Code only if they have the same Plan
Year.
(3) For purposes of determining the ADP of a Participant who is a
5-percent owner or one of the ten most highly-paid Highly Compensated
Employees, the Deferral Contributions (and Qualified Discretionary
Contributions if treated as Deferral Contributions for purposes of the
ADP test) and Compensation of such Participant shall include the
Deferral Contributions (and, if applicable, Qualified Discretionary
Contributions) and Compensation for the Plan Year of Family Members (as
defined in Section 414(q)(6) of the Code). Family Members, with respect
to between the end of the Plan Year and the date of distribution shall
be disregarded in determining income or loss.
Excess Contributions shall be distributed from the Participant's
Qualified Discretionary Contribution account only to the extent that such Excess
Contributions exceed the balance in the Participant's Deferral Contributions
account.
(4) For purposes of determining the ADP test, Deferral Contributions
and Qualified Discretionary Contributions must be made before the last
day of the twelve-month period immediately following the Plan Year to
which contributions relate.
(5) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ADP test and the amount of Qualified Discretionary
Contributions used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be prescribed
by the Secretary of the Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Actual Deferral Percentage" shall mean, for a specified group of
Participants for a Plan Year, the average of the ratios
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<PAGE> 19
(calculated separately for each Participant in such group) of (A) the
amount of Employer contributions actually paid over to the Trust on
behalf of such Participant for the Plan Year to (B) the Participant's
Compensation for such Plan Year. Employer contributions on behalf of
any Participant shall include (i) any Deferral Contributions made
pursuant to the Participant's deferral election, including Excess
Deferrals of Highly Compensated Employees, but excluding (a) Excess
Deferrals of Non-highly Compensated Employees that arise solely from
Deferral Contributions made under the Plan or plans of the Employer and
(b) Deferral Contributions that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied both
with and without exclusion of these Deferral Contributions) and (ii) at
the election of the Employer, Qualified Discretionary Contributions.
Matching Contributions, whether or not non-forfeitable when made, shall
not be considered as Employer Contributions for purposes of this
paragraph. For purposes of computing Actual Deferral Percentages, an
Employee who would be a Participant but for the failure to make
Deferral Contributions shall be treated as a Participant on whose
behalf no Deferral Contributions are made.
(2) "Excess Contributions" shall mean, with respect to any Plan Year,
the excess of
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly Compensated
Employees for such Plan Year, over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on behalf
of Highly Compensated Employees in order of the ADPs,
beginning with the highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean contributions
made by the Employer as elected in Section 1.05(b)(4) and allocated to
Participant Accounts of Non-highly Compensated Employees that such
Participants may not elect to receive in cash until distributed from
the Plan, that are nonforfeitable when made, and that are distributable
only in accordance with the distribution provisions that are applicable
to Deferral Contributions. Participants shall not be required to
satisfy any hours of service or employment requirement in order to
receive an allocation of such contributions.
(d) Notwithstanding any other provision of this Plan, Excess
Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose Accounts such Excess Contributions were allocated
for the preceding Plan Year. If such excess amounts are distributed more
than 2 1/2 months after the last day of the Plan Year in which such
excess amounts arose, a ten- (10-) percent excise tax will be imposed on
the Employer maintaining the Plan with respect to such amounts. Such
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<PAGE> 20
distributions shall be made to Highly Compensated Employees on the basis
of the respective portions of the Excess Contributions attributable to
each of such employees. Excess Contributions of Participants who are
subject to the family member aggregation rules of Section 414(q)(6) of
the Code shall be allocated among the family members in proportion to the
Deferral Contributions (and amounts treated as Deferral Contributions) of
each family member that is combined to determine the combined ADP.
Excess Contributions shall be treated as annual additions under the Plan.
Excess Contributions shall be adjusted for any income or loss up to the
date of distribution. The income or loss allocable to Excess
Contributions is (1) income or loss allocable to the Participant's
Deferral Contribution Account (and if applicable, the Qualified
Discretionary Contribution Account) for the Plan Year multiplied by a
fraction, the numerator of which is such Participant's Excess
Contributions for the year and the denominator is the Participant's
Account balance attributable to Deferral Contributions without regard to
any income or loss occurring during such Plan Year, or (2) an amount
determined under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions
required under Section 4.02(d) and Sections 4.01(c) and 4.04(d) for the
Plan Year, and is used by the Plan in allocating income or loss to the
Participants' Accounts. Income or loss allocable to the period between
the end of the Plan Year and the date of distibution shall be disregarded
in determining income or loss.
Excess Contributions shall be distributed from the Participant's
Qualified Discretionary Contribution Account only to the extent that such
Excess Contributions exceed the balance in the Participant's Deferral
Contributions Account.
4.03 MATCHING CONTRIBUTIONS: If so provided by the Employer in Section 1.05(c),
the Employer shall make a Matching Contribution on behalf of each Participant
who had Deferral Contributions made on his behalf during the year and who meets
the requirement, if any, of Section 1.05(c)(4). The amount of the Matching
Contribution shall be determined in accordance with Section 1.05(c), subject to
the limitations set forth in Section 4.04 and Section 404 of the Code. Matching
Contributions will not be allowed to be made by the Employer on any voluntary
non-deductible Employee Contributions.
4.04 LIMIT ON MATCHING CONTRIBUTIONS AND EMPLOYEE CONTRIBUTIONS:
(a) The Average Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan Year and
the ACP for Participants who are Non-highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
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<PAGE> 21
(1) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
1.25; or
(2) The ACP for Participants who are Highly Compensated Employees for
the Plan Year shall not exceed the ACP for Participants who are
Non-highly Compensated Employees for the same Plan Year multiplied by
two (2), provided that the ACP for Participants who are Highly
Compensated Employees does not exceed the ACP for Participants who
are Non-highly Compensated Employees by more than two (2) percentage
points.
(b) The following special rules apply for purposes of this section:
(1) If one or more Highly Compensated Employees participate in both a
qualified cash or deferred arrangement described in Section 401(k) of
the Code (hereafter "CODA") and a plan subject to the ACP test
maintained by the Employer and the sum of the ADP and ACP of those
Highly Compensated Employees subject to either or both tests exceeds
the Aggregate Limit, then the ACP of those Highly Compensated
Employees who also participate in a CODA will be reduced (beginning
with such Highly Compensated Employee whose ACP is the highest) so
that the limit is not exceeded. The amount by which each Highly
Compensated Employee's Contribution Percentage Amounts is reduced
shall be treated as an Excess Aggregate Contribution. The ADP and ACP
of the Highly Compensated Employees are determined after any
corrections required to meet the ADP and ACP tests. Multiple use does
not occur if either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of the
Non-highly Compensated Employees.
(2) For purposes of this section, the Contribution Percentage for any
Participant who is a Highly Compensated Employee and who is eligible
to have Contribution Percentage Amounts allocated to his or her
account under two or more plans described in section 401(a) of the
Code, or arrangements described in section 401(k) of the Code that
are maintained by the Employer, shall be determined as if the total
of such Contribution Percentage Amounts was made under each plan. If
a Highly Compensated Employee participates in two or more cash or
deferred arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar year
shall be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if mandatorily
disaggregated under regulations under Section 401(m) of the Code.
(3) In the event that this Plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if aggregated
with one or more other plans, or if one or more other plans satisfy
the requirements of such sections of the Code only
17
<PAGE> 22
if aggregated with this Plan, then this section shall be applied by
determining the Contribution Percentage of Employees as if all such
plans were a single plan. For plan years beginning after December 31,
1989, plans may be aggregated in order to satisfy Section 401(m) of
the Code only if they have the same Plan Year.
(4) For purposes of determining the Contribution percentage of a
Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution Percentage
Amounts and Compensation of such Participant shall include the
Contribution Percentage Amounts and Compensation for the Plan Year of
family members (as defined in Section 414(q)(6) of the Code). Family
members, with respect to Highly Compensated Employees, shall be
disregarded as separate Employees in determining the Contribution
Percentage both for Participants who are Non-highly Compensated
Employees and for Participants who are Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage test,
Employee Contributions made pursuant to Section 1.05(d)(1) are
considered to have been made in the Plan Year in which contributed to
the Trust. Matching Contributions and Qualified Discretionary
Contributions will be considered made for a Plan Year if made no
later than the end of the twelve-month period beginning on the day
after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to demonstrate
satisfaction of the ACP test and the amount of Qualified
Discretionary Contributions used in such test.
(7) The determination and treatment of the Contribution Percentage of
any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of Treasury.
(c) The following definitions shall apply for purposes of this Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B) where (A)
is the sum of (i) 125 percent of the greater of the ADP of the
Non-highly Compensated Employees for the Plan Year or the ACP of
Non-highly Compensated Employees under the Plan subject to Section
401(m) of the Code for the Plan Year beginning with or within the
Plan Year of the CODA and (ii) the lesser of 200% or two plus the
lesser of such ADP or ACP and where (B) is the sum of (i) 125 percent
of the lesser of the ADP of the Non-highly Compensated Employees for
the Plan Year or the ACP of Non-highly Compensated Employees under
the Plan subject to Section 401(m) of the Code for the Plan Year
beginning with or within the Plan Year of the CODA and (ii) the
lesser of 200% or two plus the greater of such ADP or ACP.
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<PAGE> 23
(2) "Average Contribution Percentage" or "ACP" shall mean the average
of the Contribution Percentages of the Eligible Participants in a
group.
(3) "Contribution Percentage" shall mean the ratio (expressed as a
percentage) of the Participant's Contribution Percentage Amounts to
the Participant's Compensation for the Plan Year.
(4) "Contribution Percentage Amounts" shall mean the sum of the
Employee Contributions and Matching Contributions made under the plan
on behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall not include Matching Contributions that are
forfeited either to correct Excess Aggregate Contributions or because
the contributions to which they relate are Excess Deferrals, Excess
Contributions or Excess Aggregate Contributions. If so elected by the
Employer in Section 1.05(b)(4), the Employer may include Qualified
Discretionary Contributions in the Contribution Percentage Amounts.
The Employer also may elect to use Deferral Contributions in the
Contribution Percentage Amounts so long as the ADP test is met before
the Deferral Contributions are used in the ACP test and continues to
be met following the exclusion of those Deferral Contributions that
are used to meet the ACP test.
(5) "Deferral Contribution" shall mean any contribution made at the
election of the Participant pursuant to a salary reduction agreement
in accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any Employee who is eligible to
make an Employee Contribution, or a Deferral Contribution (if the
Employer takes such contributions into account in the calculation of
the Contribution Percentage), or to receive a Matching Contribution.
(7) "Employee Contribution" shall mean any voluntary non-deductible
contribution made to the plan by or on behalf of a Participant that
is included in the Participant's gross income in the year in which
made and that is maintained in a separate Account to which earnings
and losses are allocated.
(8) "Matching Contribution" shall mean an Employer contribution made
to this or any other defined contribution plan on behalf of a
Participant on account of a Participant's Deferral Contribution.
(9) "Excess Aggregate Contributions" shall mean, with respect to any
Plan Year, the excess of
(A) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated
Employees for such Plan Year, over
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<PAGE> 24
(B) The maximum Contribution Percentage Amounts permitted by the
ACP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in the order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Deferrals pursuant to Section 4.01 and then determining
Excess Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable thereto,
shall be forfeited, if forfeitable, or if not forfeitable, distributed no
later than the last day of each Plan Year to Participants to whose
Accounts such Excess Aggregate Contributions were allocated for the
preceding Plan Year. Excess Aggregate Contributions of Participants who
are subject to the family member aggregation rules of Section 414(q)(6)
of the Code shall be allocated among the family members in proportion to
the Employee and Matching Contributions of each family member that is
combined to determine the combined ACP. If such Excess Aggregate
Contributions are distributed more than 2 1/2 months after the last day
of the Plan Year in which such excess amounts arose, a ten (10) percent
excise tax will be imposed on the employer maintaining the Plan with
respect to those amounts. Excess Aggregate Contributions shall be treated
as annual additions under the Plan.
Excess Aggregate Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss allocable to
Excess Aggregate Contributions is (1) income or loss allocable to the
Participant's Employee Contribution Account, Matching Contribution
Account (if any, and if all amounts therein are not used in the ADP test)
and if applicable, Qualified Non-elective Contribution Account for the
Plan Year multiplied by a fraction, the numerator of which is such
Participant's Excess Aggregate Contributions for the year and the
denominator is the Participant's Account balance(s) attributable to
Contribution Percentage Amounts without regard to income or loss
occurring during such Plan Year, or (2) such other amount determined
under any reasonable method, provided that such method is used
consistently for all Participants in calculating any distributions
required under Section 4.04(d) and Sections 4.01(c) and 4.02(d) for the
Plan Year, and is used by the Plan in allocating income or loss to the
Participants' Accounts. Income or loss allocable to the period between
the end of the Plan Year and the date of distribution shall be
disregarded in determining income or loss.
Forfeitures of Excess Aggregate Contributions shall be applied to
reduce Employer contributions; the forfeitures shall be held in the money
market fund, if any, listed in Section 1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if forfeitable, or
distributed on a PRORATA basis from the
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<PAGE> 25
Participant's Employee Contribution Account, Matching Contribution
Account and if applicable, the Participant's Deferral Contributions
Account or Qualified Discretionary Contribution Account or both.
4.05. SPECIAL RULES. Deferral Contributions and Qualified Discretionary
Contributions and income allocable to each are not distributable to a
Participant or his or her Beneficiary or Beneficiaries, in accordance with such
Participant's or beneficiary's or beneficiaries' election, earlier than upon
separation from service, death, or disability, except as otherwise provided in
Section 7.10, 7.11 or 10.06. Such amounts may also be distributed, but after
March 31, 1988, in the form of a lump sum only, upon
(a) Termination of the Plan without establishment of another
defined contribution plan, other than an employee stock ownership plan
(as defined in Section 4975(e) or Section 409 of the Code) or a
simplified employee pension plan as defined in Section 408(k) of the
Code.
(b) The disposition by a corporation to an unrelated corporation
of substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of such corporation if
such corporation continues to maintain this Plan after the disposition,
but only with respect to Employees who continue employment with the
corporation acquiring such assets.
(c) The disposition by a corporation to an unrelated entity of
such corporation's interest in a subsidiary (within the meaning of
Section 409(d)(2) of the Code) if such corporation continues to maintain
this Plan, but only with respect to Employees who continue employment
with such subsidiary.
The Participant's accrued benefit derived from Deferral Contributions,
Qualified Discretionary Contributions and Employee Contributions (as defined in
Section 4.09) is nonforfeitable. Separate Accounts for Deferral Contributions,
Qualified Discretionary Contributions, Employee Contributions and Matching
Contributions will be maintained for each Participant. Each Account will be
credited with the applicable contributions and earnings thereon.
4.06. FIXED/DISCRETIONARY EMPLOYER CONTRIBUTIONS. If so provided by the Employer
in Sections 1.05(a)(1) or 1.05(a)(2), for the Plan Year in which the Plan is
adopted and for each Plan Year thereafter, the Employer will make Fixed or
Discretionary Employer contributions to the Trust in accordance with Section
1.05 to be allocated as follows:
(a) Fixed Employer contributions shall be allocated among
eligible Participants (as determined in accordance with Section
1.05(a)(3)) in the manner specified in Section 1.05(a).
(b) Discretionary Employer contributions shall be allocated
among eligible Participants, as determined in accordance with Section
1.05(a)(3), as follows:
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<PAGE> 26
(1) If the Non-Integrated Formula is elected in
Section 1.05(a)(2)(A), such contributions shall be
allocated to eligible Participants in the ratio that
each Participant's Compensation bears to the total
Compensation paid to all eligible Participants for the
Plan Year; or
(2) If the Integrated Formula is elected in Section
1.05(a)(2)(B), such contributions shall be allocated
in the following steps:
(A) First, to each eligible Participant in the
same ratio that the sum of the Participant's
Compensation and Excess Compensation for the Plan
Year bears to the sum of the Compensation and
Excess Compensation of all Participants for the
Plan Year. This allocation as a percentage of the
sum of each Participant's Compensation and Excess
Compensation shall not exceed 5.7%.
(B) Any remaining Discretionary Employer
Contribution shall be allocated to each eligible
Participant in the same ratio that each
Participant's Compensation for the Plan Year bears
to the total Compensation of all Participants for
the Plan Year.
For purposes of this Section, "Excess Compensation"
means Compensation in excess of the taxable wage base,
as determined under Section 230 of the Social Security
Act, in effect on the first day of the Plan Year.
Further, this Section 4.06(b)(2) shall be modified as
provided in Section 9.03 for years in which the Plan is
top heavy under Article 9.
4.07. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will pay its
contribution for each Plan Year not later than the time prescribed by law for
filing the Employer's federal income tax return for the fiscal (or taxable) year
with or within which such Plan Year ends (including extensions thereof). The
Trustee will have no authority to inquire into the correctness of the amounts
contributed and paid over to the Trustee, to determine whether any contribution
is payable under this Article 4, or to enforce, by suit or otherwise, the
Employer's obligation, if any, to make a contribution to the Trustee.
4.08. RETURN OF EMPLOYER CONTRIBUTIONS. The Trustee shall, upon request by the
Employer, return to the Employer the amount (if any) determined under Section
14.22. Such amount shall be reduced by amounts attributable thereto which have
been credited to the Accounts of Participants who have since received
distributions from the Trust, except to the extent such amounts continue to be
credited to such Participants' Accounts at the time the amount is returned to
the Employer. Such amount shall also be reduced by the losses of the Trust
22
<PAGE> 27
attributable thereto, if and to the extent such losses exceed the gains and
income attributable thereto, but will not be increased by the gains and income
of the Trust attributable thereto, if and to the extent such gains and income
exceed the losses attributable thereto. In no event will the return of a
contribution hereunder cause the balance of the individual Account of any
Participant to be reduced to less than the balance which would have been
credited to the Account had the mistaken amount not been contributed.
4.09. EMPLOYEE CONTRIBUTIONS. If the Employer elected to permit Deferral
Contributions in Section 1.05(b) and if so provided by the Employer in Section
1.05(d), each Participant may elect to make Employee Contributions to the Plan
in accordance with the rules and procedures established by the Employer and in
an amount not less than one percent (1%) and not greater than ten percent (10%)
of such Participant's Compensation for the Plan Year. Such contributions and all
Employee Contributions for Plan Years beginning after December 31, 1986, shall
be subject to the nondiscrimination requirements of Section 401(m) of the Code
as set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall mean any
voluntary non-deductible contribution made to a plan by or on behalf of a
Participant that is or was included in the Participant's gross income in the
year in which made and that is maintained under a separate account to which
applicable earnings and losses are allocated. Excess Contributions may not be
recharacterized as Employee Contributions.
Employee Contributions shall be paid over to the Trustee not later than
thirty (30) days following the end of the month in which the Participant makes
the contribution. A Participant shall have a fully vested 100% nonforfeitable
right to his Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee Contributions shall be made in accordance
with Section 7.10.
4.10. ROLLOVER CONTRIBUTIONS.
(a)ROLLOVER OF ELIGIBLE ROLLOVER DISTRIBUTIONS
(1) An Employee who is or was a distributee of an "eligible rollover
distribution"(as defined in Section 402(c)(4) of the Code and the
regulations issued thereunder) from a qualified plan may directly
transfer all or any portion of such distribution to the Trust or
transfer all or any portion of such distribution to the Trust within
sixty (60) days of payment. The transfer shall be made in the form of
cash or allowable Fund Shares only.
(2) The Employer may refuse to accept rollover contributions or
instruct the Trustee not to accept rollover contributions under the
Plan.
(b) TREATMENT OF ROLLOVER AMOUNT.
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(1) An account will be established for the transferring Employee
under Article 5, the rollover amount will be credited to the account
and such amount will be subject to the terms of the Plan, including
Section 8.01, except as otherwise provided in this Section 4.10.
(2) The rollover account will at all times be fully vested in and
nonforfeitable by the Employee.
(c) ENTRY INTO PLAN BY TRANSFERRING EMPLOYEE. Although an amount may be
transferred to the Trust Fund under this Section 4.10 by an Employee who
has not yet become a Participant in accordance with Article 3, and such
amount is subject to the terms of the Plan as described in paragraph (b)
above, the Employee will not become a Participant entitled to share in
Employer contributions until he has satisfied such requirements.
(d) MONITORING OF ROLLOVERS.
(1) The Administrator shall develop such procedures and require such
information from transferring Employees as it deems necessary to
insure that amounts transferred under this Section 4.10 meet the
requirements for tax-free rollovers established by such Section and
by Section 402(c) of the Code. No such amount may be transferred
until approved by the Administrator.
(2) If a transfer made under this Section 4.10 is later determined by
the Administrator not to have met the requirements of this Section or
of the Code or Treasury regulations, the Trustee shall, within a
reasonable time after such determination is made, and on instructions
from the Administrator, distribute to the Employee the amounts then
held in the Trust attributable to the transferred amount.
4.11. DEDUCTIBLE VOLUNTARY EMPLOYEE CONTRIBUTIONS. The Administrator will not
accept deductible Employee Contributions which are made for a taxable year
beginning after December 31, 1986. Contributions made prior to that date will be
maintained in a separate Account which will be nonforfeitable at all times and
which will share in the gains and losses of the trust in the same manner as
described in Section 5.02. No part of the deductible voluntary contribution
Account will be used to purchase life insurance. Subject to Article 8, the
Participant may withdraw any part of the deductible voluntary contribution
Account upon request.
4.12. ADDITIONAL RULES FOR PAIRED PLANS. If the Employer has adopted a qualified
plan under Fidelity Basic Plan Document No. 09 which is to be considered as a
paired plan with this Plan, the elections in Section 1.03 must be identical to
the Employer's corresponding elections for the other plan. When the paired plans
are top-heavy or are deemed to be top-heavy as provided in Section 9.01, the
plan paired with this Plan will provide a minimum contribution to each non-key
Employee which is equal to 3 percent (or such other percent elected by the
Employer in Section 1.12(c)) of such Employee's Compensation. Notwithstanding
the
24
<PAGE> 29
preceding sentence, the minimum contribution shall be provided by this Plan if
contributions under the other plan paired with this Plan are frozen.
ARTICLE 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Employer and Employee
Contributions made on behalf of the Participant and earnings, expenses, gains
and losses attributable thereto, and investments made with amounts in the
Participant's Account. The Administrator will establish and maintain such other
accounts and records as it decides in its discretion to be reasonably required
or appropriate in order to discharge its duties under the Plan.
5.02. VALUATION OF ACCOUNTS. Participant Accounts will be valued at their fair
market value at least annually as of a date specified by the Administrator in
accordance with a method consistently followed and uniformly applied, and on
such date earnings, expenses, gains and losses on investments made with amounts
in each Participant's Account will be allocated to such Account. Participants
will be furnished statements of their Account values at least once each Plan
Year.
5.03. CODE SECTION 415 LIMITATIONS. Notwithstanding any other provisions of the
Plan:
Subsections (a)(1) through (a)(4)--(THESE SUBSECTIONS APPLY TO EMPLOYERS
WHO DO NOT MAINTAIN ANY QUALIFIED PLAN, INCLUDING A WELFARE BENEFIT FUND, AN
INDIVIDUAL MEDICAL ACCOUNT, OR A SIMPLIFIED EMPLOYEE PENSION IN ADDITION TO THIS
PLAN.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund,
Individual Medical Account, or a simplified employee pension, as defined
in section 408(k) of the Code, maintained by the Employer, which
provides an annual addition as defined in Section 5.03(e)(1), the amount
of Annual Additions to a Participant's Account for a Limitation Year
shall not exceed the lesser of the Maximum Permissible Amount or any
other limitation contained in this Plan. If the Employer contribution
that would otherwise be contributed or allocated to the Participant's
Account would cause the Annual Additions for the Limitation Year to
exceed the Maximum Permissible Amount, the amount contributed or
allocated will be reduced so that the Annual Additions for the
Limitation Year will equal the Maximum Permissible Amount.
(a)(2) Prior to the determination of the Participant's actual
Compensation for a Limitation Year, the Maximum Permissible Amount may
be determined on the basis of a reasonable estimation of the
Participant's compensation for such Limitation Year, uniformly
determined for all Participants similarly situated. Any Employer
contributions based on estimated annual compensation shall be reduced by
any Excess Amounts carried over from prior years.
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(a)(3) As soon as is administratively feasible after the end of the
Limitation Year, the Maximum Permissible Amount for such Limitation Year
shall be determined on the basis of the Participant's actual
Compensation for such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result of the
allocation of forfeitures or a reasonable error in determining the total
Elective Deferrals there is an Excess Amount with respect to a
Participant for a Limitation Year, such Excess Amount shall be disposed
of as follows:
(A) Any nondeductible voluntary employee contributions ("employee
contributions") or Elective Deferrals, to the extent they would reduce
the Excess Amount, will be returned to the Participant. Any gains
attributable to returned employee contributions will also be returned or
will be treated as additional employee contributions for the Limitation
Year in which the employee contributions were made.
(B) If after the application of paragraph (A) an Excess amount
still exists and the Participant is in the service of the Employer which
is covered by the Plan at the end of the Limitation Year, then such
Excess Amount shall be reapplied to reduce future Employer contributions
under this Plan for the next Limitation Year (and for each succeeding
year, as necessary) for such Participant, so that in each such Year the
sum of actual Employer contributions plus the reapplied amount shall
equal the amount of Employer contributions which would otherwise be made
to such Participant's Account.
(C) If after the application of paragraph (A) an Excess Amount
still exists and the Participant is not in the service of the Employer
which is covered by the Plan at the end of a Limitation Year, then such
Excess Amount will be held unallocated in a suspense account. The
suspense account will be applied to reduce future Employer contributions
for all remaining Participants in the next Limitation Year and each
succeeding Limitation Year if necessary.
(D) If a suspense account is in existence at any time during the
Limitation Year pursuant to this subsection, it will not participate in
the allocation of the Trust Fund's investment gains and losses. All
amounts in the suspense account must be allocated to the Accounts of
Participants before any Employer contribution may be made for the
Limitation Year. Except as provided in paragraph (A), Excess Amounts may
not be distributed to Participants or former Participants.
Subsections (b)(1) through (b)(6)--(THESE SUBSECTIONS APPLY TO EMPLOYERS
WHO, IN ADDITION TO THIS PLAN, MAINTAIN ONE OR MORE PLANS, ALL OF WHICH ARE
QUALIFIED MASTER OR PROTOTYPE DEFINED CONTRIBUTION PLANS, ANY WELFARE BENEFIT
FUND, ANY INDIVIDUAL MEDICAL ACCOUNT, OR ANY SIMPLIFIED EMPLOYEE PENSION.)
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(b)(1) If, in addition to this Plan, the Participant is covered under
any other qualified defined contribution plans (all of which are
qualified Master or Prototype Plans), Welfare Benefit Funds, Individual
Medical Accounts, or simplified employee pension Plans, maintained by
the Employer, that provide an annual addition as defined in Section
5.03(e)(1), the amount of Annual Additions to a Participant's Account
for a Limitation Year shall not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the sum of any
Annual Additions to the Participant's accounts for the same Limitation
Year under such other qualified Master or Prototype defined contribution
plans, and Welfare Benefit Funds, Individual Medical Accounts, and
simplified employee pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under other
qualified Master or Prototype defined contribution Plans, Welfare
Benefit Funds, Individual Medical Accounts, and simplified employee
pensions maintained by the Employer are less than the maximum
permissible amount and the Employer contribution that would otherwise be
contributed or allocated to the Participant's account under this plan
would cause the annual additions for the limitation year to exceed this
limitation, the amount contributed or allocated will be reduced so that
the annual additions under all such plans and funds for the limitation
year will equal the maximum permissible amount. If the annual additions
with respect to the Participant under such other qualified Master or
Prototype defined contribution Plans, Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions in the aggregate are
equal to or greater than the maximum permissible amount, no amount will
be contributed or allocated to the Participant's account under this plan
for the limitation year.
(b)(2) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
(b)(1)(A) above may be determined on the basis of a reasonable
estimation of the Participant's compensation for such Limitation Year,
uniformly determined for all Participants similarly situated. Any
Employer contribution based on estimated annual compensation shall be
reduced by any Excess Amounts carried over from prior years.
(b)(3) As soon as is administratively feasible after the end of the
Limitation Year, the amounts referred to in (b)(1)(A) shall be
determined on the basis of the Participant's actual Compensation for
such Limitation Year.
(b)(4) If a Participant's Annual Additions under this Plan and all such
other plans result in an Excess Amount, such Excess Amount shall be
deemed to consist of the Annual Additions last allocated, except that
Annual Additions attributable to a simplified employee
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pension will be deemed to have been allocated first, followed by Annual
Additions to a Welfare Benefit Fund or Individual Medical Account
regardless of the actual allocation date.
(b)(5) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation date of
another plan, the Excess Amount attributed to this Plan will be the
product of
(A) the total Excess Amount allocated as of such date (including
any amount which would have been allocated but for the limitations
of Section 415 of the Code), and
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, and (ii) the Annual
Additions allocated as of such date under all qualified defined
contribution plans (determined without regard to the limitations
of Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall be disposed of
as provided in subsection (a)(4).
Subsection (c)--(THIS SUBSECTION APPLIES ONLY TO EMPLOYERS WHO, IN
ADDITION TO THIS PLAN, MAINTAIN ONE OR MORE QUALIFIED PLANS WHICH ARE QUALIFIED
DEFINED CONTRIBUTION PLANS OTHER THAN MASTER OR PROTOTYPE PLANS.)
(c) If the Employer also maintains another plan which is a qualified
defined contribution plan other than a Master or Prototype Plan, Annual
Additions allocated under this Plan on behalf of any Participant shall be
limited in accordance with the provisions of (b)(1) through (b)(6), as
though the other plan were a Master or Prototype Plan, unless the
Employer provides other limitations in the Adoption Agreement.
Subsection (d)--(THIS SUBSECTION APPLIES ONLY TO EMPLOYERS WHO, IN
ADDITION TO THIS PLAN, MAINTAIN OR AT ANY TIME MAINTAINED A QUALIFIED DEFINED
BENEFIT PLAN.)
(d) If the Employer maintains, or at any time maintained, a qualified
defined benefit plan, the sum of any Participant's Defined Benefit
Fraction and Defined Contribution Fraction shall not exceed the combined
plan limitation of 1.0 in any Limitation Year. The combined plan
limitation will be met as provided by the Employer in the Adoption
Agreement.
SUBSECTIONS (e)(1) THROUGH (e)(11)--(DEFINITIONS.)
(e)(1) "Annual Additions" means the sum of the following amounts
credited to a Participant for a Limitation Year:
(A) all Employer contributions,
(B) all Employee Contributions,
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(C) all forfeitures,
(D) amounts allocated, after March 31, 1984, to an Individual
Medical Account which is part of a pension or annuity plan
maintained by the Employer are treated as Annual Additions to a
defined contribution plan. Also, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account
of a key employee, as defined in Section 419A(d)(3) of the Code,
under a Welfare Benefit Fund maintained by the Employer are
treated as Annual Additions to a defined contribution plan, and
(E) allocations under a simplified employee pension.
For purposes of this Section 5.03, amounts reapplied to reduce
Employer contributions under subsection (a)(4) shall also be included as
Annual Additions.
(e)(2) "Compensation" means wages as defined in Section 3401(a) of the
Code and all other payments of compensation to an employee by the
employer (in the course of the employer's trade or business) for which
the employer is required to furnish the employee a written statement
under Sections 6041(d) and 6051(a)(3) of the Code. Compensation must be
determined without regard to any rules under Section 3401(a) of the Code
that limit the remuneration included in wages based on the nature or
location of the employment or the services performed (such as the
exception for agricultural labor in Section 3401(a)(2) of the Code.)
For any Self-Employed Individual compensation will mean Earned Income.
For limitation years beginning after December 31, 1991, for purposes of
applying the limitations of this article, compensation for a limitation
year is the compensation actually paid or made available during such
limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the numerator of
which is the sum of the Participant's annual benefits (adjusted to an
actuarially equivalent straight life annuity if such benefit is
expressed in a form other than a straight life annuity or qualified
joint and survivor annuity) under all the defined benefit plans (whether
or not terminated) maintained by the Employer, each such annual benefit
computed on the assumptions that the Participant will remain in
employment until the normal retirement age under each such plan (or the
Participant's current age, if later) and that all other factors used to
determine benefits under such plan will remain constant for all future
Limitation Years, and the denominator of which is the lesser of 125
percent of the dollar limitation determined for the Limitation Year
under Sections
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415(b)(1)(A) and 415(d) of the Code or 140 percent of the
Participant's highest average Compensation for 3 consecutive calendar
years of service during which the Participant was active in each such
plan, including any adjustments under Section 415(b) of the Code.
However, if the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by the Employer which were in existence
on May 6, 1986 then the denominator of the Defined Benefit Fraction
shall not be less than 125 percent of the Participant's total accrued
benefit as of the close of the last Limitation Year beginning before
January 1, 1987, disregarding any changes in the terms and conditions of
the plan after May 5, 1986, under all such defined benefit plans that
met, individually and in the aggregate, the requirements of Section 415
of the Code for all Limitation Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the numerator
of which is the sum for the current and all prior Limitation Years of
(A) all Annual Additions (if any) to the Participant's accounts under
each defined contribution plan (whether or not terminated) maintained by
the Employer and (B) all Annual Additions attributable to the
Participant's nondeductible Employee Contributions to all defined
benefit plans (whether or not terminated) maintained by the Employer,
and the Participant's Annual Additions attributable to all Welfare
Benefit Funds, Individual Medical Accounts, and simplified employee
pensions, maintained by the Employer, and the denominator of which is
the sum of the maximum aggregate amounts for the current and all prior
Limitation Years during which the Participant was an Employee
(regardless of whether the Employer maintained a defined contribution
plan in any such year).
The maximum aggregate amount in any Limitation Year is the lesser
of 125 percent of the dollar limitation in effect under Section
415(c)(1)(A) of the Code for each such year or 35 percent of the
Participant's Compensation for each such year.
If the Participant was a participant as of the first day of the
first Limitation Year beginning after December 31, 1986, in one or more
defined contribution plans maintained by the Employer which were in
existence on May 6, 1986, then the numerator of the Defined Contribution
Fraction shall be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of this Plan.
Under the adjustment an amount equal to the product of (i) the excess of
the sum of the fractions over 1.0 and (ii) the denominator of this
fraction will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as they would
be computed as of the end of the last Limitation Year beginning before
January 1, 1987, and disregarding any changes in the terms and conditions
of the plan made after May 6, 1986, but using the Section 415 limitation
applicable to the first Limitation Year beginning on or after January 1,
1987.
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The annual addition for any limitation year beginning before
January 1, 1987 shall not be recomputed to treat all employee
contributions as annual additions.
(e)(5) "Employer" means the Employer and any Related Employer that
adopts this Plan. In the case of a group of employers which constitutes
a controlled group of corporations (as defined in Section 414(b) of the
Code as modified by Section 415(h)) or which constitutes trades or
businesses (whether or not incorporated) which are under common control
(as defined in Section 414(c) of the Code as modified by Section 415(h)
of the Code) or which constitutes an affiliated service group (as
defined in Section 414(m)of the Code) and any other entity required to
be aggregated with the Employer pursuant to regulations issued under
Section 414(o) of the Code, all such employers shall be considered a
single employer for purposes of applying the limitations of this Section
5.03.
(e)(6) "Excess Amount" means the excess of the Participant's Annual
Additions for the Limitation Year over the Maximum Permissible Amount.
(e)(7) "Individual Medical Account" means an individual medical account
as defined in Section 415(l)(2) of the Code.
(e)(8) "Limitation Year" means the Plan Year. All qualified plans of the
Employer must use the same Limitation Year. If the Limitation Year is
amended to a different 12-consecutive month period, the new Limitation
Year must begin on a date within the Limitation Year in which the
amendment is made.
(e)(9) "Master or Prototype Plan" means a plan the form of which is the
subject of a favorable opinion letter from the Internal Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a Limitation Year with
respect to any Participant the lesser of (A) $30,000 or, if greater, 25
percent of the dollar limitation set forth in Section 415(b)(1) of the
Code, as in effect for the Limitation Year, or (B) 25 percent of the
Participant's Compensation for the Limitation Year. If a short
Limitation Year is created because of an amendment changing the
Limitation Year to a different 12-consecutive-month period, the Maximum
Permissible Amount will not exceed the limitation in (e)(10)(A)
multiplied by a fraction whose numerator is the number of months in the
short Limitation Year and whose denominator is 12.
The compensation limitation referred to in subsection (e)(10)(B)
shall not apply to any contribution for medical benefits within the
meaning of Section 401(h) or Section 419A(f)(2) of the Code after
separation from service which is otherwise treated as an Annual Addition
under Section 419A(d)(2) or Section 415(l)(1) of the Code.
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(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as defined
in Section 419(e) of the Code.
ARTICLE 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All contributions made to the Accounts of
Participants shall be held for investment by the Trustee. The Accounts of
Participants shall be invested and reinvested only in eligible investments
selected by the Employer in Section 1.14(b), subject to Section 14.10.
6.02. INVESTMENT DECISIONS. Investments shall be directed by the Employer or by
each Participant or both, in accordance with the Employer's election in Section
1.14(a). Pursuant to Section 14.04, the Trustee shall have no discretion or
authority with respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which Employer
investment direction is elected, the Employer has the right to direct the
Trustee in writing with respect to the investment and reinvestment of
assets comprising the Trust Fund in the Fidelity Fund(s) designated in
Section 1.14(b) and as allowed by the Trustee.
(b) If Participant investment direction is elected, each Participant
shall direct the investment of his Account among the Fidelity Funds
listed in Section 1.14(b). The Participant shall file initial investment
instructions with the Administrator, on such form as the Administrator
may provide, selecting the Funds in which amounts credited to his Account
will be invested.
(1) Except as provided in this Section 6.02, only authorized Plan
contacts and the Participant shall have access to a Participant's
Account. While any balance remains in the Account of a Participant
after his death, the Beneficiary of the Participant shall make
decisions as to the investment of the Account as though the
Beneficiary were the Participant. To the extent required by a
qualified domestic relations order as defined in Section 414(p) of
the Code, an alternate payee shall make investment decisions with
respect to a Participant's Account as though such alternate payee
were the Participant.
(2) If the Trustee receives any contribution under the Plan as to
which investment instructions have not been provided, the Trustee
shall promptly notify the Administrator and the Administrator shall
take steps to elicit instructions from the Participant. The Trustee
shall credit any such contribution to the Participant's Account and
such amount shall be invested in the Fidelity Fund selected by the
Employer for such purposes or, absent Employer selection, in the most
conservative Fidelity Fund listed in Section 1.14(b), until
investment instructions have been received by the Trustee.
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(c) All dividends, interest, gains and distributions of any nature
received in respect of Fund Shares shall be reinvested in additional
shares of that Fidelity Fund.
(d) Expenses attributable to the acquisition of investments shall be
charged to the Account of the Participant for which such investment is
made.
6.03. PARTICIPANT DIRECTIONS TO TRUSTEE. All Participant initial investment
instructions filed with the Administrator pursuant to the provisions of Section
6.02 shall be promptly transmitted by the Administrator to the Trustee. A
Participant shall transmit subsequent investment instructions directly to the
Trustee by means of the telephone exchange system maintained by the Trustee for
such purposes. The method and frequency for change of investments will be
determined under the (a) rules applicable to the investments selected by the
Employer in Section 1.14(b) and (b) the additional rules of the Employer, if
any, limiting the frequency of investment changes, which are included in a
separate written administrative procedure adopted by the Employer and accepted
by the Trustee. The Trustee shall have no duty to inquire into the investment
decisions of a Participant or to advise him regarding the purchase, retention or
sale of assets credited to his Account.
ARTICLE 7. RIGHT TO BENEFITS.
7.01. NORMAL OR EARLY RETIREMENT. Each Participant who attains his Normal
Retirement Age or, if so provided by the Employer in Section 1.06(b), Early
Retirement Age, will have a 100-percent nonforfeitable interest in his Account
regardless of any vesting schedule elected in Section 1.07. If a Participant
retires upon the attainment of Normal or Early Retirement Age, such retirement
is referred to as a normal retirement. Upon his normal retirement the balance of
the Participant's Account, plus any amounts thereafter credited to his Account,
subject to the provisions of Section 7.08, will be distributed to him in
accordance with Article 8.
If a Participant separates from service before satisfying the age
requirements for early retirement, but has satisfied the service requirement,
the Participant will be entitled to elect an early retirement distribution upon
satisfaction of such age requirement.
7.02. LATE RETIREMENT. If a Participant continues in the service of the Employer
after attainment of Normal Retirement Age, he will continue to have a
100-percent nonforfeitable interest in his Account and will continue to
participate in the Plan until the date he establishes with the Employer for his
late retirement. Until he retires, he has a continuing election to receive all
or any portion of his Account. Upon the earlier of his late retirement or the
distribution date required under Section 8.08, the balance of his Account, plus
any amounts
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thereafter credited to his Account, subject to the provisions of
Section 7.08, will be distributed to him in accordance with Article 8 below.
7.03. DISABILITY RETIREMENT. If so provided by the Employer in Section 1.06(c),
a Participant who becomes disabled will have a 100-percent nonforfeitable
interest in his Account, the balance of which Account, plus any amounts
thereafter credited to his Account, subject to the provisions of Section 7.08,
will be distributed to him in accordance with Article 8 below. A Participant is
considered disabled if he cannot engage in any substantial, gainful activity
because of a medically determinable physical or mental impairment likely to
result in death or to be of a continuous period of not less than 12 months, and
terminates his employment with the Employer. Such termination of employment is
referred to as a disability retirement. Determinations with respect to
disability shall be made by the Administrator who may rely on the criteria set
forth in Section 1.06(c) as evidence that the Participant is disabled.
7.04. DEATH. Subject, if applicable, to Section 8.04, if a Participant dies
before the distribution of his Account has commenced, or before such
distribution has been completed, his Account shall become 100 percent vested and
his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.08. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change
any prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall be as
indicated on the designation form. In the case of a married Participant, the
Participant's spouse shall be deemed to be the designated Beneficiary unless the
Participant's spouse has consented to another designation in the manner
described in Section 8.03(d).
A copy of the death notice or other sufficient documentation must be
filed with and approved by the Administrator. If upon the death of the
Participant there is, in the opinion of the Administrator, no designated
Beneficiary for part or all of the Participant's Account, such amount will be
paid to his surviving spouse or, if none, to his estate (such spouse or estate
shall be deemed to be the Beneficiary for purposes of the Plan). If a
Beneficiary dies after benefits to such Beneficiary have commenced, but before
they have been completed, and, in the opinion of the Administrator, no person
has been designated to receive such remaining benefits, then such benefits shall
be paid in a lump sum to the deceased Beneficiary's estate.
7.05. OTHER TERMINATION OF EMPLOYMENT. If a Participant terminates his
employment for any reason other than death or normal, late, or disability
retirement, he will be entitled to a termination benefit equal to the sum of (a)
the vested percentage(s) of the value of the Matching and/or Fixed/Discretionary
Contributions to his Account, as
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adjusted for income, expense, gain, or loss, such percentage(s) determined in
accordance with the vesting schedule(s) selected by the Employer in Section
1.07, and (b) the value of the Deferral, Employee, Qualified Discretionary and
Rollover Contributions to his Account as adjusted for income, expense, gain or
loss. The amount payable under this Section 7.05 will be subject to the
provisions of Section 7.08 and will be distributed in accordance with Article 8
below.
7.06. SEPARATE ACCOUNT. If a distribution from a Participant's Account has been
made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Employer contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.07, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.05; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.07 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.07. FORFEITURES. If a Participant terminates his employment, any portion of
his Account (including any amounts credited after his termination of employment)
not payable to him under Section 7.05 will be forfeited by him upon the complete
distribution to him of the vested portion of his Account, if any, subject to the
possibility of reinstatement as described in the following paragraph. For
purposes of this paragraph, if the value of an Employee's vested Account balance
is zero, the Employee shall be deemed to have received a distribution of his
vested interest immediately following termination of employment. Such
forfeitures will be applied to reduce the contributions of the Employer next
payable under the Plan (or administrative expenses of the Plan); the forfeitures
shall be held in a money market fund pending such application.
If a Participant forfeits any portion of his Account under the preceding
paragraph but again becomes an Employee after such date, then the amount so
forfeited, without any adjustment for the earnings, expenses, or losses or gains
of the assets credited to his Account since the date forfeited, will be
recredited to his Account (or to a separate account as described in Section
7.06, if applicable) but only if he repays to the Plan before the earlier of
five years after the date of his reemployment or the date he incurs 5
consecutive 1-year breaks in service following the date of the distribution the
amount previously distributed to him, without interest, under Section 7.05. If
an
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Employee is deemed to receive a distribution pursuant to this Section 7.07,
and the Employee resumes employment before 5 consecutive 1-year breaks in
service, the Employee shall be deemed to have repaid such distribution on the
date of his reemployment. Upon such an actual or deemed repayment, the
provisions of the Plan (including Section 7.06) will thereafter apply as if no
forfeiture had occurred. The amount to be recredited pursuant to this paragraph
will be derived first from the forfeitures, if any, which as of the date of
recrediting have yet to be applied as provided in the preceding paragraph and,
to the extent such forfeitures are insufficient, from a special Employer
contribution to be made by the Employer.
If a Participant elects not to receive the nonforfeitable portion of his
Account following his termination of employment, the non-vested portion of his
Account shall be forfeited after the Participant has incurred five consecutive
1-year breaks in service as defined in Section 2.01(a)(33).
No forfeitures will occur solely as a result of a Participant's
withdrawal of Employee contributions.
7.08. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount retained by the Trustee
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
invested and any expenses properly charged under the Plan and Trust to such
amounts.
7.09. PARTICIPANT LOANS. If permitted under Section 1.09, the Administrator
shall allow Participants to apply for a loan from the Plan, subject to the
following:
(a) Loan Application. All Plan loans shall be administered by the
Administrator. Applications for loans shall be made to the Administrator
on forms available from the Administrator. Loans shall be made available
to all Participants on a reasonably equivalent basis. For this purpose,
the term "Participant" means any Participant or Beneficiary, including an
alternate payee under a qualified domestic relations order, as defined in
Section 414(p) of the Code, who is a party-in-interest (as determined
under ERISA Section 3(14)) with respect to the Plan except no loans will
be made to (1) an Employee who makes a rollover contribution in
accordance with Section 4.10 who has not satisfied the requirements of
Section 3.01 or (2) a shareholder-employee or Owner-Employee. For
purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns
(or is considered as owning within the meaning of Section 318(a)(1) of
the Code), on any day during the taxable year of such corporation, more
than 5% of the outstanding stock of the corporation.
A Participant with an existing loan may not apply for another
loan until the existing loan is paid in full and may not refinance an
existing loan or attain a second loan for the purpose of paying
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off the existing loan. A Participant may not apply for more than one loan
during each Plan Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the
amount made available to other Employees. No loan to any Participant or
Beneficiary can be made to the extent that such loan when added to the
outstanding balance of all other loans to the Participant or Beneficiary
would exceed the lesser of (1) $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 (2) one-half the
present value of the nonforfeitable Account of the Participant. For the
purpose of the above limitation, all loans from all plans of the Employer
and Related Employers are aggregated. A Participant may not request a
loan for less than $1,000. The Employer may provide that loans only be
made from certain contribution sources within Participant Account(s) by
notifying the Trustee in writing of the restricted source.
Loans may be made for any purpose or if elected by the Employer
in Section 1.09(a), on account of hardship only. A loan will be
considered to be made on account of hardship only if made on account of
an immediate and heavy financial need described in Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of interest as
determined by the Administrator based on the prevailing interest rates
charged by persons in the business of lending money for loans which would
be made under similar circumstances. The determination of a reasonable
rate of interest must be based on appropriate regional factors unless the
Plan is administered on a national basis in which case the Administrator
may establish a uniform reasonable rate of interest applicable to all
regions.
All loans shall by their terms require that repayment (principal
and interest) be amortized in level payments, not less than quarterly,
over a period not extending beyond five years from the date of the loan
unless such loan is for the purchase of a Participant's primary
residence, in which case the repayment period may not extend beyond ten
years from the date of the loan. A Participant may prepay the outstanding
loan balance prior to maturity without penalty.
(d) Security. Loans must be secured by the Participant's Accounts not to
exceed 50 percent of the Participant's vested Account. A Participant must
obtain the consent of his or her spouse, if any, to use a Participant
Account as security for the loan, if the provisions of Section 8.03 apply
to the Participant. Spousal consent shall be obtained no earlier than the
beginning of the 90-day period that ends on the date on which the loan is
to be so secured. The consent must be in writing, must acknowledge the
effect of the loan, and must be witnessed by a Plan representative
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<PAGE> 42
or notary public. Such consent shall thereafter be binding with respect
to the consenting spouse or any subsequent spouse with respect to that
loan.
(e) Default. The Administrator shall treat a loan in default if
(1) any scheduled repayment remains unpaid more than 90 days
or
(2) there is an outstanding principal balance existing on a loan
after the last scheduled repayment date.
Upon default or termination of employment, the entire
outstanding principal and accrued interest shall be immediately due and
payable. If a distributable event (as defined by the Code) has occurred,
the Administrator shall direct the Trustee to foreclose on the promissory
note and offset the Participant's vested Account by the outstanding
balance of the loan. If a distributable event has not occurred, the
Administrator shall direct the Trustee to foreclose on the promissory
note and offset the Participant's vested Account as soon as a
distributable event occurs.
(f) Pre-existing loans. The provision in paragraph (a) of this Section
7.09 limiting a Participant to one outstanding loan shall not apply to
loans made before the Employer adopted this prototype plan document. A
Participant may not apply for a new loan until all outstanding loans made
before the Employer adopted this prototype plan have been paid in full.
The Trustee may accept any loans made before the Employer adopted this
prototype plan document except such loans which require the Trustee to
hold as security for the loan property other than the Participant's
vested Account.
As of the effective date of amendment of this Plan in Section
1.01(g)(2), the Trustee shall have the right to reamortize the
outstanding principal balance of any Participant loan that is delinquent.
Such reamortization shall be based upon the remaining life of the loan
and the original maturity date may not be extended.
Notwithstanding any other provision of this Plan, the portion of the
Participant's vested Account used as a security interest held by the plan
by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Account payable at
the time of death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's vested
Account (determined without regard to the preceding sentence) is payable
to the surviving spouse, then the Account shall be adjusted by first
reducing the vested Account by the amount of the security used as
repayment of the loan, and then determining the benefit payable to the
surviving spouse.
No loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all
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<PAGE> 43
other loans to the Participant or Beneficiary would exceed the lesser of
(1) $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 (2) one-half the present value of the
nonforfeitable Account of the Participant. For the purpose of the above
limitation, all loans from all plans of the Employer and Related
Employers are aggregated.
7.10. IN-SERVICE/HARDSHIP WITHDRAWALS. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw any Employer or Employee
Contributions (and earnings thereon) prior to retirement or termination of
employment, except as follows:
(a) AGE 59 1/2. If permitted under Section 1.11(b), a Participant who has
attained the age of 59 1/2 is permitted to withdraw upon request all or any
portion of the Accounts specified by the Employer in 1.11(b).
(b) HARDSHIP. If permitted under Section 1.10, a Participant may apply to
the Administrator to withdraw some or all of his Deferral Contributions (and
earnings thereon accrued as of December 31, 1988) and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor plan, if such
withdrawal is made on account of a hardship. For purposes of this Section, a
distribution is made on account of hardship if made on account of an immediate
and heavy financial need of the Employee where such Employee lacks other
available resources. Determinations with respect to hardship shall be made by
the Administrator and shall be conclusive for purposes of the Plan, and shall be
based on the following special rules:
(1) The following are the only financial needs considered immediate
and heavy: expenses incurred or necessary for medical care (within the
meaning of Section 213(d) of the Code) of the Employee, the Employee's
spouse, children, or dependents; the purchase (excluding mortgage
payments) of a principal residence for the Employee; payment of
tuition and related educational fees for the next twelve (12) months
of post-secondary education for the Employee, the Employee's spouse,
children or dependents; or the need to prevent the eviction of the
Employee from, or a foreclosure on the mortgage of, the Employee's
principal residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than the
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period
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<PAGE> 44
following the date of his hardship distribution. The suspension
must also apply to all elective contributions and Employee
Contributions to all other qualified plans and non-qualified plans
maintained by the Employer, other than any mandatory employer
contribution portion of a defined benefit plan, including stock
option, stock purchase and other similar plans, but not including
health and welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan);
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary to
pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) The Employee agrees to limit Deferral Contributions (elective
contributions)to the Plan and any other qualified plan maintained
by the Employer for the Employee's taxable year immediately
following the taxable year of the hardship distribution to the
applicable limit under Section 402(g) of the Code for such taxable
year less the amount of such Employee's Deferral Contributions for
the taxable year of the hardship distribution.
(3) A Participant must obtain the consent of his or her spouse, if
any, to obtain a hardship withdrawal, if the provisions of Section
8.03 apply to the Participant.
(c) EMPLOYEE CONTRIBUTIONS. A Participant may elect to withdraw, in
cash, up to one hundred percent of the amount then credited to his
Employee Contribution Account. Such withdrawals shall be limited to one
(1) per Plan Year unless this prototype plan document is an amendment of
a prior plan document, in which case the rules and restrictions
governing Employee Contribution withdrawals, if any, are incorporated
herein by reference.
7.11. PRIOR PLAN IN-SERVICE DISTRIBUTION RULES. If designated by the Employer in
Section 1.11(b), a Participant shall be entitled to withdraw at anytime prior to
his termination of employment, subject to the provisions of Article 8 and the
prior plan, any vested Employer Contributions maintained in a Participant's
Account for the specified period of time.
ARTICLE 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions from the Trust to a Participant or to the Beneficiary
of the Participant shall be made in a lump sum in cash or, if elected by
the Employer in Section 1.11, under a systematic withdrawal plan
(installment(s)) upon retirement, death,
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<PAGE> 45
disability, or other termination of employment, unless another form of
distribution is required or permitted in accordance with paragraph (d) of
this Section 8.01 or Sections 1.11(c), 8.02, 8.03, 8.04 or 11.02. A
distribution may be made in Fund Shares, at the election of the
Participant, pursuant to the qualifying rollover of such distribution to
a Fidelity Investments individual retirement account.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash, over
a period certain which does not extend beyond the life expectancy of the
Participant or the joint life expectancies of the Participant and his
Beneficiary, or, if the Participant dies prior to the commencement of his
benefits the life expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if a
Participant's Account is, and at the time of any prior distribution(s)
was, $3,500 or less, the balance of such Account shall be distributed in
a lump sum as soon as practicable following retirement, disability, death
or other termination of employment.
(d) This paragraph (d) applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Article 8, a
distributee may elect, at the time and in the manner prescribed by the
Administrator, to have any portion of an eligible rollover distribution
paid directly to an eligible retirement plan specified by the distributee
in a direct rollover. The following definitions shall apply for purposes
of this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover distribution
is any distribution of all or any portion of the balance to the
credit of the distributee, except that an eligible rollover
distribution does not include: any distribution that is one of a
series of substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent
such distribution is required under Section 401(a)(9) of the Code;
and the portion of any distribution that is not includable in gross
income (determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is an
individual retirement account described in Section 408(a) of the
Code, an individual retirement annuity described in Section 408(b) of
the Code, an annuity plan described in Section 403(a) of the Code, or
a qualified trust described in Section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution. However, in
the case of an eligible rollover
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<PAGE> 46
distribution to a surviving spouse, an eligible retirement plan is
an individual retirement account or individual retirement annuity.
(3) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's surviving
spouse and the Employee's or former Employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
(4) Direct rollover: A direct rollover is a payment by the plan to
the eligible retirement plan specified by the distributee.
8.02. ANNUITY DISTRIBUTIONS. If so provided in Section 1.11(c), a Participant
may elect distributions made in whole or in part in the form of an annuity
contract subject to the provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must be purchased
from an insurance company and must be nontransferable. The terms of an
annuity contract shall comply with the requirements of the Plan and
distributions under such contract shall be made in accordance with
Section 401(a)(9) of the Code and the regulations thereunder.
(b) The payment period of an annuity contract distributed to the
Participant pursuant to this Section may be as long as the Participant
lives. If the annuity is payable to the Participant and his spouse or
designated Beneficiary, the payment period of an annuity contract may be
for as long as either the Participant or his spouse or designated
Beneficiary lives. Such an annuity may provide for an annuity certain
feature for a period not exceeding the life expectancy of the
Participant. If the annuity is payable to the Participant and his spouse
such period may not exceed the joint life and last survivor expectancy
of the Participant and his spouse, or, if the annuity is payable to the
Participant and a designated Beneficiary, the joint life and last
survivor expectancy of the Participant and such Beneficiary. If the
Participant dies prior to the commencement of his benefits, the payment
period of an annuity contract distributed to the Beneficiary of the
Participant may be as long as the Participant's Beneficiary lives, and
may provide for an annuity certain feature for a period not exceeding
the life expectancy of the Beneficiary. Any annuity contract distributed
under the Plan must provide for nonincreasing payments.
8.03. JOINT AND SURVIVOR ANNUITIES/PRERETIREMENT SURVIVOR ANNUITIES.
(a) APPLICATION. The provisions of this Section supersede any conflicting
provisions of the Plan; however, paragraph (b) of this Section shall not
apply if the Participant's Account does not exceed or at the time of any
prior distribution did not exceed
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<PAGE> 47
$3,500. A Participant is described in this Section only if (i) the
Participant has elected distribution of his Account in the form of an
Annuity Contract in accordance with Section 8.02, or (ii) the Trustee has
directly or indirectly received a transfer of assets from another plan
(including a predecessor plan) to which Section 401(a)(11) of the Code
applies with respect to such Participant.
(b) RETIREMENT ANNUITY. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below, to the extent applicable to the Participant, within
the 90-day period preceding his Annuity Starting Date (which election may
be revoked, and if revoked, remade, at any time in such period), the
vested Account due any Participant to whom this subsection (b) applies
will be paid to him by the purchase and delivery to him of an annuity
contract described in Section 8.02 providing a life annuity only form of
benefit or, if the Participant is married as of his Annuity Starting
Date, providing an immediate annuity for the life of the Participant with
a survivor annuity for the life of the Participant's spouse (determined
as of the date of distribution of the contract) which is 50 percent of
the amount of the annuity which is payable during the joint lives of the
Participant and such spouse. The Participant may elect to receive
distribution of his benefits in the form of such annuity as of the
earliest date on which he could elect to receive retirement benefits
under the Plan. Within the period beginning 90 days prior to the
Participant's Annuity Starting Date and ending 30 days prior to such
Date, the Administrator will provide such Participant with a written
explanation of (1) the terms and conditions of the annuity contract
described herein, (2) the Participant's to make, and the effect of, an
election to waive application of this subsection, (3) the rights of the
Participant's spouse under subsection (d), and (4) the right to revoke
and the period of time necessary to revoke the election to waive
application of this subsection.
(c) ANNUITY DEATH BENEFIT. Unless the Participant elects to waive the
application of this subsection in a manner satisfying the requirements of
subsection (d) below at any time within the applicable election period
(which election may be revoked, and if revoked, remade, at any time in
such period), if a married Participant to whom this Section applies dies
before his Annuity Starting Date, then notwithstanding any designation of
a Beneficiary to the contrary, 50 percent of his vested Account will be
applied to purchase an annuity contract described in Section 8.02
providing an annuity for the life of the Participant's surviving spouse,
which contract will then be promptly distributed to such spouse. In lieu
of the purchase of such an annuity contract, the spouse may elect in
writing to receive distributions under the Plan as if he or she had been
designated by the Participant as his Beneficiary with respect to 50
percent of his Account. For purposes of this subsection, the applicable
election period will commence on the first day of the Plan Year in which
the Participant attains age 35 and will end on the date of the
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<PAGE> 48
Participant's death, provided that in the case of a Participant who
terminates his employment the applicable election period with respect to
benefits accrued prior to the date of such termination will in no event
commence later than the date of his termination of employment. A
Participant may elect to waive the application of this subsection prior
to the Plan Year in which he attains age 35, provided that any such
waiver will cease to be effective as of the first day of the Plan Year in
which the Participant attains age 35.
The Administrator will provide a Participant to whom this subsection
applies with a written explanation with respect to the annuity death
benefit described in this subsection (c) comparable to that required
under subsection (b) above. Such explanation shall be furnished within
whichever of the following periods ends last: (1) the period beginning
with the first day of the Plan Year in which the Participant reaches age
32 and ending with the end of the Plan Year preceding the Plan Year in
which he reaches age 35, (2) a reasonable period ending after the
Employee becomes a Participant, (3) a reasonable period ending after this
Section 8.04 first becomes applicable to the Participant in accordance
with Section 8.04(a), (4) in the case of a Participant who separates from
service before age 35, a reasonable period of time ending after
separation from service. For purposes of the preceding sentence, the
two-year period beginning one year prior to the date of the event
described in clause (2), (3) or (4), whichever is applicable, and ending
one year after such date shall be considered reasonable, provided, that
in the case of a Participant who separates from service under (4) above
and subsequently recommences employment with the Employer, the applicable
period for such Participant shall be redetermined in accordance with this
subsection.
(d) REQUIREMENTS OF ELECTIONS. This subsection will be satisfied with
respect to a waiver or designation which is required to satisfy this
subsection if such waiver or designation is in writing and either
(1) the Participant's spouse consents thereto in writing, which
consent must acknowledge the effect of such waiver or designation and
be witnessed by a notary public or Plan representative, or
(2) the Participant establishes to the satisfaction of the
Administrator that the consent of the Participant's spouse cannot be
obtained because there is no spouse, because the spouse cannot be
located, or because of such other circumstances as the Secretary of
Treasury may prescribe.
Any consent by a spouse, or establishment that the consent of a
spouse may not be obtained, will be effective only with respect to a
specific Beneficiary (including any class of Beneficiaries or any
contingent Beneficiaries) or form of benefits identified in the
Participant's waiver or designation, unless the consent of the spouse
expressly permits designations
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<PAGE> 49
by the Participant without any requirement of further consent by
the spouse. A consent which permits such designations by the
Participant shall acknowledge that the spouse has the right to
limit consent to a specific Beneficiary and form of benefits and
that the spouse voluntarily elects to relinquish both such rights.
A consent by a spouse shall be irrevocable once made. Any such
consent, or establishment that such consent may not be obtained,
will be effective only with respect to such spouse. For purposes
of subsections (b) and (c) above, no consent of a spouse shall be
valid unless the notice required by whichever subsection is
applicable has been provided to the Participant.
(e) FORMER SPOUSE. For purposes of this Section 8.03, a former spouse of
a Participant will be treated as the spouse or surviving spouse of the
Participant, and a current spouse will not be so treated, to the extent
required under a qualified domestic relations order, as defined in
Section 414(p) of the Code.
(f) VESTED ACCOUNT BALANCE. For purposes of this Section, vested Account
shall include the aggregate value of the Participant's vested Account
derived from Employer and Employee Contributions (including rollovers),
whether vested before or upon death. The provisions of this Section shall
apply to a Participant who is vested in amounts attributable to Employer
contributions, Employee Contributions, or both, upon death or at the time
of distribution.
8.04 INSTALLMENT DISTRIBUTIONS. This Section shall be interpreted and applied in
accordance with the regulations under Section 401(a)(9) of the Code, including
the minimum distribution incidental benefit requirement of Section 1.401(a)(9)-2
of the Proposed Treasury Regulations, or any successor regulations of similar
import.
(a)IN GENERAL. If a Participant's benefit may be distributed in
accordance with Section 8.01(b), the amount to be distributed for each
calendar year for which a minimum distribution is required shall be at
least an amount equal to the quotient obtained by dividing the
Participant's interest in his Account by the life expectancy of the
Participant or Beneficiary or the joint life and last survivor
expectancy of the Participant and his Beneficiary, whichever is
applicable. For calendar years beginning before January 1, 1989, if a
Participant's Beneficiary is not his spouse, the method of distribution
selected must insure that at least 50 percent of the present value of
the amount available for distribution is paid within the life expectancy
of the Participant. For calendar years beginning after December 31,
1988, the amount to be distributed for each calendar year shall not be
less than an amount equal to the quotient obtained by dividing the
Participant's interest in his Account by the lesser of (1) the
applicable life expectancy under Section 8.01(b), or (2) if a
Participant's Beneficiary is not his spouse, the applicable divisor
determined under Section 1.401(a)(9)-2, Q&A 4 of the Proposed Treasury
Regulations, or any successor regulations of similar import.
Distributions after the death of the Participant shall be made
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using the applicable life expectancy under (1) above, without regard to
Section 1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a) for the
calendar year immediately preceding the calendar year in which the
Participant's required beginning date, as determined under Section
8.08(b), occurs shall be made on or before the Participant's required
beginning date, as so determined. Minimum distributions for other
calendar years shall be made on or before the close of such calendar
year.
(b)ADDITIONAL REQUIREMENTS FOR DISTRIBUTIONS AFTER DEATH OF PARTICIPANT.
(1) DISTRIBUTION BEGINNING BEFORE DEATH. If the Participant dies
before distribution of his benefits has begun, distributions shall be
made in accordance with the provisions of this paragraph.
Distributions under Section 8.01(a) shall be completed by the close
of the calendar year in which the fifth anniversary of the death of
the Participant occurs. Distributions under Section 8.01(b) shall
commence, if the Beneficiary is not the Participant's spouse, not
later than the close of the calendar year immediately following the
calendar year in which the death of the Participant occurs.
Distributions under Section 8.01(b) to a Beneficiary who is the
Participant's surviving spouse shall commence not later than the
close of the calendar year in which the Participant would have
attained age 70 1/2 or, if later, the close of the calendar year
immediately following the calendar year in which the death of the
Participant occurs. In the event such spouse dies prior to the date
distribution to him or her commences, he or she will be treated for
purposes of this subsection (other than the preceding sentence) as if
he or she were the Participant. If the Participant has not designated
a Beneficiary, or the Participant or Beneficiary has not effectively
selected a method of distribution, distribution of the Participant's
benefit shall be completed by the close of the calendar year in which
the fifth anniversary of the death of the Participant occurs.
Any amount paid to a child of the Participant will be treated as if
it had been paid to the surviving spouse if the amount becomes
payable to the surviving spouse when the child reaches the age of
majority.
For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be
recalculated annually unless the Participant's spouse irrevocably
elects otherwise prior to the time distributions are required to
begin. Life expectancy shall be computed in accordance with the
provisions of subsection (a) above.
(2) DISTRIBUTION BEGINNING AFTER DEATH. If the Participant dies after
distribution of his benefits has begun, distributions to the
Participant's Beneficiary will be made at least as
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rapidly as under the method of distribution being used as of the date
of the Participant's death.
For purposes of this Section 8.04(b), distribution of a
Participant's interest in his Account will be considered to begin as of
the Participant's required beginning date, as determined under Section
8.08(b). If distribution in the form of an annuity irrevocably commences
prior to such date, distribution will be considered to begin as of the
actual date distribution commences.
(c) LIFE EXPECTANCY. For purposes of this Section, life expectancy shall
be recalculated annually in the case of the Participant or a Beneficiary
who is the Participant's spouse unless the Participant or Beneficiary
irrevocably elects otherwise prior to the time distributions are required
to begin. If not recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of the Participant
or Beneficiary, whichever is applicable, as of such individual's birth
date in the first year for which a minimum distribution is required
reduced by one for each elapsed calendar year since the date life
expectancy was first calculated. For purposes of this Section, life
expectancy and joint life and last survivor expectancy shall be computed
by use of the expected return multiples in Table V and VI of section
1.72-9 of the income tax Regulations.
A Participant's interest in his Account for purposes of this Section
8.04 shall be determined as of the last valuation date in the calendar
year immediately preceding the calendar year for which a minimum
distribution is required, increased by the amount of any contributions
allocated to, and decreased by any distributions from, such Account after
the valuation date. Any distribution for the first year for which a
minimum distribution is required made after the close of such year shall
be treated as if made prior to the close of such year.
8.05. IMMEDIATE DISTRIBUTIONS. If the Account distributable to a Participant
exceeds, or at the time of any prior distribution exceeded, $3,500, no
distribution will be made to the Participant before he reaches his Normal
Retirement Age (or age 62, if later), unless the written consent of the
Participant has been obtained. Such consent shall be made in writing within the
90-day period ending on the Participant's Annuity Starting Date. Within the
period beginning 90 days before the Participant's Annuity Starting Date and
ending 30 days before such Date, the Administrator will provide such Participant
with written notice comparable to the notice described in Section 8.03(b)
containing a general description of the material features and an explanation of
the relative values of the optional forms of benefit available under the Plan
and informing the Participant of his right to defer receipt of the distribution
until his Normal Retirement Age (or age 62, if later).
The consent of the Participant's spouse must also be obtained if the
Participant is subject to the provisions of Section 8.03(a), unless the
distribution will be made in the form of the applicable retirement
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annuity contract described in Section 8.03(b). A spouse's consent to early
distribution, if required, must satisfy the requirements of Section 8.03(d).
Neither the consent of the Participant nor the Participant's spouse shall
be required to the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon termination of the Plan
if it does not offer an annuity option (purchased from a commercial provider)
and if the Employer or any Related Employer does not maintain another defined
contribution plan (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7)) the Participant's Account will, without the
Participant's consent, be distributed to the Participant. However, if any
Related Employer maintains another defined contribution plan (other than an
employee stock ownership plan as defined in Section 4975(e)(7) of the Code) then
the Participant's Account will be transferred, without the Participant's
consent, to the other plan if the Participant does not consent to an immediate
distribution.
8.06. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will determine
the method of distribution of benefits to himself and may determine the method
of distribution to his Beneficiary. Such determination will be made prior to the
time benefits become payable under the Plan. If the Participant does not
determine the method of distribution to his Beneficiary or if the Participant
permits his Beneficiary to override his determination, the Beneficiary, in the
event of the Participant's death, will determine the method of distribution of
benefits to himself as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the calendar year in which
distribution would be required to begin under Section 8.04(b) or, if earlier,
the close of the calendar year in which the fifth anniversary of the death of
the Participant occurs.
8.07. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in writing
whenever any Participant or Beneficiary is entitled to receive benefits under
the Plan. The Administrator's notice shall indicate the form of benefits that
such Participant or Beneficiary shall receive and (in the case of distributions
to a Participant) the name of any designated Beneficiary or Beneficiaries.
8.08. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made latest than the earlier of the dates described in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in which
occurs the later of the date on which the Participant attains age 65, the
date on which the Participant ceases to be employed by the Employer, or
the 10th anniversary of the year in which the Participant commenced
participation in the Plan; and
(b) April 1 of the calendar year first following the calendar year in
which the Participant attains age 70 1/2 or, in the case of a Participant
who had attained age 70 1/2 before January 1, 1988,
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the required beginning date determined in accordance with (1) or (2)
below:
(1) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(2) The required beginning date of a Participant who is a 5-percent
owner during any year beginning after December 31, 1979, is the first
day of April following the later of
(A) the calendar year in which the Participant attains age 70
1/2, or
(B) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5-percent owner, or the calendar year in which the
Participant retires.
Notwithstanding the foregoing, in the case of a Participant who attained
age 70 1/2 during 1988 and who had not retired prior to January 1, 1989, the
required beginning date described in this paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant (and spouse) to
consent to a distribution while a benefit is immediately distributable, within
the meaning of Section 8.05, shall be deemed to be an election to defer
commencement of payment of any benefit sufficient to satisfy (a) above.
Once distributions have begun to a 5-percent owner under (b) above, they
must continue to be distributed, even if the Participant ceases to be a
5-percent owner in a subsequent year.
For purposes of (b) above, a Participant is treated as a 5-percent owner
if such Participant is a 5-percent owner as defined in Section 416(i) of the
Code (determined in accordance with Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such owner attains age 66 1/2 or any subsequent Plan
Year.
The Administrator shall notify the Trustee in writing whenever a
distribution is necessary in order to comply with the minimum distribution rules
set forth in this Section.
8.09. WHEREABOUTS OF PARTICIPANTS AND BENEFICIARIES. The Administrator will at
all times be responsible for determining the whereabouts of each Participant or
Beneficiary who may be entitled to benefits under the Plan and will at all times
be responsible for instructing the Trustee in writing as to the current address
of each such Participant or Beneficiary. The Trustee will be entitled to rely on
the latest written statement received from the Administrator as to such
addresses. The Trustee will be under no duty to make any distributions under the
Plan
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unless and until it has received written instructions from the Administrator
satisfactory to the Trustee containing the name and address of the distributee,
the time when the distribution is to occur, and the form which the distribution
will take. Notwithstanding the foregoing, if the Trustee attempts to make a
distribution in accordance with the Administrator's instructions but is unable
to make such distribution because the whereabouts of the distributee is unknown,
the Trustee will notify the Administrator of such situation and thereafter the
Trustee will be under no duty to make any further distributions to such
distributee until it receives further written instructions from the
Administrator. If a benefit is forfeited because the Administrator determines
that the Participant or Beneficiary cannot be found, such benefit will be
reinstated by the Sponsor if a claim is filed by the Participant or Beneficiary
with the Administrator and the Administrator confirms the claim to the Sponsor.
ARTICLE 9. TOP-HEAVY PROVISIONS.
9.01 APPLICATION. If the Plan is or becomes a Top-Heavy Plan in any Plan Year or
is automatically deemed to be Top-Heavy in accordance with the Employer's
election in Section 1.12(a)(1) of the Adoption Agreement, the provisions of this
Article 9 shall supersede any conflicting provision in the Plan.
9.02 DEFINITIONS. For purposes of this Article 9, the following terms have the
meanings set forth below:
(a) KEY EMPLOYEE. Any Employee or former Employee (and the Beneficiary of
any such Employee) who at any time during the determination period was
(1) an officer of the Employer whose annual Compensation exceeds 50
percent of the dollar limitation under Section 415(b)(1)(A) of the Code,
(2) an owner (or considered an owner under Section 318 of the Code) of
one of the ten largest interests in the Employer if such individual's
annual Compensation exceeds the dollar limitation under Section
415(c)(1)(A) of the Code, (3) a 5-percent owner of the Employer, or (4) a
1-percent owner of the Employer who has annual Compensation of more than
$150,000. For purposes of this paragraph, the determination period is the
Plan Year containing the Determination Date and the four preceding Plan
Years. The determination of who is a Key Employee shall be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder. Annual Compensation means compensation as defined in Section
5.03(e)(2), but including amounts contributed by the Employer pursuant to
a salary reduction agreement which are excludable from the employee's
gross income under Section 125, Section 402(a)(8), and Section 403(b) of
the Code.
(b) TOP-HEAVY PLAN. The Plan is a Top-Heavy Plan if any of the following
conditions exists:
(1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the Plan
is not part of any Required Aggregation Group or Permissive
Aggregation Group,
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(2) the Plan is a part of a Required Aggregation Group but not part
of a Permissive Aggregation Group and the Top-Heavy Ratio for the
Required Aggregation Group exceeds 60 percent, or
(3) the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top-Heavy Ratio for both Groups
exceeds 60 percent.
(c) TOP-HEAVY RATIO.
(1) With respect to this Plan, or with respect to any Required
Aggregation Group or Permissive Aggregation Group that consists
solely of defined contribution plans (including any simplified
employee pension plans) and the Employer has not maintained any
defined benefit plan which during the 5-year period ending on the
determination date(s) has or has had accrued benefits, the Top-Heavy
Ratio is a fraction, the numerator of which is the sum of the account
balances of all Key Employees under the plans as of the Determination
Date (including any part of any account balance distributed in the
5-year period ending on the Determination Date), and the denominator
of which is the sum of all account balances (including any part of
any account balance distributed in the 5-year period ending on the
Determination Date) of all participants under the plans as of the
Determination Date. Both the numerator and denominator of the
Top-Heavy Ratio shall be increased, to the extent required by Section
416 of the Code, to reflect any contribution which is due but unpaid
as of the Determination Date.
(2) With respect to any Required Aggregation Group or Permissive
Aggregation Group that includes one or more defined benefit plans
which, during the 5-year period ending on the Determination Date, has
covered or could cover a Participant in this Plan, the Top-Heavy
Ratio is a fraction, the numerator of which is the sum of the account
balances under the defined contribution plans for all Key Employees
and the present value of accrued benefits under the defined benefit
plans for all Key Employees, and the denominator of which is the sum
of the account balances under the defined contribution plans for all
participants and the present value of accrued benefits under the
defined benefit plans for all participants. Both the numerator and
denominator of the Top-Heavy Ratio shall be increased for any
distribution of an account balance or an accrued benefit made in the
5-year period ending on the Determination Date and any contribution
due but unpaid as of the Determination Date.
(3) For purposes of (1) and (2) above, the value of Accounts and the
present value of accrued benefits will be determined as of the most
recent Valuation Date that falls within or ends with the 12-month
period ending on the Determination Date, except as provided in
Section 416 of the Code and the regulations thereunder for the first
and second plan years of a defined benefit plan. The Account and
accrued benefits of a Participant
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(A) who is not a Key Employee but who was a Key Employee in a prior
year, or (B) who has not been credited with at least one Hour of
Service with the Employer at any time during the 5-year period ending
on the Determination Date, will be disregarded. The calculation of
the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account, shall be made in
accordance with Section 416 of the Code and the regulations
thereunder. Deductible employee contributions shall not be taken into
account for purposes of computing the Top-Heavy Ratio. When
aggregating plans, the value of Accounts and accrued benefits shall
be calculated with reference to the Determination Dates that fall
within the same calendar year.
For purposes of determining if the Plan, or any other plan
included in a Required Aggregation Group of which this Plan is a
part, is a Top-Heavy Plan, the accrued benefit in a defined benefit
plan of an Employee other than a Key Employee shall be determined
under (i) the method, if any, that uniformly applies for accrual
purposes under all plans maintained by the Employer, or (ii) if there
is no such method, as if such benefit accrued not more rapidly than
the slowest accrual rate permitted under the fractional accrual rate
of Section 411(b)(1)(C) of the Code.
(d) PERMISSIVE AGGREGATION GROUP. The Required Aggregation Group plus any
other qualified plans of the Employer or a Related Employer which, when
considered as a group with the Required Aggregation Group, would continue
to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.
(e) REQUIRED AGGREGATION GROUP.
(1) Each qualified plan of the Employer or Related Employer in which
at least one Key Employee participates, or has participated at any
time during the determination period (regardless of whether the plan
has terminated), and
(2) any other qualified plan of the Employer or Related Employer
which enables a plan described in (1) above to meet the requirements
of Sections 401(a)(4) or 410 of the Code.
(f) DETERMINATION DATE. For any Plan Year of the Plan subsequent to the
first Plan Year, the last day of the preceding Plan Year. For the first
Plan Year of the Plan, the last day of that Plan Year.
(g) VALUATION DATE. The Determination Date.
(h) PRESENT VALUE. Present value shall be based only on the interest rate
and mortality table specified in the Adoption Agreement.
9.03. MINIMUM CONTRIBUTION.
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(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any Participant who
is not a Key Employee shall not be less than the lesser of 3 percent (or
such other percent elected by the Employer in Section 1.12(c)) of such
Participant's Compensation or, in the case where the Employer has no
defined benefit plan which designates this Plan to satisfy Section 401 of
the Code, the largest percentage of Employer contributions, as a
percentage of the first $200,000 of the Key Employee's Compensation, made
on behalf of any Key Employee for that year. If the Employer selected the
Integrated Formula in Section 1.05(a)(2), the minimum contribution shall
be determined under paragraph (e) of this Section 9.03. Further, the
minimum contribution under this Section 9.03 shall be made even though,
under other Plan provisions, the Participant would not otherwise be
entitled to receive a contribution, or would have received a lesser
contribution for the year, because (1) the Participant failed to complete
1,000 Hours of Service or any equivalent service requirement provided in
the Adoption Agreement; or (2) the Participant's Compensation was less
than a stated amount.
(b) The provisions of (a) above shall not apply to any Participant who
was not employed by the Employer on the last day of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer shall not be less than 5
percent of such Participant's Compensation, unless the Employer has
provided in Section 1.12(c) that the minimum contribution requirement
will be met in the other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the extent
required to be nonforfeitable under Section 416(b) of the Code) may not
be forfeited under Section 411(a)(3)(B) or 411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in Section 1.05(a)(2),
the allocation steps in Section 4.06(b)(2) shall be preceded by the
following steps:
(1) The Discretionary Employer Contributions will be allocated
to each eligible Participant (as determined under this Section 9.03)
in the ratio that the Participant's Compensation bears to all
Participants' Compensation, but not in excess of 3%(or such other
percent elected by the Employer in Section 1.12(c).
(2) Any Discretionary Employer Contributions remaining after
(e)(1) above will be allocated to each eligible Participant in the
ratio that the Participant's Excess Compensation for the Plan Year
bears to the Excess Compensation of all eligible Participants, but
not in excess of 3%(or such other percent elected by the Employer in
Section 1.12(c)).
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9.04. ADJUSTMENT TO THE LIMITATION ON CONTRIBUTIONS AND BENEFITS. If this Plan
is in Top-Heavy status, the number 100 shall be substituted for the number 125
in subsections (e)(3) and (e)(4) of Section 5.03. However, this substitution
shall not take effect with respect to this Plan in any Plan Year in which the
following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on behalf of each
Participant who is not a Key Employee and who is a participant in a
defined benefit plan maintained by the Employer is not less than 7 1/2
percent of such Participant's Compensation.
(b) The sum of the present value as of the Determination Date of (1) the
aggregate accounts of all Key Employees under all defined contribution
plans of the Employer and (2) the cumulative accrued benefits of all Key
Employees under all defined benefit plans of the Employer does not
exceed 90 percent of the same amounts determined for all Participants
under all plans of the Employer that are Top-Heavy Plans, excluding
Accounts and accrued benefits for Employees who formerly were but are no
longer Key Employees.
The substitutions of the number 100 for 125 shall not take effect in
any Limitation Year with respect to any Participant for whom no benefits
are accrued or contributions made for such Year.
9.05. MINIMUM VESTING. For any Plan Year in which the Plan is a Top-Heavy Plan
and all Plan Years thereafter, the Top-Heavy vesting schedule elected in Section
1.12(d) will automatically apply to the Plan. The Top-Heavy vesting schedule
applies to all benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee Contributions or those already subject to
a vesting schedule which vests at least as rapidly in all cases as the schedule
elected in Section 1.12(d), including benefits accrued before the Plan becomes a
Top-Heavy Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a Top-Heavy Plan changes
for any Plan Year. However, this Section 9.05 does not apply to the Account of
any Employee who does not have an Hour of Service after the Plan has initially
become a Top-Heavy Plan and such Employee's Account attributable to Employer
Contributions will be determined without regard to this Section 9.05.
ARTICLE 10. AMENDMENT AND TERMINATION.
10.01 AMENDMENT BY EMPLOYER. The Employer reserves the authority, subject to the
provisions of Article 1 and Section 10.03, to amend the Plan:
(a) CHANGES TO ELECTIONS CONTAINED IN THE ADOPTION AGREEMENT. By filing
with the Trustee an amended Adoption Agreement, executed by the Employer
only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on
the effective date of such amended Adoption
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Agreement except that retroactive changes to a previous election or
elections pursuant to the regulations issued under Section 401(a)(4) of
the Code shall be permitted. Any such change notwithstanding, no
Participant's Account shall be reduced by such change below the amount to
which the Participant would have been entitled if he had voluntarily left
the employ of the Employer immediately prior to the date of the change.
The Employer may from time to time make any amendment to the Plan that
may be necessary to satisfy Sections 415 or 416 of the Code because of
the required aggregation of multiple plans by completing overridingplan
language in the Adoption Agreement. The Employer may also add certain
model amendments published by the Internal Revenue Service which
specifically provide that their adoption will not cause the Plan to be
treated as an individually designed plan; or
(b) OTHER CHANGES. By amending any provision of the Plan for any reason
other than those specified in (a) above. However, upon making such
amendment, including a waiver of the minimum funding requirement under
Section 412(d) of the Code, the Employer may no longer participate in
this prototype plan arrangement and will be deemed to have an
individually designed plan. Following such amendment, the Trustee may
transfer the assets of the Trust to the trust forming part of such newly
adopted plan upon receipt of sufficient evidence (such as a determination
letter or opinion letter from the Internal Revenue Service or an opinion
of counsel satisfactory to the Trustee) that such trust will be a
qualified trust under the Code.
10.02. AMENDMENT BY PROTOTYPE SPONSOR. The Prototype Sponsor may in its
discretion amend the Plan or the Adoption Agreement at any time, subject to the
provisions of Article 1 and Section 10.03, and provided that the Prototype
Sponsor mails a copy of such amendment to the Employer at its last known address
as shown on the books of the Prototype Sponsor.
10.03. AMENDMENTS AFFECTING VESTED AND/OR ACCRUED BENEFITS.
(a) Except as permitted by Section 10.04, no amendment to the Plan shall
be effective to the extent that it has the effect of decreasing a
Participant's Account or eliminating an optional form of benefit with
respect to benefits attributable to service before the amendment.
Furthermore, if the vesting schedule of the Plan is amended, the
nonforfeitable interest of a Participant in his Account, determined as
of the later of the date the amendment is adopted or the date it becomes
effective, will not be less than the Participant's nonforfeitable
interest in his Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any amendment
resulting from a change to or from Top-Heavy Plan status, or the Plan is
amended in any way that directly or indirectly affects the computation
of a Participant's nonforfeitable interest in his Account, each
Participant with at least three (3) Years of Service for Vesting with
the Employer may elect, within a
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reasonable period after the adoption of the amendment, to have the
nonforfeitable percentage of his Account computed under the Plan without
regard to such amendment. The Participant's election may be made within
60 days from the latest of (1) the date the amendment is adopted,
(2) the date the amendment becomes effective, or (3) the date the
Participant is issued written notice of the amendment by the Employer or
the Administrator.
10.04. RETROACTIVE AMENDMENTS. An amendment made by the Prototype Sponsor in
accordance with Section 10.02 may be made effective on a date prior to the first
day of the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or to conform the Plan to any change in federal law, or to any
regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 10.01.
10.05. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
10.06. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination or partial
termination of the Plan or complete discontinuance of contributions thereunder,
each Participant (including a terminated Participant with respect to amounts not
previously forfeited by him) who is affected by such termination or partial
termination or discontinuance will have a fully vested interest in his Account,
and, subject to Section 4.05 and Article 8, the Trustee will distribute to each
Participant or other person entitled to distribution the balance of the
Participant's Account in a single lump sum payment. In the absence of such
instructions, the Trustee will notify the Administrator of such situation and
the Trustee will be under no duty to make any distributions under the Plan until
it receives written instructions from the Administrator. Upon the completion of
such distributions, the Trust will terminate, the Trustee will be relieved from
all liability under the Trust, and no Participant or other person will have any
claims thereunder, except as required by applicable law.
10.07. MERGER OR CONSOLIDATION OF PLAN; TRANSFER OF PLAN ASSETS. In case of any
merger or consolidation of the Plan with, or transfer of assets and liabilities
of the Plan to, any other plan, provision must be made so that each Participant
would, if the Plan then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater than the benefit
he would have been entitled to receive immediately before the merger,
consolidation or transfer if the Plan had then terminated.
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ARTICLE 11. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF FUNDS TO
OR FROM OTHER QUALIFIED PLANS.
11.01. AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN. In the event the Employer
has previously established a plan (the "predecessor plan") which is a defined
contribution plan under the Code and which on the date of adoption of the Plan
meets the applicable requirements of section 401(a) of the Code, the Employer
may, in accordance with the provisions of the predecessor plan, amend and
continue the predecessor plan in the form of the Plan and become the Employer
hereunder, subject to the following:
(a) Subject to the provisions of the Plan, each individual who was a
Participant or former Participant in the predecessor plan immediately
prior to the effective date of such amendment and continuation will
become a Participant or former Participant in the Plan;
(b) No election may be made under the vesting provisions of the Adoption
Agreement if such election would reduce the benefits of a Participant
under the Plan to less than the benefits to which he would have been
entitled if he voluntarily separated from the service of the Employer
immediately prior to such amendment and continuation;
(c) No amendment to the Plan shall decrease a Participant's accrued
benefit or eliminate an optional form of benefit and if the amendment of
the predecessor plan in the form of the Plan results in a change in the
method of crediting service for vesting purposes between the general
method set forth in Section 2530.200b-2 of the Department of Labor
Regulations and the elapsed-time method in Section 2.01(a)(33) of the
Plan, each Participant with respect to whom the method of crediting
vesting service is changed shall be treated in the manner set forth by
the provisions of Section 1.410(a)-7(f)(1) of the Treasury Regulations
which are incorporated herein by reference;
(d) The amounts standing to the credit of a Participant's Account
immediately prior to such amendment and continuation which represent the
amounts properly attributable to (1) contributions by the Participant and
(2) contributions by the Employer and forfeitures will constitute the
opening balance of his Account or Accounts under the Plan;
(e) Amounts being paid to a former Participant or to a Beneficiary in
accordance with the provisions of the predecessor plan will continue to
be paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement annuity in
effect after August 23, 1984, under the predecessor plan immediately
before such amendment and continuation will be deemed a valid election
and waiver of Beneficiary under Section 8.04 if such designation
satisfies the requirements of Section 8.04(d), unless
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and until the Participant revokes such election and waiver under the
Plan; and
(g) Unless the Employer and the Trustee agree otherwise, all assets of
the predecessor trust will be deemed to be assets of the Trust as of the
effective date of such amendment. Such assets will be invested by the
Trustee as soon as reasonably practicable pursuant to Article 6. The
Employer agrees to assist the Trustee in any way requested by the Trustee
in order to facilitate the transfer of assets from the predecessor trust
to the Trust Fund.
11.02. TRANSFER OF FUNDS FROM AN EXISTING PLAN. The Employer may from time to
time direct the Trustee, in accordance with such rules as the Trustee may
establish, to accept cash, allowable Fund Shares or participant loan promissory
notes transferred for the benefit of Participants from a trust forming part of
another qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of the Trust as of
the date they are received by the Trustee. Such transferred assets will be
credited to Participants' Accounts in accordance with their respective interests
immediately upon receipt by the Trustee. A Participant's interest under the Plan
in transferred assets which were fully vested and nonforfeitable under the
transferring plan will be fully vested and nonforfeitable at all times. Such
transferred assets will be invested by the Trustee in accordance with the
provisions of paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance with this Section
may cause a loss of an accrued or optional form of benefit protected by Section
411(d)(6) of the Code.
11.03. ACCEPTANCE OF ASSETS BY TRUSTEE. The Trustee will not accept assets which
are not either in a medium proper for investment under the Plan, as set forth in
Section 1.14(b), or in cash. Such assets shall be accompanied by written
instructions showing separately the respective contributions by the prior
employer and by the Employee, and identifying the assets attributable to such
contributions. The Trustee shall establish such accounts as may be necessary or
appropriate to reflect such contributions under the Plan. The Trustee shall hold
such assets for investment in accordance with the provisions of Article 6, and
shall in accordance with the written instructions of the Employer make
appropriate credits to the Accounts of the Participants for whose benefit assets
have been transferred.
11.04. TRANSFER OF ASSETS FROM TRUST. The Employer may direct the Trustee to
transfer all or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of a former
Participant or Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable requirements of the
Code. The assets so transferred shall be accompanied by written instructions
from the Employer naming the persons for whose benefit such assets have been
transferred, showing separately the respective contributions by the Employer and
by each Participant, if any, and identifying the assets
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attributable to the various contributions. The Trustee shall have no further
liabilities with respect to assets so transferred.
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ARTICLE 12. MISCELLANEOUS.
12.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
12.02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby. It is a
condition of the Plan, and each Participant expressly agrees by his
participation herein, that each Participant will look solely to the assets held
in the Trust for the payment of any benefit to which he is entitled under the
Plan.
12.03. NONALIENABILITY OF BENEFITS AND QUALIFIED DOMESTIC RELATIONS ORDERS. The
benefits provided hereunder will not be subject to alienation, assignment,
garnishment, attachment, execution or levy of any kind, either voluntarily or
involuntarily, and any attempt to cause such benefits to be so subjected will
not be recognized, except to such extent as may be required by law. The
preceding sentence shall also apply to the creation, assignment, or recognition
of a right to any benefit payable with respect to a Participant pursuant to a
domestic relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as defined in Section
414(p) of the Code, or any domestic relations order entered before January 1,
1985. The Administrator must establish reasonable procedures to determine the
qualified status of a domestic relations order. Upon receiving a domestic
relations order, the Administrator will promptly notify the Participant and any
alternate payee named in the order, in writing, of the receipt of the order and
the Plan's procedures for determining the qualified status of the order. Within
a reasonable period of time after receiving the domestic relations order, the
Administrator must determine the qualified status of the order and must notify
the Participant and each alternate payee, in writing, of its determination. The
Administrator must provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order, or in a manner
consistent with the Department of Labor regulations.
If any portion of the Participant's Account is payable during the period
the Administrator is making its determination of the qualified status of the
domestic relations order, the Administrator must make a separate accounting of
the amounts payable. If the Administrator determines the order is a qualified
domestic relations order within 18 months of the date amounts first are payable
following receipt of the order, the Administrator will direct the Trustee to
distribute the payable amounts in accordance with the order. If the
Administrator does not make his determination of the qualified status of the
order within the 18-month determination period, the Administrator will direct
the Trustee to distribute the payable amounts in the manner the Plan would
distribute if the order did not exist and will apply the order
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prospectively if the Administrator later determines the order is a qualified
domestic relations order.
A domestic relations order will not fail to be deemed a qualified
domestic relations order merely because it requires the distribution or
segregation of all or part of a Participant's Account with respect to an
alternate payee prior to the Participant's earliest retirement age (as defined
in Section 414(p) of the Code) under the Plan. A distribution to an alternate
payee prior to the Participant's attainment of the earliest retirement age is
available only if (a) the order specifies distribution at that time and (b) if
the present value of the alternate payee's benefits under the Plan exceeds
$3,500, and the order requires, and the alternate payee consents to, a
distribution occurring prior to the Participant's attainment of earliest
retirement age.
12.04. FACILITY OF PAYMENT. In the event the Administrator determines, on the
basis of medical reports or other evidence satisfactory to the Administrator,
that the recipient of any benefit payments under the Plan is incapable of
handling his affairs by reason of minority, illness, infirmity or other
incapacity, the Administrator may direct the Trustee to disburse such payments
to a person or institution designated by a court which has jurisdiction over
such recipient or a person or institution otherwise having the legal authority
under state law for the care and control of such recipient. The receipt by such
person or institution of any such payments shall be complete acquittance
therefore, and any such payment to the extent thereof, shall discharge the
liability of the Trust for the payment of benefits hereunder to such recipient.
12.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to furnish
the Trustee, and the Trustee agrees to furnish the Employer, with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code and any regulations issued or
forms adopted by the Treasury Department thereunder or under the provisions of
ERISA and any regulations issued or forms adopted by the Labor Department
thereunder.
12.06. EFFECT OF FAILURE TO QUALIFY UNDER CODE. Notwithstanding any other
provision contained herein, if the Employer fails to obtain or retain approval
of the Plan by the Internal Revenue Service as a qualified Plan under the Code,
the Employer may no longer participate in this prototype Plan arrangement and
will be deemed to have an individually designed plan.
12.07. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
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(a) If to the Employer or Administrator, to it at the address set forth
in the Adoption Agreement, to the attention of the person specified to
receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Adoption
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
12.08. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will be
construed, administered and enforced according to ERISA, and to the extent not
preempted thereby, the laws of the Commonwealth of Massachusetts.
ARTICLE 13. PLAN ADMINISTRATION.
13.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator has
the full power and the full responsibility to administer the Plan in all of its
details, subject, however, to the requirements of ERISA. The Administrator's
powers and responsibilities include, but are not limited to, the following:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to be
final and conclusive on all persons claiming benefits under the Plan;
(c) To decide all questions concerning the Plan and the eligibility of
any person to participate in the Plan;
(d) To administer the claims and review procedures specified in Section
13.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with the
provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be
paid;
(g) To authorize the payment of benefits and provide for the distribution
of Code Section 402(f) notices;
(h) To comply with the reporting and disclosure requirements of Part 1 of
Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as may
be required to assist in administering the Plan;
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(j) By written instrument, to allocate and delegate its fiduciary
responsibilities in accordance with Section 405 of ERISA including the
formation of an Administrative Committee to administer the Plan;
(k) To provide bonding coverage as required under Section 412 of ERISA.
13.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the administration
of the Plan, any discretionary action by the Administrator is required, the
Administrator shall exercise its authority in a nondiscriminatory manner so that
all persons similarly situated will receive substantially the same treatment.
13.03. CLAIMS AND REVIEW PROCEDURES.
(a) CLAIMS PROCEDURE. If any person believes he is being denied any
rights or benefits under the Plan, such person may file a claim in
writing with the Administrator. If any such claim is wholly or partially
denied, the Administrator will notify such person of its decision in
writing. Such notification will contain (1) specific reasons for the
denial, (2) specific reference to pertinent Plan provisions, (3) a
description of any additional material or information necessary for such
person to perfect such claim and an explanation of why such material or
information is necessary, and (4) information as to the steps to be taken
if the person wishes to submit a request for review. Such notification
will be given within 90 days after the claim is received by the
Administrator (or within 180 days, if special circumstances require an
extension of time for processing the claim, and if written notice of such
extension and circumstances is given to such person within the initial
90-day period). If such notification is not given within such period, the
claim will be considered denied as of the last day of such period and
such person may request a review of his claim.
(b) REVIEW PROCEDURE. Within 60 days after the date on which a person
receives a written notice of a denied claim (or, if applicable, within 60
days after the date on which such denial is considered to have occurred),
such person (or his duly authorized representative) may (1) file a
written request with the Administrator for a review of his denied claim
and of pertinent documents and (2) submit written issues and comments to
the Administrator. The Administrator will notify such person of its
decision in writing. Such notification will be written in a manner
calculated to be understood by such person and will contain specific
reasons for the decision as well as specific references to pertinent Plan
provisions. The decision on review will be made within 60 days after the
request for review is received by the Administrator (or within 120 days,
if special circumstances require an extension of time for processing the
request, such as an election by the Administrator to hold a hearing, and
if written notice of such extension and circumstances is given to such
person within the initial 60-day period). If the decision on review is
not made within such period, the claim will be considered denied.
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13.04. NAMED FIDUCIARY. The Administrator is a "named fiduciary" for purposes of
Section 402(a)(1) of ERISA and has the powers and responsibilities with respect
to the management and operation of the Plan described herein.
13.05. COSTS OF ADMINISTRATION. Unless some or all are paid by the Employer, all
reasonable costs and expenses (including legal, accounting, and employee
communication fees) incurred by the Administrator and the Trustee in
administering the Plan and Trust will be paid first from the forfeitures (if
any) resulting under Section 7.07, then from the remaining Trust Fund. All such
costs and expenses paid from the Trust Fund will, unless allocable to the
Accounts of particular Participants, be charged against the Accounts of all
Participants on a PRORATA basis or in such other reasonable manner as may be
directed by the Employer.
ARTICLE 14. TRUST AGREEMENT.
14.01. ACCEPTANCE OF TRUST RESPONSIBILITIES. By executing the Adoption
Agreement, the Employer establishes a trust to hold the assets of the Plan. By
executing the Adoption Agreement, the Trustee agrees to accept the rights,
duties and responsibilities set forth in this Article 14.
14.02. ESTABLISHMENT OF TRUST FUND. A trust is hereby established under the Plan
and the Trustee will open and maintain a trust account for the Plan and, as part
thereof, Participants' Accounts for such individuals as the Employer shall from
time to time give written notice to the Trustee are Participants in the Plan.
The Trustee will accept and hold in the Trust Fund such contributions on behalf
of Participants as it may receive from time to time from the Employer. The Trust
Fund shall be fully invested and reinvested in accordance with the applicable
provisions of the Plan in Fund Shares or as otherwise provided in Section 14.10.
14.03. EXCLUSIVE BENEFIT. The Trustee shall hold the assets of the Trust Fund
for the exclusive purpose of providing benefits to Participants and
Beneficiaries and defraying the reasonable expenses of administering the Plan.
No assets of the Plan shall revert to the Employer except as specifically
permitted by the terms of the Plan.
14.04. POWERS OF TRUSTEE. The Trustee shall have no discretion or authority with
respect to the investment of the Trust Fund but shall act solely as a directed
trustee of the funds contributed to it. In addition to and not in limitation of
such powers as the Trustee has by law or under any other provisions of the Plan,
the Trustee will have the following powers, each of which the Trustee exercises
solely as directed Trustee in accordance with the written direction of the
Employer except to the extent a Plan asset is subject to Participant direction
of investment and provided that no such power shall be exercised in any manner
inconsistent with the provisions of ERISA:
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(a) to deal with all or any part of the Trust Fund and to invest all or
a part of the Trust Fund in investments available under the Plan, without regard
to the law of any state regarding proper investment;
(b) to retain uninvested such cash as it may deem necessary or
advisable, without liability for interest thereon, for the administration of the
Trust;
(c) to sell, convert, redeem, exchange, or otherwise dispose of all or
any part of the assets constituting the Trust Fund;
(d) to enforce by suit or otherwise, or to waive, its rights on behalf
of the Trust, and to defend claims asserted against it or the Trust, provided
that the Trustee is indemnified to its satisfaction against liability and
expenses;
(e) to employ such agents and counsel as may be reasonably necessary in
collecting, managing, administering, investing, distributing and protecting the
Trust Fund or the assets thereof and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims against or in
favor of it or the Trust;
(g) to oppose, or participate in and consent to the reorganization,
merger, consolidation, or readjustment of the finances of any enterprise, to pay
assessments and expenses in connection therewith, and to deposit securities
under deposit agreements;
(h) to apply for or purchase annuity contracts in accordance with
Section 8.02;
(i) to hold securities unregistered, or to register them in its own name
or in the name of nominees;
(j) to appoint custodians to hold investments within the jurisdiction of
the district courts of the United States and to deposit securities with stock
clearing corporations or depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and all instruments
that it deems necessary or appropriate to carry out the powers herein granted;
and
(l) generally to exercise any of the powers of an owner with respect to
all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes that affiliates
of the Trustee may act as its agent in the performance of ministerial,
nonfiduciary duties under the Trust. The expenses and compensation of such agent
shall be paid by the Trustee.
The Trustee shall provide the Employer with reasonable notice of any
claim filed against the Plan or Trust or with regard to any related
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matter, or of any claim filed by the Trustee on behalf of the Plan or Trust or
with regard to any related matter.
14.05. ACCOUNTS. The Trustee will keep full accounts of all receipts and
disbursements and other transactions hereunder. Within 60 days after the close
of each Plan Year, within 60 days after termination of the Trust, and at such
other times as may be appropriate, the Trustee will determine the then net fair
market value of the Trust Fund as of the close of the Plan Year, as of the
termination of the Trust, or as of such other time, whichever is applicable, and
will render to the Employer and Administrator an account of its administration
of the Trust during the period since the last such accounting, including all
allocations made by it during such period.
14.06. APPROVING OF ACCOUNTS. To the extent permitted by law, the written
approval of any account by the Employer or Administrator will be final and
binding, as to all matters and transactions stated or shown therein, upon the
Employer, Administrator, Participants and all persons who then are or thereafter
become interested in the Trust. The failure of the Employer or Administrator to
notify the Trustee within six (6) months after the receipt of any account of its
objection to the account will, to the extent permitted by law, be the equivalent
of written approval. If the Employer or Administrator files any objections
within such six (6) month period with respect to any matters or transactions
stated or shown in the account, and the Employer or Administrator and the
Trustee cannot amicably settle the question raised by such objections, the
Trustee will have the right to have such questions settled by judicial
proceedings. Nothing herein contained will be construed so as to deprive the
Trustee of the right to have judicial settlement of its accounts. In any
proceeding for a judicial settlement of any account or for instructions, the
only necessary parties will be the Trustee, the Employer and the Administrator.
14.07. DISTRIBUTION FROM TRUST FUND. The Trustee shall make such distribution
from the Trust Fund as the Employer or Administrator may in writing direct, as
provided by the terms of the Plan, upon certification by the Employer or
Administrator that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of administering the Plan.
14.08. TRANSFER OF AMOUNTS FROM QUALIFIED PLAN. If the Plan provides that
amounts may be transferred to the Plan from another qualified plan or trust
under Section 401(a) of the Code, such transfer shall be made in accordance with
the provisions of the Plan and with such rules as may be established by the
Trustee. The Trustee will only accept assets which are in a medium proper for
investment under this agreement or in cash. Such amounts shall be accompanied by
written instructions showing separately the respective contributions by the
prior employer and the transferring Employee, and identifying the assets
attributable to such contributions. The Trustee shall hold such assets for
investment in accordance with the provisions of this agreement.
14.09. TRANSFER OF ASSETS FROM TRUST. Subject to the provisions of the Plan, the
Employer may direct the Trustee to transfer all or a specified
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portion of the Trust assets to any other plan or plans maintained by the
Employer or the employer or employers of a former Participant or Participants,
provided that the Trustee has received evidence satisfactory to it that such
other plan meets all applicable requirements of the Code. The assets so
transferred shall be accompanied by written instructions from the Employer
naming the persons for whose benefit such assets have been transferred, showing
separately the respective contributions by the Employer and by each Participant,
if any, and identifying the assets attributable to the various contributions.
The Trustee shall have no further liabilities with respect to assets so
transferred.
14.10. SEPARATE TRUST OR FUND FOR EXISTING PLAN ASSETS. With the consent of the
Trustee, the Employer may maintain a trust or fund (including a group annuity
contract) under this prototype plan document separate from the Trust Fund for
Plan assets purchased prior to the adoption of this prototype plan document
which are not Fidelity Funds listed in Section 1.14(b). The Trustee shall have
no authority and no responsibility for the Plan assets held in such separate
trust or fund. The duties and responsibilities of the trustee of a separate
trust shall be provided by a separate trust agreement, between the Employer and
the trustee.
Notwithstanding the preceding paragraph, the Trustee or an affiliate of
the Trustee may agree in writing to provide ministerial recordkeeping services
for guaranteed investment contracts held in the separate trust or fund. The
guaranteed investment contract(s) shall be valued as directed by the Employer or
the Trustee of the separate trust.
The trustee of the separate trust (hereafter referred to as "trustee")
will be the owner of any insurance contract purchased prior to the adoption of
this prototype plan document. The insurance contract(s) must provide that
proceeds will be payable to the trustee; however the trustee shall be required
to pay over all proceeds of the contract(s) to the Participant's designated
Beneficiary in accordance with the distribution provisions of this plan. A
Participant's spouse will be the designated Beneficiary of the proceeds in all
circumstances unless a qualified election has been made in accordance with
Article 8. Under no circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of this plan and the
terms of any insurance contract purchased hereunder, the plan provisions shall
control.
Any life insurance contracts held in the Trust Fund or in the separate
trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with both
nondecreasing death benefits and nonincreasing premiums. If such
contracts are held, less than 1/2 of the aggregate employer contributions
allocated to any Participant will be used to pay the premiums
attributable to them.
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(b) Term and universal life - No more than 1/4 of the aggregate employer
contributions allocated to any participant will be used to pay the
premiums on term life insurance contracts, universal life insurance
contracts, and all other life insurance contracts which are not ordinary
life.
(c) Combination - The sum of 1/2 of the ordinary life insurance premiums
and all other life insurance premiums will not exceed 1/4 of the
aggregate employer contributions allocated to any Participant.
14.11. VOTING; DELIVERY OF INFORMATION. The Trustee shall deliver, or cause to
be executed and delivered, to the Employer or Plan Administrator all notices,
prospectuses, financial statements, proxies and proxy soliciting materials
received by the Trustee relating to securities held by the Trust or, if
applicable, deliver these materials to the appropriate Participant or the
Beneficiary of a deceased Participant. The Trustee shall not vote any securities
held by the Trust except in accordance with the written instructions of the
Employer, Participant or the Beneficiary of the Participant, if the Participant
is deceased; however, the Trustee may, in the absence of instructions, vote
"present" for the sole purpose of allowing such shares to be counted for
establishment of a quorum at a shareholders' meeting. The Trustee shall have no
duty to solicit instructions from Participants, Beneficiaries, or the Employer.
14.12. COMPENSATION AND EXPENSES OF TRUSTEE. The Trustee's fee for performing
its duties hereunder will be such reasonable amounts as the Trustee may from
time to time specify by written agreement with the Employer. Such fee, any taxes
of any kind which may be levied or assessed upon or with respect to the Trust
Fund, and any and all expenses, including without limitation legal fees and
expenses of administrative and judicial proceedings, reasonably incurred by the
Trustee in connection with its duties and responsibilities hereunder will,
unless some or all have been paid by said Employer, be paid first from
forfeitures resulting under Section 7.07, then from the remaining Trust Fund and
will, unless allocable to the Accounts of particular Participants, be charged
against the respective Accounts of all Participants, in such reasonable manner
as the Trustee may determine.
14.13. RELIANCE BY TRUSTEE ON OTHER PERSONS. The Trustee may rely upon and act
upon any writing from any person authorized by the Employer or Administrator to
give instructions concerning the Plan and may conclusively rely upon and be
protected in acting upon any written order from the Employer or Administrator or
upon any other notice, request, consent, certificate, or other instructions or
paper reasonably believed by it to have been executed by a duly authorized
person, so long as it acts in good faith in taking or omitting to take any such
action. The Trustee need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest certificate it has
received from the Employer or Administrator as to any person or persons
authorized to act for the Employer or Administrator hereunder
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and to sign on behalf of the Employer or Administrator any directions or
instructions, until it receives from the Employer or Administrator written
notice that such authority has been revoked.
Notwithstanding any provision contained herein, the Trustee will be under
no duty to take any action with respect to any Participant's Account (other than
as specified herein) unless and until the Employer or Administrator furnishes
the Trustee with written instructions on a form acceptable to the Trustee, and
the Trustee agrees thereto in writing. The Trustee will not be liable for any
action taken pursuant to the Employer's or Administrator's written instructions
(nor for the collection of contributions under the Plan, nor the purpose or
propriety of any distribution made thereunder).
14.14. INDEMNIFICATION BY EMPLOYER. The Employer shall indemnify and save
harmless the Trustee from and against any and all liability to which the Trustee
may be subjected by reason of any act or conduct (except willful misconduct or
negligence) in its capacity as Trustee, including all expenses reasonably
incurred in its defense.
14.15. CONSULTATION BY TRUSTEE WITH COUNSEL. The Trustee may consult with legal
counsel (who may be but need not be counsel for the Employer or the
Administrator) concerning any question which may arise with respect to its
rights and duties under the Plan and Trust, and the opinion of such counsel
will, to the extent permitted by law, be full and complete protection in respect
of any action taken or omitted by the Trustee hereunder in good faith and in
accordance with the opinion of such counsel.
14.16. PERSONS DEALING WITH THE TRUSTEE. No person dealing with the Trustee will
be bound to see to the application of any money or property paid or delivered to
the Trustee or to inquire into the validity or propriety of any transactions.
14.17. RESIGNATION OR REMOVAL OF TRUSTEE. The Trustee may resign at any time by
written notice to the Employer, which resignation shall be effective 60 days
after delivery to the Employer. The Trustee may be removed by the Employer by
written notice to the Trustee, which removal shall be effective 60 days after
delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer may appoint a
successor trustee. Any such successor trustee will, upon written acceptance of
his appointment, become vested with the estate, rights, powers, discretion,
duties and obligations of the Trustee hereunder as if he had been originally
named as Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer will no longer
participate in this prototype plan and will be deemed to have adopted an
individually designed plan. In such event, the Employer shall appoint a
successor trustee within said 60-day period and the Trustee will transfer the
assets of the Trust to the successor trustee upon receipt of sufficient evidence
(such as a determination letter or opinion letter from the Internal Revenue
Service or an opinion of
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counsel satisfactory to the Trustee) that such trust will be a qualified trust
under the Code.
The appointment of a successor trustee shall be accomplished by delivery
to the Trustee of written notice that the Employer has appointed such successor
trustee, and written acceptance of such appointment by the successor trustee.
The Trustee may, upon transfer and delivery of the Trust Fund to a successor
trustee, reserve such reasonable amount as it shall deem necessary to provide
for its fees, compensation, costs and expenses, or for the payment of any other
liabilities chargeable against the Trust Fund for which it may be liable. The
Trustee shall not be liable for the acts or omissions of any successor trustee.
14.18. FISCAL YEAR OF THE TRUST. The fiscal year of the Trust will coincide with
the Plan Year.
14.19. DISCHARGE OF DUTIES BY FIDUCIARIES. The Trustee and the Employer and any
other fiduciary shall discharge their duties under the Plan and this Trust
Agreement solely in the interests of Participants and their Beneficiaries in
accordance with the requirements of ERISA.
14.20. AMENDMENT. In accordance with provisions of the Plan, and subject to the
limitations set forth therein, this Trust Agreement may be amended by an
instrument in writing signed by the Employer and the Trustee. No amendment to
this Trust Agreement shall divert any part of the Trust Fund to any purpose
other than as provided in Section 2 hereof.
14.21. PLAN TERMINATION. Upon termination or partial termination of the Plan or
complete discontinuance of contributions thereunder, the Trustee will make
distributions to the Participants or other persons entitled to distributions as
the Employer or Administrator directs in accordance with the provisions of the
Plan. In the absence of such instructions and unless the Plan otherwise
provides, the Trustee will notify the Employer or Administrator of such
situation and the Trustee will be under no duty to make any distributions under
the Plan until it receives written instructions from the Employer or
Administrator. Upon the completion of such distributions, the Trust will
terminate, the Trustee will be relieved from all liability under the Trust, and
no Participant or other person will have any claims thereunder, except as
required by applicable law.
14.22. PERMITTED REVERSION OF FUNDS TO EMPLOYER. If it is determined by the
Internal Revenue Service that the Plan does not initially qualify under Section
401 of the Code, all assets then held under the Plan will be returned by the
Trustee, as directed by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by law for filing
the Employer's return for the taxable year in which the Plan was adopted or such
later date as may be prescribed by regulations. Such distribution will be made
within one year after the date the initial qualification is denied. Upon such
distribution the Plan will be considered to be rescinded and to be of no force
or effect.
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Contributions under the Plan are conditioned upon their deductibility
under Section 404 of the Code. In the event the deduction of a contribution made
by the Employer is disallowed under Section 404 of the Code, such contribution
(to the extent disallowed) must be returned to the Employer within one year of
the disallowance of the deduction.
Any contribution made by the Employer because of a mistake of fact must
be returned to the Employer within one year of the contribution.
14.23. GOVERNING LAW. This Trust Agreement will be construed, administered and
enforced according to ERISA and, to the extent not preempted thereby, the laws
of the Commonwealth of Massachusetts.
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ADDENDUM
TO
CORPORATEPLAN FOR RETIREMENT
THE PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
RE: RETROACTIVE EFFECTIVE DATES
This Addendum is intended to clarify and set forth the effective dates of
certain provisions of the Plan with respect to the adopting Employer. This
Addendum applies only to the extent that the Employer has not amended the Plan
with respect to the applicable provisions of the Tax Reform Act of 1986 ("TRA
'86"). Unless otherwise specifically provided by the terms of the Plan, this
amendment and restatement is effective with respect to each change made to
satisfy the provisions of (i) TRA '86, (ii) any other change in the Code or
ERISA, or (iii) regulations, rulings, or other published guidance issued under
the Code, ERISA, or TRA '86, the first day of the first period (which may or may
not be the first day of a Plan year) with respect to which such change became
required because of such provision (including any day that became such as a
result of an election or waiver by an Employer or a waiver or exemption issued
under the Code, ERISA, or TRA `86), including, but not limited to, the
following:
(a) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1986, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable exemption
or waiver:
(1) Changes in the definition of Employee in Section 2.01(a)(10)
to reflect changes in the safe harbor exclusion for Leased
Employees;
(2) Changes in the definition of Highly Compensated Employee in
Section 2.01(a)(16)
(3) Addition of the aggregate deferral limit under Section 402(g)
of the Code in Section 4.01(c);
(4) Changes to the Code Section 401(k) discrimination test in
Section 4.02;
(5) Addition of the Code Section 401(m) discrimination test and
application of the Aggregate Limit in Section 4.04;
(6) Compliance with the Code Section 414(s) compensation
definition requirements in Sections 5.03 and 9.03;
(7) Changes in the Participant Loan provisions in Section 7.09; if
applicable, to reflect new dollar limitations, repayment
requirements, and restrictions applicable to Highly
Compensated Employees under Section 72(p) of the Code;
(8) Changes in the definition of Key Employee in Section 9.02(a);
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(9) Changes in the definition of Top-Heavy Ratio in Section
9.02(c)(3) to provide for ratable accrual.
(b) Changes in the 415 limitations in Section 5.03 as required by TRA '86 are
effective for limitation years beginning after December 31, 1986, unless a
delayed effective date applies because the Plan is collectively-bargained or
because of an applicable waiver or exemption; provided, however, that Annual
Additions shall not be recalculated to take into account all Employee
contributions for limitation years beginning before the effective date.
(c) The following changes as required by TRA '86 are effective for Plan years
beginning After December 31, 1987, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes required to provide that allocations shall not be
decreased or discontinued because of attainment of any age, if
any; and
(2) Changes in the definition of Normal Retirement Age in Section
1.06(a), if any, to reflect the five years of participation
rule.
(d) The following changes as required by TRA '86 are effective for Plan Years
beginning after December 31, 1988, unless a delayed effective date applies
because the Plan is collectively-bargained or because of an applicable waiver or
exemption:
(1) Changes in the vesting schedule specified in Section 1.07, if
applicable;
(2) Changes in the permitted disparity rules in Section
4.06(b)(2), if applicable; and
(3) Changes in the requirements for electing a former vesting
schedule in Section 10.03, if applicable.
Notwithstanding the foregoing and subject to applicable law, with respect to
Plan years beginning after December 31, 1986, and before the date of this
restatement of the Plan, the Employer may elect to operate the Plan in
accordance with any transitional rule published by the Internal Revenue Service
or a reasonable, good faith interpretation of TRA '86 and related applicable
law, in which event such transitional rule or good faith interpretation shall
prevail over the provisions in this restatement of the Plan with respect to such
Plan Year.
Each other change made under the Plan is effective as of the date specified in
Section 1.01(g) of the Adoption Agreement, unless otherwise specifically
provided by the terms of the Plan.
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CORPORATEPLAN FOR RETIREMENT(SM)
PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT ONE
SECTION 2.01(a)(7) "COMPENSATION" is amended to include:
In addition to other applicable limitations set forth in the plan, and
notwithstanding any other provision of the plan to the contrary, for plan years
beginning on or after January 1, 1994, the annual compensation of each Employee
taken into account under the plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with section 401(a)(17)(B) of the Internal Revenue Code. The cost-of-living
adjustment in effect for a calendar year applies to any period, not exceeding 12
months, over which compensation is determined (determination period) beginning
in such calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation will be multiplied by a fraction, the
numerator of which is the number of months in the determination period, and the
denominator of which is 12.
For plan years beginning on or after January 1, 1994, any reference in
this plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA '93 annual compensation limit set forth in this provision. Notwithstanding
2.01(a)(7)(A), for purpose of Section 4.02 (Additional Limit on Deferral
Contributions) and Section 4.04 (Limit on Matching Contributions), the Employer
may use Compensation as defined in Section 5.03(e)(2) excluding reimbursements
or other expense allowances, fringe benefits (cash and non-cash), moving
expenses, deferred compensation and welfare benefits, but including amounts that
are not includable in the gross income of the Participant under a salary
reduction agreement by reason of the application of Section 125, 402(a)(8),
402(h) or 403(b) of the Code.
If compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current plan year,
the compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first plan year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
SECTION 8.01(d) "DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES" is
amended to include:
(5) If a distribution is one to which sections 401(a)(11) and 417 of
the Internal Revenue Code do not apply, such distribution may commence less than
30 days after the notice required under section 1.411(a)-11(c) of the Income Tax
Regulations is given, provided that:
(1) the administrator clearly informs the Participant that the
Participant has a right to a period of at least 30 days
after receiving the notice to consider the decision of
whether or not to elect a distribution (and, if
applicable, a particular distribution option), and
3
<PAGE> 79
the Participant, after receiving the notice, affirmatively elects a
distribution.
4
<PAGE> 80
MODEL AMENDMENT TO
THE CORPORATEPLAN FOR RETIREMENT(SM)
PROFIT SHARING / 401 (K) PLAN
(DOCUMENT NO. 07)
This amendment is effective for plan years beginning after December 11,
1994.
Notwithstanding any provision of this plan to the contrary, to the
extent any optional form of benefit under this plan permits a distribution prior
to the employee's retirement, death, disability, or severance from employment,
and prior to plan termination, the optional form of benefit is not available
with respect to benefits attributable to assets (including the post-transfer
earnings thereon) and liabilities that are transferred, within the meaning of
Section 414 (1) of the Internal Revenue Code, to this plan from a money purchase
pension plan qualified under Section 401(a) of the Internal Revenue Code (other
than any portion of those assets and liabilities attributable to voluntary
employee contributions).
5
<PAGE> 81
CORPORATEPLAN FOR RETIREMENT(SM)
PROFIT SHARING/401(K) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
AMENDMENT TWO
Effective December 1, 1996, Section 2.01(a)(25) shall be amended to read as
follows:
(25) "Registered Investment Company" means any one or more corporations,
partnerships or trusts registered under the Investment Company Act of
1940.
6
<PAGE> 82
THE CORPORATEPLAN FOR RETIREMENT(SM)
(PROFIT SHARING/401(K) PLAN)
A FIDELITY PROTOTYPE PLAN
NON-STANDARDIZED ADOPTION AGREEMENT 002
BASIC PLAN NO. 07
<PAGE> 83
ADOPTION AGREEMENT
ARTICLE 1
NON-STANDARDIZED PROFIT SHARING PLAN
<TABLE>
<CAPTION>
<S> <C> <C>
1.01 PLAN INFORMATION
(a) NAME OF PLAN:
This is the LEXINGTON PRECISION CORPORATION RETIREMENT & SAVINGS PLAN (the "Plan").
---------------------------------------------------------
(b) TYPE OF PLAN:
(1) |X| 401(k) and Discretionary Profit Sharing
(2) |_| Profit Sharing Only
(3) |_| 401(k) Only
(c) NAME OF PLAN ADMINISTRATOR, IF NOT THE EMPLOYER:
Name: LEXINGTON PRECISION CORPORATION
----------------------------------------------------------
Address: 30195 CHAGRIN BLVD., SUITE 208W, CLEVELAND, OH 44124-5703
----------------------------------------------------------
Phone Number: (216) 591-1071
----------------------------------------------------------
The Plan Administrator is the agent for service of legal process for the Plan.
(d) LIMITATION YEAR (check one):
(1) |X| Calendar Year
(2) |_| Plan Year
(3) |_| Other:
(e) THREE DIGIT PLAN NUMBER: 016
---
(f) PLAN YEAR END (month/day):DECEMBER 31
-----------
(g) PLAN STATUS (check one):
(1) |_| Effective Date of new Plan:
--------------
(2) |X| Amendment Effective Date: 10/1/98 . This is (check one):
-------
(A) |_| an amendment of The CORPORATEplan for Retirement(SM) Adoption Agreement
previously executed by the Employer; or
(B) |X| conversion from another plan document into
The CORPORATEplan for Retirement(SM).
The original effective date of the Plan: 1/1/90
------
</TABLE>
2
<PAGE> 84
<TABLE>
<S> <C>
The substantive provisions of the Plan shall apply prior to the Effective Date
to the extent required by the Tax Reform Act of 1986 or other applicable laws.
1.02 EMPLOYER
(a) THE EMPLOYER IS: LEXINGTON PRECISION CORPORATION
-------------------------------
Address: 767 THIRD AVE., 29TH FLOOR
--------------------------
NEW YORK, NY 10017-2023
------------------------
Contact's Name: KELLY MACMILLAN/DENNIS J. WELHOUSE
----------------------------------
Telephone Number: 216-591-1071
------------
(1) Employer's Tax Identification Number: 22-1830121
----------
(2) Business form of Employer (check one):
(A) |X| Corporation (D) |_| Governmental
(B) |_| Sole proprietor or partnership (E) |_| Tax exempt organization
(C) |_| Subchapter S Corporation (F) |_| Rural Electric Cooperative
(3) Employer's fiscal year end: 12/31
------------
(4) Date business commenced: APRIL 25, 1966
--------------
</TABLE>
3
<PAGE> 85
<TABLE>
<S> <C>
(b) THE TERM "EMPLOYER" INCLUDES THE FOLLOWING RELATED EMPLOYER(S)
(as defined in Section 2.01(a)(26)):
1.03 COVERAGE
(a) ALL EMPLOYEES WHO MEET THE CONDITIONS SPECIFIED BELOW WILL BE
ELIGIBLE TO PARTICIPATE IN THE PLAN:
(1) SERVICE REQUIREMENT (check one):
(A) |_| no service requirement.
(B) |_| three consecutive months of service (no
minimum number Hours of Service can be
required).
(C) |X| six consecutive months of service (no
minimum number Hours of Service can be
required).
(D) |_| one Year of Service (1,000 Hours of
Service is required during the Eligibility
Computation Period.)
(2) AGE REQUIREMENT (check one):
(A) |_| no age requirement.
(B) |X| must have attained age 19.0 (not to exceed
21).
</TABLE>
4
<PAGE> 86
<TABLE>
<S> <C>
(3) THE CLASS OF EMPLOYEES ELIGIBLE TO PARTICIPATE IN THE PLAN
(check one):
(A) |_| includes all Employees of the Employer.
(B) |X| includes all Employees of the Employer
except for (check the appropriate box(es)):
(I) |_| Employees covered by a collective
bargaining agreement.
(II) |_| Highly Compensated Employees as
defined in Code Section 414(q).
(III) |X| Leased Employees as defined in
Section 2.01(a)(18).
(IV) |_| Nonresident aliens who do not
receive any earned income from the
Employer which constitutes United
States source income.
(V) |X| Other
ANY INDIVIDUAL THE EMPLOYER TREATS AS AN
INDEPENDENT CONTRACTOR EVEN IF A GOVERNMENT
AGENCY OR COURT CONSIDERS THE INDIVIDUAL AN
EMPLOYEE FOR OTHER PURPOSES
NOTE: No exclusion in this section may create a discriminatory class of
employees. An Employer's Plan must still pass the Internal Revenue
Code coverage and participation requirements if one or more of the
above groups of Employees have been excluded from the Plan.
(b) THE ENTRY DATE(S) SHALL BE (check one):
(1) |_| the first day of each Plan Year (do not select if
Section 1.03 (a)(1)(D) is elected or if there is an
age requirement of greater than 20 1/2 in Section
1.03(a)(2)(B)).
(2) |_| the first day of each Plan Year and the date six months later.
(3) |X| the first day of each Plan Year and the first day of the fourth, seventh, and
tenth months.
(4) |_| the first day of each month.
</TABLE>
5
<PAGE> 87
<TABLE>
<S> <C> <C>
(c) DATE OF INITIAL PARTICIPATION - AN EMPLOYEE WILL BECOME A
PARTICIPANT UNLESS EXCLUDED BY SECTION 1.03(a)(3) ABOVE ON THE
ENTRY DATE IMMEDIATELY FOLLOWING THE DATE THE EMPLOYEE
COMPLETES THE SERVICE AND AGE REQUIREMENT(S) IN SECTION
1.03(a), IF ANY, EXCEPT (check one):
(1) |X| No exceptions.
(2) |_| Employees employed on the Effective Date in Section 1.01(g) will become Participants on
that date.
(3) |_| Employees who meet the age and service requirement(s) of Section 1.03(a) on the Effective
Date in Section 1.01(g) will become Participants on that date.
1.04 COMPENSATION
(a) FOR PURPOSES OF DETERMINING CONTRIBUTIONS UNDER THE PLAN,
COMPENSATION SHALL BE AS DEFINED IN SECTION 2.01(a)(7), BUT
EXCLUDING (check the appropriate box(es)):
(1) |_| Overtime Pay.
(2) |_| Bonuses.
(3) |_| Commissions.
(4) |X| The value of a qualified or a non-qualified stock
option granted to an Employee by the Employer to the
extent such value is includable in the Employee's
taxable income.
NOTE: These exclusions shall not apply for purposes of the "Top Heavy" requirements in
Section 9.03 or for allocating Discretionary Employer Contributions if an Integrated
Formula is elected in Section 1.05(a)(2).
(5) |X| No exclusions.
</TABLE>
6
<PAGE> 88
<TABLE>
<S> <C>
(b) COMPENSATION FOR THE FIRST YEAR OF PARTICIPATION
Contributions for the Plan Year in which an Employee first
becomes a Participant shall be determined based on the
Employee's Compensation (check one):
(1) |X| For the entire Plan Year.
(2) |_| For the portion of the Plan Year in which the Employee is eligible to participate
in the Plan.
1.05 CONTRIBUTIONS
(a) |X| EMPLOYER CONTRIBUTIONS :
(1) |_| FIXED FORMULA - NONINTEGRATED FORMULA (check (A) or (B)):
(A) |_| FIXED PERCENTAGE EMPLOYER CONTRIBUTION:
For each Plan Year, the Employer will contribute for each eligible
Participant an amount equal to ____ % (not to exceed 15%) of such
Participant's Compensation.
(B) |_| FIXED FLAT DOLLAR EMPLOYER CONTRIBUTION:
For each Plan Year, the Employer will contribute for each eligible
Participant an amount equal to $ ____ .
(2) |X| DISCRETIONARY FORMULA
The Employer may decide each Plan Year whether to make a discretionary Employer contribution on behalf
of eligible Participants in accordance with Section 4.06. Such contributions shall be allocated to
eligible Participants based upon the following (check (A) or (B)):
(A) |X| Nonintegrated Allocation Formula:
In the ratio that each eligible
Participant's Compensation bears to the
total Compensation paid to all eligible
Participants for the Plan Year.
(B) |_| Integrated Allocation Formula: In
accordance with Section 4.06.
NOTE: An Employer who maintains any other plan that provides for Social Security
Integration (permitted disparity) may not elect (2)(B).
</TABLE>
7
<PAGE> 89
<TABLE>
<S> <C> <C>
(3) ELIGIBILITY REQUIREMENT(S)
A Participant shall be entitled to Employer Contributions for a Plan Year under this Subsection
(a) if the Participant satisfies the following requirement(s) (Check the appropriate box(es) -
Options (B) and (C) may not be elected together):
(A) |X| is employed by the Employer on the last day of the Plan Year.
(B) |_| earns at least 500 Hours of Service during the Plan Year.
(C) |_| earns at least 1,000 Hours of Service during the Plan Year.
(D) |_| no requirements.
NOTE: If option (A), (B) or (C) above is selected then Employer contributions can
only be FUNDED by the Employer AFTER Plan Year end. Employer contributions funded
during the Plan Year shall not be subject to the eligibility requirements of this
Section 1.05(a)(3).
(b) |X| DEFERRAL CONTRIBUTIONS
(1) REGULAR CONTRIBUTIONS
The Employer shall make a Deferral Contribution in accordance with Section 4.01
on behalf of each Participant who has an executed salary reduction agreement in
effect with the Employer for the payroll period in question, not to exceed 15.00%
(NO MORE THAN 15%) of Compensation for that period.
(A) A Participant may increase or decrease, on a
prospective basis, his salary reduction
agreement percentage (check one):
(i) |_| As of the beginning of each payroll period.
(ii) |X| As of the first day of each month.
(iii) |_| As of the next Entry Date.
(iv) |_| (Specify, but must be at least once per Plan Year)
(B) A Participant may revoke, on a prospective basis, a salary reduction agreement at any
time upon proper notice to the Administrator but in such case may not file a new
salary reduction agreement until (check one):
(i) |_| The first day of the next Plan Year.
(ii) |X| Any subsequent Plan Entry Date.
(iii) |_| (Specify, but must be at least once per Plan Year)
</TABLE>
8
<PAGE> 90
<TABLE>
<S> <C> <C>
(2) |_| CATCH-UP CONTRIBUTIONS
The Employer may allow Participants upon proper
notice and approval to enter into a special salary
reduction agreement to make additional Deferral
Contributions in an amount up to 100% of their
Compensation for the payroll period(s) in the final
month of the Plan Year.
(3) |_| BONUS CONTRIBUTIONS
The Employer may allow Participants upon proper
notice and approval to enter into a special salary
reduction agreement to make Deferral Contributions in
an amount up to 100% of any Employer paid cash
bonuses made for such Participants during the Plan
Year. The Compensation definition elected by the
Employer in Section 1.04(a) must include bonuses if
bonus contributions are permitted.
NOTE: A Participant's contributions under (2)
and/or (3) may not cause the Participant
to exceed the percentage limit specified
by the Employer in (1) after the Plan
Year. The Employer has the right to
restrict a Participant's right to make
Deferral Contributions if they will
adversely affect the Plan's ability to
pass the actual deferral percentage and/or
the actual contribution percentage test.
(4) |X| QUALIFIED DISCRETIONARY CONTRIBUTIONS
The Employer may contribute an amount which it
designates as a Qualified Discretionary Contribution
to be included in the actual deferral percentage or
actual contribution percentage test. Qualified
Discretionary Contributions shall be allocated to
Non-highly Compensated Employees (check one):
(A) |X| in the ratio which each such
Participant's Compensation for the Plan Year
bears to the total of all such Participants'
Compensation for the Plan Year.
(B) |_| as a flat dollar amount for each such
Participant for the Plan Year.
</TABLE>
9
<PAGE> 91
<TABLE>
<S> <C>
(c) |X| MATCHING CONTRIBUTIONS (only if Section 1.05(b) is checked)
(1) THE EMPLOYER SHALL MAKE A MATCHING CONTRIBUTION ON
BEHALF OF EACH PARTICIPANT IN AN AMOUNT EQUAL TO THE
FOLLOWING PERCENTAGE OF A PARTICIPANT'S DEFERRAL
CONTRIBUTIONS DURING THE PLAN YEAR (check one):
(A) |X| 50%
(B) |_| 100%
(C) |_| ___%
(D) |_| (Tiered Match)
______% of the first________________________% of the Participant's Compensation
contributed to the Plan,
______% of the next_________________________% of the Participant's Compensation
contributed to the Plan,
______% of the next_________________________% of the Participant's Compensation
contributed to the Plan.
NOTE: THE PERCENTAGES SPECIFIED ABOVE FOR MATCHING CONTRIBUTIONS MAY NOT INCREASE AS
THE PERCENTAGE OF COMPENSATION CONTRIBUTED INCREASES.
(E) |_| The percentage declared for the year, if any, by a Board of Directors' Resolution (or
by a Letter of Intent for a Sole Proprietor or Partnership).
(2) |_| THE EMPLOYER MAY AT PLAN YEAR END MAKE AN ADDITIONAL MATCHING CONTRIBUTION EQUAL TO A
PERCENTAGE DECLARED BY THE EMPLOYER, THROUGH A BOARD OF DIRECTORS' RESOLUTION (OR
BY A LETTER OF INTENT FOR A SOLE PROPRIETOR OR PARTNERSHIP), OF THE DEFERRAL
CONTRIBUTIONS MADE BY EACH PARTICIPANT DURING THE PLAN YEAR (ONLY IF AN OPTION IS
CHECKED UNDER SECTION 1.05(c)(1)).
(3) |X| MATCHING CONTRIBUTION LIMITS (check the appropriate box):
(A) |X| Deferral Contributions in excess of 6.0%
of the Participant's Compensation for the
period in question shall not be considered
for Matching Contributions.
Note: If the Employer elects a percentage limit in (A) above and requests the
Trustee to account separately for matched and unmatched Deferral Contributions,
the Matching Contributions allocated to each Participant must be computed, and
the percentage limit applied, based upon each payroll period.
(B) |_| Matching Contributions for each Participant for each Plan Year shall be
limited to $_______________ .
(4) ELIGIBILITY REQUIREMENT(S)
A Participant who makes Deferral Contributions during the Plan Year under Section 1.05(b) shall be
entitled to Matching Contributions for that Plan Year if the Participant satisfies the following
requirement(s) (Check the appropriate box(es). Options (B) and (C) may not be elected together):
(A) |_| Is employed by the Employer on the last day of the Plan Year.
(B) |_| Earns at least 500 Hours of Service during the Plan Year.
(C) |_| Earns at least 1,000 Hours of Service during the Plan Year.
</TABLE>
10
<PAGE> 92
<TABLE>
<CAPTION>
<S> <C> <C>
(D) |_| Is not a Highly Compensated Employee for the Plan Year.
(E) |_| Is not a Partner of the Employer, if the Employer is a Partnership.
(F) |X| No requirements.
NOTE: If option (A), (B) or (C) above is selected then Matching Contributions can
only be FUNDED by the Employer AFTER the Plan Year ends. Any Matching
Contribution funded before Plan Year end shall not be subject to the eligibility
requirements of this Section 1.05(c)(4)). If option (A), (B), or (C) is adopted
during a Plan Year, such option shall not become effective until the first day of
the next Plan Year.
(d) |_| EMPLOYEE AFTER-TAX CONTRIBUTIONS (check one):
(1) |_| Future Contributions
Participants may make voluntary non-deductible
Employee Contributions pursuant to Section 4.09 of
the Plan. This option may only be elected if the
Employer has elected to permit Deferral Contributions
under Section 1.05(b). Matching Contributions by the
Employer are not allowed on any voluntary
non-deductible Employee Contributions. Withdrawals
are limited to one per year unless Employee
Contributions were allowed under a previous plan
document which authorized more frequent withdrawals.
(2) |_| Frozen Contributions
Participants may not make voluntary non-deductible
Employee Contributions, but the Employer does
maintain frozen Participant voluntary non-deductible
Employee Contribution Accounts.
</TABLE>
11
<PAGE> 93
<TABLE>
<CAPTION>
<S> <C> <C>
1.06 RETIREMENT AGE(S)
(a) THE NORMAL RETIREMENT AGE UNDER THE PLAN IS (check one):
(1) |X| age 65.
(2) |_| age______(specify between 55 and 64).
(3) |_| later of the age________(can not exceed 65) or the fifth anniversary of the
Participant's Employment Commencement Date.
(b) |X| THE EARLY RETIREMENT AGE IS THE FIRST DAY OF THE MONTH AFTER THE PARTICIPANT ATTAINS AGE 55.0 (SPECIFY 55 OR
GREATER) AND COMPLETES 0 YEARS OF SERVICE FOR VESTING.
(c) |X| A PARTICIPANT IS ELIGIBLE FOR DISABILITY RETIREMENT IF HE/SHE (check the appropriate box(es)):
(1) |_| satisfies the requirements for benefits under the Employer's Long-Term Disability
Plan.
(2) |X| satisfies the requirements for Social Security disability benefits.
(3) |_| is determined to be disabled by a physician approved by the Employer.
</TABLE>
12
<PAGE> 94
1.07 VESTING SCHEDULE
(a) THE PARTICIPANT'S VESTED PERCENTAGE IN EMPLOYER CONTRIBUTIONS (FIXED
OR DISCRETIONARY) ELECTED IN SECTION 1.05(a) AND/OR MATCHING
CONTRIBUTIONS ELECTED IN SECTION 1.05(c) SHALL BE BASED UPON THE
SCHEDULE(S) SELECTED BELOW, EXCEPT WITH RESPECT TO ANY PLAN YEAR
DURING WHICH THE PLAN IS TOP-HEAVY. THE SCHEDULE ELECTED IN SECTION
1.12(d) SHALL AUTOMATICALLY APPLY FOR A TOP-HEAVY PLAN YEAR AND ALL
PLAN YEARS THEREAFTER UNLESS THE EMPLOYER HAS ALREADY ELECTED A MORE
FAVORABLE VESTING SCHEDULE BELOW.
<TABLE>
<CAPTION>
(1) EMPLOYER CONTRIBUTIONS (2) MATCHING CONTRIBUTIONS
(check one): (check one):
<S> <C> <C>
(A) |_| N/A - No Employer Contributions (A) |_| N/A - No Matching Contributions
(B) |_| 100% Vesting immediately (B) |_| 100% Vesting immediately
(C) |_| 3 year cliff (see C below) (C) |_| 3 year cliff (see C below)
(D) |_| 5 year cliff (see D below) (D) |_| 5 year cliff (see D below)
(E) |_| 6 year graduated (see E below) (E) |_| 6 year graduated (see E below)
(F) |X| 7 year graduated (see F below) (F) |X| 7 year graduated (see E below)
(G) |_| OTHER VESTING (complete G1 below) (G) |_| OTHER VESTING (COMPLETE G2
below)
</TABLE>
<TABLE>
<CAPTION>
YEARS OF VESTING SCHEDULE
SERVICE FOR
VESTING C D E F G1 G2
------- - - - - -- --
<S> <C> <C> <C> <C> <C> <C>
0 0% 0% 0% 0% ___% ___%
1 0% 0% 0% 0% ___% ___%
2 0% 0% 20% 0% ___% ___%
3 100% 0% 40% 20% ___% ___%
4 100% 0% 60% 40% ___% ___%
5 100% 100% 80% 60% ___% ___%
6 100% 100% 100% 80% ___% ___%
7 100% 100% 100% 100% 100% 100%
NOTE: A schedule elected under G1 or G2 above must be at least as favorable as one of the schedules in C,
D, E or F above.
(b) |_| Years of Service for Vesting shall exclude:
(1) |_| for new plans, service prior to the Effective Date as defined in Section 1.01(g)(1).
(2) |_| for existing plans converting from another plan document, service prior to the original
Effective Date as defined in Section 1.01(g)(2).
</TABLE>
13
<PAGE> 95
1.08 PREDECESSOR EMPLOYER SERVICE
|_| SERVICE FOR PURPOSES OF ELIGIBILITY IN SECTION 1.03(a)(1) AND
VESTING IN SECTION 1.07(a) OF THIS PLAN SHALL INCLUDE SERVICE
WITH THE FOLLOWING EMPLOYER(S):
1.09 PARTICIPANT LOANS
PARTICIPANT LOANS (check (a) or (b)):
(a) |X| will be allowed in accordance with Section 7.09, subject
to a $1,000 minimum amount and will be granted (check (1) or
(2)):
(1) |X| for any purpose.
(2) |_| for hardship withdrawal (as defined in
Section 7.10) purposes only.
(b) |_| will not be allowed.
1.10 HARDSHIP WITHDRAWALS
Participant withdrawals for hardship prior to termination of employment
(check one):
(a) |X| will be allowed in accordance with Section 7.10,
subject to a $1,000 minimum amount.
(b) |_| will not be allowed.
14
<PAGE> 96
1.11 DISTRIBUTIONS
(a) SUBJECT TO ARTICLES 7 AND 8 AND (b) BELOW, DISTRIBUTIONS UNDER
THE PLAN WILL BE PAID (check the appropriate box(es)):
(1) |X| as a lump sum.
(2) |_| under a systematic withdrawal plan
(installments).
(b) |X| CHECK IF A PARTICIPANT WILL BE ENTITLED TO RECEIVE A
DISTRIBUTION OF ALL OR ANY PORTION OF THE FOLLOWING ACCOUNTS
WITHOUT TERMINATING EMPLOYMENT UPON ATTAINMENT OF AGE 59 1/2
(check one):
(1) |_| Deferral Contribution Account
(2) |X| All Accounts
(c) |_| CHECK IF THE PLAN WAS CONVERTED (BY PLAN AMENDMENT) FROM
ANOTHER DEFINED CONTRIBUTION PLAN, AND THE BENEFITS WERE
PAYABLE AS (check the appropriate box(es)):
(1) |_| a form of single or joint and survivor life
annuity.
(2) |_| an in-service withdrawal of vested Employer
Contributions maintained in a Participant's Account
(check (A) and/or (B)):
(A) |_| for at least (24 or more) months.
(B) |_| after the Participant has at least 60 months
of participation.
(3) |_| another distribution option that is a "protected
benefit" under Section 411(d)(6) of the Internal
Revenue Code. Please attach a separate page
identifying the distribution option(s).
These additional forms of benefit may be provided for such
plans under Articles 7 or 8.
NOTE: Under Federal Law, distributions to Participants must
generally begin no later than April 1 following the
year in which the Participant attains age 70 1/2.
15
<PAGE> 97
1.12 TOP HEAVY STATUS
(a) THE PLAN SHALL BE SUBJECT TO THE TOP-HEAVY PLAN REQUIREMENTS OF
ARTICLE 9 (check one):
(1) |_| for each Plan Year.
(2) |X| for each Plan Year, if any, for which the
Plan is Top-Heavy as defined in Section 9.02.
(3) |_| Not applicable. (This option is available for
plans covering only employees subject to a collective
bargaining agreement and there are no Employer or
Matching Contributions elected in Section 1.05.)
(b) IN DETERMINING TOP-HEAVY STATUS, IF NECESSARY, FOR AN EMPLOYER
WITH AT LEAST ONE DEFINED BENEFIT PLAN, THE FOLLOWING
ASSUMPTIONS SHALL APPLY:
(1) Interest rate:_______% per annum
(2) Mortality table:
(3) |X| Not Applicable.
(c) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN
YEAR, EACH NON-KEY EMPLOYEE SHALL RECEIVE AN EMPLOYER
CONTRIBUTION OF AT LEAST 3 (3, 4, 5, OR 7 1/2) % OF
---
COMPENSATION FOR THE PLAN YEAR IN ACCORDANCE WITH SECTION 9.03
(check one):
(1) |X| under this Plan in any event.
(2) |_| under this Plan only if the Participant is not
entitled to such contribution under another qualified
plan of the Employer.
(3) |_| Not applicable. (This option is available for
plans covering only employees subject to a collective
bargaining agreement and there are no Employer or
Matching Contributions elected in Section 1.05.)
NOTE: Such minimum Employer contribution may be
less than the percentage indicated in
(c) above to the extent provided in
Section 9.03(a).
16
<PAGE> 98
<TABLE>
(d) IN THE EVENT THAT THE PLAN IS TREATED AS TOP-HEAVY FOR A PLAN
YEAR, THE FOLLOWING VESTING SCHEDULE SHALL APPLY INSTEAD OF THE
SCHEDULE(S) ELECTED IN SECTION 1.07(a) FOR SUCH PLAN YEAR AND
EACH PLAN YEAR THEREAFTER (check one):
(1) |_| 100% vested after _____ (not in excess of
3) years of service for vesting.
(2) |X| YEARS OF SERVICE FOR VESTING VESTING PERCENTAGE MUST BE AT LEAST
<S> <C> <C>
0 0.00% 0%
-----
1 0.00% 0%
-----
2 20.00% 20%
------
3 40.00% 40%
------
4 60.00% 60%
------
5 80.00% 80%
------
6 100.00% 100%
-------
</TABLE>
Note: If the schedule(s) elected in Section 1.07(a) is(are)
more favorable in all cases than the schedule elected
in (d) above, then the schedule(s) in Section 1.07(a)
will continue to apply even in Plan Years in which
the Plan is Top-Heavy.
1.13 TWO OR MORE PLANS - Code Section 415 limitation on annual additions
If the Employer maintains or ever maintained another qualified plan in
which any Participant in this Plan is (or was) a participant or could
become a participant, the Employer must complete this section. The
Employer must also complete this section if it maintains a welfare
benefit fund, as defined in Section 419(e) of the Code, or an
individual medical account, as defined in Section 415(l)(2) of the
Code, under which amounts are treated as annual additions with respect
to any Participant in this Plan.
(a) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY OTHER DEFINED
CONTRIBUTION PLAN WHICH IS NOT A MASTER OR PROTOTYPE PLAN,
ANNUAL ADDITIONS FOR ANY LIMITATION YEAR TO THIS PLAN WILL BE
LIMITED (check one):
(1) |_| in accordance with Section 5.03 of this Plan.
(2) |_| in accordance with another method set forth on an
attached separate sheet.
(3) |X| Not Applicable.
17
<PAGE> 99
(b) IF THE EMPLOYER MAINTAINS, OR MAINTAINED, ANY DEFINED BENEFIT
PLAN(S), THE SUM OF THE DEFINED CONTRIBUTION FRACTION AND
DEFINED BENEFIT FRACTION FOR A LIMITATION YEAR MAY NOT EXCEED
THE LIMITATION SPECIFIED IN CODE SECTION 415(e), MODIFIED BY
SECTION 416(h)(1) OF THE CODE. THIS COMBINED PLAN LIMIT
WILL BE MET AS FOLLOWS (check one):
(1) |X| Annual Additions to this Plan are limited so that
the sum of the Defined Contribution Fraction and the
Defined Benefit Fraction does not exceed 1.0.
(2) |_| another method of limiting Annual Additions or
reducing projected annual benefits is set forth on an
attached schedule.
(3) |_| Not Applicable.
1.14 ESTABLISHMENT OF TRUST AND INVESTMENT DECISIONS
(a) INVESTMENT DIRECTIONS
Participant Accounts will be invested (check one):
(1) |_| in accordance with investment directions provided
to the Trustee by the Employer for allocating all
Participant Accounts among the options listed in (b)
below.
(2) |X| in accordance with investment directions provided
to the Trustee by each Participant for allocating his
entire Account among the options listed in (b) below.
(3) |_| in accordance with investment directions provided
to the Trustee by each Participant for all
contribution sources in a Participant's Account
except the following sources shall be invested as
directed by the Employer (check (A) and/or (B)):
(A) |_| Fixed or Discretionary Employer
Contributions
(B) |_| Employer Matching Contributions
The Employer must direct the applicable sources among
the same investment options made available for
Participant directed sources listed in (b) below.
18
<PAGE> 100
(b) PLAN INVESTMENT OPTIONS
The Employer hereby establishes a Trust under the Plan in
accordance with the provisions of Article 14, and the Trustee
signifies acceptance of its duties under Article 14 by its
signature below. Participant Accounts under the Trust will be
invested among the Fidelity Funds listed below pursuant to
Participant and/or Employer directions.
<TABLE>
<CAPTION>
FUND NAME FUND NUMBER
<S> <C> <C>
1 Fidelity Managed Income Portfolio 0632
2 Fidelity Intermediate Bond Fund 0032
3 Fidelity Equity-Income Fund 0023
4 Fidelity Magellan(R)Fund 0021
5 Fidelity Freedom Income Fund(SM) 0369
6 Fidelity Freedom 2000 Fund(SM) 0370
7 Fidelity Freedom 2010 Fund(SM) 0371
8 Fidelity Freedom 2020 Fund(SM) 0372
9 Fidelity Freedom 2030 Fund(SM) 0373
10 Franklin Small Cap Growth Fund - A 3392
11 American AAdvantage International Equity Fund 3161
</TABLE>
NOTE: An additional annual recordkeeping fee will be charged
for each fund in excess of seven funds.
To the extent that the Employer selects as an
investment option the Managed Income Portfolio of the
Fidelity Group Trust for Employee Benefit Plans (the
"Group Trust"), the Employer hereby (A) agrees to the
terms of the Group Trust and adopts said terms as a
part of this Agreement and (B) acknowledges that it
has received from the Trustee a copy of the Group
Trust, the Declaration of Separate Fund for the
Managed Income Portfolio of the Group Trust, and the
Circular for the Managed Income Portfolio.
NOTE: The method and frequency for change of investments
will be determined under the rules applicable to the
selected funds or, if applicable, the rules of the
Employer adopted in accordance with Section 6.03.
Information will be provided regarding expenses, if
any, for changes in investment options.
19
<PAGE> 101
1.15 RELIANCE ON OPINION LETTER
An adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this
Plan is qualified under Section 401 of the Code. If the Employer wishes
to obtain reliance that his or her Plan(s) are qualified, application
for a determination letter should be made to the appropriate Key
District Director of the Internal Revenue Service. Failure to fill out
the Adoption Agreement properly may result in disqualification of the
Plan.
This Adoption Agreement may be used only in conjunction with Fidelity
Prototype Plan Basic Plan Document No. 07. The Prototype Sponsor shall
inform the adopting Employer of any amendments made to the Plan or of
the discontinuance or abandonment of the prototype plan document.
1.16 PROTOTYPE INFORMATION:
Name of Prototype Sponsor: Fidelity Management & Research Co.
Address of Prototype Sponsor: 82 Devonshire Street
Boston, MA 02109
Questions regarding this prototype document may be directed to the
following telephone number:
1-(800) 343-9184.
20
<PAGE> 102
EXECUTION PAGE
(FIDELITY'S COPY)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 30 day of JUNE, 1998.
-- ---- ----
Employer Lexington Precision Corporation
-------------------------------
By Kelly L. MacMillan
-------------------------------
Title Treasurer
-------------------------------
Employer Lexington Precision Corporation
-------------------------------
By Dennis J. Welhouse
-------------------------------
Title Senior Vice President
-------------------------------
Accepted by
Fidelity Management Trust Company, as Trustee
By ERIC L. WICHMANN Date AUGUST 17, 1998
----------------------------- --------------------------
Title AUTHORIZED SIGNATORY
-----------------------------
21
<PAGE> 1
Exhibit 10.6
DESCRIPTION OF 1998 COMPENSATION ARRANGEMENTS
WITH LUBIN, DELANO & COMPANY
During 1998, Lexington Precision Corporation (the "Company") compensated
Michael A. Lubin, its Chairman of the Board, and Warren Delano, its President,
indirectly through payments to Lubin, Delano & Company, an investment banking
firm of which they are the only partners. These compensation arrangements
provided for payment to Lubin, Delano & Company of a basic fee of $400,000, and
provided for a possible incentive fee based upon attaining an operating profit
target for the Company and possible transaction fees as might be agreed upon by
the Company and Lubin, Delano & Company in connection with acquisitions,
divestitures, financings and other similar transactions.
<PAGE> 1
Exhibit 10.7
LEXINGTON PRECISION CORPORATE OFFICE
1998 MANAGEMENT CASH BONUS PLAN
<PAGE> 2
LEXINGTON PRECISION CORPORATE OFFICE
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
NUMBER PAGE
------ ----
<S> <C>
I. PURPOSE OF PLAN 1
II. ELIGIBILITY 1
III. PLAN YEAR 1
IV. GROUPING OF PARTICIPANTS 1
V. SETTING OF TARGET BONUS PERCENTAGES 1
VI. AUTHORIZATION FORM 2
VII. NOTIFICATION OF EMPLOYEES 2
VIII. BASIS FOR BONUS PAYMENTS 3
IX. SETTING OF GOALS 3
X. CALCULATING THE BONUS POOL 4
XI. TIMING OF BONUS PAYMENTS 5
XII. OTHER 5
</TABLE>
<PAGE> 3
LEXINGTON PRECISION CORPORATE OFFICE
1998 MANAGEMENT CASH BONUS PLAN
I. PURPOSE OF PLAN
The "1998 MANAGEMENT CASH BONUS PLAN" (the "PLAN") is designed to
provide meaningful incentives for officers and key employees of the
Corporate Office (the "Bonus Group") of Lexington Precision Corporation
(the "COMPANY") to increase profitability while efficiently managing
the Company's assets.
II. ELIGIBILITY
A "PARTICIPANT" shall mean an individual who meets both of the
following criteria:
(1) The individual has been selected to participate in
the Plan by the Compensation Committee of the Board
of Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington
Precision Corporation; and
(2) The individual is a full-time, salaried, exempt
employee of the Company on the last day of the plan
year.
Participants who retire during the plan year and are aged 62 or older
on the date of retirement and estates of Participants who die during
the plan year will be paid bonuses (if and to the extent earned) at the
same time that all other Participants receive their bonuses after the
end of the plan year.
III. PLAN YEAR
The plan year shall mean the year ending December 31, 1998.
IV. GROUPING OF PARTICIPANTS
The Participants in the Bonus Group, will be designated at the
beginning of the plan year by the Compensation Committee of the Board
of Directors of Lexington Precision Corporation upon recommendation of
the president of Lexington Precision Corporation.
-1-
<PAGE> 4
V. SETTING OF TARGET BONUS PERCENTAGES
Subject to the adjustment for Personal Performance (defined in
Section XI below), the "TARGET BONUS" for each Participant shall mean
the amount calculated by multiplying the Participant's aggregate
base-salary received during the year by a "TARGET BONUS PERCENTAGE"
which will be set at the beginning of the plan year by the Compensation
Committee of the Board of Directors of Lexington Precision Corporation
upon recommendation of the president of Lexington Precision
Corporation. The "GROUP TARGET BONUS" shall mean the aggregate of the
Target Bonuses of all Participants in a Bonus Group. The Target Bonus
Percentage for the president of the Company will be set by the
president of Lexington Precision Corporation.
A Participant's bonus will always be based on the aggregate base-salary
received during the year, not on the base-salary level at any
particular point during the year (i.e., when calculating bonuses for
Participants who received salary increases during the year, for
Participants who are hired during the year or for Participants who
retire or die during the year).
As a general guideline, the Target Bonus Percentage levels which would
typically be assigned to various categories of employees in the Bonus
Group are set forth below:
<TABLE>
<CAPTION>
TARGET BONUS
POSITION PERCENTAGE
-------- ----------
<S> <C>
Senior Vice Presidents 20-35%
Vice Presidents 15-25%
Junior Officers 5-15%
</TABLE>
If a Participant moves to a higher management level during the year,
such Participant's Target Bonus Percentage will be reset at an
appropriate higher level determined by the Compensation Committee of
the Board of Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington Precision Corporation, as
if the Target Bonus Percentage had been at the higher level for the
entire year. If a Participant moves to a lower management level during
the year, such Participant's Target Bonus Percentage will be reset at
an appropriate lower level determined by the Compensation Committee of
the Board of Directors of Lexington Precision Corporation upon
recommendation of the president of Lexington Precision Corporation, as
if the Target Bonus Percentage had been at the lower level for the
entire year.
VI. AUTHORIZATION FORM
Attached hereto as Exhibit A is the "AUTHORIZATION FORM" which shall be
used by the Compensation Committee of the Board of Directors of
Lexington Precision Corporation upon recommendation of the president of
Lexington
-2-
<PAGE> 5
Precision Corporation at the beginning of each plan year when
designating Participants, Target Bonus Percentages and the Bonus
Group's Target Pre- Bonus Operating Profit (defined in Section IX
below).
VII. NOTIFICATION OF EMPLOYEES
Attached hereto as Exhibit B is the form of memorandum which shall be
used at the beginning of each plan year to inform employees of their
participation in the Plan and their Target Bonus Percentages and Target
Bonuses.
VIII. BASIS FOR BONUS PAYMENTS
After the end of the plan year, when financial results for the year are
available, a calculation will be made to determine the bonus that will
be paid to each Participant.
The percentage of Target Bonus earned by each Participant will depend
on the following:
(1) how well the Bonus Group performed relative to its
Target Pre-Bonus Operating Profit; and
(2) the Participant's Personal Performance (discussed
below).
All bonuses will be subject to the review and approval of the Board Of
Directors of Lexington Precision Corporation.
IX. SETTING OF GOALS
"OPERATING PROFIT" means profit before interest, income taxes and other
non-operating expenses in accordance with the Company's standard
accounting procedures.
"PRE-BONUS OPERATING PROFIT" means operating profit before deducting
any expenses for bonuses relating to the 1998 Management Cash Bonus
Plan.
The "TARGET PRE-BONUS OPERATING PROFIT" for the Bonus Group will be set
at the beginning of the year by the Compensation Committee of the Board
of Directors of Lexington Precision Corporation upon recommendation of
the president of Lexington Precision Corporation. The Target Pre-Bonus
Operating Profit will equal ONE of the following:
(1) the Bonus Group's "BUDGETED PRE-BONUS OPERATING
PROFIT" as reflected in the annual budget for the
Company;
-3-
<PAGE> 6
(2) an amount higher than the Company's Budgeted
Pre-Bonus Operating Profit if the Budgeted Pre- Bonus
Operating Profit is below reasonable
performance-standards (taking into account, among
other things, industry performance standards,
historical performance standards, and the amount of
capital invested in the Company); or
(3) an amount lower than the Company's Budgeted Pre-Bonus
Operating Profit if the Budgeted Pre- Bonus Operating
Profit is above reasonable performance-standards
(taking into account, among other things, industry
performance standards, historical performance
standards, and the amount of capital invested in the
Company).
The "reasonable performance standards" discussed above will be
determined in the sole discretion of the Compensation Committee of the
Board of Directors of Lexington Precision Corporation upon
recommendation by the president of Lexington Precision Corporation.
The Target Pre-Bonus Operating Profit will not be revised during the
plan year, except in cases where an acquisition or divestiture of a
business completed during the plan year materially affects reported
operating results during that plan year.
X. CALCULATING THE BONUS POOL
To calculate the bonus for each of the Participants in the Bonus Group,
it is first necessary to calculate the "GROUP BONUS POOL".
The Group Bonus Pool will be calculated by multiplying the Group Target
Bonus by the percentage in the column on the right below, opposite the
percentage of the Target Pre-Bonus Operating Profit which was attained
by that Bonus Group.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE OF TARGET
OF TARGET BONUS EARNED
PRE-BONUS (BEFORE ADJUSTING FOR
OPERATING PROFIT ATTAINED PERSONAL PERFORMANCE)
------------------------- ---------------------
<S> <C>
less than 85.00% None
85.00 - 89.99% 25%
90.00 - 94.99% 50
95.00 - 99.99% 75
100.00 - 109.99% (target) 100
110.00 - 119.99% 125
120.00 - 129.99% 150
130.00 - 139.99% 175
140.00% or more 200 (maximum)
</TABLE>
-4-
<PAGE> 7
The percentage of Target Bonus earned, before giving effect to
adjustments for Personal Performance, must be in the increments shown
on the above chart. For example, if the Bonus Group attained 108% of
the Target Pre-Bonus Operating Profit, the percentage used for each
Participant in the Bonus Group would be 100% (not 120% or 125%). The
percentages of Target Bonus earned are "stepped," not linear. No
bonuses will be earned by any Participants in the Bonus Group if less
than 85% of the Target Pre-Bonus Operating Profit is attained. The
Group Bonus Pool cannot exceed 200% of the Group Target Bonus.
XI. TIMING OF BONUS PAYMENTS
All bonus payments will be made as soon as practicable after the end of
the plan year. Before any bonus payments can be made the following two
requirements must be met:
(1) necessary accounting and audit work must be completed
so that all bonus calculations can be made; and
(2) the bonus must be approved by a vote of the Board of
Directors of Lexington Precision Corporation.
It is anticipated that bonuses will be paid approximately 45-75 days
after the end of the plan year.
XII. OTHER
Bonuses will be subject to income and employment tax withholding to the
extent required by applicable law.
Bonuses and the right to receive bonuses cannot be pledged, assigned or
alienated, voluntarily or involuntarily, by any Participant.
THE 1998 MANAGEMENT CASH BONUS PLAN AND ANY BONUSES GRANTED UNDER THE
1998 MANAGEMENT CASH BONUS PLAN SHALL NOT CONFER UPON ANY PARTICIPANT
ANY RIGHT WITH RESPECT TO THE CONTINUANCE OF EMPLOYMENT BY THE COMPANY,
NOR SHALL THEY INTERFERE IN ANY WAY WITH THE RIGHT OF THE COMPANY TO
TERMINATE A PARTICIPANT'S EMPLOYMENT AT ANY TIME.
THE 1998 MANAGEMENT CASH BONUS PLAN MAY BE REVISED, MODIFIED OR
TERMINATED IN ANY WAY, FOR ANY REASON AND AT ANY TIME AT THE SOLE
DISCRETION OF THE BOARD OF DIRECTORS OF LEXINGTON PRECISION CORPORATION
BY VOTE OF A MAJORITY OF THE BOARD AT ANY REGULAR OR SPECIAL MEETING OF
THE BOARD.
Revised and approved by the Board of Directors of Lexington Precision
Corporation on October 18, 1994
-5-
<PAGE> 1
Exhibit 10.76
AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 2 (the "Amendment") dated as of November
30, 1998 to Loan and Security Agreement by and between THE CIT GROUP/EQUIPMENT
FINANCING, INC. ("Lender"), Lexington Precision Corporation ("LPC").
WHEREAS, Lender and LPC are parties to a Loan and Security
Agreement dated as of March 19, 1997, including Rider A thereto (the
"Agreement").
WHEREAS, LPC and Lender desire to amend the Agreement as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties hereto hereby agree as follows:
1. Capitalized terms used herein, unless otherwise defined
herein, shall have the meaning ascribed thereto in the Agreement.
2. Section 4(d) of Rider A to the Agreement is hereby amended
in its entirety to read as follows:
(d) not incur, make or commit to make any expenditure in
respect of the purchase or other acquisition of fixed or
capital assets including leases which in accordance with
generally accepted accounting principles should be capitalized
on the books of Debtor (including normal replacements and
maintenance) which after giving effect thereto, would cause the
aggregate amount of such capital expenditures by Debtor to
exceed $18,000,000 in Debtor's fiscal year 1997, $16,000,000 in
Debtor's fiscal year 1998 and $15,000,000 (on a non-cumulative
basis) in any fiscal year thereafter.
3. Except as specifically amended herein, the Agreement remains
in effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first written above.
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: Barry L. Blailock
----------------------------------
Title: Assistant Vice President/Credit
--------------------------------
LEXINGTON PRECISION CORPORATION
By: Warren Delano
----------------------------------
Title: President
--------------------------------
<PAGE> 1
Exhibit 10.77
NEW EQUIPMENT TERM NOTE
$1,300,000 December 16, 1998
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, as successor by
merger to Congress Financial Corporation, a California corporation (the
"Payee"), at the offices of Payee at 1133 Avenue of the Americas, New York, New
York 10036, or at such other place as the Payee or any holder hereof may from
time to time designate, the principal sum of ONE MILLION THREE HUNDRED THOUSAND
DOLLARS ($1,300,000) in lawful money of the United States of America and in
immediately available funds, in eighty-four (84) consecutive monthly
installments (or earlier as hereinafter referred to) on the first day of each
month commencing February 1, 1999, of which the first eighty-three (83)
installments shall each be in the amount of FIFTEEN THOUSAND FIVE HUNDRED
DOLLARS ($15,500), and the last (i.e. eighty-fourth (84th)) installment shall be
in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing on
the first day of the month next following the date hereof, and on the first day
of each month thereafter until the indebtedness evidenced by this Note is paid
in full. Interest payable upon and during the continuance of an Event of Default
or following the effective date of termination or non-renewal of the Financing
Agreements shall be payable upon demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one-quarter of one (1/4%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; PROVIDED, THAT, at Payee's option, the Interest Rate shall mean a rate of
two and one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements, and
(b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless otherwise defined herein, all capitalized terms used herein shall
<PAGE> 2
have the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of March 11, 1997
between Debtor and Payee, as amended by the letter agreement re: Amendment to
Financing Agreements, dated October 20, 1998, between Debtor and Payee
(collectively, the "Amendment") to evidence a "New Equipment Term Loan" (as
defined in the New Equipment Term Loan Agreement as referred to in and as
modified by the Amendment) made by Payee to Debtor. This Note is secured by the
"Collateral" described in the Accounts Financing Agreement [Security Agreement],
dated January 11, 1990, by and between Payee and Debtor, as amended (the
"Accounts Agreement") and any agreement, document or instrument now or at any
time hereafter executed and/or delivered in connection therewith or related
thereto (the foregoing, as the same now exist or may hereafter be amended,
modified, supplemented, renewed, extended, restated or replaced, are hereinafter
collectively referred to as the "Financing Agreements") and is entitled to all
of the benefits and rights thereof and of the Financing Agreements. At the time
any payment is due hereunder, at its option, Payee may charge the amount thereof
to any account of Debtor maintained by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon, shall
forthwith become due and payable, together with interest accruing thereafter at
the then
-2-
<PAGE> 3
applicable rate stated above until the indebtedness evidenced by this Note is
paid in full, plus the costs and expenses of collection hereof, including, but
not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii) consents
to any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. Upon the occurrence of any Event of
Default and during the continuance thereof, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing, Debtor shall appear in
answer to such process or notice of motion or other application to said Courts,
failing which Debtor shall be deemed in default and judgment may be entered by
Payee against Debtor for the amount of the claim and other relief requested
therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
-3-
<PAGE> 4
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit of
Payee and its successors, endorsees and assigns. If any term or provision of
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION
CORPORATION
ATTEST:
By: Warren Delano
----------------------------
Dennis J. Welhouse
- ---------------------------------
Secretary Title: President
[Corporate Seal] -------------------------
-4-
<PAGE> 1
Exhibit 10.78
January 28, 1999
Lexington Precision Corporation
767 Third Avenue
New York, New York 10017
Re: AMENDMENT TO FINANCING AGREEMENTS
---------------------------------
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Precision Corporation ("LPC") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree to
amend the Financing Agreements, as set forth below:
1. DEFINITIONS:
(a) The definition of "Term Loans" contained in the letter
agreement re: Amendment to Financing Agreements, dated January 31, 1995, between
LPC and Congress (the "January 1995 Amendment"), as amended by the letter
agreement re: Amendment to Financing Agreements, dated January 16, 1996, between
LPC and Congress and the letter agreement re: Amendment to Financing Agreements,
dated March 11, 1997, between LPC and Congress, is hereby amended to mean and
include all term loans now outstanding or hereafter made by Congress to LPC,
including, without limitation, the term loans made by Congress to LPC evidenced
by the January 1999 Additional LPC Term Note (as defined below), the LPC Fifth
Restated Note (as defined below) and any and all New Equipment Term Notes
heretofore or hereafter executed by LPC, as any such notes may hereafter be
amended, renewed, extended, restated or replaced.
(b) Capitalized terms used herein, unless otherwise defined
herein, shall have the meanings ascribed thereto in the Accounts Agreement and
the other Financing Agreements.
2. ADDITIONAL TERM LOAN. In order to evidence an additional one-time
advance to LPC (the "January 1999 Additional LPC Term Loan"), which shall be
made upon the effective date hereof, LPC is executing and delivering to Congress
a Term
<PAGE> 2
Promissory Note in the principal amount of $3,550,000 (the "January 1999
Additional LPC Term Note"). The Obligations evidenced by the January 1999
Additional LPC Term Note shall be payable, including interest and other amounts,
as provided therein and, to the extent not inconsistent with the terms of the
January 1999 Additional LPC Term Note, as provided in the other Financing
Agreements, and shall be secured by all Collateral.
3. MAXIMUM AMOUNT OF NEW EQUIPMENT TERM LOANS. The first sentence of
Section 2(b) of the letter agreement re: Amendment to Financing Agreements,
dated as of March 25, 1994, between Congress and LPC, as heretofore amended by
the letter agreement re: Amendment to Financing Agreements, dated as of
August 1, 1994, the January 31, 1995 Amendment, and the March 11, 1997
Amendment, is hereby deleted in its entirety and replaced with the following:
"(b) Except in Congress' discretion the aggregate original
principal amount of all New Equipment Term Loans made to LPC plus the
aggregate original principal amount of all "New Equipment Term Loans"
(as defined in the LCI Financing Agreements) made to LCI under the LCI
Financing Agreements at any time after January 28, 1999, shall not
exceed $5,000,000."
4. MAXIMUM AMOUNT OF TERM LOANS. The aggregate principal amount of all
Term Loans and all "Term Loans" (as defined in the LCI Financing Agreements)
made to LCI, at any one time outstanding, shall not exceed the amount of
$28,000,000.
5. INVENTORY SUBLIMIT. Paragraph 3 of the letter agreement re:
Inventory Loans, dated March 23, 1990, as heretofore amended, is hereby further
amended by deleting the reference to "$7,000,000" and replacing it with
"$8,000,000".
6. TERM. The first sentence of Section 9.1 of the Accounts Agreement,
as heretofore amended, is hereby deleted in its entirety and replaced with the
following:
"This Agreement shall become effective upon
acceptance by you and shall continue in full force and effect
for a term ending April 1, 2002 (the "Renewal Date"), unless
sooner terminated pursuant to the terms hereof."
7. EARLY TERMINATION FEE. Section 9.2 of the Accounts Agreement, as
heretofore amended, is hereby further amended by deleting the reference to
"April 1, 2000" and replacing it with "October 1, 1999".
8. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants
-2-
<PAGE> 3
heretofore or hereafter made by LPC to Congress pursuant to the Financing
Agreements, LPC hereby represents, warrants and covenants with and to Congress
as follows (which representations, warranties and covenants are continuing and
shall survive the execution and delivery hereof and shall be incorporated into
and made a part of the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
(b) This Amendment and each instrument required to be executed
and delivered by LPC hereunder, has been duly executed and delivered by LPC and
is in full force and effect as of the date hereof, and the agreements and
obligations of LPC contained herein and therein constitute the legal, valid and
binding obligations of LPC enforceable against LPC in accordance with their
terms.
9. USE OF PROCEEDS; AMENDED AND RESTATED NOTE.
-------------------------------------------
The proceeds of the January 1999 Additional LPC Term Loan to
be made by Congress pursuant to Paragraph 2 hereof shall be used as follows:
(a) the amount of $2,090,175 shall be applied to the
outstanding principal balance of the Fourth Amended and Restated Promissory
Note, dated March 11, 1997, which, as of the date hereof, has an outstanding
principal balance of $8,358,180, resulting in a remaining outstanding principal
balance of $6,268,005. Such remaining outstanding principal balance will be
evidenced by the execution and delivery by LPC to Congress of a Fifth Amended
and Restated Promissory Note (as the same now exists or may hereafter be
amended, supplemented, renewed, extended, restated or replaced, the "LPC Fifth
Restated Note"). The Obligations evidenced by the LPC Fifth Restated Note shall
be payable, including interest and other amounts, as provided therein and, to
the extent not inconsistent with the terms of the LPC Fifth Restated Note, as
provided in the other Financing Agreements, and shall be secured by all
Collateral; and
(b) the amount of $1,459,825 shall be credited to LPC's
Revolving Loan account maintained by Congress under the Financing Agreements.
10. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. Anything contained in
this Amendment to the contrary notwithstanding, the terms and provisions of this
Amendment shall only become effective upon the satisfaction of the following
additional conditions precedent:
(a) Congress shall have received an executed original or
executed original counterparts (as the case may be) of this
-3-
<PAGE> 4
Amendment together with the following, each of which shall be in form and
substance satisfactory to Congress:
(i) the January 1999 Additional LPC Term Note;
(ii) the LPC Fifth Restated Note;
(iii) certified resolutions of the Board of
Directors of LPC duly authorizing the
execution and delivery of this Amendment and
the instruments and transactions hereunder;
and
(iv) an Amendment between LCI and Congress with
respect to the LCI Financing Agreements and
the documents and instruments required
thereunder and the satisfaction of all
conditions precedent to the effectiveness
thereof.
(b) All representations and warranties contained herein, in
the Accounts Agreement and in the other Financing Agreements shall be true and
correct in all material respects; and
(c) No Event of Default shall have occurred and no event shall
have occurred or condition be existing which, with notice or passage of time or
both, would constitute an Event of Default.
11. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the
Accounts Agreement and all supplements to the Accounts Agreement and all other
Financing Agreements, are hereby specifically ratified, restated and confirmed
by the parties hereto as of the date hereof and no existing defaults or Events
of Default have been waived in connection herewith. To the extent of conflict
between the terms of this Amendment and the Accounts Agreement or any of the
other Financing Agreements, the terms of this Amendment control.
12. FURTHER ASSURANCES. LPC shall execute and deliver such additional
documents and take such additional actions as may reasonably be requested by
Congress to effectuate the provisions and purposes of this Amendment, including,
but not in limitation, the following:
(a) At Congress' request, LPC shall execute and deliver to
Congress such mortgage modification agreements or similar agreements with
respect to any and all properties of LPC which are encumbered by a mortgage or
deed of trust, as the case may be, in favor of Congress, to expressly secure,
without limitation, the notes evidencing the then current Term Loans and
-4-
<PAGE> 5
other Financing Agreements evidencing the Obligations (it being agreed that the
absence of any such agreement shall not deprive Congress of the benefit of the
liens held by Congress on the real property covered by such mortgages or deeds
of trust, which shall continue to secure all Obligations); and
(b) In connection with such agreements under Section 12(a),
LPC shall arrange for the delivery, at LPC's expense, of an updated title
insurance policy and necessary endorsements thereto in favor of Congress, in
form and substance satisfactory to Congress, for each property that is subject
to such agreements.
13. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflicts of law.
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Laurence S. Forte
---------------------------------
Title: First Vice President
------------------------------
AGREED AND ACCEPTED:
LEXINGTON PRECISION CORPORATION
By: Michael A. Lubin
---------------------------------
Title: Chairman
------------------------------
-5-
<PAGE> 6
CONSENT
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
PRECISION CORPORATION to CONGRESS FINANCIAL CORPORATION, including, without
limitation, all indebtedness, liabilities and obligations under the Financing
Agreements as amended hereby.
LEXINGTON COMPONENTS, INC.
By: Michael A. Lubin
-----------------------
Title: Chairman
--------------------
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<PAGE> 1
Exhibit 10.79
January 28, 1999
Lexington Components, Inc.
767 Third Avenue
New York, New York 10017
Re: AMENDMENT TO FINANCING AGREEMENTS
---------------------------------
Gentlemen:
Reference is made to certain financing agreements dated January 11,
1990 between Lexington Components, Inc. ("LCI") and Congress Financial
Corporation ("Congress"), including, but not limited to, an Accounts Financing
Agreement [Security Agreement], as amended (the "Accounts Agreement"), and all
supplements thereto and all other related financing and security agreements
(collectively, all of the foregoing, as the same have heretofore or
contemporaneously been or may be hereafter, amended, replaced, extended,
modified or supplemented, the "Financing Agreements").
In connection with the financing arrangements pursuant to the Accounts
Agreement and the other Financing Agreements, the parties hereto hereby agree to
amend the Financing Agreements, as set forth below:
1. DEFINITIONS:
-----------
(a) The definition of "Term Loans" contained in the letter
agreement re: Amendment to Financing Agreements, dated January 31, 1995, between
LCI and Congress (the "January 1995 Amendment"), as amended by the letter
agreement re: Amendment to Financing Agreements, dated January 16, 1996, between
LCI and Congress and the letter agreement re: Amendment to Financing Agreements,
dated March 11, 1997, between LCI and Congress, is hereby amended to mean and
include all term loans now outstanding or hereafter made by Congress to LCI,
including, without limitation, the term loan made by Congress to LCI evidenced
by the January 1999 Additional LCI Term Note (as defined below), the Fourth
Amended and Restated Promissory Note, dated March 11, 1997, and any and all New
Equipment Term Notes heretofore or hereafter executed by LCI, as any such notes
may hereafter be amended, renewed, extended, restated or replaced.
(b) Capitalized terms used herein, unless otherwise defined
herein, shall have the meanings ascribed thereto in the Accounts Agreement and
the other Financing Agreements.
2. ADDITIONAL TERM LOAN. In order to evidence an additional one-time
advance to LCI (the "January 1999 Additional LCI Term Loan"), which shall be
made upon the effective date hereof, LCI is executing and delivering to Congress
a Term Promissory Note in the principal amount of $1,190,000 (the
<PAGE> 2
"January 1999 Additional LCI Term Note"). The Obligations evidenced by the
January 1999 Additional LCI Term Note shall be payable, including interest and
other amounts, as provided therein and, to the extent not inconsistent with the
terms of the January 1999 Additional LCI Term Note, as provided in the other
Financing Agreements, and shall be secured by all Collateral.
3. MAXIMUM AMOUNT OF NEW EQUIPMENT TERM LOANS. The first sentence of
Section 2(b) of the letter agreement re: Amendment to Financing Agreements,
dated as of March 25, 1994, between Congress and LCI, as heretofore amended by
the letter agreement re: Amendment to Financing Agreements, dated as of
August 1, 1994, the January 31, 1995 Amendment, and the March 11, 1997
Amendment, is hereby deleted in its entirety and replaced with the following:
"(b) Except in Congress' discretion the aggregate original
principal amount of all New Equipment Term Loans made to LCI plus the
aggregate original principal amount of all "New Equipment Term Loans"
(as defined in the LPC Financing Agreements) made to LPC under the LPC
Financing Agreements at any time after January 28, 1999, shall not
exceed $5,000,000."
4. MAXIMUM AMOUNT OF TERM LOANS. The aggregate principal amount of all
Term Loans and all "Term Loans" (as defined in the LPC Financing Agreements)
made to LPC at any one time outstanding, shall not exceed the amount of
$28,000,000.
5. INVENTORY/WORK-IN-PROCESS SUBLIMITS. Paragraph 3 of the letter
agreement re: Inventory Loans, dated March 23, 1990, as heretofore amended, is
hereby further amended by deleting the reference to "$7,000,000" and replacing
it with "$8,000,000" and by deleting the reference to "$1,000,000" and replacing
it with "$2,000,000".
6. TERM. The first sentence of Section 9.1 of the Accounts Agreement,
as heretofore amended, is hereby deleted in its entirety and replaced with the
following:
"This Agreement shall become effective upon
acceptance by you and shall continue in full force and effect
for a term ending April 1, 2002 (the "Renewal Date"), unless
sooner terminated pursuant to the terms hereof."
7. EARLY TERMINATION FEE. Section 9.2 of the Accounts Agreement, as
heretofore amended, is hereby further amended by deleting the reference to
"April 1, 2000" and replacing it with "October 1, 1999".
-2-
<PAGE> 3
8. REPRESENTATIONS, WARRANTIES AND COVENANTS. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by LPC to Congress pursuant to the Financing Agreements, LCI hereby
represents, warrants and covenants with and to Congress as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) No Event of Default exists or has occurred and is
continuing on the date of this Amendment.
(b) This Amendment and each instrument required to be executed
and delivered by LCI hereunder, has been duly executed and delivered by LCI and
is in full force and effect as of the date hereof, and the agreements and
obligations of LCI contained herein and therein constitute the legal, valid and
binding obligations of LCI enforceable against LCI in accordance with their
terms.
9. USE OF PROCEEDS.
The proceeds of the January 1999 Additional LCI Term Loan to
be made by Congress pursuant to Paragraph 2 hereof shall be credited to LCI's
Revolving Loan account maintained by Congress under the Financing Agreements.
10. CONDITIONS TO EFFECTIVENESS OF AMENDMENT. Anything contained in
this Amendment to the contrary notwithstanding, the terms and provisions of this
Amendment shall only become effective upon the satisfaction of the following
additional conditions precedent:
(a) Congress shall have received an executed original or
executed original counterparts (as the case may be) of this Amendment together
with the following, each of which shall be in form and substance satisfactory to
Congress:
(i) the January 1999 Additional LCI Term Note;
(ii) certified resolutions of the Board of
Directors of LCI duly authorizing the
execution and delivery of this Amendment and
the instruments and transactions hereunder;
and
(iii) an Amendment between LPC and Congress with
respect to the LPC Financing Agreements and
the documents and instruments required
thereunder and the satisfaction of all
conditions precedent to the effectiveness
thereof.
-3-
<PAGE> 4
(b) All representations and warranties contained herein, in
the Accounts Agreement and in the other Financing Agreements shall be true and
correct in all material respects; and
(c) No Event of Default shall have occurred and no event shall
have occurred or condition be existing which, with notice or passage of time or
both, would constitute an Event of Default.
11. EFFECT OF THIS AMENDMENT. Except as modified pursuant hereto, the
Accounts Agreement and all supplements to the Accounts Agreement and all other
Financing Agreements, are hereby specifically ratified, restated and confirmed
by the parties hereto as of the date hereof and no existing defaults or Events
of Default have been waived in connection herewith. To the extent of conflict
between the terms of this Amendment and the Accounts Agreement or any of the
other Financing Agreements, the terms of this Amendment control.
12. FURTHER ASSURANCES. LCI shall execute and deliver such additional
documents and take such additional actions as may reasonably be requested by
Congress to effectuate the provisions and purposes of this Amendment, including,
but not in limitation, the following:
(a) At Congress' request, LCI shall execute and deliver to
Congress such mortgage modification agreements or similar agreements with
respect to any and all properties of LCI which are encumbered by a mortgage or
deed of trust, as the case may be, in favor of Congress, to expressly secure,
without limitation, the notes evidencing the then current Term Loans and other
Financing Agreements evidencing the Obligations (it being agreed that the
absence of any such agreement shall not deprive Congress of the benefit of the
liens held by Congress on the real property covered by such mortgages or deeds
of trust, which shall continue to secure all Obligations); and
(b) In connection with such agreements under Section 12(a),
LCI shall arrange for the delivery, at LCI's expense, of an updated title
insurance policy and necessary endorsements thereto in favor of Congress, in
form and substance satisfactory to Congress, for each property that is subject
to such agreements.
13. GOVERNING LAW. This Amendment shall be governed by and construed in
accordance with the laws of the State of New York without reference to its
principles of conflicts of law.
-4-
<PAGE> 5
By the signatures hereto of the duly authorized officers, the parties
hereto mutually covenant, warrant and agree as set forth herein.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
By: Laurence S. Forte
------------------------------
Title: First Vice President
---------------------------
AGREED AND ACCEPTED:
LEXINGTON COMPONENTS, INC.
By: Michael A. Lubin
--------------------------
Title: Chairman
-----------------------
-5-
<PAGE> 6
CONSENT
The undersigned guarantor hereby consents to the foregoing Amendment,
agrees to be bound by its terms applicable to it, and ratifies and confirms the
terms of its Guarantee and Waiver dated January 11, 1990 as applicable to all
present and future indebtedness, liabilities and obligations of LEXINGTON
COMPONENTS, INC. to CONGRESS FINANCIAL CORPORATION, including, without
limitation, all indebtedness, liabilities and obligations under the Financing
Agreements as amended hereby.
LEXINGTON PRECISION CORPORATION
By: Michael A. Lubin
-------------------------------
Title: Chairman
----------------------------
-6-
<PAGE> 1
Exhibit 10.80
TERM PROMISSORY NOTE
$1,190,000 January 28, 1999
FOR VALUE RECEIVED, LEXINGTON COMPONENTS, INC., a Delaware corporation
(the "Debtor"), hereby unconditionally promises to pay to the order of CONGRESS
FINANCIAL CORPORATION, a Delaware corporation, as successor by merger to
Congress Financial Corporation, a California corporation (the "Payee"), at the
offices of Payee at 1133 Avenue of the Americas, New York, New York 10036, or at
such other place as the Payee or any holder hereof may from time to time
designate, the principal sum of ONE MILLION ONE HUNDRED NINETY THOUSAND DOLLARS
($1,190,000) in lawful money of the United States of America and in immediately
available funds, in eighty-four (84) consecutive monthly installments (or
earlier as hereinafter referred to) on the first day of each month, commencing
March 1, 1999, of which the first eighty-three (83) installments shall each be
in the amount of FOURTEEN THOUSAND TWO HUNDRED DOLLARS ($14,200), and the last
(i.e. eighty-fourth (84th)) installment shall be in the amount of the entire
unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing on
February 1, 1999 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
during the continuance of an Event of Default or following the effective date of
termination or non-renewal of the Financing Agreements shall be payable upon
demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one-quarter of one (1/4%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; PROVIDED, THAT, at Payee's option, the Interest Rate shall mean a rate of
two and one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements, and
(b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless otherwise defined herein, all capitalized terms used herein shall
<PAGE> 2
have the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of the date hereof,
between Debtor and Payee (the "Amendment") to evidence the "January 1999
Additional LCI Term Loan" (as defined in the Amendment) made by Payee to Debtor.
This Note is secured by the "Collateral" described in the Accounts Financing
Agreement [Security Agreement], dated January 11, 1990, by and between Payee and
Debtor, as amended (the "Accounts Agreement") and any agreement, document or
instrument now or at any time hereafter executed and/or delivered in connection
therewith or related thereto (the foregoing, as the same now exist or may
hereafter be amended, modified, supplemented, renewed, extended, restated or
replaced, are hereinafter collectively referred to as the "Financing
Agreements") and is entitled to all of the benefits and rights thereof and of
the Financing Agreements. At the time any payment is due hereunder, at its
option, Payee may charge the amount thereof to any account of Debtor maintained
by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon, shall
forthwith become due and payable, together with interest accruing thereafter at
the then applicable rate stated above until the indebtedness evidenced by this
Note is paid in full, plus the costs and expenses of
-2-
<PAGE> 3
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii) consents
to any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. Upon the occurrence of any Event of
Default and during the continuance thereof, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing, Debtor shall appear in
answer to such process or notice of motion or other application to said Courts,
failing which Debtor shall be deemed in default and judgment may be entered by
Payee against Debtor for the amount of the claim and other relief requested
therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the
-3-
<PAGE> 4
State of New York and shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns. If
any term or provision of this Note shall be held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof shall in no
way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON COMPONENTS, INC.
ATTEST:
By: Michael A. Lubin
-------------------------------------
Carly Strelzik
- -------------------------------- Title: Chairman
Assistant Secretary ---------------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.81
TERM PROMISSORY NOTE
$3,550,000 January 28, 1999
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, as successor by
merger to Congress Financial Corporation, a California corporation (the
"Payee"), at the offices of Payee at 1133 Avenue of the Americas, New York, New
York 10036, or at such other place as the Payee or any holder hereof may from
time to time designate, the principal sum of THREE MILLION FIVE HUNDRED FIFTY
THOUSAND DOLLARS ($3,550,000) in lawful money of the United States of America
and in immediately available funds, in eighty-four (84) consecutive monthly
installments (or earlier as hereinafter referred to) on the first day of each
month, commencing March 1, 1999, of which the first eighty-three (83)
installments shall each be in the amount of FORTY-TWO THOUSAND THREE HUNDRED
DOLLARS ($42,300), and the last (i.e. eighty-fourth (84th)) installment shall be
in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing on
February 1, 1999 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
during the continuance of an Event of Default or following the effective date of
termination or non-renewal of the Financing Agreements shall be payable upon
demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one-quarter of one (1/4%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; PROVIDED, THAT, at Payee's option, the Interest Rate shall mean a rate of
two and one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements, and
(b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless otherwise defined herein, all capitalized terms used herein shall
<PAGE> 2
have the meanings assigned thereto in the Accounts Agreement (as hereinafter
defined) and the other Financing Agreements.
The Interest Rate payable hereunder as to Prime Rate Loans shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in such Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is issued pursuant to the terms and provisions of the letter
agreement re: Amendment to Financing Agreements, dated as of the date hereof,
between Debtor and Payee (the "Amendment") to evidence the "January 1999
Additonal LPC Term Loan" (as defined in the Amendment) made by Payee to Debtor.
This Note is secured by the "Collateral" described in the Accounts Financing
Agreement [Security Agreement], dated January 11, 1990, by and between Payee and
Debtor, as amended (the "Accounts Agreement") and any agreement, document or
instrument now or at any time hereafter executed and/or delivered in connection
therewith or related thereto (the foregoing, as the same now exist or may
hereafter be amended, modified, supplemented, renewed, extended, restated or
replaced, are hereinafter collectively referred to as the "Financing
Agreements") and is entitled to all of the benefits and rights thereof and of
the Financing Agreements. At the time any payment is due hereunder, at its
option, Payee may charge the amount thereof to any account of Debtor maintained
by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable law or otherwise, all such
rights and remedies being cumulative, not exclusive and enforceable
alternatively, successively and concurrently, Payee may, at its option, declare
any or all of Debtor's obligations, liabilities and indebtedness owing to Payee
under the Financing Agreements (the "Obligations"), including, without
limitation, all amounts owing under this Note, to be due and payable, whereupon
the then unpaid balance hereof together with all interest accrued thereon, shall
forthwith become due and payable, together with interest accruing thereafter at
the then applicable rate stated above until the indebtedness evidenced by this
Note is paid in full, plus the costs and expenses of
-2-
<PAGE> 3
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii) consents
to any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. Upon the occurrence of any Event of
Default and during the continuance thereof, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing, Debtor shall appear in
answer to such process or notice of motion or other application to said Courts,
failing which Debtor shall be deemed in default and judgment may be entered by
Payee against Debtor for the amount of the claim and other relief requested
therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the
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<PAGE> 4
State of New York and shall be binding upon the successors and assigns of Debtor
and inure to the benefit of Payee and its successors, endorsees and assigns. If
any term or provision of this Note shall be held invalid, illegal or
unenforceable, the validity of all other terms and provisions hereof shall in no
way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION
CORPORATION
ATTEST:
By: Michael A. Lubin
--------------------------------
Carly Strelzik
- ---------------------------- Title: Chairman
Assistant Secretary -----------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.82
FIFTH
AMENDED AND RESTATED
PROMISSORY NOTE
---------------
$6,268,005 January 28, 1999
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a Delaware
corporation (the "Debtor"), hereby unconditionally promises to pay to the order
of CONGRESS FINANCIAL CORPORATION, a Delaware corporation, as successor by
merger to Congress Financial Corporation, a California corporation (the
"Payee"), at the offices of Payee at 1133 Avenue of the Americas, New York, New
York 10036, or at such other place as the Payee or any holder hereof may from
time to time designate, the principal sum of SIX MILLION TWO HUNDRED SIXTY-EIGHT
THOUSAND AND FIVE DOLLARS ($6,268,005) in lawful money of the United States of
America and in immediately available funds, in sixty-two (62) consecutive
monthly installments (or earlier as hereinafter referred to) on the first day of
each month, commencing February 1, 1999, of which the first sixty-one (61)
installments shall each be in the amount of ONE HUNDRED ONE THOUSAND ONE HUNDRED
DOLLARS ($101,100), and the last (i.e. sixty-second (62nd)) installment shall be
in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing on
February 1, 1999 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
during the continuance of an Event of Default or following the effective date of
termination or non-renewal of the Financing Agreements shall be payable upon
demand.
For purposes hereof, (a) the term "Interest Rate" shall mean, as to
Prime Rate Loans, a rate of one-quarter of one (1/4%) percent per annum in
excess of the Prime Rate, and as to Eurodollar Rate Loans, a rate of two and
three-quarters (2 3/4%) percent per annum in excess of the Adjusted Eurodollar
Rate; PROVIDED, THAT, at Payee's option, the Interest Rate shall mean a rate of
two and one-quarter (2 1/4%) percent per annum in excess of the Prime Rate as to
Prime Rate Loans and a rate of four and three-quarters (4 3/4%) percent per
annum in excess of the Adjusted Eurodollar Rate as to Eurodollar Rate Loans,
upon and during the continuance of an Event of Default or following the
effective date of termination or non-renewal of the Financing Agreements, and
(b) the term "Prime Rate" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, as its prime rate,
whether or not such announced rate is the best rate available at such bank.
Unless
<PAGE> 2
otherwise defined herein, all capitalized terms used herein shall have
the meanings assigned thereto in the Accounts Agreement (as hereinafter defined)
and the other Financing Agreements.
The Interest Rate applicable to Prime Rate Loans payable hereunder
shall increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in such Prime Rate, based on the Prime Rate in effect on the last day
of the month in which any such change occurs. Interest shall be calculated on
the basis of a three hundred sixty (360) day year and actual days elapsed. In no
event shall the interest charged hereunder exceed the maximum permitted under
the laws of the State of New York or other applicable law.
This Note is the "LPC Fifth Restated Note" issued pursuant to the terms
and provisions of the letter agreement re: Amendment to Financing Agreements,
dated as of the date hereof, between Debtor and Payee. The principal amount of
this Note represents the unpaid principal balance outstanding under that certain
Fourth Amended and Restated Promissory Note, dated March 11, 1997, in the
original principal sum of $11,324,000, made by Debtor to Payee (the "LPC Fourth
Restated Note"). None of the outstanding indebtedness evidenced by the LPC
Fourth Restated Note shall be deemed extinguished by Debtor's issuance or
Payee's acceptance of this Note. This Note shall be deemed to substitute for,
and to amend and restate in its entirety, the LPC Fourth Restated Note as to the
indebtedness previously evidenced thereby, and the LPC Fourth Restated Note
shall be so marked by Payee.
This Note is secured by the "Collateral" described in the Accounts
Financing Agreement [Security Agreement], dated January 11, 1990, by and between
Payee and Debtor, as amended (the "Accounts Agreement") and any agreement,
document or instrument now or at any time hereafter executed and/or delivered in
connection therewith or related thereto (the foregoing, as the same now exist or
may hereafter be amended, modified, supplemented, renewed, extended, restated or
replaced, are hereinafter collectively referred to as the "Financing
Agreements") and is entitled to all of the benefits and rights thereof and of
the Financing Agreements. At the time any payment is due hereunder, at its
option, Payee may charge the amount thereof to any account of Debtor maintained
by Payee.
If any principal or interest payment is not made when due hereunder,
and such failure shall continue for three (3) days, or if any other Event of
Default (as defined in the Accounts Agreement) shall occur for any reason, or if
the Financing Agreements shall be terminated or not renewed for any reason
whatsoever, then and in any such event, in addition to all rights and remedies
of Payee under the Financing Agreements, applicable
-2-
<PAGE> 3
law or otherwise, all such rights and remedies being cumulative, not exclusive
and enforceable alternatively, successively and concurrently, Payee may, at its
option, declare any or all of Debtor's obligations, liabilities and indebtedness
owing to Payee under the Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable rate stated above until the indebtedness
evidenced by this Note is paid in full, plus the costs and expenses of
collection hereof, including, but not limited to, reasonable attorneys' fees.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for any holder hereof to
first institute suit in order to enforce payment of this Note and (iii) consents
to any one or more extensions or postponements of time of payment, release,
surrender or substitution of collateral security, or forbearance or other
indulgence, without notice or consent. Upon the occurrence of any Event of
Default and during the continuance thereof, Payee shall have the right, but not
the obligation to setoff against this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment,
but may proceed against Debtor and any guarantors or endorsers hereof in such
order and manner as Payee may choose. None of the rights of Payee shall be
waived or diminished by any failure or delay in the exercise thereof.
Debtor hereby waives the right to a trial by jury and all rights of
setoff and rights to interpose counterclaims and cross-claims in any litigation
or proceeding arising in connection with this Note, the Accounts Agreement, the
other Financing Agreements, the Obligations or the Collateral, other than
compulsory counterclaims, the non-assertion of which would result in a permanent
waiver. Debtor hereby irrevocably consents to the non-exclusive jurisdiction of
the Supreme Court of the State of New York and of the United States District
Court for the Southern District of New York for all purposes in connection with
any action or proceeding arising out of or relating to this Note, the Accounts
Agreement, the other Financing Agreements, the Obligations or the Collateral and
further consents that any process or notice of motion or other application to
said Courts or any judge thereof, or any notice in connection with any
proceeding hereunder may be served (i) inside or outside the State of New York
by registered or certified mail, return receipt requested, and service or notice
so served shall be deemed complete five (5) days after the same shall have been
posted or (ii) in such other manner as may be permissible under the rules of
said Courts. Within thirty (30) days after such mailing,
-3-
<PAGE> 4
Debtor shall appear in answer to such process or notice of motion or other
application to said Courts, failing which Debtor shall be deemed in default and
judgment may be entered by Payee against Debtor for the amount of the claim and
other relief requested therein.
The execution and delivery of this Note has been authorized by the
Board of Directors of Debtor.
This Note, the other Obligations and the Collateral shall be governed
by and construed in accordance with the laws of the State of New York and shall
be binding upon the successors and assigns of Debtor and inure to the benefit of
Payee and its successors, endorsees and assigns. If any term or provision of
this Note shall be held invalid, illegal or unenforceable, the validity of all
other terms and provisions hereof shall in no way be affected thereby.
This Note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the Payee or the holder hereof.
Whenever used herein, the terms "Debtor" and "Payee" shall be deemed to
include their respective successors and assigns.
LEXINGTON PRECISION
CORPORATION
ATTEST:
By: Michael A. Lubin
------------------------------
Carly Strelzik
- ----------------------------- Title: Chairman
Assistant Secretary ---------------------------
[Corporate Seal]
-4-
<PAGE> 1
Exhibit 10.83
AMENDMENT NO. 6 TO CREDIT FACILITY AND SECURITY AGREEMENT
This Amendment No. 6 (the "Amendment") dated as of
January 31, 1999 to Credit Facility and Security Agreement by and between Bank
One, NA ("Lender"), Lexington Precision Corporation ("LPC") and Lexington
Components, Inc. ("LCI").
WHEREAS, Lender, LPC, and LCI are parties to a Credit Facility
and Security Agreement dated as of January 31, 1997, including Rider A thereto
(the "Agreement").
WHEREAS, LPC, LCI, and Lender desire to amend the Agreement as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties hereto hereby agree as follows:
1. Capitalized terms used herein, unless otherwise defined
herein, shall have the meaning ascribed thereto in the Agreement.
2. Section 2.A of Rider A to the Agreement is hereby amended
in its entirety to read as follows:
(A) Maintain on a basis consolidated with LPC's direct
and indirect subsidiaries at all times a Tangible Net Worth equal to or
greater than (i) TEN MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS
($10,400,000) from June 30, 1998 through June 30, 1999; (ii) ELEVEN
MILLION FOUR HUNDRED THOUSAND AND NO/100 DOLLARS ($11,400,000) from July
1, 1999 through December 30, 1999; and (iii) TWELVE MILLION FOUR HUNDRED
THOUSAND AND NO/100 DOLLARS ($12,400,000) on and after December 31, 1999.
3. Section 2.E of Rider A to the Agreement is hereby deleted
in its entirety.
4. Except as specifically amended herein, the Agreement
remains in effect in accordance with its terms.
[this space intentionally left blank]
<PAGE> 2
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first written above.
BANK ONE, NA
By: Mark Corr
--------------------------------
Title: Assistant Vice President
----------------------------
LEXINGTON PRECISION CORPORATION
By: Warren Delano
--------------------------------
Warren Delano
President
LEXINGTON COMPONENTS, INC.
By: Warren Delano
--------------------------------
Warren Delano
President
<PAGE> 1
Exhibit 10.84
FIFTH AMENDMENT AGREEMENT
THIS FIFTH AMENDMENT AGREEMENT ("Agreement") is made as of the 10 day
of March, 1999, by and between BANK ONE, NA (fka Bank One, Akron, NA)
("Lender"), LEXINGTON PRECISION CORPORATION, a Delaware corporation ("LPC"), and
LEXINGTON COMPONENTS, INC., a Delaware corporation ("LCI", hereinafter LPC and
LCI are referred to each as "Borrower" singularly and referred to jointly and
severally as "Borrowers", which term shall mean each of the companies
individually and both of the companies collectively).
WHEREAS, Borrowers and Lender are parties to a certain Credit Facility
and Security Agreement, including Rider A thereto, dated as of January 31, 1997,
as amended and as it may from time to time be further amended, supplemented or
otherwise modified, which provides for certain credit facilities all upon the
terms and conditions set forth therein ("Credit and Security Agreement");
WHEREAS, Borrowers and Lender desire to amend the Credit and Security
Agreement to add a new facility thereunder and to modify certain other
provisions thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit and Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrowers and Lender
agree as follows:
1. Section 2 of the Credit and Security Agreement is hereby amended to
add a new subpart K thereto as follows:
K. FACILITY 6: ADDITIONAL EQUIPMENT TERM LOAN.
1. ADDITIONAL EQUIPMENT TERM LOAN. On March 10, 1999,
Lender will make a term loan (the "Additional Equipment Term Loan") to
Borrowers in a principal amount not to exceed FIVE HUNDRED EIGHTY
THOUSAND AND NO/100 DOLLARS ($580,000.00). The Additional Equipment
Term Loan shall be subject to repayment in accordance with, and bear
interest as provided in, Section 2.K.2 of this Agreement and shall
otherwise be evidenced by, and repayable in accordance with, the
Additional Equipment Term Note.
2. PAYMENT TERMS OF ADDITIONAL EQUIPMENT TERM LOAN.
(a) INTEREST. The Additional Equipment Term Loan
shall bear interest on the unpaid principal balance until the
date paid in full at a rate per annum equal to one-quarter
percent (.25 %) in excess of the Base Rate (from time to time
in effect) on the unpaid principal amount, such interest being
payable monthly on the first day of each calendar month,
commencing on April 1, 1999 and continuing on the first
day of each
<PAGE> 2
calendar month thereafter. Interest shall be computed on a
three hundred sixty (360)-day year basis based upon the actual
number of days elapsed.
(b) FIXED PRINCIPAL INSTALLMENTS. Subject otherwise
to the terms and provisions of the Additional Equipment Term
Note, the principal balance of the Additional Equipment Term
Loan shall be payable in eighty-three (83) consecutive equal
monthly installments of SIX THOUSAND NINE HUNDRED DOLLARS
($6,900.00) each, commencing on April 1, 1999 and continuing
on the first day of each calendar month thereafter and a final
installment in the amount of the then remaining outstanding
principal balance payable on March 1, 2006.
2. Section 2 of the Credit and Security Agreement is hereby amended to
add a new subpart L thereto as follows:
L. ADJUSTMENTS TO MAXIMUM LIABILITY. Anything in this Agreement to the
contrary notwithstanding, in no event shall the liability of LCI exceed the
maximum amount that, after giving effect to the incurring of the obligations
hereunder and to any rights to contribution of LCI from LPC or any other
affiliate of LPC, would not render Lender's rights to payment hereunder void,
voidable or avoidable under any applicable fraudulent transfer law.
3. The Credit and Security Agreement is hereby amended by deleting
Section 2.J thereof in its entirety and replacing it with the following:
J. SECURITY. As security for the prompt and complete payment
and performance when due of all the Obligations and in order to induce
Lender to enter into this Agreement and make the Loans and to extend
other credit from time to time to Borrower, whether under this
Agreement or otherwise,
(1) LPC hereby grants to Lender a first priority
security interest in (a) all of LPC's right, title, and
interest in and to the machinery, equipment and other items
listed on the Collateral Schedule, (b) all currently owned or
hereafter acquired accessories and parts for, all repairs,
modifications, improvements, upgrades, accessions and
attachments to, and all replacements and substitutions for,
any of the property described in subpart (a) hereof, and
(c) all Proceeds of the foregoing;
(2) LCI hereby grants to Lender a first priority
security interest in (a) all of LCI's right, title, and
interest in and to the machinery, equipment and other items
listed on the Collateral Schedule, (b) all currently owned or
hereafter acquired accessories and parts for, all repairs,
modifications, improvements, upgrades, accessions and
attachments to, and all replacements and substitutions for,
any of the property described in subpart (a) hereof, and
(c) all Proceeds of the foregoing; and
2
<PAGE> 3
(3) LPC or LCI, as applicable, shall execute and
deliver an open-end mortgage, granting the Lender the first
and best lien on the North Canton Property, the Vienna
Property, the Casa Grande Property and the LaGrange Property,
subject only to Permitted Encumbrances.
4. The Credit and Security Agreement is hereby amended by deleting
subpart (1) from Section 5.B thereof in its entirety and replacing it with the
following:
(1) Sell, convey, transfer, exchange, lease or otherwise
relinquish possession or dispose of any of the Collateral or attempt or
offer to do any of the foregoing; provided, however, that Borrowers may
sell Collateral after obtaining the prior written consent of Lender;
5. The Credit and Security Agreement is hereby amended by deleting
subpart (6) from Section 5.B thereof in its entirety and replacing it with the
following:
(6) As to the Equipment and the North Canton Equipment, move
(or in the case of titled vehicles, change the principal base of) any
of the Equipment or North Canton Equipment from the North Canton
Property without the prior written consent of Lender; or
6. Rider A to the Credit and Security Agreement is hereby amended to
delete the definitions of "ADDITIONAL NORTH CANTON EQUIPMENT", "LOANS", "LPC
NORTH CANTON EQUIPMENT", "NORTH CANTON EQUIPMENT" and "NOTES" therefrom and to
insert in place of such definitions the following:
"ADDITIONAL NORTH CANTON EQUIPMENT": Specific machinery and
equipment of LCI and/or LPC consisting of: lathes, machining centers,
molding machines, grinders, ultrasonic cleaning tank, cabinets,
drilling machines, bandsaw, vacuum pump, lift truck, scrubber,
compressor/dryer, cutter grinder, computer, sweeper, vacuum tank, drill
sharpener, monitor, bowl feeders and loaders, and feeder bowls now
owned or hereafter acquired by LCI and/or LPC, as more particularly
described on the Collateral Schedule; all currently owned or hereafter
acquired accessories and parts for, and repairs, modifications,
improvements, upgrades, accessions and attachments to any of the
foregoing; and all replacements and substitutions for any of the
foregoing.
"LOANS": Collectively, the Additional Equipment Term Loan, the
Casa Grande Loan, the Casa Grande Construction Loans, the Casa Grande
Term Loan, the Equipment Term Loan, the North Canton Term Loan, the
Vienna Term Loan, the LaGrange Term Loan, the North Canton Equipment
Disbursement Loan and the North Canton Equipment Term Loan.
"LPC NORTH CANTON EQUIPMENT": Specific machinery and equipment
of LCI and/or LPC consisting of: lathes, transfer molding machines and
injection molding machines, now owned or hereafter acquired by LCI
and/or LPC, as more particularly described on the
3
<PAGE> 4
Collateral Schedule; all currently owned or hereafter acquired
accessories and parts for, and repairs, modifications, improvements,
upgrades, accessions and attachments to any of the foregoing; and all
replacements and substitutions for any of the foregoing.
"NORTH CANTON EQUIPMENT": The LPC North Canton Equipment, the
Additional North Canton Equipment and the Other North Canton Equipment.
"NOTES": The Additional Equipment Term Note, the Equipment
Term Note, the North Canton Term Note, the Vienna Term Note, the Casa
Grande Note, the LaGrange Term Note, the North Canton Equipment Note
and any other promissory note or other instrument evidencing a
Borrower's obligation to repay any Obligations.
7. Rider A to the Credit and Security Agreement is hereby amended to
add the following new definitions thereto:
"ADDITIONAL EQUIPMENT TERM LOAN": As defined in Section 2.K.2
of this Agreement.
"ADDITIONAL EQUIPMENT TERM NOTE": The term promissory note to
be executed by Borrowers in the form attached as Exhibit L to this
Agreement (with such changes or modifications, if any, to which Lender
may agree) evidencing the Additional Equipment Term Loan made by Lender
pursuant to Section 2.K of this Agreement, together with all amendments
thereto and all promissory notes issued in substitution therefor or
replacement thereof.
"COLLATERAL SCHEDULE": The schedule entitled "Schedule of
Collateral to the Credit Facility and Security Agreement," which
Schedule of Collateral to the Credit Facility and Security Agreement is
incorporated herein by reference but is not attached hereto, and which
is dated as of March 10, 1999 and signed by LPC, LCI and Lender, and
each additional replacement to the foregoing schedule as may
hereinafter be executed by LPC, LCI and Lender, with the written
consent of Congress.
"OTHER NORTH CANTON EQUIPMENT": Specific machinery and
equipment of LCI and/or LPC consisting of the items set forth on the
Collateral Schedule, now owned or hereafter acquired by LCI and/or LPC;
all currently owned or hereafter acquired accessories and parts for,
and repairs, modifications, improvements, upgrades, accessions and
attachments to any of the foregoing; and all replacements and
substitutions for any of the foregoing.
8. The Credit and Security Agreement is hereby amended to add a new
Exhibit L thereto in the form of Exhibit L attached hereto.
9. Concurrently with the execution of this Agreement, or at such later
date as specifically provided below, Borrowers shall:
4
<PAGE> 5
(a) deliver to Lender certified copies of the resolutions of the board
of directors of each Borrower evidencing approval of the execution of this
Agreement;
(b) execute and deliver to Lender such UCC financing statements as may
be required by Lender, subject to the provisions of Section 5.A(7) of the Credit
and Security Agreement;
(c) execute and deliver to Lender the Collateral Schedule;
(d) execute and deliver to Lender an Additional Equipment Term Note
dated as of March 10, 1999 and such Additional Equipment Term Note shall be in
the form of Exhibit L attached hereto;
(e) cause Congress to execute and deliver to Lender an amendment to the
Intercreditor Agreement, in form and substance satisfactory to Lender;
(f) within the later of thirty (30) days after the date of this
Agreement or receipt from Lender of the amendment, execute and deliver to Lender
an amendment to each of the Mortgages to reflect the additional borrowings by
Borrowers, in form and substance satisfactory to Lender; and
(g) pay all reasonable legal fees and expenses of Bank in connection
with this Agreement.
11. Borrowers hereby represent and warrant to Lender that (a) each
Borrower has the legal power and authority to execute and deliver this
Agreement; (b) this Agreement has been duly executed and delivered by each
Borrower; (c) the execution and delivery hereof by each Borrower and the
performance and observance by each Borrower of the provisions hereof do not
violate or conflict with the organizational documents of such Borrower or any
law applicable to such Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against such Borrower; (d) as of the date hereof, and after
giving effect to the transactions contemplated by this Agreement, each Borrower
is able to pay its debts as they mature and each Borrower's capital is
sufficient and not unreasonably small for the business and transaction in which
such Borrower is engaged or about to engage; (e) no Default or Event of Default
exists under the Credit and Security Agreement, nor will a Default or Event of
Default occur upon the execution and delivery of this Agreement; and (f) this
Agreement has been duly authorized, executed, and delivered by each Borrower and
constitutes a legal, valid and binding obligation of each Borrower, enforceable
in accordance with its terms.
12. Each reference that is made in the Credit and Security Agreement or
any other writing shall hereafter be construed as a reference to the Credit and
Security Agreement as amended hereby. Except as herein otherwise specifically
provided, all provisions of the Credit and Security Agreement shall remain in
full force and effect in accordance with their terms and shall not be amended or
modified hereby.
13. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts and by facsimile signature,
each of which when so executed
5
<PAGE> 6
and delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same agreement.
14. THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF OHIO. EXCEPT
AS OTHERWISE PROVIDED FOR IN THIS AGREEMENT OR AS REQUIRED BY APPLICABLE LAW,
BORROWER WAIVES (i) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT,
PROTEST, DEFAULT, NONPAYMENT, MATURITY, RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER MAY IN ANY WAY BE LIABLE, (ii) NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL WHICH MIGHT BE REQUIRED BY ANY COURT
PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S REMEDIES AND (iii) ITS
RIGHT TO A JURY TRIAL IN THE EVENT OF ANY LITIGATION INSTITUTED IN RESPECT OF
THIS AGREEMENT, THE NOTES OR ANY OF THE OTHER CREDIT DOCUMENTS. BORROWER
ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO
THIS AGREEMENT AND THE TRANSACTIONS EVIDENCED BY THIS AGREEMENT. BORROWER HEREBY
IRREVOCABLY CONSENTS AND AGREES THAT ANY LEGAL ACTION IN CONNECTION WITH THIS
AGREEMENT MAY BE INSTITUTED IN THE COURTS OF THE STATE OF OHIO, IN THE COUNTY OF
STARK OR THE UNITED STATES COURTS FOR THE NORTHERN DISTRICT OF OHIO, AS LENDER
MAY ELECT, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER HEREBY
IRREVOCABLY ACCEPTS AND SUBMITS TO, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
THE NON-EXCLUSIVE JURISDICTION OF ANY SUCH COURT, AND TO ALL PROCEEDINGS IN SUCH
COURTS. BORROWER AND LENDER ACKNOWLEDGE THAT JURY TRIALS OFTEN ENTAIL ADDITIONAL
EXPENSES AND DELAYS NOT OCCASIONED BY NON-JURY TRIALS. BORROWER AND LENDER AGREE
AND STIPULATE THAT A FAIR TRIAL MAY BE HAD BEFORE A STATE OR FEDERAL JUDGE BY
MEANS OF A BENCH TRIAL WITHOUT A JURY. IN VIEW OF THE FOREGOING, AND AS A
SPECIFICALLY NEGOTIATED PROVISION OF THIS AGREEMENT, BORROWER AND LENDER HEREBY
EXPRESSLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION ARISING UNDER THIS AGREEMENT, OR THE TRANSACTIONS RELATED HERETO,
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND BORROWER AND LENDER HEREBY AGREE AND CONSENT THAT
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
6
<PAGE> 7
LEXINGTON PRECISION CORPORATION
By: Dennis J. Welhouse
--------------------------------
Name: Dennis J. Welhouse
Title: Senior Vice President and
Assistant Secretary
LEXINGTON COMPONENTS, INC.
By: Dennis J. Welhouse
--------------------------------
Name: Dennis J. Welhouse
Title: Senior Vice President and
Assistant Secretary
BANK ONE, NA (fka as Bank One, Akron, NA)
By Mark Corr
--------------------------------
Name: Mark Corr
Title: Assistant Vice President
7
<PAGE> 1
Exhibit 10.85
EXHIBIT L
PROMISSORY NOTE
---------------
(Additional Equipment Term Loan)
$580,000.00 Cleveland, Ohio
March 10, 1999
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION, a corporation
organized under the laws of the State of Delaware ("LPC"), and LEXINGTON
COMPONENTS, INC., a corporation organized and existing under the laws of the
State of Delaware ("LCI") (hereinafter LPC and LCI are referred to each as
Borrower singularly and referred to jointly and severally as the "Borrowers,"
which term shall mean each of the companies individually and both of them
collectively), jointly and severally promise to pay to the order of BANK ONE, NA
(formerly known as Bank One, Akron, NA) (hereinafter referred to as the "Bank"),
the principal amount of FIVE HUNDRED EIGHTY THOUSAND AND NO/100 DOLLARS
($580,000.00) on March 1, 2006, or sooner as hereinafter provided, with interest
on the unpaid balance of said principal amount from the date hereof at a rate
per annum equal to one-quarter percent (.25%) in excess of the Base Rate (from
time to time in effect), as defined in the Agreement (as hereinafter defined).
If any installment of principal, interest or other amounts due and payable
hereunder are not paid when due, or within any applicable grace period set forth
in the Agreement, the Borrowers shall pay interest thereon at the rate of three
percent (3.0%) per annum in excess of the Base Rate, as the same may from time
to time be established but not to exceed the maximum rate allowed by law. Bank
shall have the right to assess a late payment processing fee in the amount of
the greater of FIFTY AND NO/100 DOLLARS ($50.00) or five percent (5 %) of the
scheduled payment in the event of a default in payment that remains uncured for
a period of at least ten (10) days.
The Borrowers agree to pay the principal amount of this Note in
eight-three (83) consecutive, equal monthly installments of SIX THOUSAND NINE
HUNDRED DOLLARS ($6,900.00) each, together with all accrued interest due at the
time of payment of each such installment of principal, commencing on April 1,
1999, and continuing on the first day of each month thereafter and a final
installment in the amount of the then remaining outstanding principal balance,
together with all accrued interest due at the time of payment of such
installment, on March 1, 2006. Monthly payments hereunder shall be applied first
to interest due and the balance to reduction of the principal amount
outstanding.
Payments of both principal of and interest on this Note shall be made
in lawful money of the United States of America, at 50 South Main Street, Akron,
Ohio 44308-1888, or at such other place as the Bank or any subsequent holder
hereof shall have designated to the Borrowers in writing. Interest payable on
this Note shall be computed on a three hundred sixty (360) day per year basis
counting the actual number of days elapsed. If any payment under this Note
becomes due and
<PAGE> 2
payable on a day which is not a Business Day (as defined in this Agreement),
payment thereof shall be made on the immediately succeeding Business Day.
This Note is issued pursuant to and is entitled to the benefits of a
Credit Facility and Security Agreement dated as of January 31, 1997, by and
among the Borrowers and the Bank (as amended, and as the same may from time to
time be further amended, restated or otherwise modified, the "Agreement"), to
which Agreement reference is hereby made for a statement of the rights and
obligations of the Bank and the duties and obligations of the Borrowers in
relation thereto; but neither this reference to said Agreement nor any
provisions thereof shall affect or impair the absolute and unconditional
obligation of the Borrowers to pay the principal of or interest on this Note
when due.
The Borrowers may prepay all or any portion of this Note at any time
and in any amount without penalty or premium, provided that all prepayments
shall be applied to installments of principal in the inverse order of their
maturities.
If an Event of Default, as defined in the Agreement, shall occur and
shall be continuing, the principal of this Note may be declared immediately due
and payable at the option of the Bank.
In the event that the Borrowers fail to pay any regularly scheduled
principal or interest payment on this Note when due (other than as a result of
acceleration thereof based on a default or event of default other than the
failure to make any such regularly scheduled payments of principal or interest
on the Note when due) which failure is not cured within the ten (10) day cure
period provided in Section 6A of the Agreement (a "Payment Default"), or if an
Event of Default occurs and is continuing, which arises from fraudulent act(s)
or practice(s) of either Borrower which Event of Default is not cured within
three (3) Business Days after the Borrowers' receipt of written notice thereof
from the Bank (a "Fraud Default"), the Borrowers hereby authorize any
attorney-at-law to appear in any court of record in the State of Ohio, or in any
other state or territory of the United States, at any time or times after the
above sum becomes due, and waive the issuance and service of process and confess
judgment against it, in favor of any holder of this Note, for the amount then
appearing due, together with the costs of suit, and thereupon to release all
errors and waive all rights of appeal and stay of execution. The foregoing
warrant of attorney shall survive any judgment, it being understood that should
any judgment be vacated for any reason, the foregoing warrant of attorney
nevertheless may thereafter be used for obtaining an additional judgment or
judgments. To the extent that the provisions of the cognovit warning set forth
above the Borrowers' signatures specifically contradict the provisions of this
paragraph regarding the requirement of a Payment Default or a Fraud Default to
take a cognovit judgment, the provisions of this paragraph control.
No delay on the part of any holder hereof in exercising any power or
rights hereunder shall operate as a waiver of any power or rights. Any demand or
notice hereunder to the Borrowers shall be deemed duly given or made when sent,
if given by telecopier, when delivered, if given by personal delivery or
overnight commercial carrier, or the fifth calendar day after deposit in the
United States
2
<PAGE> 3
mail, certified mail, return receipt requested, addressed to the address (or
telecopier number) set forth in Rider A of the Agreement or such other address
or telecopier number as may be hereafter designated in writing by the Borrowers
to the Bank.
This note is executed at Cleveland, Cuyahoga County, Ohio.
- --------------------------------------------------------------------------------
WARNING--BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL.
IF YOU DO NOT PAY ON TIME, A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT
YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU
REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR, WHETHER FOR RETURNED
GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR
ANOTHER CAUSE.
- --------------------------------------------------------------------------------
LEXINGTON PRECISION CORPORATION
("Borrower")
By: Dennis J. Welhouse
---------------------------------------------------
Name: Dennis J. Welhouse
-------------------------------------------------
Title: Senior Vice President and Assistant Secretary
------------------------------------------------
LEXINGTON COMPONENTS, INC.
("Borrower")
By: Dennis J. Welhouse
---------------------------------------------------
Name: Dennis J. Welhouse
-------------------------------------------------
Title: Senior Vice President and Assistant Secretary
------------------------------------------------
3
<PAGE> 1
Exhibit 10.86
PROMISSORY NOTE
New York, New York
$1,222,000.00 March 30, 1999
FOR VALUE RECEIVED, LEXINGTON PRECISION CORPORATION ("Debtor") promises
to pay to the order of THE CIT GROUP/EQUIPMENT FINANCING, INC. ("CIT"), at such
address as CIT may designate, in lawful money of the United States, the
principal sum of ONE MILLION TWO HUNDRED TWENTY-TWO THOUSAND AND NO/100 DOLLARS
($1,222,000.00) in sixty (60) consecutive monthly installments, commencing on
May 1, 1999 with the following installments on the same day of each month
thereafter until payment in full of this Note. The first fifty-nine (59) monthly
installments shall be level payments of principal each in the amount of
$20,366.67, and the sixtieth (60th) and final payment shall be a payment of
principal in the amount of $20,366.47, Debtor shall pay interest together with
such installment of principal, in like money, from the date hereof until payment
in full, on the unpaid principal balance hereof at an interest rate per annum
equal to two and seventy-five hundredths percent (2.75%) above the LIBOR Rate.
Each payment shall be applied first to the payment of any unpaid interest on the
principal sum and then to payment of principal. Interest shall be calculated on
the basis of a 360-day year and actual number of days elapsed. Any amount not
paid when due under this Note shall bear late charges thereon, calculated at the
Late Charge Rate, from the due date thereof until such amount shall be paid in
full. Any payment received after the maturity of any installment of principal
shall be applied first to the payment of unpaid late charges, second to the
payment of any unpaid interest on said principal, and third to the payment of
principal.
This Note is one of the Notes referred to in the Loan and Security
Agreement dated as of March 19, 1997 between Debtor and CIT (herein, as the same
may from time to time be amended, supplemented or otherwise modified, called the
"Agreement"), is secured as provided in the Agreement, and is subject to
prepayment only as provided therein, and the holder hereof is entitled to the
benefits thereof.
Terms defined in the Agreement shall have the same meaning when used in
this Note, unless the context shall otherwise require.
Except as provided in Section 6 of the Agreement, Debtor hereby waives
presentment, demand of payment, notice of dishonor, and any and all other
notices or demands in connection with the delivery, acceptance, performance,
default or enforcement of this Note and hereby consents to any extensions of
time, renewals, releases of any party to this Note, waivers or modifications
that may be granted or consented to by the holder of this Note.
Upon the occurrence of any one or more of the Events of Default
specified in the Agreement, the amounts then remaining unpaid on this Note,
together with any interest accrued. may be declared to be (or, with respect to
certain Events of Default, automatically shall become) immediately due and
payable as provided therein.
In the event that any holder shall institute any action for the
enforcement or the collection of this Note, there shall be immediately due and
payable, in addition to the unpaid balance hereof, all late charges and all
costs and expenses of such action, including reasonable attorneys' fees. In
accordance with the provisions of the Agreement, DEBTOR AND CIT WAIVE TRIAL BY
JURY IN ANY LITIGATION RELATING TO OR IN CONNECTION WITH THIS NOTE IN WHICH THEY
SHALL BE ADVERSE PARTIES, and Debtor hereby waives the right to interpose any
setoff, counterclaim or defense of any nature or description whatsoever, but
Debtor shall have the right to assert in an independent action against CIT any
such defense, offset or counterclaim (including any compulsory counterclaim)
which it may have which has not otherwise been waived pursuant to the Agreement.
Page 1 of 2
<PAGE> 2
Debtor agrees that its liabilities hereunder are absolute and
unconditional without regard to the liability of any other party, and that no
delay on the part of the holder hereof in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right hereunder preclude other or further exercise
thereof or the exercise of any other power or right.
If at any time this transaction would be usurious under applicable law,
then regardless of any provision contained in the Agreement, in this Note or in
any other agreement made in connection with this transaction, it is agreed that
(a) the total of all consideration which constitutes interest under applicable
law that is contracted for, charged or received upon the Agreement, this Note or
any such other agreement shall under no circumstances exceed the maximum rate of
interest authorized by applicable law and any excess shall be credited to Debtor
and (b) if CIT elects to accelerate the maturity of, or if CIT permits Debtor to
prepay the indebtedness described in, this Note, any amounts which because of
such action would constitute interest may never include more than the maximum
rate of interest authorized by applicable law and any excess interest, if any,
shall be credited to Debtor automatically as of the date of acceleration or
prepayment.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK.
LEXINGTON PRECISION CORPORATION
BY: Warren Delano
----------------------------
TITLE: President
----------------------------
Page 2 of 2
<PAGE> 1
Exhibit 10.87
AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT
This Amendment No. 3 (the "Amendment") dated as of March 30,
1999 to Loan and Security Agreement by and between THE CIT GROUP/EQUIPMENT
FINANCING, INC. ("Lender"), and Lexington Precision Corporation ("LPC").
WHEREAS, Lender and LPC are parties to a Loan and Security
Agreement dated as of March 19, 1997 (the "Loan and Security Agreement"),
including Rider A thereto, as amended (collectively, the "Agreement").
WHEREAS, LPC and Lender desire to amend the Agreement as
provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual promises contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by the parties
hereto, the parties hereto hereby agree as follows:
1. Capitalized terms used herein, unless otherwise defined
herein, shall have the meaning ascribed thereto in the Agreement.
2. The Loan and Security Agreement is hereby amended as
follows:
(a) The last sentence of Section 2 is amended by deleting
therein the words "first priority."
(b) Section 3(e) is amended by deleting therein the words
"first priority."
(c) Section 4(h) is amended to read in its entirety as
follows: "(h) on each Closing Date, Debtor shall have
good and marketable title to the Equipment being
financed on such date and CIT shall have a perfected
first Lien on the Priority Equipment being financed
and a perfected Lien on the Equipment being
financed."
(d) Section 5(a)(viii) is amended by deleting therein the
word "Collateral" and replacing it with "the Priority
Equipment and Priority Proceeds and a perfected
security interest in the Collateral."
(e) Section 5(b)(ii) is amended by deleting therein the
word "subordinate."
(f) Section 5(b)(vi) is amended by deleting therein the
words "first priority."
3. (a) Section 1 of Rider A to the Agreement is hereby amended
to add the following: definitions:
"PRIORITY EQUIPMENT": (i) any and all items of equipment which
are listed on Supplements, all accessions, attachments and replacement
parts thereto (other than any items removed from equipment not listed
on a Supplement comprising part of the Congress Collateral (as defined
in the Congress Subordination Agreement), and
<PAGE> 2
(iii) all replacements for the equipment, accessions and attachments
described in clauses (i) and (ii) above that are purchased with
Priority Proceeds.
"PRIORITY PROCEEDS": all proceeds of the Priority Equipment,
including all amounts payable under any casualty insurance policy for
damage to or destruction of any Priority Equipment, but excluding any
such proceeds or amounts deposited in or transferred to any of the
blocked accounts or other collateral proceeds accounts maintained under
the Credit Agreement (as such term is defined in the Congress
Subordination Agreement) that have not been claimed by CIT within a
period of 60 days following the date of such deposit or transfer.
"CONGRESS SUBORDINATION AGREEMENT": the Subordination
Agreement dated as of March 19, 1997 between CIT and Congress, as
amended, modified or supplemented.
4. Section 2 of Rider A to the Agreement is hereby amended in
its entirety to read as follows:
2. LOAN AND COMMITMENT. The aggregate principal amount of all
Loans shall not exceed the lesser of (a) $7,200,000 and (b)
100% of the Cost of new items of Equipment and 90% of the Cost
of used items of Equipment. Each Loan shall be in a principal
amount of not less than $300,000, and CIT shall not make more
than six (6) Loans. Each Loan shall be amortized in sixty (60)
level payments of principal. Interest on the unpaid principal
balance shall be payable at the rate specified in the Notes.
Interest shall be payable monthly on the first day of each
calendar month commencing with the second calendar month after
the day the Loan is made. CIT's Commitment shall terminate on
December 31, 1999. The proceeds of each Loan shall be to
finance the purchase of, or reimburse Debtor for the cost of,
the Equipment.
5. Except as specifically amended herein, the Agreement
remains in effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first written above.
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: Herb Ballard
----------------------------------
Title: Senior Credit Analyst
-------------------------------
LEXINGTON PRECISION CORPORATION
By: Warren Delano
----------------------------------
Title: President
-------------------------------
<PAGE> 1
Exhibit 21.1
Significant Subsidiary of the Company
-------------------------------------
Lexington Components, Inc., a Delaware corporation
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 103
<SECURITIES> 0
<RECEIVABLES> 17,837
<ALLOWANCES> 197
<INVENTORY> 10,170
<CURRENT-ASSETS> 32,198
<PP&E> 115,608
<DEPRECIATION> 52,871
<TOTAL-ASSETS> 108,325
<CURRENT-LIABILITIES> 40,228
<BONDS> 74,953
375
0
<COMMON> 1,087
<OTHER-SE> (10,538)
<TOTAL-LIABILITY-AND-EQUITY> 108,325
<SALES> 126,717
<TOTAL-REVENUES> 126,717
<CGS> 108,513
<TOTAL-COSTS> 108,513
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 9,772
<INCOME-PRETAX> (2,574)
<INCOME-TAX> 132
<INCOME-CONTINUING> (2,706)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,706)
<EPS-PRIMARY> (.65)
<EPS-DILUTED> (.65)
</TABLE>
