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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JUNE 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
------------------------------- to -------------------------------
Commission File Number 1-3863
HARRIS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 34-0276860
(STATE OR OTHER JURISDICTION OF INCORPORATION OR
ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
1025 WEST NASA BOULEVARD
MELBOURNE, FLORIDA 32919
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (407) 727-9100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------------- -----------------------------------------------
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Common Stock, par value $1 per share New York Stock Exchange
7 3/4% Sinking Fund Debentures due 2001 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value (based upon the closing price on the New York
Stock Exchange) of the voting stock held by non-affiliates of the registrant as
of August 21, 1997 was $3,406,757,000.
The number of outstanding shares of the registrant's Common Stock, on
August 21, 1997 was 39,831,053.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997 are incorporated by reference into
Part III of this Report on Form 10-K
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HARRIS CORPORATION
FORM 10-K
TABLE OF CONTENTS
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PAGE NO.
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PART I:
ITEM 1. Business....................................................... 1
ITEM 2. Properties..................................................... 7
ITEM 3. Legal Proceedings.............................................. 8
ITEM 4. Submission of Matters to a Vote of Security Holders............ 9
PART II:
ITEM 5. Market for the Registrant's Common Equity and Related
Stockholder Matters............................................ 13
ITEM 6. Selected Financial Data........................................ 14
ITEM 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 15
ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk...... 17
ITEM 8. Financial Statements and Supplementary Data.................... 18
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure........................................... 18
PART III:
ITEM 10. Directors and Executive Officers of the Registrant............. 19
ITEM 11. Executive Compensation......................................... 19
ITEM 12. Security Ownership of Certain Beneficial Owners
and Management................................................. 19
ITEM 13. Certain Relationships and Related Transactions................. 19
PART IV:
ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K............................................................ 20
SIGNATURES........................................................................... 22
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.......................................... 23
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PART I
ITEM 1. BUSINESS.
THE COMPANY
GENERAL
Harris Corporation was incorporated in Delaware in 1926 as the successor to
three companies founded in the 1890's. The principal executive offices of the
Company are located at 1025 West NASA Boulevard, Melbourne, Florida 32919, and
the telephone number is (407) 727-9100.
Harris Corporation, along with its subsidiaries (hereinafter called
"Harris" or the "Company"), is a worldwide company focused on four core
businesses: communications, semiconductors, office systems and equipment, and
advanced electronic systems.
The Company's four core businesses were carried out during fiscal 1997
through three business sectors and a subsidiary, which correspond to the
Company's business segments used for financial reporting purposes:
Communications Sector, Semiconductor Sector, Lanier Worldwide, Inc. and
Electronic Systems Sector. Harris structures its operations primarily around the
markets it serves. The operating divisions within each of the sectors and the
subsidiary, which are the basic operating units, have been organized on the
basis of technology and markets. For the most part, each operating division has
its own marketing, engineering, manufacturing and service organization.
Reference is made to the Note Business Segments in the Notes to Financial
Statements for further information with respect to business sectors and the
subsidiary.
Total sales in fiscal 1997 increased to $3.8 billion from $3.6 billion a
year earlier. Total sales in the United States increased 11 percent from a year
earlier while international sales, which amounted to 29 percent of the corporate
total, decreased 7 percent. Net income increased 16 percent to $207.5 million
from $178.4 million.
The markets served and principal products of the Company's three business
sectors and Lanier Worldwide, Inc. are as follows:
COMMUNICATIONS SECTOR: produces a comprehensive line of communications
equipment and systems for broadcast, radio-communication, telecommunication, and
network systems, including: transmitters and studio equipment for analog
television and digital television (formerly HDTV); analog and digital AM and FM
radio, HF, VHF, UHF radio-communication equipment; air traffic communication
systems; microwave radios and transmission equipment; digital telephone
switches; telephone subscriber-loop and test systems equipment; office wireless
systems; and in-building paging equipment.
SEMICONDUCTOR SECTOR: produces standard, custom and semi-custom integrated
circuits and discrete devices for analog, digital, mixed-signal, and power
control and protection applications. These products are used in signal
processing, data-acquisition, and logic applications for automotive systems,
wireless communications, telecommunications line cards, video and imaging
systems, multimedia, industrial equipment, computer peripherals, and military
and aerospace systems.
LANIER WORLDWIDE, INC.: markets, sells, distributes, services, supports and
provides supplies for copying systems, facsimile systems and networks, dictation
systems, multi-function devices, optical-based electronic image management
systems, document productivity solutions, continuous recording systems and
computer-based healthcare information management systems and provides a variety
of outsourcing services including transcription, systems integration,
reprographics, binding and mailroom management.
ELECTRONIC SYSTEMS SECTOR: engages in the design, development and
production of state-of-the-art electronic, communication and information systems
for defense, air traffic, aerospace, telecommunications, law enforcement and
newspaper composition markets. Applications of the sector's technologies include
advanced avionics systems, terrestrial and satellite communication terminals and
networks, global positioning system-based controls systems, signal and image
processing, weather support systems, civil and military air traffic control
systems and integrated airport communication and management systems.
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FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
The financial results shown in the following tables are presented to comply
with current financial accounting standards relating to business segment
reporting. Information concerning the identifiable assets of the Company's
business segments is contained in the Note Business Segments in the Notes to
Financial Statements. In calculating operating profit, allocation of certain
expenses among the business segments involves the exercise of business judgment.
Intersegment sales, which are insignificant, are accounted for at prices
comparable to those paid by unaffiliated customers.
NET SALES AND OPERATING PROFIT BY BUSINESS SEGMENT
(DOLLARS IN MILLIONS)
NET SALES
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COMMUNI- SEMI- LANIER ELECTRONIC
FISCAL YEAR ENDED CATIONS CONDUCTOR WORLDWIDE SYSTEMS TOTAL
----------------------- ---------- -------- -------- ---------- ---------
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June 30, 1995.......... $724.8 $658.7 $1,024.8 $1,035.8 $ 3,444.1
June 30, 1996.......... 841.6 707.7 1,117.2 954.7 3,621.2
June 27, 1997.......... 948.0 679.7 1,171.7 997.8 3,797.2
</TABLE>
OPERATING PROFIT
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COMMUNI- SEMI- LANIER ELECTRONIC CORPORATE INTEREST
FISCAL YEAR ENDED CATIONS CONDUCTOR WORLDWIDE SYSTEMS EXPENSE EXPENSE TOTAL
----------------------- ------- ------- ------- ------- ------- ------- ------
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June 30, 1995.......... $68.5 $ 83.0 $105.7 $95.5 $(49.7) $(65.4) $237.6
June 30, 1996.......... 82.4 101.0 120.7 76.7 (43.9) (62.5) 274.4
June 27, 1997.......... 83.5 111.9 129.3 84.4 (37.2) (59.9) 312.0
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DESCRIPTION OF BUSINESS
COMMUNICATIONS
The Communications Sector of the Company, which is composed of seven
operating divisions, designs, manufactures, and sells products characterized by
three principal communication technologies: (i) telecommunications, including
microwave radio products and systems, digital telephone switches, telephone test
equipment, wireless cellular, local loop and turnkey telecommunication network
management systems; (ii) broadcast, including digital and analog television and
radio studio and transmission systems; and (iii) wireless radio, including
high-frequency (HF), very high frequency (VHF) and ultra-high frequency (UHF)
products, and complete turnkey communication systems.
Sales in fiscal 1997 for this business segment increased 13 percent to
$948.0 million from $841.6 million for the prior year. The sector recorded
operating profit of $83.5 million, up from $82.4 million in fiscal 1996. The
sector contributed 25 percent of Company total sales in fiscal 1997 and 23
percent in fiscal 1996.
The sector is a worldwide supplier of voice and data digital network
switches, private-branch exchanges (PBXs), automatic call distributors and
standards-based computer telephone integration products to long-distance
carriers, local carriers, utilities, corporations and government agencies.
The sector also supplies telecommunication products and systems, including
telephone test systems and tools and operational support systems to manage
telephone subscriber loops.
Under the Farinon trademark, the sector is the largest producer of analog
and digital microwave communication systems in North America.
The sector is the leading supplier of analog and digital radio and
television broadcast transmission equipment and radio-studio equipment in the
United States and provided the nation's first advanced television transmitter to
broadcast digital television as well as the first commercial digital television
application. The sector's products include radio and television transmitters,
antennas, and audio, remote-control and video production systems. The sector is
also a leading supplier of mobile broadcast units.
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The sector is a leading supplier of secure wireless radio communication
products, systems and services including two-way HF, VHF and UHF radio equipment
and offers a comprehensive line of products including ground-to-air avionics
radios and systems for long- and short-distance communications for commercial,
military, law enforcement and government applications.
The sector designs, manufactures and markets cellular and wireless local
loop telephony equipment for private, government and public phone system
customers operating worldwide.
The sector also designs and installs turnkey communication systems
involving a variety of communication technologies, including HF, VHF, microwave,
and switching systems with command and control centers.
Internationally, particularly in the emerging markets, the sector designs,
sells, installs and services communication systems involving radio and
television broadcasting equipment, rural telecommunication networks and long-
and short-range radios on both a product and a turnkey system basis.
Principal customers for products of the Communications Sector include
foreign and domestic commercial and industrial firms, radio and TV broadcasters,
telephone companies, governmental and military agencies, utilities, construction
companies and oil producers. In general, these products are sold and serviced
domestically directly to customers through the sales organizations of the
operating divisions and through established distribution channels.
Internationally, the sector markets and sells its products and services through
established distribution channels. See "International Business."
The backlog of unfilled orders for this segment of Harris' business was
$351 million at July 25, 1997, substantially all of which is expected to be
filled during the 1998 fiscal year, compared with $360 million a year earlier.
SEMICONDUCTOR
The Semiconductor Sector of the Company produces standard, custom and
semi-custom integrated circuits and discrete semiconductors for analog, digital,
mixed signal, power control and protection applications and produces devices for
data-acquisition, signal processing, logic and power applications that demand
the highest levels of performance in terms of speed, precision, low power
consumption and reliability, often in harsh environments.
Sales in fiscal 1997 for this business segment decreased 4 percent to
$679.7 million from $707.7 million in fiscal 1996. The sector's operating profit
was $111.9 million in fiscal 1997, compared with $101.0 million in fiscal 1996.
The sector contributed 18 percent of Company total sales in fiscal 1997 and 20
percent of Company total sales in fiscal 1996.
The sector produces discrete-power products, including metal oxide
semiconductor power devices, transistors, rectifiers, power control circuits and
transient suppression products. The sector pioneered development of
"intelligent-power" technology which permits the combination of analog, logic
and power circuits on the same chip. In addition to industrial and electronic
data processing applications for motor controllers and power supplies, these
products are widely used in automotive electronic systems, such as automotive
ignition systems, anti-lock braking and engine controls, and instrument
displays.
The sector is a major supplier of devices addressing the communications
market through the provision of complex functions, including wireless, broadband
and data conversion components. In addition, the sector is a leader in
mixed-signal telecommunication line card applications, including SLICs
(subscriber line interface circuits), coder/decoder and filter products, and
cross-point switches used in private-branch-exchange systems and of other
circuits for cellular communications, high resolution medical imaging, broadcast
and interactive cable, video, multimedia and military radar systems.
The sector is a major supplier of integrated circuits and discrete devices
to the military and aerospace markets, with an emphasis on commercial and
military space applications, and other applications for radiation hardened
circuits. The sector also supplies custom and semi-custom integrated circuits,
known as application specific integrated circuits, designed for high-performance
commercial, space and military applications.
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The sector's circuits are based primarily on complementary metal oxide
semiconductor, bipolar analog, power analog/digital, metal oxide varistors,
radiation hardening and other process technologies.
Principal customers for the sector's products include video imaging,
electronic data processing, communications, telephone, industrial, medical and
other electronic equipment manufacturers, automobile manufacturers, defense
contractors and U.S. government agencies.
In general, these products are sold directly to customers through a
worldwide sales organization, which includes independent manufacturers'
representatives, and to distributors, who, in turn, resell to their customers.
Internationally, this sector also sells through distributors. See "International
Business."
The integrated circuit industry and technology are characterized by intense
competition and rapid advances in product performance. In addition to its own
research and development, Harris is a party to technology development and
exchange agreements with other companies to develop new and expanded
technologies.
The backlog of unfilled orders for this segment of Harris' business was
$294 million at July 25, 1997, substantially all of which is expected to be
filled during the 1998 fiscal year, compared with $352 million a year earlier.
LANIER WORLDWIDE
Lanier Worldwide, Inc. is a wholly-owned subsidiary of Harris which
markets, sells, and services office equipment and business communication
products and offers a variety of outsourcing services, including transcription,
systems integration, reprographics, binding and mailroom management.
Sales in fiscal 1997 for this business segment increased 5 percent to
$1,171.7 million from $1,117.2 million in fiscal year 1996. Operating profit was
$129.3 million, up from $120.7 million last year. Lanier Worldwide contributed
31 percent of Company total sales in both fiscal 1997 and fiscal 1996.
Through a global network of direct sales, national accounts and service
centers and authorized dealers, Lanier Worldwide provides copying, dictation,
continuous recording, facsimile products and systems, multi-functional devices,
document productivity systems and computer-based healthcare information
management systems. Lanier also provides facilities management operations and
other related outsourcing services. Lanier Worldwide leases certain of its
products to customers on a short-term basis.
Due to the nature of its business, backlog of unfilled orders is not
considered significant to an understanding of this segment's business.
ELECTRONIC SYSTEMS
The Electronic Systems Sector of Harris is composed of several operating
divisions and is engaged in advanced research, design, development and
production of advanced electronic, information processing and communication
systems and sub-systems for government and commercial organizations in the
United States and internationally. Applications of the sector's state-of-the-art
technologies include air traffic control, advanced aerospace products, weather
support systems, image processing, testing of complex electronics systems,
newspaper composition, law enforcement and communication and information
management systems.
The Electronic Systems Sector is a major supplier of advanced-technology
and electronic systems to the United States Department of Defense, Federal
Aviation Administration, National Aeronautics and Space Administration, Federal
Bureau of Investigation and other federal and local government agencies,
aircraft manufacturers, airports and newspapers and publishing houses.
Sales in fiscal 1997 for this business segment increased 5 percent to
$997.8 million from $954.7 million in fiscal 1996. Operating profit was $84.4
million, an increase from $76.7 million in the previous fiscal year. This sector
contributed 26 percent of Company total sales in both fiscal 1997 and fiscal
1996.
The sector is a leading supplier of air-traffic control communication
systems. The sector is also a major supplier of custom aircraft and spaceborne
communication and information processing systems, a leading
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supplier of terrestrial and satellite communication systems and a preeminent
supplier of super-high-frequency military satellite ground terminals for the
Department of Defense.
The sector is a major supplier of custom ground-based systems and software
designed to collect, store, retrieve, process, analyze, display and distribute
information for government, defense and law enforcement applications, including
meteorological data processing systems and range management information systems.
The sector also provides computer controlled electronic maintenance, logistic,
simulation and test systems for military aircraft, ships and ground vehicles.
The sector's electronic products enable high speed communications for platforms
such as the USAF F-22 air superiority fighter and the Army's Commanche advanced
armed reconnaissance helicopter.
The sector is a worldwide supplier of information-processing systems for
newspapers and publishing houses.
The sector has recently formed two joint ventures with the General Electric
Company. One relates to an energy control and management system and distribution
automation system business for electric and other utilities; a second venture
relates to transportation and electronic systems for railways, OEM and freight
shipping customers worldwide.
Most of the sales of this sector are made directly or indirectly to the
United States government under contracts or subcontracts containing standard
government contract clauses providing for redetermination of profits, if
applicable, and for termination for the convenience of the government or for
default of the contractor. These sales consist of a variety of contracts and
programs with various governmental agencies, with no single program accounting
for 10 percent or more of total Harris sales.
The backlog of unfilled orders for this segment of Harris' business was
$470 million at July 25, 1997, a substantial portion of which is expected to be
filled during the 1998 fiscal year, compared with $592 million a year earlier.
INTERNATIONAL BUSINESS
Sales in fiscal 1997 of products exported from the United States or
manufactured abroad were $1,119 million or 29 percent of the Company's total
sales, compared with $1,206 million or 33 percent of the Company's total sales
in fiscal 1996 and $1,016 million or 30 percent in fiscal 1995. Exports from the
United States, principally to Europe and Asia, totalled $550 million or 49
percent of the international sales in fiscal 1997, $632 million or 52 percent of
the international sales in fiscal 1996 and $525 million or 52 percent in fiscal
1995 of the international sales.
Foreign operations represented 15 percent of consolidated net sales and 20
percent of consolidated total assets as of the end of fiscal 1997. Electronic
products and systems are produced principally in the United States, and
international electronic revenues are derived primarily from exports. Copying
and facsimile products are produced primarily in Asia. Semiconductor assembly
and test facilities are located in Malaysia and Ireland; and communication
products assembly facilities are located in Canada and England.
International marketing activities are conducted through subsidiaries which
operate in Canada, Europe, Central and South America, Asia and Australia.
Reference is made to Exhibit 21 "Subsidiaries of the Registrant" for further
information regarding foreign subsidiaries.
Harris utilizes indirect sales channels, including dealers, distributors
and sales representatives, in the marketing and sale of some lines of products
and equipment, both domestically and internationally. These independent
representatives may buy for resale, or, in some cases, solicit orders from
commercial or governmental customers for direct sales by Harris. Prices to the
ultimate customer in many instances may be recommended or established by the
independent representative and may be on a basis which is above or below the
Company's list prices. Such independent representatives generally receive a
discount from the Company's list prices and may mark-up such prices in setting
the final sales prices paid by the customer. During the 1997 fiscal year, orders
came from a large number of foreign countries, no one of which accounted for
five percent of the Company's total orders.
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Certain of Harris' exports are paid for by letters of credit, with the
balance carried either on an open account or installment note basis. Advance
payments, progress payments or other similar payments received prior to or upon
shipment often cover most of the related costs incurred. Performance guarantees
by the Company are generally required on significant foreign government
contracts.
The particular economic, social and political conditions for business
conducted outside the United States differ from those encountered by domestic
business. Management believes that the composite business risk for the
international business as a whole is somewhat greater than that faced by its
domestic operations as a whole. International business may subject the Company
to such risks as the laws and regulations of foreign governments relating to
investments, operations, currency exchange controls, revaluations, taxes, and
fluctuations of currencies; uncertainties as to local laws and enforcement of
contract and intellectual property rights; occasional requirements for onerous
contract clauses; and, in certain areas, rapid changes in governments and
economic and political policies, political or civil unrest or the threat of
international boycotts and United States anti-boycott legislation. Nevertheless,
in the opinion of management, these risks are offset by the diversification of
the international business and the protection provided by letters of credit and
advance payments.
Except for inconsequential matters involving road and utility
rights-of-way, Harris has never been subjected to threat of government
expropriation, either within the United States or abroad.
Financial information regarding the Company's domestic and international
operations is contained in the Note Business Segments in the Notes to Financial
Statements.
COMPETITION
The Company operates in highly competitive businesses that are sensitive to
technological advances. Although successful product and systems development is
not necessarily dependent on substantial financial resources, some of Harris'
competitors in each of the sectors of its business are larger and can maintain
higher levels of expenditures for research and development than Harris. Harris
concentrates in each of its sectors on the market opportunities which management
believes are compatible with its resources, overall technological capabilities
and objectives. Principal competitive factors in these sectors are
cost-effectiveness, product quality and reliability, service and ability to meet
delivery schedules as well as, in international areas, the effectiveness of
dealers.
PRINCIPAL CUSTOMERS
Sales to the U.S. government, which is the Company's only customer
accounting for 10 percent or more of total sales, were 23 percent, 26 percent,
and 30 percent of the Company's total sales in fiscal 1997, 1996 and 1995
respectively. It is not expected that Defense Department budget cutbacks will
have a material effect on the profitability of the Company due in part to the
Company's continuing efforts to diversify and reduce its reliance on defense
contracts.
BACKLOG
Harris' backlog of unfilled orders was approximately $1.1 billion at July
25, 1997 and $1.3 billion at July 26, 1996. Substantially all of the backlog
orders at July 25, 1997 are expected to be filled by June 30, 1998.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research and engineering expenditures by Harris totaled approximately $680
million in fiscal 1997, $603 million in fiscal 1996 and $601 million in fiscal
1995. Company-sponsored research and product development costs were $175 million
in fiscal 1997, $160 million in fiscal 1996 and $134 million in fiscal 1995. The
balance was funded by government and commercial customers. Company-funded
research is directed to the development of new products and to building
technological capability in selected semiconductor, communications and
electronic systems areas. Government-funded research helps strengthen and
broaden the technical capabilities of Harris in its areas of interest. Almost
all of the operating divisions within the Company's sectors maintain their own
engineering and new product development departments, with scientific assistance
provided by advanced-technology departments.
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PATENTS AND INTELLECTUAL PROPERTY
Harris holds numerous patents which it considers, in the aggregate, to
constitute an important asset. However, the Company does not consider its
business or any sector to be materially dependent upon any single patent or any
group of related patents. The Company is engaged in a pro-active patent
licensing program, especially in the Semiconductor Sector, and has entered into
a number of unilateral license and cross-license agreements, many of which
generate substantial royalty income. Although existing license agreements have
generated income in past years and will do so in the future, there can be no
assurances the Company will enter into additional income producing license
agreements. Numerous trademarks used on or in connection with Harris products
are considered to be a valuable asset of Harris.
ENVIRONMENTAL AND OTHER REGULATIONS
The manufacturing facilities of Harris, in common with those of industry
generally, are subject to numerous laws and regulations designed to protect the
environment, particularly in regard to wastes and emissions. Harris believes
that it has materially complied with these requirements, and such compliance has
not had a material adverse effect on its business or financial condition.
Expenditures to protect the environment and to comply with current environmental
laws and regulations over the next several years are not expected to have a
material impact on the Company's competitive or financial position. If future
laws and regulations contain more stringent requirements than presently
anticipated, expenditures may be higher than the Company's present estimates of
future expenditures.
Waste treatment facilities and pollution control equipment have been
installed to satisfy legal requirements and to achieve the Company's waste
minimization and prevention goals. An estimated $.4 million was spent on
environmental capital projects in fiscal 1997 and $.3 million in fiscal 1996.
The Company currently forecasts authorization for environmental-related capital
projects totalling $3.3 million in fiscal 1998. Such amounts may increase in
future years.
EMPLOYEES
As of June 27, 1997, Harris had approximately 29,000 employees. Harris
believes that its relations with its employees are good.
ITEM 2. PROPERTIES.
Harris operates approximately 37 plants and approximately 430 offices in
the United States, Canada, Europe, Central and South America, Asia and Australia
consisting of about 7.2 million square feet of manufacturing, administrative,
engineering and office facilities that are owned and about 3.9 million square
feet of sales, office and manufacturing facilities that are leased. The leased
facilities are occupied under leases for terms ranging from one year to 30
years, a majority of which can be terminated or renewed at no longer than
five-year intervals at Harris' option. The location of the principal
manufacturing plants owned by the Company in the United States and the sectors
which utilize such plants are as follows: Electronic Systems -- Malabar,
Melbourne and Palm Bay, Florida; Semiconductor -- Palm Bay, Florida; Findlay,
Ohio; and Mountaintop, Pennsylvania; Communications -- Camarillo, Novato and
Redwood Shores, California; Greensboro, North Carolina; San Antonio, Texas;
Quincy, Illinois; and Rochester, New York; and Lanier Worldwide -- Atlanta,
Georgia. The location of the principal manufacturing plants owned by the Company
outside of the United States, and the sectors which utilize such plants are as
follows: Semiconductor -- Dundalk, Ireland; and Kuala Lumpur, Malaysia; and
Communications -- Calgary and Montreal, Canada, and Shenzhen Guangdong, China,
and Cambridge, U.K.
Harris considers its facilities to be suitable and adequate for the
purposes for which they are used.
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As of June 27, 1997, the following facilities were in productive use by
Harris:
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SQ. FT. TOTAL SQ. FT. TOTAL
SECTOR FUNCTION OWNED LEASED
------------------------- --------------------- ------------- -------------
<S> <C> <C> <C>
Communications Office/Manufacturing 885,010 757,086
Semiconductor Office/Manufacturing 2,213,084 44,344
Lanier Worldwide Office/Manufacturing 204,912 710,166
Electronic Systems Office/Manufacturing 2,895,112 296,690
OTHER
Corporate Offices 959,549 93,659
Sales/Service Offices 13,700 1,967,874
------------- -------------
TOTALS 7,171,367 3,869,819
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
From time to time, as a normal incident of the nature and kind of business
in which the Company is engaged, various claims or charges are asserted and
litigation commenced against the Company arising from or related to product
liability; patents, trademarks, or trade secrets; breach of warranty; antitrust;
distribution; or contractual relations. Claimed amounts may be substantial but
may not bear any reasonable relationship to the merits of the claim or the
extent of any real risk of court awards. In the opinion of management, final
judgments, if any, which might be rendered against the Company in currently
existing litigation are reserved against or would not have a material adverse
effect on the financial condition or the business of the Company as a whole.
Government contractors, such as the Company, engaged in supplying goods and
services to the U.S. government are dependent on congressional appropriations
and administrative allotment of funds and may be affected by changes in U.S.
government policies. U.S. government contracts typically involve long lead times
for design and development and are subject to significant changes in contract
scheduling and may be unilaterally modified or cancelled by the government.
Often these contracts call for successful design and production of complex and
technologically advanced products or systems. The Company may participate in
supplying goods and services to the U.S. government as either a prime contractor
or a subcontractor to a prime contractor. Disputes may arise between the prime
contractor and the government and the prime contractor and its subcontractor and
may result in litigation between the contracting parties.
From time to time, the Company, either individually or in conjunction with
other U.S. government contractors, may be the subject of U.S. government
investigations for alleged criminal or civil violations of procurement or other
federal laws. These investigations may be conducted without the Company's
knowledge. The Company is currently cooperating with certain government
representatives in investigations relating to potential violations of the
federal procurement laws. The Company is unable to predict the outcome of such
investigations or to estimate the amounts of resulting claims or other actions
that could be instituted against it, its officers or employees. Under present
government procurement regulations, if indicted or adjudged in violation of
procurement or other federal civil laws, a government contractor could be
suspended or debarred from eligibility for awards of new government contracts
for up to three years. In addition, a government contractor's foreign export
control licenses could be suspended or revoked. Management does not believe that
the outcome of these disputes or investigations will have a material adverse
effect on the financial condition or the business of the Company as a whole.
In addition, the Company is subject to numerous federal and state
environmental laws and regulatory requirements and is involved from time to time
in investigations or litigation of various potential environmental issues
concerning ongoing activities at its facilities or remediation as a result of
past activities. The Company from time to time receives notices from the United
States Environmental Protection Agency and equivalent state environmental
agencies that it is a potentially responsible party ("PRP") under the
Comprehensive Environmental Response, Compensation and Liability Act (commonly
known as the "Superfund Act") and/or equivalent state legislation. Such notices
assert potential liability for cleanup costs at various sites,
8
<PAGE> 11
most of which are non-Company owned treatment or disposal sites, allegedly
containing hazardous substances attributable to the Company from past
operations. The Company has been named as a PRP at 10 such sites, excluding
sites as to which the Company's records disclose no involvement or as to which
the Company's liability has been finally determined. In the opinion of
management, any payments the Company may be required to make as a result of
currently existing claims will not have a material adverse effect on the
financial condition or the business of the Company as a whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company
during the fourth quarter of fiscal 1997.
9
<PAGE> 12
EXECUTIVE OFFICERS OF THE REGISTRANT (AS OF AUGUST 29, 1997*).
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- ------------------ ------- ------------------------- -------------------------------------
<S> <C> <C> <C>
Phillip W. Farmer 58 Chairman of the Board, Chairman of the Board and Chief
President and Chief Executive Officer since July, 1995.
Executive Officer President since April, 1993. Chief
Operating Officer 1993-95.
Executive Vice President and Acting
President -- Semiconductor Sector,
1991 to 1993. President --
Electronic Systems Sector, 1989 to
1991. Senior Vice President --
Sector Executive, 1988 to 1989.
Vice President -- Palm Bay
Operations, 1986 to 1988. Vice
President -- General Manager,
Government Support Systems
Division, 1982 to 1986. Director
since 1993.
Wesley E. Cantrell 62 President and President and Chief Executive
Chief Executive Officer, Lanier Worldwide, Inc.
Officer, since March, 1987. Senior Vice
Lanier Worldwide, Inc. President -- Sector Executive,
Lanier Business Products Sector,
1985 to 1987. President, Lanier
Business Products, 1977 to 1987.
Executive Vice President and
National Sales Manager, Lanier
Business Products, 1972 to 1977.
Vice President, Lanier Business
Products, 1966 to 1972. Employed by
Lanier Business Products since
1955.
E. Van Cullens 51 President -- President -- Communications Sector
Communications Sector since June, 1997. Formerly Senior
Vice President and Head of Internet
Business Unit of Siemens Public
Communication Networks Group,
Siemens Stromberg-Carlson, 1996 to
June 1997. Senior Vice President of
Marketing and Business Development
of Siemens Stromberg-Carlson from
1991 to 1996. Various management
assignments with Stromberg-Carlson,
1984 to 1991.
John C. Garrett 54 President -- President -- Semiconductor Sector
Semiconductor Sector since April, 1993. Formerly
Executive Vice President,
Industrial Business, Square D
Company 1987 to 1993, and various
general management assignments with
General Electric Company 1964 to
1987.
</TABLE>
- ---------------
*This listing identifies the executive officers of the Company, as defined
pursuant to the Securities Exchange Act of 1934, as well as all other corporate
vice presidents.
10
<PAGE> 13
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- -------------------- ------- ------------------------- -------------------------------------
<S> <C> <C> <C>
Albert E. Smith 47 President -- Electronic President -- Electronic Systems
Systems Sector Sector since April, 1996. Formerly
President -- Space Systems
Division, Lockheed Martin, June
1994 to April 1996. Various
management assignments with
Lockheed Corporation, 1985 to June
1994.
Bryan R. Roub 56 Senior Vice President -- Senior Vice President -- Chief
Chief Financial Officer Financial Officer since October,
1993. Senior Vice
President -- Finance July, 1984 to
October, 1993. Formerly with
Midland-Ross Corporation in the
capacities of Executive Vice
President -- Finance, 1982 to 1984;
Senior Vice President, 1981 to
1982; Vice President and
Controller, 1977 to 1981; and
Controller, 1973 to 1977.
Richard L. Ballantyne 57 Vice President -- General Vice President -- General Counsel and
Counsel and Secretary Secretary since November, 1989.
Formerly Vice President -- General
Counsel and Secretary, Prime
Computer, Inc., 1982 to 1989.
James L. Christie 45 Vice President -- Vice President -- Internal Audit
Internal Audit since August, 1992. Director --
Internal Audit, 1986 to 1992.
Formerly Director -- Internal Audit
and Division Controller at Harris
Graphics Corporation, 1985 to 1986.
Various corporate and division
financial positions at Harris, 1978
to 1985.
Robert W. Fay 50 Vice President -- Vice President -- Controller since
Controller January, 1993. Acting Vice
President -- Controller,
Semiconductor Sector, 1991 to 1993.
Vice President -- Treasurer, 1988
to 1993. Treasurer, 1985 to 1988.
Director -- Financial Operations,
Semiconductor Sector, 1984 to 1985.
Controller -- Bipolar Digital
Semiconductor Division, 1981 to
1984. Manager -- Corporate Finance
and Cash Management, 1978 to 1981.
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
EXECUTIVE OFFICE
NAME AGE CURRENTLY HELD PAST BUSINESS EXPERIENCE
- ------------------- --------- ------------------------- -------------------------------------
<S> <C> <C> <C>
Nick E. Heldreth 55 Vice President -- Vice President -- Human Resources and
Human Resources and Corporate Relations since July,
Corporate Relations 1996. Vice President -- Human
Resources since June, 1986.
Formerly Vice President -- Personnel
and Industrial Relations, Commercial
Products Division, Pratt & Whitney
and various related assignments
with United Technologies Corporation,
1974 to 1986.
John G. Johnson 61 Vice President -- Vice President -- Quality and New
Quality and Processes since 1994. Formerly Vice
New Processes President and Program Manager of
Core Program. Various management
assignments with the Electronic
Systems Sector, 1962 to 1994.
Herbert N. McCauley 64 Vice President -- Vice President -- Information
Information Management Management since August, 1980. In
July 1996, also Vice President --
General Manager, Telecommunications
Systems Division. Director --
Management Information Systems,
1976 to 1980.
Ronald R. Spoehel 39 Vice President -- Vice President -- Corporate
Corporate Development Development since October, 1994.
Formerly, Senior Vice President,
ICF Kaiser International, Inc., in
various general management
assignments including member of the
office of the chairman, chief
financial officer, and treasurer,
1990 to 1994; and, Vice President,
Investment Banking, Lehman Brothers
(formerly Shearson Lehman Hutton
Inc.), 1985 to 1990.
David S. Wasserman 54 Vice President -- Vice President -- Treasurer since
Treasurer January, 1993. Vice President --
Taxes 1987 to 1993. Formerly Senior
Vice President, Midland-Ross
Corporation, 1979 to 1987.
</TABLE>
There is no family relationship between any of the Company's executive
officers or directors and there are no arrangements or understandings between
any of the Company's executive officers or directors and any other person
pursuant to which any of them was elected as an officer or director, other than
arrangements or understandings with directors or officers of the Company acting
solely in their capacities as such. All of the Company's executive officers are
elected annually and serve at the pleasure of the Board of Directors.
12
<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
Harris Corporation Common Stock, par value $1 per share (the "Common
Stock"), is listed on the New York Stock Exchange, Inc. ("NYSE"), under the
ticker symbol "HRS," and is also traded on the Boston, Chicago, Philadelphia and
Pacific Stock Exchanges and through the Intermarket Trading System. As of August
21, 1997, there were approximately 10,694 holders of record of the Common Stock.
The high and low sales prices as reported in the consolidated transaction
reporting system and the dividends paid on the Common Stock for each quarterly
period in the last two fiscal years are reported below:
<TABLE>
<CAPTION>
CASH
HIGH LOW DIVIDENDS
---- --- ---------
<S> <C> <C> <C>
FISCAL 1996
First Quarter...................... $61 3/8 $51 1/2 $0.34
Second Quarter..................... 60 5/8 50 3/4 $0.34
Third Quarter...................... 68 7/8 48 7/8 $0.34
Fourth Quarter..................... 68 57 5/8 $0.34
-------
$1.36
=======
FISCAL 1997
First Quarter...................... $65 7/8 $50 1/4 $0.38
Second Quarter..................... $71 3/8 $61 3/4 $0.38
Third Quarter...................... $80 $67 3/8 $0.38
Fourth Quarter..................... $92 1/8 $72 5/8 $0.38
-------
$1.52
=======
</TABLE>
In August, the Board declared a quarterly cash dividend of $.44 per share.
The Company has paid cash dividends in every year since 1941 and currently
expects that cash dividends will continue to be paid in the future; however,
there can be no assurances as to future dividend payments.
On August 23, 1997, the Board of Directors approved a two-for-one stock
split to shareholders of record on September 4, 1997. The additional shares will
be distributed on or around September 26, 1997. ALL INFORMATION IN THIS ANNUAL
REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND COVER PAGE) IS ON A
PRE-SPLIT BASIS.
SALES OF UNREGISTERED SECURITIES
On March 28, 1997, in connection with the acquisition of all shares of
Quorum Group, Inc., a privately-held Minnesota corporation, the Company issued
an aggregate of 695,305 shares of its Common Stock to the eight shareholders of
Quorum Group, Inc. Based upon the closing price of the shares of Common Stock on
the NYSE, the 695,305 shares delivered at the closing of the acquisition had a
market value of approximately $54 million. The sale and issuance of the
securities in connection with the acquisition of Quorum Group, Inc. were deemed
to be exempt from registration under the Securities Act of 1933 (the "Securities
Act") in reliance upon Section 4(2) of the Securities Act or Regulation D
promulgated thereunder, as transactions by an issuer not involving any public
offering. The eight former shareholders of Quorum Group, Inc. receiving shares
of Common Stock of the Company each represented his or her intention to acquire
the shares for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the
securities issued in such transaction. All recipients had adequate access
through their relationship to the Company to information about the Company.
13
<PAGE> 16
ITEM 6. SELECTED FINANCIAL DATA.
The following table summarizes selected financial information of Harris
Corporation and its subsidiaries for each of the last five fiscal years. This
table should be read in conjunction with other financial information of Harris,
including "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and financial statements included elsewhere herein.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue from sales, rentals, and
services......................... $3,797.2 $3,621.2 $3,444.1 $3,336.1 $3,099.1
Cost of sales, rentals, and
services......................... 2,519.2 2,404.6 2,328.5 2,274.8 2,086.0
Interest expense................... 59.9 62.5 65.4 58.3 59.9
Income before income taxes......... 312.0 274.4 237.6 193.5 169.8
Income taxes....................... 104.5 96.0 83.1 71.6 58.7
Income before cumulative effect of
change in accounting principle... 207.5 178.4 154.5 121.9 111.1
Cumulative effect of change in
accounting principle............. -- -- -- (10.1) --
Net income......................... 207.5 178.4 154.5 111.8 111.1
Average shares outstanding......... 39.4 39.0 39.1 39.7 39.4
Per share data:
Income before cumulative effect
of change in accounting
principle..................... 5.27 4.58 3.95 3.07 2.82
Cumulative effect of change in
accounting principle.......... -- -- -- (.25) --
Net income....................... 5.27 4.58 3.95 2.82 2.82
Cash dividends................... 1.52 1.36 1.24 1.12 1.04
Net working capital................ 774.9 757.8 755.4 893.6 792.5
Net plant and equipment............ 878.3 721.7 581.0 551.3 564.1
Long-term debt..................... 686.7 588.5 475.9 661.7 612.0
Total assets....................... 3,637.9 3,206.7 2,836.0 2,677.1 2,542.0
Shareholders' equity............... 1,578.2 1,372.9 1,248.8 1,188.0 1,141.3
Book value per share............... 39.64 35.32 32.12 30.23 28.82
</TABLE>
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information in this review, along with the Business Segment data shown
on page 2, reflects the Company's continuing operations.
RESULTS OF OPERATIONS
FISCAL 1997 COMPARED WITH 1996 -- Sales in fiscal 1997 increased 4.9 percent
while net income increased 16.3 percent.
Communications segment sales increased 12.6 percent and net income
increased 7.9 percent. The segment benefited from strong sales and earnings
growth in its microwave systems business, as well as lower tax rates.
Significant gains from the sale of investment securities were substantially
offset by very poor performance in the segment's digital switch business. This
poor performance relates to high margin orders expected in fiscal 1997 which
were delayed until fiscal 1998. Improvement in the digital switch business
coupled with expected strong performance in the microwave systems and broadcast
products businesses should result in higher sales and earnings in fiscal 1998.
Semiconductor segment sales were 4.0 percent lower than last year while net
income increased 10.7 percent. Lower earnings for the segment's discrete power
and digital products were offset by improved margins for intelligent power
products and significantly increased royalty income. Improving market conditions
for the industry and increased manufacturing capacity is expected to result in a
significant increase in fiscal 1998 sales, and higher earnings.
Lanier Worldwide segment sales and net income increased 4.9 percent and
17.1 percent, respectively. Sales in European markets were adversely affected by
currency fluctuations, while both domestic and international margins increased
due to the favorable impact of sourcing yen-based products. This segment expects
both improved sales and earnings in fiscal 1998.
Sales for the Electronic Systems segment were 4.5 percent higher than the
prior year due to growth in its information systems business. Net income for the
year increased 37.2 percent over last year due to higher margins for the
segment's core defense products and reduced losses in its energy management
business which was transferred to a joint venture in January of 1997. Earnings
in fiscal 1997 include a gain from the sale of a building which was
substantially offset by write-offs on certain long-term contracts. While the
segment continues to adjust to reduced appropriations in its core defense
business, fiscal 1998 sales are expected to be slightly higher than the prior
year with a moderate decrease in earnings.
Cost of sales, rentals, and services as a percentage of sales decreased to
66.3 percent from 66.4 percent in the prior year. For the current year, cost
ratios were lower in the Semiconductor segment due to significantly increased
royalty income and the Lanier segment due to favorable currency exchange rates.
Engineering, selling, and administrative expenses as a percentage of sales
increased from 25.2 percent in fiscal 1996 to 25.4 percent in the current year.
Lower administrative costs were offset by increased marketing expenses and
Company-sponsored research and development.
Interest income and expense were slightly lower for the year as additional
interest on borrowed funds used for major new construction projects has been
capitalized as a component of plant and equipment under construction.
"Other-net" expense was $26.2 million lower in fiscal 1997 due to gains
resulting from the sale of investment securities and a gain on the sale of a
building.
The provision for income taxes in fiscal 1997 was 33.5 percent of income
before income taxes compared to 35.0 percent in fiscal 1996. The reduction from
the statutory U.S. income tax rate of 35.0 percent in 1997 resulted from tax
benefits associated with foreign income and export sales.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$279 million in 1997, up from $225 million in the prior year. In addition,
during fiscal 1997, $71 million was invested in equipment for rental to
customers, up from $68 million invested in the prior year. Substantially all of
this investment in rental equipment is related to Lanier Worldwide products.
15
<PAGE> 18
FISCAL 1996 COMPARED WITH 1995 -- Sales in fiscal 1996 increased 5.1 percent
while net income increased 15.5 percent.
Communications segment sales increased 16.1 percent and net income
increased 30.7 percent. The segment's strong growth in sales and earnings
reflected strong demand in the segment's telecommunications and wireless
businesses, particularly microwave systems, broadcast products, and telephone
test equipment. International sales were higher than the previous year and
accounted for 49 percent of total segment sales in fiscal 1996.
Semiconductor segment sales increased 7.4 percent despite an industry-wide
slowdown in new orders during the second half of the fiscal year. Strong sales
of the segment's power control products, improved margins on military products,
and increased royalty income contributed to the segment's 23.7 percent earnings
growth.
Sales in the Lanier Worldwide segment increased 9.0 percent while net
income increased 24.2 percent. Sales and earnings were strong in both domestic
and international markets.
Electronic Systems segment sales and net income decreased 7.8 and 19.3
percent, respectively. Segment results were impacted by write-offs on
development programs, whose production follow-on is unlikely, and significantly
lower sales and losses in the segment's energy management business.
Cost of sales, rentals, and services as a percentage of sales decreased to
66.4 percent from 67.6 percent in the prior year. Continuing margin improvement
in the Semiconductor and Communications segments was offset in part by higher
costs in the Electronic Systems segment. Engineering, selling, and
administrative expenses as a percentage of sales increased to 25.2 percent from
24.3 percent last year. Higher marketing expenses and a 19.4 percent increase in
Company-sponsored research and development expenditures contributed to higher
operating expenses.
Interest income increased in 1996 due to an increase in the balance of
notes receivable from customers. Interest expense decreased due to lower
interest rates and an increase in the amount of interest capitalized.
"Other-net" expense was $7.7 million lower in fiscal 1996 due to gains from
foreign currency transactions.
The provision for income taxes in fiscal 1996 and 1995 was 35.0 percent of
income before income taxes.
CAPITAL EXPENDITURES -- Expenditures for land, buildings, and equipment totaled
$225 million in fiscal 1996, up from $139 million in the prior year. In
addition, during fiscal 1996, $68 million was invested in equipment for rental
to customers, up from $65 million invested in the prior year. Substantially all
of this investment in rental equipment is related to Lanier Worldwide products.
FINANCIAL CONDITION
CASH POSITION -- At June 27, 1997, cash and cash equivalents totaled $71
million, a decrease from $75 million at June 30, 1996. Marketable securities
were $91 million at June 27, 1997.
RECEIVABLES, UNBILLED COSTS, AND INVENTORIES -- Notes and accounts receivable
amounted to $1,038 million at June 27, 1997, compared to $919 million a year
earlier. The increase in receivables reflects increased fourth quarter revenues
and a substantial increase in notes from customer leasing. Unbilled costs and
inventories decreased $6 million from the prior year to $936 million.
BORROWING ARRANGEMENTS -- The Company has available $800 million syndicated
credit facilities. Under these agreements $347 million was outstanding at June
27, 1997. The Company also has available $142 million in open bank credit lines,
of which $99 million was available at June 27, 1997. In addition, Harris filed a
Registration Statement effective May 1996 for $250 million of medium-term notes
and subsequently issued $100 million of 6.65% Notes due 2006. Additional amounts
under the Registration Statement may be offered to the public from time to time
on terms to be determined by market conditions.
CAPITALIZATION -- At June 27, 1997, debt totaled $983 million, representing 38.4
percent of total capitalization (defined as the sum of total debt plus
shareholders' equity). A year earlier, debt of $772 million was 36.0 percent of
total capitalization. Year-end long-term debt included $350 million of
debentures, $313 million of notes payable to banks and insurance companies, and
$24 million of other long-term debt.
16
<PAGE> 19
In 1997, the Company issued 346,151 shares of the Common Stock to employees
under the terms of the Company's stock purchase, option and incentive plans and
695,305 shares for the acquisition of Quorum Group, Inc.
The Company expects to maintain operating ratios, fixed-charge coverages,
and balance-sheet ratios sufficient for retention of its present debt ratings.
RETIREMENT PLANS -- Retirement benefits for substantially all of the Company's
employees are provided primarily through a retirement plan having profit-sharing
and savings elements. The Company also has non-contributory defined benefit
pension plans and provides limited health-care benefits to retirees who have 10
or more years of service. All obligations under the Company's retirement plans
have been fully funded by the Company's contributions, the provision for which
totaled $80 million during the 1997 fiscal year.
DEFERRED INCOME TAXES -- The liability for non-current deferred income taxes was
$84 million at June 27, 1997, up from $62 million a year earlier.
IMPACT OF FOREIGN EXCHANGE -- Approximately 80 percent of the Company's
international business is transacted in local currency environments. The impact
of translating the assets and liabilities of these operations to U.S. dollars is
included as a component of Shareholders' Equity. At June 27, 1997 the cumulative
translation adjustment reduced Shareholders' Equity by $30 million compared to a
reduction of $16 million at June 30, 1996.
The Company utilizes exchange rate agreements with customers and suppliers
and foreign currency hedging instruments to minimize the currency risks of
international transactions. Gains and losses resulting from currency rate
fluctuations did not have a material effect on the Company's results in 1997,
1996 or 1995.
IMPACT OF INFLATION -- To the extent feasible, the Company has consistently
followed the practice of adjusting its prices to reflect the impact of inflation
on wages and salaries for employees and the cost of purchased materials and
services.
FORWARD-LOOKING INFORMATION
This report contains forward-looking statements that reflect management's
current assumptions and estimates of future performance and economic conditions.
Under the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995, the Company cautions investors that any forward-looking statements are
subject to risks and uncertainties that may cause actual results and future
trends to differ materially from those stated or implied by the forward-looking
statements.
The Company's consolidated results and the forward-looking statements could
be affected by, among other things, general economic conditions in the markets
in which the Company operates; successful execution of management's internal
operating plans; fluctuations in foreign currency exchange rates; worldwide
demand for integrated semiconductor circuits, particularly power products;
reductions in the U.S. and worldwide defense and space budgets, consolidations
within the defense industry and recovery of costs incurred on fixed price
contracts; termination of customer contracts; continued development and market
acceptance of new products, especially digital television broadcast products and
semiconductor wireless and multi-media products; continued success of the patent
licensing program; and the successful resolution of patent infringement and
other general litigation.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.
The Company uses foreign exchange contracts and options to hedge foreign
currency commitments. Specifically, these foreign exchange contracts offset
foreign currency denominated inventory and purchase commitments from Japanese
suppliers, intercompany loans, firm committed operating expenses in Malaysia and
Ireland, and accounts receivable from and future committed sales to customers.
Management believes the use of foreign currency financial instruments should
reduce the risks which arise from doing business in international markets. At
June 27, 1997, the Company had open foreign exchange contracts with a notional
amount of $259 million. The use of foreign exchange contracts did not have a
material effect on income or
17
<PAGE> 20
cash flows in fiscal 1997 and prior years and, based on open contracts at June
27, 1997, the Company does not expect a material effect on income or cash flows
in fiscal 1998.
The Company also maintains a portfolio of marketable equity securities
available for sale. These investments result from the funding of start-up
companies that have technology or products that are of interest to the Company.
The fair market value of these securities at June 27, 1997, was $91.3 million
with the corresponding unrealized gain included as a component of shareholders'
equity. These investments have historically had higher volatility than most
market indices. If the quoted market price of marketable equity securities was
to increase or decrease 10 percent, the fair market value of these securities
would correspondingly increase or decrease $9.1 million.
The Company utilizes both fixed-rate and variable-rate debt as described in
the Notes to Financial Statements. The Company does not expect changes in
interest rates to have a material effect on income or cash flows in fiscal 1998.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements and supplementary data required by this Item are
set forth in the pages indicated in Item 14(a)(1) and (2).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
18
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item, with respect to Directors of the
Company, is incorporated herein by reference to the Company's Proxy Statement
for the Annual Meeting of Shareholders to be held on October 24, 1997, which
proxy statement is expected to be filed within 120 days after the end of the
Company's 1997 fiscal year. Certain information regarding executive officers of
the Company is included in Part I hereof in accordance with General Instruction
G(3) of Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item, with respect to compensation of
Directors and Executive Officers of the Company, is incorporated herein by
reference to the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1997 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item, with respect to security ownership
of certain beneficial owners and management of the Company, is incorporated
herein by reference to the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on October 24, 1997, which proxy statement is expected
to be filed within 120 days after the end of the Company's 1997 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the fiscal year ended June 27, 1997, there existed no relationships
and there were no transactions reportable under this Item.
19
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
<TABLE>
<CAPTION>
PAGE
<S> <C>
(1) Financial Statements:
Report of Independent Accountants................................... 24
Consolidated Statement of Income -- Years ended June 27, 1997, June
30, 1996 and June 30, 1995......................................... 25
Consolidated Statement of Retained Earnings --
Years ended June 27, 1997, June 30, 1996 and June 30, 1995........ 25
Consolidated Balance Sheet -- June 27, 1997 and June 30, 1996....... 26
Consolidated Statement of Cash Flows --
Years ended June 27, 1997, June 30, 1996 and June 30, 1995........ 27
Notes to Financial Statements....................................... 28
(2) Financial Statement Schedules:
For each of the years ended June 27, 1997, June 30, 1996 and June
30, 1995
Schedule II -- Valuation and Qualifying Accounts............... 35
</TABLE>
All other schedules are omitted because they are not applicable, the
amounts are not significant or the required information is shown in the
financial statements or the notes thereto.
(3) Exhibits
(3)(i) Restated Certificate of Incorporation of Harris Corporation
(December 1995), incorporated herein by reference to Exhibit 3(i) to the
Company's Form 10-Q Quarterly Report for the quarter ended March 31,
1996.
(3)(ii) By-Laws of Harris Corporation as in effect February 23,
1996, incorporated herein by reference to Exhibit 3(ii) to the Company's
Form 10-Q Quarterly Report for the quarter ended March 31, 1996.
(4)(a) Specimen stock certificate for the Company's Common Stock.
(4)(b) Stockholder Protection Rights Agreement, between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, dated as
of December 6, 1996, incorporated herein by reference to Exhibit 1 to
the Company's Current Report on Form 8-K filed with the Securities and
Exchange Commission on December 6, 1996.
(4)(c) Indenture, dated as of May 1, 1996, between the Company and
Chemical Bank, as Trustee, relating to unlimited amounts of debt
securities which may be issued from time to time by the Company when and
as authorized by the Company's Board of Directors or a Committee of the
Board, incorporated by reference to Exhibit 4 to the Company's
Registration Statement on Form S-3, Registration Statement No.
333-03111.
(4)(d) Pursuant to Regulation S-K Item 601(b)(iii), Registrant by
this filing agrees, upon request, to furnish to the Securities and
Exchange Commission a copy of other instruments defining the rights of
holders of long-term debt of the Company.
(10) Material Contracts:
*(a) Form of Senior Executive Severance Agreement, incorporated
herein by reference to Exhibit 10(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1996.
*(b) Harris Corporation Annual Incentive Plan, incorporated herein
by reference to Exhibit 10(b) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.
*(c) Harris Corporation Stock Incentive Plan.
20
<PAGE> 23
*(d) Harris Corporation 1981 Stock Option Plan for Key
Employees, incorporated herein by reference to Exhibit 10(d) of the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1991.
*(e) Lanier Worldwide, Inc. Key Contributor Bonus Plan,
incorporated herein by reference to Exhibit 10(e) of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1995.
*(f) Lanier Worldwide, Inc. Long-Term Incentive Plan for Key
Employees, incorporated herein by reference to Exhibit 10(f) of the
Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1995.
*(g) Harris Corporation Retirement Plan, incorporated herein by
reference to Exhibit 10(g) to the Company's Annual Report on Form
10-K for the fiscal year ended June 30, 1996.
*(h) Harris Corporation Supplemental Executive Retirement Plan,
incorporated herein by reference to Exhibit 10(h) to the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
*(i) Lanier Worldwide, Inc. Pension Equity Plan.
*(j) Lanier Worldwide, Inc. Savings Incentive Plan.
*(k) Lanier Worldwide, Inc. Supplemental Executive Retirement
Plan.
*(l) Lanier Worldwide, Inc. Supplemental Executive Retirement
Savings Plan.
*(m) Directors Retirement Plan, incorporated herein by reference
to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996.
*(n) Harris Corporation 1997 Deferred Compensation Plan for
Outside Directors.
(o) Harris Corporation $300,000,000 364-Day Credit Agreement,
dated as of November 6, 1996, incorporated herein by reference to
Exhibit 10(i) to the Company's Form 10-Q Quarterly Report for the
quarter ended December 31, 1996.
(p) Harris Corporation $500,000,000 5-Year Credit Agreement,
dated as of November 6, 1996, incorporated herein by reference to
Exhibit 10(ii) to the Company's Form 10-Q Quarterly Report for the
quarter ended December 31, 1996.
(11) Statement regarding computation of net income per share.
(21) Subsidiaries of the Registrant.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the last
quarter of the fiscal year ended June 27, 1997.
- ------------------
*Management contract or compensatory plan or arrangement.
21
<PAGE> 24
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
HARRIS CORPORATION
(Registrant)
Dated: August 29, 1997
By /s/ BRYAN R. ROUB
-----------------------------------
Bryan R. Roub
Senior Vice President-Chief
Financial Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------ ------------------------------ ----------------
<S> <C> <C>
/s/ PHILLIP W. FARMER Chairman of the Board,
- ---------------------------------------- President
Phillip W. Farmer and Chief Executive Officer
(Principal Executive
Officer)
/s/ BRYAN R. ROUB Senior Vice President -- Chief
- ---------------------------------------- Financial Officer
Bryan R. Roub (Principal Financial
Officer)
/s/ ROBERT W. FAY Vice President -- Controller
- ---------------------------------------- (Principal Accounting
Robert W. Fay Officer)
/s/ ROBERT CIZIK Director
- ----------------------------------------
Robert Cizik
/s/ LESTER E. COLEMAN Director August 29, 1997
- ----------------------------------------
Lester E. Coleman
/s/ ALFRED C. DECRANE, JR. Director
- ----------------------------------------
Alfred C. DeCrane, Jr.
/s/ RALPH D. DENUNZIO Director
- ----------------------------------------
Ralph D. DeNunzio
/s/ JOSEPH L. DIONNE Director
- ----------------------------------------
Joseph L. Dionne
/s/ JOHN T. HARTLEY Director
- ----------------------------------------
John T. Hartley
/s/ KAREN KATEN Director
- ----------------------------------------
Karen Katen
/s/ ALEXANDER B. TROWBRIDGE Director
- ----------------------------------------
Alexander B. Trowbridge
</TABLE>
22
<PAGE> 25
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FISCAL YEAR ENDED JUNE 27, 1997
HARRIS CORPORATION
MELBOURNE, FLORIDA
23
<PAGE> 26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To Harris Directors and Shareholders:
We have audited the accompanying consolidated balance sheets of Harris
Corporation and subsidiaries as of June 27, 1997 and June 30, 1996, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the three fiscal years in the period ended June 27, 1997. Our audits
also include the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Harris
Corporation and subsidiaries at June 27, 1997 and June 30, 1996, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended June 27, 1997, 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, present fairly in all material respects the
information set forth herein.
ERNST & YOUNG LLP
Orlando, Florida
July 23, 1997
24
<PAGE> 27
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------
(In millions except per share amounts) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUE
Revenue from product sales and rentals $ 3,335.7 $3,189.2 $3,032.2
Revenue from services 461.5 432.0 411.9
Interest 37.4 38.1 36.8
--------------------------------------------
3,834.6 3,659.3 3,480.9
COSTS AND EXPENSES
Cost of product sales and rentals 2,267.4 2,151.9 2,075.9
Cost of services 251.8 252.7 252.6
Engineering, selling and administrative expenses 963.8 911.9 835.8
Interest 59.9 62.5 65.4
Other -- net (20.3) 5.9 13.6
---------------------------------------------
3,522.6 3,384.9 3,243.3
---------------------------------------------
Income before income taxes 312.0 274.4 237.6
Income taxes 104.5 96.0 83.1
---------------------------------------------
Net income $ 207.5 $ 178.4 $ 154.5
---------------------------------------------
Net income per share $ 5.27 $ 4.58 $ 3.95
----------
</TABLE>
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Fiscal years ended
--------------------------------------------
(In millions except per share amounts) 1997 1996 1995
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 1,072.7 $ 969.4 $ 943.1
Net income for the year 207.5 178.4 154.5
Cash dividends ($1.52 per share in 1997, $1.36 per share in
1996 and $1.24 per share in 1995) (60.3) (52.8) (48.2)
Non-cash dividend -- -- (55.2)
Treasury stock retired -- (22.3) (24.8)
--------------------------------------------
Balance at end of year $ 1,219.9 $1,072.7 $ 969.4
----------
</TABLE>
See Notes to Financial Statements.
25
<PAGE> 28
FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 27 June 30
--------------------------
(In millions) 1997 1996
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 70.7 $ 74.6
Marketable securities 91.3 24.8
Receivables 820.6 727.8
Unbilled costs and accrued earnings on fixed price contracts 324.8 397.8
Inventories 611.1 544.1
Deferred income taxes 145.0 171.8
--------------------------
Total current assets 2,063.5 1,940.9
OTHER ASSETS
Plant and equipment 878.3 721.7
Notes receivable-net 217.7 190.7
Intangibles resulting from acquisitions 227.5 212.8
Other assets 250.9 140.6
---------------------------
$ 3,637.9 $3,206.7
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 288.5 $ 181.3
Accounts payable 196.8 209.0
Compensation and benefits 216.9 209.3
Other accrued items 191.7 190.8
Advance payments by customers 99.3 95.2
Unearned leasing and service income 191.6 192.6
Income taxes 96.0 102.7
Current portion of long-term debt 7.8 2.2
---------------------------
Total current liabilities 1,288.6 1,183.1
OTHER LIABILITIES
Deferred income taxes 84.4 62.2
Long-term debt 686.7 588.5
SHAREHOLDERS' EQUITY
Preferred Stock, without par value; 1,000,000 shares authorized; none issued
Common Stock, $1.00 par value; 250,000,000 shares authorized; issued and
outstanding 39,812,835 shares in 1997 and 38,871,603 shares in 1996 39.8 38.9
Other capital 289.9 266.0
Retained earnings 1,219.9 1,072.7
Net unrealized gain on securities available for sale 53.8 11.1
Unearned compensation 4.4 .3
Cumulative translation adjustments (29.6) (16.1)
---------------------------
Total Shareholders' Equity 1,578.2 1,372.9
---------------------------
$ 3,637.9 $3,206.7
---------------------------
</TABLE>
See Notes to Financial Statements.
26
<PAGE> 29
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Fiscal years ended
----------------------------------------------
(In millions) 1997 1996 1995
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 207.5 $ 178.4 $ 154.5
Adjustments to reconcile income to net cash provided by
operating activities:
Depreciation 170.3 158.1 155.0
Amortization 13.2 12.6 10.3
Non-current deferred income taxes 22.2 7.4 33.3
Changes in assets and liabilities:
Receivables (188.8) (88.1) (47.0)
Unbilled costs and inventories 7.1 (65.0) (52.3)
Accounts payable and accrued liabilities (7.2) 63.7 (1.2)
Advance payments and unearned income 2.4 23.3 76.0
Income taxes (3.9) (14.8) (35.9)
Other (18.4) (13.8) 17.4
----------------------------------------------
Net cash provided by operating activities 204.4 261.8 310.1
INVESTING ACTIVITIES
Cash paid for acquired businesses (24.3) (69.9) (11.4)
Capital expenditures:
Plant and equipment (279.4) (225.4) (139.3)
Rental equipment (70.5) (67.5) (64.9)
--------------------------------------------
Net cash used in investing activities (374.2) (362.8) (215.6)
FINANCING ACTIVITIES
Proceeds from borrowings 6,519.4 1,152.2 750.0
Payments of borrowings (6,305.4) (1,025.3) (787.8)
Cash dividends (60.3) (52.8) (56.6)
Purchase of Common Stock for treasury -- (26.0) (29.8)
Proceeds from sale of Common Stock 10.9 9.2 8.6
--------------------------------------------
Net cash used in (provided by) financing activities 164.6 57.3 (115.6)
--------------------------------------------
Effect of translation on cash and cash equivalents. 1.3 (1.0) 1.3
--------------------------------------------
DECREASE IN CASH AND CASH EQUIVALENTS (3.9) (44.7) (19.8)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 74.6 119.3 139.1
--------------------------------------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 70.7 $ 74.6 $ 119.3
--------------------------------------------
</TABLE>
See Notes to Financial Statements.
27
<PAGE> 30
NOTES TO FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the
accounts of the Corporation and its subsidiaries. These statements have been
prepared in conformity with generally accepted accounting principles and require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Significant intercompany transactions and accounts have been
eliminated.
FISCAL YEAR -- In 1997, the Corporation changed its fiscal year to end on the
Friday nearest June 30. Fiscal years prior to 1997 ended on June 30. Each of the
years presented consist of 52 weeks.
CASH EQUIVALENTS -- Cash equivalents are temporary cash investments with a
maturity of three months or less when purchased. These investments include
accrued interest and are carried at the lower of cost or market.
MARKETABLE SECURITIES -- Marketable equity securities are stated at fair value,
with unrealized gains and losses, net of tax, included as a separate component
of shareholders' equity. Realized gains and losses from marketable securities
are determined using the specific identification method. The cost basis of
marketable securities was $5.8 million at June 27, 1997, and $6.6 million at
June 30, 1996. The amount of gross realized gains included in operating profit
in 1997 was $24.6 million. Gross realized gains for 1996 and 1995 were not
material.
INVENTORIES -- Inventories are priced at the lower of cost (determined by
average and first-in, first-out methods) or market.
PLANT AND EQUIPMENT -- Plant and equipment are carried on the basis of cost.
Depreciation of buildings, machinery and equipment is computed by straight-line
and accelerated methods. The estimated useful lives of buildings range between 5
and 50 years. The estimated useful lives of machinery and equipment range
between 3 and 10 years. Depreciation of rental equipment is computed by the
straight-line method using estimated useful lives from 3 to 5 years.
INTANGIBLES -- Intangibles resulting from acquisitions are being amortized by
the straight-line method principally over periods between 15 and 40 years.
Recoverability of intangibles is assessed using estimated undiscounted cash
flows of related operations.
INCOME TAXES -- The Corporation follows the liability method of accounting for
income taxes.
REVENUE RECOGNITION -- Revenue is recognized from sales other than on long-term
contracts when a product is shipped, from rentals as they accrue, and from
services when performed. Revenue on long-term contracts is accounted for
principally by the percentage-of-completion method, whereby income is recognized
based on the estimated stage of completion of individual contracts. Unearned
income on service contracts is amortized by the straight-line method over the
term of the contracts. Royalty income is included as a component of cost of
product sales and rental and is recognized on the basis of terms specified in
contractual settlement agreements.
RETIREMENT BENEFITS -- The Corporation and its subsidiaries provide retirement
benefits to substantially all employees primarily through a retirement plan
having profit-sharing and savings elements. Contributions by the Corporation to
the retirement plan are based on profits and employees' savings with no other
funding requirements. The Corporation may make additional contributions to the
fund at its discretion. The Corporation also has non-contributory defined
benefit pension plans which are fully funded.
Retirement benefits also include an unfunded limited healthcare plan for U.S.
based retirees and employees on long-term disability. The Corporation accrues
the estimated cost of these medical benefits, which are not material, during an
employee's active service life.
FUTURES AND FORWARD CONTRACTS -- Gains and losses on foreign currency exchange
and option contracts that qualify as hedges are deferred and recognized as an
adjustment of the carrying amount of the hedged asset or liability or
identifiable foreign currency firm commitment. Gains and losses on foreign
currency exchange and option contracts that do not qualify as hedges are
recognized in income based on the fair market value of the contract.
FOREIGN CURRENCY TRANSLATION -- The functional currency for most international
subsidiaries is the local currency. Assets and liabilities are translated at
current rates of exchange, and income and expense items are translated at the
weighted average exchange rate for the year. The resulting translation
adjustments are recorded as a separate component of shareholders' equity.
UNEARNED COMPENSATION -- Compensation resulting from performance shares granted
under the Corporation's long-term incentive plan is amortized to expense over
the vesting period of the performance shares and is adjusted for changes in the
market value of the Common Stock.
NET INCOME PER SHARE -- Net income per share is based upon the weighted average
number of common shares outstanding during each year.
ACCOUNTING CHANGE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share." This statement establishes
standards for computing and presenting earnings per share and is effective
beginning in the third quarter of fiscal 1998. It is expected that
implementation will not result in a material difference from earnings per share
as currently reported.
28
<PAGE> 31
RECEIVABLES
Receivables are summarized below:
<TABLE>
<CAPTION>
-----------------------
(In millions) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Accounts receivable $734.0 $653.5
Notes receivable due within one year -- net 114.9 105.6
------
848.9 759.1
Less allowances for collection losses 28.3 31.3
------
$820.6 $727.8
------
</TABLE>
INVENTORIES AND UNBILLED COSTS
Inventories are summarized below:
<TABLE>
<CAPTION>
-----------------------
(In millions) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Finished products $238.0 $160.9
Work in process 255.1 251.8
Raw materials and supplies 118.0 131.4
------
$611.1 $544.1
------
</TABLE>
Unbilled costs and accrued earnings on fixed-price contracts are net of
progress payments of $187.8 million in 1997 and $216.6 million in 1996.
PLANT AND EQUIPMENT
Plant and equipment are summarized below:
<TABLE>
<CAPTION>
---------------------------
(In millions) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Land $ 31.6 $ 31.5
Buildings 514.0 490.5
Machinery and equipment 1,364.3 1,241.1
Rental equipment 250.7 236.7
--------
2,160.6 1,999.8
Less allowances for depreciation 1,282.3 1,278.1
--------
$ 878.3 $ 721.7
--------
</TABLE>
INTANGIBLES
Accumulated amortization of intangible assets was $60.8 million at June 27,
1997, and $52.3 million at June 30, 1996.
CREDIT ARRANGEMENTS
The Corporation maintains syndicated credit facilities with various banks which
provide for borrowings up to $800 million. These facilities consist of a 364-day
$300 million facility which expires November 1997 and a five-year $500 million
facility which expires November 2001. Interest rates on borrowings under these
facilities are determined by a pricing matrix based upon the Corporation's
long-term debt rating assigned by Standard and Poor's Ratings Group and Moody's
Investors Service. A facility fee is payable on the credit and determined in the
same manner as the interest rates. The Corporation is not required to maintain
compensating balances in connection with these agreements. Under these
agreements, $346.7 million was outstanding at June 27, 1997, $100 million of
which has been classified as long-term based on the Corporation's intent to
maintain borrowings of at least that amount for the next year.
The Corporation also has lines of credit for short-term financing aggregating
$141.5 million from various U.S. and foreign banks, of which $99 million was
available on June 27, 1997. These arrangements provide for borrowing at various
interest rates, are reviewed annually for renewal, and may be used on such terms
as the Corporation and the banks mutually agree. These lines do not require
compensating balances.
Short-term debt is summarized below:
<TABLE>
<CAPTION>
-----------------------
(In millions) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Bank notes $278.0 $168.1
Other 10.5 13.2
------
$288.5 $181.3
------
</TABLE>
The weighted average interest rate for bank notes was 6.0 percent at June 27,
1997 and 6.5 percent at June 30, 1996.
LONG-TERM DEBT
Long-term debt includes the following:
<TABLE>
<CAPTION>
-----------------------
(In millions) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Notes payable to banks, due from 2001 to
2016 $162.5 $167.0
10 3/8% debentures, due 2018 150.0 150.0
7% debenture, due 2026 100.0 100.0
6.65% debenture, due 2006 100.0 --
Notes payable to insurance companies, due
from 1999 to 2001. 150.0 150.0
Other 24.2 21.5
------
$686.7 $588.5
------
</TABLE>
The weighted average interest rate for notes payable to banks was 6.5 percent
at June 27, 1997, and June 30, 1996. The weighted average interest rate for
notes payable to insurance companies was 9.7 percent at June 27, 1997, and June
30, 1996.
Indentures and note agreements contain certain financial covenants including
maintenance of at least $800 million of tangible net worth and total debt not to
exceed 45 percent of total capital.
Maturities of long-term debt for the five years following 1997 are: $7.8
million in 1998, $58.6 million in 1999, $38.5 million in 2000, $98.0 million in
2001, and $108.7 million in 2002.
29
<PAGE> 32
NOTES TO FINANCIAL STATEMENTS
SHAREHOLDERS' EQUITY
Changes in shareholders' equity accounts other than retained earnings are
summarized as follows:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Common Net Unrealized Cumulative
Stock Other Gain On Unearned Translation
(In millions) Amount Capital Securities Compensation Adjustments
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT JULY 1, 1994 $39.3 $ 230.3 -- $ (3.2) $ (21.5)
Adjustment to beginning balance for change in accounting
method, net of income taxes of $7.1 -- -- $ 11.1 -- --
Shares issued under Stock Option Plan (136,058 shares) .1 4.0 -- -- --
Shares granted under Stock Incentive Plans (249,950
shares) .3 10.6 -- (10.9) --
Compensation expense -- -- -- 11.8 --
Termination and award of shares granted under Stock
Incentive Plans (202,536 shares) (.2) (4.7) -- .6 --
Shares sold under Employee Stock Purchase Plans (98,929
shares) .1 4.4 -- -- --
Change in unrealized gain on securities, net of income
taxes of $.7 -- -- 1.1 -- --
Foreign currency translation adjustments -- -- -- -- 11.2
Purchase and retirement of Common Stock for treasury
(703,500 shares) (.7) (4.3) -- -- --
----------------------------------------------------------------------
BALANCE AT JUNE 30, 1995 38.9 240.3 12.2 (1.7) (10.3)
Shares issued under Stock Option Plans (110,945 shares) .1 3.6 -- -- --
Shares granted under Stock Incentive Plans (122,750
shares) .1 6.2 -- (6.3) --
Compensation expense -- -- -- 10.0 --
Termination and award of shares granted under Stock
Incentive Plans (131,692 shares) (.1) (2.1) -- (1.7) --
Shares sold under Employee Stock Purchase Plans (86,207
shares) .1 5.0 -- -- --
Change in unrealized gain on securities, net of income
taxes of $(.8) -- -- (1.1) -- --
Foreign currency translation adjustments -- -- -- -- (5.8)
Purchase and retirement of Common Stock for treasury
(481,000 shares) (.5) (3.2) -- -- --
Shares issued for acquisition of company (287,374
shares) .3 16.2 -- -- --
----------------------------------------------------------------------
BALANCE AT JUNE 30, 1996 38.9 266.0 11.1 .3 (16.1)
Shares issued under Stock Option Plan (127,345 shares) .1 4.4 -- -- --
Shares granted under Stock Incentive Plans (125,950
shares) .1 7.5 -- (7.6) --
Compensation expense -- -- -- 12.9 --
Termination and award of shares granted under Stock
Incentive Plans (100,225 shares) (.1) (.9) -- (1.2) --
Shares sold under Employee Stock Purchase Plans (92,856
shares) .1 6.2 -- -- --
Change in unrealized gain on securities, net of income
taxes of $24.5 -- -- 42.7 -- --
Foreign currency translation adjustments -- -- -- -- (13.5)
Shares issued for acquisition of company (695,305
shares) .7 6.7 -- -- --
----------------------------------------------------------------------
BALANCE AT JUNE 27, 1997 $39.8 $289.9 $53.8 $ 4.4 $(29.6)
----------------------------------------------------------------------
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS
On December 6, 1996, the Corporation declared a dividend of one preferred share
purchase right for each outstanding share of Common Stock. These rights, which
expire on December 6, 2006, are evidenced by Common Stock share certificates and
trade with the Common Stock until they become exercisable, entitle the holder to
purchase one two-hundredth of a share of Participating Preferred Stock for $250,
subject to adjustment. The rights are not exercisable until the earlier of 10
business days (or such later date fixed by the Board) after a party commences a
tender or exchange offer to acquire a beneficial interest of at least 15% of the
Corporation's outstanding Common Stock, or the first date of public announcement
by the Corporation that a person has acquired a beneficial interest of at least
15% of the Corporation's outstanding Common Stock or such later date fixed by
the Board of Directors of the Corporation.
Upon the first date of public announcement by the Corporation that a person
has acquired a beneficial interest of at least 15% of the Corporation's
outstanding Common Stock, or such later date fixed by the Board of Directors of
the Corporation, each right (other than rights beneficially owned by an
acquiring person or any affiliate or associate thereof) would entitle the holder
to purchase shares of Common Stock of the Corporation having a market value
equal to twice the exercise price of the right. In addition, each right (other
than rights beneficially owned by an acquiring person or any affiliate or
associate thereof) would entitle the rightholder to exercise the right and
receive shares of common stock of the acquiring company, upon a merger or other
business combination, having a market value of twice the exercise price of the
right.
Under certain circumstances after the rights become exercisable, the Board
of Directors may elect to exchange all of the then outstanding rights for shares
of Common Stock at an exchange ratio of one share of Common Stock per right,
subject to adjustment. The rights have no voting privileges and may be redeemed
by the Board of Directors at a price of $.01 per right at any time prior to the
acquisition of
30
<PAGE> 33
a beneficial ownership of 15% of the outstanding Common Stock.
NON-CASH DIVIDEND
In 1995, the Corporation spun off as a tax-free dividend its computer systems
business by distributing one share of Harris Computer Systems Corporation common
stock for every twenty shares of the Corporation's Common Stock. Cash dividends
shown in the Consolidated Statement of Cash Flows include the $8.4 million cash
balance of the Harris Computer System Corporation at the time of the spin-off;
the remainder of the dividend was a non-cash transaction.
STOCK OPTIONS AND AWARDS
The following information relates to stock option and incentive stock awards.
Option prices are 100 percent of market value on the date the options are
granted. Option grants are for a maximum of ten years after dates of grant and
may be exercised in installments.
<TABLE>
<CAPTION>
---------------------------------------------------
Number of Weighted Average Option Prices
Shares Exercise Price Per Share
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Exercised during the year:
1995 283,604 $34.22 $23.75 to $50.50
1996 224,807 $39.18 $14.38 to $57.75
1997 236,104 $42.24 $14.38 to $69.75
Granted during 1997 358,894 $65.01 $59.75 to $91.00
Expired during 1997 13,752 $64.80 $62.25 to $66.00
Terminations during 1997 24,943 $57.81 $24.44 to $66.88
Outstanding at June 30, 1996 687,219 $46.98 $14.38 to $67.13
Outstanding at June 27, 1997 771,314 $56.15 $14.38 to $91.00
Exercisable at June 30, 1996 354,243 $36.76 $14.38 to $61.25
Exercisable at June 27, 1997 297,377 $45.21 $14.38 to $67.13
---------------------------------------------------
</TABLE>
Price ranges of outstanding and exercisable options as of June 27, 1997 are
summarized below:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Outstanding Options Exercisable Options
----------------------------------------------- ----------------------------
Average Weighted Weighted
Number of Remaining Life Average Number of Average
Range of Exercise Prices Options (Years) Exercise Price Options Exercise Price
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 14.38-$37.75 121,484 4 $31.78 121,484 $31.78
$ 41.00-$65.88 578,494 5 $58.38 169,452 $54.06
$ 66.00-$91.00 71,336 5 $79.45 6,441 $66.12
--------- ---------
771,314 $56.15 297,377 $45.21
========= =========
</TABLE>
Pro forma information regarding net income and net income per share is
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" and has been determined as if the Corporation had
accounted for stock options using the fair value method of that statement. The
fair value of each option grant is estimated on the grant date using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997 and 1996, respectively: risk-free interest
rates of 6.3% and 6.4%, expected dividend yields of 2.1% in each year, expected
volatility of 22.4% and 20.8%, and expected lives of 4 years each.
For purposes of pro forma disclosure, the estimated fair value of options is
amortized to expense over their 3 year vesting period. Under the fair value
method, the Corporation's net income and net income per share would have been
reduced as follows:
<TABLE>
<CAPTION>
-------------------
(In millions, except per share amounts) 1997 1996
-------------------------------------------------------------------
<S> <C> <C>
Net income $ 2.7 $ 1.4
Net income per share $0.07 $0.04
---------
</TABLE>
Because the fair value method of accounting for options applies only to
options granted subsequent to June 30, 1995, the pro forma effect will not be
fully reflected until 1999.
The Corporation has a stock incentive plan for directors and key employees.
Awards under this plan may include the grant of performance shares, restricted
stock, stock options, stock appreciation rights or other stock-based awards. The
aggregate number of shares of Common Stock which may be awarded under the plan
in each fiscal year is one percent of the total outstanding shares of Common
Stock plus shares available from prior years. Performance shares outstanding
were 413,555 at June 27, 1997; 502,611 at June 30, 1996, and 625,551 at June 30,
1995. Shares of Common Stock reserved for future awards under the plan were
1,190,258 at June 27, 1997; 1,148,818 at June 30, 1996, and 1,046,717 at June
30, 1995.
Under the Corporation's domestic retirement plan, employees may purchase a
limited amount of the Corporation's Common Stock at 70 percent of current market
value. Shares of Common Stock reserved for future purchases by the retirement
plan were 1,182,505 at June 27, 1997.
31
<PAGE> 34
NOTES TO FINANCIAL STATEMENTS
RETIREMENT PLANS
Retirement and defined benefit plans expense amounted to $79.7 million in 1997,
$77.6 million in 1996, and $71.2 million in 1995.
RESEARCH AND DEVELOPMENT
Corporation-sponsored research and product development costs were $174.9 million
in 1997, $159.8 million in 1996, and $133.9 million in 1995.
INTEREST EXPENSE
Total interest was $68.9 million in 1997, $64.0 million in 1996, and $65.4
million in 1995, of which $9.0 million was capitalized in 1997, and $1.5 million
was capitalized in 1996. Interest paid was $65.6 million in 1997, $64.2 million
in 1996, and $64.8 million in 1995.
LEASE COMMITMENTS
Total rental expense amounted to $56.0 million in 1997, $49.8 million in 1996,
and $52.7 million in 1995. Future minimum rental commitments under leases,
primarily for land and buildings, amounted to approximately $174.4 million at
June 27, 1997. These commitments for the years following 1997 are: 1998 -- $53.1
million, 1999 -- $36.2 million, 2000 -- $21.6 million, 2001 -- $14.9 million,
2002 -- $12.7 million, and $35.9 million, thereafter.
INCOME TAXES
The provisions for income taxes are summarized as follows:
<TABLE>
<CAPTION>
------------------------------------
(In millions) 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C>
Current:
United States $ 33.8 $ 82.3 $ 89.0
International 33.5 19.3 19.9
State and local 6.7 17.3 11.7
--------
74.0 118.9 120.6
--------
Deferred:
United States 30.2 (19.3) (32.5)
International (2.9) -- (4.7)
State and local 3.2 (3.6) (.3)
---------
30.5 (22.9) (37.5)
---------
$104.5 $ 96.0 $ 83.1
---------
</TABLE>
The components of deferred income tax assets (liabilities) are as follows:
<TABLE>
<CAPTION>
-------------------------------------------------
1997 1996
-------------------------------------------------
(In millions) Current Non-Current Current Non-Current
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Completed contracts -- -- $ 18.7 --
Inventory valuations $ 64.9 -- 16.8 --
Accruals 96.0 $ 8.8 133.4 $ 8.6
Depreciation -- (85.0) -- (61.6)
Leases (2.0) (19.3) (.8) (20.5)
International tax loss
carryforwards -- 6.7 -- 6.5
All other -- net (13.9) 11.1 3.7 11.3
-------------------
145.0 (77.7) 171.8 (55.7)
Valuation allowance -- (6.7) -- (6.5)
-------------------
$ 145.0 $(84.4) $171.8 $ (62.2)
-------------------
</TABLE>
A reconciliation of the statutory United States income tax rate to the
effective income tax rate follows:
<TABLE>
<CAPTION>
-----------------------------------
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Statutory U.S. income tax rate 35.0% 35.0% 35.0%
State taxes 2.0 3.2 3.1
International income (2.4) (3.2) (4.0)
Tax benefits related to export
sales (1.7) (2.1) (1.4)
Nondeductible amortization .8 .7 .8
Other items (.2) 1.4 1.5
--------
Effective income tax rate 33.5% 35.0% 35.0%
--------
</TABLE>
United States income taxes have not been provided on $511.4 million of
undistributed earnings of international subsidiaries because of the
Corporation's intention to reinvest these earnings. The determination of
unrecognized deferred U.S. tax liability for the undistributed earnings of
international subsidiaries is not practicable.
Pretax income of international subsidiaries was $76.4 million in 1997, $74.2
million in 1996, and $63.2 million in 1995.
Income taxes paid were $75.1 million in 1997, $95.6 million in 1996, and $79.2
million in 1995.
BUSINESS SEGMENTS
The Corporation is structured primarily around the markets it serves and
operates in four business segments: Communications, Semiconductor, Lanier
Worldwide, and Electronic Systems. The Communications segment produces
broadcast, radio communications, and telecommunications products and systems.
The Semiconductor segment produces advanced analog, digital, and mixed signal
integrated circuits and discrete semiconductors for power, signal processing,
data-acquisition, and logic applications. Lanier Worldwide sells and services
copying and facsimile products, and PC-based healthcare management systems. The
Electronic Systems segment engages in advanced research and develops, designs,
and produces advanced communication and information processing systems.
Communication and electronic products and systems are produced principally in
the United States with international revenues derived primarily from exports.
Copying and facsimile products are produced principally in Asia with
international revenues derived from the Corporation's international
subsidiaries.
Net sales and operating profit by segment are on page 2. That information is
an integral part of these financial statements.
Sales made to the U.S. government by all segments (primarily Electronic
Systems segment) were 22.7 percent of total sales in 1997, 25.7 percent of total
sales in 1996, and 30.4 percent of total sales in 1995. Intersegment sales,
which are insignificant, are accounted for at prices comparable to unaffiliated
customers.
32
<PAGE> 35
Selected information by business segment and geographical area is summarized
below:
<TABLE>
<CAPTION>
------------------------------------------
(In millions) 1997 1996 1995
-------------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Communications $ 756.0 $ 691.5 $ 442.5
Semiconductor 964.2 746.6 639.2
Lanier Worldwide 1,034.6 867.1 831.6
Electronic Systems 605.1 658.1 672.3
Corporate 278.0 243.4 250.4
-------------
$ 3,637.9 $3,206.7 $2,836.0
-------------
CAPITAL EXPENDITURES
Communications $ 29.2 $ 33.8 $ 22.6
Semiconductor 176.4 146.8 80.4
Lanier Worldwide 35.9 11.7 12.3
Electronic Systems 24.1 28.1 18.6
Corporate 13.8 5.0 5.4
-------------
$ 279.4 $ 225.4 $ 139.3
-------------
DEPRECIATION
Communications $ 20.5 $ 17.9 $ 14.8
Semiconductor 50.2 47.6 44.5
Lanier Worldwide 16.8 10.3 10.0
Electronic Systems 25.2 24.2 25.7
Corporate 9.0 8.9 10.2
-------------
$ 121.7 $ 108.9 $ 105.2
-------------
GEOGRAPHICAL INFORMATION
U.S. operations:
Net sales $ 3,227.8 $3,046.4 $2,952.4
Operating profit 235.6 200.2 174.4
Identifiable assets 2,914.3 2,544.4 2,191.9
International operations:
Net sales $ 569.4 $ 574.8 $ 491.7
Operating profit 76.4 74.2 63.2
Identifiable assets 723.6 662.3 644.1
-------------
</TABLE>
Capital expenditures and depreciation do not include equipment for rental to
customers. Corporate assets consist primarily of cash, marketable securities,
deferred income taxes and plant and equipment.
Export sales approximated $550.0 million in 1997, $631.6 million in 1996, and
$524.6 million in 1995. Export sales and net sales of international operations
were principally to Europe and Asia.
FINANCIAL INSTRUMENTS
The carrying values of cash equivalents, marketable securities, accounts
receivable, notes receivable, accounts payable and short-term debt approximates
fair value. The fair value of long-term debt was $701.0 million at June 27, 1997
and $618.6 million at June 30, 1996.
The Corporation uses foreign exchange contracts and options to hedge
intercompany accounts and off-balance-sheet foreign currency commitments.
Specifically, these foreign exchange contracts offset foreign currency
denominated inventory and purchase commitments from suppliers, accounts
receivable from and future committed sales to customers, and firm committed
operating expenses. Management believes the use of foreign currency financial
instruments should reduce the risks which arise from doing business in
international markets. Contracts are for periods consistent with the terms of
the underlying transaction, generally one year or less. At June 27, 1997, open
foreign exchange contracts were $259.3 million (as described below), of which
$166.1 million were to hedge off-balance-sheet commitments. Additionally, for
the year ended June 27, 1997, the Corporation purchased and sold $1,069.2
million of foreign exchange forward and option contracts.
Deferred gains and losses are included on a net basis in the Consolidated
Balance Sheet as other assets and are recorded in income as part of the
underlying transaction when it is recognized.
At June 27, 1997, the Corporation had $7.8 million in open option contracts.
Total open foreign exchange contracts at June 27, 1997, are described in the
table below.
COMMITMENTS TO BUY FOREIGN CURRENCIES
<TABLE>
<CAPTION>
-------------------------------------------------
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (in months)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENCY
Malaysian Ringgit 267.2 $106.0 -- 1-16
Irish Punt 24.2 37.3 $(.7) 1-9
Japanese Yen 1,600.0 13.6 .3 1-5
German Mark 17.7 10.5 (.2) 1-3
Swiss Franc 8.3 6.0 (.2) 2
British Pound 1.9 3.1 .1 1-5
Norwegian Krone 13.5 1.9 (.1) 1
Dutch Guilder 3.5 1.9 (.1) 1-12
French Franc 11.0 1.9 -- 12
Belgian Franc 50.0 1.7 (.3) 2
Italian Lira 2,000.0 1.3 (.1) 2-12
Spanish Peseta 50.0 .3 -- 3
-------------------------------------------------
</TABLE>
COMMITMENTS TO SELL FOREIGN CURRENCIES
<TABLE>
<CAPTION>
-------------------------------------------------
Contract Amount
---------------
Foreign Deferred Gains Maturities
(In millions) Currency U.S. and (Losses) (in months)
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENCY
British Pound 15.9 $ 25.8 $(.8) 1-11
German Mark 37.6 23.4 1.6 1-13
Canadian Dollar 20.6 15.0 .2 1-2
French Franc 24.1 4.2 .1 1-6
Japanese Yen 320.0 2.8 -- 1-6
Belgian Franc 60.7 1.8 .1 1-3
Italian Lira 500.0 .3 -- 2
Dutch Guilder .6 .3 -- 3
Norwegian Krone 1.5 .2 -- 1
--------------------------------------------------
</TABLE>
33
<PAGE> 36
QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized below.
<TABLE>
<CAPTION>
Quarters Ended
Dollars in Millions Except Per
Share Amounts 9-30-96 12-31-96 3-31-97 6-27-97 Total Year
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1997
Net sales $883.4 $945.9 $921.4 $1,046.5 $3,797.2
Gross profit 297.7 311.6 311.6 357.1 1,278.0
Income before income taxes 58.2 69.5 83.3 101.0 312.0
Net income 38.1 45.5 55.6 68.3 207.5
Per share:
Net income .98 1.17 1.40 1.72 5.27
Cash dividends .38 .38 .38 .38 1.52
Stock prices (high/low) 65 7/8-50 1/4 71 3/8-61 3/4 80-67 3/8 92 1/8-72 5/8
---------------------------------------------------------------------
<CAPTION>
Quarters Ended
Dollars in Millions Except Per
Share Amounts 9-30-95 12-31-95 3-31-96 6-30-96 Total Year
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FISCAL 1996
Net sales $816.7 $916.6 $875.9 $1,012.0 $3,621.2
Gross profit 271.6 301.1 298.2 345.7 1,216.6
Income before income taxes 51.6 62.1 68.0 92.7 274.4
Net income 33.5 40.4 44.2 60.3 178.4
Per share:
Net income .86 1.03 1.14 1.55 4.58
Cash dividends .34 .34 .34 .34 1.36
Stock prices (high/low) 61 3/8-51 1/2 60 5/8-50 3/4 68 7/8-48 7/8 68-57 5/8
---------------------------------------------------------------------
</TABLE>
34
<PAGE> 37
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
HARRIS CORPORATION AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------------------------------------------------------------------------------------------------
ADDITIONS
----------------------------
(1) (2)
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER ACCOUNTS DEDUCTIONS-- BALANCE AT
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 27, 1997:
Amounts Deducted From Respective Asset Accounts $ 812(A)
11,838(B)
-----------
Allowances for collection losses........... $ 31,380 $ 8,880 $ 656(C) $12,650 $28,266
======== ======== =========== ========== ==========
YEAR ENDED JUNE 30, 1996:
Amounts Deducted From Respective Asset Accounts $ 40(A)
132(C)
--------------
Allowances for collection losses........... $ 29,976 $ 8,407 $ 172 $ 7,175(B) $31,380
======== ======== =========== ========== ==========
YEAR ENDED JUNE 30, 1995:
Amounts Deducted From Respective Asset Accounts $ 7,746(B)
257(C)
-----------
Allowances for collection losses........... $ 29,492 $ 7,897 $ 590(A) $ 8,003 $29,976
======== ======== =========== ========== ==========
</TABLE>
Note A -- Foreign currency translation gains and losses.
Note B -- Uncollectible accounts charged off, less recoveries on accounts
previously charged off.
Note C -- Amounts reclassified to (from) other accounts in the Consolidated
Balance Sheets.
35
<PAGE> 38
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO.
UNDER REG. S-K,
ITEM 601 DESCRIPTION
- --------------- ------------------------------------------------------------------------------
<S> <C>
4(a) Specimen stock certificate for the Company's Common Stock.
10 Material Contracts:
*10(c) Harris Corporation Stock Incentive Plan.
*10(i) Lanier Worldwide, Inc. Pension Equity Plan.
*10(j) Lanier Worldwide, Inc. Savings Incentive Plan.
*10(k) Lanier Worldwide, Inc. Supplemental Executive Retirement Plan.
*10(l) Lanier Worldwide, Inc. Supplemental Executive Retirement Savings Plan.
*10(n) Harris Corporation 1997 Deferred Compensation Plan for Outside Directors.
11 Statement regarding computation of net income per share.
21 Subsidiaries of the Registrant.
23 Consent of Ernst & Young LLP.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
Exhibit 4(a)
COMMON STOCK
NUMBER SHARES
INCORPORATED UNDER THE LAWS CUSIP 413875 10 5
OF THE STATE OF DELAWARE
HARRIS CORPORATION
This Certifies that
is the owner of
FULL-PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
Harris Corporation (hereinafter referred to as the "Corporation") transferable
in the books of the Corporation by the holder hereof in person or by duly
authorized attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Certificate of Incorporation, as
amended, of the Corporation (a copy of which Certificate is on file with the
Transfer Agents), to all of which the holder by acceptance hereof assents. This
certificate is not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the seal of the Corporation and the signatures of its duly authorized
officers.
DATED:
SECRETARY [SEAL] CHAIRMAN OF THE BOARD
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT
AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
<PAGE> 2
HARRIS CORPORATION
THE CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS A COPY OF THE POWERS, 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. ANY SUCH REQUEST IS TO BE ADDRESSED TO THE SECRETARY
OF HARRIS CORPORATION, MELBOURNE, FLORIDA 32901 OR TO THE TRANSFER AGENT NAMED
ON THE FACE OF THIS CERTIFICATE.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in
full according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
--------------------------------
TEN ENT - as tenants by the entireties (Cust) (Minor)
under Uniform Gifts to Minors
JT TEN - as joint tenants with right of
survivorship and not as tenants Act
in common ----------------------------
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, ___________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_____________________________________
|_____________________________________|______________________________________
_____________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING
POSTAL ZIP CODE OF ASSIGNEE.
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________________
_____________________________________________________________________________
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated, _________________
________________________________________________
NOTICE: The signature of this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any change
whatever.
SIGNATURE(S) GUARANTEED: ________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
Until the Separation Time (as defined in the Rights Agreement referred to
below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Stockholder Protection Rights Agreement,
dated as of December 6, 1996, (as such may be amended from time to time, the
"Rights Agreement"), between Harris Corporation (the "Company") and ChaseMellon
Shareholder Services, L.L.C. as Rights Agent, the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal executive offices of the Company. Under certain circumstances, as set
forth in the Rights Agreement, such Rights may be redeemed, may become
exercisable for securities or assets of the Company or securities of another
entity, may be exchanged for shares of Common Stock or other securities or
assets of the Company, may expire, may become void (if they are "Beneficially
Owned" by an "Acquiring Person" or an "Affiliate" or "Associate" thereof, as
such terms are defined in the Rights Agreement, or by any transferee of any of
the foregoing) or may be evidenced by separate certificates and may no longer
be evidenced by this certificate. The Company will mail or arrange for the
mailing of a copy of the Rights Agreement to the holder of this certificate
without charge after the receipt of a written request therefor.
<PAGE> 1
Exhibit 10(c)
HARRIS CORPORATION
STOCK INCENTIVE PLAN
AMENDED AS OF AUGUST 23, 1997
1. PURPOSE.
The purpose of the Harris Corporation Stock Incentive Plan (the "Plan")
is to promote the long-term growth and performance of Harris Corporation (the
"Corporation") and its affiliates and to attract and retain outstanding
individuals by awarding directors and salaried employees performance-based stock
awards, restricted stock, stock options, stock appreciation rights and/or other
stock-based awards.
2. DEFINITIONS
The following definitions are applicable to the Plan:
"Award" means the grant of performance shares, restricted stock, stock
options, stock appreciation rights or other share-based award under the Plan.
"Board" means the Board of Directors of the Corporation.
"Board Committee" means a committee of the Board consisting of Outside
Directors.
"Commission" means the Securities and Exchange Commission.
"Committee" means a committee of the Board to which the Board has
delegated authority and responsibility under the Plan and which shall be
appointed by, and serve at the pleasure of, the Board, and shall be constituted
so as to be comprised solely of two or more Outside Directors and which shall
satisfy any applicable legal requirements, including the requirements of Rule
16b-3 promulgated by the Commission under the Securities Exchange Act of 1934,
as amended from time to time, or under any successor rule adopted by the
Commission and Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder.
"Common Stock" means the common stock of the Corporation, $1.00 par
value per share.
"Executive Officer" means any Participant the Board has designated as
an executive officer of the Corporation for purposes of reporting under the
Securities Exchange Act of 1934, as amended from time to time, or any successor
thereto.
"Grant Date" means the date on which the grant of an Option under
Section 7.1 hereof or a SAR under Section 8.1 hereof becomes effective pursuant
to the terms of the Stock Option Agreement or Stock Appreciation Rights
Agreement, as the case may be, relating thereto.
1
<PAGE> 2
"Non-employee Director" means a member of the Board who is not an
employee of the Corporation or any affiliate thereof.
"Option" means the option to purchase shares of Common Stock granted
under Sections 7.1 and 10.1 hereof.
"Option Price" means the purchase price of each share of Common Stock
under an Option.
"Outside Director" means a member of the Board who is not an employee
of the Corporation or any affiliate thereof and who qualifies as (i) a
"Non-Employee Director" under Rule 16b-3(b)(3) under the Securities Exchange Act
of 1934, as amended from time to time, and (ii) an "Outside Director" under
Section 162(m) of the Internal Revenue Code of 1986, as amended from time to
time, and the regulations promulgated thereunder.
"Participant" means any salaried employee of the Corporation and its
affiliates designated by the Board Committee to receive an Award under the Plan.
"Performance Goal" means any of the following measurements: the
Corporation's revenue, earnings per share of Common Stock, net income, return on
equity, return on capital, return on assets, total shareholder return or cash
flow, or any combination thereof.
"Performance Period" means the period of time established by the Board
Committee for achievement of certain objectives under Section 5.1 hereof.
"Shares" means shares of Common Stock, subject to adjustments made
under Section 3.2 or operation of law.
"Restriction Period" means the period of time established by the Board
Committee during which certain restrictions as to vesting and on the sale or
other disposition of Shares awarded under the Plan remain in effect under
Section 6.1 hereof.
"Stock Appreciation Rights" or "SARs" means the right to receive a cash
payment from the Corporation equal to the excess of the fair market value of a
stated number of shares of Common Stock at the exercise date over a fixed price
for such shares.
"Units" means units under a share-based award that is payable solely in
cash or is actually paid in cash, determined by reference to the number of
shares by which the share- based award is measured.
3. SHARES AND UNITS SUBJECT TO PLAN
3.1 SHARES RESERVED UNDER THE PLAN. (a) The aggregate number of Shares
which may be awarded under the Plan in each fiscal year of the Corporation,
subject to adjustment as
2
<PAGE> 3
provided in Section 3.2 hereof, shall be one percent (1%) of the total
outstanding Shares as of the first day of such year for which the Plan is in
effect; provided that no more than two million (2,000,000) Shares shall be
cumulatively available for the grant of incentive stock options under the Plan.
In addition, any Common Stock issued by the Corporation through the assumption
or substitution of outstanding grants from an acquired corporation or entity
shall not reduce the shares available for grants under the Plan. Shares to be
issued pursuant to the Plan may be authorized and unissued Shares, treasury
Shares, or any combination thereof.
(b) AGGREGATE UNIT LIMIT. The aggregate number of Units which may be
awarded under the Plan in each fiscal year of the Corporation, subject to
adjustment as provided in Section 3.2 hereof, shall be one percent (1%) of the
total outstanding Shares as of the first day of such year for which the Plan is
in effect.
(c) REISSUE OF SHARES AND UNITS. The number of Shares and Units shall
be increased in any year by the number of Shares or Units available for grant
hereunder in previous years but not subject of Awards granted hereunder in such
year. Subject to Section 8.2 hereof, if any Shares or Units subject to an Award
hereunder are forfeited or any such Award otherwise terminates without the
issuance of such Shares or Units to a Participant, or if any Shares are
surrendered by a Participant in full or partial payment of the Option Price of
an Option, such Shares or Units, to the extent of any such forfeiture,
termination or surrender, shall again be available for grant under the Plan.
3.2 ADJUSTMENTS. Subject to Section 12 hereof, the aggregate number of
Shares which may be awarded under the Plan and outstanding Awards shall be
adjusted by the Board Committee to reflect a change in the capitalization of the
Corporation, including but not limited to, a stock dividend or split,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, spin-off, spin-out or other distribution of assets to shareholders;
provided that the number and price of shares subject to outstanding Options
granted to Non-employee Directors pursuant to Section 10 hereof and the number
of shares subject to future Options to be granted pursuant to Section 10 shall
be subject to adjustment only as set forth in Section 10 hereof.
4. ADMINISTRATION OF PLAN
4.1 ADMINISTRATION BY THE BOARD. The Plan shall be administered by the
Board Committee; PROVIDED, HOWEVER, the Board Committee may delegate some or all
of its authority and responsibility under the Plan to the Committee; PROVIDED,
FURTHER, that the Board Committee may not delegate to the Committee any
authority to make Awards hereunder to any Executive Officer who is also a member
of the Board. The Board Committee shall have authority to interpret the Plan, to
establish, amend, and rescind any rules and regulations relating to the Plan, to
prescribe the form of any agreement or instrument executed in connection
herewith, and to make all other determinations necessary or advisable for the
administration of the Plan. All such interpretations, rules, regulations and
determinations shall be conclusive and binding on all persons and for all
purposes. In addition, the Board Committee shall have authority, without
amending the Plan, to grant Awards hereunder to Participants who are foreign
nationals or employed outside the United States or both, on terms and conditions
different from those
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specified herein as may, in the sole judgment and discretion of the Board
Committee, be necessary or desirable to further the purpose of the Plan or to
comply with foreign legal or regulatory requirements. Notwithstanding the
foregoing, neither the Board, the Board Committee nor the Committee shall have
any discretion with respect to Options granted to Non-employee Directors
pursuant to Section 10 hereof.
4.2 DESIGNATION OF PARTICIPANTS. Participants shall be selected, from
time to time, by the Board Committee, from those salaried employees of the
Corporation and its affiliates who, in the opinion of the Board Committee, have
the capacity to contribute materially to the continued growth and successful
performance of the Corporation.
5. PERFORMANCE SHARE AWARDS
5.1 AWARDS. Awards of Shares may be made, from time to time, to such
salaried employees of the Corporation and its affiliates as may be selected by
the Board Committee. The release of such Shares to the Participant subject to
such Awards shall be contingent upon (i) the degree of attainment of the
applicable Performance Goals during the Performance Period relative to such
objectives as shall be established by the Board Committee and (ii) the
expiration of the Performance Period. Except as provided in Section 11 hereof
and the Performance Share Award Agreement between the Participant and the
Corporation, Shares subject to such Awards under this Section 5.1 shall be
released to the Participant only after the expiration of the relevant
Performance Period. Each Award under this Section 5.1 shall be evidenced by a
Performance Share Award Agreement between the Participant and the Corporation
which shall specify the applicable Performance Goals, the Performance Period,
any forfeiture conditions and such other terms and conditions as the Board
Committee shall determine.
5.2 PAYOUTS. Upon expiration of the Performance Period, the Corporation
shall at its option, cause such shares as to which a Participant is entitled
either (i) to be issued by a certificate registered in the name of the
Participant or his designee evidencing the Shares to which the Participant is
entitled and release such Shares to the custody of the Participant or (ii) to be
credited to an account for the benefit of the Participant maintained by the
Corporation's stock transfer agent or its designee.
5.3 RIGHTS AS SHAREHOLDERS. Subject to the provisions of the
Performance Share Award Agreement between the Participant and the Corporation,
during the Performance Period, Participants may exercise full voting rights with
respect to all Shares awarded thereto under Section 5.1 hereof and shall be
entitled to receive dividends and other distributions paid with respect to those
Shares.
5.4 TRANSFERABILITY OF SHARES. Shares awarded under the Plan shall not
be sold, exchanged, assigned, transferred, pledged, hypothecated or otherwise
disposed of until the expiration of the Performance Period.
5.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of one of its affiliates, the number of
Shares subject of the Award, if any, to
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<PAGE> 5
which the Participant shall be entitled shall be determined in accordance with
the Performance Share Award Agreement between the Participant and the
Corporation.
5.6 TRANSFER OF EMPLOYMENT. If a Participant transfers employment from
one business unit of the Corporation or any of its affiliates to another
business unit during a Performance Period, such Participant shall be eligible to
receive such number of Shares as the Board Committee may determine based upon
such factors as the Board Committee in its sole discretion may deem appropriate.
5.7 INDIVIDUAL SHARE LIMITATION. The number of Shares for which a
Performance Share Award may be granted to any Participant who is an Executive
Officer shall not exceed 100,000 Shares in any fiscal year.
6. RESTRICTED STOCK AWARDS
6.1 AWARDS. Awards of Shares subject to such restrictions as to vesting
and otherwise as the Board Committee shall determine, may be made, from time to
time, to salaried employees of the Corporation and its affiliates as may be
selected by the Board Committee. The Board Committee may in its sole discretion
at the time of the Award or at any time thereafter provide for the early vesting
of such Award prior to the expiration of the Restriction Period. Each Award
under this Section 6.1 shall be evidenced by a Restricted Stock Award Agreement
between the Participant and the Corporation which shall specify the vesting
schedule, any rights of acceleration, any forfeiture conditions, and such other
terms and conditions as the Board Committee shall determine.
6.2 PAYOUTS. Upon expiration of the Restriction Period, the Corporation
shall at its option, cause such shares as to which a Participant is entitled to
either (i) to be issued by a stock certificate registered in the name of the
Participant or his designee and release such Shares to the custody of the
Participant or (ii) to be credited to an account for the benefit of the
Participant maintained by the Corporation's stock transfer agent or its
designee.
6.3 RIGHTS AS SHAREHOLDERS. During the Restriction Period, Participants
may exercise full voting rights with respect to all Shares awarded thereto under
Section 6.1 hereof and shall be entitled to receive dividends and other
distributions paid with respect to those Shares.
6.4 TRANSFERABILITY OF SHARES. Shares awarded under the Plan shall not
be sold, exchanged, assigned, transferred, pledged, hypothecated or otherwise
disposed of until the expiration of the Restriction Period.
6.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, the number of
Shares subject of the Award, if any, to which the Participant shall be entitled
shall be determined in accordance with the Restricted Stock Award Agreement
between the Participant and the Corporation. All remaining shares as to which
restrictions apply at the date of termination of employment shall be forfeited
subject to such exceptions, if any, authorized by the Board Committee.
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<PAGE> 6
7. STOCK OPTIONS
7.1 GRANTS. Options may be granted, from time to time, to such salaried
employees of the Corporation and its affiliates as may be selected by the Board
Committee. The Option Price shall be determined by the Board Committee effective
on the Grant Date; PROVIDED HOWEVER, that such price shall not be less than one
hundred percent (100%) of the fair market value of a Share on the Grant Date.
The number of Shares subject to each option granted to each Participant, the
terms of each option, and any other terms and conditions of an Option granted
hereunder shall be determined by the Board Committee, in its sole discretion,
effective on the Grant Date; PROVIDED, HOWEVER, that no Option shall be
exercisable any later than ten (10) years from the Grant Date. Each Option shall
be evidenced by a Stock Option Agreement between the Participant and the
Corporation which shall specify the type of Option granted, the Option Price,
the term of the Option, the number of Shares to which the Option pertains, the
conditions upon which the Option becomes exercisable and such other terms and
conditions as the Board Committee shall determine.
7.2 PAYMENT OF OPTION PRICE. No Shares shall be issued upon exercise of
an Option until full payment of the Option Price therefor by the Participant.
Upon exercise, the Option Price may be paid in cash, in Shares having a fair
market value equal to the Option Price, or in any combination thereof.
7.3 RIGHTS AS SHAREHOLDERS. Participants shall not have any of the
rights of a shareholder with respect to any shares subject to an Option until
such Shares have been issued upon the proper exercise of such Option.
7.4 TRANSFERABILITY OF OPTIONS. Except as permitted by this Section
7.4, Options granted under the Plan may not be sold, transferred, pledged,
assigned, hypothecated or otherwise disposed of other than by will or by the
laws of descent and distribution. The Board Committee or the Committee may, in
its discretion, authorize all or a portion of the Options to be granted to a
Participant (other than incentive stock options) to be on terms which permit
transfer by such Participant to (i) immediate family members of the Participant
or to a trust, partnership or limited liability company for the benefit of such
immediate family members, (ii) pursuant to domestic relations orders referred to
in Rule 16a-12 under the Securities Exchange Act of 1934, as amended from time
to time, and (iii) to other transferees permitted by the Board Committee or the
Committee in its discretion (such transferees of a Participant are referred to
as "PERMITTED TRANSFEREES") provided that (x) there may be no payment of
consideration for any such transfer, (y) the Stock Option Agreement shall
specifically provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred Options shall be prohibited
except without consideration for such transfer to the Participant or a Permitted
Transferee of the Participant. Following transfer, Options shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer; the Participant shall remain subject to applicable tax withholding;
the events of termination of employment of a Participant shall
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<PAGE> 7
continue to be applied with respect to the Permitted Transferee; and all other
terms of the Option shall remain unchanged. All Options granted to a Participant
under the Plan shall be exercisable during the lifetime of such Participant only
by such Participant, his agent, guardian or attorney-in-fact or by a Permitted
Transferee.
7.5 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, the Options
granted hereunder shall be exercisable in accordance with the Stock Option
Agreement between the Participant and the Corporation.
7.6 INDIVIDUAL SHARE LIMITATION. The number of Shares for which Options
may be granted to any Participant who is an Executive Officer shall not exceed
500,000 Shares over any continuous five-year period. In addition, the number of
Shares for which Options may be granted to any Participant who is an Executive
Officer upon exercise by such Participant of an Option for which the Option
Price is paid in whole or in part in Shares shall not exceed 500,000 Shares over
any continuous five-year period.
8. STOCK APPRECIATION RIGHTS
8.1 GRANTS. Stock Appreciation Rights may be granted, from time to
time, to such salaried employees of the Corporation and its affiliates as may be
selected by the Board Committee. SARs may be granted at the discretion of the
Board Committee either (i) in connection with an Option or (ii) independent of
an Option. The price from which appreciation shall be computed shall be
established by the Board Committee at the Grant Date; PROVIDED, HOWEVER, that
such price shall not be less than one-hundred percent (100%) of the fair market
value of the number of Shares subject of the grant on the Grant Date. In the
event the SAR is granted in connection with an Option, the fixed price from
which appreciation shall be computed shall be the Option Price. Each grant of a
SAR shall be evidenced by a Stock Appreciation Rights Agreement between the
Participant and the Corporation which shall specify the type of SAR granted, the
number of SARs, the conditions upon which the SARs vest and such other terms and
conditions as the Board Committee shall determine.
8.2 EXERCISE OF SARS. SARs may be exercised upon such terms and
conditions as the Board Committee shall determine; PROVIDED, HOWEVER, that SARs
granted in connection with Options may be exercised only to the extent the
related Options are then exercisable. Notwithstanding Section 3.1 hereof, upon
exercise of a SAR granted in connection with an Option as to all or some of the
Shares subject of such Award, the related Option shall be automatically canceled
to the extent of the number of Shares subject of the exercise, and such Shares
shall no longer be available for grant hereunder. Conversely, if the related
Option is exercised as to some or all of the Shares subject of such Award, the
related SAR shall automatically be canceled to the extent of the number of
Shares of the exercise, and such shares shall no longer be available for grant
hereunder.
8.3 PAYMENT UPON EXERCISE. Upon exercise of a SAR, the holder shall be
paid in cash and/or Shares the excess of the fair market value of the number of
Shares subject of the exercise
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<PAGE> 8
over the fixed price, which in the case of a SAR granted in connection with an
Option shall be the Option Price for such Shares.
8.4 RIGHTS OF SHAREHOLDERS. Participants shall not have any of the
rights of a shareholder with respect to any Options granted in connection with a
SAR until Shares have been issued upon the proper exercise of an Option.
8.5 TRANSFERABILITY OF SARS. Except as permitted by this Section 8.5,
SARs granted under the Plan may not be sold, transferred, pledged, assigned,
hypothecated or otherwise disposed of other than by will or by the laws of
descent and distribution. The Board Committee or the Committee may, in its
discretion, authorize all or a portion of the SAR's to be granted to a
Participant to be on terms which permit transfer by such Participant to
Permitted Transferees provided that (x) there may be no payment of consideration
for any such transfer, (y) the Stock Appreciation Rights Agreement shall
specifically provide for transferability in a manner consistent with this
Section, and (z) subsequent transfers of transferred SAR's shall be prohibited
except without consideration for such transfer to the Participant or a Permitted
Transferee of the Participant. Following transfer, SAR's shall continue to be
subject to the same terms and conditions as were applicable immediately prior to
transfer; the Participant shall remain subject to applicable tax withholding;
the events of termination of employment of a Participant shall continue to be
applied with respect to the Permitted Transferee; and all other terms of the
SAR's shall remain unchanged. All SARs granted to a Participant under the Plan
shall be exercisable during the lifetime of such Participant only by such
Participant, his agent, guardian, or attorney-in-fact or by a Permitted
Transferee.
8.6 TERMINATION OF EMPLOYMENT. If a Participant ceases to be an
employee of either the Corporation or of any of its affiliates, SARs granted
hereunder shall be exercisable in accordance with the Stock Appreciation Rights
Agreement between the Participant and the Corporation.
8.7 INDIVIDUAL SHARE LIMITATION. The number of Shares for which SARs
may be granted to any Participant who is an Executive Officer shall not exceed
500,000 Shares over any continuous five-year period.
9. OTHER SHARE-BASED AWARDS
Awards of Shares and other awards that are valued in whole or in part
by reference to, or are otherwise based on, Shares (including, but not limited
to, phantom stock or Units, performance units, bonus stock or similar securities
or rights), may be made, from time to time, to salaried employees of the
Corporation and its affiliates as may be selected by the Board Committee. Such
Awards may be made alone or in addition to or in connection with any other Award
hereunder. The Board Committee may in its sole discretion determine the terms
and conditions of any such Award. Each such Award shall be evidenced by an
agreement between the Participant and the Corporation which shall specify the
number of Shares subject of the Award, any consideration therefor, any vesting
or performance requirements and such other terms and conditions as the Board
Committee shall determine. The number of shares or Units subject of any
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<PAGE> 9
Awards under this Section 9 which may be granted to a Participant who is an
Executive Officer shall not exceed 100,000 Shares or Units, as the case may be,
in any fiscal year.
10. NON-EMPLOYEE DIRECTORS' OPTIONS
10.1 GRANTS. Effective the date of the 1990 Annual Meeting of
Shareholders and on the date of each Annual Meeting thereafter, each
Non-employee Director shall automatically be granted an Option to purchase 1,000
Shares. All such Options shall be nonstatutory stock options. The Option Price
shall be one hundred percent (100%) of the fair market value of the Shares on
the date of grant.
10.2 EXERCISE OF OPTIONS. Except as set forth in this Section 10, fifty
percent (50%) of the total number of Shares subject of an Option granted to a
Non-employee Director shall become exercisable on the first anniversary of the
date of grant of the year in which the option is granted and twenty-five percent
(25%) on the anniversary date of each of the next two succeeding years. The
right to purchase Shares with respect to Shares which have become exercisable
shall be cumulative during the term of the Option. Any Option granted to
Non-employee Directors that has been outstanding for more than one (1) year
shall immediately become exercisable in the event of a Change of Control, as
hereinafter defined. The Option may be exercised by the Non-employee Director
during the period that the Non-employee Director remains a member of the Board
and for a period of three (3) years following retirement, provided that only
those Options exercisable at the date of the Non-employee Director's retirement
may be exercised during the period following retirement and provided further,
that in no event shall the Option be exercisable more than ten (10) years after
the date of grant.
In the event of the death of a Non-employee Director, the Option shall
be exercisable only within the twelve (12) months next succeeding the date of
death, and then only (i) by the executor or administrator of the Non-employee
Director's estate or by the person or persons to whom the Non-employee
Director's rights under the Option shall pass by the Non-employee Director's
will or the laws of descent and distribution, and (ii) if and to the extent that
the Non-employee Director was entitled to exercise the Option at the date of the
Non-employee Director's death, provided that in no event shall the Option be
exercisable more than ten (10) years after the date of grant.
10.3 PAYMENT OF OPTION PRICE. No Shares shall be issued upon exercise
of an Option until full payment of the Option Price therefor by the Non-employee
Director. Payment for the Shares may be paid in cash, in Shares having a fair
market value equal to the Option Price, or any combination thereof.
10.4 ADJUSTMENTS. In case there shall be a merger, reorganization,
consolidation, recapitalization, stock dividend or other change in corporate
structure such that the Shares are changed into or become exchangeable for a
larger or smaller number of shares, thereafter the number of Shares subject to
outstanding Options granted to Non-employee Directors and the number of Shares
subject to Options to be granted to Non-employee Directors pursuant to the
provisions of this Section 10 shall be increased or decreased, as the case may
be, in direct
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proportion to the increase or decrease in the number of Shares by reason of such
change in corporate structure, provided that the number of shares shall always
be a whole number, and the purchase price per Share of any outstanding Options
shall, in the case of an increase in the number of Shares, be proportionately
reduced, and in the case of a decrease in the number of Shares, shall be
proportionately increased.
11. CHANGE OF CONTROL
11.1 DEFINITION OF CHANGE OF CONTROL. For purposes hereof, a "change of
control" shall be deemed to have occurred if:
(i) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Corporation representing 20% or more of the
combined voting power of the Corporation's then outstanding securities eligible
to vote for the election of the Board (the "Corporation Voting Securities");
PROVIDED, however, that the event described in this paragraph (i) shall not be
deemed to be a Change of Control by virtue of any of the following acquisitions:
(a) by the Corporation or any subsidiary, (b) by any employee benefit plan
sponsored or maintained by the Corporation or any subsidiary, (c) by any
underwriter temporarily holding securities pursuant to an offering of such
securities, (d) pursuant to a Non-Control Transaction (as defined in paragraph
(iii)), (e) pursuant to any acquisition by a corporate officer of the
Corporation or any group of persons including a corporate officer;
(ii) individuals who, on July 1, 1996, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to July 1, 1996, whose election or nomination for election was approved by a
vote of at least two-thirds of the Incumbent Directors who remain on the Board
(either by a specific vote or by approval of the proxy statement of the
Corporation in which such person is named as a nominee for director, without
objection to such nomination) shall also be deemed to be an Incumbent Director;
PROVIDED, HOWEVER, that no individual initially elected or nominated as a
director of the Corporation as a result of an actual or threatened election
contest with respect to directors or any other actual or threatened solicitation
of proxies or consents by or on behalf of any person other than the Board of
Directors shall be deemed to be an Incumbent Director;
(iii) the consummation of a merger, consolidation, share
exchange or similar form of corporate reorganization of the Corporation or any
such type of transaction involving the Corporation or any of its Subsidiaries
that requires the approval of the Corporation's stockholders (whether for such
transaction or the issuance of securities in the transaction or otherwise) (a
"Business Combination"), unless immediately following such Business Combination:
(a) more than 80% of the total voting power of the corporation resulting from
such Business Combination (including, without limitation, any corporation which
directly or indirectly has beneficial ownership of 100% of the Corporation
Voting Securities) eligible to elect directors of such corporation is
represented by shares that were Corporation Voting Securities immediately prior
to
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such Business Combination (either by remaining outstanding or being converted),
and such voting power is in substantially the same proportion as the voting
power of such Corporation Voting Securities immediately prior to the Business
Combination, (b) no person (other than any publicly traded holding Corporation
resulting from such Business Combination, any employee benefit plan sponsored or
maintained by the Corporation (or the corporation resulting from such Business
Combination)) becomes the beneficial owner, directly or indirectly, of 20% or
more of the total voting power of the outstanding voting securities eligible to
elect directors of the corporation resulting from such Business Combination, and
(c) at least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were Incumbent Directors at
the time of the Board's approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies the conditions specified in (a), (b) and (c) shall be deemed to be a
"Non-Control Transaction"); or
(iv) the stockholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or the direct or indirect
sale or other disposition of all or substantially all of the assets of the
Corporation and its subsidiaries.
Notwithstanding the foregoing, a "change of control" of the
Corporation shall not be deemed to occur solely because any person acquires
beneficial ownership of more than 20% of the Corporation Voting Securities as a
result of the acquisition of Corporation Voting Securities by the Corporation
which reduces the number of Corporation Voting Securities outstanding; PROVIDED,
THAT if after such acquisition by the Corporation such person becomes the
beneficial owner of additional Corporation Voting Securities that increases the
percentage of outstanding Corporation Voting Securities beneficially owned by
such person, a "change of control" of the Corporation shall then occur.
11.2 ACCELERATION OF BENEFITS. In the event of a "change of control" of
the Corporation, all outstanding Awards shall be paid in such manner and in such
amounts as determined by the Board Committee in its sole discretion at the time
such Awards are made.
12. AMENDMENT OR TERMINATION OF PLAN
Until such time as a "change of control" shall have occurred, the Board
or the Board Committee may amend, suspend or terminate the Plan or any part
thereof from time to time, provided that no change may be made which would
impair the rights of a Participant to whom Shares have theretofore been awarded
without the consent of said Participant; and provided, further, that neither the
Board nor the Board Committee may make any alteration or amendment to the Plan
which would materially increase the benefits accruing to Participants under the
Plan, increase the aggregate number of Shares which may be issued under the Plan
(other than an increase reflecting a change in capitalization of the
Corporation), change the class of employees eligible to participate in the Plan,
or amend, modify or delete Section 10 hereof, without the approval of the
shareholders of the Corporation so long as such approval is required by
applicable law or regulation. Further, Section 10 hereof may not be amended more
frequently than once every six months, except to comply with changes to the
Internal Revenue Code, the Employee Retirement Income Security Act, or the rules
promulgated thereunder. After a "change of
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control," the Board or the Board Committee shall no longer have the power to
amend, suspend or terminate the Plan or any part thereof.
13. MISCELLANEOUS
13.1 RIGHTS OF EMPLOYEES. Nothing in the Plan shall interfere with or
limit in any way the right of the Corporation or any of its subsidiaries or
affiliates to terminate any Participant's employment at any time, nor confer
upon any Participant any right to continued employment with the Corporation or
any of its subsidiaries or affiliates.
13.2 WITHHOLDING FOR TAXES. The Corporation shall have the authority to
withhold, or to require a Participant to remit to the Corporation, prior to
issuance or delivery of any Shares or cash hereunder, an amount sufficient to
satisfy federal, state and local tax or withholding requirements associated with
any Award. In addition, the Corporation may, in its sole discretion, permit a
Participant to satisfy any tax withholding requirements, in whole or in part, by
(i) delivering to the Corporation Shares held by such Participant having a fair
market value equal to the amount of the tax or (ii) directing the Corporation to
retain Shares otherwise issuable to the Participant under the Plan.
13.3 STATUS OF AWARDS. Awards hereunder shall not be deemed
compensation for purposes of computing benefits under any retirement plan of the
Corporation or affiliate and shall not affect any benefits under any other
benefit plan now or hereafter in effect under which the availability or amount
of benefits is related to the level of compensation.
13.4 WAIVER OF RESTRICTIONS. The Board Committee may, in its sole
discretion, based on such factors as the Board Committee may deem appropriate,
waive in whole or in part, any remaining restrictions or vesting requirements in
connection with any Award hereunder.
13.5 DELEGATION TO MANAGEMENT. The Board Committee may delegate to one
or more officers of the Corporation or a committee of officers the right to
grant Awards hereunder to employees who are not officers or directors of the
Corporation and to cancel or suspend Awards to employees who are not officers or
directors of the Corporation.
13.6 ADJUSTMENT OF AWARDS. Subject to Section 12, the Board Committee
shall be authorized to make adjustments in the method of calculating attainment
of Performance Goals or in the terms and conditions of other Awards (except
Options granted pursuant to Section 10 hereof) in recognition of unusual or
nonrecurring events affecting the Corporation or its financial statements or
changes in applicable laws, regulations or accounting principles; provided,
however, that no such adjustment shall impair the rights of any Participant
without his consent and that any such adjustments shall be made in a manner
consistent with Section 162(m) of the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated thereunder. The Board
Committee may also make Awards hereunder in replacement of, or as alternatives
to, Awards previously granted to Participants, including without limitation,
previously granted Options having higher Option Prices and grants or rights
under any other plan of the Corporation or of any acquired entity. The Board
Committee may correct any defect, supply any
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omission or reconcile any inconsistency in the Plan or any Award in the manner
and to the extent it shall deem desirable to carry it into effect. In the event
the Corporation shall assume outstanding employee benefit awards or the right or
obligation to make future such awards in connection with the acquisition of
another corporation or business entity, the Board Committee may, in its
discretion, make such adjustments in the terms of Awards under the Plan as it
shall deem appropriate. Notwithstanding the above, neither the Board, the Board
Committee nor any Committee shall have the right to make any adjustments in the
terms or conditions of Options granted pursuant to Section 10.
13.7 CONSIDERATION FOR AWARDS. Except as otherwise required in any
applicable agreement or by the terms of the Plan, Participants under the Plan
shall not be required to make any payment or provide consideration for an Award
other than the rendering of services.
13.8 DEFERRAL. Notwithstanding anything contained herein to the
contrary, in the event that any Award shall be ineligible for treatment as
"other performance based compensation" under Section 162(m) of the Internal
Revenue Code of 1986, as amended, the Board Committee, in its sole discretion,
shall have the right with respect to any Executive Officer who is in the year
any Award hereunder becomes deductible by the Corporation, a "covered employee"
under Section 162(m) of the Internal Revenue Code of 1986, as amended, to defer,
in whole or in part, such Executive Officer's receipt of such Award until the
Executive Officer is no longer a "covered employee" or until such time as shall
be determined by the Board Committee, provided that the Board Committee may
effect such a deferral only in a situation where the Corporation would be
prohibited a deduction under Section 162(m) and such deferral shall be limited
to the portion of the Award that is not deductible.
13.9 EFFECTIVE DATE AND TERM OF PLAN. The Plan shall be amended as of
August 23, 1997. Unless terminated under the provisions of Section 12 hereof,
the Plan shall continue in effect until terminated by the Board.
Approved by the Board of Directors this 23rd day of August, 1997.
Attested:
/s/ R. L. Ballantyne
--------------------
Secretary
<PAGE> 1
EXHIBIT 10(i)
LANIER WORLDWIDE, INC.
PENSION EQUITY PLAN*
(AS AMENDED AND RESTATED AS OF JULY 1, 1997)
_________________________
*Working copy which includes Amendment Number One.
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TABLE OF CONTENTS
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ARTICLE ONE 1
HISTORY AND EFFECTIVE DATE 1
ARTICLE TWO 1
CONSTRUCTION 1
2.1. Controlling Laws 1
2.2. Construction 1
ARTICLE THREE 2
DEFINITIONS 2
3.1. Accrued Benefit 2
3.2. Accrued Benefit Percentage 2
3.3. Actuarial Equivalent. 2
3.4. Affiliate 3
3.5. Authorized Leave of Absence 3
3.6. Annuity Starting Date 3
3.7. Average Compensation 3
3.8. Beneficiary 3
3.9. Board 3
3.10. Break in Service 3
3.11. Code 4
3.12. Committee 4
3.13. Compensation 4
3.14. Covered Compensation 5
3.15. Determination Date 5
3.16. Early Retirement Date 5
3.17. Eligible Employee 5
3.18. Employee 6
3.19. Employer 6
3.20. Employment Commencement Date 6
3.21. Employment Termination Date 6
3.22. ERISA 6
3.23. Hour of Service 6
3.24. Lump Sum Benefit 7
3.25. Named Fiduciary 7
3.26. Normal Retirement Age 7
3.27. Normal Retirement Date 7
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3.28. Participant 7
3.29. Plan 7
3.30. Plan Sponsor 7
3.31. Plan Year 7
3.32. Prior Plan Accrued Benefit 8
3.33. Reemployment Commencement Date 8
3.34. Spouse 8
3.35. Trust Agreement 8
3.36. Trust Fund 8
3.37. Trustee 8
3.38. Vested Date 8
3.39. Year of Service 8
(a) Participation and Vesting 8
(1) Period of Employment 8
(2) Termination/Reemployment 8
(3) Service With Other Entities 9
(4) Special Rule for July 31, 1991 Participants 9
(b) Benefit Accrual 10
(1) Period of Employment 10
(2) Termination/Reemployment 10
(c) Rule of Parity for 5 Breaks in Service. 10
(d) Qualified Military Service 10
ARTICLE FOUR 11
PARTICIPATION 11
4.1. General Rule 11
4.2. Change in Employment Status or Transfer From An Affiliate 11
4.3. Reemployment Rule 11
(a) Prior Service Disregarded 11
(b) Prior Service Aggregated 11
4.4. Leased Employees 12
ARTICLE FIVE 12
BENEFITS 12
5.1. Accrued Benefit 12
5.2. Lump Sum Benefit Formula 12
(a) General 12
(b) Accrued Benefit Percentage 13
(c) Accrued Benefit Percentages of Participants on
June 30, 1997 14
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(d) Alternative Benefit Determination for Certain Plan
Participants with a Prior Plan Accrued Benefit 14
(e) Accrued Benefit Percentages of Employees of Lanier
Puerto Rico, Inc. 15
(f) Accrued Benefit Percentages of Participants
Employed by Lanier Puerto Rico, Inc. on July 15,
1997 17
5.3. Vested Benefits Upon Termination of Employment 18
5.4. Disability Retirement Benefit 18
(a) In General 18
(b) Total and Permanent Disability 18
(c) Proof of Disability 19
(d) Early Commencement 19
(e) Survivor Benefits 20
(f) Termination of Disability 20
5.5. Suspension of Benefits 20
(a) Reemployment 20
(b) Continued Employment 20
(c) Suspension Notice 21
(d) Actuarial Adjustment for Certain Months 21
(1) Following Receipt of Suspension Notice 21
(2) Prior to Receipt of Suspension Notice 21
(3) Actuarial Equivalence 22
5.6. Calculation of Additional Accrued Benefit Following Initial
Payment of Benefits 22
(a) General 22
(b) Annuity Benefits Suspended 22
(c) Lump Sum Payments 22
(d) Adjustment Where Benefits Not Suspended 22
ARTICLE SIX 23
BENEFIT PAYMENT FORMS 23
6.1. Normal Payment Forms 23
(a) In General 23
(b) Payment of Small Benefits in a Lump Sum 23
(c) Employee Contributions of former Harris/LBP Plan
Participants 23
6.2. Election Procedures and Timing 23
(a) General 23
(b) Procedures and Spousal Consent 23
(c) Timing 24
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(d) Required Beginning Date 25
6.3. Description of Options 25
(a) Payment Options 25
(1) Single Life Annuity Option 25
(2) 10 Year Period Certain and Continuous
Annuity Option 25
(3) Joint and Survivor Annuity Option 25
(4) Single Sum Option 25
(5) Other Payment Options for Certain Participants 25
(b) Direct Rollover 26
6.4. Beneficiary 26
6.5. No Estoppel 27
6.6. Claims for Benefits 27
ARTICLE SEVEN 28
SURVIVOR BENEFIT 28
7.1. Preretirement Survivor Benefit 28
(a) General 28
(b) Commencement 28
(1) Spousal Beneficiary 28
(2) Non-Spousal Beneficiary 29
7.2. No Post Retirement Survivor Benefits 29
ARTICLE EIGHT 29
PLAN FUNDING 29
8.1. Contributions 29
8.2. Trust Fund 29
8.3. Prohibition Against Reversion 30
ARTICLE NINE 30
NAMED FIDUCIARIES AND PLAN SPONSOR 30
9.1. Named Fiduciaries 30
9.2. Allocation and Delegation by Named Fiduciaries 31
9.3. Advisers 31
9.4. Dual Fiduciary Capacities 31
9.5. Committee Power and Duties 31
(a) General 31
(b) Committee Action 32
(c) Records 32
(d) Information 32
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(e) Selection of Counsel, Accountants, Agents and
other Service Providers 32
(f) Reliance 32
(g) Committee Expenses 33
(h) Plan and Trust Fund Expenses 33
ARTICLE TEN 33
TRUST FUND AND TRUSTEE 33
ARTICLE ELEVEN 33
TERMINATION, AMENDMENT AND TRANSFERS 33
11.1. Right to Terminate 33
11.2. Full Vesting Upon Termination 33
11.3. Allocation of Assets 33
11.4. Merger, Consolidation and Transfer of Assets or Liabilities 34
11.5. Amendment 34
ARTICLE TWELVE 34
RESTRICTIONS ON CERTAIN BENEFITS 34
12.1. Limitations on Annual Benefit 34
12.2. Limit on Benefits of Highest-Paid Employees in the Event of Plan
Termination 35
(a) Restricted Participants 35
(b) Applicability of Limit 35
(c) Limit 35
(d) Security Arrangement 36
(e) Plan Termination 36
ARTICLE THIRTEEN 36
MISCELLANEOUS 36
13.1. Spendthrift Clause 36
13.2. Legally Incompetent 36
13.3. Benefits Supported Only By Trust Fund 36
13.4. Discrimination 37
13.5. Plan Not An Employment Contract 37
13.6. Claims 37
13.7. Nonreversion 37
13.8. Agent for Service of Process 37
13.9. Top Heavy Plan 37
(a) Determination 37
(b) Special Top Heavy Plan Rules 38
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13.10. Qualified Domestic Relations Orders 40
13.11. Income Tax Withholding 40
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PENSION EQUITY PLAN
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LANIER WORLDWIDE, INC.
PENSION EQUITY PLAN
(AS AMENDED AND RESTATED AS OF JULY 1, 1997)
ARTICLE ONE
HISTORY AND EFFECTIVE DATE
--------------------------
THE LANIER WORLDWIDE, INC. PENSION EQUITY PLAN (THE "PLAN") IS AN AMENDMENT AND
RESTATEMENT OF THE LANIER WORLDWIDE, INC. PENSION PLAN IN EFFECT AS OF JULY 1,
1994, AS LAST AMENDED AS OF JUNE 28, 1994. THE PLAN IN EFFECT AS OF JULY 1, 1994
WAS AN AMENDMENT AND RESTATEMENT OF THE PLAN EFFECTIVE AS OF AUGUST 1, 1991. THE
PLAN IN EFFECT AS OF AUGUST 1, 1991 WAS AN AMENDMENT AND RESTATEMENT OF THE PLAN
EFFECTIVE AS OF APRIL 30, 1990. THE PLAN IN EFFECT AS OF APRIL 30, 1990 WAS AN
AMENDMENT AND RESTATEMENT OF THE HARRIS/3M DOCUMENT PRODUCTS, INC. PENSION PLAN,
AS ORIGINALLY EFFECTIVE AS OF JANUARY 1, 1986 AND AS LAST AMENDED AND RESTATED
EFFECTIVE AS OF JULY 1, 1987 ("HARRIS/DPI PLAN"). THE HARRIS/LANIER RETIREMENT
PLAN AND TRUST ("HARRIS/LBP PLAN"), AS ORIGINALLY EFFECTIVE AS OF JULY 1, 1965
AND AS LAST AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1988, WAS MERGED
INTO THE PLAN EFFECTIVE AS OF OCTOBER 1, 1989.
EXCEPT AS EXPRESSLY PROVIDED OTHERWISE, THE PROVISIONS OF THE PLAN AS AMENDED
AND RESTATED AS OF JULY 1, 1997 SHALL APPLY ONLY TO THOSE INDIVIDUALS WHO ARE
EMPLOYEES OF AN EMPLOYER ON OR AFTER JULY 1, 1997. ANY BENEFITS OF AN INDIVIDUAL
WHOSE EMPLOYMENT WITH AN EMPLOYER TERMINATED BEFORE JULY 1, 1997 AND WHO IS NOT
REEMPLOYED BY AN EMPLOYER AFTER SUCH DATE SHALL, EXCEPT AS EXPRESSLY PROVIDED
OTHERWISE IN THE PLAN, BE DETERMINED SOLELY IN ACCORDANCE WITH THE PROVISIONS OF
THE RELEVANT PRIOR PLAN DOCUMENT (OR DOCUMENTS).
ARTICLE TWO
CONSTRUCTION
------------
2.1. CONTROLLING LAWS. THE PLAN AND ITS RELATED TRUST AGREEMENT SHALL BE
CONSTRUED AND INTERPRETED UNDER THE LAWS OF THE STATE OF GEORGIA, WITHOUT REGARD
TO ITS PRINCIPLES OF CONFLICTS OF LAWS, TO THE EXTENT SUCH LAWS ARE NOT
PREEMPTED BY ERISA.
2.2. CONSTRUCTION. PLAN HEADINGS AND SUBHEADINGS ARE FOR CONVENIENCE OF
REFERENCE ONLY AND ARE NOT TO BE CONSTRUED TO ALTER THE TERMS OF THE PLAN.
WHEREVER USED IN THE PLAN, TERMS EXPRESSED IN THE MASCULINE GENDER SHALL BE
DEEMED TO INCLUDE THE
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FEMININE GENDER, AND UNLESS THE CONTEXT OTHERWISE REQUIRES, TERMS IN THE PLURAL
SHALL INCLUDE THE SINGULAR, AND TERMS IN THE SINGULAR SHALL INCLUDE THE PLURAL.
REFERENCES IN THE PLAN TO "SECTION" SHALL BE TO A SECTION IN THE PLAN UNLESS
OTHERWISE INDICATED.
ARTICLE THREE
DEFINITIONS
-----------
THE FOLLOWING CAPITALIZED TERMS AND PHRASES SHALL HAVE THE FOLLOWING RESPECTIVE
MEANINGS UNLESS THE CONTEXT CLEARLY INDICATES OTHERWISE:
3.1. ACCRUED BENEFIT. A PARTICIPANT'S BENEFIT UNDER THE PLAN AS DESCRIBED IN
SECTION 5.1.
3.2. ACCRUED BENEFIT PERCENTAGE. The percentage determined in accordance with
section 5.2(b).
3.3. ACTUARIAL EQUIVALENT. A form of benefit equivalent to the value of the form
of benefit being replaced, computed as follows:
(a) For purposes of calculating (i) a Participant's Accrued Benefit
based on his Lump Sum Benefit and (ii) benefit forms other than an
annuity form:
(1) Except as provided in clause (2) below, the
applicable mortality table is the 1983 Group Annuity
Mortality Table using 50% of the male mortality rates
and 50% of the female mortality rates, as published
by the Secretary of the Treasury or such other
mortality table designated by the Secretary of the
Treasury under section 417(e) of the Code, and the
annual interest rate on 30-year Treasury securities
for the May prior to the Plan Year which contains the
Participant's Annuity Starting Date;
(2) In the case of an Annuity Starting Date occurring
before July 1, 2000 for a Participant employed on
July 1, 1997 who will attain his Early Retirement
Date on or before July 1, 2002, the unloaded 1983
Group Annuity Mortality Table for males with a one
year set-back for a Participant and a five year
set-back for a Participant's Spouse or Beneficiary,
and an interest rate equal the Pension Benefit
Guaranty Corporation ("PBGC") interest rate (deferred
or immediate, whichever is appropriate) that would be
used by the PBGC as of the first day of the Plan Year
which contains the
PENSION EQUITY PLAN
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Annuity Start Date for purposes of determining the
present value of a single sum distribution on a plan
termination.
(b) For purposes of calculating any annuity form of benefit other than
the Participant's Accrued Benefit:
(1) The unloaded 1983 Group Annuity Mortality Table for
males with a one year set-back for a Participant and
a five year set-back for a Participant's Spouse or
Beneficiary, and
(2) An interest rate assumption equal to 7% per annum,
compounded annually.
3.4. AFFILIATE. Any entity that is (a) a member of a controlled group of
corporations (as defined in section 414(b) of the Code) of which an Employer is
a member; (b) a trade or business, whether or not incorporated, that is under
"common control" (as defined in section 414(c) of the Code) with an Employer;
(c) an organization that is a member of an affiliated service group (as defined
in section 414(m) of the Code) with an Employer, a corporation described in
clause (a) of this subdivision or a trade or business described in clause (b) of
this subdivision; or (d) an organization which is required to be aggregated with
an Employer (under section 414(o) of the Code).
3.5. AUTHORIZED LEAVE OF ABSENCE. Any period of absence authorized by an
Employer under its standard personnel practices, including as required by the
Family and Medical Leave Act of 1993, provided that the Employee returns to the
employ of the Employer by the end of such period, except as may be otherwise
required by the Family and Medical Leave Act of 1993.
3.6. ANNUITY STARTING DATE. The first day of the first month for which an
amount is payable as a benefit under the Plan.
3.7. AVERAGE COMPENSATION. As of any Determination Date, the average of a
Participant's Compensation during the five consecutive calendar year period
during which the Participant was an Employee (or actual number of consecutive
calendar years the Employee was an Employee for less than five) in which such
average is highest out of the ten consecutive calendar year period during which
the Participant was an Employee or if such period is less than ten consecutive
years, the duration of such period. Notwithstanding the foregoing, the Average
Compensation of any Participant shall not be less than his Average Compensation
determined as of July 31, 1991 under the Plan as in effect on such date.
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3.8. BENEFICIARY. A person last designated by a Participant to receive all or a
portion of the Participant's interest under the Plan in the event of the
Participant's death, subject to the provisions of sections 6.4 and 7.1.
3.9. BOARD. The board of directors of the Plan Sponsor.
3.10. BREAK IN SERVICE. Any 12 consecutive month period beginning on an
Employee's Employment Termination Date or anniversary of such date during which
the Employee has not completed an Hour of Service for an Employer. For purposes
of this definition, an Employee shall be credited with an Hour of Service for
any period in which the Employee (i) is on an Authorized Leave of Absence for
reasons other than those identified in subsection (ii); (ii) is on an
Authorized Leave of Absence for up to 24 consecutive months because of (A) the
Employee's pregnancy, (B) the birth of the Employee's child, (C) the placement
of a child with the Employee in connection with the Employee's adoption of such
child, or (D) the need to care for such child for a period beginning
immediately following such birth or adoption; or (iii) is absent from work due
to qualified military service (as such term is defined in the Uniformed
Services Employment and Reemployment Act of 1994) and is entitled to
reemployment under such Act. Notwithstanding the foregoing, clause (ii) shall
not be applicable unless the Employee furnishes to the Committee such legal
documentation as it may be reasonably require to establish to the Committee's
satisfaction that the absence is for reasons set forth in such clause and to
verify the duration of such absence.
3.11. CODE. The Internal Revenue Code of 1986, as amended.
3.12. COMMITTEE. The Pension and Retirement Committee of the Board.
3.13. COMPENSATION. For each Participant, the sum of (a) and (b), minus (c),
where
"(a)" equals the Participant's base salary and wages paid by the
Participant's Employer, and other amounts paid by the Employer that
are includible in the Participant's gross income, but excluding
payments described in (c) below, including overtime payments,
commission payments, annual bonuses, regional and shift differentials,
vacation pay, compensation received while on an Authorized Leave of
Absence, and short-term disability payments;
"(b)" equals the elective deferrals made by an Employer on behalf of
such Participant that are not includible in the Participant's gross
income for federal income tax purposes for such period because either
(i) such deferrals are
PENSION EQUITY PLAN
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contributed to a cash or deferred arrangement described in section
401(k) of the Code or (ii) they are excluded under section 125 of the
Code; and
"(c)" equals any payment made under a severance pay plan or program,
any payment made in consideration of the Participant's release of
claims in favor of an Employer or an Affiliate, any foreign or
domestic assignment allowance, any contest payments, any
expense-related reimbursements (including reimbursements commonly
referred to as "Runzheimer" payments), any signing bonuses, any
payment made under any long-term incentive plan and the value of life
insurance includible in the Participant's gross income.
For purposes of the Plan and to the extent required by section 414(u) of the
Code and the Uniformed Service Employment and Reemployment Rights Act of 1994,
the Participant's Compensation during a period of qualified military service
shall be deemed to equal the Compensation the Participant would have received
during the period of qualified military service but for his absence due to
qualified military service. If the Compensation the Participant would have
received during such period is not reasonably certain, the Participant's
Compensation for his period of qualified military service shall be based on the
Participant's Compensation during the 12-month period (or, if shorter, the
period of employment) immediately preceding the qualified military service.
The amount of an Employee's Compensation that may be taken into account for any
purpose of the Plan shall not exceed (i) for the Plan Year commencing on July
1, 1997, $160,000 and (ii) for each subsequent Plan Year, the amount prescribed
by Section 4017(a)(17) of the Code (as adjusted for increases in the
cost-of-living pursuant to section 401(a)(17)(B) of the Code).
3.14. COVERED COMPENSATION. For each Participant, as of any Determination Date,
the average of the taxable wage bases (as defined in the last sentence hereof)
in effect under the Social Security Act for each calendar year during the
35-year period ending with the last day of the calendar year in which such
Participant attains (or will attain) social security retirement age (as defined
in the last sentence hereof) determined by assuming that the taxable wage bases
for all future years shall be the same as the taxable wage base in effect as of
the beginning of the Plan Year which includes the Determination Date. A
Participant's Covered Compensation for a Plan Year after such 35-year period is
the Participant's Covered Compensation for the Plan Year during which he
attained social security retirement age. For purposes of this definition, the
term "taxable wage base" means for any Plan Year the contribution and benefit
base in effect under section 230 of the Social Security Act at the beginning of
such Plan Year, and the term "social security retirement age" means age 65 for a
Participant born before January 1, 1938; age 66 for a
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Participant born after December 31, 1937 and before January 1, 1955; and age 67
for a Participant born after December 31, 1954.
3.15. DETERMINATION DATE. The earlier of (i) the date as of which a
Participant's Accrued Benefit is determined under the Plan and (ii) the most
recent date the Participant terminated employment as an Eligible Employee.
3.16. EARLY RETIREMENT DATE. The first day of the calendar month coinciding
with or next following the later of (i) the date on which the Participant
reaches age 55 and (ii) the date on which the Participant completes 10 full
Years of Service, provided that Participant is an Employee on such date and the
Participant has not attained age 65. Notwithstanding the foregoing sentence,
the Early Retirement Date of a Participant who is a Former 3M Participant (as
defined in Exhibit A) shall be determined as set forth in Exhibit A.
3.17. ELIGIBLE EMPLOYEE. An Employee of an Employer, other than any Employee
described below:
(a) an Employee who is included in a unit of employees covered by a
collective bargaining agreement which does not provide that such
Employee be eligible to participate in the Plan;
(b) an Employee who is a nonresident alien and who receives no earned
income from an Employer from sources within the United States; or (c)
an Employee (other than an Employee of Lanier Puerto Rico, Inc.) who
works primarily outside the United States and who is paid under a
payroll system which is not linked electronically to the payroll
system for Employees who work primarily within the United States.
3.18. EMPLOYEE. An individual whose relationship with an Employer is, under
common law, that of an Employee. Notwithstanding the foregoing, no individual
who renders services for an Employer shall be considered an Employee for
purposes of the Plan if such Employee renders such services pursuant to either
(i) an agreement providing that such services are to rendered by the individual
as an independent contractor or (ii) an agreement with an entity, including a
leasing organization within the meaning of section 414(n)(2) of the Code, that
is not an Employer or Affiliate.
3.19. EMPLOYER. The Plan Sponsor, Lanier Puerto Rico, Inc., and any other
entity which (i) adopts the Plan and (ii) the Board designates in writing from
time to time as an Employer under the Plan.
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3.20. EMPLOYMENT COMMENCEMENT DATE. The first date on which an Employee first
performs an Hour of Service for an Employer.
3.21. EMPLOYMENT TERMINATION DATE. The earlier of (a) and (b) below:
(a) the date the Employee quits, retires, dies or is discharged in
accordance with the personnel policy of his Employer; and
(b) the first anniversary of the first day of an Employee's absence
from service for any other reason (e.g., disability, leave of absence,
layoff, etc.), except as provided in section 3.39(d), provided that an
Employee who fails to return to employment at the expiration of a
leave of absence shall be deemed to have terminated employment on the
earlier of (i) the date on which his leave of absence expires and (ii)
the first anniversary of the first day of his absence (except as
provided in section 3.10(iii)).
3.22. ERISA. The Employee Retirement Income Security Act of 1974, as amended.
3.23. HOUR OF SERVICE. Each hour for which:
(a) an Employee is paid, or entitled to payment, for the performance
of duties as an Employee;
(b) an Employee is paid, or entitled to payment, by an Employer on
account of a period of time during which no duties are performed
(irrespective of whether the employment relationship has terminated)
due to vacation, holiday, illness, incapacity (including disability),
lay-off, jury duty, military duty or leave of absence. No more than
501 Hours of Service will be credited under this paragraph (b) for any
single continuous period (regardless of whether such period occurs in
a single computation period);
(c) back pay is awarded or agreed to by the Employer or an Affiliate.
Such hours shall be credited to the Plan Years to which the award,
agreement or payment pertains rather than the Plan Year in which the
award, agreement or payment is made.
For purposes of paragraphs (b) and (c) above, an Hour of Service shall be
calculated in accordance with Department of Labor Regulation section
2530.200b-2, which provides that (i) if a payment is based upon hours, days,
weeks or other unit of time, the number of Hours of Service credited shall be
the number of regularly scheduled working hours for such Employee for such unit
of time, and (ii) if the payment due is not based upon units of time,
PENSION EQUITY PLAN
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the number of Hours of Service credited shall be equal to the amount of the
payment divided by the Employee's most recent hourly rate of compensation. For
payments made to an Employee without a regular work schedule, the number of
hours credited shall be calculated on a reasonable basis which reflects the
average hours worked by the Employee, or by other employees in the same job
classification, over a representative period of time and which is consistently
applied with respect to all employees within the same job classifications. In
order to avoid double counting, the same Hours of Service shall not be credited
both under paragraph (a) or paragraph (b), as applicable, and under paragraph
(c).
3.24. LUMP SUM BENEFIT. As of any Determination Date, a lump sum payment,
determined in accordance with section 5.2, payable to a Participant.
3.25. NAMED FIDUCIARY. The person or persons described in section 9.1.
3.26. NORMAL RETIREMENT AGE. The date a Participant reaches age 65 and
completes five years of Service.
3.27. NORMAL RETIREMENT DATE. For each Participant the first day of the
calendar month coincident with or immediately following the date he reaches
Normal Retirement Age.
3.28. PARTICIPANT. An Eligible Employee who has become a participant in the
Plan in accordance with Article Four or a former Eligible Employee who is
entitled to receive benefits under the Plan.
3.29. PLAN. The Lanier Worldwide, Inc. Pension Equity Plan as set forth in this
document, as may be amended in accordance with Article Eleven.
3.30. PLAN SPONSOR. Lanier Worldwide, Inc. and any successor to such
corporation.
3.31. PLAN YEAR. The fiscal year ending June 30.
3.32. PRIOR PLAN ACCRUED BENEFIT. For each Participant employed by Lanier
Puerto Rico, Inc. in the Plan on July 15, 1997, and for each other Participant
in the Plan on June 30, 1997, his Accrued Benefit determined in accordance with
the terms of the Plan in effect as of June 30, 1997.
3.33. REEMPLOYMENT COMMENCEMENT DATE. The first date on which a former Employee
is reemployed by an Employer after a Break in Service and first performs an
Hour of Service for an Employer.
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3.34. SPOUSE. The individual who is the Participant's lawful spouse on the
earlier of (a) his Annuity Starting Date and (b) his date of death.
3.35. TRUST AGREEMENT. The Harris Corporation Master Pension Trust Agreement,
as may be amended from time to time.
3.36. TRUST FUND. The trust fund created in accordance with the Trust
Agreement.
3.37. TRUSTEE. The person or persons acting from time to time as the trustee of
the Trust Fund.
3.38. VESTED DATE. For each Employee, the earlier of the date on which he (a)
completes five full Years of Service and (b) reaches Normal Retirement Age as
an Employee.
3.39. YEAR OF SERVICE. (a) PARTICIPATION AND VESTING. For participation and
vesting purposes, the term "Year of Service" shall mean a period of employment
determined in accordance with this subsection, provided that any period of
employment completed by an Employee before he reaches age 18 shall be excluded.
(1) PERIOD OF EMPLOYMENT. An Employee's period of employment
will be deemed to start on his Employment Commencement Date (or
Reemployment Commencement Date, as the case may be) and will
end on the Employee's next following Employment Termination
Date. In addition, an Employee shall receive credit for vesting
and participation purposes for each period of employment and
for each period of separation from service due to an absence or
termination of employment after his Employment Commencement
Date (or Reemployment Commencement Date, as the case maybe) if
such separation is less than 12 consecutive months in duration.
(2) TERMINATION/REEMPLOYMENT. If an Employee terminates
employment and is reemployed less than 12 months after his
Employment Termination Date, the Employee's Years of Service
shall be determined by including the period of time between his
Employment Termination Date and his Reemployment Commencement
Date. Except as provided in section 3.39(c), if an Employee
terminates employment and is reemployed more than 12 months
after his Employment Termination Date, his Years of Service
shall be determined by aggregating the service completed in
each period of employment in accordance with the rules set
forth below.
(i) FULL YEARS - First, determine the number of
completed 12 consecutive month periods within each
period of employment.
PENSION EQUITY PLAN
<PAGE> 17
(ii) EXTRA MONTHS - Next, determine the number of
completed months of employment in each period of
employment in excess of full years of employment in
each such period and aggregate such months into
additional full years of employment on the basis that
each month taken into account shall be considered as
1/12 of a year. For this purpose employment from the
anniversary of an Employment Commencement Date to the
immediately preceding date in the next succeeding
month will be treated as a completed month of
employment.
(iii) EXCESS DAYS - Next, determine the number of days
of employment in each period of employment in excess
of completed months of employment and aggregate those
additional days into additional months of employment
on the basis that 30 days of such employment equals
one month.
(3) SERVICE WITH OTHER ENTITIES. Except as set forth in
Exhibit A and section section 3.39(d) and 4.4, no period of
employment which an Employee completes as an employee of any
organization other than an Employer whatsoever shall be taken
into account under the Plan unless such organization is an
Affiliate, provided, that service with an organization prior
to the time the organization became an Affiliate or after the
organization ceases to be an Affiliate may be recognized if
the corporate documents governing the acquisition or
disposition of stock or assets of such organization provide
for such recognition. Employment by an Affiliate which is not
an Employer shall be taken into account solely for purposes
of (i) determining such Employee's Years of Service and
eligibility to participate in the Plan and (ii) determining
when such person has retired or otherwise terminated his
employment to the same extent it would have had such service
been as an Employee of an Employer.
(4) SPECIAL RULE FOR JULY 31, 1991 Participants.
Notwithstanding the foregoing provisions of this section
3.39(a), each Participant who was a Participant on July 31,
1991 shall be deemed to have completed five Years of Service
for purposes of this section 3.39(a) when he completes four
full Years of Service and 11 additional months of employment
and to have completed 10 Years of Service for purposes of
section sections 3.16, 5.3 and 6.3(a) when he completes nine
full Years of Service and 11 additional months of employment.
For this purpose, 30 days of employment shall equal one
month.
PENSION EQUITY PLAN
<PAGE> 18
(b) BENEFIT ACCRUAL. For benefit accrual purposes, the term "Year of
Service" means a Participant's full and fractional years as a
Participant and an Eligible Employee determined in accordance with this
subsection.
(1) PERIOD OF EMPLOYMENT. A Participant will receive credit
for one Year of Service for each 12 consecutive month period
during which he is both a Participant and an Eligible Employee
in any "period of employment". A "period of employment" shall
begin on the date the Eligible Employee becomes a Participant
and shall end on the last day of the calendar month in which
his Employment Termination Date occurs. A Participant will
receive credit for 1/12 of a Year of Service for each full
calendar month during a period of employment. An Eligible
Employee will be deemed to be a Participant for a full calendar
month at the beginning or at the end of a period of employment
only if he is both a Participant and an Eligible Employee on at
least 15 consecutive days in such calendar month.
An Eligible Employee will receive credit for benefit accrual
purposes for his period of absence from employment as an
Eligible Employee, provided that he returns to employment as an
Eligible Employee within 12 months of the first day of such
absence.
(2) TERMINATION/REEMPLOYMENT. If a Participant terminates
employment as an Eligible Employee and is thereafter
reemployed as such, his Years of Service and fractional Years
of Service shall be determined by first aggregating the
number of full years in each period determined in accordance
with section 3.39(b)(1) and, second, by aggregating the
additional months in each period (also determined in
accordance with section 3.39(b)(1)) and converting those
months into years on the basis that each month equals 1/12th
of one Year of Service. Notwithstanding the foregoing, a
Participant's Years of Service shall not include any service
performed by such Participant with respect to which he has
received a lump sum distribution of his nonforfeitable
Accrued Benefit, except as provided in section 13.9(b)(3).
(c) RULE OF PARITY FOR 5 BREAKS IN SERVICE. Notwithstanding the rules
set forth in section 3.39(a) and (b), if an Employee who has not
reached his Vested Date or has not become vested in any portion of his
Accrued Benefit under the terms of Article 13 has a Break in Service,
his employment in any period of employment completed before the Break
in Service shall not be aggregated with employment completed after the
Break in Service if the number of his consecutive Breaks in Service is
less
PENSION EQUITY PLAN
<PAGE> 19
than the greater of (i) five years and (ii) his Years of Service
before his Break in Service.
(d) QUALIFIED MILITARY SERVICE. A Participant who is absent from
employment on account of qualified military service (as defined in
section 414(u)(5) of the Code) and who is entitled to reemployment
rights under the Uniformed Service Employment and Reemployment Rights
Act of 1994 shall be credited with Years of Service for vesting and
participation purposes under the Plan for the period of his qualified
military service. In addition, such a Participant shall be credited
with Years of Service for purposes of benefit accrual to the extent
required by section 414(u) of the Code and the Uniformed Service
Employment and Reemployment Rights Act of 1994.
ARTICLE FOUR
PARTICIPATION
-------------
4.1. GENERAL RULE. Each Eligible Employee who is not classified as a temporary,
summer or casual part-time employee shall become a Participant on the first day
of the month which immediately follows or coincident with the later of the date
on which (i) he completes one Year of Service as determined under section
3.39(a), and (ii) he attains age 21. An Eligible Employee who is classified as
a temporary, summer or casual part-time employee shall become a Participant the
first day of the month immediately following or coincident with the earlier of
(i) the date on which he is no longer classified as a temporary, summer or
casual part-time employee, and (ii) the last day of the 12 consecutive month
period beginning on such Eligible Employee's Employment Commencement Date (or
any subsequent 12-month period beginning on any anniversary of such Employment
Commencement Date) during which such Eligible Employee completes at least 1,000
Hours of Service.
4.2. CHANGE IN EMPLOYMENT STATUS OR TRANSFER FROM AN AFFILIATE. If an
individual who is not a Participant shall become an Eligible Employee because
of a change in his employment status or because of his transfer of employment
to an Employer from an Affiliate which is not an Employer, such individual
shall become a Participant on the later of (i) the date of such change or
transfer and (ii) the first day of the month coincident with or next following
his satisfaction of the participation requirement set forth in section 4.1.
4.3. REEMPLOYMENT RULE.
PENSION EQUITY PLAN
<PAGE> 20
(a) PRIOR SERVICE DISREGARDED. If a former Employee terminates
employment before his Vested Date under circumstances such that his
prior Years of Service are disregarded on his reemployment under the
rules described in section 3.39(c), then such Employee shall be
treated under section 4.1 as a new Employee.
(b) PRIOR SERVICE AGGREGATED. If a former Employee is reemployed under
circumstances such that his prior Years of Service are aggregated with
his Years of Service following reemployment under section 3.39(c),
then he shall begin to participate in accordance with this section
4.3(b).
(1) If he was a Participant prior to his most recent
Employment Termination Date, he shall resume participation on
the first date following his reemployment that he is an
Eligible Employee.
(2) If he was not a Participant before his most recent
Employment Termination Date, he shall become a Participant on
the date on which he becomes eligible to participate under
section 4.1.
4.4. LEASED EMPLOYEES. If an individual who performed services as a leased
employee (within the meaning of section 414(n)(2) of the Code) of an Employer
or any Affiliate becomes an Employee, or if an Employee becomes such a leased
employee, then any period during which the individual performed services as a
leased employee of an Employer or Affiliate shall be taken into account solely
for the purposes of (i) measuring such individual's Years of Service for
participation and vesting purposes and (ii) determining whether such individual
has retired or otherwise terminated employment for purposes of Articles Five
and Six to the same extent such period would have been taken into account had
such services been performed as an Employee. Notwithstanding the foregoing
sentence, this section 4.4 shall not apply to any period of service during
which such a leased employee was covered by a plan described in section
414(n)(5) of the Code.
PENSION EQUITY PLAN
<PAGE> 21
ARTICLE FIVE
BENEFITS
--------
5.1. ACCRUED BENEFIT. Subject to Exhibit A, a Participant's Accrued Benefit
under the Plan shall be the Actuarial Equivalent of the Participant's Lump Sum
Benefit determined under section 5.2, and expressed as an annual benefit in the
form of a single life annuity commencing at the Participant's Normal Retirement
Date. A Participant's Accrued Benefit shall be adjusted for any period of his
qualified military service (as defined in section 414(u)(5) of the Code) to the
extent required by section 414(u) of the Code and the Uniformed Service
Employment and Reemployment Rights Act of 1994.
5.2. LUMP SUM BENEFIT FORMULA.
(a) GENERAL. A Participant's Lump Sum Benefit shall be equal to the
sum of (1) and (2) where:
"(1)" is the product of (i) a Participant's Accrued Benefit
Percentage (as determined under section 5.2(b) below), and
(ii) his Average Compensation; and
"(2)" is the product of (i) one-half of a Participant's
Accrued Benefit Percentage (as determined under section
5.2(b) below), and (ii) his Average Compensation in excess of
his Covered Compensation.
(b) ACCRUED BENEFIT PERCENTAGE. Except as provided in section 5.2(c),
(d), (e) and (f), a Participant's Accrued Benefit Percentage shall be
equal to the sum of the following applicable percentages:
(i) 2% for each Year of Service before the Participant
attains age 35;
(ii) 4% for the Year of Service in which the Participant
attains age 35, as provided in clause (vii), and for each
Year of Service thereafter before the Participant attains age
40;
(iii) 6% for the Year of Service in which the Participant
attains age 40, as provided in clause (vii), and for each
Year of Service thereafter before the Participant attains age
50;
(iv) 10% for the Year of Service in which the Participant
attains age 50, as provided in clause (vii), and for each
Year of Service thereafter before the Participant attains age
55;
PENSION EQUITY PLAN
<PAGE> 22
(v) 11% for the Year of Service in which the Participant
attains age 55, as provided in clause (vii), and for each
Year of Service thereafter before the Participant attains age
60;
(vi) 12% for the Year of Service in which the Participant
attains age 60, as provided in clause (vii), and for each
Year of Service thereafter; and
(vii) for the each Year of Service in which the Participant
attains age 35, 40, 50, 55 or 60, the relevant applicable
percentage shall be the sum of pro-rata portions of each of
the percentages applicable before and after the Participant
attains the relevant age. Such pro-rata portions shall be
determined as follows:
(1) THE PRE-ATTAINED AGE PORTION. The product of 2%,
4%, 6%, 10% or 11%, as applicable, multiplied by a
fraction, the numerator of which shall be the number
of full months during such year up to, but not
including, the month in which the Participant attained
the relevant age and the denominator of which shall be
12.
(2) THE POST-ATTAINED AGE PORTION. The product of 4%,
6%, 10%,11% or 12%, as applicable, multiplied by a
fraction, the numerator of which shall be the number
of full months during such year beginning with the
month in which the Participant attained the relevant
age and the denominator of which shall be 12.
(viii) For the year in which a Participant terminates
employment, the relevant percentage shall be determined by
multiplying the applicable percentage under clauses (i)
through (vii) above by a fraction, the numerator of which is
the number of full months during which the Participant is
employed by an Employer and the denominator of which is 12.
(c) ACCRUED BENEFIT PERCENTAGES OF PARTICIPANTS ON JUNE 30, 1997.
Except as provided in section 5.2(e) and (f) for Participants employed
by Lanier Puerto Rico, Inc., the Accrued Benefit Percentage of a
Participant with an Accrued Benefit on June 30, 1997 shall be equal to
the greater of the following:
(1) the Participant's Accrued Benefit Percentage under
section 5.2(b), except that if the Participant had attained
age 40 and had at least five Years of Service on June 30,
1997, the Participant's Accrued Benefit Percentage shall be
increased by 1% for each year of the Participant's full Years
of Service prior to such date; and
PENSION EQUITY PLAN
<PAGE> 23
(2) the sum of (A) and (B) where:
"(A)" is the Participant's Accrued Benefit
Percentage under section 5.2(b) for Years of Service
after June 30, 1997;
"(B)" is the percentage which is equal to (I)
divided by (II), where:
"(I)" is the lump sum Actuarial Equivalent
of the Participant's Prior Plan Accrued
Benefit on June 30, 1997 determined in
accordance with section 3.3(a), provided
that for this purpose only the interest
rate shall be the rate in effect one month
prior to the month identified in section
3.3(a); and
"(II)" is 150% of the Participant's Average
Compensation as of June 30, 1997
(determined in accordance with the terms of
the Plan in effect on such date), minus the
lesser of (I) 50% of his Average
Compensation as of June 30, 1997
(determined in accordance with the terms of
the Plan in effect on such date) and (II)
50% of his Covered Compensation as of June
30, 1997 (determined in accordance with the
terms of the Plan in effect on such date).
(d) ALTERNATIVE BENEFIT DETERMINATION FOR CERTAIN PLAN PARTICIPANTS
WITH A PRIOR PLAN ACCRUED BENEFIT. If a Participant satisfies the
requirements of (i) or (ii) below, then such Participant's benefit
payable under the Plan shall be the greater of (a) his Accrued Benefit
determined as of his Employment Termination Date and (b) his Prior Plan
Accrued Benefit. In the case of a Participant who satisfies the
requirements of clause (i) below, the Average Compensation and Years of
Service used in determining his Prior Plan Accrued Benefit shall be
determined as of his Employment Termination Date. In the case of a
Participant who satisfies the requirements of clause (ii) below, the
Years of Service used in determining his Prior Plan Accrued Benefit
shall be determined as of his Employment Termination Date and the
Average Compensation used in determining his Prior Plan Accrued Benefit
shall be determined as of December 31, 1997.
(i) The Participant had attained his Early Retirement
Date or his Normal Retirement Age as of July 1, 1997,
or in the case of a Participant employed by Lanier
Puerto Rico, Inc., as of July 15, 1997; or
PENSION EQUITY PLAN
<PAGE> 24
(ii) The Participant's Early Retirement Date was
within five years of July 1, 1997 (or in the case of
a Participant employed by Lanier Puerto Rico, Inc.,
as of July 15, 1997) provided the Participant
remained employed by an Employer during that period,
or the Participant is a Former 3M Participant (as
defined in Exhibit A) who is eligible for an early
unreduced retirement benefit in accordance with
section 3.4 of Exhibit A.
For purposes of this section 5.2(d), the Prior Plan Accrued Benefit
will be expressed in the form of a lump sum payment (a lump sum
Actuarial Equivalent) and will be reduced by 1.5% of the Participant's
Average Compensation (determined as of the Participant's Employment
Termination Date or December 31, 1997 as provided above) multiplied by
the Participant's Years of Service for purposes of benefit accrual
since July 1, 1997.
(e) ACCRUED BENEFIT PERCENTAGES OF EMPLOYEES OF LANIER PUERTO RICO,
INC. Except as provided in section 5.2(f), the Accrued Benefit
Percentage of a Participant who is an employee of Lanier Puerto Rico,
Inc. shall be equal to the sum (1) plus (2) where:
"(1)" is the sum of the following applicable percentages based on the
Participant's age:
(i) 1.5% for each Year of Service before
the Participant attains age 35;
(ii) 4% for the Year of Service in which the
Participant attains age 35, as provided in clause
(vii), and for each Year of Service thereafter before
the Participant attains age 40;
(iii) 6% for each Year of Service in which the
Participant attains age 40, as provided in clause
(vii), and for each Year of Service thereafter before
the Participant attains age 50;
(iv) 10% for each Year of Service in which the
Participant attains age 50, as provided in clause
(vii), and for each Year of Service thereafter before
the Participant attains age 55;
PENSION EQUITY PLAN
<PAGE> 25
(v) 12% for each Year of Service in which the
Participant attains age 55, as provided in clause
(vii), and for each Year of Service thereafter before
the Participant attains age 60;
(vi) 13% for each Year of Service in which the
Participant attains age 60, as provided in clause
(vii), and for each Year of Service thereafter.
(vii) for each Year of Service in which the
Participant attains age 35, 40, 50, 55 or 60, the
relevant applicable percentage shall be the sum of
pro-rata portions of each of the percentages
applicable before and after the Participant attains
the relevant age. Such pro-rata portions shall be
determined as follows:
(1) THE PRE-ATTAINED AGE PORTION. The
product of 1.5%, 4%, 6%, 10%, or 12%, as
applicable, multiplied by a fraction, the
numerator of which shall be the number of
full months during such year up to, but not
including, the month in which the
Participant attained the relevant age and
the denominator of which shall be 12.
(2) THE POST-ATTAINED AGE PORTION. The
product of 4%, 6%, 10%,12% or 13%, as
applicable, multiplied by a fraction, the
numerator of which shall be the number of
full months during such year beginning with
the month in which the Participant attained
the relevant age and the denominator of
which shall be 12.
(viii) For the year in which a Participant terminates
employment, the relevant percentage shall be
determined by multiplying the applicable percentage by
a fraction, the numerator of which is the number of
full months during which the Participant is employed
by an Employer and the denominator of which is 12.
"(2)" is the sum of the following applicable percentages based on the
Participant's Years of Service:
(i) 1% for each Year of Service up to and
including the Participant's 20th Year of Service;
PENSION EQUITY PLAN
<PAGE> 26
(ii) 2% for each Year of Service commencing with the
Participant's 21th Year of Service and up to and
including the Participant's 25th Year of Service;
(iii) 3% for each Year of Service commencing with the
Participant's 26th Year of Service. Notwithstanding anything in the
Plan to the contrary, the benefits of a Participant who is an employee
of Lanier Puerto Rico, Inc. and who terminates employment with Lanier
Puerto Rico, Inc. prior to July 15, 1997 shall be determined in
accordance with the terms of the Plan in effect on June 30, 1997.
(f) ACCRUED BENEFIT PERCENTAGES OF PARTICIPANTS EMPLOYED BY LANIER
PUERTO RICO, INC. ON JULY 15, 1997. The Accrued Benefit Percentage of
a Participant employed by Lanier Puerto Rico, Inc. with an Accrued
Benefit on July 15, 1997 shall be equal to the greater of the
following:
(1) the Participant's Accrued Benefit Percentage under section
5.2(e), except that if the Participant had attained age 40 and
had at least five Years of Service on July 15, 1997, the
Participant's Accrued Benefit Percentage shall be increased by
1% for each year of the Participant's full Years of Service
prior to such date; and
(2) the sum of (A) and (B) where:
"(A)" is the Participant's Accrued Benefit
Percentage under section 5.2(e) for Years of Service
after July 15, 1997;
"(B)" is the percentage which is equal to (I)
divided by (II), where:
"(I)" is the lump sum Actuarial Equivalent
of the Participant's Prior Plan Accrued
Benefit on July 15, 1997 determined in
accordance with section 3.3(a), provided
that for this purpose only the interest
rate shall be the rate in effect one
month prior to the month identified in
section 3.3(a); and
"(II)" is 150% of the Participant's Average
Compensation as of July 15, 1997
(determined in accordance with the terms of
the Plan in effect on June 30, 1997), minus
the lesser of (I) 50% of his Average
Compensation as of July 15, 1997
(determined in accordance with the terms of
the Plan in effect on June 30, 1997) and
(II) 50% of his
PENSION EQUITY PLAN
<PAGE> 27
Covered Compensation as of July 15, 1997
(determined in accordance with the terms of
the Plan in effect on June 30, 1997).
5.3. VESTED BENEFITS UPON TERMINATION OF EMPLOYMENT. A Participant whose
employment as an Employee terminates on or after his Vested Date but before his
Early Retirement Date or his Normal Retirement Age may elect to receive the
Actuarial Equivalent of his Accrued Benefit as of the first day of any month
coinciding with or following the date his employment terminates in the form of
(i) a lump sum payment or (ii) the Participant's normal payment form as
described in section 6.1(a), provided that a properly completed election is
filed with the Plan Sponsor in accordance with section 6.2. In all other cases,
a Participant whose employment as an Employee terminates on or after his Vested
Date may elect to commence distribution of his Accrued Benefit in accordance
with Article Six. Subject to Exhibit A, a Participant whose employment
terminates before his Vested Date shall not be entitled to any benefit under the
Plan.
5.4. DISABILITY RETIREMENT BENEFIT.
(a) IN GENERAL. A Participant who becomes totally and permanently
disabled, as described in section 5.4(b), while he is an Eligible
Employee and on or after the date on which he completes 10 Years of
Service determined under section 3.39(a) shall be entitled to receive
a benefit, the payment of which shall commence in accordance with
Article Six as of his Normal Retirement Date, if he is then living and
if such total and permanent disability has been continuous to his
Normal Retirement Date. The amount of his benefit shall be equal to
the Actuarial Equivalent of his Lump Sum Benefit determined as of his
Normal Retirement Date based on the following assumptions:
(1) his Covered Compensation determined as of the date his
employment terminated by reason of such disability,
(2) the Accrued Benefit Percentage which he would have been
credited with as of his Normal Retirement Date if he had
remained employed until such date and retired on that date,
and
(3) the Average Compensation which he would have had at his
Normal Retirement Date if he had continued to receive annual
Compensation after his employment terminates by reason of
disability and through his Normal Retirement Date equal to
the greater of his Compensation (i) for the last calendar
year prior to the calendar year containing the date his
employment
PENSION EQUITY PLAN
<PAGE> 28
terminates by reason of such disability and (ii) for the
calendar year in which his employment terminates by reason of
such disability.
(b) TOTAL AND PERMANENT DISABILITY. A Participant shall be considered
to be totally and permanently disabled for purposes of the Plan if he
suffers a physical or mental impairment which (1) qualifies him for a
monthly disability insurance benefit under the Social Security Act, (2)
wholly prevents him from holding any substantially gainful employment
and (3) which can be expected to result in death or to be of long
continued and indefinite duration, unless the Plan Sponsor determines
that his disability is a result of any of the following:
(i) injury or disease sustained by the Participant while
willfully participating in acts of violence, riots, civil
insurrections or while committing a felony;
(ii) injury or disease sustained by the Participant while
working for a person other than the Employer or an Affiliate
and arising out of such work; or
(iii) intentional, self-inflicted injury.
(c) PROOF OF DISABILITY. The Participant or his Beneficiary shall
provide evidence (i) that the Participant is eligible for disability
benefits under the Social Security Act, (ii) that such eligibility is
retroactive to the date his employment terminates and (iii) that the
Participant continued to be eligible for such disability benefits
through his Annuity Starting Date or his date of death, if earlier.
Such proof must be provided as soon as practical after the Participant
is determined eligible for Social Security disability benefits and
prior to payment of any benefits under the Plan. The decision of the
Committee as to the existence and continuation of a total and permanent
disability shall be final and binding.
(d) EARLY COMMENCEMENT. A Participant who is eligible for a benefit
under section 5.4(a) may elect in writing to begin receiving his
benefit, calculated pursuant to this section 5.4(d), as of the first
day of any month coinciding with or following the date he becomes
totally and permanently disabled, provided that a properly completed
election is filed with the Committee within the 90-day period ending
on such date. A disabled Participant may revoke previous election and
make a new election prior to the date payments are scheduled to
commence pursuant to such previous election, subject to the conditions
of the previous sentence. If a disabled Participant elects early
commencement of his benefit under this section 5.4(d), then the amount
of such benefit shall be based on the following:
PENSION EQUITY PLAN
<PAGE> 29
(1) his Covered Compensation determined as of the date his
employment terminates by reason of disability,
(2) the Accrued Benefit Percentage with which he would have
been credited as of his Annuity Starting Date under this
section 5.4(d) if he had remained employed until such date
and terminated employment on that date, and
(3) the Average Compensation which he would have had as of
his Annuity Starting Date under this section 5.4(d) if he had
continued to receive annual Compensation after his employment
terminated by reason of disability and through his Annuity
Starting Date in an amount equal to the greater of (i) his
Compensation for the last calendar year prior to the calendar
year containing the date his employment terminated by reason
of disability and (ii) his Compensation for the calendar year
in which his employment terminated by reason of disability.
(e) SURVIVOR BENEFITS. No survivor benefits shall be payable on behalf
of a disabled Participant who dies prior to his Annuity Starting Date,
unless and to the extent preretirement survivor benefits are payable
on behalf of such Participant under Article Seven.
(f) TERMINATION OF DISABILITY. If a Participant's total and permanent
disability ceases prior to his Annuity Starting Date for any reason
other than death, and if the Participant returns or offers to return to
the employment of an Employer or an Affiliate within 90 days after his
disability ceases, then, for purposes of determining his eligibility to
receive benefits under the Plan upon his subsequent termination of
employment and the amount of such benefits, the period during which he
was totally and permanently disabled shall be included in his Service
and he shall be treated as if he had received annual Compensation
during such period equal to the greater of (i) his Compensation for the
last calendar year prior to the calendar year containing the date his
employment terminated by reason of disability and (ii) his Compensation
for the calendar year in which his employment terminated by reason of
disability.
If such Participant does not return or offer to return to the
employment of an Employer or an Affiliate within such 90-day period,
his eligibility to receive benefits and the amount of such benefits, if
any, shall be determined as if his employment had terminated (on the
date his employment terminated as a result of such disability) for
reasons other than disability.
PENSION EQUITY PLAN
<PAGE> 30
5.5. SUSPENSION OF BENEFITS.
(a) REEMPLOYMENT. The payment of benefits to a Participant under the
Plan shall be suspended if, and as of the date, the Participant is
reemployed as a full-time Employee of an Employer (as determined in
accordance with the payroll records of the Employer).
If the Participant is not classified on the payroll as a full-time
Employee upon such reemployment, the benefit payable to the Participant
shall continue to be paid uninterrupted as adjusted in accordance with
section 5.6(d).
(b) CONTINUED EMPLOYMENT. If a Participant continues to work as a
full-time Employee after the Participant's Normal Retirement Age, then
payment of the Participant's benefits under the Plan shall not commence
while the Participant is so employed until his required beginning date
as determined pursuant to section 6.2(d).
The benefit of each Participant who continues to work as an Employee
after the Participant's Normal Retirement Age but who is not
classified as a full-time Employee shall be determined automatically
and payment shall commence to the Participant as of the Participant's
Normal Retirement Date unless the Participant elects to defer such
payments in accordance with section 6.2(c). Such benefit shall
thereafter be adjusted in accordance with section 5.6(d). If the
employment status of a Participant who is receiving benefits under the
Plan and who is classified as other than a full-time Employee changes
to that of a Participant who is classified as a full-time Employee,
then notice shall be provided to such Participant as described in
section 5.5(c) and his benefits shall be suspended while the
Participant is so employed. Alternatively, if the employment status of
a Participant who is classified as a full-time Employee and whose
benefits are suspended under this section changes to that of an other
than full-time Employee, then benefit payments shall commence to such
Participant as soon as practicable after the Plan Sponsor receives
notice of such change and such benefit shall thereafter be adjusted in
accordance with section 5.6(d).
(c) SUSPENSION NOTICE. The Committee shall provide written notice to each
Participant whose benefits are suspended under this section 5.5 by personal
delivery or by first class mail during the first calendar month in which such
benefits are suspended. Such notice shall be based on the applicable
requirements set forth in the Department of Labor regulations under section 203
of ERISA.
(d) ACTUARIAL ADJUSTMENT FOR CERTAIN MONTHS.
PENSION EQUITY PLAN
<PAGE> 31
(1) FOLLOWING RECEIPT OF SUSPENSION NOTICE. If a
Participant's benefits are suspended for any month following
receipt of suspension notice described in section 5.5(c) and
the Participant received compensation for employment for less
than 40 Hours of Service in such month, then the benefits
payable to him when benefits commence or recommence shall be
increased by the Actuarial Equivalent of the benefit which
would have been payable to the Participant during such month
as a result of his prior retirement or, if he continued in
employment after his Normal Retirement Age, the benefit which
would have been payable if he had begun receiving benefits on
his Normal Retirement Date.
(2) PRIOR TO RECEIPT OF SUSPENSION NOTICE. If a Participant's
benefits are suspended in any month prior to his Normal
Retirement Age and the Participant did not receive the
suspension notice described in section 5.5(c) during or prior
to such month, then the benefits payable to him when benefits
commence or recommence shall be increased by the Actuarial
Equivalent of the benefits which otherwise would have been
payable to him as a result of his prior retirement during the
months prior to receipt of such notice and prior to his
Normal Retirement Age. If a Participant's benefits are
suspended in any month after his Normal Retirement Age and
the Participant did not receive the notice described in
section 5.5(c) during or prior to such month, then the
benefit payable to him when benefits commence or recommence
shall be equal to the greater of (i) his Accrued Benefit
determined as of his Annuity Starting Date (calculated in
accordance with section 5.6 if applicable) as adjusted in
accordance with this section 5.5(d) and (ii) his Accrued
Benefit determined as of his Normal Retirement Date
actuarially adjusted in accordance with the factors set forth
in section 5.5(d)(3) to the date such benefits first commence
or recommence.
(3) ACTUARIAL EQUIVALENCE. Actuarial Equivalence shall be
determined as of the date as of which benefits commence or
recommence following a suspension using the mortality table
described in section 3.3(b)(1) and the interest rate in
section 3.3(b)(2).
5.6. CALCULATION OF ADDITIONAL ACCRUED BENEFIT FOLLOWING INITIAL PAYMENT OF
BENEFITS.
(a) GENERAL. Except as provided below, the Accrued Benefit
attributable to any period of employment following commencement of
benefits shall be calculated by reducing (1) the Participant's Accrued
Benefit attributable to his total Years of Service, Average
Compensation and Covered Compensation determined as of the
Participant's Employment Termination Date by (2) the Accrued Benefit
determined as of the immediately preceding Employment Termination
Date.
PENSION EQUITY PLAN
<PAGE> 32
(b) ANNUITY BENEFITS SUSPENDED. If the Accrued Benefit determined as
of the immediately preceding benefit commencement date was paid in the
form of an annuity, then the Accrued Benefit payable upon
recommencement shall be the sum of (1) the Accrued Benefit payable at
the immediately preceding benefit commencement date, (2) the
additional Accrued Benefit payable as a result of employment following
such benefit commencement calculated in accordance with section 5.6(a)
and (3) any adjustment required under section 5.5(d).
Such Accrued Benefit shall be paid upon his subsequent retirement or
when benefits commence as a result of his employment as other than a
full-time Employee or his reaching age 70 1/2. The form of benefit
shall be determined in accordance with section 6.1(a) unless the
Participant elects, in accordance with the election procedures set
forth in section 6.2, to receive an optional form.
(c) LUMP SUM PAYMENTS. If the Accrued Benefit was paid in a lump sum
before August 1, 1991 and such Participant was reemployed before August
1, 1991, then the Accrued Benefit payable on recommencement shall be
the sum of (1) the additional Accrued Benefit calculated in accordance
with section 5.6(a) reduced by applicable early commencement reduction
factors and (2) any adjustment required under section 5.5(d).
If any other Participant received a lump sum payment as of his Accrued
Benefit and he is thereafter reemployed as an Eligible Employee, he
shall be treated as a new Participant for purposes of determining his
Accrued Benefit following his reemployment.
(d) ADJUSTMENT WHERE BENEFITS NOT SUSPENDED. If a Participant is
reemployed or continues in employment after his Normal Retirement Age
and his benefits are not suspended, then his additional Accrued
Benefit shall be calculated as of each December 31 following his
Normal Retirement Age in accordance with section 5.6(a) to reflect any
additional accruals since the date as of which his benefit was last
determined. Such additional Accrued Benefit shall be paid or begin to
be paid in January following such December 31. Such additional Accrued
Benefit shall be paid in the same form as the benefit which was not
suspended.
ARTICLE SIX
BENEFIT PAYMENT FORMS
---------------------
6.1. NORMAL PAYMENT FORMS.
PENSION EQUITY PLAN
<PAGE> 33
(a) IN GENERAL. Unless a Participant otherwise elects in accordance
with section 6.2, a Participant's nonforfeitable Accrued Benefit under
the Plan shall be paid
(1) in the form of a single life annuity option (as described
in section 6.3(a)(1)) if the Participant does not have a
Spouse on his Annuity Starting Date, or
(2) subject to Exhibit A, in the form of a 50% joint and
survivor annuity option (as described in section 6.3(a)(3))
if the Participant has a Spouse on his Annuity Starting Date.
(b) PAYMENT OF SMALL BENEFITS IN A LUMP SUM. If the lump sum
Actuarial Equivalent of a Participant's nonforfeitable Accrued Benefit
as determined as soon as practicable after he terminates employment
does not exceed, and at the time of any prior distribution did not
exceed, $3,500, then the Plan Sponsor shall direct the payment of the
Participant's Accrued Benefit in a lump sum as soon as practicable
after the Participant terminates employment. If the Participant's
nonforfeitable Accrued Benefit is zero as of the date he terminates
employment, then such Participant shall be deemed to have received a
distribution of such nonforfeitable benefit upon termination of
employment.
(c) EMPLOYEE CONTRIBUTIONS OF FORMER HARRIS/LBP PLAN PARTICIPANTS.
Notwithstanding section 6.1(a), a former Harris/LBP Plan Participant
(as defined in Exhibit A) may elect to receive the portion of his
Accrued Benefit attributable to employee contributions as provided in
Exhibit A.
6.2. ELECTION PROCEDURES AND TIMING.
(a) GENERAL. Subject to section 6.2(b), a Participant who is eligible
to receive a benefit under Article Five may elect on a properly
completed form delivered to the Plan Sponsor at any time within the
90-day period ending on his Annuity Starting Date to have his Accrued
Benefit paid in one of the optional benefit payment forms described in
section 6.3 or, if applicable, Exhibit A.
(b) PROCEDURES AND SPOUSAL CONSENT. The Plan Sponsor shall (consistent
with the regulations under section 417 of the Code) furnish to each
Participant no less than 30 days and no more than 90 days before his
Annuity Starting Date such written explanation of the normal payment
forms, the optional payment forms and the Participant's rights under
sections 401(a)(11), 411(a)(11), and 417 of the Code as may be
required, provided that the Participant and his Spouse may waive the
30-day waiting period between their receipt of such written explanation
and the Participant's Annuity Starting Date, in which event such
waiting period is reduced
PENSION EQUITY PLAN
<PAGE> 34
to seven days between the receipt of the written explanation and the
Participant's Annuity Starting Date. A Participant who has made such
an election may revoke the election and make a new election prior to
the date payments were scheduled to commence under his previous
election. If the Participant is married on his Annuity Starting Date,
and if as a result of the Participant's election of an optional form
of benefit under section 6.3 (or revocation or change thereof), the
Participant's Spouse would not be entitled to receive a survivor's
benefit at least equal to the amount payable under the normal form of
benefit payment for married Participants (described in section
6.1(a)(2)), then such election shall not be effective unless it shall
have been consented to in writing by the Participant's Spouse at the
time of such election and such consent acknowledges the effect of such
election and is witnessed by either a Plan representative or a notary
public. Notwithstanding the foregoing, no spousal consent shall be
required if it is established to the satisfaction of the Plan Sponsor
that such consent cannot be obtained because the Participant's Spouse
cannot be located or such other circumstances as may be prescribed by
regulations. The consent of a Spouse shall not be necessary for a
distribution required by the terms of a qualified domestic relations
order described in section 13.10.
Any such election or revocation of an election under this section 6.2
shall be made by delivering the properly completed form provided for
this purpose to the Plan Sponsor, and the last properly completed form
delivered to the Plan Sponsor before the end of the 90-day period
described in section 6.2(a) shall control the payment of benefits
under the Plan. A Spouse's properly executed consent to the payment of
Plan benefits in one of the optional payment arrangements shall be
irrevocable with respect to such Spouse under the Plan.
(c) TIMING. Upon a Participant's termination of employment,
distribution of a Participant's nonforfeitable Accrued Benefit shall
be made as properly elected by the Participant and in accordance with
the rules and procedures established by the Committee, provided that
if the Participant fails to make a valid election prior to the later
of (i) the end of the Plan Year in which the Participant attains age
65 and (ii) the end of the Plan Year in which the Participant
terminates employment, a distribution of the Participant's
nonforfeitable Accrued Benefit shall commence in the normal payment
form applicable to such Participant under section 6.1 within 60 days
after the end of such Plan Year. A terminated Participant may properly
elect to receive his nonforfeitable Accrued Benefit in the form of (i)
a single sum payment or (ii) the Participant's normal payment form as
described in section 6.1(a) at any time after his termination of
employment, and may properly elect to receive his nonforfeitable
Accrued Benefit after he attains his Early Retirement Date or his
Normal Retirement Date in his normal payment form under section 6.1 or
any optional benefit form available to him under section 6.3(a). Such
a terminated Participant may
PENSION EQUITY PLAN
<PAGE> 35
also properly elects early commencement of such benefit under Article
Five or Exhibit A. Actual payment of the Participant's benefit shall
begin as soon as practicable after the Participant's Annuity Starting
Date. Payments which do not actually commence on the Participant's
Annuity Starting Date shall be adjusted so that the first payment
includes all amounts due through the date of such payment.
If a Participant does not retire or terminate employment on
or before his "required beginning date", then actual payment
of his or her benefits shall begin no later than his
"required beginning date."
(d) REQUIRED BEGINNING DATE. Except as otherwise provided in
this section 6.2(d), a Participant's "required beginning
date" shall be the April 1 following the calendar year in
which he reaches age 70 1/2. Notwithstanding the foregoing,
if a Participant attained age 70 1/2 prior to January 1, 1988
and was not a "5%-owner" (as described in section 416(i) of
the Code) at any time during the Plan Year ending in the
calendar year in which he reaches age 66 1/2 or any
subsequent year, his "required beginning date" shall be the
April 1 immediately following the end of the Plan Year in
which he or she actually retires or first becomes a 5%-owner,
whichever comes first.
6.3. DESCRIPTION OF OPTIONS.
(a) PAYMENT OPTIONS. A Participant may elect to receive the Actuarial
Equivalent of his nonforfeitable Lump Sum Benefit in one of the
following optional forms set forth below:
(1) SINGLE LIFE ANNUITY OPTION - a monthly benefit payable
only during the lifetime of the Participant.
(2) 10 YEAR PERIOD CERTAIN AND CONTINUOUS ANNUITY OPTION - a
reduced monthly benefit (relative to section 6.3(a)(1)) which
shall be payable during the lifetime of the Participant and
shall, if the Participant dies within 10 years of his Annuity
Starting Date, continue to be paid to his Beneficiary for the
balance of such 10-year period.
(3) JOINT AND SURVIVOR ANNUITY OPTION - a reduced monthly
benefit (relative to section 6.3(a)(1)) which shall be
payable during the lifetime of the Participant and shall
continue to be paid after the death of the Participant to the
person designated as his Beneficiary, if such Beneficiary
survives him, in an amount equal to 100% or 50% (as the
Participant shall designate) of the monthly
PENSION EQUITY PLAN
<PAGE> 36
benefit payable during the lifetime of the Participant for
such Beneficiary's lifetime.
(4) SINGLE SUM OPTION - a distribution in a single sum.
(5) OTHER PAYMENT OPTIONS FOR CERTAIN PARTICIPANTS. See
Exhibit A. No optional payment arrangement may be selected if the
value of the payments to the Participant under such option (determined
as of the Annuity Starting Date) would not comply with the minimum
distribution requirements of section 401(a)(9)(G) of the Code.
(b) DIRECT ROLLOVER. In the case of a distribution that is an
"eligible rollover distribution" within the meaning of section
402(c)(4) of the Code, a Participant, surviving Spouse or a former
spouse who is the alternate payee under a qualified domestic relations
order, as defined in section 414(p) of the Code, may elect that all or
any portion of such distribution shall be directly transferred from
the Plan to an individual retirement account or annuity described in
section 408 of the Code, to another retirement plan qualified under
section 401(a) of the Code (the terms of which permit the acceptance
of the rollover distributions) or to an annuity plan described in
section 403(a) of the Code (the terms of which permit the acceptance
of the rollover distributions). A Participant's surviving Spouse may
elect to have such a distribution transferred only to an individual
retirement account or annuity described in section 408 of the Code.
Notwithstanding the foregoing, a Participant, alternate payee or
surviving Spouse shall not be entitled to elect to have an eligible
rollover distribution transferred pursuant to this subsection (c) if
the eligible rollover distribution totals less than $200.
6.4. BENEFICIARY. Subject to section 6.2(b), each Participant may designate, on
a form provided for this purpose by the Plan Sponsor, (1) a person or persons
as his Beneficiary to receive any benefits payable in the event of the death of
the Participant under any optional form of benefit payment selected by the
Participant and (2) a secondary Beneficiary to receive benefits, if any,
payable under an optional payment form which provides a guaranteed period of
payments. The Beneficiary of each married Participant shall be the surviving
Spouse of such Participant, unless such Spouse consents in writing to the
designation of another Beneficiary in accordance with the rules described in
section 6.2(b). In the event that no such Beneficiary designation is made or is
legally ineffective, or if all designated Beneficiaries predecease the
Participant, or if the whereabouts of such Beneficiary is unknown,
distributions shall be made in the following order of priority:
(a) the Participant's surviving Spouse, if any,
PENSION EQUITY PLAN
<PAGE> 37
(b) the Participant's designated beneficiary or beneficiaries under
the Lanier Worldwide, Inc. Savings Incentive Plan, if any,
(c) the person or persons expressly designated by the Participant to
receive the Participant's death benefit under the group term life
insurance program maintained by his Employer, if any,
(d) the estate of the Participant.
A Participant may, from time to time and subject to the spousal consent
provisions of section 6.2(b), change his Beneficiary by written notice to the
Plan Sponsor, and upon receipt by the Plan Sponsor of such change the rights of
all previously designated Beneficiaries to receive any benefits under the Plan
shall cease, provided that if the optional form of payment provides a joint and
survivor annuity to the surviving Beneficiary, such Beneficiary may not be
changed after the Annuity Starting Date. If the Participant dies before his
entire benefit has been distributed to him under a period certain annuity,
payments shall be made to his Beneficiary at least as rapidly as the method of
distribution to the Participant. If a Participant dies before he has received
his benefit attributable to his employee contributions, if any, under the Plan,
the entire benefit payable to a Beneficiary shall be distributed by December 31
of the calendar year which includes the fifth anniversary of the Participant's
death.
6.5. NO ESTOPPEL. No person is entitled to any benefit under the Plan except
and to the extent expressly provided under the Plan. The fact that payments have
been made from the Plan in connection with any claim for benefits under the Plan
does not (i) establish the validity of the claim, (ii) provide any right to have
such benefits continue for any period of time, or (iii) prevent the Plan from
recovering the benefits paid to the extent that the Plan Sponsor determines that
there was no right to payment of the benefits under the Plan or that there was a
mistake in the calculation of benefits under the Plan. Thus, if a benefit is
paid under the Plan and it is thereafter determined by the Plan Sponsor that
such benefit should not have been paid, or that such benefit was overpaid
(whether or not attributable to an error by the Participant, the Plan Sponsor or
any other person), then the Plan Sponsor may take such action as the Plan
Sponsor deems necessary or appropriate to remedy such situation, including,
without limitation, deducting the amount of any overpayment theretofore made to
or on behalf of such Participant, Spouse or Beneficiary from any succeeding
payments to or on behalf of such Participant or from instituting legal action to
recover such overpayments. Conversely, if a benefit is not paid under the Plan
and it is thereafter determined by the Plan Sponsor that a benefit should have
been paid, or if a benefit is underpaid under the Plan and it is thereafter
determined by the Plan Sponsor that such benefit was underpaid, any succeeding
benefits payable shall be adjusted to correct such underpayment.
PENSION EQUITY PLAN
<PAGE> 38
6.6. CLAIMS FOR BENEFITS. If any Participant or other person (a "claimant")
believes he is entitled to benefits in an amount greater than those which the
claimant is receiving or has received, the claimant may file a claim with the
Committee. Such a claim shall be in writing and state the nature of the claim,
the facts supporting the claim, the amount claimed, and the address of the
claimant. The Committee will review the claim and, unless special circumstances
require an extension of time, within 90 days after receipt of the claim, give
written notice by registered or certified mail to the claimant of the decision
with respect to the claim. If special circumstances require an extension of
time, the claimant shall be so advised in writing within the initial 90-day
period and in no event shall such an extension exceed 90 days. The notice of the
decision with respect to the claim shall be written in a manner calculated to be
understood by the claimant and, if the claim is wholly or partially denied, set
forth the specific reasons for the denial, specific references to the pertinent
Plan provisions on which the denial is based, a description of any additional
material or information necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary, and an explanation
of the claim review procedure under the Plan. The Committee also shall advise
the claimant that the claimant's duly authorized representative may request a
review of the denial by the Committee by filing with the Committee, within 60
days after notice of the denial has been received by the claimant, a written
request for such review. The claimant shall be informed that he may have
reasonable access to pertinent documents and submit comments in writing to the
Committee within the same 60-day period. If a request is so filed, review of the
denial shall be made by the Committee within 60 days after receipt of such
request, unless special circumstances require an extension of time, and the
claimant shall be given written notice of the resulting final decision. If
special circumstances require an extension of time, the claimant shall be so
advised in writing within the initial 60-day period and in no event shall an
extension exceed 60 days. The notice of the Committee's final decision shall
include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based and shall be written in
a manner calculated to be understood by the claimant.
ARTICLE SEVEN
SURVIVOR BENEFIT
----------------
7.1. PRERETIREMENT SURVIVOR BENEFIT.
(a) GENERAL. If a Participant dies after his Vested Date but before
his Annuity Starting Date, a survivor benefit shall be payable,
subject to the terms and conditions of this section 7.1, on his behalf
to his Beneficiary determined in accordance with section 6.4. The
benefit, if any, payable under this section 7.1 shall be based on the
PENSION EQUITY PLAN
<PAGE> 39
Participant's Lump Sum Benefit determined as of the date of the
Participant's death without reference to Section 5.2 (d).
(b) COMMENCEMENT.
(1) SPOUSAL BENEFICIARY.
(i) NORMAL. If the Beneficiary eligible for a survivor benefit
under Section 7.1(a) is the Participant's Spouse, then
payment of such benefit shall be scheduled to commence in the
form of a single life annuity as of the later of (i) the date
which would have been the deceased Participant's Normal
Retirement Date if he had survived and (ii) the first day of
the calendar month following his date of death, provided that
the surviving Spouse may elect within the 90-day period ending
on the date the survivor benefit is schedule to commence that
such benefit be paid in the form of a lump sum payment.
Notwithstanding the foregoing, if the survivor benefit payable
to the Spouse does not exceed, or at any time prior to the
distribution did not exceed, $3,500, then payment of such
survivor benefit shall be paid to the Spouse in a single sum
payment as soon as practicable after the Participant's date of
death.
(ii) EARLY PAYMENT. If the survivor benefit payable to the
surviving Spouse under Section 7.1(a) exceeds $3,500, then the
surviving Spouse may file with the Committee a written request
that such benefit be paid in the form of a single sum payment
or in the form of a single life annuity in accordance with
Section 6.2.
(2) NON-SPOUSAL BENEFICIARY.
(i) NORMAL. If the Beneficiary eligible for a survivor benefit
under Section 7.1(a) is not the Participant's Spouse, then
payment of such benefit shall be scheduled to commence in the
form of a single sum payment as soon as practicable after the
Participant's date of death.
7.2. NO POST RETIREMENT SURVIVOR BENEFITS. No survivor benefit shall be payable
under the Plan on behalf of a Participant if the Participant dies after his
Annuity Starting Date unless the form of benefit payable in respect of such
Participant as of his date of death provides for a survivor benefit.
PENSION EQUITY PLAN
<PAGE> 40
ARTICLE EIGHT
PLAN FUNDING
------------
8.1. CONTRIBUTIONS. The Employers shall pay all funding costs of the Plan in
such amounts and at such times as may be recommended by the Plan's actuary in
accordance with a funding method and policy established by the Plan Sponsor
which (1) is consistent with the objectives of the Plan and (2) is designed to
pay the normal costs of the Plan and to amortize the Plan's unfunded past
service liability over a period of time not longer than is permitted by law.
Except as otherwise required under Title IV of ERISA, no Employer shall have any
obligation whatsoever to make contributions or otherwise provide for unfunded
benefits after the Plan has been terminated or contributions have been
discontinued. Forfeitures arising under the Plan shall be applied to reduce the
costs of the Plan and shall not operate to increase the benefits otherwise
payable to Participants.
8.2. TRUST FUND. The Employers shall pay all contributions to the Trustee, and
the Trustee shall hold, invest, manage and distribute such contributions and the
increment earnings thereon as the Trust Fund, in accordance with the Trust
Agreement, for the exclusive benefit of Participants and their Beneficiaries.
All of the assets of the Trust Fund shall be available on an on-going basis to
pay any of the liabilities of the Plan.
8.3. PROHIBITION AGAINST REVERSION.
(a) Except as provided in Section 8.3(b), no Employer shall have any
present or prospective right, claim, or interest in the Trust Fund or
in any contribution made to the Trustee prior to the satisfaction of
all liabilities of the Plan with respect to Participants and
Beneficiaries. Upon satisfaction of all liabilities to Participants and
Beneficiaries, the Employers shall be entitled to a reversion as
described in Section 11.3 if the Plan is terminated. For this purpose,
the term "liabilities" shall mean benefits actually accrued as of the
date of the termination.
(b) Upon direction of the Plan Sponsor, contributions by an Employer,
which are contingent of the deductibility of such contributions, shall
be returned by the Trustee, if and to the extent such a return is
permitted by law, under either of the following circumstances:
(1) the contribution made by the Employer was made by a mistake
of fact, provided that the contribution is returned to the
Employer within one year after the payment of such
contribution; or
PENSION EQUITY PLAN
<PAGE> 41
(2) the Employer's deduction for such contribution is
disallowed under section 404 of the Code, provided that the
contribution is returned to the Employer within one year after
the disallowance.
An Employer entitled to the return of a contribution in accordance with
this Section 8.3(b) may in its discretion waive such right by
submitting written notice of such waiver to the Plan Sponsor.
ARTICLE NINE
NAMED FIDUCIARIES AND PLAN SPONSOR
----------------------------------
9.1. NAMED FIDUCIARIES. The Board shall appoint the Committee, which shall
consist of two or more members. The Committee shall be the "named fiduciary"
responsible for the control, management and administration of the Plan. The
Board shall have the right at any time, with or without cause, to remove one or
more members of the Committee. In addition, any member of the Committee may
resign and such resignation shall be effective upon delivery of written
resignation to the Plan Sponsor. Upon the resignation or removal of any member
of the Committee to act hereunder, the Board shall appoint a successor member of
the Committee if necessary to satisfy the minimum number of Committee members.
Any successor member of the Committee shall have all the rights, privileges and
duties of the predecessor, but shall not be held accountable for the acts of the
predecessor.
9.2. ALLOCATION AND DELEGATION BY NAMED FIDUCIARIES. The Plan Sponsor or the
Committee may by written instrument filed with the records of the Plan,
designate any person, committee of persons, partnership or corporation to carry
out any of its responsibilities under the Plan, other than the responsibilities
of the Trustee in the management and control of the Trust Fund; provided that no
such allocation or designation shall be effective as to any other person until
such other person has consented in writing to such designation. In addition, the
members of the Committee may allocate the Committee's responsibilities among
themselves.
9.3. ADVISERS. The Plan Sponsor, or a person designated by the Plan Sponsor to
perform any responsibility of the Plan Sponsor pursuant to the procedure
described in Section 9.2, may employ one or more persons to render advice with
respect to any responsibility the Plan Sponsor has under the Plan or such person
has by virtue of such designation.
9.4. DUAL FIDUCIARY CAPACITIES. Any person may serve in more than one fiduciary
capacity with respect to the Plan, and a fiduciary may be a Participant provided
such person otherwise satisfies the requirements for participation under the
Plan, provided that no such
PENSION EQUITY PLAN
<PAGE> 42
fiduciary shall take part in any action or any matter involving solely his or
her rights under the Plan.
9.5. COMMITTEE POWER AND DUTIES.
(a) GENERAL. The Committee shall be the "administrator" of the Plan
within the meaning of such term as used in ERISA and, except for the
duties specifically vested in the Trustee, shall be responsible for the
administration of the provisions of the Plan. The Committee shall have the
exclusive responsibility and complete discretionary authority to control
the operation, management and administration of the Plan, with all powers
necessary to enable it properly to carry out such responsibilities,
including (but not limited to) the power to construe the Plan and the
Trust Agreement, to determine eligibility for benefits, to resolve all
interpretive, operational, equitable and other questions that arise under
the Plan, to designate another person as the ERISA "plan administrator"
for the Plan and to settle disputed claims. The decisions of the Plan
Sponsor on all matters within the scope of its authority shall be final
and binding upon all parties to this instrument, Participants, their
Spouses and Beneficiaries.
The members of the Committee, and each of them separately, shall discharge
their duties with respect to the Plan (i) solely in the interest of the
Participants, their Spouses and Beneficiaries, (ii) for the exclusive
purpose of providing benefits to Employees participating in the Plan,
their Spouse and Beneficiaries and of defraying reasonable expenses in
administering the Plan and (iii) with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims. The
Employers hereby jointly and severally indemnify the members of the
Committee, and each of them, from the effects and consequences of their
acts, omissions and conduct in their official capacity, except to the
extent that such effects and consequences result from their own willful
misconduct.
(b) COMMITTEE ACTION. The Committee may act at a meeting, or by writing
without a meeting, by the vote or written assent of a majority of its
members. The Committee shall elect from its members a chairman and a
secretary. The secretary shall keep the Trustee advised of the identity of
the members holding those offices, keep records of all meeting of the
Committee, and forward all necessary communication to the Trustee. The
Committee may adopt such rules and procedures as it deems desirable for
the conduct of its affairs and the administration of the Plan, provided
that any such rules and procedures shall be consistent with the provisions
of the Plan and ERISA.
PENSION EQUITY PLAN
<PAGE> 43
(c) RECORDS. The Committee shall keep a record of its proceedings and all
such records, together with such other documents as the Committee shall
determine are necessary or advisable for the administration of the Plan,
shall be preserved in the custody of the Committee.
(d) INFORMATION. Each Employer shall supply the Committee with complete
and timely information regarding employment data for each Employee and
Participant including, but not limited to, his Compensation, date of death
or other termination of employment and such other information as may be
required by the Committee. The Committee may require a Participant, Spouse
or Beneficiary to complete and file with the Committee an application for
benefits and all other forms approved by the Committee, and to furnish all
pertinent information requested by the Committee. The Committee may relay
upon all such information so furnished to it, including the Participant's
current mailing address.
(e) SELECTION OF COUNSEL, ACCOUNTANTS, AGENTS AND OTHER SERVICE PROVIDERS.
The Committee may employ counsel (who may be counsel for any Employer),
actuaries, accountants, agents and may arrange for such clerical and other
services as it may require in carrying out the provisions of the Plan. The
Committee and the Employers and their officers and directors shall be
entitled to rely on all tables, valuations, certificates and reports
furnished by any actuary, upon all certificates and reports made by its
accountants and upon all opinions given by legal counsel employed by them.
The members of the Committee and the Employers and their officers and
directors shall be fully protected in respect of any action taken or
suffered by them in good faith in reliance upon any such actuary,
accountants or counsel, and all action so taken or suffered shall be
conclusive upon all Participants, Spouses and Beneficiaries under the
Plan.
(f) RELIANCE. The officers and directors of each Employer shall be
entitled to rely upon all information and data contained in any
certificate or report or other material prepared by any accountant,
attorney or other consultant or adviser selected by the Committee to
perform services on behalf of the Plan.
(g) COMMITTEE EXPENSES. No member of the Committee shall receive any
compensation or fee for his services, but the Plan Sponsor shall reimburse
the Committee members for any necessary expenditures incurred in the
discharge of their duties as Committee members.
(h) PLAN AND TRUST FUND EXPENSES. All costs and expenses incurred in
administering the Plan and the Trust Fund, including investment advisory
fees,
PENSION EQUITY PLAN
<PAGE> 44
expenses of the Committee and the Plan Administrator, fees and
expenses of counsel and of the Trustee, and other administrative expenses
shall be paid from the Trust Fund by the Trustee to the extent such
expenses are not paid for by the Employers. The Plan Sponsor or an
Employer may seek reimbursement of any expense paid by it which is
properly payable by the Trust Fund.
ARTICLE TEN
TRUST FUND AND TRUSTEE
----------------------
The Trust Fund shall be held, administered, controlled and invested by the
Trustee subject to the terms of the Trust Agreement for the exclusive benefit
of Participants and Beneficiaries.
ARTICLE ELEVEN
TERMINATION, AMENDMENT AND TRANSFERS
------------------------------------
11.1. RIGHT TO TERMINATE. The Plan Sponsor expects the Plan to be continued
indefinitely but may terminate the Plan, in whole or in part, at any time by
action of the Board. Subject to the consent of the Plan Sponsor, an Employer at
any time may terminate its participation in the Plan, in whole or in part, by
action of its board of directors and thereby terminate the accrual of benefits
under the Plan for its Employees.
11.2. FULL VESTING UPON TERMINATION. If the Plan shall be terminated or
partially terminated under this Article Eleven, then the Accrued Benefit of each
Participant who is an Employee on the effective date of such termination or
partial termination who is affected by such termination shall immediately become
fully vested and nonforfeitable, subject to the sufficiency of the assets of the
Trust Fund to provide such benefits and subject to the provisions of Section
11.3 regarding the allocation of such assets among such benefits.
11.3. ALLOCATION OF ASSETS. Upon a complete termination of the Plan, the Plan
Sponsor shall direct the Trustee to allocate the net assets of the Trust Fund
among the affected participants and beneficiaries in accordance with section
4044 of ERISA.
After all the liabilities of the Plan to such Participants and Beneficiaries
have been satisfied, any residual assets of the Trust Fund shall be distributed
to the Plan Sponsor and the Plan Sponsor shall distribute such residual assets
(less the amount of any excise tax on such residual assets)
PENSION EQUITY PLAN
<PAGE> 45
among the Employers in accordance with the Plan Sponsor's directions. For this
purpose, the term "liabilities" shall mean benefits actually accrued as of the
date of the termination.
11.4. MERGER, CONSOLIDATION AND TRANSFER OF ASSETS OR LIABILITIES. In the case
of any merger or consolidation of the Plan with, or transfer of assets or
liabilities of the Plan to, any other plan, each Participant shall, if such plan
then terminated, be entitled to receive a benefit which immediately after the
merger, consolidation, or transfer 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).
11.5. AMENDMENT. The Plan Sponsor shall have the right at any time and from
time to time to amend the Plan in any respect by action of the Board, provided,
that except as specified in Section 11.3, no amendment shall operate either
directly or indirectly to give any Employer any interest in the Trust Fund, or
to permit the corpus or the income of the Trust Fund to be used or diverted for
purposes other than for the exclusive benefit of Participants and Beneficiaries.
No amendment shall eliminate or reduce an early retirement subsidy or eliminate
an optional form of benefit except to the extent permissible under section
411(d)(6) of the Code.
ARTICLE TWELVE
RESTRICTIONS ON CERTAIN BENEFITS
--------------------------------
12.1. LIMITATIONS ON ANNUAL BENEFIT. Notwithstanding any provision of the Plan
to the contrary, the annual benefit paid to or on behalf of a Participant shall
not exceed the limitations under section 415 of the Code, as adjusted for the
cost of living in accordance with section 415(d) of the Code and the regulations
under section 415(d) of the Code, as of January 1 of each limitation year (as
defined in section 415(d) of the Code) for Participants who are Employees and
retired and terminated Participants who are receiving benefits or who are
entitled to receive benefits, provided that the limitations of section 415 of
the Code applicable to a benefit which is paid in a single sum shall be the
limitations in effect on his Annuity Starting Date and no further benefits shall
be payable to or on behalf of a Participant as a result of any cost of living
adjustments subsequent to the payment of such single sum benefit.
Notwithstanding the foregoing, if the Accrued Benefit of a Participant exceeds
the limitations of this Section 12.1 but does not exceed the limitations of
section 415 of the Code as in effect on December 31, 1986 (including any special
grandfather provisions applicable to benefits accrued as of December 31, 1982),
then his Accrued Benefit under the Plan shall not be less than his "current
accrued benefit" (as such term is defined in section 1106(i)(3) of the Tax
Reform Act of 1986) under such plan as of June 30, 1987 or, for a person who was
a Participant in the Harris/LBP Plan, December 31, 1986.
PENSION EQUITY PLAN
<PAGE> 46
For Plan Years commencing prior to July 1, 2000, if a Participant participates
in one or more defined contribution plans maintained by an Affiliate and the sum
of the "defined benefit fraction" under the Plan and the "defined contribution
plan fraction" under such defined contribution plan or plans (as such fractions
are described in section 415 of the Code) is greater than one, his rate of
benefit accrual under the Plan shall be frozen or reduced to the extent
necessary to cause such sum not to exceed one.
For purposes of determining whether the limitations of section 415 of the Code
have been exceeded with respect to any Participant, the Participant's
"compensation," as defined in section 415(c)(3) of the Code, shall include the
items described in Section 3.14(a)(ii). A Participant's Employer shall include
Affiliates as such term is defined in Section 3.3, but modified by section
414(h) of the Code.
12.2. LIMIT ON BENEFITS OF HIGHEST-PAID EMPLOYEES IN THE EVENT OF PLAN
TERMINATION.
(a) RESTRICTED PARTICIPANTS. A restricted Participant for any Plan Year
is a Participant who is among the group of the 25 most highly compensated
employees (within the meaning of Section 414(q) of the Code) or former
employees of the Employer with the greatest compensation in the current or
any prior Plan Year.
(b) APPLICABILITY OF LIMIT. The annual benefit paid to a restricted
Participant will be subject to the limit described below, unless:
(1) after the Plan distributes the entire benefit payable to the
restricted Participant, the value of the Plan assets equals or
exceeds 110% of the value of current Plan liabilities; or
(2) the value of the benefits payable to the restricted Participant
is less than 1% of the value of current Plan liabilities before the
distribution; or
(3) another exception applies under or with respect to the
requirements of Treasury Regulation Section 1.401(a)(4)-5(b).
(c) LIMIT. If a limit applies to benefits payable to a restricted
Participant, the amount of benefits paid without a security arrangement in
any year on behalf of the Participant cannot exceed the amount payable
under a straight life annuity actuarially equivalent to
PENSION EQUITY PLAN
<PAGE> 47
all the Participant's benefits under the Plan, other than a social
security supplement, plus the amount of any social security supplement
payable in that year.
(d) SECURITY ARRANGEMENT. To the extent permitted by applicable law, a
distribution in excess of the limit may be made to a restricted
Participant if the restricted Participant provides security for any
payments in excess of the limit that is satisfactory to the Committee.
(e) PLAN TERMINATION. In the event of termination of the Plan, the
benefits payable to a restricted Participant will be limited to an amount
that satisfies the nondiscrimination requirements of section 401(a)(4) of
the Code. Any security arrangement in effect with respect to a restricted
Participant shall continue to apply only if and to the extent required
under Treasury Regulation Section 1.401(a)(4)-5(b). In particular, any
security arrangement may be terminated on certification by the Committee
that the Participant will be subject to one of the limits described in
subsection (b) above.
ARTICLE THIRTEEN
MISCELLANEOUS
-------------
13.1. SPENDTHRIFT CLAUSE. Except to the extent permitted by law or Section
13.10, no benefit, payment or distribution under the Plan shall be subject to
the claim of any creditor of a Participant, Spouse or Beneficiary, or to any
legal process by any creditor of such person, and no Participant, Spouse or
Beneficiary shall have any right to alienate, commute, anticipate, or assign all
or any portion of any benefit, payment or distribution under the Plan except to
the extent expressly provided in the Plan.
13.2. LEGALLY INCOMPETENT. The Committee may in its discretion direct payment
(A) to an incompetent or disabled person, whether because of minority or mental
or physical disability, (B) to the guardian or to the person having custody of
such person or (C) to any person designated or authorized under any state
statute to receive such payment on behalf of such incompetent or disabled
person, without further liability either on the part of the Committee or the
Employers for the amount of such payment to the person on whose account such
payment is made.
13.3. BENEFITS SUPPORTED ONLY BY TRUST FUND. Any person having any claim for
any benefit under the Plan shall look solely to the assets of the Trust Fund and
to the Pension Benefit Guaranty Corporation for the satisfaction of such claim.
In no event will the Plan Sponsor, the
PENSION EQUITY PLAN
<PAGE> 48
Employers, or any of their officers, directors, or employees be liable in their
individual capacities to any person whomsoever for the payment of benefits under
the provisions of the Plan.
13.4. DISCRIMINATION. The Committee shall administer the Plan in a manner which
it deems equitable under the circumstances for all similarly situated Employees,
Participants, Spouses and Beneficiaries, including adopting such administrative
or other rules as the Committee in its discretion deems appropriate for any such
persons affected by circumstances such as a sale, acquisition, merger,
reorganization, plant closing, layoff, work force reduction or other similar
event or transaction; provided that the Committee shall not permit any
discrimination in favor of highly compensated employees (within the meaning of
section 414(q)of the Code) which would be prohibited under section 401(a) of the
Code. If for any Plan Year the Committee determines that following the terms of
the Plan would result in a failure to satisfy the nondiscrimination tests under
section 401(a)(4) of the Code or the coverage requirements under section 410(b)
of the Code, then the Committee shall take such action, to the extent permitted
under the Code, as it deems appropriate under the circumstances to prevent such
failure.
13.5. PLAN NOT AN EMPLOYMENT CONTRACT. The Plan is not a contract of
employment. Participation in the Plan shall not give any Employee the right to
be retained in the employ of the Employer or any Affiliate, nor, upon
termination of his employment, to have any interest in the Trust Fund except as
expressly provided in the Plan.
13.6. CLAIMS. Any payment to a Participant, Spouse or Beneficiary or to his
legal representatives or heirs-at-law, made in accordance with the provisions of
the Plan, shall to the extent thereof be in full satisfaction of all claims
under the Plan against the Employers, any of whom may require such Participant,
Spouse, Beneficiary, legal representative or heirs-at-law, as a condition
precedent to such payment, to execute a receipt and release therefor in such
form as shall be determined by the Plan Sponsor.
13.7. NONREVERSION. Except as provided in Section 8.3 and Article Eleven, no
part of the Trust Fund shall ever be used for or be diverted to purposes other
than for the exclusive benefit of Participants and Beneficiaries.
13.8. AGENT FOR SERVICE OF PROCESS. The agent for service of process for the
Plan and the Committee shall be the person currently listed in the records of
the Secretary of State of Georgia as the agent for service of process for the
Plan Sponsor.
13.9. TOP HEAVY PLAN.
PENSION EQUITY PLAN
<PAGE> 49
(a) DETERMINATION. If the Committee as of each June 30 ("the
determination date") determines that the sum of the present value of the
accrued benefits (as defined below) of "key employees" (as defined in
section 416(i) of the Code) exceeds 60% of the sum of the present value of
the accrued benefits of all employees as of such determination date in
accordance with the rules set forth in section 416(q) of the Code, the
Plan shall be "top heavy" for the Plan Year which begins on the
immediately following July 1. For purposes of this Section 13.9, such
present value shall be determined using the mortality table specified in
Section 3.3(b)(1) and an interest rate specified in Section 3.3(b)(2) and
the present value of the accrued benefit of each employee as of any
determination date shall be equal to the sum of (1) and (2) where
"(1)" equals the present value of such employee's Accrued Benefit
under the Plan (determined for this purpose as of the most recent
valuation date used for computing plan cost under section 412 of the
Code which falls within the 12 consecutive month period ending on
such determination date) plus the present value of any distributions
made during the 5-year period ending on such determination date, and
"(2)" equals the present value of his accrued benefit, if any,
(determined as of the valuation date which coincides with or
precedes the determination date for such plan) plus any
distributions made from such plans during the 5-year period ending
on such determination date under each other qualified plan (as
described in section 401(a) of the Code) which is either:
(i) maintained by the Employer or an Affiliate (A) in which a
key employee is a participant or (B) which enables any plan
described in subclause (A) to meet the requirements of section
401(a)(4) or 410 of the Code, or
(ii) maintained by the Employer or an Affiliate (other than a
plan described in clause (i)) which may be aggregated with the
Plan and the plans described in clause (i), provided such
aggregate group (including a plan described in this clause
(ii)) continues to meet the requirements of sections 401(a)(4)
and 410 of the Code.
Notwithstanding any contrary Plan provision, if an individual has not
performed services for an Employer at any time during the 5-year period
ending on the determination date, any accrued benefit for such individual
shall not be taken into account for purposes of the top-heavy
determination required under this Section 13.9(a).
PENSION EQUITY PLAN
<PAGE> 50
(b) SPECIAL TOP HEAVY PLAN RULES. If the Committee determines that the
Plan is "top heavy" for any Plan Year, then the special rules set forth
below shall apply notwithstanding any other rules to the contrary set
forth elsewhere in the Plan.
(1) The Accrued Benefit for each Participant who is not a key
employee who completes at least 1000 Hours of Service during such
Plan Year shall not, in the aggregate, be less than the product of
(i) 2% of such Participant's average compensation (as defined under
section 415 of the Code) for the 5 consecutive calendar years during
which such Participant had the highest aggregate compensation from
an Affiliate (excluding compensation for years after the last year
for which the Plan is "top heavy") and (ii) his total Years of
Service for vesting purposes, not to exceed 10 (excluding years in
which the Plan is not "top-heavy"). Any accruals required under this
section by reason of the Plan being "top heavy" shall be offset by
the Actuarial Equivalent value of the contributions and forfeitures,
if any, allocated on behalf of such Participant under any defined
contribution plan (which is taken into account under this Section
13.9) solely by reason of such plan being "top heavy". No accruals
shall be permitted under this Section 13.9 for any Plan Year in
which the contributions and forfeitures allocated on behalf of such
Participant under any such defined contribution plan equal at least
5% of such Participant's compensation.
(2) A Participant's nonforfeitable interest in his Accrued Benefit
under the Plan shall be determined under the following schedule:
<TABLE>
<CAPTION>
COMPLETED YEARS NONFORFEITABLE
OF SERVICE INTEREST
--------------- --------------
<S> <C>
Less than 2................................ 0%
2.......................................... 20%
3...........................................40%
4...........................................60%
5 or more..................................100%
</TABLE>
PENSION EQUITY PLAN
<PAGE> 51
However, the vesting schedule set forth above shall not apply to any
Participant who does not have an Hour of Service after the date as of
which the Plan becomes "top heavy".In the event that the Plan later
ceases to be "top heavy," the vesting rules in Section 3.39 shall once
again apply, provided that
(A) the nonforfeitable portion of a Participant's Accrued Benefit
shall not thereafter be less than the nonforfeitable portion of his
Accrued Benefit before the Plan ceases to be "top heavy,"
(B) the nonforfeitable portion of the Accrued Benefit of any
Participant who has completed at least 3 Years of Service on the
date the Plan ceases to be "top heavy" shall continue to be
determined under the vesting schedule set forth in this Section
13.9(b)(2) if such vesting schedule is more favorable to the
Participant, and
(C) solely for purposes of Section 3.39(b) and Section 7.1, "2 full
Years of Service" shall replace the language in Section 3.38(a).
(3) If a Participant receives his Accrued Benefit in the form of a lump
sum payment and such Participant's nonforfeitable Accrued Benefit is less
than 100% upon his termination of participation in the Plan as a result of
the Plan being top-heavy in any year of his employment, then such
Participant upon his reemployment, provided he is reemployed before
incurring 5 Breaks in Service, may have his Accrued Benefit calculated in
accordance with Section 3.39 but without regard to the final sentence in
Section 3.39(a)(3) if he repays to the Plan an amount equal to the dollar
amount of his lump sum payment plus interest on such payment in accordance
with section 411(a)(7) of the Code.
(4) The Plan Sponsor shall take such action as necessary to satisfy the
requirements of sections 415(e) and 416(h) of the Code if the Plan Sponsor
(following the procedure set forth in 13.9(a)) determines that the Plan
fails to meet the requirements set forth in section 416(h) of the Code.
13.10.QUALIFIED DOMESTIC RELATIONS ORDERS .Benefits under the Plan shall be
paid in accordance with the applicable requirements of a qualified domestic
relations order" as that term is defined in section 414(p) of the Code and
section 206(d)(3) of ERISA.The Committee, in accordance with a uniform and
nondiscriminatory procedures established by the Committee, shall
(a) promptly notify the Participant and any alternate payee (as that term
is defined in section 414(p)(8) of the Code) of the receipt of a domestic
relations order and the Plan's procedures for determining the qualified
status of such order,
PENSION EQUITY PLAN
<PAGE> 52
(b) determine the qualified status of such order, and
(c) administer any distributions under the Plan pursuant to such order in
accordance with the rules set forth in section 414(p) of the Code.
The determinations and the distribution made by, or at the direction of, the
committee under this Section 13.10 shall final and binding on the Participant,
and an all other persons interested in such order.
The Plan shall begin payments of benefits to an alternate payee as of the later
of (i) the earliest date on which distribution may be made pursuant to the
order, and (ii) as soon as administratively practicable after the date such
order is determined by the Committee to be a "qualified domestic relations
order." For purposes of determining the present value of any benefits payable
pursuant to a qualified domestic relations order before a Participant's
separation from service, the interest rate shall be the interest rate described
in Section 3.3(b)(2).
13.11. INCOME TAX WITHHOLDING. The amount of any distribution to a Participant,
Spouse, Beneficiary or alternate payee shall be reduced to the extent necessary
to comply with federal, state and local income tax withholding requirements.
PENSION EQUITY PLAN
<PAGE> 53
IN WITNESS WHEREOF, Lanier Worldwide, Inc. has caused the Plan to be executed
and its seal to be affixed and attested by its duly authorized officers this
20th day of August, 1997.
LANIER WORLDWIDE, INC.
By: /s/ Wesley E. Cantrell
--------------------------------------
Title: President & Chief Executive Officer
-----------------------------------
(SEAL)
ATTEST:
By: /s/ J. M. Kelly
---------------------------------------
Title: Vice President & Assistant Secretary
------------------------------------
PENSION EQUITY PLAN
<PAGE> 54
EXHIBIT A
ARTICLE ONE
FORMER LANIER PARTICIPANTS - EMPLOYEE CONTRIBUTIONS
---------------------------------------------------
1.1. APPLICATION. This Article One shall apply only to those Participants who
are Former LBP Participants.
1.2. DEFINITIONS. The terms in this Article One shall have the meanings set
forth opposite such terms for purposes of this Article One. Except as provided
in this Section 1.2, a capitalized term shall have the meaning set forth in the
Plan as in effect on June 30, 1997.
(a) FORMER LBP PARTICIPANT. A person who was a participant in the
Harris/LBP Plan and who made mandatory participant contributions to
the Harris/LBP Plan before January 1, 1982.
(b) HARRIS/LBP PLAN. The Harris/Lanier Retirement Plan and Trust
Agreement as last amended and restated effective as of January 1,
1988.
1.3. MANDATORY PARTICIPANT CONTRIBUTIONS.
(a) INVOLUNTARY CASHOUT. If a Former LBP Participant terminates employment
prior to his Vested Date and the Actuarially Equivalent single sum value of
his Accrued Benefit attributable to his employee contributions as
determined in accordance with section 411(c) of the Code is $3,500 or less,
such participant shall receive a lump sum payment of his entire Accrued
Benefit attributable to such employee contributions.
(b) RIGHT OF IN SERVICE WITHDRAWAL. At any time prior to his termination of
employment, a Former LBP Participant may request a withdrawal of his
employee contributions which shall be paid in the normal annuity form
described in Section 6.1 of the Plan. Notwithstanding the foregoing, a
Former LBP Participant may request (subject to the spousal consent rules of
Section 6.2 of the Plan) to receive a single sum distribution of his
employee contributions. A Participant who withdraws his contributions under
this section at any time on or after January 1, 1982 and who thereafter
repays the amount refunded with interest as provided in (d) below shall not
be entitled to withdraw his employee contributions again prior to his
Annuity Starting Date.
(c) VOLUNTARY WITHDRAWAL ON TERMINATION. A Former LBP Participant who
terminates employment may request (subject to the spousal consent rules of
Section 6.2 of the Plan) to receive a single sum distribution of his entire
Accrued Benefit attributable to his employee contributions. If he does not
repay such distribution with interest as described in
PENSION EQUITY PLAN
<PAGE> 55
(d) below, then any benefit to which such Participant (or his Spouse) may
become entitled under the Plan shall be recalculated to exclude an amount
equal to his Accrued Benefit derived from employee contributions as
determined in accordance with section 411(c) of the Code.
(d) INTEREST. Interest referred to in this subsection (d) shall be computed
at an annual rate of 3%, compounded annually, for periods prior to January
1, 1976; at an annual rate of 5%, compounded annually, for periods after
1975 but prior to January 1, 1988; and at an annual rate of 120% of the
Federal mid-term rate (as in effect under section 1274 of the Code for the
first month of the Plan Year), compounded annually from January 1, 1988
until such Determination Date or repayment date, if applicable. The
interest rate under this subsection (d) shall be adjusted from time to time
in accordance with regulations under section 411(c) of the Code.
(e) REPAYMENT. Repayment described in this subsection (e) means repayment
to the Plan by the Former LBP Participant of the amount of the distribution
together with interest at the rates provided in subsection (d) above in the
form of a cash payment before (i) in the case of a distribution on account
of a separation from service, the earlier of 5 years after the first date
on which the Participant resumes employment as an Eligible Employee or the
close of 5 consecutive Breaks in Service following the distribution and
(ii) in the case of any other withdrawal, 5 years after the date of the
withdrawal.
1.4. SURVIVOR BENEFITS.
(a) SURVIVOR BENEFITS. In the event a Former LBP Participant made
contributions to the Plan and such Participant dies before his Vested Date
and his Annuity Starting Date, such Participant shall be treated as dying
after his Vested Date for purposes of Section 7.1 of the Plan and any
survivor benefit payable under Section 7.1 of the Plan shall be based on
his Accrued Benefit attributable to his employee contributions then
remaining in the Plan, with interest thereon computed at the rate described
in Section 1.3(d) above, compounded annually, to the date of the
Participant's death.
If a Participant dies after his Annuity Starting Date, and if no survivor
annuity benefit is payable to his surviving Spouse or other Beneficiary
under an optional form of benefit, then his Beneficiary shall be entitled
only to the excess, if any, of (1) the Participant's contributions under
the Plan prior to 1982, less withdrawals, with interest thereon computed at
the rates described in Section 1.3(d), compounded annually, to his benefit
commencement date, over (2) the aggregate of payments made under the Plan
to such Participant.
The survivor benefit payable under this Section 1.4, if any, shall be paid
in a single sum in cash.
PENSION EQUITY PLAN
<PAGE> 56
ARTICLE TWO
OPTIONAL FORMS OF BENEFITS
--------------------------
2.1. APPLICATION. The terms of this Article Two shall apply to those
Participants identified below.
2.2. DEFINITIONS. The terms in this Article Two shall have the meanings set
forth opposite such terms for purposes of this Article Two. Except as provided
in this Section 2.2, a capitalized term shall have the meaning set forth in the
Plan as in effect on June 30, 1997.
(a) FORMER LBP PARTICIPANT. A person who was a participant in the
Harris/LBP Plan before October 1, 1989.
(b) FORMER HARRIS/DPI PARTICIPANT. A person who was a participant in the
Harris/DPI Plan before October 1, 1989.
(c) FORMER 3M PARTICIPANT. A Former Harris/DPI Participant who transferred
from 3M or its affiliates to the employ of Harris/DPI before June 30,
1986 in accordance with the joint venture agreement between Harris/DPI
and 3M and each Former Harris/DPI Participant who transferred from 3M
Puerto Rico, Inc. to Harris/DPI after January 31, 1987 but before
August 1, 1987 in accordance with the joint venture agreement between
Harris/DPI and 3M and with respect to whom assets and liabilities were
transferred to the Harris/DPI Plan from the 3M Plan.
(d) HARRIS/DPI. Harris/3M Document Products, Inc.
(e) HARRIS/DPI PLAN. The Harris/3M Document Products, Inc. Pension Plan as
last amended and restated effective as of July 1, 1987.
(f) HARRIS/LBP PLAN. The Harris/Lanier Retirement Plan and Trust
Agreement as last amended and restated effective as of January 1,
1988.
(g) 3M. Minnesota Mining and Manufacturing Company.
PENSION EQUITY PLAN
<PAGE> 57
(h) 3M PLAN. The Employee Retirement Income Plan of Minnesota Mining and
Manufacturing Company as in effect immediately prior to June 30, 1986.
2.3. OPTIONAL FORMS OF BENEFIT - FORMER LBP PARTICIPANTS.
(a) GENERAL. Subject to Section 6.2 of the Plan, each Former LBP
Participant may elect to have the following optional payment forms at his
Annuity Starting Date after his Early Retirement Date or Normal Retirement
Date in addition to the optional payment forms described in Section 6.3 of
the Plan:
OPTION A:
---------
A single sum cash distribution of the portion of his benefit accrued
under the Harris/LBP Plan as of December 31, 1981, and a benefit
payable under any optional form described in Section 6.3 of the Plan
for that portion of his benefit accrued under the Plan after December
31, 1981.
OPTION B:
---------
A Former LBP Participant who participated in the Harris/LBP Plan at
any time after December 31, 1985 and before October 1, 1989 shall be
eligible to elect an immediate single sum payment or an immediate
annuity benefit in the form of his normal annuity payment form. Such
immediate benefit shall be equal to the Actuarial Equivalent of his
Accrued Benefit, if any, accrued under the Harris/LBP Plan prior to
October 1, 1989 and under the Plan after September 30, 1989 and
through April 30, 1990. The remainder of his Accrued Benefit shall be
paid in accordance with the terms of Articles Five and Six of the
Plan.
2.4. OPTIONAL FORMS OF BENEFIT - FORMER 3M PARTICIPANTS.
(a) GENERAL. Subject to Section 6.2 of the Plan and to the limitations in
this Section 2.4, each Former 3M Participant who terminates employment on
or after his Early Retirement Date or his Normal Retirement Date may elect
to have that portion of his Accrued Benefit which equals the Actuarial
Equivalent of such Participant's accrued benefit under the 3M Plan as of
the date his employment was transferred to the Plan Sponsor ("3M Benefit")
paid in the form of a 5 or 15 year annuity which shall be payable monthly
during the lifetime of the Participant and shall, if the Participant dies
within 5 or 15 years of his Annuity Stating Date continue to be paid to his
surviving designated Beneficiary for the balance of such 5 or 15 year
period.
PENSION EQUITY PLAN
<PAGE> 58
ARTICLE THREE
EARLY RETIREMENT BENEFITS
-------------------------
3.1. APPLICATION. This Article Three shall apply only to Participants in the
Plan as of June 30, 1997, Former 3M Participants, Eligible McCarthy Employees
and Eligible Milner Employees as defined below.
3.2 DEFINITIONS. The terms in this Section 3.2 shall have the meanings set forth
opposite such terms for purposes of this Article Three. Except as provided in
this Section 3.2, a capitalized term shall have the meaning set forth in the
Plan as in effect on June 30, 1997.
(a) ELIGIBLE MCCARTHY EMPLOYEE. Each Former 3M Participant who is a
McCarthy Employee, and whose projected EUR Date as determined as of
December 31, 1986 was on or before January 1, 2002.
(b) ELIGIBLE MILNER EMPLOYEE. Each Former 3M Participant who is a Milner
Employee, and whose projected EUR Date as determined as of April 26,
1987 was on or before May 1, 2002.
(c) EUR DATE. Notwithstanding any contrary Plan provision, the term "EUR
Date" means for each Former 3M Participant the first day of the month
coinciding with or next following the date such Participant satisfies
(or would have satisfied if he had continued in employment as an
Employee) the age and service criteria set forth below:
<TABLE>
<CAPTION>
ATTAINED AGE AT COMPLETED YEARS OF
BENEFIT COMMENCEMENT DATE BENEFIT SERVICE
-------------------------------------------------
<S> <C> <C> <C> <C>
62 to 65 28
61 29 60 30
59 32
58 34
</TABLE>
Such age and service criteria shall be adjusted, for any Annuity Starting
Date which is not on a Participant's birthday in accordance with the
following rules:
(i) The number of completed Years of Service for a
Participant whose Annuity Starting Date is between his 58th and
60th birth dates shall be equal to (A) the completed Years of
Service for his "attained age" at his last birthday reduced by
(B) the product of 1/6 and the number of months by which his
"attained age" at his Annuity Starting Date exceeds his "attained
age" at his last birthday.
PENSION EQUITY PLAN
<PAGE> 59
(ii) The number of completed Years of Service for a
Participant whose Annuity Starting Date is between his 60th and
62nd birth dates shall be equal to (A) the completed Years of
Service for his "attained age" at his last birthday reduced by
(B) the product of 1/12 and the number of months by which his
"attained age" at his Annuity Starting Date exceeds his
"attained age" at his last birthday.
(d) FORMER HARRIS/DPI PARTICIPANT. A person who was a participant in the
Harris/DPI Plan before October 1, 1989.
(e) FORMER 3M PARTICIPANT. A Former Harris/DPI Participant who
transferred from 3M or its affiliates to the employ of Harris/DPI
before June 30, 1986 in accordance with the joint venture agreement
between Harris/DPI and 3M and each Former Harris/DPI Participant who
transferred from 3M Puerto Rico, Inc. to Harris/DPI after January
31, 1987 but before August 1, 1987 in accordance with the joint
venture agreement between Harris/DPI and 3M and with respect to whom
assets and liabilities were transferred to the Harris/DPI Plan from
the 3M Plan.
(f) HARRIS/DPI. Harris/3M Document Products, Inc.
(g) HARRIS/DPI PLAN. The Harris/3M Document Products, Inc. Pension Plan
as last amended and restated effective as of July 1, 1987.
(h) MCCARTHY. McCarthy Enterprises, Inc.
(i) MCCARTHY EMPLOYEE. Each individual (1) who was an Eligible Employee
(as determined under the Plan in effect at that time) at the
Columbus, Ohio District Office or the Cincinnati, Ohio District
Office of Harris/DPI on December 31, 1986, (2) who as of such date
has not reached his Vested Date and (3) who as of the close of
business on such date became an employee of McCarthy as a result of
the sale of certain assets of the Plan Sponsor to McCarthy on such
date.
(j) MILNER. The Milner Company.
(k) MILNER EMPLOYEE. Each individual (1) who is an Eligible Employee (as
determined under the Plan in effect at that time) at the
Headquarters Office of Harris/DPI in Atlanta, Georgia, an Atlanta
Region Office or a Fort Lauderdale Region Office of Harris/DPI on
April 26, 1987, (2) who as of such date has not reached his Vested
Date and (3) who as of April 27, 1987 became an employee of
PENSION EQUITY PLAN
<PAGE> 60
Milner as a result of the sale of certain assets of Harris/DPI to Milner
on such date.
(l) 3M. Minnesota Mining and Manufacturing Company.
(m) 3M PLAN. The Employee Retirement Income Plan of Minnesota Mining and
Manufacturing Company as in effect from time to time prior to June
30, 1986.
(n) SOCIAL SECURITY BENEFIT. The monthly primary insurance amount
("PIA") which would be payable for each Former 3M Participant in
accordance with the following:
(1) PIA shall be determined:
(A) For a Former 3M Participant who on June 30, 1989 had not
reached age 62, assuming that
(i) he is age 62 on June 30, 1989,
(ii) his post-termination wages from June 30,
1989 through his retirement age under the Social
Security Act were zero, and
(iii) his PIA would be payable at age 62.
(B) For a Former 3M Participant who on June 30, 1989 was at
least age 62, assuming that
(i) his post-termination wages from June 30, 1989
through his retirement age under the Social Security Act
were zero and
(ii) his PIA would be payable on June 30, 1989.
3.3 EARLY RETIREMENT BENEFITS -- PLAN PARTICIPANTS WITH ACCRUED BENEFITS AS OF
JUNE 30, 1997
(a) GENERAL. A Participant who terminates employment as an Employee on or
after his Early Retirement Date and before his Normal Retirement Date and
who elects to begin receipt of his benefits before his Normal Retirement
Date shall be entitled to receive a subsidy
PENSION EQUITY PLAN
<PAGE> 61
equal to the difference between his Accrued Benefit determined as of June
30, 1997 without reference to the provisions of Section 3.3(b) below and
his Accrued Benefit determined as of June 30, 1997 determined in
accordance with Section 3.3(b).
(b) EARLY COMMENCEMENT REDUCTION FACTOR. If the payment of a Participant's
benefit begins between his Early Retirement Date and his Normal Retirement
Date, then, subject to Section 3.4 below, the portion of his Accrued Benefit
attributable to his accrued benefit as of June 30, 1997 shall be determined as
a percentage of his accrued benefit as of June 30, 1997 which otherwise would
be payable to him at his Normal Retirement Date. The percentage shall be
determined in accordance with the following table:
<TABLE>
<CAPTION>
PERCENTAGE OF JUNE 30, 1997 ACCRUED
PARTICIPANT'S ATTAINED AGE AT BENEFIT
ANNUITY STARTING DATE PAYABLE AT NORMAL RETIREMENT DATE
--------------------- ---------------------------------
<S> <C> <C>
65............................................... 100%
64............................................... 99%
63............................................... 97%
62............................................... 92%
61............................................... 86%
60............................................... 80%
59............................................... 74%
58............................................... 68%
57............................................... 62%
56............................................... 56%
55............................................... 50%
</TABLE>
3.4. EARLY RETIREMENT BENEFITS -- FORMER 3M PARTICIPANTS.
(a) EARLY UNREDUCED RETIREMENT DATE PROVISIONS.
(1) UNREDUCED BENEFIT.
(i) GENERAL. A Former 3M Participant who terminates employment on
or after his EUR Date and who elects to begin receipt of his
benefits before his Normal Retirement Date shall be entitled to
receive a subsidy equal to his accrued benefit determined as of
June 30, 1997 without reference to the subsection (ii) below, and
his accrued benefit determined as of June 30, 1997 determined in
accordance with subsection (ii) below.
(ii) 100% SUBSIDY. If the payment of a Former 3M Participant's
Accrued Benefit begins on or after his EUR Date and before his
Normal Retirement
PENSION EQUITY PLAN
<PAGE> 62
Date, then the portion of his accrued benefit attributable to his
Accrued Benefit as of June 30, 1997 shall equal 100% of his
accrued benefit as of June 30, 1997 which otherwise would be
payable to him at his Normal Retirement Date.
(2) SOCIAL SECURITY SUPPLEMENT. If a Former 3M Participant who
terminates employment as an Employee on or after his EUR Date and
begins receiving a benefit on or after his EUR Date but before age 62,
such Participant's Accrued Benefit shall be increased by providing such
Participant with an additional benefit, payable monthly, beginning with
the month which includes his Annuity Starting Date and ending with the
month in which he reaches age 62 or his date of death, if earlier, by
an amount which shall equal the amount of his Social Security Benefit.
(3) MCCARTHY ENTERPRISES, INC. Solely for purposes of determining
whether an Eligible McCarthy Employee is eligible for the early
unreduced retirement provisions of this section with respect to his
Accrued Benefit as determined as of December 31, 1986, his continuous
employment with McCarthy from December 31, 1986 until the date he first
terminates employment with McCarthy shall be deemed to be employment as
an Employee under the Plan. If an Eligible McCarthy Employee is
reemployed as an Employee after December 31, 1986, his eligibility for
the early unreduced retirement provisions with respect to that portion
of his Accrued Benefit, if any, accrued after December 31, 1986 shall
be determined without regard to the special rules of this section (3).
(4) THE MILNER COMPANY. Solely for purposes of determining whether an
Eligible Milner Employee is eligible for the early unreduced retirement
provisions of this section with respect to his Accrued Benefit as
determined as of April 26, 1987, his continuous employment with Milner
from April 26, 1987 until the date he first terminates employment with
Milner shall be deemed to be employment as an Employee under the Plan.
(b) EARLY RETIREMENT TIMING AND AMOUNT.
(1) TIMING. Each Former 3M Participant who terminates employment as an
Employee as of the first day of the month coincident with or next
following the date he reaches age 55 shall be fully vested in his
Accrued Benefit (without regard to his completed Years of Service) and
such Participant shall be entitled to begin receiving his Accrued
Benefit in accordance with Article Six of the Plan.
(2) AMOUNT. If a Former 3M Participant terminates employment as an
Employee in accordance with Section 3.3(b)(1) above either (i) before
his EUR Date if he has an EUR
PENSION EQUITY PLAN
<PAGE> 63
Date or (ii) if he does not have an EUR Date, then his benefit shall
be the greater of (A) and (B) where
"(A)" equals the greater of (i) or (ii) where
(i) equals his Accrued Benefit as
reduced in accordance with Section 3.3 above as if
such Former 3M Participant had elected to begin
receiving his benefit as of the date his
employment actually terminates and
(ii) equals his Accrued Benefit as
reduced by the product of 5% and 1/12th of the
number of months by which his Annuity Starting
Date precedes the earlier of his Normal Retirement
Date or his EUR Date, if any and
"(B)" equals his Accrued Benefit determined as
of June 30, 1986 (in accordance with the terms of the 3M Plan as of
June 30, 1986) as reduced by the product of 5% and 1/12th of the number
of months by which his Annuity Starting Date precedes the earlier of
his 62nd birthday or his EUR Date, if any. If such Participant
terminates employment on or after his EUR Date, his benefit shall be
determined in accordance with Section 3.3(a)(1) above.
(c) NORMAL BENEFIT FORM - FULLY SUBSIDIZED JOINT AND 50% SURVIVOR ANNUITY.
Notwithstanding Section 6.1(a)(2) of the Plan, each Former 3M Participant
who finally terminates employment as an Employee on or after age 55 shall
be entitled to receive retirement benefits (exclusive of any supplement
described in Section 4.3(a)(2) above) in the form of a fully subsidized (as
described in section 417 of the Code) joint and 50% survivor annuity
payable to the Participant if the Participant has a Spouse on his Benefit
Commencement Date. The monthly benefit payable to such Former 3M
Participant during his lifetime shall be equal to the monthly benefit
payable to him in the single life form of annuity described in Section
6.3(a)(1) of the Plan and monthly benefit equal to 50% of the benefit
payable to the Participant shall be payable to the Participant's surviving
Spouse for such Spouse's lifetime.
ARTICLE FOUR
SPECIAL VESTING PROVISIONS FOR CERTAIN PARTICIPANTS
---------------------------------------------------
4.1. APPLICATION. This Article Four shall apply only to Eligible McCarthy
Employees, Eligible Milner Employees, and Plaza Employees described below.
PENSION EQUITY PLAN
<PAGE> 64
4.2. DEFINITIONS. The terms in this Article Four shall have the meanings set
forth opposite such terms for purposes of this Article Four. Except as provided
in this Section 4.2, a capitalized term shall have the meaning set forth in the
Plan as in effect on June 30, 1997.
(a) ELIGIBLE MCCARTHY EMPLOYEE. Each Former 3M Participant who is a
McCarthy Employee, and whose projected EUR Date as determined as
of December 31, 1986 was on or before January 1, 2002.
(b) ELIGIBLE MILNER EMPLOYEE. Each Former 3M Participant who is a
Milner Employee, and whose projected EUR Date (as defined in
Section 4.3(a)(1)) as determined as of April 26, 1987 was on or
before May 1, 2002.
(c) EUR DATE. Notwithstanding any contrary Plan provision, the term
"EUR Date" means for each Former 3M Participant the first day of
the month coinciding with or next following the date such
Participant satisfies (or would have satisfied if he had continued
in employment as an Employee) the age and service criteria set
forth below:
PENSION EQUITY PLAN
<PAGE> 65
<TABLE>
<CAPTION>
ATTAINED AGE AT COMPLETED YEARS OF
BENEFIT COMMENCEMENT DATE BENEFIT SERVICE
------------------------- ---------------
<S> <C> <C> <C> <C>
62 to 65 28
61 29 60
30
59 32
58 34
</TABLE>
Such age and service criteria shall be adjusted, for any
Annuity Starting Date which is not on a Participant's
birthday in accordance with the following rules:
(i) The number of completed Years of
Service for a Participant whose Annuity Starting Date
is between his 58th and 60th birth dates shall be
equal to (A) the completed Years of Service for his
"attained age" at his last birthday reduced by (B)
the product of 1/6 and the number of months by which
his "attained age" at his Annuity Starting Date
exceeds his "attained age" at his last birthday.
(ii) The number of completed Years
of Service for a Participant whose Annuity Starting
Date is between his 60th and 62nd birth dates shall
be equal to (A) the completed Years of Service for
his "attained age" at his last birthday reduced by
(B) the product of 1/12 and the number of months by
which his "attained age" at his Annuity Starting Date
exceeds his "attained age" at his last birthday.
(d) FORMER LBP PARTICIPANT. A person who was a participant in the
Harris/LBP Plan before October 1, 1989.
(e) FORMER HARRIS/DPI PARTICIPANT. A person who was a participant in
the Harris/DPI Plan before October 1, 1989.
(f) FORMER 3M PARTICIPANT. A Former Harris/DPI Participant who
transferred from 3M or its affiliates to the employ of Harris/DPI
before June 30, 1986 in accordance with the joint venture
agreement between Harris/DPI and 3M and each Former Harris/DPI
Participant who transferred from 3M Puerto Rico, Inc. to
Harris/DPI after January 31, 1987 but before August 1, 1987 in
accordance with the joint venture agreement between Harris/DPI and
3M and with respect
PENSION EQUITY PLAN
<PAGE> 66
to whom assets and liabilities were transferred to the
Harris/DPI Plan from the 3M Plan.
(g) HARRIS/DPI. Harris/3M Document Products, Inc.
(h) HARRIS/DPI PLAN. The Harris/3M Document Products, Inc. Pension
Plan as last amended and restated effective as of July 1, 1987.
(i) HARRIS/LBP PLAN. The Harris/Lanier Retirement Plan and Trust
Agreement as last amended and restated effective as of January 1,
1988.
(j) MCCARTHY. McCarthy Enterprises, Inc.
(k) MCCARTHY EMPLOYEE. Each individual (1) who was an Eligible
Employee (as determined under the Plan in effect at that time) at
the Columbus, Ohio District Office or the Cincinnati, Ohio
District Office on December 31, 1986, (2) who as of such date has
not reached his Vested Date and (3) who as of the close of
business on such date becomes an employee of McCarthy as a result
of the sale of certain assets of the Plan Sponsor to McCarthy on
such date.
(l) MILNER. The Milner Company.
(m) MILNER EMPLOYEE. Each individual (1) who is an Eligible Employee
(as determined under the Plan in effect at that time) at the
Headquarters Office of Harris/DPI in Atlanta, Georgia, an Atlanta
Region Office or a Fort Lauderdale Region Office on April 26,
1987, (2) who as of such date has not reached his Vested Date and
(3) who as of April 27, 1987 became an employee of Milner as a
result of the sale of certain assets of the Plan Sponsor to Milner
on such date.
(n) PLAZA EMPLOYEE. Each individual who was an Eligible Employee
performing services at the Executive Conference Center, Inc.
before January 1, 1991 and who as of the close of business on
January 1, 1991 became an employee of Hotel Management Services,
Inc.
(o) 3M. Minnesota Mining and Manufacturing Company.
4.3 SPECIAL VESTING PROVISIONS.
(a) MCCARTHY EMPLOYEES. The nonforfeitable benefit, if any,
payable to or on behalf of a McCarthy Employee shall be determined
as follows:
PENSION EQUITY PLAN
<PAGE> 67
(1) Solely for purposes of determining a McCarthy Employee's
nonforfeitable interest in his Accrued Benefit as of
December 31, 1986, his Years of Service and his Vested Date
shall be determined as if his continuous employment with
McCarthy from December 31, 1986 until the date he first
terminates employment with McCarthy is employment as an
Employee under the Plan.
(2) No benefit shall be payable under the Plan to any McCarthy
Employee who terminates employment with McCarthy before he
completes 10 Years of Service or, if he is an employee of
McCarthy on July 1, 1989, 5 Years of Service except to the
extent a benefit is payable to such individual as a result
of reemployment as an Eligible Employee after December 31,
1986.
(3) If a McCarthy Employee is reemployed as an Eligible Employee
after December 31, 1986, his nonforfeitable interest in that
portion of his Accrued Benefit, if any, accrued after such
date shall be determined solely with respect to his Years of
Service under the Plan without regard to the special rules
of this section and no such individual shall receive service
credit (for vesting or benefit purposes) for employment with
McCarthy with respect to any benefits accrued under the Plan
after December 31, 1986.
(b) MILNER EMPLOYEES. The nonforfeitable benefit, if any,
payable to or on behalf of a Milner Employee shall be determined as
follows:
(1) Solely for purposes of determining a Milner Employee's
nonforfeitable interest in his Accrued Benefit as of April
26, 1987, his Years of Service and his Vested Date with
respect to such Accrued Benefit shall be determined as if
his continuous employment with Milner from April 26, 1987
until the date he first terminates employment with Milner is
employment as an Employee under the Plan.
(2) Such Accrued Benefit shall be payable to him as of his
Normal Retirement Date or as of the first day of any month
coinciding with or following the date on which he reaches
age 55 and completes 10 Years of Service (as determined in
accordance with subsection (3) below) and any survivor
benefit under Article Seven attributable to such Accrued
Benefit shall be payable to his Spouse, provided, that any
Milner Employee who is also a Former LBP Participant may
receive his Accrued Benefit at any time after his terminates
employment with Milner.
PENSION EQUITY PLAN
<PAGE> 68
(3) No benefit shall be payable under the Plan to any Milner
Employee who terminates employment with Milner before he
completes 10 Years of Service, or, if he is an Employee of
Milner on July 1, 1989, 5 Years of Service except to the
extent a benefit is payable to such individual as a result
of reemployment as an Eligible Employee after April 26,
1987.
(4) If a Milner Employee is reemployed as an Eligible
Employee after April 26, 1987, his nonforfeitable interest
in that portion of his Accrued Benefit, if any, accrued
after April 26, 1987 shall be determined solely with respect
to his Years of Service under the Plan without regard to the
special rules of this section and no such individual shall
receive service credit (for vesting or benefit purposes) for
employment with Milner with respect to any benefits accrued
under the Plan after April 26, 1987.
(c) PLAZA EMPLOYEES. Solely for purposes of determining a
Plaza Employee's nonforfeitable interest in his Accrued
Benefit as of January 1, 1991, his Years of Service and his
Vested Date with respect to such Accrued Benefit shall be
determined as if his employment with Hotel Management
Services, Inc. is employment as an Employee under the Plan
as long as such Plaza Employee is treated as a "leased
employee" of an Affiliate under section 414 of the Code. His
Accrued Benefit shall be payable to him in accordance with
Article Six of the Plan; however, a Plaza Employee shall not
be treated as having terminated employment until such time
as he is no longer treated as a "leased employee" under the
Plan or such earlier time as distribution is permissible
under the Code and consistent with the timing rules of
Article Six of the Plan.
ARTICLE FIVE
ACCRUED BENEFIT AS OF JUNE 30, 1997
-----------------------------------
5.1 GENERAL. Notwithstanding anything in the Plan or this Exhibit A to the
contrary, the Accrued Benefit of a Participant shall not be less than the
Participant's Accrued Benefit under the Plan as of June 30, 1997 (as determined
under the terms of the Plan in effect as of such date), or in the case of a
Participant employed by Lanier Puerto Rico, Inc. as of July 15, 1997 (as
determined under the terms of the Plan in effect as of June 30, 1997).
PENSION EQUITY PLAN
<PAGE> 1
EXHIBIT 10(j)
LANIER WORLDWIDE, INC.
SAVINGS INCENTIVE PLAN
(as amended and restated as of July 1, 1997)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
ARTICLE I.....................................................................................1
HISTORY AND EFFECTIVE DATE....................................................................1
ARTICLE II....................................................................................2
CONSTRUCTION..................................................................................2
2.1. Controlling Laws.....................................................................2
2.2. Construction.........................................................................2
ARTICLE III...................................................................................2
DEFINITIONS...................................................................................2
3.1. Account..............................................................................2
3.2. Affiliate............................................................................2
3.3. Average Contribution Percentage......................................................2
3.4. Average Deferral Percentage..........................................................3
3.5. Authorized Leave of Absence..........................................................3
3.6. Before-Tax Account...................................................................3
3.7. Before-Tax Contributions.............................................................3
3.8. Beneficiary..........................................................................3
3.9. Board................................................................................3
3.10. Break in Service.....................................................................3
3.11. Code.................................................................................4
3.12. Committee............................................................................4
3.13. Compensation.........................................................................4
3.14. Contribution Percentage..............................................................5
3.15. Deferral Percentage..................................................................5
3.16. Earnings and Profits.................................................................5
3.17. Effective Date.......................................................................5
3.18. Election Form........................................................................5
3.19. Eligible Employee....................................................................6
3.20. Employee.............................................................................6
3.21. Employer.............................................................................6
3.22. Employment Commencement Date.........................................................6
3.23. Employment Termination Date..........................................................6
3.24. Entry Date...........................................................................7
3.25. ERISA................................................................................7
3.26. Excess Aggregate Contributions.......................................................7
3.27. Excess Contributions.................................................................7
3.28. Excess Deferrals.....................................................................7
3.29. Forfeiture...........................................................................7
3.30. Harris/LBP Plan......................................................................7
</TABLE>
-i-
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
3.31. Harris Stock.........................................................................7
3.32. Harris Stock Fund....................................................................7
3.33. Highly Compensated Participant.......................................................7
3.34. Hour of Service......................................................................8
3.35. Matching Account.....................................................................9
3.36. Matching Contributions...............................................................9
3.37. Matched Deferrals....................................................................9
3.38. Maximum Deferral Percentage..........................................................9
3.39. Nonhighly Compensated Participant....................................................9
3.40. Normal Retirement Age................................................................9
3.41. Participant..........................................................................9
3.42. Participation Requirement............................................................9
3.43. Plan.................................................................................9
3.44. Plan Sponsor.........................................................................9
3.45. Plan Year...........................................................................10
3.46. Reemployment Commencement Date......................................................10
3.47. Rollover Account....................................................................10
3.48. Trust Agreement.....................................................................10
3.49. Trust Fund..........................................................................10
3.50. Trustee.............................................................................10
3.51. Valuation Date......................................................................10
3.52. Year of Service.....................................................................10
ARTICLE IV
PARTICIPATION.............................................................................12
4.1. General Rule.........................................................................12
4.2. Reemployment Rule....................................................................12
4.3. Change in Employment Status or Transfer From an Affiliate............................12
4.4. Information..........................................................................13
4.5. Leased Employees.....................................................................13
ARTICLE V CONTRIBUTIONS AND ACCOUNTS........................................................13
5.1. Before-Tax Contributions.............................................................13
(a) Percentage.......................................................................13
(b) Payroll Deductions...............................................................13
(c) Account Credits and Vesting......................................................13
(d) Investment Gains and Losses......................................................13
(e) Make Up of Before-Tax Contributions for Reemployed Vetrans.......................14
5.2. Election Rules.......................................................................15
(a) Initial Election.................................................................15
(b) Revised Election.................................................................15
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
(c) Revocation of Election...........................................................15
(d) Resumption After Revocation......................................................15
(e) Timeliness and Election Procedures...............................................15
(f) Committee Action.................................................................15
5.3. Matching Contributions and Forfeitures...............................................16
(a) Amount...........................................................................16
(b) Forfeitures......................................................................16
(c) Timing...........................................................................16
(d) Insufficient Earnings and Profits................................................16
(e) Account Credits and Vesting......................................................16
(f) Investment Gains and Losses......................................................17
(g) Make Up of Employer Matching Contributions.......................................17
5.4. Limitations on Allocations...........................................................17
(a) General Rule.....................................................................17
(b) Statutory Limitations on Contributions...........................................17
(1) General Rule.................................................................17
(2) Coordination.................................................................18
(3) Corrections..................................................................18
(c) Individual Dollar Limit..........................................................19
(1) This Plan....................................................................19
(2) Other Plans..................................................................19
(3) Claim........................................................................20
(4) Determination of Investment Gain or Loss.....................................20
(5) Distribution of Excess Deferrals.............................................20
(6) Forfeiture of Related Match..................................................20
(d) Limitations on Before-Tax Contributions for Highly Compensated Participants......20
(1) General......................................................................20
(2) Other Plan or Arrangements...................................................20
(3) Distribution of Excess Contributions.........................................21
(4) Determination of Investment Gains or Losses..................................21
(5) Forfeiture of Related Match..................................................21
(6) Qualified Matching Contribution..............................................21
(7) Election Regarding Harris Stock Discount.....................................22
(e) Limitations on Matching Contributions for Highly Compensated Participants........22
(1) General......................................................................22
(2) Other Plan or Arrangements...................................................22
(3) Distribution of Excess Aggregate Contributions...............................23
(4) Inclusion of Harris Stock Discount...........................................23
(f) Multiple Use Limitation..........................................................23
</TABLE>
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(g) Limitations on Deductibility.....................................................24
(h) Withholding Obligations and Account Balance......................................24
(i) Allocation Corrections...........................................................24
5.5. Rollover Accounts....................................................................24
5.6. Account Investments..................................................................25
5.7. Special Rules Concerning Harris Stock Fund...........................................25
(a) Availability.....................................................................25
(b) Restrictions on Transfers........................................................26
(c) Dividends........................................................................26
(d) Contributions....................................................................26
(e) Distributions....................................................................26
(f) Voting...........................................................................26
5.8. Expenses.............................................................................26
ARTICLE VI
PLAN BENEFITS.............................................................................27
6.1. Normal Retirement Benefit............................................................27
6.2. Disability Benefit...................................................................27
(a) Full Vesting.....................................................................27
(b) Definition.......................................................................27
(c) Determination....................................................................27
6.3. Death Benefit........................................................................28
6.4. Vested Benefit.......................................................................28
(a) General Rule.....................................................................28
(b) Vesting Schedule.................................................................28
(c) Reemployment.....................................................................28
6.5. Forfeiture of Benefit of Missing Claimant............................................29
6.6. Loans................................................................................29
(a) Request..........................................................................29
(b) Administration...................................................................30
(c) Limitations and Security.........................................................30
(d) Interest Rate....................................................................30
(e) Repayment and Default............................................................31
(f) Mechanics........................................................................32
(g) Special Powers...................................................................32
6.7. No In-Service Withdrawals............................................................32
ARTICLE VII
BENEFIT DISTRIBUTION......................................................................32
7.1. Method...............................................................................32
7.2. Distribution Deadlines...............................................................33
(a) General Rule.....................................................................33
</TABLE>
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(b) $3,500 or Less...................................................................33
(c) More than $3,500.................................................................33
(d) Statutory Deadlines..............................................................33
(1) Participant...................................................................33
(i) Initial Distribution......................................................33
(ii) Required Beginning Date..................................................33
(2) Beneficiary...................................................................34
7.3. Direct Rollover......................................................................34
7.4. Claim for Benefit....................................................................34
7.5. Mistakes.............................................................................34
7.6. Designation of Beneficiary...........................................................35
ARTICLE VIII
NAMED FIDUCIARIES, THE COMMITTEE, AND PLAN EXPENSES......................................36
8.1. Named Fiduciaries....................................................................36
8.2. Allocation and Delegation by Named Fiduciaries.......................................36
8.3. Advisers.............................................................................36
8.4. Dual Fiduciary Capacities............................................................36
8.5. The Committee........................................................................36
(a) Appointment......................................................................36
(b) Powers and Duties................................................................37
(c) Records..........................................................................37
(d) Information......................................................................37
(e) Reliance.........................................................................37
8.6. Payment of Expenses..................................................................37
ARTICLE IX
TRUST FUND AND TRUSTEE....................................................................38
ARTICLE X
AMENDMENT AND TERMINATION.................................................................38
10.1. Amendment...........................................................................38
10.2. Termination.........................................................................38
10.3. Merger or Consolidation.............................................................38
ARTICLE XI
MISCELLANEOUS.............................................................................39
11.1. Spendthrift Clause..................................................................39
11.2. Legally Incompetent.................................................................39
11.3. Benefits Supported Only by Trust Fund...............................................39
11.4. Discrimination......................................................................39
11.5. Claims..............................................................................39
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11.6. Agent for Service of Process........................................................40
11.7. Nonreversion........................................................................40
11.8. Plan Not An Employment Contract.....................................................40
11.9. Top Heavy Plan......................................................................40
(a) Determination...................................................................40
(b) Special Top Heavy Plan Rules....................................................41
11.10. Qualified Domestic Relations Order.................................................42
</TABLE>
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<PAGE> 8
LANIER WORLDWIDE, INC.
SAVINGS INCENTIVE PLAN
(as amended and restated as of July 1, 1997)
ARTICLE I
HISTORY AND EFFECTIVE DATE
--------------------------
The Lanier Worldwide, Inc. Savings Incentive Plan (the "Plan") is an amendment
and restatement of the Plan in effect as of January 1, 1997. This amendment and
restatement, effective July 1, 1997, (i) provides for the daily valuation of
Participants' Accounts, (ii) provides Participants the opportunity to change
their investment elections daily, (iii) increases the rate of Matching
Contributions and (iv) reflects the applicable requirements imposed on
tax-qualified plans under the Small Business Job Protection Act of 1996 and the
Uniformed Services Employment and Reemployment Rights Act of 1994.
The Plan in effect as of January 1, 1997 was an amendment and restatement of the
Plan effective as of June 28, 1994. The Plan in effect as of June 28, 1994 was
an amendment and restatement of the Plan effective as of June 30, 1992. The Plan
in effect as of June 30, 1992 was an amendment and restatement of the Plan
effective as of April 30, 1990. The Plan in effect as of April 30, 1990 was an
amendment and restatement of the Plan in effect as of October 1, 1989. The Plan
in effect as of October 1, 1989 was an amendment and restatement of the
Harris/3M Document Products, Inc. Savings Incentive Plan, as originally
effective as of April 1, 1986 ("Harris/DPI Plan"). The Harris/Lanier Advantage
Plan and Trust ("Harris/LBP Plan"), as originally effective as of October 1,
1986, was merged into the Plan effective as of October 1, 1989.
Except as expressly provided otherwise, the provisions of the Plan as amended
and restated as of July 1, 1997 shall apply only to those individuals who are
employees of an Employer on or after July 1, 1997. Any benefits of an individual
whose employment with an Employer terminated before July 1, 1997 and who is not
reemployed by an Employer after such date shall, except as expressly provided
otherwise in the Plan, be determined solely in accordance with the provisions of
the relevant prior Plan document (or documents).
<PAGE> 9
ARTICLE II
CONSTRUCTION
------------
2.1. CONTROLLING LAWS. The Plan and its related Trust Agreement shall be
construed and interpreted under the laws of the State of Delaware, without
regard to its principles of conflicts of laws, to the extent such laws are not
preempted by ERISA.
2.2. CONSTRUCTION. Plan headings and subheadings are for convenience of
reference only and are not to be construed to alter the terms of the Plan.
Wherever used in the Plan, the masculine gender shall be deemed to include the
feminine gender, and unless context otherwise requires, terms in the plural
shall include the singular, and terms in the singular shall include the plural.
References in this Plan to "Section" shall be to a section in this Plan unless
otherwise indicated.
ARTICLE III
DEFINITIONS
-----------
The following capitalized terms and phrases shall have the following
respective meanings unless the context clearly indicates otherwise:
3.1. ACCOUNT. The balance to the credit of a Participant under this Plan. A
Participant's Account may be subdivided for bookkeeping purposes into a
Before-Tax Account, a Matching Account and, where applicable, a Rollover
Account.
3.2. AFFILIATE. Any entity that is (a) a member of the same controlled group of
corporations (within the meaning of section 414(b) of the Code) of which an
Employer is a member, (b) a trade or business (whether or not incorporated)
under common control (within the meaning of section 414(c) of the Code) with an
Employer, (c) an organization (whether or not incorporated) that is a member of
an affiliated service group (within the meaning of section 414(m) of the Code)
that includes an Employer, a corporation described in clause (a) of this
subdivision or a trade or business described in clause (b) of this subdivision,
or (d) an organization which is required to be aggregated with an Employer
pursuant to Regulations promulgated under section 414(o) of the Code.
3.3. AVERAGE CONTRIBUTION PERCENTAGE. For each Plan Year the average (expressed
as a percentage) of the Contribution Percentages computed separately (a) for the
group of Highly Compensated Participants during such Plan Year and (b) for the
group of Nonhighly Compensated Participants during the immediately preceding
Plan Year. Notwithstanding the preceding sentence, the Committee may elect, in
any manner prescribed by the Secretary of the
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Article III: Definitions
Treasury of the United States, to determine the Average Contribution Percentage
for Nonhighly Compensated Participants for a Plan Year based upon the
Contribution Percentage for the current Plan Year rather than the prior Plan
Year.
3.4. AVERAGE DEFERRAL PERCENTAGE. For each Plan Year the average (expressed as a
percentage) of the Deferral Percentages computed separately (a) for the group of
Highly Compensated Participants during such Plan Year and (b) for the group of
Nonhighly Compensated Participants during the immediately preceding Plan Year.
Notwithstanding the preceding sentence, the Committee may elect, in any manner
prescribed by the Secretary of the Treasury of the United States, to determine
the Average Deferral Percentage for Nonhighly Compensated Participants for a
Plan Year based upon the Deferral Percentage for the current Plan Year rather
than the prior Plan Year.
3.5. AUTHORIZED LEAVE OF ABSENCE. Any period of absence authorized by an
Employer under its standard personnel practices, including as required by the
Family and Medical Leave Act of 1993, provided that the Employee returns to the
employ of the Employer by the end of such period, except as may be otherwise
required by the Family and Medical Leave Act of 1993.
3.6. BEFORE-TAX ACCOUNT. The portion of a Participant's Account attributable to
Before-Tax Contributions.
3.7. BEFORE-TAX CONTRIBUTIONS. The sum of (a) that portion of a Participant's
Compensation (as described in Section 3.13(a)) which the Participant elects to
defer into this Plan pursuant to Section 5.1 and (b) any additional contribution
made to the Plan pursuant to Section 5.4(d)(6).
3.8. BENEFICIARY. A person last designated by a Participant to receive all or a
portion of the Participant's Account in the event of the Participant's death
subject to the provisions of Section 7.6.
3.9. BOARD. The board of directors of the Plan Sponsor.
3.10. BREAK IN SERVICE. Any 12 consecutive month period beginning on an
Employee's Employment Termination Date or anniversary of such date during which
the Employee has not completed an Hour of Service for an Employer. For purposes
of this definition, an Employee shall be credited with an Hour of Service for
any period in which the Employee is (i) on an Authorized Leave of Absence for
reasons other than those identified in section (ii), (ii) is on an Authorized
Leave of Absence for up to 24 consecutive months because of (a) the Employee's
pregnancy, (b) the birth of the Employee's child, (c) the placement of the child
with the Employee in connection with the Employee's adoption of such child or
(d) the need to care for any such child for a period beginning immediately
following such birth or placement, or (iii) absent from work due to "qualified
military service" (as such term is defined in the Uniformed Services Employment
and Reemployment Act of 1994) and is entitled to reemployment under such Act.
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<PAGE> 11
Article III: Definitions
Notwithstanding the foregoing, clause (ii) of this definition shall not be
applicable unless the Employee furnishes to the Committee such legal
documentation as may be reasonably required by the Committee to establish that
the absence is for reasons set forth in such clause and to verify the duration
of such absence.
3.11. CODE. The Internal Revenue Code of 1986, as amended.
3.12. COMMITTEE. The Pension and Retirement Committee of the Board.
3.13. COMPENSATION.
(a) For purposes of determining the amount of a Participant's Before-Tax
Contributions and Matching Contributions for any period, remuneration
described in the (i) minus remuneration described in (ii) where:
"(i)" is remuneration which constitutes the Participant's base salary
and wages paid by the Participant's Employer, and other amounts paid
by the Employer that are includible in the Participant's gross income,
including overtime payments, commission payments, annual bonuses,
regional and shift differentials, but excluding payments described in
(ii) below.
"(ii)" is remuneration which constitutes any payment made under a
severance pay plan or program, any payment made in consideration of
the Participant's release of claims in favor of an Employer or an
Affiliate, any foreign or domestic assignment allowance, any contest
payments, any expense-related reimbursements (including reimbursements
commonly referred to as "Runzheimer" payments), any signing bonuses,
any payment made under any long-term incentive plan, compensation
received while on an Authorized Leave of Absence, short-term
disability payments, and the value of life insurance includible in the
Participant's gross income.
(b) For purposes of determining the limitations under section 415 of the
Code described in Section 5.4, the Committee may use any definition of
compensation permitted under section 415(c)(3) of the Code.
(c) For purposes of computing a Participant's Average Contribution
Percentage and Average Deferral Percentage, and for any other testing
purpose with respect to a Plan Year, the Committee may use any definition
of compensation allowable under section 414(s) of the Code.
The elective deferrals made by an Employer on behalf of such Participant that
are not includible in his gross income for federal income tax purposes for such
period because they are contributed to
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<PAGE> 12
Article III: Definitions
a cash or deferred arrangement described in section 401(k) of the Code, or
because they are contributed to a cafeteria plan described in section 125 of the
Code, shall be included as Compensation for all purposes; provided that for Plan
Years commencing prior to July 1, 1999, such elective deferrals shall not be
included for determining the limitations under section 415 of the Code described
in Section 5.4.
Compensation shall not include any amounts paid to or on behalf of an Employee
for any period when such Employee is not eligible to make Before-Tax
Contributions under this Plan unless the inability to make Before-Tax
Contributions is due to a suspension under Section 5.2(d) or (f) or the
application of the limitations under section 415 of the Code described in
Section 5.4.
The amount of a Participant's Compensation that may be taken into account for
any purpose of the Plan shall not exceed (i) for the Plan Year commencing on
January 1, 1997, $160,000 and (ii) for each subsequent Plan Year, the amount
prescribed by section 401(a)(17) of the Code (as adjusted for increases in the
cost-of-living pursuant to section 401(a)(17)(B) of the Code).
3.14. CONTRIBUTION PERCENTAGE. For each Participant, the ratio of (a) the amount
of the Matching Contributions, if any, to be credited for such Plan Year to his
Matching Account to (b) his Compensation for such Plan Year. For this purpose,
the amount of the Matching Contributions credited to a Participant's Matching
Account shall be determined taking into account any discount on contributions of
Harris Stock made pursuant to SectionSection 5.3(a) or 5.1(a); provided that the
Plan Sponsor does not elect to take the discount applicable to Harris Stock
contributed pursuant to Section 5.1(a) into account under Section 5.4(d)(7).
3.15. DEFERRAL PERCENTAGE. For each Participant, the ratio of (a) the amount of
the Before-Tax Contributions, if any, to be credited for such Plan Year to his
Before-Tax Employee Account to (b) his Compensation for such Plan Year. For this
purpose, the amount of a Participant's Before-Tax Contributions shall be
determined taking into account any discount on contributions of Harris Stock
pursuant to Section 5.1(a); provided that the Plan Sponsor elects to take such
discount into account under Section 5.4(d)(7).
3.16. EARNINGS AND PROFITS. The net income of an Employer as determined for each
calendar quarter by the Employer for financial accounting purposes.
3.17. EFFECTIVE DATE. With respect to this amendment and restatement of the
Plan, July 1, 1997, except as otherwise specifically provided herein.
3.18. ELECTION FORM. A form designated by the Committee for making one or more
of the elections and designations provided for under this Plan, in accordance
with such rules as may be adopted by the Committee from time to time. An
election form may be set forth on a paper
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<PAGE> 13
Article III: Definitions
document or, if prescribed by the Committee, may be communicated to, and
completed by, Employees by electronic or telephonic means.
3.19. ELIGIBLE EMPLOYEE. An Employee of an Employer, other than any Employee
described below:
(a) an Employee who is included in a unit of employees covered by a
collective bargaining agreement which does not provide that such Employee
be eligible to participate in this Plan;
(b) an Employee who is a nonresident alien and who receives no earned
income from an Employer from sources within the United States; or
(c) an Employee who works primarily outside the United States and who is
paid under a payroll system which is not linked electronically to the
payroll system for Employees who work primarily within the United States;
or
(d) an Employee who is employed by the Plan Sponsor at the Puerto Rico
branch or by Lanier Puerto Rico, Inc.
3.20. EMPLOYEE. An individual whose relationship with an Employer is, under
common law, that of an employee. Notwithstanding the foregoing, no individual
who renders service for an Employer shall be considered an Employee for purposes
of the Plan if such Employee renders such services pursuant to either (i) an
agreement providing that such services are to be rendered by the individual as
an independent contractor or (ii) an agreement with an entity, including a
leasing organization within the meaning of section 414(n)(2) of the Code, that
is not an Employer or Affiliate.
3.21. EMPLOYER. The Plan Sponsor, and any other entity which (i) adopts the Plan
and (ii) the Board designates in writing from time to time as an Employer under
the Plan.
3.22. EMPLOYMENT COMMENCEMENT DATE. The first date on which an Employee first
performs an Hour of Service for an Employer.
3.23. EMPLOYMENT TERMINATION DATE. The earlier of (a) and (b) below:
(a) The date the Employee quits, retires, dies or is discharged in
accordance with the personnel policy of his Employer; and
(b) the first anniversary of the first day of an Employee's absence from
service for any other reason (e.g., disability, leave of absence, layoff,
etc.), except as provided in Section
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<PAGE> 14
Article III: Definitions
3.52(g), provided that an Employee who fails to return to employment at
the expiration of a leave of absence shall be deemed to have terminated
employment on the earlier of (i) the date on which his leave of absence
expires and (ii) the first anniversary of the first day of his absence
(except as provided in Section 3.10(c)).
3.24. ENTRY DATE. The first day of the bi-weekly payroll period beginning on or
after the date on which an Eligible Employee satisfies the applicable
Participation Requirement.
3.25. ERISA. The Employee Retirement Income Security Act of 1974, as amended.
3.26. EXCESS AGGREGATE CONTRIBUTIONS. The excess of (a) the Matching
Contributions made on behalf of Highly Compensated Participants for a Plan Year
over (b) the maximum amount of such contributions permitted for such Plan Year
under section 401(m)(2)(A) of the Code (as described in Section 5.4(e)).
3.27. EXCESS CONTRIBUTIONS. The excess of (a) the Before-Tax Contributions
actually made on behalf of Highly Compensated Participants for a Plan Year over
(b) the maximum amount of such contributions permissible for such Plan Year
under section 401(k)(3)(A) of the Code, as described in Section 5.4(d).
3.28. EXCESS DEFERRALS. For each Participant for each calendar year the
Before-Tax Contributions for such Plan Year that the Participant designates as
exceeding the dollar limit prescribed by Section 5.4(c).
3.29. FORFEITURE. Any amount deducted from a Participant's Account and forfeited
by the Participant in accordance with the terms of this Plan.
3.30. HARRIS/LBP PLAN. The Harris/Lanier Advantage Plan, as amended from time to
time.
3.31. HARRIS STOCK. Common Stock of Harris Corporation.
3.32. HARRIS STOCK FUND. The Plan's investment fund that is designed to be
invested primarily in Harris Stock.
3.33. HIGHLY COMPENSATED PARTICIPANT. For any Plan Year, a Participant who:
(a) is a 5%-owner (as defined in section 416(i)(1) of the Code) of an
employer at any time during the Plan Year or the preceding Plan
Year; or
(b) is paid Compensation in excess of $80,000 (as adjusted for increases
in the cost of living in accordance with section 414(q)(1)(b)(ii) of
the Code) from an Employer
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<PAGE> 15
Article III: Definitions
for the preceding Plan Year. If the Committee so elects for a Plan Year,
the Participants taken into account under this paragraph (b) shall be
limited to those Participants who were members of the top-paid group (as
defined in section 414(q)(3) of the Code) for the preceding Plan Year.
Solely for purposes of this Section, the term "Participant" shall include any
Eligible Employee to the extent such Employee has satisfied the Participation
Requirement but who has not elected to make Before-Tax Contributions under the
plan. To the extent permitted by the Secretary of the Treasury of the United
States, the Committee may elect to determine who is a Highly Compensated
Participant under paragraphs (a) and (b) above by substituting "the calendar
year which ends in the Plan Year" for "the preceding Plan Year" as it appears
therein.
3.34. HOUR OF SERVICE. Each hour for which:
(a) an Employee is paid, or entitled to payment, for the performance of
duties as an Employee;
(b) an Employee is paid, or entitled to payment, by an Employer on account
of a period of time during which no duties are performed (irrespective of
whether the employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), lay-off, jury,
military duty or leave of absence. No more than 501 Hours of Service will
be credited under this paragraph (b) for any single continuous period
(regardless of whether such period occurs in a single computation period);
(c) back pay is awarded or agreed to by the Employer or an Affiliate. Such
hours shall be credited to the Plan Years to which the award, agreement or
payment pertains rather than the Plan Year in which the award, agreement
or payment is made.
For purposes of paragraphs (b) and (c) above, an Hour of Service shall be
calculated in accordance with Department of Labor Regulation Section
2530.200b-2, which provides that (i) if a payment is based upon hours, days,
weeks or other unit of time the number of Hours of Service credited will be the
number of regularly scheduled working hours for such Employee for such unit of
time, and (ii) if the payment due is not based upon units of time, the number of
Hours of Service credited shall be equal to the amount of the payment divided by
the Employee's most recent hourly rate of compensation. For payments made to an
Employee without a regular work schedule, the number of hours credited shall be
calculated on a reasonable basis which reflects the average hours worked by the
Employee, or by other employees in the same job classification, over a
representative period of time and which is consistently applied with respect to
all employees within the same job classification. In order to avoid double
counting, the same Hours of Service shall not be credited both under paragraph
(a) or paragraph (b), as applicable, and under paragraph (c).
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<PAGE> 16
Article III: Definitions
3.35. MATCHING ACCOUNT. The portion of a Participant's Account attributable to
Matching Contributions.
3.36. MATCHING CONTRIBUTIONS. The contributions made pursuant to Section 5.3.
3.37. MATCHED DEFERRALS. The portion of the Before-Tax Contributions contributed
to the Plan on behalf of a Participant for each pay period which do not exceed
6% of his Compensation for such pay period.
3.38. MAXIMUM DEFERRAL PERCENTAGE.
(a) For each Nonhighly Compensated Participant, 15%, and
(b) for each Highly Compensated Participant, 8% (or such lesser amount
which the Committee, in its sole discretion, determines is necessary to
satisfy the applicable requirements of the Code).
3.39. NONHIGHLY COMPENSATED PARTICIPANT. For any Plan Year, each Participant who
is not a Highly Compensated Participant.
3.40. NORMAL RETIREMENT AGE. The date a Participant attains age 65.
3.41. PARTICIPANT. Each Eligible Employee to the extent he has satisfied the
Participation Requirement or a former Eligible Employee who has not received a
complete distribution of his Account.
3.42. PARTICIPATION REQUIREMENT.
(a) With respect to eligibility for Before-Tax Contributions and Rollover
Contributions, the date on which an Eligible Employee first performs an
Hour of Service; and
(b) with respect to eligibility for Matching Contributions, the earlier of
(i) the date on which an Eligible Employee completes one Year of Service
and (ii) the date on which such Eligible Employee attains age 21.
3.43. PLAN. The Lanier Worldwide, Inc. Savings Incentive Plan as set forth in
this document, as may be amended in accordance with Article X.
3.44. PLAN SPONSOR. Lanier Worldwide, Inc. and any successor to such
corporation.
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<PAGE> 17
Article III: Definitions
3.45. PLAN YEAR. The fiscal year ending June 30.
3.46. REEMPLOYMENT COMMENCEMENT DATE. The first date on which a former Employee
is reemployed by an Employer after a Break in Service and first performs an Hour
of Service for an Employer.
3.47. ROLLOVER ACCOUNT. The portion of a Participant's Account attributable to
funds transferred to the Plan from another tax-qualified plan pursuant to the
provisions of Section 5.5.
3.48. TRUST AGREEMENT. The Qualified Trust Agreement between Lanier Worldwide,
Inc. and T. Rowe Price Trust Company, as may be amended from time to time.
3.49. TRUST FUND. The trust fund created in accordance with the Trust Agreement.
3.50. TRUSTEE. The person or persons acting as the trustee from time to time as
the trustee of the Trust Fund.
3.51. VALUATION DATE. Each calendar day. The determination of the Valuation Date
as of which transactions under the Plan are effected shall be determined in
accordance with rules and procedures established by the Committee.
3.52. YEAR OF SERVICE. Each completed year in any "period of employment" as an
Employee, as determined in accordance with paragraphs (a)-(e) below.
(a) PERIOD OF EMPLOYMENT. An Employee's "period of employment" will be
deemed to start on his Employment Commencement Date (or Reemployment
Commencement Date, as the case may be) and end on the Employee's next
following Employment Termination Date. In addition, an Employee shall
receive credit for vesting and participation purposes for each period of
employment and for each period of separation from service due to an
absence or termination of employment after his Employment Commencement
Date (or Reemployment Commencement Date, as the case maybe) if such
separation is less than 12 consecutive months in duration.
(b) TERMINATION/REEMPLOYMENT. If an Employee terminates employment and is
reemployed less than 12 months after his Employment Termination Date, the
Employee's Years of Service shall be determined by including the period of
time between his Employment Termination Date and his Reemployment
Commencement Date. Except as provided in Section 3.52(c) and (d), if an
Employee terminates employment and is reemployed more than 12 months after
his Employment Termination Date, his Years of Service shall be determined
by aggregating the service in each completed period of employment in
accordance with the rules set forth below:
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<PAGE> 18
Article III: Definitions
(1) FULL YEARS - First, determine the number of completed 12
consecutive month periods within each period of employment.
(2) EXTRA MONTHS - Next, determine the number of completed months
within each period of employment in excess of full years of
employment in each such period and aggregate such months into
additional full years of employment on the basis that each month
taken into account shall be considered as 1/12 of a year. For this
purpose, employment from the anniversary of an Employment
Commencement Date (or Reemployment Commencement date, as the case
may be) to the immediately preceding date in the next succeeding
month will be treated as a completed month of employment.
(3) EXCESS DAYS - Next, determine the number of days of employment
within each period of employment in excess of completed months of
employment and aggregate those additional days into additional
months on the basis that 30 days of such employment equals one
month.
(c) SERVICE PRIOR TO AGE 18. No period of employment completed by an
Employee before he reaches age 18 shall be taken into account in
calculating his Years of Service for purposes of Section 6.4.
(d) SERVICE WITH OTHER ENTITIES. Except as set forth in section 3.51(e)
and section 4.5, no period of employment which an Employee completes as an
employee of any other organization whatsoever shall be taken into account
under the Plan unless such organization is an Affiliate; provided, that
service with an organization prior to the time the organization became an
Affiliate of after the organization ceases to be a Affiliate may be
recognized if the corporate documents governing the acquisition or
disposition of the stock or assets of such organization require such
recognition. Employment by an Affiliate which is not an Employer shall be
taken into account solely for purposes of (i) determining such Employee's
Years of Service and eligibility to participate in the Plan and (ii)
determining when such person has retired or otherwise terminated his
employment to the same extent it would have had such service been as an
Employee of an Employer.
(e) QUALIFIED MILITARY SERVICE. A Participant who is absent from
employment on account of qualified military service (as defined in section
414(u)(5) of the Code) and who is entitled to reemployment rights under
the Uniformed Service Employment and Reemployment Rights Act of 1994 shall
be credited with Years of Service for vesting and participation purposes
under the Plan for the period of his qualified military service.
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ARTICLE IV
PARTICIPATION
-------------
4.1. GENERAL RULE. Each Eligible Employee who is not classified as a temporary,
summer or casual part-time employee and who was a Participant in this Plan
immediately prior to the Effective Date shall be a Participant in this Plan as
of the Effective Date. Each other Eligible Employee who is not classified as a
temporary, summer or casual part-time employee shall become a Participant on the
first Entry Date which immediately follows or is coincident with the date he
satisfies the applicable Participation Requirement. An Eligible Employee who is
classified as a temporary, summer or casual part-time employee shall become a
Participant the first Entry Date immediately following or coincident with the
earlier of (i) the date on which he is no longer classified as a temporary,
summer or casual part-time employee, and (ii) the last day of the 12 consecutive
month period beginning on such Eligible Employee's Employment Commencement Date
(or any subsequent 12-month period beginning on any anniversary of such
Employment Commencement Date) during which such Eligible Employee completes at
least 1,000 Hours of Service.
4.2. REEMPLOYMENT RULE. If an Employee terminates employment before he satisfies
the Participation Requirement and he is thereafter reemployed as an Eligible
Employee after incurring a Break in Service, he shall be subject to the general
participation rule of Section 4.1 based on his date of reemployment.
If an Employee terminates employment after he satisfies the Participation
Requirement but before he becomes a Participant and he is thereafter reemployed
as an Eligible Employee, he shall become a Participant on the later of (a) the
Entry Date on which he would have been eligible to participate under Section 4.1
had he not terminated employment and (b) the first Entry Date after his
reemployment, provided, that he completes the appropriate Election Forms, as
prescribed by the Committee.
If a Participant terminates employment and he is thereafter reemployed as an
Eligible Employee, he shall resume participation on the first Entry Date
beginning after his reemployment on which he is an Eligible Employee, provided,
that he completes the appropriate Election Forms, as prescribed by the
Committee.
4.3. CHANGE IN EMPLOYMENT STATUS OR TRANSFER FROM AN AFFILIATE. If an individual
who is not a Participant shall become an Eligible Employee because of a change
in employment status or because of his transfer of employment to an Employer
from an Affiliate which is not an Employer, such individual, shall become a
Participant on the later of (i) the date of such change or transfer and (ii) the
first Entry Date coincident with or following his satisfaction of the
Participation Requirement.
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Article IV: Participation
4.4. INFORMATION. Each Eligible Employee shall complete and deliver an election
Form to the Committee which sets forth such information as the Committee deems
necessary for the orderly administration of this Plan.
4.5. LEASED EMPLOYEES. If an individual who performed services as a leased
employee (within the meaning of section 414(n)(2) of the Code) of an Employer or
an Affiliate becomes an Employee, or if an Employee becomes such a leased
employee, then any period during which the individual performed services as a
leased employee shall be taken into account solely for the purposes of
determining whether and when such individual is eligible to participate in the
Plan under this Article 4 and measuring such individual's Years of Service to
the same extent such period would have been taken into account had such service
been performed as an Employee. Notwithstanding the foregoing sentence, this
section shall not apply to any period of service during which such a leased
employee was covered by a plan described in section 414(n)(5) of the Code.
ARTICLE V
CONTRIBUTIONS AND ACCOUNTS
--------------------------
5.1. BEFORE-TAX CONTRIBUTIONS.
(a) PERCENTAGE. Subject to the rules set forth in this Section 5.1, and in
SectionSection 5.2 and 5.4, each Participant may elect to defer any whole
percentage of his Compensation payable each pay period which is not in
excess of the Maximum Deferral Percentage. If a Participant elects to
invest Before-Tax Contributions in the Harris Stock Fund, then the normal
form of contribution shall be in cash, and such cash shall be used to
purchase shares of Harris Stock. Notwithstanding the previous sentence,
the Plan Sponsor may make, in its sole discretion, the Before- Tax
Contribution in the form of shares of Harris Stock. Any such contribution
of Harris Stock may be made at a discount from fair market value. The
Trustee is authorized to purchase shares of Harris Stock in the open
market, and to give effect to any discount decided upon by the Plan
Sponsor by allocating to the Account of each Participant on whose behalf a
Before-Tax Contribution is to be made the number of shares equal to the
amount of such Before-Tax Contribution divided by the discounted purchase
price established by the Plan Sponsor (such shares hereinafter referred to
as the "Discounted Shares").
(b) PAYROLL DEDUCTIONS. All contributions described in Section 5.1(a)
shall be made exclusively through payroll withholding, and such
contributions shall be transferred by an Employer to the Trustee as soon
as practicable after the end of the calendar month which includes the end
of the payroll period from which such contributions are withheld.
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Article V: Contribution And Accounts
(c) ACCOUNT CREDITS AND VESTING. Subject to the limitations under Section
5.4, any Before-Tax Contributions received by the Trustee on behalf of
each Participant since the immediately preceding Valuation Date shall be
credited to his Before- Tax Account as soon as administratively
practicable, provided that any Discounted Shares shall be segregated into
a separate subaccount for purposes of determining the Participant's
Deferral Percentage or Contribution Percentage as provided for in
SectionSection 5.4(d)(7) and 5.4(e)(4). Subject to investment gains and
losses, a Participant's interest in contributions which are credited to
his Before- Tax Account shall be fully vested.
(d) INVESTMENT GAINS AND LOSSES. The investment gains and losses
attributable to Before-Tax Contributions which are invested in each
investment fund within the Trust Fund shall be determined by, or at the
direction of, the Committee as of each Valuation Date, and such investment
gains and losses shall be credited to each Before-Tax Account as of such
Valuation Date in the same proportion that the balance to such account in
such fund as of such Valuation Date bears to the balance of all Before-Tax
Accounts in such fund as of such Valuation Date. For purposes of crediting
investment gains and losses as of any Valuation Date, the balance of a
Before-Tax Account shall be determined before crediting any Before-Tax
Contributions credited to such account as of such Valuation Date.
(e) MAKE UP OF BEFORE-TAX CONTRIBUTIONS FOR REEMPLOYED VETERANS. A
Participant who is absent from employment on account of qualified military
service (as defined in section 414(a)(5) of the Code) and is entitled to
reemployment rights under the Uniformed Service Employment and
Reemployment Rights Act of 1994 shall have the right to make Before-Tax
Contributions under the Plan ("Make Up Deferrals") for his period of
qualified military service. Such Participant may elect to make such Make
Up Deferrals during the period beginning on the date of such Employee's
reemployment and ending on the earlier of:
(i) the end of the period equal to the product of three and such
Employee's period of qualified military service, and
(ii) the fifth anniversary of the date of such reemployment.
Such Employee shall not be permitted to contribute Make Up Deferrals to
the Plan in excess of the amount which the Employee could have elected to
have made under the Plan in the form of Before-Tax Contributions if the
Employee had continued in employment with his Employer during such period
of qualified military service. Such Employee shall be deemed to have
earned "Compensation" equal to the Compensation such Participant wold have
received during the period of qualified military service but for his
absence due to qualified military service. If the Compensation the
Participant would have received
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Article V: Contribution and Accounts
during such period is not reasonably certain, the Participant's
Compensation for his period of qualified military service shall be based
on the Participant's Compensation during the 12- month period (or, if
shorter, the period of employment) immediately preceding the qualified
military service. Earnings and losses on such Make Up Deferrals shall be
credited as required by law. The manner in which a Participant may elect
to make Make Up Deferrals pursuant to this subsection (e) shall be
prescribed by the Committee.
5.2. ELECTION RULES.
(a) INITIAL ELECTION. A Participant's initial election under Section 5.1
for any period of employment shall be effective as of the first Entry Date
on or after the later of (1) the date he timely delivers a properly
completed Election Form to the Committee and (2) the date he satisfies the
Participation Requirement in section 3.41(a). An election shall remain in
effect until revised or revoked.
(b) REVISED ELECTION. An election, once effective, only can be revised by
a Participant once per calendar quarter, effective for the first pay
period beginning on or immediately following the date on which he timely
delivers a properly completed Election Form to the Committee.
(c) REVOCATION OF ELECTION. A Participant shall have the right to revoke
an election to make Before-Tax Contributions at any time during a Plan
Year, and any such termination shall become effective as soon as
practicable after the Participant properly completes and delivers the
related Election Form to the Committee.
(d) RESUMPTION AFTER REVOCATION. An Eligible Employee who has revoked an
election to make Before-Tax Contributions may elect to resume making
Before- Tax Contributions in accordance with Section 5.1 effective for the
first pay period which begins at least 90 days after the date his
revocation became effective, provided that the Eligible Employee timely
delivers a properly completed Election Form to the Committee.
(e) TIMELINESS AND ELECTION PROCEDURES. The Committee from time to time
shall establish and shall communicate in writing to Participants such
reasonable deadlines, rules and procedures for making the elections
described in this Plan as the Committee in its absolute discretion deems
appropriate under the circumstances for the proper administration of this
Plan.
(f) COMMITTEE ACTION. The Committee shall have the right at any time
unilaterally to reduce the contribution which an Eligible Employee elected
be made on his behalf if the Committee acting in its absolute discretion
determines that such reduction might be necessary to satisfy the
limitations of Section 5.4.
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Article V: Contribution and Accounts
5.3. MATCHING CONTRIBUTIONS AND FORFEITURES.
(a) AMOUNT. Subject to the rules set forth in this Section 5.3 and Section
5.4, the Plan Sponsor shall make a Matching Contribution on behalf of each
Employer from Earnings and Profits of all Employers for the preceding
calendar quarter. Such Matching Contribution shall be made on behalf of
each Eligible Employee who has met the Participation Requirement with
respect to Matching Contributions for each pay period beginning on or
after his applicable Entry Date and shall be equal to 50 percent of the
Matched Deferrals contributed on the Participant's behalf for the pay
period.
The normal form of Matching Contribution for Before-Tax Contributions
invested in the Harris Stock Fund shall be in cash, to be invested in
shares of Harris Stock, provided that the Plan Sponsor, in its sole
discretion, may make the Matching Contribution in shares of Harris Stock.
Any such contribution of Harris Stock may be made at a discount from fair
market value, provided that the fair market value of all Matching
Contributions does not exceed the Earnings and Profits of all Employers
from the preceding calendar quarter. The Trustee is authorized to purchase
shares of Harris Stock in the open market, and to give effect to any
discount decided upon by the Plan Sponsor by allocating to the Account of
each Participant on whose behalf the Matching Contribution is to be made
the number of shares equal to the amount of such Matching Contribution
divided by the discounted purchase price established by the Plan Sponsor
(such shares hereinafter referred to as the "Discounted Matching Shares").
(b) FORFEITURES. Forfeitures shall be applied to reduce the amounts which
the Plan Sponsor contributes to the Plan in the form of Matching
Contributions.
(c) TIMING. The Matching Contribution shall be made as soon as practicable
after the Before-Tax Contribution is credited to the Participant's
Before-Tax Account, but no less frequently than quarterly.
(d) INSUFFICIENT EARNINGS AND PROFITS. If the Employers have insufficient
Forfeitures and Earnings and Profits for the preceding calendar quarter to
make the full contribution called for under Section 5.3(a), the Plan
Sponsor may, in its sole discretion, make no contribution or a smaller
contribution for that calendar quarter.
(e) ACCOUNT CREDITS AND VESTING. The Matching Contributions made on behalf
of each Participant shall be credited by, or at the direction of, the
Committee to his Matching Account as of the date as of which such
contribution is made. A Participant's vested interest in the Matching
Contributions (and in the investment gains and losses allocable to such
contributions) credited to his Matching Account shall be determined under
Section 6.4.
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Article V: Contribution and Accounts
(f) INVESTMENT GAINS AND LOSSES. The investment gains and losses
attributable to Matching Contributions which are invested in each
investment fund within the Trust Fund shall be determined by, or at the
direction of, the Committee as of such Valuation Date, and such investment
gains and losses shall (after deductions for expenses, if any) be credited
to each Matching Account as of such Valuation Date in the same proportion
that the balance to each such account in such fund as of such Valuation
Date bears to the balance of all Matching Accounts in such fund as of such
Valuation Date. For purposes of crediting investment gains and losses as
of any Valuation Date, the balance to a Matching Account shall be
determined before crediting any Matching Contributions which are credited
as of such Valuation Date.
(g) MAKE UP OF EMPLOYER MATCHING CONTRIBUTIONS. A Participant who makes
Make Up Deferrals as described in Section 5.1(e) shall be entitled to an
allocation of matching contributions ("Make Up Matching Contributions") in
an amount equal to the amount of Matching Contributions which would have
been allocated to the Account of such Participant under the Plan if such
Make Up Deferrals had been made in the form of Before-Tax Contributions
during the period of such Participant's qualified military service (as
determined pursuant to section 414(u) of the Code). The amounts necessary
to make such allocation of Make Up Matching Contributions shall be derived
from Forfeitures not yet applied towards Matching Contributions for the
Plan Year in which the Make Up Matching Deferrals are made, and if such
Forfeitures are not sufficient for this purpose, then the Participant's
Employer shall make a special contribution which shall be utilized solely
for purposes of such allocation.
The Plan shall not be treated as failing to satisfy the nondiscrimination
rules of subsections (d) and (e) of Section 5.4 of the Plan (relating to
sections 401(k)(3) and 401(m) of the Code) for any Plan Year solely on
account of any make up contributions made by a Participant or an Employer
pursuant to this Section.
5.4. LIMITATIONS ON ALLOCATIONS.
(a) GENERAL RULE. The contributions made under SectionSection 5.1 and 5.3
and the crediting of such contributions to a Participant's Account shall
be subject to limitations, applied in the following order:
(b) STATUTORY LIMITATIONS ON CONTRIBUTIONS.
(1) GENERAL RULE. The Plan Year shall be the "limitation year." For
any Plan Year, the sum of the amounts (including any Forfeitures)
which are allocated to a Participant's Account for such Plan Year as
Matching Contributions and as Before-Tax Contributions, when added
to the contributions which are treated under
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Article V: Contribution and Accounts
Section 5.4(b)(2) as made on behalf of such Participant under this
Plan shall not exceed the lesser of (i), (ii) or (iii), where
"(i)" equals 25% of the Participant's Compensation for such
Plan Year,
"(ii)" equals $30,000, as adjusted as of the first day of each
Plan Year to equal the inflation adjusted figure, if any, as
set by the Internal Revenue Service for the calendar year
which includes the last day of such Plan Year, and
"(iii)" equals such amount as the Committee deems necessary or
appropriate to satisfy the requirements of section 415 of the
Code (including any applicable transition rules) taking into
account the coordination rules of Section 5.4(b)(2) and the
correction provisions of Section 5.4(b)(3).
(2) COORDINATION.
(i) If for any Plan Year a contribution is made on behalf of a
Participant for such year under any other defined contribution
plan maintained by an Employer or an Affiliate, such
contribution shall be treated under this Section 5.4(b) as
made under this Plan.
(ii) If a defined benefit plan is adopted or maintained by an
Employer or an Affiliate under which a benefit is accrued on
behalf of a Participant, any adjustment required to satisfy
the requirements of section 415 of the Code as a result of his
participation in such plan and in this Plan shall be made
exclusively in such defined benefit plan.
(iii) Contributions allocated to an "individual medical
benefit account" described in section 415(1) of the Code and
contributions credited under a welfare benefit fund maintained
by any Employer or an Affiliate for any year to a reserve for
post-retirement medical benefits for a Participant who is a
"key Employee" within the meaning of section 416(i) of the
Code shall be treated as a Matching Contribution made on his
behalf under this Plan when, and to the extent, required under
section 415 or 419A(d) of the Code.
(3) CORRECTIONS. If the Committee determines that the contributions
credited to a Participant's Account (subject to this Section 5.4)
will exceed the limitations set
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<PAGE> 26
Article V: Contribution and Accounts
forth in this Section 5.4(b), then the Committee shall transfer such
excess from the Participant's Account to a special suspense account.
Such transfer shall be made first from the Participant's Matching
Contributions and thereafter from his Before-Tax Contributions.
Transfers of Matching Contributions to such suspense account shall
be applied to offset the Matching Contribution for all Participants
in the next Plan Year (and in each succeeding Plan Year if
necessary). No additional Matching Contributions shall be made by
the Plan Sponsor while there is a balance credited to such suspense
account. Any suspense account established under this Section 5.4(b)
shall not be subject to adjustment for investment gains or losses
and the balance of an such account shall be returned to the Plan
Sponsor in the event this Plan is terminated before the date such
account has been so applied in its entirety. Transfers of Before-
Tax Contributions to such suspense accounts may be credited to the
Participant in the next limitation year, or may be returned to the
Participant, in the sole discretion of the Committee or its
delegate.
(c) INDIVIDUAL DOLLAR LIMIT.
(1) THIS PLAN. The sum of a Participant's Before-Tax Contributions
under this Plan and his "elective deferrals" (within the meaning of
section 402(g) of the Code) under any plan maintained by an
Affiliate shall not exceed (i) for the calendar year commencing on
January 1, 1997, $9,500 and (ii) for each subsequent calendar year,
the dollar limit prescribed by section 402(g) of the Code (as
adjusted for cost of living increases in accordance with section
402(g)(5) of the Code).
(2) OTHER PLANS. If a Participant's aggregate Before-Tax
Contributions under this Plan and his "elective deferrals" (within
the meaning of section 402(g) of the Code), if any, made under other
plans or contracts exceeds the individual dollar limit described in
Section 5.4(c)(1) in any calendar year, such Participant may
designate all or a portion of his Before-Tax Contributions made
during such calendar year as Excess Deferrals.
(3) CLAIM. A Participant may request a refund of his Excess
Deferrals by filing a written claim with the Committee on or before
March 1 of the immediately following calendar year in accordance
with section 402(g) of the Code and such reasonable administrative
rules as may be established by the Committee from time to time. A
Participant's claim must specify the dollar amount of Participant's
Excess Deferrals for the preceding calendar year and shall include
his certification that if such amounts are not distributed to him,
such Excess Deferrals, when added to his elective deferrals made
under other plans or contracts will exceed the individual dollar
limit for the calendar year for which the Before-Tax Contributions
were made.
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Article V: Contribution and Accounts
(4) DETERMINATION OF INVESTMENT GAIN OR LOSS. Excess Deferrals shall
be adjusted for investment gain or loss as determined by the
Committee in accordance with section 402(g) of the Code and the
related regulations.
(5) DISTRIBUTION OF EXCESS DEFERRALS. Notwithstanding any other
provision of this Plan, Excess Deferrals, adjusted to reflect any
investment gain or loss allocable to such Excess Deferrals, shall be
distributed no later than April 15 of any calendar year to those
Participants who request a refund in accordance with the claims
procedure set forth in this Section 5.4(c). In no event shall a
Participant receive from the Plan a distribution which exceeds
either the Participant's total Before-Tax Contributions made under
the Plan for the calendar year to which such Excess Deferrals relate
or the balance credited to his Before-Tax Account as of the
Valuation Date immediately preceding such April 15.
(6) FORFEITURE OF RELATED MATCH. A Participant shall not be entitled
to any Matching Contributions attributable to Before-Tax
Contributions refunded as Excess Deferrals and any such Matching
Contributions credited to his Account shall be treated as a
Forfeiture as of the date of such distribution without regard to
whether his interest in his Matching Account otherwise was
nonforfeitable.
(d) LIMITATIONS ON BEFORE-TAX CONTRIBUTIONS FOR HIGHLY COMPENSATED
PARTICIPANTS.
(1) GENERAL. The Average Deferral Percentage for Highly Compensated
Participants for a Plan Year shall not exceed the greater of (A) and
(B), where:
"(A)" is the Average Deferral Percentage for Nonhighly
Compensated Participants for such Plan Year multiplied by
1.25; and
"(B)" is the lesser of (i) the Average Deferral Percentage for
Nonhighly Compensated Participants for such Plan Year
multiplied by 2, or (ii) the Average Deferral Percentage for
Nonhighly Compensated Participants plus 2 percentage points,
or such smaller number of percentage points as may be
prescribed by the Secretary of the Treasury.
(2) OTHER PLAN OR ARRANGEMENTS. For purposes of this Section 5.4(d),
the Deferral Percentage for any Highly Compensated Participant for
the Plan Year who is eligible to have elective deferrals allocated
to his account under two or more plans or arrangements described in
section 401(k) of the Code that are maintained by an Employer or an
Affiliate shall be determined as if all such contributions were made
under this Plan.
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Article V: Contribution and Accounts
Further, if this Plan satisfies the requirements of section
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 section 401(a)(4) or 410(b) of the Code only if aggregated with
this Plan, then this Section 5.4(d) shall be applied by determining
the Deferral Percentage of each Participant as if all such plans
were a single plan.
(3) DISTRIBUTION OF EXCESS CONTRIBUTIONS. If the Committee
determines that Excess Contributions have been made for any Plan
Year, then such Excess Contributions (together with any investment
gains or losses) shall be distributed to affected Highly Compensated
Participants on or before the last day of the Plan Year immediately
following the Plan Year for which such Excess Contributions are
made. Such distributions shall be made on behalf of each Highly
Compensated Participant and whose actual dollar amount of Before-Tax
Contributions for such Plan Year is highest until such dollar amount
equals the greater of (i) the largest dollar amount such that one of
the tests set forth in Section 5.4(d)(1) shall be satisfied and (ii)
the next highest actual dollar amount of Before- Tax Contributions
made for such Plan Year by any Highly Compensated Participant. If
further reductions are necessary, then such Before-Tax Contributions
on behalf of each Highly Compensated Participant whose actual dollar
amount of Pay Deferral Contributions made for such Plan Year is the
highest (determined after the reduction described in the preceding
sentence) shall be reduced in accordance with the preceding
sentence. Such reductions shall continue to be made to the extent
necessary so that one of the nondiscrimination tests set forth in
Section 5.4(d)(1) shall be satisfied. The amount of Excess
Contributions which are to be distributed under this Section
5.4(d)(3) with respect to a Highly Compensated Participant for any
Plan Year shall be reduced by any Excess Deferrals previously
distributed to such Participant for the calendar year ending with or
within such Plan Year pursuant to Section 5.4(c).
(4) DETERMINATION OF INVESTMENT GAINS OR LOSSES. Excess
Contributions shall be adjusted for investment gain or loss as
determined by the Committee in accordance with section 401(k) of the
Code.
(5) FORFEITURE OF RELATED MATCH. A Participant shall not be entitled
to any Matching Contribution attributable to Before-Tax
Contributions distributed as Excess Contributions and the portion of
each affected Highly Compensated Participant's Matching Contribution
which is attributable to such distribution shall be treated as a
Forfeiture as of the date of such distribution.
(6) QUALIFIED MATCHING CONTRIBUTION. To the extent permitted by
section 401(k)(3) of the Code, if the Plan Sponsor in lieu of
distributing Excess
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Article V: Contribution and Accounts
Contributions (or in lieu of distributing any part of such Excess
Contributions) so elects in the exercise of its absolute discretion,
the Plan Sponsor may cause an additional contribution to be made to
the Plan on behalf of all eligible Nonhighly Compensated
Participants in an amount which will result in satisfying the
requirements of Section 5.4(d)(1) for such Plan Year (to the extent
such requirements are not satisfied through the distribution of
Excess Contributions to Highly Compensated Participants). Such
additional contribution (i) shall be a "qualified matching
contribution" within the meaning of section 401(k) of the Code, (ii)
shall be allocated and credited as of such date in equal parts among
the Before-Tax Accounts of all such Nonhighly Compensated
Participants and (iii) shall be used only to satisfy the limitations
of this Section 5.4(d). A Nonhighly Compensated Participant shall be
eligible for a qualified matching contribution under this Section
5.4(d) if such Participant elected that Before-Tax Contributions be
made to his Account during the last Calendar quarter of such Plan
Year and was an Eligible Employee on the last day of such Plan Year.
(7) INCLUSION OF HARRIS STOCK DISCOUNT. For purposes of calculating
a Participant's Deferral Percentage, the value of any Discounted
Shares contributed to the Participant's Account in the Plan Year
which are allocated to the subaccount described in Section 5.1(c)
will be included, unless the Plan Sponsor elects to include the
value of such Discounted Shares in determining the Participant's
Contribution Percentage as provided in Section 5.4(e)(4).
(e) LIMITATIONS ON MATCHING CONTRIBUTIONS FOR HIGHLY COMPENSATED
PARTICIPANTS.
(1) GENERAL. The Average Contribution Percentage for Highly
Compensated Participants for any Plan Year shall not exceed the
greater of:
(i) the Average Contribution Percentage for Nonhighly
Compensated Participants for such Plan Year multiplied by
1.25, and
(ii) the lesser of (A) the Average Contribution Percentage for
Nonhighly Compensated Participants for such Plan Year
multiplied by 2, and (B) the Average Contribution Percentage
for Nonhighly Compensated Participants plus 2 percentage
points, or such smaller number of percentage points as
prescribed by the Secretary of the Treasury.
(2) OTHER PLAN OR ARRANGEMENTS. For purposes of this Section 5.4(e),
the Contribution Percentage for any Highly Compensated Participant
for the Plan Year who is eligible to have "employee contributions"
(within the meaning of section 401(m) of the Code), or "matching
contributions" (as described in
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Article V: Contribution and Accounts
section 401(m)(4) of the Code) allocated to his account under two or
more plans or arrangements described in section 401(a) or 401(k) of
the Code that are maintained by an Employer or an Affiliate shall be
determined as if all such contributions were made under this Plan.
Further, if this Plan satisfies the requirements of sections
401(a)(4) and 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 sections 401(a)(4) and 410(b) of the Code only if aggregated with
this Plan, then this Section 5.4(e) shall be applied by determining
the Contribution Percentages of each Participant as if all such
plans were a single plan.
(3) DISTRIBUTION OF EXCESS AGGREGATE CONTRIBUTIONS. If the Committee
determines that Excess Aggregate Contributions have been made for
any Plan Year, then such Excess Aggregate Contributions (together
with any investment gains or losses) shall be forfeited (if
otherwise forfeitable under Section 6.4) or distributed (if not so
forfeitable) on or before the last day of the Plan Year immediately
following the Plan Year for which such Excess Aggregate
Contributions were made. Any amounts which are forfeited under this
Section 5.4(e) shall be treated as a Forfeiture as of the date of
such distribution and such Forfeitures shall not be allocated to any
Participant whose contributions were reduced under this Section
5.4(e) if such allocation would be inconsistent with section 401(m)
of the Code. The portion of such Excess Aggregate Contribution
distributed to or forfeited by each affected Highly Compensated
Participant shall be determined in accordance with the regulations
under section 401(m) of the Code.
(4) ELECTION REGARDING HARRIS STOCK DISCOUNT. For purposes of
calculating a Participant's Contribution Percentage, the Plan
Sponsor may elect to include the value of any Discounted Shares
contributed to the Participant's Account in the Plan Year which are
allocated to the subaccount described in Section 5.1(c). If no such
election is made by the Plan Sponsor, the value of such Discounted
Shares will be included in determining the Participant's Deferral
Percentage as provided in Section 5.4(d)(7).
(f) MULTIPLE USE LIMITATION. The Committee shall take whatever action is
required to prevent the multiple use of the alternative test described in
Section 5.4(d)(1)(ii) for Before-Tax Contributions and in Section
5.4(e)(1)(ii) for Matching Contributions in the same Plan Year to the
extent required under section 401(m) of Code. The Committee shall reduce
the Before-Tax Contributions made on behalf of Highly Compensated
Participants (in the manner described in Section 5.4(d)(3)) so that the
multiple use limit is not exceeded. Any such reduction shall be treated as
an Excess Aggregate Contribution.
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<PAGE> 31
Article V: Contribution and Accounts
(g) LIMITATIONS ON DEDUCTIBILITY. The sum of the Matching Contributions
and Before-Tax Contributions allocated to Participants' Accounts for any
taxable year shall not exceed the amount allowable as a deduction for such
taxable year for federal income tax purposes for contributions to this
Plan.
(h) WITHHOLDING OBLIGATIONS AND ACCOUNT BALANCE. Any distributions to a
Participant from his Before-Tax Employee Account or Matching Account which
are required under Section 5.4 shall not exceed the value (as of the date
of such distribution) of such subaccount and the amount of any such
distributions shall be reduced as the Committee deems necessary or
appropriate to satisfy any applicable tax withholding requirements with
respect to such distributions.
(i) ALLOCATION CORRECTIONS. If an error or omission is discovered in any
Account, the Committee shall make an appropriate equitable adjustment in
order to remedy such error or omission as of the Plan Year in which the
error or omission is discovered.
5.5. ROLLOVER ACCOUNTS.
(a) ESTABLISHMENT OF ACCOUNT. An Eligible Employee may establish a
Rollover Account, with the consent of the Committee or its delegate. An
Eligible Employee may only contribute amounts to a Rollover Account which
are eligible rollover distributions within the meaning of section
402(c)(4) of the Code. Eligible rollover distributions are defined as (1)
funds that the Participant elects to directly transfer either from another
plan that is tax-qualified as described in section 401(a) of the Code or
from a tax-qualified annuity plan described in section 403 of the Code,
less any after-tax amount considered contributed to such plan by the
Participant as determined under section 402(d)(4)(d)(i) of the Code, and
(2) funds previously distributed from such a tax-qualified plan that were
contributed to a "conduit" individual retirement account or annuity. Any
such eligible rollover distribution must be transferred to the Plan within
60 days of the Participant's receipt thereof unless the Participant elects
to directly transfer such distribution pursuant to subsection (1) above. A
Participant may be required to establish that the transfer of amounts into
a Rollover Account will not create adverse consequences for the Plan or
Trust. Amounts in a Rollover Account shall be held by the Trustee and
invested and distributed in accordance with the provisions of this Plan. A
Participant's Rollover Account is fully vested at all times and subject to
investment direction by the Participant.
(b) INVESTMENT GAINS AND LOSSES. The investment gains and losses
attributable to Rollover Contributions which are invested in each
investment fund within the Trust Fund shall be determined by, or at the
direction of, the Committee as of each Valuation Date, and such investment
gains and losses shall be credited to each Rollover Account as of such
Valuation Date in the same proportion that the balance to such account in
such fund as of
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<PAGE> 32
Article V: Contribution and Accounts
such Valuation Date bears to the balance of all Rollover Accounts in such
fund as of such Valuation Date. For purposes of crediting investment gains
and losses as of any Valuation Date, the balance of a Rollover Account
shall be determined before crediting any Rollover Contributions credited
to such account as of such Valuation Date.
5.6. ACCOUNT INVESTMENTS. The Trustee at the direction of the Committee shall
establish at least four separate investment funds within the Trust Fund, and
such funds as in effect from time to time shall be described in the summary plan
description for this Plan or in such other materials as the Committee furnishes
from time to time to Participants. Each Participant shall direct the investment
of his Account with respect to (1) amounts credited to his Before-Tax and
Matching Accounts as of the preceding Valuation Date, (2) his Rollover Account
and (3) future amounts credited to his Before- Tax and Matching Accounts after
such Valuation Date, in accordance with the following rules:
(a) Each such election shall be made on a properly completed Election
Form, in accordance with the applicable procedures of the Committee.
(b) No more than one change of election may be made on each business day
of the Employer with respect to each of (1),(2) and (3) above, (i.e., one
change with respect to a Participant's current Before-Tax and Matching
Accounts balance, one change with respect to a Participant's Rollover
Account or one change with respect to future amounts to be credited to his
Before-Tax and Matching Accounts, or any combination of such changes).
(c) A Participant's election with respect to his Account balance as the
preceding Valuation Date may be made in such increments of such balance as
the Committee may prescribe from time to time. A Participant's election
with respect to future contributions credited to his Account after such
Valuation Date shall be made in ten percent increments of such
contributions (or such other increments as the Committee may prescribe
from time to time).
(d) An election shall be effective on the same day if received before 4:00
p.m., Eastern Standard Time or Eastern Daylight Time, as the case may be,
on a business day, and otherwise shall be effective on the next business
day.
5.7. SPECIAL RULES CONCERNING HARRIS STOCK FUND. Notwithstanding any other
provisions to the contrary, the following rules shall apply to investments in
the Harris Stock Fund:
(a) AVAILABILITY. For any Plan Year, the Before-Tax Contributions invested
in this fund on behalf of a Participant in each Plan Year shall equal no
more than one percent of the Participant's Compensation for such Plan
Year. An election to invest in the Harris Stock Fund shall take effect as
soon as administratively feasible after the election is received.
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<PAGE> 33
Article V: Contribution and Accounts
(b) RESTRICTIONS ON TRANSFERS. A Participant may not transfer amounts from
other Investment Funds to the Harris Stock Fund. Any contributions
invested in this fund must remain in this fund for a minimum of 36 months,
provided that amounts so invested may be distributed to the Participant
(or his Beneficiary) before the expiration of the 36-month period if such
person is otherwise entitled to a distribution under the Plan.
(c) DIVIDENDS. A Participant's allocable share of cash dividends (and
other cash earnings) credited to the Harris Stock Fund, will be reinvested
in the Harris Stock Fund unless the Participant elects with respect to the
dividends credited to his Account for a quarter to invest such cash
dividends (and other cash earnings) among the Investment Funds other than
the Harris Stock Fund. Each election shall be completed by following the
appropriate procedure pursuant to Section 5.6. Dividends paid in the form
of stock shall be retained in a Participant's Account until liquidated, in
the sole discretion of the Trustee. Such liquidated dividends shall be
cash earnings subject to investment elections in accordance with this
subsection of the Plan.
(d) CONTRIBUTIONS. The normal form of contribution for amounts invested in
the Harris Stock Fund shall be in cash; provided that the Employer, in its
discretion, may make the contribution in Harris Stock, which may be
contributed at a discount from fair market value. The Trustee is
authorized to purchase Harris Stock in the open market, and to give effect
to the discount, if any, that has been established from time to time by
allocating shares to Participant's Accounts in addition to the number of
shares purchased on the open market by means of a given contribution.
Elections to invest in the Harris Stock Fund shall be given effect as soon
as practicable.
(e) DISTRIBUTIONS. Distributions from the Harris Stock Fund shall be paid
in the form of cash or shares of Harris Stock at the election of the
Participant, provided that fractional shares and distributions of a de
minimis amount as determined by the Committee or its delegate shall be
paid in cash.
(f) VOTING. Participants may submit non-binding proxies to the Trustee,
which will vote the shares in the Harris Stock Fund in accordance with the
terms of the Trust Agreement (to the extent the provisions thereof are not
inconsistent with ERISA).
5.8. EXPENSES. Expenses allocable to each Account shall be deducted quarterly,
and such deduction shall be shown separately on the statement of a Participant's
Account.
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<PAGE> 34
ARTICLE VI
PLAN BENEFITS
-------------
6.1. NORMAL RETIREMENT BENEFIT. The Account of a Participant who attains Normal
Retirement Age shall become fully vested no later than such date and, if he
retires as an Employee on such date, shall be paid to him in accordance with
Article 7. A Participant who remains an Employee after he reaches Normal
Retirement Age shall remain eligible to continue to participate in this Plan
until the date of his actual retirement and his Account shall be paid in
accordance with Article 7.
6.2. DISABILITY BENEFIT.
(a) FULL VESTING. The Matching Account of a Participant whose employment
with an Employer or an Affiliate is terminated by reason of his being
disabled within the meaning of Section 6.2(b) shall become fully vested on
the date his employment is so terminated and shall be paid to him in
accordance with Section 7. If such former Participant recovers from his
disability and is reemployed as an Employee, such Employee shall
participate in the Plan in accordance with Section 4.2 and shall become
vested in any Matching Contributions credited to his Account after his
reemployment based on his actual Years of Service in accordance with the
vesting schedule set forth in Section 6.4(b).
(b) DEFINITION. A Participant shall be treated as disabled for purposes of
this Section 6.2 if he suffers a total and permanent physical or mental
impairment which (1) qualifies him for a monthly disability insurance
benefit under the United States Social Security Act, (2) which wholly
prevents him from holding any substantially gainful employment and (3)
which can be expected to result in death or to be of long continued and
indefinite duration. An Eligible Employee shall not be treated as disabled
for purposes of this Plan, however, if the Committee determines that his
disability is a result of any of the following:
(i) any injury or disease sustained by him while willfully
participating in acts of violence, riots, civil insurrections or
while committing a felony;
(ii) any injury or disease sustained by him while working for a
person other than an Employer or any Affiliate and arising out of
such work; or
(iii) any intentional, self-inflicted injury.
(c) DETERMINATION. The Committee (or its delegate) shall have exclusive
responsibility for determining whether a Participant is disabled. It may
consider whether a Participant is disabled upon its own motion or upon the
written request of such Participant. Any determination made by the
Committee for purposes of the Plan shall be final and conclusive.
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<PAGE> 35
Article VI: Plan Benefits
6.3. DEATH BENEFIT. If a Participant dies, the vested portion of his Account
shall be paid to his Beneficiary in accordance with Article 7. If the
Participant was an Employee on his date of death, his Account also shall become
fully vested as of such date.
6.4. VESTED BENEFIT.
(a) GENERAL RULE. A Participant shall be eligible for the payment of his
Before-Tax Account, his Rollover Account and the vested portion of his
Matching Account after the date of his separation from service (within the
meaning of section 401(k)(2)(B) of the Code), or, if sooner, upon the
disposition of substantially all the assets used in a trade or business of
the Participant's Employer, or of an Affiliate's interest in a subsidiary
that was the Participant's Employer (within the meaning of section
401(k)(10) of the Code). Payment of such amounts shall be made in
accordance with Article 7.
(b) VESTING SCHEDULE. The Committee shall determine the vested portion of
the Matching Account of a Participant who has not attained Normal
Retirement Age, become disabled as determined under section 6.2 or died in
accordance with the vesting schedule set forth in this subsection. The
vested portion of a Participant's Matching Account shall be maintained as
a separate Matching Account until distributed in accordance with article
7. The balance, or nonvested portion, of a Participant's Matching Account
shall be treated as a Forfeiture as of the first Valuation Date following
the earlier of the date such Participant's Matching Account is distributed
to him in accordance with Article 7 or the date on which such Participant
incurs five consecutive Breaks in Service.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
VESTED PERCENTAGE
FULL OF
YEARS OF SERVICE MATCHING ACCOUNT
--------------------------------------------------------------------------
<S> <C>
LESS THAN 1 0%
1 20%
2 40%
3 60%
4 80%
5 OR MORE 100%
--------------------------------------------------------------------------
</TABLE>
(C) REEMPLOYMENT. If a former Employee is reemployed as an Employee before
he has five consecutive Breaks in Service and any portion of his Matching
Account had been treated as a Forfeiture under Section 6.4(b), then the
Forfeiture shall be restored to his Matching Account as of the last day of
the Plan Year in which he is reemployed if the Employee repays to the Plan
an amount equal to the amount of his distribution from his Matching
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<PAGE> 36
Article VI: Plan Benefits
Account before the earlier of (a) five years after the first date on which
the former Employee is reemployed by an Affiliate and (b) the date the
Employee incurs five consecutive Breaks in Service following the date of
distribution.
6.5. FORFEITURE OF BENEFIT OF MISSING CLAIMANT. If the Account of a Participant
becomes payable under this Article VI by reason other than his death and the
Committee is unable to locate such Participant or if no Beneficiary of a
deceased Participant is identified and located by the Committee, then the
Committee, in its discretion, may treat the Account of such Participant as a
Forfeiture as of the last day of the Plan Year which includes the anniversary of
the date the Account of such Participant first became payable or as of the last
day of any subsequent Plan Year. However, if such missing Beneficiary or
Participant files a written claim with the Committee for his Account while this
Plan remains in effect and proves his identity as the person then entitled to
such benefit under the terms of this Plan to the satisfaction of the Committee,
the Committee promptly shall restore his Account which was so treated as a
Forfeiture (without regard to any allocation of any investment gains or losses)
and such restored Account shall be paid to such person immediately thereafter in
a lump sum. The source of such restoration shall be any Forfeitures which have
not been allocated to the accounts of other Participants, or if there are
insufficient amounts in this regard, through an additional contribution to the
Plan by the Plan Sponsor to the extent necessary to make such restoration.
If this Plan is terminated and the Committee (after taking the action described
in this Section 6.5) cannot locate a Participant or Beneficiary, then such
person shall be presumed dead and, if there is no Beneficiary for such person or
such Beneficiary cannot be located, all the remaining Participants in this Plan
on the date of such termination shall be treated as such person's Beneficiary
and such Account shall be divided in an equitable manner among such
Participants.
6.6. LOANS.
(a) REQUEST. Each "eligible person" may request that a loan be made to him
under this Plan from his Account by properly completing and delivering a
related Election Form to the Committee, and all such requests shall be
granted on a reasonably equivalent basis (within the meaning of section
4975(d)(1)(A) of the Code and section 408(b)(1)(A) of ERISA) subject to
the conditions set forth in Section 6.6(a). For purposes of this Section
6.6, the term "eligible person" means each Participant and Beneficiary who
is a "party in interest" (as defined in section 3(14) of ERISA) with
respect to this Plan.
(b) ADMINISTRATION. The Committee shall be the "named fiduciary"
responsible for administering the loan program through its Human Resources
Department and may establish procedures for loan application and approval.
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<PAGE> 37
Article VI: Plan Benefits
(c) LIMITATIONS AND SECURITY.
(1) The principal amount of a loan made under this Plan to any
person together with the outstanding principal amount of any other
loan made to such person under any other plan maintained by an
Affiliate which satisfies the requirements of section 401(a) of the
Code shall not exceed the lesser of (i) and (ii), where:
"(i)" equals 50% of the vested portion of his Account
determined as of the Valuation Date coinciding with or
immediately preceding the day on which the loan is made and
"(ii)" equals $50,000 reduced by the excess (if any) of the
highest outstanding balance of any previous loans from the
Plan and any other plan maintained by an Employer or an
Affiliate during the one-year period ending one day before the
date on which such current loan is made over the outstanding
balance of such previous loans on the date on which such
current loan is made.
(2) No loan shall be made under this Plan to an eligible person
who is an Employee of an Affiliate which is not an Employer unless
such eligible Person borrows first from the Plan of the Affiliate
which employs him.
(3) No loan shall be made for a period which exceeds four years
(or such other period not exceeding five years as provided in
procedures authorized by the Committee). There is no minimum period
for a loan.
(4) Any loan made under this Plan shall be secured by 50% of his
total vested interest in his Account.
(5) No more than one loan shall be made under this Plan to an
eligible person at any one time.
(6) The principal amount of a loan made under this Plan shall not
be less than $500.
(d) INTEREST RATE. The interest rate for a loan made under this Plan
shall be set by the Committee at a rate which the Committee deems
reasonable at the time the loan is made for a fully secured loan and which
is consistent with Department of Labor regulations.
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<PAGE> 38
Article VI: Plan Benefits
(e) REPAYMENT AND DEFAULT.
(1) A loan made under this Plan shall require that repayment be
made in substantially level installments (not less frequently than
quarterly) through payroll withholding while an eligible person is
an active Employee and through such other means as the Committee
deems appropriate for an eligible Person who is not an active
Employee. Loan procedures authorized by the Committee may provide
for temporary suspensions of loan repayments for a leave of absence
not exceeding one year or for periods of "qualified military
service" (within the meaning of section 414(u) of the Code), each to
the extent permitted under applicable law.
(2) The events of default shall be set forth in the promissory
note and security agreement which evidences the loan. Such events
may include the following:
(i) an eligible person's employment as an Employee terminates
for any reason whatsoever unless such person remains a "party
in interest" with respect to this Plan following his
termination of employment,
(ii) the Trustee concludes that the eligible person no longer
is a good credit risk, or
(iii) to the extent permissible under applicable law, the
eligible person's obligation to repay the loan has been
discharged through a bankruptcy or any other legal process or
action which did not actually result in payment in full.
Upon the existence or occurrence of an event of default, the loan
may become due and payable in full and, if such loan is not actually
repaid in full, shall be canceled on the books and records of the
Plan and the amount otherwise distributable to such eligible person
under this Plan shall be reduced as of the date his Account
otherwise becomes distributable by the principal amount of the loan
at that time due plus any accrued but unpaid interest. Such
principal and interest shall be determined without regard to whether
the loan had been discharged through a bankruptcy or any other legal
process or action which did not actually result in payment in full;
however, interest shall continue to accrue on such loan only to the
extent permitted under applicable law. Notwithstanding the
foregoing, an eligible person's Account shall not be reduced by the
loan amount plus any accrued interest under this Section 6.6(e)(2)
until a distributable event occurs under the Plan. In the event a
default occurs before a distributable event, the Committee shall
take such other steps to cure the default as it deems appropriate
under the circumstances to preserve Plan assets.
-31- Savings Incentive Plan
<PAGE> 39
(3) Any loan made under this Plan shall be subject to such other
terms and conditions as the Committee from time to time shall deem
necessary or appropriate, including the condition that the eligible
person execute an applicable financing statement and the condition
that such person reimburse this Plan for the reasonable expenses
which this Plan incurs to make and service such loan.
(4) The terms and conditions of each loan shall be set forth in the
promissory note and security agreement evidencing such loan.
(f) MECHANICS. A loan to an eligible person under this Plan shall be
made from his Account as of any date acceptable to the Committee and the
Trustee. The Account investments from which the loan proceeds shall be
withdrawn and the Account investments to which loan repayments shall be
credited shall be determined under procedures authorized by the Committee.
A Participant's loan shall be an asset of his Account and all interest
paid on such loan shall be credited to his Account.
(g) SPECIAL POWERS. The Committee shall have the power to take such
action as the Committee deems necessary or appropriate to stop the payment
of an Account to or on behalf of an eligible person who fails to repay a
loan (without regard to whether his obligation to repay such loan had been
discharged through a bankruptcy or any other legal process or action)
until his Account has been reduced by the full amount due (without regard
to such discharge) on such loan or, to the extent his obligation to repay
is not extinguished under applicable law, to distribute the note which
evidences such loan in full satisfaction of any interest in such Account
which is attributable to the unpaid balance of such loan.
6.7. NO IN-SERVICE WITHDRAWALS. No Participant shall have the right to withdraw
(by reason of hardship or otherwise) all or any portion of his Account before an
event specified in Section 6.4(a).
ARTICLE VII
BENEFIT DISTRIBUTION
--------------------
7.1. METHOD. The vested portion of a Participant's Account shall be paid in a
single lump sum cash payment to him or, in the case of his death, to his
Beneficiary. Such payment, to the extent the underlying loan obligation is not
extinguished under applicable law, may include distribution of the Participant's
note which evidences a loan under Section 6.6. Notwithstanding the foregoing, a
Participant may elect to receive any amount invested in the Harris Stock Fund in
the form of Harris Stock, provided that fractional shares and distribution of a
de minimis amount as determined in the sole discretion of the Committee or its
delegate shall be paid in cash.
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<PAGE> 40
Article VII: Benefit Distribution
7.2. DISTRIBUTION DEADLINES.
(a) GENERAL RULE. The vested portion of a Participant's Account shall be
payable to him as soon as practicable after the first Valuation Date which
follows the event specified in Section 6.4(a).
(b) $3,500 OR LESS. If the vested portion of a Participant's Account is
$3,500 or less and has not exceeded $3,500 at the time of any prior
distributions under the Plan, then such vested portion automatically shall
be paid to such Participant as of the earliest date permitted under
Section 7.2(a).
(c) MORE THAN $3,500. If the vested portion of a Participant's Account
exceeds (or at the time of any prior distribution exceeded) $3,500, then
distribution of such Account at any time before the Participant reaches
Normal Retirement Age shall be subject to the Participant's consent.
Notwithstanding the preceding sentence, payment of the vested portion of
his Account shall be made to him no later than 60 days after the end of
the later of the Plan Year in which such Participant's termination of
employment occurs and the Plan Year in which the Participant attains age
65.
(d) STATUTORY DEADLINES.
(1) PARTICIPANT.
(i) INITIAL DISTRIBUTION. Notwithstanding Section 7.2(c), the
entire vested portion of a Participant's Account shall be paid
to him in a single sum on or before his "required beginning
date." For purposes of determining the amount of the initial
distribution under this Section 7.2(d)(1), a Participant's
Account shall be determined as of the most recent Valuation
Date for which valuations have been completed preceding the
"required beginning date."
(ii) REQUIRED BEGINNING DATE. Except as otherwise provided in
this 7.2(d)(1)(ii), a Participant's "required beginning date"
shall be the April 1 following the calendar year in which he
reaches age 70 1/2.
If a Participant continues in employment with an Employer after his
"required beginning date," then any additional amounts credited to
his Account shall be paid to him each calendar year thereafter in a
single sum on or before December 31 of such year.
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<PAGE> 41
Article VII: Benefit Distribution
(2) BENEFICIARY. Upon the death of a Participant, the entire
vested portion of his Account shall (regardless of any request made
by the Beneficiary) be paid to his Beneficiary in a single lump sum
before the date which is the first anniversary of the Participant's
date of death.
7.3. DIRECT ROLLOVER.
(a) A Participant or "distributee" may elect at any time to have any
portion of an "eligible rollover distribution" paid in a direct rollover
to the trustee or custodian of an "eligible retirement plan" specified by
the Participant or distributee, whichever is applicable. Payment of a
direct rollover in the form of a check payable to the trustee or custodian
of an eligible retirement plan, for the benefit of the Participant or
distributee, may be mailed to the Participant or distributee.
(b) For Purposes of this Section 7.3, the following terms shall have the
following meanings:
(1) "Distributee" means a surviving spouse, or a spouse or former
spouse who is an alternate payee under a "qualified domestic
relations order" as defined in section 414(p) of the Code.
(2) "Eligible retirement plan" means an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, 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 an
eligible rollover distribution; provided that if the distributee is
a surviving spouse, an eligible retirement plan means an individual
retirement account or individual retirement annuity.
(3) "Eligible rollover distribution" means any distribution of all
or a portion of the Participant's Account, but, to the extent
prescribed by the Secretary of the Treasury of the United States
does not include a distribution to the extent it is required under
section 401(a)(9) of the Code.
7.4. CLAIM FOR BENEFIT. Subject to SectionSection 7.2(b)(1) and 7.2(d)(1) and
(2), as a condition to the payment of any benefit under this Plan, a claim for
such benefit must be filed with the Committee on the related Election Form, and
all such claims (and any other claims by a Participant, former Participant or
Beneficiary) shall be processed in accordance with the claims procedure
established by the Committee.
7.5. MISTAKES. If a mistake is made in favor of a Participant or a Beneficiary
in the payment of an Account, the Committee or the Trustee (acting at the
Committee's direction and on behalf of
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<PAGE> 42
Article VII: Benefit Distribution
the Plan) shall take such action against the Participant or Beneficiary to
remedy such mistake and to make the Plan whole as the Committee deems proper and
appropriate under the circumstances, and any mistake made in favor of the Plan
shall promptly be corrected by, or at the direction of, the Committee.
7.6. DESIGNATION OF BENEFICIARY. Each Participant shall have the right to
designate a Beneficiary or Beneficiaries (who may be designated contingently or
successively and who may be an entity other than a natural person) to receive
any distribution to be made under this Article upon the death of such
Participant; provided that such designation shall not be effective if the
Participant is married on the date of the Participant's death unless such
designation has been consented to by such surviving spouse in writing
acknowledging the effect of such consent and witnessed by a Plan representative
or a notary public, or it is established to the satisfaction of a Plan
representative that such consent cannot be obtained because the Participant's
spouse cannot be located or because of such other circumstances as may be
prescribed in Treasury Regulations. A Participant may from time to time, without
the consent of any Beneficiary, change or cancel any such designation. Such
designation and each change therein shall be made on the Election Form
prescribed by the Committee and shall be filed with the Committee. If (i) no
Beneficiary has been named by a deceased Participant, (ii) such designation is
not effective pursuant to the first sentence of this section, (iii) the
designated Beneficiary has predeceased the Participant or (iv) the whereabouts
of the designated Beneficiary is unknown, any undistributed vested balance of
the deceased Participant shall be made in the following order of priority:
(a) the Participant's surviving spouse, if any,
(b) the Participant's designated beneficiary or beneficiaries under the
Lanier Worldwide, Inc. Pension Equity Plan, if any,
(c) the persons or persons expressly designated by the Participant to
receive t h e death benefit payable under the group term life insurance
program maintained by his Employer, if any,
(d) the estate of the Participant.
The marriage of a Participant shall be deemed to revoke any prior designation of
a Beneficiary made by such Participant and a divorce shall be deemed to revoke
any prior designation of the Participant's divorced spouse as Beneficiary if
written evidence of such marriage or divorce shall be received by the Committee
before distribution shall have been made in accordance with such designation.
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<PAGE> 43
ARTICLE VIII
NAMED FIDUCIARIES, THE COMMITTEE, AND PLAN EXPENSES
---------------------------------------------------
8.1. NAMED FIDUCIARIES. The Committee shall be the "named fiduciary" within the
meaning of such term as used in ERISA, provided that, to the extent a
Participant directs that his Before-Tax Contributions (and, hence, any
corresponding Matching Contributions) be invested in the Harris Stock Fund, the
Committee shall not be the "named fiduciary" with respect to such investment
decision and the Participant shall be responsible for the effects of such
decisions.
8.2. ALLOCATION AND DELEGATION BY NAMED FIDUCIARIES. The Committee may by
written instrument filed with the records of this Plan designate a person who is
not a Named Fiduciary to carry out any of its responsibilities under this Plan,
other than the responsibilities of the Trustee in the management and control of
the Trust Fund, provided that no such allocation or designation shall be
effective until such person has consented to such designation.
8.3. ADVISERS. The Committee, or a person designated by the Committee to
perform any responsibility of the Committee pursuant to the procedure described
in Section 8.2, may employ one or more persons to render advice with respect to
any responsibility the Committee has under this Plan or such person has by
virtue of such designation.
8.4. DUAL FIDUCIARY CAPACITIES. Any person may serve in more than one fiduciary
capacity with respect to this Plan, and a fiduciary may be a Participant if such
person otherwise satisfies the requirements for participation under this Plan.
8.5. THE COMMITTEE.
(a) APPOINTMENT. The Board shall appoint the members of the Committee
which shall be responsible (except for duties specifically vested in the
Trustee) for the administration of the provisions of the Plan. The
Committee shall be the "administrator" of the Plan within the meaning of
such term as used in ERISA. The Board shall have the right at any time,
with or without cause, to remove any member or members of the Committee. A
member of the Committee may resign and his resignation shall be effective
upon delivery of his written resignation to the Plan Sponsor. Upon the
resignation, removal or failure or inability for any reason of any member
of the Committee to act hereunder, the Board shall appoint a successor
member. All successor members of the Committee shall have all the rights,
privileges and duties of their predecessors, but shall not be held
accountable for the acts of their predecessors. Any member of the
Committee may, but need not, be an employee or a director, officer or
shareholder of the Plan Sponsor, and such status shall not disqualify him
from taking any action hereunder or render him accountable for any
distribution or other material advantage received by him under the Plan,
provided that no member of the Committee who is a Participant shall take
part in any action of the
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<PAGE> 44
Article VIII: Named Fiduciaries and Committee
Committee or any matter involving solely his own rights under the Plan.
The Trustee shall be promptly notified of the names of the persons
appointed as members of the Committee and any successor members of the
Committee by delivery to the Trustee of a certified copy of the
resolutions of the Board making such appointment.
(b) POWERS AND DUTIES. The Committee shall have the exclusive
responsibility and complete discretionary authority to control the
operation, management and administration of the Plan, with all powers
necessary to enable it properly to carry out such responsibilities,
including (but not limited to) the full discretionary power to construe
the terms of the Plan and the Trust Agreement, to determine eligibility
for benefits, to resolve all interpretive, operational, equitable, factual
and other questions that arise under the Plan and to settle disputed
claims. The decisions of the Committee on all matters within the scope of
its authority shall be final and binding upon all parties to this
instrument, Participants, their spouses and Beneficiaries and any other
concerned parties.
(c) RECORDS. The Committee shall keep a record of its proceedings and all
such records, together with such other documents as the Committee shall
determine are necessary or advisable for the administration of the Plan,
shall be preserved in the custody of the Committee.
(d) INFORMATION. Each Employer shall supply the Committee with complete
and timely information regarding employment data for each Employee and
Participant including, but not limited to, his Compensation, date of death
or other termination of employment and such other information as may be
required by the Committee.
(e) RELIANCE. The officers and directors of each Employer shall be
entitled to rely upon all information and data contained in any
certificate or report or other material prepared by any accountant,
attorney or other consultant or adviser selected by the Committee to
perform services on behalf of the Plan.
8.6. PAYMENT OF EXPENSES. All reasonable and proper expenses of the Plan and
the Trust Fund, including investment advisory fees and the Trustee's fees as
agreed upon by the Committee and the Trustee, shall be paid from the Trust Fund
by the Trustee unless the Plan Sponsor elects (in accordance with such
procedures as agreed upon by the Committee and the Trustee) to pay such
expenses. The Plan Sponsor may seek reimbursement of any expense which is
properly payable by the Trust Fund.
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<PAGE> 45
ARTICLE IX
TRUST FUND AND TRUSTEE
----------------------
The Trust Fund shall be held, administered, controlled and invested by the
Trustee subject to the terms of the Trust Agreement for the exclusive benefit of
Participants and Beneficiaries.
ARTICLE X
AMENDMENT AND TERMINATION
-------------------------
10.1. AMENDMENT. The Plan Sponsor shall have the right at any time and from
time to time to amend the Plan in any respect by action of the Board, provided
that no amendment shall be made which would divert any of the assets of the
Trust Fund to any purpose other than the exclusive benefit of Participants and
Beneficiaries, except that this Plan may be amended retroactively to affect the
Accounts maintained for any person if necessary to cause the Plan and the Trust
Fund to be exempt from income taxes under sections 401(a) and 501(a) of the
Code, respectively.
10.2. TERMINATION. The Plan Sponsor reserves the right to terminate the Plan,
in whole or in part, or to declare a discontinuance of contributions to the Plan
at any time by action of its Board, and the Plan Sponsor reserves the right to
terminate the participation in the Plan, in whole or in part, by any Employer by
action of the Board. Furthermore, an Employer's participation in the Plan
automatically shall terminate if, and at such time as, its status as an Employer
terminates for any reason whatsoever (other than through a merger or
consolidation into another Employer). If there is a termination or partial
termination of the Plan or a declaration of a discontinuance of contributions to
the Plan, then the Accounts of all affected Participants who are Employees as of
the date of such termination, partial termination or declaration shall become
fully vested.
In the case of any such termination, partial termination, or declaration, the
Plan Sponsor shall cause all unallocated amounts to be allocated to the
appropriate Accounts of the affected Participants and Beneficiaries and shall
direct the Trustee to distribute such Accounts to such Participants and
Beneficiaries in accordance with uniform rules established by the Plan Sponsor
at such time as permissible under section 401(k) of the Code, and the Trustee
shall follow such directions.
10.3. MERGER OR CONSOLIDATION. In the case of any merger or consolidation of the
Plan with, or transfer of assets or liabilities of the Plan to, any other plan,
each person for whom an Account is maintained shall, if such Plan is then
terminated, be entitled to receive a benefit which immediately after the merger,
consolidation or transfer is equal to or greater than the benefit he would have
been entitled to receive immediately before the merger, consolidation or
transfer, if this Plan had
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<PAGE> 46
been terminated; provided that no assets shall be transferred directly to this
Plan which are attributable to contributions which are subject to the joint and
survivor annuity requirements of sections 401(a)(11) and 417 of the Code.
ARTICLE XI
MISCELLANEOUS
-------------
11.1. SPENDTHRIFT CLAUSE. Subject to Section 11.10, no Account, benefit, payment
or distribution under the Plan shall (except to the extent permitted by law) be
subject to the claim of any creditor of a Participant or Beneficiary, or to any
legal process by any creditor of such person, and no Participant or Beneficiary
shall have any right to alienate, commute, anticipate, or assign all or any
portion of his Account, benefit, payment or distribution under the Plan except
under Section 6.6.
11.2. LEGALLY INCOMPETENT. The Committee may in its discretion direct that
payment be made directly to (a) a person who is incompetent or disabled, whether
because of minority or mental or physical disability, (b) to the guardian of
such person, or to the person having custody of such person or (c) to any person
designated or authorized under any state statute to receive such payment on
behalf of such incompetent or disabled person, without further liability either
on the part of the Committee, the Plan Sponsor or any Employer for the amount of
such payment to the person on whose account such payment is made.
11.3. BENEFITS SUPPORTED ONLY BY TRUST FUND. Any person having any claim for any
benefit under the Plan shall look solely to the assets of the Trust Fund for the
satisfaction of such claim. In no event will the Plan Sponsor, or an Employer,
or any of their employees, officers, or directors, be liable in their individual
capacities to any person whomsoever for the payment of benefits under the Plan.
11.4. DISCRIMINATION. The Committee shall administer the Plan in a uniform and
consistent manner with respect to all similarly situated Employees,
Participants, spouses and Beneficiaries, including adopting such administrative
or other rules as the Committee in its discretion deems appropriate for any such
persons affected by circumstances such as a sale, acquisition, merger,
reorganization, facility closing, layoff, work force reduction or other similar
event or transaction, provided that the Committee shall not permit any
discrimination in favor of Highly Compensated Employees which would be
prohibited under section 401(a) of the Code. If for any Plan Year the Committee
determines that following the terms of the Plan would result in a failure to
satisfy the coverage requirements under section 410(b) of the Code, then the
Committee shall take such action as it deems appropriate under the circumstances
to prevent such failure.
11.5. CLAIMS. Any payment to a Participant or Beneficiary or to his legal
representative, or heirs-at-law, made in accordance with the provisions of the
Plan, shall to the extent thereof be in full satisfaction of all claims under
the Plan against the Employers, any of whom may require such
-39- Savings Incentive Plan
<PAGE> 47
Article XI: Miscellaneous
Participant, Beneficiary, Spouse, his legal representative or heirs-at-law, as
a condition precedent to such payment, to execute a receipt and release
therefor in such form as shall be satisfactory to the Plan Sponsor.
11.6. AGENT FOR SERVICE OF PROCESS. The agent for service of process for the
Plan and the Committee shall be the person currently listed in the records of
the Secretary of State of Delaware as the agent for service of process for the
Plan Sponsor.
11.7. NONREVERSION. No part of the Trust Fund shall ever be used for or be
diverted to purposes other than for the exclusive benefit of Participants and
Beneficiaries, except
(a) as expressly provided otherwise in Section 5.4(b)(3) with respect to a
suspense account established in accordance with section 415 of the Code;
(b) a contribution which is made by an Employer or the Plan Sponsor by a
mistake of fact upon direction of the Committee shall be refunded by the
Trustee to the Employer or Plan Sponsor within one year after the payment
of such contribution;
(c) if the Internal Revenue Service determines that this Plan initially
fails to satisfy the requirements of section 401(a) of the Code and
related sections, all contributions made to this Plan, plus any investment
gains and less any such losses, shall be refunded to the Plan Sponsor or,
as for contributions made under Section 5.1, to the Participant on whose
behalf the contribution was made; and
(d) a contribution for which the Internal Revenue Service denies an income
tax deduction to an Employer shall be refunded by the Trustee to the Plan
Sponsor within one year after the denial of such deduction upon the Plan
Sponsor's direction, all such contributions being made expressly on the
condition that such contributions are deductible in full for federal
income tax purposes.
11.8. PLAN NOT AN EMPLOYMENT CONTRACT. The Plan is not a contract of employment.
Participation in the Plan shall not give any Employee the right to be retained
in the employ of the Employer or any Affiliate, nor, upon termination of his
employment, to have any interest in the Trust Fund except as expressly provided
in the Plan.
11.9. TOP HEAVY PLAN.
(a) DETERMINATION. If the Committee as of each June 30 (the
"determination date") determines that the sum of the present value of the
accrued benefits of "key employees" (as defined in section 416(i)(1) of
the Code) exceeds 60% of the sum of the present value of the accrued
benefits of all employees as of such determination date in accordance with
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<PAGE> 48
Article XI: Miscellaneous
the rules set forth in section 416(q) of the Code, the Plan shall be "top
heavy" for the Plan Year which begins on the immediately following July 1.
For purposes of this Section 11.9 the present value of the accrued benefit
of each employee shall be equal to the sum of (1) and (2), where
"(1)" equals the balance of his Account under this Plan (determined
for this purpose as of the determination date, including the value
of any distributions made during the 5-year period ending on such
date and any contributions due but as yet unpaid as of such date,
and
"(2)" equals the present value of his accrued benefit, if any,
(determined as of the valuation date which coincides with or
precedes the determination date for such plan) under
(A) each tax-qualified plan (as described in section 401(a) of
the Code) maintained by an Employer or an Affiliate (i) in
which a key employee is a participant or (ii) which enables
any plan described in subclause (i) to meet the requirements
of section 401(a)(4) or 410 of the Code, and
(B) each other tax-qualified plan maintained by an Employer or
an Affiliate (other than plan described in clause (A)) which
may be aggregated with the Plan and the plans described in
clause (A), provided such aggregation group (including a plan
described in this clause (B)) continues to meet the
requirements of sections 401(a)(4) and 410 of the Code,
including the value of any distributions made from such plans
during the 5-year period ending on such determination date and
the value of any contributions due under such plans but as yet
unpaid as of such valuation date. However, the accrued benefit
of any individual shall be disregarded if such individual has
not performed any services for any Employer at any time during
the 5-year period ending on the date as of which such
determination is made.
(b) SPECIAL TOP HEAVY PLAN RULES. If the Committee determines that the
Plan is "top heavy" for any Plan Year, then the special rules set forth in
this Section 11.9 shall apply notwithstanding any other rules to the
contrary set forth elsewhere in the Plan.
(1) A contribution shall be made for such Plan Year for each
Employee who is an Eligible Employee on the last day of such year
which is equal to the lesser of (A) 4% of his Compensation (as
defined for purposes of Section 5.4(b)) for such year and (B) the
percentage at which contributions are made (or are required to be
made) for such year to the key employee for whom such percentage is
the highest.
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<PAGE> 49
Article XI: Miscellaneous
(2) For Plan Years commencing prior to January 1, 2000, the
Committee shall take such action as necessary to satisfy the
requirements of section 415(e) and section 416(h) of the Code if it
(following the procedure set forth in this Section 11.9) determines
that the Plan fails to meet the requirements set forth in section
416(h)(2)(B) of the Code.
11.10. QUALIFIED DOMESTIC RELATIONS ORDER. Benefits under the Plan shall be paid
in accordance with the applicable requirements of a "qualified domestic
relations order" as that term is defined in section 414(p) of the Code and
section 206(d)(3) of ERISA. The Committee, in accordance with a uniform and
nondiscriminatory procedures established by the Committee, shall
(a) promptly notify the Participant and any alternate payee (as that
term is defined in section 414(p)(8) of the Code) of the receipt of
a domestic relations order and the Plan's procedures for determining
the qualified status of such order.
(b) determine the qualified status of such order, and
(c) administer any distributions under the Plan pursuant to such
order in accordance with the rules set forth in section 414(p) of
the Code.
The Plan shall commence payment of benefits to the Alternate Payee as of the
later of (i) the earliest date a distribution may be made pursuant to the order
and (ii) as soon as administratively practicable after the date such order is
determined by the Committee to be a "qualified domestic relations order."
The determinations and the distribution made by, or at the direction of, the
Committee under this Section 11.10 shall be final and binding on the
Participant, and on all other persons interested in such order. Unless the
"alternate payee" is also a Participant under the Plan or is a "party in
interest" (as defined in section 3(14)of ERISA), an "alternate payee" under this
Section 11.10 shall not be an eligible person for purposes of obtaining a loan
pending the distribution of such alternate payee's entire interest under this
Plan.
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<PAGE> 50
IN WITNESS WHEREOF, Lanier Worldwide, Inc. has caused its duly authorized
officers to execute and affix its seal to this Plan this 28th day of
August, 1997.
LANIER WORLDWIDE, INC.
By: /s/ Wesley E. Cantrell
------------------------------------
Title: President/Chief Executive Officer
---------------------------------
(SEAL)
ATTEST:
By: /s/ J. M. Kelly
---------------------------------------
Title: Vice President & Assistant Secretary
------------------------------------
<PAGE> 1
Exhibit 10(k)
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of July 1, 1997)
<PAGE> 2
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(as amended and restated as of July 1, 1997)
ARTICLE I - PURPOSE
The Lanier Worldwide, Inc. Supplemental Executive Retirement Plan (the
"SERP"), amended and restated as of July 1, 1997, is intended to provide
deferred compensation to a "select group of management or highly compensated
employees" (as defined in section 201(a) of ERISA) who are eligible to
participate in the Pension Plan pursuant to Article Three.
ARTICLE II - DEFINITIONS
Except as otherwise set forth below, each capitalized term used herein
shall have the meaning set forth in the Pension Plan.
2.1. CODE - means the Internal Revenue Code of 1986, as amended from time
to time.
2.2. COMMITTEE - means the Pension and Retirement Committee of the Board of
Directors of the Corporation.
2.3. CORPORATION - means Lanier Worldwide, Inc. and any successor to such
corporation.
2.4. ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.5. PARTICIPANT - means any individual who fulfills the eligibility
requirements contained in Article III hereof and whose beneficial interest in
the SERP has not been distributed in full.
2.6. PENSION PLAN - means the Lanier Worldwide, Inc. Pension Plan.
2.7. SERP - means this Lanier Worldwide, Inc. Supplemental Executive
Retirement Plan as amended from time to time.
ARTICLE III - ELIGIBILITY AND PARTICIPATION
Any Participant in the Pension Plan who is a member of a select group of
management and highly compensated employees of the Corporation and whose
retirement benefits upon termination of employment are limited under the Pension
Plan by the provisions of section 401(a)(17) or 415 of the Code shall become a
Participant in the SERP automatically upon application of such limitations.
<PAGE> 3
ARTICLE IV - AMOUNT OF BENEFITS
The amount of the benefit payable hereunder shall be the excess of (a)
the amount of the retirement benefit that would have been payable under the
Pension Plan to such Participant but for the limitations contained in the
Pension Plan to effect compliance with sections 401(a)(17) and 415 of the Code,
less (b) the amount of the retirement benefit that is actually payable under the
provisions of the Pension Plan to such Participant.
ARTICLE V - BENEFIT PAYMENTS
The supplemental pension calculated under Article IV shall be paid to a
Participant or his Beneficiary, if applicable, in the same manner and form as
the payment of the retirement benefits of such Participant, or Beneficiary,
under the Pension Plan. Any factors or conditions applicable to a Participant's
or a Beneficiary's benefit under the Pension Plan shall be applicable to such
benefits under the SERP.
ARTICLE VI - SURVIVORS' BENEFITS
In the event a Participant dies before his interest under the SERP has
been distributed to him in full, any remaining interest shall be distributed to
his Beneficiary, who shall be the person designated as his Beneficiary under the
Pension Plan, in the form of a lump sum payment as soon as adminstratively
practicable after the Participant's death.
ARTICLE VII - ADMINISTRATION
7.1 GENERAL. The Plan shall be administered by the Committee, except to the
extent that any of the Committee's powers, rights or responsibilities have been
delegated pursuant to Section 7.2. The Committee shall have the complete
authority to interpret and construe the terms of the SERP, including, but not
limited to, the status and rights of Participants, Beneficiaries and other
persons under the SERP, and the manner, time and amount of payment of any
distributions under the SERP. The Committee also shall have the complete
authority to adopt rules for carrying out the purposes of the SERP and to make
all other determinations necessary or advisable for the administration of the
SERP. Any decision made by the Committee, and any interpretation or construction
of any provision of the SERP by the Committee, shall be final and conclusive,
and shall be binding on Participants, Beneficiaries and all other concerned
parties. A Participant who has been delegated the authority to make decisions
with respect to the SERP may not participate in any decision that may affect his
rights or obligations under this SERP, unless the decision affects all
Participants.
7.2 DELEGATION OF AUTHORITY Either the Board of Directors of the Corporation or
the Committee may delegate any of the Committee's responsibilities, powers or
duties under the SERP to any person or committee.
7.3 AGENTS The Committee (or its delegate) may employ attorneys, advisors and
agents and may arrange for such clerical and other services as it may require in
carrying out the provisions of the SERP.
-2-
<PAGE> 4
7.4 LIABILITY OF DELEGATE No person to whom any responsibility, power or duty
under the SERP has been delegated shall be liable for any action or failure to
act under this SERP, except where such action or failure to act was due to gross
negligence or fraud.
ARTICLE VIII - GENERAL PROVISIONS
8.1 AMENDMENT AND TERMINATION. The Corporation may amend or terminate the SERP
at any time, in whole or in part, by written action of its Board of Directors.
8.2. ANTI-ALIENATION. No right or interest of any Participant or Beneficiary in
the SERP shall be assignable or transferable in whole or in part, either
directly or by operation of law or otherwise, including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but
excluding devolution by death or mental incapacity. Any other purported
transfer, assignment, pledge or other encumbrance or attachment of any payments
or benefits under the SERP shall not be permitted or recognized and shall be
void.
8.3. UNFUNDED STATUS. The Corporation may, but is not required to, establish a
trust to fund the amounts credited to Accounts under this SERP, provided that
the assets in such trust are subject to the claims of the Corporation's general
creditors in the event of insolvency. Any payments under the SERP shall be made
out of the general assets of the Corporation, and Participants (and
Beneficiaries) shall have no interest in any fund or specific asset of the
Corporation. The rights of each Participant (and Beneficiary) to any payments
under the SERP shall be solely those of any unsecured creditor of the
Corporation.
8.4. SEVERABILITY. If any provision of the SERP is found invalid or illegal by
any court having proper jurisdiction, the invalidity or illegality shall not
affect the other provisions of the SERP, and the SERP shall be construed and
enforced to reflect the Corporation's original intent in adopting the SERP,
consistent with applicable law.
8.5. NOT A CONTRACT OF EMPLOYMENT. The SERP shall not constitute a contract of
continuing employment or in any manner obligate the Corporation to continue the
employment of any employee.
8.6. SUCCESSORS AND ASSIGNS. The provisions of the SERP shall bind and inure the
Corporation and its successors and assigns, as well as each Participant and
Beneficiary.
8.7. CONSTRUCTION. Terms expressed in the masculine gender shall be deemed to
include the feminine gender, the singular shall include the plural and the
plural shall include the singular, unless the context clearly indicates
otherwise. Headings used herein are for convenience of reference only, and are
not to be construed to alter the terms of the SERP.
8.8. GOVERNING LAW. To the extent not governed by ERISA, the SERP shall be
construed in accordance with the laws of the State of Georgia, without regard to
its principles of conflicts of laws.
-3-
<PAGE> 5
IN WITNESS WHEREOF, Lanier Worldwide, Inc. does hereby amend and restate
this SERP, effective July 1, 1997.
Date: August 20, 1997 By /s/ Wesley E. Cantrell
---------------------------
Wesley E. Cantrell
President and Chief Executive Officer
-4-
<PAGE> 1
Exhibit 10(l)
LANIER WORLDWIDE, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT SAVINGS PLAN
ARTICLE I - PURPOSE AND EFFECTIVE DATE
The Lanier Worldwide, Inc. Supplemental Executive Retirement Savings Plan (the
"Plan"), effective as of July 1, 1997, is intended to provide deferred
compensation to a "select group of management or highly compensated employees"
(as defined in section 201(2) of ERISA) who are eligible to participate in the
Plan pursuant to Section 3.1.
ARTICLE II - DEFINITIONS
Each capitalized term used herein shall have the meaning set forth in the Lanier
Worldwide, Inc. Savings Incentive Plan (the "SIP"), except as otherwise set
forth below.
2.1. ACCOUNT - means an account established on the books of the Corporation on
behalf of a Participant pursuant to Section 5.1.
2.2. CODE - means the Internal Revenue Code of 1986, as amended from time to
time.
2.3. COMMITTEE - means the Pension and Retirement Committee of the Board.
2.4. COMPENSATION - means "Compensation" as defined in the SIP, except that the
$150,000 (as adjusted) limitation described therein shall not apply.
2.5. CORPORATION - means Lanier Worldwide, Inc., a Delaware corporation, or any
successor corporation or entity.
2.6. ERISA - means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
2.7. PARTICIPANT - means an individual who satisfies the requirements of Section
3.1 and files an election form with the Committee as described in Section 3.2.
2.8. PLAN - means this Lanier Worldwide, Inc. Supplemental Executive Retirement
Savings Plan, as amended from time to time.
2.9. SIP - means the Lanier Worldwide, Inc. Savings Incentive Plan, as amended
from time to time.
<PAGE> 2
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.1. ELIGIBILITY. (a) IN GENERAL. Participants in the Plan shall consist of such
key management employees of the Corporation (i) who have been selected, or who
have been recommended by the Chief Executive Officer to be selected, to
participate in one of the Corporation's long-term incentive plans for the plan
year and (ii) who satisfy the conditions set forth in ss. 3.1(b).
(b) ELIGIBILITY CONDITIONS. A key management employee satisfies the
conditions of this ss. 3.1(b) if as of June 1 of the immediately preceding Plan
Year (i) such employee's aggregate annual base salary and target annual bonus
for the Plan Year are projected to be equal to or exceed $125,000 (as adjusted
for cost-of-living in a manner to be determined by the Committee in its sole
discretion), and (ii) such employee is an active participant in the SIP.
3.2. PARTICIPATION. An eligible employee shall become a Participant by
completing and filing with the Committee an election form in the time and manner
prescribed by the Committee. An election form filed with the Committee shall
remain in effect until the earliest of (i) the effective date of a subsequent
election form filed by the Participant, (ii) the first day of the Plan Year in
which the employee is not selected by the Committee to be a Participant in the
Plan, and (iii) the Participant's termination of employment with the Corporation
and its Affiliates.
ARTICLE IV - CONTRIBUTIONS
4.1. ELECTIVE CONTRIBUTIONS. A Participant's Account shall be credited in an
amount equal to the amount of Before-Tax Contributions and Matching
Contributions that would be allocated for a Plan Year to a Participant's account
under the SIP, but are not so allocated because of the limitations of section
401(a)(17), 401(k)(3), 401(m)(2)(A), 402(g) or 415 of the Code. Amounts shall be
credited to a Participant's Account as of the date such contributions would have
been allocated to the Participant's Before-Tax Account and Matching Account
under the SIP had such limitations of the Code not applied.
4.2. SPECIAL AWARD AMOUNTS. The Corporation, in its sole discretion, may grant a
special award to any Participant by crediting his Account with the amount of
such special award.
4.3. TRANSFERRED ACCOUNTS. The Committee, in its sole discretion, may provide
that a Participant's Account shall be credited with amounts credited to him
under a nonqualified deferred compensation plan maintained by his prior
employer.
-2-
<PAGE> 3
ARTICLE V - ACCOUNTS AND INVESTMENTS
5.1. ESTABLISHMENT OF ACCOUNTS. An Account shall be established on the books of
the Corporation in the name of and on behalf of each Participant. A
Participant's Account shall be credited with (i) amounts described in Section
4.1, (ii) any special award granted to the Participant pursuant to Section 4.2,
and (iii) the amount permitted to be credited to the Participant's Account by
the Committee pursuant to Section 4.3.
5.2. ACCOUNT INVESTMENTS. (a) INVESTMENT FUNDS. Amounts credited to a
Participant's Account under the Plan for a Plan Year shall be deemed to be
invested in the same investment funds, and in the same proportion, as designated
by the Participant for the investment of his SIP account. If a Participant does
not have a currently effective investment election under the SIP, his Account
shall be invested in the Summit Cash Reserves Fund, or such other investment
fund available under the SIP which is designated by the Committee hereunder. A
Participant's Account shall be credited with gains and losses of the SIP
investment funds in which such Account is deemed to be invested.
(b) TIMING. Deemed investment gains and losses shall be allocated to
Participants' Accounts at the same time gains and losses are allocated to
participants' accounts under the SIP.
(c) NO ACTUAL INVESTMENT REQUIRED. The Corporation shall not be
required to invest assets in the investment funds selected by Participants,
although the Corporation may decide to do so.
ARTICLE VI - VESTING AND DISTRIBUTIONS
6.1. VESTING. Amounts credited to a Participant's Account pursuant to Section
4.1 (as adjusted for gains and losses pursuant to Section 5.2) which relate to
Matching Contributions under the SIP shall become vested at the same time and to
the same extent as Matching Contributions become vested under the SIP. A
Participant shall be 100% vested in all other amounts credited to his Account.
6.2. TIME OF PAYMENT. A Participant shall begin to receive payments of his
vested Account balance as of the date selected by the Committee which occurs as
soon as administratively practicable after the beginning of the year following
the year in which such Participant terminates employment with the Corporation
and its Affiliates, unless the Participant elects to defer the receipt of such
payments to a later date by filing an election form with the Committee, in the
time and manner designated by the Committee, during the year in which the
Participant terminates such employment. In no event, however, may a Participant
who terminates employment with the Corporation and its Affiliates prior to his
attainment of age 55
-3-
<PAGE> 4
defer the commencement of payments of his vested Account balance to a date later
than the last day of the month following the month in which the Participant
attains age 55.
6.3. FORM OF PAYMENT. (a) ELECTION. A Participant may elect the form of payment
of his Account by filing an election form with the Committee in the time and the
manner prescribed by the Committee. A Participant may change a prior election
regarding the form of payment at any time in the Plan Year prior to the Plan
Year in which payment of his vested Account balance would commence pursuant to
his original election.
(b) AVAILABLE FORMS. A Participant may elect to receive payment of his
vested Account balance in any one of the following forms:
(1) a lump sum;
(2) annual installments over a five-year period; or
(3) annual installments over a ten-year period.
A Participant who has not filed an election shall receive the payment of his
Account in annual installments over ten years.
(c) DE MINIMIS LUMP SUM PAYMENTS. Notwithstanding any provision of the
Plan to the contrary, if a Participant's vested interest in his Account is less
than an amount eligible to be paid in installments, as determined by the
Committee in its sole discretion, then the Participant's vested interest in his
Account shall be paid in a lump sum.
6.4. DEATH. If a Participant shall die before the vested balance of his Account
is distributed, then the vested balance shall be paid in a lump sum to the
beneficiary or the beneficiaries designated by the Participant on the form and
manner prescribed by the Committee. A Participant may revoke or change his
beneficiary designation at any time by filing a new beneficiary designation form
with the Committee. If a Participant does not designate a beneficiary under the
Plan or if no designated beneficiary survives the Participant, then the vested
balance of his Account shall be distributed to the Beneficiary or Beneficiaries
entitled to his account under the SIP.
6.5. PAYMENT ON INCAPACITY. In the event the Committee determines that any
individual to whom a distribution is to be made is unable to care for his
affairs by reason of illness or other disability, the distribution shall be made
to the person who the Committee, in its sole discretion, determines to be
responsible for the incapacitated individual (unless prior claim thereto has
been made by a duly qualified guardian or other legal representative). Any such
payment made under this Section 6.5 shall constitute a complete discharge of the
Corporation's obligation to make any payment under the Plan.
-4-
<PAGE> 5
6.6. OVERPAYMENTS OF INSTALLMENTS. In the event that a payment is made with
respect to a Participant's Account which exceeds the amount to which the
Participant is entitled, future payments shall be reduced in any manner which
the Committee, in its sole discretion, deems equitable.
6.7. WITHHOLDING FOR TAXES. For each calendar year in which a Participant's
Compensation is reduced pursuant to this Plan, the Corporation shall withhold
from the Participant's payments of compensation for such year any taxes imposed
upon the Participant pursuant to section 3121(v) of the Code in respect to the
amount by which the Participant's compensation is reduced. The Corporation shall
have the right to deduct any federal, state or local income, employment or other
taxes required by law to be withheld with respect to any payments to be made
under this Plan, and to withhold such amounts from any payment otherwise due the
Participant (or beneficiary).
ARTICLE VII -- ADMINISTRATION
7.1. GENERAL. The Plan shall be administered by the Committee, except to the
extent that any of the Committee's powers, rights or responsibilities have been
delegated pursuant to Section 7.2. The Committee shall have the complete
authority to interpret and construe the terms of the Plan, including, but not
limited to, the status and rights of Participants, beneficiaries and other
persons under the Plan, and the manner, time and amount of payment of any
distributions under the Plan. The Committee also shall have the complete
authority to adopt rules for carrying out the purposes of the Plan and to make
all other determinations necessary or advisable for the administration of the
Plan. Any decision made by the Committee, and any interpretation or construction
of any provision of the Plan by the Committee, shall be final and conclusive,
and shall be binding on Participants, beneficiaries and all other concerned
parties. A Participant who has been delegated the authority to make decisions
with respect to the Plan may not participate in any decision that may affect his
rights or obligations under this Plan, unless the decision affects all
Participants.
7.2. DELEGATION OF AUTHORITY. Either the Board or the Committee may delegate any
of the Committee's responsibilities, powers or duties under the Plan to any
person or committee.
7.3. AGENTS. The Committee (or its delegate) may employ attorneys, advisors and
agents and may arrange for such clerical and other services as it may require in
carrying out the provisions of the Plan.
7.4. LIABILITY OF DELEGATE. No person to whom any responsibility, power or duty
under the Plan has been delegated shall be liable for any action or failure to
act under this Plan, except where such action or failure to act was due to gross
negligence or fraud.
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<PAGE> 6
ARTICLE VIII - GENERAL PROVISIONS
8.1. AMENDMENT AND TERMINATION. The Corporation may amend or terminate the Plan
at any time, in whole or in part, by written action of its Board of Directors.
In the event the Plan is terminated, all vested amounts credited to Accounts on
the effective date of the Plan termination shall be paid at such time and in
such manner as the Corporation shall determine, but no later than when the
payments would have been made had the Plan not been terminated.
8.2. ANTI-ALIENATION. No right or interest of any Participant or beneficiary in
the Plan shall be assignable or transferable in whole or in part, either
directly or by operation of law or otherwise, including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge or bankruptcy, but
excluding devolution by death or mental incapacity. Any other purported
transfer, assignment, pledge or other encumbrance or attachment of any payments
or benefits under the Plan shall not be permitted or recognized and shall be
void.
8.3. UNFUNDED STATUS. The Corporation may, but is not required to, establish a
trust to fund the amounts credited to Accounts under this Plan, provided that
the assets in such trust are subject to the claims of the Corporation's general
creditors in the event of insolvency. Any payments under the Plan shall be made
out of the general assets of the Corporation, and Participants (and
beneficiaries) shall have no interest in any fund or specific asset of the
Corporation. The rights of each Participant (and beneficiary) to any payments
under the Plan shall be solely those of any unsecured creditor of the
Corporation.
8.4. SEVERABILITY. If any provision of the Plan is found invalid or illegal by
any court having proper jurisdiction, the invalidity or illegality shall not
affect the other provisions of the Plan, and the Plan shall be construed and
enforced to reflect the Corporation's original intent in adopting the Plan,
consistent with applicable law.
8.5. NOT A CONTRACT OF EMPLOYMENT. The Plan shall not constitute a contract of
continuing employment or in any manner obligate the Corporation to continue the
employment of any employee.
8.6. SUCCESSORS AND ASSIGNS. The provisions of the Plan shall bind and inure the
Corporation and its successors and assigns, as well as each Participant and
beneficiary.
8.7. CONSTRUCTION. Terms expressed in the masculine gender shall be deemed to
include the feminine gender, the singular shall include the plural and the
plural shall include the singular, unless the context clearly indicates
otherwise. Headings used herein are for convenience of reference only, and are
not to be construed to alter the terms of the Plan.
8.8. GOVERNING LAW. To the extent not governed by ERISA, this Plan shall be
construed in accordance with the laws of the State of Delaware, without regard
to its principles of conflicts of laws.
-6-
<PAGE> 7
IN WITNESS WHEREOF, Lanier Worldwide, Inc. does hereby adopt this
Plan, effective July 1, 1997.
Date: May 16, 1997 By: /s/ Wesley E. Cantrell
---------------------------
Wesley E. Cantrell
President and Chief Executive Officer
-7-
<PAGE> 1
EXHIBIT 10(n)
HARRIS CORPORATION
1997 DIRECTORS' DEFERRED COMPENSATION PLAN
1. PURPOSE. The purpose of this 1997 Directors' Deferred
Compensation Plan (the "PLAN") is to establish a method of deferring Directors
compensation which will aid Harris Corporation (the "CORPORATION") in attracting
and retaining as members of its Board of Directors persons whose abilities,
experience and judgment can contribute to the continued progress of the
Corporation. This Plan replaces and supersedes the Harris Corporation Deferred
Compensation Plan for Directors, Amended as of December 2, 1994 (the
"PREDECESSOR PLAN"). From and after the effective date of this Plan, no further
deferrals may be made under the Predecessor Plan and any amounts invested or
deemed invested in the investment accounts of the Predecessor Plan shall be
deemed to be invested in the equivalent investment funds under this Plan. Any
election made by a Director under the Predecessor Plan, unless and until amended
by a Director in accordance with this Plan, shall remain in effect under this
Plan.
2. RIGHT TO DEFER COMPENSATION. (a) (i) Any Director of the
Corporation who is not an employee of the Corporation or one of its subsidiaries
and WHO HAS NOT made an election under the Predecessor Plan to defer all or any
specified part of the compensation to which the Director may be entitled for
services rendered as a Director with respect to calendar year 1997, may at any
time prior to August 1, 1997, elect to defer under this Plan all or any
specified part of the compensation to which the Director may thereafter be
entitled with respect to the remainder of calendar year 1997; PROVIDED, HOWEVER,
that such Director may only invest such deferred compensation in the Harris
Stock Equivalents Fund (as defined below). References in this Plan to
compensation shall be references to compensation of a Director only for services
rendered as a Director.
(a) (ii) Any Director of the Corporation who is not an
employee of the Corporation or one of its subsidiaries and WHO HAS made an
election under the
1
<PAGE> 2
Predecessor Plan to defer all or any specified part of the compensation to which
the Director may be entitled with respect to calendar year 1997, may at any time
prior to August 1, elect to defer into the Harris Stock Equivalents Fund under
this Plan, all or a specified part of, the compensation to which the Director
may thereafter be entitled with respect to the remainder of calendar year 1997,
prior to August 1, 1997. Such Director may also elect to invest all or any
specified part of any existing balances in her/his Account (as defined below)
into the Harris Stock Equivalents Fund. Elections to invest existing balances
into the Harris Stock Equivalents Fund (x) made on or prior to June 30, 1997,
will be effective on June 30, 1997, and (y) made on or after July 1, but prior
to July 31, 1997, will be effective on July 31, 1997. The number of Deferred
Stock Units (as defined below) to be credited to a Director's Account will be
determined as set forth in Paragraph 3.
(a) (iii) Each of the foregoing elections under this Plan
for calendar year 1997 shall specify (x) in the case of an election under
Paragraph 2(a)(i), the amount or part of compensation to be deferred for the
remainder of 1997 and (y) in the case of an election under Paragraph 2(a)(ii),
the amount or part of compensation and existing balances to be invested in the
Harris Stock Equivalents Fund. Any deferral elections made under the Predecessor
Plan or made in accordance with Paragraph (a)(i) or (a)(ii) shall be irrevocable
for 1997.
(b) For calendar years subsequent to 1997, any Director of
the Corporation who is not an employee of the Corporation or one of its
subsidiaries may at any time prior to the commencement of a calendar year elect
to defer under this Plan all or any specified part of the compensation to which
the Director may thereafter be entitled with respect to such subsequent year.
Any person who is not an employee of the Corporation or one of its subsidiaries
who is elected as a Director and who was not a Director on the last day of the
calendar year immediately prior to her/his election may, within thirty days of
the commencement of her/his term, elect to defer all or any specified part of
the compensation
2
<PAGE> 3
to which she/he may thereafter be entitled with respect to the year in which
she/he is so elected.
(c) Each of the foregoing deferral elections under this Plan
shall be made by written notice delivered to the Secretary of the Corporation,
specifying the year or years with respect to which the election shall apply and
the amount or part of compensation to be deferred for such year or years (and in
the case of an election under Paragraph 2(a)(ii) the portion of existing
balances to be invested in the Harris Stock Equivalents Fund). A deferral
election under this Plan with respect to any year shall be irrevocable after
commencement of such year or, in the case of a person who was not a Director on
the last day of the calendar year immediately prior to her/his election, after
the commencement of her/his term.
3. DEFERRED COMPENSATION ACCOUNTS. (a) GENERAL. On the last day
of each calendar month in which compensation deferred under this Plan would have
become payable to a Director, the amount of such compensation shall be credited
to a Deferred Compensation Account ("ACCOUNT") which shall be established and
maintained for such Director as a special ledger account on the Corporation's
books. Amounts credited to the Account of a Director shall be deemed to be
invested in accordance with the investment election of such Director among the
investment funds of the Corporation's Retirement Plan identified on EXHIBIT A
hereto, as such exhibit may be amended from time to time; PROVIDED, HOWEVER,
that such amounts may not be deemed invested in the Harris Stock Fund of the
Corporation's Retirement Fund but, alternatively, may be deemed to be invested
in the Harris Stock Equivalents Fund as set forth in Paragraph 3(b) (the
investment funds set forth on EXHIBIT A, as amended from time to time, and the
Harris Stock Equivalents Fund are sometimes referred to as the "INVESTMENT
FUNDS"). Subject to the provisions of Section 3(b) below for investments in the
Harris Stock Equivalents Fund, a Director may invest her/his account balance or
future deferred amounts in 1.0% increments in any of the Investment Funds (or in
such other increments as are permitted under the Corporation's Retirement Plan,
as amended from time to time) and, may change
3
<PAGE> 4
her/his investment elections in a manner consistent with the changing of
investment elections as set forth in the Corporation's Retirement Plan, as
amended from time to time. A Director's account balance and future deferred
amounts shall be invested in the Balanced Fund until the Director makes a valid
investment election pursuant to this Paragraph 3. Earnings and losses with
respect to a Director's Account shall be allocated to such Account with the same
frequency and in the same manner as allocations under the Corporation's
Retirement Plan, as amended from time to time.
(b) SPECIAL RULES CONCERNING HARRIS STOCK EQUIVALENTS FUND.
Notwithstanding any other provisions of this Plan to the contrary, the following
rules shall apply to investments in the Harris Stock Equivalents Fund.
(i) NO INTRA-PLAN TRANSFERS INTO OR OUT OF THE HARRIS STOCK
EQUIVALENTS FUND. Except for a reallocation of a Director's Account balance as
set forth in Paragraph 2(a)(ii), a Director may not make an election to transfer
or reallocate amounts deemed to be invested in any of the other Investment Funds
into the Harris Stock Equivalents Fund. In addition, amounts deemed to be
invested into the Harris Stock Equivalents Fund may not thereafter be
reallocated into any of the other Investment Funds.
(ii) VALUE OF HARRIS STOCK EQUIVALENTS FUND. Amounts
credited to the Account of a Director on the last day of each calendar month and
invested in the Harris Stock Equivalents Fund shall be deemed to be invested in
Harris Corporation common stock, par value $1.00 per share ("COMMON STOCK"). The
Corporation shall credit the Harris Stock Equivalents Fund of a Director's
Account with that number of units (including fractions) obtained by dividing the
amount of such deferred compensation deemed invested in the Harris Stock
Equivalents Fund by the Fair Market Value (as defined below) of a share of
Common Stock on the date such amounts are credited to the Harris Stock
Equivalents Fund (with the units thus calculated referred to herein as "DEFERRED
STOCK UNITS"). For purposes of this Plan, Fair Market Value on any date shall
4
<PAGE> 5
mean the closing price of the Common Stock as reported by the New York Stock
Exchange, Inc. for the date which is the nearest trading date preceding the date
on which such value is to be determined.
(iii) EARNINGS ON HARRIS STOCK EQUIVALENTS FUND. The Harris
Stock Equivalents Fund account of a Director shall be credited with the amount
of cash dividends payable with respect to that number of shares of Common Stock
equal to the number of Deferred Stock Units (including fractions) credited in
the Harris Stock Equivalents Fund of such Director on the dividend payment date.
The amount so credited shall then be converted into Deferred Stock Units in the
manner described above using the Fair Market Value on the same day, and in a
manner consistent with the Corporation's Retirement Plan, as amended from time
to time.
(iv) REALLOCATIONS OF FUTURE INVESTMENTS INTO THE HARRIS
STOCK EQUIVALENTS FUND. Subject to any restrictions imposed by Section 16(b) of
the Securities Exchange Act of 1934 ("SECTION 16(B)"), changes in investment
elections with respect to future investments of deferred amounts into the Harris
Stock Equivalents Funds may be made at the Director's discretion.
(v) ADJUSTMENTS TO AVOID DILUTION. In the event of any stock
dividend or split, recapitalization, merger, consolidation, spin-off,
extraordinary dividends, combination or exchange of shares or other similar
event, the value and attributes of each Deferred Stock Unit shall be
appropriately adjusted consistent with such change to the same extent as if such
Deferred Stock Units were issued and outstanding shares of Common Stock, so as
to preserve, without increasing, the value of the deferred compensation credited
to the Harris Stock Equivalents Fund. Such adjustments shall be made by the
Board of Directors of the Corporation and shall be conclusive and binding for
all purposes of the Plan.
5
<PAGE> 6
(vi) NO RIGHTS AS SHAREHOLDER. Distributions from the Harris
Stock Equivalents Fund shall be made in cash with the amount of cash paid on
account of each Deferred Stock Unit being equal to the Fair Market Value of a
share of Common Stock on the last day of the month preceding the date of
distribution. No Director with deferred compensation credited to the Harris
Stock Equivalents Fund shall have rights as a shareholder of the Corporation
with respect to such Deferred Stock Units.
4. PAYMENT OF DEFERRED COMPENSATION. A Director shall elect the
manner in which the amounts credited to her/his Account shall be paid by a
written election delivered to the Secretary of the Corporation at the time such
Director elects to participate in this Plan. A Director may modify any payout
election up to 120 days prior to resignation or retirement, at which time the
election shall become irrevocable; PROVIDED, HOWEVER, that if a Director has
deferred amounts invested in the Harris Stock Equivalents Fund, no such
modification shall be made without the prior approval of the Board of Directors
of the Corporation or a Committee comprised solely of "non-employee directors"
as defined in Rule 16b-3(b)(3) under the Securities Exchange Act of 1934, as
amended from time to time. Payments must commence no later than age 72. A
Director's payout election shall apply to all amounts deferred and all earnings
thereon in the Director's Account regardless of the year in which the amounts
were deferred. Upon a Director's resignation or retirement, amounts credited to
the Director's Account shall be payable to her/him at her/his election in (i) a
lump sum on a date certain within five (5) years of resignation or retirement or
(ii) in annual payments over a designated number of years provided the Account
is fully paid within ten (10) years of resignation or retirement. Annual
payments shall be made on or before January 15. Until a Director's Account has
been completely distributed, earnings and losses on the unpaid balance thereof
shall be allocated as provided in Paragraph 3 above.
5. MODIFICATION OF PAYMENT TERMS IN CERTAIN CIRCUMSTANCES. If
after a person shall have ceased to be a Director, but prior to full payment to
her/him of the entire amount of her/his Account, she/he shall, after reasonable
warning from the Corporation's
6
<PAGE> 7
Board of Directors, persist in an affiliation with any business that is a
principal competitor with a significant portion of the business conducted by the
Corporation, the entire balance of such Account may, if directed by the Board of
Directors in its sole discretion, be paid immediately to her/him in a lump sum.
6. PAYMENT IN THE EVENT OF DEATH. In the event a Director or
former Director dies prior to receiving payment of the entire amount of her/his
Account, the unpaid balance shall be paid to such beneficiary as she/he may have
designated in a written notice delivered to the Secretary of the Corporation as
the person, firm or trust to receive any such post-death distribution under this
Plan or, in the absence of such written designation, to her/his legal
representative or any person, firm or organization designated in her/his last
will to receive such distributions. Distributions subsequent to the death of a
Director or former Director shall be made in a lump sum.
7. NON-ASSIGNABILITY. None of the rights or interests of any
Director or former Director in amounts of compensation deferred under this Plan
shall, prior to actual payment or distribution to her/him, be assignable or
transferable in whole or in part, either voluntarily or by operation of law or
otherwise, and shall not be subject to payment of debts by execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner.
8. PLAN TO BE UNFUNDED. The Corporation shall be under no
obligation to acquire, segregate, or reserve any funds or other assets for
purposes relating to this Plan and no Director or former Director shall have any
rights whatsoever in or with respect to any funds or other assets held by the
Corporation for purposes of this Plan or otherwise. Accounts maintained for
purposes of this Plan shall merely constitute bookkeeping records of the
Corporation and shall not constitute any allocation whatsoever of any assets of
the Corporation or be deemed to create any trust or special deposit with respect
to any of the Corporation's assets.
7
<PAGE> 8
9. MISCELLANEOUS. The Board of Directors, any Committee of the
Board of Directors, and any officer of the Corporation charged with
responsibility for the administration and operation of this Plan, may rely upon
information supplied to them by the officers of the Corporation and by the
Corporation's independent certified public accountants. The members of the Board
of Directors, and any officer of the Corporation charged with responsibility for
the administration and operation of this Plan, shall not be liable for any act
or action, whether of commission or omission, taken by any other member or by
any other officer, agent, or employee; nor, except in circumstances involving
his bad faith, for anything done or omitted to be done by herself/himself. The
Board of Directors may from time to time amend, suspend, terminate or reinstate
any or all of the provisions of this Plan, except that no such amendment,
suspension or termination shall adversely affect the Account of any Director or
former Director as it existed immediately before such amendment, suspension or
termination or the manner of distribution thereof, unless such Director or
former Director shall have consented thereto in writing. This Plan shall be
construed and governed by the laws of Delaware.
10. EFFECTIVE DATE OF THE PLAN. This Plan shall be effective on
June 27, 1997.
IN WITNESS WHEREOF, Harris Corporation does hereby adopt this
1997 Directors' Deferred Compensation Plan as of June 27, 1997.
HARRIS CORPORATION
By /s/ Phillip W. Farmer
---------------------------------
Phillip W. Farmer
Chairman of the Board, President
and Chief Executive Officer
8
<PAGE> 1
EXHIBIT 11
COMPUTATION OF NET INCOME PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------
JUNE 27, 1997 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- -------------
<S> <C> <C> <C>
Primary:
Average shares outstanding.......................... 39,388 38,975 39,146
========== ========== ==========
Net Income.......................................... $ 207,508 $ 178,367 $ 154,466
========== ========== ==========
Net income per share............................. $5.27 $4.58 $3.95
========== ========== ==========
Fully diluted:
Total primary average shares outstanding............ 39,388 38,975 39,146
Dilutive stock options and employee stock purchase
plan shares -- based on treasury stock method
using the greater of year-end market price or
average market price............................. 216 128 132
----------- ----------- -----------
Total fully diluted average shares outstanding...... 39,604 39,103 39,278
========== ========== ==========
Net income per share............................. $5.24 $4.56 $3.93
========== ========== ==========
</TABLE>
36
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
AS OF AUGUST 29, 1997
Each of the below listed subsidiaries is 100% directly or indirectly owned
by Harris Corporation except as otherwise indicated, and all are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------------------------------
<S> <C>
Harris K.K. ............................................................. Japan
Harris S.A. ............................................................. Belgium
Harris S.A. de C.V. ..................................................... Mexico
Harris Srl............................................................... Italy
Harris Advanced Technology (Malaysia) Sdn. Bhd. ......................... Malaysia
Harris Airport Systems Sdn. Bhd. ........................................ Malaysia
Harris Australia Pty. Ltd. .............................................. Australia
Harris Broadcast Systems (Nigeria) Limited (40% of voting securities
owned)................................................................. Nigeria
Harris Canada, Inc....................................................... Canada
Harris Communications Honduras, S.A. de C.V. ............................ Honduras
Harris Communications Ltd. .............................................. Hong Kong
Harris Communications (Shenzhen) Ltd. ................................... China
Harris Communications (India) Private Limited............................ India
Harris Controls Australia Limited........................................ Australia
Harris Digital Radio Technology, Inc..................................... New York
Harris do Brasil Limitada................................................ Brazil
Harris Far East Limited.................................................. Delaware
Harris Foreign Sales Corporation, Inc. .................................. Virgin Islands
Harris International Sales Corporation................................... Delaware
Harris International Systems, Inc........................................ Delaware
Harris Investments of Delaware, Inc. .................................... Delaware
Harris Ireland Development Company Limited............................... Ireland
Harris Ireland Ltd....................................................... Ireland
Harris Mauritius Limited................................................. Mauritius
Harris Microelectronics Services Corporation ............................ Delaware
Harris Pension Management Limited........................................ England
Harris Publishing Systems Corporation.................................... Delaware
Harris Semiconducteurs Sarl.............................................. France
Harris Semiconductor B.V. ............................................... Netherlands
Harris Semiconductor China, Ltd. ........................................ Hong Kong
Harris Semiconductor Design & Sales Pte. Ltd. ........................... Singapore
Harris Semiconductor GmbH................................................ Germany
Harris Semiconductor, Inc. .............................................. Delaware
Harris Semiconductor Limited............................................. England
Harris Semiconductor (Ohio), Inc. ....................................... Delaware
Harris Semiconductor Patents, Inc. ...................................... Delaware
Harris Semiconductor (Pennsylvania), Inc. ............................... Delaware
Harris Semiconductor Pte. Ltd. .......................................... Singapore
Harris Semiconductor (Suzhou) Co., Ltd. ................................. China
Harris Semiconductor (Taiwan) Ltd. ...................................... Taiwan
Harris Semiconductor Y.H. ............................................... Korea
Harris Solid-State (Malaysia) Sdn. Bhd. ................................. Malaysia
</TABLE>
37
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------------------------------
<S> <C>
Harris Southwest Properties, Inc. ....................................... Delaware
Harris Systems Limited................................................... England
Harris Technical Services Corporation.................................... Delaware
Allied Broadcast Equipment Canada, Ltd. ................................. Canada
American Coastal Insurance Ltd. ......................................... Bermuda
Anshan Harris Broadcast Equipment Company, Limited (51%)................. China
ARM Harris Communications (India) Pvt. Ltd. (51%)........................ India
Baseview Products, Inc. ................................................. Michigan
Communication & Information Processing Harris S.A........................ Argentina
ECCO Parent Limited...................................................... Ireland
Executive Conference Center, Inc. ....................................... Georgia
Fredal Office Equipment, Inc. ........................................... Quebec
GE Harris Energy Control Systems, LLC (49%).............................. Delaware
GE-Harris Railway Electronics, LLC (49%)................................. Delaware
Guangzhou Harris Telecommunications Company Ltd. (51%)................... China
Inversiones Harris Chile Limitada ....................................... Chile
ITIS S.A.R.L............................................................. France
Lanier (Australia) Pty. Ltd. ............................................ Australia
Lanier Belgium S.A. ..................................................... Belgium
Lanier Business Products, Inc. .......................................... Georgia
Lanier Canada, Inc. ..................................................... Canada
Lanier de Chile, S.A. ................................................... Chile
Lanier Colombia, S.A. ................................................... Colombia
Lanier de Costa Rica S.A. ............................................... Costa Rica
Lanier Danmark A/S....................................................... Denmark
Lanier Deutschland GmbH.................................................. Germany
Lanier Dominicana, S.A. ................................................. Dominican Republic
Lanier de El Salvador, S.A. de C.V. ..................................... El Salvador
Lanier Espana S.A. ...................................................... Spain
Lanier Europe, B.V. ..................................................... Netherlands
Lanier Finance A.G....................................................... Switzerland
Lanier Financial Services, Inc. ......................................... Georgia
Lanier de Guatemala, S.A. ............................................... Guatemala
Lanier Hellas AEBE....................................................... Greece
Lanier Holdings A.G. .................................................... Switzerland
Lanier Holdings, Inc. ................................................... Delaware
Lanier Holdings Pty. Ltd. ............................................... Australia
Lanier International, Inc. .............................................. Delaware
Lanier Italia S.p.A. .................................................... Italy
Lanier Leasing, Inc. .................................................... Delaware
Lanier Litigation Services, Inc.......................................... Minnesota
Lanier Norge A/S ........................................................ Norway
Lanier Pacific Pty. Ltd. ................................................ Australia
Lanier de Panama, S.A. .................................................. Panama
Lanier Professional Services, Inc. ...................................... Delaware
Lanier Puerto Rico, Inc. ................................................ Puerto Rico
Lanier (Schweiz) A.G. ................................................... Switzerland
</TABLE>
38
<PAGE> 3
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
NAME OF SUBSIDIARY OF INCORPORATION
- ----------------------------------------------------------------------------------------------
<S> <C>
Lanier Singapore Pte. Ltd. .............................................. Singapore
Lanier United Kingdom Ltd. .............................................. England
Lanier Worldwide, Inc. .................................................. Delaware
Maritime Communication Services, Inc..................................... Delaware
Mercury Business Equipment Ltd. ......................................... England
Quorum Litigation Services (Phils.), Inc................................. Philippines
RF Communications, Inc. ................................................. Delaware
RF Communications, Inc. ................................................. New York
TAP Technology, Inc...................................................... Delaware
VFC Capital, Inc......................................................... Delaware
</TABLE>
39
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the following registration
statements of Harris Corporation and in each related Prospectus of our report
dated July 23, 1997, with respect to the consolidated financial statements and
schedule of Harris Corporation and subsidiaries included in this Annual Report
on Form 10-K for the fiscal year ended June 27, 1997:
<TABLE>
<S> <C> <C> <C>
Form S-8 No. 2-74551 Harris Corporation 1981 Stock Option Plan for Key
Employees
Form S-8 No. 33-50169 Harris Corporation Retirement Plan
Form S-8 No. 33-50167 Harris Corporation Union Retirement Plan
Form S-8 Nos. 33-37969; Harris Corporation Stock Incentive Plan
33-51171; and
333-7985
Form S-3 No. 333-3111 Harris Corporation Debt Securities
Form S-8 No. 333-01747 Lanier Worldwide, Inc. Savings Incentive Plan
</TABLE>
ERNST & YOUNG LLP
Orlando, Florida
August 22, 1997
40
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-27-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-27-1997
<CASH> 70,700
<SECURITIES> 91,300
<RECEIVABLES> 820,600
<ALLOWANCES> 28,300
<INVENTORY> 611,100
<CURRENT-ASSETS> 2,063,500
<PP&E> 2,160,600
<DEPRECIATION> 1,282,300
<TOTAL-ASSETS> 3,637,900
<CURRENT-LIABILITIES> 1,288,600
<BONDS> 686,700
<COMMON> 39,800
0
0
<OTHER-SE> 1,538,400
<TOTAL-LIABILITY-AND-EQUITY> 3,637,900
<SALES> 3,797,200
<TOTAL-REVENUES> 3,834,600
<CGS> 2,519,200
<TOTAL-COSTS> 963,800
<OTHER-EXPENSES> (20,300)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,900
<INCOME-PRETAX> 312,000
<INCOME-TAX> 104,500
<INCOME-CONTINUING> 207,500
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 207,500
<EPS-PRIMARY> 5.27
<EPS-DILUTED> 5.24
</TABLE>
