SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1998
Commission file number 0-4217
ACETO CORPORATION
_______________________________________________________
(Exact name of the company as specified in its charter)
NEW YORK 11-1720520
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
One Hollow Lane, Suite 201 11042
LAKE SUCCESS, NEW YORK
(Address of principal (Zip Code)
executive offices)
Company's telephone number, including area code: (516) 627-6000
Securities registered pursuant to Section 12 (b) of the Act:
TITLE OF EACH CLASS Name of each exchange
ON WHICH REGISTERED
None
___________________________________________________________________
Securities registered pursuant to Section 12 (g) of the Act:
Common Stock, par value $.01
_______________________________________________________
(Title of Class)
_______________________________________________________
<PAGE>
Indicate by check mark whether the company (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 company was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No_____
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company'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. [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.
6,698,907
The aggregate market value of the voting stock of the company held by
non-affiliates of the company as of September 1, 1998 was $88,120,346.
Documents incorporated by reference: The Company's Proxy Statement for
the annual meeting of the Company's shareholders to be held on December 10,
1998. (See Part III herein).
<PAGE>
PART I
ITEM 1. BUSINESS
The Company, which was incorporated in 1947, is primarily engaged in the
marketing of fine and industrial chemicals used principally in the
agricultural, color producing, pharmaceutical and surface coating industries.
The Company sells over 600 chemicals used in these and other fields.
Most of the chemicals distributed by the Company are purchased abroad
mainly for sale throughout the United States; to a minor extent, some chemicals
are sold abroad.
During the fiscal year ended June 30, 1998 approximately 50% of the
Company's purchases of chemicals came from Europe and approximately 35% from
Asia.
There were no significant changes in the kinds of products sold by the
Company or in the markets served or methods of distribution used by it.
The chemical industry is highly competitive. Most of the chemicals that
the Company sells are in competition with the products of chemical
manufacturers, including the largest chemical companies, who have substantially
greater resources than the Company. However, in the Company's opinion, based
on reports from its customers and suppliers, its competitive position is
enhanced by the following: the chemical products that it offers are prime
quality products, many produced by major chemical companies, some of whom are
the largest chemical companies in Europe and Asia, which products are offered
by the Company at attractive and competitive prices. For the most part the
Company warehouses the inventories of the chemicals which it sells at public
warehouses strategically located throughout the United States, and can
therefore fill orders rapidly from inventory. The Company has developed ready
access to key purchasing, research and technical executives of both its
customers and suppliers, and therefore one of its salient competitive strengths
is its ability to obtain quick decisions, when necessary, because of such
access. The technical support and services that the Company provides to its
customers is also a strength. The Company does not consider itself to be a
significant factor in the chemical industry taken as a whole.
One of the Company's products accounted for 15% of revenues in fiscal
1998; no product accounted for as much as 10% of revenues in fiscal 1997 or
1996. One of the Company's customers, DuPont Pharmaceuticals Company,
purchasing primarily the aforementioned product, also accounted for 15% of
revenues in fiscal 1998. Again, no customer accounted for as much as 10% of
revenues in fiscal 1997 or 1996. One of the Company's suppliers accounted for
25%, 22% and 25% of total purchases in fiscal 1998, 1997 and 1996,
respectively.
Certain of the chemicals purchased by the Company are supplied to it on
an exclusive basis, including the aforementioned pharmaceutical product. Based
on its relationships with its vendors, the Company believes its vendors will
continue to supply such chemicals on an exclusive basis.
The Company holds no patents, trademarks, licenses, franchises or
concessions which it considers to be material to its operations.
Sales of certain of the Company's chemicals are higher in the last six
months of the fiscal year. For the most part, the Company warehouses the
products that it sells and fills orders from inventory. It, therefore, does
not consider information concerning backlogs to be applicable.
A subsidiary of the Company markets certain agricultural chemicals and
contracts for the manufacture of other agricultural chemicals which are subject
to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). FIFRA
requires that test data be provided to the Evironmental Protection Agency (EPA)
to register, obtain and maintain approved labels for pesticide products. The
EPA requires that follow-on registrants of these products compensate the
initial registrant for the cost of producing the necessary test data on a basis
prescribed in the FIFRA regulations. Follow-on registrants do not themselves
generate or contract for the data. However, when FIFRA requirements mandate
the generation of new test data to enable all registrants to continue marketing
a pesticide product, often both the initial and follow-on registrants establish
a task force to jointly undertake the testing effort. The Company is presently
a member of two such task force groups. The Company estimates the cost of test
data at the time it is first required, which estimates are amortized over a
period of up to five years, updated annually; and are included in cost of
sales.
Liability under FIFRA would arise if the Company failed to compensate the
initial registrant for the cost of producing the necessary test data. Since
the Company markets no pesticide products which are not registered, and
compensates initial registrants for the cost of producing test data, it
believes it does not subject itself to contingent liabilities in such regard.
Compliance with Federal, State and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment
will have no material effect on the capital expenditures and competitive
position of the Company. During fiscal 1993 the Company announced the closing
of its manufacturing subsidiary located in Carlstadt, New Jersey. At the same
time an environmental consultant was engaged by the Company to determine the
extent of contamination on the site and develop a plan of remediation. Based
on the initial estimates from the consultant a liability was established in
fiscal 1993 for $1.5 million. During fiscal 1997, after additional testing was
completed, the Company received a revised estimate from the consultant. As a
result, the Company recorded an additional liability of $800,000 in the quarter
ended September 30, 1996. At June 30, 1998 the remaining liability was $1.4
million. The Company believes it is possible that such amount may not be
sufficient to cover future environmental remediation but does not believe there
will be a material adverse effect on the financial position or liquidity of the
company. However, depending on the amount and timing of any required
remediation over and above the liability established, it is possible that the
Company's future results could be materially affected in a particular reporting
period. Other than the aforementioned remediation, the Company is not aware of
any material environmental liabilities.
At June 30, 1998, the Company employed approximately 75 persons, none of
whom were covered by a collective bargaining agreement.
ITEM 2. PROPERTIES
The Company's general headquarters and main sales office occupy
approximately 20,000 square feet of leased space in a modern office building in
Lake Success, New York. The present lease expires in April 2001.
The Company's former manufacturing facility is located on an 11-acre
parcel in Carlstadt, New Jersey, owned by the Company. This parcel contains
one building with approximately 5,000 square feet of office space. The
property is held for sale.
At June 30, 1998, the Company owned two parcels in Long Island City, New
York, with buildings totaling 10,000 square feet. One parcel of 5,000 square
feet was sold in July 1998 and the other is held for sale.
In January, 1997 the Company sold a parcel it owned in Long Island City,
New York. This parcel was comprised of a 5,000 square foot building.
ITEM 3. LEGAL PROCEEDINGS.
(None)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(None)
<PAGE>
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's common stock is traded in the National Market System of
NASDAQ (Symbol: ACET) and was quoted at prices* ranging as follows:
FISCAL 1998 HIGH LOW
First Quarter 12 7/8 9 1/2
Second Quarter 13 5/8 12 1/8
Third Quarter 15 1/4 13 1/8
Fourth Quarter 16 1/2 14 1/4
FISCAL 1997 HIGH LOW
First Quarter 10 1/2 8 1/8
Second Quarter 9 5/8 8 1/2
Third Quarter 9 5/8 8 3/8
Fourth Quarter 10 8 1/2
*The above prices represent high and low prices for actual transactions.
A 3 for 2 stock split was paid in April 1998. The above prices have been
adjusted for the split and dividend, as appropriate.
A cash dividend of $0.13 per common share was paid in June 1998. Cash
dividends of $0.18 per common share were paid in January 1998, June 1997 and
January 1997.
As of September 1, 1998, there were approximately 700 holders of record of the
Company's common stock.
Shares held by the nominee of the Depository Trust Company, the country's
principal central depository, were approximately 5,300,000 shares and counted
as owned by one holder. Additional individual holdings in "street name" result
in a sizable number of beneficial owners represented on our records as owned by
various banks and stockbrokers.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $182,954 $169,387 $183,163 $164,783 $149,847
Net income 7,557 (1)(2)6,228 7,154 7,756 6,994
Net income per common $1.08 (1)(2)$0.82 $0.88 $0.92 $0.82
share (3)
Total assets 84,379 86,145 87,302 86,116 81,798
Working capital 54,423 48,927 50,907 48,289 43,606
Long-term debt - 500 1,000 1,500 2,000
Redeemable preferred 750 750 750 821 821
stock
Shareholders' equity 63,261 60,434 63,161 60,143 56,846
Number of common 6,699 6,981 7,782 7,985 8,259
shares outstanding
at year end (3)
Book value per common $ 9.44 $ 8.66 $ 8.12 $ 7.53 $ 6.88
share (3)
Cash dividends per $ 0.31 $ 0.36 $ 0.36 $ 0.36 $ 0.32
common share
</TABLE>
(1) Includes an after-tax charge of $187 ($.03/share)(3)in final settlement
of a complaint by the U.S. Department of Justice sent to the Company on
February 10, 1995. The complaint alleged violation of the Resource
Conservation and Recovery Act (RCRA) by a then wholly owned subsidiary
in Waterbury, CT. This subsidiary was sold on June 19, 1996.
(2) Includes an after-tax charge of $480 ($.06/share)(3)to cover a revised
estimate for remediation of the Company's former manufacturing site in
Carlstadt, NJ.
(3) Adjusted for stock split and dividend, as appropriate.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources:
The Company's primary source of liquidity is cash provided from operating
activities; $8.6 million in fiscal 1998 and $5.8 million in fiscal 1997. Cash
and short-term investments totaled $21.0 and $14.2 million and working capital
was $54.4 and $48.9 million at June 30, 1998 and 1997, respectively. In
addition, the Company's long-term investments totaled $8.0 and $11.2 million
for the same periods. These investments are highly liquid and can be used for
working capital if needed. The Company has sufficient lines of credit available
with banks, should any additional funds be required.
Some components of working capital had significant changes. Inventory decreased
$4.4 million to $26.8 million at June 30, 1998 from $31.2 million at June 30,
1997. This resulted in a decrease of $2.8 million in the total of drafts and
acceptances payable, accounts payable and accrued merchandise purchases. These
decreases were due primarily to the timing of merchandise purchases and were
not the result of a change in the trend of business. Cash and cash equivalents,
short-term investments and long-term investments increased by a total of $3.6
million to $29.0 million at June 30, 1998 from $25.4 million at June 30, 1997.
The increase was due to current earnings and the lower inventory level,
partially offset by the repurchase of the Company's common stock for $3.6
million during fiscal 1998. Accrued compensation was $2.5 million at June 30,
1998 compared to $3.5 million at June 30, 1997. The retirement of three senior
executives on June 30, 1997 was the primary reason for the decrease.
The Company's stock buyback program resulted in the repurchase of 250,000
shares for $3.6 million during fiscal 1998 and 552,000 shares for $7.4 million
during fiscal 1997. The Company announced a 3 for 2 stock split on March 18,
1998 with a record date of March 30, 1998, paid April 13, 1998.
The former site of Arsynco, Inc., one of the Company's closed manufacturing
facilities, requires environmental remediation. In October 1996 the Company's
environmental consultant completed its investigation of the property and
estimated a cost of $1.5 million to complete the remediation. In the quarter
ended September 30, 1996 the Company increased the current environmental
remediation liability by $800,000 thereby adjusting the liability to the
revised estimate. At June 30, 1998 the remaining liability was $1.4 million.
Any funds required for additional stock buybacks and environmental remediation
will be funded by the aforementioned sources of liquidity.
Results of Operations:
Net sales increased 8% in fiscal 1998, to $183.0 million from $169.4 million in
fiscal 1997. Virtually all the sales increase can be attributed to higher sales
of a new pharmaceutical product introduced in fiscal 1997. The 8% sales
decrease in fiscal 1997 from 1996 resulted primarily from lower sales of
agrochemicals and bulk pharmaceuticals to the generic industry.
Volume increased by 12% from 1997 to 1998, compared with a 6% decrease from
1996 to 1997. Selling prices across many of our product areas tended to decline
in 1998, more than offsetting the effect on volume of the increase in sales of
a relatively high-priced product, the aforementioned pharmaceutical. These
price declines explain the greater increase in volume than sales in fiscal
1998. During fiscal 1997, selling prices remained relatively stable, but the
decrease in sales of bulk pharmaceuticals, which tend to be higher priced,
accounted for the slightly greater decrease in sales than volume.
Gross margins as a percentage of sales decreased to 12.2% in fiscal 1998 from
12.6% in fiscal 1997 and 13.0% in fiscal 1996. Increased freight and
warehousing costs, in addition to the significant sales of the aforementioned
product, which is low margin business, accounted for the decline in 1998. The
decrease in fiscal 1997 can be attributed to increased competition in the dye
and pigment intermediates business.
Selling, general and administrative expenses increased slightly in fiscal 1998
compared to 1997. Selling expenses increased by $500,000 to $1.5 million from
$1.0 million. This was the result of an increase in the cost of business travel
along with the continued development of our international sales activities.
Consulting fees increased by $300,000 primarily due to consulting agreements
with recently retired senior executives. In addition, there were modest
increases in bank fees, office and telephone expenses. Offsetting most of these
increases was a decrease in compensation expense resulting from the
aforementioned retirees, and a decrease in medical and business insurance
expense. Selling, general and administrative expenses were down 5% in fiscal
1997 compared to 1996. Several components increased, including the cost of
medical insurance, selling expenses, legal expense and consulting fees. These
increases were more than offset by the elimination of selling, general and
administrative expenses of $1.3 million from the former Pfaltz & Bauer, Inc.
subsidiary.
Interest expense, which primarily relates to long-term debt, was $59,000,
$110,000 and $157,000 in fiscal 1998, 1997 and 1996, respectively. The interest
on long-term debt continues to decline as scheduled payments reduce the
principal balance.
Other income decreased to $2.3 million in fiscal 1998 compared to $2.5 million
in fiscal 1997. Lower cash available for investments during the fiscal year due
to the Company's continuing stock repurchase program, along with lower interest
rates, caused a significant decrease in interest income on investments. This
was partially offset by an increase in commission income. The sale of property
held by a subsidiary resulted in a $200,000 gain during fiscal 1997. There were
many factors that accounted for a $1.0 million increase in other income in
comparing fiscal 1997 to 1996. In conjunction with the aforementioned sale of a
subsidiary in June 1996, inventory was transferred to the new ownership and the
Company has received and will continue to be entitled to a portion of the
proceeds from the sale of this inventory for a period of up to three years from
the date of transfer. This totaled $170,000 in fiscal, 1997. Also, relating to
this transaction, the Company earned approximately $70,000 in interest on two
notes. Royalty income increased by $100,000 and higher average cash balances
available for investment resulted in an increase of $130,000 in interest
income. In addition, during fiscal 1996, a loss of $250,000 was realized on the
sale of certain assets of Pfaltz & Bauer, Inc.
The effective tax rates were 35.6%, 38.9% and 39.4% in fiscal 1998, 1997 and
1996, respectively. Significant payments from the Company's non-qualified
retirement plan, which are deductible for tax purposes on the date of
distribution, caused an unusually low tax rate for the year ended June 30,
1998.
Impact of New Accounting Pronouncements:
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income" ("Statement
130"), which is effective for fiscal years beginning after December 15, 1997.
Statement 130 requires that all items that are required to be recognized under
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements. Management of the Company does not believe that the
implementation of Statement 130 will have a significant impact on its financial
position or results of operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and
Related Information" ("Statement 131"). Statement 131 established standards to
report information about operating segments and related discussions about
products and services, geographic areas and major customers. Statement 131 also
is effective for financial statements for fiscal years beginning after December
15, 1997. This statement permits early application and requires restatement for
all prior periods. The Company is currently evaluating the requirements of
Statement 131 and believes that the adoption of the statement will not have a
material impact on previously reported information.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133 "Accounting for Derivative Instruments and Hedging
Activities" ("Statement 133"). Statement 133 established accounting and
reporting standards for derivative instruments embedded in other contracts, and
for hedging activities. Statement 133 is effective for all fiscal quarters of
all fiscal years beginning after June 15, 1999. Early application of all the
provisions of this Statement is encouraged but is permitted only as of the
beginning of any fiscal quarter that begins after issuance of this Statement.
Management of the Company does not believe that the implementation of Statement
133 will have a significant impact on its financial position or results of
operations.
Year 2000 Disclosure:
During fiscal 1998, the Company determined that it needed to modify or replace
significant portions of its customized software so that its information systems
will function properly with respect to dates in the year 2000 and beyond. In
addition, the Company is in the process of assessing all the third party
hardware and software it uses for Year 2000 compliance. The Company also has
initiated discussions with its significant suppliers, customers, and financial
institutions to ascertain that those parties have appropriate plans to
remediate Year 2000 issues where their systems interface with the Company's
systems or otherwise impact its operations. The Company is assessing the extent
to which its operations are vulnerable should those organizations fail to
properly remediate their computer systems. The Company's Year 2000 team
includes both internal and external staff. The team's activities are designed
to ensure that there is no adverse effect on the Company's core business
operations and that transactions with customers, suppliers, and financial
institutions are fully supported. The Company has commenced testing its major
computer systems and anticipates its information systems transformation for
Year 2000 compliance will be completed in early calendar 1999. While the
Company believes its planning efforts are adequate to address its Year 2000
concerns, there can be no guarantee that the systems of other companies on
which the Company's systems and operations rely will be converted on a timely
basis. The Company believes it unlikely that there will be a material effect on
the Company.
The Company estimates that its total cost of its Year 2000 initiative will be
approximately $100,000.
Market Risk:
The Company maintains foreign currency contracts solely to hedge open purchase
commitments. It has established policies, procedures and internal processes
governing the management of this hedging to reduce market risks inherent in
foreign exchange. As of June 30, 1998, the exposure to these market risks is
not considered material.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements required by this item 8 are set forth at the end of
this report. The following is the applicable supplementary data:
The following is a summary of the unaudited quarterly results of operations for
the years ended June 30, 1998
and 1997.
QUARTERLY FINANCIAL DATA (Unaudited)
(In thousands except per share amounts)
Year ended June 30, 1998
Quarter Ended
Sept.30,1997 Dec.31,1997 Mar.31,1998 June 30,1998
Net sales $43,764 $40,671 $50,453 $48,065
Gross profit 5,169 5,528 5,690 5,921
Net income 1,533 1,974 2,112 1,938
Net income per
common share* 0.22 0.28 0.30 0.28
Year ended June 30, 1997
Quarter Ended
Sept.30,1996 Dec.31,1996 Mar.31,1997 June 30,1997
Net sales $39,184 $35,850 $47,361 $46,992
Gross profit 4,379 4,931 5,812 6,211
Net income 511(1)(2) 1,662 2,075 1,981
Net income per
common share* 0.07(1)(2) 0.22 0.28 0.27
(1) Includes an after-tax charge of $480 ($.06/share)* to cover a revised
estimate for remediation of the Company's former manufacturing site in
Carlstadt, New Jersey.
(2) Includes an after-tax charge of $187 ($.03/share)* in final settlement of
a complaint by the U.S. Department of Justice sent to the Company on
February 10, 1995. The complaint alleged violation of the Resource
Conservation and Recovery Act (RCRA) by a then wholly owned subsidiary
in Waterbury, CT. This subsidiary was sold on June 19, 1996.
* Adjusted for stock split, as appropriate.
Cost of sales during interim periods is determined by gross profit rates based
upon the mix of products sold during each quarter.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Company's proxy statement relating to the annual meeting of the Company's
shareholders to be held on December 10, 1998, which will be filed with the
Commission not later than 120 days after the end of the fiscal year covered by
this Form 10-K (the "Proxy Statement"), is hereby incorporated by reference.
Based solely on its review of the copies of such forms received by it,
the Company believes that during the fiscal year covered by this Form 10-K all
filing requirements applicable to its officers, directors, and greater than
ten-percent beneficial owners were complied with.
Item 11. Executive Compensation.
The Company's Proxy Statement is hereby incorporated by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The Company's Proxy Statement is hereby incorporated by reference.
Item 13. Certain Relationships and Related Transactions.
The Company's Proxy Statement is hereby incorporated by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) See Index to Consolidated Financial Statements and Schedules
included elsewhere herein.
(b) No reports on Form 8-K were filed during the three
months ended June 30, 1998.
(c) Exhibits
3(i) Restated Certificate of Incorporation (incorporated by
reference to Exhibit 4(a)(iii) to Registration
Statement No. 2-70623 on Form S-8 ("S-8 2-70623")).
3(ii) Certificate of Amendment dated November 21, 1985 to
Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3(ii) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30,
1986 ("1986 10-K")).
3(iii) By-laws (incorporated by reference to Exhibit 3(iii)
to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1981).
3(iii)(a) By-laws (incorporated by reference to Exhibit 1 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended December 31, 1991).
3(iii)(b) By-laws (incorporated by reference to Exhibit 3(iii)b
to the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1996 ("1996 10-K")).
3(iii)(c) By-laws, currently in effect.
10(i) Note Agreement dated December 10, 1987 with the
Prudential Insurance Company of America (incorporated
by reference to Exhibit 10(i) to the Company's Annual
Report on Form 10-K for the fiscal year ended June 30,
1987).
10(ii) Profit Sharing Plan, as amended and restated effective
July 1, 1984 (incorporated by reference to Exhibit
10(ii) to 1986 10-K).
10(ii)(a) Profit Sharing Plan, as amended and restated
effective July 1, 1989 (incorporated by reference to
Exhibit 10(iii)(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1995).
10(iii) 401(k) Plan, effective August 1, 1997.
10(iv) Excess Benefit Plan, effective June 30, 1985
(incorporated by reference to Exhibit 10(iv) to
the Company's Annual Report on Form 10-K for the
fiscal year ended June 30, 1985).
10(iv)(a) Supplemental Executive Retirement Plan, effective
June 30, 1985, as amended and restated, effective
July 1, 1992 (incorporated by reference to Exhibit
10(iv)(a) to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1993 ("1993 10-
K")).
10(v) 1980 Stock Option Plan (incorporated by reference to
Item 4(a)(ii) of S-8 2-70623).
10(v)(a) 1980 Stock Option Plan (as amended and restated
effective as of September 19, 1990) (incorporated
by reference to exhibit 4(c) to Registration Statement
No. 33-38679 on Form S-8).
10(v)(b) Aceto Corporation Stock Option Plan (as Amended and
Restated effective as of September 19, 1990) (and as
further Amended effective June 9, 1992) (incorporated
by reference to Exhibit 10(v)(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended
June 30, 1992).
10(vi) Lease between Aceto Corporation and M. Parisi & Son
Construction Co., Inc. for office space at One
Hollow Lane, Lake Success, New York dated May 24, 1990
(incorporated by reference to Exhibit 10(vi) to the
Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1990).
10(vii) Arsynco, Inc. Severance Plan for employees not
covered by the Collective Bargaining Agreement
dated January 1993 (incorporated by reference to
Exhibit 10(vii) to 1993 10-K).
10(viii) Consulting agreement dated July 1, 1996 between the
Company and Robert E. Parsont (incorporated by
reference to Exhibit 10(viii) to 1996 10-K).
10(ix) Consulting agreement dated July 1, 1997 between the
Company and Arnold J. Frankel (incorporated by
reference to Exhibit 10(ix) to 1997 10-K).
21 Subsidiaries of the Company (incorporated by reference
to Exhibit 21 to 1993 10-K).
24 Consent of KPMG Peat Marwick LLP.
<PAGE>
Exhibit 3(iii)(c)
BY-LAWS OF ACETO CORPORATION
ARTICLE I
MEETING OF SHAREHOLDERS
SEC. 1. ANNUAL MEETINGS. Meetings of shareholders shall be held at the
principal office of the Corporation, or at such place within or without the
State of New York as the Board of Directors shall authorize. The Annual
Meeting of the Shareholders shall be held within six (6) months from the date
of the close of the Corporation's fiscal year, at such place and time as the
Board of Directors shall authorize. The meeting shall be for the purpose of
electing officers and for the transaction of such business as may be brought
before it. Notice of such meeting shall be given by the Secretary as required
by law; by serving personally or mailing not less than ten (10) days and not
more than fifty (50) days previous to such meeting, postage prepaid, a copy of
such notice, addressed to each shareholder entitled to vote at such meeting.
Any and all notices of such meeting may be waived by any shareholder by written
waiver or by attendance thereat, whether in person, or by proxy.
SEC. 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Board of Directors or by the President, and shall be called by
the Chairman of the Board, the President or the Secretary at the request in
writing of a majority of the Board of Directors or at the request in writing by
shareholders owning a majority in amount of the shares issued and outstanding.
Such request shall state the purposes of the proposed meeting. Business
transacted at a Special meeting shall be confined to the purposes stated in the
notice.
SEC. 3. NOTICE OF MEETING OF SHAREHOLDERS. Written notice of the time,
place, purpose or purposes of every meeting of shareholders shall be given not
less than ten (10) nor more than sixty (60) days before the date of the
meeting, either personally or by mail to each shareholder of record entitled to
vote at the meeting.
When a meeting is adjourned to another time or place, it shall not be necessary
to give notice of the adjourned meeting if the time and place to which the
meeting is adjourned are announced at the meeting at which the adjournment is
taken, and at the adjourned meeting only such business is transacted as might
have been transacted at the original meeting. However, if after the
adjournment the Board of Directors fixes a new record date for the adjourned
meeting, a notice of the adjourned meeting shall be given to each shareholder
of record on the new record date entitled to notice.
SEC. 4. FIXING THE RECORD DATE. For the purpose of determining the
shareholders entitled to notice or to vote in any meeting of shareholders, or
at any adjournment thereof, or for the purpose of determining shareholders
entitled to receive payment of any dividend, or the allotment of any right, or
for the purpose of any other action, the Board shall fix, in advance, a date as
the record date for such determination of shareholders. Such date shall not be
more than sixty (60) nor less than ten (10) days before the date of such
meeting nor more than sixty (60) days prior to any other action.
SEC. 5. VOTING LIST. The officer or agent having charge of the stock
transfer books for shares of the Corporation shall make and certify a complete
list of the shareholders entitled to vote at a shareholders' meeting or any
adjournment thereof.
Such list shall (i) be produced at the time and place of the meeting, (ii) be
subject to the inspection of any shareholder during the whole time of the
meeting, and (iii) be prima facia evidence as who are the shareholders entitled
to examine such list or to vote at any meeting.
SEC. 6. PROXIES. Every shareholder entitled to vote at a meeting of
shareholders may authorize another person or persons to act for such
shareholder by proxy. Every proxy shall be revocable at the pleasure of the
shareholder executing it, providing that the shareholder shall file written
notice of such revocation with the Secretary of the meeting prior to the vote
of such proxy.
SEC. 7. QUORUM. At any meeting of the shareholders, the holders of one-
third of the shares entitled to vote thereat shall constitute a quorum for the
transaction of any business, provided that when a specified item of business is
required to be voted on by a class or series, voting as a class, the holders of
one-third of the shares of such class or series shall constitute a quorum for
the transaction of such specified item of business. When a quorum is once
present to organize a meeting, it is not thereby broken by the subsequent
withdrawal of any shareholders. The shareholders present may adjourn the
meeting despite the absence of a quorum.
SEC. 8. SELECTION OF INSPECTORS.
(a) The person presiding at a shareholders' meeting may, and on the request
of any shareholder entitled to vote thereat, shall appoint one or more
inspectors to act at the meeting or any adjournment thereof.
<PAGE>
(b) The requirement for inspectors at any shareholders' meeting is waived
unless compliance therewith is requested by a shareholder entitled to vote at
such meeting.
(c) Each inspector before entering upon the discharge of his or her duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting.
(d) No person shall be elected a Director at a meeting at which he or she has
served as an inspector.
SEC. 9. DUTIES OF INSPECTORS. The inspectors shall determine the number
of shares outstanding; the shares represented at the meeting; the existence of
a quorum; the validity and effect of proxies; and shall receive votes or
consents; hear and determine all challenges and questions arising with the
right to vote; count and tabulate all votes or consents; determine the result;
and do such acts as are proper to conduct the election or vote with fairness to
all shareholders.
SEC. 10. ELECTION OF DIRECTORS. Directors shall be elected by a plurality
of the votes cast at an election, votes for Directors shall be non-cumulative.
SEC. 11. ORDER OF BUSINESS. The order of business at all meetings of
shareholders shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Designation of inspectors.
4. Reading of minutes of preceding meetings, unless such reading
is waived by the votes of a majority of shareholders present at
the meeting.
5. Reports of officers.
6. Election of directors.
7. Unfinished business.
8. New business.
ARTICLE II
DIRECTORS
SEC. 1. NUMBER. The affairs and business of this Corporation shall be
managed by a Board of ten (10) directors, unless and until otherwise
determined by vote of a majority of the entire Board of Directors. The number
of Directors shall not be less than three (3). Directors need not be
shareholders.
SEC. 2. HOW ELECTED. At the annual meeting the persons duly elected by
the votes cast at the election held thereat shall become Directors for the
ensuing year.
SEC. 3. TERM OF OFFICE. The term of office of each of the Directors shall
be one year, and thereafter until his successor has been elected.;
SEC. 4. DUTIES OF DIRECTORS. The Board of Directors shall have control
and general management of the affairs and business of the Corporation. Such
Directors shall in all cases act as a Board, regularly convened, by a majority
and they may adopt such rules and regulations for the conduct of their meetings
and the management of the Corporation, as they may deem proper, not
inconsistent with these By-Laws and the Laws of the State of New York. The
Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an Executive Committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in much
resolution. Each such committee shall serve all the pleasure of the Board.
SEC. 5. DIRECTORS' MEETINGS. Regular meetings of the Board of Directors
shall be held immediately following the annual meeting of the stockholders, and
at such other times as the Board of Directors may determine. Special meetings
of the Board of Directors may be called by the Chairman of the Board or the
President at any time, and shall be called by the Chairman of the Board, the
President or the Secretary upon the written request of 2 Directors.
SEC. 6. NOTICE OF MEETINGS. Notice of meetings, other than the regular
annual meeting shall be given by service upon each Director in person or by
mailing to him or her at his or her last known Post Office address, at least 10
days before the date therein designated for such meeting, including the day of
mailing, of a written or printed notice thereof specifying the time and place
of such meeting, and the business to be brought before the meeting and no
business other than that specified in such notice shall be transacted at any
special meeting. At any meeting at which every member of the Board of
Directors shall be present, although held without notice, any business may be
transacted which might have been transacted if the meeting had been duly
called.
SEC. 7. QUORUM. At any meeting of the Board of Directors, a majority of
the Board shall constitute a quorum for the transaction of business; but in the
event of a quorum not being present, a less number may adjourn the meeting to
some future time, not more than 30 days later.
SEC. 8. VOTING. At all meetings of the Board of Directors, each
Director is to have one vote, irrespective of the number of shares of stock
that he or she may hold.
SEC. 9. VACANCIES. Whenever a vacancy shall occur in the Board of
Directors by death, resignation, removal or otherwise, the same shall be filled
without undue delay by a majority vote by ballot of the remaining members of
the Board at a Special Meeting which shall be called for that purpose. Such
election shall be held within sixty days after the occurrence of such
vacancy. The person so chosen shall hold office until the next annual
meeting or until his or her successor shall have been chosen at a
special meeting of the stockholders.
SEC. 10. REMOVAL OF DIRECTORS. Any one or more of the Directors may be
removed either with or without cause, at any time by a vote of the stockholders
holding 51% of the stock, at any special meeting called for the purpose, or at
the annual meeting.
SEC. 11. DIRECTOR ACTION BY CONFERENCE TELEPHONE. Any one or more members
of the Board of Directors or of any Committee of the Board of Directors may
participate in a meeting of such Board or Committee by means of a conference
telephone or similar equipment which allows all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at such a meeting.
SEC.12. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Corporation
shall indemnify any person, made a party to an action by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he or
she, his or her testator or intestate, is or was a director, officer, or
employee of the Corporation, against the reasonable expenses, including
attorneys' fees, actually and necessarily incurred by him or her in connection
with the defense of such action, or in connection with an appeal therein,
except in relation to matters as to which such director, officer, or employee
is adjudged to have breached his or her duty to the Corporation. The
Corporation shall indemnify any person, made, or threatened to be made, a party
to an action or proceeding other than one by or in the right of the Corporation
to procure a judgment in its favor, whether civil or criminal, including an
action by or in the right of any other corporation of any type or kind,
domestic or foreign, which any director, officer, or employee of the
Corporation served in any capacity at the request of the Corporation, by reason
of the fact that he or she, his or her testator or intestate, was a director,
officer, or employee of the Corporation, or served such other Corporation in
any capacity, against judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees actually and necessarily
incurred as a result of such action or proceeding, or any appeal therein, if
such director, officer, or employee acted, in good faith, for a purpose which
he or she reasonably believed to be in the best interests of the Corporation
and, in criminal actions or proceedings, in addition, had no reasonable cause
to believe that his or her conduct was unlawful. The foregoing right of
indemnification shall not be exclusive of other rights to which he or she may
be entitled.
The Corporation is empowered to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director of another corporation against any liability asserted against him or
her and incurred by him or her in any such capacity or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of section 722
and 717 of the Business Corporation Law.
ARTICLE III
OFFICERS
SEC. 1. NUMBER OF OFFICERS. The Officers of the Corporation shall be a
Chairman of the Board, a Chief Executive Officer, a Vice Chairman, a President,
a First Vice-President, one or more Vice Presidents, a Treasurer, and a
Secretary, and any Officer may hold more than one office, except the same
person may not hold the offices of President and Secretary.
The Board of Directors may appoint such other officers, agents and employees as
in their sole discretion they shall deem advisable, who shall be subject to
recall at all times by a majority vote of the Board of Directors.
SEC. 2. ELECTION OF OFFICERS. The Officers of the Corporation shall be
elected annually by the Board of Directors at its meeting held immediately
after the annual meeting of shareholders and shall hold office for one year and
until their successors have been duly elected and qualified.
SEC. 3. REMOVAL OF OFFICERS. Any officer elected by the Board of
Directors may be removed, with or without cause, and a successor elected, by
vote of the Board of Directors, regularly convened at a regular or special
meeting.
SEC. 4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall, if
present, preside at all meetings of the Board of Directors and at all meetings
of shareholders.
SEC. 5. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall have
general charge of the business, affairs and property of the Corporation, and
shall have general supervision of its officers and agents. He may do and
perform all acts incident to the office of Chief Executive Officer of the
Corporation.
SEC. 6. VICE CHAIRMAN. The Vice Chairman shall in the absence or
inability to act of the Chairman of the Board, if present, preside at all
meetings of shareholders and at all meetings of the Board of Directors.
SEC. 7. PRESIDENT. The President shall be the Chief Operating Officer of
the Corporation and shall have general charge of the operations thereof,
subject to the direction of the Board of Directors, and shall have general
supervision over its operating officers and agents. He shall, if present,
preside at all meetings of the Board of Directors or shareholders in the
absence of the Chairman of the Board and Vice Chairman. He may do and perform
all acts incident to the office of President. In the absence or inability of
the Chief Executive Officer to act, the President shall perform the duties and
exercise the powers of the Chief Executive Officer.
SEC. 8. VICE-PRESIDENTS. In the absence of or inability of the President
to act, the First Vice-President, and if there be no First Vice President, any
Vice President designated by the Board shall perform the duties and exercise
the powers of the President and shall perform such other functions as the Board
of Directors may from time to time designate.
SEC. 9. SECRETARY. The Secretary shall: a) Keep the minutes of the
meetings of the Board of Directors and of the shareholders in appropriate
books; b) Give and serve all notice of all meetings of the Corporation; c) Be
custodian of the records and of the seal of the Corporation and affix the
latter to such instruments or documents as may be authorized by the Board of
Directors; d) Do and perform all other duties incident to the office of
Secretary.
SEC. 10. TREASURER. The Treasurer shall: a) Have the care and custody of
and be responsible for all of the funds and securities of the Corporation and
deposit of funds in the name and to the credit of the Corporation in such banks
and safe deposit vaults as the Directors may designate; b) Exhibit at all
reasonable times his books and accounts to any Director or shareholder of the
Corporation upon application at the office of the Corporation during business
hours; c) Render a statement of the condition of the finances of the
Corporation at each stated meeting of the Board of Directors if called upon to
do so. He shall keep at the office of the Corporation correct books of account
of all of its business and transactions and such books of account as the Board
of Directors may require. He shall do and perform all other duties incident to
the office of Treasurer.
SEC. 11. DUTIES OF OFFICERS MAY BE DELEGATED. In the case of the
absence of any officer of the Corporation, or for any reason the Board or Chief
Executive Officer may deem sufficient, the Board or Chief Executive Officer
may, except as otherwise provided in these By-Laws, delegate the powers or
duties of such officers to any other officer or any Director for the time
being.
SEC. 12. VACANCIES - HOW FILLED. Should any vacancy in any office occur by
death, resignation, inability of an officer to act, or otherwise, the same
shall be filled, without undue delay, by the Board of Directors at its next
annual meeting, or at a special meeting called for that purpose.
SEC. 13. COMPENSATION OF OFFICERS. The Officers shall receive such
salary or compensation as may from time tfo time be fixed and determined by the
Board of Directors. Any Officer may, with the concurrence of the Board of
Directors, work less than full time, or serve as a consultant to the
Corporation, upon such terms and such salaries, other compensation or
consultant's fees as may from time to time be fixed and determined by the Board
of Directors.
ARTICLE IV
SEC. 1. SEAL. The seal of the Corporation shall be circular in form and
bear the name of the Corporation, and the words "Seal 1947 New York". The
Seal may be used by causing it to be impressed directly on the instrument or
writing to be sealed, or upon adhesive substance affixed thereto. The seal on
the certificates for shares or on any corporate obligation for the payment of
money may be a facsimile, engraved or printed.
ARTICLE V
CERTIFICATE OF STOCK
SEC. 1. ISSUE OF CERTIFICATES REPRESENTING SHARES. The Corporation shall
cause to be issued to each shareholder one or more certificates, under the seal
of the Corporation, signed by the Chairman of the Board, (or President) and
the Treasurer (or Secretary) certifying the number of shares owned by such
shareholder in the Corporation.
SEC. 2. TRANSFER OF STOCK. (a) Transfer of shares of the Corporation shall
be made on the share records of the corporation only by the holder of record
thereof, in person or by duly authorized attorney, upon surrender for
cancellation of the certificate or certificates representing such shares, with
an assignment or power of transfer endorsed thereon or delivered therewith,
duly executed, with such proof of the authenticity of the signature and of
authority to transfer and of payment of transfer taxes as the Corporation or
its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any
share or shares as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other
claim to, or interest in, such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise expressly provided by law.
ARTICLE VI
DIVIDENDS
SEC. 1. WHEN DECLARED. The Board of Directors shall by vote declare
dividends from the surplus profits of the Corporation whenever, in their
opinion, the condition of the Corporation's affairs will render it expedient
for such dividends to be declared.
ARTICLE VII
BILLS, NOTES, ETC.
SEC. 1. HOW MADE. All bills payable, notes, checks or other negotiable
instruments of the Corporation shall be made in the name of the Corporation,
and shall be signed by such officer or officers as the Board of Directors shall
from time to time direct. No officer or agent of the Corporation, either
singly or jointly with others, shall have the power to make any bill payable,
note, check, draft or warrant or other negotiable instrument, or endorse the
same in the name of the Corporation, or contract or cause to be contracted any
debt or liability in the name or in behalf of the Corporation, except as herein
expressly prescribed and provided.
ARTICLE VIII
AMENDMENTS
SEC. 1. HOW AMENDED. These By-Laws may be amended, altered or added to by
the vote of the Board of Directors of this Corporation at any regular meeting
of said Board, or at a special meeting of Directors called for that purpose
provided a quorum of the Directors is present at such regular or special
meeting. These By-Laws, and any amendments thereto and new By-Laws added by
the Directors may be amended, altered or replaced by the stockholders at any
annual or special meeting of the stockholders. Whenever any provision of these
By-Laws or any amendment thereto shall conflict with a provision in the
Certificate of Incorporation ( and amendment thereto then in effect), the
applicable provisions in such certificate (so amended) shall prevail and
control.
<PAGE>
EXHIBIT 10(III)
401(K) PLAN
ARTICLE I - DEFINITIONS
As used in this Plan, each of the following terms shall have the meaning for
that term set forth in this Article l:
1.1 ACCOUNT: A separate Elective Deferrals Account, Employer Contributions
Account, Rollover Contribution Account, and Transferred Account, as the case
may be.
1.2 ACCOUNT BALANCE: The value of an Account determined as of the
applicable Valuation Date.
1.3 ACTUAL DEFERRAL PERCENTAGE: The ratio (expressed as a percentage), of
(A) Elective Deferrals made on behalf of an Eligible Participant for the Plan
Year (including Excess Elective Deferrals of Highly Compensated Employees, but
excluding (1) Excess Elective Deferrals of Non-highly Compensated Employees
that arise solely from Elective Deferrals made under the Plan or plans of the
Employer or an Affiliate and (2) Elective Deferrals that are taken into account
in the ACP Test (provided the ADP Test is satisfied with or without the
exclusion of such Elective Deferrals) to (B) the Participant's CODA
Compensation for the Plan Year (whether or not the Eligible Employee was a
Participant for the entire Plan Year). The Actual Deferral Percentage of an
Eligible Participant who would be a Participant but for the failure to make an
Elective Deferral is zero.
1.4 ADJUSTMENT FACTOR: The cost of living adjustment factor prescribed by
the Secretary of the Treasury under Code Section 415(d) for years beginning
after December 31, 1987, as applied to such items and in such manner as the
Secretary shall provide.
1.5 ADMINISTRATOR: The Employer, unless otherwise specified by duly
authorized action by the Employer.
1.6 ADP TEST: The Average Actual Deferral Percentage test set forth in
Section 3.4.2(B) of the Plan.
1.7 AFFILIATE: Any corporation or unincorporated trade or business (other
than the Employer) while it is:
(A) a member of a Controlled group of corporations (within the meaning of Code
Section 414(b)) of which the Employer is a member;
(B) a member of any trade or business under "common control" (within the
meaning of Code Section 414(c)) with the Employer;
(C) a member of an Affiliated service group (as that term is defined in Code
Section 414(m)) which includes the Employer; or
(D) any other entity required to be aggregated with the Employer pursuant to
Code Section 414(o). With respect to Section 3.6, Affiliate status shall be
determined in accordance with Code Section 415(h).
1.8 ANNUITY CONTRACT: An individual or group annuity contract issued by an
insurance company providing periodic benefits, whether fixed, variable or both,
the benefits or value of which a Participant or Beneficiary cannot transfer,
sell, assign, discount, or pledge as collateral for a loan or as security for
the performance of an obligation, or for any other purpose, to any person other
than the issuer thereof. The terms of any annuity contract purchased and
distributed by the Plan to a Participant or Spouse shall comply with the
requirements of this Plan.
1.9 AVERAGE ACTUAL DEFERRAL PERCENTAGE: For any group of Eligible
Participants, the average (expressed as a percentage) of the Actual Deferral
Percentages for each of the Eligible Participants in that group, including
those not making Elective Deferrals.
1.10 AVERAGE CONTRIBUTION PERCENTAGE: For any group of Eligible
Participants, the average (expressed as a percentage) of the Contribution
Percentages for each of the Participants in that group.
1.11 BENEFICIARY: A person or persons entitled to receive any payment of
benefits pursuant to Article VII.
1.12 BENEFIT COMMENCEMENT DATE: The first day, determined pursuant to
Article V, for which a Participant or Beneficiary receives or begins to receive
payment in any form of distribution as a result of death, Disability,
termination of Employment, Early Retirement, Plan termination or upon or after
Normal Retirement Age or age 70-1/2.
1.13 CODA: A cash or deferred arrangement pursuant to Code Section 401(k)
which is part of a profit sharing plan and under which an Eligible Participant
may elect to make Elective Deferrals in accordance with Section 3.3.1.
1.14 CODA COMPENSATION: Solely for purposes of determining the Actual
Deferral Percentage and the Contribution, CODA Compensation shall be
Compensation including elective contributions.
1.15 CODE: The Internal Revenue Code of 1986, as now in effect or as
amended from time to time. A reference to a specific provision of the Code
shall include such provision and any applicable regulation pertaining thereto.
1.16 COMPENSATION: For purposes of contributions, Compensation shall be
limited to the amount paid to the Employee by the Employer as regular salary
and wages, overtime pay, bonuses, and commissions, and as defined in Section
3.6.1(H), subject to the following modifications:
(A) For a Self-Employed Individual, Compensation means his or her Earned
Income, provided that if the Self-Employed Individual is not a Participant for
an entire Plan Year, his or her Compensation for that Plan Year shall be his or
her Earned Income for that Plan Year multiplied by a fraction the numerator of
which is the number of days he or she is a Participant during the Plan Year and
the denominator of which is the number of days in the Plan Year.
Elective Deferral or an Employee Thrift Contribution shall be treated as an
Eligible Participant on behalf of whom no such contributions are made.
1.19 DEFINED BENEFIT PLAN: A plan of the type defined in Code Section
4l4(j) maintained by the Employer or Affiliate, as applicable.
1.20 DEFINED CONTRIBUTION PLAN: A plan of the type defined in Code Section
414(i) maintained by the Employer or Affiliate, as applicable.
1.21 DISABILITY: Disability shall mean a condition which results in the
Participant's qualification for Social Security disability benefits. The
permanence and degree of such impairment shall be supported by medical
evidence.
1.22 EARLY RETIREMENT: An actively employed Participant is eligible for
Early Retirement upon terminating employment prior to Normal Retirement Age and
having attained Age 55.
1.23 EARLY RETIREMENT DATE: The Participant's benefit Commencement Date
following his or her termination of Employment on or after satisfying the
requirements for Early Retirement and prior to Normal Retirement Age.
1.24 EARNED INCOME: The "net earnings from self-employment" within the
meaning of Code Section 401(c)(2) of a Self-Employed Individual from the trade
or business with respect to which the Plan is established, but only if the
personal services of the Self-Employed Individual are a material income
producing factor in that trade or business. Net earnings will be determined
without regard to items not included in gross income and the deductions
properly allocable to or chargeable against such items and are to be reduced by
contributions by the Employer or Affiliate to a Qualified Plan to the extent
deductible under Code Section 404. Where this Plan refers to Earned Income in
the context of a trade or business other than that with respect to which the
Plan is adopted, the term Earned Income means such net earnings as would be
Earned Income as defined above if that trade or business was the trade or
business with respect to which the Plan is adopted.
Net earnings shall be determined with regard to the deduction allowed to the
Employer by Code Section 164(f) for taxable years beginning after December 31,
1989.
1.25 ELECTIVE DEFERRALS: Contributions made to the Plan during the Plan
Year by the Employer, at the election of the Participant, in lieu of cash
compensation and shall include contributions that are made pursuant to a 401(k)
Election.
A Participant's Elective Deferral in any taxable year is the sum of all
Employer and Affiliate contributions pursuant to an election to defer under any
qualified cash or deferred arrangement, any simplified employee pension plan or
deferred arrangement as described in Code Section 402(h)(1)(B), any eligible
deferred compensation plan under Code Section 457, any plan as described under
Code Section 501(c)(18), and any Employer contributions made on behalf of a
Participant for the purchase of an annuity under Code Section 403(b) pursuant
to a salary reduction agreement. Such contributions are nonforfeitable when
made and are not distributable under the terms of the Plan to Participants or
their Beneficiaries earlier than the earlier of:
(A) termination from Employment, death or Disability of the Participant;
(B) termination of the Plan without establishment of another Defined
Contribution Plan by the Employer or an Affiliate,
(C) disposition by the Employer or Affiliate to an unrelated corporation of
substantially all of its assets used in a trade or business if such unrelated
corporation continues to maintain this Plan after the disposition but only with
respect to Employees who continue employment with the acquiring unrelated
entity. The sale of 85% of the assets used in a trade or business will be
deemed a sale of "substantially all" the assets used in a trade or business;
(D) sale by the Employer or Affiliate to an unrelated entity of its interest in
an Affiliate if such unrelated entity continues to maintain the Plan but only
with respect to Employees who continue employment with such unrelated entity.
Elective Deferrals shall not include any deferrals properly distributed as an
Excess Amount pursuant to Section 3.6.2.
1.26 ELECTIVE DEFERRALS ACCOUNT: The Account established for a Participant
pursuant to Section 3.5.1.
1.27 ELIGIBLE EMPLOYEE: All Employees except Employees included in a unit
of Employees covered by a collective bargaining agreement between the Employer
or a Participating Affiliate and the Employee representatives (not including
any organization more than half of whose member are Employees who are owners,
officers, or executives of the Employer or Participating Affiliate) in the
negotiation of which retirement benefits were the subject of good faith
bargaining, unless the bargaining agreement provides for participation in the
Plan.
1.28 ELIGIBLE PARTICIPANT: An Eligible Employee who has met the eligibility
requirements set forth in the Adoption Agreement whether or not he or she makes
Elective Deferrals and/or Employee Thrift Contributions.
1.29 EMPLOYEE: A Self-Employed Individual, or any individual who is
employed by the Employer in the trade or business with respect to which the
Plan is adopted and any individual who is employed by an Affiliate. Each
Leased Employee shall also be treated as an Employee of the recipient Employer.
The preceding sentence shall not apply, however, to any Leased Employee who is
(A) covered by a money purchase pension plan maintained by the Leasing
organization referred to in Section 1.54 which provides, with respect to such
Leased Employee, a nonintegrated Employer contribution rate of at least 10% of
Limitation Compensation, but including amounts contributed pursuant to a salary
reduction agreement which are excluded from the Employee's gross income under
Code Section 402(a)(8), Code Section 402(h) or Code Section 403(b), immediate
participation, and full and immediate vesting and (B) such Leased Employees do
not constitute mote than 20% of the Employer's and Affiliates' non-highly
compensated workforce. For purposes of the Plan, all Employees will be treated
as employed by a single employer.
1.30 EMPLOYER: Aceto Corporation. For all purposes relating to
eligibility, participation, contributions, vesting and allocations, Employer
includes all Participating Affiliates.
1.31 EMPLOYER ACCOUNT: The Employer Contributions Account.
1.32 EMPLOYER CONTRIBUTIONS: Any contributions made by the Employer for the
Plan Year on behalf of a Participant in accordance with Section 3.1 of the
Plan.
1.33 EMPLOYER CONTRIBUTIONS ACCOUNT: The Account established for a
Participant pursuant to Section 3.5.2.
1.34 EMPLOYMENT: An Employee's employment or self-employment with the
Employer, Affiliate or a Leasing organizations referred to in Section 1.48 or,
to the extent required under Code Section 414(a)(2) or as otherwise specified
by the Administrator on a uniform and nondiscriminatory basis, any predecessor
of any of them. If any of them maintains a plan of a Predecessor employer
(within the meaning of Code Section 414(a)(1)) employment or self-employment
with the Predecessor employer will be treated as Employment. Additionally, if
the trade or business conducted by a Self-Employed Individual becomes
incorporated, all employment with that trade or business or with any Affiliate
shall be treated as Employment with the Employer.
1.35 ENTRY DATE: For purposes of making elective deferrals, the first day
of the Plan Year and the first day of the seventh month of the Plan Year
following the date the Employee has performed one Hour of Service for the
Employer or a Participating Affiliate. For purposes of sharing in the
allocation of the Employer's Profit Sharing Contribution, the Entry Date shall
be determined as follows:
Any Eligible Employee who has an Hour of Service prior to
January 1 shall have an Entry Date on the June 30th
immediately following, provided they are still an Eligible
Employee. Any Eligible Employee who does not have an Hour
of Service until after December 31st will have an Entry Date
on the July 1st immediately following, provided that he is
an Eligible Employee at that time.
1.36 ERISA: The Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to a specific provision of ERISA shall include
such provision and any applicable regulation pertaining thereto.
1.37 EXCESS AGGREGATE CONTRIBUTIONS: With respect to any Plan Year, the
excess of:
(A) The aggregate Contribution Percentage Amounts, taken into account in
computing the numerator of the Contribution Percentage actually made on behalf
of Highly Compensated Employees for such Plan Year, over (B) The maximum
Contribution Percentage Amounts permitted by the ACP Test (determined by
reducing contributions made on behalf of Highly Compensated Employees in the
order of their Contribution Percentages beginning with the highest of such
percentages).
Such determination shall be made after first determining Excess Elective
Deferrals and then determining Excess Contributions.
1.38 EXCESS CONTRIBUTIONS: With respect to any Plan Year, the aggregate
amount of Elective Deferrals actually paid over to the Trust Fund on behalf of
Highly Compensated Employees for such Plan Year, over the maximum amount of
such contributions permitted by the ADP Test (determined by reducing
contributions made on behalf of Highly Compensated Employees in order of the
Actual Deferral Percentages, beginning with the highest of such percentages).
1.39 EXCESS ELECTIVE DEFERRALS: The amount of Elective Deferrals for a
Participant's taxable year that are includible in the gross income of the
Participant to the extent that such Elective Deferrals exceed the Code Section
402(g) dollar limitation and which the Participant allocates to this Plan
pursuant to the procedure set forth in Section 3.3.2. Excess Elective
Deferrals shall be treated as an Annual Addition pursuant to Section 3.6,
unless such amounts are distributed no later than the first April 15th
following the close of the Participant's taxable year.
1.40 FAMILY MEMBER: An individual described in Code Section 414(q)(6)(B).
1.41 401(K) CONTRIBUTIONS ACCOUNTS: The Participant's Elective Deferral
Account.
1.42 401(K) ELECTION: The election by a Participant to make Elective
Deferrals in accordance with Section 3.3.1.
1.43 FULLY VESTED SEPARATION: Termination of Employment, by reason other
than death, of a Participant whose vested percentage in each Employer Account
is 100%.
1.44 HIGHLY COMPENSATED EMPLOYEE: The term Highly Compensated Employee
includes highly compensated active Employees and highly compensated former
employees.
(A) A highly compensated active Employee includes any Employee who performs
service for the Employer or Affiliate during the Plan Year and who, during the
look-back year (the twelve-month period immediately preceding the Plan Year):
(i) received Compensation from the Employer or Affiliate in excess of $75,000
(as adjusted by the Adjustment Factor);
(ii) received Compensation from the Employer or Affiliate in excess of $50,000
(as adjusted by the Adjustment Factor) and was a member of the top paid group
for such year; or
(iii) was an officer of the Employer or Affiliate and received Compensation
during such year that is greater than 50% of the Defined Benefit Dollar
Limitation.
(B) The term Highly Compensated Employee also includes:
(i) Employees who are both described in the preceding sentence if the term
"Plan Year" is substituted for the term "Look-back years" and the Employee is
one of the 100 Employees who received the most Compensation from the Employer
or Affiliate during the Plan Year; and
(ii) Employees who are 5% owners at any time during the Look-back year or Plan
Year.
(C) If no officer has received Compensation that is greater than 50% of the
Defined Benefit Dollar Limitation in effect during either the Plan Year or
Look-back year, the highest paid officer of such year shall be treated as a
Highly Compensated Employee.
(D) A highly compensated former employee includes any Employee who terminated
Employment (or was deemed to have terminated) prior to the Plan Year, performs
no service for the Employer or Affiliate during the Plan Year, and was a highly
compensated active employee for either the separation year or any Plan Year
ending on or after the Employee's 55th birthday.
(E) If an Employee is, during a Plan Year or Look-back year, a Family Member of
either (i) a 5% owner who is an active or former Employee or (ii) a Highly
Compensated Employee who is one of the ten most highly compensated employees
ranked on the basis of Compensation paid by the Employer or Affiliate during
such year, then the Family Member and the 5% owner or top-ten Highly
Compensated Employee shall be aggregated. In such case, the Family Member and
5% owner or top-ten Highly Compensated Employee shall be treated as a single
Employee receiving Compensation and plan contributions or benefits equal to the
sum of such Compensation and contributions or benefits of the Family Member and
5% owner or top-ten Highly Compensated Employee. For purposes of this section,
Family Member includes the Spouse, lineal ascendants and descendants of the
Employee or former employee and the spouses of such lineal ascendants and
descendants.
(F) The determination of who is a Highly Compensated Employee, including the
determinations of the number and identity of Employees in the top-paid group;
the top 100 Employees; the number of Employees treated as officers; and the
Compensation that is considered will be made in accordance with Code Section
414(q).
An Hour of Service is an hour for which an Employee is paid, or entitled to
payment, for the performance of duties for the Employer or an Affiliate. In
addition to service with an Affiliate, Hours of Service will also be credited
for any individual considered an Employee for purposes of this Plan under Code
Section 414(n).
1.45 IMMEDIATELY DISTRIBUTABLE: A Participant's Account is Immediately
Distributable if any part of such Account could be distributed to the
Participant or Participant's Surviving Spouse before the Participant attains
(or would have attained if not deceased) Normal Retirement Age.
1.46 INVESTMENT MANAGER: Any person appointed by the Trustee or, with
respect to Participant-Directed Assets, by the Participant or Beneficiary
having the power to direct the investment of such assets, to serve as such in
accordance with Section 10.8.
1.47 KEY EMPLOYEE: Any Employee or former Employee (and the beneficiaries
of such Employee) who at any time during the Determination period' was (A) an
officer of the Employer or Affiliate, having an annual Compensation greater
than 50% of the Defined Benefit Dollar Limitation for any Plan Year within the
Determination period.; (B) an owner (or considered an owner under Code Section
318) of one of the ten largest interests in the Employer or Affiliate if such
individual's Compensation exceeds 100% of the dollar limitation under Code
Section 415(c)(1)(A); (C) a "5% owner" (as defined in Code Section 416(i)) of
the Employer or Affiliate, or (D) a "1% owner" (as defined in Code Section
416(i)) of the Employer or Affiliate who has an annual compensation of more
than $150,000. Annual compensation means compensation as defined in Code
Section 415(c)(3), but including amounts contributed by the Employer pursuant
to a salary reduction agreement which are excludable from the Employee's gross
income under Code Section 125, Code Section 402(a)(8), Code Section 402(h) or
Code Section 403(b). The "determination period" is the Plan Year containing
the determination date and the four preceding Plan Years. The determination
date for the first Plan Year is the last day of that Plan Year, and for any
subsequent Plan Year is the last day of the preceding Plan Year. The
determination of who is a Key Employee will be made in accordance with Code
Section 416(i).
1.48 LEASED EMPLOYEE: Any individual (other than an Employee of the
recipient Employer or Affiliate) who, pursuant to an agreement between the
Employer or Affiliate and any other person (the Leasing organization) has
performed services for the Employer (or for the Employer or Affiliate and
related persons determined in accordance with Code Section 414(n)(6)) on a
substantially full-time basis for a period of at least one year, which services
are of a type historically performed, in the business field of the recipient
Employer or Affiliate, by employees. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient Employer or Affiliate shall be treated as provided
by the recipient Employer.
1.49 LIMITATION YEAR: The Limitation Year is the Plan Year. All Qualified
Plans maintained by the Employer must use the same Limitation Year. If the
Limitation Year is amended to a different 12-consecutive month period, the new
Limitation Year must begin on a date within the Limitation Year in which the
amendment is made.
1.50 NET PROFITS: The current and accumulated profits of the Employer from
the trade or business of the Employer with respect to which the Plan is
established, as determined by the Employer before deductions for federal, state
and local taxes on income and before contributions under the Plan or any other
Qualified Plan.
1.51 NON-HIGHLY COMPENSATED EMPLOYEE: An Employee of the Employer who is
neither a Highly Compensated Employee nor a Family Member.
1.52 NONVESTED SEPARATION: Termination of Employment of a Participant whose
vested percentage in each Employer Account is 0%.
1.53 NORMAL RETIREMENT AGE: Age 65. If, for Plan Years beginning before
January 1, 1988, Normal Retirement Age was determined with reference to the
anniversary of the participation commencement date (more than 5 but not to
exceed 10 years), the anniversary date for Participants who first commenced
participation under the Plan before the first Plan Year beginning on or after
January 1, 1988, shall be the earlier of (A) the tenth anniversary of the date
the Participant commenced participation in the Plan (or such anniversary as had
been elected by the Employer, if less than 10) or (B) the fifth anniversary of
the first day of the first Plan Year beginning on or after January 1, 1988.
1.54 OWNER-EMPLOYEE: An individual who is a sole proprietor, if the
Employer is a sole proprietorship, or if the Employer is a partnership, a
partner owning more than 10% of either the capital interest or the profits
interest in the Employer; provided that where this Plan refers to any Owner-
Employee in the context of a trade or business other than the trade or business
with respect to which the Plan is adopted, the term Owner-Employee means a
person who would be an Owner-Employer as defined above if that other trade or
business was the Employer.
1.55 PARTIALLY VESTED SEPARATION: Termination of Employment of a
Participant whose vested percentage in any Employer Account is less than 100%
but greater than 0%.
1.56 PARTICIPANT: An Employee who has commenced, but not terminated,
participation in the Plan as provided in Article II.
1.57 PARTICIPANT-DIRECTED ASSETS: The assets of an Account which are
invested, as described in Section 10.5.1, according to the direction of the
Participant or the Participant's Beneficiary, as the case may be, in either
individually selected investments or in commingled funds or in shares of
regulated investment companies.
1.58 PARTICIPATING AFFILIATE: Any Affiliate or any other employer
designated as such by the Employer, and, by duly authorized action, that has
adopted the Plan with the consent of the Employer and has not withdrawn
therefrom.
1.59 PERIOD OF SEVERANCE: For purposes of the hourly records method, a
Period of Severance is a period equal to the number of consecutive Plan Years
or, with respect to eligibility, the applicable computation period under the
definition of Year of Service, in which an Employee has 500 Hours of Service or
less. The Period of Severance shall be determined on the basis of Hours of
Service and shall commence with the First Plan Year in which the Employee has
500 Hours of Service or less. With respect to any period of absence during
which a Period of Severance does not commence, the Participant shall be
credited with the Hours of Service (up to a maximum of 501 Hours of Service in
a Plan Year) which would otherwise have been credited to him or her but for
such absence, or if such Hours of Service cannot be determined, 8 Hours of
Service for each day of absence.
For purposes of the elapsed time method, A Period of Severance is a continuous
period of at least 12 consecutive months during which an individual's
Employment is not continuing, beginning on the date an Employee retires, quits
or is discharged or, if earlier, the first 12-month anniversary of the date
that the individual is otherwise first absent from service (with or without
pay) for any other reason, and ending on the date the individual again performs
an Hour of Service.
Anything in the definition thereof to the contrary notwithstanding, a Period of
Severance shall not commence if the Participant is:
(A) On an authorized leave of absence in accordance with standard personnel
policies applied in a nondiscriminatory manner to all Employees similarly
situated and returns to active Employment by the Employer or Affiliate
immediately upon the expiration of such leave of absence;
(B) On a military leave while such Employee's reemployment rights are protected
by law and returns to active Employment within ninety days after his or her
discharge or release (or such longer period as may be prescribed by law); or
(C) Absent from work by reason of (i) the pregnancy of the Employee, (ii) the
birth of a child of the Employee, or (iii) the placement of a child with the
Employee in connection with the adoption of such child by such Employee, or
(iv) the care of such child for a period beginning immediately following such
birth or placement. In determining when such a Participant's Period of
Severance begins, the Participant will be credited with (i) for purposes of the
elapsed time method, the 12-consecutive month period beginning on the first
anniversary of the first date of such absence; or (ii) for purposes of the
hourly records method, the Hours of Service he or she would normally have had
but for such absence, or if such Hours cannot be determined, eight Hours of
Service for each day of such absence; provided, however, that such Hours of
Service shall not exceed 501 and shall be credited only in the year in which
such absence began if such crediting would prevent the Participant from
incurring a Period of Severance in that year, or in any other case, shall be
credited in the immediately following year.
1.60 PLAN: The plan established and executed by the Employer in the form of
this Plan. The Plan shall have the name of the Aceto Corporation 401(k) Plan.
1.61 PLAN YEAR: Each 12-consecutive month period ending on the 30th day of
June during any part of which the Plan is in effect.
1.62 QUALIFIED NONELECTIVE CONTRIBUTIONS: Contributions (other than
Elective Deferrals), if any, made by the Employer which the Participant may not
elect to receive in cash until distributed from the Plan, which are
nonforfeitable when made, and which are not distributable under the terms of
the Plan to Participants or their Beneficiaries earlier than the earlier of:
(A) termination of Employment, death, or Disability of the Participant;
(B) attainment of the age 59-1/2 by the Participant;
(C) termination of the Plan without establishment of another Defined
Contribution Plan by the Employer or an Affiliate;
(D) disposition by the Employer or Participating Affiliate to an unrelated
corporation of substantially all of its assets used in a trade or business if
such unrelated corporation continues to maintain this Plan after the
disposition but only with respect to Employees who continue employment with the
acquiring unrelated entity. The sale of 85% of the assets used in a trade or
business will be deemed a sale of "substantially all" the assets used in a
trade or business,
(E) sale by the Employer to an unrelated entity of its interest in an Affiliate
if such unrelated entity continues to maintain the Plan but only with respect
to Employees who continue employment with such unrelated entity; and
(F) effective for Plan Years beginning before January 1, 1989, upon the
hardship of the Participant.
1.63 QUALIFIED NONELECTIVE CONTRIBUTIONS ACCOUNT: The Account established
for a Participant pursuant to Section 3.5.3.
1.64 QUALIFIED PLAN: A Defined Benefit Plan or Defined Contribution Plan.
1.65 QUALIFYING EMPLOYER SECURITIES: Employer securities, as that term is
defined in ERISA Section 407(d)(5).
1.66 ROLLOVER CONTRIBUTION: A contribution described in Section 3.2.
1.67 ROLLOVER CONTRIBUTIONS ACCOUNT: The Account established for a
Participant pursuant to Section 3.5.4.
1.68 SELF-EMPLOYED INDIVIDUAL: An individual who has Earned Income for the
Plan Year involved from the trade or business for which the Plan is
established, or who would have had such Earned Income but for the fact that the
trade or business with respect to which the Plan is established had no Net
Profits for that Plan Year.
1.69 SOCIAL SECURITY RETIREMENT AGE: Age 65 in the case of a Participant
attaining age 62 before January 1, 2000 (I.E., born before January 1, 1938),
age 66 for a Participant attaining age 62 after December 31, 1999, and before
January 1, 2017 (I.E., born after December 31, 1937, but before January 1,
1955), and age 67 for a Participant attaining age 62 after December 31, 2016
(I.E., born after December 31, 1954).
1.70 SPONSOR: The Employer.
1.71 SPOUSE: The person married to a Participant, provided that a former
spouse will be treated as the Spouse to the extent provided under a "qualified
domestic relations order" (or a "domestic relations order" treated as such) as
referred to in Section 12.6.
1.72 SURVIVING SPOUSE: The person married to a Participant on the earliest
of:
(A) the date of the Participant's death; (B) the Participant's Benefit
Commencement Date. Anything contained herein to the contrary notwithstanding,
a former spouse will be treated as the Surviving Spouse to the extent provided
under a "qualified domestic relations order" (or a "domestic relations order"
treated as such) as referred to in Section 12.6.
1.73 TAXABLE WAGE BASE: The maximum amount of earnings which may be
considered "wages" for the Plan Year involved under Code Section 3121(a)(1).
1.74 TRANSFERRED ACCOUNT: The Account established for a Participant
pursuant to Section 3.5.5.
1.75 TRUST: The trust established under the Plan to which Plan
contributions are made and in which Plan assets are held.
1.76 TRUST FUND: The assets of the Trust held by or in the name of the
Trustee.
1.77 TRUSTEE: The person appointed as Trustee pursuant to Article X and any
successor Trustee.
1.78 VALUATION DATE: Daily, or determined pursuant to Section 10.6, if
applicable, and each other date as may be determined by the Administrator.
1.79 VESTING SERVICE: The Years of Service credited to a Participant under
Article IV for purposes of determining the Participant's vested percentage in
any Employer Account established for the Participant.
1.80 YEARS OF SERVICE: An Employee shall be credited with one Year of
Service for each Plan Year in which he or she has 1,000 Hours of Service.
Solely for purposes of eligibility to participate, an Employee shall be
credited with a Year of Service on the last day of the 12-consecutive month
period which begins on the first day on which he or she has an Hour of Service,
if he or she has at least 1,000 Hours of Service in that period.
If an Employee fails to be credited with a Year of Service on such date, he or
she shall be credited with a Year of Service on the last day of each succeeding
12-consecutive month period in which her or she is credited with at least 1,000
Hours of Service.
Service with a predecessor employer, determined in the manner in which the
rules of this Plan would have credited such service had the Participant earned
such service under the terms of this Plan, may be included in Years of Service,
to the extent required by Code Section 414(a).
ARTICLE II - PARTICIPATION
2.1 ADMISSION AS A PARTICIPANT
2.1.1 An Eligible Employee shall become a Participant on the Entry Date
coincident with or next following the date on which he or she performs an Hour
of Service, provided, however that:
(A) an Eligible Employee who has met the eligibility requirements as of the
first day of the Plan Year in which the Plan is adopted as a new Plan shall
become a Participant as of such date;
(B) an Eligible Employee who had met the eligibility requirements of a plan
that is restated and/or amended to become this Plan shall become a Participant
as of the date this Plan is adopted; and
2.1.2 An Employee who did not become a Participant on the Entry Date
coincident with or next following the day on which he or she met the
eligibility requirements because he or she was not then an Eligible Employee
shall become a Participant on the first day on which he or she again becomes an
Eligible Employee unless determined otherwise in accordance with Section 2.3.1
of the Plan.
2.1.3 An Eligible Employee shall become a Participant upon filing his or her
401 (k) Election with the Administrator.
2.1.4 An individual who has ceased to be a Participant and who again becomes
an Eligible Employee shall become a Participant immediately upon reemployment
as an Eligible Employee unless determined otherwise in accordance with Section
2.3.1 of the Plan.
2.2 ROLLOVER MEMBERSHIP AND TRUST TO TRUST TRANSFER
An Eligible Employee who makes a Rollover Contribution or a trust to trust
transfer shall become a Participant as of the date of such contribution or
transfer even if he or she had not previously become a Participant. Such an
Eligible Employee shall be a Participant only for the purposes of such Rollover
Contribution or transfer and shall not be eligible to share in contributions
made by the Employer until he or she has become a Participant in accordance
with Section 2.1.
2.3 CREDITING OF SERVICE FOR ELIGIBILITY PURPOSE
2.3.1 For purposes of eligibility to participate, an Eligible Employee or
Participant without any vested interest in any Employer Account and without an
Elective Deferrals Account who terminates Employment shall lose credit for his
or her Years of Service prior to such termination of Employment if his or her
Period of Severance equals or exceeds five years or, if greater, the aggregate
number of Years of Service.
2.3.2 For purposes of eligibility to participate, a Participant who has a
vested interest in any Employer Account and who terminates Employment shall
retain credit for his or her Years of Service prior to such termination of
Employment without regard to the length of his or her period of Severance. In
the event such Participant returns to Employment, he or she shall participate
immediately.
2.3.3 A former Eligible Employee who was not a Participant who again becomes
an Eligible Employee with no Years of Service to his or her credit shall be
treated as a new Employee.
2.4 TERMINATION OF PARTICIPATION
A Participant shall cease to be a Participant:
(A) upon his or her death;
(B) upon the payment to him or her of all nonforfeitable benefits due to him or
her under the Plan, whether directly or by the purchase of an Annuity Contract;
or
(C) upon his or her Nonvested Separation.
2.5 LIMITATION FOR OWNER-EMPLOYEE
2.5.1 If the Plan provides contributions or benefits for one or more
Owner-Employees who control the trade or business for which this Plan is
established and who also control as an Owner-Employee or as Owner-Employees one
or more other trades or businesses, this Plan and the plan established for each
such other trade or business must, when looked at as a single plan, satisfy the
requirements of Code Sections 401(a) and (d) with respect to the employees of
this and all of such other trades or businesses.
2.5.2 If the Plan provides contributions or benefits for one or more Owner-
Employees who control as an Owner-Employee or as Owner-Employees one or more
other trades or businesses, the employees of the other trades or businesses
must be included in a plan which satisfies the requirements of Code Sections
401(a) and (d) and which provides contributions and benefits for the employees
of such other trades or businesses not less favorable than the contributions
and benefits provided for Owner-Employees under this Plan.
2.5.3 If an individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which are not controlled and the individual
controls a trade or business, then the contributions or benefits of the
employees under the plan of the trades or businesses which are controlled must
be as favorable as those provided for such individual under the most favorable
plan of the trade or business which is not controlled.
2.5.4 For purposes of the preceding three subsections, an Owner-Employee, or
two or more Owner-Employees, will be considered to control a trade or business
if the Owner-Employee, or two or more Owner-Employees together
(A) own the entire interest in an unincorporated trade or business, or
(B) in the case of a partnership, own more than 50% of either the capital
interest or the profits interest in the partnership.
For purposes of the preceding sentence, an Owner-Employee, or two or more
Owner-Employees, shall be treated as owning any interest in a partnership which
is owned, directly or indirectly, by a partnership which such Owner-Employee,
or such two or more Owner-Employees, are considered to control within the
meaning of the preceding sentence.
2.6 CORRECTIONS WITH REGARD TO PARTICIPATION
2.6.1 If in any Plan Year an Eligible Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission
is not made until after a contribution by the Employer for the year has been
made, the Employer shall make a subsequent contribution with respect to the
omitted Eligible Employee in the amount which would have contributed with
respect to such Eligible Employee had he or she not been omitted. Such
contribution shall be made whether or not it is deductible in whole or in part
in any taxable year under applicable provisions of the Code. It shall be the
responsibility of the Employer and Administrator to take any and all actions as
required by this Section 2.6.1.
2.6.2 If in any Plan Year any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made,
the amount contributed on behalf of such ineligible person shall constitute a
forfeiture for the Plan Year in which the discovery is made. It shall be the
responsibility of the Employer and Administrator to take any and all actions as
required by this Section 2.6.2
2.7 PROVISION OF INFORMATION
Each Employee shall execute such forms as may reasonably be required by the
Administrator, and shall make available to the Administrator any information
the Administrator may reasonably request in this regard. By virtue of his or
her participation in this Plan, an Employee agrees, on his or her own behalf
and on behalf of all persons who may have or claim any right by reason of the
Employee's participation in the Plan, to be bound by all provisions of the
Plan.
ARTICLE III - CONTRIBUTIONS AND ACCOUNT ALLOCATIONS
3.1 EMPLOYER CONTRIBUTIONS AND ALLOCATIONS
3.1.1 The Employer will contribute cash and/or Qualifying Employer Securities
to the Trust Fund, in such amount, if any, as determined by the Employer and
with respect to Qualifying Employer Securities as is consistent with Sections
10.4.2 and 10.4.3. Net Profits are not necessary for an Employer to make
contributions. Employer Contributions for a Plan Year will be allocated no
later than the last day of the Plan Year to the Employer Contributions Account
of Participants eligible for an allocation in the manner specified in Section
3.1.3.
3.1.2 For purposes of the Plan, contributions provided by the Leasing
organizations referred to in Section 1.50 of a Leased Employee which are
attributable to services performed for the Employer shall be treated as
provided by the Employer.
3.1.3. Employer contributions will be allocated among the Employer
Contribution Accounts of the Participants as follows:
(A) A dollar amount, equal to 3.8% multiplied by a Participant's Compensation
for the Plan Year up to the Compensation Base for that year shall be allocated
to each Participant's account.
(B) If the Employer does not contribute an amount equal to the above stated
percentage of Compensation up to the Compensation Base for all Participants,
each Participant will be allocated a share of the contribution in the same
proportion that his Compensation, up to the Compensation Base, bears to the
total Compensation up to the Compensation Base, of all Participants for that
year.
(C) The balance of the Employer's contribution over the amount allocated under
subparagraph (1) hereof shall be allocated to each Participant's account in a
dollar amount equal to 6.5% multiplied by a Participant's Compensation for the
Plan Year in excess of the Compensation Base for the year (herein referred to
as "Excess Compensation"). If the Employer does not contribute an amount equal
to the above stated percentage of "Excess Compensation" for all Participants,
each Participant will be allocated a share of the contribution in the same
proportion that his "Excess Compensation" bears to the total "Excess
Compensation" of all Participants for that year.
(D) For purposes of this section, "Compensation Base" shall be $60,600.
3.1.4 Any Participant who terminated employment during the Plan Year for
reasons other than death, disability, or retirement, shall not receive an
allocation under 3.1, but shall share only in the earnings and losses of the
Participant's Employer Contribution Account.
3.2 ROLLOVER CONTRIBUTIONS AND TRUST TO TRUST TRANSFERS
3.2.1 Any Eligible Employee or Participant may make a Rollover Contribution
under the Plan. A Rollover Contribution shall be in cash or in other property
acceptable to the Trustee and shall be a contribution attributable to (a) a
"qualified total distribution" (as defined in Code Section 402(a)(5)),
distributed to the contributing Employee under Code Section 402(a)(5) from a
Qualified Plan or distributed to the Employee under Code Section 403(a)(4) from
an "employee annuity" or referred to in that section, or (b) a payout or
distribution to the Employee referred to in Code Section 408(d)(3) from an
"individual retirement account" or an "individual retirement annuity"
described, respectively, in Code Section 408(a) or Section 408(b) consisting
exclusively of amounts attributable to "qualified total distributions" (as
defined in Code Section 402(a)(5)) from a Qualified Plan.
The Plan shall not accept a Rollover Contribution attributable to any
accumulated deductible employee contributions as defined by Code Section
72(o)(5)(B). The Trustee may condition acceptance of a Rollover Contribution
upon receipt of such documents as it may require. In the event that an
Employee makes a contribution pursuant to this Section 3.2 intended to be a
Rollover Contribution but which did not qualify as a Rollover Contribution, the
Trustee shall distribute to the Employee as soon as practicable after that
conclusion is reached the entire Account balance in his or her Rollover
Contributions Account deriving from such contributions determined as of the
valuation date coincident with or immediately preceding such discovery.
3.2.2 Any Eligible Employee or Participant may direct the Administrator to
direct the Trustee to accept a transfer to the Trust Fund from another trust
established pursuant to another Qualified Plan of all or any part of the assets
held in such other trust. The Plan shall not accept a direct transfer
attributable to accumulated deductible employee contributions as defined by
Code Section 72(o)(5)(B). The Trustee may condition acceptance of such a trust
to trust transfer upon receipt of such documents as it may require.
3.3 SECTION 401(K) CONTRIBUTIONS AND ACCOUNT ALLOCATIONS
3.3.1 ELECTIVE DEFERRALS
(A) AMOUNT OF ELECTIVE DEFERRALS
Subject to the limitations contained in Section 3.3.2, the Employer will
contribute cash to the Trust Fund in an amount equal to, as specified on the
Participant's 401(k) Election form, the specific dollar amount, or the deferral
percentage multiplied by each such Participant's Compensation.
(B) The amount elected by a Participant pursuant to a 401(k) Election shall not
exceed 10% of the Participant's compensation. The 401(k) Election shall be
made on a form provided by the Administrator but no election shall be effective
prior to approval by the Administrator. The Administrator may reduce the
amount of any 401(k) Election, or make such other modifications as necessary,
so that the Plan complies with the provisions of the Code. A Participant's
401(k) Election shall remain in effect until modified or terminated.
Modification or termination of a 401(k) Election shall be made quarterly,
effective as of the first payroll period coincident or next following the first
day of the applicable quarter.
3.3.2 LIMITATION ON ELECTIVE DEFERRALS
(A) MAXIMUM AMOUNT OF ELECTIVE DEFERRALS AND DISTRIBUTION OF EXCESS ELECTIVE
DEFERRALS
(i) No Participant shall be permitted to have Elective Deferrals made under
this Plan, or any other Qualified Plan maintained by the Employer, during any
calendar year in excess of the dollar limitation contained in Code Section
402(g) in effect at the beginning of the Participant's taxable year.
(ii) Notwithstanding any other provision of the Plan, Excess Elective Deferrals
made to this Plan or assigned to this Plan, plus any income and minus any loss
allocable thereto, shall be distributed no later than each April 15, to
Participants to whose account Excess Elective Deferrals were designated for the
preceding calendar year and who claim Excess Elective Deferrals for such
taxable year. Excess Elective Deferrals shall be treated as Annual Additions.
(iii) CLAIMS. A Participant may designate to this Plan any amount of his or
her Elective Deferrals as Excess Elective Deferrals during his or her taxable
year. A Participant's claim shall be in writing, shall be submitted to the
Administrator no later than March 1, shall specify the Participant's Excess
Elective Deferral for the preceding calendar year, and shall be accompanied by
the Participant's written statement that if such amounts are not distributed,
such Excess Elective Deferred, when added to amounts deferred under other plans
or arrangements described in Code Section 401(k), Code Section 408(k), Code
Section 403(b) or Code Section 457, exceeds the limit imposed on the
Participant by Code Section 402(g) for the year in which the deferral occurred.
A Participant is deemed to notify the Administrator of any Excess Elective
Deferrals that arise by taking into account only those Elective Deferrals made
to this Plan and any other plans of the Employer or an Affiliate.
(iv) DETERMINATION OF INCOME OR LOSS. Excess Elective Deferrals shall be
adjusted for income or loss up to the date of distribution. The income or loss
allocable to Participant's Excess Elective Deferrals is the sum of: (1) the
income or loss allocable to the Participant's Elective Deferrals Account for
the Participant's taxable year multiplied by a fraction, the numerator of which
is the Participant's Excess Elective Deferrals for the Participant's taxable
year and the denominator of which is the Account Balance of the Participant's
Elective Deferrals Account without regard to any income or loss occurring
during such taxable year; and (2) ten percent of the amount determined under
(1) multiplied by the number of whole calendar months between the end of the
Participant's taxable year and the date of distribution, counting the month of
distribution if distribution occurs after the 15th of such month.
Anything in the preceding paragraph of this Section 3.3.2(A)(iv) to the
contrary notwithstanding, any reasonable method for computing the income or
loss allocable to Excess Elective Deferrals may be used, provided that such
method is used consistently for all Participants and for all corrective
distributions under the Plan, and is used by the Plan for allocating income or
loss to Participants' Accounts. Income or loss allocable to the period between
the end of the taxable year and the date of distribution may be disregarded in
determining income or loss.
(B) ADP TEST
The Average Actual Deferral Percentage for Highly Compensated Employees for
each Plan Year and the Average Actual Deferral Percentage for Non-highly
Compensated Employees for the same Plan Year must satisfy one of the following
tests:
(i) The Average Actual Deferral Percentage for Eligible Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Actual Deferral Percentage for Eligible Participants who are Non-highly
Compensated Employees for the Plan Year multiplied by 1.25; or
(ii) The Average Actual Deferral Percentage for Eligible Participants who are
Highly Compensated Employees for the Plan Year shall not exceed the Average
Actual Deferral Percentage for Eligible Participants who are Non-highly
Compensated Employees for the Plan Year multiplied by 2.0; provided that the
Average Actual Deferral Percentage for Eligible Participants who are Highly
Compensated Employees does not exceed the Average Actual Deferral Percentage
for Participants who are Non-highly Compensated Employees by more than two
percentage points.
(C) SPECIAL ACTUAL DEFERRAL PERCENTAGE RULES
(i) The Actual Deferral Percentage for any Eligible Participant who is a Highly
Compensated Employee for the Plan Year and who is eligible to have Elective
Deferrals and Qualified Matching Contributions or Qualified Nonelective
Contributions, or both, if treated as Elective Deferrals for purposes of the
ADP Test, allocated to his or her accounts under two or more plans or
arrangements described in Code Section 401 (k) that are maintained by the
Employer shall be determined as if all such Elective Deferrals, Qualified
Matching Contributions and Qualified Nonelective Contributions were made under
a single arrangement. If a Highly Compensated Employee participates in two or
more cash or deferred arrangements that have different plan years, all cash or
deferred arrangements ending with or within the same calendar year shall be
treated as a single arrangement.
(ii) In the event that this Plan satisfies the requirements of Code Section
401(k), Code Section 401(a)(4) or Code Section 410(b) only if aggregated with
one or more other qualified plans, or if one or more other qualified plans
satisfy the requirements of such Code Sections only if aggregated with this
Plan, then this Section shall be applied by determining the Actual Deferral
Percentage of Employees as if all such qualified plans were a single qualified
plan. For Plan Years beginning after December 31, 1989, plans may be
aggregated in order to satisfy Code Section 401(k) only if they have the same
plan year.
(iii) For purposes of determining the Actual Deferral Percentage of an Eligible
Participant who is a 5% owner or one of the ten most highly paid Highly
Compensated Employees, the Elective Deferrals (and Qualified Matching
Contributions or Qualified Nonelective Contributions, or both, if treated as
Elective Deferrals for purposes of one of the tests referred to in Section
3.3.2(B)) and CODA Compensation of such Participant shall include the Elective
Deferrals (and, if applicable, Qualified Matching Contributions, Qualified
Nonelective Contributions) and CODA Compensation for the Plan Year of Family
Members. Family Members with respect to such Highly Compensated Employees
shall be disregarded as separate employees in determining the Actual Deferral
Percentage both for Eligible Participants who are Non-highly Compensated
Employees and for Eligible Participants who are Highly Compensated Employees.
(iv) For purposes of determining the ADP Test, Elective Deferrals, Qualified
Matching Contributions, and Qualified Nonelective Contributions must be made
before the last day of the 12-month period immediately following the Plan Year
to which such contributions relate.
(v) The Employer shall maintain records sufficient to demonstrate satisfaction
of the ADP Test and the amount of Qualified Nonelective Contributions and/or
Qualified Matching Contribution used in such test.
(vi) The determination and treatment of the Elective Deferrals, Qualified
Matching Contributions, and Qualified Nonelective Contributions, used in the
ADP Test shall satisfy such other requirements as may be prescribed by the
Secretary of the Treasury.
(D) DISTRIBUTION OF EXCESS CONTRIBUTIONS
(i) In General: Notwithstanding any other provision of the Plan except Section
3.3.2(E), Excess Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each Plan Year
beginning after December 31, 1987, to Participants to whose Accounts Elective
Deferrals, Qualified Matching Contributions, and Qualified Nonelective
Contributions were allocated for the preceding Plan Year. Excess Contributions
of Participants who are subject to the Family Member aggregation rules shall be
allocated among the Family Members in proportion to the Elective Deferrals (and
amounts treated as Elective Deferrals) of each Family Member that is combined
to determine the combined Actual Deferral Percentage. Excess Contributions
shall be treated as Annual Additions.
(ii) Determination of Income or Loss. Excess Contributions shall be adjusted
for any income or loss up to the date of distribution. The income or loss
allocable to Excess Contributions is the sum of: (1) the income or loss
allocable to the Participant's Elective Deferrals Account (and, if applicable,
the Qualified Nonelective Contributions Account or the Qualified Matching
Contributions Account or both) for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's Excess Contributions for the year and
the denominator of which is the Account Balances of Participant's Elective
Deferrals Account, Qualified Nonelective Contributions Account and Qualified
Matching Contributions Account if any of such contributions are included in the
ADP Test, without regard to any income or loss occurring during such Plan Year;
and (2) 10% of the amount determined under (i) multiplied by the number of
whole calendar months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution occurs after
the 15th of such month.
Anything in the preceding paragraph of this Section 3.3.2(D)(ii) to the
contrary notwithstanding, any reasonable method for computing the income or
loss allocable to Excess Contributions may be used, provided that such method
is used consistently for all Participants and for all corrective distributions
under the Plan for the Plan Year, and is used by the Plan for allocating income
or loss to Participant's Accounts. Income or loss allocable to the period
between the end of the Plan Year and the date of distribution may be
disregarded in determining income or loss.
(iii) Accounting for Excess Contributions. Amounts distributed under this
Section 3.3.2(D) shall first be distributed from the Participant's Elective
Deferrals Account and Qualified Matching Contributions Account in proportion to
the Participant's Elective Deferrals and Qualified Matching Contributions (to
the extent used in the ADP Test) for the Plan Year. Excess Contributions shall
be distributed from the Participant's Qualified Nonelective Contributions
Account only to the extent that such Excess Contributions exceed the balance in
the Participant's Elective Deferrals Account and Qualified Matching
Contributions Account.
(E) In lieu of distributing Excess Contributions pursuant to the preceding
Section 3.3.2(D), and as specified in the Adoption Agreement, the Employer may
make special Qualified Nonelective Contributions on behalf of Non-highly
Compensated Employees that are sufficient to satisfy the ADP Test.
(F) In lieu of distributing Excess Contributions, the Participant may treat his
or her Excess Contributions as an amount distributed and then re-contributed by
such Participant. Recharacterized amounts are 100% nonforfeitable and subject
to the same distribution requirements as Elective Deferrals. Amounts may not
be characterized by a Highly Compensated Employee to the extent that such
amount in combination with other amounts made to the Participant's Participant
Contributions Account would exceed any stated limit on such contributions, as
specified in the Adoption Agreement. If Excess Contributions are
re-characterized, they must be so no later than two and one half months after
the last day of the Plan Year in which such Excess Contributions arose and they
are deemed to occur no earlier than the date the last Highly Compensated
Employee is informed in writing of the amount re-characterized and the
consequences thereof. Recharacterized amounts are taxable to the Participant
for the tax year in which he or she would have received such contributions in
cash.
(G) Under no circumstances may Elective Deferrals, Qualified Matching
Contributions and Qualified Nonelective Contributions be contributed and
allocated to the Trust later than the last day of the 12-month period
immediately following the Plan Year to which such contributions relate.
3.4 TREATMENT OF FORFEITURES
3.4.1 Forfeitures, if any, shall be allocated as of the last day of the Plan
Year to the Employer Accounts of those Participants who are eligible to share
in the allocation of contributions to that particular Employer Account (whether
or not a contribution was made for that Plan Year) for that Plan Year in that
particular Employer Account category with respect to which such forfeitures are
attributable.
3.5 ESTABLISHING OF ACCOUNTS
3.5.1 An Elective Deferrals Account shall be established for each Eligible
Participant who makes a 401(k) Election to which the Administrator shall
credit, or cause to be credited, Elective Deferrals allocable to each such
Participant, plus earnings or losses thereon.
3.5.2 An Employer Contributions Account shall be established for each
Participant to which the Administrator shall credit or cause to be credited
Employer contributions pursuant to Section 3.1, and forfeitures attributable to
such contributions, if any, plus earnings or losses thereon.
3.5.3 A Qualified Nonelective Contributions Account shall be established for
each Participant for when Qualified Nonelective Contributions are made, to
which the Administrator shall credit, or cease to be credited, all amounts
allocable to each such Participant, plus earnings or losses thereon.
3.5.4 A Rollover Contributions Account shall be established for each
Participant who contributes to the Plan pursuant to Section 3.2 to which the
Administrator shall credit, or cause to be credited, Rollover Contributions
made by the Participant, plus earnings or losses thereon.
3.5.5 A Transferred Contributions Account shall be established for each
Participant for whom assets are transferred from another Qualified Plan, to
which the Administrator shall credit, or cause to be credited, transferred
assets, plus earnings or losses thereon.
3.6 LIMITATION ON AMOUNT OF ALLOCATIONS
3.6.1 As used in this Section 3.6, each of the following terms shall have the
meaning for that term set forth in this Section 3.6.1:
(A) ANNUAL ADDITIONS means, for each Participant, the sum of the following
amounts credited to the Participant's Accounts for the Limitation Year:
(i) Employer Contributions within the meaning of IRS regulation 1.415-6(b);
(ii) Employee Contributions;
(iii) forfeitures;
(iv) allocation under a simplified employee pension; and
(v) any Excess Amount applied under a Defined Contribution Plan in the
Limitation Year to reduce Employer Contributions will also be considered as
part of the Annual Additions for such Limitation Year.
Amounts allocated after March 31, 1984, to an "individual medical benefit
account" as defined in Code Section 415(1)(2) ("Individual Medical Benefit
Account") which is part of a pension or annuity plan maintained by the Employer
or Affiliate are treated as Annual Additions to a Defined Contribution Plan.
Also, amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after that date, which are attributable to post-
retirement medical benefits allocated to the separate account of a key employee
as defined in Code Section 419(d)(3) under a "welfare benefit fund" as defined
in Code Section 419(e) ("Welfare Benefit Fund") maintained by the Employer or
Affiliate, are treated as Annual Additions to a Defined Contribution Plan.
(B) DEFINED BENEFIT DOLLAR LIMITATION means $90,000 multiplied by the
Adjustment Factor or such other limitation set forth in Code Section 415(b)(1)
as in effect for the Limitation Year.
(C) DEFINED BENEFIT FRACTION means a fraction, the numerator of which is the
sum of the Projected Annual Benefits of the Participant involved under all
Defined Benefit Plans (whether or not terminated) maintained by the Employer or
Affiliate, and the denominator of which is the lesser of 125% of the Defined
Benefit Dollar Limitation determined for the Limitation Year or 140% of the
Participant's Highest Average Limitation Compensation, including any
adjustments under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of the first
day of the first Limitation Year beginning after December 31, 1986, in one or
more Defined Benefit Plans maintained by the Employer or Affiliate which were
in existence on May 5, 1986, the denominator of this fraction will not be less
than 125% of the sum of the annual benefits under such Plans which the
Participant had accrued as of the close of the last Limitation Year beginning
before January 1, 1987, disregarding any changes in the terms and conditions of
the plans after May 5, 1986. The preceding sentence applies only if the Defined
Benefit Plans individually and in the aggregate satisfied the requirements of
Code Section 415 for all Limitation Years beginning before January 1, 1987.
(D) DEFINED CONTRIBUTION DOLLAR LIMITATION means $30,000 or if greater,
one-fourth of the Defined Benefit Dollar Limitation as in effect for the
Limitation Year.
(E) DEFINED CONTRIBUTION FRACTION means a fraction, the numerator of which is
the sum of the Annual Additions to the Participant's Account or Accounts under
all the Defined Contribution Plans (whether or not terminated) maintained by
the Employer or Affiliate for the current and all prior Limitation Years
(including the Annual Additions attributable to the Participant's nondeductible
contributions to all Defined Benefit Plans, whether or not terminated,
maintained by the Employer or Affiliate and the Annual Additions attributable
to all Welfare Benefit Funds, Individual Medical Benefit Accounts, and
simplified employee pensions maintained by the Employer or Affiliate), and the
denominator of which is the sum of the "maximum aggregate amounts" (as defined
in the following sentence) for the current and all prior Limitation on Years of
Service with the Employer or Affiliate (regardless of whether a Defined
Contribution Plan was maintained by the Employer or Affiliate). The "maximum
aggregate amount" in any Limitation Year is the lesser of (i) 125% of the
Defined Benefit Dollar Limitation in effect under Code Section 415(c)(1)(A) or
(ii) 35% of the Participant's Compensation for such year.
If the Employee was a Participant as of the first day of the first Limitation
Year beginning after December 31, 1986, in one or more Defined Contribution
Plans maintained by the Employer or Affiliate in existence on May 5, 1986, the
numerator of this fraction will be adjusted if the sum of this fraction and the
Defined Benefit Fraction would otherwise exceed 1.0 under the terms of this
Plan. Under the adjustment, an amount equal to the product of (A) the excess
of the sum of the fractions over 1.0 times (B) the denominator of this fraction
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as of
the later of the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the Plans
made after May 6, 1986, but using the Code Section 415 limitation applicable to
the first Limitation Year beginning on or after January 1, 1987. The Annual
Addition for any Limitation Year beginning before January 1, 1987, shall not be
recomputed to treat all Participant contributions as Annual Additions.
(F) EXCESS AMOUNTS means the excess of the Participant's Annual Additions for
the Limitation Year involved over the Maximum Permissible Amount for that
Limitation Year.
(G) HIGHEST AVERAGE LIMITATION COMPENSATION means the average Compensation as
defined in Code Section 415(c)(3) of the Participant involved for that period
of three consecutive Years of Service with the Employer or Affiliate (or if the
Participant has less than three such Years of Service, the actual number
thereof) that produces the highest average.
(H) LIMITATION COMPENSATION means Compensation, defined as information required
to be reported under Sections 6041 and 6051 (Wages, Tips and other Compensation
Box Form W-2).
Limitation Compensation is defined as wages as defined in Code Section 3401 (a)
and all other payments of compensation to an Employee by the Employer (in the
course of the Employer's trade or business) for which the Employer is required
to furnish the Employee a written statement under Sections 6041(d) and
6051(a)(3) of the Code. Compensation must be determined without regard to any
rules under Section 3401(a) that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in Section 3401(a)(2)).
For a Self-Employed Individual, Limitation Compensation means his or her Earned
Income, provided that if the Self-Employed Individual is not a Participant for
an entire Plan Year, his or her Limitation Compensation for that Plan Year
shall be his or her Earned Income for that Plan Year multiplied by a fraction
the numerator of which is the number of days he or she is a Participant during
the Plan Year and the denominator of which is the number of days in the Plan
Year. Additionally, Limitation Compensation for a Participant in a Defined
Contribution Plan who is permanently and totally disabled (as defined in Code
Section 22(e)) is the compensation such Participant would have received for the
Limitation Year if the Participant had been paid at the rate of compensation
paid immediately before becoming disabled; such imputed compensation may be
taken into account only if the Participant is not a Highly Compensated Employee
and contributions made on behalf of such Participant are nonforfeitable when
made.
(I) MAXIMUM PERMISSIBLE AMOUNT means the maximum Annual Addition which may be
contributed or allocated to a Participant's Account under the Plan for any
Limitation Year. The maximum Annual Addition shall not exceed the lesser of:
(a) the Defined Contribution Dollar Limitation, or (b) 25% of the Participant's
Compensation for the Limitation Year. The Compensation limitation referred to
in (b) shall not apply to any contribution for medical benefits (within the
meaning of Code Sections 401(h) or 419A(f)(2)) which is otherwise treated as an
Annual Addition under Code Section 415(1)(1) or 419A(d)(2). If a short
Limitation Year is created because of an amendment changing the Limitation Year
to a different 12-consecutive month period, the Maximum Permissible Amount will
not exceed the Defined Contribution Dollar Limitation multiplied by the
following fraction:
NUMBER OF MONTHS IN THE SHORT LIMITATION YEAR
12
(J) PROJECTED ANNUAL BENEFIT means the annual retirement benefit (adjusted to
an actuarially equivalent straight life annuity if such benefit is expressed in
a form other than a straight life annuity or Qualified Joint and Survivor
Annuity) to which the Participant would be entitled under the terms of a
Defined Benefit Plan assuming:
(i) the Participant continues in employment with the Employer or Affiliate
until the Participant's "normal retirement age" under the Plan within the
meaning of Code Section 411(a)(8) (or the Participant's current age, if later);
and
(ii) the Participant's Limitation Compensation for the current Limitation Year
and all other relevant factors used to determine benefits under the Plan will
remain constant for all future Limitation Years.
3.6.2 The provisions of this subsection 3.6.2 apply with respect to a
Participant who does not participate in, and has never participated in, another
Qualified Plan, a Welfare Benefit Fund or an Individual Medical Benefit Account
or a simplified employee pension, as defined in Code Section 401(k), maintained
by the Employer or an Affiliate, which provided an Annual Addition as defined
in Section 3.6.1(A) of the Plan, other than this Plan:
(A) The amount of Annual Additions which may be credited to the Participant's
Account for any Limitation Year will not exceed the lesser of the Maximum
Permissible Amount or any other limitation contained in this Plan. If the
Employer Contribution that would otherwise be contributed or allocated to the
Participant's Account would cause the Annual Additions on behalf of the
Participant for the Limitation Year to exceed the Maximum Permissible Amount
with respect to that Participant for the Limitation Year, the amount
contributed or allocated will be reduced so that the Annual Additions on behalf
of the Participant for the Limitation Year will equal such Maximum Permissible
Amount.
(B) Prior to determining the Participant's actual Limitation Compensation for a
Limitation Year, the Employer may determine the Maximum Permissible Amount for
the Participant for the Limitation Year on the basis of a reasonable estimation
of the Participant's Compensation for that Limitation Year. Such estimated
Compensation shall be uniformly determined for all Participants similarly
situated.
(C) As soon as is administratively feasible after the end of a Limitation Year,
the Maximum Permissible Amount for the Limitation Year will be determined on
the basis of the Participant's actual compensation for the Limitation Year.
(D) If pursuant to Section 3.6.2(C) or as a result of the allocation of
forfeitures, there is an Excess Amount with respect to the Participant for a
Limitation Year, the Excess Amount shall be disposed of as follows:
(i) First, any contribution to the Participant's Elective Deferrals Account,
Participant Voluntary Nondeductible Contributions Account or Employee Thrift
Contributions Account, if applicable, and any earnings allocable thereto will
be distributed to the Participant to the extent that the return thereof would
reduce the Excess Amount in such Participant's Accounts.
(ii) If after the application of Section 3.6.2(D)(i) an Excess Amount still
exists, and the Participant is covered by the Plan at the end of the Limitation
Year, the remaining Excess Amount in the Participant's Account will be used to
reduce Employer contributions (including allocation of any forfeitures) under
this Plan for such Participant in the next Limitation Year, and in each
succeeding Limitation Year, if necessary.
(iii) If after the application of Section 3.6.2(D)(i) an Excess Amount still
exists, and the Participant is not covered by the Plan at the end of the
Limitation Year, the Excess Amount will be held unallocated in a suspense
account. The suspense account will be applied to reduce future Employer
contributions under this Plain for all remaining Participants in the next
Limitation Year, and in each succeeding Limitation Year, if necessary;
provided, however, that if all or any part of the Excess Amount held in a
suspense account is attributable to a Participant's Elective Deferrals, such
Excess Amount shall be held unallocated in a suspense account to be used for
such Participant in the next Limitation Year and each succeeding Limitation
Year as an Elective Deferral if such Participant is covered by the Plan in the
next and each succeeding Limitation Year, if necessary.
(iv) If a suspense account is in existence at any time during a Limitation Year
pursuant to Section 3.6.2(D)(iii), the suspense account will not participate in
the allocation of the Trust Fund's investment gains or losses to or from any
other Account. If a suspense account is in existence at any time during a
particular Limitation Year, all amounts in the suspense account must be
allocated and reallocated to Participants' Accounts before any Employer or
Participant contributions may be made to the Plan for the Limitation Year.
Excess Amounts, other than those Excess Amounts referred to in Section
3.6.2(D)(i), may not be distributed to Participants or Former Participants.
3.6.3 The provisions of this subsection 3.6.3 apply with respect to a
Participant who, in addition to this Plan, is covered or has been covered under
one or more Defined Contribution Plans which are Master or Prototype Plans,
Welfare Benefit Funds an Individual Medical Benefit Account or a simplified
employee pension maintained by the Employer or an Affiliate, which provides an
Annual Addition as described in Section 3.6.1(A) of the Plan during any
Limitation Year.
(A) The Annual Additions which may be credited to a Participant's Accounts
under this Plan for any such Limitation Year will not exceed the Maximum
Permissible Amount reduced by the Annual Additions credited to the
Participant's account or accounts under any other plans and Welfare Benefit
Fund, Individual Medical Benefit Account or simplified employee pension for the
same Limitation Year.
If the Annual Additions with respect to the Participant under any one or more
other such Defined Contribution Plans or Welfare Benefit Funds, Individual
Medical Benefit Account or simplified employee pension maintained by the
Employer are less than the Maximum Permissible Amount and the Employer
Contribution that would otherwise be contributed or allocated to a
Participant's Account under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed or allocated
shall be reduced so that the Annual Additions under all such plans and funds
for the Limitation Year will equal the Maximum Permissible Amount. If the
Annual Additions with respect to the Participant under such other Defined
Contribution Plans and Welfare Benefit Funds, Individual Medical Benefit
Account or simplified employee pension in the aggregate are equal to or greater
than the Maximum Permissible Amount, no amount will be contributed or allocated
to any of the Participant's Account under this Plan for the Limitation Year.
(B) Prior to determining the Participant's actual compensation for a Limitation
Year, the Maximum Permissible Amount her a Participant may be determined in the
manner described in Section 3.6.2(B).
(C) As soon as is administratively feasible after the end of a Limitation Year,
the Maximum Permissible Amount for the Limitation Year will be determined on
the basis of the Participant's actual Limitation Compensation for the
Limitation Year.
(D) If, pursuant to subsection 3.6.3(C) above, or as a result of the allocation
of forfeitures, a Participant's Annual Additions under this Plan and the
Participant's Annual Additions under such other plans would result in an Excess
Amount for a Limitation Year, the Excess Amount will be deemed to consist of
the Annual Additions last allocated, except that Annual Additions attributable
to simplified employee pension will be deemed to have been allocated first,
followed by Annual Additions to a Welfare benefit Fund or Individual Medical
Benefit Account regardless of the actual allocation date.
(E) If an Excess Amount was allocated to a Participant on an allocation date of
this Plan which coincided with an allocation date of another such plan, the
Excess Amount attributed to this Plan will be the product of:
(i) the total Excess Amount allocated as of such date, multiplied by (ii) the
ratio of (A) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under this Plan to (B) the total Annual
Additions allocated to the Participant for the Limitation Year as of such date
under this Plan and all of the other plans referred to in the first sentence of
this Section 3.6.3.
(F) Any Excess Amount attributed to this Plan will be disposed in the manner
described in Section 3.6.2(D).
3.6.4 If a Participant is covered under one or more Defined Contribution
Plans, other than this Plan, maintained by the Employer or an Affiliate which
are not Master or Prototype Plans, or Welfare Benefit Funds or an Individual
Medical Benefit Account maintained by the Employer, Annual Additions which may
be credited to the Participant's Account under this Plan for any Limitation
Year shall be limited in accordance with the provisions of subsections 3.6.3(A)
- - (F) above as though each such other plan was a Master or Prototype Plan.
3.6.5 If the Employer maintains, or at any time maintained, a Defined Benefit
Plan covering any Participant in this Plan, the sum of the Participant's
Defined Benefit Fraction and Defined Contribution Fraction will not exceed 1.0
in any Limitation Year. If such sum would otherwise exceed 1.0 and if such
Defined Benefit Plan does not provide for a reduction in benefits thereunder,
Annual Additions which may be credited to a Participant's Account under this
Plan for any Limitation Year shall be limited in accordance with the provisions
of Section 3.6.2.
3.6.6 If required pursuant to Section 4.4.4, "100%" shall be substituted for
"125%" wherever the latter percentage appears in this Section 3.6.
3.7 RETURN OF EMPLOYER CONTRIBUTIONS UNDER SPECIAL CIRCUMSTANCES
Notwithstanding any provision of this Plan to the contrary, upon timely written
demand by the Employer or the Administrator to the Trustee:
(A) Any contribution by the Employer to the Plan under a mistake of fact shall
be returned to the Employer by the Trustee within one year after the payment of
the contribution.
(B) Any contribution made by the Employer incident to the determination by the
Commissioner of Internal Revenue that the Plan is initially a Qualified Plan
shall be returned to the Employer by the Trustee within one year after
notification from the Internal Revenue Service that the Plan is not initially a
Qualified Plan but only if the application for the qualification is made by the
time prescribed by law for filing the Employer's return for the taxable year in
which the Plan is adopted, or such later date as the Secretary of the Treasury
may prescribe.
(C) In the event the deduction of a contribution made by the Employer is
disallowed under Code Section 404, such contribution (to the extent disallowed)
must be returned to the Employer within one year of the disallowance of the
deduction.
ARTICLE IV - VESTING
4.1 DETERMINATION OF VESTING
4.1.1 A Participant shall at all times have a vested percentage of 100% in
the Account Balance of each of his or her 401(k) Contributions Accounts,
Rollover Contributions Account and Transferred Account.
4.1.2 A Participant shall have a vested percentage of 100% in his or her
Account Balance of each of his or her Employer Accounts if he or she terminates
Employment due to the attainment of Normal Retirement Age or upon Disability or
death.
4.1.3 The vested percentage of a Participant in the Account Balance of each
of his or her Employer Accounts not vested pursuant to Section 4.1.1 or 4.1.2
shall be determined in accordance with the following schedule:
20% after 1 year of Vesting Service
40% after 2 years of Vesting Service
60% after 3 years of Vesting Service
80% after 4 years of Vesting Service
100% after 5 years of Vesting Service
4.2 RULES FOR CREDITING VESTING SERVICE
4.2.1 Subject to Section 4.2.2 all Years of Service shall be credited for
purposes of determining a Participant's Vesting Service. If the Employer
maintains the plan of a predecessor employer, service with such predecessor
employer shall be treated as service with the Employer for purposes of Vesting
Service.
4.2.2 An Employee who terminates Employment with no vested percentage in an
Employer Account shall, if he or she returns to Employment, have no credit for
Vesting Service prior to such termination of Employment if his or her period of
Severance equals or exceeds five years.
4.2.3 Vesting Service of an Employee following a Period of Severance of five
years or more shall not be counted for the purpose of computing his or her
vested percentage in his or her Employer Accounts derived from contributions
accrued prior to the Period of Severance. If applicable, separate records
shall be maintained reflecting the Participant's vested rights in his or her
Account Balance attributable to service prior to the Period of Severance and
reflecting the Participant's vested percentage in his or her Account Balance
attributable to service after the Period of Severance. Vesting Service prior
to and following an Employee's Period of Severance shall be counted for
purposes of computing his or her vested percentage in an Employer Account
derived from contributions made after the Period of Severance.
4.3 EMPLOYER ACCOUNTS FORFEITURES
4.3.1 Subject to Section 5.6, upon the Nonvested Separation of a Participant,
the nonvested portion of each Employer Account of such Participant will be
forfeited as of the date of termination of Employment.
Upon the Partially Vested Separation of a Participant, the nonvested portion of
each Employer Account of such Participant will be forfeited as of the date of
termination of Employment; provided, however, that such Participant receives a
distribution in accordance with Section 5.6. If a Participant does not receive
a distribution following his or her termination of Employment, the nonvested
portion of each Employer Account of the Participant shall be forfeited
following a Period of Severance of one year.
4.3.2 Forfeitures for a Plan Year shall be allocated in accordance with
Section 3.5.1.
4.4 TOP-HEAVY PROVISIONS
4.4.1 As used in this Section 4.4, each of the following terms shall have the
meanings for that term set forth in this Section 4.4.1:
(A) DETERMINATION DATE means, for any Plan Year subsequent to the first Plan
Year, the last day of the preceding Plan year. For the first Plan Year of the
Plan, the last day of that year.
(B) PERMISSIVE AGGREGATION GROUP means the Required Aggregation Group of plans
plus any other plan or plans of the Employer or Affiliate which, when
considered as a group with the Required Aggregation Group, would continue to
satisfy the requirements of Code Sections 401(a)(4) and 410.
(C) REQUIRED AGGREGATION GROUP means (i) each Qualified Plan of the Employer or
Affiliate in which at least one Key Employee participates or participated at
any time during the determination period (regardless of whether the Plan has
terminated), and (ii) any other qualified plan of the Employer or Affiliate
which enables a plan described in (i) to meet the requirements of Code Sections
401(a)(4) or 410.
(D) SUPER TOP-HEAVY means the Plan if any Top-Heavy Ratio as determined under
the definition of Top-Heavy Plan exceeds 90%.
(E) TOP-HEAVY PLAN means the Plan if any of the following conditions exists:
(i) If the Top-Heavy Ratio for the Plan exceeds 60% and the Plan is not part of
any Required Aggregation Group or Permissive Aggregation Group of Plans.
(ii) If the Plan is a part of a Required Aggregation Group of plans but not
part of a Permissive Aggregation Group and the Top-Heavy Ratio for the group of
plans exceeds 60%.
(iii) If the Plan is a part of a Required Aggregation Group and part of a
Permissive Aggregation Group of plans and the Top-Heavy Ratio for the
Permissive Aggregation Group exceeds 60%.
(F) Top-Heavy Ratio means:
(i) If the Employer or Affiliate maintains one or more Defined Contribution
Plans (including any Simplified Employee Pension Plan) and the Employer or
Affiliate has never maintained any Defined Benefit Plan which during the five-
year period ending on the Determination Date has or has had accrued benefits,
the Top-Heavy Ratio for this Plan alone or for the Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of which is the
sum of the Account Balances of all Key Employees as of the Termination Date
(including any part of any Account Balance distributed in the five-year period
ending on the Determination Date), and the denominator of which is the sum of
all Account Balances (including any part of any Account Balance distributed in
the five-year period ending on the Determination Date), both computed in
accordance with Code Section 416. Both the numerator and denominator of the
Top-Heavy Ratio are increased to reflect any contribution not actually made as
of the Determination Date, but which is required to be taken into account on
that date under Code Section 416.
(ii) If the Employer or an Affiliate maintains one or more Defined Contribution
Plans (including any Simplified Employee Pension Plan) and the Employer or an
Affiliate maintains or has maintained one or more Defined Benefit Plans which
during the five-year period ending on the Determination Date has or has had any
accrued benefit, the Top-Heavy Ratio for any Required or Permissive Aggregation
Group as appropriate is a fraction, the numerator of which is the sum of
Account Balances under the aggregated Defined Contribution Plans for all Key
Employees, determined in accordance with (i) above, and the present value of
accrued benefits under the aggregated Defined Benefit Plans for all Key
Employees as of the Determination Date, and the denominator of which is the sum
of the Account Balances under the aggregated Defined Contribution Plans for all
Participants, determined in accordance with (i) above, and the present value of
accrued benefits under the Defined Benefit Plans for all Participants as of the
Determination Date, all determined in accordance with Code Section 416. The
accrued benefit under a Defined Benefit Plan in both the numerator and
denominator of the Top-Heavy Ratio are increased for any distribution of an
accrued benefit made in the five-year period ending on the Determination Date.
(iii) For purposes of (i) and (ii) above, the value of Account Balances and the
present value of accrued benefits will be determined as of the most recent
Valuation Date that falls within or ends with the 12-month period ending on the
Determination Date, except as provided in Code Section 416 for the first and
second Plan Years of a Defined Benefit Plan. The Account Balances and accrued
benefits of a Participant (1) who is not a Key Employee but who was a Key
Employee in a prior year, or (2) who has not been credited with at least one
Hour of Service with the Employer or an Affiliate at any time during the
five-year period ending on the Determination Date, will be disregarded. The
calculation of the Top-Heavy Ratio, and the extent to which distributions,
rollovers, and transfers are taken into account will be made in accordance with
Code Section 416.
Elective Deferrals will not be taken into account for purposes of computing the
Top-Heavy Ratio. When aggregating plans the value of Account Balances and
accrued benefits will be calculated with reference to the Determination Dates
that fall within the same calendar year.
The accrued benefit of a Participant who is not a Key Employee shall be
determined under (A) the method, if any, that uniformly applies for accrual
purposes under all Defined Benefit Plans or (B) if there is no such method, as
if such benefit accrued not more rapidly than the slowest accrual rate
permitted under the fractional rule of Code Section 411(b)(1)(C).
4.4.2 If the Plan is determined to be a Top-Heavy Plan or a Super Top-Heavy
Plan as of any Determination Date, then the following Top-Heavy vesting
schedule, beginning with the first Plan Year commencing after such
Determination Date, shall apply only for those Plan Years in which the Plan
continues to be a Top-Heavy Plan or Super Top-Heavy Plan, as the case may be:
Top-Heavy Vesting Schedule
20% after 1 year of Vesting Service
40% after 2 years of Vesting Service
60% after 3 years of Vesting Service
80% after 4 years of Vesting Service
100% after 5 years of Vesting Service
4.4.3 (A) Except as provided in Sections 4.4.3(C) and (D), for any Plan Year
in which the Plan is a Top-Heavy Plan, contributions and forfeitures allocated
to the Employer Contributions Account of any Participant who is not a Key
Employee in respect of that Plan Year shall not be less than the lesser of:
(i) 3% of such Participant's Limitation Compensation, or
(ii) if the Employer has no Defined Benefit Plan which designates this Plan to
satisfy Code Section 401, the largest percentage of contributions and
forfeitures, as a percentage of the Key Employee's Limitation Compensation,
allocated to the Employer Contributions Account of any Key Employee for that
year. The minimum allocation is determined without regard to any Social
Security contribution. This minimum allocation shall be made even though,
under other Plan provisions, the Participant would not otherwise be entitled to
receive an allocation, or would have received a lesser allocation for the Plan
Year because of (a) the Participant's failure to complete a Year of Service,
(b) the Participant's failure to make mandatory Participant contributions to
the Plan or (c) compensation less than a stated amount.
(B) For purposes of computing the minimum allocation, a Participant's
Limitation Compensation will be applied.
(C) The provision in (A) above shall not apply to any Participant who was not
employed by the Employer or an Affiliate on the last day of the Plan Year.
(D) With respect to any profit-sharing or money purchase pension plan which
becomes Top-Heavy and is integrated with Social Security, prior to making the
allocations specified in Section 3.1, anything contained therein to the
contrary notwithstanding there shall be an allocation of the Employer
Contribution to each eligible Participant's Employer Contribution Account in
the ratio that each such Participant's Limitation Compensation for the Plan
Year bears to the Limitation Compensation of all such Participants for the Plan
Year, but not in excess of 3% of such Limitation Compensation.
4.4.4 If the Plan becomes a Top-Heavy Plan, then the maximum benefit which
can be provided under Section 3.6 shall continue to be determined by applying
"125%" wherever it appears in that Section and by substituting "4%" for "3%"
wherever that appears in Section 4.4.3. However, if the Plan becomes a Super
Top-Heavy Plan, the maximum benefit which can be provided under Section 3.6
shall be determined by substituting "100%" for "125%" wherever the latter
percentage appears and the 3% minimum contribution provided for in Section
4.4.4 shall remain unchanged.
4.4.5 Beginning with the Plan Year in which this Plan is Top-Heavy, the
minimum Top-Heavy vesting schedules will apply. The minimum vesting schedule
applies to all benefits within the meaning of Code Section 411(a)(7) except
those attributable to Employee contributions, including benefits accrued before
the effective date of Code Section 416 and benefits accrued before the Plan
became Top-Heavy. However, this Section 4.4 does not apply to the Account
Balances of any Employee who does not have an Hour of Service after the Plan
has initially become Top-Heavy and such Employee's vesting in his or her
Employer Contributions Account will be determined without regard to this
Section 4.4 The minimum allocation pursuant to Section 4.4.3 (to the extent
required to be nonforfeitable under Code Section 416(b)) may not be forfeited
under Code Section 411(a)(3)(B) or Code Section 411 (a)(3)(D).
ARTICLE V - AMOUNT AND DISTRIBUTION
OF BENEFITS, WITHDRAWALS AND LOANS
5.1 DISTRIBUTION UPON TERMINATION OF EMPLOYMENT
5.1.1 Subject to Section 5.1.2, a Participant's Benefit Commencement Date
shall be as soon as practicable following his or her Fully Vested Separation,
Partially Vested Separation or Nonvested Separation, if applicable, and in
accordance with Section 5.6. A Participant who has reached Normal Retirement
Age may receive distributions from the Participant's Employer Contributions
Account while employed. Any such distribution will be made in accordance with
Section 6 as if the Participant had retired at his Normal Retirement Age, or
any date thereafter until he terminates employment. Any Participant who
remains employed after his Normal Retirement Age will be deemed to have elected
to defer receipt of benefits until retirement unless he elects to begin
distribution in accordance with this section and Section 6. Each 401(k)
Contributions Account of a Participant shall be payable in accordance with the
events specified in Section 1.25 of the Plan.
5.1.2 A Participant's Benefit Commencement Date may be deferred, at the
election of the Participant and with applicable spousal consent, until the
earliest of his or her Normal Retirement Age, Disability, or Early Retirement.
5.2 AMOUNT OF BENEFITS UPON A FULLY VESTED SEPARATION
A Participant's benefits upon his or her Fully Vested Separation for any reason
other than Disability shall be the Account Balance of all of his or her
Accounts determined in accordance with Section 10.6.2.
5.3 AMOUNT OF BENEFITS UPON A PARTIALLY VESTED SEPARATION
A Participant's benefits upon his or her Partially Vested Separation for any
reason other than Disability shall be: (A) the Account Balance of his or her
Employer Accounts determined in accordance with Section 10.6.2 multiplied by
his or her vested percentage determined pursuant to Section 4.1.3, or, if
applicable, Section 4.4.2, plus (B) the Account Balance of his or her other
Accounts determined in accordance with Section 10.6.2
5.4 AMOUNT OF BENEFITS UPON A NONVESTED SEPARATION
A Participant's benefits upon his or her Nonvested Separation shall be the
Account Balance of his or her Accounts other than Employer Accounts, if any,
determined in accordance with Section 10.6.2.
5.5 AMOUNT OF BENEFITS UPON A SEPARATION DUE TO DISABILITY
If a Participant terminates Employment due to a Disability, his or her benefit
shall be the Account Balance of all of his or her Accounts determined as a
Fully Vested Separation in accordance with Section 5.2 and Section 10.6.2.
5.6 DISTRIBUTION AND RESTORATION
5.6.1 If, upon a Participant's termination of Employment, the vested Account
Balance of his or her Accounts as of the applicable Valuation Date is equal to
or less than $3,500, such Participant will receive a distribution of his or her
entire vested benefit and the nonvested portion will be treated as a
forfeiture. If the value of a Participants vested Account is zero, the
Participant shall be deemed to have received a distribution of such vested
Account.
5.6.2 If, upon a Participant's termination of Employment, the vested Account
Balance of his or her Accounts as of the applicable Valuation Date exceeds
$3,500, the Participant may elect, in accordance with Article VI, to receive a
distribution of the entire vested portion of such Accounts and the nonvested
portion, if any, will be treated as a forfeiture.
5.6.3 Neither the consent of the Participant nor the Participant's Spouse
shall be required to the extent that a distribution is required to satisfy Code
Section 401(a)(9) or Code Section 415.
5.6.4 If a Participant, who after termination of Employment received a
distribution and forfeited any portion of an Employer Account or is deemed to
have received a distribution in accordance with Section 5.6.1, resumes
Employment, he or she shall have the right, while an Employee, to repay the
full amount previously distributed from such Employer Account. Such repayment
must occur before the earlier of (i) the date on which he or she would have
incurred a Period of Severance of five years commencing after the distribution
or (ii) five years after the first date on which the Participant is
subsequently reemployed. If the Participant makes a repayment, the Account
Balance of his or her relevant Employer Account shall be restored to its value
as of the date of distribution. The restored amount shall be derived from
forfeitures during the Plan Year and, if such forfeitures are not sufficient,
from a contribution by the Employer made as of that date (determined without
reference to Net Profits). If an Employee who had a Nonvested Separation and
was deemed to receive a distribution resumed Employment before a Period of
Severance of five years, his or her Employer Account will be restored, upon
reemployment, to the amount on the date of such deemed distribution.
5.7 WITHDRAWALS DURING EMPLOYMENT
5.7.1 Prior to termination of Employment, each Participant with a Rollover
Contributions Account may elect to withdraw, as of the Valuation Date next
following the receipt of an election by the Administrator, and upon such notice
as the Administrator may require, all or any of such Account, as of such
Valuation Date.
5.7.2 The Administrator may establish from time to time rules and procedures
with respect to any withdrawals including the order of Accounts from which such
withdrawals shall be made.
5.7.3 No forfeitures shall occur as a result of a withdrawal pursuant to this
Section 5.7.
5.7.4 If a Participant is married at the time of such election, the
Participant's Spouse must consent to such a withdrawal in the same manner as
provided in Section 6.2.1.
5.8 LOANS
5.8.1 A Participant may submit an application to the Administrator to borrow
from any Account maintained for the Participant (on such terms and conditions
as the Administrator shall prescribe) an amount which when added to the
outstanding balance of all other loans to the Participant would not exceed the
lesser of (a) $50,000 reduced by the excess (if any) of the highest outstanding
balance of loans during the one year period ending on the day before the loan
is made, over the outstanding balance of loans from the Plan on the date the
loan is made, or (b) 50% of the vested portion of his or her Account from which
the borrowing is to be made as of the Valuation Date next following the receipt
of his or her loan application by the Administrator and the expiration of such
notice period as the Administrator may require. For this purpose, all loans
from Qualified Plans of the Employer or an Affiliate shall be aggregated, and
an assignment or pledge of any portion of the Participant's interest in the
Plan, and a loan, pledge or assignment with respect to any insurance contract
purchased under the Plan, will be treated as a loan under this Section 5.8.1.
5.8.2 If approved, each such loan shall comply with the following conditions:
(A) it shall be evidenced by a negotiable promissory note;
(B) the rate of interest payable on the unpaid balance of such loan shall be a
reasonable rate determined by the Administrator,
(C) the Participant must obtain the consent of his or her Spouse, if any,
within the 90 day period before the time an Account is used as security for the
loan. A new consent is required if an Account is used for any increase in the
amount of security. The consent shall comply with the requirements of Section
6.2.1, but shall be deemed to meet any requirements contained in section 6.2.1
relating to the consent of any subsequent Spouse. A new consent shall be
required if an Account is used for renegotiation, extension, renewal, or other
revision of the loan;
(D) the loan, by its terms, must require repayment (principal and interest) be
amortized in level payments, not less frequently than quarterly, over a period
not extending beyond five years from the date of the loan; provided, however,
that if the proceeds of the loan are used to acquire a dwelling unit which
within a reasonable time (determined at the time the loan is made) will be used
as the principal residence of the Participant, the repayment schedule may be
for a term in excess of five years; and
(E) the loan shall be adequately secured and may be secured by no more than 50%
of the Participant's vested interest in the Account Balance of his or her
Accounts.
5.8.3 If a Participant or Beneficiary requests and is granted a loan, and the
loan is made from Participant Directed Assets, principal and interest payments
with respect to the loan shall be credited solely to the Account of the
borrowing Participant from which the loan was made. Any loss caused by
nonpayment or other default on a Participant's loan obligations shall be
charged solely to that Account. Any other loan shall be treated as an
investment of the Trust Fund and interest and principal payments on account
thereof shall be credited to the Trust Fund. The Administrator shall determine
the order of Accounts from which a loan may be made.
5.8.4 Anything herein to the contrary notwithstanding:
(A) in the event of a default, foreclosure on the promissory note will not
occur until a distributable event occurs under this Article V;
(B) no loan will be made to any Owner-Employee or to any "shareholder-employee"
of the Employer or a Participating Affiliate or with respect to any amounts
attributable to a Rollover Contribution or a trust to trust transfer and
relating to prior participation by such an individual in a Qualified Plan. For
this purpose, a "shareholder-employee" means an employee or officer of an
electing small business, I.E., an "S corporation" as defined in Code Section
1361, who owns (or is considered as owning within the meaning of Code Section
318(a)(1)) on any day during the taxable year of such corporation, more than 5%
of the outstanding stock of the corporation; and
(C) loans shall not be made available to Highly Compensated Employees in an
amount greater than the amount made available to other Employees.
5.8.5 If a valid spousal consent has been obtained in accordance with Section
5.8.2(C), then, notwithstanding any other provision of this Plan, the portion
of the Participant's vested Account used as a security interest held by the
Plan by reason of a loan outstanding to the Participant shall be taken into
account for purposes of determining the amount of the Participant's benefit
payable at the time of death or distribution; but only if the reduction is used
as repayment of the loan. If less than 100% of the Participant's vested
benefit (determined without regard to the preceding sentence) is payable to the
Surviving Spouse, then the Participant's benefit shall be adjusted by first
reducing the Participant's vested benefit by the amount of the security used as
repayment of the loan, and then determining the benefit payable to the
Surviving Spouse.
5.9 LIMITATION ON COMMENCEMENT OF BENEFIT
5.9.1 Anything in this Article V to the contrary notwithstanding, a
Participant's Benefit Commencement Date shall in no event be later than the
60th day after the close of the Plan Year in which the latest of the following
events occur:
(A) the attainment by the Participant of his or her Normal Retirement Age;
(B) the tenth anniversary of the year in which the Participant commenced
participation in the Plan; or
(C) the Participant's termination of Employment. Notwithstanding the
foregoing, the failure of a Participant and Spouse to consent to a distribution
while a benefit is Immediately Distributable, shall be deemed to be an election
to defer commencement of payment of any benefit sufficient to satisfy this
Section.
5.9.2 If it is not possible to distribute a Participant's Accounts because
the Administrator has been unable to locate the Participant after making
reasonable efforts to do so, then a distribution of the Participant's Accounts
shall be made when the Participant can be located.
5.10 DISTRIBUTION REQUIREMENTS
5.10.1 The requirements of this Article shall apply to any distribution of a
Participant's interest and will take precedence over any inconsistent
provisions of this Plan. As used in this Section 5.10, each of the following
terms shall have the meaning for that term set forth in this Section 5.10.1:
(A) APPLICABLE LIFE EXPECTANCY. The life expectancy (or joint and last
survivor expectancy) calculated using the attained age of the Participant (or
designated Beneficiary) as of the Participant's (or designated Beneficiary's)
birthday in the applicable calendar year reduced by one for each calendar year
which has elapsed since the date Life Expectancy was first calculated. If Life
Expectancy is being recalculated, the Applicable Life Expectancy shall be the
Life Expectancy as so recalculated. The applicable calendar year shall be the
first distribution calendar year, and if Life Expectancy is being recalculated
such succeeding calendar year.
(B) DESIGNATED BENEFICIARY. The individual who is designated as the
Beneficiary under the Plan in accordance with Code Section 401(a)(9). In the
event that a Participant names a trust to be a designated Beneficiary, such
designation shall provide that, as of the later of the date on which the trust
is named as a beneficiary or the Participant's Required Beginning Date, and as
of all subsequent periods during which the trust is named as a Beneficiary, the
following requirements are met:
(i) the trust is a valid trust under state law, or would be but for the fact
that there is no corpus; (ii) the trust is irrevocable; (iii) the Beneficiaries
of the trust who are Beneficiaries with respect to the trust's interest in the
Participant's benefits are identifiable from the trust instrument within the
meaning of Code Section 401(a)(9); and (iv) a copy of the trust is provided to
the Plan.
(C) DISTRIBUTION CALENDAR YEAR. A calendar year for which a minimum
distribution is required. For distributions beginning before the Participant's
death, the first Distribution Calendar Year is the calendar year immediately
preceding the calendar year which contains the Participant's Required Beginning
Date. For distributions beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which distributions are
required to begin pursuant to Section 7.2.
(D) LIFE EXPECTANCY. Life Expectancy and joint and last survivor expectancy
are computed by use of the expected return multiples in Tables V and VI of
section 1.72-9 of the regulations issued under the Code.
Unless otherwise elected by the Participant (or Spouse, in the case of
distributions described in Section 7.2) by the time distributions are required
to begin, Life Expectancies shall not be recalculated annually. Such election
shall be irrevocable as to the Participant or Spouse and shall apply to all
subsequent years. The Life Expectancy of a nonspouse Beneficiary may not be
recalculated.
(E) REQUIRED BEGINNING DATE
(i) GENERAL RULE. The Required Beginning Date of a Participant is the first
day of April of the calendar year following the calendar year in which the
Participant attains age 70-1/2.
(ii) TRANSITIONAL RULE. The Required Beginning Date of a Participant who
attains age 70-1/2 before January 1, 1988, shall be determined in accordance
with (1) or (2) below:
(1) NON-5% OWNERS. The Required Beginning Date of a Participant who is not a
5% owners as defined in (iii) below is the first day of April of the calendar
year following the calendar year in which the later of retirement or attainment
of age 70-1/2 occurs.
(2) 5% OWNERS. The Required beginning Date of a Participant who is a 5% owner
during any year beginning after December 31, 1979, is the first day of April
following the later of:
(a) the calendar year in which the Participant attains age 70-1/2; or
(b) the earlier of the calendar year with or within which ends the Plan Year in
which the Participant becomes a 5% owner, or the calendar year in which the
Participant retires. The Required Beginning Date of a Participant who is not a
5% owner who attains age 70-1/2 during 1988 and who has not retired as of
January 1, 1989, is April 1, 1990.
(iii) 5% OWNER. A Participant is treated as a 5% owner for purposes of this
Section 5.10 if such Participant is a 5% owner as defined in Code Section
416(i) (determined in accordance with section 416 but without regard to whether
the plan is top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such owner attains age 66-1/2 or any subsequent Plan
Year.
(iv) Once distributions have begun to a 5% owner under this Section 5.10, they
must continue to be distributed, even if the Participant ceases to be a 5%
owner in a subsequent year.
5.10.2 All distributions required under this Section 5.10 shall be determined
and made in accordance with the Income Tax Regulations under Code Section 401
(a)(9), including the minimum distribution incidental benefit requirement of
section 1.401(a)(9)-2 of the regulations issued under the Code.
The entire interest of a Participant must be distributed or begin to be
distributed no later than the Participant's Required Beginning Date.
5.10.3 LIMITS ON DISTRIBUTION PERIODS. As of the first Distribution Calendar
Year. distributions, if not made in a lump sum, may only be made over one of
the following periods (or a combination thereof):
(A) the life of the Participant;
(B) the life of the Participant and a Designated beneficiary;
(C) a period certain not extending beyond the Life Expectancy of the
Participant; or
(D) a period certain not extending beyond the joint and last survivor
expectancy of the Participant and a Designated Beneficiary.
5.10.4 DETERMINATION OF AMOUNT TO BE DISTRIBUTED EACH YEAR. (A) If the
Participant's interest is to be paid in the form of annuity distributions under
the Plan (whether directly or in the form of an annuity purchased from an
insurance company), payments under the annuity shall satisfy the following
requirements
(i) the annuity distributions must be paid in periodic payments made at
intervals not longer than one year;
(ii) the distribution period must be over a life (or lives) or over a period
certain not longer than a Life Expectancy (or joint life and last survivor
expectancy) described in Code Section 401(a)(9)(A)(ii) or Code Section
401(a)(9)(B)(iii), whichever is applicable;
(iii) the Life Expectancy (or joint life and last survivor expectancy) for
purposes of determining the period certain shall be determined without
recalculation of Life Expectancy;
(iv) once payments have begun over a period certain, the period certain may not
be lengthened even if the period certain is shorter than the maximum permitted;
(v) payments must either be nonincreasing or increase only as follows:
(1) with any percentage increase in a specified and generally recognized
cost-of-living index;
(2) to the extent of the reduction to the amount of the Participant's payments
to provide for a survivor benefit upon death, but only if the beneficiary whose
life was being used to determine the distribution period described in Section
5.10.4(A)(iii) dies and the payments continue otherwise in accordance with that
section over the life of the Participant;
(3) to provide cash refunds of Employee contributions upon the Participant's
death; or
(4) because of an increase in benefits under the Plan.
(vi) If the annuity is a life annuity (or a life annuity with a period certain
not exceeding 20 years), the amount which must be distributed on or before the
Participant's Required Beginning Date (or, in the case of distributions after
the death of the Participant, the date distributions are required to begin
pursuant to Section 7.2) shall be the payment which is required for one payment
interval. The second payment need not be made until the end of the next
payment interval even if that payment interval ends in the next calendar year.
Payment intervals are the periods for which payments are received, E.G.,
bimonthly, monthly, semi-annually, or annually. If the annuity is a period
certain annuity without a life contingency (or is a life annuity with a period
certain exceeding 20 years) periodic payments for each distribution calendar
year shall be combined and treated as an annual amount.
The amount which must be distributed by the Participant's Required Beginning
Date (or, in the case of distributions after the death of the Participant, the
date distributions are required to begin pursuant to Section 7.2) is the annual
amount for the first Distribution Calendar Year. The annual amount for other
Distribution Calendar Years, including the annual amount for the calendar year
in which the Participant's Required Beginning Date (or the date distributions
are required to begin pursuant to Section 7.2) occurs, must be distributed on
or before December 31 of the calendar year for which the distribution is
required.
(B) Annuities are subject to the following additional conditions:
(i) Unless the Participant's Spouse is the Designated Beneficiary, if the
Participant's interest is being distributed in the form of a period certain
annuity without a life contingency, the period certain as of the beginning of
the first Distribution Calendar Year may not exceed the applicable period
determined using the table set forth in Q&A A-5 of section 1.401(a)(9)-2 of the
regulations issued under the Code.
(ii) If the Participant's interest is being distributed in the form of a joint
and survivor annuity for the joint lives of the Participant and a nonspouse
Beneficiary, annuity payments to be made on or after the Participant's Required
Beginning Date to the Designated Beneficiary after the Participant's death must
not at any time exceed the applicable percentage of the annuity payment for
such period that would have been payable to the Participant using the table set
forth in Q&A A-6 of section 1.401(a)(9)-2 of the regulations under the Code.
(D) If the form of distribution is an annuity made in accordance with Section
5.10.4, any additional benefits accruing to the Participant after his or her
Required Beginning Date shall be distributed as a separate and identifiable
component of the annuity beginning with the first payment interval ending in
the calendar year immediately following the calendar year in which such amount
accrues.
(E) Any part of the Participant's interest which is in the form of an
individual account shall be distributed in a manner satisfying the requirements
of Code Section 401(a)(9).
ARTICLE VI - FORMS OF PAYMENT
OF RETIREMENT BENEFITS
6.1 METHODS OF DISTRIBUTION
6.1.1 A Participant's Accounts shall be payable in the normal form of a
lump-sum distribution in accordance with Section 6.1.1(A) below. A Participant
may at any time prior to his or her Benefit Commencement Date elect, in
accordance with Section 6.2, either of the following benefit forms:
(A) A lump-sum distribution in cash or in kind, or part in cash and part in
kind; or
(B) In periodic payments payable in cash or in kind, or part in cash and part
in kind over a period not in excess of that required to comply with Section
5.10.4.
Anything in this Section 6.1.1 to the contrary notwithstanding, if the value of
a Participant's vested Account as of the applicable Valuation Date is $3,500 or
less, his or her benefit shall be paid in the form of a lump sum distribution
and no optional form of benefit payment shall be available.
6.1.2 On the death of the Participant, the Participant's benefits will be
paid to his or her Surviving Spouse, if any, or, if his or her Surviving Spouse
has already consented in a manner conforming to an election under Section
6.2.1, then to the Participant's Beneficiary. The normal form of benefit shall
be a lump-sum. A Participant may elect to receive his or her benefit in the
form of installments in accordance with Section 6.1.1(B) of the Plan. This
Section 6.1.2 shall not apply, however, with respect to the Participant if it
is determined that the Plan is a direct or indirect transferee of a defined
benefit plan, a money purchase pension plan (including a target benefit plan)
or a stock bonus or profit-sharing plan which is subject to the survivor
annuity requirements of Code Sections 401(a)(11) and 417. In addition, this
Section 6.1.2 shall not apply unless the Participant's Surviving Spouse, if
any, is the Beneficiary of (i) the proceeds of any insurance on the
Participant's life purchased by Employer contributions or (ii) forfeitures
allocated to the Participant's Employer Account or unless the Participant's
Surviving Spouse has consented to the Participant's designation of another
Beneficiary as referred to in this Section 6.1.2.
6.2 ELECTION OF OPTIONAL FORMS
6.2.1 The election of an optional benefit by a Participant shall not be
effective unless (A) the Participant's Spouse consents in writing; (B) the
election designates a specific alternate beneficiary including any class of
Beneficiaries or any contingent Beneficiaries which may not be changed without
spousal consent (or the Spouse expressly permits designations by the
Participant without any further spousal consent); (C) the Spouse's consent to
the waiver is witnessed by a Plan representative or notary public; and (D) the
Spouse's consent acknowledges the effect of the election. Additionally, a
Participant's election will not be effective unless the election designates a
form of benefit payment which may not be changed without spousal consent or the
Spouse expressly permits designations without any further spousal consent.
Notwithstanding this consent requirement, if the Participant establishes to the
satisfaction of a Plan representative that such written consent may not be
obtained because there is no Spouse or the Spouse cannot be located, the
election will be deemed effective. Any consent necessary under this provision
will not be valid with respect to any other Spouse. A consent that permits
designations by the Participant without any requirement of further consent by
such Spouse must acknowledge that the Spouse has the right to limit consent to
a specific Beneficiary, and a specific form of benefit, where applicable, and
that the Spouse voluntarily elects to relinquish either or both of such rights.
Additionally, a revocation of a prior waiver may be made by a Participant
without the consent of the Spouse at any time before his or her Benefit
Commencement Date. The number of revocations shall not be limited. Any new
waiver will require a new consent by the electing Participant's Spouse. No
consent obtained under this provision shall be valid unless the Participant has
received notice as provided in this Section.
6.2.2 A Participant may revoke his or her election to take an optional form
of benefit, and elect a different form of benefit, at any time prior to the
Participant's Benefit Commencement Date.
6.3 DIRECT ROLLOVERS
6.3.1 Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this Section 6.3, a Distributee
may elect, at the time and in the manner prescribed by the Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan specified by the Distributee in a Direct Rollover.
6.3.2 Definitions - All terms used in this Section 6.3 shall have the meaning
set forth below:
(A) ELIGIBLE ROLLOVER DISTRIBUTION: An Eligible Rollover Distribution is any
distribution of all or any portion of the balance to the credit of the
Distributee, except, that an Eligible Rollover Distribution shall not include:
any distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the Distributee or the joint lives (or joint life expectancies)
of the Distributee and the Distributee's designated beneficiary, or for a
specified period of ten years or more; any distribution to the extent such
distribution is required under Code Section 401(a)(9); and the portion of any
distribution that is not includible in gross income (determined without regard
to the exclusion for net unrealized appreciation with respect to employer
securities).
(B) ELIGIBLE RETIREMENT PLAN: An Eligible Retirement Plan is an individual
retirement account described in Code Section 408(a), an individual retirement
annuity described in Code Section 408(b), an annuity plan described in Code
Section 403(a), or a qualified trust described in Code Section 401(a) that
accepts the Distributee's Eligible Rollover Distribution. However, in the case
of an Eligible Rollover Distribution to the Surviving Spouse, an Eligible
Retirement Plan is an individual retirement account or individual retirement
annuity.
(C) DISTRIBUTEE: A Distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's Surviving Spouse and the
Employee's or former Employee's Spouse or former Spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code Section
414(p), are Distributees with regard to the interest of the Spouse or former
Spouse.
(D) DIRECT ROLLOVER: A Direct Rollover is a payment by the Plan to the
Eligible Retirement Plan specified by the Distributee.
ARTICLE VII - DEATH BENEFITS
7.1 PAYMENT OF ACCOUNT BALANCES
7.l.1 The benefits payable to the Beneficiary of a Participant who dies while
an Employee shall be the Account Balance of all of his or her Accounts. The
benefits payable to the beneficiary of a Participant who dies after terminating
Employment shall be the vested Account Balance of all of his or her Accounts.
Except as otherwise provided in this Article VII, a Beneficiary may request
that he or she be paid his or her benefits as soon as practicable after the
Participant's death.
7.1.2 If a Participant dies before distribution of his or her entire interest
in the Plan has been completed, the remaining interest shall, subject to
Section 7.2.5, be distributed to the Participant's Beneficiary in the form, at
the time and from among the methods specified in Section 6.1.1 as elected by
the beneficiary in writing filed with the Administrator. If an election is not
received by the Administrator within 90 days following the date the
Administrator is notified of the Participant's death, the distribution shall be
made, if to a Surviving Spouse, in accordance with Section 7.2.5(B), and, if to
some other Beneficiary, to the Beneficiary in a lump-sum.
7.1.3 The value of the benefits payable to a Beneficiary shall be determined
in accordance with Section 10.6.2. If the value of such death benefit is
$3,500 or less, distribution of such benefit shall be made in a lump-sum as
soon as practicable following the death of the Participant.
7.2 BENEFICIARIES
7.2.1 A Participant shall designate one or more Beneficiaries to whom amounts
due after his or her death shall be paid. In the event a Participant fails to
make a proper designation or in the event that no designated beneficiary
survives the Participant, the Participant's Beneficiary shall be the
Participant's Surviving Spouse, or if the Participant has no Surviving Spouse,
the legal representative of the Participant's estate, as an asset of that
estate. A Participant's Beneficiary shall not have any right to benefits under
the Plan unless he or she shall survive the Participant.
7.2.2 Any designation of a beneficiary incorporated into an insurance
contract shall be governed by the terms of such insurance contract. Any other
designation of a Beneficiary must be filed with the Administrator, in a time
and manner designated by such Administrator, in order to be effective. Any
such designation of a Beneficiary may be revoked by filing a later designation
or an instrument of revocation with the Administrator, in a time and manner
designated by the Administrator.
7.2.3 A married Participant whom designation of a Beneficiary is someone
other than his or her Spouse, inducing a Beneficiary referred to in the first
sentence of Section 7.2.2, or the change of any such Beneficiary to a new
Beneficiary other than the Participant's Spouse, shall not be valid unless made
in writing and consented to by the Participant's Spouse in such terms and in
such a manner as described in Section 6.2.1.
7.2.4 Notwithstanding any other provision of the Plan to the contrary:
(A) If the Participant dies after his or her Benefit Commencement Date, but
before distribution of his or her benefit has been completed, the remaining
portion of such benefit may continue in the form and over the period in which
the distributions were being made, but in any event must continue to be made at
least as rapidly as under the method of distribution being used prior to the
Participant's death.
(B) If the Participant dies leaving a Surviving Spouse before his or her
Benefit Commencement Date, the Surviving Spouse shall receive his or her
distribution in the form of a lump-sum unless she or he elects within 90 days
following the date the Administrator is notified of the Participant's death,
any other form of benefit payment specified in Section 6.1.1, or the
Participant's Surviving Spouse has already consented in a manner described in
Section 6.2.1 to a distribution to an alternate Beneficiary designated by the
Participant. If the Participant's benefit is $3,500 or less, distribution
shall be made in the form of a lump-sum comprised of the assets in the Account
immediately prior to the distribution if the Account consists of Participant-
Directed Assets. If the Account does not consist of Participant-Directed
Assets, the distribution shall be in cash.
(C) If the Participant dies before his or her Benefit Commencement Date, the
distribution of the Participant's entire interest shall be completed by
December 31 of the calendar year containing the fifth anniversary of the
Participant's death except to the extent that an election is made by the
designated Beneficiary involved to receive distributions in accordance with (i)
or (ii) of this subsection (C) below:
(i) if any portion of the Participant's interest is payable to a designated
Beneficiary who is an individual, distributions may be made in substantially
equal installments over the life or Life Expectancy, as defined in Section
5.10.1(D), of the designated Beneficiary commencing on or before December 31 of
the calendar year immediately following the calendar year of the Participant's
death;
(ii) if the designated Beneficiary is the Participant's Surviving Spouse, the
date distributions are required to begin in accordance with (i) of this
subsection (C) shall not be earlier than the later of December 31 of the
calendar year in which the Participant died and December 31 of the calendar
year in which the Participant would have attained age 65; and
(iii) if the Surviving Spouse dies before payments begin subsequent
distributions shall be made as if the Surviving Spouse had been the
Participant.
(D) For purposes of this Section 7.2.4, distribution of a Participant's
interest is considered to begin on the Participant's Required Beginning Date,
as defined in Section 5.10.1(E).
(E) For purposes of this Section 7.2.4, any amount paid to a child of the
Participant will be treated as if it had been paid to the Participants
Surviving Spouse if the amount becomes payable to such Surviving Spouse when
the child reaches the age of majority.
(F) If the Participant has not made an election pursuant to this Section 7.2.4
by the time of his or her death, the Participant's designated Beneficiary must
elect the method of distribution no later than the earlier of (i) December 31
of the calendar year in which distributions would be required to begin under
this Section or (ii) December 31 of the calendar year which contains the fifth
anniversary of the date of death of the Participant. If the Participant has no
designated Beneficiary, or if the designated Beneficiary does not elect a
method of distribution, distribution of the Participant's entire interest must
be completed by December 31 of the calendar year containing the fifth
anniversary of the Participant's death.
ARTICLE VIII - FIDUCIARIES
8.1 NAMED FIDUCIARY
8.1.1 The Administrator shall be a Named fiduciary of the Plan, as that term
is defined in ERISA Section 402(a)(2), with authority to control and manage the
operation and administration of the Plan, other than authority to manage and
control Plan assets.
The Administrator shall also be the "administrator" and "plan administrator"
with respect to the Plan, as those terms are defined in ERISA Section 3(16)(A)
and in Code Section 414(g), respectively.
8.1.2 The Trustee, or Investment Committee if appointed by the Employer,
shall be a "named fiduciary" of the Plan, as that term is defined in ERISA
Section 402(a)(2), with authority to manage and control all Trust Fund assets
and to select an Investment Manager or Investment Managers. If Merrill Lynch
Trust Company is the Trustee, it shall be a nondiscretionary trustee; an
Investment Committee shall be appointed and shall be the Employer, who may also
remove such Investment Committee; and the Investment Committee shall be the
"named fiduciary" with respect to Trust Fund assets. Anything in this Section
8.1.2. to the contrary notwithstanding, with respect to Participant-Directed
Assets, the Participant or Beneficiary having the power to direct the
investment of such assets shall be the "named fiduciary" with respect thereto.
8.1.3 The Trustee, or Investment Committee if appointed by the Employer,
shall have the power to make and deal with any investment of the Trust Fund
permitted in Section 10.4, except Participant-Directed Assets or assets for
which an Investment Manager has such power, in any manner which it deems
advisable and shall also:
(A) establish and carry out a funding policy and method consistent with the
objective of the Plan and the requirements of ERISA;
(B) have the power to select Annuity Contracts, if applicable,
(C) have the power to determine, if applicable, what investments specified in
Section 10.4, including, without limitation, Qualified Employer Securities and
regulated investment company shares, are available as Participant-Directed
Assets; and
(D) have all rights, powers, duties and obligations granted or imposed upon it
elsewhere in the Plan.
8.2 EMPLOYMENT OF ADVISERS
A "named fiduciary" with respect to the Plan (as defined in ERISA Section
402(a)(2)) and any "fiduciary" (as defined in ERISA Section 3(4)) appointed by
such a "named fiduciary," may employ one or more persons to render advice with
regard to any responsibility of such "named fiduciary" or "fiduciary" under the
Plan.
8.3 MULTIPLE FIDUCIARY CAPACITIES
Any "named fiduciary" with respect to the Plan (as defined in ERISA Section
402(a)(2)) and any other fiduciary (as defined in ERISA Section 3(4)) with
respect to the Plan may serve in more than one fiduciary capacity.
8.4 INDEMNIFICATION
To the extent not prohibited by state or federal law, the Employer agrees to,
and shall indemnify and save harmless, as the case may be, each Administrator
(if a person other than the Employer), Trustee, Investment Committee and/or any
Employee, officer or director of the Employer, or an Affiliate, from all claims
for liability, loss, damage or expense (including payment of reasonable
expenses in connection with the defense against any such claim) which result
from any exercise or failure to exercise any of the indemnified person's
responsibilities with respect to the Plan, other than by reason of gross
negligence.
8.5 PAYMENT OF EXPENSES
8.5.1 All Plan expenses, including without limitation, expenses and fees
(including fees for legal services rendered and fees to the Trustee) of the
Sponsor, Administrator, Investment Manager, Trustee, and any insurance company,
shall be charged against and withdrawn from the Trust Fund; provided, however,
the Employer may pay any of such expenses or reimburse the Trust Fund for any
payment.
8.5.2 All transactional costs or charges imposed or incurred (if any) for
Participant-Directed Assets shall be charged to the Account of the directing
Participant or Beneficiary. Transactional costs and charges shall include, but
shall not be limited to, charges for the acquisition or sale or exchange of
Participant-Directed Assets, brokerage commissions, service charges and
professional fees.
8.5.3 Any taxes which may be imposed upon the Trust Fund or the income
therefrom shall be deducted from and charged against the Trust Fund.
ARTICLE IX - PLAN ADMINISTRATION
9.1 THE ADMINISTRATOR
9.1.1 The Employer, or one or more persons appointed by the Employer, will be
the Administrator. Persons appointed by the Employer may also be removed by
the Employer. If any individual is appointed as Administrator, and the
individual is an Employee, the individual will be considered to have resigned
as Administrator if he or she terminates Employment and at least one other
person continues to serve as Administrator. Employees shall receive no
compensation for their services rendered to or as Administrator.
9.1.2 If more than one person is designated as Administrator, the
Administrator shall act by a majority of its members at the time in office and
such action may be taken either by a vote at a meeting or in writing without a
meeting. However, if less than three members are appointed, the Administrators
shall act only upon the unanimous consent of its members. An Administrator who
is also a Participant shall not vote or act upon any matter relating to himself
or herself, unless such person is the sole Administrator.
9.1.3 The Administrator may authorize in writing any person to execute any
document or documents on the Administrator's behalf, and any interested person,
upon receipt of notice of such authorization directed to it, may thereafter
accept and rely upon any document executed by such authorized person until the
Administrator shall deliver to such interested person a written revocation of
such authorization.
9.2 POWERS AND DUTIES OF THE ADMINISTRATOR
9.2.1 The Administrator shall have the power to construe the Plan and to
determine all questions of fact or interpretation that may arise thereunder,
and any such construction or determination shall be conclusively binding upon
all persons interested in the Plan. The Administrator shall have absolute
discretion to interpret and apply the Plan, and to determine all issues arising
under the Plan or the manner which, in the Administrator's discretion, is
determined to be in the best interest of all Plan participants and
beneficiaries.
9.2.2 The Administrator shall have the power to promulgate such rules and
procedures, to maintain or cause to be maintained such records and to issue
such forms as it shall deem necessary and proper for the administration of the
Plan.
9.2.3 Subject to the terms of the Plan, the Administrator shall determine the
time and manner in which all elections authorized by the Plan shall be made or
revoked.
9.2.4 The Administrator shall have all the rights, powers, duties and
obligations granted to or imposed upon it elsewhere in the Plan.
9.2.5 The Administrator shall exercise all of its responsibilities in a
uniform and nondiscriminatory manner.
9.3 DELEGATION OF RESPONSIBILITY
The Administrator may designate persons, including persons other than "named
fiduciaries" (as defined in ERISA Section 402(a)(2)) to carry out the specified
responsibilities of the Administrator and shall not be liable for any act or
omission of a person so designated.
ARTICLE X - TRUSTEE AND INVESTMENT COMMITTEE
10.1 APPOINTMENT OF TRUSTEE AND INVESTMENT COMMITTEE
10.1.1 The Employer shall appoint one or more persons as a Trustee who shall
serve as such for all or a portion of the Trust Fund.
10.1.2 An Employee appointed as Trustee or to the Investment Committee shall
receive no compensation for services rendered in such capacity and will be
considered to have resigned if he or she terminates Employment and at least one
other person continues to act as Trustee or as the Investment Committee, as the
case may be. If Merrill Lynch Trust Company is the Trustee, the Employer shall
appoint an Investment Committee and Merrill Lynch Trust Company shall be a
nondiscretionary trustee.
10.1.3 If more than one person is acting as the Trustee, or as an Investment
Committee, such Trustee, or Investment Committee, shall act by a majority of
the persons at the time so acting and such action may be taken either by a vote
at a meeting or in writing without a meeting. If less than three members are
serving, the Trustee, or Investment Committee, shall act only upon the
unanimous consent of those serving. The Trustee, or Investment Committee, may
authorize in writing any person to execute any document or documents on its
behalf, and any interested person, upon receipt of notice of such authorization
directed to it, may thereafter accept and rely upon any document executed by
such authorized person until the Trustee, or Investment Committee, shall
deliver to such interested person a written revocation of such authorization.
10.2 THE TRUST FUND
The Trustee shall receive such sums of money or other property acceptable to
the Trustee which shall from time to time be paid or delivered to the Trustee
under the Plan. The Trustee shall hold in the Trust Fund all such assets,
without distinction between principal and income, together with all property
purchased therewith and the proceeds thereof and the earnings and income
thereon. The Trustee shall not be responsible for, or have any duty to
enforce, the collection of any contributions or assets to be paid or
transferred to it, or for verifying whether contributions or transfers to it
are allowable under the Plan, nor shall the Trustee be responsible for the
adequacy of the Trust Fund to meet or discharge liabilities under the Plan.
10.2.1 The Trustee shall receive in cash or other assets acceptable to the
Trustee, so long as such assets received do not constitute a prohibited
transaction, all contributions paid or delivered to it which are allocable
under the Plan and to the Trust Fund and all transfers paid or delivered under
the Plan to the Trust Fund from a predecessor trustee or another trust
(including a trust forming part of another plan qualified under Code Section
401(a); provided, however, that the Trustee shall not be obligated to receive
any such contribution or transfer unless prior thereto or coincident therewith,
as the Trustee may specify, the Trustee has received such reconciliation,
allocation, investment or other information concerning or such direction,
contribution or representation with respect to, the contribution or transfer or
the source thereof as the Trustee may require. The Trustee shall have no duty
or authority to (a) require any contributions or transfers to be made under the
Plan or to the Trustee, (b) compute any amount to be contributed or transferred
under the Plan to the Trustee, or (c) determine whether amounts received by the
Trustee comply with the Plan.
10.2.2 The Trust Fund shall consist of all money and other property received
by the Trustee pursuant to Section 10.2, increased by any income or gains on or
increment in such assets and decreased by any investment loss or expense,
benefit or disbursement paid pursuant to the Plan.
10.3 RELATIONSHIP WITH ADMINISTRATOR
10.3.1 Neither the Trustee, nor the Investment Committee, if any, shall be
responsible in any respect for the administration of the Plan. Payments of
money or property from the Trust Fund shall be made by the Trustee upon
direction from the Administrator or its designee. Payments by the Trustee
shall be transmitted to the Administrator or its designee for delivery to the
proper payees or to payee addresses supplied by the Administrator or its
designee, and the Trustee's obligation to make such payments shall be satisfied
upon such transmittal. The Trustee shall have no obligation to determine the
identity of persons entitled to payments under the Plan or their addresses.
10.3.2 Directions from or on behalf of the Administrator or its designee shall
be communicated to the Trustee or the Trustee's designee for that purpose only
in a manner and in accordance with procedures acceptable to the Trustee. The
Trustee's designee shall not, however, be empowered to implement any such
directions except in accordance with procedures acceptable to the Trustee. The
Trustee shall have no liability for following any such directions or failing to
act in the absence of any such directions. The Trustee shall have no liability
for the acts or omissions of any person making or failing to make any direction
under the Plan or the provisions of this Article X nor any duty or obligation
to review any such direction, act or omission.
10.3.3 If a dispute arises over the propriety of the Trustee making any
payment from the Trust Fund, the Trustee may withhold the payment until the
dispute has been resolved by a court of competent jurisdiction or settled by
the parties to the dispute. The Trustee may consult legal counsel and shall be
fully protected in acting upon the advice of counsel.
10.4 INVESTMENT OF ASSETS
10.4.1 Except as provided in Section 10.4.2, investments of the Trust Fund
shall be made in the following, but only if compatible with the Sponsor's
administrative and operational requirement and framework:
(A) shares of any regulated investment company managed in whole or in part by
Merrill Lynch Trust Company or any affiliate of Merrill Lynch Trust Company;
(B) any property purchased through Merrill Lynch Trust Company or any affiliate
of Merrill Lynch Trust Company, whether or not productive of income or
consisting of wasting assets, including, without limitation by specification,
governmental, corporate or personal obligations, trust and participation
certificates, leaseholds, fee titles, mortgages and other interests in realty,
preferred and common stocks, convertible stocks and securities, shares of
regulated investment companies, certificates of deposit, put and call options
and other option contracts of any type, foreign or domestic, whether or not
traded on any exchange, futures contracts and options on futures contracts
traded on or subject to the rules of an exchange which has been designated as a
contract market by the Commodity Futures Trading Commission, an independent
U.S. government agency, contracts relating to the lending of property,
evidences of indebtedness or ownership in foreign corporations or other
enterprises, or indebtedness of foreign governments, group trust
participations, limited or general partnership interests, insurance contracts,
annuity contracts, any other evidences of indebtedness or ownership including
oil, mineral or gas properties, royalty interests or rights (including
equipment pertaining thereto); and
(C) Qualifying Employer Securities or "qualifying employer real properties" (as
that term is defined in ERISA Section 407(d) to the extent permitted in Section
10.4.3).
10.4.2 (A) Up to 25% or with the written consent of Merrill Lynch Trust
Company or its representative, an additional percentage of each Plan Year's
contributions may be invested in property as specified in Section 10.4.1(B)
acquired through a person other than Merrill Lynch Trust Company or an
affiliate of Merrill Lynch Trust Company.
(B) Except as permitted by Section 10.4.2 and except as may result from a
Rollover Contribution or a trust to trust transfer, without the written consent
of Merrill Lynch Trust Company or its representative, property may not be
acquired through a person other than Merrill Lynch Trust Company or an
affiliate of Merrill Lynch Trust Company if following such acquisitions the
value of the property so acquired would exceed 25% of the value of the Trust
Fund.
10.4.3 In its sole discretion, the Investment Committee, or Trustee if there
is no Investment Committee:
(A) may permit the investment of up to 10% of the Trust Fund in Qualifying
Employer Securities or "qualifying employer real property" (as that term is
defined in ERISA Section 407(d)), to the extent such investment is compatible
with Merrill Lynch Trust Company's administrative and operational requirements
and framework; and
(B) may determine, subject to Section 10.4.2, that a percentage of assets in
excess of 10% of the Trust Fund may be invested in Qualifying Employer
Securities or "qualifying employer real property."
10.5 INVESTMENT DIRECTION, PARTICIPANT-DIRECTED ASSETS AND QUALIFYING
EMPLOYER INVESTMENTS
10.5.1 The Trustee, or Investment Committee if appointed, shall manage the
investment of the Trust Fund except insofar as (a) an Investment Manager has
authority to manage Trust assets, or (b) Participant-Directed Assets are
utilized. Except as required by ERISA, if an Investment Committee is acting,
the Trustee shall invest the Trust Fund as directed by the Investment
Committee, an Investment Manager or a Participant or Beneficiary, as the case
may be, and the Trustee shall have no discretionary control over, nor any other
discretion regarding, the investment or reinvestment of any asset of the Trust.
Participant-Directed Assets shall be invested in accordance with the direction
of the Participant or, in the event of the Participant's death before an
Account is fully paid out, the Participant's Beneficiary with respect to the
assets involved; provided, however, that Participant-Directed Assets may not be
invested in "collectibles" (as defined in Code Section 408(m)(2)). If there
are Participant-Directed Assets, the investment of these assets shall be made
in accordance with such rules and procedures established by the Administrator
which must be consistent with the rules and procedures of Merrill Lynch Trust
Company or its affiliate, as the case may be.
10.5.2 With respect to Participant-Directed Assets, neither the Administrator,
the Investment Committee nor the Trustee shall:
(A) make any investments or dispose of any investments without the direction of
the Participant or Beneficiary for whom the Participant-Directed Assets are
maintained, except as provided in Section 8.5 so as to pay fees or expenses of
the Plan;
(B) be responsible for reviewing any investment direction with respect to
Participant-Directed Assets or for making recommendations on acquiring,
retaining or disposing of any assets or otherwise regarding any assets;
(C) have any duty to determine whether any investment is an authorized or
proper one; or
(D) be liable for following any investment direction or for any losses, taxes
or other consequences incurred as a consequence of investments selected by any
Participant or Beneficiary or for holding assets uninvested until it receives
proper instructions.
10.5.3 If Participant-Directed Assets are permitted, a list of the
Participants and beneficiaries and such information concerning them as the
Trustee may specify shall be provided by the Employer or the Administrator to
the Trustee and/or such person as are necessary for the implementation of the
directions in accordance with the procedure acceptable to the Trustee.
10.5.4 It is understood that the Trustee may, from time to time, have on hand
funds which are received as contributions or transfers to the Trust Fund which
are awaiting investment, or funds from the sale of Trust Fund assets which are
awaiting reinvestment. Absent receipt by the Trustee of a direction from the
proper person for the investment or reinvestment of such funds or otherwise
prior to the application of funds in implementation of such a direction, the
Trustee shall cause such funds to be invested in shares of such money market
fund or other short term investment vehicle as the Trustee, or Investment
Committee if appointed, may specify for this purpose from time to time. Any
such investment fund may be sponsored, managed or distributed by Merrill Lynch
Trust Company or an affiliate of Merrill Lynch Trust Company.
10.5.5 Directions for the investment or reinvestment of Trust assets of a type
referred to in Section 10.4 from the Investment Committee, an Investment
Manager or a Participant or Beneficiary, as the case may be, shall, in a manner
and in accordance with procedures acceptable to the Trustee, be communicated to
and implemented by, as the case may be, the Trustee, the Trustee's designee or,
with the Trustee's consent and if an Investment Committee is operating, a
broker/ dealer designated for the purpose by the Investment Committee.
Communication of any such direction to such a designee or broker/dealer shall
conclusively be deemed an authorization to the designee or broker/dealer to
implement the direction even though coming from a person other than the
Trustee. The Trustee shall have no liability for its or any other person's
following such directions or failing to act in the absence of any such
directions. The Trustee shall have no liability for the acts or omissions of
any person directing the investment or reinvestment of Trust Fund assets or
making or failing to make any direction referred to in Section 10.5.6.
10.5.6 The voting and other rights in securities or other assets held in the
Trust shall be exercised by the Trustee provided, however, that if an
Investment Committee is appointed, the Trustee shall act as directed by such
person who at the time has the right to direct the investment or reinvestment
of the security or other asset involved.
10.5.7 With respect to any Qualifying Employer Securities allocated to an
Account, each Participant shall be entitled to direct the Trustee in writing as
to the manner in which Qualifying Employer Securities are to be voted.
10.5.8 With respect to any Qualifying Employer Securities allocated to an
Account, each Participant shall be entitled to direct the Trustee in writing as
to the manner in which to respond to a tender or exchange offer or other
decisions with respect to the Qualifying Employer Securities.
The Administrator shall utilize its best efforts to timely distribute or cause
to be distributed to each Participant such information received from the
Trustee as will be distributed to shareholders of the Employer in connection
with any such tender or exchange offer or other similar matter or any vote
referred to in Section 10.5.7.
10.5.9 If an Investment Committee is appointed, notwithstanding any provision
hereof to the contrary, in the event the person with the right to direct a
voting or other decision with respect to any security, Qualifying Employer
Securities, or other asset held in the Trust does not communicate any decision
on the matter to the Trustee or the Trustee's designee by the time prescribed
by the Trustee or the Trustee's designee for that purpose or if the Trustee
notifies the Investment Committee, if applicable, either that it does not have
precise information as to the securities, Qualifying Employer Securities, or
other assets involved allocated on the applicable record date to the accounts
of all Participants and Beneficiaries or that time constraints make it unlikely
that Participant, Beneficiary or Investment Manager direction, as the case may
be, can be received on a timely basis, the decision shall be the responsibility
of the Investment Committee and shall be communicated to the Trustee on a
timely basis. In the event an Investment Committee with any right under the
Plan to direct a voting or other decision with respect to any security,
Qualifying Employer Securities, or other asset held in the Trust, does not
communicate any decision on the matter to the Trustee or the Trustee's designee
by the time prescribed by the Trustee for that purpose, the Trustee may, at the
cost of the Employer, retain an Investment Manager with full discretion to make
the decision. Except as required by ERISA, the Trustee shall (a) follow all
directions above referred to in this Section and (b) shall have no duty to
exercise voting or other rights relating to any such security, Qualifying
Employer Security or other asset.
10.5.10 The Administrator shall establish, or cause to be established, a
procedure acceptable to the Trustee for the timely dissemination to each person
entitled to direct the Trustee or its designee as to a voting or other decision
called for thereby or referred to therein of all proxy and other materials
bearing on the decision.
10.5.11 Any person authorized to direct the investment of Trust assets may,
if the Trustee and the Investment Committee, if applicable, so permit, direct
the Trustee to invest such assets in a common or collective trust maintained by
the Trustee for the investment of assets of qualified trusts under section
401(a) of the Code, individual retirement accounts under section 408(a) of the
Code and plans or governmental units described in section 818(a)(6) of the
Code. The documents governing any such common or collective trust fund
maintained by the Trustee, and in which Trust assets have been invested, are
hereby incorporated into this Article X by reference.
10.6 VALUATION OF ACCOUNTS
10.6.1 A Participant's Accounts shall be valued at fair market value on each
Valuation Date. Subject to Section 10.6.2(A), as of each Valuation Date, the
earnings and loses and expenses of the Trust Fund shall be allocated to each
Participant Account in the ratio that such Account Balance in that category of
Accounts bears to all Account Balances in that category. With respect to
Participant-Directed Assets, the earnings and losses and expenses (including
transactional expenses pursuant to Section 8.5.2) of such Participant-Directed
Assets shall be allocated to the Account of the Participant or Beneficiary
having authority to direct the investment of the assets in his or her Account.
10.6.2 The Valuation Date with respect to any distributions (including,
without limitation, loan distributions and purchase of annuities from any
Account upon the occurrence of a Benefit Commencement Date or otherwise, shall
be:
(A) with respect to Participant-Directed Asset, the date as of which the
Account distribution is made; and
(B) with respect to other assets, the Valuation Date immediately preceding the
Benefit Commencement Date, if applicable, or immediately preceding the proposed
date of any other distribution from an Account.
With respect to any contribution allocable to an Account which has not been
made as of a Valuation Date determined pursuant to this Section 10.6.2, the
principal amount of such contribution distributable because of the occurrence
of a Benefit Commencement Date shall be distributed as soon as practicable
after the date paid to the Trust Fund.
10.6.3 The assets of the Trust shall be valued at fair market value as
determined by the Trustee based upon such sources of information as it may deem
reliable, including, but not limited to, stock market quotations, statistical
evaluation services, newspapers of general circulation, financial advice from
investment counselors or brokerage firms, or any combination of sources. The
reasonable costs incurred in establishing values of the Trust Fund shall be a
charge against the Trust Fund, unless paid by the Employer. When the Trustee
is unable to arrive at a value based upon information from independent sources,
it may rely upon information from the Employer, Administrator, Investment
Committee, appraisers or other sources, and shall not incur any liability for
inaccurate valuation based in good faith upon such information.
10.7 INSURANCE CONTRACTS
The Trustee, if an Investment Committee is not appointed, Investment Committee,
or Participant or Beneficiary with respect to Participant-Directed Assets, may
appoint one or more insurance companies to hold assets of the Plan, and may
direct the purchase of insurance contracts or policies from one or more
insurance companies with assets of the Plan. Neither the Investment Committee,
Trustee nor the Administrator shall be liable for the validity of any such
contract or policy, the failure of any insurance company to make any payments
or for any act or omission of an insurance company with respect to any duties
delegated to any insurance company.
10.8 THE INVESTMENT MANAGER
l0.8.1 The Trustee, if an Investment Committee is not appointed, Investment
Committee, or the Participant or Beneficiary with respect to
Participant-Directed Assets, may, by an instrument in writing, appoint one or
more Investment Managers, who may be an affiliate of the Merrill Lynch Trust
Company, to direct the Trustee in the investment of all or a specified portion
of the assets of the Trust in property specified in Section 10.4. Any such
Investment Manager shall be directed by the Trustee, if an Investment Committee
is not appointed, Investment Committee, Participant or Beneficiary, as the case
may be, to act in accordance with the procedures referred to in Section 10.5.5.
If appointed, the Investment Committee shall notify the Trustee in writing
before the effectiveness of the appointment or removal of any Investment
Manager. If there is more than one Investment Manager whose appointment is
effective under the Plan at any one time, the Trustee shall, upon written
instructions from the Investment Committee, Participant or Beneficiary,
establish separate funds for control by each such Investment Manager. The
funds shall consist of those Trust Fund assets designated by the Investment
Committee, Participant or Beneficiary.
10.8.2 Each person appointed as an Investment Manager shall be:
(A) an investment adviser registered under the Investment Advisers Act of 1940,
(B) a bank as defined in that Act, or
(C) an insurance company qualified to manage, acquire or dispose of any asset
of the Plan under the laws of more than one state.
10.8.3 Each Investment Manager shall acknowledge In writing that it is a
"fiduciary" (as defined in ERISA Section 3(21)) with respect to the Plan. The
Trustee, or the Investment Committee if appointed, shall enter into an
agreement with each Investment Manager specifying the duties and compensation
of such Investment Manager and the other terms and conditions under which such
investment Manager shall be retained. Neither the Trustee nor the Investment
Committee, if appointed, shall be liable for any act or omission of any
Investment Manager and shall not be liable for following the advice of any
Investment Manager with respect to any duties delegated to any Investment
Manager.
10.8.4 The Trustee, or Investment Committee if appointed, or the Participant
or Beneficiary, if applicable with respect to Participant-Directed Assets,
shall have the power to determine the amount of Trust Fund assets to be
invested pursuant to the direction of a designated Investment Manager and to
set investment objectives and guidelines for the Investment Manager.
10.8.5 SECOND TRUST FUND. The Employer may appoint a second trustee under the
Plan with respect to assets which the Employer desires to contribute or have
transferred to the Trust Fund, but which the other Trustee does not choose to
accept: provided, however, that if a Merrill Lynch Trust Company is a Trustee,
its consent (which consent may be evidenced by its acceptance of its
appointment as Trustee) shall be required. In the event and upon the
effectiveness of the acceptance of the Second Trustee's appointment, the
Employer shall be deemed to have created two trust funds under the Plan, each
with its own Trustee, each governed separately by this Article X. Each Trustee
under such an arrangement shall, however, discharge its duties and
responsibilities solely with respect to those assets of the Trust delivered
into its possession and except pursuant to ERISA, shall have no duties,
responsibilities or obligations with respect to property of the other Trust nor
any liability for the acts or omissions of the other Trustee. As a condition
to its consent to the appointment of a second trustee, the Merrill Lynch Trust
Company shall assure that recordkeeping, distribution and reporting procedures
are established on a coordinated basis between it and the second trustee as
considered necessary or appropriate with respect to the Trusts.
10.9 POWERS OF TRUSTEE
10.9.1 At the direction of the person authorized to direct such action as
referred to in Section 10.5.1, but limited to those assets or categories of
assets acceptable to the Trustee as referred to in Section 10.4, or at its own
discretion if no such person is so authorized, the Trustee, or the Trustee's
designee or a broker/dealer as referred to in Section 10.5.5, is authorized and
empowered:
(A) To invest and reinvest the Trust Fund, together with the income therefrom,
in assets specified in Section 10.4;
(B) To deposit or invest all or any part of the assets of the Trust in savings
accounts or certificates of deposit or other deposits in a bank or savings and
loan association or other depository institution, including the Trustee or any
of its affiliates, provided with respect to such deposits with the Trustee or
an affiliate the deposits bear a reasonable interest rate;
(C) To hold, manage, improve, repair and control all property, real or
personal, forming part of the Trust Fund; to sell, convey, transfer, exchange,
partition, lease for any term, even extending beyond the duration of this
Trust, and otherwise dispose of the same from time to time;
(D) To have, respecting securities, all the rights' powers and privileges of an
owner, including the power to give proxies, pay assessments and other sums
deemed by the Trustee necessary for the protection of the Trust Fund; to vote
any corporate stock either in person or by proxy, with or without power of
substitution, for any purpose; to participate in voting trusts, pooling
agreements, foreclosures, reorganizations, consolidations, mergers and
liquidations, and in connection therewith to deposit securities with or
transfer title to any protective or other committee; to exercise or sell stock
subscriptions or conversion rights; and, regardless of any limitation elsewhere
in this instrument relative to investments by the Trustee, to accept and retain
as an investment any securities or other property received through the exercise
of any of the foregoing powers;
(E) Subject to Section 10.5.4 hereof, to hold in cash, without liability for
interest, such portion of the Trust Fund which it is directed to so hold
pending investments, or payment of expenses, or the distribution of benefits;
(F) To take such actions as may be necessary or desirable to protect the Trust
from loss due to the default on mortgages held in the Trust including the
appointment of agents or trustees in such other jurisdictions as may seem
desirable, to transfer property to such agents or trustees, to grant to such
agents such powers as are necessary or desirable to protect the Trust Fund, to
direct such agent or trustee, or to delegate such power to direct, and to
remove such agent or trustee;
(G) To settle, compromise or abandon all claims and demands in favor of or
against the Trust Fund;
(H) To invest in any common or collective trust fund of the type referred to in
Section 10.5.B hereof maintained by the Trustee;
(I) To exercise all of the further rights, powers, options and privileges
granted, provided for, or vested in trustees generally under the laws of the
State of New Jersey, so that the powers conferred upon the Trustee herein shall
not be in limitation of any authority conferred by law, but shall be in
addition thereto;
(J) To borrow money from any source and to execute promissory notes, mortgages
or other obligations and to pledge or mortgage any trust assets as security,
subject to applicable requirements of the Code and ERISA; and
(K) To maintain accounts at, execute transactions through, and lend on an
adequately secured basis stocks, bonds or other securities to, any brokerage or
other firm, including any firm which is an affiliate of the Trustee.
l0.9.2 To the extent necessary or which it deems appropriate to implement its
powers under Section 10.9.1 or otherwise to fulfill any of its duties and
responsibilities as trustee of the Trust Fund, the Trustee shall have the
following additional powers and authority:
(A) to register securities, or any other property, in its name or in the name
of any nominee, including the name of any affiliate or the nominee name
designated by any affiliate, with or without indication of the capacity in
which property shall be held, or to hold securities in bearer form and to
deposit any securities or other property in a depository or clearing
corporation,
(B) to designate and engage the services of, and to delegate powers and
responsibilities to, such agents, representatives, advisers, counsel and
accountants as the Trustee considers necessary or appropriate, any of whom may
be an affiliate of the Trustee or a person who renders services to such an
affiliate, and, as a part of its expenses under this Trust Agreement, to pay
their reasonable expenses and compensation;
(C) to make, execute and deliver, as Trustee, any and all deeds, leases,
mortgages, conveyances, waivers, releases or other instruments in writing
necessary or appropriate for the accomplishment of any of the powers listed in
this Trust Agreement; and
(D) generally to do all other acts which the Trustee deems necessary or
appropriate for the protection of the Trust Fund.
10.9.3 The Trustee shall have no duties responsibilities other than those
specified in the Plan.
10.10 ACCOUNTING AND RECORDS
l0.10.1 The Trustee shall maintain or cause to be maintained accurate
records and accounts of all Trust transactions and assets. The records and
accounts shall be available at reasonable times during normal business hours
for inspection or audit by the Administrator, Investment Committee, if
appointed, or any person designated for the purpose by either of them.
l0.10.2 Within 90 days following the close of each fiscal year of the Plan
or the effective date of the removal or resignation of the Trustee, the Trustee
shall file with the Administrator a written accounting setting forth all
transactions since the end of the period covered by the last previous
accounting. The accounting shall include a listing of the assets of the Trust
showing the value of such assets at the close of the period covered by the
accounting. On direction of the Administrator, and if previously agreed to by
the Trustee, the Trustee shall submit to the Administrator interim valuations,
reports or other information pertaining to the Trust.
The Administrator may approve the accounting by written approval delivered to
the Trustee or by failure to deliver written objections to the Trustee within
60 days after receipt of the accounting. Any such approval shall be binding on
the Employer, the Administrator, the Investment Committee and, to the extent
permitted by ERISA, all other persons.
10.11 JUDICIAL SETTLEMENT OF ACCOUNT
The Trustee can apply to a court of competent jurisdiction at any time for
judicial settlement of any matter involving the Plan including judicial
settlement of the Group Trustee's account. If it does so, the Trustee must
give the Administrator the opportunity to participate in the court proceedings,
but the Trustee can also involve other persons. Reasonable expenses the
Trustee incurs in legal proceedings involving the Plan, including attorney's
fees, other than legal proceedings involving claims for breach of fiduciary
duty, are chargeable to the Trust Fund as an administrative expense. Any
judgment or decree which may be entered in such a proceeding, shall, subject to
the provision of ERISA, be conclusive upon all persons having or claiming to
have any interest in the Trust Fund or under any Plan.
10.12 RESIGNATION AND REMOVAL OF TRUSTEE
10.12.1 The Trustee may resign at any time upon at least 30 days' written
notice to the Employer.
10.12.2 The Employer may remove the Trustee upon at least 30 days' written
notice to the Trustee.
10.12.3 Upon resignation or removal of the Trustee, the Employer shall
appoint a successor trustee. Upon failure of the Employer to appoint, or the
failure of the effectiveness of the appointment by the Employer of, a successor
trustee by the effective date of the resignation or removal, the Trustee may
apply to any court of competent jurisdiction for the appointment of a
successor.
Promptly after receipt by the Trustee of notice of the effectiveness of the
appointment of the successor trustee: (a) the Trustee shall deliver to the
successor trustee such records as may be reasonably requested to enable the
successor trustee to properly administer the Trust Fund and all property of the
Trust after deducting therefrom such amounts as the Trustee deems necessary to
provide for expenses, taxes, compensation or other amounts due to or by the
Trustee not paid by the Employer prior to the delivery.
10.12.4 Upon resignation or removal of the Trustee, the Trustee shall have the
right to a settlement of its account, which settlement shall be made, at the
Trustee's option, either by an agreement of settlement between the Trustee and
the Employer or by a judicial settlement in an action instituted by the
Trustee.
l0.12.5 The Trustee shall not be obligated to transfer Trust assets until
the Trustee is provided assurance by the Employer satisfactory to the Trustee
that all fees and expenses reasonably anticipated will be paid.
10.12.6 Upon settlement of the account and transfer of the Trust Fund to
the successor trustee, all rights and privileges under the Trust Agreement
shall vest in the successor trustee and all responsibility and liability of the
Trustee with respect to the Trust and assets thereof shall, except as otherwise
required by ERISA, terminate subject only to the requirement that the Trustee
execute all necessary documents to transfer the Trust assets to the successor
trustee.
ARTICLE XI - PLAN AMENDMENT OR TERMINATION
11.1 PLAN AMENDMENT
11.l.1 The Employer shall have the right at any time, by an instrument in
writing, effective retroactively or otherwise, to amend any part of the Plan.
No amendment shall:
(A) authorize any part of the Trust Fund to be used for, or diverted to,
purposes other than for the exclusive benefit of Participants or their
Beneficiaries;
(B) decrease the accrued benefits of any Participant or his or her Beneficiary
under the Plan. An amendment which has the effect of (1) eliminating or
inducing an Early Retirement benefit or a retirement-type subsidy, or (2)
eliminating an optional form of benefit payment, with respect to benefits
attributable to service before the amendment shall be treated as reducing
accrued benefits. In the case of a retirement type subsidy, the preceding
sentence shall apply only with respect to a Participant who satisfies (either
before or after the amendment) the preamendment conditions for the subsidy. In
general, a retirement type subsidy is a subsidy that continues after
retirement, but does not include a qualified disability benefit, a medical
benefit, a social security supplement, a death benefit (including life
insurance), or a plant shutdown benefit (that does not continue after
retirement age).
(C) reduce the vested percentage of any Participant determined without regard
to such amendment as of the later of the date such amendment is adopted or the
date it becomes effective;
(D) eliminate an optional form of benefit distribution with respect to benefits
attributable to service before the amendment; or
(E) change the vesting schedule, or in any way amend the Plan to either
directly or indirectly affect the computation of a Participant's vested unless
each Participant having not less than 3 years of Vesting Service is permitted
to elect, within a reasonable period specified by the Administrator after the
adoption of such amendment, to have his or her vested percentage computed
without regard to such amendment. The period during which the election may be
made shall commence with the date the amendment is adopted and shall end on the
later of:
(i) 60 days after the amendment is adopted;
(ii) 60 days after the amendment becomes effective; or
(iii) 60 days after the Participant is issued written notice by the
Administrator.
11.1.2 Anything contained in this Section 11.2 to the contrary
notwithstanding, a Participant's benefit may be reduced to the extent permitted
under Code Section 412(c)(8).
11.2 RIGHT OF THE EMPLOYER TO TERMINATE PLAN
11.2.1 The Employer intends and expects that from year to year it will be
able to and will deem it advisable to continue this Plan in effect and to make
contributions as herein provided. The Employer reserves the right, however, to
terminate the Plan with respect to its Employees at any time by an instrument
in writing delivered to the Administrator and the Trustee, or to completely
discontinue its contributions thereto at any time.
l1.2.2 The Plan will also terminate: (A) if the Employer is judicially
declared bankrupt or insolvent; (B) upon the sale or other disposition of all
or substantially all of the assets of the business; or (C) upon any other
termination of the business. Any successor to or purchaser of the Employer's
trade or business, after any event specified in the prior sentence, may
continue the Plan, in which case the successor or purchaser will thereafter be
considered the Employer for purposes of the Plan.
11.2.3 Anything contained herein to the contrary notwithstanding, if the
Employer fails to attain or retain qualification of the Plan under Code Section
401(a), the Plan will terminate and the assets distributed in conformity with
Section 3.10 and 11.3.2.
11.3 EFFECT OF PARTIAL OR COMPLETE TERMINATION OR COMPLETE DISCONTINUANCE OF
CONTRIBUTIONS
11.3.1 Determination of Date of Complete or Partial Termination. The date of
complete or partial termination shall be established by the Administrator in
accordance with the directions of the Employer (if then in existence) in
accordance with applicable law.
11.3.2 EFFECT OF TERMINATION
(A) As of the date of a partial termination of the Plan:
(i) the accrued benefit of each affected Participant, to the extent funded,
shall become nonforfeitable;
(ii) no affected Participant shall be granted credit based on Hours of Service
after such date;
(iii) Compensation paid to affected Participants after such date shall not be
taken into account; and
(iv) no contributions by affected Participants shall be required or permitted.
(a) As of the date of the complete termination of the Plan or of a complete
discontinuance of contributions:
(i) the accrued benefit of each affected Participant to the extent funded,
shall become nonforfeitable;
(ii) no affected Participant shall be granted credit based on Hours of Service
after such date;
(iii) Compensation paid after such date shall not be taken into account;
(iv) no contributions by affected Participants shall be required or permitted;
(v) no Eligible Employee shall become a Participant after such date; and
(vi) except as may otherwise be required by applicable law, all obligations of
the Employer and Participating Affiliates to fund the Plan shall terminate.
(C) All other provisions of the Plan shall remain in effect unless otherwise
amended.
11.3.3 Upon the complete discontinuance of profit sharing contributions under
the Plan, at the Employer's election, either the Trust Fund shall continue to
be held and distributed as if the Plan had not been terminated (in which case
such Plan shall continue to be subject to all requirements under Title I of
ERISA, and qualification requirements under the Code) or any and all assets
remaining in the Trust Fund as of the date of such termination or
discontinuance, together with any earnings subsequently accruing thereon, shall
be distributed by the Trustee to the Participants at the Administrator's
direction. Upon the complete termination of the Plan, the Trust Fund shall be
distributed to Participants within one year after the date of termination.
If the Employer or any Affiliate maintains another Defined Contribution Plan
(other than an employee stock ownership plan as defined in Code Section
4975(e)(7)), then the Participant's Account(s) will be transferred, without the
Participant's consent, to the other plan if the Participant does not consent to
an immediate distribution. Distributions shall be made in compliance with the
applicable provisions, including restrictions, of Article VI and VII. The
Trust Fund shall continue in effect until all distributions therefrom are
complete. Upon the completion of such distributions, the Trustee shall be
relieved from all further liability with respect to all amounts so paid or
distributed.
11.4 BANKRUPTCY
In the event that the Employer shall at any time be judicially declared
bankrupt or insolvent without any provisions being made for the continuation of
this Plan, the Plan shall be completely terminated in accordance with this
Article XI.
ARTICLE XII - MISCELLANEOUS PROVISIONS
12.1 EXCLUSIVE BENEFIT OF PARTICIPANTS
Notwithstanding anything in the Plan to the contrary, the Trust Fund shall be
held for the benefit of all persons who shall be entitled to receive payments
under the Plan. Subject to Section 3.7, it shall be prohibited at any time for
any part of the Trust Fund (other than such part as is required to pay
expenses) to be used for, or diverted to, purposes other than for the exclusive
benefit of Participants or their Beneficiaries.
12.2 PLAN NOT A CONTRACT OF EMPLOYMENT
The Plan is not a contract of Employment, and the terms of Employment of any
Employee shall not be affected in any way by the Plan or related instruments
except as specifically provided therein.
12.3 ACTION BY EMPLOYER
Any action by the Employer shall be taken by the board of directors of the
corporation or any person or persons duly empowered to exercise the powers of
the corporation with respect to the Plan.
12.4 SOURCE OF BENEFITS
Benefits under the Plan shall be paid or provided for solely from the Trust
Fund, and neither the Employer, any Participating Affiliate, the Trustee, the
Administrator, nor any Investment Manager or insurance company shall assume any
liability under the Plan therefor.
12.5 BENEFITS NOT ASSIGNABLE
Benefits provided under the Plan may not be assigned or alienated, either
voluntarily or involuntarily. In the event that a Participant or Beneficiary
becomes individually liable with respect to any expenses listed in Section 8.5,
the provision of Section 401(a)(13) of the Code shall be applicable with
respect to any claim the Plan may have against the Participant or Beneficiary
individually with respect to such expenses. The preceding sentence shall also
apply to the creation, assignment or recognition of a right to any benefit
payable with respect to a Participant pursuant to a "domestic relations order"
(as defined in Code Section 414(p)) unless such order is determined by the
Administrator to be a "qualified domestic relations order" (as defined in Code
Section 414(p)) or, in the case of a "domestic relations order" entered before
January 1, 1985, if either payment of benefits pursuant to the order has
commenced as of that date or the Administrator decides to treat such order as a
"qualified domestic relations order" within the meaning of Code Section 414(p)
even if it does not otherwise qualify as such.
12.6 DOMESTIC RELATIONS ORDERS
Any other provision of the Plan to the contrary notwithstanding, the
Administrator shall have all powers necessary with respect to the Plan for the
proper operation of Code Section 414(p) with respect to "qualified domestic
relations orders" (or "domestic relations orders" treated as such) referred to
in Section 12.5, including, but not limited to, the power to establish all
necessary or appropriate procedures, to authorize the establishment of new
accounts with such assets and subject to such investment control by the
Administrator as the Administrator may deem appropriate, and the Administrator
may decide upon and direct appropriate distributions therefrom.
12.7 CLAIMS PROCEDURE
In the event that a claim by a Participant, Beneficiary, or other person for
benefits under the Plan is denied, the Administrator will so notify the
claimant, giving the reasons for the denial. This notice will also refer to
the specific provisions of the Plan on which the denial was based, will specify
whether any additional information is needed from the Participant or
Beneficiary and will explain the review procedure.
Within 60 days after receiving the denial, the claimant may submit, directly or
through a duly authorized representative, a written request for reconsideration
of the application to the Administrator. Documents or records relied on by the
claimant should be filed with the request. The person making the request may
review relevant documents and submit issues and additional comments in writing.
The Administrator will review the claim within 60 days (or 120 days if a
hearing is held because special circumstances exist) and provide a written
response to the appeal. The response will explain the reasons for the decision
and will refer to the Plan provisions on which the decision is based. The
decision of the Administrator is the final one under this claims procedure.
12.8 RECORDS AND DOCUMENT; ERRORS
Participants and Beneficiaries must supply the Administrator with such personal
history data as may be required by the Administrator in the operation of the
Plan. Proof of age, when required, must be established by evidence
satisfactory to the Administrator, and the records of the Employer and
Participating Affiliates concerning length of service and compensation may be
accepted by the Administrator as conclusive for the purposes of the Plan.
Should any error in the records maintained under the Plan result in any
Participant or Beneficiary receiving from the Plan more or less than he or she
would have been entitled to receive had the records been correct, the
Administrator, in its discretion, may correct such error and, as far as
practicable, may adjust benefits in such manner that the aggregate value of the
benefit under the Plan shall be the amount to which such Participant or
Beneficiary was properly entitled.
12.9 BENEFITS PAYABLE TO MINORS, INCOMPETENTS AND OTHERS
In the event any benefit is payable to a minor or to a Participant or
Beneficiary declared incompetent by a court having jurisdiction over such
matters and a guardian, committee, conservator or other legal representative of
the estate of such a person is appointed, benefits to which he or she is
entitled shall be paid to the legally appointed person. The receipt by any
such person to whom any such payment on behalf of any Participant or
Beneficiary is made shall be a sufficient discharge therefor.
12.10 PLAN MERGER OR TRANSFER OF ASSETS
12.10.1 The merger or consolidation of the Employer with any other person,
or the transfer of the assets of the Employer to any other person, or the
merger of the Plan with any other plan shall not constitute a termination of
the Plan if provision is made for the continuation of the Plan.
12.10.2 The Plan may not merge or consolidate with, or transfer any assets
or liabilities to, any other plan, unless each Participant would (if the Plan
had then terminated) receive a benefit immediately after the merger,
consolidation or transfer which is equal to or greater than the benefit he or
she would have been entitled to receive immediately before the merger,
consolidation or transfer (if the Plan had then terminated). Any merger or
consolidation shall not constitute a termination of a Plan or require the
acceleration of vesting of Participants' Account Balances.
12.11 PARTICIPATING AFFILIATES
12.11.1 With the consent of the Employer and by duly authorized action, any
Affiliate may adopt the Plan. Such Affiliate shall determine the classes of
its Employees who shall be Eligible Employees and the amount of its
contribution to the Plan on behalf of such Employees.
12.11.2 With the consent of the Employer and by duly authorized action, a
Participating Affiliate may terminate its participation in the Plan or withdraw
from the Plan. Any such withdrawal shall be deemed an adoption by such
Participating Affiliate of a plan and trust identical to the Plan and the
Trust, except that all references to the Employer shall be deemed to refer to
such Participating Affiliate. At such time and in such manner as the Employer
directs, the assets the Trust allocable to Employees of such Participating
Affiliate shall be transferred to the trust deemed adopted by such
Participating Affiliate.
12.11.3 A Participating Affiliate shall have no power with respect to the
Plan except as specifically provided herein.
12.12 CONTROLLING LAW
The Plan is intended to qualify under Code Section 401(a) and to comply with
ERISA, and its terms shall be interpreted accordingly. Otherwise, to the
extent not preempted by ERISA, the laws of the State of New York shall control
the interpretation and performance of the terms of the Plan.
12.13 SINGULAR AND PLURAL AND ARTICLE AND SECTION REFERENCES
As used in the Plan, the singular includes the plural, and the plural includes
the singular, unless qualified by the context. Titles of Articles and Sections
of the Plan are for convenience of reference only and are to be disregarded in
applying the provisions of the Plan. Any reference in this Plan to an Article
or Section is to the Article or Section so specified of the Plan, unless
otherwise indicated.
<PAGE>
Pursuant to his authorization by action of the Board of Directors, the
undersigned hereby executes and adopts this Plan on behalf of the Employer.
Dated: August 15, 1997 ____________________________________________
Don Horowitz, Secretary/Treasurer
<PAGE>
Exhibit 24
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Aceto Corporation:
We consent to incorporation by reference in the registration statement (No. 33-
38679) on Form S-8 of Aceto Corporation of our report dated August 15, 1998,
relating to the consolidated balance sheets of Aceto Corporation and
subsidiaries as of June 30, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the years
in the three-year period ended June 30, 1998, and all related schedules, which
report appears in the June 30, 1998 annual report on Form 10-K of Aceto
Corporation.
KPMG PEAT MARWICK LLP
Jericho, New York
September 24, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 5 (d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
ACETO CORPORATION
(Company)
By /S/LEONARD S. SCHWARTZ /S/DONALD HOROWITZ
Leonard S. Schwartz Donald Horowitz
Chairman, President Secretary/Treasurer and
and Chief Executive Officer Chief Financial Officer
Date: September 24, 1998
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 Company
and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
/S/LEONARD S. SCHWARTZ Chairman, President and 9-24-98
Leonard S. Schwartz Chief Executive Officer
/S/DONALD HOROWITZ Secretary/Treasurer, 9-24-98
Donald Horowitz Chief Financial Officer
/S/ANTHONY BALDI Director 9-24-98
Anthony Baldi
/S/THOMAS BRUNNER Director 9-24-98
Thomas Brunner
/S/SAMUEL I. HENDLER
Samuel I. Hendler Director 9-24-98
/S/RICHARD AMITRANO Director 9-24-98
Richard Amitrano
<PAGE>
ACETO CORPORATION AND SUBSIDIARIES
Index to Consolidated Financial Statements
Independent Auditors' Report
Consolidated financial statements:
Consolidated balance sheets as of June 30, 1998 and 1997
Consolidated statements of income for the years ended June 30,
1998, 1997 and 1996
Consolidated statements of cash flows for the years ended June
30, 1998, 1997 and 1996
Consolidated statements of shareholders' equity for the years
ended June 30, 1998, 1997 and 1996
Notes to consolidated financial statements
Schedules:
II - Valuation and qualifying accounts
All other schedules are omitted because they are not required
or the information required is given in the consolidated
financial statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Aceto Corporation:
We have audited the accompanying consolidated balance sheets of Aceto
Corporation and subsidiaries as of June 30, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity, and cash flows for
each of the years in the three-year period ended June 30, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Aceto Corporation
and subsidiaries at June 30, 1998 and 1997, and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 1998 in conformity with generally accepted accounting principles.
Jericho, New York KPMG PEAT MARWICK LLP
August 14, 1998
<PAGE>
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
YEARS ENDED JUNE 30, 1998 AND 1997
Assets 1998 1997
(In thousands)
Current assets:
Cash and cash equivalents $ 9,178 $ 4,142
Short-term investments 11,862 10,013
Receivables:
Trade, less allowance for
doubtful accounts:
1998, $219; 1997, $219 23,986 24,627
Other _1,502 1,363
25,488 25,990
Inventory 26,783 31,210
Prepaid expenses 233 240
Deferred income tax benefit 754 1,267
Property held for sale 493 512
Total current assets 74,791 73,374
Long-term investments 8,025 11,212
Long-term notes receivable 902 948
Property and equipment:
Computers 812 674
Furniture and fixtures 599 573
Automobiles 158 178
1,569 1,425
Less accumulated depreciation 1,189 1,125
380 300
Other assets 281 311
Total Assets $84,379 $86,145
See accompanying notes to consolidated financial statements.
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997
(In thousands except par value)
Current liabilities:
Drafts and acceptances payable $ 549 $ 743
Current installments
on long-term debt 250 250
Accounts payable 2,195 3,939
Accrued merchandise purchases 10,905 11,720
Accrued compensation 2,549 3,455
Accrued environmental
remediation 1,378 1,387
Accrued income taxes 716 943
Other accrued expenses 1,826 2,010
Total current liabilities 20,368 24,447
Long-term debt, excluding
current installments <N~> 500
Deferred income taxes <N~> 14
Redeemable preferred stock,
$2.50 par value per share;
Authorized 2,000 shares;
issued and outstanding:
300 shares 750 750
Shareholders' equity:
Common stock, $.01 par value per share;
Authorized 10,000 shares;
issued: 1998, 9,001; 1997, 6,001 90 60
outstanding: 1998, 6,699; 1997, 4,654
Capital in excess of par value 57,531 57,381
Retained earnings 26,888 21,079
84,509 78,520
Less:
Cost of common shares held in treasury;
1998, 2,302 shares; 1997, 1,347 shares 21,248 18,086
Total shareholders' equity 63,261 60,434
Commitments and contingencies
Total Liabilities and Shareholders' Equity $84,379 $86,145
<PAGE>
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
1998 1997 1996
(In thousands except per share amounts)
Net sales $182,954 $169,387 $183,163
Cost of sales 160,645 148,053 159,289
Gross profit 22,309 21,334 23,874
Selling, general and
administrative expenses 12,816 12,719(1) 13,430
Provision for environmental remediation <N~> 800(2) <N~>
Operating profit 9,493 7,815 10,444
Other income (expense):
Interest expense (59) (110) (157)
Interest and other income 2,309 2,496 1,522
2,250 2,386 1,365
Income before income taxes 11,743 10,201 11,809
Income taxes:
Federal:
Current 3,299 3,571 3,603
Deferred 424 (121) 346
State and local:
Current 388 544 644
Deferred 75 (21) 62
4,186 3,973 4,655
Net Income $ 7,557 $ 6,228(1)(2)$7,154
Net income per common share:
Basic $ 1.11 $ 0.83(1)(2)$ 0.89
Diluted 1.08 0.82(1)(2) 0.88
Weighted average shares outstanding:
Basic 6,732 7,458 7,948
Diluted 6,987 7,625 8,137
See accompanying notes to consolidated financial statements.
(1) Includes an after-tax charge of $187($.03/share), $225 pre-tax in final
settlement of a complaint by the U.S. Department of Justice sent to the Company
on February 10, 1995. The complaint alleged violation of the Resource
Conservation and Recovery Act (RCRA) by a then wholly owned subsidiary in
Waterbury, CT. This subsidiary was sold on June 19, 1996.
(2) Includes an after-tax charge of $480($.06/share), $800 pre-tax to cover a
revised estimate for remediation of the Company's former manufacturing site in
Carlstadt, NJ.
<PAGE>
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
1998 1997 1996
(In thousands)
Operating activities:
Net income $7,557 $6,228 $7,154
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 192 179 265
Loss (gain) on sale of assets <N~> (198) 257
Stock distribution to employees <N~> <N~> 3
Effect of market value over original
option price for options exercised 234 59 144
Provision for doubtful accounts <N~> 12 3
Provision for (recovery of) deferred
income taxes 499 (142) 407
Changes in:
Investments - trading securities (774) (437) 2,965
Trade accounts receivable 641 100 1,350
Other receivables (139) (773) 576
Inventory 4,427 (1,054) 367
Prepaid expenses 7 (136) 123
Other assets 30 (120) -
Drafts & acceptances payable (194) (259) 73
Accounts payable (1,744) 892 467
Accrued merchandise purchases (815) 518 (153)
Accrued compensation (906) 125 (263)
Accrued environmental remediation (9) 597 (195)
Accrued income taxes (227) 242 (980)
Other accrued expenses (184) (45) (200)
Net cash provided by operating activities 8,595 5,788 12,363
Investing activities:
Purchases of investments<N~>held-to-maturity (4,732) (6,186) (7,653)
Proceeds from investments<N~>held-to-maturity 6,844 8,728 3,838
Changes in notes receivable 46 (158) 28
Purchases of property and equipment (253) (155) (77)
Proceeds from sale of property <N~> 259 92
Net cash provided by (used in)
investing activities 1,905 2,488 (3,772)
Financing activities:
Payments of long-term debt (500) (500) (500)
Payments of cash dividends (1,748) (1,795) (1,948)
Proceeds from exercise of stock options 433 138 223
Payments for purchases of treasury stock (3,649) (7,357) (2,630)
Net cash used in financing activities (5,464) (9,514) (4,855)
Net increase (decrease) in cash and
cash equivalents 5,036 (1,238) 3,736
Cash and cash equivalents at beginning of year 4,142 5,380 1,644
Cash and cash equivalents at end of year $9,178 $4,142 $5,380
See accompanying notes to consolidated financial statements.
<PAGE>
ACETO CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
Common
Common Capital in Stock
Stock Excess of Retained Held in
Issued Par Value Earnings Treasury Total
Balance at June 30, 1995 $ 55 $50,168 $18,747 $(8,827) $60,143
Net income <N~> <N~> 7,154 <N~> 7,154
Stock distribution to employees
(175 shares) <N~> 1 <N~> 2 3
Stock dividend paid
(471,000 shares) 5 7,303 (7,313) <N~> (5)
Cash dividends:
Common stock($.36 per share)<N~> <N~> (1,869) <N~> (1,869)
Preferred stock <N~> <N~> (73) <N~> (73)
Exercise of stock options
(36,000 shares) <N~> (159) <N~> 400 241
Federal income tax benefit
from 1980 stock option plan <N~> 126 <N~> <N~> 126
Purchase of treasury stock
(171,000 shares) <N~> <N~> <N~> (2,630) (2,630)
Conversion of redeemable
preferred stock (11,000 shares)<N~> (52) <N~> 123 71
Balance at June 30, 1996 60 57,387 16,646 (10,932) 63,161
Net income <N~> <N~> 6,228 <N~> 6,228
Cash dividends:
Common stock ($.36 per share)<N~> <N~> (1,725) <N~> (1,725)
Preferred stock <N~> <N~> (70) <N~> (70)
Exercise of stock options
(19,000 shares) <N~> (46) <N~> 203 157
Federal income tax benefit
from 1980 stock option plan <N~> 40 <N~> <N~> 40
Purchase of treasury stock
(552,000 shares) <N~> <N~> <N~> (7,357) (7,357)
Balance at June 30, 1997 60 57,381 21,079 (18,086) 60,434
Net income <N~> <N~> 7,557 <N~> 7,557
Stock split - 3 for 2 30 (30) <N~> <N~> <N~>
Cash dividends:
Common stock ($.31 per share)<N~> <N~> (1,678) <N~> (1,678)
Preferred stock <N~> <N~> (70) <N~> (70)
Exercise of stock options
(47,000 shares) <N~> 24 <N~> 487 511
Federal income tax benefit
from 1980 stock option plan <N~> 156 <N~> <N~> 156
Purchase of treasury stock
(250,000 shares) <N~> <N~> <N~> (3,649) (3,649)
Balance at June 30, 1998 $ 90 $ 57,531 $ 26,888 $(21,248) $ 63,261
See accompanying notes to consolidated financial statements.
ACETO CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS EXCEPT AMOUNTS AND PAR VALUE PER SHARE)
(1) DESCRIPTION OF BUSINESS
The Company is primarily engaged in the marketing of fine and industrial
chemicals used principally in the agricultural, color producing, pharmaceutical
and surface coating industries. Most of the chemicals distributed by the
Company are purchased abroad mainly for sale throughout the United States; to a
minor extent, some chemicals are sold abroad.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Aceto Corporation
and all subsidiaries. All significant intercompany accounts and transactions
are eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash equivalents at June 30, 1998 and 1997 were $1,000 and $0, respectively.
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
MARKETABLE INVESTMENT SECURITIES
The Company classifies investments in marketable securities as trading,
available-for-sale or held-to-maturity at the time of purchase and periodically
re-evaluates such classifications. There were no securities classified as
available-for-sale as of June 30, 1998 and 1997. Trading securities are carried
at fair value, with unrealized holding gains and losses included in earnings.
Held-to-maturity securities are recorded at cost and are adjusted for the
amortization or accretion of premiums or discounts over the life of the related
security. In determining realized gains and losses, the cost of securities sold
is based on the specific identification method. Interest and dividends on the
investments are accrued at the balance sheet date.
INVENTORY
Inventory consists of finished goods and is stated at the lower of cost
(principally on a specific identification basis) or market (net realizable
value).
INCOME TAXES
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
PROPERTY HELD FOR SALE
Property held for sale is stated at cost. Buildings included in the property
held for sale are depreciated using the straight-line method over twenty years.
Impairment, if any, is recognized if the estimated fair value less costs to
sell is lower than the carrying value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. The Company depreciates property and
equipment using sum-of-the-years and declining balance methods. The range of
estimated useful lives are as follows:
Computers 5 years
Furniture and fixtures 10 years
Automobiles 3 years
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of all financial instruments classified as a current asset
or current liability are deemed to approximate fair value because of the short
maturity of these instruments. The fair value of foreign currency contracts
(used for hedging purposes) was estimated by obtaining quotes from brokers and
the difference between the fair value and contract value was immaterial.
The difference between the fair value of long-term financial instruments and
their carrying value at both June 30, 1998 and 1997 was not material. The fair
value of the Company<O~>s long-term debt and notes receivable was based upon
current rates offered for similar financial instruments to the Company.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of on July 1, 1996. This statement requires
that long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value less costs to sell. Adoption of this statement did not
have a material impact on the Company's financial position, results of
operations or liquidity.
STOCK OPTIONS
Prior to July 1, 1996 the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board (<O`>APB<O'>)
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if and to the extent that the current market price of the underlying
stock exceeded the exercise price. On July 1, 1996, the Company adopted
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (<O`>Statement 123<O'>), which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, Statement 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net income and
pro forma earnings per share disclosures for employee stock option grants made
in the prior year and future years as if the fair-value-based method defined in
Statement 123 had been applied. The Company has elected to continue to apply
the provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of Statement 123.
COMMON STOCK
On March 18, 1998, the Board of Directors authorized a three for two stock
split effected in the form of a stock dividend, which was payable April 13,
1998, to shareholders of record on March 30, 1998. In accounting for the stock
split, an amount equal to the par value of the common shares issued was
transferred from capital in excess of par value to common stock. This transfer
has been reflected on the consolidated balance sheet as of June 30, 1998. The
share amounts presented in the consolidated balance sheet as of June 30, 1997
reflect the actual share amounts issued and outstanding at June 30, 1997. Par
value remains unchanged at $.01 as well as the authorized shares of 10,000,000.
All historical weighted average share and net income per share amounts have
been restated to reflect the stock split.
NET INCOME PER COMMON SHARE
Net income per common share, both basic and diluted, is determined based on the
weighted average number of common shares outstanding for the period. Diluted
weighted average shares outstanding include shares issuable from the exercise
of stock options and the conversion of preferred stock. Basic and diluted
weighted average common shares outstanding for the fiscal years ended June 30,
1998, 1997 and 1996, adjusted as appropriate for the 3 for 2 stock split paid
in April 1998 and the 10% stock dividend paid in January 1996 were as follows:
June 30th
1998 1997 1996
Basic 6,732,000 7,458,000 7,948,000
Diluted 6,987,000 7,625,000 8,137,000
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("Statement 128"). In
accordance with the requirements of Statement 128, net income per common share
amounts ("basic EPS") were computed by dividing net income after deducting
preferred stock dividends on the Company's $2.50 cumulative redeemable
preferred stock by the weighted average number of common shares outstanding and
excluded any potential dilution. Net income per common share amounts <N~>
assuming dilution ("diluted EPS") were computed by reflecting potential
dilution from the exercise of stock options and conversion of preferred stock.
Statement 128 requires the presentation of both basic EPS and diluted EPS on
the face of the income statement. Income per share amounts for the same prior-
year periods have been restated to conform with the provisions of Statement
128.
FOREIGN EXCHANGE RISK MANAGEMENT
A significant amount of purchases made by the Company are denominated in
foreign currencies. The Company generally enters into future foreign exchange
contracts consistent with the exposure relating to such purchases. The decision
to enter into a future foreign exchange contract is made by management taking
into consideration the volatility of currency rates in the particular foreign
country and the timing of the purchase commitment. In certain instances the
Company may delay the purchase of foreign exchange contracts. At June 30, 1998
the Company did not have future foreign exchange contracts for open purchase
commitments of approximately $1,300.
(3) INVESTMENTS
A summary of trading securities, classified as short-term, was as follows:
June 30, 1998 June 30, 1997
Aggregate Cost Aggregate Cost
Fair Value Basis Fair Value Basis
U.S. Treasury securities $2,874 $2,800 $2,610 $2,602
Corporate debt securities 1,201 817 691 344
The change in the net unrealized holding gains (or losses) on trading
securities was $4, $(31) and $47 for the years ended June 30, 1998, 1997 and
1996 respectively. A summary of held-to-maturity securities as of June 30,
1998 was as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost or Cost Gains Losses Value
Held-to-maturity securities:
Short-term investments:
Corporate debt securities 7,280 18 <N~> 7,298
Municipal obligations 507 <N~> 4 503
Long-term investments:
U.S. treasury securities 1,996 18 <N~> 2,014
Corporate debt securities 6,029 41 <N~> 6,070
The contractual maturity on the long-term investments ranges between one and
three years.
(4) NOTES RECEIVABLE
Notes receivable at June 30, 1998 and 1997, respectively, were as follows:
Date of Interest Original Outstanding
Note Rate Maturit y Amount June 30, 1998 June 30, 1997
Jan 1997(1 9.50% Jan 2007 $ 206 $189 $202
June 1996(1) 9.25% July 2001 460 450 457
June 1996(2) Prime+1.0% June 2003 175 175 175
Sep 1993(1) Prime+2.5% Oct 2003 256 134 160
$1,097 $948 $994
(1) Secured by a first mortgage on the real property sold.
(2) Collateralized by a security interest in assets sold and contract
rights.
The short-term portion of notes receivable was $46 at both June 30, 1998 and
1997 and is included in the amounts above.
(5) ENVIRONMENTAL REMEDIATION
It is the policy of the Company to accrue and charge against earnings
environmental remediation costs at the time it is determined that a liability
has been incurred and the amount of that liability can be reasonably estimated.
During fiscal 1993 the Company announced the closing of its manufacturing
subsidiary located in Carlstadt, New Jersey. At the same time an environmental
consultant was engaged by the Company to determine the extent of contamination
on the site and develop a plan of remediation. Based on the initial estimates
from the consultant a liability was established in fiscal 1993 for $1,500.
During fiscal 1997 after additional testing was completed, the Company received
a revised estimate from the consultant. As a result, the Company recorded an
additional liability of $800 in the quarter ended September 30, 1996. At both
June 30, 1998 and 1997 the remaining liability was $1,400. The Company believes
it is possible that such amount may not be sufficient to cover future
environmental remediation but does not believe there will be a material adverse
effect on the financial position or liquidity of the Company. However,
depending on the amount and timing of any required remediation over and above
the liability established, it is possible that the Company's future results
could be materially affected in a particular reporting period. Other than the
aforementioned remediation, the Company is not aware of any material
environmental liabilities.
(6) FINANCING ARRANGEMENTS
At June 30, 1998 and 1997 the Company had available two lines of credit with
financial institutions totaling $15,000 and $13,000, respectively. The Company
maintains compensating balances under informal arrangements. There were no
short-term loans outstanding under the lines of credit at any time during the
three year period ended June 30, 1998. The lines of credit can be withdrawn by
the financial institutions at any time.
(7) LONG-TERM DEBT
Long-term debt outstanding at June 30, 1998 and 1997 was as follows:
1998 1997
Note payable to the Prudential
Insurance Company of America
in equal semi-annual installments
of $250 maturing Jan. 1, 1999,
plus interest at 9.10% payable
quarterly $ 250 $ 750
Less current installments 250 250
$ <N~> $ 500
The agreement underlying the long-term debt contains certain defined
restrictive covenants, including limitations on corporate acquisitions and
mergers and additional debt, minimum working capital and debt/equity ratios and
the acquisition of the Company's stock.
(8) NET INCOME PER COMMON SHARE
The following table sets forth a computation of basic and diluted income per
common share. A reconciliation between the numerators and denominators of the
basic and diluted income per share computation for net income was as follows:
Year Ended
June 30, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income $7,557
Preferred stock dividends (70)
Basic income per share 7,487 6,732 $1.11
Effect of dilutive securities:
Stock options <N~> 116
Convertible preferred stock 70 139
Diluted income per share $7,557 6,987 $1.08
Year Ended
June 30, 1997
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income $6,228
Preferred stock dividends (70)
Basic income per share 6,158 7,458 $0.83
Effect of dilutive securities:
Stock options <N~> 28
Convertible preferred stock 70 139
Diluted income per share $6,228 7,625 $0.82
Year Ended
June 30, 1996
Income Shares Per Share
(Numerator) (Denominator) Amount
Net income $7,154
Preferred stock dividends (73)
Basic income per share 7,081 7,948 $0.89
Effect of dilutive securities:
Stock options <N~> 50
Convertible preferred stock 73 139
Diluted income per share $7,154 8,137 $0.88
(9) REDEEMABLE PREFERRED STOCK
The Company has 2,000,000 authorized shares of redeemable preferred stock with
a par value of $2.50 per share. The stock is redeemable at the option of either
the holder or issuer at par. All of the outstanding preferred stock is held by
the Aceto Corporation Profit Sharing Plan. Redeemable preferred stock
outstanding at both June 30, 1998 and 1997 consisted of the following:
Shares Par Value
Third series 100,000 $250
Fourth series 40,000 100
Fifth series 40,000 100
Sixth series 40,000 100
Seventh series 40,000 100
Eighth series 40,000 100
300,000 $750
The third, fourth, fifth, sixth, seventh and eighth series of preferred stock
are convertible beginning on the date of issue into the Company's common stock
at ratios of 6.4, 6.4, 5.1, 6.0, 6.0 and 4.2 shares of preferred stock to 1
share of common stock, respectively, subject to antidilution provisions. The
third and sixth series pay 10%, the fourth and fifth series pay 8%, the seventh
series pays 9.5% and the eighth series pays 9% annual cumulative cash dividends
on par value. All series have voting rights. In the event of liquidation of the
Company, all series share ratably in the remaining proceeds.
(10) STOCK OPTION PLAN
Under the terms of the Company's 1980 stock option plan, options may be issued
to officers and key employees. The exercise price per share, determined by the
Board of Directors, can be greater or less than the market value of the stock
on the date of grant. The options vest, as determined by the Board of
Directors, either immediately or over a period of years. The options expire no
later than five or ten years from the date they are fully vested. At June 30,
1998 and 1997, options to purchase 312,000 and 13,000 shares of common stock,
respectively, were available for grant.
The following tabulations summarize the shares of common stock under option at
June 30, 1998, 1997 and 1996, and the activity with respect to options for the
respective years then ended.
Shares Weighted Average
subject to exercise price
option per share
Balance at June 30, 1995 180,000 $5.61
Granted 219,000 7.94
Exercised (54,000) 4.10
Forfeited (2,000) 7.84
Balance at June 30, 1996 343,000 7.08
Granted 225,000 8.93
Exercised (29,000) 4.86
Forfeited (12,000) 7.99
Balance at June 30, 1997 527,000 7.96
Granted 81,000 10.00
Exercised (66,000) 6.54
Forfeited <N~>
Balance at June 30, 1998 542,000 8.44
At June 30, 1998, outstanding options had expiration dates ranging from
December 31, 1998 to December 31, 2015.
Under the plan, during the period options become exercisable, compensation is
charged to operations for the excess of fair market value over the option price
at the date of grant. Such charges to operations were $121, $121 and $128 in
fiscal 1998, 1997 and 1996, respectively.
The per share weighted average fair value of stock options granted during 1998,
1997 and 1996 was $6.07, $2.89 and $3.85, respectively, on the date of the
grant using the Black-Scholes option-pricing model with the following weighted
average assumptions:
Risk-free
Date of Expected Expected interest Dividend
Grant volatility(%) life(years) rate(%) yield(%)
1998
1/26/98 20 5.0 6.22 1.90
1/26/98 20 16.5 6.25 1.90
1997
1/24/97 20 5.0 6.19 2.62
6/05/97 20 13.4 6.52 2.67
1996
1/29/96 20 5.0 5.18 2.25
1/29/96 20 6.8 5.24 2.25
3/20/96 20 6.8 5.93 2.34
The Company applies APB Opinion No. 25 in accounting for its stock option
grants and, accordingly, no compensation cost has been recognized in the
financial statements for its stock options which have an exercise price equal
to or greater than the fair value of the stock on the date of the grant. Had
the Company determined compensation cost based on the fair value at the grant
date for its stock options under Statement 123, the Company's net income and
income per share would have been reduced to the pro forma amounts indicated
below:
1998 1997 1996
Net income:
As reported $7,557 $6,228 $7,154
Pro forma 7,281 5,983 6,943
Income per share-basic:
As reported $ 1.11 $ 0.83 $ 0.89
Pro forma 1.07 0.79 0.86
Income per share-diluted:
As reported 1.08 0.82 0.88
Pro forma 1.04 0.79 0.85
Pro forma net income reflects only options granted in fiscal 1998, 1997 and
1996. Therefore, the full impact of calculating compensation costs for stock
options under Statement 123 is not reflected in the pro forma net income
amounts presented above because compensation costs are reflected over the
options' vesting period and compensation cost for options granted prior to July
1, 1995 is not considered.
Summarized information about stock options outstanding and exercisable at June
30, 1998 was as follows:
Outstanding Exercisable
Exercise Number of Average Average Number of Average
Price Range Shares Life(1) Price(2) Shares Price(2)
$5-7.50 30,000 1.2 $ 6.67 30,000 $6.67
7.50-10 491,000 9.2 8.51 194,000 8.27
10-13 21,000 4.5 12.92 21,000 6.67
(1) Weighted average contractual life remaining, in years.
(2) Weighted average exercise price.
(11) INTEREST AND OTHER INCOME
Interest and other income earned during the fiscal years ended June 30, 1998,
1997 and 1996 were comprised of the following:
1998 1997 1996
Dividends $ 140 $ 19 $ 14
Interest 1,314 1,595 1,469
Net gain (loss) on investments 114 105 44
Net gain (loss) on sale of assets <N~> 198 (243)
Royalty income 427 248 143
Misc. other income 314 331 95
$2,309 $2,496 $1,522
(12) INCOME TAXES
The tax effects of temporary differences that give rise to the deferred tax
assets and liabilities at June 30, 1998 and 1997 are presented below:
1998 1997
Deferred tax assets (liabilities):
Accrued environmental remediation
liabilities not currently
deductible $ 551 $ 555
Accrued compensation 314 468
Additional costs inventoried for
tax purposes pursuant to the
Tax Reform Act of 1986 125 156
Allowance for doubtful accounts
receivable 88 88
Differences in depreciation of
property and equipment 31 (14)
475 election (172) <N~>
Other (183) <N~>
Net deferred tax asset 754 $ 1,253
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in making this assessment. In order to
fully realize the deferred tax asset, the Company will need to generate future
taxable income of approximately $2,000. Taxable income for the years ended June
30, 1998 and 1997 was approximately $10,900 and $9,900, respectively. Based
upon the level of historical taxable income and projections for taxable income
over the periods which the deferred tax assets are deductible, management
believes it is more likely than not the Company will realize the benefits of
these deductible differences.
Reconciliation of the statutory Federal income tax rate and the effective tax
rate for the fiscal years ended June 30, 1998, 1997 and 1996 was as follows:
1998 1997 1996
Federal statutory tax rate 34.0% 34.0% 34.0%
State and local taxes, net
of Federal income tax
benefit 3.0 3.4 3.9
Other (1.4) 1.5 1.5
Effective tax rate 35.6% 38.9% 39.4%
(13) SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes during the years ended June 30, 1998,
1997 and 1996 was as follows:
1998 1997 1996
Interest $ 59 $ 110 $ 156
Income taxes 3,759 5,024 3,736
In January 1997, the Company received a note in the amount of $206 in
connection with the sale of a building and land. In June 1996, the Company
received notes aggregating $635 in connection with the sale of certain assets
and real property.
(14) PROFIT-SHARING PLANS
The Company has profit-sharing plans in which employees of the parent company
and subsidiaries are eligible to participate. The Company's annual contribution
per employee, which is at management's discretion, is based on a percentage of
compensation paid. The Company's provisions for profit sharing contribution
amounted to $607, $607 and $664 in fiscal 1998, 1997 and 1996, respectively.
(15) SEGMENT INFORMATION
The Company's operations, which principally consist of the marketing of
chemicals, are considered to be one industry segment as defined by Financial
Accounting Standards Board Statement No. 14.
(16) BUSINESS AND CREDIT CONCENTRATIONS
One of the Company's products accounted for 15% of revenues in fiscal 1998; no
product accounted for as much as 10% of revenues in fiscal 1997 or 1996. One of
the Company's customers, purchasing primarily the aforementioned product, also
accounted for 15% of revenues in fiscal 1998. Again, no customer accounted for
as much as 10% of revenues in fiscal 1997 or 1996. One of the Company's
suppliers accounted for 25%, 22% and 25% of total purchases in fiscal 1998,
1997 and 1996, respectively.
Financial instruments, which potentially subject the Company to concentrations
of credit risk, consist principally of trade receivables. The Company's
customers are dispersed across many industries and are located primarily in the
United States. The Company estimates an allowance for doubtful accounts based
upon the creditworthiness of its customers as well as general economic
conditions. Consequently, an adverse change in those factors could affect
the Company's estimate of this allowance. The Company as a policy does not
require collateral from its customers, however it maintains credit insurance
covering certain non-United States receivables.
(17) COMMITMENTS AND CONTINGENCIES
(a) A subsidiary of the Company markets certain agricultural chemicals which
are subject to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA).
FIFRA requires that test data be provided to the Environmental Protection
Agency (EPA) to register, obtain and maintain approved labels for pesticide
products. The EPA requires that follow-on registrants of these products
compensate the initial registrant for the cost of producing the necessary test
data on a basis prescribed in the FIFRA regulations. Follow-on registrants do
not themselves generate or contract for the data. However, when FIFRA
requirements mandate the generation of new test data to enable all registrant's
to continue marketing a pesticide product, often both the initial and follow-on
registrants establish a task force to jointly undertake the testing effort. The
Company is presently a member of two such task force groups. The Company
estimates the cost of test data at the time it is first required, which
estimates are amortized over a period of up to five years, updated annually,
and are included in cost of sales.
Liability under FIFRA would arise if the Company marketed pesticide products
not registered under FIFRA, or failed to compensate the initial registrant for
the cost of producing the necessary test data. Since the Company markets no
pesticide products which are not registered, and compensates initial
registrants for the cost of producing test data, it believes it does not
subject itself to contingent liabilities in such regard.
(b) The Company and its subsidiaries are subject to various claims which have
arisen in the normal course of their business. The impact of the final
resolution of these matters on the Company's results of operations or
liquidity in a particular reporting period is not known. Management is of the
opinion, however, that the ultimate outcome of such matters will not have a
material adverse effect upon the Company's financial condition.
(c) The Company enters into foreign exchange contracts to minimize the effect
of exchange rate fluctuations on costs. The foreign exchange contracts are
entered into solely as hedges of inventory purchase commitments. Gains and
losses on the foreign exchange contracts are reported as a component of the
underlying transaction. Contracts terminated prior to the transaction date are
recognized as income or loss at the time of termination. During fiscal years
1998 and 1997 the amount of such gain or loss was insignificant. At June 30,
1998 the company had future foreign currency contracts in the amount of
$10,800. These contracts have varying maturities extending to December 1999.
(d) At June 30, 1998, the Company had non-negotiated letters of credit and bank
acceptances to purchase merchandise of approximately $5,000 which approximated
the fair value of the merchandise. The terms of the letters of credit are all
less than one year. No material loss is anticipated due to non-performance by
the counterparties to these agreements.
(e) The Company currently leases an office facility under an operating lease
expiring April 2001. At June 30, 1998, future minimum lease payments in the
aggregate and for each of the five succeeding years are as follows:
Fiscal year
ending
June 30 Amount
1999 $ 555
2000 555
2001 440
2002 <N~>
2003 <N~>
$1,550
Total rental expense relating to the current office facility amounted to
approximately $530, $490 and $480 for fiscal 1998, 1997 and 1996, respectively.
<PAGE>
Schedule II
ACETO CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years ended June 30, 1998, 1997 and 1996
Balance at Charged to Balance
beginning costs and Deduc- at end
DESCRIPTION OF YEAR EXPENSES TIONS OF YEAR
Year ended June 30, 1998:
Allowance for doubtful
accounts $ 219,366 26,857 26,857(a) $ 219,366
Year ended June 30, 1997:
Allowance for doubtful
accounts $ 207,366 80,379 68,379(a) $ 219,366
Year ended June 30, 1996:
Allowance for doubtful
accounts $ 204,366 95,509 92,509(a) $ 207,366
(a) Specific accounts written off as uncollectible.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 9,178
<SECURITIES> 11,862
<RECEIVABLES> 24,205
<ALLOWANCES> 219
<INVENTORY> 26,783
<CURRENT-ASSETS> 74,791
<PP&E> 1,569
<DEPRECIATION> 1,189
<TOTAL-ASSETS> 84,379
<CURRENT-LIABILITIES> 20,368
<BONDS> 0
<COMMON> 90
0
750
<OTHER-SE> 63,171
<TOTAL-LIABILITY-AND-EQUITY> 84,379
<SALES> 182,954
<TOTAL-REVENUES> 182,954
<CGS> 160,645
<TOTAL-COSTS> 160,645
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59
<INCOME-PRETAX> 11,743
<INCOME-TAX> 4,186
<INCOME-CONTINUING> 7,557
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,557
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.08
</TABLE>
