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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 10-K
(Mark one)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File No.: 1-8467 _______________________
BMC INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-0169210
(State or other jurisdiction of the incorporation) (I.R.S. Employer I.D. No.)
TWO APPLETREE SQUARE, MINNEAPOLIS, MINNESOTA 55425
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (612) 851-6000
_______________________
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
COMMON STOCK NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
_______________________
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 10, 1995, 13,399,942 shares of Common Stock of the Registrant were
outstanding. The aggregate market value of the Common Stock as of such date
(based on the closing price of the Common Stock at that date on the New York
Stock Exchange), excluding shares deemed beneficially owned by directors and
officers, was approximately $223 million.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Stockholders for the year ended December 31,
1994 (the "1994 Annual Report"), are incorporated by reference into Part I and
II, to the extent specific pages are referred to herein. Portions of the proxy
statement, dated March 27, 1995, for the annual meeting of stockholders to be
held May 4, 1995 (the "1995 Proxy Statement") are incorporated by reference into
Part III, to the extent specific pages are referred to herein.
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PART I
ITEM 1. BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS.
BMC Industries, Inc. is a Minnesota corporation with its executive offices
located at Two Appletree Square, Minneapolis, Minnesota 55425; telephone (612)
851-6000. Unless the context otherwise indicates, the terms "Company" or "BMC"
as used herein mean BMC Industries, Inc. and its consolidated subsidiaries.
BMC was organized in 1907 under the name Buckbee-Mears Company. Over the course
of its early history, the Company developed an expertise in photolithography and
in the chemical etching of metals. In the 1950's, BMC collaborated in the
development of chemically etched aperture masks for color cathode ray tubes.
The Company entered the optical business in 1969 with the acquisition of Vision-
Ease Lens, a manufacturer of glass multifocal ophthalmic lenses, based in St.
Cloud, Minnesota.
In the early 1980's, the Company sought accelerated growth through acquisition,
acquiring additional optical products operations and operations producing
electronic interconnection components and related manufacturing equipment. In
1985, the Company determined that the interest burden from acquisition-related
debt and a worsening economy in the electronics industry made it impossible to
sustain the growth strategy. Between 1985 and 1987, the Company divested
several optical products operations and all of the interconnection component
operations. Additionally, a contact lens manufacturing operation and the
Company's former European optical products businesses were divested in 1989.
The Company presently is composed of two product groups, referred to as
Precision Imaged Products and Optical Products. Precision Imaged Products
designs, manufactures and markets precision etched metal parts, specialty
printed circuits, precision electroformed components and precision etched and
filled glass products. Precision Imaged Products includes the only U.S. and the
only independent European manufacturers of aperture masks for color cathode ray
tubes, an integral component of color television picture tubes and color
computer monitors. Precision Imaged Products, through its Peptech division,
also is involved in the sale, design, manufacture and installation of aperture
mask manufacturing equipment and the licensing of BMC's related proprietary
process technology. Optical Products designs, manufactures and markets
polycarbonate, glass and hard-resin plastic multifocal and single-vision
ophthalmic lenses for the personal eyewear market. As of February 28, 1995, the
Company had 1,853 employees.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Financial Information about the Company's business segments for the most recent
three fiscal years is contained on pages 33-35 of the 1994 Annual Report, and is
incorporated herein by reference.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
The Company's business is divided into two product groups: Precision Imaged
Products and Optical Products.
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PRECISION IMAGED PRODUCTS
Precision Imaged Products ("PIP") includes operations that design, manufacture
and market precision etched metal parts, specialty printed circuits, precision
electroformed components and precision etched and filled glass products. The
group's Peptech division is involved in the sale, design, manufacture and
installation of aperture mask manufacturing equipment and the licensing of the
Company's related proprietary process technology.
PRODUCTS AND MARKETING. PIP includes Buckbee-Mears Cortland (Cortland, New
York), Buckbee-Mears Europe (Mullheim, Germany) and Buckbee-Mears St. Paul (St.
Paul, Minnesota). The Cortland and Mullheim facilities primarily manufacture
aperture masks. The St. Paul facility manufactures precision etched metal
parts, specialty printed circuits, precision electroformed components and
precision etched and filled glass products. Two customers each accounted for
more than 10% of PIP's 1994 total revenues, while one accounted for more than
10% of the Company's 1994 total revenues. Thomson, S.A. of France (including
its U.S. based operations) accounted for approximately 20% of the Company's 1994
total revenues. Thomson produces televisions in North America and Europe under
various trademarks, including RCA and GE.
Aperture masks are photochemically etched fine screen grids essential in the
manufacture and operation of color cathode ray tubes used in color televisions
and color computer monitors. An aperture mask allows electron beams to activate
selectively the red, green or blue phosphors on the inside face plate of the
cathode ray tube, producing a color image. Aperture masks are made from cold
rolled steel or invar (a nickel alloy). The Company's facilities employ an
automated continuous photochemical etching process originally developed by the
Company. Aperture masks are sold directly by the Company to color picture tube
manufacturers in North America, Western and Eastern Europe, India, and Asia.
PIP maintains an in-house sales staff to sell aperture masks directly to its
customers.
During the 1980's, the Company expanded its aperture mask production capacity by
adding additional aperture mask production lines in 1984 and 1988 at its
Cortland, New York facility and in 1986 at its Mullheim, Germany facility. In
1986, the Company also added a specialized production line at Mullheim. The
specialized line is designed to manufacture precision etched components other
than aperture masks, such as gimbel springs for use in computer disk drives.
This line was modified in late 1993 and is now capable of manufacturing certain
small-sized aperture masks. At its Cortland operation, the Company also
manufactures small quantities of special-purpose, very-high-resolution foil
aperture masks for military avionics use.
The Company was engaged in research and development efforts in recent prior
years aimed at developing the manufacturing and technical expertise necessary to
produce aperture masks for high definition television ("HDTV") and other large
color cathode ray tube applications ("jumbo masks"). As a result, the Company
has delivered limited quantities of prototype HDTV aperture masks to customers
engaged in HDTV research and development. Commercial production deliveries of
other jumbo masks, which are manufactured primarily from invar, have increased
significantly in the last three years due to a corresponding increase in sales
of jumbo televisions, particularly in the United States. In addition, over the
past few years, the Company has engaged in research and development efforts
aimed at developing the manufacturing and technical expertise necessary to
produce aperture masks for high-resolution color computer monitors.
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In 1993, the Company modified one of the three manufacturing lines at its
Cortland, New York facility to permit the production of high-resolution masks
for computer monitors. An initial pre-production run of high-resolution masks
was completed during the fourth quarter of 1993. During 1994, the Company
qualified as a high-resolution computer monitor mask vendor and began its first
volume shipments of the product. In February 1994, the Company began steps to
upgrade another one of the three manufacturing lines at its Cortland, New York
facility. The upgraded line in Cortland will serve the growing demand for large
and jumbo masks for high-performance color television tubes, and at the same
time allow the Company to dedicate the previously modified manufacturing line to
the production of high-resolution computer monitor masks. The Company expects
to complete the process upgrades by the fourth quarter of 1995.
In February of 1994, the Company initiated construction of a new production line
at its Mullheim, Germany facility. The line is expected to be operational in
the fourth quarter of 1995, with a ramp into full volume production during 1996.
The new production line in the German facility will be dedicated exclusively to
the production of high-resolution computer monitor masks.
In January 1995, the Company announced its plans to add a new television
aperture mask production line in 1997. The Company expects to finalize site
selection and break ground on the new television aperture mask line before the
end of 1995. This line will add manufacturing capacity for seven to nine
million television aperture masks, focused particularly on the growing market
for large masks (25-29 inch).
Products manufactured at the St. Paul, Minnesota facility include precision
etched metal parts; large size, tight tolerances specialty printed circuits up
to four by twelve feet in area; precision electroformed components; and,
precision etched and filled glass products. These products are sold directly by
the Company, both by in-house sales personnel and manufacturers representatives,
to manufacturers of military and avionics electronics, microwave antennas,
computers and printers, various consumer products, medical electronics and
computer aided design/computer aided manufacturing ("CAD/CAM") equipment.
PIP's Peptech division was created to coordinate and administer sales of
aperture mask manufacturing equipment and licensing of related proprietary
process technology and to exercise general oversight over the group's
technological resources, development efforts and future equipment sales
activities. In 1991, the Company (through its Peptech division) largely
completed delivery and installation of aperture mask manufacturing equipment to
a Chinese customer; in 1992, acceptance testing of the equipment was completed
and the customer commenced commercial production. In 1993, the Company (through
Peptech) entered into a 24-month contract to deliver and install aperture mask
manufacturing equipment to another Chinese customer. The Company expects that
installation and start-up of the mask production equipment covered by this
contract will be completed in 1995.
INTELLECTUAL PROPERTY. The Company has a number of patents which are important
to the success of its PIP operations. These patents range in their expiration
dates from 1997 to 2012. The loss of any single patent would not have a
material adverse effect on the business of the Company as a whole. The Company
believes that improvement of existing products and processes and a reliance on
trade secrets and unpatented proprietary know-how are as important as patent
protection in establishing and maintaining the Company's competitive position.
At the same time, the Company continues to seek patent protection for its
products and processes on a selective basis. However, there can be no assurance
that any patents obtained will provide substantial protection or be of
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commercial value. The Company generally requires its consultants and employees
to agree in writing to maintain the confidentiality of the Company's information
and (within certain limits) to assign to the Company any inventions, and any
patent or other intellectual property rights, relating to the Company's
business.
COMPETITION. Competition with respect to the products described above is
intense, with no one competitor dominating the market. The principal methods of
competition are pricing, product quality and product availability.
The Company is one of only five independent aperture mask manufacturers in
the world. In addition, several color picture tube manufacturers operate
captive aperture mask production facilities. State directed ventures operate
in China. The Company believes that it has approximately a 20% share of the
total world television aperture mask market held by independent
manufacturers. The Company is the only independent aperture mask
manufacturer with production facilities in either North America or Western
Europe.
Many producers compete in the market for precision etched metal parts produced
by the St. Paul facility; there is no clear market share leader. The Company
sells its precision etched metal parts to approximately 350 industrial users.
The specialty printed circuit market served by that facility includes producers
of a wide variety of end products; its size therefore is difficult to quantify.
The Company estimates that there are approximately 100 customers for specialty
circuits, primarily military and industrial users.
SUPPLIES. Each of the PIP operations have available multiple sources of the raw
materials needed to manufacture its products. The Cortland operation imports
from Japan and Germany all of its steel and invar requirements necessary in the
manufacture of its products; the Mullheim operation imports from Japan a portion
of its steel and invar requirements. Importation of such steel into the United
States is subject to restrictions imposed by U.S. federal trade legislation and
regulations, but the Company does not anticipate difficulty in obtaining this or
any other raw materials. In 1992, the Company was involved in a successful
effort to exclude aperture mask steel from products currently involved in a
dumping investigation by the U.S. International Trade Commission.
BACKLOG. As of December 31, 1994, the backlog of PIP sales orders believed to
be firm was $126 million, compared with $121 million as of December 31, 1993.
The Company expects that all of the December 31, 1994 backlog orders will be
filled within the current fiscal year. Backlog orders are based on the results
of annual price/quantity negotiations with aperture mask customers and purchase
orders in hand from other customers. Backlog orders may be changed or cancelled
by aperture mask customers without penalty.
ENVIRONMENTAL. Chemically etching metals, which is performed by all PIP
operations, requires the Company to utilize chemical substances which must be
handled in accordance with applicable laws and regulations. The etching
processes also generate wastewater, which is treated using on-site wastewater
treatment systems, and wastes, some of which are classified as hazardous under
applicable environmental laws and regulations. The Company employs systems for
either disposing of such wastes in accordance with applicable laws or
regulations or recycling the chemicals it utilizes through the manufacturing
process. The wastes and the wastewater treatment systems are monitored by
environmental agencies to assure compliance with applicable standards.
Generation of waste does entail that the Company maintain responsibility for the
waste even after proper disposal. As of March 28, 1995, the Company was
involved in a total of eight (8) sites where
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environmental investigations are ongoing, of which 5 relate to the PIP division
and 3 relate to the Optical Products division. See "Optical Products --
Environmental" for a discussion of the sites relating to the Optical Products
division.
During 1994, the Company received a request for information from the
Environmental Protection Agency (the "EPA") regarding the Company's potential
involvement at a new site. The EPA also initiated additional investigations at
two other sites where the Company had previously been identified as a
potentially responsible party ("PRP"). These additional three (3) sites bring
the total to five (5) potential sites, involving the Company's PIP division,
where environmental investigations are still occurring and where final
settlement has not been reached. However, it is not currently anticipated that
the Company's share of the costs of environmental remediation activities for any
of the sites will have a materially adverse effect on the financial condition of
the Company as a whole.
In addition to the above sites, the Company has been named a defendant in
connection with real property located in Irvine, California previously occupied
by a discontinued operation of the Company's PIP division. The Company has
reached a settlement for this site with the other parties to the lawsuit, which
is subject to court approval, and is in the process of obtaining approval for
the proposed remediation system from the applicable state regulatory agency.
The settlement amount and the cost of the proposed remediation system are both
within the amounts previously reserved by the Company for this matter. The
Company has also been named as a defendant by parties identified as PRP's for a
site in Cortland, New York. The Company is presently committed to a vigorous
defense of this case. It is impossible at this time to predict the likely
outcome of this matter or the Company's exposure if either case is decided
adversely. However, it is not currently anticipated that either case will have
a material adverse effect on the financial condition of the Company as a whole.
PIP estimates that in 1994 and 1993 it incurred approximately $3.4 and $3.5
million, respectively, in expenditures (including capital expenditures) related
to efforts to comply with applicable laws and regulations regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment. In addition, it estimates that it will make
approximately $400 thousand dollars in capital expenditures for environmental
control facilities during 1995.
Optical Products
----------------
Optical Products, also referred to as Vision-Ease Lens ("Vision-Ease"), is a
major U.S. manufacturer of ophthalmic lenses, including semi-finished
polycarbonate, glass and hard-resin plastic multifocal and single-vision lenses
and finished polycarbonate single-vision lenses, with group headquarters located
in Brooklyn Park, Minnesota. Vision-Ease includes operations located in
Brooklyn Center and St. Cloud, Minnesota and in Ft. Lauderdale, Florida.
Vision-Ease also has 10 distribution centers in the U.S. and a sales subsidiary
in Canada.
PRODUCTS AND MARKETING. Ophthalmic lenses are manufactured from three principal
materials: polycarbonate ("poly"), glass and hard-resin plastic. Hard-resin
plastic includes both standard plastic lenses and high-index plastic lenses.
Semi-finished lenses are sold to independent wholesale optical laboratories or
retail outlets with on-site laboratories, which then finish the lens by grinding
and polishing the back side of the lens according to the prescription provided
by the optometrist or ophthalmologist. After processing, the lens is edged and
inserted into the frame by either the wholesale laboratory or the retail optical
dispenser. The Company also factory finishes and sells
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to wholesale and retail laboratories a broad range of standard power
prescription poly lenses. These finished lenses are ready to be edged and
inserted into the frame without laboratory surfacing. Vision-Ease additionally
markets limited quantities of lenses produced by third party manufacturers.
Vision-Ease manufactures finished and semi-finished single-vision and semi-
finished multifocal poly lenses, including progressive power multifocal lenses,
at its Brooklyn Center facility. Progressive power multifocal lenses provide a
gradual transition from distance to near viewing without the visual "jump"
generally associated with a multifocal lens. Due to the strong market demand,
Vision-Ease doubled its polycarbonate manufacturing capacity in 1994. The
Company produces semi-finished glass multifocal and single-vision lenses at its
St. Cloud facility. The Ft. Lauderdale facility manufactures semi-finished
hard-resin plastic multifocal (including high-index) and single-vision lenses,
including plastic progressive power multifocal lenses, and glass progressive
power multifocal lenses.
A strategic supply agreement has been reached with a low-cost, off-shore
supplier for mid-range power standard hard-resin plastic lenses. Under the
terms of the supply agreement, Vision-Ease is committed to purchase
approximately $12 million dollars of lens over a four year period. This
agreement will allow Vision-Ease to focus manufacturing capabilities on
higher-margin products within this segment and to be cost-competitive on
mid-range, lower-margin products.
Over the last three years, the Company has made increasing investments in lens
development work, particularly in poly lens development and other higher margin
products. The result has been the 1992 introduction of a high-index plastic
lens product line and a new poly single-vision lens product line, and the first
quarter 1993 introduction of a poly progressive lens product line and other new
poly products. The Company has added several new products during 1994:
VersaLite Sungrays (a fixed-tint sunglass lens) and the VersaLite 1.0 (the
thinnest and lightest single-vision lens). Vision-Ease will continue to make
significant investments in poly lens development.
Vision-Ease also markets the Optifacts-TM- computer software system. Optifacts-
TM- combines proprietary software and standard major manufacturer computer
hardware for use by optical wholesale laboratories. The Optifacts-TM- software
assists the laboratory in order entry, inventory tracking and related business
functions.
Vision-Ease markets its optical products to more than 1,000 wholesalers and
retailers in the U.S. and to more than 200 in international markets. No single
customer of Vision-Ease accounted for more than 10% of its or the Company's
total revenues in 1994. Vision-Ease utilizes independent sales representatives
to market its lens products, and the Company advertises extensively in industry
publications. Vision-Ease also maintains an internal sales and marketing
department to coordinate all sales and promotional activities and provide
customer service.
INTELLECTUAL PROPERTY. The Company has several patents protecting certain of
the products and manufacturing processes of its Vision-Ease operations. These
patents have expiration dates ranging from 1998 to 2012. The loss of any
single patent would not have a material adverse effect on the business of the
Company as a whole. The Company believes that improvement of existing products
and processes, the development of new lens products and a reliance on trade
secrets and unpatented proprietary know-how are as important as patent
protection in establishing and maintaining the Company's competitive position.
At the same time, the Company continues to seek patent
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protection for its products and processes on a selective basis. However, there
can be no assurance that any patents obtained will provide substantial
protection or be of commercial value. The Company generally requires its
consultants and employees to agree in writing to maintain the confidentiality of
the Company's information and (within certain limits) to assign to the Company
any inventions, and any patent or other intellectual property rights, relating
to the Company's business.
COMPETITION. Competition in the ophthalmic industry with respect to all of the
products described above is intense, with no one firm dominating the industry.
The principal methods of competition in the industry are pricing, product
quality and customer service, particularly with respect to turnaround time from
order to shipment.
SUPPLIES. Vision-Ease has available multiple sources of the raw materials
required to manufacture all of its products, with the exception of a monomer
required in the production of standard hard-resin plastic lenses, which is
available domestically only through Pittsburgh Plate Glass Industries, Inc.
and Akzo Chemie America, a monomer required in the production of high-index
plastic lenses, available only from Daiso, a Japanese company, and
photochromic glass blanks used in producing photochromic glass lenses, which
are available domestically only from Corning Glass and Schott. Although the
Company's principal supplier of standard monomer is Akzo Chemie America, the
products of both domestic suppliers are qualified for use in the Company's
production process. Alternate offshore supplies of both standard monomer and
photochromic glass blanks are available in the event of any disruption of
supplies from domestic sources.
BACKLOG. Due to the significance to the ophthalmic industry of rapid turnaround
time from order to shipment, the backlog of sales orders is not material. Due
to the large number of stock-keeping units required, there is a need to maintain
a significant amount of inventory in order to satisfy rapid response time.
ENVIRONMENTAL. As part of its lens manufacturing processes, the Company
utilizes hazardous chemical substances, which must be handled in accordance with
applicable laws and regulations. The lens manufacturing processes also generate
wastewater and wastes, some of which are classified as hazardous under
applicable environmental laws and regulations. The Company employs systems for
either disposing of such wastes in accordance with applicable laws and
regulations, or recycling the chemicals it utilizes through the manufacturing
process. The wastes and the wastewater treatment systems are monitored by
environmental agencies to assure compliance with applicable standards. The
wastes generated by Vision-Ease operations must be managed and disposed of
properly and the Company retains responsibility for those wastes even after
proper disposal. As of March 28, 1995, the Company was involved in a total of
eight (8) sites where environmental investigations are ongoing, of which 5
relate to the PIP division and 3 relate to the Optical Products division. See
"Precision Imaged Products -- Environmental" for a discussion of the sites
relating to the PIP division.
During 1994, the Company received correspondence from a group of private parties
regarding the Company's potential involvement at a new site. This additional
site brings the total to three (3) potential sites, involving the Company's
Optical Products division, where environmental investigations are still
occurring and where final settlement has not been reached. However, it is not
currently anticipated that the Company's share of the costs of environmental
remediation activities for any of the sites will have a materially adverse
effect on the financial condition of the Company as a whole.
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The Company has also continued its site investigations at its Fort
Lauderdale facility. At this time, there has been no communication from the
state regulatory agency regarding the ultimate resolution of the Fort
Lauderdale property. The Company's consultant, however, has indicated that
some type of remediation is reasonably probable to occur and has provided the
Company an approximate cost range for that remediation. Based on the
consultant's estimates, and in accordance with allowable accounting
principles, the Company has reserved for potential remediation costs.
Because the governmental bodies have not yet identified the full extent of
any remedial actions, it is still impossible at this time to predict the
likely outcome of the Fort Lauderdale matter as well as the sites discussed
above, or the Company's exposure if any of these cases are decided adversely.
However, it is not currently anticipated that the Company's share of the
costs of environmental remediation activities for any of the sites, including
the range provided by the Company's consultant for the Fort Lauderdale
facility, will have a materially adverse effect on the financial condition of
the Company.
Vision-Ease estimates that in 1994 and 1993 it incurred approximately $580,000
and $319,000, respectively, in expenditures (including capital expenditures)
related to efforts to comply with applicable laws and regulations regulating the
discharge of materials into the environment or otherwise relating to the
protection of the environment. In addition, it estimates that it will make
approximately $70,000 in capital expenditures for environmental control
facilities during 1995.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
Financial information about the Company's foreign and domestic operations and
export sales for the most recent three fiscal years is contained on page 35 of
the 1994 Annual Report, and is incorporated herein by reference.
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ITEM 2. PROPERTIES
The locations of the Company's principal production facilities are as follows:
Approximate Square
Feet of Space
Location Principal Use (in thousands)
-------- ------------- ------------------
Owned:
St. Cloud, MN Optical Products 94
Mullheim, Germany Precision Imaged Products 170
Cortland, NY Precision Imaged Products 152
Leased:
St. Paul, MN Precision Imaged Products 111
Ft. Lauderdale, FL Optical Products 65
Brooklyn Center, MN Optical Products 37
The Company leases approximately 9,500 square feet in Minneapolis, Minnesota for
its corporate administrative offices. The Company leases approximately 6,000
square feet in Brooklyn Park, Minnesota for the administrative offices of
Vision-Ease.
The Company's existing facilities are fully utilized. The Company plans to
begin construction of a new aperture mask production facility in 1995.
ITEM 3. LEGAL PROCEEDINGS
With regard to certain environmental matters, See Item 1(c) "Narrative
Description of Business" and Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Other than as noted above, there are no material pending or threatened legal,
governmental, administrative or other proceedings to which the Company is a
party or of which any of its property is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth quarter
of the fiscal year covered by this Report.
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ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company, their ages, the year first elected or
appointed as an executive officer and the offices held as of March 27, 1995 are
as follows:
Date First
Elected or
Appointed as
an Executive
Name (Age) Officer Title
---------- ------------ -----
Paul B. Burke (39) August, 1985 President and Chief Executive
Officer
Michael P. Hawks (42) August, 1985 Treasurer and Secretary
Merle D. Kerr (48) May, 1983 Vice President Finance and Chief
Financial Officer
Terry R. Nygaard (46) May, 1993 Corporate Controller
There are no family relationships between or among any of the executive officers
of the Company. Executive officers of the Company are elected by the Board of
Directors for one-year terms, commencing with their election at the first
meeting of the Board of Directors immediately following the annual meeting of
stockholders and continuing until the next such meeting of the Board of
Directors.
Except as indicated below, there has been no change in the principal occupations
or employment of the executive officers of the Company during the past five
years.
Mr. Burke is also a director of the Company. Mr. Burke joined the Company as
Associate General Counsel in June, 1983, and became Vice President, Secretary
and General Counsel in August, 1985. In November, 1987, he was appointed Vice
President, Fort Lauderdale Operations of the Company's Vision-Ease Lens Division
and in May, 1989, he was appointed President of Vision-Ease Lens. In May, 1991,
Mr. Burke was elected President and Chief Operating Officer of the Company, and
in July, 1991, he became President and Chief Executive Officer. Mr. Burke has
also been appointed Chairman of the Board effective as of the next scheduled
board meeting, which will be held following the 1995 Annual Meeting.
Mr. Hawks joined the Company in October, 1983 as Assistant Corporate Controller
and became Corporate Controller in August, 1985. In May, 1993, Mr. Hawks became
Treasurer and Secretary of the Company.
Mr. Kerr joined the Company in May, 1983 as Corporate Controller and became Vice
President Finance and Chief Financial Officer in July, 1985, and Treasurer in
August, 1985. In May, 1993, Mr. Kerr relinquished the title of Treasurer.
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Mr. Nygaard joined the Company in July, 1984 as Director of Taxes and became
Corporate Controller in May, 1993.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock on page 36 of the 1994 Annual Report is incorporated
herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
Historical Financial Summary on pages 16-17 of the 1994 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis on pages 18-20 of the 1994 Annual Report is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and related notes on pages 21-36 of the
1994 Annual Report are incorporated herein by reference.
Selected Quarterly Data (unaudited) on page 37 of the 1994 Annual Report is
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
In addition to certain information as to executive officers of the Company
included in Part I of this Form 10-K, the information contained on pages 2-5 and
pages 18-19 of the 1995 Proxy Statement, with respect to directors and executive
officers of the Company and Section 16 compliance, is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained on pages 7-14 of the 1995 Proxy Statement, with
respect to executive compensation and transactions, is incorporated herein by
reference.
11
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information contained on pages 5-7 of the 1995 Proxy Statement, with respect
to security ownership of certain beneficial owners and management, is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained on page 18 of the 1995 Proxy Statement, with respect
to certain relationships and related transactions, is incorporated herein by
reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. FINANCIAL STATEMENTS:
The following items are incorporated in this Form 10-K by reference to
the Registrant's 1994 Annual Report (page numbers refer to pages in
such 1994 Annual Report):
Consolidated Financial Statements: Page:
---------------------------------- -----
Consolidated Statements of Earnings for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . 21
Consolidated Balance Sheets, December 31, 1994 and 1993. . . . 22
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992 . . . . . . . . . . . . . . . 23
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1994, 1993 and 1992 . . . . . . . . . . . . 24
Notes to Consolidated Financial Statements . . . . . . . . . . 25-35
Report of Independent Auditors . . . . . . . . . . . . . . . . 36
2. FINANCIAL STATEMENT SCHEDULE:
Selected quarterly data (unaudited) is contained on page 37 of the
1994 Annual Report.
The following supplemental financial data is included herein and
should be read in conjunction with the consolidated financial
statements referenced above:
Consent of Independent Auditors (filed as Exhibit 23.1 to this Form
10-K)
12
<PAGE>
Supplemental Schedule: Page:
---------------------- -----
II - Valuation and Qualifying Accounts 16
Schedules other than the one listed above are omitted because of the
absence of the conditions under which they are required or because the
information required is included in the consolidated financial
statements or the notes thereto.
3. EXHIBITS:
Reference is made to the Exhibit Index hereinafter contained on pages
18-23 of this Form 10-K.
A copy of any of the exhibits listed or referred to herein will be
furnished at a reasonable cost to any person who was a stockholder of
the Company as of March 10, 1995, upon receipt from any such person of
a written request for any such exhibit. Such request should be sent
to Investor Relations Department, BMC Industries, Inc., Two Appletree
Square, Minneapolis, Minnesota 55425.
The following is a list of each management contract or compensatory
plan or arrangement required to be filed as an exhibit to this Form
10-K pursuant to Item 14(c):
a) 1984 Omnibus Stock Program, as amended effective December 19,
1989 (incorporated by reference to Exhibit 10.1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1989
(File No. 1-8467)).
b) 1994 Management Incentive Bonus Plan Summary (incorporated by
reference to Exhibit 10.3 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 (File No. 1-8467)).
c) 1995 Management Incentive Bonus Plan Summary (filed herewith as
Exhibit 10.3).
d) Interest Rate Supplement Program (incorporated by reference to
written description thereof on page 10 of the Company's Proxy
Statement dated March 22, 1991 (File No. 1-8467)).
e) Revised Executive Expense Policy (effective as of January 1,
1993) (incorporated by reference to Exhibit 10.7 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1991
(File No. 1-8467)).
f) BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1988
(File No. 1-8467)).
13
<PAGE>
g) First and Second Declaration of Amendment, effective March 15,
1991 and June 3, 1991, respectively, to BMC Industries, Inc.
Supplemental Executive Retirement Plan (incorporated by reference
to Exhibit 10.9 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1991 (File No. 1-8467)).
h) Third Declaration of Amendment, effective as of January 1, 1992,
to BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-8467)).
i) Fourth Declaration of Amendment, effective as of June 30, 1992,
to BMC Industries, Inc. Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1992
(File No. 1-8467)).
j) BMC Industries, Inc. Profit Sharing Plan 1994 Revision, as
amended (filed herewith as Exhibit 10.10).
k) BMC Industries, Inc. Savings Plan 1994 Revision, as amended
(filed herewith as Exhibit 10.11).
l) Description of directors' fees (incorporated by reference to
written description thereof on page 4 of the Company's Proxy
Statement dated March 27, 1995 (File No. 1-8467)).
m) Directors' Deferred Compensation Plan (incorporated by reference
to Exhibit 10.16 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1984 (File No. 1-8467)).
n) Form of Change of Control Agreement entered into between the
Company and Messrs. Burke, Kerr and Hawks (incorporated by
reference to Exhibit 10.31 to the Company's Annual Report on Form
10-K for the year ended December 31, 1991 (File No. 1-8467)).
o) 1994 Stock Incentive Plan (incorporated by reference to Exhibit
10.12 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-8467)).
p) BMC Stock Option Exercise Loan Program, as revised December 14,
1994 (filed herewith as Exhibit 10.15).
q) BMC Industries, Inc. Benefit Equalization Plan (incorporated by
reference to Exhibit 10.14 to the Company's Annual Report on Form
10-K for the year ended December 31, 1993 (File No. 1-8467)).
14
<PAGE>
(B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1994.
(C) EXHIBITS
The response to this portion of Item 14 is submitted as a separate section
of this report.
(D) FINANCIAL STATEMENT SCHEDULES
The response to this portion of Item 14 is submitted as a separate section
of this report.
15
<PAGE>
Schedule II
Valuation and Qualifying Accounts
Years Ended December 31
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance Charged to Balance
Beginning Costs and Translation at End of
of Year Expenses Deductions Adjustment Year
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994
--------------------------------------------------------------------------------
Allowance for
doubtful accounts $ 1,493 $ 800 $ 877 $ 45 $ 1,461
--------------------------------------------------------------------------------
Allowance for
merchandise
returns 627 974 1,068 $ 30 563
--------------------------------------------------------------------------------
$ 2,120 $ 1,774 $ 1,945 $ 75 $ 2,024
--------------------------------------------------------------------------------
Inventory reserves $ 3,238 $ 790 $ 1,131 $ 101 $ 2,998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1993
--------------------------------------------------------------------------------
Allowance for
doubtful accounts $ 1,424 $ 788 $ 684 $ (35) $ 1,493
--------------------------------------------------------------------------------
Allowance for
merchandise
returns 578 1,018 953 (16) 627
--------------------------------------------------------------------------------
$ 2,002 $ 1,806 $ 1,637 $ (51) $ 2,120
--------------------------------------------------------------------------------
Inventory reserves $ 4,234 $ 916 $ 1,815 $ (97) $ 3,238
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
1992
--------------------------------------------------------------------------------
Allowance for
doubtful accounts $ 1,275 $ 556 $ 373 $ (34) $ 1,424
--------------------------------------------------------------------------------
Allowance for
merchandise
returns 574 861 841 (16) 578
--------------------------------------------------------------------------------
$ 1,849 $ 1,417 $ 1,214 $ (50) $ 2,002
--------------------------------------------------------------------------------
Inventory reserves $ 3,215 $ 1,872 $ 730 $(123) $ 4,234
--------------------------------------------------------------------------------
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on
March 30, 1995, on its behalf by the undersigned, thereunto duly authorized.
BMC INDUSTRIES, INC.
By /S/ Merle D. Kerr
--------------------------------------
Merle D. Kerr
Vice President Finance and Chief
Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below on March 30, 1995, by the following persons on behalf of
the Registrant and in the capacities indicated.
Signature Title
/S/ Paul B. Burke President, Chief Executive Office and
------------------------------
Paul B. Burke Director (Principal Executive Officer)
/S/ Merle D. Kerr Vice President Finance and Chief Financial
------------------------------
Merle D. Kerr Officer (Principal Financial Officer)
/S/ Terry R. Nygaard Corporate Controller (Principal Accounting
------------------------------
Terry R. Nygaard Officer)
/S/ Lyle D. Altman Director
------------------------------
Lyle D. Altman
/S/ John W. Castro Director
------------------------------
John W. Castro
/S/ Joe E. Davis Director
------------------------------
Joe E. Davis
/S/ Norman C. Mears Director
------------------------------
Norman C. Mears
/S/ S. Walter Richey Director
------------------------------
S. Walter Richey
/S/ Richard A. Swalin Director
------------------------------
Richard A. Swalin
<PAGE>
BMC Industries, Inc.
Exhibit Index to Annual Report on Form 10-K
For the Year Ended December 31, 1994
<TABLE>
Exhibit No. Exhibit Method of Filing
----------- ------- ----------------
<C> <S> <C>
3.1 Second Restated Articles Filed electronically.
of Incorporation of the
Company, as amended.
3.2 Amendment to the Second Filed electronically.
Restated Articles of
Incorporation.
3.3 Restated Bylaws of the Filed electronically.
Company, as amended.
4.1 Specimen Form of the Incorporated by reference to Exhibit
Company's Common Stock 4.3 to the Company's Registration
Certificate. Statement on Form S-2 (File No.
2-83809).
10.1 1984 Omnibus Stock Incorporated by reference to Exhibit
Program, as amended 10.1 to the Company's Annual
effective December 19, 1989. Report on Form 10-K for the year
ended December 31, 1989
(File No. 1-8467).
10.2 1994 Management Incentive Incorporated by reference to Exhibit
Bonus Plan Summary. 10.3 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993 (File No. 1-8467).
10.3 1995 Management Incentive Filed electronically.
Bonus Plan Summary.
10.4 Interest Rate Supplement Incorporated by reference to written
Program. description thereof on page 10 of the
Company's Proxy Statement dated
March 22, 1991 (File No. 1-8467).
10.5 Revised Executive Expense Incorporated by reference to Exhibit
Policy (effective as of 10.7 to the Company's Annual
January 1, 1993). Report on Form 10-K for the year ended December 31, 1991 (File No. 1-8467).
18
<PAGE>
10.6 BMC Industries, Inc. Incorporated by reference to Exhibit
Supplemental Executive 10.10 to the Company's Annual
Retirement Plan. Report on Form 10-K for the year
ended December 31, 1988 (File No.
1-8467).
10.7 First and Second Declaration Incorporated by reference to Exhibit
of Amendment, effective 10.9 to the Company's Annual
March 15, 1991 and June 3, Report on Form 10-K for the year
1991, respectively, to BMC ended December 31, 1991 (File No.
Industries, Inc. Supplemental 1-8467).
Executive Retirement Plan.
10.8 Third Declaration of Incorporated by reference to Exhibit
Amendment, effective as of 10.9 to the Company's Annual
January 1, 1992, to BMC Report on Form 10-K for the year
Industries, Inc. Supplemental ended December 31, 1992 (File No.
Executive Retirement Plan. 1-8467).
10.9 Fourth Declaration of Incorporated by reference to Exhibit
Amendment, effective as of 10.10 to the Company's Annual
June 30, 1992, to BMC Report on Form 10-K for the year
Industries, Inc. Supplemental ended December 31, 1992 (File No.
Executive Retirement Plan. 1-8467).
10.10 BMC Industries, Inc. Profit Filed electronically.
Sharing Plan 1994 Revision,
as amended.
10.11 BMC Industries, Inc. Savings Filed electronically.
Plan 1994 Revision,
as amended.
10.12 Description of directors' fees. Incorporated by reference to written
description thereof on page 4 of the
Company's Proxy Statement dated
March 27, 1995 (File No. 1-8467).
10.13 Directors' Deferred Incorporated by reference to Exhibit
Compensation Plan. 10.16 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1984 (File No.
1-8467).
10.14 1994 Stock Incentive Plan. Incorporated by reference to Exhibit
10.12 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993 (File No.
1-8467).
19
<PAGE>
10.15 BMC Stock Option Exercise Filed electronically.
Loan Program, as revised
December 14, 1994.
10.16 BMC Industries, Inc. Benefit Incorporated by reference to Exhibit
Equalization Plan. 10.14 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1993 (File No.
1-8467).
10.17 Lease Agreement, dated Incorporated by reference to Exhibit
November 20, 1978, between 10.9 to the Company's Registration
Control Data Corporation Statement on Form S-2 (File No. 2-
and the Company. 79667).
10.18 Amendment to Lease Incorporated by reference to Exhibit
Agreement, dated December 10.24 to the Company's Annual
27, 1983, between Control Report on Form 10-K for the year
Data Corporation and the ended December 31, 1983 (File No.
Company. 1-8467).
10.19 Amendment to Lease Incorporated by reference to Exhibit
Agreement, dated April 9, 10.15 to the Company's Annual
1986, between Control Data Report on Form 10-K for the year
Corporation and the ended December 31, 1987 (File No.
Company. 1-8467).
10.20 Amendment to Lease Incorporated by reference to Exhibit
Agreement, dated April 12, 10.14 to the Company's Annual
1989, between GMT Report on Form 10-K for the year
Corporation (as successor in ended December 31, 1989 (File No.
interest to Control Data 1-8467).
Corporation) and the
Company.
10.21 Amendment to Lease Incorporated by reference to exhibit
Agreement, dated March 19, 10.15 to the Company's Annual
1990, between GMT Report on Form 10-K for the year
Corporation and the ended December 31, 1989 (File No.
Company. 1-8467).
20
<PAGE>
10.22 Amendment to Lease Incorporated by reference to Exhibit
Agreement, dated May 17, 10.20 to the Company's Annual
1993, between GMT Report on Form 10-K for the year
Corporation and the ended December 31, 1993 (File No.
Company. 1-8467).
10.23 Amendment of Lease, dated Filed electronically.
April 6, 1994 by and between
GMT Corporation and the
Company.
10.24 Waiver of Condition Filed electronically.
Precedent, dated July 29,
1994, by and between GMT
Corporation and the
Company.
10.25 Lease Agreement, dated June Incorporated by reference to Exhibit
25, 1987, between ATS II 10.17 to the Company's Annual
Associates Limited Report on Form 10-K for the year
Partnership and the ended December 31, 1987 (File No.
Company. 1-8467).
10.26 Amendment to Lease Incorporated by reference to Exhibit
Agreement, dated December 10.19 to the Company's Annual
4, 1992, by and between ATS Report on Form 10-K for the year
II Associates Limited ended December 31, 1992 (File No.
Partnership and the 1-8467).
Company.
10.27 Amendment to Lease, dated Filed electronically
December 7, 1994, by and
between ATS II Associates
Limited Partnership and the
Company.
10.28 Amendment to Lease, dated Filed electronically
February 16, 1995, by and
between ATS II Associates
Limited Partnership and the
Company.
10.29 Lease Agreement, dated Incorporated by reference to Exhibit
December 8, 1983, between 10.32 to the Company's Annual
ARI Limited Partnership and Report on Form 10-K for the year
the Company. ended December 31, 1983 (File No.
1-8467).
21
<PAGE>
10.30 Lease, dated January 26, Incorporated by reference to Exhibit
1994, by and between 7100 10.24 to the Company's Annual
Northland Circle and the Report on Form 10-K for the year
Company. ended December 31, 1993 (File No.
1-8467).
10.31 Second Amendment to Filed electronically
Lease, dated October 14,
1994, by and between
Lutheran Brotherhood
and the Company.
10.32 Form of Change of Control Incorporated by reference to Exhibit
Agreement entered into 10.31 to the Company's Annual
between the Company and Report on Form 10-K for the year
Messrs. Burke, Kerr and ended December 31, 1991 (File No.
Hawks. 1-8467).
10.33 Credit Agreement, dated Filed electronically.
September 30, 1994, by and
between The First National
Bank of Chicago and the
Company.
10.34 Credit Agreement, dated Filed electronically.
September 30, 1994, by and
between Norwest Bank
Minnesota, National
Association and the
Company.
10.35 Credit Agreement, dated Filed electronically.
September 30, 1994, by and
between NBD Bank, N.A.
and the Company.
10.36 Product Manufacturing and Filed electronically.
Sales Agreement, dated
October 17, 1994, between
Polycore Optical, PTE. Ltd.
and Vision-Ease, a unit of
the Company, without
exhibits.
13.1 1994 Annual Report to Filed electronically.
Stockholders, pages 16-37.
22
<PAGE>
21.1 Subsidiaries of the Incorporated by reference to Exhibit
Registrant. 22.1 to the Company's Annual
Report on Form 10-K for the year
ended December 31, 1991 (File No.
1-8467).
23.1 Consent of Ernst & Young Filed electronically.
LLP, Independent Auditors.
27.1 Financial Data Schedule Filed electronically.
99.1 Press Release, dated Filed electronically.
January 5, 1995.
99.2 Press Release, dated Filed electronically.
February 14, 1995.
99.3 Press Release, dated March Filed electronically.
10, 1995.
</TABLE>
23
<PAGE>
SECOND RESTATED
ARTICLES OF INCORPORATION OF
BMC INDUSTRIES, INC.
ARTICLE I
The name of this Corporation is BMC Industries, Inc.
ARTICLE II
The purposes of this Corporation are general business purposes.
ARTICLE III
This Corporation shall have perpetual duration.
ARTICLE IV
The address of the registered office of this Corporation is Two Appletree
Square, Minneapolis, Minnesota 55425.
ARTICLE V
The aggregate number of shares that this Corporation has authority to issue
is twenty-five million (25,000,000) shares which shall consist of five hundred
thousand (500,000) undesignated shares and twenty-four million five hundred
thousand (24,500,000) shares of voting common stock. Only the authorization of
the Board of Directors is necessary for this Corporation to issue shares and
other securities and rights to purchase shares and other securities. All
24,500,000 shares of voting common stock shall have equal rights and
preferences. The Board of Directors is authorized to establish, from the
undesignated shares, one or more classes and series of shares, to designate each
such class and series and to fix the rights and preferences of such class and
series. All stockholders are denied preemptive rights, unless the Board of
Directors shall grant preemptive rights to the holders of some or all of the
undesignated shares with respect to some or all of the undesignated shares.
This Corporation may issue shares of voting common stock to the holders of
shares of any class or series of the undesignated shares and it may issue shares
of any class or series of the undesignated shares to the holders of shares of
voting common stock.
The vote required for any amendment to, or repeal of, all or any portion of
this Article V shall be the affirmative vote of the holders of at least two-
thirds of the voting power of the outstanding shares; provided, however, that if
the then current pre-existing Board of Directors of this Corporation shall by
resolution adopted at a meeting of the Board of Directors duly approved the
amendment or repeal proposal and have determined to recommend it for approval by
the holders of shares entitled to vote on the matter, then the vote required
shall be the affirmative vote of the holders of at least a majority of the
voting power of the outstanding shares.
<PAGE>
ARTICLE VI
The number of directors of this Corporation shall be not less than three
(3) nor more than seventeen (17), as determined from time to time by the Board
of Directors. The directors shall be classified with respect to their terms of
office by dividing them into two classes, with each class being as nearly equal
in number as possible. The terms of office of the directors initially classified
as Class A shall expire at the 1991 annual meeting of shareholders; and the
terms of those classified as Class B shall expire at the end of the 1992 annual
meeting of shareholders. At each annual meeting of shareholders after such
initial classification, directors of the class whose term is expiring will be
elected to hold office until the second succeeding annual meeting. Except as
provided below, directors shall hold office until the expiration of the terms
for which they were elected or until their successors are elected and qualified.
The stockholders or Board of Directors may remove a director from office at any
time for cause. The Board of Directors may remove a director from office, with
or without cause, if the director was named by the Board to fill a vacancy. The
Board of Directors may remove a director at any time, with or without cause, if
the director is or at any time has been an officer of the corporation; provided,
that the vote required for any such removal shall be the affirmative vote of at
least seventy-five percent of the remaining directors. Upon election or
appointment to the Board of Directors, each director shall offer his or her
resignation from the Board of Directors, to be effective at such time as he or
she may change his or her principal occupation or employment. If the office of
any director or directors becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office, increase in the number of
directors, or otherwise, a majority of the remaining directors, though less than
a quorum, at a meeting called for that purpose, may choose a successor or
successors, who shall hold office until the expiration of the term of the class
for which appointed or until a successor shall be elected or qualified.
The vote required for any amendment to, or repeal of, all or any portion of
this Article VI shall be the affirmative vote of the holders of at least two-
thirds of the voting power of the outstanding shares; provided, however, that if
the then current or a pre-existing Board of Directors of this Corporation shall
by resolution adopted at a meeting of the Board of Directors have approved the
amendment or repeal proposal and have determined to recommend it for approval by
the holders of shares entitled to vote on the matter, then the vote required
shall be the affirmative vote of the holders of at least a majority of the
voting power of the outstanding shares.
ARTICLE VII
The name and address of each of the directors of this Corporation at the
time of adoption of these Second Restated Articles of Incorporation are:
2
<PAGE>
Name Address
---- -------
Lyle D. Altman 7600 Boone Avenue North
Brooklyn Park, MN 55428
Paul B. Burke Two Appletree Square
Suite 400
Minneapolis, MN 55425
Joe E. Davis 3436 Caribeth Drive
Encino, CA 91436
H. D. Elverum 6101 Waterford Court
Edina, MN 55436
Norman C. Mears 1830 Eagle Ridge
Apt. 1002
St. Paul, MN 55118
Burton N. Noah 1500 North Lakeshore Drive
#11C
Chicago, IL 60610
S. Walter Richey 444 Pine Street
St. Paul, MN 55101
ARTICLE VIII
In addition to the requirements of applicable state law, and other
provisions of these Articles:
(a) The affirmative vote of the holders of at least two-thirds of the
voting power of the outstanding shares of voting common stock not Beneficially
Owned by Controlling Persons shall be required for the approval of a Business
Combination Unless:
(1) the Business Combination will result in an involuntary sale,
redemption, cancellation or other termination of ownership of all shares of
voting common stock of this Corporation owned by stockholders who do not
vote in favor of the Business Combination and the cash or fair value of
other readily marketable consideration to be received by such stockholders
for such shares shall at least be equal to the Minimum Price Per Share, and
a proxy statement responsive to the requirements of the Securities Exchange
Act of 1934 shall be mailed to the stockholders of this Corporation for the
purpose of soliciting stockholder approval of the Business Combination; or
(2) the then current Board of Directors of this corporation shall by
resolution adopted at a meeting of the Board of Directors by the
affirmative vote of at least two-thirds of the directors then in office
have approved
3
<PAGE>
the Business Combination as being in the best interests of this
Corporation.
(b) Solely for the purposes of this Article, the following definitions
shall apply:
(1) "AFFILIATE" shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with another Person.
(2) "ASSOCIATE" shall mean: (i) any corporation or organization of
which a Person is an officer or partner or is, directly or indirectly, the
Beneficial Owner of five percent (5%) or more of any class of equity
securities; (ii) any trust or other estate in which a Person serves as
trustee or in a similar fiduciary capacity; or (iii) the immediate family
of a Person, including without limitation, a spouse, parents, children
(even if of legal age and living independently), siblings, fathers and
mothers-in-laws, sons and daughters-in law, and brothers and sisters-in-
law.
(3) "BENEFICIAL OWNERSHIP" shall include without limitation: (i)
all shares directly or indirectly owned by a Person, by an Affiliate of
such Person or by an Associate of such Person or such Affiliate; (ii) all
shares which such Person, Affiliate or Associate has the right to acquire
(a) through the exercise of any option warrant or right (whether or not
currently exercisable), (b) through the conversion of a security, (c)
pursuant to the power to revoke a trust, discretionary account or similar
arrangement, or (d) pursuant to the automatic termination or a trust,
discretionary account or similar arrangement; and (iii) all shares as to
which such Person, Affiliate or Associate directly or indirectly, through
any contract, arrangement, understanding, relationship or otherwise
(including without limitation any written or unwritten agreement to act in
concert but specifically excluding any participation agreement,
arrangement, understanding or relationship between or among any two or more
commercial banks made or established in connection with and furtherance of
a bona fide lending arrangement with this Corporation and/or one or more
Subsidiaries) has or shares voting power (which includes the power to vote
or to direct the voting of such shares) or investment power (which includes
the power to dispose or to direct the disposition of such shares) or both.
(4) "BUSINESS COMBINATION" shall mean: (i) any merger of this
Corporation with or into a Controlling Person or Affiliate or a Controlling
Person or Associate of such Controlling Person or Affiliate; (ii) any sale,
lease, exchange, transfer or other disposition, including without
limitation a mortgage or any other security device, of all or any
Substantial Part of the assets of this Corporation, including without
limitation any voting securities of a
4
<PAGE>
Subsidiary, or of a Subsidiary, to or with a controlling Person or
Affiliate of a Controlling Person or Associate of such Controlling Person
or Affiliate; (iii) any merger into this Corporation, or into a Subsidiary,
of a Controlling Person or an Affiliate of a Controlling Person or an
Associate of such Controlling Person or Affiliate; (iv) any sale, lease,
exchange, transfer or other disposition to this Corporation or a Subsidiary
of all or any part of the assets of a Controlling Person or Affiliate of a
Controlling Person or Associate of such Controlling Person or Affiliate but
not including any dispositions of assets which, if included with all other
dispositions consummated during the same fiscal year of this Corporation by
the same Controlling Person, Affiliates thereof and Associates of such
Controlling Person or Affiliates, would not result in dispositions during
such year by all such Persons of assets having an aggregate fair value
(determined at the time of disposition of the respective assets) in excess
of one percent (1%) of the total consolidated assets of this Corporation
(as shown on its certified balance sheet as of the end of the fiscal year
preceding the proposed disposition), provided, however, that in no event
shall any disposition of assets be excepted from Stockholder approval by
reason of the preceding exclusion if such disposition, when included with
all other dispositions consummated during the same, and immediately
preceding two fiscal years of this Corporation by the same Controlling
Person, Affiliates thereof and Associates of such Controlling Person or
Affiliates, would result in dispositions by all such Persons of assets
having an aggregate fair value (determined at the time of disposition of
the respective assets) in excess of two percent (2%) of the total
consolidated assets of this Corporation (as shown on its certified balance
sheet as of the end of the fiscal year preceding the proposed disposition);
(v) any reclassification of voting common stock of this Corporation, or any
recapitalization involving voting common stock of this Corporation,
consummated within three years after a Controlling Person becomes a
Controlling Person; and (vi) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of
Business Combination, but, notwithstanding anything to the contrary herein,
Business Combination shall not include dissolution of this Corporation, or
any Section 621 Merger, or any transaction involving a Controlling Person
or Affiliate of a Controlling Person or Associate of such Controlling
Person or Affiliate which is to be consummated or become effective after
such Controlling Person has been a Controlling Person for at least three
years.
(5) "CONTROL" shall mean the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by
contract or otherwise.
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(6) "CONTROLLING PERSON" shall mean any Person who Beneficially Owns
a number of voting shares of this Corporation, whether or not such number
includes shares not then issued, which exceeds a number equal to fifteen
percent (15%) of the voting power of the shares of this Corporation
entitled to vote, but shall in no event at any time include any Person who,
on December 31, 1982, Beneficially Owned a number of voting shares of this
Corporation which on such date exceeded fifteen percent (15%) of the voting
power of the shares of this Corporation on such date.
(7) "MINIMUM PRICE PER SHARE" shall mean the higher of (i) the
highest gross per share price paid or agreed to be paid to acquire any
shares of voting common stock of this Corporation Beneficially Owned by a
Controlling Person, provided such payment or agreement to make payment was
made within three years immediately prior to the record date set to
determine the stockholders entitled to vote on the Business Combination in
question, or, in the case of a Section 621 Merger, three years immediately
prior to the effective date of such Section 621 Merger, or (ii) the highest
per share asked public market price (in the event the shares are not listed
on a national securities exchange) or the highest per share closing public
market price (in the event the shares are listed on a national securities
exchange) for such shares during such three year period. The calculation of
the Minimum Price Per Share shall require appropriate adjustments for
capital changes, including without limitation stock splits, stock
dividends, reverse stock splits, and stock distributions.
(8) "PERSON" shall mean an individual, a corporation, a partnership,
an association, a joint-stock company, a business trust, an unincorporated
organization and any other entity or group.
(9) "SECTION 621 MERGER" shall mean any merger of this Corporation
into another corporation pursuant to M.S.A Section 302A.621, as amended
from time to time, or any successor or replacement statute (collectively
"Section 621"), but only if Section 621 does not give voting rights to the
stockholders of this Corporation with respect to the merger. If voting
rights are required by Section 621, or in connection therewith, a merger
under such section shall not be a Section 621 Merger for purposes of this
Article VIII.
(10) "SECURITIES EXCHANGE ACT OF 1934" shall mean the Securities
Exchange Act of 1934, as amended from time to time as well as any successor
or replacement statute.
(11) "SUBSIDIARY" shall mean any corporation twenty percent (20%) or
more of whose outstanding securities representing the right to vote for the
election of directors
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is Beneficially Owned by this Corporation and/or one or more Subsidiaries.
(12) "SUBSTANTIAL PART" shall mean more than ten percent (10%) of the
total assets of the corporation in question, as shown on its certified
balance sheet as of the end of the most recent fiscal year ended prior to
the time the determination is being made.
(c) A Controlling Person shall be subject to all fiduciary and other
standards of conduct and obligations imposed by applicable state law and shall
be considered not to have satisfied such standards of conduct and obligations
unless such Controlling Person shall, in the event of a Section 621 Merger which
occurs before the Controlling Person has been a Controlling Person for three
years, pay or cause to be paid for each share of voting common stock of this
Corporation, as to which share ownership is being sold, redeemed, canceled or
otherwise terminated in a Section 621 Merger, cash or other readily marketable
consideration having a fair value at least equal to the Minimum Price Per Share.
The vote required for approval of any amendment to, or repeal of, any
portion of this Article VIII shall be the affirmative vote of the holders of at
least two-thirds of the voting power of the outstanding shares of voting common
stock not Beneficially Owned by Controlling Persons.
ARTICLE IX
Where stockholders approval is required by applicable state law for any of
the following transactions, the vote required for such approval shall be the
affirmative vote of the holders of at least two-thirds of the voting power of
the outstanding shares:
(a) Any plan of merger;
(b) Any plan of exchange;
(c) Any sale, lease, transfer or other disposition of all or substantially
all of this Corporation's property and assets, including its goodwill, not in
the usual and regular course of its business;
(d) Any dissolution of this Corporation;
(e) Any amendment to, or repeal of, a bylaw or bylaws lawfully proposed by
a stockholder or stockholders holding at least the required statutory voting
power; or
(f) Any amendment to, or repeal of, all or any portion of this Article IX;
provided, however, that if the then current or preexisting Board of Directors of
this Corporation shall by resolution adopted at a
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meeting of the Board of Directors have approved one of the enumerated matters
(other than dissolution of this Corporation or an amendment of this Article IX
to alter the two-thirds dissolution vote) and shall have determined to recommend
it for approval by the holders of shares entitled to vote on the matter, then
the vote required shall be the affirmative vote of the holders of at least a
majority of the voting power of the outstanding shares.
ARTICLE X
Each director, officer, employee and agent, past or present, of this
Corporation, and each person who serves or may have served at the request of
this Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and their
respective heirs, administrators and executors shall be indemnified by this
Corporation in accordance with, and to the fullest extent provided by,
applicable state law, as it may from time to time be amended.
ARTICLE XI
No director of the Corporation, including a person deemed to be a director
under applicable law, shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty by such director
as a director, except to the extent provided by applicable law for: (i)
liability based on a breach of the duty of loyalty to the Corporation or the
stockholders; (ii) liability for acts or omissions not in good faith or that
involve intentional misconduct or a knowing violation of law; (iii) liability
based on the payment of an improper dividend or an improper acquisition of the
Corporation's shares under Section 559 of the Minnesota Business Corporation Act
(Minnesota Statutes, Chap. 302A) or on violations of state securities laws under
Section 80A.23 of the Minnesota Statutes; (iv) liability for any transaction
from which the director derived an improper personal benefit; or (v) liability
for any act or omission occurring prior to the date that this Article XI becomes
effective. If Chapter 302A of the Minnesota Business Corporation Act is amended
hereafter to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Corporation in addition to
the limitation on personal liability provided herein, shall be eliminated or
limited to the fullest extent permitted by any such amendment. Any repeal or
modification of this Article by the Stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at or prior to the time of such repeal or modification.
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RESOLUTIONS ADOPTED
BY THE BOARD OF DIRECTORS OF
BMC INDUSTRIES, INC.
AT A MEETING HELD DECEMBER 14, 1994
RESOLVED, that the Board of Directors of the Company deems it advisable
and in the best interests of the Company to amend the first paragraph of
Article V of its Second Restated Articles of Incorporation in its entirety
to provide as follows:
The aggregate number of shares that this Corporation has authority
to issue is fifty million (50,000,000) shares which shall consist of
five hundred thousand (500,000) undesignated shares and forty-nine
million five hundred thousand (49,500,000) shares of voting common
stock. Only the authorization of the Board of Directors is
necessary for this Corporation to issue shares and other securities
and rights to purchase shares and other securities. All 49,500,000
shares of voting common stock shall have equal rights and
preferences. The Board of Directors is authorized to establish,
from the undesignated shares, one or more classes and series of
shares, to designate each such class and series, and to fix the
rights and preferences of each such class and series. All
stockholders are denied preemptive rights, unless the Board of
Directors shall grant preemptive rights to the holders of some or
all of the undesignated shares with respect to some or all of the
undesignated shares. This Corporation may issue shares of voting
common stock to the holders of shares of any class or series of the
undesignated shares and it may issue shares of any class or series
of the undesignated shares to the holders of shares of voting common
stock.
RESOLVED, FURTHER, that the Board of Directors of the Company deems it
advisable and in the best interests of the Company to amend the second
paragraph of Article V of its Second Restated Articles of Incorporation in
its entirety to provide as follows:
The vote required for any amendment to, or repeal of, all or any
portion of this Article V shall be the affirmative vote of the
holders of at least two-thirds of the voting power of the
outstanding shares; provided, however, that if the then current or a
pre-existing Board of Directors of this Corporation shall by
resolution adopted at a meeting of the Board of Directors have
approved the amendment or repeal proposal and have determined to
recommend it for approval by the holders of shares entitled to vote
on the matter, then the vote required shall be the affirmative vote
of the holders of at least a majority of the voting power of the
outstanding shares; provided, further, that notwithstanding the
foregoing, the Board of Directors may amend this Article V to
increase or decrease the number of authorized shares in
<PAGE>
connection with any division or combination of shares to the extent
such increase or decrease will not result in the percentage of
authorized shares that remains unissued after the division or
combination exceeding the percentage of authorized shares that were
unissued before the division or combination.
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EXHIBIT A
RESTATED BYLAWS
OF
BMC INDUSTRIES, INC.
(as amended effective April 28, 1983, February 11, 1986,
February 8, 1989, July 15, 1991, and December 14, 1994)
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The registered office of the
corporation is Two Appletree Square, Minneapolis, Minnesota 55425.
Section 2. PRINCIPAL EXECUTIVE OFFICE. The principal executive
office of the corporation is Two Appletree Square, Minneapolis, Minnesota 55425.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE OF MEETING. All meetings of the stockholders
shall be held at the registered office of the corporation or, except for a
meeting called by or at the demand of a stockholder, at such other place as may
be fixed from time to time by the Board of Directors (the "Board").
Section 2. ANNUAL MEETING. An annual meeting of stockholders
shall be held each year on the date fixed by the Board for the purpose of
electing directors and for the transaction of any other business appropriate for
action by the stockholders.
Section 3. SPECIAL MEETINGS. Special meetings of the
stockholders may be called by the chief executive officer, the chief financial
officer, two or more directors or a stockholder or stockholders holding ten
percent or more of the voting power of all shares entitled to vote, except that
a special meeting for the purpose of considering any action to directly or
indirectly facilitate or effect a business combination, including any action to
change or otherwise affect the composition of the board of directors for that
purpose, must be called by 25 percent or more of the voting power of all shares
entitled to vote. Special meetings shall be held on the date and at the time
and place fixed by the chief executive officer or the Board, or in Hennepin
County, Minnesota at the place fixed by a stockholder or stockholders lawfully
calling a meeting. The business to be transacted at a special meeting shall be
limited to the purposes stated in the notice of the meeting.
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Section 4. NOTICE. Notice of all meetings of stockholders shall
be given to every holder of record of shares entitled to vote, shall be given at
least ten, and not more than 60 days, before the date of the meeting and shall
contain the date, time and place of the meeting and, in the case of a special
meeting, the purpose of the meeting.
Section 5. RECORD DATE. The Board shall fix a record date not
more than 60 days before the date of a meeting of stockholders as the date for
the determination of the holders of shares entitled to notice of and to vote at
the meeting.
Section 6. QUORUM. The holders of a majority of the voting power
of the shares entitled to vote at a meeting present in person or by proxy at the
meeting are a quorum for the transaction of business. If a quorum is present
when a meeting is convened, the stockholders present may continue to transact
business until adjournment sine die, even though the withdrawal of a number of
stockholders originally present leaves less than the proportion otherwise
required for a quorum.
Section 7. VOTING RIGHTS. Unless otherwise provided in the terms
of the shares, a stockholder has one vote for each share held on a record date.
A stockholder may cast a vote in person or by proxy. Such vote shall be by
written ballot unless the chairman of the meeting determines to require a voice
vote on a particular matter.
Section 8. PROXIES. The chairman of the meeting shall, after
stockholders have had a reasonable opportunity to vote and file proxies, close
the polls after which no further ballots, proxies or revocations shall be
received or considered.
Section 9. ACT OF AND PROPOSALS BY THE STOCKHOLDERS. Except as
otherwise provided by applicable state law or the articles of incorporation of
the corporation, the stockholders small take action by the affirmative vote of
the holders of a majority of the voting power of the shares present and entitled
to vote.
Any proposal by a stockholder or stockholders to amend the articles of
incorporation or bylaws of the corporation to the extent permitted by Sections
302A.135 and 302A.181, Minnesota Statutes, and any other proposal by a
stockholder or stockholders to the extent authorized to be made, shall be made
pursuant to timely notice in writing to the secretary of the corporation. To be
timely, any such notice shall be received at the principal executive offices of
the corporation not less than 120 days prior to the annual meeting of
stockholders and any meeting of the stockholders called for the election of
directors.
Section 10. NOMINATIONS OF DIRECTORS. Nominations for the
election of directors may be made only by or at the direction of the Board or by
a stockholder entitled to vote for the election of
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directors. All such nominations, except those made by or at the direction of
the Board of Directors, shall be made pursuant to timely notice in writing to
the secretary of the corporation. To be timely, any such notice shall be
received at the principal executive offices of the corporation not less than 120
days prior to the annual meeting of stockholders and any meeting of the
stockholders called for the election of directors. if any such notice is
received on a timely basis, then nominations to be made by or at the direction
of the Board shall be made not less than 30 days prior to such meeting,
provided, however, that if prior to such meeting the chairman of the Board or
chief executive officer should learn that any Board nominee will be unable to
serve by reason of death, incapacity or other unexpected occurrence, the Board
shall have the right to nominate a substitute nominee for such person. Notice
of nominations which are made by or at the direction of the Board shall be given
to the secretary by the chairman of the Board or chief executive officer on
behalf of the Board.
Each notice hereunder must set forth (i) the name, age, business address and, if
known, residence address of each nominee, (ii) the principal occupation or
employment of each nominee, (iii) the number of shares of stock of the
corporation beneficially owned by each nominee, (iv) the class of directors to
which the nominee is nominated, and (v) such other information concerning each
such nominee as would be required, under the rules of the Securities and
Exchange Commission, in a proxy statement soliciting proxies for the election of
such nominee. Such notice must also include a signed consent of each such
nominee to serve as a director of the corporation, if elected.
If the chairman of the meeting determines that a nomination was not made in
accordance with the foregoing procedure, he shall so declare to the meeting and
such nomination shall be void and shall be disregarded for all purposes.
ARTICLE III
BOARD OF DIRECTORS
Section 1. BOARD TO MANAGE. The business and affairs of the
corporation shall be managed by or under the direction of the Board.
Section 2. NUMBER AND TERM OF OFFICE. The number of directors
shall be at least three but not more than seventeen, as determined from time to
time by the Board. The terms of office of directors shall be classified as
required by the articles of incorporation of the corporation. Directors shall
hold office until the expiration of the terms for which they were elected,
provided, however, that a director may be removed from office as a director at
any time by the stockholders for proper cause or by the directors with or
without cause if the director was named by the Board to fill a vacancy. If the
office of any director becomes
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vacant by reason of permitted removal by action of the stockholders, the
stockholders may fill the vacancy at the meeting at which the removal occurred,
and, absent such action, a majority of the remaining directors, though less than
a quorum, may fill the vacancy. The vacancy shall be filled for the full
remaining term of the removed director. If the office of any director becomes
vacant by reason of death, resignation or permitted removal by action of the
directors, or a new directorship is created by increase in the number of
directors within the permitted range of three or seventeen, a majority of the
remaining directors, though less than a quorum, may fill the vacancy or new
directorship, either until the next annual meeting of the stockholders or for
the full remaining term of the former director, in the case of a vacancy, or the
full term of the new directorship.
Section 3. MEETINGS OF THE BOARD. The Board may hold meetings
either within or without the State of Minnesota at such places as the Board may
select. If the Board fails to select a place for a meeting, the meeting shall
be held at the principal executive office of the corporation. At least four
regular meetings of the Board shall be held each year. One shall be held
immediately following the annual meeting of the stockholders. The other regular
meetings shall be held on dates and at times determined by the Board. No notice
of a regular meeting is required if the date, time and place of the meeting has
been announced at a previous meeting of the Board. A special meeting of the
Board may be called by the chief executive officer unless a different officer is
vested with such power by the Board, by giving, or causing the secretary to
give, at least two hours notice to all directors of the date, time and place of
the meeting. Any director may call a special meeting of the Board by giving, or
causing the secretary to give, at least twenty-four hours notice to all
directors of the date, time and place of the meeting.
Section 4. ADVANCE ACTION BY ABSENT DIRECTORS. A director may
give advance written consent or opposition to a proposal to be acted on at a
Board meeting.
Section 5. ELECTRONIC COMMUNICATIONS. A conference among
directors by any means of communications through which the directors may
simultaneously hear each other during the conference constitute a Board meeting
if the required meeting notice has been given and a quorum is present. Such a
conference may consist of one or more directors physically present at the
meeting location and other directors participating and considered present by
such means of communications.
Section 6. QUORUM. At all meetings of the Board, a majority of
the directors then holding office is a quorum for the transaction of business.
In the absence of a quorum, a majority of the directors present may adjourn a
meeting from time to time until a quorum is present. If a quorum is present
when a meeting is convened, the directors present may continue to transact
business until adjournment sine die even though the withdrawal of a number
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of directors originally present leaves less than the proportion otherwise
required for a quorum.
Section 7. ACT OF THE BOARD. The Board shall take action by the
affirmative vote of at least a majority of the directors present at a meeting.
The Board may also act without a meeting by written action signed by all of the
directors then holding office.
Section 8. BOARD-APPOINTED COMMITTEES. A resolution approved by
the affirmative vote of a majority of the directors then holding office may
establish committees having the authority of the Board to the extent provided in
the resolution and each such committee is subject at all times to the direction
and control of the Board except as provided by applicable state law with respect
to a committee of disinterested persons.
ARTICLE IV
OFFICERS
Section 1. REQUIRED OFFICERS. The corporation shall have
officers who shall serve as chief executive officer and chief financial officer
and such other officers as the Board shall determine from time to time. All
officers shall serve at the pleasure of the Board.
Section 2. CHIEF EXECUTIVE OFFICER. The chief executive officer
of the corporation shall preside at all meetings of the stockholders and of the
Board unless a different individual is designated by the Board to so preside.
The chief executive officer shall also:
(a) have general policy level responsibility for the management of the
business and affairs of the corporation;
(b) have responsibility for development and implementation of long range
plans for the corporation;
(c) see that all the orders and resolutions of the Board are carried
into effect; and
(d) perform other duties prescribed by the Board or these bylaws.
Section 3. CHIEF FINANCIAL OFFICER. One or more officers,
however denominated by the Board, together may share the following functions of
chief financial officer, which shall be to:
(a) cause accurate financial records to be maintained for the
corporation;
(b) cause all funds belonging to the corporation to be deposited in the
name of and to the credit of the
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corporation in banks and other depositories selected pursuant to
general or specific Board resolutions;
(c) cause corporate funds to be disbursed as appropriate;
(d) cause appropriate internal control systems to be developed,
maintained, improved and implemented; and
(e) perform other duties prescribed by the Board or the chief executive
officer.
ARTICLE V
SHARE CERTIFICATES/TRANSFER
Section 1. CERTIFICATES. Certificated shares of this corporation
shall be in such form as prescribed by law and adopted by the Board.
Section 2. TRANSFER OF SHARES. Transfer of shares on the books
of the corporation shall be made by the transfer agent-registrar in accordance
with procedures adopted by the Board.
Section 3. LOST, STOLEN OR DESTROYED CERTIFICATES. No certificate
for shares of the corporation shall be issued in place of one claimed to be
lost, stolen or destroyed except in compliance with Section 336.8-405, Minnesota
Statutes, as amended from time to time, and the corporation may require a
satisfactory bond of indemnity protecting the corporation against any claim by
reason of the lost, stolen or destroyed certificate.
ARTICLE VI
GENERAL PROVISIONS
Section 1. VOTING OF SHARES. The chief executive officer, or a
person serving any function of chief financial officer, unless some other person
is appointed by the Board, may vote shares of any corporation held or owned by
the corporation and may take any required action with respect to investments in
other types of legal entities.
Section 2. EXECUTION OF CONTRACTS. Contracts, deeds, mortgages,
bonds, debentures and other documents and instruments of the corporation may be
signed and delivered on behalf of the corporation by the chief executive officer
or by a person serving any function of chief financial officer, or by such other
person or by such other officer as the Board or the chief executive officer may
specify.
Section 3. FISCAL YEAR. The fiscal year of the corporation shall
be the calendar year.
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Section 4. NO SEAL. No corporate seal shall be required of, or
utilized by the corporation.
7
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BMC INDUSTRIES, INC.
1995 MANAGEMENT INCENTIVE PLAN
OBJECTIVES
- To focus management's attention on division's
annual profit performance and balance sheet
management.
- To recognize the extraordinary contributions of
individual managers, in years when earnings exceed
"Par" performance.
GLOSSARY OF TERMS
"Maximum" Performance- That level of consolidated net earnings
justifying a "maximum" incentive award.
"Par" Performance- The level of consolidated net
earnings, as approved by the Board,
justifying a "target incentive
award".
"Cut-in" Performance- The minimum level of consolidated
net earnings, defined as 95% of
"Par", justifying an incentive
award.
"Target" Incentive- The percent (%) of base pay when a
100% incentive award is earned.
"Minimum" Incentive- The percent (%) of base pay when a
50% incentive award is earned.
"Maximum" Incentive- The percent (%) of base pay when a
150% incentive award is earned.
"BMC Earnings Threshold"- The minimum level of consolidated
net earnings before a division
participant in the Plan will be
eligible for an incentive award.
"Division DCE Threshold"- The "Cut-in" performance standard,
expressed as DCE, below which
incentive will not be awarded.
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1995 MANAGEMENT INCENTIVE PLAN SUMMARY
PARTICIPANTS: Elected officers and key managers.
PERFORMANCE STANDARDS:
A. 1995 Corporate Performance Standards-
"Maximum" performance is 115% of the "Par" consolidated
net earnings.
"Par" performance is the consolidated net earnings number, as
approved by the Board.
"Cut-in" performance is 95% of the "Par" consolidated
net earnings.
B. 1995 Division Performance Standards-
The "BMC Earnings Threshold" is 75% of the 1995
Corporate "Cut-in" performance standard.
The "DCE Threshold" is the "Cut-in" defined at the DCE
line.
"Par" performance is the BUDGETED operating earnings
(budgeted DCE adjusted for allocated and actual
interest expenses, third party translation gains/losses
and plotter charges and the depreciation from the
decrease in capital spending.
AWARD LEVELS: "Target" incentive awards range from 10%
to 50% of base salary, depending on
level of responsibility.
ORGANIZATION WEIGHTING: There is no organization weighting,
i.e., Corporate participants earn awards
based on Corporate performance and
division participants earn awards based
on division performance.
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INCENTIVE OPPORTUNITY: Individual incentive awards will be
prorated and calculated based on the
following, once the applicable
"Thresholds" have been exceeded.
- 150% of "Target" incentive is
earned when reported earnings equal
or exceed "Maximum".
- 100% of "Target" incentive is
earned when reported earnings equal
"Par".
- 50% of "Target" incentive is earned
when reported earnings equal "Cut-
in".
- No incentive will be paid when
reported earnings fall down below
"Cut-in".
- Division/Corporate staff
"Discretion-ary Incentive Pools"
will be generated when earnings
performance exceeds "Par". The
"Pool" will be 10% of the accrued
incentive dollars at "Par".
Discretionary awards will be in
addition to the incentive awards by
formula. However, such awards
cannot exceed the "Pool" and must
be approved by the CEO.
PAYMENT FORM: Cash.
5
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BMC INDUSTRIES, INC.
1995 MANAGEMENT INCENTIVE PLAN
GENERAL PROVISIONS
1. "Base salary" in the Plan means the cumulative base salary
earned, not paid, by BMC or one of its divisions during the
1995 calendar year, excluding all other forms of
compensation.
2. Incentive compensation payments for 1995 will be made as
soon as practicable after the review and receipt of the
audited financial statements for the year.
3. If a participant becomes ineligible during the year because
of a change in position, the participant will be entitled to
incentive compensation only for the period of time he/she
was participating, and then only if the participant remains
in the employ of the Company through the date the incentive
payment is made.
4. Payments will be made only to those participants who are in
the employment of the Company on the date the incentive
payment is made except:
a. If the participant is a member of a division divested
during 1995 and remains in the employ of the Company
through the closing date of the divestiture, he/she
will be eligible for an incentive award based on year-
to-date performance versus year-to-date performance
standards. The year-to-date proforma "Cut-in" and "Par"
will be determined by applying the percent that the
Cut-in and Par performance standards are of the
approved 1995 budget.
b. If a participant dies during 1995, prorated incentive
compensation will be paid to the participant's
beneficiary, as designated under the Group Life
Insurance Plan, or if a beneficiary is not so
designated, to the duly appointed personal
representative of the participant's estate.
c. If a participant retires with the consent of the
Company during 1995, he/she will be entitled to receive
incentive compensation prorated relative to the
duration of the employee's participation in the 1995
Plan.
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d. If a participant has been given a military leave of
absence and is to immediately enter the service of the
armed forces, the participant will be paid an amount
prorated relative to the duration of his/her
participation in the 1995 Plan prior to entering the
service.
e. If a participant for any reason such as illness,
disability, etc., is able to work only part-time, the
Chief Executive Officer may determine the extent to
which such employee shall participate. Each case is to
be handled on the basis of its own merits.
5. The inclusion of a participant in this Plan does not
constitute or imply a guarantee of employment.
6. The inclusion of a participant in this Plan does not
constitute a warranty that he/she will necessarily
participate in a future plan, and the fact that a plan has
been established for this year is not to be construed as an
obligation to establish any such plan in the future.
7. A participant whose general job performance is
unsatisfactory, or whose managerial behavior is not in the
best interest of the Company, will be terminated from the
Management Incentive Plan, effective upon written notice
with no rights to a prorated award.
8. The obligation of the Company, as set forth herein, shall be
subject to modification in such manner and to such extent as
it deems necessary to comply with any law, regulation or
governmental order pertaining to employee compensation.
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BMC INDUSTRIES, INC.
PROFIT SHARING PLAN
1994 REVISION
As Amended Effective Generally as of January 1, 1994
<PAGE>
BMC INDUSTRIES, INC.
PROFIT SHARING PLAN
1994 REVISION
TABLE OF CONTENTS
PAGE
ARTICLE I Description and Purpose................................... 1
1.1 Plan Name................................................. 1
1.2 Plan Description.......................................... 1
1.3 Plan Purposes............................................. 1
1.4 Plan Background........................................... 1
ARTICLE II Eligibility............................................... 2
2.1 Eligibility Requirements.................................. 2
2.2 Transfer Among Participating Employers or Business Units.. 2
2.3 Multiple Employment....................................... 2
2.4 Reentry................................................... 2
2.5 Condition of Participation................................ 2
2.6 Termination of Participation.............................. 3
ARTICLE III Contributions............................................. 4
3.1 Amount of Participating Employer Contribution............. 4
3.2 Eligibility for Participating Employer Contribution....... 4
3.3 Allocation of Participating Employer Contribution......... 5
3.4 Timing of Profit Sharing Contribution..................... 6
3.5 Rollovers and Transfers................................... 6
ARTICLE IV Accounts and Valuation.................................... 8
4.1 Establishment of Accounts................................. 8
4.2 Valuation and Account Adjustment.......................... 8
4.3 Adjustment Accounting..................................... 8
4.4 Allocations Do Not Create Rights.......................... 8
ARTICLE V Participant Investment Direction.......................... 9
5.1 Establishment of Investment Funds......................... 9
5.2 Contribution Investment Directions........................ 9
5.3 Transfer Among Investment Funds........................... 10
5.4 Investment Direction Responsibility Resides With
Participants.............................................. 10
5.5 Beneficiaries and Alternate Payees........................ 10
ARTICLE VI Withdrawals During Employment............................. 11
6.1 Hardship Withdrawals from Profit Sharing Account.......... 11
6.2 Rules for Withdrawals..................................... 11
6.3 No Withdrawals from Rollover Account...................... 12
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ARTICLE VII Vesting and Forfeitures................................... 13
7.1 Vesting................................................... 13
7.2 Forfeiture Upon Distribution.............................. 14
7.3 Other Forfeitures......................................... 15
7.4 Reallocation of Forfeitures............................... 15
ARTICLE VIII Distributions After Termination........................... 16
8.1 Time and Form of Distribution............................. 16
8.2 Beneficiary Designation................................... 19
8.3 Assignment, Alienation of Benefits........................ 20
8.4 Payment in Event of Incapacity............................ 21
8.5 Payment Satisfies Claims.................................. 21
8.6 Disposition if Distributee Cannot be Located.............. 21
8.7 Direct Rollovers.......................................... 21
ARTICLE IX Contribution Limitations.................................. 22
9.1 Aggregate Defined Contribution Limitations................ 22
9.2 Aggregate Defined Contribution/Defined Benefit
Limitations............................................... 22
9.3 Administrator's Discretion................................ 23
ARTICLE X Service Rules............................................. 24
10.1 Computation Period........................................ 24
10.2 Vesting Service........................................... 24
10.3 Hour of Service........................................... 24
10.4 One-Year Break in Service................................. 26
10.5 Loss of Service........................................... 27
10.6 Pre-Acquisition Service................................... 27
ARTICLE XI Adoption, Amendment and Termination....................... 28
11.1 Adoption by Affiliated Organizations...................... 28
11.2 Authority to Amend and Procedure.......................... 28
11.3 Authority to Terminate and Procedure...................... 28
11.4 Vesting Upon Termination, Partial Termination or
Discontinuance of Contributions........................... 29
11.5 Distribution Following Termination, Partial Termination or
Discontinuance of Contributions........................... 29
ARTICLE XII Definitions, Construction and Interpretations............. 30
12.1 Account................................................... 30
12.2 Active Participant........................................ 30
12.3 Administrator............................................. 30
12.4 Affiliated Organization................................... 30
12.5 Board..................................................... 30
12.6 Beneficiary............................................... 30
12.7 Code...................................................... 30
12.8 Committee................................................. 31
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12.9 Company................................................... 31
12.10 Compensation.............................................. 31
12.11 Disabled.................................................. 31
12.12 Employee.................................................. 31
12.13 Excess Compensation....................................... 31
12.14 Fund...................................................... 31
12.15 Governing Law............................................. 31
12.16 Headings.................................................. 32
12.17 Highly Compensated Employee............................... 32
12.18 Normal Retirement Date.................................... 33
12.19 Number and Gender......................................... 33
12.20 Participant............................................... 33
12.21 Participating Business Unit............................... 33
12.22 Participating Employer.................................... 33
12.23 Plan...................................................... 33
12.24 Plan Rule................................................. 34
12.25 Plan Year................................................. 34
12.26 Profit Sharing Account.................................... 34
12.27 Qualified Employee........................................ 34
12.28 Rollover Account.......................................... 34
12.29 Section 415 Wages......................................... 34
12.30 Spousal Consent........................................... 34
12.31 Termination of Employment................................. 35
12.32 Treasury Regulations...................................... 35
12.33 Trust..................................................... 35
12.34 Trustee................................................... 35
12.35 Valuation Date............................................ 35
ARTICLE XIII Administration of Plan.................................... 36
13.1 Named Fiduciary........................................... 36
13.2 Committee................................................. 36
13.3 Administrator............................................. 37
13.4 Compensation and Expenses................................. 38
13.5 Plan Rules................................................ 38
13.6 Administrator's Discretion................................ 38
13.7 Indemnification........................................... 38
13.8 Benefit Claim Procedure................................... 39
13.9 Correction of Errors...................................... 39
ARTICLE XIV Miscellaneous............................................. 40
14.1 Merger, Consolidation, Transfer of Assets................. 40
14.2 Limited Reversion of Fund................................. 40
14.3 Top-Heavy Provisions...................................... 40
14.4 No Employment Rights Created.............................. 44
14.5 Special Provisions........................................ 44
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BMC INDUSTRIES, INC.
PROFIT SHARING PLAN
1994 REVISION
ARTICLE I
DESCRIPTION AND PURPOSE
1.1 PLAN NAME. The name of the Plan is the "BMC Industries, Inc. Profit
Sharing Plan."
1.2 PLAN DESCRIPTION. The Plan is a profit sharing plan that is intended
to qualify under Code section 401(a) and to satisfy the requirements of Code
section 401(l).
1.3 PLAN PURPOSES. The purposes of the Plan are to promote effort and
cooperation on the part of Active Participants; to provide a measure of economic
security to Active Participants by accumulating contributions for distribution
upon retirement, as a supplement to other resources then available; and to
permit Active Participants to share in the profits and growth of their
Participating Employer.
1.4 PLAN BACKGROUND. (A) The Company adopted and established the Plan
effective as of January 1, 1985. As so adopted and established, the Plan
consisted of two component plans, a profit sharing plan and a money purchase
pension plan, the terms of which were set forth in a single plan instrument.
(B) The Vision-Ease Corporation adopted and established a profit sharing
plan effective as of January 31, 1957 by way of an instrument entitled "The
Vision-Ease Corporation Profit Sharing Trust." Effective as of January 1, 1976,
the plan was restated in the manner set forth in the instrument entitled "The
Vision-Ease Corporation Profit Sharing Plan - 1976 Revision." Effective as of
January 1, 1979, the plan was again restated in the manner set forth in the 1979
Restatement. Effective as of October 26, 1982, The Vision-Ease Corporation was
merged with and into Camelot Industries Corporation and in connection therewith
sponsorship of the plan was assumed by Camelot Industries Corporation and the
plan was amended and renamed "Camelot Industries Corporation Vision-Ease
Division Profit Sharing Plan." Effective as of September 30, 1987, Camelot
Industries Corporation was merged with and into the Company and in connection
therewith sponsorship of the plan was assumed by the Company.
(C) Effective as of December 31, 1988, the money purchase pension plan
component of the Plan and the Camelot Industries Corporation Vision-Ease
Division Profit Sharing Plan were merged with and into the profit sharing plan
component of the Plan. For purposes of evidencing such merger and the terms of
the continuing profit sharing plan and to bring the Plan into compliance with
the provisions of the Tax Reform Act of 1986 and other applicable law, the Plan
was restated in the manner set forth in the 1989 Revision.
(D) Effective generally as of January 1, 1994, the Plan was restated in
the manner set forth in this 1994 Revision to comply with changes in applicable
law and make certain other miscellaneous changes.
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ARTICLE II
ELIGIBILITY
2.1 ELIGIBILITY REQUIREMENTS. (A) An Employee is eligible to participate
in the Plan
(1) on the date on which he or she first completes an Hour of
Actual Service as a Qualified Employee for the purpose of having a
rollover or transfer made on his or her behalf pursuant to Section 3.5,
and
(2) as of the January 1 that falls on or last precedes the last
day of the first 12-month period of the type described in Section 10.1
during which he or she completes at least 1000 Hours of Service, if he or
she is a Qualified Employee on that day, for the purpose of being eligible
to share in the allocation of his or her Participating Employer's
contributions pursuant to Article III.
(B) If an Employee is not a Qualified Employee on the date on which he
or she would otherwise be eligible to participate in the Plan for the purpose
specified in Subsection (A)(2), he or she will become eligible to participate as
of the January 1 that falls on or last precedes the first following date on
which he or she completes an Hour of Actual Service as a Qualified Employee.
(C) Notwithstanding Subsection (A)(2), in conjunction with an
acquisition, the Company's Board may specify a special entry date for those
Qualified Employees with respect to whom pre-acquisition service is taken into
account pursuant to Section 10.6.
2.2 TRANSFER AMONG PARTICIPATING EMPLOYERS OR BUSINESS UNITS. A
Participant who transfers from one Participating Employer or Business Unit to
another Participating Employer or Business Unit as a Qualified Employee will
participate in the Plan for the Plan Year during which the transfer occurs on
the basis of his or her separate Compensation for the Plan Year from each such
Participating Employer or Business Unit, as the case may be.
2.3 MULTIPLE EMPLOYMENT. A Participant who is simultaneously employed as a
Qualified Employee with more than one Participating Employer or Business Unit
will participate in the Plan as a Qualified Employee of all such Participating
Employers or Business Units on the basis of his or her separate Compensation
from each such Participating Employer or Business Unit, as the case may be.
2.4 REENTRY. An Active Participant who ceases to be a Qualified Employee
will be eligible to resume active participation in the Plan as of the first
following date on which he or she completes an Hour of Actual Service as a
Qualified Employee.
2.5 CONDITION OF PARTICIPATION. Each eligible Qualified Employee, as a
condition of participation, is bound by all the terms and conditions of the Plan
and must furnish to the Administrator such pertinent information and execute
such instruments as the Administrator may require.
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2.6 TERMINATION OF PARTICIPATION. A Participant will cease to be such as
of the later of the date on which
(a) he or she ceases to be a Qualified Employee, or
(b) all benefits, if any, to which he or she is entitled under the
Plan have been distributed.
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ARTICLE III
CONTRIBUTIONS
3.1 AMOUNT OF PARTICIPATING EMPLOYER CONTRIBUTION. (A) Subject to the
limitations set forth at Article IX, for each Plan Year each Participating
Employer will make a basic contribution under the Plan, from its annual earnings
or profits for the Plan Year or from its accumulated earnings or profits, in an
amount equal to three percent of the aggregate Compensation for the Plan Year of
all Participants eligible to share in the contribution pursuant to Section 3.2;
provided, that, to the extent the Participating Employer is prevented from
making all or any portion of such contribution for any Plan Year because its
current or accumulated earnings or profits are inadequate, the Participating
Employer may, in its sole discretion, make such contribution in its entirety, or
make any specified portion thereof, notwithstanding such inadequacy.
(B) Subject to the limitations set forth at Article IX, for each Plan
Year each Participating Employer will make an additional contribution under the
Plan for each of the Participating Employer's Participating Business Units,
other than the glass lens organization unit within the Vision-Ease Lens
Participating Business Unit, which is expressly covered by the provisions of
Subsection (C), from its annual earnings or profits for such Plan Year or from
its accumulated earnings or profits, in the amount, if any, separately
determined by the Participating Employer's Board for each Participating Business
Unit based upon the differing annual profit performance of such Participating
Business Units.
(C) Notwithstanding Subsection (B), and subject to the limitations set
forth at Article IX, for each Plan Year the Company will make an additional
contribution under the Plan with respect to the glass lens organization unit of
the Vision-Ease Lens Participating Business Unit, from its annual earnings or
profits for such Plan Year or from its accumulated earnings or profits, in an
amount calculated in the manner set forth in Appendix A to the Plan.
(D) Subject to the limitations set forth at Article IX, for each Plan
Year a Participating Employer may contribute with respect to any Participating
Business Unit any additional amount determined by its Board to be advisable to
assist the Plan in satisfying any requirement imposed by the Code or Treasury
Regulations.
3.2 ELIGIBILITY FOR PARTICIPATING EMPLOYER CONTRIBUTION. To be eligible to
share in a Participating Employer's contribution for a particular Plan Year, a
Participant must have entered the Plan as a Participant pursuant to Section
2.1(A)(2) as of a date within or before the Plan Year, received Compensation for
the Plan Year from the Participating Employer with respect to a period during
which he or she was an Active Participant employed by the Participating Employer
and either -
(a) completed at least 1000 Hours of Service during the Plan Year
and been employed with an Affiliated Organization on the last day of the
Plan Year, or
(b) terminated employment during the Plan Year
(i) at or after his or her Normal Retirement Date
(ii) on account of his or her death or
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(iii) on account of his or her becoming Disabled or
(iv) following his or her attainment of age 60 if the sum of
his age and years of Vesting Service equals or exceeds
65;
provided, that this condition will be applied only once with respect to a
Participant, such sole application being made for the Plan Year during
which this clause first applies and the conditions under clause (a) are
not satisfied.
3.3 ALLOCATION OF PARTICIPATING EMPLOYER CONTRIBUTION. (A) Subject to the
limitations set forth at Article IX, a Participating Employer's contribution for
a Plan Year will be allocated among Participants who have satisfied the
eligibility conditions under Section 3.2 as follows:
(1) The portion of the contribution described in Section 3.1(A)
will be allocated to each eligible Participant in the same proportion that
his or her Compensation for the Plan Year bears to the aggregate
Compensation for the Plan Year of all Participants eligible to share in
that portion of the Participating Employer's contributions.
(2) The portion of the contribution described in Section 3.1(B)
with respect to a given Participating Business Unit will be allocated to
each eligible Participant who received Compensation for the Plan Year with
respect to services for the Participating Business Unit (other than
administrative services with respect to which he or she is included in the
Corporate Participating Business Unit unless the contribution relates to
the Corporate Participating Business Unit) as follows:
(a) An amount equal to three percent of his or her Excess
Compensation for the Plan Year. If, however, such contribution is
less than 3 percent of the aggregate Excess Compensation of all
eligible Participants in his or her Participating Business Unit,
such contribution will be allocated to each eligible Participant in
the same proportion that his or her Excess Compensation for the Plan
Year bears to the aggregate Excess Compensation for the Plan Year of
all eligible Participants in his or her Participating Business Unit.
(b) To the extent the contribution is not exhausted after it
has been allocated under clause (a), each eligible Participant's
share of the remainder will be an amount equal to 2.7 percent of the
sum of his or her Compensation plus his or her Excess Compensation
for the Plan Year. If, however, such contribution is less than 2.7
percent of the aggregate sum of the Compensation plus Excess
Compensation of all eligible Participants in his or her
Participating Business Unit, such contribution will be allocated to
each eligible Participant in the same proportion that the sum of his
or her Compensation plus his or her Excess Compensation for the Plan
Year bears to the sum of the aggregate Compensation plus the
aggregate Excess Compensation for the Plan Year of all eligible
Participants in his or her Participating Business Unit.
(c) To the extent the contribution is not exhausted after it
has been allocated pursuant to clauses (a) and (b), the balance, if
any, will be allocated to each eligible Participant in the same
proportion that his or her Compensation bears
5
<PAGE>
to the aggregate Compensation for the Plan Year of all eligible
Participants in his or her Participating Business Unit.
(3) The portion of the contribution described in Section 3.1(C)
will be allocated to each eligible Participant who received Compensation
for the Plan Year with respect to services for the glass lens organization
unit of the Vision-Ease Lens Participating Business Unit (other than
administrative services with respect to which he or she is included in the
Corporate Participating Business Unit) in the same proportion that his or
her Compensation for the Plan Year bears to the aggregate Compensation for
the Plan Year of all such eligible Participants.
(4) The portion of the contribution described in Section 3.1(D)
will be allocated to each eligible Participant who received Compensation
for the Plan Year with respect to services for the Participating Business
Unit to which the portion of the contribution relates (other than
administrative services with respect to which he or she is included in the
Corporate Participating Business Unit unless the contribution relates to
the Corporate Participating Business Unit) and who is not a Highly
Compensated Employee in the same proportion that his or her Compensation
for the Plan Year bears to the aggregate Compensation for the Plan Year of
all eligible Participants in the Participating Business Unit who are not
Highly Compensated Employees.
(B) Any contribution made prior to completion of the allocation of such
contribution among eligible Participants will be carried in a suspense account
until the allocation is made, but the allocation, when made, will be made as of
the last day of the Plan Year for which such contribution is made. The Trustee
will invest the suspense account balance in accordance with Plan Rules and any
earnings or losses attributable to such suspense account will be allocated at
the same time and in the same manner as the contribution.
3.4 TIMING OF PROFIT SHARING CONTRIBUTION. A Participating Employer's
contribution for a Plan Year, if any, will be paid to the Trustee on such date
or dates during or following the Plan Year as the Participating Employer may
elect but in no case more than 12 months after the end of the Plan Year.
3.5 ROLLOVERS AND TRANSFERS. (A) An Active Participant may, with the
prior consent of the Administrator, contribute to the Trust, within 60 days of
receipt,
(1) the balance of an individual retirement account to which the
only contributions have been one or more "eligible rollover
distributions," within the meaning of Code section 402(c)(4), from a plan
qualified under Code section 401(a), or
(2) an eligible rollover distribution from such a qualified plan.
(B) With the prior consent of the Administrator, the accounts under
another plan qualified under Code section 401(a) of an Active Participant may be
transferred directly to the Trust. Other than in connection with an
acquisition, such a transfer will not be permitted if, as a result of the
transfer, the Plan would be required to provide any option with respect to the
form or time of distribution or any other right, benefit or feature not
available under the Plan prior to the transfer.
6
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(C) Other than in connection with an acquisition, any contribution or
transfer to the Trust pursuant to Subsection (A) or (B) must be made in cash and
will be credited to the Active Participant's Rollover Account.
7
<PAGE>
ARTICLE IV
ACCOUNTS AND VALUATION
4.1 ESTABLISHMENT OF ACCOUNTS. The following Accounts will be established
and maintained for each Participant:
(a) A Profit Sharing Account, to which there will be added
Participating Employer contributions made on the Participant's behalf, the
Participant's share of forfeitures with respect to Plan Years ending
before January 1, 1994, the Participant's share of employer money purchase
contributions made under provisions of the Plan in effect prior to January
1, 1989 and, with respect to any Participant who participated in the
Camelot Industries Corporation Vision-Ease Division Profit Sharing Plan
prior to January 1, 1989, the balance of his or her basic account under
such plan as of December 31, 1988;
(b) A Rollover Account, to which there will be added rollover or
trust-to-trust transfers made by or on behalf of the Participant, and with
respect to any Participant who participated in the Camelot Industries
Corporation Vision-Ease Division Profit Sharing Plan prior to January 1,
1989 for whom a rollover account had been established under the provisions
of such plan, the balance of such account as of December 31, 1988.
One or more additional accounts may be established for any Participant or group
of similarly situated Participants in connection with the merger of another plan
into the Plan, in which case provisions of the Plan applicable solely to such
Accounts will be set forth on an exhibit to the Plan in accordance with Section
14.5.
4.2 VALUATION AND ACCOUNT ADJUSTMENT. (A) As of the close of business on
each Valuation Date, each Participant's Accounts within each investment fund
established pursuant to Section 5.1 will be separately adjusted in a uniform and
equitable manner to reflect income, expenses, gains and losses of the investment
fund, as well as withdrawals and distributions since the last prior adjustment.
(B) The Administrator may from time to time cause Participants' Accounts
to be adjusted in accordance with Subsection (A) on any interim Valuation Date
where the Administrator deems such adjustment to be necessary to prevent
inequitable results because of extraordinary increases or decreases in the value
of the Fund since the last preceding Valuation Date or other events.
4.3 ADJUSTMENT ACCOUNTING. The adjustments made under Section 4.2 will be
set forth in the accounting rendered as of the Valuation Date for which they
were made.
4.4 ALLOCATIONS DO NOT CREATE RIGHTS. The fact that amounts are added to
the Accounts of a Participant does not vest in the Participant any right, title
or interest in or to any portion of the Fund except at the time or times and
upon the terms and conditions expressly set forth in the Plan. Notwithstanding
any addition to an Account, the issuance of any statement or the distribution of
all or any portion of an Account balance, the Administrator may cause the
Account to be adjusted to the extent necessary to correct any error in such
Account, whether caused by a misapplication of any provision of the Plan or
otherwise, and may recover from any distributee the amount of any excess
distribution. Any such adjustment will be made within a reasonable time after
the error is discovered.
8
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ARTICLE V
PARTICIPANT INVESTMENT DIRECTION
5.1 ESTABLISHMENT OF INVESTMENT FUNDS. (A) In order to allow each
Participant to determine the manner in which his or her Accounts will be
invested, the Trustee will maintain, within the Trust, three or more separate
investment funds of such nature and possessing such characteristics as the
Committee may specify from time to time. Each Participant's Accounts will be
invested in the investment funds in the proportions directed by the Participant
in accordance with the procedures set forth in Sections 5.2 and 5.3. The
Committee may, from time to time, establish additional investment funds or
eliminate any existing investment fund.
(B) Notwithstanding any other provision of the Plan to the contrary, the
Committee may suspend Participant investment activity (including such activity
in connection with withdrawals and distributions) in any or all investment
funds, or impose special rules or restrictions of uniform application, for a
period determined by the Committee to be necessary in connection with
(1) the establishment or termination of any investment fund,
(2) the receipt by the Trustee from, or transfer by the Trustee
to, another trust of account balances pursuant to Section 3.5 or 8.7 in
connection with an acquisition or divestiture or otherwise,
(3) a change of Trustee or investment manager, or
(4) such other circumstances determined by the Committee as making
such suspension or special rules or restrictions necessary or appropriate.
5.2 CONTRIBUTION INVESTMENT DIRECTIONS. (A) In conjunction with his or
her enrollment in the Plan, a Participant must direct the manner in which
contributions to his or her Accounts will be invested among the investment funds
maintained pursuant to Section 5.1. The direction must be made in accordance
with and is subject to Plan Rules. To the extent a Participant fails to direct
the investment of contributions to his or her Accounts, the contributions will
be invested in accordance with Plan Rules.
(B) A Participant may direct a change in the manner in which future
contributions to his or her Accounts will be invested among the investment funds
maintained pursuant to Section 5.1. The direction must be made in accordance
with and is subject to Plan Rules and will be effective as of the January 1 or
July 1 that next follows by at least 30 days (or such shorter period as the Plan
Rules may allow) after the date on which the Administrator receives the
direction from the Participant.
(C) Contributions made prior to a date on which they may be invested in
the investment fund directed by the Participant will be invested in short-term
investments until such date, at which time the contributions will be invested in
the appropriate investment fund or funds in accordance with the Participant's
directions. Any income realized from such short-term investments will be
allocated in a uniform and equitable manner among the investment funds in which
such contributions are invested.
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5.3 TRANSFER AMONG INVESTMENT FUNDS. (A) A Participant who is an Employee
may direct the transfer of his or her Accounts among the investment funds
maintained pursuant to Section 5.1. The direction must be made in accordance
with and is subject to Plan Rules and will be effective on or as soon as
administratively practicable after the January 1 or July 1 that next follows by
at least 30 days (or such shorter period as the Plan Rules allow) after the date
on which the Administrator receives the direction from the Participant. Plan
Rules will include procedures pursuant to which Participants are provided with
the opportunity to obtain written confirmation of investment directions made
pursuant to this section.
(B) The vested Account balances of any Participant who has terminated
employment with all Affiliated Organizations (including contributions, if any,
allocated to such Account following such termination of employment) will, as of
the January 1 or July 1 that first follows the Participant's termination of
employment, be transferred to the investment fund under Section 5.1 that
provides for a fixed return on principal. If there is more than one such
investment fund then in effect, the Plan Rules will specify from among such
funds that fund to which all transfers pursuant to this Subsection (B) will be
made.
(C) Plan Rules may impose uniform limitations and restrictions
applicable to transfers into and out of specific investment funds.
5.4 INVESTMENT DIRECTION RESPONSIBILITY RESIDES WITH PARTICIPANTS. Neither
any Affiliated Organization, the Administrator, the Committee nor the Trustee
has any authority, discretion, responsibility or liability with respect to a
Participant's selection of the investment funds or other directed investments in
which his or her Account will be invested, the entire authority, discretion and
responsibility for, and any results attributable to, the selection being that of
the Participant.
5.5 BENEFICIARIES AND ALTERNATE PAYEES. Solely for purposes of this
article, the term "Participant" includes the Beneficiary of a deceased
Participant and an alternate payee under a qualified domestic relations order
within the meaning of Code section 414(p) unless otherwise provided in such
order, but only after
(1) the Administrator has determined the identity of the
Beneficiary and the amount of the Account balance to which he or she is
entitled in the case of a Beneficiary of a deceased Participant, or
(2) the Administrator has, in accordance with Plan Rules, made a
final determination that the order is a qualified domestic relations order
and all rights to contest such determination in a court of competent
jurisdiction within the time prescribed by Plan Rules have expired or been
exhausted in the case of an alternate payee.
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ARTICLE VI
WITHDRAWALS DURING EMPLOYMENT
6.1 HARDSHIP WITHDRAWALS FROM PROFIT SHARING ACCOUNT. (A) Subject to the
provisions of Section 6.2, a Participant who is employed with the glass lens
organization unit of the Vision-Ease Lens Participating Business Unit may make a
withdrawal from his or her Profit Sharing Account in an amount not in excess of
the lesser of (1) the amount by which his or her vested Profit Sharing Account
balance as of the last preceding Valuation Date exceeds the total amount of
contributions allocated to his Profit Sharing Account during the two Plan Years
immediately preceding the date of the withdrawal distribution or (2) the amount
required to satisfy the hardship; provided, that in no event may a Participant
withdraw the portion of his Profit Sharing Account balance, if any, attributable
to reallocated forfeitures of money purchase pension contributions made under
the provisions of the Plan in effect prior to January 1, 1989. Such withdrawal
will be made only if the Administrator determines that the Participant has
suffered an economic hardship as a result of expenses of medical or hospital
care attributable to the sickness, accident or other disabling cause affecting
the Participant, or a member of his or her family who is dependent on the
Participant for care or support, or has suffered such other financial emergency
of a nature that he or she is confronted by impending financial ruin or his or
her family's stability is clearly endangered by present or impending want or
privation.
(B) The Administrator's determination of the existence of a
Participant's financial hardship and the amount that may be withdrawn to satisfy
the need created by such hardship will be made in accordance with Treasury
Regulations, and is final and binding on the Participant. The Administrator may
require the Participant to make representations and certifications concerning
his or her entitlement to a withdrawal pursuant to this section and is entitled
to rely on such representations and certifications unless the Administrator has
actual knowledge to the contrary. The Administrator is not obligated to
supervise or otherwise verify that amounts withdrawn are applied in the manner
specified in the Participant's withdrawal application.
6.2 RULES FOR WITHDRAWALS.
(A) A withdrawal distribution will be made only upon the Administrator's
receipt from the Participant of a complete and accurate written application on a
form provided by the Administrator.
(B) A withdrawal will be made among the investment funds in which the
Account is invested according to the Participant's specifications.
(C) No withdrawal distribution will be permitted unless,during the
90-day period ending on the date of the withdrawal distribution, the
Participant's spouse consents to the distribution on a form provided by the
Administrator.
(D) All withdrawal distributions will be made by check drawn on the
Trust as soon as administratively practicable after the Administrator's
determination that a Participant is entitled to receive the withdrawal
distribution and will be based on the balance of the Participant's Account as of
the Valuation Date that last precedes the date of the withdrawal distribution.
(E) The provisions of Section 8.7 apply to any withdrawal distribution
after December 31, 1992 that constitutes an eligible rollover distribution
within the meaning of Code section 402(c)(4).
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(F) In the case of a withdrawal distribution to a Participant who does
not have a fully vested interest in his or her Profit Sharing Account at the
time of the withdrawal, the vested portion of the Account after the withdrawal
distribution will be determined in accordance with Section 7.3(B).
6.3 NO WITHDRAWALS FROM ROLLOVER ACCOUNT. No Participant may withdraw any
portion of the balance of his or her Rollover Account.
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ARTICLE VII
VESTING AND FORFEITURES
7.1 VESTING. (A) Each Participant, at all times, has a fully vested
nonforfeitable interest in his or her Rollover Account.
(B) A Participant will acquire a fully vested nonforfeitable interest in
his or her Profit Sharing Account upon attaining his or her Normal Retirement
Date while he or she is an Employee.
(C) A Participant will acquire a fully vested nonforfeitable interest in
his or her Profit Sharing Account if he or she dies or becomes Disabled while he
or she is an Employee.
(D) A Participant will acquire a fully vested nonforfeitable interest in
his or her Profit Sharing Account upon the Participant's termination of
employment following the Participant's attainment of age 60 if the sum of his or
her age and years of Vesting Service equals or exceeds 65.
(E) A Participant will acquire a fully vested nonforfeitable interest in
his or her Profit Sharing Account upon the Participant's termination of
employment if the Affiliated Organization, Participating Business Unit, business
unit, location or division at which the Participant is employed, permanently
ceases operations or is sold or otherwise transferred through sale of stock or
of business and assets, in such manner that it no longer is, or is no longer
owned by, an Affiliated Organization.
(F) A Participant will acquire a fully vested nonforfeitable interest in
his or her Profit Sharing Account upon a Change in Control with respect to the
Company, which for purposes of this subsection means any of the following:
(1) The sale, lease, exchange, or other transfer of all or
substantially all of the assets of the Company, in one transaction or in a
series of related transactions, to any Person:
(2) The approval by the stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
(3) Any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of 50 percent or more of the
combined voting power of the Company's outstanding securities ordinarily
having the right to vote at elections of directors;
(4) Individuals who constitute the Company's Board of Directors on
January 1, 1994 (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to January 1, 1994 whose election, or nomination for election,
by the Company's stockholders, was approved by a vote of at least a
majority of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a
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nominee for director, without objection to such nomination) will, for
purposes of this clause (4), be deemed to be a member of the Incumbent
Board; or
(5) A change in control of a nature that is determined by
independent legal counsel to the Company to be required to be reported
(assuming such event has not been "previously reported") in response to
Item 1(a) of the Current Report on Form 8-K, as in effect on January 1,
1994, pursuant to section 13 or 15(d) of the Exchange Act, whether or not
the Company is then subject to such reporting requirement.
For purpose of applying the foregoing, the term "Person" means and includes any
individual, corporation, partnership, group, association or other "person," as
such term is used in section 14(d) of the Exchange Act, other than the Company,
a wholly-owned subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company or a wholly-owned subsidiary of the Company.
(G) A Participant whose Profit Sharing Account is not otherwise fully
vested pursuant to Subsections (B), (C), (D), (E) or (F), will acquire a fully
vested nonforfeitable interest in his or her Profit Sharing Account upon his or
her completion of five (5) years of Vesting Service; provided that each
Participant whose basic account balance under the Camelot Industries Corporation
Vision-Ease Division Profit Sharing Plan was transferred to his or her Profit
Sharing Account in connection with the merger of such plan with and into this
Plan, will acquire a vested interest in his or her Profit Sharing Account
balance to the extent set forth in the following schedule:
<TABLE>
<CAPTION>
VESTED
YEARS OF VESTING SERVICE INTEREST
------------------------ --------
<S> <C>
Less Than Two Years 0%
Two Years 10%
Three Years 20%
Four Years 30%
Five or More Years 100%
</TABLE>
7.2 FORFEITURE UPON DISTRIBUTION. (A) If the entire vested balance of a
Participant's Accounts is distributed not later than the last day of the second
Plan Year following the Plan Year during which his or her employment terminates,
and if the amount of such distribution was not more than $3500 or the
distribution was made with the Participant's consent, the nonvested portion of
the Participant's Profit Sharing Account will, at the time of such distribution,
be forfeited. A Participant who has no vested interest in his or her Profit
Sharing Account at termination of employment will be deemed to have received
distribution of the entire vested balance in such Account upon such termination.
(B) If a Participant described in Subsection (A)(1) received a
distribution of less than the entire balance of his or her Accounts, (2) resumes
employment with a Participating Employer as a Qualified Employee, and (3) repays
to the Trustee the full amount distributed before the earlier of (a) five years
following the date of reemployment as a Qualified Employee or (b) the date on
which he or she incurs five consecutive One-Year Breaks in Service following the
distribution, the amount of any forfeitures pursuant to Subsection (A) will be
restored to the Participant's Profit Sharing Account, unadjusted for any change
in Fund value occurring after the Valuation Date immediately preceding the
distribution. The restoration will be made from forfeitures that arise for the
Plan Year for which the restoration is to be made. To the extent such
forfeitures are
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<PAGE>
insufficient for such purpose, the Participating Employer with whom the
Participant was last employed as a Qualified Employee will contribute the amount
required to restore the Account. A Participant described in the last sentence
of Subsection (A) who is reemployed prior to incurring five consecutive One Year
Breaks in Service following the distribution will be deemed to have repaid his
or her deemed distribution upon his or her reemployment as a Qualified Employee.
7.3 OTHER FORFEITURES. (A) Except as provided in Section 7.2, the
nonvested portion of a Participant's Profit Sharing Account will continue to be
held in a subaccount until the Participant incurs five consecutive One-Year
Breaks in Service, at which time the subaccount balance will be forfeited. If
the Participant resumes employment with an Affiliated Organization prior to
incurring five consecutive One-Year Breaks in Service, the subaccount will be
disregarded and its balance will be included in the Participant's Profit Sharing
Account balance.
(B) A Participant's vested interest in his or her Profit Sharing Account
balance following a resumption of employment in accordance with the last
sentence of Subsection (A) at any given time will not be less than the amount
"X" determined by the formula: X = P(AB + (R x D)) - (R x D), where P is the
Participant's vested percentage at the time of determination; AB is the Account
balance at the time of determination; D is the amount of the distribution; and R
is the ratio of the Account balance at the time of determination, to the balance
immediately following the distribution.
7.4 REALLOCATION OF FORFEITURES. All forfeitures occurring under this
article in a Plan Year will be allocated as of the last day of the Plan Year as
follows:
(1) The forfeitures will first be applied to restore the Profit
Sharing Accounts of Participants as provided in Section 7.2(B); and
(2) Any remaining forfeitures will be used to reduce the Profit
Sharing Contribution that each Participating Employer makes pursuant to
Section 3.1.
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ARTICLE VIII
DISTRIBUTIONS AFTER TERMINATION
8.1 TIME AND FORM OF DISTRIBUTION. (A) Following a Participant's
termination of employment or earlier attainment of age 70-1/2, the Trustee will
distribute to the Participant or, if the Participant has died, to his or her
Beneficiary, the aggregate vested balance of the Participant's Accounts. The
amount of any such distribution made in the form of a lump sum payment, or the
amount that is applied to purchase an annuity contract in accordance with
Subsection (D), as the case may be, will be equal to the balance of the
Participant's Accounts as of the Valuation Date that coincides with or last
precedes the distribution date increased by contributions added to the
Participant's Account and decreased by the amount of any withdrawals and
distributions since such Valuation Date through the date of the distribution. A
lump sum distribution may be made in two payments, the first in an amount equal
to the vested balance of the Participant's Accounts as of the Valuation Date
that last precedes the distribution date and the second in an amount equal to
the vested portion of the Accounts attributable to the period after such
Valuation Date through the date of the first distribution. The two payments
will be considered a single distribution for the purpose of applying clause (1).
Subject to the remaining subsections of this section and Section 8.7,
distribution will be made in accordance with the following provisions-
(1) If the aggregate vested balance of the Participant's Accounts
at the time of the distribution is not more than $3500 distribution to the
Participant, or the Participant's Beneficiary in the case of his or her
death, will be made in the form of a lump sum payment as soon as
administratively practicable following the Participant's termination of
employment or, if the Participant's employment has not terminated,
following the date on which the Participant attains age 70-1/2. This
clause will not apply, however, if the aggregate vested balance of the
Participant's Accounts exceeded $3500 at the time of any previous
distribution to the Participant.
(2) If clause (1) does not apply, distribution to the Participant
will be made in the form determined pursuant to Subsection (D). The
distribution will be made or commence, according to the Participant's
election on a form provided by the Administrator, on such date as the
Participant specifies following his or her termination of employment,
which date may not be later than the date specified under Subsection
(C)(1) unless the Participant elects to defer the distribution in the
manner described in Subsection (B).
(3) Subject to clause (1) above and Subsection (D)(4), any
distribution to the Participant's Beneficiary will be made at such time or
times and in such manner as the Beneficiary elects in accordance with
Subsection (F).
(B) Subject to the provisions of the other subsections of this section,
a Participant described in Subsection (A)(2) may elect to defer commencement of
his or her distribution under the Plan by providing the Administrator a written,
signed statement indicating in which of the available forms the benefit will be
paid and specifying the date on which the payment is to be made or commence,
provided such date may not be later than April 1 of the calendar year following
the calendar year in which the Participant attains age 70-1/2. Such deferral
election must be provided not later than the thirtieth day (or such later date
as Plan Rules may allow) after the close of the Plan Year during which there
occurs the later of the Participant's termination of employment or sixty-fifth
birthday. Plan Rules may permit a Participant to modify any such election in
any manner
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<PAGE>
determined by the Committee to be consistent with Code section 401(a)(14) and
Treasury Regulations thereunder and the other provisions of this section.
(C) Distribution to the Participant will be made, or commence, not later
than the earlier of -
(1) the sixtieth day following the close of the Plan Year during
which there occurs the later of --
(a) the date of his or her termination of employment, or
(b) his or her sixty-fifth birthday; or
(2) the April 1 of the calendar year following the calendar year
during which he or she attains age 70-1/2.
(D) (1) Unless a Participant described in Subsection (A)(2) otherwise
elects in accordance with the provisions of clause (3), the Trustee will,
with the vested portion of the Participant's Accounts, purchase and
distribute to the Participant an annuity contract that provides for
payments for the life of the Participant if the Participant is not married
on his or her "annuity starting date," within the meaning of Code section
417(f)(2), on the date on which distribution would otherwise be made to
him under the Plan or, if the Participant is then married, for payments
for the life of the Participant, with not less than 50 percent and not
more than 100 percent of the amount of such payments, as specified by the
Participant on a form provided by the Administrator, continuing after the
Participant's death for the life of such spouse; provided, first, that
each qualified joint and survivor option payable under such annuity
contract will be actuarially equivalent to each other option based upon
reasonable actuarial assumptions specified in the contract; and, second,
that if a Participant does not otherwise elect, the benefit payable under
the annuity contract with respect to a married Participant will be
payments for his life with 50 percent of the amount of such payments
continuing thereafter for the life of such spouse.
(2) Each qualified joint and survivor annuity contract purchased
for a Participant will provide for payment of benefits commencing at such
time as the Participant elects; provided, that distribution of benefits
under such contract will conform to the requirements of the other
subsections of this section, applied as if such qualified joint and
survivor contract constituted the Participant's vested Accounts. No such
contract may be subject to transfer or to exchange for another annuity
contract that does not conform to the requirements of this Subsection (D).
No such qualified joint and survivor contract may be subject to surrender
or encumbrance without the consent of the Participant's spouse.
(3) A Participant whose benefit would otherwise be paid in the
form of an annuity contract described in clause (1) may elect to receive a
lump sum payment or installment payments in lieu of such qualified joint
and survivor annuity contract. The Participant's election must be in
writing, in form prescribed by the Administrator; must be made within the
90-day period ending on the Participant's annuity starting date; may be
revoked and a new election made any number of times during the election
period; and will not be effective unless the Participant's spouse consents
to such lump sum payment or installment payments, as the case may be.
17
<PAGE>
(4) If a Participant dies prior to his or her annuity starting
date and is married on the date of his or her death, the Administrator
will, with the vested balance of the Participant's Account, purchase and
distribute to the Participant's surviving spouse a nontransferable annuity
contract that provides payments to the surviving spouse for life,
commencing at such time not later than the date on which the Participant
would have attained age 70-1/2 as such spouse elects; provided, that this
clause (4) will not apply if -
(a) the Participant's spouse elects, in a written, signed
statement delivered to the Administrator prior to the purchase of
the annuity contract, to receive the balance of the Participant's
Account in a lump sum payment or installment payments in accordance
with the provisions of Subsection (F), or
(b) the Participant elected, by a signed written statement
delivered to the Administrator within the period commencing on the
first day of the Plan Year in which he or she attained age 35 and
ending on the date of his or her death, to waive the provisions of
this clause (4), and the Participant's spouse consented to such
election; provided that a Participant may, at any time and any
number of times, by signed written notice delivered to the
Administrator during the Participant's lifetime, revoke any election
made under this clause (b), and may make a new election following
any such revocation.
(5) Distribution of any annuity contract pursuant to the foregoing
provisions of this Subsection (D) satisfies in full any claims that the
Participant or his or her spouse may have under the Plan, and neither any
Affiliated Organization, the Trustee nor the Administrator is responsible
to any extent with respect to any payments to which the Participant or his
or her spouse may be entitled under such annuity contract.
(6) The provisions of this Subsection (D) apply notwithstanding
and supersede any designation by a married Participant of any primary
Beneficiary other than his or her spouse which designation is not made
either in conjunction with an election pursuant to clause (3) or (4)(b) of
this Subsection (D), as the case may be, or thereafter with the spouse's
consent.
(E) If a Participant described in Subsection (A)(2) elects to receive
his or her distribution in the form of installment payments, such installments
will be substantially equal in amount and will be made on a monthly, quarterly,
semi-annual or annual basis, for a period not extending beyond either the
Participant's life expectancy or the life expectancy of the Participant and his
or her Beneficiary; and, if the Participant's Beneficiary is not his or her
spouse, the period over which such payments are to be made will be determined by
reference to the applicable table of joint life expectancies set forth in
Treasury Regulation section 1.401(a)(9)-2. Prior to April 1 of the calendar
year following the calendar year during which he or she attains age 70-1/2, the
Participant may elect, in writing to the Administrator, whether the life
expectancies for the Participant and his or her spouse are to be recalculated on
an annual basis for purposes of determining the amount of each installment
payment hereunder. Any such election will become irrevocable as of the date
specified above. If no such election is made, the life expectancies of the
Participant and his or her spouse will not be recalculated.
(F) Subject to Subsections (A)(1) and (D), if a Participant dies before
receiving the full amount to which he or she is entitled, the amount remaining
will be distributed to the Participant's
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<PAGE>
Beneficiary at such time or times and in such manner as the Beneficiary elects,
subject, however to the following rules:
(1) If the Participant dies after April 1 of the calendar year
following the calendar year during which he or she attains age 70-1/2,
distribution will be made to the Beneficiary at a rate that would result
in the benefit being distributed at least as rapidly as if distribution
were made at the same rate as was in effect immediately prior to the
Participant's death;
(2) If the Participant dies before April 1 of the calendar year
following the calendar year during which he or she attains age 70-1/2,
distribution will, at the Beneficiary's election, be made either -
(a) in a lump sum payment no later than December 31 of the
calendar year which contains the fifth anniversary of the date of
the Participant's death, or
(b) in installments, commencing no later than December 31 of
the calendar year immediately following the calendar year in which
the Participant died (unless the Beneficiary is the Participant's
spouse, in which case payments shall begin no later than such date
specified above or December 31 of the calendar year in which the
Participant would have attained age 70-1/2 if he or she had lived),
and being paid over a period not exceeding the Beneficiary's
remaining life expectancy, (as determined on the basis of the
Beneficiary's age as of the date on which payments are required to
commence under this clause (2) and, if the Beneficiary is the
Participant's surviving spouse, as redetermined on an annual basis
if so elected by such surviving spouse).
A Beneficiary's election with respect to the time and manner in which any
amount remaining at the Participant's death will be distributed must be
made no later than the earlier of the dates set forth in clause 2(a) and
(b) above, and shall be irrevocable following such date. If the
Beneficiary fails to make an election under clause (2), distribution will
be made in the manner set forth at clause (2)(a). If the Participant's
spouse is the Beneficiary and dies after the Participant's death but
before distributions to such spouse have commenced, the foregoing rules
will be applied as if the surviving spouse were the Participant, including
the substitution of the surviving spouse's date of death for the
Participant's date of death; provided, that the alternative commencement
date in clause (2)(b) relating to the date on which the Participant would
have attained age 70-1/2 had he or she lived will not be available.
(G) Notwithstanding any other provision of the Plan to the contrary,
distributions (including payments made under an annuity contract distributed
pursuant to Subsection (D)) will be made in accordance with regulations issued
under Code section 401(a)(9), including Treasury Regulation section
1.401(a)(9)-2, and any provisions of the Plan reflecting Code section 401(a)(9)
takes precedence over any distribution options in the Plan that are inconsistent
with Code section 401(a)(9).
8.2 BENEFICIARY DESIGNATION. (A) (1) Each Participant may designate, on
a form provided by the Administrator, one or more persons to be primary
Beneficiaries or alternative Beneficiaries for all or a specified fractional
part of his or her aggregate Accounts and may change or revoke any
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<PAGE>
such designation from time to time. No such designation, change or revocation
will be effective unless executed by the Participant and received by the
Administrator during the Participant's lifetime. Except as provided in
Subsection (B), no such change or revocation will require the consent of any
person.
(2) If a Participant
(a) fails to designate a Beneficiary, or
(b) revokes a Beneficiary designation without naming another
Beneficiary, or
(c) designates as Beneficiaries one or more persons none of
whom survives the Participant,
for all or any portion of the Participant's Accounts, such Accounts or
portion will be distributed to the first class of the following classes of
automatic Beneficiaries that includes a member surviving the Participant:
Participant's spouse;
Participant's issue, per stirpes and not per capita;
Participant's parents;
Participant's brothers and sisters;
Representative of Participant's estate.
(3) When used in this section and, unless the designation
otherwise specifies, when used in a Beneficiary designation: the term
"per stirpes" means in equal shares among living children and the issue
(taken collectively) of each deceased child, with such issue taking by
right of representation; "children" means issue of the first generation;
and "issue" means all persons who are descended from the person referred
to, either by legitimate birth or legal adoption. The automatic
Beneficiaries specified above and, unless the designation otherwise
specifies, the Beneficiaries designated by the Participant, will become
fixed as of the Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of all payments due such
Beneficiary, any remaining payments will be made to the representative of
such Beneficiary's estate. Any designation of a Beneficiary by name that
is accompanied by a description of relationship or only by statement of
relationship to the Participant will be effective only to designate the
person or persons standing in such relationship to the Participant at the
Participant's death.
(B) Notwithstanding Subsection (A), no designation of a Beneficiary
other than the Participant's spouse will be effective unless such spouse
consents to the designation. Any such consent will be effective only with
respect to the Beneficiary or class of Beneficiaries so designated and only with
respect to the spouse who so consented.
8.3 ASSIGNMENT, ALIENATION OF BENEFITS. (A) Except as required under a
qualified domestic relations order or by the terms of any loan from the Trust,
no benefit under the Plan may in any manner be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered or charged, and any attempt to do so
will be void. No benefit under the Plan may in any manner be liable for, or
20
<PAGE>
subject to, the debts, contracts, liabilities, engagements or torts of the
person entitled to such benefit.
(B) To the extent provided in a qualified domestic relations order,
distribution of benefits assigned to an alternate payee by such order may be
distributed to the alternate payee prior to the Participant's earliest
retirement age in the form of a lump sum payment. The terms "qualified domestic
relations order," "alternate payee" and "earliest retirement age" have the
meanings given in Code section 414(p).
8.4 PAYMENT IN EVENT OF INCAPACITY. If any person entitled to receive any
payment under the Plan is physically, mentally or legally incapable of receiving
or acknowledging receipt of the payment, and no legal representative has been
appointed for such person, the Administrator in his or her discretion may (but
is not required to) cause any sum otherwise payable to such person to be paid to
any one or more as may be chosen by the Administrator from the following: the
Beneficiaries, if any, designated by such person, the institution maintaining
such person, a custodian for such person under the Uniform Transfers to Minors
Act of any state or such person's spouse, children, parents or other relatives
by blood or marriage. Any such payment completely discharges all liability
under the Plan to the extent of the payment.
8.5 PAYMENT SATISFIES CLAIMS. Any payment to or for the benefit of any
Participant, legal representative or Beneficiary in accordance with the
provisions of the Plan will, to the extent of such payment, be in full
satisfaction of all claims against the Trustee, the Administrator and all
Affiliated Organizations, any of whom may require the payee to execute a
receipted release as a condition precedent to such payment.
8.6 DISPOSITION IF DISTRIBUTEE CANNOT BE LOCATED. If the Administrator is
unable to locate a Participant or Beneficiary to whom a distribution is due, the
Participant's Accounts will continue to be held in the Fund until such time as
the Administrator has located the Participant or Beneficiary or the Participant
or Beneficiary makes a proper claim for the benefit, as the case may be;
provided, that, any Accounts not claimed within the period prescribed by
applicable escheat laws will be paid to such governmental authorities, in such
manner, as is specified in such laws.
8.7 DIRECT ROLLOVERS. To the extent a distribution after December 31,
1992, is an "eligible rollover distribution," within the meaning of Code section
402(c)(4), the Administrator will, if so instructed by the distributee in
accordance with Plan Rules, direct the Trustee to make the distribution to an
"eligible retirement plan," within the meaning of Code section 402(c)(8). The
foregoing provision will not apply (a) if the aggregate taxable distributions to
be made to the distributee during the calendar year are less than $200, or (b)
if less than the entire taxable amount of the distribution is to be distributed
to the eligible retirement plan, and the amount to be distributed to the
eligible retirement plan is less than $500.
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<PAGE>
ARTICLE IX
CONTRIBUTION LIMITATIONS
9.1 AGGREGATE DEFINED CONTRIBUTION LIMITATIONS. (A) Notwithstanding any
contrary provisions of this Plan, there will not be allocated to any
Participant's Profit Sharing Account for a Plan Year any amount that would cause
the aggregate "annual additions," with respect to the Participant for the Plan
Year to exceed the lesser of:
(1) $30,000 (or, if greater, one-fourth of the dollar limitation
in effect under Code section 415(b)(1)(A) for the calendar year during
which the Plan Year in question begins); and
(2) 25 percent of the Participant's Section 415 Wages for the Plan
Year.
(B) For purposes of Subsection (A), the "annual additions" with respect
to a Participant for a Plan Year are the sum of -
(1) the aggregate amount of Profit Sharing Contributions and
forfeitures allocated to the Participant's Accounts under the Plan for the
Plan Year and employer contributions, employee contributions and
forfeitures allocated to the Participant's accounts under the BMC
Industries, Inc. Savings Plan, or any other qualified defined contribution
plan maintained by any Affiliated Organization for the Plan Year; plus
(2) the amount, if any, attributable to post-retirement medical
benefits that is allocated to a separate account for the Participant as a
"key employee" (as defined in Section 14.3(C)), to the extent required
under Code section 419A(d)(1).
(C) If the Administrator determines that the limitation under Subsection
(A) may otherwise be exceeded for a Plan Year, following any adjustments under
the corresponding provisions of the BMC Industries, Inc. Savings Plan, to the
extent necessary to prevent such excess from occurring, the amount of the Profit
Sharing Contribution that would otherwise be allocated to the Participant's
Profit Sharing Account pursuant to Section 3.3 will be reduced and the
Participating Employer's contribution for the Plan Year will be reduced by the
same amount.
9.2 AGGREGATE DEFINED CONTRIBUTION/DEFINED BENEFIT LIMITATIONS. (A) In no
event will the amount of a Participant's annual additions under the Plan exceed
an amount that would cause the decimal equivalent of the sum of the "defined
benefit fraction" plus the "defined contribution fraction" to exceed one.
(B) The "defined benefit fraction" is a fraction, the numerator of which
is the Participant's aggregate projected annual benefit under all qualified
defined benefit pension plans maintained by any Affiliated Organization
(determined as of the end of the Plan Year), and the denominator of which is the
lesser of:
(1) 125 percent of the maximum dollar benefit limitation in effect
under Code section 415(b)(1)(A) for the calendar year during which the
Plan Year in question begins; and
22
<PAGE>
(2) 140 percent of the average Section 415 Wages of the Participant
during the three consecutive Plan Years during which he or she was a
Participant in any such defined benefit pension plan that produce the
highest average.
(C) The "defined contribution fraction" is a fraction, the numerator of
which is the sum of the annual additions with respect to the Participant for the
Plan Year under this Plan and any other qualified defined contribution plans
maintained by an Affiliated Organization, determined in the manner described in
Section 9.6, and the denominator of which is the aggregate of the lesser of:
(1) 125 percent of the maximum annual addition dollar limit in
effect under Code section 415(c)(1)(A) for the calendar year during which
the Plan Year in question begins; and
(2) 140 percent of 25 percent of the Participant's Section 415
Wages for the Plan Year,
applied for all years during which the Participant was an Employee, without
regard to whether there was a qualified defined contribution plan in effect
during all such years.
(D) If the annual additions that would otherwise be made with respect to
a Participant for a Plan Year would cause the limitation of Subsection (A) to be
exceeded, the Participant's benefit under one or more qualified defined benefit
pension plans maintained by an Affiliated Organization will, to the extent
provided in such plans, be reduced to the extent necessary to prevent such
excess from occurring, and, if a sufficient reduction cannot be made under such
plans, the provisions of Section 9.1(C) will be applied to reduce the amount of
the annual additions to the Participant's Accounts for such Plan Year to the
extent necessary to prevent such excess.
9.3 ADMINISTRATOR'S DISCRETION. Notwithstanding the foregoing provisions
of this article, the Administrator may, in his or her discretion, apply the
provisions of Sections 9.1 and 9.2 in any manner permitted by Treasury
Regulations that will cause the Plan to satisfy the limitations of the Code
incorporated in such sections, and the Administrator's good faith application of
Treasury Regulations will be binding on all Participants and Beneficiaries.
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ARTICLE X
SERVICE RULES
10.1 COMPUTATION PERIOD. The "Computation Period" is -
(a) for the purpose of determining whether an Employee has
satisfied the eligibility service requirement described in Section
2.1(A)(2), the 12-month period commencing with the date on which he or she
first completes an Hour of Actual Service and, thereafter, Plan Years,
commencing with the Plan Year that includes the first anniversary of such
date; and
(b) for the purpose of determining the extent of an Employee's
Vesting Service, Plan Years.
If an Employee who terminates employment before satisfying the eligibility
service requirement described in Section 2.1(A)(2) again becomes an Employee
after the end of the Computation Period of the type specified in clause (a)
during which he or she terminated employment, his or her previous service will
be disregarded in determining his or her new Computation Period pursuant to
clause (a).
10.2 VESTING SERVICE. The term "Vesting Service" with respect to an
Employee means, except as otherwise provided in Section 10.5, the sum of (a) the
aggregate number of Computation Periods of the type specified at clause (b) of
Section 10.1 during each of which the Employee completes at least 1000 Hours of
Service, plus (b) to the extent not included as Vesting Service under clause
(a), the aggregate number of years of continuous service, if any, credited to an
Employee under the Camelot Industries Corporation Vision-Ease Division Profit
Sharing Plan as of December 31, 1988, plus (c) to the extent not included as
Vesting Service under clause (a), the aggregate number of years of continuous
service, if any, credited to an Employee pursuant to any of the following
terminated defined benefit plans in which he or she participated as of May 31,
1985: BMC Industries Retirement Plan; Camelot Industries Corporation Retirement
Plan For Salaried Employees; Salaried Employees' Retirement Plan of Advanced
Controls, Inc; and, Integrated Microcircuits, Inc. Retirement Plan For Certain
Salaried Employees.
10.3 HOUR OF SERVICE. (A) Subject to the remaining subsections of this
section, the term "Hour of Service," with respect to an Employee, includes and
is limited to -
(1) each "Hour of Actual Service," which is an hour for which the
Employee is paid, or entitled to payment, for the performance of duties
for an Affiliated Organization;
(2) each hour for which the Employee is paid, or entitled to
payment, by an Affiliated Organization on account of a period of time
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness
(including disability), layoff, jury duty, military duty or leave of
absence;
(3) each hour for which the Employee is not paid or entitled to
payment but which is required by federal law to be credited to the
Employee; and
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(4) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Affiliated Organization;
provided, first, that Hours of Service taken into account under clause (1)
or (2) will not also be taken into account under this clause (4); and
second, that Hours of Service taken into account under this clause (4)
that relate to periods specified in clause (2) will be subject to the
rules under Subsection (B).
(B) The following rules will apply for purposes of determining the Hours
of Service completed by an Employee under Subsection (A)(2):
(1) No more than 501 hours will be credited to the Employee on
account of any single continuous period during which the Employee performs
no duties (whether or not such period occurs in a single Computation
Period).
(2) No more than the number of hours regularly scheduled for the
performance of duties for the period during which no duties are performed
will be credited to the Employee for such period.
(3) The Employee will not be credited with hours for which
payments are made or due under a plan maintained solely for the purpose of
complying with workers' compensation, unemployment compensation or
disability insurance laws, or for which payments are made solely to
reimburse medical or medically related expenses.
(4) A payment will be deemed to be made by or due from an
Affiliated Organization, regardless of whether such payment is made by or
due from the Affiliated Organization directly or indirectly through a
trust fund or insurer to which the Affiliated Organization contributes or
pays premiums.
(5) If the payment made or due is calculated on the basis of units
of time, the number of Hours of Service to be credited will be the number
of regularly scheduled working hours included in the units of time on the
basis of which the payment is calculated; provided, that, if such a
payment is made to an Employee described in Subsection (D)(1), the number
of Hours of Service to be credited will be the number of equivalent hours
determined under Subsection (D)(1) that are included in the units of time
on the basis of which the payment is calculated.
(6) If the payment made or due is not calculated on the basis of
units of time, the number of Hours of Service to be credited will be equal
to the amount of the payment, divided by the Employee's most recent hourly
rate of compensation before the period during which no duties are
performed.
(C) Hours of Service will be credited -
(1) in the case of Hours of Service described in Subsection
(A)(1), to the Computation Period in which the duties are performed;
(2) in the case of Hours of Service described in Subsection
(A)(2), to the Computation Period or Periods in which the period during
which no duties are performed occurs; provided, that, if the payment is
not calculated on the basis of units of time, the
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Hours of Service will not be allocated between more than the first two
Computation Periods of such period;
(3) in the case of Hours of Service described in Subsection
(A)(3), to the Computation Period or Periods determined by the
Administrator in accordance with the applicable federal law; and
(4) in the case of Hours of Service described in Subsection
(A)(4), to the Computation Period or Periods to which the award or
agreement for back pay pertains.
(D) For purposes of determining the number of Hours of Service completed
by an Employee during a particular period of time -
(1) an Employee who is not subject to the overtime provisions of
the Fair Labor Standards Act of 1938, as from time to time amended, will
be credited with 45 Hours of Service for each seven consecutive days, or
fraction thereof, during which he or she completes at least one Hour of
Service;
(2) each other Employee will be credited with the number of Hours
of Service that he or she completes during such period.
(E) Notwithstanding the foregoing provisions of this section, an
individual will be credited with the number of Hours of Service he or she
completes, determined in the manner specified in Subsections (A) through (E),
(1) while, although not an Employee, he or she is considered to be
a "leased employee" of an Affiliated Organization or of a "related person"
(within the meaning of Code sections 414(n)(2) and 144(a)(3)),
respectively, and
(2) with any other organization to the extent such Hours of
Service are required to be taken into account pursuant to Treasury
Regulations under Code section 414(o).
10.4 -- ONE-YEAR BREAK IN SERVICE. An Employee will incur a "One-Year Break in
Service" if the Employee fails to complete more than 500 Hours of Service during
a Computation Period; provided, that, for purposes only of determining whether
an Employee has incurred such a One-Year Break in Service, in addition to Hours
of Service credited under Section 10.4, there will be taken into account the
number of Hours of Service that otherwise would have been credited to the
Employee, or, if the number of such hours of service cannot be determined, eight
hours of service for each day on which the Employee would have otherwise
performed services for an Affiliated Organization, during an authorized leave of
absence, while still employed with the Affiliated Organization, due to -
(a) the Employee's pregnancy,
(b) the birth of the Employee's child,
(c) the placement of a child with the Employee in connection with
the adoption of such child by the Employee, or
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(d) the Employee's caring for such child for a period beginning
immediately following such birth or placement;
provided, first, that the total number of such additional Hours of Service taken
into account by reason of any such absence will not exceed 501; second, that, if
the Employee would be prevented from incurring a One-Year Break in Service for
the Computation Period in which such absence commenced solely because the
additional Hours of Service are so credited, such Hours of Service will be
credited only to such Computation Period or, if a One-Year Break in Service for
such Computation Period would not be so prevented, such additional Hours of
Service will be credited to the Computation Period following the Computation
Period during which such absence commenced; and third, that, notwithstanding the
foregoing, no such additional Hours of Service will be credited unless the
Employee furnishes to the Administrator, on a timely basis, such information as
the Administrator reasonably requires in order to establish the number of days
during which the Employee was absent for one of the reasons set forth at items
(a) through (d). In addition, an Employee will be credited with Hours of
Service for the purpose of determining whether he or she has incurred a One-Year
Break in Service to the extent required by the Family and Medical Leave Act of
1993.
10.5 LOSS OF SERVICE. If a Participant experiences at least five
consecutive One-Year Breaks in Service with respect to his or her Vesting
Service, then:
(a) if the Participant had a vested interest in his or her Profit
Sharing Account prior to the Breaks in Service,
(1) Vesting Service completed prior to such Breaks in
Service will be taken into account in determining his or her vested
interest in his or her Accounts attributable to contributions made
for periods after the Breaks in Service but only if the Employee
completes one year of Vesting Service following such breaks in
service, and
(2) the extent of the Employee's vested interest in his or
her Accounts as determined under Section 7.1 prior to the Breaks in
Service will not be increased by Vesting Service completed following
the Breaks in Service; or
(b) if the Participant had no vested interest in his or her Profit
Sharing Account prior to the Breaks in Service, the Participant's Vesting
Service completed prior to the Breaks in Service will not be taken into
account for any purpose under the Plan.
10.6 PRE-ACQUISITION SERVICE. Service with an Affiliated Organization
prior to the date on which it became an Affiliated Organization (or, with
another entity prior to the acquisition of such entity's business or assets by
an Affiliated Organization) will be taken into account under this Plan only if,
to the extent and for the purposes, provided in any agreement pursuant to which
it became an Affiliated Organization (or such business or assets were acquired)
or as provided by resolution of the Company's Board. If such Hours of Service
are to be taken into account, unless otherwise specifically provided in such
agreement or resolution, such Hours of Service will be determined in accordance
with the provisions of this article. If less than the entire period of
employment with an Affiliated Organization prior to its becoming such (or with
another entity prior to the acquisition of its business or assets) is to be
taken into account, the extent to which such period of employment is to be taken
into account will be specified in an exhibit to the Plan.
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ARTICLE XI
ADOPTION, AMENDMENT AND TERMINATION
11.1 ADOPTION BY AFFILIATED ORGANIZATIONS. An Affiliated Organization may
adopt this Plan and become a Participating Employer with the prior approval of
the Committee by furnishing to the Administrator a certified copy of a
resolution of its Board adopting the Plan. Any adoption of the Plan by an
Affiliated Organization, however, must either be authorized by the Company's
Board in advance or be ratified by such Board prior to the end of the fiscal
year of such Affiliated Organization in which it adopts the Plan.
11.2 AUTHORITY TO AMEND AND PROCEDURE. (A) The Company reserves the right
to amend the Plan at any time, to any extent that it may deem advisable. Each
amendment will be stated in a written instrument, approved in advance or
ratified by the Company's Board and executed in the name of the Company by its
President or Vice President or its Director of Compensation and Benefits and
attested by the Secretary or Assistant Secretary. On and after the effective
date of the amendment, all interested parties will be bound by the amendment;
provided, first, that no amendment will increase the duties or liabilities of
the Trustee without its written consent; and, second, that no amendment will
have any retroactive effect so as to deprive any Participant, or any Beneficiary
of a deceased Participant, of any benefit already accrued or vested or of any
option with respect to the form of such benefit that is protected by Code
section 411(d)(6), except that any amendment that is required to conform the
Plan with government regulations so as to qualify the Trust for income tax
exemption may be made retroactively to the Effective Date of the Plan or to any
later date.
(B) If the schedule for determining the extent to which benefits under
the Plan are vested is changed, each Participant with at least three years of
Vesting Service may elect to have his or her vested benefits determined without
regard to such change by giving written notice of such election to the
Administrator within the period beginning on the date such change was adopted
(or the Plan's top heavy status changed) and ending 60 days after the latest of
(1) the date such change is adopted, (2) the date such change becomes effective
or (3) the date the Participant is issued notice of such change by the
Administrator or the Trustee. Except as otherwise provided in an amendment
permitted by Treasury Regulations, if an optional form of benefit payment
protected under Code section 411(d)(6) is eliminated, each Participant may elect
to have that portion of the value of his or her Accounts that was accrued as of
the date of such elimination, distributed in the optional form of benefit
payment that was eliminated.
(C) The provisions of the Plan in effect at the termination of a
Participant's employment will, except as specifically provided otherwise by a
subsequent amendment, continue to apply to such Participant.
11.3 AUTHORITY TO TERMINATE AND PROCEDURE. The Company expects to continue
the Plan indefinitely but reserves the right to terminate the Plan in its
entirety at any time. Each Participating Employer expects to continue its
participation in the Plan indefinitely but reserves the right to cease its
participation in the Plan at any time. The Plan will terminate in its entirety
as of the date specified by the Company in a written instrument adopted and
executed in the manner of an amendment. The Plan will terminate with respect to
a particular Participating Employer as of a date specified in a written
instrument approved in advance or ratified by the Participating Employer's Board
and executed in the name of the Participating Employer by two officers.
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11.4 VESTING UPON TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE OF
CONTRIBUTIONS. Upon termination of the Plan or upon the complete
discontinuance of contributions by all Participating Employers, to the extent
required by Code section 411(d)(3) and Treasury Regulations thereunder, the
Accounts of each affected Participant will, to the extent funded, vest in full.
Upon a partial termination of the Plan, the Accounts of each Participant as to
whom the Plan has been partially terminated will, to the extent funded, vest in
full.
11.5 DISTRIBUTION FOLLOWING TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE
OF CONTRIBUTIONS. After termination or partial termination of the Plan or the
complete discontinuance of contributions under the Plan, the Trustee will
continue to hold and distribute the Fund at the times and in the manner provided
by Article VIII as if such event had not occurred or, if the Administrator so
directs in accordance with Treasury Regulations, will distribute to each
Participant the entire balance of his or her Accounts.
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ARTICLE XII
DEFINITIONS, CONSTRUCTION AND INTERPRETATIONS
The definitions and the rules of construction and interpretations set forth in
this article will be applied in construing this instrument unless the context
otherwise indicates.
12.1 ACCOUNT. An "Account" with respect to a Participant is any or all of
the accounts maintained on his or her behalf pursuant to Section 4.1, as the
context requires.
12.2 ACTIVE PARTICIPANT. An "Active Participant" is a Participant who is a
Qualified Employee.
12.3 ADMINISTRATOR. The "Administrator" of the Plan is the Committee person
performing administrative functions pursuant to Section 13.3.
12.4 AFFILIATED ORGANIZATION. An "Affiliated Organization" is the Company
and:
(a) any corporation that is a member of a controlled group of
corporations (within the meaning of Code section 1563(a) without regard to
Code sections 1563(a)(4) and 1563(e)(3)(C)) that includes the Company;
(b) any trade or business (whether or not incorporated) that is
controlled (within the meaning of Code section 414(c)) by the Company;
(c) any member of an "affiliated service group" (within the
meaning of Code section 414(m)) of which the Company is a member; or
(d) any other organization that, together with the Company, is
treated as a single employer pursuant to Code section 414(o) and Treasury
Regulations;
provided, that, for purposes of applying the limitations set forth at Sections
9.1 and 9.2 of the Plan, Code section 1563(a) will be applied by substituting
the phrase "more than 50 percent" for the phrase "at least 80 percent" wherever
it appears.
12.5 BOARD. The "Board" is the board of directors of the Affiliated
Organization in question. When the Plan provides for an action to be taken by
the Board, the action may be taken by any committee or individual authorized to
take such action pursuant to a proper delegation by the board of directors in
question.
12.6 BENEFICIARY. A "Beneficiary" is a person designated or otherwise
determined under the provisions of Section 8.2 as the distributee of benefits
payable after the death of a Participant. A person designated as, or otherwise
determined to be, a Beneficiary under the terms of the Plan has no interest in
or rights under the Plan until the Participant in question has died. A
Beneficiary will cease to be such on the day on which all benefits to which he
or she is entitled under the Plan have been distributed.
12.7 CODE. The "Code" is the Internal Revenue Code of 1986, as amended.
Any reference to a specific provision of the Code includes a reference to such
provision as it may be amended from time to time and to any successor provision.
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12.8 COMMITTEE. The "Committee" is the Administrative Committee described
in Article XIII.
12.9 COMPANY. The "Company" is BMC Industries, Inc., any successor which
will maintain this Plan and any predecessor that has maintained this Plan.
12.10 COMPENSATION. (A) The "Compensation" of a Participant from a
Participating Employer for any Plan Year is, for non-sales personnel, the
Participant's annual base salary paid by the Participating Employer, including
shift premium, increased by amounts paid to the Participant for time in excess
of straight time but disregarding the portion of such amounts, if any,
representing a premium over straight time rates, and for sales personnel, the
greater of (1) the Participant's annual base salary paid by the Participating
Employer or (2) the lesser of (a) the Participant's annual base salary plus
commissions paid by the Participating Employer or (b) Sixty Thousand Dollars;
provided, that in no event will severance pay of any kind or nature be taken
into account as Compensation.
(B) Notwithstanding Subsection (A), in no event will a Participant's
Compensation for any Plan Year be taken into account to the extent it exceeds
$150,000 (or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 401(a)(17) for the calendar year during
which the Plan Year in question begins).
(C) In the case of a Participant who is a Highly Compensated Employee
described in clause (1) of Section 12.17(A), or of a Highly Compensated Employee
described in clause (2) or (3) of Section 12.17(A) whose "includable
compensation" (as defined in Section 12.17(B)(2)) for the Plan Year is not less
than the includable compensation of at least ten other Highly Compensated
Employees, the limitation set forth in Subsection (B) will be applied to the
Participant, the Participant's spouse and the Participant's lineal descendants
who have not attained age 19 prior to the end of the Plan Year in question as if
they were a single Participant. If the deemed single Participant has
Compensation in excess of the limitation in effect for a Plan Year, the
limitation will be prorated among each individual who is deemed to be a single
Participant in proportion to his or her Compensation for the Plan Year (without
regard to Subsection (B) and this subsection).
12.11 DISABLED. A Participant will be considered to be "Disabled" only if he
or she has been determined to be eligible to receive benefits under the
Company's Long Term Disability Income Protection Plan or any successor thereto.
12.12 EMPLOYEE. An "Employee" is an individual who performs services for an
Affiliated Organization as a common-law employee of the Affiliated Organization.
12.13 EXCESS COMPENSATION. "Excess Compensation" of a Participant from a
Participating Employer for a Plan Year means the portion of his or her
Compensation from the Participating Employer for the Plan Year, if any, in
excess of the contribution and benefit base in effect at the beginning of the
Plan Year under section 230 of the Social Security Act.
12.14 FUND. The "Fund" is the total of all of the assets of every kind and
nature, both principal and income, held in the Trust at any particular time or,
if the context so requires, one or more of the investment funds described in
Section 5.1.
12.15 GOVERNING LAW. To the extent that state law is not preempted by
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or any other laws of the United
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States, this Plan will be administered, construed, and enforced according to the
internal, substantive laws of the State of Minnesota, without regard to its
conflict of laws rules.
12.16 HEADINGS. The headings of articles and sections are included solely
for convenience. If there is a conflict between the headings and the text, the
text will control.
12.17 HIGHLY COMPENSATED EMPLOYEE. (A) A "Highly Compensated Employee" for
any Plan Year is any employee who -
(1) at any time during such Plan Year or the preceding Plan Year,
owns or owned (or is considered as owning or having owned within the
meaning of Code section 318) more than five percent of the outstanding
stock of an Affiliated Organization or stock possessing more than five
percent of the total combined voting power of all outstanding stock of an
Affiliated Organization, or
(2) during the Plan Year preceding such Plan Year -
(a) received includable compensation in excess of $75,000
(or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 414(q)(1)(B) for the
calendar year during which the Plan Year in question begins), or
(b) received includable compensation in excess of $50,000
(or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 414(q)(1)(C) for the
calendar year during which the Plan Year in question begins) and
whose includable compensation exceeded the includable compensation
of at least 80 percent of all employees, excluding, for purposes of
determining the number of employees in such group but not for
purposes of determining the specific employees comprising the group,
all employees who
(i) have completed less than six months of service
with the Affiliated Organizations,
(ii) normally work fewer than 17-1/2 hours per week for
the Affiliated Organizations,
(iii) normally work for the Affiliated Organizations
during not more than six months during any calendar year, or
(iv) have not attained age 21, or
(c) was at any time an officer of an Affiliated Organization
(an administrative executive in regular and continued service with
the Affiliated Organization) and received includable compensation in
excess of 50 percent of the amount in effect under Code section
415(b)(1)(A) for the calendar year during which the Plan Year in
question begins, but in no case will there be taken into account
more than the lesser of (i) 50 employees, or (ii) the greater of
three employees or ten percent of the aggregate number of employees,
excluding, for purposes of determining the number of such officers,
any employees that are
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excluded pursuant to clause (b); or, if no officer received
includable compensation in excess of such amount, the officer with
the highest includable compensation for the Plan Year, or
(3) during such Plan Year, is described in items (a), (b) or (c)
of clause (2) and received compensation in an amount that is not less than
the amount of includable compensation received by at least 100 other
employees.
(B) For purposes of this section,
(1) an "employee" is any individual who is not described in clause
(b) of Section 12.27 and who, during the Plan Year for which the
determination is being made, performs services for an Affiliated
Organization as
(a) a common law employee,
(b) an employee pursuant to Code section 401(c)(1), or
(c) a leased employee who is treated as an employee of an
Affiliated Organization pursuant to Code section 414(n)(2) or
414(o)(2), and
(2) "includable compensation" for any period means an employee's
Section 415 Wages for the period increased by the amount of any reductions
to the employee's compensation for the period in connection with an
election by the employee made pursuant to a plan maintained by an
Affiliated Organization under Code section 125 or 401(k).
12.18 NORMAL RETIREMENT DATE. The "Normal Retirement Date" of a Participant
is the last day of the Plan Year in which he or she attains age 65.
12.19 NUMBER AND GENDER. Wherever appropriate, the singular number may be
read as the plural, the plural may be read as the singular, and the masculine
gender may be read as the feminine gender.
12.20 PARTICIPANT. A "Participant" is a current or former Qualified Employee
who has entered the Plan pursuant to the provisions of Article II and has not
ceased to be a Participant pursuant to Section 2.6.
12.21 PARTICIPATING BUSINESS UNIT. A "Participating Business Unit" is a
division, work location or other operational unit of a Participating Employer,
the eligible employees of which have been designated by the Participating
Employer to participate in the Plan, as communicated in writing to the Company
by the Participating Employer's Board.
12.22 PARTICIPATING EMPLOYER. A "Participating Employer" is the Company and
any other Affiliated Organization that has adopted the Plan, or all of them
collectively, as the context requires, and their respective successors. An
Affiliated Organization will cease to be a Participating Employer upon a
termination of the Plan as to its Employees or upon its ceasing to be an
Affiliated Organization.
12.23 PLAN. The "Plan" is that set forth in this instrument, as amended from
time to time.
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12.24 PLAN RULE. A "Plan Rule" is a rule, policy, practice or procedure
adopted by the Administrator or the Committee.
12.25 PLAN YEAR. A "Plan Year" is the calendar year.
12.26 PROFIT SHARING ACCOUNT. The "Profit Sharing Account" is the Account
established pursuant to Section 4.1(a).
12.27 QUALIFIED EMPLOYEE. A "Qualified Employee" is an Employee who is
classified by a Participating Employer as a common-law employee of the
Participating Employer and who is a part of a Participating Business Unit
together with any person who is a United States citizen and who is employed as a
common-law employee by a foreign subsidiary of a Participating Employer, with
respect to which subsidiary such Participating Employer has entered into an
agreement under Code section 3121(1), but only if contributions under a funded
plan of deferred compensation, which is sponsored by such foreign subsidiary or
a Participating Employer, are not provided for such person with respect to
remuneration paid to him by such foreign subsidiary, provided that such person
is employed at a facility, or within a division or business unit, the eligible
employees of which have been designated by the Participating Employer to
participate in the Plan. In no event, however, will the term Qualified Employee
include any such person who is -
(a) covered by a collective bargaining agreement, for whom
retirement benefits were the subject of good faith bargaining between such
person's representative and the Participating Employer, and who is not, as
a result of such bargaining, specifically covered by this Plan; or
(b) a nonresident alien who receives no earned income (within the
meaning of Code section 911(d)(2)) from a Participating Employer that
constitutes income from sources within the United States (within the
meaning of Code section 861(a)(3)).
12.28 ROLLOVER ACCOUNT. The "Rollover Account" is the account established
pursuant to Section 4.1(b).
12.29 SECTION 415 WAGES. (A) An individual's "Section 415 Wages" for any
period is the sum of his or her remuneration for the period from all Affiliated
Organizations that constitutes "compensation" within the meaning of Code section
415(c)(3) and Treasury Regulations thereunder.
(B) Notwithstanding Subsection (A), the Administrator may, in his or her
discretion, for any Plan Year, determine the items of remuneration that, in
accordance with Treasury Regulations, will be included in Section 415 Wages for
such Plan Year; provided that for each purpose under this Plan, the
Administrator's determination will be uniform throughout any Plan Year.
(C) Section 415 Wages will not include the amount by which a
Participant's wages or salary is reduced under Code section 125 or 401(k).
12.30 SPOUSAL CONSENT. Whenever the consent of a Participant's spouse is
required with respect to any act of the Participant, such consent will be deemed
to have been obtained only if:
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(a) the Participant's spouse executes a written consent to such
act, which consent acknowledges the effect of such act and is witnessed by
a Plan representative or a notary public; or
(b) the Administrator determines that no such consent can be
obtained because the Participant has no spouse, because the Participant's
spouse cannot be located, or because of such other circumstances as may,
under Treasury Regulations, justify the lack of such consent.
Any such consent by the Participant's spouse or such determination by the
Administrator that such spouse's consent is not required is effective only with
respect to the particular spouse of the Participant who so consented or with
respect to whom such determination was made. Any such consent by the
Participant's spouse to an act of the Participant under the Plan is irrevocable
with respect to that act.
12.31 TERMINATION OF EMPLOYMENT. For purposes of determining entitlement to
a distribution under this Plan, a Participant will be deemed to have terminated
employment only if he or she has completely severed his or her employment
relationship with all Affiliated Organizations or become Disabled. Neither
transfer of employment among Affiliated Organizations nor absence from active
service by reason of disability leave, other than in connection with a
Participant becoming Disabled, or any other leave of absence will constitute a
termination of employment.
12.32 TREASURY REGULATIONS. "Treasury Regulations" mean regulations,
rulings, notices and other promulgations issued under the authority of the
Secretary of the Treasury that apply to, or may be relied upon in the
administration of, this Plan.
12.33 TRUST. The "Trust" is that created pursuant to and evidenced by that
certain Master Trust Agreement, dated July 1, 1984, between the Company, as
grantor, and Wachovia Bank and Trust Company, N.A., as trustee, and may be
referred to as the "BMC Industries, Inc. Profit Sharing Trust."
12.34 TRUSTEE. The "Trustee" is the corporation and/or individual or
individuals who from time to time is or are the duly appointed and acting
trustee or trustees of the Trust.
12.35 VALUATION DATE. A "Valuation Date" is June 30 and December 31 of each
Plan Year and such interim dates as the Administrator may from time to time
specify pursuant to Section 4.2(B).
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ARTICLE XIII
ADMINISTRATION OF PLAN
13.1 NAMED FIDUCIARY. The Company is the "named fiduciary" of the Plan for
purposes of the Employee Retirement Income Security Act of 1974, as amended.
13.2 COMMITTEE. (A) The general administration of the Plan on behalf of the
Company and the duty to carry out its provisions is vested in a Committee
composed of not fewer than three members. One member of the Committee will be
the head of the Company's human resources function, a second member of the
Committee will be the head of the Company's financial function and a third
member of the Committee will be the head of the Company's treasury function.
Additional members may be appointed to the Committee by the Company's Board to
serve at its pleasure. Each such additional member will file written acceptance
of his or her appointment with such Board. A Committee member may resign by
delivering his or her written resignation to such Board; and any Committee
member, other than the heads of the Company's human resources, financial and
treasury functions, may be removed, with or without cause, by resolution of such
Board and the delivery of written notice of such removal to the removed member.
Any such resignation or removal will be effective upon delivery of the written
resignation or notice of removal, as the case may be, or upon any later date
specified therein. Vacancies created by any such resignation or removal will be
filled by appointment by such Board; provided, that, subject to there being at
least three persons serving as Committee members at all times, the Board need
not fill any vacancy so created.
(B) In addition to its general duties and power of administration of the
Plan, the Committee has authority and discretion with respect to -
(1) The selection, designation and removal of the Administrator,
the Trustee and any investment managers of the Fund;
(2) The direction of investments of assets comprising the Fund in
insurance-company issued deposit administration or similar group annuity
contract or contracts; and
(3) In case of any investment fund maintained pursuant to Section
5.1 the assets of which are primarily invested in one or more insurance
company issued deposit administration or group annuity contracts, to
determine, from time to time, the portion of such investment fund, if any,
that will not be invested in such insurance-company issued contracts and
to direct the Trustee as to the specific investments or types of
investments with respect to such portion of such investment fund;
provided, that nothing contained in this clause (3) requires the Committee
to exercise such authority and discretion or limits the authority and
discretion of the Committee to delegate any such duties to the
Administrator, the Trustee or any investment manager.
(C) At least annually, the Committee will determine the Plan's funding
policy and short- and long-run financial needs and communicate the same to the
Trustee and any investment manager of the Fund.
(D) The Committee will perform its duties hereunder in accordance with
the following procedures:
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(1) The head of the Company's human resources function will act as
the chair of the Committee and will preside over the Committee's meetings;
(2) The Committee will designate the head of the Company's human
resources function, or such other person as it may determine, to serve as
Administrator pursuant to Section 13.3, as it may specify in writing to
such head of the Company's human resources function or other person, and
may from time to time revoke such designation and designate another person
to serve as Administrator. Each such designation must be in writing, and
a copy thereof must be furnished to the Administrator and the Trustee.
The Administrator must file a written acceptance with the Committee. Such
Administrator's duty hereunder will terminate upon revocation of such
designation by the Committee or upon resignation as Administrator by the
person so designated. Such revocation or resignation must be in writing
and will be effective upon delivery thereof to the Administrator or the
Committee as the case may be, and in either case to the Trustee;
(3) The Committee will appoint a secretary who may, but need not,
be a member of the Committee, and who will keep minutes of the Committee's
meetings and perform such other duties as may be specified from time to
time by the Committee;
(4) The Committee may appoint such subcommittees with such duties
and powers as it may specify, and it may delegate administrative powers to
one or more of its members or to such other person or entity as it may
designate;
(5) The Committee will meet at such times and places and upon such
notice as its members may determine from time to time. A majority of the
current membership of the Committee will constitute a quorum for the
transaction of business, and all acts of the Committee at any meeting will
require, for their validity, the affirmative vote of a majority of the
current membership of the Committee;
(6) The Committee may adopt bylaws for the conduct of its
business, provided such bylaws are not inconsistent with the provisions of
this article;
(7) No member of the Committee may vote with respect to a decision
of the Committee relating solely to his or her own participation under the
Plan.
13.3 ADMINISTRATOR. (A) The Administrator designated by the Committee will
perform the following administrative duties:
(1) the determination of initial and continuing eligibility of
Employees to participate in the Plan and enrollment of Participants in the
Plan;
(2) the determination of Participants' entitlement to, and the
amount of benefit contributions under the Plan;
(3) the processing of Participants' Beneficiary designations;
(4) the review of claims made pursuant to the Plan's benefit claim
procedure;
(5) the computation of the amount of each Participant's benefit
account balances;
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(6) the authorization of disbursements from the Fund in the form
of withdrawals and distributions;
(7) the preparation, distribution to Participants and filing with
appropriate governmental agencies of such reports, disclosures and forms
as are required by law, and retention of copies thereof in the
Administrator's files; and
(8) such other duties as specified in the Plan or as the Committee
may delegate to the Administrator from time to time.
(B) The Administrator may delegate such of his or her duties specified in
Subsection (A) as he or she may specify in writing to such other person as he or
she may designate and may from time to time revoke such authority and delegate
it to another person. Each such delegation must be in writing, and a copy
thereof must be furnished to the person to whom the duty is delegated. Such
person must file a written acceptance with the Administrator. Such person's
duty hereunder will terminate upon revocation of such authority by the
Administrator or upon withdrawal of such acceptance by the person to whom the
duty was delegated. Such revocation or withdrawal must be in writing, and will
be effective upon delivery of a copy thereof to the person or entity to whom the
duty was delegated or to the Administrator as the case may be.
13.4 COMPENSATION AND EXPENSES. An Employee performing administrative
duties in connection with the Plan will receive no compensation from the Fund
for such services, but may be reimbursed from the Fund for all sums reasonably
and necessarily expended in the performance of such duties. The Administrator
may retain such independent accounting, legal, clerical and other services as
may reasonably be required in the administration of the Plan and may pay
reasonable compensation from the Fund for such services. Any such reimbursement
or compensation and all other costs of administering the Plan will, to the
extent not paid by the Participating Employers, be paid by the Trustee from the
Fund upon statements issued by the Administrator.
13.5 PLAN RULES. The Committee and the Administrator each have the
discretionary power and authority to make such Plan Rules as the Committee or
Administrator deem to be necessary or appropriate to perform their respective
duties in connection with the administration of the Plan and to modify or
rescind any such Plan Rules. Plan Rules will be uniform and nondiscriminatory
with respect to any similarly situated persons.
13.6 ADMINISTRATOR'S DISCRETION. To the extent applicable to their
respective administrative duties, the Committee and the Administrator each have
the discretionary power and authority to make all determinations necessary or
appropriate for the administration of the Plan, and to construe, interpret,
apply and enforce the provisions of the Plan and Plan Rules, including the
discretionary power and authority to remedy ambiguities, inconsistencies,
omissions and erroneous Account balances. In the exercise of their
discretionary powers, the Committee and the Administrator will treat all
similarly situated persons uniformly.
13.7 INDEMNIFICATION. The Participating Employers jointly and severally
agree to indemnify and hold harmless, to the extent permitted by law, each
director, officer, and employee of any Affiliated Organization against any and
all liabilities, losses, costs and expenses (including legal fees) of every kind
and nature that may be imposed on, incurred by, or asserted against such person
at any time by reason of such person's services in connection with the Plan, but
only if such person did not act dishonestly or in bad faith or in willful
violation of the law or regulations under which such liability,
38
<PAGE>
loss, cost or expense arises. The Participating Employers have the right, but
not the obligation, to select counsel and control the defense and settlement of
any action for which a person may be entitled to indemnification under this
provision.
13.8 BENEFIT CLAIM PROCEDURE. If a request for a benefit by a Participant
or Beneficiary of a deceased Participant is denied in whole or in part, he or
she may, within 30 days after receipt of notice of the denial, file with the
Administrator a written claim objecting to the denial. Not later than 90 days
after receipt of such claim, the Administrator will render a written decision on
the claim to the claimant. If the claim is denied in whole or in part, such
decision will include: the reasons for the denial; a reference to the Plan
provision that is the basis for the denial; a description of any additional
material or information necessary for the claimant to perfect the claim; an
explanation as to why such information or material is necessary; and an
explanation of the Plan's claim procedure. Not later than 60 days after
receiving the Administrator's written decision, the claimant may file with the
Administrator a written request for review of the Administrator's decision, and
the claimant or the representative may thereafter review Plan documents that
relate to the claim and submit written comments to the Administrator. Not later
than 60 days after the Administrator's receipt of the request for review, the
Administrator will render a written decision on the claim, which decision will
include the specific reasons for the decision, including references to specific
Plan provisions where appropriate. The 90- and 60-day periods during which the
Administrator must respond to the claimant may be extended by up to an
additional 90 or 60 days, respectively, if circumstances beyond the
Administrator's control so require and if notice of such extension is given to
the claimant.
13.9 CORRECTION OF ERRORS. If the Administrator determines that, by reason
of administrative error or other cause attributable to a Participating Employer,
the Account of any Participant has incurred a loss, the Administrator may enter
into an agreement with such Participating Employer under which the Account is
fully restored and may, upon such restoration, release the Participating
Employer from further responsibility.
39
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.1 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. If this Plan is merged or
consolidated with, or its assets or liabilities are transferred to, any other
plan, each Participant will be entitled to receive a benefit immediately after
such merger, consolidation or transfer (if such other plan were then terminated)
that is equal to or greater than the benefit he or she would have been entitled
to receive immediately before such merger, consolidation or transfer (if this
Plan had then terminated).
14.2 LIMITED REVERSION OF FUND. (A) Except as provided in Subsection (B),
no corpus or income of the Trust will at any time revert to Participating
Employer or be used other than for the exclusive benefit of Eligible Employees,
Participants and Beneficiaries by paying benefits and, if applicable,
administrative expenses of the Plan.
(B) Notwithstanding any contrary provision in the Plan,
(1) All contributions made by a Participating Employer to the
Trustee prior to the initial determination of the Internal Revenue Service
as to qualification of the Plan under Section 401(a) of the Code and the
tax exempt status of the Trust under Code section 501(a) will be repaid by
the Trustee to such Participating Employer, upon the Participating
Employer's written request, if the Internal Revenue Service rules that the
Plan, as adopted by that Participating Employer, is not qualified or the
Trust is not tax exempt; provided, that the Participating Employer
requests such determination within a reasonable time after adoption of the
Plan, and the repayment by the Trustee to such Participating Employer is
made within one year after the date of denial of qualification of the
Plan; and
(2) To the extent a contribution is made by a Participating
Employer by a mistake of fact or a deduction is disallowed a Participating
Employer under Code section 404, the Trustee will repay the contribution
to such Participating Employer upon the Participating Employer's written
request; provided, that such repayment is made within one year after the
mistaken payment is made or the deduction is disallowed, as the case may
be. The amount returned to the Participating Employer will not include
any investment gains or earnings but will be reduced by any investment
losses. Each contribution to the Plan by a Participating Employer is
expressly conditioned on such contribution's being fully deductible by the
Participating Employer under Code section 404.
14.3 TOP-HEAVY PROVISIONS. (A) (1) Notwithstanding the provisions of
Article III, for any Plan Year during which the Plan is a top-heavy plan,
the amount of contributions (excluding Pre-Tax Contributions) made and
allocated for such Plan Year on behalf of each Active Participant who is
not a key employee and who is employed with an Affiliated Organization on
the last day of the Plan Year, expressed as a percentage of the
Participant's Section 415 Wages for the Plan Year, must be at least equal
to the lesser of
(a) three percent, or
(b) the largest percentage of such Section 415 Wages at
which contributions (including pre-tax contributions) are made and
allocated on behalf of any key employee for such Plan Year.
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(2) If, in addition to this Plan, an Affiliated Organization
maintains another qualified defined contribution plan or one or more
qualified defined benefit pension plans during a Plan Year, the provisions
of clause (1) will be applied for such Plan Year -
(a) by taking into account the employer contributions (other
than elective deferrals for a non-key employee) on behalf of the
Participant under all such defined contribution plans;
(b) without regard to any Participant who is not a key
employee and whose accrued benefit, expressed as a single life
annuity, under a defined benefit pension plan maintained by the
Affiliated Organization for such Plan Year is not less than the
product of -
(i) the Participant's average Section 415 Wages for
the period of consecutive years not exceeding the period of
consecutive years (not exceeding five) when the Participant
had the highest aggregate Section 415 Wages, disregarding
years in which the Participant completed less than 1000 Hours
of Service, multiplied by
(ii) the lesser of (A) two percent per year of service,
disregarding years of service beginning after the close of the
last Plan Year in which such defined benefit plan was a top
heavy plan, or (B) 20 percent.
(B) If the Plan is a top-heavy plan, a Participant's vested accrued
benefit under the Plan derived from Participating Employer contributions shall
be the greater of the vested accrued benefit attributable to such contributions
determined under Section 7.1 or the vested accrued benefit determined under the
following subsections:
(1) Subject to the following subsections, the vested percentage
applied to the Participant's Accounts attributable to Participating
Employer contributions will be determined from the following table:
<TABLE>
<CAPTION>
YEARS OF VESTING SERVICE VESTED PERCENTAGE
------------------------ -----------------
<S> <C>
Less than Two Years 0%
Two Years 20%
Three Years 40%
Four Years 60%
Five or More Years 100%
</TABLE>
(2) This section will not apply to a Participant who has no Years
of Service after the Plan becomes a top-heavy plan.
(3) If the Plan ceases to be a top-heavy plan and continues to be
a non-top-heavy plan until the Participant's termination of employment,
the Participant's Account attributable to Participating Employer
contributions for purposes of this section will not include the portion of
such Accounts attributable to Participating Employer contributions for
periods after such cessation. However, for purposes of Section 7.1, the
vesting schedule
41
<PAGE>
of the Plan will be deemed to have been amended effective as of the first
day of the Plan Year following the last Plan Year for which the Plan was a
top-heavy plan.
(C) For purposes of Subsection (A),
(1) (a) The Plan will be a "top-heavy plan" for a particular
Plan Year if, as of the last day of the initial Plan Year or, with
respect to any other Plan Year, as of the last day of the preceding
Plan Year, the aggregate of the Account balances of key employees is
greater than 60 percent of the aggregate of the Account balances of
all Participants.
(b) For purposes of calculating the aggregate Account
balances for both key employees and employees who are not key
employees:
(i) Any distributions made within the five-year period
preceding the Plan Year for which the determination is being
made, other than a distribution transferred or rolled over to
a plan maintained by an Affiliated Organization, will be
included;
(ii) Amounts transferred or rolled over from a plan not
maintained by an Affiliated Organization at the initiation of
the Participant will be excluded;
(iii) The Account balances of any key employee and any
employee who is not a key employee who has not performed an
Actual Hour of Service at any time during the five-year period
ending on the date as of which the determination is being made
will be excluded; and
(iv) The terms "key employee" and "employee" will
include the Beneficiaries of such persons who have died.
(2) (a) Notwithstanding the provisions of clause (1), this Plan
will not be a top-heavy plan if it is part of either a "required
aggregation group" or a "permissive aggregation group" and such
aggregation group is not top-heavy. An aggregation group will be
top-heavy if the sum of the present value of accrued benefits and
account balances of key employees is more than 60 percent of the sum
of the present value of accrued benefits and account balances for
all Participants, such accrued benefits and account balances being
calculated in each case in the same manner as set forth in clause
(1).
(b) Each plan in a required aggregation group will be
top-heavy if the group is top-heavy. No plan in a required
aggregation group will be top-heavy if the group is not top-heavy.
(c) If a permissive aggregation group is top-heavy, only
those plans that are part of an underlying top-heavy, required
aggregation group will be top-heavy. No plan in a permissive
aggregation group will be top-heavy if the group is not top-heavy.
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(3) The "required aggregation group" consists of (i) each plan of
an Affiliated Organization in which a key employee participates, and (ii)
each other plan of an Affiliated Organization that enables a plan in which
a key employee participates to meet the nondiscrimination requirements of
Code sections 401(a)(4) and 410.
(4) A "permissive aggregation group" consists of those plans that
are required to be aggregated and one or more plans (providing comparable
benefits or contributions) that are not required to be aggregated, which,
when taken together, satisfy the requirements of Code sections 401(a)(4)
and 410.
(5) For purposes of applying clauses (2), (3) and (4) of this
Subsection (B), any qualified defined contribution plan maintained by an
Affiliated Organization at any time within the five-year period preceding
the Plan Year for which the determination being made which, as of the date
of such determination, has been formally terminated, has ceased crediting
service for benefit accruals and vesting and has been or is distributing
all plan assets to participants or their beneficiaries, will be taken into
account to the extent required or permitted under such clauses and under
Code section 416.
(D) A "key employee" is any individual who is or was employed with an
Affiliated Organization and who, at any time during the Plan Year in question or
any of the preceding four Plan Years is or was:
(1) An officer of the Affiliated Organization (an administrative
executive in regular and continued service with the Affiliated
Organization) whose includable compensation for such Plan Year exceeds 50
percent of the amount in effect under Code section 415(b)(1)(A) for such
Plan Year, but in no case will there be taken into account more than the
lesser of (a) 50 individuals or (b) the greater of (i) three individuals
or (ii) ten percent of the number of the Affiliated Organization
employees, excluding for purposes of determining the number of such
officers, any employees that are excluded pursuant to Section
12.17(A)(2)(b);
(2) The owner of an interest in the Affiliated Organization, that
is not less than the interest owned by at least ten other individuals
employed with the Affiliated Organization; provided, that, such owner will
not be a key employee solely by reason of such ownership for a Plan Year
if he or she does not own more than one-half of one percent of the value
of the outstanding interests of the Affiliated Organization or if the
amount of his or her includable compensation for such Plan Year is less
than the amount in effect under Code section 415(c)(1)(A) for such Plan
Year;
(3) The owner of more than five percent of the Affiliated
Organization outstanding stock or more than five percent of the total
combined voting power of the Affiliated Organization stock; or
(4) The owner of more than one percent of the Affiliated
Organization's outstanding stock or more than one percent of the total
combined voting power of the Affiliated Organization's stock, whose
includable compensation for such Plan Year exceeds $150,000.
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For purposes of this Subsection (C), the term "includable compensation" has the
same meaning as in Section 12.17(B)(2) and ownership of an Affiliated
Organization stock will be determined in accordance with Code section 318;
provided, that subparagraph 318(a)(2)(C) will be applied by substituting the
phrase "5 percent" for the phrase "50 percent" wherever it appears in such Code
section.
(E) If an Affiliated Organization maintains a qualified defined
contribution plan and a qualified defined pension plan, the limitation on
combined contributions and accrued benefits will be adjusted by substituting
"100 percent" for "125 percent" in the definitions of the defined benefit
fraction and the defined contribution fraction in Section 9.7; provided, first,
that this Subsection (D) will be applied prospectively only to prohibit
additional contributions allocated, and forfeitures reallocated, to and defined
benefit accruals for, a Participant and will not reduce any allocations or
reallocations made to, or benefits accrued for, such Participant prior to the
Plan Year for which it first becomes effective; and, second, that if the Plan
would not be a top heavy plan if "90 percent" were substituted for "60 percent"
in clause (1)(a) of Subsection (B), this Subsection (D) will not apply if -
(1) the aggregate employer contribution (other than elective
contributions) under all such qualified defined contribution plans on
behalf of each Participant who is not a key employee and who is employed
with an Affiliated Organization on the last day of the Plan Year is not
less than seven and one-half percent of his or her includable compensation
for the Plan Year, or
(2) the accrued benefit for each Participant under the qualified
defined benefit pension plan is not less than the benefit described in
Subsection (A)(2)(b), applied by substituting "3 percent" for "2 percent"
in item (A) of clause (ii) and "30 percent" for "20 percent" in item (B)
of clause (ii).
14.4 NO EMPLOYMENT RIGHTS CREATED. The establishment and maintenance of the
Plan neither give any Employee a right to continuing employment nor limit the
right of an Affiliated Organization to discharge or otherwise deal with the
Employee without regard to the effect such action might have on his or her
initial or continued participation in the Plan.
14.5 SPECIAL PROVISIONS. Special provisions of the Plan applicable only to
certain Participants will be set forth on an exhibit to the Plan. In the event
of a conflict between the terms of the exhibit and the terms of the Plan, the
exhibit controls.
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APPENDIX A
BMC INDUSTRIES, INC.
PROFIT SHARING PLAN
VISION-EASE LENS DIVISION CONTRIBUTION CALCULATION FORMULA
I. DEFINITIONS:
1. "DCE" is division controllable earnings of the glass lens
organization unit.
2. "Floor contribution" is the contribution made pursuant to Section
3.1(A) with respect to Participants employed with the glass lens
organization unit who are subject to Section 3.1(C).
3. "Earnings threshold" is the minimum portion of DCE reserved for
retained earnings and shall equal fifteen percent of the glass lens
organization unit's sales.
4. "Glass lens organization unit" consists of exempt and not-exempt
Employees of the Vision-Ease Lens Participating Business Unit who
are directly involved in production of glass lenses.
5. "Sales" are third party sales excluding intercompany sales.
Other capitalized terms shall have the meanings ascribed to them in the Plan.
II. CALCULATION OF COMPANY CONTRIBUTION
The formula used to calculate the contribution with respect to the glass
lens organization unit is as follows:
1. DCE, less:
2. earnings threshold, times:
3. Forty percent, less"
4. floor contribution = Section 3.1(C) contribution.
III. EMPLOYER CONTRIBUTION
The amount of the contribution for the glass lens organization unit will be the
sum of (1) the floor contribution, plus (2) the Section 3.1(C) contribution
calculated above except that in no event will the total contribution exceed
fifteen percent of the aggregate Compensation of all Participants who share in
the contribution pursuant to Section 3.1(C) for a given Plan Year.
Notwithstanding anything herein to the contrary, for purposes of calculating any
contributions under this Appendix A, all profits attributable to the Canadian
operations of the Vision-Ease Lens Division Participating Business Unit will be
excluded.
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BMC INDUSTRIES, INC. SAVINGS PLAN
1994 REVISION
As Amended Effective Generally as of January 1, 1994
<PAGE>
BMC INDUSTRIES, INC. SAVINGS PLAN
1994 REVISION
TABLE OF CONTENTS
PAGE
ARTICLE I Description and Purpose........................................ 1
1.1 Plan Name...................................................... 1
1.2 Plan Description............................................... 1
1.3 Plan Purposes.................................................. 1
1.4 Plan Background................................................ 1
ARTICLE II Eligibility.................................................... 2
2.1 Eligibility Requirements....................................... 2
2.2 Reentry........................................................ 3
2.3 Condition of Participation..................................... 3
2.4 Termination of Participation................................... 3
ARTICLE III Contributions.................................................. 4
3.1 Pre-Tax Contributions.......................................... 4
3.2 Matching Contributions......................................... 5
3.3 After-Tax Contributions........................................ 6
3.4 Rollovers and Transfers........................................ 7
3.5 Corrective Contributions....................................... 8
ARTICLE IV Accounts and Valuation......................................... 9
4.1 Establishment of Accounts...................................... 9
4.2 Valuation and Account Adjustment............................... 9
4.3 Adjustment Accounting.......................................... 10
4.4 Allocations Do Not Create Rights............................... 10
ARTICLE V Participant Investment Direction............................... 11
5.1 Establishment of Investment Funds.............................. 11
5.2 Investment of Account Balances................................. 11
5.3 BMC Common Stock Fund Investment Limit......................... 13
5.4 Investment Direction Responsibility Resides With Participants.. 13
5.5 Beneficiaries and Alternate Payees............................. 13
ARTICLE VI Withdrawals During Employment.................................. 14
6.1 Hardship Withdrawals from Pre-Tax Contribution Account......... 14
6.2 Other Withdrawals from Pre-Tax Contribution Account............ 15
6.3 Withdrawals from After-Tax Contribution Account and Employee
Basic Contribution Account..................................... 15
6.4 Rules for Withdrawals.......................................... 15
6.5 No Withdrawals from Other Accounts............................. 16
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ARTICLE VII Vesting and Forfeitures........................................ 17
7.1 Vesting........................................................ 17
7.2 Forfeiture Upon Distribution................................... 18
7.3 Other Forfeitures.............................................. 18
7.4 Reallocation of Forfeitures.................................... 19
ARTICLE VIIIDistributions After Termination................................ 20
8.1 Time and Form of Distribution.................................. 20
8.2 Beneficiary Designation........................................ 22
8.3 Assignment, Alienation of Benefits............................. 23
8.4 Payment in Event of Incapacity................................. 24
8.5 Payment Satisfies Claims....................................... 24
8.6 Disposition if Distributee Cannot be Located................... 24
8.7 Direct Rollovers and Transfers................................. 24
ARTICLE IX Contribution Limitations....................................... 25
9.1 Pre-Tax Contribution Dollar Limitation......................... 25
9.2 Actual Deferral Percentage Limitations......................... 25
9.3 Actual Contribution Percentage Limitations..................... 27
9.4 Multiple Use Limitation........................................ 29
9.5 Earnings on Excess Contributions............................... 31
9.6 Aggregate Defined Contribution Limitations..................... 31
9.7 Aggregate Defined Contribution/Defined Benefit Limitations..... 32
9.8 Administrator's Discretion..................................... 33
ARTICLE X Service Rules.................................................. 34
10.1 Computation Period............................................. 34
10.2 Vesting Service................................................ 34
10.3 Hour of Service................................................ 34
10.4 One-Year Break in Service...................................... 36
10.5 Pre-Acquisition Service........................................ 37
ARTICLE XI Adoption, Amendment and Termination............................ 38
11.1 Adoption by Affiliated Organizations........................... 38
11.2 Authority to Amend and Procedure............................... 38
11.3 Authority to Terminate and Procedure........................... 38
11.4 Vesting Upon Termination, Partial Termination or Discontinuance
of Contributions............................................... 39
11.5 Distribution Following Termination, Partial Termination or
Discontinuance of Contributions................................ 39
ARTICLE XII Definitions, Construction and Interpretations.................. 40
12.1 Account........................................................ 40
12.2 Active Participant............................................. 40
12.3 Administrator.................................................. 40
12.4 Affiliated Organization........................................ 40
12.5 After-Tax Contribution Account................................. 40
ii
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12.6 After-Tax Contributions........................................ 40
12.7 Board.......................................................... 40
12.8 Beneficiary.................................................... 40
12.9 Code........................................................... 41
12.10 Committee...................................................... 41
12.11 Company........................................................ 41
12.12 Company Stock.................................................. 41
12.13 Compensation................................................... 41
12.14 Disabled....................................................... 41
12.15 Employee....................................................... 41
12.16 Employee Basic Contribution Account............................ 41
12.17 Employer Contribution Account.................................. 42
12.18 Fund........................................................... 42
12.19 Governing Law.................................................. 42
12.20 Headings....................................................... 42
12.21 Highly Compensated Employee.................................... 42
12.22 Matching Contribution Account.................................. 43
12.23 Matching Contributions......................................... 43
12.24 Normal Retirement Date......................................... 44
12.25 Number and Gender.............................................. 44
12.26 Participant.................................................... 44
12.27 Participating Business Unit.................................... 44
12.28 Participating Employer......................................... 44
12.29 Plan........................................................... 44
12.30 Plan Rule...................................................... 44
12.31 Plan Year...................................................... 44
12.32 Pre-Tax Contribution Account................................... 44
12.33 Pre-Tax Contributions.......................................... 44
12.34 Qualified Employee............................................. 44
12.35 Reporting Person............................................... 45
12.36 Rollover Account............................................... 45
12.37 Section 415 Wages.............................................. 45
12.38 Termination of Employment...................................... 45
12.39 Testing Wages.................................................. 46
12.40 Treasury Regulations........................................... 46
12.41 Trust.......................................................... 46
12.42 Trustee........................................................ 46
12.43 Valuation Date................................................. 46
ARTICLE XIII Administration of Plan........................................ 47
13.1 Named Fiduciary................................................ 47
13.2 Committee...................................................... 47
13.3 Administrator.................................................. 48
13.4 Compensation and Expenses...................................... 49
13.5 Plan Rules..................................................... 49
13.6 Administrator's Discretion..................................... 49
13.7 Indemnification................................................ 49
13.8 Benefit Claim Procedure........................................ 50
13.9 Correction of Errors........................................... 50
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ARTICLE XIV Miscellaneous.................................................. 51
14.1 Merger, Consolidation, Transfer of Assets...................... 51
14.2 Limited Reversion of Fund...................................... 51
14.3 Top-Heavy Provisions........................................... 51
14.4 No Employment Rights Created................................... 54
14.5 Special Provisions............................................. 55
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BMC INDUSTRIES, INC. SAVINGS PLAN
1994 REVISION
ARTICLE I
DESCRIPTION AND PURPOSE
1.1 PLAN NAME. The name of the Plan is the "BMC Industries, Inc. Savings
Plan."
1.2 PLAN DESCRIPTION. The Plan is a profit sharing plan providing for
Pre-Tax Contributions pursuant to a qualified cash or deferred arrangement,
Matching Contributions and After-Tax Contributions. The Plan is intended to
qualify under Code section 401(a) and to satisfy the requirements of Code
sections 401(k) and 401(m). Notwithstanding the designation of the Plan as a
profit sharing plan, a Participating Employer may make contributions to the Plan
even though it has no current or accumulated earnings and profits.
1.3 PLAN PURPOSES. The purposes of the Plan are to promote effort and
cooperation on the part of Active Participants; to provide a measure of economic
security to Active Participants by accumulating contributions for distribution
upon retirement, as a supplement to other resources then available; and to
permit Active Participants to share in the profits and growth of their
Participating Employer.
1.4 PLAN BACKGROUND. (A) The Company adopted and established the Plan
effective as of April 1, 1979, as an employee thrift and profit sharing plan
with after-tax employee contributions and employer matching contributions made
from current or accumulated profits.
(B) Effective generally as of January 1, 1985, the Plan was restated in
the manner set forth in the 1984 Restatement to meet the requirements of the Tax
Equity and Fiscal Responsibility Act of 1982, the Deficit Reduction Act of 1984
and the Retirement Equity Act of 1984.
(C) Effective generally as of July 1, 1985, the Plan was restated in the
manner set forth in the 1985 Revision for purposes of incorporating into the
Plan a cash or deferred arrangement pursuant to Code section 401(k) and
providing for Participants' Matching Contribution Accounts to be invested in
Company Stock.
(D) Effective generally as of January 1, 1987, the Plan was restated in
the manner set forth in the 1987 Revision for purposes of satisfying the
requirements of the Tax Reform Act of 1986.
(E) Effective generally as of January 1, 1994, the Plan was restated in
the manner set forth in the 1994 Revision to comply with changes in applicable
law and make certain other miscellaneous changes.
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ARTICLE II
ELIGIBILITY
2.1 ELIGIBILITY REQUIREMENTS. (A) An Employee is eligible to participate
in the Plan
(1) for the purpose of having a rollover or transfer made on his
or her behalf pursuant to Section 3.4, on the day on which he or she first
completes an Hour of Actual Service as a Qualified Employee,
(2) for the purpose of having Pre-Tax Contributions (but not
Matching Contributions with respect thereto) made on his or her behalf and
making After-Tax Contributions, on the first day of the calendar quarter
that falls on or next follows the last day of the six-month period
beginning on the date on which he or she first completes an Hour of Actual
Service if he or she completes at least 1000 Hours of Service during such
period and is a Qualified Employee on the date on which he or she would
otherwise be eligible to participate, and
(3) for the purpose of having Matching Contributions made on his or
her behalf, on the first day of the calendar quarter that falls on or next
follows the last day of the first Computation Period of the type described
in Section 10.1(a) during which he or she completes at least 1000 Hours of
Service if he or she is a Qualified Employee on the date on which he or
she would otherwise be eligible to participate.
(B) If the six-month period described in Subsection (A)(2) or the
Computation Period described in Subsection (A)(3) with respect to an Employee
begins on an Affiliated Organization's first regular business day after the
first day of a calendar quarter, notwithstanding Subsection (A)(2) or (3), as
the case may be, the Employee is eligible to participate in the Plan for the
purpose specified as of the first day of the calendar quarter immediately
preceding the last day of the six-month period or the last day of the
Computation Period, as the case may be, if the sole reason he or she is not then
eligible pursuant to Subsection (A) is that the six-month period or Computation
Period has not ended.
(C) If an Employee or former Employee has satisfied the service
requirements set forth in Subsection (A)(2) or (3) but is not a Qualified
Employee on the date on which he or she would otherwise be eligible to
participate in the Plan for a specified purpose, he or she will become eligible
to participate for that purpose on the first day of the calendar quarter that
falls on or next follows the date on which he or she completes an Hour of Actual
Service as a Qualified Employee, if he or she remains a Qualified Employee on
the date on which he or she would otherwise become eligible to participate.
(D) Notwithstanding Subsection (A), in conjunction with an acquisition,
the Company's Board may specify a special entry date for those Qualified
Employees with respect to whom pre-acquisition service is taken into account
pursuant to Section 10.5.
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2.2 REENTRY. An Active Participant who ceases to be a Qualified Employee
will be eligible to resume active participation in the Plan as of the first day
of the calendar quarter that falls on or next follows the date on which he or
she completes an Hour of Actual Service of a Qualified Employee following the
cessation if he or she remains a Qualified Employee on the date on which he or
she would otherwise be eligible to resume active participation.
2.3 CONDITION OF PARTICIPATION. Each eligible Qualified Employee, as a
condition of participation, is bound by all the terms and conditions of the Plan
and must furnish to the Administrator such pertinent information and execute
such instruments as the Administrator may require.
2.4 TERMINATION OF PARTICIPATION. A Participant will cease to be such as
of the later of the date on which
(a) he or she ceases to be a Qualified Employee, or
(b) all benefits, if any, to which he or she is entitled under the
Plan have been distributed.
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ARTICLE III
CONTRIBUTIONS
3.1 PRE-TAX CONTRIBUTIONS. (A) Subject to the limitations of Article IX,
for each Plan Year the Participating Employer of each Active Participant will
make Pre-Tax Contributions to the Trust on behalf of the Participant in the
amount by which the Participant's Compensation has been reduced in accordance
with the succeeding provisions of this section. Pre-Tax Contributions will be
paid to the Trustee as soon as administratively practicable after the date on
which the Participant would have received the Compensation but for the
Participant's election pursuant to this section.
(B) Except as provided in Subsection (C), an Active Participant's
Compensation will be reduced in accordance with the following rules:
(1) An Active Participant may elect to reduce his or her
Compensation by any one percent increment from one percent to a maximum of
eight percent, and the percentage so elected will automatically apply to
his or her Compensation as adjusted from time to time. Plan Rules may,
however, specify a lower maximum percentage for Active Participants who
are Highly Compensated Employees.
(2) In conjunction with an Active Participant's entering or
reentering the Plan pursuant to Article II, reduction of his or her
Compensation will begin as of the first payroll period that begins at
least 30 days (or such shorter period as Plan Rules may allow) after the
Administrator receives the Active Participant's complete and accurate
written election on a form provided by the Administrator. If, however,
the election is not received until after a date determined pursuant to
Plan Rules, it will not be effective and Compensation reductions will
begin in accordance with clause (3).
(3) If an Active Participant does not elect to reduce his or her
Compensation in conjunction with his or her entry or reentry into the Plan
in accordance with clause (2), he or she may thereafter elect to have such
reductions begin as of the first payroll period that begins on or after
the first day of the calendar quarter that follows by at least 30 days (or
such shorter period as Plan Rules may allow) the date on which the
Administrator receives a complete and accurate written election on a form
provided by the Administrator.
(4) No Pre-Tax Contributions will be made on behalf of a
Participant with respect to a period during which he or she is not an
Active Participant. Only Compensation payable after an Active
Participant's complete and accurate written election on a form provided by
the Administrator has been properly filed will be reduced pursuant to the
election.
(5) An Active Participant may increase the percentage rate at
which his or her Compensation will be reduced as of the first payroll
period that begins on or after the first day of any calendar quarter that
follows by at least 30 days (or such shorter period as Plan Rules may
allow) the date on which the Administrator receives a complete and
accurate written notice of such change on a form provided by the
Administrator.
(6) An Active Participant may decrease the percentage rate at
which his or her Compensation will be reduced or suspend Compensation
reductions entirely beginning with the first payroll period that begins at
least 30 days (or such shorter period as Plan Rules
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may allow) after the date on which the Administrator receives a complete
and accurate written notice of such suspension on a form provided by the
Administrator. Compensation reductions for any Active Participant who
makes a hardship withdrawal pursuant to Section 6.1 will be automatically
suspended for the 12-month period beginning on the date of the withdrawal
distribution.
(7) An Active Participant whose Compensation reductions have
ceased by reason of automatic or voluntary suspension may, after the end
of the suspension period, resume Compensation reductions in accordance
with clause (3).
(C) Compensation reductions will be made in accordance with Plan Rules.
If any election or notice submitted by an Active Participant to the
Administrator is not processed on a timely basis or if, for any reason, an
Active Participant's Compensation are not reduced in accordance with his or her
election, no retroactive adjustments will be made to take into account the
effect of any such delay or failure. Plan Rules may, however, permit an Active
Participant to elect to reduce his or her Compensation payable during any
remaining portion of the Plan Year in which the delay or failure occurred at
more than the otherwise applicable percentage to adjust for the effect of such
delay or failure so long as the total reductions for the Plan Year do not exceed
the applicable maximum percentage or the limitations of Article IX.
3.2 MATCHING CONTRIBUTIONS. (A) (1) Subject to Subsection (C) and the
limitations of Article IX, the Participating Employer of each Participant
who is an Active Participant for purposes of this section on the last day
of a calendar quarter will make a Matching Contribution on behalf of the
Participant in an amount equal to 25 percent of the lesser of (a) the
aggregate amount of Pre-Tax Contributions made by the Participating
Employer on the Participant's behalf for the calendar quarter or (b) six
percent of his or her Compensation for such calendar quarter.
(2) Subject to Subsection (C) and the limitations of Article IX,
the Participating Employer of each Participant who is an Active
Participant for purposes of this section on the last day of a Plan Year
will make a Matching Contribution on behalf of the Participant in an
amount equal to a percentage, determined by the Participating Employer's
Board, of the lesser of (a) the Pre-Tax Contributions made by the
Participating Employer on the Participant's behalf for the Plan Year, or
(b) six percent of his or her Compensation for such Plan Year; provided,
first, that such percentage may be established at different levels for
Participants employed in different Participating Business Units of the
Participating Employer based upon the differing annual profit performance
of such Business Units, as determined by the Participating Employer's
Board; and, second, that, for a Participant employed at two or more
Participating Business Units during a Plan Year, the Matching Contribution
made on his or her behalf under this clause (2) will be the aggregate of
each such Participating Business Unit's respective matching percentage for
the Plan Year pursuant to this clause (2), multiplied by the Participant's
Pre-Tax Contributions made, or six percent of his or her Compensation
earned, while he or she was a Qualified Employee at such Participating
Business Unit.
(B) A Participating Employer's Matching Contributions for a Plan Year
will be paid to the Trustee on such date or dates during or following such Plan
Year as the Participating Employer may elect but in no case more than 12 months
after the end of the Plan Year.
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<PAGE>
(C) No Matching Contributions will be made with respect to any portion
of an Active Participant's Pre-Tax Contributions that is distributed to the
Participant pursuant to Article IX. If the Administrator determines that any
Matching Contributions that have been added to a Participant's Matching
Contribution Account should not have been added by reason of this subsection,
the contributions will be subtracted from such Account as soon as
administratively practicable after the determination and will be applied to
satisfy the Matching Contribution obligations of the Participating Employer who
made the excess Matching Contributions for the Plan Year in which such excess
contributions were made. If, because of the passage of time, the excess cannot
be applied to satisfy the Participating Employer's Matching Contribution
obligations for the Plan Year in which the excess contribution was made, the
excess will, subject to the limitations of Article IX, be allocated, in the
discretion of the Administrator
(1) among the Matching Contribution Accounts of all Active
Participants who made Pre-Tax Contributions as Qualified Employees of the
Participating Employer as if it were an additional Matching Contribution
by the Participating Employer for such Plan Year, or
(2) as a corrective contribution pursuant to Section 3.5.
3.3 AFTER-TAX CONTRIBUTIONS. (A) Subject to the limitations of Article
IX, an Active Participant may make After-Tax Contributions to the Trust in
accordance with the succeeding provisions of this section. No Participant is
required to make After-Tax Contributions as a condition of having Pre-Tax
Contributions or Matching Contributions made on his or her behalf. After-Tax
Contributions will be made as soon as administratively practicable after the
date on which the Participant would have received the Compensation but for the
Participant's election pursuant to this section.
(B) Except as provided in Subsection (C), After-Tax Contributions will
be made in accordance with the following rules:
(1) An Active Participant may elect to contribute any one percent
increment of his or her Compensation from one percent to a maximum of six
percent, and the percentage so elected will automatically apply to his or
her Compensation as adjusted from time to time. Plan Rules may, however,
specify a lower maximum percentage for Active Participants who are Highly
Compensated Employees.
(2) In conjunction with an Active Participant's entering or
reentering the Plan pursuant to Article II, After-Tax Contributions will
begin as of the first payroll period that begins at least 30 days (or such
shorter period as Plan Rules may allow) after the Administrator receives
the Active Participant's complete and accurate written election on a form
provided by the Administrator. If, however, the election is not received
until after a date determined pursuant to Plan Rules, it will not be
effective and After-Tax Contributions will begin in accordance with clause
(3).
(3) If an Active Participant does not elect to have After-Tax
Contributions made on his or her behalf in conjunction with his or her
entry or reentry into the Plan in accordance with clause (2), he or she
may thereafter elect to have After-Tax Contributions made as of the first
payroll period that begins on or after the first day of the calendar
quarter that follows by at least 30 days (or such shorter period as Plan
Rules may allow) the
6
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date on which the Administrator receives a complete and accurate written
election on a form provided by the Administrator.
(4) No After-Tax Contributions may be made by a Participant with
respect to a period during which he or she is not an Active Participant.
Only Compensation payable after an Active Participant's complete and
accurate written election on a form provided by the Administrator has been
properly filed may be contributed.
(5) An Active Participant may increase the percentage rate of his
or her After-Tax Contributions by providing a notice to the Administrator
in accordance with the procedure established in Section 3.1(B)(5).
(6) An Active Participant may decrease the percentage rate at
which his or her After-Tax Contributions are made or suspend his or her
After-Tax Contributions by providing a notice to the Administrator in
accordance with the procedure established in Section 3.1(B)(6). After-Tax
Contributions by any Active Participant who makes a hardship withdrawal
under Section 6.1 will automatically be suspended for the 12-month period
beginning on the date of the withdrawal distribution.
(7) An Active Participant whose After-Tax Contributions have
ceased by reason of automatic or voluntary suspension may, after the end
of the suspension period, resume After-Tax Contributions by submitting a
written election in accordance with the procedure established in Section
3.1(B)(3).
(C) After-Tax Contributions will be made in accordance with Plan Rules.
If any election or notice submitted by a Participant to the Administrator is not
processed on a timely basis, or if, for any reason, After-Tax Contribution are
not made in accordance with the Participant's election, no retroactive
adjustments will be made to take into account the effect of any such delay or
failure. Plan Rules may, however, permit a Participant to increase After-Tax
Contributions with respect to the Plan Year during which such delay or failure
occurred above the otherwise applicable maximum percentage to adjust for the
effect of such delay or failure so long as the total contributions for the Plan
Year do not exceed the otherwise applicable maximum percentage or the
limitations of Article IX.
3.4 ROLLOVERS AND TRANSFERS. (A) An Active Participant may, with the
prior consent of the Administrator, contribute to the Trust, within 60 days of
receipt,
(1) the balance of an individual retirement account to which the
only contributions have been one or more "eligible rollover
distributions," within the meaning of Code section 402(c)(4), from a plan
qualified under Code section 401(a), or
(2) an eligible rollover distribution from such a qualified plan.
(B) With the prior consent of the Administrator, the accounts under
another plan qualified under Code section 401(a) of an Active Participant may be
transferred directly to the Trust. Other than in connection with an
acquisition, such a transfer will not be permitted if, as a result of the
transfer, the Plan would be required to provide any option with respect to the
form or time of distribution or any other right, benefit or feature not
available under the Plan prior to the transfer.
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<PAGE>
(C) Other than in connection with an acquisition, any contribution or
transfer to the Trust pursuant to Subsection (A) or (B) must be made in cash and
will be credited to the Active Participant's Rollover Account.
3.5 CORRECTIVE CONTRIBUTIONS. For any Plan Year a Participating Employer
may contribute to the Matching Contribution Accounts of Active Participants who
are not Highly Compensated Employees, or any group of such Active Participants,
such amounts as it deems advisable to assist the Plan in satisfying the
requirements of Sections 9.2, 9.3 and 9.4, or any other requirement under the
Code or Treasury Regulations, for such Plan Year. Subject to the limitations of
Article IX, such contributions will be allocated among the Matching Contribution
Accounts of such Active Participants in proportion to the Pre-Tax Contributions
made on their behalf for the Plan Year. Any amount allocated to an Active
Participant's Matching Contribution Account pursuant to this section will be
added to a separate subaccount with respect to which gains, losses, withdrawals
and other credits or charges are separately allocated on a reasonable and
consistent basis pursuant to Section 4.2.
8
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ARTICLE IV
ACCOUNTS AND VALUATION
4.1 ESTABLISHMENT OF ACCOUNTS. The following Accounts will be established
and maintained for each Participant:
(a) A Pre-Tax Contribution Account, to which Pre-Tax Contributions
made on the Participant's behalf will be added;
(b) A Matching Contribution Account, to which Matching
Contributions made on the Participant's behalf will be added;
(c) An After-Tax Contribution Account, to which After-Tax
Contributions will be added together with "supplemental contributions"
made pursuant to prior Plan provisions;
(d) A Rollover Account, to which rollover or trust-to-trust
transfers made by or on behalf of the Participant will be added;
(e) An Employee Basic Contribution Account, in which employee
basic contributions made pursuant to prior Plan provisions will be held;
and
(f) An Employer Contribution Account, in which employer
contributions and employer matching contributions made on the
Participant's behalf pursuant to prior Plan provisions will be held.
One or more additional accounts may be established for any Participant or group
of similarly situated Participants in connection with the merger of another plan
into the Plan, in which case provisions of the Plan applicable solely to such
accounts will be set forth on an exhibit to the Plan in accordance with Section
14.5.
4.2 VALUATION AND ACCOUNT ADJUSTMENT. (A) As of the close of business on
each Valuation Date, each Participant's Accounts within each investment fund
established pursuant to Section 5.1 will be separately adjusted in a uniform and
equitable manner to reflect income, expenses, gains and losses of the investment
fund, as well as contributions, withdrawals and distributions since the last
prior adjustment.
(B) The Administrator may from time to time cause Participants' Accounts
to be adjusted in accordance with Subsection (A) on any interim Valuation Date
where the Administrator deems such adjustment to be necessary to prevent
inequitable results because of extraordinary increases or decreases in the value
of the Fund since the last preceding Valuation Date or other events.
(C) Notwithstanding any other provision of this section, the portion of
a Participant's Accounts invested in Company Stock will be accounted for on the
basis of the number of full and fractional shares of Company Stock credited to
the Account. Accordingly, except as otherwise provided in the Plan, such
portion of a Participant's Accounts will not be separately adjusted for
appreciation or depreciation in the value of Company Stock, such appreciation or
depreciation being automatically reflected in the fair market value of the
shares.
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4.3 ADJUSTMENT ACCOUNTING. The adjustments made under Section 4.2 will be
set forth in the accounting rendered as of the Valuation Date for which they
were made.
4.4 ALLOCATIONS DO NOT CREATE RIGHTS. The fact that amounts are added to
the Accounts of a Participant does not vest in the Participant any right, title
or interest in or to any portion of the Fund except at the time or times and
upon the terms and conditions expressly set forth in the Plan. Notwithstanding
any addition to an Account, the issuance of any statement or the distribution of
all or any portion of an Account balance, the Administrator may cause the
Account to be adjusted to the extent necessary to correct any error in such
Account, whether caused by a misapplication of any provision of the Plan or
otherwise, and may recover from any distributee the amount of any excess
distribution. Any such adjustment will be made within a reasonable time after
the error is discovered.
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ARTICLE V
PARTICIPANT INVESTMENT DIRECTION
5.1 ESTABLISHMENT OF INVESTMENT FUNDS. (A) In order to allow each
Participant to determine the manner in which his or her Accounts will be
invested, the Trustee will maintain, within the Trust, an investment fund
designated as the BMC Common Stock Fund and three or more separate investment
funds of such nature and possessing such characteristics as the Committee may
specify from time to time. Each Participant's Accounts will be invested in the
investment funds in accordance with Section 5.2. The Committee may, from time
to time, establish additional investment funds or eliminate any existing
investment fund.
(B) The BMC Common Stock Fund will be invested primarily and may be
invested entirely in shares of Company Stock. The Trustee will retain in a
subaccount within the BMC Common Stock Fund such amounts of cash as it
determines to be necessary. Shares of Company Stock held in the BMC Common
Stock Fund will be voted and tendered and sold by the Trustee in its discretion.
(C) Notwithstanding any other provision of the Plan to the contrary, the
Committee may suspend Participant investment activity (including such activity
in connection with withdrawals and distributions) in any or all investment
funds, or impose special rules or restrictions of uniform application, for a
period determined by the Committee to be necessary in connection with
(1) the establishment or termination of any investment fund,
(2) the receipt by the Trustee from, or transfer by the Trustee
to, another trust of account balances pursuant to Section 3.4 or 8.7 in
connection with an acquisition or divestiture or otherwise,
(3) a change of Trustee or investment manager, or
(4) such other circumstances determined by the Committee as making
such suspension or special rules or restrictions necessary or appropriate.
5.2 INVESTMENT OF ACCOUNT BALANCES. (A) Subject to Subsections (B) and
(C), all amounts credited to each Participant's Matching Contribution Account
will be invested only in the BMC Common Stock Fund and all amounts credited to
each other Account of a Participant will be invested only in one or more of the
other investment funds maintained pursuant to Section 5.1.
(B) Notwithstanding Subsection (A), any Participant who has attained age
55 may make a one-time irrevocable investment direction pursuant to which all
Matching Contributions credited to his or her Matching Contribution Account
after the effective date of such direction (including any amount so credited
that relates to Pre-Tax Contributions made with respect to the calendar quarter
immediately preceding the effective date of such direction) will be invested in
one or more of the investment funds maintained pursuant to Section 5.1 other
than the BMC Common Stock Fund. Such direction must be made in accordance with
and is subject to Plan Rules and will be effective as of the first day of the
calendar quarter that next follows by at least 30 days (or such shorter period
as the Administrator may allow) the date on which the Administrator receives a
complete and accurate direction from the Participant in form prescribed by Plan
Rules. The direction will remain in effect with respect to all of the
Participant's future participation in the Plan,
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whether or not the Participant experiences any period of one or more One-Year
Breaks in Service or ceases for any period to be a Participant.
(C) Notwithstanding Subsection (A), any Participant who has attained age
55 may direct the transfer of a portion of his or her Matching Contribution
Account from the BMC Common Stock Fund to one or more of the investment funds
maintained pursuant to Section 5.1 other than the BMC Common Stock Fund. Each
Participant will be entitled to make a total of four directions pursuant to this
Subsection (C) during his or her lifetime. The portion of the Participant's
Matching Contribution Account balance to which any such direction relates will
be determined by multiplying the number of full and fractional shares of Company
Stock credited to such Account as of the Valuation Date coinciding with the
effective date of the transfer by a fraction (not to exceed one), the numerator
of which will be one, two, three or four, as specified by the Participant, and
the denominator of which will be four less the sum of the numerators specified
by the Participant for all prior directions. Each direction must be made in
accordance with and is subject to Plan Rules and will be effective as of the
first day of the calendar quarter that next follows by at least 30 days (or such
shorter period as the Administrator may by uniform rule allow) the date on which
the Administrator receives a complete and accurate direction from the
Participant in a form prescribed by Plan Rules. The amount transferred will be
based on the value of the shares of Company Stock as of the Valuation Date
coinciding with the effective date of the transfer. If a Participant makes a
direction pursuant to this Subsection (C), notwithstanding any other provision
of the Plan to the contrary, all Matching Contributions credited to the
Participant's Matching Contribution Account after the effective date of such
direction (including any amount so credited that relates to Pre-Tax
Contributions made with respect to the calendar quarter immediately preceding
the effective date of the first such direction) will be invested in one or more
of the investment funds maintained pursuant to Section 5.1 other than the BMC
Common Stock Fund as directed by the Participant.
(D) Subject to the provisions of Subsections (A), (B) and (C), in
conjunction with his or her enrollment in the Plan, a Participant must direct
the manner in which contributions to his or her Accounts will be invested among
the investment funds maintained pursuant to Section 5.1. The direction must be
made in accordance with and is subject to Plan Rules.
(E) Subject to Subsections (A), (B) and (C), a Participant may direct a
change in the manner in which future contributions credited to his or her
Accounts and his or her existing Account balances will be invested among the
investment funds maintained pursuant to Section 5.1. The direction must be made
in accordance with and is subject to Plan Rules and will apply to both future
contributions credited to the Participant's Accounts and to the Participant's
existing Account balances. Such a direction will be effective as of the first
day of the calendar quarter that next follows by at least 30 days (or such
shorter period as the Administrator may allow) the date on which the
Administrator receives a complete and accurate direction in form prescribed by
Plan Rules.
(F) Notwithstanding the foregoing provisions of this Section 5.2,
contributions made before the end of a month will be invested by the Trustee in
short-term investments until the end of that month, at which time the
contributions will be invested in the appropriate investment fund or funds in
accordance with the terms hereof and the Participants' directions. Any income
realized with respect to those short-term investments may first be used in
satisfaction of the fees of the Trustee and any investment managers and
administrative expenses of the Plan and, to the extent the income exceeds the
fees and expenses, if paid by the Trust, the excess will be allocated among
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the investment funds on a pro rata basis in accordance with the relative values
of the funds on the Valuation Date coinciding with or next preceding the last
day of that month.
(G) Plan Rules may impose uniform limitations and restrictions
applicable to transfers into and out of specific investment funds.
5.3 BMC COMMON STOCK FUND INVESTMENT LIMIT. Notwithstanding any other
provisions of the Plan, the Matching Contribution Account of any Participant who
is a Reporting Person will not be invested in the BMC Common Stock Fund to the
extent the aggregate fair market value of Company Stock held in the Trust
credited to the Matching Contribution Accounts of all Participants who are
Reporting Persons equals or exceeds 20 percent of the market value of all
securities with a readily ascertainable market value held in the Trust, as
determined as of the last day of the preceding Plan Year. To the extent
necessary to prevent the foregoing limitation from being exceeded, the
Administrator will ratably reduce the extent to which the Matching Contribution
Accounts or Matching Contributions are invested in the BMC Common Stock Fund.
5.4 INVESTMENT DIRECTION RESPONSIBILITY RESIDES WITH PARTICIPANTS. Neither
any Affiliated Organization, the Administrator, the Committee nor the Trustee
has any authority, discretion, responsibility or liability with respect to a
Participant's selection of the investment funds or other directed investments in
which his or her Account will be invested, the entire authority, discretion and
responsibility for, and any results attributable to, the selection being that of
the Participant.
5.5 BENEFICIARIES AND ALTERNATE PAYEES. Solely for purposes of this
article, the term "Participant" includes the Beneficiary of a deceased
Participant and an alternate payee under a qualified domestic relations order
within the meaning of Code section 414(p) unless otherwise provided in such
order, but only after
(1) the Administrator has determined the identity of the
Beneficiary and the amount of the Account balance to which he or she is
entitled in the case of a Beneficiary of a deceased Participant, or
(2) the Administrator has, in accordance with Plan Rules, made a
final determination that the order is a qualified domestic relations order
and all rights to contest such determination in a court of competent
jurisdiction within the time prescribed by Plan Rules have expired or been
exhausted in the case of an alternate payee.
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<PAGE>
ARTICLE VI
WITHDRAWALS DURING EMPLOYMENT
6.1 HARDSHIP WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT. (A) Subject
to the provisions of Section 6.4, a Participant who is an Employee may withdraw
from his or her Pre-Tax Contribution Account an amount not in excess of the
portion of his or her Pre-Tax Contribution Account balance consisting of Pre-Tax
Contributions. Such withdrawal will be made only if the Administrator
determines that the distribution is made on account of an immediate and heavy
financial need of the Participant and is necessary to satisfy such financial
need.
(B) A distribution will be deemed to be made on account of an immediate
and heavy financial need only if it is determined by the Administrator to be on
account of:
(1) expenses for medical care, described in Code section 213(d),
incurred or to be incurred by the Participant, the Participant's spouse or
the Participant's dependent (as described in Code section 152);
(2) costs directly related to the purchase (excluding mortgage
payments) of a principal residence of the Participant;
(3) payment of tuition and related educational expenses for the
next year of post-secondary education for the Participant or his or her
spouse, child or other dependent; or
(4) payments necessary to prevent the eviction of the Participant
from his or her principal residence or foreclosure of the mortgage on the
Participant's principal residence.
(C) A distribution will be deemed to be necessary to satisfy the
immediate and heavy financial need only if the Administrator determines that
each of the following requirements is satisfied.
(1) The distribution is not in excess of the sum of the amount of
the immediate and heavy financial need of the Participant plus, if elected
by the Participant, the amount necessary to pay any federal, state or
local taxes or penalties that the Participant will incur in connection
with the distribution, as estimated by the Administrator in accordance
with Plan Rules.
(2) The Participant has received all withdrawals and has taken all
nontaxable loans available under the Plan and all other qualified plans
maintained by any Affiliated Organization.
(3) All Pre-Tax Contributions and After-Tax Contributions under
this Plan and all elective deferrals and after-tax employee contributions
by or on behalf of the Participant under any other qualified or
nonqualified plan of deferred compensation maintained by any Affiliated
Organization are suspended for a period of 12 months following the date of
the distribution.
(4) For the Participant's taxable year following the taxable year
during which he or she received the distribution, the amount of elective
deferrals under any qualified plan maintained by any Affiliated
Organization (including Pre-Tax Contributions pursuant to the
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<PAGE>
Plan) that may be made on the Participant's behalf under Code section
402(g) is reduced by the sum of such elective deferrals made on the
Participant's behalf for the taxable year during which he or she received
the distribution.
(D) The Administrator's determination of the existence of a
Participant's financial hardship and the amount that may be withdrawn to satisfy
the need created by such hardship will be made in accordance with Treasury
Regulations, and is final and binding on the Participant. The Administrator may
require the Participant to make representations and certifications concerning
his or her entitlement to a withdrawal pursuant to this section and is entitled
to rely on such representations and certifications unless the Administrator has
actual knowledge to the contrary. The Administrator is not obligated to
supervise or otherwise verify that amounts withdrawn are applied in the manner
specified in the Participant's withdrawal application.
6.2 OTHER WITHDRAWALS FROM PRE-TAX CONTRIBUTION ACCOUNT. Subject to the
provisions of Section 6.4, a Participant who is an Employee and has attained age
59-1/2 or who has become Disabled may withdraw all or any portion of the balance
of his or her Pre-Tax Contribution Account.
6.3 WITHDRAWALS FROM AFTER-TAX CONTRIBUTION ACCOUNT AND EMPLOYEE BASIC
CONTRIBUTION ACCOUNT. (A) Subject to the provisions of Section 6.4, a
Participant who is an Employee may withdraw first from his or her After-Tax
Contribution Account and second from his or her Employee Basic Contribution
Account, an amount not in excess of the portion of such Accounts consisting of
his or her contributions to such Accounts. If a Participant makes a withdrawal
from his or her After-Tax Contribution Account or his or her Employee Basic
Contribution Account, he or she will not be permitted to make any additional
After-Tax Contributions for a period of six months after the date of such
withdrawal.
(B) A Participant's After-Tax Contribution Account and Employee Basic
Contribution Account balances will be treated as a separate contract under the
Plan for purposes of Code section 72(d) and such balances will be separately
accounted for in accordance with Treasury Regulations. Insofar as the Plan
permitted Participants to effect in-service withdrawals from their After-Tax
Contribution Accounts and Employee Basic Contribution Accounts on May 5, 1986,
notwithstanding Subsection (A) all withdrawals from such Accounts pursuant to
this section will be deemed to be made first from such Participant's investment
in the contract as of December 31, 1986 to the extent thereof and, second, from
the aforementioned separate section 72(d) contract.
6.4 RULES FOR WITHDRAWALS.
(A) A withdrawal distribution will be made only upon the Administrator's
receipt from the Participant of a complete and accurate written application on a
form provided by the Administrator.
(B) A withdrawal from an particular Account will be made on a pro rata
basis among all investment funds in which the Account is invested.
(C) All withdrawal distributions will be made by check drawn on the
Trust as soon as administratively practicable after the Administrator's
determination that a Participant is entitled to receive the withdrawal
distribution and will be based on the balance of the Participant's Account as of
the Valuation Date that last precedes the date of the withdrawal distribution.
15
<PAGE>
(D) The provisions of Section 8.7(A) apply to any withdrawal
distribution after December 31, 1992 that constitutes an eligible rollover
distribution within the meaning of Code section 402(c)(4).
6.5 NO WITHDRAWALS FROM OTHER ACCOUNTS. Except as provided in Section 8.1
in connection with a Participant who attains age 70-1/2 prior to his or her
termination of employment, in no case may a Participant make a withdrawal from
his or her Matching Contribution Account, Rollover Account or Employer
Contribution Account while he or she is an Employee.
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<PAGE>
ARTICLE VII
VESTING AND FORFEITURES
7.1 VESTING. (A) Each Participant, at all times, has a fully vested
nonforfeitable interest in his or her Pre-Tax Contribution Account, After-Tax
Contribution Account, Rollover Account, Employee Basic Contribution Account and
Employer Contribution Account.
(B) A Participant will acquire a fully vested nonforfeitable interest in
his or her Matching Contribution Account upon attaining his or her Normal
Retirement Date while he or she is an Employee.
(C) A Participant will acquire a fully vested nonforfeitable interest in
his or her Matching Contribution Account if he or she dies or becomes Disabled
while he or she is an Employee.
(D) A Participant will acquire a fully vested nonforfeitable interest in
his or her Matching Contribution Account due upon the Participant's Termination
of Employment if the Affiliated Organization, Participating Business Unit,
business unit, location or division at which the Participant is employed,
permanently ceases operations or is sold or otherwise transferred through sale
of stock or of business and assets, in such manner that it no longer is, or is
no longer owned by, an Affiliated Organization.
(E) A Participant will acquire a fully vested nonforfeitable interest in
his or her Matching Contribution Account upon a Change in Control with respect
to the Company, which for purposes of this subsection means any of the
following:
(1) The sale, lease, exchange, or other transfer of all or
substantially all of the assets of the Company, in one transaction or in a
series of related transactions, to any Person:
(2) The approval by the stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company;
(3) Any Person is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of 50 percent or more of the
combined voting power of the Company's outstanding securities ordinarily
having the right to vote at elections of directors;
(4) Individuals who constitute the Company's Board of Directors on
January 1, 1994 (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided that any person becoming a director
subsequent to January 1, 1994 whose election, or nomination for election,
by the Company's stockholders, was approved by a vote of at least a
majority of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without objection to
such nomination) will, for purposes of this clause (4), be deemed to be a
member of the Incumbent Board; or
(5) A change in control of a nature that is determined by
independent legal counsel to the Company to be required to be reported
(assuming such event has not been "previously reported") in response to
Item 1(a) of the Current Report on Form 8-K, as in
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effect on January 1, 1994, pursuant to section 13 or 15(d) of the Exchange
Act, whether or not the Company is then subject to such reporting
requirement.
For purpose of applying the foregoing, the term "Person" means and includes any
individual, corporation, partnership, group, association or other "person," as
such term is used in section 14(d) of the Exchange Act, other than the Company,
a wholly-owned subsidiary of the Company or any employee benefit plan(s)
sponsored by the Company or a wholly-owned subsidiary of the Company.
(F) A Participant whose employment terminates prior to his or her Normal
Retirement Date other than by reason of death or becoming Disabled will acquire
a vested nonforfeitable interest in his or her Matching Contribution Account to
the extent provided in the following schedule:
<TABLE>
<CAPTION>
VESTED
YEARS OF VESTING SERVICE INTEREST
------------------------ --------
<S> <C>
Less Than One Year 0%
One Year 25%
Two Years 50%
Three Years 75%
Four Year or More Years 100%
</TABLE>
7.2 FORFEITURE UPON DISTRIBUTION. (A) If the entire vested balance of a
Participant's Accounts is distributed not later than the last day of the second
Plan Year following the Plan Year during which his or her employment terminates,
and if the amount of such distribution was not more than $3500 or the
distribution was made with the Participant's consent, the nonvested portion of
the Participant's Matching Contribution Account will, at the time of such
distribution, be forfeited. A Participant who has no vested interest in his or
her Matching Contribution Account at termination of employment will be deemed to
have received distribution of the entire vested balance in such Account upon
such termination.
(B) If a Participant described in Subsection (A) (1) received a
distribution of less than the entire balance of his or her Accounts, (2) resumes
employment with a Participating Employer as a Qualified Employee, and (3) repays
to the Trustee the full amount distributed before the earlier of (a) five years
following the date of reemployment as a Qualified Employee or (b) the date on
which he or she incurs five consecutive One-Year Breaks in Service following the
distribution, the amount of any forfeitures pursuant to Subsection (A) will be
restored to the Participant's Matching Contribution Account, unadjusted for any
change in Fund value occurring after the Valuation Date immediately preceding
the distribution. The restoration will be made from forfeitures that arise for
the Plan Year for which the restoration is to be made. To the extent such
forfeitures are insufficient for such purpose, the Participating Employer with
whom the Participant was last employed as a Qualified Employee will contribute
the amount required to restore the Account. A Participant described in the last
sentence of Subsection (A) who is reemployed prior to incurring five consecutive
One Year Breaks in Service following the distribution will be deemed to have
repaid his or her deemed distribution upon his or her reemployment as a
Qualified Employee.
7.3 OTHER FORFEITURES. (A) Except as provided in Section 7.2, the
nonvested portion of a Participant's Matching Contribution Account will continue
to be held in a subaccount until the Participant incurs five consecutive
One-Year Breaks in Service, at which time the subaccount
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<PAGE>
balance will be forfeited. If the Participant resumes employment with an
Affiliated Organization prior to incurring five consecutive One-Year Breaks in
Service, the subaccount will be disregarded and its balance will be included in
the Participant's Matching Contribution Account balance.
(B) A Participant's vested interest in his or her Matching Contribution
Account balance following a resumption of employment in accordance with the last
sentence of Subsection (A) at any given time will not be less than the amount
"X" determined by the formula: X = P(AB + (R x D)) - (R x D), where P is the
Participant's vested percentage at the time of determination; AB is the Account
balance at the time of determination; D is the amount of the distribution; and R
is the ratio of the Account balance at the time of determination, to the balance
immediately following the distribution.
7.4 REALLOCATION OF FORFEITURES. All forfeitures occurring under this
article in a Plan Year will be applied as of the last day of the Plan Year as
follows:
(1) The forfeitures will first be applied to restore the Matching
Contribution Accounts of Participants as provided in Section 7.2(B); and
(2) Any remaining forfeitures will be applied toward the Matching
Contribution obligation of the Participating Employer with whom the
Participant whose Matching Contribution Account was forfeited was last
employed for the Plan Year or, if necessary, the following Plan Year.
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<PAGE>
ARTICLE VIII
DISTRIBUTIONS AFTER TERMINATION
8.1 TIME AND FORM OF DISTRIBUTION. (A) Following a Participant's
termination of employment or earlier attainment of age 70-1/2, the Trustee will
distribute to the Participant or, if the Participant has died, to his or her
Beneficiary, the vested balance of the Participant's Accounts. The amount of
any distribution made in the form of a lump sum payment will be equal to the
balance of the Participant's Accounts as of the Valuation Date that coincides
with or last precedes the distribution date increased by the amount of any
contributions added to the Participant's Accounts and decreased by the amount of
any withdrawals, and distribution since such Valuation Date through the date of
the distribution. A lump sum distribution may be made in two payments, the
first in an amount equal to the vested balance of the Participant's Accounts as
of the Valuation Date that last precedes the distribution date and the second in
an amount equal to the vested portion of the Accounts attributable to the period
after such Valuation Date through the date of the first distribution. The two
payments will be considered a single distribution for the purpose of applying
clause (1). Subject to the remaining subsections of this Section 8.1 and
Section 8.7, distributions will be made in accordance with the following
provisions-
(1) If the aggregate vested balance of the Participant's Accounts
at the time of the distribution is not more than $3500, distribution to
the Participant will be made in the form of a lump sum payment as soon as
administratively practicable after the Participant's termination of
employment. This clause will not apply, however, if the aggregate vested
balance of the Participant's Accounts exceeded $3500 at the time of any
previous distribution to the Participant.
(2) If clause (1) does not apply, distribution to the Participant
will be made in the form of a lump sum payment or installment payments, as
elected by the Participant in accordance with the provisions of this
section and Plan Rules, on such date or dates as the Participant specifies
following his or her termination of employment; provided, however, that if
the Participant has not, prior to the deadline for making a deferral
election under Subsection (B), either (a) made an election to receive a
lump sum payment or installment payments pursuant to this clause (2) or a
deferral election pursuant to Subsection (B) or (b) begun receiving
installment payments under Subsection (C)(2), then distribution will be
made in the form of a lump sum payment not later than the sixtieth day
after the close of the Plan Year during which there occurs the later of
the Participant's termination of employment or sixty-fifth birthday.
(3) If the aggregate vested balance of a Participant's Accounts at
the time of his or her death is not more than $3500 (whether or not
distribution to the Participant had begun prior to his or her death),
distribution to the Participant's Beneficiary will be made, in a lump sum
payment, as soon as administratively practicable after the Administrator's
receipt of notice of the Participant's death. If the foregoing sentence
does not apply, distribution to the Participant's Beneficiary will be made
at such time or times and in such manner as the Beneficiary elects in
accordance with Subsection (E).
(4) Distributions will be made in the form of a check drawn on the
Trust; provided, that at the election of a Participant or Beneficiary of a
deceased Participant, distribution of the vested portion of a Matching
Contribution Account balance invested in
20
<PAGE>
Company Stock may be distributed in the form of full shares of Company
Stock and cash in lieu of any fractional share.
(B) Subject to the provisions of the other subsections of this section,
a Participant described in Subsection (A)(2) may elect to defer commencement of
his or her distribution under the Plan by providing the Administrator a written,
signed statement indicating whether the benefit will be paid in the form of a
lump sum or installment payments and specifying the date on which the payment is
to be made or commence, provided such date may not be later than April 1 of the
calendar year following the calendar year in which the Participant attains age
70-1/2. Such deferral election must be provided not later than the thirtieth day
(or such later date as Plan Rules may allow) after the close of the Plan Year
during which there occurs the later of the Participant's termination of
employment or sixty-fifth birthday. Plan Rules may permit a Participant to
modify any such election in any manner determined by the Committee to be
consistent with Code section 401(a)(14) and Treasury Regulations thereunder and
the other provisions of this section.
(C) Notwithstanding any other provision of this section, if a
Participant remains employed following the calendar year in which he or she
attains age 70-1/2, distribution will be made or commence on April 1 of the
calendar year following the calendar year in which the Participant attains age
70-1/2,
(1) for a Participant described in Subsection (A)(1), in the form
of a lump sum, and amounts subsequently credited to the Accounts of such
Participant will be distributed not later than the last day of the Plan
Year following the Plan Year with respect to which such amounts are
credited, except that, any balance in the Participant's Accounts as of the
last day of the Plan Year during which the Participant terminated
employment will be distributed within 60 days after the end of such Plan
Year, and
(2) for a Participant described in Subsection (A)(2) who has not
previously elected (in accordance with Plan Rules) to receive a lump sum
payment or installment payments, in the form of annual installment
payments over the Participant's life expectancy or if applicable, the life
expectancy of the Participant and his or her Beneficiary or Beneficiaries
in accordance with the provisions of Code section 401(a)(9) and applicable
Treasury Regulations, and any amount remaining in the Participant's
Accounts on the date on which he or she terminates employment will be
distributed to the Participant or, if the Participant has died, to his or
her Beneficiary, in accordance with the other provisions of this section.
(D) If a distribution is to be made in installments, such installments
will be substantially equal in amount and paid on a monthly, quarterly or annual
basis, for a period not extending beyond either the Participant's life
expectancy or the life expectancy of the Participant and the Participant's
Beneficiary; and, if the Participant's Beneficiary is not the Participant's
spouse, the period over which such payments are to be made will be determined by
reference to the applicable table of joint life expectancies set forth in
Treasury Regulation section 1.401(a)(9)-2. Prior to April 1 of the calendar
year following the calendar year during which the Participant attains age
70-1/2, the Participant may elect, in writing to the Administrator, whether the
life expectancies for the Participant and the Participant's spouse are to be
recalculated on an annual basis for purposes of determining the amount of each
installment payment hereunder. Any such election will become irrevocable as of
the date specified above. If no such election is made, the life expectancies of
the Participant and the Participant's spouse will be recalculated on an annual
basis.
21
<PAGE>
(E) If a Participant dies before receiving the full amount to which he
or she is entitled, the amount remaining will be distributed to the
Participant's Beneficiary at such time or times and in such manner as the
Beneficiary elects, subject, however to the following rules -
(1) If the Participant dies after April 1 of the calendar year
following the calendar year during which he or she attains age 70-1/2, the
distribution will be made to the Beneficiary at a rate that would result
in the benefit being distributed at least as rapidly as if distribution
were made at the same rate as was in effect immediately prior to the
Participant's death.
(2) If the Participant dies before April 1 of the calendar year
following the calendar year during which he or she attains age 70-1/2, the
distribution will, at the Beneficiary's election, be made either -
(a) in the form of a lump sum payment no later than December
31 of the calendar year which contains the fifth anniversary of the
date of the Participant's death, or
(b) in installments, commencing no later than December 31 of
the calendar year immediately following the calendar year in which
the Participant died (unless the Beneficiary is the Participant's
spouse, in which case payments will begin no later than the later of
the date specified above or December 31 of the calendar year in
which the Participant would have attained age 70-1/2 had he or she
lived), and being paid over a period not exceeding the Beneficiary's
remaining life expectancy (as determined on the basis of the
Beneficiary's age as of the date on which payments are required to
commence under this clause (2) and, if the Beneficiary is the
Participant's spouse, as redetermined on an annual basis).
A Beneficiary's election with respect to whether clause (2) (a) or (b) above
will apply to distributions of any amount remaining at the Participant's death
must be made no later than the earlier of the dates set forth in clause 2(a) and
(b), and is irrevocable following such date. If the Beneficiary fails to make an
election under clause (2), distribution will be made in the manner set forth at
clause (2) (a). If the Participant's spouse is the Beneficiary and dies after
the Participant's death but before distributions to such spouse have commenced,
the foregoing rules will be applied as if the surviving spouse were the
Participant, including the substitution of the surviving spouse's date of death
for the Participant's date of death; provided that the alternative commencement
date in clause (2)(b) relating to the date on which the Participant would have
attained age 70-1/2 had he or she lived will not be available.
(F) Notwithstanding any other provision of the Plan to the contrary,
distributions will be made in accordance with Treasury Regulations issued under
Code section 401(a)(9), including Treasury Regulation section 1.401(a)(9)-2, and
any provisions of the Plan reflecting Code section 401(a)(9) take precedence
over any distribution options that are inconsistent with Code section 401(a)(9).
8.2 BENEFICIARY DESIGNATION. (A) (1) Each Participant may designate, on
a form provided by the Administrator, one or more persons to be primary
Beneficiaries or alternative Beneficiaries for all or a specified fractional
part of his or her aggregate Accounts and may change or revoke any such
designation from time to time. No such designation, change or revocation will
be effective
22
<PAGE>
unless executed by the Participant and received by the Administrator during the
Participant's lifetime. Except as provided in Subsection (B), no such change or
revocation will require the consent of any person.
(2) If a Participant
(a) fails to designate a Beneficiary, or
(b) revokes a Beneficiary designation without naming another
Beneficiary, or
(c) designates as Beneficiaries one or more persons none of
whom survives the Participant,
for all or any portion of the Participant's Accounts, such Accounts or
portion will be distributed to the first class of the following classes of
automatic Beneficiaries that includes a member surviving the Participant:
Participant's spouse;
Participant's issue, per stirpes and not per capita;
Participant's parents;
Participant's brothers and sisters;
Representative of Participant's estate.
(3) When used in this section and, unless the designation
otherwise specifies, when used in a Beneficiary designation: the term
"per stirpes" means in equal shares among living children and the issue
(taken collectively) of each deceased child, with such issue taking by
right of representation; "children" means issue of the first generation;
and "issue" means all persons who are descended from the person referred
to, either by legitimate birth or legal adoption. The automatic
Beneficiaries specified above and, unless the designation otherwise
specifies, the Beneficiaries designated by the Participant, will become
fixed as of the Participant's death so that, if a Beneficiary survives the
Participant but dies before the receipt of all payments due such
Beneficiary, any remaining payments will be made to the representative of
such Beneficiary's estate. Any designation of a Beneficiary by name that
is accompanied by a description of relationship or only by statement of
relationship to the Participant will be effective only to designate the
person or persons standing in such relationship to the Participant at the
Participant's death.
(B) Notwithstanding Subsection (A), no designation of a Beneficiary
other than the Participant's spouse will be effective unless such spouse
consents to the designation. Any such consent will be effective only with
respect to the Beneficiary or class of Beneficiaries so designated and only with
respect to the spouse who so consented.
8.3 ASSIGNMENT, ALIENATION OF BENEFITS. (A) Except as required under a
qualified domestic relations order or by the terms of any loan from the Trust,
no benefit under the Plan may in any manner be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered or charged, and any attempt to do so
will be void. No benefit under the Plan may in any manner be liable for, or
subject to, the debts, contracts, liabilities, engagements or torts of the
person entitled to such benefit.
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<PAGE>
(B) To the extent provided in a qualified domestic relations order,
distribution of benefits assigned to an alternate payee by such order may be
distributed to the alternate payee prior to the Participant's earliest
retirement age in the form of a lump sum payment. The terms "qualified domestic
relations order," "alternate payee" and "earliest retirement age" have the
meanings given in Code section 414(p).
8.4 PAYMENT IN EVENT OF INCAPACITY. If any person entitled to receive any
payment under the Plan is physically, mentally or legally incapable of receiving
or acknowledging receipt of the payment, and no legal representative has been
appointed for such person, the Administrator in his or her discretion may (but
is not required to) cause any sum otherwise payable to such person to be paid to
any one or more as may be chosen by the Administrator from the following: the
Beneficiaries, if any, designated by such person, the institution maintaining
such person, a custodian for such person under the Uniform Transfers to Minors
Act of any state or such person's spouse, children, parents or other relatives
by blood or marriage. Any such payment completely discharges all liability
under the Plan to the extent of the payment.
8.5 PAYMENT SATISFIES CLAIMS. Any payment to or for the benefit of any
Participant, legal representative or Beneficiary in accordance with the
provisions of the Plan will, to the extent of such payment, be in full
satisfaction of all claims against the Trustee, the Administrator and all
Affiliated Organizations, any of whom may require the payee to execute a
receipted release as a condition precedent to such payment.
8.6 DISPOSITION IF DISTRIBUTEE CANNOT BE LOCATED. If the Administrator is
unable to locate a Participant or Beneficiary to whom a distribution is due, the
Participant's Accounts will continue to be held in the Fund until such time as
the Administrator has located the Participant or Beneficiary or the Participant
or Beneficiary makes a proper claim for the benefit, as the case may be;
provided, that, any Accounts not claimed within the period prescribed by
applicable escheat laws will be paid to such governmental authorities, in such
manner, as is specified in such laws.
8.7 DIRECT ROLLOVERS AND TRANSFERS. (A) To the extent a distribution
after December 31, 1992, is an "eligible rollover distribution," within the
meaning of Code section 402(c)(4), the Administrator will, if so instructed by
the distributee in accordance with Plan Rules, direct the Trustee to make the
distribution to an "eligible retirement plan," within the meaning of Code
section 402(c)(8). The foregoing provision will not apply (1) if the aggregate
taxable distributions to be made to the distributee during the calendar year are
less than $200, or (2) if less than the entire taxable amount of the
distribution is to be distributed to the eligible retirement plan, and the
amount to be distributed to the eligible retirement plan is less than $500.
(B) The Administrator may, in conjunction with the sale of all or a
portion of a business operation of an Affiliated Organization, direct the
Trustee to transfer the balance of any or all of the Accounts of a Participant
who is employed with the purchaser of such business operation or an affiliate
thereof, to the trustee of a plan sponsored by such purchaser or affiliate,
provided
(1) the other plan is qualified under Code section 401(a),
(2) the other plan satisfies the withdrawal requirements set forth
in Code section 401(k) with respect to the transferred Accounts to which
such requirements are applicable, and
(3) the trustee is willing to accept such transfer.
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ARTICLE IX
CONTRIBUTION LIMITATIONS
9.1 PRE-TAX CONTRIBUTION DOLLAR LIMITATION. The aggregate amount of
Pre-Tax Contributions and other "elective deferrals" (within the meaning of the
Code section 402(g)(3)) under any other qualified plan maintained by any
Affiliated Organization with respect to a Participant for any taxable year of
the Participant may not exceed $7000 (automatically adjusted for increases in
the cost of living in accordance with Treasury Regulations). The limitation for
any Participant who received a hardship distribution under Section 6.1 will, for
the year following the year in which such distribution was made, be reduced as
provided in Section 6.1(C)(4). If the foregoing limitation is exceeded for any
taxable year of the Participant, the Participant will be deemed to have notified
the Administrator of such excess and the amount of Pre-Tax Contributions in
excess of the limitation, increased by Fund earnings or decreased by Fund losses
attributable to the excess determined in accordance with Section 9.5, will be
distributed to the Participant. Such distribution may be made at any time after
the excess contributions are received, but not later than April 15 of the
taxable year following the taxable year to which such limitation relates. The
amount distributed to a Participant who has made elective deferrals for the
taxable year other than pursuant to Section 3.1 will, to the extent of such
other elective deferrals, be determined in accordance with written allocation
instructions received by the Administrator from the Participant not later than
March 1 of the taxable year following the taxable year with respect to which the
Pre-Tax Contributions were made.
9.2 ACTUAL DEFERRAL PERCENTAGE LIMITATIONS. (A) Notwithstanding Section
3.1, for any Plan Year, Pre-Tax Contributions may be made on behalf of Active
Participants who are Highly Compensated Employees only if the requirements of
Code section 401(k)(3), as set forth in Subsection (B) are satisfied. To the
extent deemed necessary by the Administrator in order to comply with such
requirements, the Administrator may, in accordance with Plan Rules,
prospectively decrease the rate at which a Participant's Compensation will be
reduced.
(B) (1) The requirements of Code section 401(k)(3) will be satisfied
for any Plan Year if, for that Plan Year, the Plan satisfies the requirements of
Code section 410(b)(1) with respect to "eligible employees" and either of the
following tests.
(a) The "actual deferral percentage" for eligible employees
who are Highly Compensated Employees is not more than the product of
the actual deferral percentage for all other eligible employees,
multiplied by one and one-quarter.
(b) The excess of the actual deferral percentage for
eligible employees who are Highly Compensated Employees over the
actual deferral percentage for all other eligible employees is not
more than two percentage points and the actual deferral percentage
for eligible employees who are Highly Compensated Employees is not
more than the product of the actual deferral percentage of all other
eligible employees, multiplied by two.
(2) For purposes of this section,
(a) "eligible employee" means an Active Participant who is
eligible to have Pre-Tax Contributions made on his or her behalf for
the Plan Year in question or would be so eligible but for a
suspension imposed under Section 6.1(C)(3); and
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(b) "actual deferral percentage," with respect to either of
the two groups of eligible employees referenced above, is the
average of the ratios, calculated separately for each eligible
employee in the particular group, of the amount of Pre-Tax
Contributions made on behalf of the eligible employee for the Plan
Year, to the eligible employee's Testing Wages for the Plan Year, or
the portion of the Plan Year during which he or she was an eligible
employee, as specified in Plan Rules. In computing the actual
deferral percentage, the following rules apply.
(i) If aggregation of Pre-Tax Contributions and
Testing Wages is required under Sections 12.21(C) and
12.39(C), the actual deferral percentage of the Highly
Compensated Employee to whom the aggregate amounts are
attributed is the actual deferral percentage determined for
the group of all eligible family members, treating such group
as a single eligible employee.
(ii) If any eligible employee is required to be
aggregated with more than one family group under Section
12.21(C), all the groups with which such eligible employee is
aggregated will be treated as a single family group.
(iii) Any Pre-Tax Contributions made on behalf of an
eligible employee who is not a Highly Compensated Employee
that are in excess of the limitation of Section 9.1 will be
excluded.
(iv) Any Pre-Tax Contributions that are distributed to
the eligible employee pursuant to Section 9.6(C) will be
excluded.
(v) Except as otherwise provided in Treasury
Regulations, Pre-Tax Contributions taken into account in
determining the actual contribution percentage under Section
9.3(B)(2) will be excluded.
(vi) To the extent determined by the Administrator, all
or any portion of the Matching Contribution for the Plan Year
credited to a subaccount in accordance with Section 3.5 or
Subsection (D) will be included.
(vii) Elective contributions under any other plan that
is aggregated with this Plan to satisfy the requirements of
Code section 410(b) will be included.
(viii) To the extent required by Treasury Regulations,
elective contributions made under any other cash or deferred
arrangement of any Affiliated Organization on behalf of any
eligible employee who is a Highly Compensated Employee will be
included.
(C) If, for any Plan Year, the requirements of Subsection (B) are not
satisfied, the Administrator will determine the amount by which Pre-Tax
Contributions made on behalf of each eligible employee who is a Highly
Compensated Employee for the Plan Year exceeds the permissible amount as
determined under Subsection (B). The determination will be made by successively
decreasing the rate of Compensation reductions for Highly Compensated Employees
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who, during the Plan Year, had the greatest percentage of Compensation
reductions made on their behalf, to the next lower percentage, then again
decreasing the percentage of such Highly Compensated Employees' Compensation
reductions, together with the percentage of Compensation reductions of such
Highly Compensated Employees who were already at such lower percentage, to the
next lower percentage, and continuing such procedure for as many percentage
decreases as the Administrator deems necessary. The Administrator may, in his
or her discretion, make such reductions in any amount, in lieu of one percent
increments.
(D) At such time as the Administrator specifies following the last day
of the Plan Year for which the determination described in Subsection (C) is
made, but in no case later than the last day of the following Plan Year, the
excess determined pursuant to Subsection (C) will be corrected by taking any one
or more of the following steps.
(1) The amount of excess Pre-Tax Contributions so determined,
increased by Fund earnings or decreased by Fund losses attributable to
such excess as determined under Section 9.5, will be returned to each such
Highly Compensated Employee. The amount to be returned pursuant to the
foregoing sentence with respect to any Plan Year will be reduced by the
portion of the amount, if any, distributed pursuant to Section 9.1 that is
attributable to Pre-Tax Contributions that relate to such Plan Year,
determined by assuming that Pre-Tax Contributions in excess of the
limitation described in Section 9.1 for a given taxable year are the first
contributions made for a Plan Year falling within such taxable year.
(2) All or any portion of the Matching Contribution for the Plan
Year will be transferred to a subaccount of the type described in Section
3.5 for any similarly situated group of eligible employees.
(3) The Participating Employer will make an additional
contribution for the Plan Year pursuant to Section 3.5.
(E) Any excess amount determined under Subsection (C) for a Highly
Compensated Employee whose actual deferral percentage is determined under
Subsection (B)(2)(b)(i) will be allocated among all persons whose contributions
are aggregated to determine such percentage in proportion to the amount of
Pre-Tax Contributions made on behalf of each with respect to the Plan Year.
(F) To the extent required or permitted by Treasury Regulations, the
Administrator will or may, as the case may be, apply the limitations described
in this section separately to each group of eligible employees who are included
in a unit of employees covered by a collective bargaining agreement and those
who are not included or are included in a different unit.
9.3 ACTUAL CONTRIBUTION PERCENTAGE LIMITATIONS. (A) Notwithstanding
Section 3.2, for any Plan Year, Matching Contributions may be made on behalf of
and After-Tax Contributions may be made by Active Participants who are Highly
Compensated Employees with respect to that Plan Year only to the extent that
either of the following tests is satisfied.
(1) The "actual contribution percentage" for "eligible employees"
who are Highly Compensated Employees is not more than the product of the
actual contribution percentage for all other eligible employees,
multiplied by one and one-quarter.
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(2) The excess of the actual contribution percentage for eligible
employees who are Highly Compensated Employees over the actual
contribution percentage for all other eligible employees is not more than
two percentage points and the actual contribution percentage for Highly
Compensated Employees is not more than the product of the actual
contribution percentage for all other eligible employees, multiplied by
two.
(B) For purposes of this section,
(1) "eligible employee" means an Active Participant who is
eligible to make After-Tax Contributions (or would be eligible but for a
suspension imposed under Section 6.1(C)(3)) or to have Matching
Contributions made on his or her behalf for the Plan Year in question (or
would be eligible if he or she had elected to make Pre-Tax Contributions
for such Plan Year), and
(2) the "actual contribution percentage" with respect to either of
the two groups of eligible employees referenced above, is the average of
the ratios, calculated separately for each eligible employee in the
particular group, of the aggregate amount of Matching Contributions made
on behalf of the eligible employee for the Plan Year, and After-Tax
Contributions made by the eligible employee for the Plan Year, to the
eligible employee's Testing Wages for the Plan Year, or the portion of the
Plan Year during which he or she was an eligible employee, as specified in
Plan Rules. In computing the "actual contribution percentage" the
following rules apply.
(a) If aggregation of Matching Contributions and Testing
Wages is required under Sections 12.21(C) and 12.39(C), the actual
contribution percentage of the Highly Compensated Employee to whom
the aggregate amounts are attributed is the actual contribution
percentage determined for the group of all eligible family members,
treating such group as a single eligible employee.
(b) If any eligible employee is required to be aggregated
with more than one family group under Section 12.21(C), all the
groups with which such eligible employee is aggregated will be
treated as a single family group.
(c) Except as otherwise provided in Treasury Regulations,
Matching Contributions taken into account in determining the actual
deferral percentage under Section 9.2(B)(2)(b) will be excluded.
(d) Matching Contributions taken into account for purposes
of the minimum contribution required by Section 14.3(A) will be
excluded.
(e) Any Matching Contributions forfeited pursuant to Section
9.6(C) will be excluded.
(f) To the extent determined by the Administrator, all or
any portion of the Pre-Tax Contributions for the Plan Year on behalf
of eligible employees will be included.
(g) Matching contributions (within the meaning of Code
section 401(m)(4)(A)) and after-tax contributions made under any
other plan that is
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aggregated with this Plan to satisfy the requirements of Code
section 410(b) will be included.
(h) To the extent required by Treasury Regulations, matching
contributions (within the meaning of Code section 401(m)(4)(A)) and
after-tax contributions made under any other qualified plan of any
Affiliated Organization on behalf of or by any eligible employee who
is a Highly Compensated Employee will be included.
(C) If, for any Plan Year, the requirements of Subsection (A) are not
satisfied, the Administrator will determine the amount by which After-Tax
Contributions made by each Highly Compensated Employee for the Plan Year and, if
necessary, Matching Contributions made on behalf of each Highly Compensated
Employee for the Plan Year exceed the permissible amount as determined under
Subsection (A), such determination being made in accordance with the procedure
described in Section 9.2(C) with respect to reductions of Compensation.
(D) At such time as the Administrator specifies on or following the last
day of the Plan Year for which the determination described in Subsection (C) is
made, but in no case later than the last day of the following Plan Year, the
excess determined pursuant to Subsection (C) will be corrected by taking either
or both of the following steps.
(1) The amount of excess After-Tax Contributions and Matching
Contributions so determined with respect to each Highly Compensated
Employee, increased by Fund earnings or decreased by Fund losses
attributable to such excess as determined under Section 9.5, will be
distributed to such Highly Compensated Employee; provided however, that to
the extent the excess Matching Contributions would not be fully vested if
retained in the Plan, such excess will be forfeited rather than
distributed, and any such forfeitures will be applied as provided in
Section 3.2(C).
(2) The Participating Employer will make an additional Matching
Contribution for the Plan Year pursuant to Section 3.5.
(E) Any excess amount determined under Subsection (C) for a Highly
Compensated Employee whose actual contribution percentage is determined under
Subsection (B)(2)(a) will be allocated among all persons whose contributions are
aggregated to determine such percentage in proportion to the amount of After-Tax
Contributions and Matching Contributions made on behalf of each with respect to
the Plan Year.
(F) To the extent provided in Treasury Regulations, the limitations
described in this section do not apply to any group of eligible employees who
are included in a unit of Employees covered by a collective bargaining
agreement.
9.4 MULTIPLE USE LIMITATION. (A) This section applies for any Plan Year
for which the sum of the actual deferral percentage, as determined under Section
9.2(B)(2)(b), for eligible employees who are Highly Compensated Employees plus
the actual contribution percentage, as determined under Section 9.3(B)(2), for
eligible employees who are Highly Compensated Employees, exceeds the "aggregate
limit." For purposes of this subsection, the aggregate limit is the greater of:
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(1) The sum of:
(a) the product of one and one-quarter, multiplied by the
greater of:
(i) the actual deferral percentage, as determined
under Section 9.2(B)(2)(b), for the Plan Year for eligible
employees who are not Highly Compensated Employees, or
(ii) the actual contribution percentage, as determined
under Section 9.3(B)(2), for the Plan Year for eligible
employees who are not Highly Compensated Employees;
plus
(b) the sum of two percentage points plus the lesser of the
actual deferral percentage determined under item (i) of clause (a)
above or the actual contribution percentage determined under item
(ii) of clause (a) above, with such sum in no case exceeding twice
the lesser of such actual deferral percentage or actual contribution
percentage;
or
(2) The sum of:
(a) the product of one and one-quarter, multiplied by the
lesser of:
(i) the actual deferral percentage, as determined
under Section 9.2(B)(2)(b), for the Plan Year for eligible
employees who are not Highly Compensated Employees, or
(ii) the actual contribution percentage, as determined
under Section 9.3(B)(2), for the Plan Year for eligible
employees who are not Highly Compensated Employees;
plus
(b) the sum of two percentage points plus the greater of the
actual deferral percentage determined under item (i) of clause (a)
above or the actual contribution percentage determined under item
(ii) of clause (a) above, with such sum in no case exceeding twice
the lesser of such actual deferral percentage or actual contribution
percentage.
(B) If, for any Plan Year, the calculations under Subsection (A) require
that this section be applied, the Administrator will determine the amount by
which After-Tax Contributions made by, and Matching Contributions made on behalf
of each Highly Compensated Employee for the Plan Year causes the excess amount
determined under Subsection (A), such determination being made in accordance
with the provisions of Section 9.3(C). At such time as the Administrator
specifies on or following the last day of the Plan Year for which such
determination is made, but
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in no case later than the last day of the following Plan Year, the excess will
be corrected by taking any one or more of the steps described in Sections 9.2(D)
and 9.3(D).
(C) To the extent provided in Treasury Regulations, the limitations
described in this section do not apply to any group of eligible employees who
are included in a unit of employees covered by a collective bargaining
agreement.
9.5 EARNINGS ON EXCESS CONTRIBUTIONS. The amount of Fund earnings or
losses with respect to the excess amount of contributions returned to a Highly
Compensated Employee pursuant to the foregoing provisions of this article is an
amount equal to the product of the total earnings or losses for the
Participant's Account to which the excess contributions were credited for the
Plan Year, multiplied by a fraction, the numerator of which is the excess amount
of contributions made on the Participant's behalf to such Account for the Plan
Year, and the denominator of which is the closing balance of such Account for
the Plan Year, decreased by the amount of earnings credited to that Account, or
increased by the amount of losses debited to that Account, for the Plan Year.
9.6 AGGREGATE DEFINED CONTRIBUTION LIMITATIONS. (A) Notwithstanding any
contrary provisions of this Plan, there will not be allocated to any
Participant's Accounts for a Plan Year any amount that would cause the aggregate
"annual additions," with respect to the Participant for the Plan Year to exceed
the lesser of:
(1) $30,000 (or, if greater, one-fourth of the dollar limitation
in effect under Code section 415(b)(1)(A) for the calendar year during
which the Plan Year in question begins); and
(2) 25 percent of the Participant's Section 415 Wages for the Plan
Year.
(B) For purposes of Subsection (A), the "annual additions" with respect
to a Participant for a Plan Year are the sum of -
(1) the aggregate amount of Pre-Tax Contributions, Matching
Contributions and After-Tax Contributions allocated to the Participant's
Accounts under the Plan for the Plan Year (including any Pre-Tax
Contributions, Matching Contributions and After-Tax Contributions that are
distributed or forfeited pursuant to Section 9.2, 9.3 or 9.4 but excluding
any Pre-Tax Contributions in excess of the limitation of Section 9.1 that
are distributed to the Participant by the April 15 following the Plan Year
to which such contributions relate) and employer contributions, employee
contributions and forfeitures allocated to the Participant's accounts
under any other qualified defined contribution plan maintained by any
Affiliated Organization for the Plan Year; plus
(2) the amount, if any, attributable to post-retirement medical
benefits that is allocated to a separate account for the Participant as a
"key employee" (as defined in Section 14.3(C)), to the extent required
under Code section 419A(d)(1).
(C) (1) If the Administrator, in his or her discretion, determines that
the limitation under Subsection (A) may otherwise be exceeded for a Plan
Year, to the extent necessary to prevent such excess from occurring, the
amount of a Participant's After-Tax Contributions and Pre-Tax
Contributions will be prospectively reduced.
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(2) If a further reduction of contributions is required, the
amount of the supplemental Matching Contribution that would otherwise be
allocated to the Participant's Matching Contribution Account pursuant to
Section 3.2(A)(2) will be reduced and the aggregate amount of the
supplemental Matching Contribution for the Plan Year will be reduced by
the same amount.
(3) If, in spite of such reductions and as a result of reasonable
error in estimating the amount of the Participant's Compensation,
After-Tax Contributions, other elective deferrals within the meaning of
Code section 402(g)(3) or Section 415 Wages for the Plan Year, the
limitation would otherwise by exceeded, then, to the extent required to
prevent such excess,
(a) the amount of After-Tax Contributions made by the
Participant for the Plan Year, together with earnings on such
contributions, will be returned to the Participant, then
(b) the amount of Pre-Tax Contributions made on behalf of
the Participant for the Plan Year, together with earnings on such
contributions, will be distributed to the Participant and any
Matching Contributions attributable to the amount so distributed,
together with earnings on such contributions, will be forfeited and
applied as provided in Section 3.2(C).
9.7 AGGREGATE DEFINED CONTRIBUTION/DEFINED BENEFIT LIMITATIONS. (A) In no
event will the amount of a Participant's annual additions under the Plan exceed
an amount that would cause the decimal equivalent of the sum of the "defined
benefit fraction" plus the "defined contribution fraction" to exceed one.
(B) The "defined benefit fraction" is a fraction, the numerator of which
is the Participant's aggregate projected annual benefit under all qualified
defined benefit pension plans maintained by any Affiliated Organization
(determined as of the end of the Plan Year), and the denominator of which is the
lesser of:
(1) 125 percent of the maximum dollar benefit limitation in effect
under Code section 415(b)(1)(A) for the calendar year during which the
Plan Year in question begins; and
(2) 140 percent of the average Section 415 Wages of the Participant
during the three consecutive Plan Years during which he or she was a
Participant in any such defined benefit pension plan that produce the
highest average.
(C) The "defined contribution fraction" is a fraction, the numerator of
which is the sum of the annual additions with respect to the Participant for the
Plan Year under this Plan and any other qualified defined contribution plans
maintained by an Affiliated Organization, determined in the manner described in
Section 9.6, and the denominator of which is the aggregate of the lesser of:
(1) 125 percent of the maximum annual addition dollar limit in
effect under Code section 415(c)(1)(A) for the calendar year during which
the Plan Year in question begins; and
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(2) 140 percent of 25 percent of the Participant's Section 415
Wages for the Plan Year,
applied for all years during which the Participant was an Employee, without
regard to whether there was a qualified defined contribution plan in effect
during all such years.
(D) If the annual additions that would otherwise be made with respect to
a Participant for a Plan Year would cause the limitation of Subsection (A) to be
exceeded, the Participant's benefit under one or more qualified defined benefit
pension plans maintained by an Affiliated Organization will, to the extent
provided in such plans, be reduced to the extent necessary to prevent such
excess from occurring, and, if a sufficient reduction cannot be made under such
plans, the provisions of Section 9.6(C) will be applied to reduce the amount of
the annual additions to the Participant's Accounts under this Plan for such Plan
Year to the extent necessary to prevent such excess.
9.8 ADMINISTRATOR'S DISCRETION. Notwithstanding the foregoing provisions
of this article, the Administrator may, in his or her discretion, apply the
provisions of Sections 9.1 through 9.7 in any manner permitted by Treasury
Regulations that will cause the Plan to satisfy the limitations of the Code
incorporated in such sections, and the Administrator's good faith application of
Treasury Regulations will be binding on all Participants and Beneficiaries.
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ARTICLE X
SERVICE RULES
10.1 COMPUTATION PERIOD. The "Computation Period" is -
(a) for the purpose of determining whether an Employee has
satisfied the eligibility service requirement described in Section
2.1(A)(3), the 12-month period commencing with the date on which he or she
first completes an Hour of Actual Service and, thereafter, Plan Years,
commencing with the Plan Year that includes the first anniversary of such
date; and
(b) for the purpose of determining the extent of an Employee's
Vesting Service, Plan Years.
If an Employee who terminates employment before satisfying the eligibility
service requirement described in Section 2.1(A)(3) again becomes an Employee
after the end of the Computation Period of the type specified in clause (a)
during which he or she terminated employment, his or her previous service will
be disregarded in determining his or her new Computation Period pursuant to
clause (a).
10.2 VESTING SERVICE. (A) The term "Vesting Service" with respect to an
Employee means the sum of:
(1) for service prior to January 1, 1976, the Employee's
continuous period of employment from his or her most recent hire date by
an Affiliated Organization to January 1, 1976; plus
(2) for service on and after January 1, 1976, the aggregate number
of Computation Periods commencing on and after such date, during each of
which the Employee completes at least 1000 Hours of Service.
(B) In addition, for each Employee who was employed with Electronics
Stamping Corporation on September 1, 1981, Vesting Service will also include the
sum of:
(1) for service prior to 1981, the number of years under clauses
(1) and (2) of Subsection (A), while he or she was employed with
Electronics Stamping Corporation; plus
(2) for 1981, one year (but no more) if he or she either -
(a) completed at least 1000 hours of service with
Electronics Stamping Corporation during the period commencing on
November 1, 1980 and ending on October 31, 1981, or
(b) completed at least 1000 hours of service in the
aggregate with Electronics Stamping Corporation and/or any
Affiliated Organization, during 1981.
10.3 HOUR OF SERVICE. (A) Subject to the remaining subsections of this
section, the term "Hour of Service," with respect to an Employee, includes and
is limited to -
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(1) each "Hour of Actual Service," which is an hour for which the
Employee is paid, or entitled to payment, for the performance of duties
for an Affiliated Organization;
(2) each hour for which the Employee is paid, or entitled to
payment, by an Affiliated Organization on account of a period of time
during which no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation, holiday, illness
(including disability), layoff, jury duty, military duty or leave of
absence;
(3) each hour for which the Employee is not paid or entitled to
payment but which is required by federal law to be credited to the
Employee; and
(4) each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by an Affiliated Organization;
provided, first, that Hours of Service taken into account under clause (1)
or (2) will not also be taken into account under this clause (4); and
second, that Hours of Service taken into account under this clause (4)
that relate to periods specified in clause (2) will be subject to the
rules under Subsection (B).
(B) The following rules will apply for purposes of determining the Hours
of Service completed by an Employee under Subsection (A)(2):
(1) No more than 501 hours will be credited to the Employee on
account of any single continuous period during which the Employee performs
no duties (whether or not such period occurs in a single Computation
Period).
(2) No more than the number of hours regularly scheduled for the
performance of duties for the period during which no duties are performed
will be credited to the Employee for such period.
(3) The Employee will not be credited with hours for which
payments are made or due under a plan maintained solely for the purpose of
complying with workers' compensation, unemployment compensation or
disability insurance laws, or for which payments are made solely to
reimburse medical or medically related expenses.
(4) A payment will be deemed to be made by or due from an
Affiliated Organization, regardless of whether such payment is made by or
due from the Affiliated Organization directly or indirectly through a
trust fund or insurer to which the Affiliated Organization contributes or
pays premiums.
(5) If the payment made or due is calculated on the basis of units
of time, the number of Hours of Service to be credited will be the number
of regularly scheduled working hours included in the units of time on the
basis of which the payment is calculated; provided, that, if such a
payment is made to an Employee described in Subsection (D)(1), the number
of Hours of Service to be credited will be the number of equivalent hours
determined under Subsection (D)(1) that are included in the units of time
on the basis of which the payment is calculated.
(6) If the payment made or due is not calculated on the basis of
units of time, the number of Hours of Service to be credited will be equal
to the amount of the payment,
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divided by the Employee's most recent hourly rate of compensation before
the period during which no duties are performed.
(C) Hours of Service will be credited -
(1) in the case of Hours of Service described in Subsection
(A)(1), to the Computation Period in which the duties are performed;
(2) in the case of Hours of Service described in Subsection
(A)(2), to the Computation Period or Periods in which the period during
which no duties are performed occurs; provided, that, if the payment is
not calculated on the basis of units of time, the Hours of Service will
not be allocated between more than the first two Computation Periods of
such period;
(3) in the case of Hours of Service described in Subsection
(A)(3), to the Computation Period or Periods determined by the
Administrator in accordance with the applicable federal law; and
(4) in the case of Hours of Service described in Subsection
(A)(4), to the Computation Period or Periods to which the award or
agreement for back pay pertains.
(D) For purposes of determining the number of Hours of Service completed
by an Employee during a particular period of time -
(1) an Employee who is not subject to the overtime provisions of
the Fair Labor Standards Act of 1938, as from time to time amended, will
be credited with 45 Hours of Service for each seven consecutive days, or
fraction thereof, during which he or she completes at least one Hour of
Service;
(2) each other Employee will be credited with the number of Hours
of Service that he or she completes during such period.
(E) Notwithstanding the foregoing provisions of this section, an
individual will be credited with the number of Hours of Service he or she
completes, determined in the manner specified in Subsections (A) through (E),
(1) while, although not an Employee, he or she is considered to be
a "leased employee" of an Affiliated Organization or of a "related person"
(within the meaning of Code sections 414(n)(2) and 144(a)(3)),
respectively, and
(2) with any other organization to the extent such Hours of
Service are required to be taken into account pursuant to Treasury
Regulations under Code section 414(o).
10.4 ONE-YEAR BREAK IN SERVICE. An Employee will incur a "One-Year Break in
Service" if the Employee fails to complete more than 500 Hours of Service during
a Computation Period; provided, that, for purposes only of determining whether
an Employee has incurred such a One-Year Break in Service, in addition to Hours
of Service credited under Section 10.4, there will be taken into account the
number of Hours of Service that otherwise would have been credited to the
Employee, or, if the number of such hours of service cannot be determined, eight
hours of
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service for each day on which the Employee would have otherwise performed
services for an Affiliated Organization, during an authorized leave of absence,
while still employed with the Affiliated Organization, due to -
(a) the Employee's pregnancy,
(b) the birth of the Employee's child,
(c) the placement of a child with the Employee in connection with
the adoption of such child by the Employee, or
(d) the Employee's caring for such child for a period beginning
immediately following such birth or placement;
provided, first, that the total number of such additional Hours of Service taken
into account by reason of any such absence will not exceed 501; second, that, if
the Employee would be prevented from incurring a One-Year Break in Service for
the Computation Period in which such absence commenced solely because the
additional Hours of Service are so credited, such Hours of Service will be
credited only to such Computation Period or, if a One-Year Break in Service for
such Computation Period would not be so prevented, such additional Hours of
Service will be credited to the Computation Period following the Computation
Period during which such absence commenced; and third, that, notwithstanding the
foregoing, no such additional Hours of Service will be credited unless the
Employee furnishes to the Administrator, on a timely basis, such information as
the Administrator reasonably requires in order to establish the number of days
during which the Employee was absent for one of the reasons set forth at items
(a) through (d). In addition, an Employee will be credited with Hours of
Service for the purpose of determining whether he or she has incurred a One-Year
Break in Service to the extent required by the Family and Medical Leave Act of
1993.
10.5 PRE-ACQUISITION SERVICE. Service with an Affiliated Organization
prior to the date on which it became an Affiliated Organization (or, with
another entity prior to the acquisition of such entity's business or assets by
an Affiliated Organization) will be taken into account under this Plan only if,
to the extent and for the purposes, provided in any agreement pursuant to which
it became an Affiliated Organization (or such business or assets were acquired)
or as provided by resolution of the Company's Board. If such Hours of Service
are to be taken into account, unless otherwise specifically provided in such
agreement or resolution, such Hours of Service will be determined in accordance
with the provisions of this article. If less than the entire period of
employment with an Affiliated Organization prior to its becoming such (or with
another entity prior to the acquisition of its business or assets) is to be
taken into account, the extent to which such period of employment is to be taken
into account will be specified in an exhibit to the Plan.
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ARTICLE XI
ADOPTION, AMENDMENT AND TERMINATION
11.1 ADOPTION BY AFFILIATED ORGANIZATIONS. An Affiliated Organization may
adopt this Plan and become a Participating Employer with the prior approval of
the Committee by furnishing to the Administrator a certified copy of a
resolution of its Board adopting the Plan. Any adoption of the Plan by an
Affiliated Organization, however, must either be authorized by the Company's
Board in advance or be ratified by such Board prior to the end of the fiscal
year of such Affiliated Organization in which it adopts the Plan.
11.2 AUTHORITY TO AMEND AND PROCEDURE. (A) The Company reserves the right
to amend the Plan at any time, to any extent that it may deem advisable. Each
amendment will be stated in a written instrument, approved in advance or
ratified by the Company's Board and executed in the name of the Company by its
President or a Vice President or its Director of Compensation and Benefits and
attested by the Secretary or Assistant Secretary. On and after the effective
date of the amendment, all interested parties will be bound by the amendment;
provided, first, that no amendment will increase the duties or liabilities of
the Trustee without its written consent; and, second, that no amendment will
have any retroactive effect so as to deprive any Participant, or any Beneficiary
of a deceased Participant, of any benefit already accrued or vested or of any
option with respect to the form of such benefit that is protected by Code
section 411(d)(6), except that any amendment that is required to conform the
Plan with government regulations so as to qualify the Trust for income tax
exemption may be made retroactively to the Effective Date of the Plan or to any
later date.
(B) If the schedule for determining the extent to which benefits under
the Plan are vested is changed, each Participant with at least three years of
Vesting Service may elect to have his or her vested benefits determined without
regard to such change by giving written notice of such election to the
Administrator within the period beginning on the date such change was adopted
(or the Plan's top heavy status changed) and ending 60 days after the latest of
(1) the date such change is adopted, (2) the date such change becomes effective
or (3) the date the Participant is issued notice of such change by the
Administrator or the Trustee. Except as otherwise provided in an amendment
permitted by Treasury Regulations, if an optional form of benefit payment
protected under Code section 411(d)(6) is eliminated, each Participant may elect
to have that portion of the value of his or her Accounts that was accrued as of
the date of such elimination, distributed in the optional form of benefit
payment that was eliminated.
(C) The provisions of the Plan in effect at the termination of a
Participant's employment will, except as specifically provided otherwise by a
subsequent amendment, continue to apply to such Participant.
11.3 AUTHORITY TO TERMINATE AND PROCEDURE. The Company expects to continue
the Plan indefinitely but reserves the right to terminate the Plan in its
entirety at any time. Each Participating Employer expects to continue its
participation in the Plan indefinitely but reserves the right to cease its
participation in the Plan at any time. The Plan will terminate in its entirety
as of the date specified by the Company in a written instrument adopted and
executed in the manner of an amendment. The Plan will terminate with respect to
a particular Participating Employer as of a date specified in a written
instrument approved in advance or ratified by the Participating Employer's Board
and executed in the name of the Participating Employer by two officers.
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11.4 VESTING UPON TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE OF
CONTRIBUTIONS. Upon termination of the Plan or upon the complete
discontinuance of contributions by all Participating Employers, to the extent
required by Code section 411(d)(3) and Treasury Regulations thereunder, the
Accounts of each affected Participant will, to the extent funded, vest in full.
Upon a partial termination of the Plan, the Accounts of each Participant as to
whom the Plan has been partially terminated will, to the extent funded, vest in
full.
11.5 DISTRIBUTION FOLLOWING TERMINATION, PARTIAL TERMINATION OR DISCONTINUANCE
OF CONTRIBUTIONS. After termination or partial termination of the Plan or the
complete discontinuance of contributions under the Plan, the Trustee will
continue to hold and distribute the Fund at the times and in the manner provided
by Article VIII as if such event had not occurred or, if the Administrator so
directs in accordance with Treasury Regulations, will distribute to each
Participant the entire balance of his or her Accounts.
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ARTICLE XII
DEFINITIONS, CONSTRUCTION AND INTERPRETATIONS
The definitions and the rules of construction and interpretations set forth in
this article will be applied in construing this instrument unless the context
otherwise indicates.
12.1 ACCOUNT. An "Account" with respect to a Participant is any or all of
the accounts maintained on his or her behalf pursuant to Section 4.1, as the
context requires.
12.2 ACTIVE PARTICIPANT. An "Active Participant" is a Participant who is a
Qualified Employee.
12.3 ADMINISTRATOR. The "Administrator" of the Plan is the person
performing administrative functions pursuant to Section 13.3.
12.4 AFFILIATED ORGANIZATION. An "Affiliated Organization" is the Company
and:
(a) any corporation that is a member of a controlled group of
corporations (within the meaning of Code section 1563(a) without regard to
Code sections 1563(a)(4) and 1563(e)(3)(C)) that includes the Company;
(b) any trade or business (whether or not incorporated) that is
controlled (within the meaning of Code section 414(c)) by the Company;
(c) any member of an "affiliated service group" (within the
meaning of Code section 414(m)) of which the Company is a member; or
(d) any other organization that, together with the Company, is
treated as a single employer pursuant to Code section 414(o) and Treasury
Regulations;
provided, that, for purposes of applying the limitations set forth at Sections
9.6 and 9.7 of the Plan, Code section 1563(a) will be applied by substituting
the phrase "more than 50 percent" for the phrase "at least 80 percent" wherever
it appears.
12.5 AFTER-TAX CONTRIBUTION ACCOUNT. An "After-Tax Contribution Account" is
an account established pursuant to Section 4.1(c).
12.6 AFTER-TAX CONTRIBUTIONS. "After-Tax Contributions" are contributions
made by Participants pursuant to Section 3.3.
12.7 BOARD. The "Board" is the board of directors of the Affiliated
Organization in question. When the Plan provides for an action to be taken by
the Board, the action may be taken by any committee or individual authorized to
take such action pursuant to a proper delegation by the board of directors in
question.
12.8 BENEFICIARY. A "Beneficiary" is a person designated or otherwise
determined under the provisions of Section 8.2 as the distributee of benefits
payable after the death of a Participant. A person designated as, or otherwise
determined to be, a Beneficiary under the terms of the Plan has no interest in
or rights under the Plan until the Participant in question has died. A
Beneficiary will
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cease to be such on the day on which all benefits to which he or she is entitled
under the Plan have been distributed.
12.9 CODE. The "Code" is the Internal Revenue Code of 1986, as amended.
Any reference to a specific provision of the Code includes a reference to such
provision as it may be amended from time to time and to any successor provision.
12.10 COMMITTEE. The "Committee" is the administrative committee described
in Article XIII.
12.11 COMPANY. The "Company" is BMC Industries, Inc., any successor which
will maintain this Plan and any predecessor that has maintained this Plan.
12.12 COMPANY STOCK. "Company Stock" is common stock of the Company.
12.13 COMPENSATION. (A) The "Compensation" of a Participant from a
Participating Employer for any Plan Year is the sum of all remuneration paid to
the Participant by the Participating Employer for the portion of a Plan Year in
which he or she is an Active Participant that is reportable in the "wages, tips,
other compensation" box of Internal Revenue Form W-2, excluding (to the extent
otherwise included) the amount of any imputed income of the Participant with
respect to such portion of the Plan Year, increased by amounts that are deferred
under Section 3.1 as Pre-Tax Contributions and amounts by which a Participant's
wages or salary from the Participating Employer for such portion of the Plan
Year is reduced under a Code section 125 cafeteria plan.
(B) Notwithstanding Subsection (A), in no event will a Participant's
Compensation for any Plan Year be taken into account to the extent they exceed
$150,000 (or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 401(a)(17) for the calendar year during
which the Plan Year in question begins).
(C) In the case of a Participant who is a Highly Compensated Employee
described in clause (1) of Section 12.21(A), or of a Highly Compensated Employee
described in clause (2) or (3) of Section 12.21(A) whose "includable
compensation" (as defined in Section 12.21(B)(2)) for the Plan Year is not less
than the includable compensation of at least ten other Highly Compensated
Employees, the limitation set forth in Subsection (B) will be applied to the
Participant, the Participant's spouse and the Participant's lineal descendants
who have not attained age 19 prior to the end of the Plan Year in question as if
they were a single Participant. If the deemed single Participant has
Compensation in excess of the limitation in effect for a Plan Year, the
limitation will be prorated among each individual who is deemed to be a single
Participant in proportion to his or her Compensation for the Plan Year (without
regard to Subsection (B) and this subsection).
12.14 DISABLED. A Participant will be considered to be "Disabled" only if
the Administrator determines that, by reason of illness, bodily injury or
disease, he or she is unable to perform any occupation for remuneration or
profit and the disability is likely to be of long and indefinite duration or to
result in death.
12.15 EMPLOYEE. An "Employee" is an individual who performs services for an
Affiliated Organization as a common-law employee of the Affiliated Organization.
12.16 EMPLOYEE BASIC CONTRIBUTION ACCOUNT. An "Employee Basic Contribution
Account" is an account established pursuant to Section 4.1(e).
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12.17 EMPLOYER CONTRIBUTION ACCOUNT. An "Employer Contribution Account" is
an account established pursuant to Section 4.1(f).
12.18 FUND. The "Fund" is the total of all of the assets of every kind and
nature, both principal and income, held in the Trust at any particular time or,
if the context so requires, one or more of the investment funds described in
Section 5.1.
12.19 GOVERNING LAW. To the extent that state law is not preempted by
provisions of the Employee Retirement Income Security Act of 1974, as amended,
or any other laws of the United States, this Plan will be administered,
construed, and enforced according to the internal, substantive laws of the State
of Minnesota, without regard to its conflict of laws rules.
12.20 HEADINGS. The headings of articles and sections are included solely
for convenience. If there is a conflict between the headings and the text, the
text will control.
12.21 HIGHLY COMPENSATED EMPLOYEE. (A) A "Highly Compensated Employee" for
any Plan Year is any employee who -
(1) at any time during such Plan Year or the preceding Plan Year,
owns or owned (or is considered as owning or having owned within the
meaning of Code section 318) more than five percent of the outstanding
stock of an Affiliated Organization or stock possessing more than five
percent of the total combined voting power of all outstanding stock of an
Affiliated Organization, or
(2) during the Plan Year preceding such Plan Year -
(a) received includable compensation in excess of $75,000
(or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 414(q)(1)(B) for the
calendar year during which the Plan Year in question begins), or
(b) received includable compensation in excess of $50,000
(or such dollar amount, adjusted to reflect increases in the cost of
living, as in effect under Code section 414(q)(1)(C) for the
calendar year during which the Plan Year in question begins) and
whose includable compensation exceeded the includable compensation
of at least 80 percent of all employees, excluding, for purposes of
determining the number of employees in such group but not for
purposes of determining the specific employees comprising the group,
all employees who
(i) have completed less than six months of service
with the Affiliated Organizations,
(ii) normally work fewer than 17-1/2 hours per week for
the Affiliated Organizations,
(iii) normally work for the Affiliated Organizations
during not more than six months during any calendar year, or
(iv) have not attained age 21, or
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(c) was at any time an officer of an Affiliated Organization
(an administrative executive in regular and continued service with
the Affiliated Organization) and received includable compensation in
excess of 50 percent of the amount in effect under Code section
415(b)(1)(A) for the calendar year during which the Plan Year in
question begins, but in no case will there be taken into account
more than the lesser of (i) 50 employees, or (ii) the greater of
three employees or ten percent of the aggregate number of employees,
excluding, for purposes of determining the number of such officers,
any employees that are excluded pursuant to clause (b); or, if no
officer received includable compensation in excess of such amount,
the officer with the highest compensation for the Plan Year, or
(3) during such Plan Year, is described in items (a), (b) or (c)
of clause (2) and received compensation in an amount that is not less than
the amount of includable compensation received by at least 100 other
employees.
(B) For purposes of this section,
(1) an "employee" is any individual who is not described in clause
(b) of Section 12.34 and who, during the Plan Year for which the
determination is being made, performs services for an Affiliated
Organization as
(a) a common law employee,
(b) an employee pursuant to Code section 401(c)(1), or
(c) a leased employee who is treated as an employee of an
Affiliated Organization pursuant to Code section 414(n)(2) or
414(o)(2), and
(2) "includable compensation" for any period means an employee's
Section 415 Wages for the period increased by the amount of any reductions
to the employee's compensation for the period in connection with an
election by the employee made pursuant to a plan maintained by an
Affiliated Organization under Code section 125 or 401(k).
(C) For purposes of applying Sections 9.2, 9.3 and 9.4, any employee who
is the spouse, a lineal ascendant or descendant or the spouse of a lineal
ascendant or descendant of a Highly Compensated Employee described in clause (1)
of Subsection (A), or of a Highly Compensated Employee described in clause (2)
or (3) of Subsection (A) whose compensation for the Plan Year is not less than
the compensation of at least ten other Highly Compensated Employees, will not be
considered a separate employee and any Compensation with respect to such
employee, and any contributions allocated to the employee's Accounts under this
Plan if the employee is a Participant, will be deemed to have been paid to, or
allocated to the Accounts of such Highly Compensated Employee.
12.22 MATCHING CONTRIBUTION ACCOUNT. A "Matching Contribution Account" is an
account established pursuant to Section 4.1(b).
12.23 MATCHING CONTRIBUTIONS. "Matching Contributions" means contributions
made pursuant to Section 3.2 or 3.5.
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12.24 NORMAL RETIREMENT DATE. The "Normal Retirement Date" of a Participant
is the day in which he or she attains age 65.
12.25 NUMBER AND GENDER. Wherever appropriate, the singular number may be
read as the plural, the plural may be read as the singular, and the masculine
gender may be read as the feminine gender.
12.26 PARTICIPANT. A "Participant" is a current or former Qualified Employee
who has entered the Plan pursuant to the provisions of Article II and has not
ceased to be a Participant pursuant to Section 2.4.
12.27 PARTICIPATING BUSINESS UNIT. A "Participating Business Unit" is a
division, work location or other operational unit of a Participating Employer,
the eligible employees of which have been designated by the Participating
Employer to participate in the Plan, as communicated in writing to the Company
by the Participating Business Unit's Board.
12.28 PARTICIPATING EMPLOYER. A "Participating Employer" is the Company and
any other Affiliated Organization that has adopted the Plan, or all of them
collectively, as the context requires, and their respective successors. An
Affiliated Organization will cease to be a Participating Employer upon a
termination of the Plan as to its Employees or upon its ceasing to be an
Affiliated Organization.
12.29 PLAN. The "Plan" is that set forth in this instrument, as the same
may be from time to time amended.
12.30 PLAN RULE. A "Plan Rule" is a rule, policy, practice or procedure
adopted by the Administrator or the Committee.
12.31 PLAN YEAR. A "Plan Year" is the calendar year.
12.32 PRE-TAX CONTRIBUTION ACCOUNT. A "Pre-Tax Contribution Account" is an
account established pursuant to Section 4.1(a).
12.33 PRE-TAX CONTRIBUTIONS. "Pre-Tax Contributions" means contributions made
pursuant to Section 3.1.
12.34 QUALIFIED EMPLOYEE. A "Qualified Employee" is an Employee who performs
services for a Participating Business Unit and is classified by a Participating
Employer as a common-law employee together with any person who is a United
States citizen and who is employed as a common-law employee by a foreign
subsidiary of a Participating Employer, with respect to which subsidiary such
Participating Employer has entered into an agreement under Code section 3121(1),
but only if contributions under a funded plan of deferred compensation, which is
sponsored by such foreign subsidiary or a Participating Employer, are not
provided for such person with respect to remuneration paid to him by such
foreign subsidiary, provided that such person is employed at a facility, or
within a division or business unit, the eligible employees of which have been
designated by the Participating Employer to participate in the Plan. In no
event, however, will the term Qualified Employee include any such person who
is -
(a) covered by a collective bargaining agreement, for whom
retirement benefits were the subject of good faith bargaining between such
person's representative and the
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Participating Employer, and who is not, as a result of such bargaining,
specifically covered by this Plan; or
(b) a nonresident alien who receives no earned income (within the
meaning of Code section 911(d)(2)) from a Participating Employer that
constitutes income from sources within the United States (within the
meaning of Code section 861(a)(3)).
12.35 REPORTING PERSON. A "Reporting Person" is any Participant or
Beneficiary who is subject to the reporting requirements of section 16 of the
Securities Exchange Act of 1934 with respect to securities of the Company or its
affiliates.
12.36 ROLLOVER ACCOUNT. A "Rollover Account" is an account established
pursuant to Section 4.1(d).
12.37 SECTION 415 WAGES. (A) An individual's "Section 415 Wages" for any
period is the sum of his or her remuneration for the period from all Affiliated
Organizations that constitutes "compensation" within the meaning of Code section
415(c)(3) and Treasury Regulations thereunder.
(B) Notwithstanding Subsection (A), the Administrator may, in his or her
discretion, for any Plan Year, determine the items of remuneration that, in
accordance with Treasury Regulations, will be included in Section 415 Wages for
such Plan Year; provided that for each purpose under this Plan, the
Administrator's determination will be uniform throughout any Plan Year.
(C) Section 415 Wages will not include the amount by which a
Participant's wages or salary is reduced under Code section 125 or 401(k).
12.38 TERMINATION OF EMPLOYMENT. (A) For purposes of determining
entitlement to a distribution under this Plan, a Participant will be deemed to
have terminated employment only if he or she has completely severed his or her
employment relationship with all Affiliated Organizations or become Disabled.
Neither transfer of employment among Affiliated Organizations nor absence from
active service by reason of disability leave, other than in connection with a
Participant becoming disabled, or any other leave of absence will constitute a
termination of employment.
(B) A Participant will be deemed to have terminated employment in
conjunction with the disposition of all or any portion of the business operation
of an Affiliated Organization which is a disposition of a subsidiary or of
substantially all of the assets used in a trade or business of an Affiliated
Organization within the meaning of Code section 401(k)(10)(A) with respect to
which the requirements of Code section 401(k)(10)(B) and (C) are satisfied.
(C) A Participant who, in conjunction with the disposition of all or any
portion of a business operation of an Affiliated Organization which is not
described in Subsection (B), transfers employment to the acquiror of such
business operation or to any affiliate of such acquiror will not be considered
to have terminated employment. If a Participant is deemed to have continued
employment by reason of the preceding sentence, such sentence will continue to
apply to such Participant in the event of any subsequent transfer of employment
in conjunction with the disposition of all or any portion of a business
operation of the initial acquiror or any subsequent acquirors which is not a
disposition of a subsidiary of such acquiror or of substantially all of the
assets used in a trade or business of such acquiror within the meaning of Code
section 401(k)(10)(A) with respect to which the requirements of Code section
401(k)(10)(B) and (C) are
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satisfied. Except in conjunction with such a disposition of a subsidiary or
substantially all of the assets used in a trade or business of the seller, such
a Participant will be considered to have terminated employment only when he or
she has severed the employment relationship with all such acquirors and their
affiliates.
12.39 TESTING WAGES. (A) An individual's "Testing Wages" for any period is
his or her Section 415 Wages for the period, increased by the amount by which a
Participant's compensation for the period is reduced in connection with an
election by the individual under a plan maintained by an Affiliated Organization
pursuant to Code section 125 or Code section 401(k).
(B) In no event will an individual's Testing Wages for any Plan Year be
taken into account to the extent it exceeds $150,000 (or such dollar amount,
adjusted to reflect increases in the cost of living, as in effect under Code
section 401(a)(17) for the calendar year during which the Plan Year in question
begins).
(C) In the case of a Participant who is a Highly Compensated Employee
described in clause (1) of Section 12.21(A), or a Highly Compensated Employee
described in clause (2) or (3) of Section 12.21(A) whose "includable
compensation" (as defined in Section 12.21(B)(2)) for a Plan Year is not less
than the compensation of at least ten other Highly Compensated Employees, the
limitation set forth in Subsection (B) will be applied to the Participant, the
Participant's spouse and the Participant's lineal descendants who have not
attained age 19 before the last day of the Plan Year in question as if they were
a single Participant.
(D) The Administrator may, in his or her discretion, for any Plan Year,
adopt any alternative definition of Testing Wages that complies with Code
section 414(s) and Treasury regulations thereunder; provided, that for each
purpose under this Plan, the Administrator's determination will be uniform
throughout any Plan Year.
12.40 TREASURY REGULATIONS. "Treasury Regulations" mean regulations,
rulings, notices and other promulgations issued under the authority of the
Secretary of the Treasury that apply to, or may be relied upon in the
administration of, this Plan.
12.41 TRUST. The "Trust" is that created by the Company for purposes of
implementing benefits under the Plan, and may, as from time to time amended, be
referred to as the "BMC Industries, Inc. Savings Trust."
12.42 TRUSTEE. The "Trustee" is the corporation and/or individual or
individuals who from time to time is or are the duly appointed and acting
trustee or trustees of the Trust.
12.43 VALUATION DATE. A "Valuation Date" is the last day of each calendar
quarter and such interim dates as the Administrator may from time to time
specify pursuant to Section 4.2(B).
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ARTICLE XIII
ADMINISTRATION OF PLAN
13.1 NAMED FIDUCIARY. The Company is the "named fiduciary" of the Plan for
purposes of the Employee Retirement Income Security Act of 1974, as amended.
13.2 COMMITTEE. (A) The general administration of the Plan on behalf of the
Company and the duty to carry out its provisions is vested in a Committee
composed of not fewer than three members. One member of the Committee will be
the head of the Company's human resources function, a second member of the
Committee will be the head of the Company's financial function and a third
member of the Committee will be the head of the Company's treasury function.
Additional members may be appointed to the Committee by the Company's Board to
serve at its pleasure. Each such additional member will file written acceptance
of his or her appointment with such Board. A Committee member may resign by
delivering his or her written resignation to such Board; and any Committee
member, other than the heads of the Company's human resources, financial and
treasury functions, may be removed, with or without cause, by resolution of such
Board and the delivery of written notice of such removal to the removed member.
Any such resignation or removal will be effective upon delivery of the written
resignation or notice of removal, as the case may be, or upon any later date
specified therein. Vacancies created by any such resignation or removal will be
filled by appointment by such Board; provided, that, subject to there being at
least three persons serving as Committee members at all times, the Board need
not fill any vacancy so created.
(B) In addition to its general duties and power of administration of the
Plan, the Committee has authority and discretion with respect to -
(1) The selection, designation and removal of the Administrator,
the Trustee and any investment managers of the Fund;
(2) The direction of investments of assets comprising the Fund in
insurance-company issued deposit administration or similar group annuity
contract or contracts; and
(3) In case of any investment fund maintained pursuant to Section
5.1 the assets of which are primarily invested in one or more insurance
company issued deposit administration or group annuity contracts, to
determine, from time to time, the portion of such investment fund, if any,
that will not be invested in such insurance-company issued contracts and
to direct the Trustee as to the specific investments or types of
investments with respect to such portion of such investment fund;
provided, that nothing contained in this clause (3) requires the Committee
to exercise such authority and discretion or limits the authority and
discretion of the Committee to delegate any such duties to the
Administrator, the Trustee or any investment manager.
(C) At least annually, the Committee will determine the Plan's funding
policy and short- and long-run financial needs and communicate the same to the
Trustee and any investment manager of the Fund.
(D) The Committee will perform its duties hereunder in accordance with
the following procedures:
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(1) The head of the Company's human resources function will act as
the chair of the Committee and will preside over the Committee's meetings;
(2) The Committee will designate the head of the Company's human
resources function, or such other person as it may determine, to serve as
Administrator pursuant to Section 13.3, as it may specify in writing to
such head of the Company's human resources function or other person, and
may from time to time revoke such designation and designate another person
to serve as Administrator. Each such designation must be in writing, and
a copy thereof must be furnished to the Administrator and the Trustee.
The Administrator must file a written acceptance with the Committee. Such
Administrator's duty hereunder will terminate upon revocation of such
designation by the Committee or upon resignation as Administrator by the
person so designated. Such revocation or resignation must be in writing
and will be effective upon delivery thereof to the Administrator or the
Committee as the case may be, and in either case to the Trustee;
(3) The Committee will appoint a secretary who may, but need not,
be a member of the Committee, and who will keep minutes of the Committee's
meetings and perform such other duties as may be specified from time to
time by the Committee;
(4) The Committee may appoint such subcommittees with such duties
and powers as it may specify, and it may delegate administrative powers to
one or more of its members or to such other person or entity as it may
designate;
(5) The Committee will meet at such times and places and upon such
notice as its members may determine from time to time. A majority of the
current membership of the Committee will constitute a quorum for the
transaction of business, and all acts of the Committee at any meeting will
require, for their validity, the affirmative vote of a majority of the
current membership of the Committee;
(6) The Committee may adopt bylaws for the conduct of its
business, provided such bylaws are not inconsistent with the provisions of
this article;
(7) No member of the Committee may vote with respect to a decision
of the Committee relating solely to his or her own participation under the
Plan.
13.3 ADMINISTRATOR. (A) The Administrator designated by the Committee will
perform the following administrative duties:
(1) the determination of initial and continuing eligibility of
Employees to participate in the Plan and enrollment of Participants in the
Plan;
(2) the determination of Participants' entitlement to, and the
amount of benefit contributions under the Plan;
(3) the processing of Participants' Beneficiary designations;
(4) the review of claims made pursuant to the Plan's benefit claim
procedure;
(5) the computation of the amount of each Participant's benefit
account balances;
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(6) the authorization of disbursements from the Fund in the form
of withdrawals and distributions;
(7) the preparation, distribution to Participants and filing with
appropriate governmental agencies of such reports, disclosures and forms
as are required by law, and retention of copies thereof in the
Administrator's files; and
(8) such other duties as specified in the Plan or as the Committee
may delegate to the Administrator from time to time.
(B) The Administrator may delegate such of his or her duties specified
in Subsection (A) as he or she may specify in writing to such other person as he
or she may designate and may from time to time revoke such authority and
delegate it to another person. Each such delegation must be in writing, and a
copy thereof must be furnished to the person to whom the duty is delegated.
Such person must file a written acceptance with the Administrator. Such
person's duty hereunder will terminate upon revocation of such authority by the
Administrator or upon withdrawal of such acceptance by the person to whom the
duty was delegated. Such revocation or withdrawal must be in writing, and will
be effective upon delivery of a copy thereof to the person or entity to whom the
duty was delegated or to the Administrator as the case may be.
13.4 COMPENSATION AND EXPENSES. An Employee performing administrative
duties in connection with the Plan will receive no compensation from the Fund
for such services, but may be reimbursed from the Fund for all sums reasonably
and necessarily expended in the performance of such duties. The Administrator
may retain such independent accounting, legal, clerical and other services as
may reasonably be required in the administration of the Plan and may pay
reasonable compensation from the Fund for such services. Any such reimbursement
or compensation and all other costs of administering the Plan will, to the
extent not paid by the Participating Employers, be paid by the Trustee from the
Fund upon statements issued by the Administrator.
13.5 PLAN RULES. The Committee and the Administrator each have the
discretionary power and authority to make such Plan Rules as the Committee or
Administrator deem to be necessary or appropriate to perform their respective
duties in connection with the administration of the Plan and to modify or
rescind any such Plan Rules. Plan Rules will be uniform and nondiscriminatory
with respect to any similarly situated persons.
13.6 ADMINISTRATOR'S DISCRETION. To the extent applicable to their
respective administrative duties, the Committee and the Administrator each have
the discretionary power and authority to make all determinations necessary or
appropriate for the administration of the Plan, and to construe, interpret,
apply and enforce the provisions of the Plan and Plan Rules, including the
discretionary power and authority to remedy ambiguities, inconsistencies,
omissions and erroneous Account balances. In the exercise of their
discretionary powers, the Committee and the Administrator will treat all
similarly situated persons uniformly.
13.7 INDEMNIFICATION. The Participating Employers jointly and severally
agree to indemnify and hold harmless, to the extent permitted by law, each
director, officer, and employee of any Affiliated Organization against any and
all liabilities, losses, costs and expenses (including legal fees) of every kind
and nature that may be imposed on, incurred by, or asserted against such person
at any time by reason of such person's services in connection with the Plan, but
only if such person did not act dishonestly or in bad faith or in willful
violation of the law or regulations under which such liability,
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loss, cost or expense arises. The Participating Employers have the right, but
not the obligation, to select counsel and control the defense and settlement of
any action for which a person may be entitled to indemnification under this
provision.
13.8 BENEFIT CLAIM PROCEDURE. If a request for a benefit by a Participant
or Beneficiary of a deceased Participant is denied in whole or in part, he or
she may, within 30 days after receipt of notice of the denial, file with the
Administrator a written claim objecting to the denial. Not later than 90 days
after receipt of such claim, the Administrator will render a written decision on
the claim to the claimant. If the claim is denied in whole or in part, such
decision will include: the reasons for the denial; a reference to the Plan
provision that is the basis for the denial; a description of any additional
material or information necessary for the claimant to perfect the claim; an
explanation as to why such information or material is necessary; and an
explanation of the Plan's claim procedure. Not later than 60 days after
receiving the Administrator's written decision, the claimant may file with the
Administrator a written request for review of the Administrator's decision, and
the claimant or the representative may thereafter review Plan documents that
relate to the claim and submit written comments to the Administrator. Not later
than 60 days after the Administrator's receipt of the request for review, the
Administrator will render a written decision on the claim, which decision will
include the specific reasons for the decision, including references to specific
Plan provisions where appropriate. The 90- and 60-day periods during which the
Administrator must respond to the claimant may be extended by up to an
additional 90 or 60 days, respectively, if circumstances beyond the
Administrator's control so require and if notice of such extension is given to
the claimant.
13.9 CORRECTION OF ERRORS. If the Administrator determines that, by reason
of administrative error or other cause attributable to a Participating Employer,
the Account of any Participant has incurred a loss, the Administrator may enter
into an agreement with such Participating Employer under which the Account is
fully restored and may, upon such restoration, release the Participating
Employer from further responsibility.
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ARTICLE XIV
MISCELLANEOUS
14.1 MERGER, CONSOLIDATION, TRANSFER OF ASSETS. If this Plan is merged or
consolidated with, or its assets or liabilities are transferred to, any other
plan, each Participant will be entitled to receive a benefit immediately after
such merger, consolidation or transfer (if such other plan were then terminated)
that is equal to or greater than the benefit he or she would have been entitled
to receive immediately before such merger, consolidation or transfer (if this
Plan had then terminated).
14.2 LIMITED REVERSION OF FUND. (A) Except as provided in Subsection (B),
no corpus or income of the Trust will at any time revert to Participating
Employer or be used other than for the exclusive benefit of Eligible Employees,
Participants and Beneficiaries by paying benefits and, if applicable,
administrative expenses of the Plan.
(B) Notwithstanding any contrary provision in the Plan,
(1) All contributions made by a Participating Employer to the
Trustee prior to the initial determination of the Internal Revenue Service
as to qualification of the Plan under Section 401(a) of the Code and the
tax exempt status of the Trust under Code section 501(a) will be repaid by
the Trustee to such Participating Employer, upon the Participating
Employer's written request, if the Internal Revenue Service rules that the
Plan, as adopted by that Participating Employer, is not qualified or the
Trust is not tax exempt; provided, that the Participating Employer
requests such determination within a reasonable time after adoption of the
Plan, and the repayment by the Trustee to such Participating Employer is
made within one year after the date of denial of qualification of the
Plan; and
(2) To the extent a contribution is made by a Participating
Employer by a mistake of fact or a deduction is disallowed a Participating
Employer under Code section 404, the Trustee will repay the contribution
to such Participating Employer upon the Participating Employer's written
request; provided, that such repayment is made within one year after the
mistaken payment is made or the deduction is disallowed, as the case may
be. The amount returned to the Participating Employer will not include
any investment gains or earnings but will be reduced by any investment
losses. Each contribution to the Plan by a Participating Employer is
expressly conditioned on such contribution's being fully deductible by the
Participating Employer under Code section 404.
14.3 TOP-HEAVY PROVISIONS. (A) (1) Notwithstanding the provisions of
Sections 3.1, 3.2 and 3.3, for any Plan Year during which the Plan is a
top-heavy plan, the amount of contributions (excluding Pre-Tax
Contributions) made and allocated for such Plan Year on behalf of each
Active Participant who is not a key employee and who is employed with an
Affiliated Organization on the last day of the Plan Year, expressed as a
percentage of the Participant's Testing Wages for the Plan Year, must be
at least equal to the lesser of
(a) three percent, or
(b) the largest percentage of such Testing Wages at which
contributions (including Pre-Tax Contributions) are made and
allocated on behalf of any key employee for such Plan Year.
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(2) If, in addition to this Plan, an Affiliated Organization
maintains another qualified defined contribution plan or one or more
qualified defined benefit pension plans during a Plan Year, the provisions
of clause (1) will be applied for such Plan Year -
(a) by taking into account the employer contributions (other
than elective deferrals for a non-key employee) on behalf of the
Participant under all such defined contribution plans;
(b) without regard to any Participant who is not a key
employee and whose accrued benefit, expressed as a single life
annuity, under a defined benefit pension plan maintained by the
Affiliated Organization for such Plan Year is not less than the
product of -
(i) the Participant's average Testing Wages for the
period of consecutive years not exceeding the period of
consecutive years (not exceeding five) when the Participant
had the highest aggregate Testing Wages, disregarding years in
which the Participant completed less than 1000 Hours of
Service, multiplied by
(ii) the lesser of (A) two percent per year of service,
disregarding years of service beginning after the close of the
last Plan Year in which such defined benefit plan was a top
heavy plan, or (B) 20 percent.
(B) For purposes of Subsection (A),
(1) (a) The Plan will be a "top-heavy plan" for a particular
Plan Year if, as of the last day of the initial Plan Year or, with
respect to any other Plan Year, as of the last day of the preceding
Plan Year, the aggregate of the Account balances of key employees is
greater than 60 percent of the aggregate of the Account balances of
all Participants.
(b) For purposes of calculating the aggregate Account
balances for both key employees and employees who are not key
employees:
(i) Any distributions made within the five-year period
preceding the Plan Year for which the determination is being
made, other than a distribution transferred or rolled over to
a plan maintained by an Affiliated Organization, will be
included;
(ii) Amounts transferred or rolled over from a plan not
maintained by an Affiliated Organization at the initiation of
the Participant will be excluded;
(iii) The Account balances of any key employee and any
employee who is not a key employee who has not performed an
Actual Hour of Service at any time during the five-year period
ending on the date as of which the determination is being made
will be excluded; and
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(iv) The terms "key employee" and "employee" will
include the Beneficiaries of such persons who have died.
(2) (a) Notwithstanding the provisions of clause (1), this Plan
will not be a top-heavy plan if it is part of either a "required
aggregation group" or a "permissive aggregation group" and such
aggregation group is not top-heavy. An aggregation group will be
top-heavy if the sum of the present value of accrued benefits and
account balances of key employees is more than 60 percent of the sum
of the present value of accrued benefits and account balances for
all Participants, such accrued benefits and account balances being
calculated in each case in the same manner as set forth in clause
(1).
(b) Each plan in a required aggregation group will be
top-heavy if the group is top-heavy. No plan in a required
aggregation group will be top-heavy if the group is not top-heavy.
(c) If a permissive aggregation group is top-heavy, only
those plans that are part of an underlying top-heavy, required
aggregation group will be top-heavy. No plan in a permissive
aggregation group will be top-heavy if the group is not top-heavy.
(3) The "required aggregation group" consists of (i) each plan of
an Affiliated Organization in which a key employee participates, and (ii)
each other plan of an Affiliated Organization that enables a plan in which
a key employee participates to meet the nondiscrimination requirements of
Code sections 401(a)(4) and 410.
(4) A "permissive aggregation group" consists of those plans that
are required to be aggregated and one or more plans (providing comparable
benefits or contributions) that are not required to be aggregated, which,
when taken together, satisfy the requirements of Code sections 401(a)(4)
and 410.
(5) For purposes of applying clauses (2), (3) and (4) of this
Subsection (B), any qualified defined contribution plan maintained by an
Affiliated Organization at any time within the five-year period preceding
the Plan Year for which the determination being made which, as of the date
of such determination, has been formally terminated, has ceased crediting
service for benefit accruals and vesting and has been or is distributing
all plan assets to participants or their beneficiaries, will be taken into
account to the extent required or permitted under such clauses and under
Code section 416.
(C) A "key employee" is any individual who is or was employed with an
Affiliated Organization and who, at any time during the Plan Year in question or
any of the preceding four Plan Years is or was:
(1) An officer of the Affiliated Organization (an administrative
executive in regular and continued service with the Affiliated
Organization) whose includable compensation for such Plan Year exceeds 50
percent of the amount in effect under Code section 415(b)(1)(A) for such
Plan Year, but in no case will there be taken into account more than the
lesser of (a) 50 individuals or (b) the greater of (i) three individuals
or (ii) ten percent of the number of the Affiliated Organization
employees, excluding for purposes
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of determining the number of such officers, any employees that are
excluded pursuant to Section 12.21(A)(2)(b);
(2) The owner of an interest in the Affiliated Organization, that
is not less than the interest owned by at least ten other individuals
employed with the Affiliated Organization; provided, that, such owner will
not be a key employee solely by reason of such ownership for a Plan Year
if he or she does not own more than one-half of one percent of the value
of the outstanding interests of the Affiliated Organization or if the
amount of his or her includable compensation for such Plan Year is less
than the amount in effect under Code section 415(c)(1)(A) for such Plan
Year;
(3) The owner of more than five percent of the Affiliated
Organization outstanding stock or more than five percent of the total
combined voting power of the Affiliated Organization stock; or
(4) The owner of more than one percent of the Affiliated
Organization's outstanding stock or more than one percent of the total
combined voting power of the Affiliated Organization's stock, whose
includable compensation for such Plan Year exceed $150,000.
For purposes of this Subsection (C), the term "compensation" has the same
meaning as in Section 12.21(B)(2) and ownership of an Affiliated Organization
stock will be determined in accordance with Code section 318; provided, that
subparagraph 318(a)(2)(C) will be applied by substituting the phrase "5 percent"
for the phrase "50 percent" wherever it appears in such Code section.
(D) If an Affiliated Organization maintains a qualified defined
contribution plan and a qualified defined pension plan, the limitation on
combined contributions and accrued benefits will be adjusted by substituting
"100 percent" for "125 percent" in the definitions of the defined benefit
fraction and the defined contribution fraction in Section 9.7; provided, first,
that this Subsection (D) will be applied prospectively only to prohibit
additional contributions allocated, and forfeitures reallocated, to and defined
benefit accruals for, a Participant and will not reduce any allocations or
reallocations made to, or benefits accrued for, such Participant prior to the
Plan Year for which it first becomes effective; and, second, that if the Plan
would not be a top heavy plan if "90 percent" were substituted for "60 percent"
in clause (1)(a) of Subsection (B), this Subsection (D) will not apply if -
(1) the aggregate employer contribution (other than elective
contributions) under all such qualified defined contribution plans on
behalf of each Participant who is not a key employee and who is employed
with an Affiliated Organization on the last day of the Plan Year is not
less than seven and one-half percent of his or her Testing Wages for the
Plan Year, or
(2) the accrued benefit for each Participant under the qualified
defined benefit pension plan is not less than the benefit described in
Subsection (A)(2)(b), applied by substituting "3 percent" for "2 percent"
in item (A) of clause (ii) and "30 percent" for "20 percent" in item (B)
of clause (ii).
14.4 NO EMPLOYMENT RIGHTS CREATED. The establishment and maintenance of the
Plan neither give any Employee a right to continuing employment nor limit the
right of an Affiliated
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Organization to discharge or otherwise deal with the Employee without regard to
the effect such action might have on his or her initial or continued
participation in the Plan.
14.5 SPECIAL PROVISIONS. Special provisions of the Plan applicable only to
certain Participants will be set forth on an exhibit to the Plan. In the event
of a conflict between the terms of the exhibit and the terms of the Plan, the
exhibit controls.
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12/12/94(1)
BMC STOCK OPTION EXERCISE LOAN PROGRAM
as revised December 14, 1994
PURPOSES:
- To facilitate stock option holder's exercise of stock options.
- To encourage share ownership by key employees.
- To minimize tax consequences to employee of stock option exercise by
providing the means to carry BMC stock for a sufficient period to
qualify for long-term capital gains treatment.
- To minimize the need to sell shares in the open market to pay for
taxes due upon exercise of options.
ELIGIBILITY:
- Effective date of the Program is April 22, 1993.
- Any employee of BMC with exercisable non-qualified stock option grants
is eligible to participate in the Program.
- Approval of loans is at the sole and absolute discretion of the
Compensation Committee or its designee.
- Employees holding options which are exercisable and vested at the time
a loan is requested (whether or not exercisable and vested at the
effective date of the Program) are eligible to be considered by the
Compensation Committee for loan approval.
AMOUNT OF LOANS:
- The total amount which any employee may borrow under the Program shall
be determined by the Compensation Committee in its sole and absolute
discretion.
- In addition, any employees' first loan request may not exceed
100% of the exercise price of the option to be financed with such
loan, plus 100% of the state and federal income taxes actually
paid within 15 months of such exercise on any income recognized
by reason of such exercise.
- Any loan request by an employee under the Program subsequent to
the employee's first loan request may not exceed the lesser of
(a) 100% of the exercise price of the option to be financed with
such loan, plus 100% of the state and federal income taxes
actually paid within 15 months of such exercise on any income
recognized by reason of such exercise or (b) such amount that
when added to the principal amount of all then outstanding loans
under the Program will not exceed 60% of the market value of all
the BMC stock of such employee pledged as collateral immediately
following such loan under the Program (determined as provided
below under "Loan Terms") (including any stock pledged
<PAGE>
upon the option exercise requested to be financed by such
subsequent loan) or (c) eight times the employee's then-current
base annual salary.
- The amount of any loan used for the payment of taxes shall be
advanced only as and when payment of such taxes is made by the
employee.
- In no event shall any advance under the Program be made which
would cause the aggregate amount of principal and accrued
interest outstanding under all loans to any employee to exceed
100% of the market value of all BMC stock of such employee
pledged as collateral under the Program at the time of such
advance.
LOAN TERMS:
- Loans to any employee under the Program shall be interest free (a)
with respect to all amounts advanced to pay any option exercise price,
and (b) with respect to amounts advanced to pay income taxes to the
extent the aggregate principal amount of such tax payment advances
outstanding under the Program to the employee is not greater than the
product of the amount of the employee's base annual compensation plus
target bonus amount under the Management Incentive Plan as of the
first day of the then current calendar quarter multiplied times two
(such product the "Interest Free Loan Amount").
- To the extent the aggregate outstanding principal amount of tax
payment advances to any employee is in excess of the Interest Free
Loan Amount at any time, the amount of such excess shall bear interest
at the following rates:
(a) The interest rate applicable under any short-term borrowings by
BMC if any such borrowings are outstanding at the beginning of
any calendar quarter, such rate to apply for the entire calendar
quarter.
(b) The interest rate payable to BMC under its short-term money
market investments if BMC has no short-term borrowings
outstanding at the beginning of any calendar quarter, such rate
to apply for the entire calendar quarter.
- Any interest shall accrue as provided above, but shall not be payable
except as provided below, and shall not compound whether or not paid
from year-to-year or otherwise.
- Notes will be in the form of a Demand Promissory Note.
- The BMC stock will be held as collateral for all loans under the
Program and "legended" to the Company.
- The "market value" of BMC stock as of any date shall be determined by
reference to the closing price of BMC stock on the NYSE on the
business day preceding such determination.
METHODS OF REPAYMENT:
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- 30% of any payout under the Management Incentive Plan (net of
estimated applicable state and federal income taxes and other
withholding) received while a loan is outstanding will be applied to
repayment of the loan.
- Required Paydowns from Stock Sale Proceeds - A portion of proceeds
from the sale of BMC stock pledged under the Program would be required
to be applied to the repayment of amounts outstanding under all loans
under the Program in an amount equal to the lesser of (a) 100% of such
proceeds or (b) (i) the amount of all accrued interest, plus (ii) the
product of the amount of such proceeds remaining after payment of all
accrued interest multiplied times a fraction the numerator of which is
the principal amount of the loan and the denominator of which is the
market value of the BMC stock pledged as collateral for such loan
immediately following such payment (stock will be legended but legend
will be released upon receipt of proceeds).
- Any dividends received by an employee in respect of BMC stock pledged
for a loan under the Program, net of deduction for applicable
estimated state and federal income taxes and other withholdings on
such dividends, shall be applied to repayment of the loan.
- Repayment can be effected by other means at the employee's option
including through payroll deduction, use of the employee's flex
account, or bonus proceeds beyond the 30% described above.
- All payments shall be applied first to accrued interest, next to any
amount or principal advanced to pay income taxes and then to all other
principal.
- Partial Release of Pledged Stock upon Payment (whether or not with
stock sale proceeds) - If the market value of BMC stock pledged as
collateral for loans under the Program to any employee (excluding the
market value of any shares sold to yield payment proceeds) exceeds the
amount of the loans prior to payment on a loan such stock shall be
released upon any payment of all then accrued interest and any amount
of principal, upon request of the employee, such that ratio of the
principal amount of the loan outstanding immediately after such
payment to the market value of the shares remaining pledged
immediately after such release is not greater than the ratio of the
principal amount of the loan outstanding immediately prior to such
payment to the market value of the shares immediately prior to such
release (excluding the market value of any shares sold to yield
payment proceeds). No such release shall be required unless at least
100 shares of pledged BMC stock is eligible for release.
EVENTS TRIGGERING DEMAND FOR PAYMENT:
- Termination of employment from BMC would require repayment of
principal within 45 days or such longer period determined at the
discretion of the Compensation Committee.
- In the event of the death or long-term disability of the employee,
repayment may be extended up to six months or longer at the discretion
of the Compensation Committee.
- Employee's declaration of bankruptcy would require immediate repayment
of principal.
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- Notwithstanding these events, demand for repayment may be made at any
time by the Compensation Committee.
EVENTS PERMITTING EXTENSION OF REPAYMENT:
- Written consent of the Compensation Committee, at its sole and
absolute discretion.
- Where it is determined by the Compensation Committee in its sole and
absolute discretion that repayment would result in adverse
consequences to the Company or employee. For example:
- Sale of BMC stock to enable repayment would cause personal
liability under Section 16(b) of the Exchange Act.
- Sale of BMC stock at current prices, or in large blocks may
abnormally suppress market price of the stock or cause similar
hardship.
CONSEQUENCES TO EMPLOYEE:
- For tax purposes, the employee must recognize income in an amount
equal to the interest-free discount received on the loan proceeds. On
a "demand" note, this amount is calculated each December on the
principal amount of the loan using the "applicable federal rate"
(AFD).
- Imputed interest will not be subject to federal or state income tax
withholding but WILL BE subject to FICA and/or Medicare tax
withholding prescribed by the tax regulations.
- Employee SHOULD be entitled to an offsetting interest deduction, in
the current year if the employee has sufficient net investment income,
or in the year the stock is sold as an offset to the gain on the
stock.
- Employees should, however, consult with their own tax advisers to
determine the actual tax consequences of participation in the Program.
REQUIRED DISCLOSURES:
- Schedule II of Form 10K requires the disclosure of aggregate
indebtedness of more than $100,000 from any employee. Disclosure
includes name, amount of indebtedness, due date, interest rate, terms
of repayment and collateral.
- The Annual Report requires disclosure of the sum total of all amounts
due from officers and directors, even though the dollar amount may be
relatively small.
- Proxy disclosure of the loan amount and the compensation element is
required.
- Filings necessary to comply with margin stock rules will be made.
4
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AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE ("Amendment") is made this 6th day of April, 1994 by and
between GMT Corporation, a Delaware corporation, whose address is 245 East Sixth
Street, St. Paul, Minnesota 55101 ("Landlord") and BMC Industries, Inc., a
Minnesota corporation whose address is 245 East Sixth Street, St. Paul,
Minnesota 55101 ("Tenant").
WITNESSETH:
WHEREAS, pursuant to the appropriate assignments, Landlord and Tenant are
parties to that certain Lease Agreement by and between Control Data Corporation
and Buckbee-Mears Company dated November 20, 1978, as amended by that certain
Amendment of Lease dated April 30, 1979, as further amended by that certain
Amendment No. 1 of Lease dated April 4, 1980, as further amended by that certain
Amendment of Lease dated December 27, 1983, as further amended by that certain
Amendment of Lease dated April 9, 1981, and that certain Amendment of Lease
dated April 12, 1989, as further amended by that certain Amendment of Lease
dated March 19, 1990, and as further amended by that certain Amendment of Lease
dated May 31, 1993 (collectively, the "Lease"); and
WHEREAS, the Lease covers certain demised premises and the property located at
245 East Sixth Street and 413 Wacouta Street, St. Paul, Minnesota (collectively
the "Complex"); and
WHEREAS, Landlord and Tenant desire to amend the Lease upon the terms and
conditions, and in the manner set forth below.
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Lease.
2. EFFECTIVE DATE. The effective date of this Amendment of the Lease shall be
as of April 1, 1994.
3. DEMISED PREMISES. As of the effective date of this Amendment, the "Demised
Premises" shall mean the following:
i) The 9,739 square feet located on the first floor of a portion of the
Complex located at 245 East Sixth Street and as shown on the
Exhibit A-1 attached hereto (the "PS 1 Space");
ii) The 5,890 square feet located on the fifth floor of that portion of
the Complex located at 245 East Sixth Street as shown on the
Exhibit A-2 attached hereto (the "PS 5 Space");
iii) The 29,115 square feet of space on the fifth floor over the parking
ramp portion of the Complex located at 245 East Sixth Street as
shown on Exhibit A-3 attached hereto (the "RB 5 Space");
<PAGE>
iv) The 29,115 square feet of space on the sixth floor over the parking
ramp located in that portion of the Complex at 245 East Sixth Street
as shown on Exhibit A-4 attached hereto (the "RB 6 Space");
v) The 9,640 square feet of space in that portion of the Complex
located at 413 Wacouta Street as shown on Exhibit A-5 attached
hereto (the "Firebarn Space");
vi) The 17,377 square feet of space in the basement of the portion of
the Complex located at 245 East Sixth Street as shown on Exhibit A-6
attached hereto (the "PS B Space");
vii) The 1,782 square feet of space at Suite 228 on the second floor of
that portion of the Complex located at 245 East Sixth Street as
shown on Exhibit A-7 attached hereto (the "PS 228 Space");
viii) The approximately 5,000 square feet of space on the second floor of
that portion of the Complex at 245 East Sixth Street as shown on
Exhibit A-8 attached hereto (the "PS 2 Space") and
ix) The 19,867 square feet of space on the sixth floor of the portion of
the Complex at 245 East Sixth Street as shown on Exhibit A-9
attached hereto (the "PS 6 Space").
4. TERM OF LEASE. The term of the Lease for the Demised Premises shall
commence as of the effective date of this Amendment, except that the
commencement date for the PS 2 Space shall commence in accordance with the
provisions of Section 7 below. The Lease term for all of the Demised
Premises shall expire as of 12:00 a.m. CST February 28, 1999, unless said
term is duly extended pursuant to Section 6 below.
5. RENT AMOUNT. Basic Rental and Tenant's share of CAM Charges (as defined
below) shall be as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Annual Rent Annual CAM Charges
Space Square Footage Per Square Foot Per Square Foot
----- -------------- --------------- -------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------
PS 1 9,739 $3.50 $1.51
--------------------------------------------------------------------------------
PS 5 5,890 $3.50 $1.51
--------------------------------------------------------------------------------
RB 5 29,115 $3.50 $ .28
--------------------------------------------------------------------------------
RB 6 29,115 $3.50 $ .28
--------------------------------------------------------------------------------
FB 9,640 $2.55 $1.51
--------------------------------------------------------------------------------
PS B 17,377 $2.00 $1.51
--------------------------------------------------------------------------------
PS 228 1,782 $3.50 $1.51
--------------------------------------------------------------------------------
PS 2 5,000 $3.50 $1.51
--------------------------------------------------------------------------------
PS 6 19,867 $5.17 $1.51
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
"CAM Charges" shall mean annual common area maintenance charges and all
other regularly recurring charges which Tenant is obligated to pay under
Sections 3.A(1), 4 and 6 of the Lease. CAM Charges shall not include
charges for real estate taxes or assessments, nor shall it include charges
for any extraordinary item of repair or improvement or other charge for
which Tenant is responsible under the Lease.
Basic Rental, Tenant's share of CAM Charges and Tenant's proportionate
share of all other payments set forth in the Lease shall be paid in
consecutive monthly installments due in advance on the first (1st) day of
each lease month hereunder in an amount equal to one twelfth (1/12th) of
the annual amount due.
6. OPTIONS TO EXTEND. Provided Tenant is not in default under this Lease,
Tenant shall have two (2) consecutive five (5) year options to extend the
term of the Lease for the entire Demised Premises. In order to exercise
said option, Tenant shall notify Landlord in writing of Tenant's intent to
so extend the term of the Lease at least one hundred eighty (180) days
prior to the expiration of the then current term of the Lease. For each
option period there shall be an adjustment ("Adjustment") in the Basic
Rental and the Tenant's annual share of common area maintenance charges
calculated by multiplying the Basic Rental and the Tenant's share of annual
common area maintenance charges set forth in Section 4 above by a fraction,
the numerator of which shall be the Price Index (as defined below) for the
month immediately preceding the first month of the option period in
question, and the denominator of which shall be the Base Price Index (as
defined below); provided, however, no adjustment shall reduce the Basic
Rental as previously payable in accordance with the Lease. In addition,
notwithstanding anything to the contrary contained herein, in no event
shall any Adjustment be in excess of 5% per annum.
"Price Index" shall mean the Minneapolis-St. Paul All Items Consumer Price
Index for Urban Consumers (1967=100), published by the United States
Department of Labor, Bureau of Labor Statistics. If publication of the
Consumer Price Index is discontinued, the parties hereto shall accept
comparable statistics on cost of living for the Minneapolis-St. Paul
Metropolitan area as computed and published by an agency of the United
States or by a responsible financial periodical of recognizable authority
then to be selected by the parties.
"Base Price Index" shall mean the Price Index for the month of February,
1994.
7. CIRCUIT BOARD PRODUCTION. Upon the expiration of Tenant's current lease at
its present Maplewood facility with respect to Tenant's circuit board
production and commencing on January 1, 1996, Tenant shall operate its
circuit board production facility at the Demised Premises. The term of the
Lease with respect to the PS 2 Space shall commence on January 1, 1996 and
no rent, CAM Charges, taxes or assessments under this Lease shall accrue
for the PS 2 Space between the date hereof and December 31, 1995. Landlord
agrees to provide Tenant access to the PS 2 Space as of September 1, 1995
and allow Tenant at that time, at its sole cost to construct any and all
improvements Tenant deems necessary for its new uses of the FB Space, the
PS 228 Space and the PS 2 Space. Said improvements to the PS 2 Space, the
PS 228 Space, and the FB Space shall be commenced promptly after September
1, 1995 and shall be performed in a diligent manner in accordance with all
applicable governing codes and subject to Landlord's prior written approval
of the Plans, which will not be unreasonably withheld.
3
<PAGE>
8. CAPITAL EQUIPMENT. Notwithstanding any provision to the Lease to the
contrary, Tenant shall have no obligation or requirement to make a minimum
investment in capital equipment.
9. PS 6 SPACE. (a) Tenant hereby surrenders and yields up the PS 6 Space
to Landlord effective from and after the Surrender Date (as defined below)
for the unexpired portion of the term of the Lease, and Landlord hereby
accepts this surrender of the PS 6 Space from and after the Surrender Date.
As of the Surrender Date, the PS 6 Space shall no longer be a portion of
the Demised Premises. "Surrender Date" shall mean the latter of (i)
Tenant's vacation of PS 6 Space or (ii) November 30, 1994. Tenant shall
remain obligated to pay Landlord rent for the PS 6 Space pursuant to the
terms of the Lease until the Surrender Date.
(b) Tenant shall promptly quit and surrender possession of
the PS 6 Space to Landlord on the Surrender Date in the condition required
by the Lease and in good order and condition, reasonable wear and tear and
damage by fire or other casualty expected. Any property of Tenant not
removed from the PS 6 Space on or before the Surrender Date shall remain
the responsibility of Tenant to remove.
(c) Tenant agrees that on the sixth floor of the main
Business Center Tenant will tear down the walls constructed by Tenant
subsequent to 1978 and remove its equipment, consistent with Tenant's
restoration on the fifth floor of the main Business Center. Landlord
agrees that as to the fifth and sixth floors of the main Business Center,
Tenant shall have no further obligation to restore, renovate or
rehabilitate except as set forth herein. Landlord agrees that Tenant shall
not be responsible for removing any asbestos or asbestos-containing
material from the PS 6 Space. All construction shall be performed in a
good and workmanlike manner and in accordance with governing codes after
prior written notice to Landlord. Tenant shall cause such work to be
completed within thirty (30) days of the Surrender Date.
(d) Landlord and Tenant agree that the electrical service
on the 5th floor of the Main Building needs to be revised and upgraded.
Landlord shall cause such electrical work to be performed pursuant to a
plan approved in advance in writing by Tenant, said approval of Tenant
shall not be unreasonably withheld or delayed. Tenant shall pay the cost
of such electrical work in an amount not to exceed $10,000. Landlord shall
not complete such electrical work until Landlord has leased the space to
another party. Thereafter, Landlord shall cause said electrical work to be
completed within 30 days. In the event said work is required during the
calendar year of 1994, Landlord will advance the cost of the work and
Tenant shall reimburse Landlord, payable with interest at the rate of 4%
per annum on or before January 31, 1995.
10. REAL ESTATE TAXES. (a) Notwithstanding any provision to the contrary
contained in the Lease, Tenant hereby agrees to waive any and all claims it
may have had against Landlord with respect to reimbursement or recovery of
real estate taxes payable in 1992 and prior years regarding the Complex or
the Demised Premises.
(b) Landlord and Tenant agree that Tenant is
entitled to a credit for the real estate taxes paid by Tenant to Landlord
with respect to the Demised Premises in 1993 in the amount of $56,537.00 as
a result of Landlord's successful petition for a
4
<PAGE>
reduction in said property taxes. Said credit, together with interest
thereon calculated at 4% per annum from July 1, 1993 until paid, shall be
payable to Tenant pursuant to an offset of rent over a five month period
commencing with the rent payable in August, 1994 through December, 1994, if
not earlier paid.
11. ACCESS TO OTHER SPACE. During the term of the Lease, Landlord agrees to
provide Tenant with access, and Tenant shall have the right to use, the
areas on the 6th floor of the Lowertown Business Center Building commonly
referred to as the "telephone room" and the "first aid room" as shown on
the attached Exhibit "B". In addition, Landlord shall provide Tenant
access to, and Tenant shall have the exclusive right to use, two of the
enclosed garage stalls located on the ground level of the parking ramp.
Tenant shall not be obligated to pay any Basic Rental, CAM Charges or taxes
and assessments for the use of the spaces described in this paragraph.
Tenant's right to use the first aid room shall be exclusive of the rights
of other tenants of the Complex. Tenant's use of the telephone room shall
be non-exclusive of the rights of other tenants of the Complex to the
extent said other tenants' use of the telephone room is for said tenants
telephone service. Tenant's use of the telephone room shall not
unreasonably interfere with the use of said spaces by any of Landlord's
other tenants, and Tenant shall comply with all reasonable rules and
regulations established by Landlord for the space described in this
paragraph from time to time. Landlord covenants that the use of the
telephone room by Landlord's other tenants shall not unreasonably interfere
with Tenant's use thereof.
12. MAINTENANCE AND REPAIRS. During the term of the Lease, Tenant shall, at
its sole cost and expense, maintain and be responsible for any repairs and
improvements to the heating, air conditioning, electrical and plumbing
systems for the Demised Premises. Notwithstanding the foregoing, Tenant
shall not be responsible for the systems in the building to which the
systems in the Demised Premises, are connected, nor shall Tenant be
responsible for repairs to said systems necessitated by events occurring
off the Demised Premises. All such maintenance, repairs or improvements to
the heating, air conditioning, electrical and plumbing systems made by
Tenant shall be of good quality reasonably acceptable to Landlord and shall
further comply in all respects with all applicable governmental laws, rules
and regulations.
13. ASBESTOS REMOVAL. Landlord and Tenant agree that the asbestos contained in
the soffit area below the RB 5 Space needs to be removed. Subject to the
provisions of Section 16.iii. below, Landlord agrees to remove said
asbestos on or before November 30, 1994, and Landlord shall waive any claim
it may have against Tenant with respect to the asbestos contained in the
soffit area below the RB 5 Space.
14. RIGHT OF FIRST REFUSAL. Tenant hereby grants to Landlord during the term
of the Lease, the right of first refusal to lease to or otherwise provide
Tenant space for any expansion or other additional space requirements of
Buckbee Mears St. Paul, a division of BMC Industries, Inc., in the City of
St. Paul. Tenant shall give Landlord written notice of its intent to
expand its operations in St. Paul at least 90 days prior to Tenant's need
for expanded space. Within 10 days of Landlord's receipt of said notice,
Landlord shall advise Tenant in writing that Landlord intends to
accommodate Tenant's expansion needs. Thereafter, Landlord and Tenant
shall promptly and diligently negotiate in good faith with respect to
Landlord's providing of space to meet Tenant's expansion needs, whether in
the Complex or at other locations owned or leased by Landlord in St. Paul.
Notwithstanding
5
<PAGE>
the foregoing, said right of first refusal shall not apply to Tenant's move
of some of its offices in conjunction with this Amendment to the building
at 7th Street and Wall Street owned by Tenant.
15. PS 228 SPACE LEASE. Landlord and Tenant hereby acknowledge and agree that
the Lease Agreement by and between Landlord and Tenant dated May 31, 1988
with respect to the PS 228 Space is terminated as of the effective date of
this Amendment. As of the effective date of this Amendment, the PS 228
Space shall be a portion of the Demised Premises, subject to the terms and
conditions of the Lease as modified by this Amendment.
16. CONDITIONS PRECEDENT. Notwithstanding the above-stated effective date of
this Amendment, nor anything contained to the contrary herein, this
Amendment shall not be effective until the following conditions precedent
have been satisfied:
i. Tenant shall have received final approval from the City of St. Paul
for a grants in the amount of: (a) approximately $1,000,000.00 to
be distributed to Tenant over the next three to four years for
Tenant's purchase of equipment to be used in its St. Paul
facilities, and (b) approximately $80,000.00 from the City of St.
Paul to reimburse Tenant for relocation costs with respect to
Tenant's move of its Maplewood facility to the Demised Premises; and
ii. Tenant shall have executed a three year contract with its union
employees at its Buckbee-Mears St. Paul division upon terms and
conditions satisfactory to Tenant; and
iii. Landlord and the Port Authority of St. Paul shall have entered into
an Amendment to the Lease between Landlord and the Port Authority of
St. Paul with respect to the Complex upon terms and conditions
satisfactory to Landlord in its sole discretion, said terms to
include but not be limited to (a) Landlord's obligations to the Port
Authority being reduced to the extent this Amendment reduces
Tenant's rent obligations to Landlord, and (b) the Port Authority of
St. Paul approving a loan to Landlord with respect to the asbestos
removal work described in Section 13 above.
iv. Landlord shall have received written approval from Century Life
Insurance Company regarding the form and substance of this
Amendment.
In the event the conditions precedent described in this Section 16 are not
satisfied prior to July 30, 1994, this Amendment shall be null and void and
be of no further effect.
17. NO FURTHER AMENDMENT. Except as specifically provided herein, the terms
and conditions of the Lease are hereby confirmed and shall continue in full
force and effect. In the event of any inconsistency between the terms of
this Amendment and any other terms of the Lease, the provisions of this
Amendment shall control.
18. LEASE IN FULL FORCE AND EFFECT. Tenant acknowledges and agrees that the
Lease is fully enforceable against the Tenant in accordance with its terms
and that Tenant has no defenses, counterclaims, rights of offset or
deductions of any kind whatsoever under the Lease.
6
<PAGE>
19. MODIFICATION. The terms of this Amendment or the Lease shall not be
amended or otherwise modified except in a writing signed by both Landlord
and Tenant.
IN WITNESS WHEREOF, this Amendment of Lease has been executed this 6th day
of April, 1994.
LANDLORD:
GMT CORPORATION
By [Signature]
--------------------------------------
Its
--------------------------------------
TENANT:
BMC INDUSTRIES, INC.
By [Signature]
--------------------------------------
Its
--------------------------------------
7
<PAGE>
WAIVER OF CONDITIONS PRECEDENT
THIS WAIVER OF CONDITIONS PRECEDENT (this "Waiver") is made as of the ____ day
of _________, 199__ by and between GMT CORPORATION, a Delaware corporation,
whose address is 245 East Sixth Street, St. Paul, Minnesota 55101 ("Landlord")
and BMC INDUSTRIES, INC., a Minnesota corporation, whose address is 245 East
Sixth Street, St. Paul, Minnesota 55101 ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant entered into an Amendment of Lease (the
"Amendment") dated April 6, 1994 with respect to certain demised premises in the
property located at 245 East Sixth Street and 413 Wacouta Street, St. Paul,
Minnesota. A copy of said Amendment is attached hereto as Exhibit A; and
WHEREAS, Section 16 of the Amendment sets forth certain conditions precedent to
the Amendment taking effect; and
WHEREAS, Landlord and Tenant desire to waive said conditions precedent or
otherwise agree to said conditions precedent being satisfied.
NOW, THEREFORE, in consideration of the foregoing premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Tenant and Landlord agree that except for those set forth in Section 16.iii
of the Amendment, the conditions precedent to the Amendment becoming
effective set forth in Section 16 of the Amendment have been all either
waived or completely satisfied.
2. Tenant and Landlord further agree that the terms of the Lease as amended by
the Amendment, are to be further amended as follows:
A. Section 2 of the Amendment is hereby amended such that the effective
date of the Amendment of the Lease shall be as of August 1, 1994.
B. The last sentence of Section 10(b) is amended such that the words
"August, 1994 through December, 1994" are replaced with "November,
1994 through March, 1995".
C. The second sentence of Section 11 of the Amendment is hereby amended
such in addition to the two (2) enclosed parking stalls provided for
therein, Tenant shall have the right to use an additional five general
parking stalls located in the parking ramp.
D. The second sentence of Section 15 of the Amendment is hereby amended
such that "November 30, 1994" is replaced with "May 31, 1995".
E. Section 9 of the Amendment is hereby amended such that a new
subsection (e) is added as follows:
(e) Landlord agrees to, at its cost, expend up to $10,000 with regard
to the resurfacing of the alley dividing the Complex. Landlord
will perform such work in conjunction with Landlord's repair of
the parking ramp.
<PAGE>
Landlord and Tenant agree to further document the amendments to the
Amendment set forth above in such other documentation as either party may
reasonably require.
3. This Waiver may be executed in counterpart originals, provided, however,
this Waiver shall not be effective as against either party unless and until
both Landlord and Tenant have executed this Waiver.
IN WITNESS WHEREOF, this Waiver has been executed as of the date first written
above.
Landlord: Tenant:
GMT CORPORATION BMC INDUSTRIES, INC.
By: __________________________________ By: _____________________________
Its: __________________________________ Its: _____________________________
2
<PAGE>
AMENDMENT TO LEASE
December 7, 1994
The terms of a certain Lease dated June 25, 1987 and as amended 12/4/92 by and
between ATS II Associates Limited Partnership and BMC Industries, Inc. for
offices at Suite 400, Two Appletree Square, Bloomington, Minnesota, are hereby
amended by mutual consent upon the same terms and conditions except that
effective January 15, 1995:
* The Leased Premises shall be expanded to 8,704 rentable square feet (7,739
sq. ft. existing space and 965 sq. ft. expansion space) as shown on the
attached Exhibit A.
* The Annual Base Rent shall be increased by Twelve Thousand Three Hundred
and 00/100 Dollars ($12,300.00), payable in equal monthly installments of
One Thousand Twenty-Five and 00/100 Dollars ($1,025.00).
* For the 965 sq.ft. expansion space, Base Taxes shall be $2.36 per sq. ft.
and Base Operating Costs shall be $3.83 per sq. ft.
* Landlord shall paint existing painted surfaces and shampoo carpet in
expansion space.
Witness our hands and seals this day of , 19 .
--------- ------------ ----
In presence of : ATS II ASSOCIATES LIMITED PARTNERSHIP
APPLETREE PROPERTIES, INC., AGENT
------------------------------- By:
------------------------------------------
Its:
-----------------------------------------
TENANT BMC INDUSTRIES, INC.
[SIGNATURE]
-------------------------------- By:
------------------------------------------
Its:
-----------------------------------------
By: /s/ Michael P. Hawks
------------------------------------------
Its: TREASURER AND SECRETARY
---------------------------------------------
<PAGE>
[FLOOR PLAN]
EXHIBIT A
TWO APPLETREE SQUARE
612 854-3248
BLOOMINGTON, MINNESOTA 55420
4TH FLOOR PLAN
[LEGEND]
<PAGE>
AMENDMENT TO LEASE
February 16, 1995
The terms of a certain lease dated June 25, 1987 and as amended 12/4/92 and
12/7/94 by and between ATS II Associates Limited Partnership and BMC
Industries, Inc. for offices at Suite 400, Two Appletree Square, Bloomington,
Minnesota, are hereby amended by mutual consent upon the same terms and
conditions except that effective April 1, 1995:
* The Leased Premises shall be expanded to 9,486 rentable square feet (8,704
sq. ft. existing space and 782 sq. ft. expansion space) as shown on the
attached Exhibit A.
* The annual Base Rental shall be increased by Nine Thousand Nine Hundred
Seventy Two and 00/100 Dollars ($9,972.00) payable in equal monthly
installments of Eight Hundred Thirty One and 00/100 Dollars ($831.00).
* For the 782 sq.ft. expansion space, Base Taxes and Base Operating Costs
shall be the 1994 actual cost per square foot.
* Tenant, at its sole cost, shall be responsible for all demolition,
construction, electrical and decorating costs.
Witness our hands and seals this day of , 19 .
--------- ------------ ----
In Presence of : ATS II ASSOCIATES LIMITED PARTNERSHIP
APPLETREE PROPERTIES, INC., AGENT
------------------------------- By:
------------------------------------------
Its:
-----------------------------------------
TENANT BMC INDUSTRIES, INC.
-------------------------------- By:
------------------------------------------
Its:
-----------------------------------------
By: /s/ Michael P. Hawks
------------------------------------------
Its: TREASURER AND SECRETARY
-----------------------------------------
<PAGE>
[FLOOR PLAN]
EXHIBIT A
TWO APPLETREE SQUARE
612 854-3248
BLOOMINGTON, MINNESOTA 55420
4TH FLOOR PLAN
[LEGEND]
<PAGE>
SECOND AMENDMENT TO LEASE
This indenture, made as of the 14th day of October 1994, by and between
Lutheran Brotherhood, hereinafter referred to as "Landlord", and BMC Industries,
Inc., successor in interest to Poly Optics Company, hereinafter referred to as
"Tenant".
WITNESSETH
WHEREAS, Landlord and Tenant's predecessor, Poly Optics Company, entered
into a certain Lease Agreement, dated March 22, 1989, and as extended by
Agreement to Extend Lease dated March 30, 1992, and as amended by Amendment to
Lease dated October 15, 1993 (hereinafter collectively referred to as the
"Lease") under which Landlord demised to Tenant the Premises commonly known as
6800 Shingle Creek Parkway, Bays 230-300, Brooklyn Center, Minnesota, and;
WHEREAS, Landlord and Tenant desire to amend the Lease so as to increase
the rents payable thereunder, and increase the area contained within the Leased
Premises; and
WHEREAS, it is intended by this instrument to amend the Lease,
NOW THEREFORE, in consideration of the Premises, and of the covenants and
agreements herein undertaken to be kept and performed, it is agreed as follows:
1. Effective December 1, 1994, and continuing until the expiration of the
Lease, the area of the Leased Premises shall be changed from 32,208 total
square feet comprised of 1,660 square feet of office space and 30,548
square feet of warehouse space contained within Bays 230-300 to 36,856
total square feet comprised of 1,660 square feet of office space and 35,196
square feet of warehouse space contained within Bays 230-300 and 470.
2. Effective December 1, 1994 and continuing until expiration of the Lease,
Paragraph 3 of the Amendment to Lease, and Section 5B of the Lease shall
each be deleted in its respective entirety and replaced with the following:
"The ground floor area of the Leased Premises occupied by Tenant
(approximately 36,956 square feet) constitutes 21-7/8 of the total ground
floor area (of 167,564 square feet) in the Building of which the Leased
Premises are a part. Landlord will bill Tenant monthly, or less often at
its option, for Tenant's share of the additional rental due and payable.
3. Anything else to the contrary contained within the Lease notwithstanding,
for the period from the 1st day of December, 1994, through and including
the last day of March, 1998, Tenant shall pay to the Landlord, as Base
Rent, over and above the other and additional payments to be made by Tenant
for Leased Premises, the sum of Four Hundred and Fourteen Thousand Eight
Hundred Dollars ($414,800), payable monthly in advance in monthly
installments according to the following schedule:
For the period of December 1, 1994 through and including March 31, 1995,
monthly base rent shall be paid at the rate of $10,118.00 per month.
For the period of April 1, 1995 through and including March 31, 1998,
monthly base rent shall be paid at the rate of $10,398.00.
4. Tenant agrees to accept the portion of the Leased Premises located within
Bay 470 and consisting of 4,648 square feet in its "as is" condition. The
Landlord shall have no obligation
<PAGE>
to perform any improvements to this portion of the Leased Premises.
Except as herein specifically amended, all other terms, covenants, and
conditions of the Lease shall remain in full force and effect, and the same are
hereby ratified and confirmed.
<PAGE>
Submission of this instrument to Tenant, or its agents or attorneys for
examination, review, consideration or signature does not constitute or imply an
offer to Lease, reservation of space, or option to Lease, and this instrument
shall have no binding legal effect until execution hereof by both Landlord and
Tenant or their respective agents.
IN WITNESS WHEREOF, Landlord and Tenant have executed this within agreement
as of the date and year first above written.
TENANT: LANDLORD:
BMC INDUSTRIES, INC. LUTHERAN BROTHERHOOD
By: /s/ Donald Hill 11-16-94 By: /s/ Clifford W. Habeck
---------------------------- ----------------------------
DONALD HILL CLIFFORD W. HABECK
ITS: PLANT CONTROLLER ITS: ASSISTANT VICE PRESIDENT
<PAGE>
11/30/94
CREDIT AGREEMENT
This Credit Agreement (as amended or modified and in effect from time to
time, this "AGREEMENT"), dated as of September 30, 1994, is between BMC
Industries, Inc., a Minnesota corporation (the "COMPANY"), and The First
National Bank of Chicago (the "BANK"). The parties hereto agree as follows:
1. DEFINITIONS
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Company or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Rate Loans, a day other than Saturday or Sunday on which
banks are open for business in Chicago and New York and on which dealings in
United States dollars are carried on in the offshore interbank market and (ii)
for all other purposes, a day other than Saturday or Sunday on which banks are
open for business in Chicago.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with generally accepted accounting principles consistently
applied.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles consistently applied.
"COMMITMENT" means the obligation of the Bank to make Loans not exceeding
$10,000,000 at any one time outstanding, as such amount may be modified from
time to time.
"CONSOLIDATED NET INCOME" means the net income of the Company and its
Subsidiaries on a consolidated basis after excluding the sum of (i) any net
losses or any undistributed net income of any minority interest held by the
Company, (ii) the gain or loss resulting from the sale of any capital assets
other than in the ordinary course of business, (iii) extraordinary or non-
recurring gains or losses, provided they
<PAGE>
are identified as such in the Company's audited financial statements and (iv)
any gain resulting from any write-up of assets.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit; provided
that, (a) with respect to the Company, its obligations under that certain Pledge
Declaration made to Deutsche Bank AG dated September 23, 1994, and any
extension, increase, substitution or replacement therefor, (b) obligations of
the Company or any Subsidiary to reimburse the issuer of any letter of credit
issued in connection with any obligation of the Company, and (c) any transaction
described in Section 6.7(vii), shall in each case not be a Contingent Obligation
hereunder.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by the Bank from time to time, changing when and as
said corporate base rate changes.
"DEFAULT" means an event described in Section 7.
"DOMESTIC SUBSIDIARY" means any Subsidiary that is organized under the laws
of the United States of America or a jurisdiction thereof and that conducts
substantially all of its business and has substantially all of its property
within the United States of America.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Rate Loan for
the relevant Eurodollar Interest Period, the rate determined by the Bank to be
the rate at which deposits in U.S. dollars are offered by the Bank to first-
class banks in the offshore interbank market at approximately 10 a.m. (Central
Standard Time) two Business Days prior to the first day of such Eurodollar
Interest Period, in the approximate amount of the relevant Eurodollar Rate Loan
and having a maturity approximately equal to such Eurodollar Interest Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Eurodollar Rate Loan,
a period of one, two, three or six months commencing on a Business Day selected
by the Company pursuant to this Agreement. Such Eurodollar Interest Period
shall end on (but exclude) the day which corresponds numerically to such date
one, two, three or six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Eurodollar Interest Period shall end on the last Business
Day of such next, second, third or sixth succeeding month. If a Eurodollar
Interest Period would otherwise end on a day which is not a Business Day, such
Eurodollar Interest Period shall end on the
2
<PAGE>
next succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new month, such Eurodollar Interest Period shall end on
the immediately preceding Business Day.
"EURODOLLAR RATE" means, with respect to a Eurodollar Rate Loan for each
day during the relevant Eurodollar Interest Period, the sum of (i) the quotient
of (a) the Eurodollar Base Rate applicable to that Eurodollar Interest Period
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to that Eurodollar Interest Period plus (ii) (a) 0.50% per annum
during any period the ratio described in Section 6.10 is not greater than .35 to
1.0; (b) 0.60% per annum during any period the ratio described in Section 6.10
is greater than .35 to 1.0 and not greater than .50 to 1.0; and (c) 0.75% per
annum during any period the ratio described in Section 6.10 is greater than .50
to 1.0. The Eurodollar Rate shall be rounded, if necessary, to the next higher
1/16 of 1%.
"EURODOLLAR RATE LOAN" means a Loan that bears interest at the Eurodollar
Rate.
"FLOATING RATE" means a rate per annum equal to the Corporate Base Rate.
"FLOATING RATE LOAN" means a Loan that bears interest at the Floating Rate.
"FOREIGN SUBSIDIARY" means a Subsidiary which is not a Domestic Subsidiary.
"INDEBTEDNESS" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the purchase price of property or services
deferred beyond 12 months (other than accounts payable and accrued expenses
arising in the ordinary course of such Person's business payable on terms
customary in the trade, obligations to then current or former employees of the
Company or any Subsidiary, and obligations in settlement of claims made by Eagle
Industries/Armorlite), (iii) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv) obligations which are evidenced
by notes, acceptances, and other such instruments, except for any such
instruments representing obligations (a) to then current or former employees of
the Company or any Subsidiary, (b) in settlement of claims made by Eagle
Industries/Armorlite, and (c) any such instrument representing any reimbursement
obligation under a letter of credit excluded from the definition of Contingent
Obligations, (v) Capitalized Lease Obligations, and (vi) Contingent Obligations.
For the purpose of computing the "Indebtedness" of any Person, there shall be
excluded any particular Indebtedness to the extent that, upon or prior to the
maturity thereof, there shall have been deposited with the proper depositary in
trust the necessary funds (or evidences of such Indebtedness, if permitted by
the instrument creating such Indebtedness) for the payment, redemption or
satisfaction of such Indebtedness; and thereafter such funds and evidences of
Indebtedness so deposited shall not be included in any computation of the assets
of such Person. Any determination of "Indebtedness" provided to be for the
Company and its Subsidiaries
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on a consolidated basis in accordance with generally accepted accounting
principles consistently applied shall require the elimination of all inter-
company items.
"INTEREST COVERAGE RATIO" means, as of any date of determination and
calculated for the period of four consecutive fiscal quarters ended as at such
date, the ratio of (i) the sum of (a) Consolidated Net Income plus (b) Interest
Expense plus (c) income taxes, to (ii) Interest Expense, all determined for the
Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"INTEREST EXPENSE" means, for any period of calculation and without
duplication, all interest, whether paid in cash, accrued as a liability or
capitalized, on Indebtedness during such period, all calculated for such period
for the Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"LENDING INSTALLATION" means any office, branch, subsidiary or affiliate of
the Bank.
"LIEN" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement, lessor's interest under a Capitalized
Lease or analogous instrument, in, of or on any Person's assets or properties in
favor of any other Person.
"LOAN" means any loan made by the Bank to the Company pursuant to this
Agreement and the Note.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) the
validity or enforceability of any material provision of this Agreement.
"NET WORTH" means the sum of retained earnings, stockholders' common
equity, preferred stock, plus minority interests, minus treasury stock
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"NOTE" means a promissory note in substantially the form of Exhibit "A"
hereto, duly executed and delivered to the Bank by the Company, including any
amendment, modification, renewal or replacement of such promissory note.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid interest
on the Note, all accrued and unpaid facility fees and all other obligations of
the Company to the Bank arising under this Agreement and the Note.
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"PERSON" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.
"RESERVE REQUIREMENT" means with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities (in the case of Eurodollar Rate Loans).
"REVOLVING CREDIT TERMINATION DATE" means September 30, 1996.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SUBSIDIARY" means any corporation more than 50% of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries, or any similar business organization which is so owned
or controlled.
"TOTAL CAPITALIZATION" means the sum of Net Worth plus Indebtedness
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
2. THE LOANS
2.1. THE LOANS. From and including the date of this Agreement and prior to
the Revolving Credit Termination Date, the Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Company from time
to time in amounts not to exceed in the aggregate at any one time outstanding
the amount of the Commitment. Subject to the terms of this Agreement, the
Company may borrow, repay and reborrow at any time prior to the Revolving Credit
Termination Date. The Loans may be Floating Rate Loans or Eurodollar Rate
Loans, or a combination thereof, selected by the Company in accordance with
Section 2.3. The Loans shall be repaid
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in full on the Revolving Credit Termination Date. The Bank may book the Loans
at any Lending Installation. The Company may from time to time pay all
outstanding Floating Rate Loans, or any portion of the outstanding Floating Rate
Loans, without penalty or premium. A Eurodollar Rate Loan may not be paid
prior to the last day of the applicable Eurodollar Interest Period.
2.2. FACILITY FEES AND REDUCTION OF THE COMMITMENT. The Company agrees to
pay to the Bank a facility fee of the per annum percentages set forth below on
the daily unborrowed amount of the Commitment from the date hereof to and
including the Revolving Credit Termination Date, payable in arrears on the last
day of each calendar quarter hereafter and on the Revolving Credit Termination
Date. The per annum percentage applicable to the determination of the foregoing
facility fee shall be;
(i) 0.15% during any period the ratio described in Section 6.10 is
not greater than .35 to 1.0;
(ii) 0.175% during any period the ratio described in Section 6.10 is
greater than .35 to 1.0 and not greater than .50 to 1.0; and
(iii) 0.20% during any period the ratio described in Section 6.10
is greater than .50 to 1.0.
The Company may permanently reduce the Commitment in whole, or in part, in
integral multiples of $1,000,000 upon at least ten Business Days' written notice
to the Bank, which shall specify the amount of any such reduction, provided,
however, that the amount of the Commitment may not be reduced below the
outstanding principal amount of the Loans. All accrued facility fees shall be
payable on the effective date of any termination of the obligations of the Bank
to make Loans hereunder.
2.3. METHOD OF SELECTING RATE OPTIONS AND EURODOLLAR INTEREST PERIODS. The
Company shall select the Rate Option and Eurodollar Interest Period, if any,
applicable to each Loan from time to time. The Company shall give the Bank
irrevocable borrowing notice (in accordance with Section 2.5 below) not later
than 10:00 a.m. (Central Time) on the borrowing date of each Floating Rate Loan
and three Business Days before the borrowing date for each Eurodollar Rate Loan,
specifying:
(i) the borrowing date, which shall be a Business Day, of such Loan,
(ii) the aggregate amount of such Loan,
(iii) the Rate Option selected for such Loan, and
(iv) in the case of each Eurodollar Rate Loan, the Eurodollar
Interest Period applicable thereto.
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Each Eurodollar Rate Loan shall bear interest from and including the first day
of the Eurodollar Interest Period applicable thereto to (but not including) the
last day of such Eurodollar Interest Period at the interest rate determined as
applicable to such Eurodollar Rate Loan. If at the end of a Eurodollar
Interest Period for an outstanding Eurodollar Rate Loan, the Company has failed
to select a new Rate Option or to pay such Eurodollar Rate Loan, then such Loan
shall be converted to a Floating Rate Loan on and after the last day of such
Eurodollar Interest Period until paid or until the effective date of a new Rate
Option with respect thereto selected by the Company. An outstanding Floating
Rate Loan may be converted to a Eurodollar Rate Loan at any time subject to the
notice provisions applicable to the type of Loan selected. The Company may not
select a Eurodollar Rate for a Loan if there exists a Default or Unmatured
Default hereunder. The Company shall not select a Eurodollar Interest Period
which would end after the Revolving Credit Termination Date. Each Eurodollar
Rate Loan shall be in the minimum amount of $100,000.
2.4. METHOD OF PAYMENT. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Bank at the Bank's address specified pursuant
to Section 13, or at any other Lending Installation of the Bank specified in
writing by the Bank to the Company, by noon (local time) on the date when due.
The Bank is hereby authorized to charge the account of the Company maintained
with the Bank for each payment of principal, interest and fees as it becomes due
hereunder.
2.5. THE NOTE; TELEPHONIC NOTICES. The Bank is hereby authorized to record
the principal amount of each of the Loans and each repayment on the schedule
attached to its Note provided, however, that the failure to so record shall not
affect the Company's obligations under the Note. The Company hereby authorizes
the Bank to extend Loans and effect Rate Option selections based on telephonic
notices made by any person or persons the Bank in good faith believes to be
acting on behalf of the Company. The Company agrees to deliver promptly to the
Bank a written confirmation, if such confirmation is requested by the Bank, of
each telephonic notice signed by an authorized officer of the Company. If the
written confirmation differs in any material respect from the action taken by
the Bank, the records of the Bank shall govern absent manifest error.
2.6. INTEREST PAYMENT DATES; INTEREST BASIS; APPLICABLE MARGIN.
(i) Interest accrued on a Eurodollar Rate Loan shall be payable on the
last day of its applicable Eurodollar Interest Period and on any date
on which the Eurodollar Rate Loan is paid or prepaid, whether due to
acceleration or otherwise. Interest accrued on each Eurodollar Rate
Loan having a Eurodollar Interest Period longer than three months
shall also be payable on the last day of each three-month interval
during such Eurodollar Interest Period. Interest accrued on a
Floating Rate Loan shall be payable on the last day of each calendar
quarter hereafter and on any date on which the Floating Rate Loan is
paid or prepaid, whether due to
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acceleration or otherwise. Interest and commitment fees shall be
calculated for actual days elapsed on the basis of a 360-day year.
Interest shall be payable for the day a Loan is made but not for the
day of any payment on the amount paid if payment is received prior to
noon (local time) at the place of payment. If any payment of
principal of or interest on a Loan shall become due on a day which is
not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension
of time shall be included in computing interest in connection with
such payment.
(ii) The applicable margin to be utilized with respect to each Eurodollar
Rate Loan and for Facility Fees payable hereunder, shall be subject to
adjustment (upward or downwards, as appropriate) based on the
Company's indebtedness to Total Capitalization Ratio as at the end of
each fiscal quarter in accordance with the definition of Eurodollar
Rate and the provisions of Section 2.2. The Company's Indebtedness to
Total Capitalization Ratio as at the last day of each fiscal quarter
shall be determined from the then most recent compliance certificate
and annual or quarterly financial statements of the Company in each
case delivered by the Company to the Bank pursuant to Section 6.1.
The adjustment, if any, to the applicable margin shall be effective as
of the first day of the fiscal quarter immediately following the end
of the fiscal quarter to which the compliance certificate and
financial statements of the Company showing an Indebtedness to Total
Capitalization Ratio requiring an adjustment relate, except with
respect to any Eurodollar Rate Loan which is payable between such
quarter-end and the date such certificate and financial statements are
delivered by the Company, with respect to which no adjustment shall be
made.
2.7. TERMINATION OF PRIOR AGREEMENT. This Agreement and the Note replace
and supersede the letter agreement between the Company and the Bank, dated
September 30, 1993 (the "LETTER AGREEMENT") and any promissory notes issued in
connection therewith. The Company and the Bank agree that, upon the execution
hereof, the Letter Agreement is hereby terminated and cancelled.
3. CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or compliance of the
Bank with such,
(i) subjects the Bank or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from the Company
(excluding taxation of the overall net income of the Bank or
applicable Lending Installation), or changes the basis of taxation of
payments to the Bank in respect of its Loans or other amounts due it
hereunder, by an amount deemed material by the Bank, or
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(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
the Bank or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Rate Loans), by an amount deemed material by
the Bank, or
(iii) imposes any other condition the result of which is to increase
the cost to the Bank or any applicable Lending Installation of
making, funding or maintaining Loans or reduces any amount
receivable by the Bank or any applicable Lending Installation in
connection with Loans, or requires the Bank or any applicable
Lending Installation to make any payment calculated by reference
to the amount of Loans held or interest received by it, by an
amount deemed material by the Bank, or
(iv) affects the amount of capital required or expected to be maintained by
the Bank or its Lending Installation or any corporation controlling
the Bank and the Bank determines the amount of capital required is
increased by or based upon the existence of this Agreement or its
obligation to make Loans hereunder or of commitments of this type, by
an amount deemed material by the Bank,
then, within 15 days of demand by the Bank, the Company shall pay the Bank that
portion of such increased expense incurred (including, in the case of Section
3.1 (iv), any reduction in the rate of return on capital to an amount below that
which it could have achieved but for such law, rule, regulation, policy,
guideline or directive and after taking into account the Bank's policies as to
capital adequacy) or reduction in an amount received which the Bank determines
is attributable to making, funding and maintaining its Loans and its Commitment.
3.2. AVAILABILITY OF RATE OPTIONS. If the Bank determines that maintenance
of its Eurodollar Rate Loans at a suitable Lending Installation would violate
any applicable law, rule, regulation, or directive, whether or not having the
force of law, or if the Bank determines that (i) deposits of a type and maturity
appropriate to match fund Eurodollar Rate Loans are not available to it or (ii)
a Rate Option does not accurately reflect the cost of making or maintaining a
Loan at such Rate Option, then the Bank may suspend the availability of the
affected Rate Option and require any Eurodollar Rate Loans outstanding under an
affected Rate Option to be repaid or converted to an unaffected Rate Option.
3.3. FUNDING INDEMNIFICATION. If any payment of a Eurodollar Rate Loan
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Rate Loan is not made on the date specified by the Company for any
reason other than default by the Bank, the Company will indemnify the Bank for
any loss or cost incurred by it
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resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurodollar
Rate Loan.
3.4. BANK STATEMENTS; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, the Bank shall designate an alternate Lending Installation with
respect to Eurodollar Rate Loans to reduce any liability of the Company to the
Bank under Section 3.1 or to avoid the unavailability of a Rate Option under
Section 3.2, so long as such designation is not disadvantageous to the Bank.
The Bank shall deliver a written statement as to the amount due, if any, under
Section 3.1 or 3.3. Such written statement shall set forth in reasonable detail
the calculations upon which the Bank determined such amount and shall be final,
conclusive and binding on the Company in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Rate Loan shall be calculated as though the Bank funded its
Eurodollar Rate Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Eurodollar
Rate applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement shall
be payable on demand after receipt by the Company of the written statement. The
obligations of the Company under Sections 3.1 and 3.3 shall survive payment of
the Obligations and termination of this Agreement.
4. CONDITIONS PRECEDENT
4.1. INITIAL LOAN. The Bank shall not be required to make the initial Loan
hereunder unless the Company has furnished to the Bank such opinions of counsel,
certificates of incumbency, resolutions, by-laws and articles of incorporation
as the Bank may reasonably request.
4.2. EACH LOAN. The Bank shall not be required to make any Loan, unless on
the applicable borrowing date (i) there exists no Default or Unmatured Default,
(ii) the representations and warranties contained in Article V are true and
correct as of such borrowing date except that the reference to financial
statements in Section 5.4 shall be deemed to refer to the financial statements
then most recently furnished to the Bank hereunder, and the reference to
financial statements in Section 5.5 shall include all financial statements then
previously furnished to the Bank under Section 6.1, and (iii) all material legal
matters incident to the making of such Loan shall be reasonably satisfactory to
the Bank and its counsel. The Bank may require a certificate of compliance with
the conditions described in Sections 4.2(i) and (ii) from an officer of the
Company as a condition to making any Loan hereunder.
5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Company and the
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing
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under the laws of its jurisdiction of incorporation and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where the failure to have such authority would not have a
Material Adverse Effect.
5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power and
authority and legal right to execute and deliver this Agreement and the Note and
to perform its obligations thereunder. The execution and delivery by the
Company of this Agreement and the Note and the performance of its obligations
thereunder have been duly authorized by all necessary corporate proceedings, and
this Agreement and the Note each constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their terms
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and delivery
by the Company of this Agreement and the Note, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any Subsidiary or the Company's or any
Subsidiary's articles of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which the Company or any Subsidiary is a
party or is subject, or by which it, or its property, is bound, or conflict with
or constitute a default thereunder, or result in the creation or imposition of
any Lien in, of or on the property of the Company or a Subsidiary pursuant to
the terms of any such indenture, instrument or agreement. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is required
in connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, this Agreement or the Note.
5.4. FINANCIAL STATEMENTS. The June 30, 1994 consolidated financial
statements of the Company and the Subsidiaries heretofore delivered to the Bank
were prepared in accordance with generally accepted accounting principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Company and the
Subsidiaries at such date and the consolidated results of their operations for
the period then ended.
5.5. LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Company or any Subsidiary which might have a Material Adverse Effect. Other
than any liability incident to such litigation, arbitration or proceedings which
has or may become a Contingent Obligation, the Company has no material
Contingent Obligations not provided for or disclosed in the financial statements
referred to in Section 5.4.
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5.6. REGULATION U. Margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System) constitutes less than 25% of those
assets of the Company and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
5.7. COMPLIANCE WITH LAWS. The Company and its Subsidiaries have complied
in all materials respects with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of their
respective businesses or the ownership of their respective properties.
6. COVENANTS
During the term of this Agreement, unless the Bank shall otherwise consent
in writing:
6.1. FINANCIAL REPORTING. The Company will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Bank:
(i) Within 90 days after the close of each of its fiscal years occurring
after the date hereof, an unqualified (except for qualifications
relating to changes in accounting principles or practices reflecting
changes in generally accepted principles of accounting and required or
approved by the Company's independent certified public accountants)
audit report certified by independent certified public accountants,
acceptable to the Bank, prepared in accordance with generally accepted
accounting principles on a consolidated and consolidating basis
(consolidating statements need not be certified by such accountants)
for itself and the Subsidiaries, including balance sheets as of the
end of such period, related profit and loss and reconciliation of
surplus statements, and a statement of cash flows.
(ii) Within 45 days after the close of the first three quarterly periods of
each of its fiscal years occurring after the date hereof, for itself
and the Subsidiaries, consolidated and consolidating unaudited balance
sheets as at the close of each such period and consolidated and
consolidating profit and loss and reconciliation of surplus statements
and a statement of cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by an
officer of the Company.
(iii) Together with the financial statements required hereunder, a
compliance certificate signed by a financial officer of the Company
showing the calculations necessary to determine compliance with
Sections 6.9, 6.10 and 6.11 of this Agreement and stating that no
Default or Unmatured Default existed as of the date of the
corresponding financial statement,
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or if any Default or Unmatured Default existed as of the date of the
corresponding financial statement, stating the nature and status
thereof.
(iv) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(v) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Company or any Subsidiary files with the Securities and
Exchange Commission.
(vi) Such other information (including non-financial information) as the
Bank or any Bank may from time to time reasonably request.
6.2. USE OF PROCEEDS. The Company will, and will cause each Subsidiary to,
use the proceeds of the Loans for general corporate purposes. The Company will
not, nor will it permit any Subsidiary to, use any of the proceeds of the Loans
to purchase or carry any "margin stock" (as defined in Regulation U) in excess
of that which would be permitted under Section 5.6.
6.3. CONDUCT OF BUSINESS. The Company will, and will cause each Subsidiary
to, carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted or at
the time any such Subsidiary is created or acquired and to do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, except that the Company may dissolve a Subsidiary if such
dissolution would not have a Material Adverse Effect.
6.4. TAXES. The Company will, and will cause each Subsidiary to, pay when
due all taxes, assessments and governmental charges and levies upon it or its
income, profits or property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
6.5. COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.
6.6. MERGER. The Company will not, nor will it permit any Subsidiary to,
merge or consolidate with or into any other Person, except to the extent the
Company or any Subsidiary is the surviving entity and except that a Subsidiary
may merge with the Company or a wholly-owned Subsidiary; provided that, as a
result of any merger involving the Company, the Company is the survivor and
immediately prior to and
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immediately after any such permitted merger there shall be no Default or
Unmatured Default hereunder.
6.7. LIENS. The Company will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the property of the
Company or any Subsidiary, except:
(i) Liens for taxes, assessments or governmental charges or levies on its
property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and
by appropriate proceedings.
(ii) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens, deposits, pledges or liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations or
surety or appeal bonds and other similar liens arising in the ordinary
course of business which secure payment of obligations not more than
60 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves shall have
been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar
legislation.
(iv) Utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing
with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere
with the use thereof in the business of the Company or the
Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Liens of or resulting from any judgments or awards in an amount not
exceeding $5,000,000, in the aggregate, the time for the appeal or
petition for rehearing of which shall not have expired, or in respect
of which the Company or any Subsidiary shall at any time in good faith
be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review
shall have been secured.
(vii) Liens which may be deemed to exist on notes, drafts or instruments
received in payment of trade receivables owing to any Foreign
Subsidiary which are sold or otherwise negotiated by such Foreign
Subsidiary with recourse.
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(viii) Liens securing Indebtedness of a Subsidiary to the Company or to a
Subsidiary.
(ix) Liens incurred after the date hereof given to secure the payment of
the purchase price incurred in connection with the acquisition,
construction or improvement of fixed assets useful and intended to be
used in carrying on the business of the Company or a Subsidiary,
including Liens existing on such fixed assets at the time of
acquisition thereof or at the time of acquisition by the Company or a
Subsidiary of any business entity then owning such fixed assets,
whether or not such existing Liens were given to secure the payment of
the purchase price of the fixed assets to which they attach so long as
they were not incurred, extended or renewed in contemplation of such
acquisition, provided that (i) the Lien shall attach solely to the
property acquired, constructed or improved and (ii) at the time of
acquisition, construction or improvement of such fixed assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens
on such fixed assets whether or not assumed by the Company or a
Subsidiary shall not exceed an amount equal to 100% of the lesser of
the total purchase price or fair market value at the time of
acquisition, construction or improvement of such fixed assets (as
determined in good faith by the Board of Directors of the Company).
(x) Any Lien on any asset existing at the time such asset is acquired by
the Company or one of its Subsidiaries or is merged into or
consolidated with the Company or one of its Subsidiaries and not
created in contemplation of such event and any extension, renewal or
replacement Lien arising out of the extension, renewal or replacement
of the related obligation secured by such Lien, so long as any such
replacement Lien does not extend to property not covered by the Lien
replaced or renewed.
6.8. NOTICE OF DEFAULT. The Company will, and will cause each Subsidiary
to, give prompt notice in writing to the Bank of the occurrence of any Default
or Unmatured Default.
6.9. INTEREST COVERAGE RATIO. As at the end of each fiscal quarter of the
Company, the Interest Coverage Ratio shall not be less than 2.5 to 1.0.
6.10. INDEBTEDNESS TO TOTAL CAPITALIZATION RATIO. As at the end of each
fiscal quarter of the Company, the ratio of Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied to Total Capitalization
shall not be greater than .55 to 1.0.
6.11. MINIMUM NET WORTH. As at the end of each fiscal quarter of the
Company, the Net Worth shall be at least $60 million plus 50% of aggregate
Consolidated Net Income earned after December 31, 1994.
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7. DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf of
the Company or any Subsidiary to the Bank under or in connection with this
Agreement, any Loan, or any certificate or information delivered in connection
with this Agreement or the Note shall be materially false on the date as of
which made.
7.2. Nonpayment of principal of the Note when due, or nonpayment of
interest upon the Note or of any facility fee or other obligations under this
Agreement or the Note within five days after the same becomes due.
7.3. The breach by the Company of any of the terms or provisions of
Sections 6.6 through 6.11.
7.4. The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty days after written notice from the
Bank.
7.5. Failure of the Company or any Subsidiary to pay any Indebtedness equal
to or exceeding $1,000,000 in the aggregate when due; or the default by the
Company or any Subsidiary in the performance of any term, provision or condition
contained in any agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause such Indebtedness to become due prior
to its stated maturity, or which continues unwaived for a period of 30 days or
more after it first becomes known to any officer of the Company and the effect
of which as of the end of such period is to permit the holder or holders of such
Indebtedness to cause such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of the Company or any Subsidiary shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the
Company or any Subsidiary shall not pay, or admit in writing its inability to
pay, its debts generally as they become due.
7.6. The Company or any Subsidiary shall (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or hereafter
in effect, (ii) make an assignment for the benefit of creditors, (iii) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (iv) institute any proceeding seeking an order
for relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate
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action to authorize or effect any of the foregoing actions set forth in this
Section 7.6 or (vi) fail to contest in good faith any appointment or proceeding
described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
Subsidiary, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for the Company or any Subsidiary or any substantial part of its
property, or a proceeding described in Section 7. 6 (iv) shall be instituted
against the Company or any Subsidiary and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30 consecutive days.
8. ACCELERATION AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Company, the obligations of the Bank to make Loans hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Bank. If any
other Default occurs, the Bank may terminate or suspend the obligations of the
Bank to make Loans hereunder, or declare the Obligations to be due and payable,
or both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Company hereby expressly waives.
8.2. PRESERVATION OF RIGHTS. No delay or omission of the Bank to exercise
any right under this Agreement or the Note shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Company to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of this Agreement or the Note whatsoever shall be valid
unless in writing signed by the Bank and then only to the extent in such writing
specifically set forth. All remedies contained in this Agreement and the Note
or by law afforded shall be cumulative and all shall be available to the Bank
until the Obligations have been paid in full.
9. GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Company contained in this Agreement shall survive delivery of the Note and
the making of the Loans herein contemplated.
9.2. TAXES. Any taxes (excluding income taxes) or other similar
assessments or charges payable or ruled payable by any governmental authority in
respect of this Agreement and the Note shall be paid by the Company, together
with interest and penalties, if any.
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9.3. EXPENSES; INDEMNIFICATION. Upon any acceleration of the Obligations
in accordance with Section 8.1, or if the Company shall fail to pay on principal
Obligations after its due date, the Company shall reimburse the Bank for any
costs, internal charges and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Bank, which attorneys may be employees of
the Bank) paid or incurred by the Bank in connection with the preparation,
review, execution, delivery, amendment, modification, administration, collection
and enforcement of this Agreement and the Note; provided that, the Company shall
also reimburse the Bank up to a maximum amount of $1,500 for such costs incurred
by the Bank in connection with the preparation, review and execution of this
Agreement and the Note promptly after execution and delivery of this Agreement
by the Bank and the Company. The Company further agrees to indemnify the Bank,
its directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefore whether or not the Bank is a
party thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the Note, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder; provided, however, the Company shall have no obligation to indemnify
the Bank for its losses arising as a result of the Bank's negligence or willful
misconduct. The obligations of the Company under this Section shall survive the
termination of this Agreement.
9.4. CHOICE OF LAW. THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.5. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
and the Note shall be binding upon and inure to the benefit of the Company and
the Bank and their respective successors and assigns, except that the Company
shall not have the right to assign its rights or obligations under this
Agreement or the Note. The Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities participating interests in any Loan, the Note or
the Commitment. The Bank may, with the consent of the Company, which consent
shall not be unreasonably withheld, assign to one or more banks or other
entities all or any part of its rights and obligations under this Agreement or
the Note (and the Company shall release the Bank for the amount so assigned).
The Bank may disclose information pertaining to the Company and its Subsidiaries
to prospective assignees and participants.
9.6. GIVING NOTICE. Except as otherwise permitted by Section 2.5 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or the Note shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage
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prepaid, shall be deemed given when received; any notice, if transmitted by
telex or facsimile, shall be deemed given when transmitted (answerback confirmed
in the case of telexes).
9.7. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT AND THE NOTE OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
9.8. SETOFF. In addition to, and without limitation of, any rights of the
Bank under applicable law, if the Company becomes insolvent, however evidenced,
or any Default or Unmatured Default under Section 7.7 occurs, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by the Bank to or for the credit or account of the Company may be
offset and applied toward the payment of the Obligations owing to the Bank,
whether or not the Obligations, or any part hereof, shall then be due.
9.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
9.10 OTHER FINANCING. If at any time from and after the effective date of
this Agreement, the Company or any Domestic Subsidiary shall enter into any
trust indenture or other agreement for, relating to, or amending any terms or
conditions applicable to any Indebtedness with any initial term of not less than
180-days incurred in connection with the domestic operations of the Company or
such Domestic Subsidiary, in an amount equal to or in excess of $1,000,000,
which includes covenants or defaults reasonably determined by the Bank to be
more restrictive than those provided for in Section 6 and Section 7 of this
Agreement, the Company shall promptly so advise the Bank. Thereupon, if the
Bank shall request by notice to the Company, the Company or such Domestic
Subsidiary, as the case may be, shall enter into an amendment to this Agreement
providing for substantially the same such covenants and defaults as those
provided for in such trust indenture or other agreement, mutatis mutandis, to
the extent required and as may be selected by the Bank, such amendment to remain
in effect for the entire duration of the term to maturity of such Indebtedness
(to and including the date to which the same may be extended at the Company's or
Subsidiary's option); provided, however, that if any such trust indenture or
other agreement shall be modified, supplemented, amended or terminated so as to
modify, amend or eliminate such trust indenture or other agreement or any such
covenant, term, condition or default so made a part of this Agreement, then, the
Company shall give the Bank prompt notice thereof and such modification,
supplement or amendment shall operate to modify, amend or eliminate such
covenants, term, condition or default as so made a part of this Agreement.
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IN WITNESS WHEREOF, the Company and the Bank have executed this Agreement
as of the date first above written.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
------------------------------------------
Title: TREASURER AND SECRETARY
---------------------------------------
Two Appletree Square
Minneapolis, Minnesota 55425
Attention: Michael P. Hawks
Treasurer and Secretary
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ J. Garland Smith
------------------------------------------
Title: VICE PRESIDENT
---------------------------------------
One First National Plaza
Chicago, Illinois 60670
Attention: J. GARLAND SMITH
-----------------------------------
VICE PRESIDENT
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EXHIBIT "A"
NOTE
$10,000,000 September 30, 1994
BMC Industries, Inc., a corporation (the "COMPANY"), promises to pay to the
order of The First National Bank of Chicago (the "BANK") the lesser of the
principal sum of Ten Million Dollars or the aggregate unpaid principal amount of
all Loans made by the Bank to the Company pursuant to Section 2.1 of the Credit
Agreement (this "AGREEMENT") hereinafter referred to, in immediately available
funds at the main office of the Bank in Chicago, Illinois, together with
interest on the unpaid principal amount hereof at the rates and on the dates set
forth in this Agreement. The Company shall pay the Loans in full on the
Revolving Credit Termination Date (as defined in this Agreement).
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is the Note issued pursuant to, and is entitled to the benefits
of, the Credit Agreement, dated as of September 30, 1994, between the Company
and the Bank, to which Agreement, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in this Agreement.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
------------------------------------
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11/15/94
CREDIT AGREEMENT
This Credit Agreement (as amended or modified and in effect from time to
time, this "AGREEMENT"), dated as of September 30, 1994, is between BMC
Industries, Inc., a Minnesota corporation (the "COMPANY"), and Norwest Bank
Minnesota, National Association (the "BANK"). The parties hereto agree as
follows:
1. DEFINITIONS
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Company or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Rate Loans, a day other than Saturday or Sunday on which
banks are open for business and on which dealings in United States dollars are
carried on in the offshore interbank market and (ii) for all other purposes, a
day other than Saturday or Sunday on which banks are open for business in
Minneapolis.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with generally accepted accounting principles consistently
applied.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles consistently applied.
"COMMITMENT" means the obligation of the Bank to make Loans not exceeding
$5,000,000 at any one time outstanding, as such amount may be modified from time
to time.
"CONSOLIDATED NET INCOME" means the net income of the Company and its
Subsidiaries on a consolidated basis after excluding the sum of (i) any net
losses or any undistributed net income of any minority interest held by the
Company, (ii) the gain or loss resulting from the sale of any capital assets
other than in the ordinary course of business, (iii) extraordinary or non-
recurring gains or losses, provided they are identified as such in the Company's
audited financial statements and (iv) any gain resulting from any write-up of
assets.
<PAGE>
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit; provided
that, (a) with respect to the Company, its obligations under that certain Pledge
Declaration made to Deutsche Bank AG dated September 23, 1994, and any
extension, increase, substitution or replacement therefor, (b) obligations of
the Company or any Subsidiary to reimburse the issuer of any letter of credit
issued in connection with any obligation of the Company, and (c) any transaction
described in Section 6.7(vii), shall in each case not be a Contingent Obligation
hereunder.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by the Bank from time to time, changing when and as
said corporate base rate changes.
"DEFAULT" means an event described in Section 7.
"DOMESTIC SUBSIDIARY" means any Subsidiary that is organized under the laws
of the United States of America or a jurisdiction thereof and that conducts
substantially all of its business and has substantially all of its property
within the United States of America.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Rate Loan for
the relevant Eurodollar Interest Period, the rate determined by the Bank to be
the rate at which deposits in U.S. dollars are offered by the Bank to first-
class banks in the offshore interbank market at approximately 10 a.m. (Central
Time) two Business Days prior to the first day of such Eurodollar Interest
Period, in the approximate amount of the relevant Eurodollar Rate Loan and
having a maturity approximately equal to such Eurodollar Interest Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Eurodollar Rate Loan,
a period of one, two, three or six months commencing on a Business Day selected
by the Company pursuant to this Agreement. Such Eurodollar Interest Period
shall end on (but exclude) the day which corresponds numerically to such date
one, two, three or six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Eurodollar Interest Period shall end on the last Business
Day of such next, second, third or sixth succeeding month. If a Eurodollar
Interest Period would otherwise end on a day which is not a Business Day, such
Eurodollar Interest Period shall end on the next succeeding Business Day,
provided, however, that if said next succeeding Business Day falls in a new
month, such Eurodollar Interest Period shall end on the immediately preceding
Business Day.
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<PAGE>
"EURODOLLAR RATE" means, with respect to a Eurodollar Rate Loan for each
day during the relevant Eurodollar Interest Period, the sum of (i) the quotient
of (a) the Eurodollar Base Rate applicable to that Eurodollar Interest Period
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to that Eurodollar Interest Period plus (ii) (a) 0.50% per annum
during any period the ratio described in Section 6.10 is not greater than .35 to
1.0; (b) 0.60% per annum during any period the ratio described in Section 6.10
is greater than .35 to 1.0 and not greater than .50 to 1.0; and (c) 0.75% per
annum during any period the ratio described in Section 6.10 is greater than .50
to 1.0. The Eurodollar Rate shall be rounded, if necessary, to the next higher
1/16 of 1%.
"EURODOLLAR RATE LOAN" means a Loan that bears interest at the Eurodollar
Rate.
"FLOATING RATE" means a rate per annum equal to the Corporate Base Rate.
"FLOATING RATE LOAN" means a Loan that bears interest at the Floating Rate.
"FOREIGN SUBSIDIARY" means a Subsidiary which is not a Domestic Subsidiary.
"INDEBTEDNESS" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the purchase price of property or services
deferred beyond 12 months (other than accounts payable and accrued expenses
arising in the ordinary course of such Person's business payable on terms
customary in the trade, to then current or former employees of the Company or
any Subsidiary, and obligations in settlement of claims made by Eagle
Industries/Armorlite), (iii) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv) obligations which are evidenced
by notes, acceptances, and other such instruments, except for any such
instruments representing obligations (a) to then current or former employees of
the Company or any Subsidiary, (b) in settlement of claims made by Eagle
Industries/Armorlite, and (c) any such instrument representing any reimbursement
obligation under a letter of credit excluded from the definition of Contingent
Obligations, (v) Capitalized Lease Obligations, and (vi) Contingent Obligations.
For the purpose of computing the "Indebtedness" of any Person, there shall be
excluded any particular Indebtedness to the extent that, upon or prior to the
maturity thereof, there shall have been deposited with the proper depositary in
trust the necessary funds (or evidences of such Indebtedness, if permitted by
the instrument creating such Indebtedness) for the payment, redemption or
satisfaction of such Indebtedness; and thereafter such funds and evidences of
Indebtedness so deposited shall not be included in any computation of the assets
of such Person. Any determination of "Indebtedness" provided to be for the
Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied shall require the
elimination of all inter-company items.
"INTEREST COVERAGE RATIO" means, as of any date of determination and
calculated for the period of four consecutive fiscal quarters ended as at such
date, the ratio of
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(i) the sum of (a) Consolidated Net Income plus (b) Interest Expense plus (c)
income taxes, to (ii) Interest Expense, all determined for the Company and its
Subsidiaries on a consolidated basis in accordance with generally accepted
accounting principles consistently applied.
"INTEREST EXPENSE" means, for any period of calculation and without
duplication, all interest, whether paid in cash, accrued as a liability or
capitalized, on Indebtedness during such period, all calculated for such period
for the Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"LENDING INSTALLATION" means any office, branch, subsidiary or affiliate of
the Bank.
"LIEN" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement, lessor's interest under a Capitalized
Lease or analogous instrument, in, of or on any Person's assets or properties in
favor of any other Person.
"LOAN" means any loan made by the Bank to the Company pursuant to this
Agreement and the Note.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) the
validity or enforceability of any material provision of this Agreement.
"NET WORTH" means the sum of retained earnings, stockholders' common
equity, preferred stock, plus minority interests, minus treasury stock
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"NOTE" means a promissory note in substantially the form of Exhibit "A"
hereto, duly executed and delivered to the Bank by the Company, including any
amendment, modification, renewal or replacement of such promissory note.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid interest
on the Note, all accrued and unpaid commitment fees and all other obligations of
the Company to the Bank arising under this Agreement and the Note.
"PERSON" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
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<PAGE>
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.
"RESERVE REQUIREMENT" means with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities (in the case of Eurodollar Rate Loans).
"REVOLVING CREDIT TERMINATION DATE" means September 30, 1996.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SUBSIDIARY" means any corporation more than 50% of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries, or any similar business organization which is so owned
or controlled.
"TOTAL CAPITALIZATION" means the sum of Net Worth plus Indebtedness
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
2. THE LOANS
2.1. THE LOANS. From and including the date of this Agreement and prior to
the Revolving Credit Termination Date, the Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Company from time
to time in amounts not to exceed in the aggregate at any one time outstanding
the amount of the Commitment. Subject to the terms of this Agreement, the
Company may borrow, repay and reborrow at any time prior to the Revolving Credit
Termination Date. The Loans may be Floating Rate Loans or Eurodollar Rate
Loans, or a combination thereof, selected by the Company in accordance with
Section 2.3. The Loans shall be repaid in full on the Revolving Credit
Termination Date. The Bank may book the Loans at any Lending Installation. The
Company may from time to time pay all outstanding Floating Rate Loans, or any
portion of the outstanding Floating Rate Loans, without penalty or premium. A
Eurodollar Rate Loan may not be paid prior to the last day of the applicable
Eurodollar Interest Period.
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2.2. COMMITMENT FEES AND REDUCTION OF THE COMMITMENT. The Company agrees
to pay to the Bank a commitment fee of the per annum percentages set forth below
on the daily unborrowed amount of the Commitment from the date hereof to and
including the Revolving Credit Termination Date, payable in arrears on the last
day of each calendar quarter hereafter and on the Revolving Credit Termination
Date. The per annum percentage applicable to the determination of the foregoing
commitment fee shall be;
(i) 0.15% during any period the ratio described in Section 6.10 is
not greater than .35 to 1.0;
(ii) 0.175% during any period the ratio described in Section 6.10 is
greater than .35 to 1.0 and not greater than .50 to 1.0; and
(iii) 0.20% during any period the ratio described in Section 6.10 is
greater than .50 to 1.0.
The Company may permanently reduce the Commitment in whole, or in part, in
integral multiples of $1,000,000 upon at least ten Business Days' written notice
to the Bank, which shall specify the amount of any such reduction, provided,
however, that the amount of the Commitment may not be reduced below the
outstanding principal amount of the Loans. All accrued commitment fees shall be
payable on the effective date of any termination of the obligations of the Bank
to make Loans hereunder.
2.3. METHOD OF SELECTING RATE OPTIONS AND EURODOLLAR INTEREST PERIODS. The
Company shall select the Rate Option and Eurodollar Interest Period, if any,
applicable to each Loan from time to time. The Company shall give the Bank
irrevocable borrowing notice (in accordance with Section 2.5 below) not later
than 10:00 a.m. (Central Time) time on the borrowing date of each Floating Rate
Loan and three Business Days before the borrowing date for each Eurodollar Rate
Loan, specifying:
(i) the borrowing date, which shall be a Business Day, of such Loan,
(ii) the aggregate amount of such Loan,
(iii) the Rate Option selected for such Loan, and
(iv) in the case of each Eurodollar Rate Loan, the Eurodollar Interest
Period applicable thereto.
Each Eurodollar Rate Loan shall bear interest from and including the first day
of the Eurodollar Interest Period applicable thereto to (but not including) the
last day of such Eurodollar Interest Period at the interest rate determined as
applicable to such Eurodollar Rate Loan. If at the end of a Eurodollar
Interest Period for an outstanding Eurodollar Rate Loan, the Company has failed
to select a new Rate Option or to pay
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such Eurodollar Rate Loan, then such Loan shall be converted to a Floating Rate
Loan on and after the last day of such Eurodollar Interest Period until paid or
until the effective date of a new Rate Option with respect thereto selected by
the Company. An outstanding Floating Rate Loan may be converted to a Eurodollar
Rate Loan at any time subject to the notice provisions applicable to the type of
Loan selected. The Company may not select a Eurodollar Rate for a Loan if there
exists a Default or Unmatured Default hereunder. The Company shall not select a
Eurodollar Interest Period which would end after the Revolving Credit
Termination Date. Each Eurodollar Rate Loan shall be in the minimum amount of
$100,000.
2.4. METHOD OF PAYMENT. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Bank at the Bank's address specified pursuant
to Section 13, or at any other Lending Installation of the Bank specified in
writing by the Bank to the Company, by noon (local time) on the date when due.
The Bank is hereby authorized to charge the account of the Company maintained
with the Bank for each payment of principal, interest and fees as it becomes due
hereunder.
2.5. THE NOTE; TELEPHONIC NOTICES. The Company hereby authorizes the Bank
to extend Loans and effect Rate Option selections based on telephonic notices
made by any person or persons the Bank in good faith believes to be acting on
behalf of the Company. The Company agrees to deliver promptly to the Bank a
written confirmation, if such confirmation is requested by the Bank, of each
telephonic notice signed by an authorized officer of the Company, provided,
however, that the failure to provide a written confirmation shall not affect the
Company's obligations under the Note. If the written confirmation differs in
any material respect from the action taken by the Bank, the records of the Bank
shall govern absent manifest error.
2.6. INTEREST PAYMENT DATES; INTEREST BASIS. Interest accrued on a
Eurodollar Rate Loan shall be payable on the last day of its applicable
Eurodollar Interest Period and on any date on which the Eurodollar Rate Loan is
paid or prepaid, whether due to acceleration or otherwise. Interest accrued on
each Eurodollar Rate Loan having a Eurodollar Interest Period longer than three
months shall also be payable on the last day of each three-month interval during
such Eurodollar Interest Period. Interest accrued on a Floating Rate Loan shall
be payable on the last day of each calendar quarter hereafter and on any date on
which the Floating Rate Loan is paid or prepaid, whether due to acceleration or
otherwise. Interest and commitment fees shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest shall be payable for the day a
Loan is made but not for the day of any payment on the amount paid if payment is
received prior to noon (local time) at the place of payment. If any payment of
principal of or interest on a Loan shall become due on a day which is not a
Business Day, such payment shall be made on the next succeeding Business Day
and, in the case of a principal payment, such extension of time shall be
included in computing interest in connection with such payment.
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2.7. TERMINATION OF PRIOR AGREEMENT. This Agreement and the Note replace
and supersede the letter agreement between the Company and the Bank, dated June
9, 1994 the "LETTER AGREEMENT") and any promissory notes issued in connection
therewith. The Company and the Bank agree that, upon the execution hereof, the
Letter Agreement is hereby terminated and cancelled.
3. CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or compliance of the
Bank with such,
(i) subjects the Bank or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from the Company
(excluding taxation of the overall net income of the Bank or
applicable Lending Installation), or changes the basis of taxation of
payments to the Bank in respect of its Loans or other amounts due it
hereunder, by an amount deemed material by the Bank, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by,
the Bank or any applicable Lending Installation (other than reserves
and assessments taken into account in determining the interest rate
applicable to Eurodollar Rate Loans), by an amount deemed material by
the Bank, or
(iii) imposes any other condition the result of which is to increase the
cost to the Bank or any applicable Lending Installation of making,
funding or maintaining Loans or reduces any amount receivable by the
Bank or any applicable Lending Installation in connection with Loans,
or requires the Bank or any applicable Lending Installation to make
any payment calculated by reference to the amount of Loans held or
interest received by it, by an amount deemed material by the Bank, or
(iv) affects the amount of capital required or expected to be maintained by
the Bank or its Lending Installation or any corporation controlling
the Bank and the Bank determines the amount of capital required is
increased by or based upon the existence of this Agreement or its
obligation to make Loans hereunder or of commitments of this type, by
an amount deemed material by the Bank,
then, within 15 days of demand by the Bank, the Company shall pay the Bank that
portion of such increased expense incurred (including, in the case of Section
3.1 (iv), any reduction in the rate of return on capital to an amount below that
which it could have achieved but for such law, rule, regulation, policy,
guideline or directive and after
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taking into account the Bank's policies as to capital adequacy) or reduction in
an amount received which the Bank determines is attributable to making, funding
and maintaining its Loans and its Commitment.
3.2. AVAILABILITY OF RATE OPTIONS. If the Bank determines that maintenance
of its Eurodollar Rate Loans at a suitable Lending Installation would violate
any applicable law, rule, regulation, or directive, whether or not having the
force of law, or if the Bank determines that (i) deposits of a type and maturity
appropriate to match fund Eurodollar Rate Loans are not available to it or (ii)
a Rate Option does not accurately reflect the cost of making or maintaining a
Loan at such Rate Option, then the Bank may suspend the availability of the
affected Rate Option and require any Eurodollar Rate Loans outstanding under an
affected Rate Option to be repaid or converted to an unaffected Rate Option.
3.3. FUNDING INDEMNIFICATION. If any payment of a Eurodollar Rate Loan
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Rate Loan is not made on the date specified by the Company for any
reason other than default by the Bank, the Company will indemnify the Bank for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Eurodollar Rate Loan.
3.4. BANK STATEMENTS; SURVIVAL OF INDEMNITY. The Bank shall deliver a
written statement as to the amount due, if any, under Section 3.1 or 3.3. Such
written statement shall set forth in reasonable detail the calculations upon
which the Bank determined such amount and shall be final, conclusive and binding
on the Company in the absence of manifest error. Determination of amounts
payable under such Sections in connection with a Eurodollar Rate Loan shall be
calculated as though the Bank funded its Eurodollar Rate Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Eurodollar Rate applicable to such Loan,
whether in fact that is the case or not. Unless otherwise provided herein, the
amount specified in the written statement shall be payable on demand after
receipt by the Company of the written statement. The obligations of the Company
under Sections 3.1 and 3.3 shall survive payment of the Obligations and
termination of this Agreement.
4. CONDITIONS PRECEDENT
4.1. INITIAL LOAN. The Bank shall not be required to make the initial Loan
hereunder unless the Company has furnished to the Bank such opinions of counsel,
certificates of incumbency, resolutions, by-laws and articles of incorporation
as the Bank may reasonably request.
4.2. EACH LOAN. The Bank shall not be required to make any Loan, unless on
the applicable borrowing date (i) there exists no Default or Unmatured Default,
(ii) the representations and warranties contained in Article V are true and
correct as of such borrowing date except that the reference to financial
statements in Section 5.4 shall
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be deemed to refer to the financial statements then most recently furnished to
the Bank hereunder, and the reference to financial statements in Section 5.5
shall include all financial statements then previously furnished to the Bank
under Section 6.1, and (iii) all material legal matters incident to the making
of such Loan shall be reasonably satisfactory to the Bank and its counsel. The
Bank may require a certificate of compliance with the conditions described in
Sections 4.2(i) and (ii) from an officer of the Company as a condition to making
any Loan hereunder.
5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Company and the
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted except where the failure to have such authority would not
have a Material Adverse Effect.
5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power and
authority and legal right to execute and deliver this Agreement and the Note and
to perform its obligations thereunder. The execution and delivery by the
Company of this Agreement and the Note and the performance of its obligations
thereunder have been duly authorized by all necessary corporate proceedings, and
this Agreement and the Note each constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their terms
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and delivery
by the Company of this Agreement and the Note, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any Subsidiary or the Company's or any
Subsidiary's articles of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which the Company or any Subsidiary is a
party or is subject, or by which it, or its property, is bound, or conflict with
or constitute a default thereunder, or result in the creation or imposition of
any Lien in, of or on the property of the Company or a Subsidiary pursuant to
the terms of any such indenture, instrument or agreement. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, is required to authorize, or is required
in connection with the execution, delivery and performance of, or the legality,
validity, binding effect or enforceability of, this Agreement or the Note.
5.4. FINANCIAL STATEMENTS. The June 30, 1994 consolidated financial
statements of the Company and the Subsidiaries heretofore delivered to the Bank
were
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prepared in accordance with generally accepted accounting principles in effect
on the date such statements were prepared and fairly present the consolidated
financial condition and operations of the Company and the Subsidiaries at such
date and the consolidated results of their operations for the period then ended.
5.5. LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Company or any Subsidiary which might have a Material Adverse Effect. Other
than any liability incident to such litigation, arbitration or proceedings which
has or may become a Contingent Obligation, the Company has no material
Contingent Obligations not provided for or disclosed in the financial statements
referred to in Section 5.4.
5.6. REGULATION U. Margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System) constitutes less than 25% of those
assets of the Company and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
5.7. COMPLIANCE WITH LAWS. The Company and its Subsidiaries have complied
in all materials respects with all applicable statutes, rules, regulations,
orders and restrictions of any domestic or foreign government or any
instrumentality or agency thereof, having jurisdiction over the conduct of their
respective businesses or the ownership of their respective properties.
6. COVENANTS
During the term of this Agreement, unless the Bank shall otherwise consent
in writing:
6.1. FINANCIAL REPORTING. The Company will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Bank:
(i) Within 90 days after the close of each of its fiscal years occurring
after the date hereof, an unqualified (except for qualifications
relating to changes in accounting principles or practices reflecting
changes in generally accepted principles of accounting and required or
approved by the Company's independent certified public accountants)
audit report certified by independent certified public accountants,
acceptable to the Bank, prepared in accordance with generally accepted
accounting principles on a consolidated and consolidating basis
(consolidating statements need not be certified by such accountants)
for itself and the Subsidiaries, including balance sheets as of the
end of such period, related profit and loss and reconciliation of
surplus statements, and a statement of cash flows.
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(ii) Within 45 days after the close of the first three quarterly periods of
each of its fiscal years occurring after the date hereof, for itself
and the Subsidiaries, consolidated and consolidating unaudited balance
sheets as at the close of each such period and consolidated and
consolidating profit and loss and reconciliation of surplus statements
and a statement of cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by an
officer of the Company.
(iii) Together with the financial statements required hereunder, a
compliance certificate signed by a financial officer of the Company
showing the calculations necessary to determine compliance with
Sections 6.9, 6.10 and 6.11 of this Agreement and stating that no
Default or Unmatured Default existed as of the date of the
corresponding financial statement, or if any Default or Unmatured
Default existed as of the date of the corresponding financial
statement, stating the nature and status thereof.
(iv) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(v) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Company or any Subsidiary files with the Securities and
Exchange Commission.
(vi) Such other information (including non-financial information) as the
Bank or any Bank may from time to time reasonably request.
6.2. USE OF PROCEEDS. The Company will, and will cause each Subsidiary to,
use the proceeds of the Loans for general corporate purposes. The Company will
not, nor will it permit any Subsidiary to, use any of the proceeds of the Loans
to purchase or carry any "margin stock" (as defined in Regulation U) in excess
of that which would be permitted under Section 5.6.
6.3. CONDUCT OF BUSINESS. The Company will, and will cause each Subsidiary
to, carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted or at
the time any such Subsidiary is created or acquired and to do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, except that the Company may dissolve a Subsidiary if such
dissolution would not have a Material Adverse Effect.
6.4. TAXES. The Company will, and will cause each Subsidiary to, pay when
due all taxes, assessments and governmental charges and levies upon it or its
income, profits or property, except those which are being contested in good
faith by
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appropriate proceedings and with respect to which adequate reserves have been
set aside.
6.5. COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.
6.6. MERGER. The Company will not, nor will it permit any Subsidiary to,
merge or consolidate with or into any other Person, except to the extent the
Company or any Subsidiary is the surviving entity and except that a Subsidiary
may merge with the Company or a wholly-owned Subsidiary; provided that, as a
result of any merger involving the Company the Company is the survivor and
immediately prior to and immediately after any such merger there shall be no
Default or Unmatured Default hereunder.
6.7. LIENS. The Company will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the property of the
Company or any Subsidiary, except:
(i) Liens for taxes, assessments or governmental charges or levies on its
property if the same shall not at the time be delinquent or thereafter
can be paid without penalty, or are being contested in good faith and
by appropriate proceedings.
(ii) Liens imposed by law, such as carriers', warehousemen's and mechanics'
liens, deposits, pledges or liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations or
surety or appeal bonds and other similar liens arising in the ordinary
course of business which secure payment of obligations not more than
60 days past due or which are being contested in good faith by
appropriate proceedings and for which adequate reserves shall have
been set aside on its books.
(iii) Liens arising out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally existing
with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere
with the use thereof in the business of the Company or the
Subsidiaries.
(v) Liens existing on the date hereof.
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(vi) Liens of or resulting from any judgments or awards in an amount not
exceeding $5,000,000, in the aggregate, the time for the appeal or
petition for rehearing of which shall not have expired, or in respect
of which the Company or any Subsidiary shall at any time in good faith
be prosecuting an appeal or proceeding for a review and in respect of
which a stay of execution pending such appeal or proceeding for review
shall have been secured.
(vii) Liens which may be deemed to exist on notes, drafts or instruments
received in payment of trade receivables owing to any Foreign
Subsidiary which are sold or otherwise negotiated by such Foreign
Subsidiary with recourse.
(viii) Liens securing Indebtedness of a Subsidiary to the Company or to a
Subsidiary.
(ix) Liens incurred after the date hereof given to secure the payment of
the purchase price incurred in connection with the acquisition,
construction or improvement of fixed assets useful and intended to be
used in carrying on the business of the Company or a Subsidiary,
including Liens existing on such fixed assets at the time of
acquisition thereof or at the time of acquisition by the Company or a
Subsidiary of any business entity then owning such fixed assets,
whether or not such existing Liens were given to secure the payment of
the purchase price of the fixed assets to which they attach so long as
they were not incurred, extended or renewed in contemplation of such
acquisition, provided that (i) the Lien shall attach solely to the
property acquired, constructed or improved and (ii) at the time of
acquisition, construction or improvement of such fixed assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens
on such fixed assets whether or not assumed by the Company or a
Subsidiary shall not exceed an amount equal to 100% of the lesser of
the total purchase price or fair market value at the time of
acquisition, construction or improvement of such fixed assets (as
determined in good faith by the Board of Directors of the Company).
(x) Any Lien on any asset existing at the time such asset is acquired by
the Company or one of its Subsidiaries or is merged into or
consolidated with the Company or one of its Subsidiaries and not
created in contemplation of such event and any extension, renewal or
replacement Lien arising out of the extension, renewal or replacement
of the related obligation secured by such Lien, so long as any such
replacement Lien does not extend to property not covered by the Lien
replaced or renewed.
6.8. NOTICE OF DEFAULT. The Company will, and will cause each Subsidiary
to, give prompt notice in writing to the Bank of the occurrence of any Default
or Unmatured Default.
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6.9. INTEREST COVERAGE RATIO. As at the end of each fiscal quarter of the
Company, the Interest Coverage Ratio shall not be less than 2.5 to 1.0.
6.10. INDEBTEDNESS TO TOTAL CAPITALIZATION RATIO. As at the end of each
fiscal quarter of the Company, the ratio of Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied to Total Capitalization
shall not be greater than .55 to 1.0.
6.11. MINIMUM NET WORTH. As at the end of each fiscal quarter of the
Company, the Net Worth shall be at least $60 million plus 50% of aggregate
Consolidated Net Income earned after December 31, 1994.
7. DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf of
the Company or any Subsidiary to the Bank under or in connection with this
Agreement, any Loan, or any certificate or information delivered in connection
with this Agreement or the Note shall be materially false on the date as of
which made.
7.2. Nonpayment of principal of the Note when due, or nonpayment of
interest upon the Note or of any facility fee or other obligations under this
Agreement or the Note within five days after the same becomes due.
7.3. The breach by the Company of any of the terms or provisions of
Sections 6.6 through 6.11.
7.4. The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty days after written notice from the
Bank.
7.5. Failure of the Company or any Subsidiary to pay any Indebtedness equal
to or exceeding $1,000,000 in the aggregate when due; or the default by the
Company or any Subsidiary in the performance of any term, provision or condition
contained in any agreement under which any such Indebtedness was created or is
governed, the effect of which is to cause such Indebtedness to become due prior
to its stated maturity, or which continues unwaived for a period of 30 days or
more after it first becomes known to any officer of the Company and the effect
of which as of the end of such period is to permit the holder or holders of such
Indebtedness to cause such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of the Company or any Subsidiary shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior
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to the stated maturity thereof; or the Company or any Subsidiary shall not pay,
or admit in writing its inability to pay, its debts generally as they become
due.
7.6. The Company or any Subsidiary shall (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or hereafter
in effect, (ii) make an assignment for the benefit of creditors, (iii) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (iv) institute any proceeding seeking an order
for relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
Subsidiary, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for the Company or any Subsidiary or any substantial part of its
property, or a proceeding described in Section 7. 6 (iv) shall be instituted
against the Company or any Subsidiary and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30 consecutive days.
8. ACCELERATION AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Company, the obligations of the Bank to make Loans hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Bank. If any
other Default occurs, the Bank may terminate or suspend the obligations of the
Bank to make Loans hereunder, or declare the Obligations to be due and payable,
or both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Company hereby expressly waives.
8.2. PRESERVATION OF RIGHTS. No delay or omission of the Bank to exercise
any right under this Agreement or the Note shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Company to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of this Agreement or the Note whatsoever shall be valid
unless in writing signed by the Bank and then only to the extent in such writing
specifically set forth. All remedies contained in this
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Agreement and the Note or by law afforded shall be cumulative and all shall be
available to the Bank until the Obligations have been paid in full.
9. GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Company contained in this Agreement shall survive delivery of the Note and
the making of the Loans herein contemplated.
9.2. TAXES. Any taxes (excluding income taxes) or other similar
assessments or charges payable or ruled payable by any governmental authority in
respect of this Agreement and the Note shall be paid by the Company, together
with interest and penalties, if any.
9.3. EXPENSES; INDEMNIFICATION. Upon any acceleration of the Obligations
in accordance with Section 8.1, or if the Company shall fail to pay on principal
Obligations after its due date, the Company shall reimburse the Bank for any
costs, internal charges and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Bank, which attorneys may be employees of
the Bank) paid or incurred by the Bank in connection with the preparation,
review, execution, delivery, amendment, modification, administration, collection
and enforcement of this Agreement and the Note; provided that, the Company shall
also reimburse the Bank up to a maximum amount of $1,500 for such costs incurred
by the Bank in connection with the preparation, review and execution of this
Agreement and the Note promptly after execution and delivery of this Agreement
by the Bank and the Company and receipt by the Company of copies of invoices for
such outside legal services. The Company further agrees to indemnify the Bank,
its directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefore whether or not the Bank is a
party thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the Note, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder; provided, however, the Company shall have no obligation to indemnify
the Bank for its losses arising as a result of the Bank's negligence or willful
misconduct. The obligations of the Company under this Section shall survive the
termination of this Agreement.
9.4. CHOICE OF LAW. THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
MINNESOTA, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.5. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
and the Note shall be binding upon and inure to the benefit of the Company and
the Bank and their respective successors and assigns, except that the Company
shall not have the right to assign its rights or obligations under this
Agreement or the Note.
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The Bank may, in the ordinary course of its commercial banking business and in
accordance with applicable law, at any time sell to one or more banks or other
entities participating interests in any Loan, the Note or the Commitment. The
Bank may, with the consent of the Company, which consent shall not be
unreasonably withheld, assign to one or more banks or other entities all or any
part of its rights and obligations under this Agreement or the Note (and the
Company shall release the Bank for the amount so assigned). The Bank may
disclose information pertaining to the Company and its Subsidiaries to
prospective assignees and participants.
9.6. GIVING NOTICE. Except as otherwise permitted by Section 2.5 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or the Note shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
9.7. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT AND THE NOTE OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
9.8. SETOFF. In addition to, and without limitation of, any rights of the
Bank under applicable law, if the Company becomes insolvent, however evidenced,
or any Default or Unmatured Default under Section 7.7 occurs, any and all
deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by the Bank to or for the credit or account of the Company may be
offset and applied toward the payment of the Obligations owing to the Bank,
whether or not the Obligations, or any part hereof, shall then be due.
9.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
9.10 OTHER FINANCING. If at any time from and after the effective date of
this Agreement, the Company or any Domestic Subsidiary shall enter into any
trust indenture or other agreement for, relating to, or amending any terms or
conditions applicable to any Indebtedness with any initial term of not less than
180-days incurred in connection with the domestic operations of the Company or
such Domestic Subsidiary, in an amount equal to or in excess of $1,000,000,
which includes covenants or defaults reasonably determined by the Bank to be
more restrictive than
18
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those provided for in Section 6 and Section 7 of this Agreement, the Company
shall promptly so advise the Bank. Thereupon, if the Bank shall request by
notice to the Company, the Company or such Domestic Subsidiary, as the case may
be, shall enter into an amendment to this Agreement providing for substantially
the same such covenants and defaults as those provided for in such trust
indenture or other agreement, mutatis mutandis, to the extent required and as
may be selected by the Bank, such amendment to remain in effect for the entire
duration of the term to maturity of such Indebtedness (to and including the date
to which the same may be extended at the Company's or Subsidiary's option);
provided, however, that if any such trust indenture or other agreement shall be
modified, supplemented, amended or terminated so as to modify, amend or
eliminate such trust indenture or other agreement or any such covenant, term,
condition or default so made a part of this Agreement, then, the Company shall
give the Bank prompt notice thereof and such modification, supplement or
amendment shall operate to modify, amend or eliminate such covenants, term,
condition or default as so made a part of this Agreement.
IN WITNESS WHEREOF, the Company and the Bank have executed this Agreement
as of the date first above written.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
-------------------------------------
Title: TREASURER AND SECRETARY
----------------------------------
Two Appletree Square, Suite 400
Minneapolis, Minnesota 55425
Attention: Michael P. Hawks
Treasurer and Secretary
Norwest Bank Minnesota, National Association
By: /s/ Scott D. Bjelde
-------------------------------------
Title: AVP
----------------------------------
Norwest Center
Sixth and Marquette
Minneapolis, Minnesota 55479-0085
Attention: Scott D. Bjelde
-----------------------
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EXHIBIT "A"
NOTE
$5,000,000 September 30, 1994
BMC Industries, Inc., a corporation (the "COMPANY"), promises to pay to the
order of Norwest Bank Minnesota, National Association (the "BANK") the lesser
of the principal sum of Five Million Dollars or the aggregate unpaid principal
amount of all Loans made by the Bank to the Company pursuant to Section 2.1 of
the Credit Agreement (this "AGREEMENT") hereinafter referred to, in immediately
available funds at the main office of the Bank in Minneapolis, Minnesota,
together with interest on the unpaid principal amount hereof at the rates and on
the dates set forth in this Agreement. The Company shall pay the Loans in full
on the Revolving Credit Termination Date (as defined in this Agreement).
This Note is the Note issued pursuant to, and is entitled to the benefits
of, the Credit Agreement, dated as of September 30, 1994, between the Company
and the Bank, to which Agreement, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in this Agreement.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
---------------------------------
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11/15/94
CREDIT AGREEMENT
This Credit Agreement (as amended or modified and in effect from time to
time, this "AGREEMENT"), dated as of September 30, 1994, is between BMC
Industries, Inc., a Minnesota corporation (the "COMPANY"), and NBD Bank, N.A.
(the "BANK"). The parties hereto agree as follows:
1. DEFINITIONS
"ACQUISITION" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Company or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency) or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership.
"BUSINESS DAY" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Rate Loans, a day other than Saturday or Sunday on which
banks are open for business in Chicago and New York and on which dealings in
United States dollars are carried on in the offshore interbank market and (ii)
for all other purposes, a day other than Saturday or Sunday on which banks are
open for business in Chicago.
"CAPITALIZED LEASE" of a Person means any lease of property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with generally accepted accounting principles consistently
applied.
"CAPITALIZED LEASE OBLIGATIONS" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles consistently applied.
"COMMITMENT" means the obligation of the Bank to make Loans not exceeding
$10,000,000 at any one time outstanding, as such amount may be modified from
time to time.
"CONSOLIDATED NET INCOME" means the net income of the Company and its
Subsidiaries on a consolidated basis after excluding the sum of (i) any net
losses or any undistributed net income of any minority interest held by the
Company, (ii) the gain or loss resulting from the sale of any capital assets
other than in the ordinary course of business, (iii) extraordinary or non-
recurring gains or losses, provided they
<PAGE>
are identified as such in the Company's audited financial statements and (iv)
any gain resulting from any write-up of assets.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit; provided
that, (a) with respect to the Company, its obligations under that certain Pledge
Declaration made to Deutsche Bank AG dated September 23, 1994, and any
extension, increase, substitution or replacement therefor, (b) obligations of
the Company or any Subsidiary to reimburse the issuer of any letter of credit
issued in connection with any obligation of the Company, and (c) any transaction
described in Section 6.7 (vii), shall in each case not be a Contingent
Obligation hereunder.
"CORPORATE BASE RATE" means a rate per annum equal to the corporate base
rate of interest announced by the Bank from time to time, changing when and as
said corporate base rate changes.
"DEFAULT" means an event described in Section 7.
"DOMESTIC SUBSIDIARY" means any Subsidiary that is organized under the laws
of the United States of America or a jurisdiction thereof and that conducts
substantially all of its business and has substantially all of its property
within the United States of America.
"EURODOLLAR BASE RATE" means, with respect to a Eurodollar Rate Loan for
the relevant Eurodollar Interest Period, the rate determined by the Bank to be
the rate at which deposits in U.S. dollars are offered by the Bank to first-
class banks in the offshore interbank market at approximately 10 a.m. (Central
Time) two Business Days prior to the first day of such Eurodollar Interest
Period, in the approximate amount of the relevant Eurodollar Rate Loan and
having a maturity approximately equal to such Eurodollar Interest Period.
"EURODOLLAR INTEREST PERIOD" means, with respect to a Eurodollar Rate Loan,
a period of one, two, three or six months commencing on a Business Day selected
by the Company pursuant to this Agreement. Such Eurodollar Interest Period
shall end on (but exclude) the day which corresponds numerically to such date
one, two, three or six months thereafter, provided, however, that if there is no
such numerically corresponding day in such next, second, third or sixth
succeeding month, such Eurodollar Interest Period shall end on the last Business
Day of such next, second, third or sixth succeeding month. If a Eurodollar
Interest Period would otherwise end on a day which is not a Business Day, such
Eurodollar Interest Period shall end on the
2
<PAGE>
next succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new month, such Eurodollar Interest Period shall end on
the immediately preceding Business Day.
"EURODOLLAR RATE" means, with respect to a Eurodollar Rate Loan for each
day during the relevant Eurodollar Interest Period, the sum of (i) the quotient
of (a) the Eurodollar Base Rate applicable to that Eurodollar Interest Period
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to that Eurodollar Interest Period plus (ii) (a) 0.50% per annum
during any period the ratio described in Section 6.10 is not greater than .35 to
1.0; (b) 0.60% per annum during any period the ratio described in Section 6.10
is greater than .35 to 1.0 and not greater than .50 to 1.0; and (c) 0.75% per
annum during any period the ratio described in Section 6.10 is greater than .50
to 1.0. The Eurodollar Rate shall be rounded, if necessary, to the next higher
1/16 of 1%.
"EURODOLLAR RATE LOAN" means a Loan that bears interest at the Eurodollar
Rate.
"FLOATING RATE" means a rate per annum equal to the Corporate Base Rate.
"FLOATING RATE LOAN" means a Loan that bears interest at the Floating Rate.
"FOREIGN SUBSIDIARY" means a Subsidiary which is not a Domestic Subsidiary.
"INDEBTEDNESS" of a Person means such Person's (i) obligations for borrowed
money, (ii) obligations representing the purchase price of property or services
deferred beyond 12 months (other than accounts payable and accrued expenses
arising in the ordinary course of such Person's business payable on terms
customary in the trade, obligations to then current or former employees of the
Company or any Subsidiary, and obligations in settlement of claims made by Eagle
Industries/Armorlite), (iii) obligations, whether or not assumed, secured by
Liens or payable out of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv) obligations which are evidenced
by notes, acceptances, and other such instruments, except for any such
instruments representing obligations (a) to then current or former employees of
the Company or any Subsidiary, (b) in settlement of claims made by Eagle
Industries/Armorlite, and (c) any such instrument representing any reimbursement
obligation under a letter of credit excluded from the definition of Contingent
Obligations, (v) Capitalized Lease Obligations, and (vi) Contingent Obligations.
For the purpose of computing the "Indebtedness" of any Person, there shall be
excluded any particular Indebtedness to the extent that, upon or prior to the
maturity thereof, there shall have been deposited with the proper depositary in
trust the necessary funds (or evidences of such Indebtedness, if permitted by
the instrument creating such Indebtedness) for the payment, redemption or
satisfaction of such Indebtedness; and thereafter such funds and evidences of
Indebtedness so deposited shall not be included in any computation of the assets
of such Person. Any determination of "Indebtedness" provided to be for the
Company and its Subsidiaries
3
<PAGE>
on a consolidated basis in accordance with generally accepted accounting
principles consistently applied shall require the elimination of all inter-
company items.
"INTEREST COVERAGE RATIO" means, as of any date of determination and
calculated for the period of four consecutive fiscal quarters ended as at such
date, the ratio of (i) the sum of (a) Consolidated Net Income plus (b) Interest
Expense plus (c) income taxes, to (ii) Interest Expense, all determined for the
Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"INTEREST EXPENSE" means, for any period of calculation and without
duplication, all interest, whether paid in cash, accrued as a liability or
capitalized, on Indebtedness during such period, all calculated for such period
for the Company and its Subsidiaries on a consolidated basis in accordance with
generally accepted accounting principles consistently applied.
"LENDING INSTALLATION" means any office, branch, subsidiary or affiliate of
the Bank.
"LIEN" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement, lessor's interest under a Capitalized
Lease or analogous instrument, in, of or on any Person's assets or properties in
favor of any other Person.
"LOAN" means any loan made by the Bank to the Company pursuant to this
Agreement and the Note.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, properties, condition (financial or otherwise), or results of
operations of the Company and its Subsidiaries taken as a whole, or (ii) the
validity or enforceability of any material provision of this Agreement.
"NET WORTH" means the sum of retained earnings, stockholders' common
equity, preferred stock, plus minority interests, minus treasury stock
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"NOTE" means a promissory note in substantially the form of Exhibit "A"
hereto, duly executed and delivered to the Bank by the Company, including any
amendment, modification, renewal or replacement of such promissory note.
"OBLIGATIONS" means all unpaid principal of and accrued and unpaid interest
on the Note, all accrued and unpaid facility fees and all other obligations of
the Company to the Bank arising under this Agreement and the Note.
4
<PAGE>
"PERSON" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"RATE OPTION" means the Eurodollar Rate or the Floating Rate.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.
"RESERVE REQUIREMENT" means with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on Eurocurrency
liabilities (in the case of Eurodollar Rate Loans).
"REVOLVING CREDIT TERMINATION DATE" means September 30, 1996.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SUBSIDIARY" means any corporation more than 50% of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries, or any similar business organization which is so owned
or controlled.
"TOTAL CAPITALIZATION" means the sum of Net Worth plus Indebtedness
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with generally accepted accounting principles consistently applied.
"UNMATURED DEFAULT" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
2. THE LOANS
2.1. THE LOANS. From and including the date of this Agreement and prior to
the Revolving Credit Termination Date, the Bank agrees, on the terms and
conditions set forth in this Agreement, to make Loans to the Company from time
to time in amounts not to exceed in the aggregate at any one time outstanding
the amount of the Commitment. Subject to the terms of this Agreement, the
Company may borrow, repay and reborrow at any time prior to the Revolving Credit
Termination Date. The Loans may be Floating Rate Loans or Eurodollar Rate
Loans, or a combination thereof, selected by the Company in accordance with
Section 2.3. The Loans shall be repaid
5
<PAGE>
in full on the Revolving Credit Termination Date. The Bank may book the Loans
at any Lending Installation. The Company may from time to time pay all
outstanding Floating Rate Loans, or any portion of the outstanding Floating Rate
Loans, without penalty or premium. A Eurodollar Rate Loan may not be paid prior
to the last day of the applicable Eurodollar Interest Period.
2.2. FACILITY FEES AND REDUCTION OF THE COMMITMENT. The Company agrees to
pay to the Bank a facility fee of the per annum percentages set forth below on
the daily unborrowed amount of the Commitment from the date hereof to and
including the Revolving Credit Termination Date, payable in arrears on the last
day of each calendar quarter hereafter and on the Revolving Credit Termination
Date. The per annum percentage applicable to the determination of the foregoing
facility fee shall be:
(i) 0.15% during any period the ratio described in Section 6.10 is
not greater than .35 to 1.0;
(ii) 0.175% during any period the ratio described in Section 6.10
is greater than .35 to 1.0 and not greater than .50 to 1.0;
and
(iii) 0.20% during any period the ratio described in Section 6.10 is
not greater than .50 to 1.0;
The Company may permanently reduce the Commitment in whole, or in part, in
integral multiples of $1,000,000 upon at least ten Business Days' written notice
to the Bank, which shall specify the amount of any such reduction, provided,
however, that the amount of the Commitment may not be reduced below the
outstanding principal amount of the Loans. All accrued facility fees shall be
payable on the effective date of any termination of the obligations of the Bank
to make Loans hereunder.
2.3. METHOD OF SELECTING RATE OPTIONS AND EURODOLLAR INTEREST PERIODS. The
Company shall select the Rate Option and Eurodollar Interest Period, if any,
applicable to each Loan from time to time. The Company shall give the Bank
irrevocable borrowing notice (in accordance with Section 2.5 below) not later
than 10:00 a.m. (Central Time) on the borrowing date of each Floating Rate Loan
and three Business Days before the borrowing date for each Eurodollar Rate Loan,
specifying:
(i) the borrowing date, which shall be a Business Day, of such
Loan,
(ii) the aggregate amount of such Loan,
(iii) the Rate Option selected for such Loan, and
(iv) in the case of each Eurodollar Rate Loan, the Eurodollar
Interest Period applicable thereto.
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<PAGE>
Each Eurodollar Rate Loan shall bear interest from and including the first day
of the Eurodollar Interest Period applicable thereto to (but not including) the
last day of such Eurodollar Interest Period at the interest rate determined as
applicable to such Eurodollar Rate Loan. If at the end of a Eurodollar
Interest Period for an outstanding Eurodollar Rate Loan, the Company has failed
to select a new Rate Option or to pay such Eurodollar Rate Loan, then such Loan
shall be converted to a Floating Rate Loan on and after the last day of such
Eurodollar Interest Period until paid or until the effective date of a new Rate
Option with respect thereto selected by the Company. An outstanding Floating
Rate Loan may be converted to a Eurodollar Rate Loan at any time subject to the
notice provisions applicable to the type of Loan selected. The Company may not
select a Eurodollar Rate for a Loan if there exists a Default or Unmatured
Default hereunder. The Company shall not select a Eurodollar Interest Period
which would end after the Revolving Credit Termination Date. Each Eurodollar
Rate Loan shall be in the minimum amount of $1,000,000.
2.4. METHOD OF PAYMENT. All payments of principal, interest, and fees
hereunder shall be made, without setoff, deduction, or counterclaim, in
immediately available funds to the Bank at the Bank's address specified pursuant
to Section 13, or at any other Lending Installation of the Bank specified in
writing by the Bank to the Company, by noon (local time) on the date when due.
The Bank is hereby authorized to charge the account of the Company maintained
with the Bank for each payment of principal, interest and fees as it becomes due
hereunder.
2.5. THE NOTE; TELEPHONIC NOTICES. The Bank is hereby authorized to record
the principal amount of each of the Loans and each repayment on the schedule
attached to its Note provided, however, that the failure to so record shall not
affect the Company's obligations under the Note. The Company hereby authorizes
the Bank to extend Loans and effect Rate Option selections based on telephonic
notices made by any person or persons the Bank in good faith believes to be
acting on behalf of the Company. The Company agrees to deliver promptly to the
Bank a written confirmation, if such confirmation is requested by the Bank, of
each telephonic notice signed by an authorized officer of the Company. If the
written confirmation differs in any material respect from the action taken by
the Bank, the records of the Bank shall govern absent manifest error.
2.6. INTEREST PAYMENT DATES; INTEREST BASIS. Interest accrued on a
Eurodollar Rate Loan shall be payable on the last day of its applicable
Eurodollar Interest Period and on any date on which the Eurodollar Rate Loan is
paid or prepaid, whether due to acceleration or otherwise. Interest accrued on
each Eurodollar Rate Loan having a Eurodollar Interest Period longer than three
months shall also be payable on the last day of each three-month interval during
such Eurodollar Interest Period. Interest accrued on a Floating Rate Loan shall
be payable on the last day of each calendar quarter hereafter and on any date on
which the Floating Rate Loan is paid or prepaid, whether due to acceleration or
otherwise. Interest and commitment fees shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest shall be payable for the day a
Loan is made but not for the day of any payment on the amount
7
<PAGE>
paid if payment is received prior to noon (local time) at the place of payment.
If any payment of principal of or interest on a Loan shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.7. TERMINATION OF PRIOR AGREEMENT. This Agreement and the Note replace
and supersede the letter agreement between the Company and the Bank, dated
October 29, 1993 (the "LETTER AGREEMENT") and any promissory notes issued in
connection therewith. The Company and the Bank agree that, upon the execution
hereof, the Letter Agreement is hereby terminated and cancelled.
3. CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any law or any governmental or quasi-
governmental rule, regulation, policy, guideline or directive (whether or not
having the force of law), or any interpretation thereof, or compliance of the
Bank with such,
(i) subjects the Bank or any applicable Lending Installation to any tax,
duty, charge or withholding on or from payments due from the Company
(excluding taxation of the overall net income of the Bank or
applicable Lending Installation), or changes the basis of taxation
of payments to the Bank in respect of its Loans or other amounts due
it hereunder, by an amount deemed material by the Bank, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended
by, the Bank or any applicable Lending Installation (other than
reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Rate Loans), by an amount
deemed material by the Bank, or
(iii) imposes any other condition the result of which is to increase the
cost to the Bank or any applicable Lending Installation of making,
funding or maintaining Loans or reduces any amount receivable by the
Bank or any applicable Lending Installation in connection with
Loans, or requires the Bank or any applicable Lending Installation
to make any payment calculated by reference to the amount of Loans
held or interest received by it, by an amount deemed material by the
Bank, or
(iv) affects the amount of capital required or expected to be maintained
by the Bank or its Lending Installation or any corporation
controlling the Bank and the Bank determines the amount of capital
required is increased by or based upon the existence of this
Agreement or its obligation to
8
<PAGE>
make Loans hereunder or of commitments of this type, by an amount
deemed material by the Bank,
then, within 15 days of demand by the Bank, the Company shall pay the Bank that
portion of such increased expense incurred (including, in the case of Section
3.1 (iv), any reduction in the rate of return on capital to an amount below that
which it could have achieved but for such law, rule, regulation, policy,
guideline or directive and after taking into account the Bank's policies as to
capital adequacy) or reduction in an amount received which the Bank determines
is attributable to making, funding and maintaining its Loans and its Commitment.
3.2. AVAILABILITY OF RATE OPTIONS. If the Bank determines that
maintenance of its Eurodollar Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Bank determines that (i) deposits of a type
and maturity appropriate to match fund Eurodollar Rate Loans are not available
to it or (ii) a Rate Option does not accurately reflect the cost of making or
maintaining a Loan at such Rate Option, then the Bank may suspend the
availability of the affected Rate Option and require any Eurodollar Rate Loans
outstanding under an affected Rate Option to be repaid or converted to an
unaffected Rate Option.
3.3. FUNDING INDEMNIFICATION. If any payment of a Eurodollar Rate Loan
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Rate Loan is not made on the date specified by the Company for any
reason other than default by the Bank, the Company will indemnify the Bank for
any loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Eurodollar Rate Loan.
3.4. BANK STATEMENTS; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, the Bank shall designate an alternate Lending Installation with
respect to Eurodollar Rate Loans to reduce any liability of the Company to the
Bank under Section 3.1 or to avoid the unavailability of a Rate Option under
Section 3.2, so long as such designation is not disadvantageous to the Bank.
The Bank shall deliver a written statement as to the amount due, if any, under
Section 3.1 or 3.3. Such written statement shall set forth in reasonable detail
the calculations upon which the Bank determined such amount and shall be final,
conclusive and binding on the Company in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Rate Loan shall be calculated as though the Bank funded its
Eurodollar Rate Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Eurodollar
Rate applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the written statement shall
be payable on demand after receipt by the Company of the written statement. The
obligations of the Company under Sections 3.1 and 3.3 shall survive payment of
the Obligations and termination of this Agreement.
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4. CONDITIONS PRECEDENT
4.1. INITIAL LOAN. The Bank shall not be required to make the initial
Loan hereunder unless the Company has furnished to the Bank such opinions of
counsel, certificates of incumbency, resolutions, by-laws and articles of
incorporation as the Bank may reasonably request.
4.2. EACH LOAN. The Bank shall not be required to make any Loan, unless
on the applicable borrowing date (i) there exists no Default or Unmatured
Default, (ii) the representations and warranties contained in Article V are true
and correct as of such borrowing date except that the reference to financial
statements in Section 5.4 shall be deemed to refer to the financial statements
then most recently furnished to the Bank hereunder, and the reference to
financial statements in Section 5.5 shall include all financial statements then
previously furnished to the Bank under Section 6.1, and (iii) all material legal
matters incident to the making of such Loan shall be reasonably satisfactory to
the Bank and its counsel. The Bank may require a certificate of compliance with
the conditions described in Sections 4.2(i) and (ii) from an officer of the
Company as a condition to making any Loan hereunder.
5. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Bank that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Company and the
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted except where the failure to have such authority would not
have a Material Adverse Effect.
5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power and
authority and legal right to execute and deliver this Agreement and the Note and
to perform its obligations thereunder. The execution and delivery by the
Company of this Agreement and the Note and the performance of its obligations
thereunder have been duly authorized by all necessary corporate proceedings, and
this Agreement and the Note each constitute legal, valid and binding obligations
of the Company enforceable against the Company in accordance with their terms
except as enforceability may be limited by applicable bankruptcy, insolvency, or
similar laws affecting the enforcement of creditors' rights generally or by
equitable principles relating to enforceability.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and delivery
by the Company of this Agreement and the Note, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any Subsidiary or the Company's or any
Subsidiary's articles of incorporation or by-laws or the provisions of any
indenture, instrument or agreement to which the Company or any Subsidiary is a
party or is subject, or by
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which it, or its property, is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on the
property of the Company or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of, or the legality, validity, binding
effect or enforceability of, this Agreement or the Note.
5.4. FINANCIAL STATEMENTS. The June 30, 1994 consolidated financial
statements of the Company and the Subsidiaries heretofore delivered to the Bank
were prepared in accordance with generally accepted accounting principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Company and the
Subsidiaries at such date and the consolidated results of their operations for
the period then ended.
5.5. LITIGATION AND CONTINGENT OBLIGATIONS. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Company or any Subsidiary which might have a Material Adverse Effect. Other
than any liability incident to such litigation, arbitration or proceedings which
has or may become a Contingent Obligation, the Company has no material
Contingent Obligations not provided for or disclosed in the financial statements
referred to in Section 5.4.
5.6. REGULATION U. Margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System) constitutes less than 25% of those
assets of the Company and its Subsidiaries which are subject to any limitation
on sale, pledge, or other restriction hereunder.
5.7. COMPLIANCE WITH LAWS. The Company and its Subsidiaries have
complied in all materials respects with all applicable statutes, rules,
regulations, orders and restrictions of any domestic or foreign government or
any instrumentality or agency thereof, having jurisdiction over the conduct of
their respective businesses or the ownership of their respective properties.
6. COVENANTS
During the term of this Agreement, unless the Bank shall otherwise consent
in writing:
6.1. FINANCIAL REPORTING. The Company will maintain, for itself and each
Subsidiary, a system of accounting established and administered in accordance
with generally accepted accounting principles, and furnish to the Bank:
(i) Within 90 days after the close of each of its fiscal years occurring
after the date hereof, an unqualified (except for qualifications
relating to
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<PAGE>
changes in accounting principles or practices reflecting changes in
generally accepted principles of accounting and required or approved
by the Company's independent certified public accountants) audit
report certified by independent certified public accountants,
acceptable to the Bank, prepared in accordance with generally
accepted accounting principles on a consolidated and consolidating
basis (consolidating statements need not be certified by such
accountants) for itself and the Subsidiaries, including balance
sheets as of the end of such period, related profit and loss and
reconciliation of surplus statements, and a statement of cash flows.
(ii) Within 45 days after the close of the first three quarterly periods
of each of its fiscal years occurring after the date hereof, for
itself and the Subsidiaries, consolidated and consolidating
unaudited balance sheets as at the close of each such period and
consolidated and consolidating profit and loss and reconciliation of
surplus statements and a statement of cash flows for the period from
the beginning of such fiscal year to the end of such quarter, all
certified by an officer of the Company.
(iii) Together with the financial statements required hereunder, a
compliance certificate signed by a financial officer of the Company
showing the calculations necessary to determine compliance with
Sections 6.9, 6.10 and 6.11 of this Agreement and stating that no
Default or Unmatured Default existed as of the date of the
corresponding financial statement, or if any Default or Unmatured
Default existed as of the date of the corresponding financial
statement, stating the nature and status thereof.
(iv) Promptly upon the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(v) Promptly upon the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports
which the Company or any Subsidiary files with the Securities and
Exchange Commission.
(vi) Such other information (including non-financial information) as the
Bank or any Bank may from time to time reasonably request.
6.2. USE OF PROCEEDS. The Company will, and will cause each Subsidiary
to, use the proceeds of the Loans for general corporate purposes. The Company
will not, nor will it permit any Subsidiary to, use any of the proceeds of the
Loans to purchase or carry any "margin stock" (as defined in Regulation U) in
excess of that which would be permitted under Section 5.6.
6.3. CONDUCT OF BUSINESS. The Company will, and will cause each
Subsidiary to, carry on and conduct its business in substantially the same
manner and in
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substantially the same fields of enterprise as it is presently conducted or at
the time any such Subsidiary is created or acquired and to do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted, except that the Company may dissolve a Subsidiary if such
dissolution would not have a Material Adverse Effect.
6.4. TAXES. The Company will, and will cause each Subsidiary to, pay
when due all taxes, assessments and governmental charges and levies upon it or
its income, profits or property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
6.5. COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply in all material respects with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject.
6.6. MERGER. The Company will not, nor will it permit any Subsidiary to,
merge or consolidate with or into any other Person, except to the extent the
Company or any Subsidiary is the surviving entity and except that a Subsidiary
may merge with the Company or a wholly-owned Subsidiary; provided that, as a
result of any merger involving the Company the Company is the survivor and
immediately prior to and immediately after any such merger there shall be no
Default or Unmatured Default hereunder.
6.7. LIENS. The Company will not, nor will it permit any Subsidiary to,
create, incur, or suffer to exist any Lien in, of or on the property of the
Company or any Subsidiary, except:
(i) Liens for taxes, assessments or governmental charges or levies on
its property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in
good faith and by appropriate proceedings.
(ii) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens, deposits, pledges or liens to secure the
performance of bids, tenders or trade contracts, or to secure
statutory obligations or surety or appeal bonds and other similar
liens arising in the ordinary course of business which secure
payment of obligations not more than 60 days past due or which are
being contested in good faith by appropriate proceedings and for
which adequate reserves shall have been set aside on its books.
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(iii) Liens arising out of pledges or deposits under worker's compensation
laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation.
(iv) Utility easements, building restrictions and such other encumbrances
or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which
do not in any material way affect the marketability of the same or
interfere with the use thereof in the business of the Company or the
Subsidiaries.
(v) Liens existing on the date hereof.
(vi) Liens of or resulting from any judgments or awards in an amount not
exceeding $5,000,000, in the aggregate, the time for the appeal or
petition for rehearing of which shall not have expired, or in
respect of which the Company or any Subsidiary shall at any time in
good faith be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or
proceeding for review shall have been secured.
(vii) Liens which may be deemed to exist on notes, drafts or instruments
received in payment of trade receivables owing to any Foreign
Subsidiary which are sold or otherwise negotiated by such Foreign
Subsidiary with recourse.
(viii) Liens securing Indebtedness of a Subsidiary to the Company or to a
Subsidiary.
(ix) Liens incurred after the date hereof given to secure the payment of
the purchase price incurred in connection with the acquisition,
construction or improvement of fixed assets useful and intended to
be used in carrying on the business of the Company or a Subsidiary,
including Liens existing on such fixed assets at the time of
acquisition thereof or at the time of acquisition by the Company or
a Subsidiary of any business entity then owning such fixed assets,
whether or not such existing Liens were given to secure the payment
of the purchase price of the fixed assets to which they attach so
long as they were not incurred, extended or renewed in contemplation
of such acquisition, provided that (i) the Lien shall attach solely
to the property acquired, constructed or improved and (ii) at the
time of acquisition, construction or improvement of such fixed
assets, the aggregate amount remaining unpaid on all Indebtedness
secured by Liens on such fixed assets whether or not assumed by the
Company or a Subsidiary shall not exceed an amount equal to 100% of
the lesser of the total purchase price or fair market value at the
time of acquisition, construction or improvement of such fixed
assets (as determined in good faith by the Board of Directors of the
Company).
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(x) Any Lien on any asset existing at the time such asset is acquired by
the Company or one of its Subsidiaries or is merged into or
consolidated with the Company or one of its Subsidiaries and not
created in contemplation of such event and any extension, renewal or
replacement Lien arising out of the extension, renewal or
replacement of the related obligation secured by such Lien, so long
as any such replacement Lien does not extend to property not covered
by the Lien replaced or renewed.
6.8. NOTICE OF DEFAULT. The Company will, and will cause each Subsidiary
to, give prompt notice in writing to the Bank of the occurrence of any Default
or Unmatured Default.
6.9. INTEREST COVERAGE RATIO. As at the end of each fiscal quarter of
the Company, the Interest Coverage Ratio shall not be less than 2.5 to 1.0.
6.10. INDEBTEDNESS TO TOTAL CAPITALIZATION RATIO. As at the end of each
fiscal quarter of the Company, the ratio of Indebtedness of the Company and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles consistently applied to Total Capitalization
shall not be greater than .55 to 1.0.
6.11. MINIMUM NET WORTH. As at the end of each fiscal quarter of the
Company, the Net Worth shall be at least $60 million plus 50% of aggregate
Consolidated Net Income earned after December 31, 1994.
7. DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made or deemed made by or on behalf
of the Company or any Subsidiary to the Bank under or in connection with this
Agreement, any Loan, or any certificate or information delivered in connection
with this Agreement or the Note shall be materially false on the date as of
which made.
7.2. Nonpayment of principal of the Note when due, or nonpayment of
interest upon the Note or of any facility fee or other obligations under this
Agreement or the Note within five days after the same becomes due.
7.3. The breach by the Company of any of the terms or provisions of
Sections 6.6 through 6.11.
7.4. The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty days after written notice from the
Bank.
15
<PAGE>
7.5. Failure of the Company or any Subsidiary to pay any Indebtedness
equal to or exceeding $1,000,000 in the aggregate when due; or the default by
the Company or any Subsidiary in the performance of any term, provision or
condition contained in any agreement under which any such Indebtedness was
created or is governed, the effect of which is to cause such Indebtedness to
become due prior to its stated maturity, or which continues unwaived for a
period of 30 days or more after it first becomes known to any officer of the
Company and the effect of which as of the end of such period is to permit the
holder or holders of such Indebtedness to cause such Indebtedness to become due
prior to its stated maturity; or any such Indebtedness of the Company or any
Subsidiary shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled payment) prior to the stated maturity
thereof; or the Company or any Subsidiary shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.6. The Company or any Subsidiary shall (i) have an order for relief
entered with respect to it under the Federal bankruptcy laws as now or hereafter
in effect, (ii) make an assignment for the benefit of creditors, (iii) apply
for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (iv) institute any proceeding seeking an order
for relief under the Federal bankruptcy laws as now or hereafter in effect or
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
winding up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other pleading
denying the material allegations of any such proceeding filed against it, (v)
take any corporate action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (vi) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
Subsidiary, a receiver, trustee, examiner, liquidator or similar official shall
be appointed for the Company or any Subsidiary or any substantial part of its
property, or a proceeding described in Section 7. 6 (iv) shall be instituted
against the Company or any Subsidiary and such appointment continues
undischarged or such proceeding continues undismissed or unstayed for a period
of 30 consecutive days.
8. ACCELERATION AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or 7.7 occurs
with respect to the Company, the obligations of the Bank to make Loans hereunder
shall automatically terminate and the Obligations shall immediately become due
and payable without any election or action on the part of the Bank. If any
other Default occurs, the Bank may terminate or suspend the obligations of the
Bank to make Loans hereunder, or declare the Obligations to be due and payable,
or both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Company hereby expressly waives.
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<PAGE>
8.2. PRESERVATION OF RIGHTS. No delay or omission of the Bank to
exercise any right under this Agreement or the Note shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Company to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of this Agreement or the Note whatsoever shall be valid
unless in writing signed by the Bank and then only to the extent in such writing
specifically set forth. All remedies contained in this Agreement and the Note
or by law afforded shall be cumulative and all shall be available to the Bank
until the Obligations have been paid in full.
9. GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Company contained in this Agreement shall survive delivery of the Note and
the making of the Loans herein contemplated.
9.2. TAXES. Any taxes (excluding income taxes) or other similar
assessments or charges payable or ruled payable by any governmental authority in
respect of this Agreement and the Note shall be paid by the Company, together
with interest and penalties, if any.
9.3. EXPENSES; INDEMNIFICATION. Upon any acceleration of the Obligations
in accordance with Section 8.1, or if the Company shall fail to pay on principal
Obligations after its due date, the Company shall reimburse the Bank for any
costs, internal charges and out-of-pocket expenses (including attorneys' fees
and time charges of attorneys for the Bank, which attorneys may be employees of
the Bank) paid or incurred by the Bank in connection with the preparation,
review, execution, delivery, amendment, modification, administration, collection
and enforcement of this Agreement and the Note; provided that, the Company shall
also reimburse the Bank up to a maximum amount of $1,500 for such costs incurred
by the Bank in connection with the preparation, review and execution of this
Agreement and the Note promptly after execution and delivery of this Agreement
by the Bank and the Company and receipt by the Company of copies of invoices for
such outside legal services. The Company further agrees to indemnify the Bank,
its directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefore whether or not the Bank is a
party thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the Note, the transactions contemplated hereby or the direct or
indirect application or proposed application of the proceeds of any Loan
hereunder; provided, however, the Company shall have no obligation to indemnify
the Bank for its losses arising as a result of the Bank's negligence or willful
misconduct. The obligations of the Company under this Section shall survive the
termination of this Agreement.
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9.4. CHOICE OF LAW. THIS AGREEMENT AND THE NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
MICHIGAN, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.5. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
and the Note shall be binding upon and inure to the benefit of the Company and
the Bank and their respective successors and assigns, except that the Company
shall not have the right to assign its rights or obligations under this
Agreement or the Note. The Bank may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to one
or more banks or other entities participating interests in any Loan, the Note or
the Commitment. The Bank may, with the consent of the Company, which consent
shall not be unreasonably withheld, assign to one or more banks or other
entities all or any part of its rights and obligations under this Agreement or
the Note (and the Company shall release the Bank for the amount so assigned).
The Bank may disclose information pertaining to the Company and its Subsidiaries
to prospective assignees and participants.
9.6. GIVING NOTICE. Except as otherwise permitted by Section 2.5 with
respect to borrowing notices, all notices and other communications provided to
any party hereto under this Agreement or the Note shall be in writing or by
telex or by facsimile and addressed or delivered to such party at its address
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other parties. Any notice, if
mailed and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes).
9.7. WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK HEREBY WAIVE TRIAL
BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS AGREEMENT AND THE NOTE OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
9.8. SETOFF. In addition to, and without limitation of, any rights of
the Bank under applicable law, if the Company becomes insolvent, however
evidenced, or any Default or Unmatured Default under Section 7.7 occurs, any and
all deposits (including all account balances, whether provisional or final and
whether or not collected or available) and any other Indebtedness at any time
held or owing by the Bank to or for the credit or account of the Company may be
offset and applied toward the payment of the Obligations owing to the Bank,
whether or not the Obligations, or any part hereof, shall then be due.
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9.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any of the parties hereto may execute this Agreement by signing any such
counterpart.
9.10 OTHER FINANCING. If at any time from and after the effective date
of this Agreement, the Company or any Domestic Subsidiary shall enter into any
trust indenture or other agreement for, relating to, or amending any terms or
conditions applicable to any Indebtedness with any initial term of not less than
180-days incurred in connection with the domestic operations of the Company or
such Domestic Subsidiary, in an amount equal to or in excess of $1,000,000,
which includes covenants or defaults reasonably determined by the Bank to be
more restrictive than those provided for in Section 6 and Section 7 of this
Agreement, the Company shall promptly so advise the Bank. Thereupon, if the
Bank shall request by notice to the Company, the Company or such Domestic
Subsidiary, as the case may be, shall enter into an amendment to this Agreement
providing for substantially the same such covenants and defaults as those
provided for in such trust indenture or other agreement, mutatis mutandis, to
the extent required and as may be selected by the Bank, such amendment to remain
in effect for the entire duration of the term to maturity of such Indebtedness
(to and including the date to which the same may be extended at the Company's or
Subsidiary's option); provided, however, that if any such trust indenture or
other agreement shall be modified, supplemented, amended or terminated so as to
modify, amend or eliminate such trust indenture or other agreement or any such
covenant, term, condition or default so made a part of this Agreement, then, the
Company shall give the Bank prompt notice thereof and such modification,
supplement or amendment shall operate to modify, amend or eliminate such
covenants, term, condition or default as so made a part of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the Company and the Bank have executed this Agreement as of
the date first above written.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
-------------------------------------------
Title: TREASURER AND SECRETARY
----------------------------------------
Two Appletree Square, Suite 400
Minneapolis, Minnesota 55425
Attention: Michael P. Hawks
Treasurer and Secretary
NBD Bank, N.A.
By: /s/ Patrick P. Skiles
-------------------------------------------
Title: VICE PRESIDENT
----------------------------------------
611 Woodward Avenue
Detroit, Michigan 48226
Attention:
------------------------------------
20
<PAGE>
EXHIBIT "A"
NOTE
$10,000,000 September 30, 1994
BMC Industries, Inc., a corporation (the "COMPANY"), promises to pay to the
order of NBD Bank, N.A. (the "BANK") the lesser of the principal sum of Ten
Million Dollars or the aggregate unpaid principal amount of all Loans made by
the Bank to the Company pursuant to Section 2.1 of the Credit Agreement (this
"AGREEMENT") hereinafter referred to, in immediately available funds at the main
office of the Bank in Detroit, Michigan, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in this
Agreement. The Company shall pay the Loans in full on the Revolving Credit
Termination Date (as defined in this Agreement).
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is the Note issued pursuant to, and is entitled to the benefits
of, the Credit Agreement, dated as of September 30, 1994, between the Company
and the Bank, to which Agreement, as it may be amended from time to time,
reference is hereby made for a statement of the terms and conditions under which
this Note may be prepaid or its maturity date accelerated. Capitalized terms
used herein and not otherwise defined herein are used with the meanings
attributed to them in this Agreement.
BMC INDUSTRIES, INC.
By: /s/ Michael P. Hawks
-------------------------------------------
21
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PRODUCT MANUFACTURING AND SALES AGREEMENT
THIS PRODUCT MANUFACTURING AND SALES AGREEMENT (this "Agreement") is made and
entered into as of the 17th day of October, 1994, between POLYCORE OPTICAL, PTE.
LTD. ("Seller"), and VISION-EASE, a unit of BMC Industries, Inc. ("Buyer").
RECITALS
WHEREAS, Buyer and Seller desire to enter into a business relationship whereby
Buyer will commit to long-term purchases of certain hard resin lenses from
Seller and Seller will commit to certain pricing terms, quality levels and
payment and other terms on such purchases.
WHEREAS, Buyer and Seller have agreed to enter into such business relationship
upon the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
in this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1
DEFINITIONS
For purposes of this Agreement, the following words, terms and phrases shall
have the meanings assigned to them in this Section 1 unless the context
otherwise requires:
1.1 PRODUCTS. "Products" shall mean the hard resin lenses manufactured by
Seller according to the specifications supplied by Buyer (and more particularly
described in EXHIBIT A attached hereto) specifically for and at the request of
Buyer for sale by Buyer.
1.2 ASSET PURCHASE AGREEMENT. "Asset Purchase Agreement" shall mean that
certain Asset Purchase Agreement between the parties hereto pursuant to which
Buyer has agreed to sell to Seller certain glass molds and open and shut line
equipment and operating software.
SECTION 2
MANUFACTURE AND PURCHASE OF PRODUCTS
2.1 MANUFACTURE AND PURCHASE.
(a) During the term of this Agreement, Seller shall manufacture for and
sell to Buyer, and Buyer shall purchase from Seller, Products in the
minimum quantities specified in EXHIBIT B attached hereto. Seller shall
manufacture for and sell to Buyer such additional quantities of Products
as the parties shall mutually agree in good faith.
(b) Buyer expects to purchase the quantities of finished Products
specified in EXHIBIT C attached hereto; provided, however, that Buyer
shall be under no obligation to purchase any
<PAGE>
finished Products from Seller. In the event that Buyer elects to purchase
such finished Products, Seller shall manufacture and sell such Products to
Buyer. In addition, Seller shall manufacture for and sell to Buyer such
additional quantities of finished Products as the parties shall mutually
agree in good faith.
2.2 FORECASTS. Buyer agrees to provide Seller with the following forecasts
of Buyer's intended purchases of Products by means of SKU:
(a) at least ninety (90) calendar days prior to each anniversary date of
this Agreement, a forecast for the twelve (12) month period beginning on
such anniversary date; and
(b) at least ninety (90) calendar days prior to each January 1, April 1,
July 1 and October 1 during the term of this Agreement, a forecast for the
calendar quarter beginning on such date.
Such forecasts shall NOT be deemed to create any obligation on Buyer to
purchase Products but shall be utilized simply for planning purposes; provided,
however, that Buyer's actual purchases of Products will be within plus or minus
ten percent (10%) of the quarterly forecasts. Buyer's current intended annual
purchases of Products are set forth on EXHIBIT D hereto.
2.3 SEMI-FINISHED LENSES. Seller shall not sell any semi-finished lenses
which are substantially the same as the specifications and design of Buyer's
Products to any United States distributor, supplier, laboratory or other concern
or entity at a price which is less than one hundred ten percent (110%) of the
price paid by Buyer hereunder; provided, however, that Seller retains the right
to negotiate any price with respect to sales of semi-finished lenses to United
States distributors, suppliers, laboratories and other entities which purchase
more of such lenses from Seller on an annual basis than Buyer purchases from
Seller on an annual basis; provided, further, that Seller notifies Buyer, at
least sixty (60) calendar days in advance of making sales to any such entity,
that Seller has entered into an agreement or arrangement, whether oral or
written, with any such entity and provides Buyer with a summary of the principal
terms and conditions of such agreement or arrangement.
2.4 TRADEMARKS. Seller shall not use, and is not granted any right with
respect to the use of, any of Buyer's current trademarks or any other marketing
identification name, word or logo currently used by Buyer. Buyer shall not use,
and is not granted any right with respect to the use of, any of Seller's current
trademarks or any other marketing identification name, word or logo currently
used by Seller. Neither party shall adopt, use or register any words, phrases
or symbols which are identical to or confusingly similar to any of the other
party's trademarks.
2.5 AREA OF DISTRIBUTION. Buyer reserves the right to sell, market and
distribute any and all lens products, whether manufactured by Seller, Buyer or
some other manufacturer, anywhere in the world.
2.6 ASSET PURCHASE AGREEMENT. This Agreement and the rights and obligations
of the parties set forth herein shall only become effective if and when the
parties hereto enter into the Asset Purchase Agreement. Seller's obligation to
manufacture and sell Products to Buyer, and Buyer's obligation to purchase
Products from Seller, shall become effective on the date which is ninety (90)
calendar days after the Equipment (as defined in the Asset Purchase Agreement)
becomes
2
<PAGE>
operationally fit to perform its intended functions in the Seller's facility (as
determined by the parties in good faith); provided, however, that in no event
shall the Seller's obligations under this Agreement become effective more than
180 calendar days after delivery of the Equipment has been tendered to Seller by
Buyer.
SECTION 3
ORDERING
3.1 PURCHASE ORDERS. Buyer shall purchase Products during the term of this
Agreement by means of written purchase orders sent by SKU. Buyer's purchase
orders shall set forth at a minimum:
(a) an identification of the Products ordered;
(b) quantity;
(c) requested delivery dates; and
(d) shipping instructions and shipping address.
Purchase orders must be received by Seller at least thirty (30) calendar days
prior to the delivery dates requested in the order.
3.2 SPECIFICATIONS. Seller shall manufacture all Products according to
Buyer's specification as initially described in EXHIBIT E. No change in or
modification to the specifications of any of the Products shall be made by
Seller without the written approval and authorization of Buyer's Vice President
of Sales and Marketing and its Quality Control Director. Buyer reserves the
right to change or modify the specifications of any of the Products in its sole
discretion by written notice to Seller, provided that such change or
modification is within the manufacturing capabilities of Seller and does not
increase the manufacturing cost of the Product to which such change or
modification relates.
3.3 CONFIRMATION. Seller shall, by written notice to Buyer, confirm each
order within fifteen (15) calendar days of receiving the order. The written
confirmation shall include:
(a) order origin and number;
(b) date of receipt of order;
(c) unit prices and total order price; and
(d) scheduled shipment date.
Each purchase order shall be deemed to be an offer by Buyer to purchase the
Products pursuant to the terms of this Agreement and, when accepted by Seller as
hereinabove provided, shall give rise to a contract under the terms set forth
herein to the exclusion of any additional or contrary terms set forth in the
purchase order, notification of acceptance, invoice or any other document not
signed by the parties.
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3.4 DELIVERY TERMS. All deliveries of the Products shall be Free Carrier at
the seaport of Seller's choice. Unless otherwise provided in this Agreement
"Free Carrier" shall be construed in accordance with INCOTERMS 1990 of the
International Chamber of Commerce. All risk of damage to or loss or delay of
the Products shall pass to Buyer upon their delivery at the Free Carrier
delivery point to the common carrier designated by Buyer. Buyer shall bear all
costs of shipping the Products ordered. Buyer shall insure each shipment of
Products with a reputable insurer for the full invoice value of such shipment.
Such insurance shall provide for full coverage from the time the Products are
delivered at the Free Carrier point until Buyer shall have received such
Products. Seller shall provide proper shipping documentation and packaging for
sea shipping. Buyer may, at its discretion and cost, request air shipments on
certain items from time to time.
3.5 CANCELLATION AND CHANGES. Buyer shall have the right to modify or
cancel any purchase order, including accepted purchase orders, or may defer
shipment of any Products upon ten (10) calendar days' written notice prior to
Buyer's requested delivery date of such Products.
3.6 FILL RATES. Seller shall provide minimum first time fill rates of
ninety-eight percent (98%) for all of Buyer's orders placed at least thirty (30)
calendar days in advance of Buyer's requested delivery date. The balance of any
orders not completely filled within sixty (60) calendar days shall be air
shipped at Seller's cost and expense.
SECTION 4
PRODUCT PACKAGING
4.1 PACKAGE DESIGN. Buyer shall provide Seller with the required package
dimensions, design and graphics. Seller shall procure all required packaging
materials and shall package the Products as required for intercontinental
shipping. The package or label, as requested by Buyer, shall be marked with the
lens base, add, style, diameter and other required product specifications.
4.2 BAR CODING. Seller shall apply, either by means of a label or to the
package, the OPC/Vision-Ease bar code and bar code number. Buyer shall provide
such bar coding numbers to Seller.
4.3 COSTS. All costs incurred by Seller associated with such packaging and
bar coding shall be deemed included in the price of the Products payable by
Buyer pursuant to the terms of this Agreement.
SECTION 5
PRICE AND PAYMENT
5.1 PRICE.
(a) The initial prices for all Products are as shown in the attached
EXHIBIT F (semi-finished Products) and EXHIBIT G (finished Products).
(b) The initial prices for the Products may be adjusted once in each of
years two and three of this contract upon the mutual agreement of Buyer
and Seller to reflect any changes
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<PAGE>
in the documented raw material cost changes incurred by Seller, but in any
such event, the amount of such adjustment shall not be greater than the
amount of such raw material cost change.
(c) In the event that Buyer and Seller agree to extend the term of this
Agreement, Buyer and Seller agree to negotiate in good faith the price of
the Products after the initial term of this Agreement. The intent of such
negotiations will be to share any industry price increases equally. The
determination of industry price changes shall be based on a formula of
industry price changes as documented by the Optical Manufacturers
Association (OMA). A separate calculation will be used for SR coated and
non-SR coated Products.
(d) Seller shall provide its best possible pricing on any additional
products provided to Buyer.
5.2 INVOICES; PAYMENT TERMS. Seller shall issue individual invoices for
each shipment made against any purchase order. Notwithstanding any terms stated
in the invoice, payment for the Products shall be due net thirty (30) calendar
days from the date of shipment of the Products. All payments made under this
Agreement shall be made in United States dollars. All payments shall be made by
wire transfer to the bank or banks designated in writing by Seller to Buyer from
time to time during the term of this Agreement.
5.3 RESALE PRICES. Buyer may resell the Products at such prices and upon
such terms as Buyer, in its sole discretion, shall determine.
5.4 SETOFF. Buyer shall have the right to set-off any amounts owing to
Seller under this Agreement against any amounts which are more than thirty (30)
days past due and owing to the Buyer by Seller in connection with the Asset
Purchase Agreement.
SECTION 6
ACCEPTANCE AND WARRANTY
6.1 ACCEPTANCE OF PRODUCTS. Buyer shall conduct any incoming acceptance
tests as soon as possible upon arrival of the Products at the shipping address,
but in no event later than thirty (30) calendar days from the date of receipt of
each shipment of Products. Buyer shall audit all incoming shipments of Product
using General Inspection Level 2 Multiple Sample Plan Mil-STD-105E using a 6.5%
AQL; provided that, in its discretion, Buyer may employ and accept a level 1
inspection. Shipments having greater than six and one-half percent (6.5%)
defective product will be retested by Buyer. If after the retesting the
shipment fails to pass, Seller shall assume responsibility for the reinspection
of the defective Product. In the event that Seller is obligated to reinspect
such defective Product or in the event of any shortage, damage or other
discrepancy in or to a shipment of Products, Buyer shall promptly report the
same to Seller in writing and furnish such written evidence or other
documentation as Seller may deem appropriate.
6.2 CUSTOMER RETURNS. Buyer shall assume responsibility for customer
returns of defective Products amounting to one percent (1%) or less of each
shipment of Products received by Buyer from Seller. Returns in excess of one
percent (1%) will be forwarded to Seller for full credit to Buyer's account.
5
<PAGE>
SECTION 7
MODIFICATIONS; IMPROVEMENTS
7.1 MODIFICATIONS. Seller may not, without the prior written consent of
Buyer, alter the specifications for any Product or discontinue the manufacture
of any Product.
7.2 IMPROVEMENTS. Buyer and Seller agree to establish ongoing and open
communications on new product development and product specification changes.
Seller agrees to provide continuous product improvements and enhancements as
demanded by the U.S. marketplace. Such enhancements shall include, but not be
limited to, an improved tinting/dying rate on scratch resistant coated Products.
SECTION 8
PATENT INDEMNIFICATION
Seller agrees that it will indemnify and hold harmless Buyer from and against
any loss, damage, cost or liability which may be incurred by Buyer as a result
of a final judgment of a court of last resort based on a claim that any of the
Products furnished hereunder infringes any patent of the United States or any
other country, and that Seller will, at its own expense, defend any action, suit
or proceeding which is based on an allegation that any Product manufactured by
Seller and sold to Buyer hereunder constitutes an infringement of any patent of
the United States or any other country; provided, that:
(a) Buyer immediately notifies Seller in writing of the existence of any
notice or claim of infringement and of any such action, suit or proceeding
upon Buyer's discovery of the existence thereof;
(b) Buyer gives Seller full control of the defense of any such suit,
including appeals from any judgment therein and any negotiations for the
settlement or compromise thereof with full authority to enter into a
binding settlement or compromise; and
(c) Buyer cooperates with Seller, at Seller's expense, in the defense
thereof.
In the event that any such Products are held to constitute an infringement and
the use, possession, sale, reproduction or distribution thereof is enjoined,
Seller shall use its best efforts to replace such infringing Products during the
term of this Agreement with non-infringing Products at Seller's expense.
SECTION 9
IMPORT AND EXPORT OF PRODUCTS
9.1 IMPORT DOCUMENTATION. Buyer shall be responsible for obtaining all
licenses and permits and for satisfying all formalities as may be required to
import the Products into any country for sale by Buyer in accordance with then
prevailing laws and regulations. If applicable, all import duties shall be paid
by Buyer. Seller shall supply Buyer with all necessary information and
documentation reasonably required by Buyer to obtain requisite import licenses
and permits for the Products,
6
<PAGE>
including such information and documentation as may be required to satisfy FDA
import requirements and regulations.
9.2 EXPORT REGULATIONS. Seller shall be responsible for obtaining all
licenses and permits and for satisfying all formalities as may be required to
export the Products. Buyer shall supply Seller with all necessary information
and documentation reasonably requested by Seller to obtain requisite export
licenses and permits for the Products.
SECTION 10
DURATION AND TERMINATION
10.1 TERM. The term of this Agreement shall commence as of the date first
above written and shall continue in force for a term of three (3) years from
such date. This Agreement may be extended thereafter by the written agreement
of both parties.
10.2 TERMINATION FOR BREACH. If either party breaches any of the terms or
conditions contained in this Agreement, the other party may terminate this
Agreement by written notice effective upon receipt or upon such later date
specified in the notice, if the breaching party fails to cure its breach within
thirty (30) calendar days after receiving a written demand to cure such breach
from the non-breaching party. If Buyer defaults in the payment of any sum due
under this Agreement, then Seller shall have the right, without further notice,
to immediately terminate this Agreement. If Seller defaults in the payment of
any sum due in connection with the Asset Purchase Agreement, then Buyer shall
have the right, in its discretion and without further notice, to immediately
terminate this Agreement.
10.3 OTHER TERMINATION. Either party may terminate this Agreement
immediately upon written notice in the event of the insolvency of the other
party, the filing by or against the other party of any voluntary or involuntary
petition in bankruptcy, or for any similar relief, or the execution of any
assignment by the other party for the benefit of creditors, or the appointment
of a receiver of the other party for any reason, or should the other party or a
substantial part of its business come under the control of a third party.
10.4 RIGHTS UPON TERMINATION. Termination of this Agreement shall be without
prejudice to the rights of either party to receive payments or to any other
remedies which either party may have in respect of claims due or accrued prior
to the date of termination. Seller's obligation to fill Buyer's purchase orders
then outstanding shall survive termination of this Agreement.
SECTION 11
ARBITRATION
Any dispute, controversy or claim arising out of or relating to this Agreement
or the breach, termination or invalidity thereof shall be finally settled by
binding arbitration in accordance with the UNCITRAL Arbitration Rules in effect
on the date of this Agreement by a single arbitrator appointed in accordance
with such Rules. The appointing authority shall be the American Arbitration
Association. The place of arbitration shall be Minneapolis, Minnesota, U.S.A.
The
7
<PAGE>
arbitration shall be conducted in the English language. Judgment upon the award
rendered by the arbitration may be entered in any court having jurisdiction
thereof.
SECTION 12
CONFIDENTIALITY
12.1 CONFIDENTIALITY. Seller and Buyer agree not to use for any purpose
other than in accordance with this Agreement, and not to disclose to any third
party without the prior written consent of the other party, any information
received from the other party which is identified as confidential or restricted
prior to disclosure to the receiving party or any other information that derives
independent economic value from not being generally known, or not being readily
ascertainable by proper means, by other persons who can obtain economic value
from the disclosure or use of such information. The above confidentiality
obligation shall not extend to information which:
(a) was in the possession of, or was known by, the receiving party prior
to its receipt from the disclosing party;
(b) is or becomes generally available to the public without the fault of
the receiving party;
(c) is received by the receiving party from a lawful source other than
the disclosing party; or
(d) is required to be disclosed by law or court order.
12.2 TERMINATION. The obligation of confidentiality under Section 12.1
above shall survive the termination of this Agreement.
SECTION 13
MISCELLANEOUS
13.1 PUBLICITY. Any publicity issued by either party relating to this
Agreement must be coordinated with the other party in advance on a good faith
basis and shall in no event divulge the terms of this Agreement.
13.2 NOTICES. All notices, consents, requests, demands and other
communications permitted or required to be given hereunder will be deemed
sufficient if given in writing and if delivered personally, or by registered or
certified air mail, postage prepaid, return receipt requested, or by telecopier,
addressed to the parties as set forth below or at such other addresses as the
respective parties may designate by like communication from time to time, and
shall be effective upon dispatch.
8
<PAGE>
If to Seller: Polycore Optical, Pte. Ltd.
12 Kallang Sector
Singapore 1334
Attention:
Telecopier:
If to Buyer: Vision-Ease
7100 Northland Circle, Suite 312
Brooklyn Park, Minnesota 55428
U.S.A.
Attention:
Telecopier:
13.3 ASSIGNMENT; BINDING EFFECT. Neither party shall have the right to
assign or otherwise transfer its rights and obligations under this Agreement
except with the prior written consent of the other party, which shall not be
unreasonably withheld. Any prohibited assignment shall be null and void. This
Agreement is binding upon and inures to the benefit of the parties and their
respective successors and permitted assigns.
13.4 GOVERNING LAW. This Agreement (including the Exhibits attached hereto)
and the legal relations between the parties shall be governed by and construed
in accordance with the laws of the State of Minnesota, U.S.A. (without regard to
the laws of conflict of any jurisdiction) as to all matters, including, without
limitation, matters of validity, interpretation, construction, effect,
performance, enforcement and remedies.
13.5 RELATIONSHIP. This Agreement does not make either party the employee,
agent or legal representative of the other for any purpose whatsoever. Neither
party is granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the other
party. In fulfilling its obligations under this Agreement, each party shall be
deemed an independent contractor. Nothing contained in this Agreement will
constitute or be construed to be or create a partnership, joint venture,
franchise or similar agreement between the parties hereto.
13.6 WAIVER. No failure or delay by either party to take any action or
assert any right or remedy hereunder or to enforce strict compliance with any
provisions hereof will be deemed to be a wavier of, or estoppel with respect to,
such right, remedy or noncompliance in the event of the continuation or
repetition of the circumstances giving rise to such right, remedy or
noncompliance. No waiver shall be effective unless given in a duly executed
written instrument. All rights and remedies herein provided are cumulative and
not exclusive of any remedies provided by law or equity.
13.7 SEVERABILITY. In the event that any of the terms or provisions of this
Agreement are in conflict with any rule of law or statutory provision or
otherwise unenforceable under the laws or regulations of any government or
subdivision thereof having jurisdiction over this Agreement, such terms or
provisions will be deemed stricken from this Agreement to the extent necessary
to avoid such conflict, but such invalidity or unenforceability shall not
invalidate any of the other terms or provisions of this Agreement and the
remainder of such terms or provisions and the remainder of this Agreement will
continue in full force and effect, unless the invalidity or unenforceability of
any
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<PAGE>
such provisions hereof does substantial violence to, or where the invalid or
unenforceable provisions comprise an integral part of, or are otherwise
inseparable from, the remainder of this Agreement.
13.8 AMENDMENTS. This Agreement shall not be amended, modified, rescinded,
cancelled or waived, in whole or in part, except by a written instrument signed
by the parties hereto.
13.9 ENTIRE AGREEMENT. This Agreement (including the Exhibits attached
hereto) constitutes the entire agreement of the parties with respect to the
subject matter hereof, and supersedes all previous agreements by and between the
parties, as well as all proposals, oral or written, and all negotiations,
conversations, and understandings heretofore had between the parties related to
this Agreement. Further, this Agreement supersedes any terms and conditions
stated in any purchase order, confirmation of the purchase order or any invoice
to the extent they are inconsistent with this Agreement.
13.10 COUNTERPARTS. This Agreement shall be executed in two or more
counterparts in the English language, and each such counterpart shall be deemed
an original hereof. In case of any conflict between the English version and any
translated version of this Agreement, the English version shall govern.
IN WITNESS WHEREOF, Seller and Buyer have caused this Product Manufacturing and
Sales Agreement to be duly executed as of the date first above written.
POLYCORE OPTICAL, PTE. LTD. VISION-EASE, a unit of BMC Industries, Inc.
By /s/ By /s/ Ray Rogers
----------------------------- --------------------------------------
Its Managing Director Its President
----------------------------- --------------------------------------
10
<PAGE>
HISTORICAL FINANCIAL SUMMARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992 1991 1990
---------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND STATISTICS AND RATIOS)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS(1)
Net sales of primary products $211,293 $189,372 $179,541 $187,650 $172,518
Equipment and technology sales 8,675 6,059 1,289 15,535 2,480
---------------------------------------------------------------------------------------------------------------------------------
Total revenues 219,968 195,431 180,830 203,185 174,998
Cost and expenses of primary products sales 187,129 172,177 165,408 175,357 162,392
Cost of equipment and technology sales 6,140 3,264 1,465 10,005 951
---------------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before interest expense
and income taxes 26,699 19,990 13,957 17,823 11,655
Interest expense--net 2,369 4,820 6,209 7,804 7,762
Income taxes 9,326 4,790 709 1,776 2,047
---------------------------------------------------------------------------------------------------------------------------------
Earnings from continuing operations before cumulative
effect of accounting changes 15,004 10,380 7,039 8,243 1,846
Provision for loss related to discontinued operation--net of tax (839) (415) -- -- --
Cumulative effect of accounting changes -- 12,131 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Net earnings $ 14,165 $ 22,096 $ 7,039 $ 8,243 $ 1,846
---------------------------------------------------------------------------------------------------------------------------------
Primary earnings per share
Number of shares included in per share computation 13,668 12,432 11,650 11,136 11,018
Earnings per share from continuing operations $ 1.10 $ .83 $ .60 $ .74 $ .17
Loss per share from discontinued operation (.06) (.03) -- -- --
Cumulative effect of accounting changes -- .98 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Primary earnings per share $ 1.04 $ 1.78 $ .60 $ .74 $ .17
---------------------------------------------------------------------------------------------------------------------------------
Fully-diluted earnings per share
Number of shares included in per share computation 13,762 13,042 11,866 11,238 11,080
Earnings per share from continuing operations $ 1.09 $ .79 $ .59 $ .73 $ .17
Loss per share from discontinued operation (.06) (.03) -- -- --
Cumulative effect of accounting changes -- .93 -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Fully-diluted earnings per share $ 1.03 $ 1.69 $ .59 $ .73 $ .17
---------------------------------------------------------------------------------------------------------------------------------
Cash dividends per share $ .04 -- -- -- --
---------------------------------------------------------------------------------------------------------------------------------
Depreciation expense $ 7,444 $ 7,780 $ 8,011 $ 7,561 $ 6,901
Net cash provided by (used in) operating activities 36,680 25,931 15,173 30,747 (1,699)
Capital expenditures 13,537 7,870 6,751 6,304 10,052
---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Working capital $ 38,769 $ 34,517 $ 36,843 $ 35,797 $ 35,261
Property, plant and equipment--net 49,858 43,005 44,712 47,256 48,783
Total assets 138,686 130,312 118,942 124,618 129,960
Total debt 66 27,247 44,311 56,582 72,136
Stockholders' equity 81,788 58,900 37,455 30,949 22,441
---------------------------------------------------------------------------------------------------------------------------------
STATISTICS AND RATIOS
Current ratio 2.0 1.9 2.2 2.0 1.9
Total debt to equity ratio 0.0 0.5 1.2 1.8 3.2
Earnings from continuing operations before interest expense
and income taxes, as a percentage of total
revenues 12.1% 10.2% 7.7% 8.8% 6.7%
Return on average equity (excluding cumulative effect
of accounting changes) 20.1% 20.7% 20.6% 30.9% 9.1%
Book value per share $ 6.11 $ 5.19 $ 3.43 $ 2.87 $ 2.09
---------------------------------------------------------------------------------------------------------------------------------
<FN>
THE NUMBER OF SHARES AND PER SHARE AMOUNTS HAVE BEEN ADJUSTED FOR A
TWO-FOR-ONE STOCK SPLIT IN 1994.
(1) 1991 NET EARNINGS INCLUDED A $1,374 CHARGE FOR MANAGEMENT TRANSITION COSTS
AND A $591 TAX BENEFIT DUE TO A NEW TAX TREATY BETWEEN THE U.S. AND
GERMANY.
</TABLE>
16 17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
The following discussion and analysis examines the operating results of the
Company's two business segments. As used herein, "operating profit" refers to
operating profit before corporate allocation, corporate expense and interest, as
shown in Note 10 to the Consolidated Financial Statements--Segment Information.
PRECISION IMAGED PRODUCTS
TOTAL REVENUES AND OPERATING PROFIT
COMPARISON OF 1994 AND 1993--Total revenues of the Precision Imaged Products
group were $145.3 million for 1994, an increase of $19.9 million or 15.8% from
those for 1993. $2.6 million of this increase was due to an increase in sales of
equipment and technology. Net sales (which exclude equipment and technology
sales) increased by $17.3 million or 14.4%. The improvement was primarily
attributable to a shift in product mix to higher-priced color television
aperture masks.
Operating profit of the Precision Imaged Products group was $22,219,000 for
1994, an increase of $5,855,000 or 35.8% from that realized for 1993. This
improvement was net of a $260,000 decrease in profits from equipment and
technology sales. The rate of operating profit as a percentage of net sales
(before equipment and technology sales and profits) was 14.4% for 1994, compared
to 11.4% for 1993. This improvement was primarily due to a shift in product mix
to higher-margin large and jumbo aperture masks and masks manufactured from
invar steel.
COMPARISON OF 1993 AND 1992--Total revenues of the Precision Imaged Products
group were $125.4 million for 1993, an increase of $13.5 million or 12.1% from
those for 1992. $4.8 million of this increase was due to an increase in sales of
equipment and technology. Net sales (which exclude equipment and technology
sales) increased by $8.7 million or 7.9%. The improvement was primarily
attributable to higher average selling prices, reflecting a shift in product mix
to higher-priced color television aperture masks.
Operating profit of the Precision Imaged Products group was $16,364,000 for
1993, an increase of $5,115,000 or 45.5% from that realized for 1992. $2,971,000
of this increase was due to an increase in profits from equipment and technology
sales. The rate of operating profit as a percentage of net sales (before
equipment and technology sales and profits) was 11.4% for 1993, compared to
10.3% for 1992. This improvement was primarily due to a shift in product mix to
higher-margin masks
OPTICAL PRODUCTS
TOTAL REVENUES AND OPERATING PROFIT
COMPARISON OF 1994 AND 1993--Total revenues of the Optical Products group were
$74.7 million for 1994, an increase of $4.7 million or 6.7% from those for 1993.
The increase was due primarily to increased unit sales of polycarbonate eyewear
lenses, reflecting an increase in size and share of that market. In addition,
there was a slight increase in unit sales and average selling price of glass
eyewear lenses despite a reduction in the size of the glass lens market. These
increases were partially offset by a reduction in unit sales of plastic eyewear
lenses, reflecting a reduction in share of that market.
Operating profit of the Optical Products group was $8,329,000 for 1994, an
increase of $955,000 or 13.0% over 1993. The rate of operating profit expressed
as a percentage of total revenues was 11.2% for 1994, compared to 10.5% for
1993. The increase was primarily due to increased sales of polycarbonate eyewear
lenses.
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<PAGE>
COMPARISON OF 1993 AND 1992--Total revenues of the Optical Products group were
$70.0 million for 1993, an increase of $1.1 million or 1.6% from those for 1992.
The increase was due primarily to increased unit sales of polycarbonate eyewear
lenses, reflecting an increase in size and share of that market, partially
offset by decreased unit sales of plastic and glass eyewear lenses, reflecting a
reduction in size and share of the plastic lens market and a reduction in size
of the glass lens market.
Operating profit of the Optical Products group was $7,374,000 for 1993, an
increase of $1,021,000 or 16.1% over 1992. The rate of operating profit
expressed as a percentage of total revenues was 10.5% for 1993, compared to 9.2%
for 1992. The increase was primarily due to improved sales of polycarbonate
eyewear lenses and to improved operating efficiencies at the glass and plastic
lens manufacturing facilities.
SELLING EXPENSES
Selling expenses were $8.4 million, $7.9 million and $7.9 million or 4.0%, 4.2%
and 4.4% of net sales before equipment and technology sales for 1994, 1993 and
1992, respectively.
ADMINISTRATIVE EXPENSES
Administrative expenses were $3.8 million, $3.8 million and $4.1 million or
1.8%, 2.0% and 2.3% of net sales before equipment and technology sales for 1994,
1993 and 1992, respectively.
INTEREST EXPENSE--NET
Net interest expense was $2.4 million, $4.8 million and $6.2 million for 1994,
1993 and 1992, respectively. The decreases were due to lower average debt
balances and the payoff of all outstanding debt in 1994.
OTHER INCOME (EXPENSE)
Other income (expense) was $(57,000), $93,000 and $448,000 for 1994, 1993 and
1992, respectively. The amounts were primarily composed of currency translation
gains and losses.
INCOME TAXES
Expressed as a percentage of earnings before income taxes, the Company's
effective tax rate was 38.3%, 31.6% and 9.2% in 1994, 1993 and 1992,
respectively. The higher effective rate in 1994 versus 1993 was due to increased
amortization of a deferred tax asset as the tax benefits underlying the deferred
tax asset, principally net operating loss carryforwards, are realized. 1994 and
1993 had higher effective rates than 1992 due primarily to adoption of Financial
Accounting Standards Board Statement Number 109--ACCOUNTING FOR INCOME TAXES and
improved profitability at the Company's German subsidiary, whose earnings incur
taxes at rates higher than in the U.S. Under the new accounting pronouncement, a
deferred tax asset is recognized for temporary differences which will result in
tax deductions in future years and for net operating loss and tax credit
carryforwards. As these benefits are utilized, a charge is made against
earnings. This change in accounting method changes the timing for recognition of
tax benefits for purposes of the Company's financial statements. The low
effective rate for 1992 was further attributable to the fact that foreign
operations incurred losses during the year.
DIVIDENDS
In 1994, the Company resumed the payment of cash dividends to shareholders. Cash
dividends of two cents per share were declared in both the third and fourth
quarters of 1994.
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<PAGE>
ENVIRONMENTAL
In 1994, the Company received a request for information from the Environmental
Protection Agency (EPA) and correspondence from a group of private parties, both
regarding the Company's potential involvement at two new sites. In addition, the
EPA initiated additional investigations at two other sites where the Company had
previously been identified as a potentially responsible party (PRP). These four
sites bring the total to eight potential sites involving the Company where
environmental investigations are still occurring and where final settlement has
not been reached. The Company has also continued its site investigations at its
Fort Lauderdale facility. At this time, there has been no communication from the
state regulatory agency regarding the ultimate resolution of the Fort Lauderdale
property. The Company's consultant, however, has indicated that some type of
remediation is reasonably probable to occur and has provided the Company an
approximate cost range for that remediation. Based on the consultant's
estimates, and in accordance with allowable accounting principles, the Company
has reserved an adequate amount for potential remediation costs. Because the
governmental bodies have not yet identified the full extent of any remedial
actions, it is still impossible at this time to predict the likely outcome of
the Fort Lauderdale matter as well as the additional eight sites discussed
above, or the Company's exposure if any of these cases are decided adversely.
However, it is not currently anticipated that the Company's share of the costs
of environmental remediation activities for any of the sites, including the
range provided by the Company's consultant for the Fort Lauderdale facility,
will have a materially adverse effect on the financial condition of the Company.
In addition to the above sites, the Company has been named as a defendant
in connection with real property located in Irvine, California previously
occupied by a discontinued operation of the Company. The Company has reached a
settlement in principle for this site with the other parties to the lawsuit and
is in the process of obtaining approval for the proposed remediation system by
the applicable state regulatory agency. The settlement amount and the cost of
the proposed remediation system are both within the amounts previously reserved
by the Company for this matter. The Company has also been named as a defendant
by parties identified as PRP's for a site in Cortland, N.Y. The Company is
presently committed to a vigorous defense of this case. It is impossible at this
time to predict the likely outcome of this matter or the Company's exposure if
either case is decided adversely. However, it is not currently anticipated that
either case will have a materially adverse effect on the financial condition of
the Company.
FINANCIAL POSITION AND LIQUIDITY
Cash balances increased by $3.4 million and debt decreased by $27.2 million
during 1994. Working capital was $38.8 million, and the current ratio was 2.0,
at December 31, 1994, compared to $34.5 million and a current ratio of 1.9, at
December 31, 1993.
During 1994, the Company retired all of its outstanding senior,
subordinated and industrial development bond debt. At December 31, 1994, the
Company's long-term debt consisted of a capital lease obligation of $0.1
million, compared to $27.2 million of debt outstanding at December 31, 1993. The
ratio of debt to equity was 0.0 at December 31, 1994, compared to 0.5 at
December 31, 1993. The ratio of total liabilities to equity improved to 0.7 at
December 31, 1994, compared to 1.2 at December 31, 1993.
In addition to $14.3 million in cash and cash equivalent balances (before
deducting approximately $2.0 million in outstanding checks included in accounts
payable), the Company had $41.8 million available for borrowing under domestic
and foreign bank lines at December 31, 1994. As of December 31, 1994, the
Company had commitments of approximately $7.2 million related to capital
projects. This amount included approximately $5.7 million related to the ongoing
line upgrades at the Company's Cortland aperture mask facility.
The Company announced in early 1995 a $35-$45 million expansion program for
its aperture mask operations. The cost of this expansion is expected to be
financed primarily through internally-generated cash along with some incremental
debt. The Company believes that such sources are adequate to meet its short and
long-term financing needs.
20
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
REVENUES
Net sales of primary products $211,293 $189,372 $179,541
Equipment and technology sales 8,675 6,059 1,289
----------------------------------------------------------------------------------------------------
TOTAL REVENUES 219,968 195,431 180,830
----------------------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES
Cost of sales of primary products 174,884 160,564 153,819
Cost of equipment and technology sales 6,140 3,264 1,465
Selling 8,396 7,865 7,944
Administrative 3,792 3,841 4,093
----------------------------------------------------------------------------------------------------
TOTAL OPERATING COSTS AND EXPENSES 193,212 175,534 167,321
----------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 26,756 19,897 13,509
----------------------------------------------------------------------------------------------------
OTHER INCOME AND (EXPENSES)
Interest expense (3,129) (5,136) (6,661)
Interest income 760 316 452
Other income (expense) (57) 93 448
----------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF ACCOUNTING CHANGES 24,330 15,170 7,748
Income Taxes 9,326 4,790 709
----------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGES 15,004 10,380 7,039
Provision for Loss Related to Discontinued Operation
(less applicable income tax benefits of $461 and $244) (839) (415) --
----------------------------------------------------------------------------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 14,165 9,965 7,039
Cumulative Effect of Accounting Changes
Accounting for postretirement benefits
other than pensions -- (724) --
Accounting for income taxes -- 12,855 --
----------------------------------------------------------------------------------------------------
NET EARNINGS $ 14,165 $ 22,096 $ 7,039
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
PRIMARY EARNINGS PER SHARE
Earnings per share from continuing operations $ 1.10 $ .83 $ .60
Loss per share from discontinued operation (.06) (.03) --
Cumulative effect of accounting changes -- .98 --
----------------------------------------------------------------------------------------------------
TOTAL $ 1.04 $ 1.78 $ .60
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
FULLY-DILUTED EARNINGS PER SHARE
Earnings per share from continuing operations $ 1.09 $ .79 $ .59
Loss per share from discontinued operation (.06) (.03) --
Cumulative effect of accounting changes -- .93 --
----------------------------------------------------------------------------------------------------
TOTAL $ 1.03 $ 1.69 $ .59
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
NUMBER OF SHARES INCLUDED IN PER SHARE COMPUTATION
Common and common equivalent shares 13,668 12,432 11,650
Common shares assuming full dilution 13,762 13,042 11,866
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
21
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
December 31, 1994 1993
----------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 14,327 $ 10,927
Trade accounts and notes receivable, less allowances
of $2,024 and $2,120 24,564 22,711
Inventories 28,792 27,278
Deferred income taxes 5,914 4,051
Other current assets 5,221 6,547
----------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 78,818 71,514
PROPERTY, PLANT AND EQUIPMENT - NET 49,858 43,005
DEFERRED INCOME TAXES 3,297 8,095
OTHER ASSETS - NET 6,713 7,698
----------------------------------------------------------------------------------------------------
TOTAL ASSETS $138,686 $130,312
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 19 $ 8,914
Accounts payable 12,090 9,828
Accrued compensation and benefits 11,513 8,788
Income taxes payable 5,514 3,976
Other current liabilities 10,913 5,491
----------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 40,049 36,997
LONG-TERM DEBT 47 18,333
OTHER LIABILITIES 15,788 15,237
DEFERRED INCOME TAXES 1,014 845
STOCKHOLDERS' EQUITY
Common stock (issued: 13,392 and 11,357 shares) 51,156 43,611
Other (1,263) (1,097)
Retained earnings 27,559 13,928
Cumulative translation adjustment 4,336 2,458
----------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 81,788 58,900
----------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $138,686 $130,312
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
----------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 14,165 $ 22,096 $ 7,039
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 8,250 8,462 8,480
Provisions for product returns and losses on
trade receivables and inventory reserves 2,564 2,722 3,289
Deferred income taxes 3,844 1,639 (239)
Cumulative effect of accounting changes -- (12,131) --
Provision for loss related to discontinued operation 839 415 --
Other non-cash income and expense items (590) (881) 1,191
Decrease (increase) in
Trade accounts and notes receivable (2,996) (4,259) (817)
Inventories (1,467) 2,888 (3,525)
Other current assets 615 262 (252)
Other noncurrent assets (256) (1,145) 187
Increase (decrease) in
Accounts payable 1,964 543 294
Income taxes payable 2,250 1,425 (288)
Accrued expenses and other current liabilities 7,498 3,895 (186)
----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 36,680 25,931 15,173
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (13,537) (7,870) (6,751)
Proceeds from sale of property and equipment 312 340 44
Proceeds from non-trade notes receivable -- 67 516
----------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (13,225) (7,463) (6,191)
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt(1) (22,604) (17,508) (12,307)
Common stock issued(1) 2,634 1,592 446
Cash dividends paid (267) -- --
Employee loans for exercise of stock options (130) (871) --
----------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (20,367) (16,787) (11,861)
----------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS 312 (130) 53
----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,400 1,551 (2,826)
Cash and Cash Equivalents at Beginning of Year 10,927 9,376 12,202
----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 14,327 $ 10,927 $ 9,376
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
<FN>
(1) IN 1994, IN ADDITION TO THE LONG-TERM DEBT REPAYMENT AND COMMON STOCK
ISSUANCE SHOWN ABOVE, $4,911 OF LONG-TERM DEBT WAS REDUCED AS CONSIDERATION
FOR THE EXERCISE OF WARRANTS.
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
23
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994, 1993 and 1992 Retained Cumulative
Common Earnings Translation
Stock Other (Deficit) Adjustment
-----------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 $41,573 $(15,207) $ 4,583
Net earnings 7,039
Exercise of options - 158 shares 446
Translation adjustment (979)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1992 42,019 (8,168) 3,604
Net earnings 22,096
Exercise of options - 433 shares 1,592
Employee loans for option exercises,
net of repayments $ (871)
Minimum pension liability adjustment (226)
Translation adjustment (1,146)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 43,611 (1,097) 13,928 2,458
Net earnings 14,165
Exercise of options - 106 shares 825
Exercise of warrants - 1,931 shares 6,720
Employee loans for option exercises,
net of repayments (130)
Minimum pension liability adjustment (36)
Translation adjustment 1,878
Cash dividends declared (534)
-----------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $51,156 $(1,263) $ 27,559 $ 4,336
-----------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------
<FN>
COMMON STOCK: 24,500 SHARES OF VOTING COMMON STOCK WITHOUT PAR VALUE AUTHORIZED;
13,392, 11,357 AND 10,924 SHARES ISSUED AND OUTSTANDING AT DECEMBER 31, 1994,
1993 AND 1992, RESPECTIVELY.
UNDESIGNATED STOCK: 500 SHARES AUTHORIZED; NONE ISSUED. THE BOARD OF DIRECTORS
IS AUTHORIZED TO DESIGNATE THE NAME OF EACH CLASS OR SERIES OF THE UNDESIGNATED
SHARES AND TO SET THE TERMS THEREOF (INCLUDING, WITHOUT LIMITATION, TERMS WITH
RESPECT TO REDEMPTION, DIVIDEND, LIQUIDATION, CONVERSION AND VOTING RIGHTS AND
PREFERENCES).
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned.
CASH EQUIVALENTS -- consist of highly-liquid debt instruments with a
maturity of three months or less at the date of purchase. These debt
securities are comprised of commercial paper and are classified as
held-to-maturity. These securities are carried at amortized cost which
approximates fair market value.
INVENTORIES -- are stated at the lower of cost or market. Cost is
determined principally on the average cost method.
PROPERTY, PLANT AND EQUIPMENT -- are stated at cost. Depreciation is
provided on the straight-line method over estimated useful lives of 3 to 45
years for buildings and improvements and 3 to 20 years for machinery and
equipment.
INCOME TAXES -- Effective January 1, 1993, the Company changed its method
of accounting for income taxes as required by Financial Accounting
Standards Board Statement No. 109 -- ACCOUNTING FOR INCOME TAXES. As
permitted under the new rules, prior years' financial statements have not
been restated. The cumulative effect of adopting Statement No. 109 as of
January 1, 1993 was to increase 1993 net income by $12,855. Under Statement
No. 109, a deferred tax liability is recognized for temporary differences
between financial reporting and tax reporting which will result in taxable
income in future years. A deferred tax asset is recognized for temporary
differences which will result in tax deductions in future years and for net
operating loss and tax credit carryforwards. The deferred tax asset is
reduced by a valuation allowance to a net amount which the Company believes
it more likely than not will realize, based on the Company's estimates of
its future earnings and the expected timing of temporary difference
reversals.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS -- Effective January 1, 1993,
the Company adopted Financial Accounting Standards Board Statement No. 106
-- EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS.
The cumulative effect of adopting Statement No. 106 was to decrease 1993
net income by $724, net of tax. Under the new rules, the Company accrues
the expected cost of providing postretirement benefits other than pensions
during the years that eligible employees render service.
CONTRACT ACCOUNTING -- The Company accounts for long-term equipment
construction contracts under the percentage-of-completion method, generally
measured on the attainment of specific contract milestones. Estimated
contract earnings are reviewed periodically as work progresses. In the
event such estimates indicate a loss would be incurred on the contract, the
estimated amount of such loss would be recognized in the period the
estimated loss was determined.
NET EARNINGS PER SHARE -- Primary earnings per common and common equivalent
share and earnings per common and common equivalent share assuming full
dilution are computed using the weighted average number of common and
common equivalent shares outstanding during the period. Common stock
equivalents include dilutive stock options and warrants using the treasury
stock method.
STOCK SPLIT -- On August 15, 1994, the Company declared a two-for-one stock
split. Shareholders of record on August 25, 1994, received one additional
share of common stock for each common share owned on that date. As a
result, the number of outstanding shares and earnings per share for prior
periods presented have been restated to reflect the split.
RECLASSIFICATION -- Certain items in the 1993 and 1992 consolidated
financial statements have been reclassified to conform to the 1994
presentation.
25
<PAGE>
2. INVENTORIES
The following is a summary of inventories at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Raw materials $ 9,748 $ 8,543
Work in process 5,501 4,559
Finished goods 13,543 14,176
----------------------------------------------------------------------
Total inventories $28,792 $27,278
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
3. OTHER ASSETS AND OTHER LIABILITIES
The following is a summary of other current assets at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Molds used to produce plastic lenses $ 3,729 $ 4,804
Prepaid expenses 1,166 1,460
Other 326 283
----------------------------------------------------------------------
Total other current assets $ 5,221 $ 6,547
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The following is a summary of other assets - net at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Cash surrender value of life insurance
to fund retirement obligations $ 3,254 $ 3,013
Recoverable foreign income taxes 2,265 2,918
Other 1,194 1,767
----------------------------------------------------------------------
Total other assets - net $ 6,713 $ 7,698
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
Included in accounts payable were outstanding checks totaling $1,951 and
$973 at December 31, 1994 and 1993, respectively.
The following is a summary of other current liabilities at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Net deferred revenue relating to
equipment contract $ 3,928 $ 912
Environmental remediation costs 2,760 835
Accrued payroll and other taxes 930 766
Other employee retirement and
severance obligations 669 654
Other 2,626 2,324
----------------------------------------------------------------------
Total other current liabilities $10,913 $ 5,491
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The following is a summary of other liabilities at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Accrued foreign pension cost $ 6,991 $ 5,584
Other employee retirement obligations 5,947 6,524
Workers' compensation 1,229 1,532
Other 1,621 1,597
----------------------------------------------------------------------
Total other liabilities $15,788 $15,237
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
26
<PAGE>
4. PROPERTY, PLANT AND EQUIPMENT -- NET
The following is a summary of property, plant and equipment -- net at
December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Land and improvements $ 2,386 $ 2,209
Buildings and improvements 40,447 34,667
Machinery and equipment 87,789 80,114
----------------------------------------------------------------------
Total 130,622 116,990
Less accumulated depreciation and
amortization 80,764 73,985
----------------------------------------------------------------------
Total property, plant and equipment -- net $ 49,858 $ 43,005
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
5. DEBT AND WARRANT EXERCISE
The following is a summary of long-term debt at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
10.75% senior unsecured notes $10,909
11.5% subordinated unsecured notes 13,897
11.05% First Mortgage Industrial
Development Bonds 2,357
Capital lease obligation $66 84
----------------------------------------------------------------------
66 27,247
Less amounts due within one year 19 8,914
----------------------------------------------------------------------
Total long-term debt $47 $18,333
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
In the third quarter of 1994, the Company repaid all of the remaining
outstanding balances of its senior, subordinated and industrial development
bond debt. Existing cash balances and proceeds from the exercise of
detachable warrants to purchase shares of the Company's common stock were
used for these repayments. These detachable warrants had been issued to
purchasers of the Company's subordinated notes. All such warrants were
exercised during 1994, resulting in the issuance by the Company of 1,931
shares of common stock for an average exercise price of $3.48 per share.
The Company maintains revolving credit agreements with three domestic
banks that provide for unsecured borrowings totaling $25,000. These
agreements terminate on September 30, 1996. Borrowings under the agreements
bear interest at either the prime rate or the LIBOR rate plus 0.50% to
0.75%. The addition to the LIBOR rate is dependent upon the Company's ratio
of debt-to-total capitalization. In addition, the Company pays a facility
fee on unborrowed funds at rates ranging from 0.15% to 0.20%, depending
upon the Company's debt-to-total capitalization ratio.
The Company's German subsidiary maintains short-term lines of credit
of $8,389 and a long-term line of credit of $8,389. The short-term credit
lines provide for unsecured borrowings which generally bear interest at
either 0.75% over the DM LIBOR rate or approximately 3% over the BBD rate.
The lines may be withdrawn at any time. The long-term credit line provides
for secured borrowings which bear interest at 0.75% over the LIBOR rate.
$4,710 of such borrowings are secured by land and buildings with a net book
value of approximately $7,568.
There were no borrowings outstanding under any of the credit lines at
December 31, 1994. There were approximately $12,566 in outstanding letters
of credit at December 31, 1994.
Interest expense paid, net of amounts capitalized of $137, $309 and
$139, was $2,428, $4,319 and $6,013 in 1994, 1993 and 1992, respectively.
27
<PAGE>
6. COMMITMENTS
The Company leases three manufacturing facilities, 16 sales, distribution
or administrative facilities and the Company headquarters. In addition, the
Company leases data processing and other equipment.
At December 31, 1994, the approximate future minimum rental
commitments required under non-cancelable operating leases are as follows:
<TABLE>
<S> <C>
----------------------------------------------------------------------
1995 $1,643
----------------------------------------------------------------------
1996 1,599
----------------------------------------------------------------------
1997 1,237
----------------------------------------------------------------------
1998 619
----------------------------------------------------------------------
1999 97
----------------------------------------------------------------------
Thereafter --
----------------------------------------------------------------------
Total minimum lease payments $5,195
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
Rent expense was $2,788, $3,073 and $3,113 in 1994, 1993 and 1992,
respectively.
At December 31, 1994, the Company had forward foreign exchange
contracts to purchase $7,421 of German marks. The contracts have maturities
ranging from three months to one year and are for the purpose of hedging
obligations to the Company's German subsidiary in connection with a
subcontract for the construction and installation of equipment related to
the current long-term Chinese equipment construction contract.
At December 31, 1994, the Company had commitments of approximately
$7,200 related to capital projects.
7. STOCK OPTION PLAN
The 1994 Stock Incentive Plan (the "1994 Plan") provides for the granting
of either incentive stock options or nonqualified options to purchase
shares of the Company's common stock and for other stock-based awards to
officers, directors and key employees responsible for the direction and
management of the Company. At December 31, 1994, 2,251,528 shares of common
stock were reserved for issuance under the 1994 Plan and the 1984 Omnibus
Stock Plan (the "1984 Plan"), including 1,072,540 unoptioned shares
available for the granting of options and/or other stock-based awards.
At December 31, 1993, 937,628 shares of common stock were reserved for
issuance under the 1984 Plan, including 19,940 unoptioned shares available
for the granting of options and/or other stock-based awards. The 1984 Plan
terminated on January 10, 1994. In addition, 220,000 shares of common stock
were reserved for issuance under the 1994 Plan at December 31, 1993.
Information relating to stock options during 1994 and 1993 is as
follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Option Price
------------------------
Number Per Share Total
of Shares Average Price
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares under option at December 31, 1992 1,256,406 $ 3.69 $ 4,637
Granted 367,000 9.12 3,348
Exercised (432,936) 3.02 (1,306)
Forfeited (52,782) 3.88 (205)
---------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1993 1,137,688 5.69 6,474
Granted 167,000 14.37 2,400
Exercised (106,100) 4.12 (437)
Forfeited (19,600) 4.73 (93)
---------------------------------------------------------------------------------------------------------
Shares under option at December 31, 1994 1,178,988 $ 7.08 $ 8,344
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Shares exercisable at December 31, 1994 276,550 $ 4.07 $ 1,126
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1994, there were no shares outstanding pursuant to
other stock-based awards under the 1994 or 1984 Plans and all
outstanding options were nonqualified options.
28
<PAGE>
STOCK OPTION EXERCISE LOAN PROGRAM -- In 1993, the Company established the
Stock Option Exercise Loan Program under which holders of exercisable stock
options may obtain interest-free and interest-bearing loans from the
Company to facilitate their exercise of stock options. Such loans are
evidenced by demand promissory notes and are secured by the shares of
stock. The portion of such loans directly related to the exercise price of
options is classified as a reduction of stockholders' equity. The remainder
is included in current assets.
8. EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory profit sharing plan covering
substantially all of its domestic salaried employees and those domestic
hourly employees not covered by a pension plan or retirement fund described
below. Under the terms of the profit sharing plan, the Company makes an
annual minimum contribution equal to 3% of participants' wages, with the
potential for an additional discretionary contribution depending upon the
Company's profitability. Provisions of the plan include 100% vesting after
five years of continuous service and payment of benefits upon retirement,
total disability, death or termination.
The Company also maintains a 401(k) savings plan covering
substantially all of its domestic salaried employees and a majority of
those domestic hourly employees not covered by a pension plan or
retirement fund described below. Under the terms of the savings plan, the
Company makes an annual minimum contribution, which is invested in Company
stock, equal to 25% of participants' before-tax contributions up to 6% of
base salary, with the potential for an additional discretionary
contribution depending upon the Company's profitability. Provisions of the
plan include vesting of 25% per year of continuous service in the
Company's contributions and payment of benefits upon retirement, total
disability, death or termination.
One domestic operation has a noncontributory defined benefit pension
plan for its hourly employees. Benefits payable under the plan are based
upon various monthly amounts for each year of credited service. The
Company's funding policy meets or exceeds the funding requirements of
federal laws and regulations. The projected benefit obligation was
determined using an assumed discount rate of 7.5%. The discount rate was
adjusted from 8% to 7.5% in 1993. The assumed long-term rate of return on
plan assets, invested in diversified portfolios comprised of debt and
equity securities, was 7.5%.
In 1989, the Company adopted a supplemental defined benefit retirement
plan for corporate and operations management over 45 years of age. In 1992,
the Company curtailed benefits payable under the Plan. The Company's
funding policy is to maintain plan assets approximately equal to the vested
benefit obligation. The projected benefit obligation was determined using
an assumed discount rate and an assumed rate of increase in future
compensation of 7.5% and 5%, respectively. The assumed long-term rate of
return on plan assets, invested primarily in diversified portfolios
comprised of debt and equity securities, was 7.5%.
In addition, the Company's German subsidiary has a noncontributory
defined benefit pension plan covering substantially all of its employees.
Benefits payable under the plan are based upon the participant's base
salary prior to retirement and years of credited service. As allowed under
German law, this plan is not funded. The projected benefit obligation was
determined using an assumed discount rate and an assumed rate of increase
in future compensation of 7.5% and 3%, respectively.
29
<PAGE>
Pension costs for the above three defined benefit plans included the
following components:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost for benefits earned during the year $ 434 $ 436 $ 506
Interest cost on projected benefit obligation 666 613 593
Actual return on plan assets (23) (131) (94)
Net amortization and deferral (138) (18) 279
---------------------------------------------------------------------------------------------------------
Pension costs $ 939 $ 900 $1,284
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
The following is a summary of the funded status of the above three defined
benefit plans at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
Vested benefit obligation $(8,089) $(6,930)
----------------------------------------------------------------------
----------------------------------------------------------------------
Accumulated benefit obligation $(8,783) $(7,610)
----------------------------------------------------------------------
----------------------------------------------------------------------
Projected benefit obligation $(9,869) $(8,550)
Plan assets at fair value 2,716 2,857
----------------------------------------------------------------------
Projected benefit obligation in excess
of plan assets (7,153) (5,693)
Unrecognized net (gain) loss (28) 116
Unrecognized prior service cost 147 75
Unrecognized transition amount 204 207
Minimum pension liability adjustment (450) (348)
----------------------------------------------------------------------
Accrued pension costs $(7,280) $(5,643)
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
Under a contract with its union employees, another domestic operation
makes, on behalf of each active participant, fixed weekly contributions to
a retirement fund (aggregating $143, $144 and $155 in 1994, 1993 and 1992,
respectively). At December 31, 1994, the market value of this fund's
assets, $11,114, exceeded benefit obligations of $10,248 by $866. Pursuant
to the plan, excess funded amounts are not available to the Company.
The total cost of all profit sharing, savings and pension plans,
domestic and foreign, was $4,605, $3,516 and $4,033 in 1994, 1993 and 1992,
respectively.
In addition to the defined benefit plans discussed above, the Company
has two defined benefit postretirement plans covering certain U.S.
employees. One plan provides medical benefits and the other provides life
insurance benefits. Under the medical benefits plan, the Company provides a
specific dollar amount to retired salaried employees or their surviving
spouses with which to purchase coverage through the BMC Flexible Benefits
Plan. The future increases in these dollar amounts are limited to 5%. The
life insurance plan provides term life insurance coverage to all retired
full-time hourly employees at one domestic operation. The Company accrues
the expected cost of providing benefits under these two plans during the
years that eligible employees render service.
The following table shows the two plans' combined funded status and
corresponding accrued postretirement benefit cost as recognized in the
Company's Consolidated Balance Sheet as of December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation $(1,038) $(1,386)
Plan assets at fair value -- --
----------------------------------------------------------------------
Accumulated postretirement benefit obligation
in excess of plan assets (1,038) (1,386)
Unrecognized net (gain) or loss (382) 78
----------------------------------------------------------------------
Accrued postretirement benefit cost $(1,420) $(1,308)
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The assumed discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%.
30
<PAGE>
9. INCOME TAXES
The provision for income taxes was based on earnings (loss) before income
taxes, as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Domestic $18,304 $13,643 $ 8,881
Foreign 6,026 1,527 (1,133)
---------------------------------------------------------------------------------------------------------
Earnings from continuing operations before cumulative
effect of accounting changes 24,330 15,170 7,748
Provision for loss related to discontinued operation (1,300) (659) --
---------------------------------------------------------------------------------------------------------
Earnings before cumulative effect of accounting changes 23,030 14,511 7,748
Cumulative effect of change in accounting for
postretirement benefits -- (1,148) --
---------------------------------------------------------------------------------------------------------
Earnings before income taxes $23,030 $13,363 $ 7,748
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
The provision (benefit) for income taxes consisted of:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal 722 350 270
State 1,246 1,040 585
Foreign 3,514 1,761 93
Deferred
Federal and state 3,934 1,769 --
Foreign (90) (130) (239)
---------------------------------------------------------------------------------------------------------
Provision for income taxes on earnings from
continuing operations before cumulative effect of
accounting changes 9,326 4,790 709
Tax benefit associated with provision for loss
related to discontinued operation (461) (244) --
---------------------------------------------------------------------------------------------------------
Provision for income taxes before cumulative
effect of accounting changes 8,865 4,546 709
Tax benefit associated with cumulative effect
of change in accounting for postretirement benefits -- (424) --
---------------------------------------------------------------------------------------------------------
Income tax expense before cumulative effect
of change in accounting for income taxes 8,865 4,122 709
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
Cumulative effect of change in accounting
for income taxes -- (12,855) --
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
Significant components of deferred tax assets and liabilities were as
follows at December 31:
<TABLE>
<CAPTION>
----------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------
<S> <C> <C>
FEDERAL AND STATE NET DEFERRED TAXES
Deferred tax asset
Compensation and benefit related accruals $ 4,463 $ 4,031
Reserves and accruals 4,372 2,827
Depreciation 3,784 3,447
Credit carryforwards 3,362 2,519
Net operating loss carryforwards 1,122 9,121
Other temporary differences 1,812 1,303
----------------------------------------------------------------------
Total 18,915 23,248
Deferred tax liability
Capitalized molds (1,508) (1,722)
----------------------------------------------------------------------
Net deferred tax asset before valuation
allowance 17,407 21,526
Valuation allowance (8,349) (9,380)
----------------------------------------------------------------------
Net deferred tax asset $ 9,058 $12,146
----------------------------------------------------------------------
----------------------------------------------------------------------
FOREIGN NET DEFERRED TAXES
Deferred tax liability
Depreciation $ 1,194 $ 1,168
Other temporary differences 656 107
----------------------------------------------------------------------
Total 1,850 1,275
----------------------------------------------------------------------
Deferred tax asset
Retirement benefits (575) (410)
Other temporary differences (414) (20)
----------------------------------------------------------------------
Total (989) (430)
----------------------------------------------------------------------
Net deferred tax liability $ 861 $ 845
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
The federal and state net deferred tax asset included a current portion of
$5,761 and $4,051 at December 1994 and 1993, respectively, and a long-term
portion of $3,297 and $8,095 at December 31, 1994 and 1993, respectively.
The foreign net deferred tax liability included a current asset of $153 and
$0 at December 31, 1994 and 1993, respectively, and a long-term liability
of $1,014 and $845 at December 31, 1994 and 1993, respectively.
Net operating loss carryforwards of $3,298 at December 31, 1994 expire
in 2002. General business credit carryforwards of $1,343 expire in various
amounts through 2008. Foreign tax credit carryovers of $538 expire in 1998
and 1999. Alternative minimum tax credits of $1,481 may be carried forward
indefinitely to offset regular tax liabilities. These
32
<PAGE>
tax benefits, together with future tax deductions from the reversal of
temporary differences, comprise the deferred tax asset which has been
reduced by a valuation allowance. This valuation allowance reduces the
deferred tax asset to a net amount which the Company believes it more
likely than not will realize, based on the Company's estimates of its
future earnings and the expected timing of temporary difference reversals.
The net change in the total valuation allowance for the year ended December
31, 1994 was a decrease of $1,031.
The differences between income taxes at the U.S. federal statutory tax
rate and the effective tax rate were as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
Utilization of net operating loss carryforwards -- -- (35.5)
Differences in taxation of foreign earnings 5.4 7.2 3.1
State income taxes, net of federal benefit 2.6 3.9 5.0
Change in deferred tax valuation reserve (4.2) (14.2) --
Other items (0.5) (0.3) 2.6
---------------------------------------------------------------------------------------------------------
Effective Tax Rate 38.3% 31.6% 9.2%
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
In 1994 and 1993, income tax benefit from the utilization of net operating
loss carryforwards was realized as a reduction of the deferred tax asset,
whereas in 1992, the utilization of net operating loss carryforwards was
realized as a reduction of income tax expense.
Differences in taxation of foreign earnings relate primarily to full
taxation, for reporting purposes, of foreign earnings at rates in excess of
the U.S. statutory rate. Undistributed earnings of the German and Canadian
subsidiaries included in retained earnings at December 31, 1994 were
approximately $7,200 and $1,000, respectively. No U.S. taxes have been
provided on these undistributed earnings because the Company expects to be
able to utilize foreign tax credits to offset any U.S. tax that would
result from their distribution.
Income taxes paid were $2,967, $1,965 and $993 in 1994, 1993 and 1992,
respectively.
10. SEGMENT INFORMATION
The Company manufactures and sells a variety of products in two business
segments. Precision Imaged Products manufactures principally aperture
masks, photochemically etched fine mesh grids used in the manufacture of
color television tubes and computer monitors (aperture mask total revenues
comprised 54%, 53% and 52% of the Company's consolidated total revenues in
1994, 1993 and 1992, respectively). Optical Products manufactures
ophthalmic lenses.
33
<PAGE>
The following is a summary of certain financial information relating
to the two industry
segments served:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL REVENUES BY SEGMENT
Precision Imaged Products* $145,301 $125,447 $111,939
Optical Products 74,667 69,984 68,891
---------------------------------------------------------------------------------------------------------
TOTAL REVENUES $219,968 $195,431 $180,830
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
OPERATING PROFIT BY SEGMENT
Precision Imaged Products
Before corporate allocation* $ 22,219 $ 16,364 $ 11,249
Less corporate allocation 1,714 1,629 1,432
---------------------------------------------------------------------------------------------------------
TOTAL 20,505 14,735 9,817
Optical Products
Before corporate allocation 8,329 7,374 6,353
Less corporate allocation 880 908 882
---------------------------------------------------------------------------------------------------------
TOTAL 7,449 6,466 5,471
---------------------------------------------------------------------------------------------------------
TOTAL OPERATING PROFIT 27,954 21,201 15,288
Corporate Expense (1,255) (1,211) (1,331)
Interest Expense - Net (2,369) (4,820) (6,209)
---------------------------------------------------------------------------------------------------------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES $ 24,330 $ 15,170 $ 7,748
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS BY SEGMENT
Precision Imaged Products $ 71,505 $ 64,751 $ 66,019
Optical Products 38,583 38,385 40,527
Other 7,463 6,596 3,637
---------------------------------------------------------------------------------------------------------
TOTAL IDENTIFIABLE ASSETS 117,551 109,732 110,183
CORPORATE ASSETS 21,135 20,580 8,759
---------------------------------------------------------------------------------------------------------
TOTAL ASSETS $138,686 $130,312 $118,942
---------------------------------------------------------------------------------------------------------
DEPRECIATION AND AMORTIZATION BY SEGMENT
Precision Imaged Products $ 5,724 $ 5,773 $ 5,947
Optical Products 1,806 2,079 2,117
Other 720 610 416
---------------------------------------------------------------------------------------------------------
TOTAL DEPRECIATION AND AMORTIZATION $ 8,250 $ 8,462 $ 8,480
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES BY SEGMENT
Precision Imaged Products $ 10,511 $ 6,190 $ 5,500
Optical Products 2,586 1,496 1,210
Other 440 184 41
---------------------------------------------------------------------------------------------------------
TOTAL CAPITAL EXPENDITURES $ 13,537 $ 7,870 $ 6,751
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
<FN>
*Total revenues included $8,675, $6,059 and $1,289 from equipment and
technology sales in 1994, 1993 and 1992, respectively, while operating
profit included $2,535, $2,795 and $(176) of profit (loss) from such sales,
respectively.
</TABLE>
Total revenues by segment are primarily to unaffiliated customers.
Operating profit is operating profit before corporate allocation, corporate
expense and net interest expense.
34
<PAGE>
The following is a summary of the Company's operations in different
geographic areas:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Years Ended December 31, 1994 1993 1992
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL REVENUES FROM UNAFFILIATED CUSTOMERS
U.S. $159,075 $144,106 $136,604
Germany 57,771 47,909 41,260
Other 3,122 3,416 2,966
---------------------------------------------------------------------------------------------------------
TOTAL $219,968 $195,431 $180,830
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
TRANSFERS BETWEEN GEOGRAPHIC AREAS
U.S. $ 765 $ 1,681 $ 3,388
Germany 558 427 694
Eliminations (1,323) (2,108) (4,082)
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
NET EARNINGS
U.S. $ 11,563 $ 22,187 $ 8,026
Germany 2,716 (76) (985)
Other (114) (15) (2)
---------------------------------------------------------------------------------------------------------
TOTAL $ 14,165 $ 22,096 $ 7,039
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
U.S. $ 88,525 $ 83,189 $ 79,390
Germany 29,770 28,131 32,081
Other 973 1,340 1,522
Eliminations (1,717) (2,928) (2,810)
---------------------------------------------------------------------------------------------------------
TOTAL $117,551 $109,732 $110,183
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
</TABLE>
Transfers between geographic areas are accounted for principally at
estimated market value. Net sales to unaffiliated foreign customers from
domestic operations (export sales) in 1994, 1993 and 1992 were $31,337,
$31,586 and $29,830 or 14%, 16% and 16%, respectively, of total revenues.
Precision Imaged Products had sales to one customer of $45,171, $39,390 and
$34,847 and to another customer of $21,647, $19,868 and $16,919 in 1994,
1993 and 1992, respectively.
11. CONCENTRATIONS OF CREDIT RISK
Approximately 68% of the trade accounts and notes receivable before
allowances ("receivables") of Precision Imaged Products at December 31,
1994 were represented by four customers. Approximately 30% of the
receivables of Optical Products at December 31, 1994 were represented by 20
customers. These 24 customers represented approximately 52% of the
Company's consolidated receivables at December 31, 1994, with one customer
of Precision Imaged Products representing approximately 19%.
12. PROVISION FOR LOSS RELATED TO DISCONTINUED OPERATION
During 1994, the Company made a provision for environmental remediation
costs and related expenses of $1,300, less applicable income taxes of $461,
pertaining to property previously utilized by one of its discontinued
operations. This provision was in addition to a provision made in 1993 for
$659, less applicable income taxes of $244, which related to the same
matter.
13. SUBSEQUENT EVENT
In January 1995, a U.S. District Court jury in Miami, Florida, awarded the
Company a verdict totalling $5.1 million against Barth Industries (Barth)
of Cleveland, Ohio and its parent, Nesco Holdings, Inc. (Nesco). The
verdict relates to an agreement under which Barth and Nesco were to help
automate the plastic lens production plant in Ft.Lauderdale. The Company
has not recorded any income relating to this verdict as a final judgement
has not yet been rendered and Barth and Nesco are expected to appeal.
35
<PAGE>
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS, BMC INDUSTRIES, INC.
We have audited the accompanying consolidated balance sheets of BMC Industries,
Inc. as of December 31, 1994 and 1993, and the related consolidated statements
of earnings, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of BMC Industries,
Inc. at December 31, 1994 and 1993, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
As discussed in the notes to the Consolidated Financial Statements, in 1993
the Company changed its methods of accounting for income taxes and
postretirement benefits other than pensions.
ERNST & YOUNG LLP
Minneapolis, Minnesota
February 21, 1995
PRICE RANGE OF COMMON STOCK
The Company's common stock is traded on the New York Stock Exchange under the
ticker symbol "BMC." The table below sets forth the high and low reported sales
prices of BMC stock by quarter for the years 1994, 1993 and 1992. All per share
amounts have been adjusted for a two-for-one stock split in 1994. At February
28, 1995 there were approximately 1,027 stockholders of record.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Price
Dividends ------------------------
Per Share High Low
--------------------------------------------------------------------------
<S> <C> <C> <C>
1994
FIRST QUARTER $ -- $ 13 3/16 $ 9 3/4
SECOND QUARTER -- 14 3/8 10 1/2
THIRD QUARTER .02 14 5/8 13 1/4
FOURTH QUARTER .02 16 3/4 13 1/8
--------------------------------------------------------------------------
1993
First Quarter -- $ 5 5/8 $ 4 5/8
Second Quarter -- 6 11/16 4 15/16
Third Quarter -- 8 1/4 5 7/8
Fourth Quarter -- 10 11/16 7 7/16
--------------------------------------------------------------------------
1992
First Quarter -- $ 6 1/16 $ 3 13/16
Second Quarter -- 5 7/16 3 1/4
Third Quarter -- 4 3/8 3 9/16
Fourth Quarter -- 5 1/2 3 1/2
--------------------------------------------------------------------------
</TABLE>
36
<PAGE>
SELECTED QUARTERLY DATA
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
(UNAUDITED) First Second Third Fourth Total
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Quarter Quarter Quarter Quarter Year
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994(1)
Total revenues $52,406 $57,305 $53,979 $56,278 $219,968
Gross profit 8,070 11,135 8,185 11,554 38,944
Earnings from continuing operations 2,702 4,677 2,286 5,339 15,004
Provision for (loss) related to
discontinued operation (839) -- -- -- (839)
Net earnings 1,863 4,677 2,286 5,339 14,165
PRIMARY EARNINGS (LOSS) PER SHARE(3)
Earnings from continuing operations .20 .34 .16 .38 1.10
Provision for (loss) related to
discontinued operation (.06) -- -- -- (.06)
Net earnings .14 .34 .16 .38 1.04
Common and common equivalent shares 13,274 13,570 13,861 13,965 13,668
FULLY-DILUTED EARNINGS PER SHARE(3)
Earnings from continuing operations .20 .34 .16 .38 1.09
Provision for (loss) related to
discontinued operation (.06) -- -- -- (.06)
Net earnings .14 .34 .16 .38 1.03
Shares assuming full dilution 13,274 13,612 13,862 13,978 13,762
-----------------------------------------------------------------------------------------------------------------------------
1993(2)
Total revenues $46,021 $49,277 $45,208 $54,925 $195,431
Gross profit 6,632 9,529 5,486 9,956 31,603
Earnings from continuing operations before
cumulative effect of accounting changes 1,417 3,806 1,487 3,670 10,380
Provision for (loss) related to
discontinued operation -- -- -- (415) (415)
Cumulative effect of accounting changes 12,131 -- -- -- 12,131
Net earnings 13,548 3,806 1,487 3,255 22,096
PRIMARY EARNINGS (LOSS) PER SHARE(3)
Earnings from continuing operations before
cumulative effect of accounting changes .12 .31 .12 .28 .83
Provision for (loss) related to
discontinued operation -- -- -- (.03) (.03)
Cumulative effect of accounting changes 1.02 -- -- -- .98
Net earnings 1.14 .31 .12 .25 1.78
Common and common equivalent shares 11,864 12,332 12,594 12,940 12,432
FULLY-DILUTED EARNINGS PER SHARE(3)
Earnings from continuing operations before
cumulative effect of accounting changes .12 .31 .12 .28 .79
Provision for (loss) related to
discontinued operation -- -- -- (.03) (.03)
Cumulative effect of accounting changes 1.02 -- -- -- .93
Net earnings 1.14 .31 .12 .25 1.69
Shares assuming full dilution 11,864 12,376 12,743 13,128 13,042
-----------------------------------------------------------------------------------------------------------------------------
<FN>
THE NUMBER OF SHARES AND PER SHARE AMOUNTS HAVE BEEN ADJUSTED FOR A
TWO-FOR-ONE STOCK SPLIT IN 1994.
(1) TOTAL REVENUES FOR 1994 INCLUDED $161, $3,604, $491 AND $4,419 IN THE
FIRST, SECOND, THIRD AND FOURTH QUARTERS, RESPECTIVELY, FROM EQUIPMENT AND
TECHNOLOGY SALES. NET EARNINGS FOR 1994 INCLUDED GAINS (LOSSES) OF $(64),
$580, $209 AND $895 IN THE FIRST, SECOND, THIRD AND FOURTH QUARTERS,
RESPECTIVELY, FROM EQUIPMENT AND TECHNOLOGY SALES.
(2) TOTAL REVENUES FOR 1993 INCLUDED $113, $841, $650 AND $4,455 IN THE FIRST,
SECOND, THIRD AND FOURTH QUARTERS,RESPECTIVELY, FROM EQUIPMENT AND
TECHNOLOGY SALES. NET EARNINGS FOR 1993 INCLUDED GAINS (LOSSES) OF $(63),
$490, $229 AND $1,232 IN THE FIRST, SECOND, THIRD AND FOURTH QUARTERS,
RESPECTIVELY, FROM EQUIPMENT AND TECHNOLOGY SALES.
(3) PER SHARE CALCULATIONS FOR EACH OF THE QUARTERS AND THE TOTAL YEARS WERE
BASED ON THE WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING EACH
PERIOD. ACCORDINGLY, THE SUM OF THE QUARTERS MAY NOT NECESSARILY BE EQUAL
TO THE TOTAL YEAR PER SHARE AMOUNTS.
</TABLE>
37
<PAGE>
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of BMC Industries, Inc. of our report dated February 21, 1995, included in the
1994 Annual Report to Stockholders of BMC Industries, Inc.
Our audits also included the financial statement schedule of BMC Industries,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
(Form S-8, No. 33-2613 and No. 33-32389) pertaining to the BMC Industries, Inc.
1984 Omnibus Stock Program and in the Registration Statement (Form S-8 No. 33-
55089) pertaining to the BMC Industries, Inc. 1994 Stock Incentive Plan and the
related Prospectuses of our report dated February 21, 1995, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of BMC Industries,
Inc.
Ernst & Young LLP
Minneapolis, Minnesota
March 30, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Consolidated Statements of Earnings and the Consolidated Balance Sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 14,327
<SECURITIES> 0
<RECEIVABLES> 26,588
<ALLOWANCES> 2,024
<INVENTORY> 28,792
<CURRENT-ASSETS> 78,818
<PP&E> 130,622
<DEPRECIATION> 80,764
<TOTAL-ASSETS> 138,686
<CURRENT-LIABILITIES> 40,049
<BONDS> 47
<COMMON> 51,156
0
0
<OTHER-SE> (1,263)
<TOTAL-LIABILITY-AND-EQUITY> 138,686
<SALES> 219,968
<TOTAL-REVENUES> 220,728
<CGS> 193,212
<TOTAL-COSTS> 193,212
<OTHER-EXPENSES> 57
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,129
<INCOME-PRETAX> 24,330
<INCOME-TAX> 9,326
<INCOME-CONTINUING> 15,004
<DISCONTINUED> (839)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,165
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.03
</TABLE>
<PAGE>
CONTACT: Merle D. Kerr (NYSE--BMC)
(612)851-6020 FOR IMMEDIATE RELEASE
BMC ANNOUNCES NEW MASK EXPANSION
INVESTMENT OF $35+ MILLION
January 5, 1995-- Minneapolis, Minnesota--BMC Industries, Inc. announced today
plans to expand its aperture mask business by the addition of another new
production line, in addition to the $25 million expansion announced in February
of last year. The new expansion will result in the addition of 7 to 9 million
entertainment TV masks annually to BMC's total aperture mask production
capacity. The expansion is expected to require an investment of $35 to $45
million. BMC presently manufactures masks at facilities in Cortland, New York
and Mullheim, Germany.
The Company indicated that its decision to expand was based upon anticipated
growth in demand for entertainment TV's over the next 5 to 10 years. The
Company further indicated that this expansion will be specifically aimed at the
rapidly growing "large" segment of the TV market comprised of tubes in the range
of 25 inches and above.
BMC's President and Chief Executive Officer, Paul B. Burke stated, "Continued
worldwide growth in demand for televisions and particularly rapid growth in
demand for televisions in the 25 inch and larger category represent an
opportunity for BMC to both serve our customers as they expand and to boost our
sales and profitability by the addition of a new production line."
BMC stated that the new capacity is expected to become operational during 1997.
The Company also indicated that the location for the expansion had not yet been
determined and that a final decision would not be made until later this year.
BMC confirmed that its Cortland, New York plant is one of several sites under
consideration.
BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. The
Company is also a leading producer of polycarbonate, glass and plastic eyewear
lenses. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.
<PAGE>
CONTACT: Mike Hawks (NYSE--BMC)
(612)851-6030 FOR IMMEDIATE RELEASE
BMC REPORTS RECORD 1994 EARNINGS
February 14, 1995 -- Minneapolis, MN -- BMC Industries, Inc. today reported
fourth quarter 1994 net earnings of $5,339,000 or $.38 per share, up 45% from
earnings from continuing operations of $3,670,000 or $.28 per share in the year-
earlier period. Fourth quarter total revenues were $56,278,000, an increase of
2% from $54,925,000 a year ago.
For the total year of 1994, earnings from continuing operations amounted to
$15,004,000 or $1.09 per share, an increase of 45% from $10,380,000 or $.79 per
share in 1993. Total revenues rose 13% in 1994 to $219,968,000, from
$195,431,000 in 1993.
Paul B. Burke, BMC's president and chief executive officer, said 1994 earnings
from continuing operations of $15,004,000 represented continued improvement in
the Company's core manufacturing operations. Burke said the fourth quarter net
income was a new fourth quarter record for BMC. The fourth quarter of 1994 also
marks the fifteenth consecutive quarter of increased net earnings over the year-
earlier period, excluding income from the sale of equipment and technology and
other non-recurring items. This long string of quarterly increases reflects the
ongoing shift in the Company's sales mix toward high-margin aperture mask and
eyewear lens products and continuing operating improvement.
Burke added that both of the Company's core manufacturing operations, Precision
Imaged Products and Optical products, showed improved sales and improved profit
margins. He said these improvements reflected increased unit volumes, improved
operating efficiencies and the Company's ongoing focus on higher-margin growth
opportunities in its primary markets.
BMC is one of the world's largest manufacturers of aperture masks for color
television tubes and computer monitors. The Company is also a leading producer
of polycarbonate, glass and plastic eyewear lenses. The common stock of the
Company is traded on the New York Stock Exchange under the symbol "BMC".
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
December 31 December 31
------------------ -------------------
1994 1993 1994 1993
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues
Net sales of primary products $ 51,859 $ 50,470 $211,293 $189,372
Equipment and technology sales 4,419 4,455 8,675 6,059
-----------------------------------------------------------------------------------------------------------
Total Revenues 56,278 54,925 219,968 195,431
-----------------------------------------------------------------------------------------------------------
Operating Costs and Expenses
Cost of sales of primary products 41,729 42,282 174,884 160,564
Cost of equipment and technology sales 2,995 2,687 6,140 3,264
Selling 2,256 2,081 8,396 7,865
Administrative 743 1,015 3,792 3,841
-----------------------------------------------------------------------------------------------------------
Total Operating Costs and Expenses 47,723 48,065 193,212 175,534
-----------------------------------------------------------------------------------------------------------
Income from Operations 8,555 6,860 26,756 19,897
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Other Income and (Expense)
Interest expense (77) (1,307) (3,129) (5,136)
Interest income 381 157 760 316
Other (38) 28 (57) 93
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Earnings from Continuing Operations before Income Taxes
and Cumulative Effect of Accounting Changes 8,821 5,738 24,330 15,170
Income Taxes 3,482 2,068 9,326 4,790
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Earnings from Continuing Operations before Cumulative
Effect of Accounting Changes 5,339 3,670 15,004 10,380
Provision for Loss Related to Discontinued Operation (less
applicable income tax benefit of $461 and $244)--(Note 1) -- (415) (839) (415)
-----------------------------------------------------------------------------------------------------------
Earnings before Cumulative Effect of Accounting Changes 5,339 3,255 14,165 9,965
Cumulative Effect of Accounting Changes (Note 2) -- -- -- 12,131
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Net Earnings $ 5,339 $ 3,255 $ 14,165 $ 22,096
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Net Earnings Per Common and Common Equivalent Share
Earnings before Cumulative Effect of Accounting Changes
Continuing Operations $ 0.38 $ 0.28 $ 1.10 $ 0.83
Discontinued Operation -- (0.03) (0.06) (0.03)
Cumulative Effect of Accounting Changes -- -- -- 0.98
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Total $ 0.38 $ 0.25 $ 1.04 $ 1.78
-----------------------------------------------------------------------------------------------------------
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Net Earnings Per Common Share Assuming Full Dilution
Earnings before Cumulative Effect of Accounting Changes
Continuing Operations $ 0.38 $ 0.28 $ 1.09 $ 0.79
Discontinued Operation -- (0.03) (0.06) (0.03)
Cumulative Effect of Accounting Changes -- -- -- 0.93
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Total $ 0.38 $ 0.25 $ 1.03 $ 1.69
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Number of Shares Included in Per Share Computation (Note 3)
Common and common equivalent shares 13,965 12,940 13,668 12,432
Common shares assuming full dilution 13,978 13,128 13,762 13,042
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</TABLE>
<PAGE>
Note 1 - Provision for Loss Related to Discontinued Operation
In the first quarter of 1994, the Company made a provision for estimated losses
of $1,300, less applicable income tax effect of $461, related to a discontinued
operation. This provision was prompted by claims and expenses growing out of
environmental contamination and other claims related to the discontinued
operation. The environmental contamination occurred before 1980 at an operation
acquired by BMC in 1983 and disposed of in 1986. This provision was in addition
to a provision made in the fourth quarter of 1993 which related to the same
matter.
Note 2- Cumulative Effect of Accounting Changes
Effective January 1, 1993, the Company changed its method of accounting for
income taxes as required by Financial Accounting Standards Board Statement No.
109, ACCOUNTING FOR INCOME TAXES. As permitted under the new rules, prior
years' financial statements were not restated. The cumulative effect of
adopting Statement No. 109 as of January 1, 1993 was to increase net income by
$12,855, or $.99 per share. The principal change affecting the Company under
Statement No. 109 is a change in the recognition and measurement criteria with
respect to deferred tax assets.
Also effective January 1, 1993, the Company adopted Financial Accounting
Standards Board Statement No. 106, EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS. The cumulative effect of adopting Statement No.
106 was to decrease net income by $724, net of tax, or $.06 per share. Under
the new rules the Company accrues the expected cost of providing postretirement
benefits other than pensions during the years that eligible employees render
service.
Note 3 - Stock Split
On August 15, 1994, the Company declared a two-for-one stock split. Shareholders
of record on August 25, 1994, received one additional share of common stock for
each common share owned on that date. As a result, the number of outstanding
shares and earnings per share for prior periods presented have been restated to
reflect the split.
<PAGE>
CONTACT: Michael P. Hawks (NYSE--BMC)
(612) 851-6030 FOR IMMEDIATE RELEASE
BMC ANNOUNCES QUARTERLY DIVIDEND
March 10, 1995 -- Minneapolis, MN -- BMC Industries, Inc. today announced that
its Board of Directors has approved a continuation of its quarterly cash
dividend of two cents per share.
Shareholders of record as of March 22, 1995 will receive a dividend of two cents
for each share owned on that date, to be paid on April 5, 1995.
BMC Industries, Inc. is one of the world's largest manufacturers of aperture
masks for color picture tubes used in televisions and computer monitors. The
Company is also a leading producer of polycarbonate, glass and plastic eyewear
lenses. BMC's common stock is traded on the New York Stock Exchange under the
symbol BMC.
