UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______ to ________
Commission file number 0-7152
DEVCON INTERNATIONAL CORP.
(Exact Name of Registrant as Specified in its Charter)
Florida 59-0671992
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1350 E. Newport Center Dr. Suite 201, Deerfield Beach, FL 33442
(Address of Principal Executive Offices) (Zip Code)
(954) 429-1500
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of March 26, 1997, the number of shares of the registrant's Common Stock
outstanding was 4,498,935. The aggregate market value of the Common Stock held
by non-affiliates of the registrant as of March 26, 1997 was approximately
$10,328,730 , based on a closing price of $5.06 for the Common Stock as reported
on the NASDAQ National Market System on such date. For purposes of the foregoing
computation, all executive officers, directors and 5 percent beneficial owners
of the registrant are deemed to be affiliates. Such determination should not be
deemed to be an admission that such executive officers, directors or 5 percent
beneficial owners are, in fact, affiliates of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III (Items 10, 11, 12 and 13) is incorporated
by reference from the registrant's definitive proxy statement (to be filed
pursuant to Regulation 14A).
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
Devcon International Corp. (the "Company") is the largest producer and
distributor of ready-mix concrete and quarry products in the United States
Virgin Islands, Antigua and Barbuda, West Indies ("Antigua"), St. Maarten,
Netherlands Antilles ("St. Maarten"), St. Martin, French West Indies ("St.
Martin"), Saba, Netherlands Antilles ("Saba"), Dominica, West Indies
("Dominica") and Tortola, British Virgin Islands ("Tortola") and is a land
development contractor in the Caribbean. The Company also owns and operates a
marina in the United States Virgin Islands.
In the Caribbean, the Company produces and distributes ready-mix concrete,
crushed stone, concrete block, asphalt and distributes bulk and bagged cement.
The Company's facilities have enabled the Company to establish a significant
market share in most of the locations in which it operates and afford the
Company resources, production capacity, a local presence and a cost structure
that the Company believes would be difficult for competitors to duplicate. As a
result, the Company has less competition and, therefore, produces a substantial
percentage of the concrete and related products used in these islands.
The Company performs earthmoving, excavating and filling operations and builds
golf courses, roads, utility infrastructures, dredges waterways and constructs
deep water piers and marinas in the Caribbean. The Company has historically
provided land development contracting services to both private enterprises and
governments in Florida and the Caribbean. Since early 1993, the Company has not
been seeking new contracts in the United States. The Company's project managers
have substantial experience working in the land development contracting
business, and the Company has equipment that is well-suited for the Caribbean
markets. The Company has equipment and personnel in the Caribbean that the
Company believes, in some instances, allow the Company to start work more
quickly and less expensively than other contractors and, therefore, to bid
competitively for and complete cost-effectively land development contracts. The
Company believes that its relationships with customers in the Caribbean give it
a competitive advan tage.
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The following table sets forth certain financial information concerning the
Company's concrete and related products, land development contracting and other
business:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Revenues*:
Concrete and related products................................$52,987 $37,716 $39,342
Contracting.................................................. 13,982 16,068 22,942
Other........................................................ 2,509 2,367 2,965
------- ------- -------
Total..................................................$69,478 $56,151 $65,249
======= ======= =======
Operating income (loss)*:
Concrete and related products................................ 4,864 1,252 2,841
Contracting.................................................. (1,093) (569) 1,747
Other........................................................ 416 409 321
Unallocated corporate overhead............................... (716) (818) (424)
------- ------- -------
Total..................................................$ 3,471 $ 274 $ 4,485
======= ======= =======
</TABLE>
- -------------------------
* Information is presented net of intersegment sales. See Note 12 of
Notes to Consolidated Financial Statements for additional financial
information with respect to the Company's business segments. See
Summary of Significant Accounting Policies in Notes to Consolidated
Financial Statements.
The Company's principal executive offices are located at 1350 East Newport
Center Drive, Suite 201, Deerfield Beach, Florida 33442 and its telephone number
is (954)429-1500. Unless the context otherwise requires, the terms the "Company"
and "Devcon" as used herein refer to Devcon International Corp. and its
subsidiaries.
BUSINESS DEVELOPMENT
The Company expanded its operations in the Caribbean by opening a quarry in
Puerto Rico in May 1996 and acquiring a company in St. Martin in August 1995,
which sells and distributes ready mix concrete and operates a quarry. The
Company opened ready-mix concrete plants on the islands of Saba and St. Kitts
during the second quarter of 1993 and in 1992 completed the installation of a
bulk cement facility and cement bagging plant in Dominica. From time to time,
the Company investigates the possibility of expanding its operations to other
areas of the Caribbean where the Company does not presently do business. Such
expansion can take place in the form of joint ventures, acquisitions or other
business arrange ments. The Company does not have any current plans or
definitive agreements regarding any particular joint venture, acquisition or
business arrangement at this time and there can be no assurance that the Company
will be able to consummate any such transactions on satisfactory terms.
RISKS OF FOREIGN OPERATIONS
Various portions of the Company's operations are conducted in foreign areas,
primarily Antigua, St. Maarten, St. Martin, Dominica, Saba, St. Kitts and
Tortola, all of which are in the Caribbean. In 1996, 52.5 percent of the Com
pany's revenues were derived from foreign operations. Overseas contract work
performed by the parent company (a United States corporation) is not considered
foreign source revenue for purposes of the foregoing calculation. The majority
of contract work is performed by the parent company. For a summary of the Com
pany's revenues and earnings from foreign operations, see Note 10 of Notes to
Consolidated Financial Statements. The potential risks of doing business in
foreign areas include potential adverse changes in the diplomatic relations of
foreign countries with the United States, changes in the relative purchasing
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power of the United States dollar, hostility from local populations, adverse
effects of exchange controls, restrictions on the withdrawal of foreign
investment and earnings, government policies against businesses owned by non-
nationals, expropriations of property, the instability of foreign governments
and the risk of insurrection that could result in losses against which the
Company is not insured. The Company was not subject to these risks in Florida
and is not subject to them in Puerto Rico or the United States Virgin Islands
(United States territories that use the United States dollar as their currency).
The Company also is subject under certain circumstances to United States Federal
income tax upon the distribution of certain offshore earnings. See Note 8 of
Notes to Consolidated Financial Statements. Although the Company has not
encountered significant difficulties in its foreign operations in the past,
there can be no assurance that the Company will not encounter difficulties in
the future.
CONCRETE AND RELATED PRODUCTS
GENERAL The Company manufactures and distributes ready-mix concrete and crushed
aggregate (both coarse and fine) in Guaynabo, Puerto Rico, on St. Thomas and St.
Croix, United States Virgin Islands, Antigua, St. Maarten, St. Martin, Dominica,
Saba, St. Kitts and Tortola (although crushed aggregate is not manufactured on
Dominica, St. Kitts or St. Maarten and the Company does not distribute ready-mix
concrete in Puerto Rico). The Company's customers on St. Kitts are limited, at
this time, to those organizations or individuals engaged in duty free
contracting or development activities. With the exception of Puerto Rico, the
Company also distributes bulk and bagged cement to customers on each of the
foregoing islands. In addition, the Company manufactures concrete block on St.
Thomas, Antigua and St. Maarten.
The Company's concrete and related products business employs assets such as
quarries, rock crushing plants, bulk cement terminals, concrete block plants,
concrete batch plants, a fleet of concrete mixer trucks, cement bagging
facilities and asphalt plants, in various locations in the United States Virgin
Islands, Antigua, St. Maarten, St. Martin, Dominica, St. Kitts, Saba and Tortola
and Puerto Rico. The Company also leases an oceangoing bulk cement ship that
affords the Company ready access to reliable and more economical sources of
cement. As a result, the Company has become the largest supplier of concrete and
related products in the United States Virgin Islands, Antigua, St. Maarten, St.
Martin, Dominica, Saba and Tortola. The Company is presently investigating the
possibility of expanding its cement distribution and concrete and aggregate busi
ness to other areas in the Caribbean. See "Business - Business Development."
READY-MIX CONCRETE AND CONCRETE BLOCK The Company's concrete batch plants mix
cement, sand, crushed stone, water and certain chemical additives to produce
ready-mix concrete for use in local construction. The Company's fleet of
concrete mixer trucks deliver the concrete to the customer's job site. At the
Company's concrete block plants, a low moisture concrete mixture is machine
formed, then dried and stored for later sale. The Company's ready-mix concrete
operations are significantly larger than those of any other competitor on
Antigua, St. Maarten, St. Martin, Dominica, Tortola, Saba and St. Thomas. The
Company has the only concrete block plant on St. Thomas, and in Antigua and St.
Maarten, the Company's block plant is the area's largest.
QUARRY OPERATIONS AND CRUSHED STONE The Company owns or leases quarry sites on
which it blasts rock from exposed mineral formations. At the quarries, this rock
is crushed and screened to varying sizes of aggregate from 3 1/2-inch stones
down to manufactured sand, the aggregate is then sorted, cleaned and stored. The
resulting aggregate is sold to customers and used in the Company's operations to
make concrete products. The Company's quarries are the largest on St. Thomas,
St. Croix, Antigua, St. Martin, Saba and Tortola. It is significantly less
expensive to manufacture crushed rock at the Company's quarries than to import
aggregate from off-island sources.
BULK AND BAGGED CEMENT The Company leases an oceangoing bulk cement ship with a
6,000 metric ton capacity. The ship delivers cement in bulk to the Company's
cement terminals on St. Thomas, St. Croix, Antigua, Dominica and St. Maarten.
From silos at these terminals, the cement is transferred for use in the
Company's
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concrete batch plants, sold in bulk or bagged and then sold. Bulk cement is
readily available from a number of manufacturers located throughout the
Caribbean basin. As a result of the Company's bulk cement ship, the Company is
able to assure itself of reliable and relatively economical sources of cement.
See "Business - Equipment."
SUPPLIES The Company presently obtains all of the crushed rock and a majority of
the sand necessary for the production of ready-mix concrete in the United States
Virgin Islands, Antigua, St. Martin, St. Maarten, Saba and Tortola by quarrying
its own rock and crushing it at its own locations. The Company's ability to
produce its own sand gives it a competitive advantage because of the substantial
investment required to produce sand, the difficulty in obtaining the necessary
environmental permits to establish quarries and the moratorium on mining beach
sand imposed by most Caribbean countries. The sand the Company pro duces is
blended with sand obtained from various offshore sources unaffiliated with the
Company and, occasionally, from Company construction or dredging sites. The
Company's oceangoing bulk cement ship described above allows it to satisfy its
bulk cement requirements.
CUSTOMERS The Company's primary customers are building contractors, governments,
asphalt pavers and individual homeowners. Customers generally pick up quarry
products, concrete block and bagged cement at the Company's facilities, and the
Company generally delivers ready-mix concrete and bulk cement to the customer's
job sites.
COMPETITION The Company has few competitors in the concrete and related products
business in the locations where it conducts business. The Company encounters
competition from the producers of asphalt, which is an alternative material to
concrete for road construction. The Company's concrete and related products
facilities and the Company's oceangoing bulk cement ship have enabled the
Company to establish a significant market share in the United States Virgin
Islands, Antigua, St. Maarten, St. Martin, Dominica, Saba and Tortola and afford
the Company resources, a production capacity, a local presence and a cost
structure that the Company believes would be difficult for competitors to
duplicate. As a result, the Company believes that it presently has a competitive
advantage in the United States Virgin Islands, Antigua, St. Maarten, St. Martin,
Dominica, Saba and Tortola.
LAND DEVELOPMENT CONTRACTING
GENERAL The Company has completed a wide variety of land development construc
tion projects since its inception, including interstate highways, airport sites
and runways, deep-water piers and marinas, hydraulic dredging projects, golf
courses, industrial site development and residential and commercial site devel
opment. The Company generally attempts to pursue the most profitable types of
land development contracting work available, rather than attempting to maintain
a high level of volume. In prior years, the Company has been engaged in residen
tial and commercial site development (including golf courses) for real estate
developers and marine construction (dredging of deep-water harbors and
construction of deep-water piers and marinas) in the Caribbean.
The nature of the work performed by the Company's land development contracting
division is such that the work is accomplished and revenue generated on a
contract-by-contract basis. The majority of the Company's land development
contracts are less than one year in duration, although it does obtain multi-year
contracts from time to time. A majority of the Company's contracts are
fixed-price contracts. These contracts are bid or negotiated at an established
price that does not vary except for changes in the scope of the work requested
by the owner during the term of the contract. The majority of the Company's work
is performed using its own labor and equipment and is not subcontracted. The
Company also enters into unit-price contracts pursuant to which the Company's
fee is based upon the quantity of work performed. The Company historically has
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contracted to provide land development contracting services to both private
enterprises and governments. The Company believes that, on occasion, it is able
to obtain more desirable margins on some private and public contracts in the
United States Virgin Islands and Antigua because the Company has equipment and
personnel in those markets that, in some instances, allow the Company to start
work more quickly and less expensively than other contractors. As a result, the
Company believes that it is able to bid competitively for and complete cost-
effectively land development contracts in the Company's Caribbean markets.
OPERATIONS The Company's first step in any project is deciding whether to submit
a bid on, or to negotiate to undertake, a particular project. The Company
obtains leads for new projects from a variety of sources, including past or
existing customers of the Company and from engineering firms with which the
Company has established business relationships. At the appropriate time, a
proposal is submitted that the Company believes will best meet a customer's
objectives. In some instances in the past, the Company has provided long-term or
short-term financing to facilitate early commencement or efficient continuation
of a project. The Company believes that providing such financing enhances its
ability to obtain more profitable construction contracts. The continuation of
such financing is contingent upon the financial position and operating results
of the Company. All project proposals and bids are reviewed by the Company's
Vice President of Construction Operations and/or the Company's President,
depending upon the size of the contract. After a proposal has been accepted, a
formal contract is negotiated with the customer. The Company is normally the
prime contractor on any work it undertakes. The Company assigns a project
manager and a field superintendent to maintain close contact with the customer
and its engineers, to supervise personnel and the relocation, purchase, lease
and maintenance of equipment and to schedule and monitor the Company's
operations. The Company currently employs 5 job superintendents.
BACKLOG The Company's backlog of unfilled portions of land development contracts
at December 31, 1996 was $3.4 million involving 19 projects, as compared to
$11.4 million involving 25 projects at December 31, 1995. Since December 31,
1996 the Company has entered into new land development contracts in the
Caribbean amounting to $7.5 million. The Company reasonably expects that all of
the backlog, including the 1997 contracts, will be completed during the year
ending December 31, 1997. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Revenues."
BONDING In order to bid on some private construction contracts and substantially
all government contracts, the Company must obtain a bond for the performance of
the contract. The Company's bonding capacity is sufficient to enable the Company
to perform some government and major private contracts.
COMPETITION The land development contracting business is extremely competitive,
regardless of the general level of activity within the construction industry.
The Company believes that the primary factors of competition are price, prior
experience and relationships, the amount of machinery and heavy equipment
available to complete a given job, the speed with which a company can complete a
specific contract, the availability of an engineering staff to assist an owner
in planning its projects so as to minimize costs, the ability to innovate and,
where applicable, the ability to obtain bonding for large contracts in order to
guarantee completion. Management believes that the Company competes effectively
on the basis of the foregoing factors and that the Company's relative
competitive position in its Caribbean markets is favorable.
OTHER OPERATIONS
MARINA Two subsidiaries of the Company own a Virgin Islands general partnership
formed in 1988 to construct and operate a marina on a 4.92 acre parcel of land
leased by the partnership from the United States Virgin Islands government. The
lease is for a term of 20 years commencing in 1991 and contains a renewal option
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for an additional 10 years. The Company originally owned fifty percent of the
marina partnership. It acquired management control of the marina in 1991 and
acquired its partner's fifty percent interest in 1992. The marina facility
contains retail and office space, a fuel farm and 96 slips for boats ranging in
size from 15 to 200 feet in length. In March 1997, the Company entered into a
contract, subject to significant contingencies, including the prospective
buyer's satisfaction with its due diligence, to sell the marina for $4.6
million. If the sale does close in accordance with the terms and conditions
outlined in the contract, the Company would recognize a modest gain on the
transaction.
DISCONTINUED OPERATION
In September 1989, a subsidiary of the Company obtained a minority interest in a
partnership engaged in the manufacture, sale and distribution of acoustical
ceiling tiles. The subsidiary invested approximately $1.2 million in the
partnership for a 29 percent interest and two of the Company's directors
obtained an 11 percent interest for which they paid $450,000. In January 1994,
an Antiguan subsidiary of the Company became the new general partner and the
Company's ownership interest in the partnership was increased to 64.47 percent.
The directors' ownership interest was reduced to 6.47 percent. In November 1995,
the Company elected to dispose of this operation because of its poor operating
results and uncertain prospects for improvement. Accordingly, at December 31,
1995, the intended disposal has been accounted for as a discontinued operation.
The financial statements for all prior periods presented have been restated to
reflect the ceiling tile partnership as a discontinued operation. The Company's
investment in the partnership was written down $800,000, to its estimated net
realizable value of approximately $749,000, which consists primarily of
property, equipment and inventory with a net book value of approximately $1.4
million, along with debt of approximately $621,000. The Company provided no
reserve for anticipated losses during the phaseout period and expects to
recognize no income tax benefit on the loss from discontinued operations. The
Company sold its interest in the ceiling tile business in September 1996 in
exchange for one secured promissory note in the amount of $600,000 and one
unsecured promissory note in the amount of $385,000 and took an additional loss
on disposal of approximately $488,000.
TAX EXEMPTIONS AND BENEFITS
The Company for a number of years has benefitted from having a substantial part
of the earnings of its offshore operations taxed at rates lower than United
States statutory Federal income tax rates due to tax exemptions and lower
prevailing tax rates offshore. The United States Virgin Islands Industrial
Development Commission ("IDC") and the Government of Antigua have granted the
Company certain tax exemptions that exempt a larger portion of the earnings of
the Company's offshore operations from tax in the United States Virgin Islands
and Antigua through 2003 and 1996, as more fully described below.
In April 1988, the IDC granted a subsidiary of the Company a 10-year tax
exemption expiring in 1998, pursuant to which, and subject to certain conditions
and exceptions, the Company's (i) production and sale of ready-mix concrete;
(ii) production and sale of concrete block on St. Thomas and St. Johns and
outside of the Virgin Islands; (iii) production and sale of sand and aggregate;
and (iv) bagging of cement from imported bulk cement, are 100 percent exempt
from all United States Virgin Islands real property, gross receipts (currently
set at 4 percent) and excise taxes, 90 percent exempt from United States Virgin
Islands income taxes, and approximately 83 percent exempt from United States
Virgin Islands custom duties. The IDC granted the Company the tax exemption in
return for the Company's commitment to (i) make capital expenditures of at least
$4.6 million for new or replacement equipment over a 10-year period, which the
Company has satisfied; (ii) employ a minimum of 142 United States Virgin Islands
residents as full-time personnel; (iii) spend at least $75,000 annually for a
youth training program; (iv) not increase the price of its concrete and related
products except as the result of certain direct cost increases incurred by the
Company over which it has no control; and (v) make an annual scholarship fund
contribution of $150,000.
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In January 1994, the Company received a five year extension, through April 2003,
of its previously granted benefits. This extension was granted in return for the
Company agreeing to (i) continue to employ a minimum of 160 United States Virgin
Islands residents as full time personnel, (ii) make additional capital
expenditures of $1.7 million and (iii) continue to make a combined youth
training/scholarship contribution of $225,000 per annum during the extension
period.
In partial consideration for the Company's work on a major contract, the
Government of Antigua granted two subsidiaries of the Company a 10-year tax
holiday effective January 1, 1987 and expiring on December 31, 1996 from all
taxes due (i) in connection with the Company's construction contract with
Antigua to, among other things, dredge St. John's harbor, (ii) as a result of
the Company's participation in a joint venture to develop 230 acres of vacant
land as well as 20,000 square feet of commercial property in Antigua; and (iii)
in connection with the Company's sale of concrete and related products in
Antigua. The tax holiday also exempted the Company from certain accrued tax
liabilities. In 1989, in connection with and in consideration for additional
work done by the Company with respect to the foregoing contract, the Government
of Antigua granted an additional tax exemption to the Company. The tax exemption
exempts the Company from taxes that would otherwise result from the Company's
income relating to a construction contract in Jolly Harbor, Antigua. The Company
is currently negotiating with the government of Antigua regarding the tax
holiday which expired at the end of 1996. The Company is seeking an extension of
the current tax holiday, or as an alternative, the offset of any taxes due
against sums due the Company from the Government of Antigua and Barbuda.Although
there is no assurance, management believes that one of these two alternatives
will ultimately be obtained.
Furthermore, as a result of certain United States tax laws, earnings from the
Company's offshore operations are not taxable for United States Federal income
tax purposes and most post-April 1988 concrete and related product earnings in
the United States Virgin Islands can be distributed to the Company in the United
States free of statutory United States Federal income tax. However, the
distribution to the Company's United States operations of (i) earnings from the
Company's United States Virgin Islands operations accumulated prior to April 1,
1988 or (ii) earnings from the Company's Antigua, St. Martin, St. Maarten,
Dominica, Saba, St. Kitts and Tortola operations, would in each case subject the
Company to United States Federal income tax on any amounts so distributed, less
applicable tax credits for taxes previously paid in such jurisdictions. At
December 31, 1996, $42.5 million of such accumulated earnings from the Company's
United States Virgin Islands, Antigua, St. Martin, St. Maarten, Dominica, Saba,
St. Kitts and Tortola operations had not been distributed to the Company's
United States operations. The Company has not provided for Federal income tax on
the undistributed earnings of foreign subsidiaries because the Company intends
to permanently reinvest those earnings in regions offshore of the United States.
The aforementioned tax exemptions, along with the Company's ability to receive
most of the current earnings from its United States Virgin Islands operations
without being subjected to United States Federal income taxes thereon, result in
a significant reduction in the tax expense (including Federal income taxes)
incurred by the Company with respect to its earnings from Caribbean operations.
For further information on both tax exemptions and income taxes in general, see
Note 8 of Notes to Consolidated Financial Statements.
EQUIPMENT
The concrete and related products and the land development contracting
businesses require the Company to lease or purchase and maintain many items of
equipment. As of December 31, 1996, the Company's equipment included an ocean
going bulk cement vessel, cranes, bulldozers, road graders, rollers, backhoes,
earthmovers, hydraulic dredges, barges, rock crushers for use at the Company's
rock crushing
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plants, equipment at the Company's bulk cement terminals and concrete block and
batch plants, concrete mixer trucks, asphalt processing and paving equipment and
other miscellaneous items. A portion of this equipment is encumbered by chattel
mortgages. See Notes 7 and 11 of Notes to Consolidated Financial Statements and
"Management Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
MISCELLANEOUS INVESTMENTS AND JOINT VENTURES
The Company has invested or participated in several joint ventures in connection
with the activities of its land development contracting division and concrete
and related products division, which are more particularly described below.
In connection with a land development contract with the Government of Antigua
and as partial consideration therefor, the Company obtained a 75 percent
interest in a corporation formed to own and develop approximately 230 acres of
real property in Antigua (the "Corbkinnon Property"), and a 1 percent interest
in another corporation (the "Newport Project") formed to develop approximately
20,000 square feet of commercial property located in downtown St. Johns,
Antigua. In 1990, the Company sold a portion of its 75 percent interest in the
Corbkinnon Property for $500,000 and the buyer's commitment to provide 50
percent of the financing required to develop the project. The Company agreed to
provide the first $500,000 of financing and provide a guarantee for 50 percent
of all additional financing required. As a result of the transaction, the
Company's remaining interest in the Corbkinnon Property is 34 percent. The
Company did not record earnings or losses for the Corbkinnon Property or the
Newport Project in 1996 because the amounts are not material. For additional
information, see Notes 4 and 10 of Notes to Consolidated Financial Statements.
The Company is a 43 percent shareholder in a corporation formed to construct
condominium housing units in Antigua. The Company has advanced $200,000 in
capital contributions to the corporation. In 1996, the Company recorded a loss
of $50,000 related to its investment in this corporation, which investment is
being accounted for under the equity method. For additional information, see
Note 4 of Notes to Consolidated Financial Statements.
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Donald L. Smith, Jr., 75, a co-founder of the Company, has served as its
Chairman of the Board, President and Chief Executive Officer since its formation
in 1951.
Richard L. Hornsby, 61, was appointed the Company's Executive Vice President in
March 1989. Mr. Hornsby served as Vice President of the Company from August 1986
to February 1989. From September 1981 until July 1986 he was Financial Manager
of R.O.L., Inc. and L.O.R., Inc., companies primarily engaged in various private
investment activities. He has been a director of the Company since 1975 and
served as Vice President-Finance from 1972 to 1977.
Henry C. Obenauf, 67, was appointed Vice President-Engineering of the Company in
March 1989, after having served as Vice President of the Company since 1977. Mr.
Obenauf has been employed by the Company for over 21 years.
Walter B. Barrett, 39, has served as Vice President-Finance, Chief Financial
Officer and Treasurer since May 1991. Prior to that and from August 1985 he
served as Treasurer and Chief Financial Officer of James A. Cummings, Inc., a
large South Florida general contractor.
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Donald L. Smith, III, 43, was appointed Vice President-Construction Operations
for the Company in December 1992. Prior to that and from March 1992, he served
as Assistant Vice President of Construction Operations-South Florida and
Caribbean of the Company. Mr. Smith joined the Company in 1976 and has served in
various supervisory and managerial positions with the Company since that time.
EMPLOYEES
At December 31, 1996, the Company employed 68 persons in the land development
contracting business in the Caribbean, of whom 24 United States Virgin Islands
and Antigua employees are members of a union. The Company employed 395 persons
in its concrete and related products division, of whom 139 employees in the
Caribbean are members of a union. The Company will also utilize personnel in one
division or another as its needs warrant. In addition, the Company employs 38
managerial, supervisory and administrative personnel in the overall admin
istration and management of all divisions of the Company. Employee relations in
the Company are considered satisfactory and the Company has never been subjected
to a work stoppage.
ITEM 2. PROPERTY
GENERAL
Substantially all of the real property that the Company owns or leases is
utilized by its concrete and related products division. The Company has one
quarry in Puerto Rico, quarries, rock crushing plants and concrete batch plants
on St. Thomas, St. Croix, Antigua, St. Martin, Saba and Tortola, concrete batch
plants on Dominica, St. Maarten and St. Kitts, and bulk cement terminals and
cement bagging facilities on St. Croix, St. Thomas, St. Maarten, Dominica and
Antigua. In addition, the Company has asphalt plants on St. Croix and Antigua
and concrete block plants on St. Thomas, Antigua and St. Maarten.
OTHER PROPERTY
The Company also has a 34 percent interest in 230 acres of real property and a 1
percent interest in a commercial property development, both in Antigua (see
"Business - Miscellaneous Investments and Joint Ventures"), and the Company owns
undeveloped parcels of land in Collier County, Florida, and St. Johns, United
States Virgin Islands. The Company has no current plans to develop or sell the
parcels located in the United States and United States Virgin Islands.
The following table sets forth certain information concerning the property and
facilities that are owned or leased by the Company for use in its operations.
<TABLE>
<CAPTION>
LEASE EXPIRATION
DESCRIPTION LOCATION WITH ALL OPTIONS AREA
----------- -------- ---------------- ----
<S> <C> <C> <C>
Principal executive offices Deerfield Beach 5/07 8,410 sq. ft. (1)
Maintenance shop for heavy equipment Deerfield Beach Month to Month 4.40 acres (1)(2)
Concrete block plant and St. Thomas 6/04 11.00 acres (1)
equipment maintenance facility
Quarry and office building St. Thomas - 8.50 acres
Quarry and concrete batch plant St. Thomas 2/98 44.00 acres (1)
Barge terminal St. Thomas 7/97 1.50 acres (1)
Bulk cement terminal and bagging facility St. Thomas 5/12 .50 acres (1)
Marina and adjoining commercial property St. Thomas 6/21 4.92 acres (1)
Quarry St. Thomas 8/96 7.49 acres (1)
Bulk cement terminal, bagging facility St. Croix - 7.00 acres
Concrete batch plant and office St. Croix - 3.20 acres
Quarry, rock crushing plant and St. Croix - 61.34 acres
maintenance shop St. Croix 7/10 6.00 acres (1)
St. Croix 5/03 10.78 acres (1)
Concrete batch plant, concrete Antigua 9/16 22.61 acres (1)
block plant, rock crushing plant,
asphalt plant, quarry and office
Bulk cement terminal and bagging facility Antigua - 8.00 acres
Concrete batch plant, cement bagging Dominica 6/12 1.14 acres (1)
plant, undeveloped land, silo and office Dominica - .77 acres
Concrete batch plant and block plant St. Maarten 5/12 7.77 acres (1)
Equipment maintenance facility
and office building St. Maarten 6/48 5.38 acres (1)
10
<PAGE>
LEASE EXPIRATION
DESCRIPTION LOCATION WITH ALL OPTIONS AREA
----------- -------- ---------------- ----
<S> <C> <C> <C>
Cement terminal and barge unloading facility St. Maarten 6/05 .30 acres (1)
Bagging facility St. Maarten 4/01 .30 acres (1)
Undeveloped land - future site of concrete St. Maarten 3/51 3.00 acres (1)
batch plant, concrete block plant,
equipment maintenance facility and
office building
Quarry, rock crushing plant, concrete Tortola - 30.00 acres
batch plant, equipment maintenance
facility and office building
Quarry, rock crushing plant and Saba 12/02 6.00 acres (1)(3)
concrete batch plant
Concrete batch plant St. Kitts Month to Month 1.00 acre (1)(3)
Quarry, rock crushing plant, concrete St. Martin 7/10 123.5 acres (1)
batch plant and office building
Quarry, rock crushing plant and
office building Guaynabo, Puerto Rico 2/28 40.00 acres (1)(3)
- --------------------------------------------------------------------------------
</TABLE>
(1) Underlying land is leased, however, any equipment or
machinery on the land is owned by the Company.
(2) Leased from Donald L. Smith, Jr., the Company's Chairman,
President, and Chief Executive Officer. See "Certain
Relationships and Related Transactions."
(3) Acreage is estimated.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in routine litigation arising in the
ordinary course of its business, primarily related to its contracting
activities. No litigation in which the Company is presently involved is material
to its financial position or results of operations. For further information, see
Note 17 of Notes to Consolidated Financial Statements.
The Company is subject to certain Federal, state and local environmental laws
and regulations. Management believes that the Company is in compliance with all
such laws and regulations. Compliance with environmental protection laws has not
had a material adverse impact on the Company's financial condition or results of
operations in the past and is not expected to have a material adverse impact in
the foreseeable future.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders during the
fourth quarter of 1996.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
MARKET INFORMATION
The Company's Common Stock is traded in the over-the-counter market and quoted
in the NASDAQ National Market System under the symbol DEVC. The following table
sets forth the high and low sales prices for the Company's Common Stock for each
quarter for the last two fiscal years as quoted in the NASDAQ National Market
System.
1996 HIGH LOW
---- ---- ---
First Quarter $10.63 $8.05
Second Quarter 10.38 8.50
Third Quarter 8.88 6.88
Fourth Quarter 7.00 6.13
1995 HIGH LOW
---- ---- ---
First Quarter $8.75 $8.00
Second Quarter 8.38 6.75
Third Quarter 9.88 5.50
Fourth Quarter 8.88 6.87
As of March 26, 1997, there were 226 holders of record of the 4,498,935
outstanding shares of Common Stock. The closing sales price for the Common Stock
on March 26, 1997 was $5.06 . The Company paid no dividends in 1996 or 1995. The
payment of cash dividends will depend upon the earnings, financial position and
cash requirements of the Company, its compliance with loan agreements and other
relevant factors existing from time to time. The Company does not presently
intend to pay dividends.
ITEM 6 SELECTED FINANCIAL DATA
The following selected financial data of the Company and its consolidated
subsidiaries are qualified in their entirety by, and should be read in
conjunction with, the Consolidated Financial Statements and the notes thereto
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations." The data for each of the 5 years in the period ended December 31,
1996, are derived from the Consolidated Financial Statements of the Company
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
Consolidated Financial Statements of the Company as of December 31, 1996 and
1995 and for each of the years in the three year period ended December 31, 1996
and the report thereon appear elsewhere herein.
12
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
EARNINGS STATEMENT DATA: (In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Concrete and related
products revenues $ 52,987 $ 37,716 $ 39,342 $ 38,300 $ 43,042
Contracting revenues 13,982 16,068 22,942 16,926 32,248
Other revenues 2,509 2,367 2,965 638 -
-------- -------- -------- -------- --------
Total revenues 69,478 56,151 65,249 55,864 75,290
-------- -------- -------- -------- --------
Cost of concrete and
related products 39,277 29,069 29,200 31,820 31,972
Cost of contracting 12,458 14,103 19,250 19,700 31,245
Cost of other 1,913 1,721 2,388 529 -
-------- -------- -------- -------- --------
Gross profit 15,830 11,258 14,411 3,815 12,073
Selling, general and
administrative
expenses 12,359 10,984 9,926 11,970 11,435
-------- -------- -------- -------- --------
Operating income
(loss) 3,471 274 4,485 (8,155) 638
Other deductions (2,287) (1,961) (1,854) (3,338) (1,801)
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations before
income taxes 1,184 (1,687) 2,631 (11,493) (1,163)
Income taxes 383 145 50 108 195
-------- -------- -------- -------- --------
Income (loss) from
continuing
operations 801 (1,832) 2,581 (11,601) (1,358)
Income (loss) from
discontinued
operations, net (488) (915) (470) 2,027 (87)
Cumulative effect of
change in accounting
principle - - - 500 -
-------- -------- -------- -------- --------
Net earnings (loss) $ 313 $ (2,747) $ 2,111 $ (9,074) $ (1,445)
======== ======== ======== ======== ========
Earnings(loss)per share:
From continuing
operations $ .17 $ (.40) $ .57 $(2.55) $ (.30)
From discontinued
operations (.10) (.20) (.11) .44 (.02)
From change in
accounting
principle - - - .11 -
-------- --------- -------- -------- --------
$ .07 $ (.60) $ .46 $ (2.00) $ (.32)
======== ========= ======== ======== ========
Weighted average number
of shares outstanding 4,672 4,567 4,560 4,541 4,515
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital $13,579 $ 4,848 $ 10,845 $ 3,312 $ 8,524
Total assets 94,926 97,313 99,541 101,518 105,755
Long-term debt,
excluding current
installments 19,251 15,548 17,454 16,776 10,127
Total stockholders' 59,552 59,159 61,655 59,544 68,118
equity
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All dollar amounts of $1.0 million or more are rounded to the nearest one tenth
of a million; all other dollar amounts are rounded to the nearest one thousand
and all percentages are stated to the nearest one tenth of one percent.
This Form 10-K contains certain "forward-looking statements" within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which represent the Company's expectations and beliefs. These statements
by their nature involve substantial risks and uncertainties, certain of which
are beyond the Company's control, and actual results may differ materially
depending on a variety of important factors, including the financial condition
of the Company's customers, changes in domestic and foreign economic and
political conditions, demand for the Company's services and changes in the
Company's competitive environment.
The Company cautions that the factors described above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements of the Company made by or on behalf of the Company. Any forward-
looking statement speaks only as of the date on which such statement is made,
and the Company undertakes no obligation to update any forward-looking statement
or statements to reflect events or circumstances after the date on which such
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time, and it is not possible for management to
predict all of such factors or the effect that any such factor may have on the
Company's business.
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 WITH YEAR ENDED DECEMBER 31, 1995
REVENUES
The Company's revenues in 1996 were $69.5 million as compared to $56.2 million
in 1995. This 23.7 percent increase was primarily due to increases in the
Company's concrete and related products division revenues, offset by decreases
in the land development contracting division revenues.
The Company's concrete and related products division revenues increased 40.5
percent to $53.0 million in 1996 from $37.7 million in 1995. This increase was
primarily due to increased demand for this division's products on certain
Caribbean islands, which was generated by an increase in the overall level of
construction activity in certain locations in which the Company operates its
business. The Company believes that this increase was primarily attributable to
repair and rebuilding required as a result of Hurricanes Luis and Marilyn, which
struck the Caribbean in September 1995. At the present time, the Company cannot
predict whether concrete and related products revenue levels in 1997 will be
less than or greater than revenue levels achieved in 1996.
Revenues from the Company's land development contracting division decreased by
13.0 percent to $14.0 million in 1996 from $16.1 million in 1995. This decrease
was primarily attributable to the completion in mid 1996 of several hurricane
damage-related repair contracts which were not replaced by new contract backlog.
The Company's backlog of unfilled portions of land development contracts at
December 31, 1996 was $3.4 million involving 19 projects, as compared to $11.4
million involving 22 projects at December 31, 1995. Since December 31, 1996 the
Company has entered into new land development contracts in the Caribbean
amounting to $7.5 million. The Company reasonably expects that all of the
backlog, including the 1997 contracts, will be completed during the year ending
December 31, 1997. The Company needs to obtain additional new contracts as 1997
progresses or its contract revenue levels in 1997 will be lower than those
obtained in 1996. The Company does not presently know whether it will be
successful in obtaining such contracts.
14
<PAGE>
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues decreased to 74.1 percent in 1996 from 77.1 percent in 1995.
This decrease was primarily attributable to the mix of products sold, the
locations in which sales were made during the year and the increase in revenues
actually recognized in 1996.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues
increased to 89.1 percent in 1996 from 87.8 percent in 1995. This increase is
attributable to losses taken on certain contracts and by the significant levels
of cost involved in owning and operating heavy construction equipment. In
addition, the Company's gross margins are also affected by the varying
profitability levels of individual contracts and the stage of completion of such
contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A expense") increased by 12.5
percent to $12.4 million in 1996 from $11.0 million in 1995. This increase was
primarily attributable to increases in insurance and to legal fees, primarily
related to construction litigation, and by additional SG&A expense of the
Company's new operations in St. Martin and Puerto Rico. SG&A expense as a
percentage of revenue decreased to 17.8 percent in 1996 from 19.6 percent in
1995. This percentage decrease was primarily attributable to the increase in
revenues recognized, offset by the increase in expenses actually incurred.
DIVISIONAL OPERATING INCOME
Operating income increased to $3.5 million in 1996 from $274,000 in 1995. The
Company's concrete and related products division operating income increased to
$4.9 million in 1996 from $1.3 million in 1995. This increase is primarily
attributable to decreases in cost of sales and an increase in revenues for this
division, offset by increases in SG&A expense.
The Company's land development contracting division operating loss increased to
a loss of $1.1 million in 1996 from a loss of $570,000 in 1995. This increase in
loss is primarily attributable to the decline in contract revenues and increases
in SG&A expense, principally legal fees associated with litigation regarding two
of the Company's completed construction projects.
INCOME TAXES
Income taxes increased to $383,000 in 1996 from $145,000 in 1995. The Company's
tax rate varies depending on the level of the Company's earnings in the various
tax jurisdictions in which it operates, the level of operating loss
carryforwards and tax exemptions available to the Company. See "Business - Tax
Exemptions and Benefits".
NET EARNINGS (LOSS)
The Company's net earnings increased to income of $313,000 in 1996 from a net
loss of $2.7 million in 1995. This increase in net earnings was primarily
attributable to improvements in concrete and related products division profits,
offset by increases in selling, general and administrative expenses, even though
SG&A expense as a percentage of revenue declined.
15
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1995 WITH YEAR ENDED DECEMBER 31, 1994
REVENUES
The Company's revenues in 1995 were $56.2 million as compared to $65.2 million
in 1994. This 13.9 percent decrease was primarily due to decreases in the
Company's land development contracting revenues, and to a lesser extent
decreases in concrete and related products division revenues.
The Company's concrete and related products division revenues decreased 4.1
percent to $37.7 million in 1995 from $39.3 million in 1994. This decrease was
primarily due to decreased demand for this division's products on two Caribbean
islands, offset by increased demand on certain other islands. Hurricanes Luis
and Marilyn, which struck the Caribbean in September 1995, disrupted business
operations significantly in the short term, however, sales volume in all
locations except two have returned to or exceeded pre-storm levels.
Revenues from the Company's land development contracting division decreased by
30.0 percent to $16.1 million in 1995 from $22.9 million in 1994. This decrease
was primarily attributable to the recognition of revenues in 1994 on several
construction contracts obtained during the latter part of 1993. The Company's
contracting operations were not significantly affected by the hurricanes,
although it did acquire a number of hurricane-related repair and rebuilding
projects.
COST OF CONCRETE AND RELATED PRODUCTS
Cost of concrete and related products as a percentage of concrete and related
products revenues increased to 77.1 percent in 1995 from 74.2 percent in 1994.
This increase was primarily attributable to changes in the mix of products sold
and the decline in revenues actually recognized.
COST OF CONTRACTING
Cost of contracting as a percentage of land development contracting revenues
increased to 87.8 percent in 1995 from 83.9 percent in 1994. This increase is
attributable to the decline in revenues actually recognized, contract losses
recognized on several contracts and the significant levels of cost involved in
owning and operating heavy construction equipment. In addition, the Company's
gross margins are also affected by the varying profitability levels of
individual contracts and the stage of completion of such contracts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A expense") increased by 10.7
percent to $11.0 million in 1995 from $9.9 million in 1994. This increase was
primarily attributable to the opening of a new operation on St. Martin in 1995,
and increases in insurance and other operating costs, offset by decreases in
cost resulting from various personnel reductions. SG&A expense as a percentage
of revenue increased to 19.6 percent in 1995 from 15.2 percent in 1994. This
percentage increase was primarily attributable to the decrease in revenues
recognized and the increase in expenses actually incurred.
DIVISIONAL OPERATING INCOME
Operating income decreased to $274,000 in 1995 from $4.5 million in 1994. The
Company's concrete and related products division operating income decreased to
$1.3 million in 1995 from $2.8 million in 1994. This decrease is primarily
attributable to decreases in sales revenues and increases in cost of sales.
16
<PAGE>
The Company's land development contracting division operating income decreased
to a loss of $570,000 in 1995 from income of $1.7 million in 1994. This decrease
is primarily attributable to declines in contract revenues recognized and losses
taken on certain contracts.
INCOME TAXES
Income taxes increased to $145,000 in 1995 from $50,000 in 1994. The Company's
tax rate varies depending on the level of the Company's earnings in the various
tax jurisdictions in which it operates and the level of operating loss
carryforwards and tax exemptions available to the Company.
NET EARNINGS (LOSS)
The Company's net loss was $2.7 million in 1995 as compared to income of $2.1
million in 1994. This net loss was primarily attributable to losses recognized
in the Company's land development contracting division, declines in the concrete
and related products division profits and the write-down of the Company's
investment in its ceiling tile business.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally funds its working capital needs from operations and bank
borrowings. In the land development contracting business, the Company must
expend considerable amounts of funds for equipment, labor and supplies to meet
the needs of particular projects. The Company's capital needs are greatest at
the start of any new contract, since the Company generally must complete 45 to
60 days of work before receiving the first progress payment. In addition, as a
project continues, a portion of the progress billing is usually withheld as
retainage until all work is complete, further increasing the need for capital.
On occasion the Company has provided long-term financing to certain customers
who have utilized its land development contracting services. The Company has
also provided financing for other business ventures from time to time. With
respect to the Company's concrete and related products division, accounts
receivable are typically outstanding for a minimum of 60 days and in some cases
much longer. The nature of the Company's business requires a continuing
investment in plant and equipment, along with the related maintenance and upkeep
costs of such equipment.
The Company has funded many of these expenditures out of its current working
capital. However, notwithstanding the foregoing and after factoring in the
Company's obligations as set forth below, management believes that the Company's
cash flow from operations, existing working capital (approximately $13.6 million
at December 31, 1996) and funds available from lines of credit will be adequate
to meet the Company's anticipated needs for operations during the next twelve
months.
The Company turned its fiscal year-end accounts receivable approximately 5.2
times in 1996, 4.7 times in 1995 and 4.5 times in 1994. The improvement in the
Company's accounts receivable turnover ratio from 1995 to 1996 is due primarily
to (i) a reduction in contract retainage receivables as a result of a gradual
decline in the number of pending construction contracts held by the Company and
(ii) modest improvements in the Company's collection process. The increase in
the Company's accounts receivable turnover ratio has had only a modest effect on
the Company's liquidity as the additional cash generated has been used for debt
repayment and capital expenditures.
At December 31, 1996, the Company had revolving secured lines of credit in the
amount of $1.0 million, $1.0 million and $400,000 from commercial banks in South
Florida and the Caribbean. The Company had no borrowings outstanding under one
of the $1.0 million lines of credit, $1,000 in borrowings under the other $1.0
million line of credit, and $400,000 of borrowings outstanding under the
$400,000 line of credit. One $1.0 million line expires in November 1997, the
other
17
<PAGE>
expires in June 1997 and the $400,000 line is due on demand. The interest rates
on all such indebtedness outstanding at December 31, 1996 was 8.75 percent.
The Company has a $500,000 unsecured overdraft facility from a commercial bank
in the Caribbean. The facility is due on demand and bears interest at 14.0
percent per annum. At December 31, 1996 the Company had borrowings of $258,000
outstanding under this line.
The Company has entered into a $5.0 million term loan with a Caribbean bank,
repayable in monthly installments through December 2001. The interest rate on
indebtedness outstanding at December 31, 1996 was 9.75 percent and the Company
had $3.5 million of borrowings outstanding. The loan is secured by a leasehold
mortgage on a marina in the U.S. Virgin Islands.
The Company has borrowed $5.4 million from a Company officer. The note is
unsecured, bears interest at the prime interest rate and is due in full on
January 1, 1998.
In November 1996, the Company entered into a $6.0 million term loan with a
Caribbean bank. The loan proceeds were used to repay and retire a $2.0 million
revolving line of credit which expired in May 1996, two term loans totalling
$642,000, an equipment loan with a balance of $186,000, a term loan due in
November 1996 with a balance of $1.5 million, a line of credit due in November
1996 with a balance of $567,000, another line of credit with a balance of
$400,000, which expired in May 1996 and various other notes amounting to
approximately $403,000. The balance of $302,000 was used to provide additional
working capital for the Company. The loan is collateralized by various parcels
of real property and other assets located in the United States Virgin Islands
and certain other areas.
The Company purchases equipment from time to time as needed for its ongoing
business operations. The Company is currently replacing or upgrading various
equipment used by the concrete and related products division, principally
concrete trucks and quarry equipment. This upgrading and replacement program
will continue throughout 1997 and should result in a net cash expenditure of
approximately $2.2 million. At present, management believes that the Company's
inventory of construction equipment is adequate for its current contractual
commitments and operating activities, however, the acquisition of significant
new construction contracts, depending on the nature of the contract, the job
location and job duration, may require the Company to make significant
investments in heavy construction equipment. If the Company does not obtain
additional contract backlog, then it plans to sell a portion of the equipment it
currently owns. The Company will have to bear the carrying costs, principally
depreciation and interest, on any idle equipment not sold. During 1996, the
Company has sold equipment with an original cost basis of approximately $18.4
million and net book value of $5.9 million. In December 1996, the Company sold
its cement hauling vessel to a third party for $3.9 million. The Company has
leased the vessel back for a four year term, with options to renew the lease for
four additional one year periods. After the related debt on the vessel was
repaid the Company received cash of approximately $2.0 million as a result of
this transaction. The Company expects to complete additional equipment sales
during 1997. The Company believes it has available or can obtain sufficient
financing for most of its contemplated equipment replacements and additions.
Historically, the Company has used a number of lenders to finance a portion of
its machinery and equipment purchases on an individual asset basis. At December
31, 1996 amounts outstanding to these lenders totalled $6.5 million. These loans
are typically repaid over a three to five year term in monthly principal and
interest installments.
A significant portion of the Company's outstanding debt bears interest at
variable rates. The Company could be negatively impacted by a substantial
increase in interest rates.
18
<PAGE>
The Company has contingent obligations and has made certain guarantees in
connection with acquisitions, its participation in certain joint ventures,
certain employee and construction bonding matters and its receipt of a tax
exemption. As part of the 1995 acquisition of Societe des Carrieres de Grand
Case (SCGC), a French company operating a ready-mix concrete plant and quarry in
St. Martin, the Company agreed to pay the quarry owners (who were also the
owners of SCGC), a royalty payment of $550,000 per year through August 2000,
which at the Company's option, may be renewed for two successive five year
periods and requires annual payments of $550,000 per year. At the end of the
fifteen year royalty period, the Company has the option to purchase a fifty
hectare parcel of property for $4.4 million. In connection with a 1990 St.
Maarten acquisition, the Company agreed to pay the seller annually an amount per
unit of certain concrete and stone products sold by the Company in St. Maarten
from April 1, 1990 to March 31, 1998, but in no event less than $500,000 per
year. The Company has certain offsets available against this payment which has
reduced the minimum annual payment to $350,000 per year.
Notes receivable and accrued interest at December 31, 1996 include $14.6
million, net due the Company pursuant to certain promissory notes delivered to
the Company in connection with two construction contracts with the Government of
Antigua, $2.0 million of which is classified as a current receivable. The notes
call for both quarterly and monthly principal and interest payments until
maturity in 1997. The notes will not be satisfied at maturity but the Antiguan
government has advised the Company that payments will continue until the
obligation is satisfied. The Government of Antigua has routinely made the
required quarterly payments aggregating $2.0 million per year but has made only
some of the required monthly payments. A portion of the payment received from
Antigua was derived from the lease proceeds the Antiguan government received
from the United States Department of Defense for the rental of two military
bases. One of the bases was closed at the end of 1995, resulting in a shortfall
of $700,000 per year in the required quarterly payments. To partially make up
this shortfall, the Antiguan government has entered into a written agreement
with the Company requiring Antigua to pay $600,000 per year from its fuel tax
revenues. Payments under this agreement commenced in January 1997. The Company
does not presently anticipate any other material increases in or accelerations
of payments by the Government of Antigua. Management believes that the
receivable from the Government of Antigua is fairly stated, based on the present
stream of cash flow being received and, therefore, no reserve has been
established against the receivable reflected in the Company's financial
statements.
19
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information and the supplementary data required in response to
this Item are as follows:
PAGE NUMBER(S)
--------------
Independent Auditors' Report 21
Financial Statements:
Consolidated Balance Sheets 22-23
December 31, 1996 and 1995
Consolidated Statements of Operations
For Each of the Years in the Three Year Period
Ended December 31, 1996 24-25
Consolidated Statements of Stockholders' Equity
For Each of the Years in the Three Year Period
Ended December 31, 1996 26
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year Period
Ended December 31, 1996 27-28
Notes to Consolidated Financial Statements 29-47
Schedule II - Valuation and Qualifying Accounts 53
20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Devcon International Corp.:
We have audited the consolidated financial statements of Devcon International
Corp. and subsidiaries as listed in the accompanying index. In connection with
our audits of the consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and this financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and this financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Devcon International
Corp. and subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1996 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly, in all material respects, the information set forth
therein.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 25, 1997
21
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
ASSETS 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash (note 8) $ 303,994 $ 438,682
Cash equivalents (notes 7 and 8) 1,600,000 977,456
Receivables, net (notes 2 and 7) 13,803,565 12,043,706
Costs in excess of billings and
estimated earnings (notes 16 and 17) 3,124,860 3,461,984
Inventories (note 3) 6,998,678 6,392,278
Other 825,853 936,446
Net assets of discontinued
operation (note 9) - 749,114
----------- ------------
Total current assets 26,656,950 24,999,666
Property, plant and equipment (note 7)
Land 5,695,867 5,667,867
Buildings 4,146,231 4,248,816
Leasehold interests 12,210,055 12,590,763
Equipment 61,864,583 72,319,224
Furniture and fixtures 581,050 1,057,850
Construction in process 585,480 1,396,187
---------- ------------
85,083,266 97,280,707
Less accumulated depreciation (37,587,567) (45,898,662)
----------- -----------
47,495,699 51,382,045
Investments in unconsolidated joint
ventures and affiliates (note 4) 158,780 208,780
Advances to unconsolidated joint
ventures and affiliates (note 4) 1,021,453 1,047,663
Receivables, net (notes 2 and 7) 17,296,278 17,585,097
Intangible assets, net of accumulated
amortization (note 5) 1,093,907 1,086,801
Other assets 1,203,073 1,002,588
----------- -----------
$94,926,140 $97,312,640
=========== ===========
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Balance Sheets
(continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
---- ----
<S> <C> <C>
Current liabilities:
Accounts payable, trade and other $ 5,950,704 $ 6,501,977
Accrued expenses and other liabilities 1,163,944 1,451,429
Notes payable to banks (note 7) 400,000 3,467,310
Current installments of long-term debt
(note 7) 4,424,726 7,274,506
Billings in excess of costs and
estimated earnings (note 16) 112,652 766,399
Income taxes (note 8) 1,026,010 689,650
----------- -----------
Total current liabilities 13,078,036 20,151,271
Long-term debt, excluding current
installments and notes payable
to banks (note 7) 19,251,369 15,547,908
Minority interest in consolidated
subsidiaries (note 5) 1,925,446 675,853
Deferred income taxes (note 8) 495,400 651,979
Other liabilities 624,204 1,127,043
----------- -----------
Total liabilities 35,374,455 38,154,054
Stockholders' equity (note 14):
Common stock, $0.10 par value.
Authorized 15,000,000 shares,
issued and outstanding,
4,498,935 shares in 1996 and
4,464,510 shares in 1995 449,894 446,451
Additional paid-in capital 12,064,133 11,987,365
Retained earnings (note 8) 47,037,658 46,724,770
----------- -----------
Total stockholders' equity 59,551,685 59,158,586
----------- -----------
$94,926,140 $97,312,640
=========== ===========
</TABLE>
Commitments and contingencies (notes
8, 11 and 17)
See accompanying notes to consolidated financial statements.
23
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations
For Each of the Years in the Three Year Period Ended December 31, 1996
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Concrete and related products
revenues $52,987,242 $37,716,253 $39,342,107
Contracting revenues 13,981,732 16,068,283 22,941,915
Other revenues 2,509,395 2,366,926 2,965,081
----------- ----------- -----------
Total revenues 69,478,369 56,151,462 65,249,103
Cost of concrete and related
products 39,276,983 29,069,207 29,200,324
Cost of contracting 12,457,949 14,102,977 19,249,741
Cost of other 1,913,286 1,720,911 2,387,592
----------- ----------- -----------
Gross profit 15,830,151 11,258,367 14,411,446
Operating expenses:
Selling, general and
administrative 12,056,001 10,682,423 9,626,374
Provision for doubtful accounts
and notes 302,863 301,510 300,000
----------- ----------- -----------
Operating income 3,471,287 274,434 4,485,072
----------- ----------- -----------
Other income (deductions):
Joint venture equity loss (note 4) (50,000) - -
Gain (loss) on sale of equipment (2,147) 164,116 34,895
Interest expense (2,609,580) (2,555,848) (2,704,105)
Interest and other income 392,355 462,840 854,024
Minority interest (17,819) (31,693) (38,344)
----------- ----------- -----------
(2,287,191) (1,960,585) (1,853,530)
----------- ----------- -----------
Income (loss) from
continuing operations
before income taxes 1,184,096 (1,686,151) 2,631,542
Income taxes (note 8) 383,089 145,352 50,000
----------- ----------- -----------
Income (loss) from
continuing operations 801,007 (1,831,503) 2,581,542
Discontinued operation (note 9)
Impairment loss - (800,000) -
Loss from discontinued operation - (115,000) (470,076)
Loss on sale of discontinued
operation (488,119) - -
----------- ----------- -----------
Loss from discontinued operation (488,119) (915,000) (470,076)
----------- ----------- -----------
Net earnings (loss) $ 312,888 $(2,746,503) $ 2,111,466
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Operations (Continued)
1996 1995 1994
---- ---- ----
Earnings (loss) per share:
From continuing operations $ .17 $ (.40) $ .57
From discontinued operation (.10) (.20) (.11)
----------- ---------- ---------
Net earnings (loss) $ .07 $ (.60) $ .46
=========== ========== =========
Weighted average number of shares 4,672,179 4,566,671 4,560,397
=========== ========== =========
See accompanying notes to consolidated financial statements.
25
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For Each of the Years in the Three Year Period Ended December 31, 1996
ADDITIONAL
COMMON PAID-IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
------ ---------- -------- -----
<S> <C> <C> <C> <C>
Balances at December 31, 1993 $443,118 $11,740,700 $47,359,807 $59,543,625
Net earnings - - 2,111,466 2,111,466
-------- ----------- ----------- -----------
Balances at December 31, 1994 443,118 11,740,700 49,471,273 61,655,091
Stock issued in connection with
acquisition of additional
partnership interest 3,333 246,665 - 249,998
Net loss - - 2,746,503) (2,746,503)
-------- ----------- ----------- -----------
Balances at December 31, 1995 446,451 11,987,365 46,724,770 59,158,586
Stock issued in connection with
exercise of stock options 3,443 76,768 - 80,211
Net earnings - - 312,888 312,888
-------- ----------- ----------- -----------
Balances at December 31, 1996 $449,894 $12,064,133 $47,037,658 $59,551,685
======== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
26
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For Each of the Years in the Three Year Period Ended December 31, 1996
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 312,888 $(2,746,503) $ 2,111,466
Adjustments to reconcile net earnings
(loss) to net cash provided by
operating activities:
Depreciation and amortization 5,421,183 4,714,254 6,459,492
Deferred income tax benefit (156,579) (777,021) -
Joint venture equity loss 50,000 - -
Provision for doubtful accounts
and notes 302,863 301,510 300,000
(Gain) loss on sale of equipment 2,147 (164,116) (34,896)
Loss from discontinued operation 488,119 915,000 470,076
Increase in minority interest
in consolidated subsidiaries 17,819 31,693 38,345
Changes in operating assets and liabilities:
(Increase) decrease in receivables (2,314,992) 347,378 (523,019)
Decrease (increase) in costs
in excess of billings and
estimated earnings 337,124 (850,490) (1,534,007)
(Increase) decrease in inventories (606,400) 1,222,357 (78,381)
Decrease (increase) in other current
assets 136,804 17,399 (150,394)
Increase in other assets - (65,249) (33,887)
(Decrease) increase in accounts
payable and accrued expenses (1,527,284) 858,170 (75,814)
Increase (decrease) in billings in
excess of costs and estimated
earnings (653,747) 710,121 (375,372)
Increase (decrease) in income
taxes payable 336,360 641,375 (72,992)
Increase (decrease) in other non
current liabilities (502,838) 42,985 (288,224)
---------- ----------- -----------
Net cash provided by continuing
operations 1,643,467 5,198,863 6,212,393
Net cash used by
discontinued operation (102,005) (165,886) (1,010,422)
---------- ----------- -----------
Net cash provided by operating
activities $ 1,541,462 $ 5,032,977 $ 5,201,971
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
27
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Purchases of property, plant and
equipment $(6,643,817) $(6,249,083) $(3,319,741)
Proceeds from disposition of property,
plant and equipment 5,876,197 697,887 665,945
Payment to acquire subsidiary company (171,711) (1,000,000) -
Issuance of notes (245,477) (227,233) (2,697,116)
Payments on notes 2,478,790 2,831,286 3,137,015
Advances to affiliates - (36,209) (59,130)
Advances from affiliates - 340,000 100,000
----------- ----------- --------
Net cash provided by (used in)
investing activities 1,293,982 (3,643,352) (2,173,027)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from debt 12,345,275 9,540,913 7,301,564
Principal payments on debt (14,973,904) (10,140,800) (11,350,542)
Payments for debt issuance costs (200,485) - -
Net borrowings (repayments) from bank
overdrafts 481,526 (315,650) 698,257
----------- ----------- -----------
Net cash used in
financing activities (2,347,588) (915,537) (3,350,721)
----------- ----------- -----------
Net increase (decrease) in cash
and cash equivalents 487,856 474,088 (321,777)
Cash and cash equivalents at
beginning of year 1,416,138 942,050 1,263,827
----------- ----------- -----------
Cash and cash equivalents at
end of year $ 1,903,994 $ 1,416,138 $ 942,050
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for:
Interest $ 2,648,250 $ 2,579,748 $ 3,017,610
=========== =========== ===========
Income taxes $ 203,308 $ 87,888 $ 147,938
=========== =========== ===========
</TABLE>
Supplemental non-cash items:
During 1995, the Company issued 33,333 shares of common stock to acquire an
additional interest in a Mexican manufacturing partnership.
During 1996, the minority interest shareholders in the new subsidiary operating
in Puerto Rico exchanged equipment, leaseholds and notes receivable totalling
$1,231,774 for their 49.98% ownership.
During 1996, Common Stock under the 1986 Stock Option Plan was issued in
exchange for officer and employee receivables totaling $130,436.
See accompanying notes to consolidated financial statements.
28
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Years ended December 31, 1996, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of
Devcon International Corp. and its majority owned
subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
The Company's investments in unconsolidated joint ventures and
affiliates are accounted for by the equity method. Under the
equity method, original investments are recorded at cost and
adjusted by the Company's share of undistributed earnings or
losses of these companies.
(b) REVENUE RECOGNITION
CONCRETE AND RELATED PRODUCTS
Revenue is recognized when the products are delivered.
CONTRACTING
The Company uses the percentage of completion method of
accounting for financial statement preparation and tax
reporting purposes. Revenues earned and related costs are
recorded based on the Company's estimates of the percentage of
completion of each project using the cost to cost method.
Anticipated losses on contracts are charged to earnings when
probable and estimable. Changes in estimated profits on
contracts are recorded in the period of change. Selling,
general and administrative expenses are not allocated to
contract costs. Monthly billings are based on the percentage
of work completed in accordance with a specific contract.
Contracts are generally completed within one year of the
commencement date, although the Company has had contracts that
extended past one year.
OTHER
Other revenue consists of revenue from a marina owned by the
Company. Revenue is recognized when products or services are
delivered.
(c) CASH AND CASH EQUIVALENTS
The Company considers certificates of deposits, commercial
paper and repurchase agreements with an original maturity or
restriction of three months or less at time of purchase to be
cash equivalents.
(d) INVENTORIES
The cost of sand, stone, cement and concrete block inventories
is determined using average costs approximating the first-in,
first-out (FIFO) method and is not in excess of market. All
other inventories are stated at the lower of average cost or
market.
29
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation
on property, plant and equipment is calculated on the
straight-line method over the estimated useful lives of the
assets. Property, plant and equipment and leasehold
improvements are amortized using the straight-line method
over the shorter of the lease term or the estimated useful
life of the asset.
Useful lives and/or lease terms for each asset type are
summarized below:
Buildings 15 - 40 years
Leasehold interests 3 - 55 years
Equipment 3 - 20 years
Furniture and fixtures 3 - 10 years
During 1995, the Company changed the estimated useful lives of
certain equipment used by the concrete and related products
and land development contracting divisions in order to more
closely match the useful lives to the actual service life of
the assets. This change in useful lives was made prospectively
and reduced annual depreciation expense for 1995 by
approximately $900,000 as compared to 1994.
(f) FOREIGN CURRENCY TRANSLATION
The Company owns subsidiaries whose functional currencies are
the Eastern Caribbean Dollar and the French Franc. The assets
and liabilities of these subsidiaries have been translated
into U.S. dollars at year end exchange rates. Income statement
accounts are translated into U.S. dollars at average exchange
rates during the period. Resulting translation adjustments
were not significant.
(g) INTANGIBLE ASSETS
The excess of cost over the fair value of net assets of
subsidiaries acquired is amortized over five to ten year
periods on a straight-line basis. The Company periodically
evaluates the recoverability of its intangible assets as well
as their amortization periods to determine whether an
adjustment to the carrying value or a revision to the
estimated useful lives is appropriate. The primary indicators
of recoverability are the current and forecasted operating
cash flows which pertain to that particular asset. An entity
that has a deficit in its cash flow from operations for a full
fiscal year, in light of the surrounding economic environment,
is viewed by the Company as a situation which could indicate
an impairment of value. Taking into account the above factors,
the Company determines that an impairment loss has been
triggered when the future projected undiscounted cash flows
associated with the intangible asset does not exceed its
current carrying amount and the amount of the impairment loss
to be recorded is the difference between the current carrying
amount and the future projected discounted cash flows. Based
on the Company's policy, management believes that there is no
impairment of value related to the intangible assets as of
December 31, 1996.
Accumulated amortization on intangible assets amounted to
$371,187 in 1996 and $206,582 in 1995.
30
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(h) EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per share is computed by dividing the
weighted average number of shares outstanding during each
year, increased by common equivalent shares (stock options)
using the treasury stock method. Fully diluted earnings per
share did not differ significantly from primary earnings per
share in any of the years presented.
(i) FOREIGN OPERATIONS
Various portions of the Company's operations are conducted in
foreign areas, primarily Antigua, St. Maarten, St. Martin,
Dominica, Saba, St. Kitts and Tortola, all of which are in the
Caribbean. In 1996, 52.5 percent of the Company's revenues
were derived from foreign operations. Overseas contract work
performed by the parent company (a United States corporation)
is not considered foreign source revenue for purposes of the
foregoing calculation. The majority of contract work is
performed by the parent company. The potential risks of doing
business in foreign areas include potential adverse changes in
the diplomatic relations of foreign countries with the United
States, changes in the relative purchasing power of the United
States dollar, hostility from local populations, adverse
effects of exchange controls, restrictions on the withdrawal
of foreign investment and earnings, government policies
against busi nesses owned by non-nationals, expropriations of
property, the instability of foreign governments and the risk
of insurrection that could result in losses against which the
Company is not insured. The Company was not subject to these
risks in Florida and is not subject to them in Puerto Rico or
the United States Virgin Islands (United States territories
that use the United States dollar as their currency). Although
the Company has not encountered significant difficulties in
its foreign operations in the past, there can be no assurance
that the Company will not encounter difficulties in the
future.
(j) INCOME TAXES
The Company and certain of its domestic subsidiaries file
consolidated Federal and state income tax returns.
Subsidiaries located in U.S. possessions and foreign countries
file individual income tax returns. Deferred income taxes are
recognized for income and expense items that are reported in
different years for financial reporting and income tax
purposes.
U.S. income taxes are not provided on undistributed earnings
which are expected to be permanently reinvested by the foreign
subsidiaries located in Antigua, the Netherlands Antilles, the
French West Indies, the British Virgin Islands, Dominica,
Grand Cayman, the Bahamas and certain subsidiaries located in
U.S. possessions.
The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes." Under the asset and liability
method of Statement 109, deferred tax assets and liabilities
are recognized for the
31
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
estimated future tax consequences attributable to
differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income
for the period that includes the enactment date.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and
liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements
in conformity with generally accepted accounting principles.
(l) IMPAIRMENT OF LONG-LIVED ASSETS AND
LONG-LIVED ASSETS TO BE DISPOSED OF
The Company adopted the provisions of SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, on January 1, 1996. This Statement
requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the
fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value
less costs to sell. Adoption of this Statement did not have a
material impact on the Company's financial position, results
of operations, or liquidity.
(m) STOCK OPTION PLAN
Prior to January 1, 1996, the Company accounted for its stock
option plan in accordance with the provisions of Accounting
Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR STOCK
ISSUED TO EMPLOYEES, and related interpretations. As such,
compensation expense would be recorded on the date of grant
only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the Company
adopted SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION,
which permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the
date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply the provisions of APB Opinion
No. 25 and provide pro forma net income and pro forma earnings
per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method
defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No.
25 and provide the pro forma disclosure provisions of SFAS No.
123.
32
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2) RECEIVABLES
Receivables consist of the following:
DECEMBER 31,
-----------------------------------
1996 1995
---- ----
<S> <C> <C>
Concrete and related products
division trade accounts receivable $10,005,085 $ 7,469,882
Land development contracting
division trade accounts
receivable, including retainages 2,992,384 3,307,229
Other division trade accounts receivable 167,093 73,180
Accrued interest and other receivables 71,715 303,722
Notes and other receivables due from the
Government of Antigua and Barbuda 15,642,579 17,274,649
Trade notes receivable - other 4,181,837 2,853,673
Due from employees and officers 1,010,741 802,869
----------- -----------
34,071,434 32,085,204
Allowance for doubtful accounts
and notes (2,971,591) (2,456,401)
----------- -----------
$31,099,843 $29,628,803
=========== ===========
</TABLE>
Receivables are classified in the consolidated balance sheets as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
------ ----
<S> <C> <C>
Current assets $13,803,565 $12,043,706
Noncurrent assets 17,296,278 17,585,097
----------- -----------
$31,099,843 $29,628,803
=========== ===========
</TABLE>
Retainage will be due upon completion of construction contracts and
acceptance by the customer. The Company expects retainage will be
collected during 1997.
Included in notes and other receivables are unsecured notes due from
the Government of Antigua and Barbuda amounting to $14,598,656 and
$16,218,549 in 1996 and 1995, respectively, which were delivered to the
Company in connection with two construction contracts performed by the
Company for the Government of Antigua and Barbuda, $2.0 million of
which is classified as a current receivable. The notes are accounted
for using the cost recovery method and all payments received are
applied against the outstanding principal balance of the notes. The
notes call for both quarterly and monthly principal and interest
payments until maturity in 1997. The notes will not be satisfied at
maturity but the Antiguan government has advised the Company that
payments will continue until the obligation is satisfied. The
Government of Antigua has routinely made the required quarterly
payments aggregating $2.0 million per year but has made only some of
the required monthly payments. A portion of the payment received from
Antigua is derived from the lease proceeds the Antiguan government
receives from the United States Department of Defense for the rental of
two military bases. One of the bases was closed at the end of 1995,
resulting in a shortfall of $700,000 per year in the required quarterly
payments. To partially make up this shortfall, the Antiguan government
has entered into a written agreement with the Company requiring Antigua
to pay $600,000 per year from its fuel tax revenues. Payments under
this agreement commenced in January 1997. The Company does not
33
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
presently anticipate any other material increases in or accelerations
of payments by the Government of Antigua.
Notes receivable from an Antiguan government agency, amounting to
$855,803 in 1996 and 1995, are included in the total due from the
government of Antigua, along with Antigua-Barbuda Government
Development Bonds 1994-1997 series amounting to $188,120 and $200,297
in 1996 and 1995, respectively.
The Company also has trade receivables from various Antiguan government
agencies of $476,652 and $717,554 in 1996 and 1995, respectively.
Several of the Company's customers perform services for the Antiguan
government and depend on payments from the government to satisfy their
obligations to the Company.
Employee receivables consist primarily of amounts due from certain
officers and employees as a result of payments made by the Company
pursuant to a split dollar life insurance plan. The Company's advances
to pay premiums are secured by a pledge of the cash value of the issued
policies. Amounts due the Company under the split dollar plans amounted
to $493,167 and $403,028 in 1996 and 1995, respectively.
Trade notes receivable - other consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Unsecured promissory notes receivable with
varying terms and maturity dates $ 326,988 $ 262,711
Secured promissory notes receivable with
varying terms and maturity dates 513,880 692,367
8 percent note receivable due in weekly
installments from April 1994 through
April 1997, with a balloon payment due in
April 1997, secured by first and
second mortgages on two parcels of land 467,816 536,431
8 percent note receivable, due on demand,
secured by first mortgage on real
property 805,341 812,763
Notes receivable bearing interest at 2%
over prime interest rate, secured by
real estate 549,402 549,401
8 percent note receivable, due in
installments through July 2005, secured
by land and building 600,000 -
12.5 percent note receivable, due in
installments through June 30, 2001
and secured by pledge of stock of
subsidiary company (see note 5) 604,760 -
6 percent note receivable, due in monthly
installments from August 1997 through
July 2000 313,650 -
---------- ----------
$4,181,837 $2,853,673
========== ==========
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) INVENTORIES
DECEMBER 31,
-----------------------------
1996 1995
----- ----
<S> <C> <C>
Inventories consist of the following:
Sand, stone, cement and concrete block $5,262,116 $4,744,067
Maintenance parts 1,232,562 1,318,037
Other 504,000 330,174
---------- ----------
$6,998,678 $6,392,278
========== ==========
</TABLE>
(4) INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED JOINT VENTURES AND
AFFILIATES
At December 31, 1996, the Company has equity interests in two real
estate ventures, a 43 percent equity interest in a foreign construction
company and a 1 percent equity interest in a commercial property
development in Antigua. One real estate joint venture was formed
primarily to acquire and develop land for sale in Antigua, West Indies.
The other real estate venture was formed to develop property in Florida
and has insignificant assets and operations. A loss of $50,000 was
recognized in 1996 related to the Company's investment in the foreign
construction company. The Company recognized no gain or loss on this
venture in 1995. No income or loss was recognized in 1996 and 1995 on
any of the other ventures because the amounts were not material.
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
UNCONSOLIDATED JOINT UNCONSOLIDATED JOINT
VENTURES AND AFFILIATES VENTURES AND AFFILIATES
----------------------- -----------------------
ADVANCES INVESTMENTS ADVANCES INVESTMENTS
TO IN TO IN
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Commercial property $ 11,323 $ - $ 11,323 $ -
Real estate 960,130 8,780 960,130 8,780
Construction 50,000 150,000 76,210 200,000
---------- ---------- ---------- ----------
$1,021,453 $ 158,780 $1,047,663 $ 208,780
========== ========== ========== ==========
</TABLE>
(5) ACQUISITIONS
In May 1996, the Company contributed approximately $1.2 million in
capital to a new subsidiary company in return for a 50.02 percent
ownership interest. The new subsidiary leases and operates a quarry in
Puerto Rico. Capital contributions of the Company's minority ownership
partners, amounting to approximately $1.2 million, are classified as
part of minority interest in consolidated subsidiaries.
On August 16, 1995, the Company acquired, for $1,000,000 cash, the
stock of Societe des Carrieres de Grand Case (SCGC), a French company
engaged in the ready mix concrete and quarry business on the French
island of St. Martin. The transaction was accounted for as a purchase.
As a result of the transaction the Company recorded costs in excess of
the fair value of the net assets purchased in the amount of $615,000.
35
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of financial instruments including cash, cash
equivalents, receivables, net, other current assets, accounts payable
trade and other, accrued expenses and other liabilities, notes payable
to banks, and current installments of long-term debt approximated fair
value at December 31, 1996 because of the short maturity of these
instruments. The carrying value of debt and notes receivable
approximated fair value at December 31, 1996 based upon the present
value of estimated future cash flows.
(7) LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
---- ----
<S> <C> <C>
Installment notes payable in monthly
installments through 2001, bearing
interest at a weighted average rate
of 9.06 percent and secured by
equipment with a carrying value
of approximately $9,246,000 $6,943,967 $5,630,811
Notes and mortgages payable in installments
through 2003, bearing interest at 8.0 to
10.75 percent and secured by equipment and real
property with a carrying value
of approximately $4,574,000 4,027,166 5,799,189
Obligation arising from an acquisition,
payable in monthly installments
through 1998, discounted at 10 percent 375,895 621,520
Unsecured notes payable due through 1998,
bearing interest at a weighted average
rate of 7.4 percent 1,013,838 2,269,445
Unsecured note payable to a Company
officer, due January 1, 1998 and bearing
interest at the prime interest rate 5,397,561 4,712,561
Note payable to bank under a $400,000
revolving line of credit, due on
demand, secured by a certificate of deposit and
bearing interest at the prime interest rate 400,000 400,000
Note payable to a bank under a $1,000,000
revolving line of credit, maturing in June
1997, bearing interest at 1/2 percent over
the prime interest rate and secured by real
property with a net carrying value of
approximately $1,880,000 1,000 517,000
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
DECEMBER 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Note payable to a bank under a $1,000,000
revolving line of credit, maturing in November
1997, secured by notes receivable from the
Government of Antigua, real property and
equipment and bearing interest at 1 percent
over the prime interest rate - -
Bank term loan of $6,000,000 due
in monthly installments from December
1996 through November 2002 and bearing
interest at 1 percent over the prime interest
rate. Secured by notes receivable from the
Government of Antigua and real property and
equipment with a net carrying value of
approximately $7,622,000 5,916,668 -
Installment and bank notes payable
repaid or refinanced during 1996 - 6,339,198
----------- -----------
Total debt outstanding $24,076,095 $26,289,724
=========== ===========
</TABLE>
The effective interest on all debt outstanding was 10.4% at December
31, 1996 and 9.6% at December 31, 1995.
Shown in the consolidated balance sheet under the following captions:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Current installments of long term debt $ 4,424,726 $ 7,274,506
Notes payable to banks 400,000 3,467,310
Long-term debt 19,251,369 15,547,908
----------- -----------
$24,076,095 $26,289,724
=========== ===========
</TABLE>
The total maturities of long-term debt subsequent to December 31, 1996
are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 4,824,726
1998 9,100,766
1999 3,320,869
2000 4,229,399
2001 1,190,207
Thereafter 1,410,128
-----------
$24,076,095
===========
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) INCOME TAXES
Income tax expense (benefit) consists of:
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
1996:
Federal $ - $ - $ -
State - - -
Foreign 539,668 (156,579) 383,089
-------- --------- --------
$539,668 $(156,579) $383,089
======== ========= ========
1995:
Federal $ 5,000 $ - $ 5,000
State - - -
Foreign 917,373 (777,021) 140,352
-------- --------- ---------
$922,373 $(777,021) $ 145,352
======== ========= =========
1994:
Federal $ - $ - $ -
State - - -
Foreign 50,000 $ - 50,000
-------- --------- --------
$ 50,000 $ - $ 50,000
======== ========= ========
The significant components of deferred income tax benefit attributable
to income or loss from continuing operations for the years ended
December 31, 1996, 1995 and 1994 are as follows:
1996 1995 1994
---- ---- ----
Deferred income tax expense
(exclusive of component below) $ 364,000 $2,342,000 $ -
Decrease in valuation
allowance for deferred tax
assets (530,579) (3,119,021) -
--------- ---------- --------
$(156,579) $ (777,021) -
========= ========== ========
</TABLE>
The actual expense differs from the "expected" tax expense computed by
applying the U.S. Federal corporate income tax rate to earnings before
income taxes as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Computed "expected"
tax expense (benefit) $ 402,000 $ (934,000) $ 718,000
Increase (reduction) in income taxes
resulting from:
Tax incentives granted to a subsidiary
in U.S. possession (94,000) - -
Tax incentives granted
to foreign subsidiaries (1,097,000) (1,208,000) (1,307,000)
Change in deferred tax
valuation allowance (520,579) - -
Net operating losses not
utilized 1,648,979 2,294,000 598,000
Other 43,089 (6,648) 41,000
---------- ---------- ----------
$ 383,089 $ 145,352 $ 50,000
========== ========== ==========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Deferred income taxes reflect the net tax effects of (a) temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax
purposes, and (b) net operating loss carryforwards.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
December 31, 1996 are presented below:
DECEMBER 31,
-----------------------------------------
Deferred tax assets: 1996 1995
---- ----
<S> <C> <C>
Net operating loss carryforwards $ 6,024,000 $ 5,841,000
Other - 182,000
----------- -----------
Total gross deferred tax assets 6,024,000 6,023,000
Less valuation allowances (3,614,400) (4,134,979)
Net deferred tax assets 2,409,600 1,888,021
----------- -----------
Deferred tax liabilities:
Plant and equipment, principally due
to differences in depreciation and
capitalized interest (2,458,000) (1,693,000)
Investments in joint ventures,
principally due to differences in
recording the investment between
book and tax (447,000) (847,000)
----------- -----------
Total gross deferred tax liabilities (2,905,000) (2,540,000)
----------- -----------
Net deferred tax liability $ (495,400) $ (651,979)
=========== ===========
</TABLE>
The valuation allowance for deferred tax assets as of December 31, 1996
was $3,614,400. The valuation allowance was established at
approximately 60 percent of the potential deferred tax benefit as the
Company believes it can utilize net operating losses via partial
repatriation of foreign subsidiary earnings.
In April 1988, the Virgin Islands Industrial Development Commission
(IDC) granted a subsidiary of the Company a 10-year tax exemption
expiring in April 1998, pursuant to which, and subject to certain
conditions and exceptions, the Company's (i) production and sale of
ready-mix concrete; (ii) production and sale of concrete block on St.
Thomas and St. Johns and outside of the Virgin Islands; (iii)
production and sale of sand and aggregate; and (iv) bagging of cement
from imported bulk cement, are 100 percent exempt from all United
States Virgin Islands real property, gross receipts (currently set at 4
percent) and excise taxes, 90 percent exempt from United States Virgin
Islands income taxes, and approximately 83 percent exempt from United
States Virgin Islands custom duties. The IDC granted the Company the
tax exemption in return for the Company's commitment to (i) make
capital expenditures of at least $4.6 million for new or replacement
equipment over a 10-year period, which the Company has satisfied; (ii)
employ a minimum of 142 United States Virgin Islands residents as
full-time personnel; (iii) spend at least $75,000 annually for a youth
training program; (iv) not increase the price of its concrete and
related products except as the result of certain direct cost increases
39
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
incurred by the Company over which it has no control; and (v) make an
annual scholarship fund contribution of $150,000.
In January 1994, the Company received a five year extension, through
April 2003, of its previously granted benefits. This extension was
granted in return for the Company agreeing to (i) continue to employ a
minimum of 160 United States Virgin Islands residents as full time
personnel; (ii) make additional capital expenditures of $1.7 million;
and (iii) continue to make a combined job training/scholarship
contribution of $225,000 per annum during the extension period.
The Company believes it is in compliance with all the requirements of
this program.
In partial consideration for the Company's work on a major contract,
the Government of Antigua granted two subsidiaries of the Company a
10-year tax holiday effective January 1, 1987 and expiring on December
31, 1996 from all taxes due (i) in connection with the Company's
construction contract with Antigua to, among other things, dredge St.
John's harbor, (ii) as a result of the Company's participation in a
joint venture to develop 230 acres of vacant land as well as 20,000
square feet of commercial property in Antigua; and (iii) in connection
with the Company's sale of concrete and related products in Antigua.
The tax holiday also exempted the Company from certain accrued tax
liabilities. In 1989, in connection with and in consideration for
additional work done by the Company with respect to the foregoing
contract, the Government of Antigua granted an additional tax exemption
to the Company. The tax exemption exempts the Company from taxes that
would otherwise result from the Company's income relating to a
construction contract in Jolly Harbor, Antigua. The Company is
currently negotiating with the government of Antigua regarding the tax
holiday which expired at the end of 1996. The Company is seeking an
extension of the current tax holiday, or as an alternative, the offset
of any taxes due against sums due the Company from the Government of
Antigua and Barbuda. Although there is no assurance, management
believes that one of these two alternatives will ultimately be
obtained.
At December 31, 1996, approximately $42.5 million of foreign
subsidiaries earnings have not been distributed and no U.S. income
taxes have been provided thereon as these earnings are considered
permanently reinvested in the subsidiaries operations, and in the year
earned, were not of the nature which would require current income tax
recognition under United States income tax laws. Current assets include
approximately $1.9 million of cash and cash equivalents that the
Company currently intends to use to fund foreign operations and U.S.
possession operations, respectively, due to U.S. income tax
restrictions. Should the foreign subsidiaries distribute these earnings
to the parent company or provide the parent company access to these
earnings through other means, taxes at the U.S. Federal tax rate, net
of foreign tax credits, may be incurred.
At December 31, 1996, the Company had accumulated net operating loss
carryforwards available to offset future taxable income in their
Caribbean and United States operations of approximately $17.7 million,
which expire in varying periods through the year ended December 31,
2004.
(9) DISCONTINUED OPERATIONS
In September 1989, a subsidiary of the Company obtained a minority
interest in a partnership engaged in the manufacture, sale and
distribution of acoustical ceiling tiles. The subsidiary invested
40
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
approximately $1.2 million in the partnership for a 29 percent interest
and two of the Company's directors obtained an 11 percent interest for
which they paid $450,000. In January 1994, an Antiguan subsidiary of
the Company became the new general partner and the Company's ownership
interest in the partnership was increased to 64.47 percent. The
directors' ownership interest was reduced to 6.47 percent. In November
1995 the Company decided to sell this operation because of its poor
operating results and uncertain prospects for improvement. Accordingly,
at December 31, 1995, the intended disposal has been accounted for as a
discontinued operation. The financial statements for all prior periods
presented have been restated to reflect the ceiling tile partnership as
a discontinued operation. The Company's investment in the partnership
was written down $800,000, to its estimated net realizable value of
approximately $749,000, which consists principally of property,
equipment and inventory with a net book value of approximately $1.4
million, along with debt of approximately $621,000. The Company
provided no reserve for anticipated losses during the phaseout period
and expects to recognize no income tax benefit on the loss from
discontinued operations. The Company sold its interest in the ceiling
tile business in September 1996 in exchange for one secured promissory
note in the amount of $600,000 and one unsecured promissory note in the
amount of $385,000 and took an additional loss on disposal of
approximately $488,000.
(10) FOREIGN SUBSIDIARIES
Summary combined financial information for the Company's foreign
subsidiaries, located in the Caribbean, except for those located in the
U.S. Virgin Islands and Puerto Rico follows:
DECEMBER 31,
--------------------------
1996 1995
---- ----
Current assets $14,707,914 $11,903,636
Advances to the Company (3,821,952) 1,533,672
Property, plant and equipment, net 22,144,913 25,103,665
Investment in joint ventures and
affiliates 1,158,233 1,180,234
Notes receivable 15,923,419 17,004,414
Other assets 1,432,475 803,252
----------- -----------
Total assets $51,545,002 $57,528,873
=========== ===========
Current liabilities $ 4,453,492 $ 6,037,488
Long-term debt 1,916,966 5,937,412
Equity 45,174,544 45,553,973
----------- -----------
Total liabilities and equity $51,545,002 $57,528,873
=========== ===========
1996 1995 1994
---- ---- ----
Revenue $36,474,931 $29,858,843 $30,186,482
Expenses 34,283,074 27,955,868 26,284,718
----------- ----------- -----------
Net earnings $ 2,191,857 $ 1,902,975 $ 3,901,764
=========== =========== ===========
41
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) LEASE COMMITMENTS
The Company leases real property, buildings and equipment under
operating leases that expire over one to fifty-five years. Future
minimum lease payments under noncancellable operating leases as of
December 31, 1996 are as follows:
OPERATING
LEASES
---------
Years ending December 31,
1997 $ 3,820,219
1998 3,726,174
1999 3,737,237
2000 3,596,555
2001 1,395,511
Thereafter 14,708,301
-----------
Total minimum lease payments $30,983,997
===========
Total rent expense for operating leases was $1,843,719 in 1996,
$1,147,041 1995 and $950,908 in 1994. Some operating leases have
provisions for contingent rentals or royalties based on related sales
and production; such contingent expense amounted to $160,433 in 1996,
$63,575 in 1995 and $131,041 in 1994. Included in the above minimum
lease commitments are royalty payments due to the owners of the SCGC
quarry. See note 17.
During October 1996, the Company entered into an agreement for the sale
and leaseback of the Company's bulk cement vessel. The vessel was sold
for $3,850,000, which approximated net book value and related costs of
disposition. The proceeds from the sale were utilized to repay debt on
the vessel of approximately $1.8 million. The four year lease is
classified as an operating lease. The Company has the option to renew
the lease at the end of the original lease term for four additional one
year terms.
(12) LINES OF BUSINESS
The Company operates primarily in two principal lines of business.
Information about the Company's operations in these different
industries are as follows:
<TABLE>
<CAPTION>
Revenues: 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Concrete and related
products $52,987,242 $ 37,716,253 $ 39,342,107
Contracting 13,981,732 16,068,283 22,941,915
Other 2,509,395 2,366,926 2,965,081
----------- ------------ ------------
Total $69,478,369 $ 56,151,462 $ 65,249,103
=========== ============ ============
Operating income (loss):
Concrete and related
products $ 4,864,592 $ 1,252,108 $ 2,841,153
Contracting (1,093,272) (569,224) 1,746,494
Other 415,967 409,550 321,425
Unallocated corporate
overhead (716,000) (818,000) (424,000)
----------- ------------ ------------
Total $ 3,471,287 $ 274,434 $ 4,485,072
=========== ============ ============
Identifiable assets:
Concrete and related
products $59,977,842 $ 54,885,292 $ 53,009,725
Contracting 30,912,211 37,346,656 40,691,336
Other 4,036,087 5,080,692 5,839,934
----------- ------------ ------------
Total $94,926,140 $ 97,312,640 $ 99,540,995
=========== ============ ============
</TABLE>
42
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1996 1995 1994
---- ---- ----
Depreciation and amortization:
Concrete and related
products $ 3,889,666 $ 3,187,278 $ 4,256,729
Contracting 1,261,863 1,257,950 1,939,495
Other 269,654 269,026 263,268
----------- ------------ ------------
Total $ 5,421,183 $ 4,714,254 $ 6,459,492
=========== ============ ============
Capital expenditures:
Concrete and related
products $ 5,539,134 $ 3,484,749 2,063,196
Contracting 1,072,683 2,764,334 1,232,690
Other 32,000 - 23,855
----------- ------------ ------------
Total $ 6,643,817 $ 6,249,083 $ 3,319,741
=========== ============ ============
Revenues by line of business include only sales to unaffiliated
customers, as reported in the Company's consolidated statement of
operations.
Operating income (loss) is revenues less operating expenses. In
computing operating income (loss), the following items have not been
added or deducted: interest expense, income tax expense, equity in
earnings from unconsolidated joint ventures and affiliates, interest
and other income, minority interest and gain or loss on sales of
equipment.
(13) RELATED PARTY TRANSACTIONS
The Company leases a 4.4 acre parcel of real property from the
Company's President, pursuant to which he received $48,605 in annual
rent in 1996.
The Company has borrowed approximately $5.4 million from a Company
officer. The note is unsecured, bears interest at the prime interest
rate and is due in full on January 1, 1998. See note 7.
(14) STOCK OPTION PLANS
The Company adopted stock option plans for officers and employees in
1986 (the "1986 Plan") and 1992 (the "1992 Plan"). Each plan terminates
10 years after the adoption date. Until 1996 and 2002, respectively,
options to acquire up to 300,000 and 350,000 shares, respectively, of
common stock may be granted to officers and employees of the Company at
no less than the fair market value on the date of grant.
All stock options granted pursuant to the 1986 Plan vest and become
fully exercisable (i) on the date the Optionee reaches the age of 65
years old and for the six month period thereafter or as otherwise
modified by the Company's Board of Directors, (ii) on the date of
permanent disability of the Optionee and for the six month period
thereafter, (iii) on the date of a change of control and for the six
month period thereafter and (iv) on the date of termination of the
Optionee by the Company from employment with the Company without cause
and for the six month period after termination.
43
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
All stock options granted pursuant to the 1992 Plan vest and become
exercisable in varying terms and periods which are established by the
Compensation Committee of the Board of Directors. All options issued
pursuant to the 1992 Plan expire ten years after the date of issue.
The Company adopted a stock option plan for nonemployee directors in
1992 (the "1992 Directors Plan"). This plan terminates in 2002. Options
to acquire up to 50,000 shares of common stock may be granted to
nonemployee directors at no less than the fair market value on the date
of grant. The 1992 Directors Plan provides that each director shall
receive an initial grant of 8,000 shares and be granted an additional
1,000 shares annually immediately subsequent to their reelection as a
director of the Company. All stock options have ten year terms and vest
and become fully exercisable six months after the date of issue.
Stock option activity for all plans during the periods indicated is as
follows:
<TABLE>
<CAPTION>
(All exercise prices rounded to the nearest dollar)
1986 PLAN 1992 PLAN DIRECTORS PLAN
------------------------- -------------------- ---------------------
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C>
Balance at
12/31/93 186,330 $2 to $7 40,000 $10 27,000 $6 to $14
Granted - - - - 3,000 $9
Exercised - - - - - -
Expired - - - - - -
------- ------ ------- -------
Balance at
12/31/94 186,330 $2 to $7 40,000 $10 30,000 $6 to $14
Granted - - 210,000 $7 3,000 $8
Exercised - - - - - -
Expired - - - - - -
------- ------- ------- -------
Balance at
12/31/95 186,330 $2 to $7 250,000 $7 to $10 33,000 $6 to $14
Granted - - 30,000 $8 10,000 $9
Exercised (34,425) $2 - - - -
Expired - - - - (11,000) $6 to $14
------- ------- ------- -------
Balance at
12/31/96 151,905 $2 to $7 280,000 $7 to $10 32,000 $6 to $14
======= ======= =======
Exercisable 121,990 72,000 32,000
------- ------- -------
Available for
Future Grant -0- 70,000 18,000
======= ======= =======
</TABLE>
The per share weighted-average fair value of stock options granted
during 1996 and 1995 was $4.30 and $3.39 on the date of grant using the
Black Scholes option-pricing model with the following weighted-average
assumptions: 1996 - expected dividend yield of 0%, risk free interest
rate of 7.0% and an expected life of 10 years; 1995 - expected dividend
yield of 0%, risk-free interest rate of 7.0% and an expected life of 10
years.
44
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company applies APB Opinion No. 25 in accounting for its Plan and,
accordingly, no compensation cost has been recognized for its stock
options in the financial statements. Had the Company determined
compensation cost based on the fair value at the grant date for its
stock options under SFAS No. 123, the Company's net income or loss
would have been the pro forma amounts indicated below:
NET INCOME 1996 1995 1994
---------- ---- ---- ----
Net income (loss),
as reported $312,888 $(2,746,503) $2,111,466
Net income (loss),
pro forma $125,428 $(2,758,143) $2,097,306
Earnings (loss)
per share from
continuing operations,
as reported $ .17 $ (.40) $ .57
Earnings (loss)
per share from
continuing operations,
pro forma $ .13 $ (.40) $ .56
Pro forma net income (loss) reflects only options granted in 1996, 1995
and 1994. The full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
(loss) amounts presented above because compensation cost is reflected
over the options' vesting period of five years and compensation cost
for options granted prior to January 1, 1994 is not considered.
(15) EMPLOYEE BENEFIT PLANS
The Company sponsors a 401(k) plan for all employees over the age of 21
with 1,000 hours of service in the previous 12 months of employment.
Employee contributions are matched by the Company up to 3 percent of an
employee's salary. The Company's contributions totaled $148,758 in
1996, $129,518 in 1995 and $134,146 in 1994.
(16) COSTS AND ESTIMATED EARNINGS ON CONTRACTS
1996 1995
---- ----
Costs incurred on uncompleted
contracts $ 65,279,390 $ 39,745,046
Costs incurred on completed
contracts 22,764,409 43,155,784
Estimated earnings 16,851,270 18,181,493
------------ ------------
104,895,069 101,082,323
Less: Billings to date (101,882,861) (98,386,738)
------------ ------------
$ 3,012,208 $ 2,695,585
============ ============
Included in the accompanying balance sheet under the following
captions:
1996 1995
---- ----
Costs in excess of billings
and estimated earnings $ 3,124,860 $ 3,461,984
Billings in excess of costs
and estimated earnings (112,652) (766,399)
------------ ------------
$ 3,012,208 $ 2,695,585
============ ============
45
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(17) COMMITMENTS AND CONTINGENCIES
The Company believes it is entitled to additional compensation on a
Florida construction project and is pursuing a claim of approximately
$4.0 million against the owner of the property. In addition to its
claim, the Company has an account receivable of approximately $500,000
from the owner of the project. Costs in excess of billings and
estimated earnings on this project amount to approximately $750,000.
This amount is included in the Company's claim. Management does not
believe any reserves are required for these amounts. While the Company
believes it has a meritorious claim, there is no assurance the claim
will be settled on a basis favorable to
the Company. No income or loss on this contract was recorded in 1996,
1995 or 1994.
The Company has contingent obligations and has made certain guarantees
in connection with acquisitions, its participation in certain joint
ventures, certain employee and construction bonding matters and its
receipt of a tax exemption. As part of the 1995 acquisition of Societe
des Carrieres de Grand Case (SCGC), a French company operating a
ready-mix concrete plant and quarry in St. Martin, the Company agreed
to pay the quarry owners (who were also the owners of SCGC), a royalty
payment of $550,000 per year through August 2000, which at the
Company's option, may be renewed for two successive five year periods
and requires annual payments of $550,000 per year. At the end of the
fifteen year royalty period, the Company has the option to purchase a
fifty hectare parcel of property for $4.4 million. In connection with a
1990 St. Maarten acquisition, the Company agreed to pay the seller
annually an amount per unit of certain concrete and stone products sold
by the Company in St. Maarten from April 1, 1990 to March 31, 1998, but
in no event less than $500,000 per year. The Company has certain
offsets available against this payment which has reduced the minimum
annual payment to $350,000 per year.
In 1989, the Company entered into a new Life Insurance and Salary
Continuation Agreement with the President of the Company. The agreement
provides that should the President cease to be employed by the Company
as a result of disablement or death, the Company shall pay an amount
equal to his salary and bonus for a period of five years to the
President or his designated beneficiary. The Company has not accrued
for the salary continuation over the expected remaining period of the
President's active employment as the agreement does not provide for
payment upon retirement; therefore, based on present facts and
circumstances, future payments, if any, are not determinable at this
date.
The Company is involved in other litigation and claims arising in the
normal course of business. The Company believes that such litigation
and claims will be resolved without a material effect on its financial
condition or results of operations.
The Company is subject to certain Federal, state and local
environmental laws and regulations. Management believes that the
Company is in compliance with all such laws and regulations. Compliance
with environmental protection laws has not had a material adverse
impact on the Company's financial condition or results of operations in
the past and is not expected to have a material adverse impact in the
foreseeable future.
In connection with a land development contract with the Government of
Antigua and as partial consideration therefore, the Company obtained a
75 percent interest in a corporation formed to own and develop
approximately 230 acres of real property in Antigua (the "Corbkinnon
Property"). In 1990, the Company sold a portion of its 75 percent
interest in the
46
<PAGE>
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Corbkinnon Property for $500,000 and the buyer's commitment to provide
50 percent of the financing required to develop the project. The
Company agreed to provide the first $500,000 of financing and provide a
guarantee for 50 percent of all additional financing required.
The Company sold substantially all of its interest in a real estate
joint venture with the Government of Antigua and Barbuda to a third
party in 1990. In connection with this sale, the third party purchaser
assumed the Company's guarantee of payment to the Government of Antigua
and Barbuda made upon the formation of the joint venture. This
guarantee, which would become an obligation of the Company in the event
of a default by the
purchaser, provides a guarantee that net profits from the joint
venture's operations will equal or exceed $20,000 per month. No
liability has been incurred by the Company nor have payments been made
by the Company or the purchaser in connection with this guarantee. The
guarantee expires upon the sale or disposal by the venture of its real
estate. There are no current plans to sell or dispose of any of the
venture's property.
(18) BUSINESS AND CREDIT CONCENTRATIONS
The Company's customers are concentrated in the Caribbean and are
primarily involved in the contracting industry. Credit risk may be
affected by the economic and political conditions in the various
countries in which the Company operates. Financial instruments which
potentially expose the Company to concentrations of credit risk consist
primarily of receivables and costs in excess of billings and estimated
earnings. No single customer accounted for a significant amount of the
Company's sales in 1996, 1995 or 1994 and there are no significant
receivables from a single customer as of December 31, 1996 or 1995,
other than the notes receivable due from the Government of Antigua and
Barbuda. Although receivables are generally not collateralized, the
Company may place liens or their equivalent in certain jurisdictions in
the event of non-payment. The Company estimates an allowance for
doubtful accounts based on the creditworthiness of customers as well as
the general economic conditions of the countries in which it operates.
Consequently, an adverse change in these factors would affect the
Company's estimate of its bad debts.
47
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Company has had no changes in or disagreements with its independent
certified public accountants on accounting and financial disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information with respect to the directors and executive officers of
the Company is incorporated by reference to the Company's Proxy
Statement to be filed with the Securities and Exchange Commission
pursuant to Regulation 14A not later than 120 days after the end of the
fiscal year covered by this report. Information as to executive
officers is included in Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION.
The information required in response to this item is incorporated by
reference to the Company's Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
The information included in the proxy statement pursuant to Rule
402(i), (k) and (l) is not incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required in response to this item is incorporated by
reference to the Company's Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in response to this item is incorporated by
reference to the Company's Proxy Statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the end of the fiscal year covered by this report.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
(1) Financial Statements.
An index to financial statements for the year ended December 31, 1996
appears on pages 20 and 48.
(2) Financial Statement Schedule.
The following financial statement schedule for each of the years in the
three year period ended December 31, 1996 is submitted herewith:
FORM 10-K
(PAGE NUMBER(S)
---------------
ITEM
----
Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts.............. 53
All other financial schedules are omitted because they are not
required, inapplicable, or the information is otherwise shown in the
financial statements or notes thereto.
48
<PAGE>
(3) Exhibits.
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Registrant's Restated Articles of Incorporation (1)(3.1)
3.2 Registrant's Bylaws(2)(3.2)
10.1 Registrant's 1986 Non-Qualified Stock Option Plan (3)(10.1)
10.2 Registrant's 1992 Stock Option Plan (10)(A)
10.3 Registrant's 1992 Directors' Stock Option Plan (10)(B)
10.4 V. I. Cement and Building Products Inc. 401(k) Retirement and Savings
Plan (14)
10.5 Life Insurance and Salary Continuation Agreement dated as of March 29,
1989, between the Registrant and Donald L. Smith, Jr.(5)(10.13)
10.6 Form of Indemnification Agreement between the Registrant, and its
directors and certain of its officers(6)(A)
10.7 St. John's Dredging and Deep Water Pier Construction Agreement
dated as of April 3, 1987, by and between Antigua and Barbuda and
Antigua Masonry Products, Limited (the "St. Johns Agreement") (6)(10.1)
10.8 Amendment No. 1 to the St. John's Agreement dated June 15, 1988(7)
(10.2)
10.9 Amendment No. 2 to the St. John's Agreement dated December 7, 1988 (9)
(10.34)
10.10 Amendment No. 3 to the St. John's Agreement dated January 23, 1989 (9)
(10.35)
10.11 Amendment No. 4 to the St. John's Agreement dated April 5, 1989 (9)
(10.36)
10.12 Amendment No. 5 to the St. John's Agreement dated January 29, 1991 (9)
(10.37)
10.13 Amendment No. 6 to the St. Johns Agreement dated November 30, 1993 (12)
(10.39)
10.14 Amendment No. 7 to the St. John's Agreement, dated December 21, 1994
(14)
10.15 Amendment No. 8 to the St. John's Agreement, dated October 23, 1996
(14)
10.16 Dredging, Filling and Other Land Improvements Agreement by and between
Jolly Harbour Ltd. (Vaduz, Liechtenstein), Antigua Development and
Construction, Limited, and the Registrant(4)(10.1)
10.17 Mortgage Note dated June 12, 1989 of Crown Bay Marina Joint Venture-I
to Banco Popular de Puerto Rico for $5,000,000 (7)(10.5)
10.18 Guarantee dated June 12, 1989, from the Registrant to Banco Popular de
Puerto Rico(7)(10.6)10.17
10.19 Lease dated October 31, 1989, between William G. Clarenbach and
Pricilla E. Clarenbach, as lessors, and Controlled Concrete Products,
Inc., as lessee (1)(10.26)
10.20 Lease dated April 13, 1981, between Mariano Lima and Genevieve Lima, as
lessors, and the Registrant, as lessee(1)(10.28)
10.21 Lease dated May 23, 1983, between the Government of the Virgin Islands,
as lessor, and Controlled Concrete Products, Inc. as lessee(1)(10.29)
10.22 Lease dated February 24, 1989, between Felix Pitterson, as lessor, and
V.I. Cement and Building Products, Inc., as lessee(1)(10.30)
10.23 Lease dated September 1, 1989, between Donald L. Smith, Jr., as lessor,
and the Registrant, as lessee(1)(10.31)
10.24 Lease dated September 12, 1966, between His Honour Hugh Burrowes,
a Commander of the British Empire of Government House in the Island of
Antigua, as lessor, and The Antigua Sand and Aggregate Limited, as
lessee(1)(10.32)
49
<PAGE>
10.25 Stock Purchase Agreement, dated April 18, 1990, by and between
B.B.W. Holding Corporation Limited ("BBW Holding") and Proar
Construction Materials Company N.V. ("Proar Construction") (8)(2.1)
10.26 Incentive Agreement, dated April 18, 1990, by and among BBW
Holding, Proar Construction, Bouwbedrijf Boven Winden N.V., Cramer
Construction N.V. and Caribbean Heavy Construction Company Limited
(8)(28.1)
10.27 Agreement, dated April 18, 1990, by and between Mr. Richard
Lawrence, Sr. and the Registrant (8)(28.2)
10.28 Notes receivable from Red Pond Estates, N.V. in the principal
sums of $242,516, $139,478 and $167,740, respectively (11) (10.41)
10.29 Material Purchase Agreement, dated August 17, 1995, between
Bouwbedrijf Boven Winden, N.V. and Hubert Petit, Francois Petit and
Michel Petit (13) (10.41)
10.30 Stock Purchase Agreement, dated August 17, 1995, between the
Registrant and Hubert Petit, Francois Petit and Michel Petit
(13)(10.42)
10.31 Loan Agreement dated November 12, 1996 between V. I. Cement and
Building Products, Inc. and Banco Popular de Puerto Rico (14)
10.32 $6,000,000 Installment Note dated November 12, 1996 between V. I.
Cement and Building Products, Inc. and Banco Popular de Puerto Rico
(14)
10.33 $1,000,000 Promissory Note dated November 12, 1996 between V. I.
Cement and Building Products, Inc. and Banco Popular de Puerto Rico
(14)
10.34 Time Charter Agreement, dated October 28, 1996, between Caribbean
Cement Carriers, Ltd. and Kristian Gerhard Jebsen Skibsrederi A/S (14)
10.35 Loan Agreement, dated June 30, 1993, between the Registrant and
Barnett Bank of South Florida (12) (10.44)
10.36 Standstill Agreement, dated February 26, 1997, between the
Registrant and Barnett Bank, N.A. (14)
21.1 Registrant's Subsidiaries (14)
23.1 Consent of KPMG Peat Marwick, LLP (14)
27.1 Financial Data Schedule
50
<PAGE>
(1) Incorporated by reference to the exhibit shown in parenthesis and
filed with the Registrant's Registration statement on Form S-2 (No.
33-31107).
(2) Incorporated by reference to the exhibit shown in the parenthesis
and filed with the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1989.
(3) Incorporated by reference to the exhibit shown in the parenthesis
and filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1987 (the "1987 10-K").
(4) Incorporated by reference to the exhibit shown in the parenthesis
and filed with the Registrant's Form 8 dated July 14, 1988 to the 1987
10-K.
(5) Incorporated by reference to the exhibit shown in the parenthesis
and filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1988 (the "1988 10-K").
(6) Incorporated by reference to the exhibit shown in parenthesis and
filed with the Registrant's Proxy Statement dated May 30, 1989.
(7) Incorporated by reference to the exhibit shown in parenthesis and
filed with the Registrant's Form 8 dated August 17, 1989 to the 1988
10-K.
(8) Incorporated by reference to the exhibit shown in parenthesis and
filed with Registrant's Current Report on Form 8-K dated May 2, 1990.
(9) Incorporated by reference to the exhibit showing in parenthesis and
filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1991.
(10) Incorporated by reference to the exhibit showing in parenthesis
and filed with the Registrant's Proxy Statement dated May 6, 1992.
(11) Incorporated by reference to the exhibit showing in parenthesis
and filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.
(12) Incorporated by reference to the exhibit showing in parenthesis
and filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.
(13) Incorporated by reference to the exhibit showing in parenthesis
and filed with the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
(14) Filed herewith.
Management employee contracts, compensatory plans and other arrangements
included as part of the exhibits referred to above are as follows:
10.1 Registrant's 1986 Non Qualified Stock Option Plan (3) (10.1)
10.2 Registrant's 1992 Stock Option Plan (10)(A)
10.3 Registrant's 1992 Directors' Stock Option Plan (10) (B)
10.4 V. I. Cement and Building Products, Inc. 401(k) Retirement and Savings
Plan (14)
10.5 Life Insurance and Salary Continuation Agreement dated as of March 29,
1989, between the Registrant and Donald L. Smith, Jr.(5)(10.13)
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed by the Registrant during the last quarter of
the period covered by this report.
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
March 28, 1997 DEVCON INTERNATIONAL CORP.
By:/S/ DONALD L. SMITH, JR.
------------------------
Donald L. Smith, Jr.
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
DEVCON INTERNATIONAL CORP.
March 28, 1997 By:/S/ DONALD L. SMITH, JR.
------------------------
Donald L. Smith, Jr.
Chairman, President and
Chief Executive Officer
March 28, 1997 By:/S/ RICHARD L. HORNSBY
----------------------
Richard L. Hornsby
Executive Vice President
and Director
March 28, 1997 By:/S/ WALTER B. BARRETT
---------------------
Walter B. Barrett
Vice President of Finance,
Chief Financial Officer and
Treasurer
March 28, 1997 By:/S/ ROBERT A. STEELE
--------------------
Robert A. Steele
Director
March 28, 1997 By:/S/ ROBERT L. KESTER
--------------------
Robert L. Kester
Director
March 28, 1997 By:/S/ W. DOUGLAS PITTS
--------------------
W. Douglas Pitts
Director
52
<PAGE>
Schedule II
Valuation and Qualifying Accounts
ALLOWANCE FOR DOUBTFUL BALANCE AT ADDITIONS BALANCE
ACCOUNTS FOR THE YEAR BEGINNING CHARGED TO AT END
ENDED DECEMBER 31, OF YEAR EXPENSE DEDUCTIONS OF YEAR
- ---------------------- ---------- ---------- ---------- -------
1994 $4,126,402 $ 300,000 $(1,757,316) $2,669,086
========== ========== =========== ==========
1995 $2,669,086 $ 301,510 $ (514,195) $2,456,401
========== ========== =========== ==========
1996 $2,456,401 $ 302,863 $ 212,327 $2,971,591
========== ========== =========== ==========
53
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.4 V. I. Cement and Building Products Inc. 401(k) Retirement and
Savings Plan
10.14 Amendment No. 7 to the St. John's Agreement, dated December 21,
1994
10.15 Amendment No. 8 to the St. John's Agreement, dated October 23,
1996
10.31 Loan Agreement dated November 12, 1996 between V. I. Cement and
Building Products, Inc. and Banco Popular de Puerto Rico
10.32 $6,000,000 Installment Note dated November 12, 1996 between V. I.
Cement and Building Products, Inc. and Banco Popular de Puerto
Rico
10.33 $1,000,000 Promissory Note dated November 12, 1996 between V. I.
Cement and Building Products, Inc. and Banco Popular de Puerto
Rico
10.34 Time Charter Agreement, dated October 28, 1996, between Caribbean
Cement Carriers, Ltd. and Kristian Gerhard Jebsen Skibsrederi A/S
10.35 Loan Agreement, dated June 30, 1993, between the Registrant and
Barnett Bank of South Florida
10.36 Standstill Agreement, dated February 26, 1997, between the
Registrant and Barnett Bank, N.A.
21.1 Registrant's Subsidiaries
23.1 Consent of KPMG Peat Marwick, LLP
27.1 Financial Data Schedule
EXHIBIT 10.4
V.I. CEMENT AND BUILDING PRODUCTS, INC.
401(K) RETIREMENT & SAVINGS PLAN
<PAGE>
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS .......................................24
2.2 DETERMINATION OF TOP HEAVY STATUS .................................24
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER .......................28
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY ...........................28
2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES .....................29
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR ............................29
2.7 RECORDS AND REPORTS ...............................................30
2.8 APPOINTMENT OF ADVISERS ...........................................30
2.9 INFORMATION FROM EMPLOYER .........................................31
2.10 PAYMENT OF EXPENSES ...............................................31
2.11 MAJORITY ACTIONS ..................................................31
2.12 CLAIMS PROCEDURE ..................................................31
2.13 CLAIMS REVIEW PROCEDURE ...........................................31
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY .........................................32
3.2 APPLICATION FOR PARTICIPATION .....................................32
3.3 EFFECTIVE DATE OF PARTICIPATION ...................................32
<PAGE>
3.4 DETERMINATION OF ELIGIBILITY ......................................33
3.5 TERMINATION OF ELIGIBILITY ........................................33
3.6 OMISSION OF ELIGIBLE EMPLOYEE .....................................33
3.7 INCLUSION OF INELIGIBLE EMPLOYEE ..................................34
3.8 ELECTION NOT TO PARTICIPATE .......................................34
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION....................34
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION ...........................35
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION ........................38
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS...............39
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS ..................................45
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS . . ................47
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS ..............................49
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE.......................
TESTS .............................................................52
4.9 MAXIMUM ANNUAL ADDITIONS ..........................................54
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS..........................58
4.11 TRANSFERS FROM QUALIFIED PLANS ....................................59
4.12 DIRECTED INVESTMENT ACCOUNT .......................................60
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND .......................................61
5.2 METHOD OF VALUATION ...............................................61
<PAGE>
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT .........................62
6.2 DETERMINATION OF BENEFITS UPON DEATH ..............................62
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY ..................63
6.4 DETERMINATION OF BENEFITS UPON TERMINATION ........................64
6.5 DISTRIBUTION OF BENEFITS ..........................................67
6.6 DISTRIBUTION OF BENEFITS UPON DEATH ...............................72
6.7 TIME OF SEGREGATION OR DISTRIBUTION ...............................75
6.8 DISTRIBUTION FOR MINOR BENEFICIARY ................................75
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN . . ................76
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP .................................76
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION ...................77
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE .............................78
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE .......................78
7.3 OTHER POWERS OF THE TRUSTEE .......................................79
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS ..........................81
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES .....................81
7.6 ANNUAL REPORT OF THE TRUSTEE ......................................82
7.7 AUDIT..............................................................82
7.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE ....................83
7.9 TRANSFER OF INTEREST ..............................................84
7.10 DIRECT ROLLOVER ...................................................84
<PAGE>
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT .........................................................85
8.2 TERMINATION .......................................................86
8.3 MERGER OR CONSOLIDATION ...........................................86
ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS ..............................................87
9.2 ALIENATION.........................................................87
9.3 CONSTRUCTION OF PLAN ..............................................87
9.4 GENDER AND NUMBER..................................................87
9.5 LEGAL ACTION ......................................................88
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS ............................88
9.7 BONDING ...........................................................88
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE ........................89
9.9 INSURER'S PROTECTIVE CLAUSE .......................................89
9.10 RECEIPT AND RELEASE FOR PAYMENTS ..................................89
9.11 ACTION BY THE EMPLOYER ............................................89
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY.................89
9.13 HEADINGS ..........................................................90
9.14 APPROVAL BY INTERNAL REVENUE SERVICE ..............................90
9.15 UNIFORMITY ........................................................91
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS .......................................91
<PAGE>
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS ...........................91
10.3 DESIGNATION OF AGENT ..............................................92
10.4 EMPLOYEE TRANSFERS ................................................92
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION .............................92
10.6 AMENDMENT .........................................................93
10.7 DISCONTINUANCE OF PARTICIPATION ...................................93
10.8 ADMINISTRATOR'S AUTHORITY .........................................93
<PAGE>
V.I. CEMENT AND BUILDING PRODUCTS, INC.
401(K) RETIREMENT & SAVINGS PLAN
THIS AGREEMENT, hereby made and entered into this 1st day of January,
1996, by and between VI Cement and Building Products, Inc. (herein referred to
as the "Employer") and Donald L. Smith, Geoffrey L. Smith and Richard L. Hornsby
(herein referred to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan and
Trust effective 01/01/88, (hereinafter called the "Effective Date") known as
V.I. Cement and Building Products, Inc. 401(k) Retirement & Savings Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability to
amend the Plan, provided the Trustee joins in such amendment if the provisions
of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective 01/01/96, except as otherwise provided, the
Employer and the Trustee in accordance with the provisions of the Plan
pertaining to amendments thereof, hereby amend the Plan in its entirety and
restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as it may
be amended from time to time.
1.2 "Administrator" means the person or entity designated by the Employer
pursuant to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1.4 "Aggregate Account" means, with respect to each Participant, the value of
all accounts maintained on behalf of a Participant, whether attributable to
Employer or Employee contributions, subject to the
7
<PAGE>
provisions of Section 2.2.
1.5 "Anniversary Date" means 1996.
1.6 "Beneficiary" means the person to whom the share of a deceased Participant's
total account is payable, subject to the restrictions of Sections 6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or replaced from
time to time.
1.8 "Compensation" with respect to any Participant means such Participant's
wages as defined in Code Section 3401(a) and all other payments of compensation
by the Employer (in the course of the Employer's trade or business) for a Plan
Year for which the Employer is required to furnish the Participant a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052. Compensation must be
determined without regard to any rules under Code Section 3401(a) that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural labor in Code
Section 3401(a)(2)).
For purposes of this Section, the determination of Compensation shall
be made BY:
(a) including amounts which are contributed by the Employer pursuant to
a salary reduction agreement and which are not includible in the gross
income of the Participant under Code Sections 125, 402(e)(3),
402(h)(1)(B), 403(b) or 457, and Employee contributions described in
Code Section 414(h)(2) that are treated as Employer contributions.
For a Participant's initial year of participation, Compensation shall
be recognized as of such Employee's effective date of participation
pursuant to Section 3.3.
Compensation in excess of $200,000 shall be disregarded. Such amount shall be;
adjusted at the same time and in such manner as permitted under Code Section
415(d), except that the dollar increase in effect on January 1 of any calendar
year shall be effective for the Plan Year beginning with or within such calendar
year and the first adjustment to the $200,000 limitation shall be effective on
January 1, 1990. For any short Plan Year the Compensation limit shall be an
amount equal to the Compensation limit for the calendar year in which the Plan
Year begins multiplied by the ratio obtained by dividing the number of full
months in the short Plan Year by twelve (12). In applying this limitation, the
family group of a Highly Compensated Participant who is subject to the Family
Member aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10) Highly
Compensated Employees paid the greatest "415 Compensation" during the year,
shall be treated
8
<PAGE>
as a single Participant, except that for this purpose Family Members shall
include only the affected Participant's spouse and any lineal descendants who
have not attained age nineteen (19) before the close of the year. If, as a
result of the application of such rules the adjusted $200,000 limitation is
exceeded, then the limitation shall be prorated among the affected Family
Members in proportion to each such Family Member's Compensation prior to the
application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation. In addition to other
applicable limitations set forth in the Plan, and notwithstanding any other
provision of the Plan to the contrary, for Plan Years beginning on or after
January 1, 1994, the annual Compensation of each Employee taken into account
under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA
'93 annual compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Code Section 401(a)(17)(B).
The cost of living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Code Section 401(a)(17) shall mean the OBRA '93 annual
compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, as a result of such rules, the maximum "annual addition" limit of Section
4.9(a) would be exceeded for one or more of the affected Family Members, the
prorated Compensation of all affected Family Members shall be adjusted to avoid
or reduce any excess. The prorated Compensation of any affected Family Member
whose allocation would exceed the limit shall be adjusted downward to the level
needed to provide an allocation equal to such limit. The prorated Compensation
of affected Family Members not affected by such limit shall then be adjusted
upward on a pro rata basis not to exceed each such affected Family Member's
Compensation as determined prior to application of the Family Member rule. The
resulting allocation shall not exceed such individual's maximum "annual
addition" limit. If, after these adjustments, an "excess amount" still results,
such "excess amount"
9
<PAGE>
shall be disposed of in the manner described in Section 4.10(a) pro rata among
all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code Section
413(c) or 414(f) (a plan maintained by more than one Employer), the $200,000
limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and restatement, the
definition of Compensation has been modified, then, for Plan Years prior to the
Plan Year which includes the adoption date of this amendment and restatement,
Compensation means compensation determined pursuant to the Plan then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit (without
regard to Family Member aggregation) shall apply only for Top Heavy Plan Years
and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement income or
annuity policy, or annuity contract (group or individual) issued pursuant to the
terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the amount of
the Participant's total Compensation which has been contributed to the Plan in
accordance with the Participant's deferral election pursuant to Section 4.2
excluding any such amounts distributed as excess "annual additions" pursuant to
Section 4.10(a).
1.11 "Early Retirement Date." This Plan does not provide for a retirement date
prior to Normal Retirement Date.
1.12 "Elective Contribution" means the Employer's contributions to the Plan of
Deferred Compensation excluding any such amounts distributed as excess "annual
additions" pursuant to Section 4.10(a). In addition, any Employer Qualified
Non-Elective Contribution made pursuant to Section 4.1(c) and Section 4.6 shall
be considered an Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-l(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a collective bargaining
agreement between Employee representatives (within the meaning of Code Section
7701(a)(46)) and the Employer under which retirement benefits were the subject
of good faith bargaining between the parties will not be eligible to participate
in this Plan unless such agreement expressly provides for coverage in this Plan
or two
10
<PAGE>
percent or more of the Employees of the Employer who are covered pursuant to
that agreement are professionals as defined in Regulation 1.410(b)-9.
Employees of Affiliated Employers shall not be eligible to participate in this
Plan unless such Affiliated Employers have specifically adopted this Plan in
writing.
1.14 "Employee" means any person who is employed by the Employer or Affiliated
Employer, but excludes any person who is an independent contractor. Employee
shall include Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) unless such Leased Employees are covered by a plan described in Code
Section 414(n)(5) and such Leased Employees do not constitute more than 20% of
the recipient's non-highly compensated work force.
1.15 "Employer" means VI Cement and Building Products, Inc. and any
Participating Employer (as defined in Section 10.1) which shall adopt this Plan;
any successor which shall maintain this Plan; and any predecessor which has
maintained this Plan. The Employer is a corporation, with principal offices in
the State of Florida.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan Year, the
excess of the aggregate amount of the Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section 4.7(c) on behalf of
Highly Compensated Participants for such Plan Year, over the maximum amount of
such contributions permitted under the limitations of Section 4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the excess of
Elective Contributions made on behalf of Highly Compensated Participants for the
Plan Year over the maximum amount of such contributions permitted under Section
4.5(a). Excess Contributions shall be treated as an "annual addition" pursuant
to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable year of a
Participant, the excess of the aggregate amount of such Participant's Deferred
Compensation and the elective deferrals pursuant to Section 4.2(f) actually made
on behalf of such Participant for such taxable year, over the dollar limitation
provided for in Code Section 402(g), which is incorporated herein by reference.
Excess Deferred Compensation shall be treated as an "annual addition" pursuant
to Section 4.9(b) when contributed to the Plan unless distributed to the
affected Participant not later than the first April 15th following the close of
the Participant's taxable year. Additionally, for purposes of Sections 2.2 and
4.4(g), Excess Deferred Compensation shall continue to be treated as Employer
contributions even if distributed pursuant to Section 4.2(f). However, Excess
Deferred Compensation of Non-Highly Compensated Participants is not taken into
account for purposes of Section 4.5(a) to the extent such
11
<PAGE>
Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant, such
Participant's spouse and such Participant's lineal descendants and ascendants
and their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary authority
or discretionary control respecting management of the Plan or exercises any
authority or control respecting management or disposition of its assets, (b)
renders investment advice for a fee or other compensation, direct or indirect,
with respect to any monies or other property of the Plan or has any authority or
responsibility to do so, or (c) has any discretionary authority or discretionary
responsibility in the administration of the Plan, including, but not limited to,
the Trustee, the Employer and its representative body, and the Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months commencing
on January 1st of each year and ending the following December 31st.
1.22 "Forfeiture" means that portion of a Participant's Account that is not
Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a Terminated
Participant's Account, or
(b) the last day of the Plan Year in which the Participant incurs five
(5) consecutive l-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated
Participant shall be deemed to have received a distribution of his
Vested benefit upon his termination of employment. Restoration of such
amounts shall occur pursuant to Section 6.4(g)(2). In addition, the
term Forfeiture shall also include amounts deemed to be Forfeitures
pursuant to any other provision of this Plan.
1.23 "Former Participant" means a person who has been a Participant, but who has
ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such Participant's
wages as defined in Code Section 3401(a) and all other payments of compensation
by the Employer (in the course of the Employer's trade or business) for a Plan
Year for which the Employer is required to furnish the Participant a written
statement under Code Sections 6041(d), 6051(a)(3) and 6052. "415 Compensation"
must be determined without regard to any rules under Code Section 3401(a) that
limit the remuneration included in wages based on the nature or
12
<PAGE>
location of the employment or the services performed (such as the exception for
agricultural labor in Code Section 3401(a)(2)).
If, in connection with the adoption of this amendment and restatement, the
definition of "415 Compensation" has been modified, then, for Plan Years prior
to the Plan Year which includes the adoption date of this amendment and
restatement, "415 Compensation" means compensation determined pursuant to the
Plan then in effect.
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
For purposes of this Section, the determination of "414(s) Compensation" shall
be made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457,
and Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded. Such amount
shall be adjusted at the same time and in such manner as permitted under Code
Section 415(d), except that the dollar increase in effect on January 1 of any
calendar year shall be effective for the Plan Year beginning with or within such
calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "414(s) Compensation"
limit shall be an amount equal to the "414(s) Compensation" limit for the
calendar year in which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by twelve (12). In
applying this limitation, the family group of a Highly Compensated Participant
who is subject to the Family Member aggregation rules of Code Section 414(q)(6)
because such Participant is either a "five percent owner" of the Employer or one
of the ten (10) Highly Compensated Employees paid the greatest "415
Compensation" during the year, shall be treated as a single Participant, except
that for this purpose Family Members shall include only the affected
Participant's spouse and any lineal descendants who have not attained age
nineteen (19) before the close of the year.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for
13
<PAGE>
increases in the cost of living in accordance with Code Section 401(a)(17)(B).
The cost of living adjustment in effect for a calendar year applies to any
period, not exceeding 12 months, over which Compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in this Plan
to the limitation under Code Section 401(a)(17) shall mean the OBRA '93 annual
compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account in
determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
If, in connection with the adoption of this amendment and restatement, the
definition of "414(s) Compensation" has been modified, then, for Plan Years
prior to the Plan Year which includes the adoption date of this amendment and
restatement, "414(s) Compensation" means compensation determined pursuant to the
Plan then in effect.
1.26 "Highly Compensated Employee" means an Employee described in Code Section
414(q) and the Regulations thereunder, and generally means an Employee who
performed services for the Employer during the "determination year" and is in
one or more of the following groups:
(a) Employees who at any time during the "determination year" or
"lookback year" were "five percent owners" as defined in Section
1.32(c).
(b) Employees who received "415 Compensation" during the "look back
year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the "look-back
year" from the Employer in excess of $50,000 and were in the Top Paid
Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were officers of the
Employer (as that term is defined within the meaning of the Regulations
under Code Section 416) and received "415 Compensation" during the
"look-back year" from the Employer greater than 50 percent of the limit
in effect under Code Section 415(b)(1)(A) for any such Plan Year. The
number of officers shall
14
<PAGE>
be limited to the lesser of (i) 50 employees; or (ii) the greater of 3
employees or 10 percent of all employees. For the purpose of
determining the number of officers, Employees described in Section
1.56(a), (b), (c) and (d) shall be excluded, but such Employees shall
still be considered for the purpose of identifying the particular
Employees who are officers. If the Employer does not have at least one
officer whose annual "415 Compensation" is in excess of 50 percent of
the Code Section 415(b)(1)(A) limit, then the highest paid officer of
the Employer will be treated as a Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100 Employees paid
the greatest "415 Compensation" during the "determination year" and are
also described in (b), (c) or (d) above when these paragraphs are
modified to substitute "determination year" for "look-back year."
The "determination year" shall be the Plan Year for which testing is
being performed, and the "look-back year" shall be the immediately
preceding twelve-month period.
For purposes of this Section, the determination of "415 Compensation"
shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code Sections
125, 402(e)(3), 402(h)(1)(B), 403(b) or 457, and Employee contributions
described in Code Section 414(h)(2) that are treated as Employer
contributions. Additionally, the dollar threshold amounts specified in
(b) and (c) above shall be adjusted at such time and in such manner as
is provided in Regulations. In the case of such an adjustment, the
dollar limits which shall be applied are those for the calendar year in
which the "determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who are
nonresident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting
United States source income within the meaning of Code Section
861(a)(3) shall not be treated as Employees. Additionally, all
Affiliated Employers shall be taken into account as a single employer
and Leased Employees within the meaning of Code Sections 414(n)(2) and
414(o)(2) shall be considered Employees unless such Leased Employees
are covered by a plan described in Code Section 414(n)(5) and are not
covered in any qualified plan maintained by the Employer. The exclusion
of Leased Employees for this purpose shall be applied on a uniform and
consistent basis for all of the Employer's retirement plans. Highly
Compensated Former Employees shall be treated as Highly Compensated
Employees without regard to whether they performed services during the
"determination year."
15
<PAGE>
1.27 "Highly Compensated Former Employee" means a former Employee who had a
separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner." For purposes
of this Section, "determination year," "415 Compensation" and "five percent
owner" shall be determined in accordance with Section 1.26. Highly Compensated
Former Employees shall be treated as Highly Compensated Employees. The method
set forth in this Section for determining who is a "Highly Compensated Former
Employee" shall be applied on a uniform and consistent basis for all purposes
for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated Employee who
is eligible to participate in the Plan.
1.29 "Hour of Service" means (1) each hour for which an Employee is directly or
indirectly compensated or entitled to compensation by the Employer for the
performance of duties during the applicable computation period; (2) each hour
for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are required to
be credited to an Employee on account of any single continuous period during
which the
Employee performs no duties (whether or not such period occurs in a single
computation period); (ii) an hour for which an Employee is directly or
indirectly paid, or entitled to payment, on account of a period during which no
duties are performed is not required to be credited to the Employee if such
payment is made or due under a plan maintained solely for the purpose of
complying with applicable worker's compensation, or unemployment compensation or
disability insurance laws; and (iii) Hours of Service are not required to be
credited for a payment which solely reimburses an Employee for medical
16
<PAGE>
or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made by or due
from the Employer regardless of whether such payment is made by or due from the
Employer directly, or indirectly through, among others, a trust fund, or
insurer, to which the Employer contributes or pays premiums and regardless of
whether contributions made or due to the trust fund, insurer, or other entity
are for the benefit of particular Employees or are on behalf of a group of
Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a Year of
Service, a year of participation for purposes of accrued benefits, a l-Year
Break in Service, and employment commencement date (or reemployment commencement
date). In addition, Hours of Service will be credited for employment with other
Affiliated Employers. The provisions of Department of Labor regulations
2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to "excess amounts" which
shall equal the allocable gain or loss for the "applicable computation period".
The income allocable to "excess amounts" for the "applicable computation period"
is determined by multiplying the income for the "applicable computation period"
by a fraction. The numerator of the fraction is the "excess amount" for the
"applicable computation period." The denominator of the fraction is the total
"account balance" attributable to "Employer contributions" as of the end of the
"applicable computation period", reduced by the gain allocable to such total
amount for the "applicable computation period" and increased by the loss
allocable to such total amount for the "applicable computation period". The
provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by substituting:
(1) "Excess Deferred Compensation" for "excess amounts"; (2)
"taxable year of the Participant" for "applicable computation
period"; (3) "Deferred Compensation" for "Employer
contributions";
and
(4) "Participant's Elective Account" for "account balance."
(b) For purposes of Section 4.6(a), by substituting:
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Elective Contributions" for "Employer contributions";
and
(4) "Participant's Elective Account" for "account balance."
(c) For purposes of Section 4.8(a), by substituting:
17
<PAGE>
(1) "Excess Aggregate Contributions" for "excess amounts;"
(2) "Plan Year" for "applicable computation period;"
(3) "Employer matching contributions made pursuant to Section
4.1(b) and any qualified non-elective contributions or
elective deferrals taken into account pursuant to Section
4.7(c)" for "Employer contributions;" and
(4) "Participant's Account" for "account balance."
Income allocable to any distribution of Excess Deferred Compensation on
or before the last day of the taxable year of the Participant shall be
calculated from the first day of the taxable year of the Participant to
the date on which the distribution is made pursuant to either the
"fractional method" or the "safe harbor method." Under such "safe
harbor method," allocable Income for such period shall be deemed to
equal ten percent (10%) of the Income allocable to such Excess Deferred
Compensation multiplied by the number of calendar months in such
period. For purposes of determining the number of calendar months in
such period, a distribution occurring on or before the fifteenth day of
the month shall be treated as having been made on the last day of the
preceding month and a distribution occurring after such fifteenth day
shall be treated as having been made on the first day of the next
subsequent month.
1.31 "Investment Manager" means an entity that (a) has the power to manage,
acquire, or dispose of Plan assets and (b) acknowledges fiduciary responsibility
to the Plan in writing. Such entity must be a person, firm, or corporation
registered as an investment adviser under the Investment Advisers Act of 1940, a
bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i) and the
Regulations thereunder. Generally, any Employee or former Employee (as well as
each of his Beneficiaries) is considered a Key Employee if he, at any time
during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) having annual "415 l
Compensation" greater than 50 percent of the amount in effect under
Code Section 415(b)(1)(A) for any such Plan Year.
(b) one of the ten employees having annual "415 Compensation" from the
Employer for a Plan Year greater than the dollar limitation in effect
under Code Section 415(c)(1)(A) for the calendar year in which such
Plan Year ends and owning (or considered as owning within the meaning
of Code Section 318) both more than one-half percent interest and the
largest interests in
18
<PAGE>
the Employer.
(c) a "five percent owner" of the Employer. "Five percent owner" means
any person who owns (or is considered as owning within the meaning of
Code Section 318) more than five percent (5%) of the outstanding stock
of the Employer or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer or, in the
case of an unincorporated business, any person who owns more than five
percent (5%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), (m) and (o)
shall be treated as separate employers.
(d) a "one percent owner" of the Employer having an annual "415
Compensation" from the Employer of more than $150,000. "One percent
owner" means any person who owns (or is considered as owning within the
meaning of Code Section 318) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one
percent (1%) of the total combined voting power of all stock of the
Employer or, in the case of an unincorporated business, any person who
owns more than one percent (1%) of the capital or profits interest in
the Employer. In determining percentage ownership hereunder, employers
that would otherwise be aggregated under Code Sections 414(b), (c), (m)
and (o) shall be treated as separate employers. However, in determining
whether an individual has "415 Compensation" of more than $150,000,
"415 Compensation" from each employer required to be aggregated under
Code Sections 414(b), (c), (m) and (o) shall be taken into account.
For purposes of this Section, the determination of "415 Compensation" shall be
made by including amounts which are contributed by the Employer pursuant to a
salary reduction agreement and which are not includible in the gross income of
the Participant under Code Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457,
and Employee contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
1.33 "Late Retirement Date" means the first day of the month coinciding with or
next following a Participant's actual Retirement Date after having reached his
Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as
19
<PAGE>
provided by the recipient employer. A Leased Employee shall not be considered an
Employee of the recipient:
(a) if such employee is covered by a money purchase pension plan
providing:
(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3), but
including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(e)(3), 402(h)(1)(B), 403(b) or 457, and
Employee contributions described in Code Section 414(h)(2)
that are treated as Employer contributions.
(2) immediate participation; and
(3) full and immediate vesting, and
(b) if Leased Employees do not constitute more than 20% of the
recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to the Plan
excluding, however, contributions made pursuant to the Participant's deferral
election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is neither a
Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65 birthday. A Participant
shall become fully Vested in his Participant's Account upon attaining his Normal
Retirement Age.
1.39 "Normal Retirement Date" means the first day of the month coinciding with
or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period during
which an Employee has not completed more than 500 Hours of Service with the
Employer. Further, solely for the purpose of determining whether a Participant
has incurred a 1-Year Break in Service, Hours of Service shall be recognized for
"authorized leaves of absence" and "maternity and paternity leaves of absence."
Years of Service and 1-Year Breaks in Service shall be measured on the same
computation period.
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"Authorized leave of absence" means an unpaid, temporary cessation from active
employment with the Employer pursuant to an established nondiscriminatory
policy, whether occasioned by illness, military service, or any other reason.
A "maternity or paternity leave of absence" means, for Plan Years beginning
after December 31, 1984, an absence from work for any period by reason of the
Employee's pregnancy, birth of the Employee's child, placement of a child with
the Employee in connection with the adoption of such child, or any absence for
the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the Plan as
provided in Sections 3.2 and 3.3, and has not for any reason become ineligible
to participate further in the Plan.
1.42 "Participant's Account" means the account established and maintained by the
Administrator for each Participant with respect to his total interest in the
Plan and Trust resulting from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect to that portion of the
Participant's Account attributable to Employer matching contributions made
pursuant to Section 4.1(b) and Employer discretionary contributions made
pursuant to Section 4.1(d).
1.43 "Participant's Combined Account" means the total aggregate amount of each
Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
1.45 "Plan" means this instrument, including all amendments thereto.
1.46 "Plan Year" means the Plan's accounting year of twelve (12)
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months commencing on January 1st of each year and ending the following December
31st.
1.47 "Pre-Retirement Survivor Annuity" is an immediate annuity for the life of
the Participant's spouse the payments under which must be equal to the amount of
benefit which can be purchased with the accounts of a Participant used to
provide the death benefit under the Plan.
1.48 "Qualified Non-Elective Contribution" means the Employer's contributions to
the Plan that are made pursuant to Section 4.1(c) and Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are made pursuant to
Section 4.8(h) which are used to satisfy the "Actual Contribution Percentage"
tests shall be considered Qualified Non-Elective Contributions and be subject to
the provisions of Sections 4.2(b) and 4.2(c).
1.49 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.50 "Retired Participant" means a person who has been a Participant, but who
has become entitled to retirement benefits under the Plan.
1.51 "Retirement Date" means the date as of which a Participant retires for
reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date or Late Retirement Date (see
Section 6.1).
1.52 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.53 "Terminated Participant" means a person who has been a Participant, but
whose employment has been terminated other than by death, Total and Permanent
Disability or retirement.
1.54 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.55 "Top Heavy Plan Year" means a Plan Year during which the Plan is a
Top Heavy Plan.
1.56 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n)(2) and 414(o)(2) shall be considered
Employees unless
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such Leased Employees are covered by a plan described in Code Section 414(n)(5)
and are not covered in any qualified plan maintained by the Employer. Employees
who are non-resident aliens and who received no earned income (within the
meaning of Code Section 911(d)(2)) from the Employer constituting United States
source income within the meaning of Code Section 861(a)(3) shall not be treated
as Employees. Additionally, for the purpose of determining the number of active
Employees in any year, the following additional Employees shall also be
excluded; however, such Employees shall still be considered for the purpose of
identifying the particular Employees in the Top Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per week;
(c) Employees who normally work less than six (6) months during a year;
and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer are covered
under agreements the Secretary of Labor finds to be collective bargaining
agreements between Employee representatives and the Employer, and the Plan
covers only Employees who are not covered under such agreements, then Employees
covered by such agreements shall be excluded from both the total number of
active Employees as well as from the identification of particular Employees in
the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied on a uniform
and consistent basis for all purposes for which the Code Section 414(q)
definition is applicable.
1.57 "Total and Permanent Disability" means a physical or mental condition of a
Participant resulting from bodily injury, disease, or mental disorder which
renders him incapable of continuing his usual and customary employment with the
Employer. The disability of a Participant shall be determined by a licensed
physician chosen by the Administrator. The determination shall be applied
uniformly to all Participants.
1.58 "Trustee" means the person or entity named as trustee herein or in any
separate trust forming a part of this Plan, and any successors.
1.59 "Trust Fund" means the assets of the Plan and Trust as the same shall exist
from time to time.
1.60 "Vested" means the nonforfeitable portion of any account maintained
on behalf of a Participant.
1.61 "Year of Service" means the computation period of twelve (12) consecutive
months, herein set forth, during which an Employee has at least 1000 Hours of
Service.
For purposes of eligibility for participation, the initial computation
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period shall begin with the date on which the Employee first performs an Hour of
Service. The participation computation period beginning after a 1-Year Break in
Service shall be measured from the date on which an Employee again performs an
Hour of Service. The participation computation period shall shift to the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service. An Employee who is credited with the required
Hours of Service in both the initial computation period (or the computation
period beginning after a l-Year Break in Service) and the Plan Year which
includes the anniversary of the date on which the Employee first performed an
Hour of Service, shall be credited with two (2) Years of Service for purposes of
eligibility to participate.
For vesting purposes, the computation period shall be the Plan Year, including
periods prior to the Effective Date of the Plan.
For all other purposes, the computation period shall be the Plan Year.
Notwithstanding the foregoing, for any short Plan Year, the determination of
whether an Employee has completed a Year of Service shall be made in accordance
with Department of Labor regulation 2530.203-2(c). However, in determining
whether an Employee has completed a Year of Service for benefit accrual purposes
in the short Plan Year, the number of the Hours of Service required shall be
proportionately reduced based on the number of full months in the short Plan
Year.
Years of Service with Devoon International Corporation shall be recognized.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special vesting
requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan and the
special minimum allocation requirements of Code Section 416(c) pursuant to
Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year in which, as
of the Determination Date, (1) the Present Value of Accrued Benefits of
Key Employees and (2) the sum of the Aggregate Accounts of Key
Employees under this Plan and all plans of an Aggregation Group,
exceeds sixty percent (60%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
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If any Participant is a Non-Key Employee for any Plan Year, but such
Participant was a Key Employee for any prior Plan Year, such
Participant's Present Value of Accrued Benefit and/or Aggregate Account
balance shall not be taken into account for purposes of determining
whether this Plan is a Top Heavy or Super Top Heavy Plan (or whether
any Aggregation Group which includes this Plan is a Top Heavy Group).
In addition, if a Participant or Former Participant has not performed
any services for any Employer maintaining the Plan at any time during
the five year period ending on the Determination Date, any accrued
benefit for such Participant or Former Participant shall not be taken
into account for the purposes of determining whether this Plan is a Top
Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan Year in
which, as of the Determination Date, (1) the Present Value of Accrued
Benefits of Key Employees and (2) the sum of the Aggregate Accounts of
Key Employees under this Plan and all plans of an Aggregation Group,
exceeds ninety percent (90%) of the Present Value of Accrued Benefits
and the Aggregate Accounts of all Key and Non-Key Employees under this
Plan and all plans of an Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as of the
Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the most
recent valuation occurring within a twelve (12) month period
ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of any
contributions actually made after the valuation date but due
on or before the Determination Date, except for the first Plan
Year when such adjustment shall also reflect the amount of any
contributions made after the Determination Date that are
allocated as of a date in that first Plan Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the Determination
Date, such distributions are not included as distributions for
top heavy purposes to the extent that such distributions are
already included in the Participant's Aggregate Account
balance as of the valuation date. Notwithstanding anything
herein to the contrary, all distributions, including
distributions made prior to January 1, 1984, and distributions
under a terminated plan which if it had not been terminated
would have been required to be included in an Aggregation
Group, will be counted. Further, distributions from the Plan
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(including the cash value of life insurance policies) of a
Participant's account balance because of death shall be
treated as a distribution for the purposes of this paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate Account
balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee and
made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always consider
such rollovers or plan-to-plan transfers as a distribution for
the purposes of this Section. If this Plan is the plan
accepting such rollovers or plan-to-plan transfers, it shall
not consider such rollovers or plan-to-plan transfers as part
of the Participant's Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or made
to a plan maintained by the same employer), if this Plan
provides the rollover or plan-to-plan transfer, it shall not
be counted as a distribution for purposes of this Section. If
this Plan is the plan accepting such rollover or plan-to-plan
transfer, it shall consider such rollover or plan-to-plan
transfer as part of the Participant's Aggregate Account
balance, irrespective of the date on which such rollover or
plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers are
to be treated as the same employer in (5) and (6) above, all
employers aggregated under Code Section 414(b), (c), (m) and
(o) are treated as the same employer.
(d) "Aggregation Group" means either a Required Aggregation Group or a
Permissive Aggregation Group as hereinafter determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in
which a Key Employee is a participant in the Plan Year
containing the Determination Date or any of the four preceding
Plan Years, and each other plan of the Employer which enables
any plan in which a Key Employee participates to meet the
requirements of Code Sections 401(a)(4) or 410, will be
required to be aggregated. Such group shall be known as a
Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in the
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group will be considered a Top Heavy Plan if the Required
Aggregation Group is a Top Heavy Group. No plan in the
Required Aggregation Group will be considered a Top Heavy Plan
if the Required Aggregation Group is not a Top Heavy Group.
(2) Permissive Aggregation Group: The Employer may also
include any other plan not required to be included in the
Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions of
Code Sections 401(a)(4) and 410. Such group shall be known as
a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if the
Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar year shall
be aggregated in order to determine whether such plans are Top
Heavy Plans.
(4) An Aggregation Group shall include any terminated plan of
the Employer if it was maintained within the last five (5)
years ending on the Determination Date.
(e) "Determination Date" means (a) the last day of the preceding Plan
Year, or (b) in the case of the first Plan Year, the last day of such
Plan Year.
(f) Present Value of Accrued Benefit: In the case of a defined benefit
plan, the Present Value of Accrued Benefit for a Participant other than
a Key Employee, shall be as determined using the single accrual method
used for all plans of the Employer and Affiliated Employers, or if no
such single method exists, using a method which results in benefits
accruing not more rapidly than the slowest accrual rate permitted under
Code Section 411(b)(1)(C). The determination of the Present Value of
Accrued Benefit shall be determined as of the most recent valuation
date that falls within or ends with the 12month period ending on the
Determination Date except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a defined
benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which, as of
the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees
under all defined benefit plans included in the group, and
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(2) the Aggregate Accounts of Key Employees under all defined
contribution plans included in the group,exceeds sixty percent
(60%) of a similar sum determined for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove the Trustee
and the Administrator from time to time as it deems necessary for the
proper administration of the Plan to assure that the Plan is being
operated for the exclusive benefit of the Participants and their
Beneficiaries in accordance with the terms of the Plan, the Code, and
the Act.
(b) The Employer shall establish a "funding policy and method," i.e.,
it shall determine whether the Plan has a short run need for liquidity
(e.g., to pay benefits) or whether liquidity is a long run goal and
investment growth (and stability of same) is a more current need, or
shall appoint a qualified person to do so. The Employer or its delegate
shall communicate such needs and goals to the Trustee, who shall
coordinate such Plan needs with its investment policy. The
communication of such a "funding policy and method" shall not, however,
constitute a directive to the Trustee as to investment of the Trust
Funds. Such "funding policy and method" shall be consistent with the
objectives of this Plan and with the requirements of Title I of the
Act.
(c) The Employer shall periodically review the performance of any
Fiduciary or other person to whom duties have been delegated or
allocated by it under the provisions of this Plan or pursuant to
procedures established hereunder. This requirement may be satisfied by
formal periodic review by the Employer or by a qualified person
specifically designated by the Employer, through day-to-day conduct and
evaluation, or through other appropriate ways.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any person, including,
but not limited to, the Employees of the Employer, shall be eligible to serve as
an Administrator. Any person so appointed shall signify his acceptance by filing
written acceptance with the Employer. An Administrator may resign by delivering
his written resignation to the Employer or be removed by the Employer by
delivery of written notice of removal, to take effect at a date specified
therein, or upon delivery to the Administrator if no date is specified.
The Employer, upon the resignation or removal of an Administrator, shall
promptly designate in writing a successor to this position. If the Employer does
not appoint an Administrator, the Employer will function as the Administrator.
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2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the responsibilities of
each Administrator may be specified by the Employer and accepted in writing by
each Administrator. In the event that no such delegation is made by the
Employer, the Administrators may allocate the responsibilities among themselves,
in which event the Administrators shall notify the Employer and the Trustee in
writing of such action and specify the responsibilities of each Administrator.
The Trustee thereafter shall accept and rely upon any documents executed by the
appropriate Administrator until such time as the Employer or the Administrators
file with the Trustee a written revocation of such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to administer the Plan for
the exclusive benefit of the Participants and their Beneficiaries, subject to
the specific terms of the Plan. The Administrator shall administer the Plan in
accordance with its terms and shall have the power and discretion to construe
the terms of the Plan and to determine all questions arising in connection with
the administration, interpretation, and application of the Plan. Any such
determination by the Administrator shall be conclusive and binding upon all
persons. The Administrator may establish procedures, correct any defect, supply
any information, or reconcile any inconsistency in such manner and to such
extent as shall be deemed necessary or advisable to carry out the purpose of the
Plan; provided, however, that any procedure, discretionary act, interpretation
or construction shall be done in a nondiscriminatory manner based upon uniform
principles consistently applied and shall be consistent with the intent that the
Plan shall continue to be deemed a qualified plan under the terms of Code
Section 401(a), and shall comply with the terms of the Act and all regulations
issued pursuant thereto. The Administrator shall have all powers necessary or
appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the general administration
of the Plan, including, but not limited to, the following:
(a) the discretion to determine all questions relating to the
eligibility of Employees to participate or remain a Participant
hereunder and to receive benefits under the Plan;
(b) to compute, certify, and direct the Trustee with respect to the
amount and the kind of benefits to which any Participant shall be
entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the
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Trust;
(d) to maintain all necessary records for the administration of the
Plan;
(e) to interpret the provisions of the Plan and to make and publish
such rules for regulation of the Plan as are consistent with the
terms hereof;
(f) to determine the size and type of any Contract to be purchased from
any insurer, and to designate the insurer from which such Contract
shall be purchased;
(g) to compute and certify to the Employer and to the Trustee from
time to time the sums of money necessary or desirable to be
contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding the short
and long-term liquidity needs of the Plan in order that the Trustee can
exercise any investment discretion in a manner designed to accomplish
specific objectives;
(i) to prepare and distribute to Employees a procedure for notifying
Participants and Beneficiaries of their rights to elect joint and
survivor annuities and Pre-Retirement Survivor Annuities as required by
the Act and Regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible Employees
that they may elect to have a portion of their Compensation deferred or
paid to them in cash;
(k) to assist any Participant regarding his rights, benefits, or
elections available under the Plan.
2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall keep all
other books of account, records, and other data that may be necessary for proper
administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the Administrator, may
appoint counsel, specialists, advisers, and other persons as the Administrator
or the Trustee deems necessary or desirable in connection with the
administration of this Plan.
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2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer shall supply
full and timely information to the Administrator on all matters relating to the
Compensation of all Participants, their Hours of Service, their Years of
Service, their retirement, death, disability, or termination of employment, and
such other pertinent facts as the Administrator may require; and the
Administrator shall advise the Trustee of such of the foregoing facts as may be
pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund unless paid by
the Employer. Such expenses shall include any expenses incident to the
functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of administrative
authority pursuant to Section 2.5, if there shall be more than one
Administrator, they shall act by a majority of their number, but may authorize
one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed in writing with the
Administrator. Written notice of the disposition of a claim shall be furnished
to the claimant within 90 days after the application is filed. In the event the
claim is denied, the reasons for the denial shall be specifically set forth in
the notice in language calculated to be understood by the claimant, pertinent
provisions of the Plan shall be cited, and, where appropriate, an explanation as
to how the claimant can perfect the claim will be provided. In addition, the
claimant shall be furnished with an explanation of the Plan's claims review
procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has been denied a
benefit by a decision of the Administrator pursuant to Section 2.12 shall be
entitled to request the Administrator to give further consideration to his claim
by filing with the Administrator (on a form which may be obtained from the
Administrator) a request for a hearing. Such request, together with a written
statement of the reasons why the
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claimant believes his claim should be allowed, shall be filed with the
Administrator no later than 60 days after receipt of the written notification
provided for in Section 2.12. The Administrator shall then conduct a hearing
within the next 60 days, at which the claimant may be represented by an attorney
or any other representative of his choosing and at which the claimant shall have
an opportunity to submit written and oral evidence and arguments in support of
his claim. At the hearing (or prior thereto upon 5 business days written notice
to the Administrator) the claimant or his representative shall have an
opportunity to review all documents in the possession of the Administrator which
are pertinent to the claim at issue and its disallowance. Either the claimant or
the Administrator may cause a court reporter to attend the hearing and record
the proceedings. In such event, a complete written transcript of the proceedings
shall be furnished to both parties by the court reporter. The full expense of
any such court reporter and such transcripts shall be borne by the party causing
the court reporter to attend the hearing. A final decision as to the allowance
of the claim shall be made by the Administrator within 60 days of receipt of the
appeal (unless there has been an extension of 60 days due to special
circumstances, provided the delay and the special circumstances occasioning it
are communicated to the claimant within the 60 day period). Such communication
shall be written in a manner calculated to be understood by the claimant and
shall include specific reasons for the decision and specific references to the
pertinent Plan provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Any Eligible Employee who has completed one (1) Year of Service and has attained
age 21 shall be eligible to participate hereunder as of the date he has
satisfied such requirements. However, any Employee who was a Participant in the
Plan prior to the effective date of this amendment and restatement shall
continue to participate in the Plan. The Employer shall give each prospective
Eligible Employee written notice of his eligibility to participate in the Plan
prior to the close of the Plan Year in which he first becomes an Eligible
Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee shall make
application to the Employer for participation in the Plan and agree to the terms
hereof. Upon the acceptance of any benefits under this Plan, such Employee shall
automatically be deemed to have made application and shall be bound by the terms
and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
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An Eligible Employee shall become a Participant effective as of the earlier of
the first day of the Plan Year or the first day of the seventh month of such
Plan Year coinciding with or next following the date such Employee met the
eligibility requirements of Section 3.1, provided said Employee was still
employed as of such date (or if not employed on such date, as of the date of
rehire if a l-Year Break in Service has not occurred).
In the event an Employee who is not a member of an eligible class of Employees
becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee for
participation in the Plan based upon information furnished by the Employer. Such
determination shall be conclusive and binding upon all persons, as long as the
same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a classification of an
Eligible Employee to an ineligible Employee, such Former Participant
shall continue to vest in his interest in the Plan for each Year of
Service completed while a noneligible Employee, until such time as his
Participant's Account shall be forfeited or distributed pursuant to the
terms of the Plan. Additionally, his interest in the Plan shall
continue to share in the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an eligible
class of Employees and becomes ineligible to participate but has not
incurred a l-Year Break in Service, such Employee will participate
immediately upon returning to an eligible class of Employees. If such
Participant incurs a l-Year Break in Service, eligibility will be
determined under the break in service rules of the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a Participant in
the Plan is erroneously omitted and discovery of such omission is not made until
after a contribution by his Employer for the year has been made, the Employer
shall make a subsequent contribution with respect to the omitted Employee in the
amount which the said Employer would have contributed with respect to him had he
not been omitted. Such contribution shall be made regardless of whether or not
it is deductible in whole or in part in any taxable year under applicable
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provisions of the Code.
3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included as a
Participant in the Plan is erroneously included and discovery of such incorrect
inclusion is not made until after a contribution for the year has been made, the
Employer shall not be entitled to recover the contribution made with respect to
the ineligible person regardless of whether or not a deduction is allowable with
respect to such contribution. In such event, the amount contributed with respect
to the ineligible person shall constitute a Forfeiture (except for Deferred
Compensation which shall be distributed to the ineligible person) for the Plan
Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect voluntarily not
to participate in the Plan. The election not to participate must be communicated
to the Employer, in writing, at least thirty (30) days before the beginning of a
Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of all
Participants made pursuant to Section 4.2(a), which amount shall be
deemed an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share in matching
contributions for the Plan Year, a matching contribution equal to 100%
of each such Participant's Deferred Compensation, which amount shall be
deemed an Employer's Non-Elective Contribution.
Except, however, in applying the matching percentage specified above,
only salary reductions up to 3% of Compensation shall be considered.
(c) On behalf of each Participant who is eligible to share in the
Qualified Non-Elective Contribution for the Plan Year, a discretionary
Qualified NonElective Contribution equal to a percentage of each
eligible individual's Compensation, the exact percentage to be
determined each year by the Employer. The Employer's Qualified
Non-Elective Contribution shall be deemed an Employer's Elective
Contribution.
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(d) A discretionary amount, which amount shall be deemed an Employer's
Non-Elective Contribution.
(e) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum amount
allowable as a deduction to the Employer under the provisions of Code
Section 404. All contributions by the Employer shall be made in cash or
in such property as is acceptable to the Trustee.
(f) Except, however, to the extent necessary to provide the top heavy
minimum allocations, the Employer shall make a contribution even if it
exceeds the amount which is deductible under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 20% of his
Compensation which would have been received in the Plan Year, but for
the deferral election. A deferral election (or modification of an
earlier election) may not be made with respect to Compensation which is
currently available on or before the date the Participant executed such
election.
The amount by which Compensation is reduced shall be that Participant's
Deferred Compensation and be treated as an Employer Elective
Contribution and allocated to that Participant's Elective Account.
(b) The balance in each Participant's Elective Account shall be fully
Vested at all times and shall not be subject to Forfeiture for any
reason.
(c) Amounts held in the Participant's Elective Account may not be
distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment or
existence of a "successor plan," as that term is described in
Regulation 1.401(k)-l(d)(3);
(4) the date of disposition by the Employer to an entity that
is not an Affiliated Employer of substantially all of the
assets (within the meaning of Code Section 409(d)(2)) used in
a trade or business of such corporation if such corporation
continues to maintain this Plan after the disposition with
respect to a Participant who continues employment with the
corporation acquiring such assets;
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(5) the date of disposition by the Employer or an Affiliated
Employer who maintains the Plan of its interest in a
subsidiary (within the meaning of Code Section 409(d)(3)) to
an entity which is not an Affiliated Employer but only with
respect to a Participant who continues employment with such
subsidiary; or
(6) the proven financial hardship of a Participant, subject to
the limitations of Section 6.10.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all other
plans, contracts or arrangements of the Employer maintaining this Plan
shall not exceed, during any taxable year of the Participant, the
limitation imposed by Code Section 402(g), as in effect at the
beginning of such taxable year. If such dollar limitation is exceeded,
a Participant will be deemed to have notified the Administrator of such
excess amount which shall be distributed in a manner consistent with
Section 4.2(f). The dollar limitation shall be adjusted annually
pursuant to the method provided in Code Section 415(d) in accordance
with Regulations.
(e) In the event a Participant has received a hardship distribution
from his Participant's Elective Account pursuant to Section 6.10 or
pursuant to Regulation 1.401(k)-l(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall not be
permitted to elect to have Deferred Compensation contributed to the
Plan on his behalf for a period of twelve (12) months following the
receipt of the distribution. Furthermore, the dollar limitation under
Code Section 402(g) shall be reduced, with respect to the Participant's
taxable year following the taxable year in which the hardship
distribution was made, by the amount of such Participant's Deferred
Compensation, if any, pursuant to this Plan (and any other plan
maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this Plan together
with any elective deferrals (as defined in Regulation 1.402(g)-l(b))
under another qualified cash or deferred arrangement (as defined in
Code Section 401(k)), a simplified employee pension (as defined in Code
Section 408(k)), a salary reduction arrangement (within the meaning of
Code Section 3121(a)(5)(D)), a deferred compensation plan under Code
Section 457, or a trust described in Code Section 501(c)(18)
cumulatively exceed the limitation imposed by Code Section 402(g) (as
adjusted annually in accordance with the method provided in Code
Section 415(d) pursuant to Regulations) for such Participant's taxable
year, the Participant may, not later than March 1 following the close
of the Participant's taxable year, notify the Administrator in writing
of such excess and request that his Deferred Compensation under this
Plan be reduced by an amount specified by the Participant. In such
event, the Administrator may
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direct the Trustee to distribute such excess amount (and any Income
allocable to such excess amount) to the Participant not later than the
first April 15th following the close of the Participant's taxable year.
Distributions in accordance with this paragraph may be made for any
taxable year of the Participant which begins after December 31, 1986.
Any distribution of less than the entire amount of Excess Deferred
Compensation and Income shall be treated as a pro rata distribution of
Excess Deferred Compensation and Income. The amount distributed shall
not exceed the Participant's Deferred Compensation under the Plan for
the taxable year. Any distribution on or before the last day of the
Participant's taxable year must satisfy each of the following
conditions:
(1) the distribution must be made after the date on which the
Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as Excess
Deferred Compensation; and
(3) the Plan must designate the distribution as a distribution
of Excess Deferred Compensation.
Any distribution made pursuant to this Section 4.2(f) shall be made
first from unmatched Deferred Compensation and, thereafter,
simultaneously from Deferred Compensation which is matched and matching
contributions which relate to such Deferred Compensation. However, any
such matching contributions which are not Vested shall be forfeited in
lieu of being distributed.
(g) Notwithstanding Section 4.2(f) above, a Participant's Excess
Deferred Compensation shall be reduced, but not below zero, by any
distribution of Excess Contributions pursuant to Section 4.6(a) for the
Plan Year beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date when the Participant
shall be entitled to receive benefits, the fair market value of the
Participant's Elective Account shall be used to provide additional
benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(j) Employer Elective Contributions made pursuant to this Section may
be segregated into a separate account for each Participant in a
federally insured savings account, certificate of deposit in a bank or
savings and loan association, money market certificate, or other
short-term debt security acceptable to the Trustee until such time as
the allocations pursuant to Section 4.4 have been made.
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(k) The Employer and the Administrator shall implement the salary
reduction elections provided for herein in accordance with the
following:
(1) A Participant may commence making elective deferrals to
the Plan only after first satisfying the eligibility and
participation requirements specified in Article III. However,
the Participant must make his initial salary deferral election
within a reasonable time, not to exceed thirty (30) days,
after entering the Plan pursuant to Section 3.3. If the
Participant fails to make an initial salary deferral election
within such time, then such Participant may thereafter make an
election in accordance with the rules governing modifications.
The Participant shall make such an election by entering into a
written salary reduction agreement with the Employer and
filing such agreement with the Administrator. Such election
shall initially be effective beginning with the pay period
following the acceptance of the salary reduction agreement by
the Administrator, shall not have retroactive effect and shall
remain in force until revoked.
(2) A Participant may modify a prior election at any time
during the Plan Year and concurrently make a new election by
filing a written notice with the Administrator within a
reasonable time before the pay period for which such
modification is to be effective. Any modification shall not
have retroactive effect and shall remain in force until
revoked.
(3) A Participant may elect to prospectively revoke his salary
reduction agreement in its entirety at any time during the
Plan Year by providing the Administrator with thirty (30) days
written notice of such revocation (or upon such shorter notice
period as may be acceptable to the Administrator). Such
revocation shall become effective as of the beginning of the
first pay period coincident with or next following the
expiration of the notice period. Furthermore, the termination
of the Participant's employment, or the cessation of
participation for any reason, shall be deemed to revoke any
salary reduction agreement then in effect, effective
immediately following the close of the pay period within which
such termination or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to the Plan for
each Plan Year within the time prescribed by law, including extensions of time,
for the filing of the Employer's federal income tax return for the Fiscal Year.
However, Employer Elective Contributions accumulated through payroll
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deductions shall be paid to the Trustee as of the earliest date on which such
contributions can reasonably be segregated from the Employer's general assets,
but in any event within ninety (90) days from the date on which such amounts
would otherwise have been payable to the Participant in cash. The provisions of
Department of Labor regulations 2510.3-102 are incorporated herein by reference.
Furthermore, any additional Employer contributions which are allocable to the
Participant's Elective Account for a Plan Year shall be paid to the Plan no
later than the twelvemonth period immediately following the close of such Plan
Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an account in the
name of each Participant to which the Administrator shall credit as of
each Anniversary Date all amounts allocated to each such Participant as
set forth herein.
(b) The Employer shall provide the Administrator with all information
required by the Administrator to make a proper allocation of the
Employer's contributions for each Plan Year. Within a reasonable period
of time after the date of receipt by the Administrator of such
information, the Administrator shall allocate such contribution as
follows:
(1) With respect to the Employer's Elective Contribution made
pursuant to Section 4.1(a), to each Participant's Elective
Account in an amount equal to each such Participant's Deferred
Compensation for the year.
(2) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(b), to each Participant's Account
in accordance with Section 4.1(b).
Any Participant actively employed during the Plan Year shall
be eligible to share in the matching contribution for the Plan
Year.
(3) With respect to the Employer's Qualified Non-Elective
Contribution made pursuant to Section 4.1(c), to each
Participant's Elective Account in accordance with Section
4.1(c).
Any Participant actively employed during the Plan Year shall
be eligible to share in the Qualified Non-Elective
Contribution for the Plan Year.
(4) With respect to the Employer's Non-Elective Contribution
made pursuant to Section 4.1(d), to each Participant's Account
in the same proportion that each such Participant's
Compensation for the year bears to the total Compensation of
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all Participants for such year.
Only Participants who have completed a Year of Service during
the Plan Year and are actively employed on the last day of the
Plan Year shall be eligible to share in the discretionary
contribution for the year. However, with respect to Plan Years
beginning after December 31, 1989, in lieu of the foregoing,
only Participants who are actively employed on the last day of
the Plan Year shall be eligible to share in the discretionary
contribution for the year.
(c) As of each Anniversary Date any amounts which became Forfeitures
since the last Anniversary Date shall first be made available to
reinstate previously forfeited account balances of Former Participants,
if any, in accordance with Section 6.4(g)(2). The remaining
Forfeitures, if any, shall be allocated to Participants' Accounts in
the following manner:
(1) Forfeitures attributable to Employer matching
contributions made pursuant to Section 4.1(b) shall be
allocated among the Participants' Accounts in the same
proportion that each such Participant's Compensation for the
year bears to the total Compensation of all Participants for
the year.
Except, however, Participants who are not eligible to share in
matching contributions (whether or not a deferral election was
made or suspended pursuant to Section 4.2(e)) for a Plan Year
shall not share in Plan Forfeitures attributable to Employer
matching contributions for that year.
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(d) shall be
allocated among the Participants' Accounts of Participants
otherwise eligible to share in the allocation of discretionary
contributions for the year in the same proportion that each
such Participant's Compensation for the year bears to the
total Compensation of all such Participants for the year.
Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition"
(as defined in Section 4.9) to any Participant's Account to
exceed the amount allowable by the Code, the excess shall be
reallocated in accordance with Section 4.10.
(d) For any Top Heavy Plan Year, Non-Key Employees not otherwise
eligible to share in the allocation of contributions and Forfeitures as
provided above, shall receive the minimum allocation provided for in
Section 4.4(g) if eligible pursuant to the provisions of Section
4.4(j).
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(e) Notwithstanding the foregoing, Participants who are not actively
employed on the last day of the Plan Year due to Retirement (Normal or
Late), Total and Permanent Disability or death shall share in the
allocation of contributions and Forfeitures for that Plan Year.
(f) As of each Anniversary Date or other valuation date, any earnings
or losses (net appreciation or net depreciation) of the Trust Fund
shall be allocated in the same proportion that each Participant's and
Former Participant's time weighted average nonsegregated accounts bear
to the total of all Participants' and Former Participants' time
weighted average nonsegregated accounts as of such date.
Participants' transfers from other qualified plans deposited in the
general Trust Fund shall share in any earnings and losses (net
appreciation or net depreciation) of the Trust Fund in the same manner
provided above. Each segregated account maintained on behalf of a
Participant shall be credited or charged with its separate earnings and
losses.
(g) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the sum of
the Employer's contributions and Forfeitures allocated to the
Participant's Combined Account of each Non-Key Employee shall be equal
to at least three percent (3%) of such Non-Key Employee's "415
Compensation" (reduced by contributions and forfeitures, if any,
allocated to each Non-Key Employee in any defined contribution plan
included with this plan in a Required Aggregation Group). However, if
(1) the sum of the Employer's contributions and Forfeitures allocated
to the Participant's Combined Account of each Key Employee for such Top
Heavy Plan Year is less than three percent (3%) of each Key Employee's
"415 Compensation" and (2) this Plan is not required to be included in
an Aggregation Group to enable a defined benefit plan to meet the
requirements of Code Section 401(a)(4) or 410, the sum of the
Employer's contributions and Forfeitures allocated to the Participant's
Combined Account of each Non-Key Employee shall be equal to the largest
percentage allocated to the Participant's Combined Account of any Key
Employee. However, in determining whether a Non-Key Employee has
received the required minimum allocation, such Non-Key Employee's
Deferred Compensation and matching contributions needed to satisfy the
"Actual Contribution Percentage" tests pursuant to Section 4.7(a) shall
not be taken into account.
However, no such minimum allocation shall be required in this Plan for
any Non-Key Employee who participates in another defined contribution
plan subject to Code Section 412 providing such benefits included with
this Plan in a Required Aggregation Group.
(h) For any Plan Year when (1) the Plan is a Top Heavy Plan but not
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a Super Top Heavy Plan and (2) a Key Employee is a Participant in both
this Plan and a defined benefit plan included in a Required Aggregation
Group which is top heavy, the extra minimum allocation (required by
Section 4.9(m) to provide higher limitations) shall be provided for
each Non-Key Employee who is a Participant only in this Plan by
substituting four percent (4%) for three percent (3%) in the paragraph
above.
(i) For purposes of the minimum allocations set forth above, the
percentage allocated to the Participant's Combined Account of any Key
Employee shall be equal to the ratio of the sum of the Employer's
contributions and Forfeitures allocated on behalf of such Key Employee
divided by the "415 Compensation" for such Key Employee.
(j) For any Top Heavy Plan Year, the minimum allocations set forth
above shall be allocated to the Participant's Combined Account of all
Non-Key Employees who are Participants and who are employed by the
Employer on the last day of the Plan Year, including Non-Key Employees
who have (1) failed to complete a Year of Service; and (2) declined to
make mandatory contributions (if required) or, in the case of a cash or
deferred arrangement, elective contributions to the Plan.
(k) In lieu of the above, in any Plan Year in which a Non-Key Employee
is a Participant in both this Plan and a defined benefit pension plan
included in a Required Aggregation Group which is top heavy, the
Employer shall not be required to provide such Non-Key Employee with
both the full separate defined benefit plan minimum benefit and the
full separate defined contribution plan minimum allocation.
Therefore, for any Plan Year when (1) the Plan is a Top Heavy Plan but
not a Super Top Heavy Plan, and (2) a Key Employee is a Participant in
both this Plan and a defined benefit plan included in a Required
Aggregation Group which is top heavy, a Non-Key Employee who is
participating in this Plan and a defined benefit plan maintained by the
Employer shall receive a minimum monthly accrued benefit in the defined
benefit plan equal to the product of (1) one-twelfth (1/ 12th) of "415
Compensation" averaged over the five (5) consecutive "limitation years"
(or actual "limitation years," if less) which produce the highest
average and (2) the lesser of (i) three percent (3%) multiplied by
years of service when the plan is top heavy or (ii) thirty percent
(30%). Further, the extra minimum allocation (required by Section
4.9(m) to provide higher limitations) shall be provided.
Except, however, in the event this Plan is a Super Top Heavy Plan, the
three percent (3%) minimum accrual shall be reduced to two percent (2%)
and 20% shall be substituted for 30% in the paragraph above.
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(l) For the purposes of this Section, "415 Compensation" shall be
limited to $200,000. Such amount shall be adjusted at the same time and
in the same manner as permitted under Code Section 415(d), except that
the dollar increase in effect on January 1 of any calendar year shall
be effective for the Plan Year beginning with or within such calendar
year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the "415
Compensation" limit shall be an amount equal to the "415 Compensation"
limit for the calendar year in which the Plan Year begins multiplied by
the ratio obtained by dividing the number of full months in the short
Plan Year by twelve (12). However, for Plan Years beginning prior to
January 1, 1989, the $200,000 limit shall apply only for Top Heavy Plan
Years and shall not be adjusted.
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for
Plan Years beginning on or after January 1, 1994, the annual
Compensation of each Employee taken into account under the Plan shall
not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual
compensation limit is $150,000, as adjusted by the Commissioner for
increases in the cost of living in accordance with Code Section
401(a)(17)(B). The cost of living adjustment in effect for a calendar
year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such
calendar year. If a determination period consists of fewer than 12
months, the OBRA '93 annual compensation limit will be multiplied by a
fraction, the numerator of which is the number of months in the
determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean
the OBRA '93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into
account in determining an Employee's benefits accruing in the current
Plan Year, the Compensation for that prior determination period is
subject to the OBRA '93 annual compensation limit in effect for that
prior determination period. For this purpose, for determination periods
beginning before the first day of the first Plan Year beginning on or
after January 1, 1994, the OBRA '93 annual compensation limit is
$150,000.
(m) Notwithstanding anything herein to the contrary, Participants who
terminated employment for any reason during the Plan Year shall share
in the salary reduction contributions made by the Employer for the year
of termination without regard to the Hours of Service credited.
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(n) If a Former Participant is reemployed after five (5) consecutive
1-Year Breaks in Service, then separate accounts shall be maintained as
follows:
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan
attributable to postbreak service.
(o) Notwithstanding anything to the contrary, for Plan Years beginning
after December 31, 1989, if this is a Plan that would otherwise fail to
meet the requirements of Code Sections 401(a)(26), 410(b)(1) or
410(b)(2)(A)(i) and the Regulations thereunder because Employer
contributions would not be allocated to a sufficient number or
percentage of Participants for a Plan Year, then the following rules
shall apply:
(1) The group of Participants eligible to share in the
Employer's contribution and Forfeitures for the Plan Year
shall be expanded to include the minimum number of
Participants who would not otherwise be eligible as are
necessary to satisfy the applicable test specified above. The
specific Participants who shall become eligible under the
terms of this paragraph shall be those who are actively
employed on the last day of the Plan Year and, when compared
to similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the
applicable test is still not satisfied, then the group of
Participants eligible to share in the Employer's contribution
and Forfeitures for the Plan Year shall be further expanded to
include the minimum number of Participants who are not
actively employed on the last day of the Plan Year as are
necessary to satisfy the applicable test. The specific
Participants who shall become eligible to share shall be those
Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours
of Service in the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be
reallocated to satisfy these requirements. In such event, the
Employer shall make an additional contribution equal to the
amount such affected Participants would have received had they
been included in the allocations, even if it exceeds the
amount which would be deductible under Code Section 404. Any
adjustment to the allocations pursuant to this paragraph shall
be considered a retroactive amendment adopted by the last day
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of the Plan Year.
(4) Notwithstanding the foregoing, for any Top Heavy Plan Year
beginning after December 31, 1992, if the portion of the Plan
which is not a Code Section 401(k) or 401(m) plan would fail
to satisfy Code Section 410(b) if the coverage tests were
applied by treating those Participants whose only allocation
(under such portion of the Plan) would otherwise be provided
under the top heavy formula as if they were not currently
benefiting under the Plan, then, for purposes of this Section
4.4(o), such Participants shall be treated as not benefiting
and shall therefore be eligible to be included in the expanded
class of Participants who will share in the allocation
provided under the Plan's non top heavy formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1986, the annual allocation derived from Employer
Elective Contributions to a Participant's Elective Account shall
satisfy one of the following tests:
(1) The "Actual Deferral Percentage" for the Highly
Compensated Participant group shall not be more than the
"Actual Deferral Percentage" of the Non-Highly Compensated
Participant group multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the
Highly Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
shall not be more than two percentage points. Additionally,
the "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not exceed the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group
multiplied by 2. The provisions of Code Section 401(k)(3) and
Regulation 1.401(k)-l(b) are incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective
deferrals pursuant to Section 4.2 and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2, the provisions of
which are incorporated herein by reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the
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average of the ratios, calculated separately for each Participant in
such group, of the amount of Employer Elective Contributions allocated
to each Participant's Elective Account for such Plan Year, to such
Participant's "414(s) Compensation" for such Plan Year. The actual
deferral ratio for each Participant and the "Actual Deferral
Percentage" for each group shall be calculated to the nearest
one-hundredth of one percent for Plan Years beginning after December
31, 1988. Employer Elective Contributions allocated to each Non-Highly
Compensated Participant's Elective Account shall be reduced by Excess
Deferred Compensation to the extent such excess amounts are made under
this Plan or any other plan maintained by the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual deferral ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer Elective
Contributions and "414(s) Compensation" of all eligible Family
Members (including Highly Compensated Participants). However,
in applying the $200,000 limit to "414(s) Compensation," for
Plan Years beginning after December 31, 1988, Family Members
shall include only the affected Employee's spouse and any
lineal descendants who have not attained age 19 before the
close of the Plan Year. Notwithstanding the foregoing, with
respect to Plan Years beginning prior to January 1, 1990,
compliance with the Regulations then in effect shall be deemed
to be compliance with this paragraph.
(2) The Employer Elective Contributions and "414(s)
Compensation" of all Family Members shall be disregarded for
purposes of determining the "Actual Deferral Percentage" of
the Non-Highly Compensated Participant group except to the
extent taken into account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the
Participant are aggregated as one family group in accordance
with paragraphs (1) and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly Compensated
Participant and a Non-Highly Compensated Participant shall include any
Employee eligible to make a deferral election pursuant to Section 4.2,
whether or not such deferral election was made or suspended pursuant
to Section 4.2.
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(e) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii) as in
effect for Plan Years beginning after December 31, 1988), the cash or
deferred arrangements included in such plans shall be treated as one
arrangement. In addition, two or more cash or deferred arrangements may
be considered as a single arrangement for purposes of determining
whether or not such arrangements satisfy Code Sections 401(a)(4),
410(b) and 401(k). In such a case, the cash or deferred arrangements
included in such plans and the plans including such arrangements shall
be treated as one arrangement and as one plan for purposes of this
Section and Code Sections 401(a)(4), 410(b) and 401(k). Plans may be
aggregated under this paragraph (e) for Plan Years beginning after
December 31, 1989 only if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section
4975(e)(7) or 409 may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part
of an employee stock ownership plan as defined in Code Section
4975(e)(7) or 409 for Plan Years beginning after December 31, 1988) of
the Employer or an Affiliated Employer, all such cash or deferred
arrangements shall be treated as one cash or deferred arrangement for
the purpose of determining the actual deferral ratio with respect to
such Highly Compensated Participant. However, for Plan Years beginning
after December 31, 1988, if the cash or deferred arrangements have
different plan years, this paragraph shall be applied by treating all
cash or deferred arrangements ending with or within the same calendar
year as a single arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a) for Plan Years beginning after December 31, 1986, the
Administrator shall adjust Excess Contributions pursuant to the options set
forth below:
(a) On or before the fifteenth day of the third month following the end
of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him until one of the tests set forth
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in Section 4.5(a) is satisfied, or until his actual deferral ratio
equals the actual deferral ratio of the Highly Compensated Participant
having the second highest actual deferral ratio. This process shall
continue until one of the tests set forth in Section 4.5(a) is
satisfied. For each Highly Compensated Participant, the amount of
Excess Contributions is equal to the Elective Contributions on behalf
of such Highly Compensated Participant (determined prior to the
application of this paragraph) minus the amount determined by
multiplying the Highly Compensated Participant's actual deferral ratio
(determined after application of this paragraph) by his "414(s)
Compensation." However, in determining the amount of Excess
Contributions to be distributed with respect to an affected Highly
Compensated Participant as determined herein, such amount shall be
reduced by any Excess Deferred Compensation previously distributed to
such affected Highly Compensated Participant for his taxable year
ending with or within such Plan Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are
allocable;
(ii) shall be made first from unmatched Deferred
Compensation and, thereafter, simultaneously from Deferred
Compensation which is matched and matching contributions
which relate to such Deferred Compensation. However, any
such matching contributions which are not Vested shall be
forfeited in lieu of being distributed;
(iii) shall be made from Qualified Non-Elective
Contributions only to the extent that Excess Contributions
exceed the balance in the Participant's Elective Account
attributable to Deferred Compensation;
(iv) shall be adjusted for Income; and
(v) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) Any distribution of less than the entire amount of Excess
Contributions shall be treated as a pro rata distribution of
Excess Contributions and Income.
(3) The determination and correction of Excess Contributions
of a Highly Compensated Participant whose actual deferral
ratio is determined under the family aggregation rules shall
be accomplished by reducing the actual deferral ratio as
required herein, and the Excess Contributions for the family
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unit shall then be allocated among the Family Members in
proportion to the Elective Contributions of each Family Member
that were combined to determine the group actual deferral
ratio. Notwithstanding the foregoing, with respect to Plan
Years beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance
with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution on
behalf of Non-Highly Compensated Participants in an amount sufficient
to satisfy one of the tests set forth in Section 4.5(a). Such
contribution shall be allocated to the Participant's Elective Account
of each Non-Highly Compensated Participant in the same proportion that
each Non-Highly Compensated Participant's Compensation for the year
bears to the total Compensation of all Non-Highly Compensated
Participants.
(c) If during a Plan Year the projected aggregate amount of Elective
Contributions to be allocated to all Highly Compensated Participants
under this Plan would, by virtue of the tests set forth in Section
4.5(a), cause the Plan to fail such tests, then the Administrator may
automatically reduce proportionately or in the order provided in
Section 4.6(a) each affected Highly Compensated Participant's deferral
election made pursuant to Section 4.2 by an amount necessary to satisfy
one of the tests set forth in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years beginning
after December 31, 1986 for the Highly Compensated Participant
group shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly
Compensated Participant group; or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group, or such percentage
for the Non-Highly Compensated Participant group plus 2
percentage points. However, for Plan Years beginning after
December 31, 1988, to prevent the multiple use of the
alternative method described in this paragraph and Code
Section 401(m)(9)(A), any Highly Compensated Participant
eligible to make elective deferrals pursuant to Section 4.2 or
any other cash or deferred arrangement maintained by the
Employer or an Affiliated Employer and to make Employee
contributions or to receive matching contributions under this
Plan or under any other plan maintained by the Employer or an
Affiliated Employer shall have his actual contribution ratio
reduced pursuant to Regulation 1.401(m)-2. The provisions of
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Code Section 401(m) and Regulations 1.401(m)-l(b) and
1.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately
for each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant
to Section 4.1(b) on behalf of each such Participant for such
Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan
Year.
(c) For purposes of determining the "Actual Contribution Percentage"
and the amount of Excess Aggregate Contributions pursuant to Section
4.8(d), only Employer matching contributions (excluding Employer
matching contributions forfeited or distributed pursuant to Sections
4.2(f) and 4.6(a)(1) or forfeited pursuant to Section 4.8(a))
contributed to the Plan prior to the end of the succeeding Plan Year
shall be considered. In addition, the Administrator may elect to take
into account, with respect to Employees eligible to have Employer
matching contributions pursuant to Section 4.1(b) allocated to their
accounts, elective deferrals (as defined in Regulation 1.402(g)-l(b))
and qualified non-elective contributions (as defined in Code Section
401(m)(4)(C)) contributed to any plan maintained by the Employer. Such
elective deferrals and qualified non-elective contributions shall be
treated as Employer matching contributions subject to Regulation
1.401(m)-l(b)(5) which is incorporated herein by reference. However,
for Plan Years beginning after December 31, 1988, the Plan Year must be
the same as the plan year of the plan to which the elective deferrals
and the qualified non-elective contributions are made.
(d) For the purpose of determining the actual contribution ratio of a
Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Employee is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation"
during the year, the following shall apply:
(1) The combined actual contribution ratio for the family
group (which shall be treated as one Highly Compensated
Participant) shall be determined by aggregating Employer
matching contributions made pursuant to Section 4.1(b) and
"414(s) Compensation" of all eligible Family Members
(including Highly Compensated Participants). However, in
applying the $200,000 limit to "414(s) Compensation" for Plan
Years beginning after December 31, 1988, Family Members shall
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include only the affected Employee's spouse and any lineal
descendants who have not attained age 19 before the close of
the Plan Year. Notwithstanding the foregoing, with respect to
Plan Years beginning prior to January 1, 1990, compliance with
the Regulations then in effect shall be deemed to be
compliance with this paragraph.
(2) The Employer matching contributions made pursuant to
Section 4.1(b) and "414(s) Compensation" of all Family Members
shall be disregarded for purposes of determining the "Actual
Contribution Percentage" of the NonHighly Compensated
Participant group except to the extent taken into account in
paragraph (1) above.
(3) If a Participant is required to be aggregated as a member
of more than one family group in a plan, all Participants who
are members of those family groups that include the
Participant are aggregated as one family group in accordance
with paragraphs (1) and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4), 410(b)
and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as
one plan for purposes of Code Sections 401(a)(4) or 410(b) (other than
the average benefits test under Code Section 410(b)(2)(A)(ii) as in
effect for Plan Years beginning after December 31, 1988), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or
both, are made may be considered as a single plan for purposes of
determining whether or not such plans satisfy Code Sections 401(a)(4),
410(b) and 401(m). In such a case, the aggregated plans must satisfy
this Section and Code Sections 401(a)(4), 410(b) and 401(m) as though
such aggregated plans were a single plan. Plans may be aggregated under
this paragraph (e) for Plan Years beginning after December 31, 1988,
only if they have the same plan year.
Notwithstanding the above, for Plan Years beginning after December 31,
1988, an employee stock ownership plan described in Code Section
4975(e)(7) or 409 may not be aggregated with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(m).
(f) If a Highly Compensated Participant is a Participant under two or
more plans (other than an employee stock ownership plan as defined in
Code Section 4975(e)(7) or 409 for Plan Years beginning after December
31, 1988) which are maintained by the Employer or an Affiliated
Employer to which matching contributions, Employee contributions, or
both, are made, all such contributions on behalf of such Highly
Compensated Participant shall be aggregated for
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purposes of determining such Highly Compensated Participant's actual
contribution ratio. However, for Plan Years beginning after December
31, 1988, if the plans have different plan years, this paragraph shall
be applied by treating all plans ending with or within the same
calendar year as a single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Employer matching contributions pursuant to
Section 4.1(b) (whether or not a deferral election was made or
suspended pursuant to Section 4.2(e)) allocated to his account for the
Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December 31,
1986, the "Actual Contribution Percentage" for the Highly Compensated
Participant group exceeds the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group pursuant to Section 4.7(a),
the Administrator (on or before the fifteenth day of the third month
following the end of the Plan Year, but in no event later than the
close of the following Plan Year) shall direct the Trustee to
distribute to the Highly Compensated Participant having the highest
actual contribution ratio, his Vested portion of Excess Aggregate
Contributions (and Income allocable to such contributions) and, if
forfeitable, forfeit such non-Vested Excess Aggregate Contributions
attributable to Employer matching contributions (and Income allocable
to such forfeitures) until either one of the tests set forth in Section
4.7(a) is satisfied, or until his actual contribution ratio equals the
actual contribution ratio of the Highly Compensated Participant having
the second highest actual contribution ratio. This process shall
continue until one of the tests set forth in Section 4.7(a) is
satisfied.
If the correction of Excess Aggregate Contributions attributable to
Employer matching contributions is not in proportion to the Vested and
nonVested portion of such contributions, then the Vested portion of the
Participant's Account attributable to Employer matching contributions
after the correction shall be subject to Section 6.5(h).
(b) Any distribution and/or forfeiture of less than the entire amount
of Excess Aggregate Contributions (and Income) shall be treated as a
pro rata distribution and/or forfeiture of Excess Aggregate
Contributions and Income. Distribution of Excess Aggregate
Contributions shall be designated by the Employer as a distribution of
Excess Aggregate Contributions (and Income). Forfeitures of Excess
Aggregate Contributions shall be treated in accordance with Section
4.4. However, no such forfeiture may be allocated to a Highly
Compensated Participant whose contributions
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are reduced pursuant to this Section.
(c) Excess Aggregate Contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes
of Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to Participants'
Accounts for the Plan Year in which the forfeiture occurs shall be
treated as an "annual addition" pursuant to Section 4.9(b) for the
Participants to whose Accounts they are reallocated and for the
Participants from whose Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to
Section 4.7(c) on behalf of the Highly Compensated Participant
(determined prior to the application of this paragraph) minus the
amount determined by multiplying the Highly Compensated Participant's
actual contribution ratio (determined after application of this
paragraph) by his "414(s) Compensation." The actual contribution ratio
must be rounded to the nearest one-hundredth of one percent for Plan
Years beginning after December 31, 1988. In no case shall the amount of
Excess Aggregate Contribution with respect to any Highly Compensated
Participant exceed the amount of Employer matching contributions made
pursuant to Section 4.1(b) and any qualified non-elective contributions
or elective deferrals taken into account pursuant to Section 4.7(c) on
behalf of such Highly Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate Contributions
with respect to any Plan Year shall be made after first determining the
Excess Contributions, if any, to be treated as voluntary Employee
contributions due to recharacterization for the plan year of any other
qualified cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within the Plan
Year.
(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules,
then the actual contribution ratio shall be reduced and the Excess
Aggregate Contributions for the family unit shall be allocated among
the Family Members in proportion to the sum of Employer matching
contributions made pursuant to Section 4.1(b) and any qualified
nonelective contributions or elective deferrals taken into account
pursuant to Section 4.7(c) of each Family Member that were combined to
determine the group actual contribution ratio. Notwithstanding the
foregoing, with respect to Plan Years beginning prior to January 1,
1990, compliance with the Regulations then in
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effect shall be deemed to be compliance with this paragraph.
(g) If during a Plan Year the projected aggregate amount of Employer
matching contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.7(a), cause the Plan to fail such tests, then the
Administrator may automatically reduce proportionately or in the order
provided in Section 4.8(a) each affected Highly Compensated
Participant's projected share of such contributions by an amount
necessary to satisfy one of the tests set forth in Section 4.7(a).
(h) Notwithstanding the above, within twelve (12) months after the end
of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 4.7(a). Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated
Participant in the same proportion that each Non-Highly Compensated
Participant's Compensation for the year bears to the total Compensation
of all Non-Highly Compensated Participants. A separate accounting shall
be maintained for the purpose of excluding such contributions from the
"Actual Deferral Percentage" tests pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 (or, if greater, one-fourth of the
dollar limitation in effect under Code Section 415(b)(1)(A)) or (2)
twenty-five percent (25%) of the Participant's "415 Compensation" for
such "limitation year." For any short "limitation year," the dollar
limitation in (1) above shall be reduced by a fraction, the numerator
of which is the number of full months in the short "limitation year"
and the denominator of which is twelve (12).
(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts
for any "limitation year" of (1) Employer contributions, (2) Employee
contributions, (3) forfeitures, (4) amounts allocated, after March 31,
1984, to an individual medical account, as defined in Code Section
415(1)(2) which is part of a pension or annuity plan maintained by the
Employer and (5) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date, which
are attributable to post-retirement medical benefits allocated to the
separate account of a key employee (as defined in Code Section
419A(d)(3)) under a welfare benefit plan (as defined in Code Section
419(e)) maintained by the Employer. Except, however, the "415
Compensation" percentage
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limitation referred to in paragraph (a)(2) above shall not apply to:
(1) any contribution for medical benefits (within the meaning of Code
Section 419A(f)(2)) after separation from service which is otherwise
treated as an "annual addition," or (2) any amount otherwise treated as
an "annual addition" under Code Section 415(1)(1).
(c) For purposes of applying the limitations of Code Section 415, the
transfer of funds from one qualified plan to another is not an "annual
addition." In addition, the following are not Employee contributions
for the purposes of Section 4.9(b)(2): (1) rollover contributions (as
defined in Code Sections 402(a)(5), 403(a)(4), 403(b)(8) and
408(d)(3)); (2) repayments of loans made to a Participant from the
Plan; (3) repayments of distributions received by an Employee pursuant
to Code Section 411(a)(7)(B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section
411(a)(3)(D) (mandatory contributions); and (5) Employee contributions
to a simplified employee pension excludable from gross income under
Code Section 408(k)(6).
(d) For purposes of applying the limitations of Code Section 415, the
"limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b)(1)(A) stated in
paragraph (a)(1) above shall be adjusted annually as provided in Code
Section 415(d) pursuant to the Regulations. The adjusted limitation is
effective as of January 1st of each calendar year and is applicable to
"limitation years" ending with or within that calendar year.
(f) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall
be treated as one defined benefit plan, and all qualified defined
contribution plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined contribution plan.
(g) For the purpose of this Section, if the Employer is a member of a
controlled group of corporations, trades or businesses under common
control (as defined by Code Section 1563(a) or Code Section 414(b) and
(c) as modified by Code Section 415(h)), is a member of an affiliated
service group (as defined by Code Section 414(m)), or is a member of a
group of entities required to be aggregated pursuant to Regulations
under Code Section 414(o), all Employees of such Employers shall be
considered to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code Section
413(c) plan, all Employers of a Participant who maintain this Plan will
be considered to be a single Employer.
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<PAGE>
(i) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have
different Anniversary Dates, the maximum "annual additions"
under this Plan shall equal the maximum "annual additions" for
the "limitation year" minus any "annual additions" previously
credited to such Participant's accounts during the "limitation
year."
(2) If a Participant participates in both a defined
contribution plan subject to Code Section 412 and a defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same Anniversary Date, "annual
additions" will be credited to the Participant's accounts
under the defined contribution plan subject to Code Section
412 prior to crediting "annual additions" to the Participant's
accounts under the defined contribution plan not subject to
Code Section 412.
(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained
by the Employer which have the same Anniversary Date, the
maximum "annual additions" under this Plan shall equal the
product of (A) the maximum "annual additions" for the
"limitation year" minus any "annual additions" previously
credited under subparagraphs (1) or (2) above, multiplied by
(B) a fraction (i) the numerator of which is the "annual
additions" which would be credited to such Participant's
accounts under this Plan without regard to the limitations of
Code Section 415 and (ii) the denominator of which is such
"annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan
fraction and the defined contribution plan fraction for any "limitation
year" may not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year" is a
fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether
or not terminated) maintained by the Employer, and the denominator of
which is the lesser of 125 percent of the dollar limitation determined
for the "limitation year" under Code Sections 415(b) and (d) or 140
percent of the highest average compensation, including any adjustments
under Code Section 415(b).
Notwithstanding the above, if the Participant was a Participant as of
the first day of the first "limitation year" beginning after December
31, 1986, in one or more defined benefit plans maintained by the
Employer which were in existence on May 6, 1986, the
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<PAGE>
denominator of this fraction will not be less than 125 percent of the
sum of the annual benefits under such plans which the Participant had
accrued as of the close of the last "limitation year" beginning before
January 1, 1987, disregarding any changes in the terms and conditions
of the plan after May 5, 1986. The preceding sentence applies only if
the defined benefit plans individually and in the aggregate satisfied
the requirements of Code Section 415 for all "limitation years"
beginning before January 1, 1987.
(l) The defined contribution plan fraction for any "limitation year" is
a fraction, the numerator of which is the sum of the annual additions
to the Participant's Account under all the defined contribution plans
(whether or not terminated) maintained by the Employer for the current
and all prior "limitation years" (including the annual additions
attributable to the Participant's nondeductible Employee contributions
to all defined benefit plans, whether or not terminated, maintained by
the Employer, and the annual additions attributable to all welfare
benefit funds, as defined in Code Section 419(e), and individual
medical accounts, as defined in Code Section 415(1)(2), maintained by
the Employer), and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior "limitation years" of
service with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount in
any "limitation year" is the lesser of 125 percent of the dollar
limitation determined under Code Sections 415(b) and (d) in effect
under Code Section 415(c)(1)(A) or 35 percent of the Participant's
Compensation for such year.
If the Employee was a Participant as of the end of the first day of the
first "limitation year" beginning after December 31, 1986, in one or
more defined contribution plans maintained by the Employer which were
in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed
as of the end of the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Code Section 415 limitation
applicable to the first "limitation year" beginning on or after January
1, 1987. The annual addition for any "limitation year" beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be
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substituted for 125 percent in Sections 4.9(k) and 4.9(1) unless the
extra minimum allocation is being provided pursuant to Section 4.4.
However, for any "limitation year" in which the Plan is a Super Top
Heavy Plan, 100 percent shall be substituted for 125 percent in any
event.
(n) If the sum of the defined benefit plan fraction and the defined
contribution plan fraction shall exceed 1.0 in any "limitation year"
for any Participant in this Plan, the Administrator shall adjust the
numerator of the defined benefit plan fraction so that the sum of both
fractions shall not exceed 1.0 in any "limitation year" for such
Participant.
(o) Notwithstanding anything contained in this Section to the contrary,
the limitations, adjustments and other requirements prescribed in this
Section shall at all times comply with the provisions of Code Section
415 and the Regulations thereunder, the terms of which are specifically
incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of
Code Section 402(g)(3)) that may be made with respect to any
Participant under the limits of Section 4.9 or other facts and
circumstances to which Regulation 1.415-6(b)(6) shall be applicable,
the "annual additions" under this Plan would cause the maximum "annual
additions" to be exceeded for any Participant, the Administrator shall
(1) distribute any elective deferrals (within the meaning of Code
Section 402(g)(3)) or return any voluntary Employee contributions
credited for the "limitation year" to the extent that the return would
reduce the "excess amount" in the Participant's accounts (2) hold any
"excess amount" remaining after the return of any elective deferrals or
voluntary Employee contributions in a "Section 415 suspense account"
(3) use the "Section 415 suspense account" in the next "limitation
year" (and succeeding "limitation years" if necessary) to reduce
Employer contributions for that Participant if that Participant is
covered by the Plan as of the end of the "limitation year," or if the
Participant is not so covered, allocate and reallocate the "Section 415
suspense account" in the next "limitation year" (and succeeding
"limitation years" if necessary) to all Participants in the Plan before
any Employer or Employee contributions which would constitute "annual
additions" are made to the Plan for such "limitation year" (4) reduce
Employer contributions to the Plan for such "limitation year" by the
amount of the "Section 415 suspense account" allocated and reallocated
during such "limitation year."
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any,
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of (1) the "annual additions" which would be credited to his account
under the terms of the Plan without regard to the limitations of Code
Section 415 over (2) the maximum "annual additions" determined pursuant
to Section 4.9.
(c) For purposes of this Section, "Section 415 suspense account" shall
mean an unallocated account equal to the sum of "excess amounts" for
all Participants in the Plan during the "limitation year." The "Section
415 suspense account" shall not share in any earnings or losses of the
Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be transferred
from other qualified plans by Participants, provided that the trust
from which such funds are transferred permits the transfer to be made
and the transfer will not jeopardize the tax exempt status of the Plan
or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein
referred to as a "Participant's Rollover Account." Such account shall
be fully Vested at all times and shall not be subject to Forfeiture for
any reason.
(b) Amounts in a Participant's Rollover Account shall be held by the
Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)4), amounts attributable to elective contributions (as defined
in Regulation 1.401(k)-l(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-l(d).
(d) At Normal Retirement Date, or such other date when the Participant
or his Beneficiary shall be entitled to receive benefits, the fair
market value of the Participant's Rollover Account shall be used to
provide additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall
be made in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all notice
and consent requirements of Code Sections 417 and 41 l(a)(^) and the
Regulations thereunder. Furthermore, such amounts shall be considered
as part of a Participant's benefit in determining whether an
involuntary cash-out of benefits without Participant consent may be
made.
(e) The Administrator may direct that employee transfers made after a
valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
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deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the
Trustee until such time as the allocations pursuant to this Plan have
been made, at which time they may remain segregated or be invested as
part of the general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account may be
treated as a Directed Investment Account pursuant to Section 4.12.
(g) For purposes of this Section, the term "qualified plan" shall mean
any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts
transferred to this Plan directly from another qualified plan; (ii)
distributions from another qualified plan which are eligible rollover
distributions and which are either transferred by the Employee to this
Plan within sixty (60) days following his receipt thereof or are
transferred pursuant to a direct rollover; (iii) amounts transferred to
this Plan from a conduit individual retirement account provided that
the conduit individual retirement account has no assets other than
assets which (A) were previously distributed to the Employee by another
qualified plan as a lump-sum distribution (B) were eligible for
tax-free rollover to a qualified plan and (C) were deposited in such
conduit individual retirement account within sixty (60) days of receipt
thereof and other than earnings on said assets; and (iv) amounts
distributed to the Employee from a conduit individual retirement
account meeting the requirements of clause (iii) above, and transferred
by the Employee to this Plan within sixty (60) days of his receipt
thereof from such conduit individual retirement account.
(h) Prior to accepting any transfers to which this Section applies, the
Administrator may require the Employee to establish that the amounts to
be transferred to this Plan meet the requirements of this Section and
may also require the Employee to provide an opinion of counsel
satisfactory to the Employer that the amounts to be transferred meet
the requirements of this Section.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it
will not result in the elimination or reduction of any "Section 41
l(d)(6) protected benefit" as described in Section 8.1.
4.12 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine that
all Participants be permitted to direct the Trustee as to the
investment of all or a portion of the interest in any one or more
of their individual account balances. If such authorization is
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given, Participants may, subject to a procedure established by the
Administrator and applied in a uniform nondiscriminatory manner, direct
the Trustee in writing to invest any portion of their account in
specific assets, specific funds or other investments permitted under
the Plan and the directed investment procedure. That portion of the
account of any Participant so directing will thereupon be considered a
Directed Investment Account, which shall not share in Trust Fund
earnings.
(b) A separate Directed Investment Account shall be established for
each Participant who has directed an investment. Transfers between the
Participant's regular account and his Directed Investment Account shall
be charged and credited as the case may be to each account. The
Directed Investment Account shall not share in Trust Fund earnings, but
it shall be charged or credited as appropriate with the net earnings,
gains, losses and expenses as well as any appreciation or depreciation
in market value during each Plan Year attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date, and at
such other date or dates deemed necessary by the Administrator, herein called
"valuation date," to determine the net worth of the assets comprising the Trust
Fund as it exists on the "valuation date." In determining such net worth, the
Trustee shall value the assets comprising the Trust Fund at their fair market
value as of the "valuation date" and shall deduct all expenses for which the
Trustee has not yet obtained reimbursement from the Employer or the Trust Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund which
are listed on a registered stock exchange, the Administrator shall direct the
Trustee to value the same at the prices they were last traded on such exchange
preceding the close of business on the "valuation date." If such securities were
not traded on the "valuation date," or if the exchange on which they are traded
was not open for business on the "valuation date," then the securities shall be
valued at the prices at which they were last traded prior to the "valuation
date." Any unlisted security held in the Trust Fund shall be valued at its bid
price next preceding the close of business on the "valuation date," which bid
price shall be obtained from a registered broker or an investment banker. In
determining the fair market value of assets other than securities for which
trading or bid prices can be obtained, the Trustee may appraise such assets
itself, or in its discretion, employ one or more appraisers for that purpose and
rely on the values established by such appraiser or appraisers.
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ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and retire for
the purposes hereof on his Normal Retirement Date. However, a Participant may
postpone the termination of his employment with the Employer to a later date, in
which event the participation of such Participant in the Plan, including the
right to receive allocations pursuant to Section 4.4, shall continue until his
Late Retirement Date. Upon a Participant's Retirement Date or attainment of his
Normal Retirement Date without termination of employment with the Employer, or
as soon thereafter as is practicable, the Trustee shall distribute all amounts
credited to such Participant's Combined Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or other
termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the
provisions of Sections 6.6 and 6.7, to distribute the value of the
deceased Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator shall
direct the Trustee, in accordance with the provisions of Sections 6.6
and 6.7, to distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) The Administrator may require such proper proof of death and such
evidence of the right of any person to receive payment of the value of
the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(d) Unless otherwise elected in the manner prescribed in Section 6.6,
the Beneficiary of the death benefit shall be the Participant's spouse,
who shall receive such benefit in the form of a Pre-Retirement Survivor
Annuity pursuant to Section 6.6. Except, however, the Participant may
designate a Beneficiary other than his spouse if:
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(l) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in
Section 6.6, and the spouse has waived his or her right to be
the Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a
court order to such effect (and there is no "qualified
domestic relations order" as defined in Code Section 414(p)
which provides otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made on a form
satisfactory to the Administrator. A Participant may at any time revoke
his designation of a Beneficiary or change his Beneficiary by filing
written notice of such revocation or change with the Administrator.
However, the Participant's spouse must again consent in writing to any
change in Beneficiary unless the original consent acknowledged that the
spouse had the right to limit consent only to a specific Beneficiary
and that the spouse voluntarily elected to relinquish such right. In
the event no valid designation of Beneficiary exists at the time of the
Participant's death, the death benefit shall be payable to his estate.
6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to his
Retirement Date or other termination of his employment, all amounts credited to
such Participant's Combined Account shall become fully Vested. In the event of a
Participant's Total and Permanent Disability, the Trustee, in accordance with
the provisions of Sections 6.5 and 6.7, shall distribute to such Participant all
amounts credited to such Participant's Combined Account as though he had
retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or subsequent to
the termination of a Participant's employment for any reason other than
death, Total and Permanent Disability or retirement, the Administrator
may direct the Trustee to segregate the amount of the Vested portion of
such Terminated Participant's Combined Account and invest the aggregate
amount thereof in a separate, federally insured savings account,
certificate of deposit, common or collective trust fund of a bank or a
deferred annuity. In the event the Vested portion of a Participant's
Combined Account is not segregated, the amount shall remain in a
separate account for the Terminated Participant and share in
allocations pursuant to Section 4.4 until such time as a
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distribution is made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant shall be made
on the occurrence of an event which would result in the distribution
had the Terminated Participant remained in the employ of the Employer
(upon the Participant's death, Total and Permanent Disability or Normal
Retirement). However, at the election of the Participant, the
Administrator shall direct the Trustee to cause the entire Vested
portion of the Terminated Participant's Combined Account to be payable
to such Terminated Participant. Any distribution under this paragraph
shall be made in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all notice
and consent requirements of Code Sections 417 and 41 l(a)(l 1) and the
Regulations thereunder.
If the value of a Terminated Participant's Vested benefit derived from
Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire Vested
benefit to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall
be deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
Years of Service Percentage
Less than 3 0%
3 20%
4 40%
5 60%
6 80%
7 100%
(c) Notwithstanding the vesting provided for in paragraph (b) above,
for any Top Heavy Plan Year, the Vested portion of the Participant's
Account of any Participant who has an Hour of Service after the Plan
becomes top heavy shall be a percentage of the total amount credited to
his Participant's Account determined on the basis of the Participant's
number of Years of Service according to the following schedule:
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Vesting Schedule
Years of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 100%
If in any subsequent Plan Year, the Plan ceases to be a Top Heavy Plan,
the Administrator shall revert to the vesting schedule in effect before
this Plan became a Top Heavy Plan. Any such reversion shall be treated
as a Plan amendment pursuant to the terms of the Plan.
(d) Notwithstanding the vesting schedule above, the Vested percentage
of a Participant's Account shall not be less than the Vested percentage
attained as of the later of the effective date or adoption date of this
amendment and restatement.
(e) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(f) The computation of a Participant's nonforfeitable percentage of his
interest in the Plan shall not be reduced as the result of any direct
or indirect amendment to this Plan. For this purpose, the Plan shall be
treated as having been amended if the Plan provides for an automatic
change in vesting due to a change in top heavy status. In the event
that the Plan is amended to change or modify any vesting schedule, a
Participant with at least three (3) Years of Service as of the
expiration date of the election period may elect to have his
nonforfeitable percentage computed under the Plan without regard to
such amendment. If a Participant fails to make such election, then such
Participant shall be subject to the new vesting schedule. The
Participant's election period shall commence on the adoption date of
the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(g) (l) If any Former Participant shall be reemployed by the
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Employer before a l-Year Break in Service occurs, he shall
continue to participate in the Plan in the same manner as if
such termination had not occurred.
(2) If any Former Participant shall be reemployed by the
Employer before five (5) consecutive l-Year Breaks in Service,
and such Former Participant had received, or was deemed to
have received, a distribution of his entire Vested interest
prior to his reemployment, his forfeited account shall be
reinstated only if he repays the full amount distributed to
him before the earlier of five (5) years after the first date
on which the Participant is subsequently reemployed by the
Employer or the close of the first period of five (5)
consecutive l-Year Breaks in Service commencing after the
distribution, or in the event of a deemed distribution, upon
the reemployment of such Former Participant. In the event the
Former Participant does repay the full amount distributed to
him, or in the event of a deemed distribution, the
undistributed portion of the Participant's Account must be
restored in full, unadjusted by any gains or losses occurring
subsequent to the Anniversary Date or other valuation date
coinciding with or preceding his termination. The source for
such reinstatement shall first be any Forfeitures occurring
during the year. If such source is insufficient, then the
Employer shall contribute an amount which is sufficient to
restore any such forfeited Accounts provided, however, that if
a discretionary contribution is made for such year pursuant to
Section 4.1(d), such contribution shall first be applied to
restore any such Accounts and the remainder shall be allocated
in accordance with Section 4.4.
(3) If any Former Participant is reemployed after a l-Year
Break in Service has occurred, Years of Service shall include
Years of Service prior to his lYear Break in Service subject
to the following rules:
(i) If a Former Participant has a l-Year Break in
Service, his prebreak and post-break service shall be
used for computing Years of Service for eligibility
and for vesting purposes only after he has been
employed for one (1) Year of Service following the
date of his reemployment with the Employer;
(ii) Any Former Participant who under the Plan does
not have a nonforfeitable right to any interest in
the Plan resulting from Employer contributions shall
lose credits otherwise allowable under (i) above if
his consecutive l-Year Breaks in Service equal or
exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of SeNice,
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(iii) After five (5) consecutive l-Year Breaks in
Service, a Former Participant's Vested Account
balance attributable to pre-break service shall not
be increased as a result of post-break service;
(iv) If a Former Participant who has not had his
Years of Service before a l-Year Break in Service
disregarded pursuant to (ii) above completes one (1)
Year of Service for eligibility purposes following
his reemployment with the Employer, he shall
participate in the Plan retroactively from his date
of reemployment;
(v) If a Former Participant who has not had his Years
of Service before a l-Year Break in Service
disregarded pursuant to (ii) above completes a Year
of Service (a l-Year Break in Service previously
occurred, but employment had not terminated), he
shall participate in the Plan retroactively from the
first day of the Plan Year during which he completes
one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a) (l) Unless otherwise elected as provided below, a
Participant who is married on the "annuity starting date"
and who does not die before the "annuity starting date"
shall receive the value of all of his benefits in the form
of a joint and survivor annuity. The joint and survivor
annuity is an annuity that commences immediately and shall
be equal in value to a single life armuity. Such joint and
survivor benefits following the Participant's death shall
continue to the spouse during the spouse's lifetime at a
rate equal to 50% of the rate at which such benefits were
payable to the Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint
and survivor annuity and automatic form of payment for the
purposes of this Plan. However, the Participant may elect to
receive a smaller annuity benefit with continuation of
payments to the spouse at a rate of seventy-five percent
(75%) or one hundred percent (100%) of the rate payable to a
Participant during his lifetime, which alternative joint and
survivor annuity shall be equal in value to the automatic
joint and 50% survivor annuity. An unmarried Participant
shall receive the value of his benefit in the form of a life
annuity. Such unmarried Participant, however, may elect in
writing to waive the life annuity. The election must comply
with the provisions of this Section as if it were an
election to waive the joint and survivor annuity by a
married Participant, but without the spousal consent
requirement. The Participant may elect to have any annuity
provided for in this Section distributed upon the attainment
of the "earliest retirement age" under the Plan. The
"earliest retirement age" is the earliest date on which,
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under the Plan, the Participant could elect to receive
retirement benefits.
(2) Any election to waive the joint and survivor annuity must
be made by the Participant in writing during the election
period and be consented to by the Participant's spouse. If the
spouse is legally incompetent to give consent, the spouse's
legal guardian, even if such guardian is the Participant, may
give consent. Such election shall designate a Beneficiary (or
a form of benefits) that may not be changed without spousal
consent (unless the consent of the spouse expressly permits
designations by the Participant without the requirement of
further consent by the spouse). Such spouse's consent shall be
irrevocable and must acknowledge the effect of such election
and be witnessed by a Plan representative or a notary public.
Such consent shall not be required if it is established to the
satisfaction of the Administrator that the required consent
cannot be obtained because there is no spouse, the spouse
cannot be located, or other circumstances that may be
prescribed by Regulations. The election made by the
Participant and consented to by his spouse may be revoked by
the Participant in writing without the consent of the spouse
at any time during the election period. The number of
revocations shall not be limited. Any new election must comply
with the requirements of this paragraph. A former spouse's
waiver shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor
annuity shall be the 90 day period ending on the "annuity
starting date."
(4) For purposes of this Section, the "annuity starting date"
means the first day of the first period for which an amount is
paid as an annuity, or, in the case of a benefit not payable
in the form of an annuity, the first day on which all events
have occurred which entitle the Participant to such benefit.
(5) With regard to the election, the Administrator shall
provide to the Participant no less than 30 days and no more
than 90 days before the "annuity starting date" a written
explanation of:
(i) the terms and conditions of the joint and
survivor annuity, and
(ii) the Participant's right to make, and the effect
of, an election to waive the joint and survivor
annuity, and
(iii) the right of the Participant's spouse to
consent
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to any election to waive the joint and
survivor annuity, and
(iv) the right of the Participant to revoke such
election, and the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a)(2) above not to receive his benefit in the form of a
joint and survivor annuity, or if such Participant is not married, in
the form of a life annuity, the Administrator, pursuant to the election
of the Participant, shall direct the Trustee to distribute to a
Participant or his Beneficiary any amount to which he is entitled under
the Plan in one or more of the following methods:
(1) One lump-sum payment in cash;
(2) Payments over a period certain in monthly, quarterly,
semiannual, or annual cash installments. In order to provide
such installment payments, the Administrator may (A) segregate
the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit in a bank or savings
and loan association, money market certificate or other liquid
shortterm security or (B) purchase a nontransferable annuity
contract for a term certain (with no life contingencies)
providing for such payment. The period over which such payment
is to be made shall not extend beyond the Participant's life
expectancy (or the life expectancy of the Participant and his
designated Beneficiary).
(3) Purchase of or providing an annuity. However, such annuity
may not be in any form that will provide for payments over a
period extending beyond either the life of the Participant (or
the lives of the Participant and his designated Beneficiary)
or the life expectancy of the Participant (or the life
expectancy of the Participant and his designated Beneficiary).
(c) The present value of a Participant's joint and survivor annuity
derived from Employer and Employee contributions may not be paid
without his written consent if the value exceeds, or has ever exceeded,
$3,500 at the time of any prior distribution. Further, the spouse of a
Participant must consent in writing to any immediate distribution. If
the value of the Participant's benefit derived from Employer and
Employee contributions does not exceed $3,500 and has never exceeded
$3,500 at the time of any prior distribution, the Administrator may
immediately distribute such benefit without such Participant's consent.
No distribution may be made under the preceding sentence after the
"annuity starting date" unless the Participant and his spouse consent
in writing to such distribution. Any written consent required under
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this paragraph must be obtained not more than 90 days before
commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)(2).
(d) Any distribution to a Participant who has a benefit which exceeds,
or has ever exceeded, $3,500 at the time of any prior distribution
shall require such Participant's consent if such distribution commences
prior to the later of his Normal Retirement Age or age 62. With regard
to this required consent:
(1) No consent shall be valid unless the Participant has
received a general description of the material features and an
explanation of the relative values of the optional forms of
benefit available under the Plan that would satisfy the notice
requirements of Code Section 417.
(2) The Participant must be informed of his right to defer
receipt of the distribution. If a Participant fails to
consent, it shall be deemed an election to defer the
commencement of payment of any benefit. However, any election
to defer the receipt of benefits shall not apply with respect
to distributions which are required under Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall
be provided no less than 30 days and no more than 90 days
before the "annuity starting date".
(4) Written consent of the Participant to the distribution
must not be made before the Participant receives the notice
and must not be made more than 90 days before the "annuity
starting date".
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent
to the distribution.
(e) Notwithstanding any provision in the Plan to the contrary, the
distribution of a Participant's benefits, whether under the Plan or
through the purchase of an annuity contract, shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder (including
Regulation 1.401(a)(9)-2), the provisions of which are incorporated
herein by reference:
(1) A Participant's benefits shall be distributed to him not
later than April 1st of the calendar year following the later
of (i) the calendar year in which the Participant attains age
70 1/2 or (ii) the calendar year in which the Participant
retires, provided, however, that this clause (ii) shall not
apply in the case of a Participant who is a "five (5) percent
owner" at any time during the five (5)
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Plan Year period ending in the calendar year in which he
attains age 70 1/2 or, in the case of a Participant who
becomes a "five (5) percent owner" during any subsequent Plan
Year, clause (ii) shall no longer apply and the required
beginning date shall be the April 1st of the calendar year
following the calendar year in which such subsequent Plan Year
ends. Alternatively, distributions to a Participant must begin
no later than the applicable April 1st as determined under the
preceding sentence and must be made over the life of the
Participant (or the lives of the Participant and the
Participant's designated Beneficiary) or the life expectancy
of the Participant (or the life expectancies of the
Participant and his designated Beneficiary) in accordance with
Regulations. Notwithstanding the foregoing, clause (ii) above
shall not apply to any Participant unless the Participant had
attained age 70 1/2 before January 1, 1988 and was not a "five
(5) percent owner" at any time during the Plan Year ending
with or within the calendar year in which the Participant
attained age 66 1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a)(9)(G) and the Regulations
thereunder.
Additionally, for calendar years beginning before 1989, distributions
may also be made under an alternative method which provides that the
then present value of the payments to be made over the period of the
Participant's life expectancy exceeds fifty percent (50%) of the then
present value of the total payments to be made to the Participant and
his Beneficiaries.
(f) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity)
may, at the election of the Participant or the Participant's spouse, be
redetermined in accordance with Regulations. The election, once made,
shall be irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed
using the return multiples in Tables V and VI of Regulation 1.72-9.
(g) All annuity Contracts under this Plan shall be non-transferable
when distributed. Furthermore, the terms of any annuity Contract
purchased and distributed to a Participant or spouse shall comply with
all of the requirements of the Plan.
(h) If a distribution is made at a time when a Participant is not fully
Vested in his Participant's Account (employment has not terminated) and
the Participant may increase the Vested
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percentage in such account:
(1) a separate account shall be established for the
Participant's interest in the Plan as of the time of the
distribution; and
(2) at any relevant time, the Participant's Vested portion of
the separate account shall be equal to an amount ("X")
determined by the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested
percentage at the relevant time, AB is the account balance at
the relevant time, D is the amount of distribution, and R is
the ratio of the account balance at the relevant time to the
account balance after distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested Participant
who dies before the annuity starting date and who has a surviving
spouse shall have his death benefit paid to his surviving spouse in the
form of a Pre-Retirement Survivor Annuity. The Participant's spouse may
direct that payment of the Pre-Retirement Survivor Annuity commence
within a reasonable period after the Participant's death. If the spouse
does not so direct, payment of such benefit will commence at the time
the Participant would have attained the later of his Normal Retirement
Age or age 62. However, the spouse may elect a later commencement date.
Any distribution to the Participant's spouse shall be subject to the
rules specified in Section 6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity before
the Participant's death must be made by the Participant in writing
during the election period and shall require the spouse's irrevocable
consent in the same manner provided for in Section 6.5(a)(2). Further,
the spouse's consent must acknowledge the specific nonspouse
Beneficiary. Notwithstanding the foregoing, the nonspouse Beneficiary
need not be acknowledged, provided the consent of the spouse
acknowledges that the spouse has the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elects to
relinquish such right.
(c) The election period to waive the Pre-Retirement Survivor Annuity
shall begin on the first day of the Plan Year in which the Participant
attains age 35 and end on the date of the Participant's death. An
earlier waiver (with spousal consent) may be made provided a written
explanation of the Pre-Retirement Survivor Annuity is given to the
Participant and such waiver becomes invalid at the beginning of the
Plan Year in which the Participant turns age 35. In the event a Vested
Participant
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separates from service prior to the beginning of the election period,
the election period shall begin on the date of such separation from
service.
(d) With regard to the election, the Administrator shall provide each
Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation of
the Pre-Retirement Survivor Annuity containing comparable information
to that required pursuant to Section 6.5(a)(5). For the purposes of
this paragraph, the term "applicable period" means, with respect to a
Participant, whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year
in which the Participant attains age 32 and ending with the
close of the Plan Year preceding the Plan Year in which the
Participant attains age 35;
(2) A reasonable period after the individual becomes a
Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retirement Survivor Annuity
with respect to the Participant;
(4) A reasonable period ending after Code Section 401(a)(11)
applies to the Participant; or
(5) A reasonable period after separation from service in the
case of a Participant who separates before attaining age 35.
For this purpose, the Administrator must provide the
explanation beginning one year before the separation from
service and ending one year after such separation. If such a
Participant thereafter returns to employment with the
Employer, the applicable period for such Participant shall be
redetermined.
For purposes of applying this Section 6.6(d), a reasonable
period ending after the enumerated events described in
paragraphs (2), (3) and (4) is the end of the two year period
beginning one year prior to the date the applicable event
occurs, and ending one year after that date.
(e) If the present value of the Pre-Retirement Survivor Annuity derived
from Employer and Employee contributions does not exceed $3,500 and has
never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to
the Participant's spouse. No distribution may be made under the
preceding sentence after the annuity starting date unless the spouse
consents in writing. If the value exceeds, or has ever exceeded, $3,500
at the time of any prior distribution, an immediate distribution of the
entire
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amount may be made to the surviving spouse, provided such surviving
spouse consents in writing to such distribution. Any written consent
required under this paragraph must be obtained not more than 90 days
before commencement of the distribution and shall be made in a manner
consistent with Section 6.5(a)(2).
(f) (l) In the event the death benefit is not paid in the form of
a PreRetirement Survivor Annuity, it shall be paid to the
Participant's Beneficiary by either of the following methods,
as elected by the Participant (or if no election has been made
prior to the Participant's death, by his Beneficiary), subject
to the rules specified in Section 6.6(g):
(i) One lump-sum payment in cash;
(ii) Payment in monthly, quarterly, semi-annual, or
annual cash installments over a period to be
determined by the Participant or his Beneficiary.
After periodic installments commence, the Beneficiary
shall have the right to direct the Trustee to reduce
the period over which such periodic installments
shall be made, and the Trustee shall adjust the cash
amount of such periodic installments accordingly.
(2) In the event the death benefit payable pursuant to Section
6.2 is payable in installments, then, upon the death of the
Participant, the Administrator may direct the Trustee to
segregate the death benefit into a separate account, and the
Trustee shall invest such segregated account separately, and
the funds accumulated in such account shall be used for the
payment of the installments.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in
accordance with the following requirements and shall otherwise comply
with Code Section 401(a)(9) and the Regulations thereunder. If it is
determined pursuant to Regulations that the distribution of a
Participant's interest has begun and the Participant dies before his
entire interest has been distributed to him, the remaining portion of
such interest shall be distributed at least as rapidly as under the
method of distribution selected pursuant to Section 6.5 as of his date
of death. If a Participant dies before he has begun to receive any
distributions of his interest under the Plan or before distributions
are deemed to have begun pursuant to Regulations, then his death
benefit shall be distributed to his Beneficiaries by December 31st of
the calendar year in which the fifth anniversary of his date of death
occurs.
However, in the event that the Participant's spouse (determined
as of the date of the Participant's death) is his Beneficiary,
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then in lieu of the preceding rules, distributions must be made over
the life of the spouse (or over a period not extending beyond the life
expectancy of the spouse) and must commence on or before the later of:
(1) December 31st of the calendar year immediately following
the calendar year in which the Participant died; or
(2) December 31 st of the calendar year in which the
Participant would have attained age 70 1/2. If the surviving
spouse dies before distributions to such 4 spouse begin, then
the 5-year distribution requirement of this Section shall
apply as if the spouse was the Participant.
(h) For purposes of this Section, the life expectancy of a Participant
and a Participant's spouse (other than in the case of a life annuity)
may, at the election of the Participant or the Participant's spouse, be
redetermined in accordance with regulations. The election, once made,
shall be irrevocable. If no election is made by the time distributions
must commence, then the life expectancy of the Participant and the
Participant's spouse shall not be subject to recalculation. Life
expectancy and joint and last survivor expectancy shall be computed
using the return multiples in Tables V and VI of Regulation 1.72-9.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to make a
distribution or to commence a series of payments on or as of an Anniversary
Date, the distribution may be made or begun on such date or as soon thereafter
as is practicable. However, unless a Former Participant elects in writing to
defer the receipt of benefits (such election may not result in a death benefit
that is more than incidental), the payment of benefits shall begin not later
than the 60th day after the close of the Plan Year in which the latest of the
following events occurs:
(a)the date on which the Participant attains the earlier of age
65 or the Normal Retirement Age specified herein;
(b) the 10th anniversary of the year in which the Participant
commenced participation in the Plan; or
(c) the date the Participant terminates his service with the
Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the Administrator may
direct that such distribution be paid to the legal guardian, or if none, to a
parent of such Beneficiary or a responsible adult with whom the Beneficiary
maintains his residence, or to the custodian for such Beneficiary under the
Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted by the
laws of the state in
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which said Beneficiary resides. Such a payment to the legal guardian, custodian
or parent of a minor Beneficiary shall fully discharge the Trustee, Employer,
and Plan from further liability on account thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall direct
the Trustee to distribute to any Participant in any one Plan Year up to
the lesser of 100% of his Participant's Elective Account valued as of
the last Anniversary Date or other valuation date or the amount
necessary to satisfy the immediate and heavy financial need of the
Participant. Any distribution made pursuant to this Section shall be
deemed to be made as of the first day of the Plan Year or, if later,
the valuation date immediately preceding the date of distribution, and
the Participant's Elective Account shall be reduced accordingly.
Withdrawal under this Section shall be authorized only if the
distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of
his dependents (as defined in Code Section 152) or necessary
for these persons to obtain medical care;
(2) The costs directly related to the purchase of a
principal residence for the Participant (excluding mortgage
payments);
(3) Payment of tuition and related educational fees for the
next twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the
Participant from his principal residence or foreclosure on the
mortgage of the Participant's principal residence.
(b) No distribution shall be made pursuant to this Section unless the
Administrator, based upon the Participant's representation and such
other facts as are known to the Administrator, determines that all of
the following conditions are satisfied:
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(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The
amount of the immediate and heavy financial need may include
any amounts necessary to pay any federal, state, or local
income taxes or penalties reasonably anticipated to result
from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by
the Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and
voluntary Employee contributions will be suspended for at
least twelve (12) months after receipt of the hardship
distribution or, the Participant, pursuant to a legally
enforceable agreement, will suspend his elective deferrals and
voluntary Employee contributions to the Plan and all other
plans maintained by the Employer for at least twelve (12)
months after receipt of the hardship distribution; and
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals
for the Participant's taxable year immediately following the
taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next
taxable year less the amount of such Participant's elective
deferrals for the taxable year of the hardship distribution.
(c) Notwithstanding the above, for Plan Years beginning after December
31, 1988, distributions from the Participant's Elective Account
pursuant to this Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as of the end of
the last Plan Year ending before July 1, 1989, plus the total
Participant's Deferred Compensation after such date, reduced by the
amount of any previous distributions pursuant to this Section.
(d) Any distribution made pursuant to this Section shall be made in a
manner which is consistent with and satisfies the provisions of Section
6.5, including, but not limited to, all notice and consent requirements
of Code Sections 417 and 41 l(a)(l 1) and the Regulations thereunder.
6.11 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant in this
Plan shall be subject to the rights afforded to any "alternate payee" under a
"qualified domestic relations order."
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Furthermore, a distribution TO AN "ALTERNATE PAYEE" shall be permitted if such
distribution is authorized by a "qualified domestic relations order," even if
the affected Participant has not separated from service and has not reached the
"earliest retirement age" under the Plan. For the purposes of this Section,
"alternate payee," "qualified domestic relations order" and "earliest retirement
age" shall have the meaning set forth under Code Section 414(p).
ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by the
Employer, to invest, manage, and control the Plan assets subject,
however, to the direction of an Investment Manager if the Trustee
should appoint such manager as to all or a portion of the assets of the
Plan;
(b) At the direction of the Administrator, to pay benefits required
under the Plan to be paid to Participants, or, in the event of their
death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish to
the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.6; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep the
Trust Fund invested without distinction between principal and income
and in such securities or property, real or personal, wherever
situated, as the Trustee shall deem advisable, including, but not
limited to, stocks, common or preferred, bonds and other evidences of
indebtedness or ownership, and real estate or any interest therein. The
Trustee shall at all times in making investments of the Trust Fund
consider, among other factors, the short and long-term financial needs
of the Plan on the basis of information furnished by the Employer. In
making such investments, the Trustee shall not be restricted to
securities or other property of the character expressly authorized by
the applicable law for trust investments; however, the Trustee shall
give due regard to any limitations imposed by the Code or the Act so
that at all times the Plan may qualify as a qualified Profit Sharing
Plan and Trust.
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(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical
and record-keeping nature.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase
of securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to purchase, or
otherwise dispose of any securities or other property held by the
Trustee, by private contract or at public auction. No person dealing
with the Trustee shall be bound to see to the application of the
purchase money or to inquire into the validity, expediency, or
propriety of any such sale or other disposition, with or without
advertisement;
(c) To vote upon any stocks, bonds, or other securities; to give
general or special proxies or powers of attorney with or without power
of substitution; to exercise any conversion privileges, subscription
rights or other options, and to make any payments incidental thereto;
to oppose, or to consent to, or otherwise participate in, corporate
reorganizations or other changes affecting corporate securities, and to
delegate discretionary powers, and to pay any assessments or charges in
connection therewith; and generally to exercise any of the powers of an
owner with respect to stocks, bonds, securities, or other property;
(d) To cause any securities or other property to be registered in the
Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee
shall be bound to see to the application of the money lent or to
inquire into the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
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balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder, whether or not such securities or other property
would normally be purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all documents of
transfer and conveyance and any and all other instruments that may be
necessary or appropriate to carry out the powers herein granted;
(i) To settle, compromise, or submit to arbitration any claims, debts,
or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the Plan
in all suits and legal and administrative proceedings;
(j) To employ suitable agents and counsel and to pay their reasonable
expenses and compensation, and such agent or counsel may or may not be
agent or counsel for the Employer;
(k) To apply for and procure from responsible insurance companies, to
be selected by the Administrator, as an investment of the Trust Fund
such annuity, or other Contracts (on the life of any Participant) as
the Administrator shall deem proper; to exercise, at any time or from
time to time, whatever rights and privileges may be granted under such
annuity, or other Contracts; to collect, receive, and settle for the
proceeds of all such annuity or other Contracts as and when entitled to
do so under the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings accounts
bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the options
are traded on and purchased through a national securities exchange
registered under the Securities Exchange Act of 1934, as amended, or,
if the options are not traded on a national securities exchange, are
guaranteed by a member firm of the New York Stock Exchange;
(p) To deposit monies in federally insured savings accounts or
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certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and
to commingle such assets and make joint or common investments and carry
joint accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments or
accounts or any pooled assets of the two or more trusts in accordance
with their respective interests;
(r) To do all such acts and exercise all such rights and privileges,
although not specifically mentioned herein, as the Trustee may deem
necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the Trustee
shall be exercised in the sole fiduciary discretion of the Trustee.
However, if Participants are so empowered by the Administrator, each
Participant may direct the Trustee to separate and keep separate all or
a portion of his account; and further each Participant is authorized
and empowered, in his sole and absolute discretion, to give directions
to the Trustee pursuant to the procedure established by the
Administrator and in such form as the Trustee may require concerning
the investment of the Participant's Directed Investment Account. The
Trustee shall comply as promptly as practicable with directions given
by the Participant hereunder. The Trustee may refuse to comply with any
direction from the Participant in the event the Trustee, in its sole
and absolute discretion, deems such directions improper by virtue of
applicable law. The Trustee shall not be responsible or liable for any
loss or expense which may result from the Trustee's refusal or failure
to comply with any directions from the Participant. Any costs and
expenses related to compliance with the Participant's directions shall
be borne by the Participant's Directed Investment Account.
7.4 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from time to time, in
accordance with the terms of the Plan, make payments out of the Trust Fund. The
Trustee shall not be responsible in any way for the application of such
payments.
7.5 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall from time to
time be agreed upon in writing by the Employer and the Trustee. An individual
serving as Trustee who already receives full-time pay from the Employer shall
not receive compensation from the Plan. In addition, the Trustee shall be
reimbursed for any
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reasonable expenses, including reasonable counsel fees incurred by it as
Trustee. Such compensation and expenses shall be paid from the Trust Fund unless
paid or advanced by the Employer. All taxes of any kind and all kinds whatsoever
that may be levied or assessed under existing or future laws upon, or in respect
of, the Trust Fund or the income thereof, shall be paid from the Trust Fund.
7.6 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the Anniversary Date or
receipt of the Employer's contribution for each Plan Year, the Trustee shall
furnish to the Employer and Administrator a written statement of account with
respect to the Plan Year for which such contribution was made setting forth:
(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales
or other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator deems
appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be
deemed an approval thereof. The approval by the Employer of any
statement of account shall be binding as to all matters embraced
therein as between the Employer and the Trustee to the same extent as
if the account of the Trustee had been settled by judgment or decree in
an action for a judicial settlement of its account in a court of
competent jurisdiction in which the Trustee, the Employer and all
persons having or claiming an interest in the Plan were parties;
provided, however, that nothing herein contained shall deprive the
Trustee of its right to have its accounts judicially settled if the
Trustee so desires.
7.7 AUDIT
(a) If an audit of the Plan's records shall be required by the Act and
the regulations thereunder for any Plan Year, the Administrator shall
direct the Trustee to engage on behalf of all Participants an
independent qualified public accountant for that purpose. Such
accountant shall, after an audit of the books and records of the Plan
in accordance with generally accepted auditing standards, within a
reasonable period after the close of the Plan Year, furnish to the
Administrator and the Trustee a
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report of his audit setting forth his opinion as to whether any
statements, schedules or lists that are required by Act Section 103 or
the Secretary of Labor to be filed with the Plan's annual report, are
presented fairly in conformity with generally accepted accounting
principles applied consistently. All auditing and accounting fees shall
be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred
twenty (120) days after the end of the Plan Year or by such other date
as may be prescribed under regulations of the Secretary of Labor.
7.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the Employer,
at least thirty (30) days before its effective date, a written notice
of his resignation.
(b) The Employer may remove the Trustee by mailing by registered or
certified mail, addressed to such Trustee at his last known address, at
least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any Trustee,
a successor may be appointed by the Employer; and such successor, upon
accepting such appointment in writing and delivering same to the
Employer, shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with
like respect as if he were originally named as a Trustee herein. Until
such a successor is appointed, the remaining Trustee or Trustees shall
have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such
designation, the successor shall, without further act, become vested
with all the estate, rights, powers, discretions, and duties of his
predecessor with the like effect as if he were originally named as
Trustee herein immediately upon the death, resignation, incapacity, or
removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he shall
furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year
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during which he served as Trustee. This statement shall be either
(i) included as part of the annual statement of account for
the Plan Year required under Section 7.6 or
(ii) set forth in a special statement. Any such special
statement of account should be rendered to the Employer no
later than the due date of the annual statement of account for
the Plan Year. The procedures set forth in Section 7.6 for the
approval by the Employer of annual statements of account shall
apply to any special statement of account rendered hereunder
and approval by the Employer of any such special statement in
the manner provided in Section 7.6 shall have the same effect
upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have
any duty or responsibility to investigate the acts or
transactions of any predecessor who has rendered all
statements of account required by Section 7.6 and this
subparagraph.
7.9 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee at the
direction of the Administrator shall transfer the Vested interest, if any, of
such Participant in his account to another tNSt forming part of a pension,
profit sharing or stock bonus plan maintained by such Participant's new employer
and represented by said employer in writing as meeting the requirements of Code
Section 401(a), provided that the trust to which such transfers are made permits
the transfer to be made.
7.10 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Section, a
distributed may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributed in a direct rollover.
(b) For purposes of this Section the following definitions shall
apply:
(1) An eligible rollover distribution is any distribution of
all or any portion of the balance to the credit of the
distributee, except that an eligible rollover distribution
does not include: any distribution that is one of a series of
substantially equal periodic payments (not less frequently
than annually) made for the life (or life expectancy) of the
distributee or the joint lives (or joint life expectancies) of
the distributee and the distributee's
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designated beneficiary, or for a specified period of ten years
or more; any distribution to the extent such distribution is
required under Code Section 401(a)(9); and the portion of any
distribution that is not includible in gross income
(determined without regard to the exclusion for net unrealized
appreciation with respect to employer securities).
(2) An eligible retirement plan is an individual retirement
account described in Code Section 408(a), an individual
retirement annuity described in Code Section 408(b), an
annuity plan described in Code Section 403(a), or a qualified
tNSt described in Code Section 401(a), that accepts the
distributee's eligible rollover distribution. However, in the
case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(3) A distributes includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse
and the Employee's or former Employee's spouse or former
spouse who is the alternate payee under a qualified domestic
relations order, as defined in Code Section 414(p), are
distributees with regard to the interest of the spouse or
former spouse.
(4) A direct rollover is a payment by the plan to the
eligible retirement plan specified by the distributed
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the Plan,
subject to the limitations of this Section. Any such amendment shall be
adopted by formal action of the Employer's board of directors and
executed by an officer authorized to act on behalf of the Employer.
However, any amendment which affects the rights, duties or
responsibilities of the Trustee and Administrator may only be made with
the Trustee's and Administrator's written consent. Any such amendment
shall become effective as provided therein upon its execution. The
Trustee shall not be required to execute any such amendment unless the
Tmst provisions contained herein are a part of the Plan and the
amendment affects the duties of the Trustee hereunder.
(b) No amendment to the Plan shall be effective if it authorizes or
permits any part of the Tmst Fund (other than such part as is required
to pay taxes and administration expenses) to be used for or diverted to
any purpose other than for the exclusive benefit
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of the Participants or their Beneficiaries or estates; or causes any
reduction in the amount credited to the account of any Participant; or
causes or permits any portion of the Tmst Fund to revert to or become
property of the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger,
plan transfer or similar transaction) shall be effective to the extent
it eliminates or reduces any "Section 41 l(d)(6) protected benefit" or
adds or modifies conditions relating to "Section 41 l(d)(6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 41 l(d)(6) protected benefits" are benefits
described in Code Section 41 l(d)(6)(A), early retirement benefits and
retirement-type subsidies, and optional forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the Plan
by delivering to the Trustee and Administrator written notice of such
termination. Upon any full or partial termination, all amounts credited
to the affected Participants' Combined Accounts shall become 100%
Vested as provided in Section 6.4 and shall not thereafter be subject
to forfeiture, and all unallocated amounts shall be allocated to the
accounts of all Participants in accordance with the provisions hereof.
(b) Upon the full termination of the Plan, the Employer shall direct
the distribution of the assets of the Tmst Fund to Participants in a
manner which is consistent with and satisfies the provisions of Section
6.5. Distributions to a Participant shall be made in cash or through
the purchase of irrevocable nontransferable deferred commitments from
an insurer. Except as permitted by Regulations, the termination of the
Plan shall not result in the reduction of "Section 41 l(d)(6) protected
benefits" in accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets and/or
liabilities may be transferred to any other plan and tNSt only if the benefits
which would be received by a Participant of this Plan, in the event of a
termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 41 l(d)(6) protected
benefits" in accordance with Section 8.1(c).
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ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the Employer and
any Participant or to be a consideration or an inducement for the employment of
any Participant or Employee. Nothing contained in this Plan shall be deemed to
give any Participant or Employee the right to be retained in the service of the
Employer or to interfere with the right of the Employer to discharge any
Participant or Employee at any time regardless of the effect which such
discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which shall be
payable out of the Tmst Fund to any person (including a Participant or
his Beneficiary) shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, or charge,
and any attempt to anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void; and no such benefit
shall in any manner be liable for, or subject to, the debts, contracts,
liabilities, engagements, or torts of any such person, nor shall it be
subject to attachment or legal process for or against such person, and
the same shall not be recognized by the Trustee, except to such extent
as may be required by law.
(b) This provision shall not apply to a "qualified domestic relations
order" defined in Code Section 414(p), and those other domestic
relations orders permitted to be so treated by the Administrator under
the provisions of the Retirement Equity Act of 1984. The Administrator
shall establish a written procedure to determine the qualified status
of domestic relations orders and to administer distributions under such
qualified orders. Further, to the extent provided under a "qualified
domestic relations order," a former spouse of a Participant shall be
treated as the spouse or surviving spouse for all purposes under the
Plan.
9.3 CONSTRUCTION OF PLAN
This Plan and Tmst shall be constmed and enforced according to the Act and the
laws of the State of Florida, other than its laws respecting choice of law, to
the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter gender,
they shall be constmed as though they were also used in another gender in all
cases where they would so apply, and whenever any words are used herein in the
singular or plural form, they shall
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be constmed as though they were also used in the other form in all cases where
they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the Tmst and/or
Plan established hereunder to which the Trustee or the Administrator may be a
party, and such claim, suit, or proceeding is resolved in favor of the Trustee
or Administrator, they shall be entitled to be reimbursed from the Tmst Fund for
any and all costs, attorney's fees, and other expenses pertaining thereto
incurred by them for which they shall have become liable.
9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted by
law, it shall be impossible by operation of the Plan or of the Tmst, by
termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any tNSt fund maintained
pursuant to the Plan or any funds contributed thereto to be used for,
or diverted to, purposes other than the exclusive benefit of
Participants, Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Act Section 403(c)(2)(A), the
Employer may demand repayment of such excessive contribution at any
time within one (1) year following the time of payment and the Trustees
shall return such amount to the Employer within the one (1) year
period. Earnings of the Plan attributable to the excess contributions
may not be returned to the Employer but any losses attributable thereto
must reduce the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted by the
Act and regulations thereunder, shall be bonded in an amount not less than 10%
of the amount of the funds such Fiduciary handles; provided, however, that the
minimum bond shall be $1,000 and the maximum bond, $500,000. The amount of funds
handled shall be determined at the beginning of each Plan Year by the amount of
funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the
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cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Tmst Fund or by the Employer.
9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be responsible
for the validity of any Contract issued hereunder or for the failure on the part
of the insurer to make payments provided by any such Contract, or for the action
of any person which may delay payment or render a Contract null and void or
unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or to any
guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or required to do
or perform any act or matter or thing, it shall be done and performed by a
person duly authorized by its legally constituted authority.
9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the Administrator
and (3) the Trustee. The named Fiduciaries shall have only those specific
powers, duties, responsibilities, and obligations as are specifically given them
under the Plan. In general, the Employer shall have the sole responsibility for
making the contributions provided for under Section 4. 1; and shall have the
sole
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authority to appoint and remove the Trustee and the Administrator; to formulate
the Plan's "funding policy and method"; and to amend or terminate, in whole or
in part, the Plan. The Administrator shall have the sole responsibility for the
administration of the Plan, which responsibility is specifically described in
the Plan. The Trustee shall have the sole responsibility of management of the
assets held under the Tmst, except those assets, the management of which has
been assigned to an Investment Manager, who shall be solely responsible for the
management of the assets assigned to it, all as specifically provided in the
Plan. Each named Fiduciary warrants that any directions given, information
furnished, or action taken by it shall be in accordance with the provisions of
the Plan, authorizing or providing for such direction, information or action.
Furthermore, each named Fiduciary may rely upon any such direction, information
or action of another named Fiduciary as being proper under the Plan, and is not
required under the Plan to inquire into the propriety of any such direction,
information or action. It is intended under the Plan that each named Fiduciary
shall be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan. No named Fiduciary shall
guarantee the Tmst Fund in any manner against investment loss or depreciation in
asset value. Any person or group may serve in more than one Fiduciary capacity.
In the furtherance of their responsibilities hereunder, the "named Fiduciaries"
shall be empowered to interpret the Plan and Trust and to resolve ambiguities,
inconsistencies and omissions, which findings shall be binding, final and
conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for convenience of
reference and are to be ignored in any construction of the provisions hereof.
9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions to
this Plan are conditioned upon the initial qualification of the Plan
under Code Section 401. If the Plan receives an adverse determination
with respect to its initial qualification, then the Plan may return
such contributions to the Employer within one year after such
determination, provided the application for the determination is made
by the time prescribed by law for filing the Employer's return for the
taxable year in which the Plan was adopted, or such later date as the
Secretary of the Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except Sections
3.6, 3.7, and 4.1(f), any contribution by the Employer to the Tmst Fund
is conditioned upon the deductibility of the contribution by the
Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand
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repayment of such disallowed contribution and the Trustee shall return
such contribution within one (1) year following the disallowance.
Earnings of the Plan attributable to the excess contribution may not be
returned to the Employer, but any losses attributable thereto must
reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a uniform,
nondiscriminatory manner. In the event of any conflict between the terms of this
Plan and any Contract purchased hereunder, the Plan provisions shall control.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the same
Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold and
invest as one Tmst Fund all contributions made by Participating
Employers, as well as all increments thereof However, the assets of the
Plan shall, on an ongoing basis, be available to pay benefits to all
Participants and Beneficiaries under the Plan without regard to the
Employer or Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer
or a Participating Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such Participant's Combined
Account as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall
continue to his credit.
(d) All rights and values forfeited by termination of employment shall
inure only to the benefit of the Participants of the Employer or
Participating Employer by which the forfeiting Participant was
employed, except if the Forfeiture is for an Employee whose Employer is
an Affiliated Employer, then said
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Forfeiture shall inure to the benefit of the Participants of those
Employers who are Affiliated Employers. Should an Employee of one
("First") Employer be transferred to an associated ("Second") Employer
which is an Affiliated Employer, such transfer shall not cause his
account balance (generated while an Employee of "First" Employer) in
any manner, or by any amount to be forfeited. Such Employee's
Participant Combined Account balance for all purposes of the Plan,
including length of service, shall be considered as though he had
always been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) Any expenses of the Tmst which are to be paid by the Employer or
borne by the Tmst Fund shall be paid by each Participating Employer in
the same proportion that the total amount standing to the credit of all
Participants employed by such Employer bears to the total standing to
the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between Participating
Employers, and in the event of any such transfer, the Employee involved shall
carry with him his accumulated service and eligibility. No such transfer shall
effect a termination of employment hereunder, and the Participating Employer to
which the Employee is transferred shall thereupon become obligated hereunder
with respect to such Employee in the same manner as was the Participating
Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan Year shall be allocated
only among those Participants of the Employer or Participating Employer making
the contribution, except if the contribution is made by an Affiliated Employer,
in which event such contribution shall be allocated among all Participants of
all Participating Employers who are Affiliated Employers in accordance with the
provisions of this Plan. On the basis of the information furnished by the
Administrator, the Trustee shall keep separate books and records concerning the
affairs of each Participating Employer
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hereunder and as to the accounts and credits of the Employees of each
Participating Employer. The Trustee may, but need not, register Contracts so as
to evidence that a particular Participating Employer is the interested Employer
hereunder, but in the event of an Employee transfer from one Participating
Employer to another, the employing Employer shall immediately notify the Trustee
thereof.
10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke its
participation in the Plan. At the time of any such discontinuance or revocation,
satisfactory evidence thereof and of any applicable conditions imposed shall be
delivered to the Trustee. The Trustee shall thereafter transfer, deliver and
assign Contracts and other Tmst Fund assets allocable to the Participants of
such Participating Employer to such new Trustee as shall have been designated by
such Participating Employer, in the event that it has established a separate
pension plan for its Employees, provided however, that no such transfer shall be
made if the result is the elimination or reduction of any "Section 41 l(d)(6)
protected benefits" in accordance with Section 8.1(c). If no successor is
designated, the Trustee shall retain such assets for the Employees of said
Participating Employer pursuant to the provisions of Article VII hereof. In no
such event shall any part of the corpus or income of the Tmst as it relates to
such Participating Employer be used for or diverted to purposes other than for
the exclusive benefit of the Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary Ales or
regulations, binding upon all Participating Employers and all Participants, to
effectuate the purpose of this Article.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
VI Cement and Building Products, Inc.
By /S/ DONALD L. SMITH, JR.
----------------------------
EMPLOYER
ATTEST /S/ BEVERLY E. ZIROLLA
----------------------------
/S/ DONALD L. SMITH, JR.
TRUSTEE
/S/ RICHARD L. HORNSBY
----------------------------
TRUSTEE
/S/ GEOFFREY L. SMITH
----------------------------
TRUSTEE
94
EXHIBIT 10.14
AMENDMENT NO. 7 TO ST. JOHN'S DREDGING
AND DEEP WATER PIER CONSTRUCTION AGREEMENT
This Amendment No. 7 effective November 30, 1993 ("Amendment No. 7") to the St.
John's Dredging and Deep Water Pier Construction Agreement (the Agreement")
dated April 3, 1987 by and between ANTIGUA AND BARBUDA acting through its
government (hereinafter referred to as "Antigua") and ANTIGUA MASONRY PRODUCTS,
a corporation organized and existing under the laws of Antigua and Barbuda,
which assigned its interest to ANTIGUA HEAVY CONSTRUCTORS, LTD., a corporation
organized and existing under the laws of Antigua and Barbuda (hereinafter
referred to as ("Contractor"), as amended on June 15, 1988 ("Amendment No. 3"),
February 16, 1990 ("Amendment No. 4"), and on October 24, 1991 ("Amendment No.
5"). Amendments Nos. 1, 2, 3, 4, 5 and 6 are hereinafter collectively referred
to as the "Amendments". This Amendment No. 7 is made by and between Antigua and
Contractor. Except as otherwise set forth herein, terms defined in the Agreement
and in Amendments Nos. 1, 2, 3, 4, 5 and 6 shall have the same meaning when used
herein.
In consideration of the mutual covenants and agreements hereinafter set forth,
Antigua and Contractor agree as follows:
1. Article 17 is not amended or modified, except as
provided in Section 10 of Amendment No. 1 and Section
4 of Amendment No. 2 and except for the following:
a) As payment on principal and interest due on
the Notes, Antigua agrees to exempt Antigua
Development and Construction, Limited
("ADC") a wholly owned subsidiary of Antigua
Masonry Products, Limited, from payment of
all income taxes in Antigua arising from
ADC's contract with Dr. Alfred Erhart for
the development of the Jolly Harbor project.
Contractor will credit $400,000 against the
Antigua notes upon receipt of a certificate
or letter within thirty (30) days of the
date hereof, exempting ADC from the payment
of all income taxes in Antigua arising from
ADC's contract with Dr. Alfred Erhart for
the development of the Jolly Harbor project.
2. Article 28 of the Agreement, is hereby amended to
read in its entirety as follows:
ARTICLE 28
PAYMENT GUARANTEE OF DEEP BAY
DEVELOPMENT COMPANY LIMITED NOTES
Antigua hereby unconditionally guarantees payment of certain promissory notes
payable to Contractor and Antigua Masonry Products, Ltd. ("AMPL") by Deep Bay
Development Company, Limited ("Deep Bay") as follows:
<PAGE>
a) Note dated April 29, 1989 payable
to Contractor for road construction
(Hattons Hill) US$128,000
b) Note dated April 29, 1989 payable
to AMPL for construction materials
(concrete, stone, paving stone, etc.) 200,000
c) Note dated August 1, 1989 payable
to Contractor for paving (roads and
parking lots at Royal Antiguan Hotel) 458,959
-----------
US$786,959
-----------
The above is hereinafter referred to as the "Antigua Guarantee."
Antigua hereby agrees that the Antigua Guarantee is secured by the
escrow accounts and other elements of security as set forth in Article
18 of the Agreement as amended by Amendments 1 through 6 ("The
Agreement as Amended"). Antigua specifically agrees that after all
principal and interest on notes issued by Antigua to Contractor under
the terms of the Agreement As Amended have been paid, any outstanding
principal and interest due Contractor on the US$786,959 Deep Bay notes
listed above will be paid by Antigua from the sources set forth in
Article 18.2 of the Agreement as Amended.
3. Antigua agrees to undertake any needed action and do whatever is
constitutionally necessary to give full effect to this Amendment
No. 7 including:
a) Obtaining Cabinet approval by October 31, 1994, and
b) Obtaining approval by Parliament as part of a supplementary
appropriations bill or such other bill as Antigua may choose,
no later than December 15, 1994.
4. All provisions not amended or modified remain a part of the Agreement,
as amended by the Amendments, which Amendments are also governed by
such provisions, including without limitation, those relating to
governing law. The execution and delivery of the Amendments by either
party shall not constitute a waiver by either party of any provision
of the Agreement, which provisions remain in effect notwithstanding
the Amendments unless expressly waived therein.
5. Any reference to the Agreement in any promissory note issued pursuant
to the Agreement or the Amendments, whether prior to or subsequent to
the date hereof, or references to the Agreement in the Corbison Point
Sales Escrow Agreement or the Project Escrow Agreement, shall be
construed to be a reference to the Agreement as modified by the
Amendments.
<PAGE>
IN WITNESS WHEREOF, the parties hereto, by and through their respective
undersigned signatories, have each executed and delivered Amendment No. 7 as of
this 21 day of December 1994.
ANTIGUA AND BARBUDA, acting
through its government
By: /S/ KESTER B. BIRD
-------------------------------
Honorable Lester B. Bird
Prime Minister
ACKNOWLEDGED BY:
By: /S/ MOLWYN JOSEPH ANTIGUA HEAVY CONSTRUCTORS, LIMITED
----------------------------- as assignee of ANTIGUA MASONRY PRODUCTS
Honorable Molwyn Joseph LIMITED
Minister of Finance
By: /S/ RICHARD L. HORNSBY
---------------------------------
Richard L. Hornsby
Director
EXHIBIT 10.15
AMENDMENT NO. 8 TO ST. JOHN'S DREDGING
AND DEEP WATER PIER CONSTRUCTION AGREEMENT
This Amendment No. 8, effective October 1, 1996, ("Amendment No. 8") to the St.
John's Dredging and Deep Water Pier Construction Agreement (the "Agreement")
dated April 3, 1987 by and between ANTIGUA AND BARBUDA, acting through its
government (hereinafter ("Antigua") and ANTIGUA MASONRY PRODUCTS, LTD., a
corporation organized and existing under the laws of Antigua and Barbuda, which
assigned its interest to ANTIGUA HEAVY CONSTRUCTORS, LTD., a corporation
organized and existing under the laws of Antigua and Barbuda (hereinafter the
"Contractor") as amended by Amendments 1, 2, 3, 4, 5, 6 and 7. This Amendment
No. 8 is made by and between Antigua and Contractor. Except as otherwise set
forth herein, terms defined in the Agreement and the Amendments shall have the
same meaning when used herein.
In consideration of the mutual covenants and agreements hereinafter set forth,
Antigua and Contractor agree as follows:
Article 18 which has been amended by Amendments Nos. 1, 2, 4 and 5 is hereby
amended further to provide that:
1. Effective January 1, 1996 the quarterly payment from Antigua
to Contractor to be made from the revenues to Antigua received
from the United States Navy and Air Force for rental of
property in Antigua is reduced from US$500,000 per quarter to
US$312,500 per quarter, and
2. Beginning in November 1996, US$50,000 per month is to be
transferred on the tenth (both) business day of each month
from Antigua's fuel tax revenues on deposit in a local
Antiguan Bank to Antigua Heavy Constructors, Ltd.'s account in
the Antigua Commercial Bank (Account Number 100001557).
Antigua warrants that it will issue an irrevocable letter to
its bank instructing the bank to make the transfer set forth
herein, such letter to be substantially in the form attached
hereto as Exhibit "A".
Antigua agrees to undertake any needed action and do whatever is
constitutionally necessary to give full effect to this Amendment No. 8.
IN WITNESS WHEREOF, the parties hereto, by and through their respective
undersigned signatories, have each executed and delivered this Amendment No. 8
as of this 23 day of October 1996.
ANTIGUA AND BARBUDA
Acting Through its Government
By: /S/ LESTER B. BIRD
--------------------------
Prime Minister
ANTIGUA HEAVY CONSTRUCTORS, LTD.
as Assignee of
Antigua Masonry Products, Ltd.
By: /S/ RICHARD L. HORNSBY
--------------------------
Director
Acknowledged by Antigua and Barbuda
Minister of Finance
/S/ JOHN E. ST. LUCE
- -------------------------------
<PAGE>
EXHIBIT "A"
IRREVOCABLE LETTER TO BANK
____________________ Manager
____________________ St. John's, Antigua
Dear Sir:
The Government of Antigua and Barbuda has signed Amendment No. 8 to the St.
John's Dredging and Deep Water Pier Construction Agreement. This amendment
provides that we issue you a standing order to transfer US$50,000 per month from
the Government's fuel tax revenue deposit account in your bank to Antigua Heavy
Constructors, Ltd.'s account in the Antigua Commercial Bank (Account number
100001557). This transfer is to be made on the tenth (both) business day of each
month commencing in November 1996.
This letter is your standing instruction and is irrevocable without the written
consent of Antigua Heavy Constructors, Ltd. or until any promissory notes issued
to Antigua Heavy Constructors, Ltd. under the terms of the St John's Dredging
and Deep Water Pier Construction Agreement as amended are paid in full.
Yours truly,
- ------------------
D. Keith L. Hurst
Financial Secretary
- ------------------
Ludolph Brown
Accountant General
cc: Honourable Prime Minister
Honourable Finance Minister
Director of Audit
EXHIBIT 10.31
LOAN AGREEMENT
THIS LOAN AGREEMENT dated the 12 day of November, 1996, is between V.I. CEMENT
AND BUILDING PRODUCTS, INC., a Delaware corporation qualified to do business in
the U.S. Virgin Islands, whose mailing address is 1350 E. Newport Center Drive,
Suite 201, Deerfield Beach, Florida 33443 (hereinafter referred to as the
"Borrower"), and BANCO POPULAR DE PUERTO RICO, a commercial banking institution
having a mailing address of P.O. Box 8580, St. Thomas, U.S. Virgin Islands 00801
(hereinafter referred to as the "Bank").
WITNESSETH:
1. REPRESENTATIONS. As an inducement to the Bank to enter into this Agreement
and to lend under the terms hereof, the Borrower represents, covenants and
warrants to the Bank that:
1.1 CORPORATE EXISTENCE AND POWER. The Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Delaware and
is qualified to do business and in good standing under the laws of the U.S.
Virgin Islands and has the corporate power to make this Agreement and to borrow
hereunder.
1.2 CORPORATE AUTHORITY. The making and performance by the Borrower of
this Agreement has been duly authorized by all necessary corporate action and
will not violate any provision of law or of its Articles of Incorporation or
Bylaws or result in the breach of, or constitute a default under, or, except as
hereinafter provided, result in the creation of any lien, charge or encumbrance
upon any property or assets of the Borrower pursuant to any indenture or bank
loan or credit agreement, or other agreement or instrument to which the Borrower
is a party or by which the Borrower or its property may be bound or affected.
1.3 FINANCIAL CONDITION. The most recent balance sheet and income
statement of the Borrower, and other related information, heretofore furnished
to the Bank, are complete and correct and fairly present the financial condition
of the Borrower and the results of operations for the period(s) specified
therein. To the best of the Borrower's knowledge and belief, the Borrower has no
contingent obligations, liabilities for taxes, or unusual forward or long term
commitments, except as herein specifically mentioned, not disclosed by, or
reserved against, in said balance SHEET, AND, AT THE PRESENT time, there are no
material unrealized or anticipated losses from any unfavorable commitments of
the Borrower. Said financial statements have been prepared in accordance with
generally accepted accounting principles and practices consistently maintained
by the Borrower throughout the period involved. Since the dates of such
financial statements, and SINCE THE date of the other financial information
provided to the Bank, there have been no material adverse changes in the
financial condition of the Borrower from that set forth in said balance sheet or
in said other financial information as of the date hereof, and no dividends or
other distributions have been declared or paid or made to its stockholders.
1.4 LITIGATION. Except as Bank has been advised in writing, there are
no suits or proceedings pending, or, to the knowledge of the Borrower,
threatened, against or affecting the Borrower which, if adversely determined,
would have a material adverse effect on the financial condition or business of
the Borrower. Except as the Bank has been advised in writing, there are no
proceedings by or before any governmental commission, bureau or other
administrative agency pending, or to the knowledge of the Borrower threatened,
against the Borrower.
1.5 TITLES: LIENS. The Borrower has exclusive good and marketable
title to each of the fixed properties and assets reflected in its balance sheet
free and clear of all mortgages, liens and encumbrances, except (a) liens, if
any, for current taxes, assessments and governmental charges not delinquent or
whose
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validity is being contested at the time in good faith and by appropriate
proceedings, and covenants, restrictions, rights, easements, liens, encumbrances
and minor irregularities in title which, in its opinion, do not and will not
interfere with the occupation, use and enjoyment of such properties and assets
in the normal course of business as presently conducted or planned or materially
impair the value of such properties and assets for the purpose of such business,
(b) mortgages, liens and encumbrances in favor of the Bank, and (c) mortgages,
liens and encumbrances in favor of third parties of which the Bank has been
advised in writing and approved by the Bank.
1.6 GOVERNMENTAL LICENSES AND PERMITS. The Borrower possesses all
licenses and permits necessary for the operation of its business without
substantial known conflict with the rights of others.
1.7 ENVIRONMENTAL COMPLIANCE. The Borrower has duly complied with and
Borrower's business operations, assets, equipment, property, leaseholds and
other facilities are in compliance with the provisions of all federal, state and
territorial environmental, health, and safety laws, codes and ordinances, and
all rules and regulations promulgated thereunder. The Borrower has been issued
and will maintain all required federal, state and territorial permits, licenses,
certificates, and approvals relating to (1) air emissions, (2) discharges to
surface WATER or groundwater, (3) noise emissions, (4) solid or liquid waste
disposal, (5) the use, generation, storage, transportation or disposal of toxic
or hazardous substances or wastes (intended hereby and hereafter to include any
and all such materials listed in any federal, state or territorial law, code or
ordinance, and all rules and regulations promulgated thereunder, as hazardous or
potentially hazardous, or (6) other environmental, health, or safety matters.
The Borrower has received no notice of, and neither knows of nor suspects, facts
which might constitute any violation of any federal, state or territorial
environmental, health, or safety laws, codes or ordinances, and any rules or
regulations promulgated thereunder with respect to the Borrower's business,
operations, assets, equipment, property, leaseholds, or other facilities. Except
in accordance with a valid governmental permit, license, certificate or
approval, there has been no emission, spill, release, or discharge into or upon
(1) the air, (2) soils or any improvements located thereon, (3) surface water or
groundwater, or (4) the sewer, septic system or waste treatment, storage or
disposal system servicing any of the Borrower's properties, of any toxic or
hazardous substances or wastes at or from any of the Borrower's properties; and
accordingly, except for inventory of raw materials, supplies, work in progress
and finished, that are to be used or sold in the ordinary course of business,
the Borrower's properties are free of all such toxic or hazardous substances or
wastes. There has been no complaint, order, directive, claim, citation, or
notice by any governmental authority or any person or entity with respect to (1)
air emissions, (2) spills, releases, or discharges to soils or improvements
located thereon, surface water, groundwater or the sewer, septic system or waste
treatment, storage or disposal systems servicing any of the Borrower's
properties, (3) noise emissions, (4) solid or liquid waste disposal, (5) the
use, generation, storage, transportation, or disposal of toxic or hazardous
substances or waste, or (6) other environmental, health, or safety matters
affecting the Borrower or Borrower's business, operations, assets, equipment,
property, leaseholds, or other facilities. The Borrower has no indebtedness,
obligation or liability, absolute or contingent, matured or not matured, with
respect to the storage, treatment, cleanup, or disposal of any solid wastes,
hazardous wastes, or other toxic or hazardous substances (including without
limitation any such indebtedness, obligation or liability with respect to any
current regulation, law or statute regarding such storage, treatment, cleanup,
or disposal), which has not been previously disclosed to the Bank in writing.
1.8 ENFORCEABILITY. This Agreement, the Notes (as defined in Section
2.4), security instruments (as defined in Section 3) and other documents
provided to the Bank in connection with the Loan and executed or to be executed
simultaneously herewith (collectively referred to herein as the "Loan
Documents")
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are the legal, valid and binding obligations of the Borrower, enforceable
against the Borrower in accordance with their respective terms.
2. THE AGREEMENT TO LEND.
2.1 THE LOAN.
2.1.1 AMOUNTS. The Bank agrees, on the terms and conditions of this
Agreement, to extend to the Borrower the following credit facilities in the
aggregate maximum principal amount of SEVEN MILLION DOLLARS ($7,000,000.00),
(the "Loan"), which the Borrower hereby accepts.
2.1.1.1 a term loan (the term Loan") in the principal sum of SIX
MILLION DOLLARS ($6,000,000.00);
2.1.1.2 a revolving line of credit (the "Line of Credit") in an
aggregate principal amount at any one time outstanding of up to but not
exceeding ONE MILLION DOLLARS ($1,000,000.00).
2 1.2 TYPES.
2.1.2.1 THE TERM LOAN. The Term Loan shall be a six (6) year
installment loan payable in seventy-two (72) monthly payments of principal and
interest as hereinafter provided.
2.1.2.2. THE LINE OF CREDIT. The Line of Credit is a revolving credit
(i.e., a credit which may be used repeatedly up to the limit, and for the time
specified, after partial or total repayments have been made) in the aggregate
maximum principal amount thereof (i.e., ONE MILLION DOLLARS ($1,OOO,OOO.OO),
subject to annual review and annual re-approval by the Bank. Accordingly, the
Borrower may, at any time, and periodically from time to time, from the date
hereof and until revoked by the Bank, draw against this credit, on a revolving
basis, in accordance with the terms and provisions of this Agreement, and may,
at any time, and periodically from time to time, during said period, reborrow,
likewise on a revolving basis, the whole or any part or parts of the principal
sum or sums so drawn, to the end that the said REVOLVING CREDIT SHALL CONTINUE
to be available to, and may be used repeatedly by, the Borrower, during said
period, on a revolving basis, up to the said principal sum of ONE MILLION
DOLLARS ($l,000,000.00) at any one time outstanding, notwithstanding the fact
that such partial or total repayments, if any, have been, or will be, from time
to time made.
2.1.2.2.1 ANNUAL REVIEW AND REAPPROVAL. On July 1, 1997, and on each
subsequent anniversary of said date, the Line of Credit is subject to annual
review and approval by the Bank. The Bank shall review the history of the
Borrower's use of the Line of Credit and the terms, provisions and outstanding
balance of the Line of Credit, together with the financial statements of the
Borrower and Guarantor (as defined in Section 5.2), and such other documents and
information as the Bank deems necessary or desirable for the purpose of
determining whether the Line of Credit should be renewed, extended, modified or
terminated. A condition of such approval shall be the absence of any material
adverse change in prevailing economic conditions and/or in the Borrower's or
Guarantor's financial condition. The Bank shall have the right, in ITS SOLE
DISCRETION, to make such a determination and shall advise the Borrower in
writing of any decision to renew, extend or modify the Line of Credit and of the
conditions of such renewal, extension or modification, if any.
2.1.2.2.2 ANNUAL CLEAN UP. The Borrower agrees that for a period of
thirty (30) consecutive days during each twelve (12) MONTH PERIOD hereafter the
Borrower shall have repaid to the Bank all funds drawn under the Line of Credit
and THERE SHALL BE NO REVOLVING CREDIT outstanding under this Agreement.
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2.2 PRINCIPAL REPAYMENT OF TERM LOAN. The Borrower shall repay the
principal amount of the Term Loan to the Bank in seventy-two consecutive monthly
installments as follows: (i) seventy-one (71) consecutive monthly installments
of EIGHTY THREE THOUSAND THREE HUNDRED THIRTY FOUR AND 00/100 DOLLARS
($83,334.00) each, plus interest accrued to time of payment; and (ii) a seventy
second (72nd), final installment of the principal then outstanding plus accrued
but unpaid interest on the unpaid principal balance, commencing on the first day
of the first full month following the date hereof and continuing on the first
day of each subsequent month. All payments shall be applied first to late
charges, if any, second to accrued interest and the remainder to the outstanding
principal balance.
2.3 INTEREST. The Term Loan and the Line of Credit shall both bear
interest at a rate per annum equal to one percent (1%) above the prime rate as
it varies (any change in interest resulting from the change in the prime rate to
be effective at the beginning of the day on which such change in the prime rate
is announced). The term "prime rate" as used herein means that rate of interest
from time to time announced by The Chase Manhattan Bank, N.A. at its principal
offices in New York, New York as its commercial loan prime rate. Interest shall
be calculated daily on a three hundred sixty (360) day basis at the rate
hereinabove set forth. Interest on the Line of Credit shall be calculated daily
on the principal sums advanced and outstanding and shall be due and payable
monthly by invoice to Borrower. Interest accrued on the Term Loan at the rate
hereinabove specified shall be due and payable on the first day of each month
together with each monthly principal installment payment as described in
paragraph 2.2 above, provided however, that interest accrued from the date
hereof to the first day of the first full month following the date hereof shall
be due and payable on such first day of such first full month.
2.4 THE NOTES.
2.4.1 THE TERM LOAN NOTE AND REVOLVING CREDIT NOTE. The Term Loan shall
be evidenced by an installment note in the amount of the Term Loan and dated the
date hereof, due and payable to the order of the Bank as herein and therein
provided (the "Installment Note"). The Line of Credit shall be evidenced by a
Revolving Credit Note of the Borrower dated the date hereof and payable to the
order of the Bank as herein and therein set forth in the principal sum of the
Line of Credit to cover the Line of Credit or so much thereof as shall be
outstanding from time to time (the Revolving Credit Note"). The said principal
sum together with all accrued and unpaid interest shall be due and payable in
full ON DEMAND at the office of the Bank in Charlotte Amalie, St. Thomas, U.S.
Virgin Islands, or at such other place as the holder may, from time to time,
designate in writing. (The "Installment Note" and the "Revolving Credit Note"
are collectively referred to hereinafter as the Notes").
2.5 PURPOSE. The Loan shall be made by the Bank to enable the Borrower
to refinance the following existing debts, to provide the Borrower with working
capital and to pay the costs associated with the Loan:
$3,600,000.00 - To repay outstanding debt owned to Banco Popular de
Puerto Rico. This includes two (2)Lines of Credits,
numbers 1145029-9007 and 1145029-9006 with
outstanding balances of $1,980,000.00 and
$400,000.00 respectively. Also included are three
(3) Term Loans in the name of the Borrower and one
(1) Term Loan in the name of Devcon International
Corporation, the Guarantor of the Loan. The
outstanding balances of loan numbers 1145029-9005,
1145029-9002, 1145029-9001 and 11442869002 are
$16,676.00, $333,300-00, $600,000.00 and
$255,554.00 respectively;
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$1,800,000.00 - To repay existing debt owed to Barnett Bank of
Broward County, N.A.;
$ 100,000.00 - To repay outstanding debt owed to Barclay's Bank;
$1,000,000.00 - An advised Line of Credit to be used for working
capital; and
$ 500,000.00 - to be used for working capital and costs
associated with this transaction;
The proceeds of the Loan may not be used for any other purpose without the prior
written consent of the Bank.
3. SECURITY. Repayment of the Loan and the Borrower's obligations hereunder
shall be secured pursuant to the terms of the following agreements satisfactory
in form and substance to the Bank and its counsel (hereinafter collectively
referred to as the "Security Instruments"):
3.1 FIRST PRIORITY MORTGAGE. A first priority mortgage, in the amount
of the Loan, granting to the Bank a first priority lien over the following
properties located in St. Croix, U.S. Virgin Islands (the St. Croix
Properties"), in which Borrower has a fee simple interest:
Plot No. 5 and Plot No. 6 Estate Springfield
Matr. No. 11 Prince Quarter
St. Croix, Virgin Islands
as more fully described on PWD Drawing No. 2279 dated 12/14/67
and
Reminder of Parcel No. 2 of Estate Springfield
Prince Quarter
St. Croix, Virgin Islands
as shown on PWD Drawing No. 1915 dated 5/28/66
and
Parcel No. 3 of Estate Springfield
St. Croix, Virgin Islands
as shown on PWD Drawing No. 968 dated 9/8/60
and
Plot No. 303 Estate Grove Place
St. Croix, Virgin Islands
as shown on PWD Drawing No. 304-0, dated 5/4/60
and
Plot No. 13 of Parcel No. 2 Estate Plessens
Register No. 12a Prince Quarter
St. Croix, Virgin Islands
as shown on PWD No. 1390 revised 11/27/72
as revised November 27, 1972
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and
] Plot No. 6 and Plot No. 6A of Estate Montpellier
(subdivided from Parcel No. 3 Estate Montpellier)
Matr. No. 12-B Prince Quarter
St. Croix, Virgin Islands
as shown on PWD Drawing No. 1390, revised 11/ 27/72
and
A Charge, in the amount of the Loan, granted by Tortola Concrete Products
Limited (the "Charger") to the Bank as Chargee granting the Bank a lien over the
following property located in Tortola, British Virgin Islands, in which Charger
has a fee simple interest:
Mount Sage, Block 2434B, Parcel 2
3.2 FIRST PRIORITY LEASEHOLD MORTGAGES. A first priority leasehold
mortgage, in the amount of the Loan (the "Mariendahl Leasehold Mortgage")
granting to the Bank a first priority lien over the Borrower's leasehold
interest in a Lease Agreement dated July 30, 1991 between Ross Properties, Inc.,
as lessor and the Borrower as lessee (the "Estate Mariendahl Lease") pursuant to
which the Borrower possesses the property and improvements known as:
Parcels No. 6 Estate Mariendahl
Western Section
No. 4 Red Hook Quarter
St. Thomas, U.S. Virgin Islands
and
A first priority leasehold mortgage, in the amount of the Loan (the "Crown Bay
Leasehold Mortgage") granting to the Bank a first priority lien over the
Borrower's leasehold interest in a Lease Agreement dated December 29, 1992
between the Virgin Islands Port Authority, as lessor and the Borrower as lessee
(the "Estate Crown Bay Lease") pursuant to which the Borrower possesses the
property and improvements known as:
Parcel No. 170-5 Crown Bay Landfill
Subbase
St. Thomas, U.S. Virgin Islands
(the St. Croix properties described above along with the properties covered by
the Mariendahl Leasehold Mortgage and the Crown Bay Leasehold Mortgage are
collectively referred to hereinafter as the "Mortgaged Property"), together with
valid consents from the respective lessors.
3.3 ASSIGNMENT OF LEASE AND ESTOPPEL CERTIFICATE. A valid assignment of
each of the above referenced leases (the Assignment of Lease"), together with a
valid consent thereto and estoppel certificate from the lessor of each such
lease.
3.4 ASSIGNMENT OF CERTIFICATES OF DEPOSIT AND PLEDGE AGREEMENT. The
Borrower shall have executed and delivered to the Bank (i) an Assignment of
Certificate of Deposit No.00001626746-30131104514 and No.
00001626746-30131104515 both in the face amount of $226,929.53, and (ii) a
Pledge Agreement, issued in the name of the Borrower and given to secure the
Loan.
3.5 SECURITY AGREEMENT. The Borrower is to submit to the Bank a
complete listing of the Borrower's assets and the lien position of each asset.
The Borrower shall have executed and delivered to the Bank a Security Agreement
and corresponding financing statement (Form UCC-1) satisfactory in form and
substance
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to the Bank and its counsel, granting to the Bank a perfected SECURITY INTEREST
in all assets owned by the Borrower wherever located and however held including,
but not limited to, all INVENTORY, MACHINERY, equipment, furniture, fixtures,
accounts, accounts receivable, contracts, contract rights, intangibles, all
other personal property and all accessions, products and proceeds of the
foregoing. All personalty, acquired by the Borrower after the Closing of this
Loan, and during the term of the Loan, for the operation of the Borrower's
business, shall immediately thereupon be subject to the lien of the Security
Agreement as additional collateral security for the Loan. The Borrower shall
promptly notify the Bank of each such acquisition, including a description of
the property acquired, the cost of such property and the quantity or amount
acquired. The Borrower SHALL PROMPTLY thereafter, as the Bank requests, execute
and deliver to the Bank any documents or instruments deemed necessary or
convenient by the Bank or its counsel to perfect a valid lien on such property.
3.6 ASSIGNMENT OF NOTE RECEIVABLES. A valid Deed of Assignment
respecting note receivables, contract rights and proceeds, including accrued
interest thereon, due Guarantor Devcon International Corp. from the Government
of Antigua and Barbuda.
3.7 FLOATING CHARGE AND DEBENTURE ON BRITISH VIRGIN ISLAND ASSETS.
Tortola Concrete Products Limited, an affiliate of Borrower, shall execute
appropriate and enforceable documents to confirm the Bank's floating charge and
debenture on all of Borrower's assets and that of its affiliates in the British
Virgin Islands.
3.8 UNCONDITIONAL AND UNLIMITED CORPORATE GUARANTY. The Bank shall have
received the unconditional and unlimited guaranty of Devcon International Corp.
(the "Guarantor") guaranteeing repayment of the Loan, the Borrower's obligations
under this Agreement, the Notes and the Security Instruments securing the Notes.
4. CONDITIONS OF LENDING. The obligation of the Bank to make the Loan is subject
to the following conditions precedent:
4.1 APPROVAL OF BANK COUNSEL. All legal matters incident to the
transactions hereby contemplated shall be satisfactory to counsel for the Bank.
4.2 PROOF OF CORPORATE ACTION BY BORROWER AND GUARANTOR. The Bank shall
have received certified copies of all corporate action taken by the Borrower and
Guarantor to authorize the execution and delivery of this Agreement, the Notes
the Security Instruments and the borrowing hereunder, and such other papers as
the Bank shall reasonably request.
4.3 LOAN FEES. As its fees for both the Term Loan facility and the Line
of Credit, the Bank shall receive from the Borrower a non-refundable origination
fee in the amount of Seventy Thousand and 00/100 Dollars ($70,000.00) and an
application fee of Three Hundred and 00/100 Dollars ($300.00).
4.4 GOVERNMENTAL LICENSES AND PERMITS. The Bank shall have been
provided with copies of all licenses and permits necessary for the operation of
the Borrower's business.
4.5 SUBORDINATION OF SHAREHOLDERS' LOANS. All shareholders shall have
executed and delivered to the Bank a subordination agreement, satisfactory in
form and substance to the Bank and its counsel, subordinating their shareholder
loans in the amount of approximately $4.9 million outstanding to the Loan.
4.6 INSURANCE. The Bank shall have received evidence of insurance
coverage for the full insurable value of all of the property to be pledged as
security for the Loan naming Banco Popular de Puerto Rico as Mortgagee/Loss
Payee. Said policy is to cover all risks of loss or damage to all properties,
real and personal, by fire, earthquake, the hazards covered by extended coverage
endorsements, and such
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other insurable hazards as the Bank may require, including flood damage
insurance if it is determined that the properties to be pledged as security for
the Loan are in a federal flood hazard zone.
Insurance coverage must be provided by a COMPANY WITH A current rating
by A.M. Best & Co. of 3 or better. In the case the issuing company does not have
a satisfactory rating, the policy must have a cut-through endorsement and the
reinsuring company(s) must have a current rating by A.M. Best & Co. of B+ or
better.
4.7 OPINION OF COUNSEL FOR THE BORROWER AND GUARANTOR. The Bank shall
have received from counsel for the Borrower and the Guarantor a favorable
opinion dated the same date hereof addressed to the Bank and satisfactory in
scope and form to the Bank and its counsel, covering the following matters.
(a) BORROWER. The Borrower is duly incorporated, validly
existing and in good standing under the laws of Delaware and the U.S. Virgin
Islands, has the legal capacity and authority to own real property and other
property to the extent required to properly and adequately conduct its business
and that no part of this transaction violates any restriction, term, condition
or provision of the Borrower's Articles of Incorporation or Bylaws.
(b) LOAN AGREEMENT. This loan agreement has been duly
authorized, executed and delivered by the Borrower and constitutes A LEGAL,
VALID and binding obligation as may be limited by bankruptcy, insolvency,
moratorium, reorganization and similar laws generally affecting the rights of
creditors and by principles of equity.
(c) NOTES. The Notes have been duly authorized, executed and
delivered by the Borrower and constitute legal, valid and binding instruments,
enforceable in accordance with their TERMS, EXCEPT as may be limited by
bankruptcy, insolvency, moratorium, reorganization and other laws generally
affecting the rights of creditors and by principles of equity.
(d) SECURITY INSTRUMENTS. The Security Instruments have been
duly authorized, executed and delivered by the Borrower or the Guarantor, as the
case may be, and constitute legal, valid and Guarantor. The Bank shall have
received from counsel for the Borrower and the Guarantor a favorable opinion
dated the same date hereof addressed to the Bank and satisfactory in scope and
form to the Bank and its counsel, covering the following matters.
(e) GUARANTY. The guaranty of the Guarantor has been duly
executed and delivered by the Guarantor and constitutes a legal, valid and
binding instrument, enforceable in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium, reorganization and other laws
generally affecting the rights of creditors and by principles of equity.
(f) REMEDIES. The remedies contained within all the loan
documents are effective under the laws of the U.S. Virgin Islands in order to
expedite the collection of the Loan and/or foreclosure upon default under the
terms of the Loan Documents.
4.8 TITLE INSURANCE. The Bank shall have received A COMMITMEnt for
TITLE insurance issued by a title company satisfactory to the Bank, dated the
date of this Agreement and satisfactory in substance and form to the Bank and
its counsel, stating that the title to the Mortgaged Property or possession of
the leasehold premises as the case may be, is vested in the Borrower, and
insuring the interest of the Bank as holder of a first priority mortgage(s) and
leasehold mortgage(s) on the Mortgaged property with no exceptions other than
(i) a lien for real estate taxes not yet due and payable, and (ii) such other
exceptions acceptable to the Bank and its counsel.
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4.9 AS-BUILT SURVEY. The Bank shall have received two (2) copies of a
current as-built survey of the Mortgaged Property together with an A.L.T.A.
certification and Surveyor's Report, satisfactory in substance and form to the
Bank and the title insurer, showing all easements, encroachments, rights-of-way,
roads, alleyways, paths, and set-backs and such other matters as REVEALED by
inspection and survey of the Mortgaged Property, and shall clearly indicate all
monuments and other controls relied upon by the surveyors. All of the foregoing
shall be sufficient to delete the standard survey exception in the commitment
for title insurance provided for in Section 4.8.
4.10 APPRAISAL. The Bank shall have received an updated appraisal
report indicating that the Mortgaged Property with improvements has a current
fair market value satisfactory to the Bank.
4.11 REAL ESTATE TAXES. The Bank shall have received a Certificate of
Real Property Tax Status from the Treasury Division, Department of Finance,
showing that there are no taxes owed on the Mortgaged Property, together with
copies of the paid receipts for the 1992, 1993, 1994 and 1995 real property
taxes.
4.12 TAX CLAUSE. The Borrower shall have furnished or cause to be
furnished, evidence to the effect that all taxes, assessments, and governmental
charges lawfully levied and assessed against it and the Guarantor have been
fully satisfied.
4.13 LANDLORD'S CONSENT TO FIRST PRIORITY LEASEHOLD MORTGAGE AND
ESTOPPEL CERTIFICATE. The Bank shall have received a validly executed Consent to
First Priority Leasehold Mortgage and Estoppel Certificate from the Borrower's
landlords respecting each of the leasehold parcels described above and included
within the Mortgaged Property, satisfactory in form and substance to the Bank
and its counsel, consenting to the Borrower's execution and the recording of the
First Priority Leasehold Mortgage and stating that the Borrower is not in
default under the terms of its leasehold interests.
4.14 CONSENT TO ASSIGNMENT OF LEASE AND ESTOPPEL CERTIFICATE. The Bank
shall have received a validly executed Consent to Assignment of Lease and
Estoppel Certificate from the Borrower's landlord respecting each of the
LEASEHOLD PARCELS described hereinabove in paragraph 3.2, in form and substance
satisfactory to the Bank and its counsel, consenting to the Borrower's execution
and the recording of the Assignment of Lease and stating that the Borrower is
not in default under the to terms of its lease.
4.15 LEASE OF BUSINESS PREMISES. The Bank shall have been provided with
a certified copy of each of the leases described above and any extensions or
renewals thereof, which shall provide for a term with options to extend, for a
period of not less than the life of this Loan.
4.16 ZONING. The Bank shall have received written evidence to the
effect that the Mortgaged Property has been zoned for the purposes consistent
with the uses contemplated beyond any possibility of appeal and to the effect
that there is no pending proceeding either administrative, legislative or
judicial, which would in any manner adversely affect the status of the zoning
with respect to the Mortgaged Property or any part thereof.
4.17 OTHER DOCUMENTATION. The Bank shall have received from the
Borrower such other items required to be provided by the Borrower or on its
behalf as may be set forth on the Closing Agenda utilized by the Bank and the
Borrower to close the Loan, but not otherwise specifically referred to herein.
5. AFFIRMATIVE COVENANTS. The Borrower agrees that so long as credit shall
remain available hereunder and until payment in full of the Notes, unless the
Bank shall otherwise consent in writing it will:
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5.1 APPLICATION OF LOAN PROCEEDS. Apply the proceeds of the Loan
solely for the specific purposes agreed to herein.
5.2 FURNISH FINANCIAL STATEMENTS. Furnish the Bank, or caused to be
furnished annually to the Bank, (a) within ninety (90) days after the end of
each fiscal year of the Borrower, in such form as is acceptable to the Bank, (i)
the audited annual financial statements of the Borrower, prepared by independent
certified public accountants acceptable to the Bank, (ii) the income tax returns
of the Borrower and the Guarantor, (iii) the financial statements of the
Guarantor, and (iv) the 10-K and quarterly 10-Q reports submitted by Borrower to
the SEC, and (b) such further information regarding the business affairs and
financial condition of the Borrowers at such times, in such form and in such
manner, prepared by such persons as are acceptable to the Bank. The financial
statements must reflect a financial net worth satisfactory to the Bank.
5.3 PAYMENT OF TAXES. Pay and discharge or cause to be paid and
discharged (a) all taxes, assessments and governmental charges or liens imposed
upon Borrower or upon any property belonging to Borrower, prior to the date on
which penalties attach thereto, and (b) all lawful claims which, if unpaid,
might become a lien or charge upon the property of the Borrower; provided, that
the Borrower shall not be required to pay any such tax, assessment, charge, levy
or claim the payment of which is being contested in good faith and by proper
judicial or administrative proceedings.
5.4 REAL PROPERTY TAXES. Pay or caused to be paid all real property
taxes on the Mortgaged Property and submit to the Bank evidence of such
payments.
5.5 WORKERS' COMPENSATION. Pay or cause to be paid to the Commissioner
of Finance workers' compensation premiums for all employees of the Borrower, and
submit to the Bank upon payment evidence of said payments and insurance
coverage;
5.6 INSPECTION AND MAINTENANCE. Allow the Bank or its duly authorized
representatives to inspect the books, records, assets, property, and operations
of the Borrower at any reasonable time on reasonable notice and maintain said
books, records, assets, property and operations of the Borrower to the
satisfaction of the Bank. "Reasonable notice" shall mean five (5) days for
purposes of this paragraph.
5.7 NOTICE OF LITIGATION. Promptly give notice in writing to the Bank
of all litigation and of all proceedings by or before any governmental
regulatory agency, against or affecting the Borrower or the Guarantor, where the
amount involved is in excess of $100,000.00 or which, if adversely determined,
would otherwise have a material adverse effect on the financial condition or
business of the Borrower or the Guarantors.
5.8 INSURANCE.
(a) Maintain, or cause to be maintained, with a financially
sound and reputable insurance company doing business in the U.S. Virgin Islands
and acceptable to the Bank, public liability and indemnity insurance,
satisfactory in form and substance to the Bank and its counsel, and in limits
approved by the Bank, covering the Borrower against the risks of third party
property damage and personal injury liability.
(b) Maintain, or cause to be maintained, with a financially
sound and reputable insurance company acceptable to the Bank, special
multi-peril insurance coverage including fire and extended coverage, casualty,
vandalism and malicious mischief insurance on all of the Borrower's property,
real and personal, in such amounts as are acceptable to the Bank, but in no
event less than the full replacement cost of all improvements, inventory,
furniture, fixtures, machinery and equipment located in or on any of the
Borrower's business premises. The foregoing insurance policies shall contain an
endorsement, satisfactory to the
10
<PAGE>
Bank and its counsel, providing for payment to the Bank as mortgagee/loss payee
(as its interests may appear).
(c) Maintain, or cause to be maintained, with a financially
sound and reputable insurance company acceptable to the Bank, comprehensive
property insurance over the Mortgaged Property with the Bank named as
mortgagee/loss payee.
(d) Insurance coverage must be provided by an insurance
company with a current rating by A.M. Best & Co. of 3 or better and the
foregoing policies shall also provide that they may not be canceled, or the
amount(s) of coverage provided reduced, for any reasons until not less than the
thirty (30) days written notice shall have been given to the Bank of the
insurance company intention to cancel or reduce the amount(s) of coverage
provided under such policies during which time the Borrower shall REPLACE said
policies with new, substitute or successor policies to comply with the
requirements of this Section.
(e) If it is determined from the National Flood Insurance
Report that the Borrower's business premises or the Mortgaged Property are
located in designated flood prone areas, the Borrower shall maintain or cause to
be maintained Federal Flood Insurance up to the maximum amount available
covering such premises, and furnish the Bank with evidence of such insurance
naming the Bank as mortgagee/loss payee.
5.9 ENVIRONMENTAL COMPLIANCE. Be and remain in compliance with the
provisions of all federal, state, and local environmental, health, and safety
laws, codes and ordinances, and all rules and regulations issued thereunder;
notify the Bank immediately of any notice of a hazardous discharge or
environmental complaint received from any governmental agency or any other
party; notify the Bank immediately of any hazardous discharge from or affecting
its premises; immediately contain and remove the same, in compliance with all
applicable laws; promptly pay any fine or penalty assessed in connection
therewith; and at the Bank's request, and at the Borrower's expense, provide a
report of a qualified environmental engineer, satisfactory in scope, form, and
content to the Bank, and such other and further assurances reasonably
satisfactory to the Bank that the condition has been corrected.
5.10 DEPOSIT ACCOUNTS. Maintain or cause to be maintained all deposit
accounts of the Borrower and the Guarantors with the Bank.
5.11 SHAREHOLDER LOANS. Subordinate shareholder debt of approximately
$4.9 million outstanding, with a limit of $4.0 million with the provision that
for every $200 increase in retained earnings the subordinated debt will reduce
by $1.00 subject to the receipt of annual financial statements and 10-K report.
5.12 ACCOUNTS RECEIVABLE/INTERCOMPANY ADVANCES. Provide to the Bank
quarterly aging of accounts receivable and intercompany advances.
5.13 CREDIT CARD TRANSACTIONS. Process all merchant VISA, Mastercard
and Discover credit card business of the Borrower through the Bank.
5.14 MANAGEMENT COMPENSATION. Obtain the Bank's approval of the levels
of compensation that the Borrower proposes to pay its directors, officers,
managing partners, consultants and agents.
5.15 GUARANTOR'S COVENANTS. Devcon International Corp., the Guarantor
of this Loan, agrees to the following special conditions on a consolidated
basis, that it will not:
(a) Permit its debt (which shall include the total of its
liabilities, including short-term liabilities, deferred tax liabilities and all
other non-current liabilities to exceed sixty percent (60.0%) of its adjusted
net
11
<PAGE>
worth (net worth reduced by intangible assets such as GOOD will, that have
limited value in liquidation); or
(b) incur or report a net loss during any fiscal year; or
(c) permit current assets, at any one time to be less than
one and one-half (1.50) times current liabilities; or
(d) make any additional acquisition in excess of $500,000.00.
6. NEGATIVE COVENANTS. The Borrower agrees that so long as credit shall remain
available hereunder and until payment in full of the Notes, and all other credit
advanced by the Bank to the Borrower, without the prior written consent of the
Bank, it will not:
6.1 LIMITATION OF LIENS. Mortgage, pledge, hypothecate, assign,
transfer, suffer to exist, or voluntarily or involuntarily subject to any lien
or encumbrance to secure any indebtedness, any of the property or assets of the
Borrower, now owned or hereafter acquired: excluding, however, from the
operation of this covenant, liens, mortgages or encumbrances in favor of the
Bank.
6.2 LIMITATION ON INDEBTEDNESS. Create or incur any indebtedness or
obligation for borrowed money or issue or sell any obligations of the Borrower,
excluding, however, from the OPERATION of this covenant, the Loan hereunder or
other loans made by the Bank and trade payables and other indebtedness incurred
in the ordinary course of business.
6.3 CONTINGENT LIABILITIES. Assume, guarantee, endorse or otherwise
become liable upon the obligations of any person, firm or corporation except by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business.
6.4 CONSOLIDATION OR MERGER. Merge into or consolidate with or into any
corporation, partnership or other business entity. For the purposes of this
Section 6.4, the acquisition by the Borrower of all or substantially all of the
assets, together with the assumption of all or substantially all of the
obligations and liabilities, of any corporation or other entity shall be deemed
to be a consolidation of such corporation or other entity with the Borrower.
6.5 DISPOSITION OF ASSETS. Lend, sell, lease, transfer or otherwise
dispose of any of its assets Other than obsolete or worn-out property not used
or useful in its business), whether now owned or hereafter acquired, except in
the ordinary and regular course of the Borrower's business.
6.6 DIVIDENDS. Declare or pay any dividend or authorize or make any
other distribution on any shares of capital stock of the Borrower, whether now
or hereafter outstanding.
6.7 COMPENSATION AGREEMENTS. Permit the individual or aggregate
compensation (including salaries, BONUSES, COMMISSIONS and other forms of
remuneration) paid to officers, directors, managing partners, agents, employees
or consultants of the Borrower to exceed an amount satisfactory to the Bank and
which is reasonable and appropriate in relation to work performed or services
provided, and comparable to compensation paid by other companies of comparable
size engaged in a similar business as the Borrower in St. Thomas, U.S. Virgin
Islands.
6.8 MODIFICATIONS TO LEASE. Amend, assign or terminate its leases or
sublet the leased property described in Section 3.2 hereof or enter into any new
agreement for the occupancy of such property on terms not acceptable to the
Bank.
12
<PAGE>
6.9 LOANS, ADVANCES INVESTMENTS. Purchase or otherwise acquire any
shares of stock or obligations of, or make or repay loans or advances to, or
make investments in, any individual, firm or corporation, including, without
limitation, any shareholder, director, officer, managing partner, agents or
employee of the Borrower, or any other person or persons related to the Borrower
in any way whatsoever.
6.10 BORROWER'S SHARES. Purchase, acquire, redeem, retire or issue, or
make any commitment to purchase, acquire, redeem, retire or issue, any of the
Borrower shares whether now or hereafter outstanding or consent to the transfer
of any such shares.
6.11 CHANGE OF BUSINESS. Effect, cause, or permit any change from the
business now conducted by the Borrower.
6.12 CAPITAL EXPENDITURES. Make any capital acquisitions in excess of
$500,000.00 or other investments or expenditures or commitments for fixed or
capital assets in any fiscal year in excess of the sum of amounts (i) reserved
for depreciation for such year plus (ii) contributed by the shareholders for
such purpose.
6.13 ISSUANCE OF STOCK OF BORROWER. Permit or consent to the issuance
of any further capital stock of the Borrower or the sale of any treasury stock.
7. EXPENSES. The Borrower agrees to pay all reasonable expenses (including legal
expenses and attorneys' fees and special counsel fees and disbursements
associated with collateralizing this Loan in the jurisdiction where the
collateral is located) payable in connection with the execution and delivery of
this Agreement and of the Notes, and the Security Instruments herein referred
to, as well as all expenses (including legal expenses and attorneys' fees) of
every kind incidental to the collection or enforcement of this Agreement, the
Notes and the other said Security Instruments.
8. EVENTS OF DEFAULT. If any one of the following "events of default" shall
occur:
8.1 any representation or warranty made by the Borrower or the
Guarantor to the Bank in the Notes, this Agreement or the Security Instruments
referred to herein, including the Charge and Debenture or any other instruments
executed in connection with the Loan proves to have been incorrect in any
material respect as of the date of this Agreement or as of the date on which it
is made, or any statement, certificate or data heretofore or hereafter furnished
by the Borrower or Guarantor to the Bank in connection with the application for
this Loan or in the administration of this Agreement proves to have been
incorrect in any material respect as of the date when the facts therein set
forth were stated or certified; or
8.2 default by the Borrower in the performance of any covenant or
agreement herein, or in the Security Instruments referred to herein, which shall
remain unremedied for fifteen (15) days after written notice thereof shall have
been given by the Bank: or
8.3 default by the Guarantor in the performance of any covenant or
agreement in the Guaranty which shall remain unremedied for fifteen (15) days
after written notice thereof shall have been given by the Bank; or
8.4 default in the due payment of the principal of the Notes, or
default in the payment of interest on the Notes, or of any other indebtedness,
which term shall be construed to mean any obligation or liability for borrowed
money, owing by the Borrower to the Bank now existing or hereafter incurred,
when the same shall be due; or
13
<PAGE>
8.5 a judgment for the payment of money shall be rendered against the
Borrower or the Guarantor and any such judgment shall remain unsatisfied and in
effect for any period of 60 consecutive days without a stay of execution; or
8.6 the Borrower or Guarantor shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of the Borrower or Guarantor,
or of all or a substantial part of the assets of the Borrower or of the
Guarantor, (ii) be unable, or admit in writing, the inability to pay debts as
they mature, (iii) make a general assignment for the benefit of creditors; (iv)
be adjudicated a bankrupt or insolvent, or (v) file a voluntary petition in
bankruptcy or a petition or an answer seeking reorganization or an arrangement
with creditors or to take advantage of any insolvency law or an answer admitting
the material allegations of a petition filed against the Borrower or the
Guarantor in any bankruptcy, reorganization or insolvency law or an answer
admitting the material allegations of a petition filed against the Borrower or
the Guarantor in any bankruptcy proceeding, reorganization or insolvency
proceeding, or corporate action shall be taken by the Borrower or the Guarantor
for the purpose of effecting any of the foregoing; or
8.7 an order, judgment or decree shall be entered, without the
application, approval or consent of the Borrower, by any court of competent
jurisdiction, approving a petition seeking reorganization of the Borrower or
appointing a receiver, trustee or liquidator of the Borrower or of all or a
substantial part of the assets of the Borrower, and such order, judgment or
decree shall continue unstayed and in effect for any period of sixty (60)
consecutive days; or
8.8 the financial condition of the Borrower or the Guarantor, or the
physical condition of the Mortgaged Property, shall adversely change in any
material respect from the condition of any of the foregoing represented in the
information and documentation submitted by the Borrower in support of its
application for the Loan;
8.9 the Borrower shall default under either the Estate Mariendahl Lease
or the Estate Crown Bay Lease as described hereinabove and any cure period under
any such lease with respect to such default shall have expired; THEN the Bank
may by written notice to the Borrower (i) immediately terminate the commitments
of the Bank hereunder, and (ii) declare the principal of and interest accrued on
the Notes, and all other liabilities of the Borrower to the Bank to be forthwith
due and payable, whereupon the same shall become forthwith due and payable.
9 ENTIRE AGREEMENT: NO WAIVER EXCEPT AS INDICATED. The Borrower understands and
agrees that this Loan Agreement, along with Notes and Security Instruments
executed simultaneously herewith, constitute the entire agreement of the parties
with respect to the subject matter hereof, and supersede any and all prior
agreements, written or oral, among the parties concerning the subject matter
hereof (except that the Commitment Letter dated June 20, 1996 and executed by
the Borrower and Guarantor on June 28, 1996, the terms and provisions of which
are incorporated herein by this reference, shall survive the closing of the Loan
as set forth in Paragraph 17 of said Commitment Letter).
10. AMENDMENT TO LOAN AGREEMENT. This Loan Agreement may not be changed orally,
but only by an agreement in writing signed by both parties to this Loan
Agreement.
11. NO WAIVER: REMEDIES CUMULATIVE. No failure to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and are not exclusive of any remedies provided by law.
14
<PAGE>
12. WAIVER OF RIGHT TO TRIAL BY JURY. THE BANK AND THE BORROWER HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER OF TEEM MAY HAVE
TO A TRIAL BY JURY WITH RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT AND THE LOAN DOCUMENTS, AND/OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION THEREWITH, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS BY
ANY PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE BANK'S PERFORMANCE
UNDER SAID AGREEMENT. FURTHER, THE BORROWER HEREBY CERTIFIES THAT NO
REPRESENTATIVE OR AGENT OF THE BANK, NOR THE BANK'S COUNSEL, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK COULD NOT, IN THE EVENT OF SUCH
LITIGATION, SEEK TO ENFORCE THIS WAIVER OF RIGHT TO JURY TRIAL PROVISION. NO
REPRESENTATIVE OR AGENT OF THE BANK, NOR THE BANK'S COUNSEL HAS THE AUTHORITY TO
WAIVE, CONDITION, OR MODIFY THIS PROVISION.
13. DEFINITIONS.
13.1 Any accounting term used herein shall, unless the context
otherwise specifies, be defined as most commonly defined in accordance with
generally accepted accounting principles.
13.2 "Indebtedness" shall mean any obligation or liability for borrowed
money, howsoever evidenced, or any obligation represented by a promissory note.
14. CHANGE OF PARTIES. The Borrower will not assign this Agreement or any of the
monies due hereunder or convey or further encumber its assets or any part
thereof without the prior written consent of the Bank. In the event of any such
approved assignment, conveyance or encumbrance and if the Bank shall elect to
continue to make the Loan hereunder or any part thereof to the Borrower or its
successor or assignee, all sums so advanced shall be deemed advances under this
Agreement and not in modification hereof. In the event the Borrower shall part
with or in any manner be deprived of its title to its assets or any part thereof
in violation of this section, the Bank may, at its option, continue to make
advances under this Agreement and not in modification hereof. If the Borrower is
in default under this Agreement, or as a part of the sale, consolidation,
liquidation or merger of the Bank, the Bank may assign this Agreement and the
Notes and cause the assignee to make any advances not made at the time of the
assignment, in which event all of the terms hereof shall continue to apply to
the Loan, the Notes, the Security Instruments and any other documents entered
into pursuant to the Loan. All sums so advanced shall be deemed advances under
this Agreement and not in modification hereof.
15. NOTE. Any notice required herein shall be deemed to have been properly
served if sent by United States registered mail, postage prepaid, addressed to
the parties hereto at the addresses set forth above, or at such other address as
shall later be designated in writing.
15
<PAGE>
16. CONSTRUCTION. This Agreement is being executed in and shall be construed in
accordance with the laws of the United States Virgin Islands.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals the day
and year first above written.
V.I. CEMENT AND BUILDING PRODUCTS,INC.
By: /S/ WALTER B. BARRETT
-----------------------------------
Vice President
(SEAL)
Attest: /S/ RONALD L. MOOREHEAD
-----------------------------------
Vice President
BANCO POPULAR DE PUERTO RICO
By:/S/ STANLEY OLIVE
-----------------------------------
Vice President
16
EXHIBIT 10.32
V.I. Cement and Building
Products, Inc.
Page 1
INSTALLMENT NOTE
$6,000,000.00 St. Thomas, U.S.V.I.
November 12,, 1996
FOR VALUE RECEIVED, V.I. CEMENT AND BUILDING PRODUCTS, INC., a Delaware
corporation qualified to do business in the U.S. Virgin Islands (the
"undersigned"), promises to pay to BANCO POPULAR de PUERTO RICO (the "Bank"), or
ORDER, the principal sum of SIX MILLION DOLLARS ($6,000,000.00), lawful money of
the United States of America, pursuant to the terms of the Loan Agreement of
even date herewith between the undersigned and the Bank (the "Loan Agreement")
with interest from the date hereof at a rate per annum equal to one percent (1%)
above the prime rate as it varies (any change in interest resulting from a
change in the prime rate is to be effective at the beginning of the day on which
each such change in the prime rate is announced), calculated on a three hundred
sixty (360) day basis. The term "prime rate" as used herein means that rate of
interest from time to time announced by The Chase Manhattan Bank, N.A. at its
principal offices in New York, New York as its commercial loan prime rate. The
said principal shall be payable at the office of the Bank in St. Thomas, U.S.
Virgin Islands, or at such other place as the holder may, from time to time,
designate in writing, in seventy-two (72) consecutive monthly installments
commencing on the first day of the first full month following the date hereof
and continuing on the first day of each subsequent month, as follows: (i)
seventy-one consecutive monthly principal installments of EIGHTY-THREE THOUSAND
THREE HUNDRED THIRTY-FOUR AND 00/100 DOLLARS ($83,334.00); and (ii) a
seventy-second (72nd), final installment of EIGHTY THREE THOUSAND TWO HUNDRED
SIXTY-EIGHT AND 00/100 DOLLARS ($83,268.00) together with all interest accrued
but unpaid to the date of said final payment. Interest accrued on the principal
sum at the rate hereinabove specified shall be due and payable with each monthly
installment of principal.
All installment payments shall be applied first toward late charges, if any,
second to interest accrued on this Note and then toward the outstanding
principal balance.
AND IT IS HEREBY EXPRESSLY AGREED that the entire principal sum from time to
time outstanding hereunder and all accrued and unpaid interest thereon shall
become due and payable, at the option of the Bank or the Note holder, in the
event of a default in the payment of any sum for ten (10) days after it is due
hereunder, and any monthly payment not received by the Bank or the Note holder
within ten (10) days after the payment is due shall be assessed a late charge of
five percent (5%) of the payment.
This Note may not be changed orally, but only by an agreement in writing signed
by the party against whom enforcement of any change, waiver, modification or
discharge is sought.
In case recourse to the courts by the holder of this Note becomes necessary in
order to collect the whole or any unpaid part thereof together with all accrued
interest thereon, the undersigned agrees to pay any and all court expenses,
disbursements, and attorneys' fees that may be incurred. The undersigned
expressly authorizes and empowers the Bank, at its option, at any time, to
appropriate and to apply to the payment of this Note, and any other obligation
or obligations now existing or hereafter arising of the undersigned to the Bank,
any and all monies now or hereafter in the hands of the Bank on deposit or
otherwise to the credit of or belonging to the undersigned.
Presentment for acceptance or payment, notice of dishonor, protest and notice of
protest are hereby waived.
<PAGE>
This Note is being issued pursuant to the Loan Agreement and is secured by the
Security Instruments referred to therein, and any default by the undersigned
under the Loan Agreement or any of the Security Instruments shall constitute a
default under this Note.
This Note may be prepaid at any time, and from time to time, in whole or in
part, without any premium or penalty therefore provided, however, that all such
prepayments shall be applied first toward late charges, if any, second to
interest accrued on this Note, and then toward installments of principal due, in
the inverse order of their maturity.
Executed as a sealed instrument as of the date set forth above.
V.I. CEMENT AND BUILDING PRODUCTS, INC.,
a Delaware corporation
By: /S/ WALTER B. BARRETT, VICE PRESIDENT
--------------------------------------
(SEAL)
Attest: /S/ RONALD L. MOOREHEAD, VICE PRESIDENT
---------------------------------------
EXHIBIT 10.33
V.I. Cement and Building Products, Inc.
Page 1
PROMISSORY NOTE
$1,000,000.00 St. Thomas, U.S.V.I.
November 12, 1996
FOR VALUE RECEIVED, V.I. CEMENT AND BUILDING PRODUCTS, INC., a Delaware
corporation qualified to do business in the U. S. Virgin Islands (the
"undersigned"), promises to pay to BANCO POPULAR DE PUERTO RICO (the "Bank"), or
ORDER, the principal sum of ONE MILLION DOLLARS ($1,000,000.00), lawful money of
the United States of America, or so much thereof as may be advanced or upon
repayment readvanced by the Bank from time to time after the date hereof
pursuant to the terms of the Loan Agreement of even date herewith between the
undersigned and the Bank (the "Loan Agreement"), with interest from the date
drawn at a rate per annum equal to one percent (1%) above the prime rate as it
varies (any change in interest resulting from a change in the prime rate is to
be effective at the beginning of the day on which each such change in the prime
rate is announced, calculated on a three hundred sixty (360) day basis. The term
"prime rate" as used herein means that rate of interest from time to time
announced by The Chase Manhattan Bank, N.A. at its principal offices in New
York, New York as its commercial loan prime rate. Interest accrued on the
principal sum from time to time outstanding at the rate hereinabove set forth
shall be payable monthly commencing on the first day of the month following the
date of the first draw hereunder and continuing on the same day each month until
the entire principal sum and all accrued interest is fully paid.
The said principal sum together with all accrued and unpaid interest shall be
payable in full ON DEMAND twelve (12) months from the date hereof at the office
of the Bank in Charlotte Amalie, St. Thomas, U.S. Virgin Islands, or at such
other place as the holder may, from time to time, designate in writing.
The line of credit evidenced hereby is a revolving credit in the aggregate
maximum principal sum of ONE MILLION DOLLARS ($1,000,000.00), and is subject to
annual review and annual reapproval by the Bank. Accordingly, the undersigned
may, at any time, and periodically from time to time, borrow, repay and reborrow
hereunder, on a revolving basis, in accordance with the terms and provisions of
the Loan Agreement; provided, however, that for a period of thirty (30)
consecutive days during each calendar year hereafter there shall be no revolving
credit outstanding under this Note.
AND IT IS HEREBY EXPRESSLY AGREED that the entire principal sum from time to
time outstanding hereunder and all accrued and unpaid interest thereon shall
become due and payable, at the option of the Bank or the Note holder, in the
event of a default in the payment of any sum for ten (10) days after it is due
hereunder, and any monthly payment not received by the Bank or the Note holder
within ten (10) days after the payment is due shall be assessed a late charge of
five percent (5%) of the payment.
This Note may not be changed orally, but only by an agreement in writing signed
by the party against whom enforcement of any change, waiver, modification or
discharge is sought.
In case recourse to the courts by the holder of this Note becomes necessary in
order to collect the whole or any unpaid part thereof together with all accrued
interest thereon, the undersigned agrees to pay any and all court expenses,
disbursements, and attorneys' fees that may be incurred. The undersigned
expressly authorizes and empowers the Bank, at its option, at any time, to
<PAGE>
appropriate and to apply to the payment of this Note, and any other obligation
or obligations now existing or hereafter arising of the undersigned to the Bank,
any and all monies now or hereafter in the hands of the Bank on deposit or
otherwise to the credit of or belonging to the undersigned.
Presentment for acceptance or payment, notice of dishonor, protest and notice of
protest are hereby waived.
This Note is being issued pursuant to the Loan Agreement and is secured by the
Security Instruments referred to therein, and any default by the undersigned
under the Loan Agreement or any of the Security Instruments shall constitute a
default under this Note.
This Note may be prepaid at any time, and from time to time, in whole or in
part, without any premium or penalty therefore provided, however, that all such
prepayments shall be applied first toward interest accrued on this Note, and
then toward the outstanding principal balance.
Executed as a sealed instrument as of the date set forth above.
V.I. CEMENT AND BUILDING PRODUCTS INC.,
a Delaware corporation
/S/ WALTER B. BARRETT, VICE PRESIDENT
--------------------------------------
(SEAL)
ATTEST: /S/ RONALD L. MOOREHEAD, VICE PRESIDENT
-----------------------------------------
EXHIBIT 10.34
Faber Shipping Aps The Baltic and International Maritime
Copenhagen Conference
Uniform Time-Charter (Box Layout 1974)
Code Name: "BALTIME 1939"
- -------------------------------------------------------------------------------
2. Place and date
Copenhagen, 28th Oktober 1996
- -------------------------------------------------------------------------------
3. OWNERS/PLACE OF BUSINESS 4. CHARTERS/PLACE OF BUSINESS
Kristian Gerhard Jebsen Caribbean Cement Carriers Lts c/o
Skibsrederi A/S Devcon International Corp.
Folke Bernadottesvei 38 1350 E. Newport Center Drive S201
Fyllingsdalen 5033 Bergen Deerfield Beach, FL 33442
Norge USA
- -------------------------------------------------------------------------------
5. VESSEL'S NAME 6. GRT/NRT
M/V "GALIZANO" TBR 387/1866
- -------------------------------------------------------------------------------
7. Class 8. Indicated horse power
100A1 LMC (UMS) 4400 BHP
- -------------------------------------------------------------------------------
9. Total tons d.w. (abt)on Board 10. Cubic feet grain/bale capacity
of Trade summer freeboard 6750 Cbm
6174 mts on 6,782 m draft
- -------------------------------------------------------------------------------
11.Permanent bunkers (abt.)
340 mts FO, 66 mts GO
- -------------------------------------------------------------------------------
12. Speed capability in knots (abt.) on a consumption in tons (abt.) of
11,5 knots on 8,5 mts FO (C1 29)
- -------------------------------------------------------------------------------
13.Present position
Caribbean Sea
- -------------------------------------------------------------------------------
14.Period of hire (Cl.1)
4 Yrs T/C with 4x1 Yr Further 15. Port of delivery (Cl.1)
T/C in Chopt decl. within 6 See C1 54
mos from expiration of prev. _________________________________
period and with 30 days mo1 16. Time of delivery (C1.1)
on any final period See C1 55
- -------------------------------------------------------------------------------
17.(a) Trade limits (C1.2)
See C1 27
- -------------------------------------------------------------------------------
(b) Cargo exclusions specially agreed
See C1 27
- -------------------------------------------------------------------------------
18.Bunkers on re-delivery (state min. and max quantity) (C1.5)
Same as on delivery, but always sufficient to reach main bunkering port
(Prices both ends FO: USDls 100, GO: USDls 185)
- -------------------------------------------------------------------------------
19.Charter hire (C1.6) 20. Hire payment (state currenty,
See C1 26 method and place of payment;
also beneficiary and bank
account
(C1.6)
See C1 26
- -------------------------------------------------------------------------------
21. Place or range of re-delivery 22. War (only to be filled in in
(C1.7) Section C agreed) (c1.21)
1 SO/SB in Charterer's option
Within Caribbean, ATDNSHINC
- -------------------------------------------------------------------------------
23.Cancelling date (Cl.25) 24. Place of arbitration (only to
December 1996 31st filled if place other than
London agreed) (C1.23)
- -------------------------------------------------------------------------------
25.Brokerage commission and to 26. Numbers of additional clauses
and to whom payable (C1.25) covering special provisions,
1,25% to Broker in Box 1 if agreed
26-68
<PAGE>
It is mutually agreed that this Contract shall be performed subject to the
conditions contained in this Charter which shall include Part I as well as Part
II. In the event of a conflict of conditions, the provisions of Part I shall
prevail over those of Part II to the extent of such conflict.
Signature (Owners) Signature (Charterers)
/S/ RICHARD L. HORNSBY
-----------------------------
<PAGE>
Second Original
Rider to MV GALIZANO (tbr) charterparty dated 28th November,1996
Cl 26 Payment
United States Dollars 5,700 for the first 12 months,
United States Dollars 5,800 for the second 12 months,
United States Dollars 5,900 for the third 12 months,
United States Dollars 6,135 for the forth 12 months,
United States Dollars 6,335 for the first optional 12 months,
United States Dollars 6,535 for the second optional 12 months,
United States Dollars 6,735 for the third optional 12 months,
United States Dollars 6,935 for the forth optional 12 months, per day pro
rata, including overtime of crew and officers, and luboil.
Above daily hire rates to be increased by US $ 68 per day as to compensate
for owners cost for extra maintenance due to purchase of low grade of fuel
(RMF 25) presently available in the trading area.
Payable monthly every 30 days in advance, in free transferable currency.
Owners bankers:
Den Norske Bank, Torgalm 2, 5014 Bergen
Acct no 5201.04.92882
In favour of: KGJS Cement
c/o Kristian Gerhard Jebsen Skibsrederi AS
To offset errors Owners are to give Charterers two banking days notice the
failure before having the power to exercise their right under clause 6, in
this case a telex from Charterers's bank confirming irrevocable hire
payment directly to the owners to be considered as proper hire payment.
Cl 27 Trading limits:
Trading bulk cement only. Via safe ports, berths, anchorages always
afloat within IWL with harmless bulk cement cargoes. Should the vessel,
upon direct request by Charterers enter any port, where tide may cause
the vessel to touch bottom, and should the vessel nonetheless touch
bottom due to this cause, while in such port or berth, then the
Charterers shall indemnify Owners for direct related costs of such
repairs which affects the vessel's class certificates and the vessel's
painting system. Such repairs to be effected simultaneous with regular
docking, unless if requested earlier by Class Society, in which latter
case Vessel shall remain on hire. Since the vessel in performing her
service hereunder incurs the risk of touching bottom at ports/places of
loading and discharging, the Master is to report each such event
forthwith to Owners and Charterers. A joint underwater/diver inspection
to take place about every six months to ascertain the extent of any
damages if grounding/touching bottom has been so reported - unless
sooner mutually called for by circumstances and/or Class. Vessel may be
used for transport of empty paperbags as deck cargo against Bill of
Lading.
Cl 28 Off hire:
When the vessel is off hire nothing whatsoever to be paid by the
charterers. Should the vessel go off hire during the currency of this
charter, Charterers to have the option of adding any such time to the
charter period. Such option to be declared no later than 14 days prior
to expiry of CP, for offhire up to that date. Owners to be allowed 12
hours free time per 30 days, counting pro-rata.
1
<PAGE>
Cl 29 Vessel's specifications.
Name "mv"GALIZANO"
Dwt /draft :6,174 dwt on 6,782 m summer draft fully
loaded
Built :Sept 1981 at Astilleros Construcciones
S.A. Vigo Spain H.no 254
Dimensions :106,81/97,16x 15,83x8,72 m
Class :Lloyds Register +100 A1 Cement-Carrier
LMC - (UMS)
Flag :Cayman Island
Tonnage :3875/1866 Grt/Nrt
Holds :4 x 2 Holds (1480+1755+1755+1759) ttl
6750 Cbm, abt 5700 Mts
bulk cement in holds
Main Engine :Deutz Diesel RBV 12M 350 - 4400 Bhp
Generators :3 x 400 KW 440V 60Hz AC, Caterpillar
Engines
Speed/Cons :11,5 knots on 8,5 ts IFO 180 + 1,6 ts
gasoil
Tanks :340 mts FO and 66 mts Gasoil - 1790 mts
Ballast water
Misc. :275 KW bowthruster
Loading/Discharging Gatz - Fuller type
Loading :Pneumatic at 600 mts/hr via 2
connections at port and starboard
10-12" pipes, or Mechanical (gravity)
at 750 Mts/hr via 2 inlets at midship
and starboard side - Flange midship
534 mm and starboard 691 mm.
Loading con. :0,75 Mts gasoil per day
Discharging :Pneumatic at approx 220 mts/hr via 2
connections at port and starboard
with 100 m horizontal and 30 m
vertical distance in 2 x 10" pipes,
with max 4 pieces of 90 degr bends,
or Mechanical at approx 250 mts/hr at
port and starboard via screw and
airslide.
Discharg. con. :4,5 mts gasoil per day
All details about and without guarantee
Cl 30 Stevedore damage clause
Any damage caused by stevedore during the currency of this charter
party shall be reported by the master to the Charterers and to their
agents, in writing, within 48 hours of the occurance or as soon as
possible thereafter, but latest when the damage should have been
discovered by the exercise of due diligence. The master shall use
his best efforts to obtain written acknowledgement by responsible
parties causing damage unless damage should have been made good in
the meantime.
Stevedores damages in full affecting seaworthiness or the proper
working of the vessel and/or her equipment, shall be repaired
without delay to the vessel after each occurrence in the charterer's
time and shall be paid for in full by Charterers, and vessel to
remain on-hire for such period.
Other repairs shall be done at the same time, but if this is not
possible, same shall be repaired whilst vessel in drydock, in the
Owners' time, provided this does not interfere with the Owners'
repair work, or by vessel's crew at the Owners' conveniency. All
cost of such repairs shall be for the Charterers' account. Any time
spent in repairing stevedores damages shall be for Charterers
account. The Charterer shall pay for stevedores damages whether or
not payment has been made by stevedores to the Charterers.
CL 31 The vessel to supply power for working winches/cranes as on
board, day and night, and also to supply lights for night work as on
board.
2
<PAGE>
CL 32 The Owners to provide crew required for the discharge operations
day/night free of expenses to the Charterers. It is agreed that the
handling and connection of vessel's hoses shall be effected by the
crew (if permitted by shore regulations) but the last connection
between vessel's hoses and receivers' installation on quayside shall
be effected by the receivers. If further men are required, or if the
stevedores refuse, or are not permitted to work with the crew, the
Charterers to provide and pay for other men.
CL 33 P and I Bunkering clause, New Jason clause, Both to blame
collision clause and General clause paramount to be considered
incorporated in the charter party and to apply.
CL 34 Deratisation valid certificates to be on board, otherwise
detention to be for Owners' account.
CL 35 If the vessel is delayed by strike of officers and/or crew, or
due to delay or deficiency of officers and/or crew, no hire to be
paid for the time hereby lost.
CL 36 It is understood that Buyers will dock, repair and upgrade the
vessel within aprox. 3 months after delivery. It is Buyers intention
to undertake such work at a European yard and offhire estimated to
be approx. 2 months. Buyers to cooperate with Charterers to schedule
the offhire period best possible, to enable Charterers to minimize
logistic problems, however view Special Survey 1/97, vessel to be in
drydock within due date.
L 37 If the vessel is arrested, boycotted or in any way detained
because of matters of Owners' or crew's concern, including troubles
with unions or similar institutions, no hire is due for the time
lost thereby.
CL 38 The Charterers are not responsible for smuggling by officers and
crew. All detention and expenses incurring therefrom to be for the
Owners' account, and time lost shall be deducted from the hire.
CL 39 The vessel is steaming about 11,5 knots under good weather
conditions up to beaufort 4 scale included, if the speed be reduced
by defect in or breakdown of any part of her hull, machinery or
equipment, the time so lost and the cost of any fuel oil consumed in
consequence thereof, and all extra expenses shall be for Owners'
account. In case vessel will not perform mentioned speed under
mentioned conditions, the Charterers after agreement of the Owners
to deduct proportional hire. The bunker consumption which is
described to be about 8,5 ts IFO 180 and 1,6 Ts Gasoil based on 11,5
knots service speed, every 24 hours at sea. Port consumption about
1,6 ts gasoil, 0,75 ts gasoil for loading and 4,5 ts gasoil for
discharging., all 24 hours. If vessel consumes bunkers in addition
to the above, charterers after the agreement of the owners to deduct
same amount. The figures in this clause as per received/quoted by
Sellers during negotiations and will be reevaluated at a later stage
latest after 2 months hire in Owners option It is understood that
the interpretation of the word "about" is "5 pct more or less"
CL 40 The vessel to be manned with qualified master, officers, engineers
and crew in order to ensure the vessel operates satisfactory. If the
Charterers shall have reason to be dissatisfied with the conduct of
the Captain, Officers or Engineers, the Owners shall on receiving
particulars of the complaint, investigate the same and, if necessary
or if Masters or Crew's performance not improves, make a change in
the appointments Master, chief officers must be able to speak and
read english language.
CL 41 At loading and discharging ports, any time lost by the vessel for
the reasons of not all being on board when the vessel is ready to
sail or for crews strike, to be for the Owners account.
CL 42 The Charterers shall have the permission to appoint a supercargo
who shall accompany the vessel at his own risk, and see that voyage
is
3
<PAGE>
persecuted with the utmost despatch. He is to be furnished with free
accommodation and same fare as provided for at the Captain's table.
The charterers paying at the rate of US dls 10,per day of his
victualling.
CL 43 The vessel to be equipped with a wireless installation. Vessel to
carry a qualified operator, who may be one of the officers or the
captain. Vessel to listen as a rule at least once every watch
period to her radio station. This rule must be complied with, in
particularly if the vessel is at sea and master has not received any
instructions about forthcoming employment of the vessel, or port of
loading or discharging as the case may be. Charterers to pay Owners
US Dls 200,- per month in lieu of cost of advising vessel's ETA.
Master to telex/telefax ETA to Charterers and Receivers on departure
from loading port and Charterers and Agents on departure from
discharging port and will only be required to update that
information if vessel's ETA alters by more than two hours.
CL 44 It is expressly understood that pilot, canal steersmen, boatage and
tug assistance will only be used by Master when customary and
advisable, but always for Masters final decision.(see part 11 Cl 4)
It is also expressly understood that customary assistance of
vessel's crew includes work at any time day, night, free of charge
to the timecharterers as outlines here below: (it is understood as
on board) -Raising/lowering of derricks/cranes in preparing for
loading and discharging.
-Opening/closing of holds (or other means) in preparing for
loading/discharging.
-Driving/maintenance care of winches/cranes and power when required
for preparing loading/discharging. Supervision of loading and
stowage of the cargo thoroughly to secure best utilization of the
ship and protection of the cargo in accordance with good seamanship.
-Connecting/disconnecting pipes for loading and/or discharging in
order to commence cargo operations immediately on arrival at berth
or place, provided permitted by local regulations. If Charterers
require holds to be swept by crew, Charterers will pay US dls
500,per hold.
CL 45 Owners guarantee that the vessel is entered and shall remain
entered for the duration of this charter in a recognized Protection
and Indemnity Association. The Charterers for all the period of
timecharter must be covered by a first class charterers liability,
which name to be given.
CL 46 The fuel oil on board the vessel on delivery is the property of
the Sellers, and will be taken over by the Charterers, without any
cost to Buyers (new Owners)
CL 47 Charters agree to have their agent attend, if required by owners,
all owners' matter. Owners in such case to refund agent outlays and
to pay them customary agency fee for the service rendered.
CL 48 Lubricating oil, grease, drinking water to be for Owners' account.
CL 49 Charterers to give owners notice of redelivery as per part 2 line
119.
CL 50 While the surveyor is taking draft readings and/or tank soundings
in principle, master is not to take on, or pump ballast at load and
discharge ports, and vessel is not to take on, release or switch
from one tank or other compartments to another any ballast, fresh
water or fuel-/gasoil provided will not be necessary for technical
reason and/or safety of the vessel. Vessel to furnish a certified
calibration scale for all tanks including plimsoller marks amidship
and draft marks on port and starboard sides bow and stem to be
clearly cut and marked on shell plating. Vessel to furnish capacity
plan, displacement scale and deadweight scale and same to be
certified by the Master as to correctness at time of loading.
However, the shipmaster, although appointed by the shipowners, shall
be under the orders and directions
4
<PAGE>
of the Charterers as regards employment and agency; and Charterers
are to load, stow and trim the cargo at their expenses, under the
supervision of the shipmaster, who is to sign the bill(s) of lading,
as presented, in conformity with mate's or tally clerk's receipts.
CL 51 This fixture is to be kept strictly private and very confidential
and not to be disclosed to any third party.
CL 52 Charterers to copy Owners with full set of instruction for each
and every voyage performed under this charterparty.
CL 53 It is understood and agreed that there shall be held a joint
on-hire and off-hire survey, by an independent surveyor, cost of
same to be shared 50/50 between the Owners and the Charterers. Time
for on-hire and off-hire to count. On-hire survey to be held after
completion of drydock at or as close as possible to the docking yard
in Owners option, and off-hire survey to be held at last discharge
port.
CL 54 Port of delivery: One safe port and berth in Caribbean on back to
back terms with MOA dated 28th Oktober 1996
CL 55 Time of delivery: 1st Nov -31st Dec 1996 on back to back terms to
coincide with MOA dated 28th October 1996. Present Owners to notify
Buyers of the intended delivery through 3025-20 days approx.
delivery notices included named port plus 15-10-8-5-4-3-2-1 definite
delivery notices. Sellers to have the vessel ready for sailing/take
over about 5th-10th December 1996 Both parties to do their utmost to
meet this required date from buyers enable coordinate with intended
drydocking in Europe and avoid possible delays due to holidays
coming up at the end of the year.
CL 56 Owners have the option to change vessel's flag/name/ownership,
however this charterparty to be maintained until end of same, and
Owners to remain responsible towards Charterers for the fulfillment
of this charterparty.
CL 57 NIL
CL 58 Any cargo claim to be settled in accordance to NYPE Interclub
Agreement amended 1984
CL 59 Basis war risk insurance to be for Owners account, any extra war
risk insurance and/or crew war bonus payable due to vessel' trading
to be for Charterers account.
CL 60 This charterparty is to be construed and governed by in
accordance with English Law.
CL 61 Delivery /redelivery times shall both be calculated on the basis
of local time.
CL 62 Vessel's holds on delivery to be suitable for carrying cement in
bulk, vessel's holds on redelivery to be in same condition as on
delivery, to masters satisfaction, charterers option to redeliver
unclean paying US dls 4000,- in lieu of hold cleaning.
CL 63 Any extra insurance both on cargoes/vessel owing vessel's age,
flag, class or ownership or nationality to be for Charterers
account, except for reason of change in flag/name/Ownership as per
Cl 56.
CL 64 Master to sign bills of lading stipulating, "freight payable as
per contract", however Charterers to hold Owners harmless for any
consequences therefrom.
CL 65 Vessel not to trade in ice.
CL 66 In the event of outbreak of war (whether there be a declaration of
war or not) between any two or more of the following countries which
directly effect the performance of this charterparty: United States
of
5
<PAGE>
America, UK, France, Norway, Greece, Italy, C.l.S., PRC, Canada,
Japan, or in the event of the nation under whose flag the vessel
sails becoming involved in war (whether there be a declaration of
war or not, the owners may cancel this charter.
CL 67 Owners have the right to transfer their interest in this CP as a
result of any sale of the vessel, but owners to remain responsible
for the fulfillment of this charterparty.
CL 68 Bunker clause: Charterers have informed that due to continuous
supply problems, the vessel presently is running on RMF 25 but
Charterers to do their best efforts to secure the fuel type, for
delivery within vessel's trading pattern, as per following
specification: (RME 25) IFO 180 cst at 50 C with max density of
0.991 at 15 C. Flashpoint not below 60 C and vanadium max 200 ppm.
Cleanliness and stability, dry sludge by Shell hot filtration test:
before/after treatment max 0.05%. Once the Charterers have
established the continuous supply of fuel (RME 25), the extra
hirepayment of US $ 68 per day, as per clause 26 to be deleted.
Should the above type of fuel (RME 25) not be available or not be
receivable for any practical and economical reasons, taking Vessel's
logistic etc into consideration, then Charterers have the right to
use type RMF 25, and pay the extra payment of US $ 68 per day as per
Cl 26. Charterers always to cooperate closely with Owners to enable
vessel to be supplied with bunkers within charterparty specification
or as close to as possible.
Fuel supplied must be blended in shoretanks, no barge blending
permitted.
Gasoil supplied for aux engines to be ISO 8217 class DMA except
density at 15C which not to exceed 0.890.
Cl 69 During the currency of this Charter the Vessel, as today, to keep
the name DEVCON as painted outside her hull. Owners to keep this
painting in same good maintenance standard as for rest of the
Vessel.
<TABLE>
<S> <C>
DATED Dated 28.10.96
Charterers: Owners:
Caribbean Cement Carriers, Ltd Kristian Gerhard Jebsen Skipsrederi
A/S
By: /S/ RICHARD L. HORNSBY By: /S/ JAN PEDERSEX
-------------------------- -------------------------------
Richard L. Hornsby Jan Pedersex
Vice President
</TABLE>
6
<PAGE>
SECOND ORIGINAL
Sideletter to Charterparty MV "Galizano" dated 28th October 1996
To Kristian Gerhard Jebsen Skipsrederi A/S
Folke Bemadottes vej 38
Fyllingsdalen 5033 Bergen
Norway
In consideration of Kristian Gerhard Jebsen of Folke Bemadottesvej 38,
Fyllingsdalen 5033 Bergen, Norway (The "Beneficiary", which expression shall
include its successors and assigns) agreeing to charter the vessel MV Galizano
(The "Vessel") to Caribbean Cement Carriers Ltd. (The "Charterer") in accordance
with the terms of charterparty dated 28th October 1996 as the charterparty may
from time to time be amended and/or supplanted (The "Charterparty"), the
undersigned (The "Guarantor") agrees with the Beneficiary and undertakes as
follows:
1. The Guarantor hereby irrevocable and unconditionally guarantees to
the Beneficiary full performance, observance and compliance by the
Charterer of each and every obligation on the part of the Charterer
under the Charterparty. If at any time any default is made by the
Charterer, the Guarantor will on demand perform the obligation in
respect of which default has occured and/or will pay any sum or sums
that may be payable in consequence of such default. The Guarantor
accepts liability hereunder as if it was a primary obligor and
further accepts that liability will in no way be conditional upon
the Guarantor first taking any steps or proceedings against the
Charterer.
2. The construction, validity and performance of this guarantee is
subject to English Law. The English courts shall have jurisdiction
over any dispute arising out of or in connection with this
guarantee.
7 November 1996
For Devcon International Corp.
1350 E. Newport Center Drive, Suite 201
Deerfield Beach, Florida 33442
U.S.A.
/S/ RICHARD HORNSBY
-----------------------------
Mr. Richard Hornsby
Exec. Vice President
7
EXHIBIT 10.36
STANDSTILL AGREEMENT
This Agreement is made as of February 26, 1997, but to be effective as of
November 30, 1996, by Devcon International Corp., a Florida Corporation, the
"Borrower", Masonry Products - Virgin Island Corp. a Florida Corporation, as
Guarantor" and Barnett Bank N.A., a national banking association, formerly known
as Barnett Bank of Jacksonville, successor by merger to Barnett Bank of Broward
County, N. A "the Bank".
RECITALS
This Agreement is made and entered into in reliance on the accuracy of the
following recitals, which are acknowledged by Borrower, Guarantor and Bank to be
true and accurate:
WHEREAS, Borrower executed in favor of Bank and is liable to Bank for a
promissory note, said Note being more particularly described as follows:
Renewal Promissory Note dated June 30, 1993 in the original principal
amount of $l,000,000 which matured on June 30, 1996, on which is owed
as of the Agreement Date, the outstanding principal balance of $1,000
together with accrued and unpaid interest of $21.86
WHEREAS, on June 30, 1993, Guarantor executed and delivered to Bank an
unconditional guaranty of the Note; "Guaranty"; and
WHEREAS, the Note matured on June 30, 1996, and Borrower and Guarantor did not
pay the Note in full on said date; and
WHEREAS, the Borrower, Guarantors and Bank executed a Standstill Agreement dated
July 17, 1996, which extended the maturity until September 30, 1996; and on
October 31, 1996, further extended the standstill maturity date until November
30, 1996; and
WHEREAS, by reason of said maturity, Bank is entitled to have full payment of
the Note and to begin enforcement of Bank's rights under the Note, Mortgage,
Loan Agreement and Security Agreement, which documents, together with the
Guaranty are collectively referred to herein as "Loan Documents"; and
WHEREAS, Borrower and Guarantor are going to or have commenced negotiations with
Bank concerning the Note and plan to continue to evaluate and discuss, as each
party deems necessary, various courses of action that might be in the mutual
interests of all parties including, but not limited to attempting to reach
agreement on payoff, alternative financing, or, modification of the Note; and
WHEREAS, each party requests the other party "standstill" from taking certain
actions for such time and under such conditions as are her hereinafter set
forth; and
WHEREAS, although Bank is under no obligation to do so, Bank is willing to
standstill from enforcement of its rights arising from said maturity against
Borrower and Guarantor and Borrower's and Guarantor's assets, provided that such
standstill is on the terms and conditions as set out herein, and provided that,
except as expressly provided for in this Agreement, such standstill does not
waive or otherwise prejudice the rights of Bank; and
WHEREAS, Borrower and Guarantor are willing to standstill from pursuing any
right, claim, or defense they may have or allege to have against Bank provided
that such standstill is on the terms and conditions as set out herein, and
providing that, except as expressly provided for in this Agreement, such
1
<PAGE>
standstill does not waive or otherwise prejudice the rights of Borrower and
Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for other valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Borrower, Guarantor and Bank hereby acknowledge, agree and affirm as follows:
1. Each of the above RECITALS is incorporated herein and is relied upon by
Borrower, Guarantor and Bank in agreeing to the terms of this
Agreement.
2. Unless this Agreement is violated by Borrower or Guarantor, Bank will
not initiate or pursue any claim, cause of action, remedy, set-off or
other rights it may have or otherwise enforce against Borrower or
Guarantor under the Loan Documents, or by lien, attachment, execution,
encumbrance, right of set-off or foreclosure against any asset of
Borrower or Guarantor, and shall not join in any petition for
appointment of a receiver for under any section or chapter of the
Bankruptcy Code, or any state or federal law or regulation affecting
creditors' rights prior to the day after June 30, 1997 "Standstill
Maturity Date". The Note is hereby extended, without additional
modification or amendment to the Note, to mature on the Standstill
Maturity Date.
3. Unless this Agreement is violated by Bank, Borrower and Guarantor will
not initiate or pursue any claim, cause of action defense or other
rights they may have or allege to have against Bank prior to the day
after the Standstill Maturity Date.
4. The Loan Documents are authentic and valid, remain in full force and
effect and are legally binding and enforceable against the signatories
thereto.
5. Any and all prepayment penalties and late charges set forth in the Loan
Documents applicable to the payment of the Note prior to the Agreement
Date only are hereby waived by Bank provided that payment in full of
the Note is made on or before the Standstill Maturity Date.
6. Borrower will continue to conduct its business in a prudent manner,
make normal and necessary payments to entities/individuals as Borrower
deems necessary for operation of its business.
7. If any additional event of default under the Loan Documents occurs
after the Agreement Date but prior to the Standstill Maturity Date, or
if any additional event of default previously unknown or undisclosed to
Bank occurring prior to the Agreement Date is found, same will be a
violation of this Agreement. Upon the occurrence of any such event of
default, Bank may without demand, presentment or other notice of any
kind, all of which are hereby expressly waived by Borrower and
Guarantor, immediately exercise all rights and remedies available to
Bank herein and in the Loan Documents without any notice, demand, or
grace period or cure provision as may otherwise be allowed for or
required in the Loan Documents.
8. In addition to any financial information that Borrower and Guarantor
are required to provide to Bank under the Loan Documents, Borrower and
Guarantor will provide to Bank such financial information as Bank may
reasonably require.
9. Until the Standstill Maturity Date, interest shall continue to accrue
on the Note from the Agreement Date at the rate of .5% per annum in
excess of the rate of interest as is publicly announced by Barnett
Banks, Inc. from time to time as its prime rate. Borrower has paid
accrued and unpaid interest through February 28, 1997 upon execution of
this Agreement. Bank will continue to fund advances under the
provisions of the Loan Documents.
2
<PAGE>
10. On the Standstill Maturity Date the Note is due and payable in full.
Borrower's, Guarantor's and Bank's standstill of their rights and
remedies will cease the day after the Standstill Maturity Date and
Borrower, Guarantor and Bank are entitled to take whatever actions they
may have without regard to any payments being tendered or accepted
hereinafter or immediately prior hereto.
11. In the event that during the term of this Agreement any petition in
bankruptcy shall be filed by Borrower or Guarantor, or against Borrower
or Guarantor, by any third party, or if Borrower or Guarantor shall
execute any assignments for the benefit of creditors or shall in any
manner take or accept the benefit of any proceeding under the statue or
otherwise for the relief of debtors, then and in that event, this
Agreement, with the exception of the consent to lift stay in paragraph
17 hereof, shall become null and void and Bank shall have the right to
demand, receive and collect the Note in full, less any payments made
under this Agreement, with the same force and effect as if this
Agreement had not been made.
12. Borrower and Guarantor may have liabilities to Bank under other loans
or credit facilities other than those reflected in the Loan Documents.
Borrower, Guarantor and Bank intend that such other loans ad facilities
shall not be affected by this Agreement and shall remain in full force
and effect in all respects.
13. The standstill of performance by Borrower and Guarantor under any of
the terms of this Agreement shall not operate as a waiver or release of
performance under other terms of this Agreement or the Loan Documents.
Except as specifically provided in this Agreement, Borrower and
Guarantor will comply with all requirements of the Loan Documents to
the extent not inconsistent with this Agreement. This Agreement does
not represent (i) a commitment by Bank to make any new loans or grant
or extend any financial accommodations to Borrower or Guarantor, (ii) a
commitment by Bank to restructure the Loan Documents or grant or extend
any financial accommodations with respect to the Loan Documents, or
(iii) except as expressly provided for herein, an intention by Bank to
waive, modify or forbear from exercising any of its rights, powers and
privileges under the Loan Documents. Borrower and Guarantor
acknowledge, agree and affirm that no such commitment, waiver,
modification or forbearance has been offered, granted, extended or
agreed to by Bank.
14. Any waiver of jury trial or consent to jurisdiction previously executed
by, or between Borrower, Guarantor and Bank shall unconditionally be
fully effective and extend fully to this Agreement and any document
executed in conjunction herewith.
15. Borrower and Guarantor agree that through Standstill Maturity Date,
Bank will provide the following response to any inquiry concerning
Borrower:
"Since 1978, Barnett Bank has made various extensions of credit to
Devcon International Corp. on both a secured and unsecured basis. High
credit to mid-seven figure range. Payment history has been as agreed."
Borrower, Guarantor and Bank each agree that if during the standstill
period any party discovers information that might make the above
statement misleading to a third party, such party will immediately
communicate such information to all other parties, and each party
agrees to make all reasonable efforts to cooperate in preparing a
substitute statement, which statement shall not be provided to any
third party until approved in writing by all parties to this Agreement.
During the standstill period, when communicating with third parties,
Borrower and Guarantor agree that Borrower and Guarantor will disclose
3
<PAGE>
fully and accurately the terms of this Agreement. Bank agrees that
Borrower and Guarantor may give copies of this Agreement to third
parties; however, only with prior notice to and consent by Bank.
16. The parties may commence discussions or negotiations concerning the
Loan Documents. Without liability for filing to do so, the parties
plan, but are not obligated or committed to doing so, to discuss
various courses of action that might be in the parties mutual
interests. Any party, in its sole and absolute discretion, may
terminate these discussions and negotiations at any time and for any
reason. Upon such termination of discussions, any change in the
parties' respective obligations to one another subsequent to the
Agreement Date shall be only as set forth in a formal, executed written
agreement.
17. The fact that the parties may commence or have commenced discussions or
negotiations shal1 be without prejudice to any party and shall not be
used against any party during the negotiations undertaken between the
parties are intended as and shall be construed to constitute settlement
negotiations designed to resolve a pending dispute between the parties.
Accordingly, statements made and documents generated and exchanged by
and between the parties from and after the Agreement Date through the
Standstill Maturity Date are privileged and shall not be susceptible to
production in discovery or introduction in evidence. This Agreement
shall not be used during the course of litigation for any purpose,
unless there is a dispute over the application of this Agreement.
18. Neither the execution of this Agreement nor any discussions shall
operate to toll any time period which otherwise might be applicable,
including without limitation, any time periods which may be provided
for in the Loan Documents or by statute upon the commencement of
judicial or non-judicial foreclosure preceedings.
19. As a material inducement to the agreements of Bank in this Agreement,
Borrower and Guarantor agree that in the event that Borrower or
Guarantor is the subject of any insolvency, bankruptcy, receivership,
dissolution, reorganization or similar proceeding, federal or state,
voluntary or involuntary, under any present or future law or act, Bank
is entitled to the automatic and absolute lifting of any automatic stay
as to the enforcement of its remedies under the Loan Documents against
any collateral or security interest granted to Bank or against any
account of Borrower or Guarantor, including specifically, but not
limited to the stay imposed by Section 362 of the United States
Bankruptcy Code, as amended, or any similar state law and, to
accomplish such purposes, Borrower and Guarantor agree to the full
extent permitted by law not to seek to take advantage of any
appraisement, valuation, stay or extension law now or hereafter in
force, in order to prevent or hinder the enforcement of the Loan
Documents or the provisions of this Agreement. Borrower and Guarantor
hereby consent to the immediate lifting of any such automatic stay, and
will not contest any motion by Bank to lift such stay. Borrower and
Guarantor agree to execute all documentation necessary to waive or
provide for relief from any stay provisions under any federal or state
law.
20. Separate counterparts of this Agreement may be signed by the parties
hereto with the same effect as if all the parties had subscribed and
signed their names to the original Agreement. Notwithstanding anything
to the contrary herein, no party is bound hereby until this Agreement
has been executed by all of the parties hereto.
4
<PAGE>
21. This Agreement shall bind and inure to the benefit of the respective
transferees, heirs, personal representative, successors and assigns of
each of the parties; provided, however, that Borrower and Guarantor may
not assign this Agreement or any rights hereunder without Bank's prior
written consent and any prohibited assignment shall be absolutely void.
22. This Agreement has been negotiated, executed and delivered in St.
Marys, Georgia and shall be deemed to have been made in the State of
Florida, and the validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder
and concerning the Loan Documents, shall be determined under, governed
by and construed in accordance with the internal laws of the State of
Florida. The Loan Documents are hereby supplemented and modified to the
extent set forth herein, which modifications shall supersede and
prevail over any conflicting provision of the Loan Documents.
23. Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
24. This Agreement embodies the entire terms and agreements of the parties.
There are no representations, promises, terms, conditions or
obligations other than those contained herein and this Agreement shall
supersede and previous communications, understandings, discussions,
representations or agreements, either oral or written, between the
parties hereto relative to the terms of this Agreement. All
representations and warranties set forth herein shall survive the
execution of this Agreement. Without limiting the foregoing, no letter,
telegram or other communications passing between the parties hereto
concerning any matters during the negotiation of this Agreement shall
be deemed a part of this Agreement, nor shall it have the effect of
modifying or adding to this Agreement.
The undersigned have executed this Agreement as of the Agreement Date.
<TABLE>
<S> <C>
BARNETT BANK N.A., a national banking Devcon International Corp.
association, formerly known as Barnett
Bank of Jacksonville, successor by merger
to Barnett Bank of Broward County, N.A. /S/ WALTER B. BARRETT
By: Barnett Banks, Inc., a Florida -------------------------
corporation, as Attorney-In fact By: Walter B. Barrett
for Barnett Bank, N.A. pursuant to Vice President
a Power of Attorney dated as of
March 1, 1992
By: /S/ L. R. ROSS
-------------------------------
Print Name: L. R. Ross
Title: Senior Workout Officer
GUARANTOR:
WITNESS Masonry Products-Virgin Island Corp.
/S/ V. THOMAS FOUNTAIN
- ----------------------------
/S/ V. THOMAS FOUNTAIN /S/ WALTER B. BARRETT
- ---------------------------- ------------------------------------
Vice President
</TABLE>
5
<PAGE>
STATE OF GEORGIA)ss
COUNTY OF CAMDEN)
The foregoing Standstill Agreement was acknowledged before me this 26th day of
February, 1997 by Water B. Barrett, as Vice President of Devcon International
Corp., a Florida corporation, for and on behalf of the corporation, who is
personally known to me or produced drivers license as identification and did not
take an oath.
My Commission Expires: NOTARY PUBLIC
January 16,2000 /S/ V. Thomas Fountain
Camden County, Georgia
STATE OF GEORGIA)ss
COUNTY OF CAMDEN)
The foregoing Standstill Agreement was acknowledged before me this 26th day of
February, 1997 by Water B. Barrett, as Vice President of Masonry Products Virgin
Island Corp., a Florida corporation, for and on behalf of the corporation, who
is personally known to me or produced DRIVERS LICENSE as identification and did
not take an oath.
My Commission Expires: NOTARY PUBLIC
January 16, 2000 /S/ V. Thomas Fountain
Camden County, Georgia
STATE OF GEORGIA)ss
COUNTY OF CAMDEN)
The foregoing Standstill Agreement was acknowledged before me this 26th day of
February, 1997 by L. R. Ross, as Senior Workout Officer of BARNETT BANK INC. a
Florida Corporation, as attorney in fact for BARNETT BANK N.A, a Florida banking
corporation, on behalf of the corporation, pursuant to that Power of Attorney
dated as of March 1, 1992 and Third Amended and Restated Florida Certificate of
Designation dated January 18, 1994. He is personally known to me or produced
DRIVERS LICENSE as identification and did not take an oath.
My Commission Expires: NOTARY PUBLIC
January 16, 2000 /S/ V. Thomas Fountain
Camden County, Georgia
6
EXHIBIT 21.1
DEVCON INTERNATIONAL CORP.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Antigua Cement, Ltd.
Antigua Development and Construction, Ltd.
Antigua Heavy Constructors, Ltd.
Antigua Masonry Products, Ltd.
Bahamas Construction and Development, Ltd.
Bouwbedrijf Boven Winden, N.V.
Bouwbedrijf Boven Winden (Saba), N.V.
Bouwbedrijf Boven Winden (St. Eustatius), N.V.
Caribbean Cement Carriers, Ltd.
Caribbean Construction and Development, Ltd.
Caribbean Heavy Construction, Ltd.
Caribbean Masonry Products, Ltd.
Cramer Construction, N.V.
Crown Bay Marina Joint Venture I
Devcon Caribbean Purchasing Corp.
Devcon Crown Bay II Corp.
Devcon Crown Bay Corp.
Devcon Masonry Products (BVI), Ltd.
Island Drilling and Blasting, Inc.
Marco, Inc.
M21 Industries, Inc.
Proar Construction Materials Company, N.V.
Puerto Rico Crushing Company, Inc.
Seaward Shipping & Dredging Co., Ltd.
Societe des Carriers de Grand Case, S.A.R.L.
St. Martin Block, S.A.R.L. V.I.
Cement and Building Products, Inc.
ACCOUNTANTS' CONSENT
The Board of Directors
Devcon International Corp. and Subsidiaries
We consent to incorporation by reference in the registration statements (No.
33-32968 and No. 33-59557) on Form S-8 and (No. 33-65235) on Form S-3 of Devcon
International Corp. and subsidiaries of our report dated March 21, 1997,
relating to the consolidated balance sheets of Devcon International Corp. and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three year period ended December 31, 1996, and the related
schedule, which report appears in the December 31, 1996 annual report on Form
10-K of Devcon International Corp. and subsidiaries.
KPMG PEAT MARWICK LLP
Fort Lauderdale, Florida
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 303,994
<SECURITIES> 0
<RECEIVABLES> 16,775,156
<ALLOWANCES> 2,971,591
<INVENTORY> 6,998,678
<CURRENT-ASSETS> 26,656,950
<PP&E> 85,083,267
<DEPRECIATION> 37,587,567
<TOTAL-ASSETS> 94,926,140
<CURRENT-LIABILITIES> 13,078,036
<BONDS> 0
0
0
<COMMON> 449,894
<OTHER-SE> 12,064,133
<TOTAL-LIABILITY-AND-EQUITY> 94,926,140
<SALES> 69,478,369
<TOTAL-REVENUES> 69,478,369
<CGS> 53,648,218
<TOTAL-COSTS> 53,648,218
<OTHER-EXPENSES> 11,733,612
<LOSS-PROVISION> 302,863
<INTEREST-EXPENSE> 2,609,580
<INCOME-PRETAX> 1,184,096
<INCOME-TAX> 383,089
<INCOME-CONTINUING> 801,007
<DISCONTINUED> 488,119
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 312,888
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
