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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20459
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 1996
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-9919
PSC INC.
Incorporated pursuant to the Laws of New York State
Internal Revenue Service -- Employer Identification No. 16-0969362
675 Basket Road, Webster, New York 14580
(716) 265-1600
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 12 months preceding (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 ___
As of May 7, 1996 there were 10,006,999 shares of common stock outstanding.
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2
PSC Inc. AND SUBSIDIARIES
INDEX
PAGE NUMBER
PART I FINANCIAL INFORMATION
Item 1 -Financial Statements
Consolidated Balance Sheets as of
March 31, 1996 (Unaudited) and
December 31, 1995....................................3 - 4
Consolidated Statements of Operations and
Retained Earnings for the three
months ended:
March 31, 1996 (Unaudited) and
March 31, 1995 (Unaudited) ..............................5
Consolidated Statements of Cash Flows
for the three months ended:
March 31, 1996 (Unaudited) and
March 31, 1995 (Unaudited) ..............................6
Notes to Consolidated Financial
Statements (Unaudited) ..............................7 - 8
Item 2 -Management's Discussion and Analysis of
Financial Condition and Results of
Operations .........................................9 - 10
PART II OTHER INFORMATION
Item 1 -Legal Proceedings ....................................11
Item 2 -Changes in Securities ................................11
Item 3 -Defaults upon Senior Securities ......................11
Item 4 - Submission of Matters to a Vote of
Security Holders.....................................11
Item 5 -Other Information.....................................11
Item 6 - Exhibits and Reports on Form 8-K.....................11
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3
PART I - FINANCIAL INFORMATION
Item 1: Financial Statements
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term investments ...................... $ 8,731 $ 5,538
Marketable securities - 4,204
Accounts receivable, net of allowance
for doubtful accounts of $401
and $387, respectively ............................ 15,197 15,897
Inventories .......................................... 11,377 10,440
Prepaid expenses and other ........................... 711 623
------- --------
TOTAL CURRENT ASSETS .................................. 36,016 36,702
PROPERTY, PLANT AND EQUIPMENT, net
of accumulated depreciation of $4,789
and $4,112, respectively ............................. 22,007 22,157
DEFERRED TAX ASSETS .......................................... 1,484 1,506
INTANGIBLE ASSETS, net of accumulated
amortization of $2,838 and $2,376 respectively ............. 10,870 10,872
------- --------
TOTAL ASSETS ................................................. $ 70,377 $ 71,237
======== ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
4
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All amounts in thousands)
(Continued)
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt ..... $ 134 $ 131
Accounts payable ...................... 7,018 8,397
Accrued expenses ...................... 7,103 6,202
Accrued payroll and commissions ....... 793 1,237
Accrued acquisition related
restructuring costs ................ 259 338
------- --------
TOTAL CURRENT LIABILITIES ........... 15,307 16,305
LONG-TERM DEBT, less current maturities ...... 467 492
OTHER LONG-TERM LIABILITIES .................. 756 1,113
SHAREHOLDERS' EQUITY
Common stock, par value $.01;
25,000 authorized,10,001 and 9,985
shares issued and outstanding ...... 100 100
Additional paid-in capital ............ 45,999 45,881
Retained earnings ..................... 7,983 7,548
Cumulative translation adjustment ..... 2 35
Less treasury stock, 39 shares
repurchased, at cost ................. (237) (237)
-------- ---------
TOTAL SHAREHOLDERS' EQUITY .......... 53,847 53,327
------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY .................................. $70,377 $ 71,237
======= =========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
5
PSC Inc. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(All amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
---- ----
<S> <C> <C>
NET SALES ................................................ $21,499 $ 22,263
COST OF SALES ............................................ 12,343 11,761
------- -------
Gross profit .................................... 9,156 10,502
OPERATING EXPENSES
Engineering, research and development ........... 1,780 1,085
Selling, general and administrative ............. 6,746 6,224
------- --------
Income from operations ..................... 630 3,193
INTEREST AND OTHER INCOME (EXPENSE) ...................... 61 (159)
------- --------
Income before provision for income taxes ... 691 3,034
INCOME TAX PROVISION ..................................... 256 1,153
------ -------
NET INCOME ............................................... $ 435 $ 1,881
======= ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE ................................. $ .04 $ .22
======= ========
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Common shares ................................... 9,961 7,643
Common equivalent shares ........................ 243 772
------- --------
10,204 8,415
======= ========
RETAINED EARNINGS:
Retained earnings, beginning of period .......... $ 7,548 $ 2,099
Net income ...................................... 435 1,881
------- --------
Retained earnings, end of period ................ $ 7,983 $ 3,980
======= ========
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
6
PSC INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31
---------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .................................................. $ 435 $ 1,881
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization .......................... 1,139 603
Loss on disposition of assets .......................... 37 --
Deferred tax assets .................................... 64 144
Decrease (increase) in assets:
Accounts receivable ................................ 668 (1,405)
Inventories ........................................ (937) (717)
Prepaid expenses and other ......................... (130) 259
Increase (decrease) in liabilities:
Accounts payable ................................... (1,379) (241)
Accrued expenses ................................... 757 2,209
Accrued payroll and commissions .................... (444) 10
Accrued acquisition related restructuring costs .... (292) (238)
------- -------
Net cash (used in) provided by
operating activities ......................... (82) 2,505
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net ................................... (519) (3,208)
Additions to intangible assets .............................. (428) (244)
Proceeds from sale of investments 4,167 --
------ -------
Net cash provided by
(used in) investing activities ................ 3,220 (3,452)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Additions to long-term debt ................................. -- 1,199
Principal repayments of long-term debt ...................... (30) (14,216)
Exercise of stock options and sale of common stock .......... 118 20,881
------ -------
Net cash provided by financing activities ....... 88 7,864
------ -------
FOREIGN CURRENCY TRANSLATION .................................... (33) (8)
NET INCREASE IN CASH
------- -------
AND SHORT-TERM INVESTMENTS ............................. 3,193 6,909
CASH AND SHORT-TERM INVESTMENTS:
Beginning of period .................................... 5,538 2,720
------ -------
End of period .......................................... $8,731 $ 9,629
====== =======
</TABLE>
SEE ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
7
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 1996 and 1995
(All amounts in thousands, except per share data)
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements have been prepared by
the Company without audit. In the opinion of management, these financial
statements include all adjustments necessary to present fairly the
Company's financial position as of March 31, 1996, and the results of
operations and its cash flows for the three months ended March 31, 1996
and 1995. The results of operations for the three months ended March 31,
1996 are not necessarily indicative of the results to be expected for the
full year.
Certain information and disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The accompanying financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's December 31, 1995 annual report on
Form 10-K.
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is based on the weighted
average number of common and common equivalent shares (stock options
determined under the treasury stock method) outstanding during the period.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method)
or market. Elements of cost include materials, labor, and overhead and
consist of the following:
March 31, 1996 Dec. 31, 1995
-------------- -------------
Raw materials ............... $ 7,365 $ 6,914
Work-in-process ............. 2,288 2,090
Finished goods .............. 1,724 1,436
-------- --------
$ 11,377 $ 10,440
======== ========
(2) LONG-TERM DEBT
Long-term debt consists of the following:
March 31, 1996 Dec. 31, 1995
-------------- -------------
Capital lease obligations ....... $ 534 $ 553
Other ........................... 67 70
------ ------
601 623
Less: current maturities ....... 134 131
------ ------
$ 467 $ 492
====== ======
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8
PSC Inc. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED March 31, 1996 and 1995
(All amounts in thousands, except per share data)
(Unaudited)
(3) SHAREHOLDERS' EQUITY
During the three month period ended March 31, 1996, employees purchased
approximately 13 shares at $7.86 per share under the provisions of the
Company's Employee Stock Purchase Plan.
Changes in the status of options under the Company's stock option plans
are summarized as follows:
January 1, 1996 January 1, 1995
to to
March 31, 1996 December 31, 1995
-------------- -----------------
Options outstanding at
beginning of period ............... 2,138 2,299
Options granted ..................... 282 105
Options exercised ................... (3) (200)
Options forfeited/canceled .......... (10) (66)
----- -----
Options outstanding at
end of period ..................... 2,407 2,138
===== =====
Number of options at end of period:
Exercisable ...................... 1,627 1,575
Available for grant .............. 1,365 1,637
Average price of options:
Outstanding at end of period ...... $8.35 $8.41
Exercised ......................... $6.53 $6.52
<PAGE>
9
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and Notes to Consolidated Financial Statements
of the Company's December 31, 1995 annual report on Form 10-K.
Results of Operations:
Net Sales. Consolidated net sales during the three months ended March 31, 1996
decreased $0.8 million or 3% compared with the same period in 1995. The decrease
is primarily due to decreased sales volume of the Company's scan engines
associated with the production delays of the new DI-1000 products.
Geographically, domestic net sales decreased by 6% and international net sales
increased by approximately 6%. International net sales represented approximately
22% of net sales in the first quarter of 1996 versus 20% of net sales in the
first quarter of 1995.
Gross Profit. Consolidated gross profit during the three months ended March 31,
1996 decreased $1.3 million or 13% compared with the same period in 1995. As a
percentage of sales, gross profit decreased from 47.2% to 42.6%. The decrease in
gross profit percentage is primarily due to the decreased sales volume discussed
above, lower average selling prices for its handheld products and scan engines
and production start-up delays associated with its new DI-1000 products.
Engineering, Research and Development. Engineering, Research and Development
(ER&D) expenses increased $695 or 64%, as compared to the same period in 1995.
As a percentage of sales, ER&D was 8.3% in the first quarter of 1996 versus 4.9%
in the first quarter of 1995. The dollar increases were primarily related to the
Company's new product development for its handheld laser scanner products and
its LazerData product line's fixed position scanners.
Selling, General and Administrative. Selling, General and Administrative (SG&A)
expenses increased $0.5 million or 8%, as compared to the same period in 1995.
As a percentage of sales, SG&A was 31.4% in 1996 and 28.0% in 1995. The
increased dollar amount is primarily due to start-up costs associated with the
Company's new South American subsidiary and increased marketing related
expenses.
Acquisition Related Restructuring and Other Costs . During the 1994 fourth
quarter, the Company recognized a one-time pre-tax restructuring charge of $3.0
million. The charge related to the integration of the Company's existing fixed
position scanner product lines with those of LazerData, which was acquired in
December 1994. The restructuring program in part, provided for employee
severance and benefit costs for the elimination of approximately 12
manufacturing and engineering support positions. As of March 31, 1996, all
positions targeted in the restructuring program have been eliminated. The amount
of the restructuring accrual at March 31, 1996 was approximately $0.5 million.
Restructuring actions are substantially complete as of March 31, 1996. There
have been no re-allocations and/or re-estimates to date.
<PAGE>
10
Provision for Income Taxes. Provision for income tax dollar amounts was down
$0.9 million due to the reduction in pre-tax net income. The Company's effective
tax rate was 37.0% in 1996, compared with 38.0% in 1995. The Company expects to
record income tax expense at or about the combined federal and state statutory
tax rate in 1996.
Liquidity and Capital Resources:
The Company utilizes a number of measures of liquidity, including the following:
March 31, 1996 Dec. 31, 1995
-------------- -------------
Cash (used in) provided by operations ($82) $ 2,897
Working capital $20,709 $20,397
Long-term debt to capital
(Long-term debt to long-term debt plus equity) 0.9% 0.9%
Cash provided by operations decreased $2.6 million versus the first quarter of
1995 primarily due to the decreased net income. Working capital increased $0.3
million from December 31, 1995 primarily due to a reduction in current
liabilities ($1.0 million) offset by a smaller reduction in current assets ($0.6
million).
Property, plant and equipment expenditures totaled $0.5 million for the three
months ended March 31, 1996 compared with $3.2 million for the three months
ended March 31, 1995. The 1995 expenditures primarily related to the
construction costs of the Company's headquarters, manufacturing and engineering
facility.
The long-term debt to capital percentage was 0.9% at both March 31, 1996 and
December 31, 1995.
At March 31, 1996, liquidity immediately available to the Company consisted of
cash and short-term investments of approximately $8.7 million. In addition, the
Company has a revolving loan agreement with Manufacturers and Traders Trust
Company pursuant to which the bank has agreed to provide a line of credit
totaling $20.0 million. The agreement expires in September 2000. As of March 31,
1996, the Company had no outstanding borrowings under this agreement. The
Company believes that it has adequate liquidity for the next twelve months to
meet its current and anticipated operating needs from the results of its
operations, existing credit facilities and working capital. As part of its
overall business strategy, the Company may from time to time evaluate other
acquisition opportunities. The funding for these future transactions, if any,
may require the Company to obtain additional sources of financing.
<PAGE>
11
Part II: OTHER INFORMATION
Item 1: Legal Proceedings:
On or about April 1, 1996, PSC filed suit in the United States
District Court for the Western District of New York located in Rochester,
New York, against Symbol Technologies, Inc. ("Symbol") for violation of the
antitrust laws, unfair trade practices and for declaration of
noninfringement and/or invalidity of about 32 Symbol patents. On or about
the same effective date Symbol sued PSC for patent infringement in the
United States District Court for the Southern District of New York in
Manhattan, alleging infringement of about 19 patents, as well as suing
PSC's customer, Data General. Symbol has also alleged breaches of the
Symbol-PSC License Agreements of 1991 and 1995 and violation of a 1991
Consent Judgment. Symbol has also moved for a preliminary injunction in
that proceeding on four patents. Presently before the Southern District
Court is a motion by PSC to transfer the Southern District action to
Rochester. There is no date set for a pre-motion conference as required
under the Court's rules, as to Symbol's request to perfect filing of its
preliminary injunction motion.
Other legal proceedings incorporated by reference to Item 3 of the
Annual Report on Form 10K for the fiscal period ended December 31, 1995.
Item 2: Changes in Securities: None
Item 3: Defaults upon Senior Securities: None
Item 4: Submission of Matters to a Vote of Security Holders: None
Item 5: Other Information: None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits: Page
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10.1 Lease Agreement between Klute Corporation and PSC S.A., Inc. dated
February 5, 1996......................................................13
10.2 Restated PSC Inc. 401(k) Profit Sharing Plan as of January 1, 1995 ...36
10.3 Restated PSC Inc. 401(k) Profit Sharing Plan as of October 1, 1995....56
(b) Reports on Form 8-K: None
<PAGE>
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SIGNATURES
Pursuant to the requirements 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.
PSC Inc.
DATE: May 8, 1996 By: /s/ L. Michael Hone
-------------------
L. Michael Hone, Chairman,
Chief Executive Officer, and President
DATE: May 8, 1996 By: /s/ William J. Woodard
-------------------------------
William J. Woodard
Vice President, Finance and Treasurer
(Principal Financial Officer)
DATE: May 8, 1996 By: /s/ Scott D. Deverell
----------------------
Scott D. Deverell
(Principal Accounting Officer)
STANDARD OFFICE BUILDING LEASE
This Lease Agreement (sometimes hereinafter referred to as the "Lease") made and
entered into this 5th day of February, 1996, by and between Klute Corporation a
Florida Corporation (hereinafter called "Landlord"), whose address for purposes
hereof is 1110 Brickell Ave. #105, Miami, FL 33131 and PSC S.A., Inc. a New York
Corporation (hereinafter called "Tenant"), whose address for purposes hereof is
1110 Brickell Avenue, Suite 505, Miami, Florida 33131.
WITNESSETH
LEASED PREMISES:
1. Subject to and upon the terms, provisions, covenants and conditions
hereinafter set forth, and each in consideration of the duties, covenants and
obligations of the other hereunder, Landlord does hereby lease, demise and let
to Tenant and Tenant does hereby lease, demise and let from Landlord those
certain premises thereinafter sometimes called the "Premises" or "Leased
Premises") in the building known as 1110 Brickell Building (hereinafter called
the "Building") located at 1110 Brickell Avenue, Miami, Dad, Florida 33131, such
Leased Premises being more particularly described as follows 1,232 (Rentable)
square feet of Net Rentable Area (hereinafter defined) located on the Suite 505,
(5th) Fifth floor of the Building as reflected on the floor plan of such Leased
Premises attached hereto as Exhibit "A" and made a part hereof, identified by
the signatures or initials of Landlord and Tenant . The term "Net Rentable
Area", as used herein, shall refer to (i) in the case of a single tenancy floor,
all space measured from the inside surface of the outer glass of the Building to
the inside surface of the opposite outer wall, excluding only the areas
("Service Areas") within the outside walls used for building stairs, fire
towers, elevator shafts, flues, vents, pipe shafts and vertical ducts, but
including any such areas which are for the specific use of the particular tenant
such as special stairs or elevators, and (ii) in the case of a multi-tenancy
floor, all space within the inside surface of the outer glass enclosing the
tenant occupied portion of the floor and measured to the midpoint of the walls
separating areas leased by or held for lease to other tenants or from areas
devoted to corridors, elevator foyers, rest rooms and other similar facilities
for the use of all tenants on the particular floor (hereinafter sometimes called
"Common Areas"), but including a proportionate part of the Common Areas located
on such floor.
No deductions from Net Rentable Areas are made for columns necessary to
the Building. The Net Rentable Areas in the Leased Premises and in the Building
have been calculated on the basis of the foregoing definition and are hereby
stipulated above as to the Leased Premises, whether the same should be more or
less as a result of minor variations resulting from actual construction and
completion of the Leased Premises for occupancy so long as such work is done
substantially in accordance with the approved plans.
TERM:
2. This Lease shall be for the term of THREE (3) YEARS AND FIFTEEN (15) DAYS
commencing on the 15th day of February, 1996, and ending on the 28th day of
February, 1999 (hereinafter sometimes referred to as the "Lease Term" or
"Term"), unless sooner terminated or extended as provided herein.
If the Landlord is unable to give possession of the Leased Premises on
the date of the commencement of the aforesaid Lease Term by reason of the
holding over of any prior tenant or tenants of for any other reasons, an
abatement or diminution of the rent to be paid hereunder shall be allowed Tenant
under such circumstances until possession is given to Tenant, but nothing herein
shall operate to extend the Initial Term of the lease beyond the agreed
expiration date, and said abatement in rent shall be the full extent of
Landlord's liability to Tenant for any loss or damage to Tenant on account of
said delay in obtaining possession of the Premises. There shall be no delay in
the commencement of the Term of this Lease and/or payment of rent where Tenant
fails to occupy premises when same are ready for occupancy, or when Landlord
shall be delayed in substantially completing such Leased Premises as a result
of:
<PAGE>
14
(a) Tenant's failure to promptly furnish working drawings and plans as required
or (b) Tenant's failure to approve cost estimates within one (1) week or (c)
Tenant's failure to promptly select materials, finishes, or installation or (d)
Tenant's changes in plans (notwithstanding Landlord's approval of such changes),
or (e) Any other act of omission by Tenant or its agents, or failure to promptly
make other decisions, necessary to the preparation of the Leased Premises for
occupancy.
The commencement of the Terms and the payment of rent shall not be
affected, delayed or deferred on account of any of the foregoing. For the
purposes of this paragraph, the Leased Premises shall be deemed substantially
completed and ready for occupancy by Tenant when Landlord's Supervising
Architects certifies that the work required of Landlord, if any, has been
substantially completed in accordance with said approved plans and
specifications.
Taking possession of the Leased Premise by Tenant shall be conclusive
evidence as against Tenant that the Leased Premises were in good and
satisfactory condition when possession was so taken. This Lease does not grant
any right to light or air over or about the Leased Premises or Building.
If Tenant, with Landlord's consent, shall occupy the Leased Premises
prior to the beginning of the Lease Term as specified hereinabove, all
provisions of this Lease shall be in full force and effect commencing upon such
occupancy, and rent for such period shall be paid by Tenant at the same rate
herein specified.
BASE RENT:
3. Tenant agrees to pay Landlord a total "Base Rental" of Fifty-Six Thousand One
Hundred and Forty-Eight Dollars and 82/100 ($56,148.82) (being an annual Base
Rental of (See Addendum - Parag. #49) in equal monthly installments of (See
Addendum - Parag. #49) which is computed at a Base Rental of $15.00 per rentable
square foot per annum for each and every calendar month of the Term of this
Lease, without any offset or deduction whatsoever, in lawful legal tender for
public or private debts) money of the United States of America, at the
Management Office of the Building or elsewhere as designated from time to time
by landlord's written notice to Tenant. Landlord upon execution of this Lease by
Landlord and Tenant, hereby acknowledged payment by Tenant of the sum of Two
Thousand Two Hundred and Eighty Five Dollars and 65/100 (Sales Tax Included)
($2,285.65) representing payment of rental for the first full calendar month of
this Lease and (15) fifteen days in February 1996. The balance of the total Base
Rental is payable in equal monthly installments as specified above, on the first
day of each month hereafter ensuing, the first of which shall be due and payable
on the first of April, 1996. If the Term of this Lease commences on any day of a
month excepting the first day, Tenant shall pay Landlord rental as provided for
herein for such commencement month on a pro rate basis (such proration to be
based on the actual number of days in the commencement month) and the first
month's rent paid by Tenant, if any, upon execution of this Lease shall apply
and be credited to the next full month's rent due hereunder. Rental for any
partial month of occupancy at the end of the Term of this Lease will be
prorated, such proration to be based on the actual number of days in the partial
month.
In addition to Base Rental, Tenant shall and hereby agrees to pay to
Landlord each month a sum equal to any sales tax, tax on rentals, and any other
charges, taxes and/or impositions now in existence or hereafter imposed based
upon the privilege of renting the space leased hereunder or upon the amount of
rentals collected therefor. Nothing herein shall, however, be taken to require
Tenant to pay any part of any Federal and State Taxes on income imposed upon
Landlord.
Tenant shall be required to pay Landlord interest on any rental due
that remains unpaid for five (5) days after its due date. Said interest will be
computed at the maximum legal rate from due date.
<PAGE>
15
ADDITIONAL RENT:
4A. In the event that the cost to the Landlord for the Operating Expenses of the
Building, as hereinafter defined, during any calendar year of the Lease Term
subsequent to the Base Year (which the parties hereto agree shall be calendar
year 1996) shall exceed the cost to the LANDLORD for the Operating Expenses of
the Building during the Base Year, then TENANT shall pay to LANDLORD as
additional rent TENANT's "proportionate share" (as such term is hereinafter
defined) of the increase in such costs for each calendar yea, if any. The
proportionate share to be paid by the TENANT shall be the percentage which the
Net Rentable Area then leased by the TENANT in the Building bears to the Total
Net Rentable Area contained in the Building, which is 95,000 rentable square
feet. The amount of such additional rent, if any, shall be determined in
accordance with the following formula: net rentable square feet of Leased
Premises, divided by Total Net Rentable Area (the "proportionate share")
multiplied by an increase in Operating Expenses over the Operating Expenses of
the Base Year equals additional rent due from TENANT except that such additional
rent shall be prorated for any partial calendar year following the commencement
of the Lease Term.
The term "Operating Expenses" as used herein shall mean the cost of all
expenses, cost and disbursements of every kind and nature which LANDLORD shall
pay or become obligated to pay because of or in connection with the ownership,
maintenance and/or operation of the Building computed on the accrual basis, but
shall not include the replacement of capital investment items and new capital
improvements. By way of explanation and clarification, but not by way of
limitation, these Operating Expenses will include the following:
a. Wages and salaries of all employees engaged in operation and
maintenance of the Building; employer's social security taxes, unemployment
taxes or insurance, and any other taxes which may be levied on such wages and
salaries; the cost of disability and hospitalization insurance, pension or
retirement benefits, or any other fringe benefits for such employees.
b. All supplies and materials used in operation and maintenance
of the Building.
c. Cost of the utilities including water, sewer, electricity,
gas and fuel oil used by the Building and not charged directly to another
tenant.
d. Cost of customary Building management; janitorial services; trash
and garbage removal; servicing and maintenance of all systems and equipment,
including, but not limited to, elevators, plumbing, heating, air conditioning,
ventilating, lighting, electrical, security and fire alarms, fire pumps, fire
extinguishers and hose cabinets, mail chute, and staging; guard service;
painting; window cleaning landscaping and gardening.
e. Cost of casualty and liability insurance applicable to
the Building and LANDLORD's personal property used in connection therewith.
f. All taxes and assessments and governmental charges whether federal,
state, county or municipal, and whether they be taxing districts or authorities
presently taxing the Leased Premises or by others, subsequently created or
otherwise, and any other taxes and assessments attributable to the Building or
its operation excluding, however, federal and state taxes on income.
The Operating Expenses for the Base Year is hereby defined as $*See
Below LANDLORD agrees to maintain accounting books and records reflecting
Operating Expenses of the Building in accordance with generally accepted
accounting principles.
In the event the Operating Expenses in any year after the Base Year are
reduced because of a major capital improvement or by the use of automation, then
the Operating Expenses for the Base Year shall be reduced for the purpose of
determining additional rent as though such improvement or automation was in
effect during the Base Year.
LANDLORD shall notify TENANT, within ninety (90) days after the end of
the Base Year and each calendar year thereafter during the term hereof, of the
amount which LANDLORD estimates (as evidenced by budgets prepared by or on
behalf of LANDLORD) will be the amount of TENANT's proportionate share of
Increases in Operating Expenses for the then current calendar year and TENANT
shall pay such sum in advance to LANDLORD in equal monthly installments, during
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16
the balance of said calendar year, on the first day of each remaining month in
said calendar year commencing on the first day of the first month following
TENANT's receipt of such notification. Within ninety (90) days following the end
of each calendar year after the Base Year, LANDLORD shall submit to TENANT a
statement showing the actual amount which should have been paid by TENANT with
respect to increases in Operating Expenses for the past calendar year, the
amount thereof actually paid during that year by TENANT and the amount of the
resulting balance due thereon, or overpayment thereof, as the case may be.
Within thirty (30) days after receipt by TENANT of said statement, TENANT shall
have the right in person to inspect LANDLORD's books and records showing the
Operating Expenses for the Building for the calendar year covered by said
statement. Said statement shall become final and conclusive between the parties,
their successors and assigns as to the matters set forth therein unless LANDLORD
receives written objections with respect thereto within said thirty (30) day
period. Any balance shown to be due pursuant to said statement shall be paid by
TENANT to LANDLORD within thirty (30) days following TENANT's receipt thereof
and any overpayments shall be immediately credited against TENANT's obligation
to pay expected additional rent in connection with anticipated increases in
Operating Expenses or, if by reason of any termination of the Lease no such
future obligation exists, refunded to TENANT. Anything herein to the contrary
notwithstanding, TENANT shall not delay or withhold payment of any balance shown
to be due pursuant to a statement rendered by LANDLORD to TENANT, pursuant to
the terms hereof, because of any objection with TENANT may raise with respect
thereto and LANDLORD shall immediately credit any overpayment found to be owing
to TENANT against TENANT's proportionate share of increases in Operating
Expenses for the then current calendar year (and future calendar years, if
necessary) upon the resolution of said objection or, if at the time of the
resolution of said objection the Lease Term has expired, immediately refund to
TENANT any overpayment found to be owing to TENANT.
Additional rent, due by reason of the provisions of this subparagraph
4A for the 36 months of this Lease, is due and payable even though it may not be
calculated until subsequent to the termination date of the Lease; the Operating
Expenses for the calendar year during which the Lease terminates shall be
prorated according to that portion of said calendar year that this Lease was
actually in effect. TENANT expressly agrees that LANDLORD, at LANDLORD's sole
discretion, may apply the security deposit specified in paragraph 7 hereof, if
any, in full or partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this subparagraph 4A. If
said security deposit is greater than the amount of any such additional rent and
there are no other sums or amounts owed LANDLORD by TENANT by reason of any
other terms, provisions, covenants or conditions of this Lease, then LANDLORD
shall refund the balance of said security deposit to TENANT as provided in
paragraph 7 hereof. Nothing herein contained shall be construed to relieve
TENANT, or imply that TENANT is relieved, of the liability for or the obligation
to pay any additional rent due for the final months
* 1996 Operating expenses to be furnished when compiled
** Sales Tax included
All sums owe Landlord under the Lease shall be considered rents.
of this Lease by reason of the provisions of this paragraph 4A. If said security
deposit is less than such additional rent, nor shall LANDLORD be required to
first apply said security deposit to such additional rent if there are any other
sums or amounts owed LANDLORD by TENANT by reason of any other terms,
provisions, covenants or conditions of this Lease. If in any calendar year the
increase in Operating Expenses is negative, no additional rentals is to be
charged, but additional rent shall nevertheless be collected at the last year's
rate and adjusted thereafter.
4B. In the event that "Impositions" (as such term is hereinafter defined)
against the Building and/or the land on which it is located are increased during
any calendar year of the Lease Term subsequent to the Base Year over the amount
of said impositions during the Base Year, then TENANT shall pay to LANDLORD, as
additional rent, TENANT's Proportionate Share of the increases over the Base
Year in such Impositions for each calendar year, if any.
The term "Impositions" as use therein shall mean all impositions,
taxes, assessments (special or otherwise), water and sewer assessments and other
governmental liens or charges of any and every kind, nature and sort whatsoever,
ordinary and extraordinary, foreseen and unforeseen, and substitutes therefor,
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17
including all taxes whatsoever (except only those taxes of the following
categories: any inheritance, estate, succession, transfer or gift taxes imposed
upon LANDLORD or any income taxes specifically payable by LANDLORD as a separate
tax paying entity without regard to LANDLORD's income source as arising from or
out of the Building and/or the land on which it is located) attributable in any
manner to the Building, the land on which the Building is located or the rents
(however the term may be defined) receivable therefrom, or any part thereof, or
any use thereon, or any facility located therein or used in conjunction
therewith or any charge or other payment required to be paid to any governmental
authority, whether or not any of the foregoing shall be designated "real estate
tax", "sales tax", "rental tax", "excise tax", "business tax", or designated in
any other manner.
LANDLORD shall notify TENANT, within ninety (90) days after the end of
the Base Year and each calendar year thereafter, of the amount which LANDLORD
estimates (as evidenced by budgets prepared by or on behalf of LANDLORD) will be
the amount of TENANT's Proportionate Share of Increases in Impositions for the
then current calendar year and TENANT shall pay such sum to LANDLORD in equal
monthly installments during the balance of said calendar year, in advance on the
first day of each month commencing on the first day of the first month following
TENANT's receipt of such notification. Within ninety (90) days following the
date on which LANDLORD receives a tax bill or statement showing what the actual
Impositions are with respect to each calendar year, LANDLORD shall submit to
TENANT a statement, together with a copy of said bill or statements, showing the
actual amount to be paid by TENANT in the year in question with respect to
increases in Impositions for such year, the amount thereof theretofore paid by
TENANT and the amount of the resulting balance due thereon, or overpayment
thereof, as the case may be. Any balance shown to be due pursuant to said
statement shall be spread over the remaining months of the year and be paid by
TENANT to LANDLORD or if after the close of the Calendar Year within ten (10)
days following TENANT's receipt thereof and any overpayments shall be
immediately credited against TENANT's obligation to pay such additional rent in
connection with increased Impositions in later years, or, if no such future
obligation exists, be immediately refunded to TENANT.
Additional rent, due by reason of the provisions of this subparagraph
4B for the final months of this Lease, shall be payable even though the amount
thereof is not determinable until subsequent to the termination of the Lease;
the Impositions for the calendar year during which the Lease terminates shall be
prorated according to that portion of said calendar year that this Lease was
actually in effect. TENANT expressly agrees that LANDLORD, at LANDLORD's sole
discretion, may apply the security deposits specified in paragraph 7 hereof, if
any, in full or partial satisfaction of any additional rent due for the final
months of this Lease by reason of the provisions of this paragraph 4B. If said
security deposit is greater than the amount of such additional rent and there
are no other sums or amounts owed LANDLORD by TENANT by reason of any other
terms, provisions, covenants or conditions of this Lease, then LANDLORD shall
refund the balance of said security deposit to TENANT as provided in paragraph 7
hereof. Nothing herein contained shall be construed to relieve TENANT, or imply
that TENANT is relieved, of the liability for or the obligation to pay any
additional rent due for the final months of this Lease by reason of the
provisions of this paragraph 4B if said security deposit is less than such
additional rent, nor shall LANDLORD be required to first apply said security
deposit to such additional rent if there are any other sums or amounts owed
LANDLORD by TENANT by reason of any of the terms, provisions, covenants or
conditions of this Lease. If in any calendar year the increase in Impositions is
negative, no additional rental is to be charged, but rent shall be collected at
the last year's rate and adjusted thereafter.
4C It is the intention of the parties hereto to provide that the TENANT shall
pay in advance of their due date TENANT's Proportionate Share of Increases in
Operating Expenses and Impositions, and to share in reduction only by category
to the end that an increase in Operating Expenses shall not be offset by a
decrease in taxes and vice versa. In no event shall the Base Rental be reduced
by reason of decreases in Operating Expenses and/or Impositions.
COST OF LIVING INCREASE:
5. Deleted
<PAGE>
18
TIME OF PAYMENT:
6. Tenant agrees: that Tenant will promptly pay said rents (Base Rental as the
same may be adjusted from time to time pursuant to paragraph 5 and Additional
Rental), at the times and place stated above; that Tenant will pay charges for
work performed on order of Tenant, and any other charges that accrue under this
Lease; that, if any part of the rent or above mentioned charges shall remain due
and unpaid for seven days next after the same shall become due and payable,
Landlord shall have the option (in addition to all other rights and remedies
available to it by law and equity) of declaring the balance of the entire rent
for the entire Term of this Lease to be immediately due and payable, and
Landlord may then proceed to collect all of the unpaid rent called for by this
Lease by distress or otherwise.
SECURITY DEPOSIT:
7. Tenant, concurrently with the execution of this Lease, has deposited with
Landlord the sum of One Thousand Six Hundred and Forty Dollars and 00/100
($1,640.00), the receipt of which is hereby acknowledged by Landlord, which sum
shall be retained by Landlord as security for the payment by Tenant of the rents
and all other payments herein agreed to be paid by Tenant, and for the faithful
performance by Tenant of the terms, provisions, covenants and conditions of this
Lease. It is agreed that Landlord, at Landlord's option, may at the time of any
default by Tenant under any of the terms, provisions, covenants or conditions of
the Lease apply said sum or any part thereof toward the payment of the rents and
all other sums payable by Tenant under this Lease, and towards the performance
of each and every one of Tenant's covenants under this Lease, but such covenants
and Tenant's liability under this Lease shall thereby be discharged only pro
tanto that Tenant shall remain liable for any amounts that such sum shall be
insufficient to pay; that Landlord may exhaust any and all rights and remedies
against Tenant before resorting to said sum, but nothing herein contained shall
require or be deemed to require Landlord so to do; that, in the event this
deposit shall not be utilized for any such purposes, then such deposit shall be
returned by Landlord to Tenant within ten (10) days next after the expiration of
the Term of this Lease or the determination and payment of the amount due under
paragraph 4 of this Lease, if any, whichever later occurs. Landlord shall not be
required to pay Tenant any interest on said security deposit.
USE:
8. The Tenant will use and occupy the Leased Premises for the following
use or purpose and for no other use or purpose: General Office.
QUIET ENJOYMENT:
9. Upon payment by Tenant of the rents herein provided, and upon the observance
and performance of all terms, provisions, covenants and conditions on Tenant's
part to be observed and performed, Tenant shall, subject to all of the terms,
provisions, covenants and conditions of this Lease Agreement, peaceably and
quietly hold and enjoy the Leased Premises for the Term hereby demised.
INSURANCE PREMIUMS:
10. If the Landlord's insurance premiums exceed the standard premium rates
because the nature of Tenant's operation results in extra hazardous exposure,
then Tenant shall, upon receipt of appropriate invoices from Landlord, reimburse
Landlord for such increase in premiums. It is understood and agreed between the
parties hereto that any such increase in premiums shall be considered as rent
due and shall be included in any lien for rent.
RULES AND REGULATIONS:
11. Tenant agrees to comply with all rules and regulations Landlord may adopt
from time to time for operation of the Building and parking facilities and
protection and welfare of Building and Parking facilities, its tenants, visitors
and occupants. The present rules and regulations, which Tenant hereby agrees to
<PAGE>
19
comply with, entitled "Rules and Regulations" are attached hereto and are by
this reference incorporated herein. Any future rules and regulations shall
become a part of this Lease and Tenant hereby agrees to comply with the same
upon delivery of a copy thereof to Tenant, providing the same do not materially
deprive Tenant of its rights established under this Lease.
GOVERNMENTAL REQUIREMENTS/SERVICES
13. Landlord will furnish the following services to Tenant:
(A) Cleaning services, deemed by Landlord to be normal and usual in a first
class office building, on Monday through Friday, except that shampooing and
replacement of carpet as required by Tenant shall be Tenant's expense.
(B) Automatically operated elevator service, public stairs, electrical current
for lighting, incidentals, and normal office use, and water at those points of
supply provided for general use of its Tenants at all times and on all days
throughout the year.
(C) Heat and air conditioning on Monday through Friday from 8:30A.M. to 5:00
P.M. except Memorial Day, Fourth of July, Labor Day, Thanksgiving Day, Christmas
Day and New Year's Day, Landlord shall also furnish heat and air conditioning at
such other times as are not provided for herein, provided Tenant gives written
request to Landlord before 2 P.M. of the business day preceding the extra usage
and if Tenant requires heat and air conditioning during such hours, Tenant shall
be billed for such service at the rate of $15.00 per hours per partial floor and
said rate may be changed with thirty (30) days prior written notice.
No electric current shall be used except that furnished or approved by
Landlord, nor shall electric cable or wire be brought into the Leased Premises,
except upon the written consent and approval of the Landlord. Tenant shall use
only office machines and equipment that operate on the Building's standard
electric circuits, but which in no event shall overload the Building's standard
electric circuits from which the Tenant obtains electric current. Any
consumption of electric current in excess of that considered by landlord to be
used, normal and customary for all Tenants, or which require special circuits or
equipment (the installation of which shall be at Tenant's expense after approval
in writing by the Landlord), shall be paid for by the Tenant as additional rent
paid to the Landlord in an amount to be determined by Landlord, based upon
Landlord's estimated cost of such excess electric current consumption or based
upon the actual cost thereof if such excess electric current consumption is
separately metered.
Such services shall be provided as long as the Tenant is not in default
under any of the terms, provisions, covenants and conditions of this Lease,
subject to interruption caused by repairs, renewals, improvements, changes to
service, alterations, strikes, lockouts, labor controversies, inability to
obtain fuel or power, accidents, breakdowns, catastrophes, national or local
emergencies, acts of God and conditions and causes beyond the control of
Landlord, and upon such happening, no claim for damages or abatement of rent for
failure to furnish any such services shall be made by the Tenant or allowed by
the Landlord.
TENANT WORK:
14. It is understood and agreed between the parties hereto that any charges
against Tenant by Landlord for services or for work done on the Leased Premises
by order of Tenant, or otherwise accruing under this Lease, shall be considered
as rent due and shall be included in any lien for rent.
REPAIR OF LEASED PREMISES:
15. Tenant will, at Tenant's own expense, keep the Leased Premises in good
repair and tenantable condition during the Lease Term and will replace at its
own expense any and all broken glass caused by Tenant in and about said Leased
Premises.
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20
Tenant will make no alterations, additions or improvements in or to the
Leased Premises without the written consent of Landlord, which shall not be
unreasonably withheld, but may be predicated upon but not limited to Tenant's
use of contractors who are acceptable to Landlord; and all additions, fixtures,
carpet or improvements, except only office furniture and fixtures which shall be
readily removable without injury to the Leased Premises, shall be and remain a
part of the Leased Premises at the expiration of this Lease.
It is further agreed that this Lease is made by the Landlord and
accepted by the Tenant with the distinct understanding and agreement that the
Landlord shall have the right and privilege to make and build additions to the
Building of which the Leased Premises are a part, and make such alterations and
repairs to said Building as it may deem wise and advisable without any liability
to the Tenant therefor.
INDEMNIFICATION:
16. Tenant further agrees that Tenant will pay al liens of contractors,
subcontractors, mechanics, laborers, materialmen, and other items of like
character, and will indemnify Landlord against all expenses, costs, and charges,
including bond premiums for release of liens and attorneys' fees and costs
reasonably incurred in and about the defense of any suit in discharging the said
Premises or any part thereof from any liens, judgments, or encumbrances caused
or suffered by Tenant, in the event any such lien shall be made or filed, Tenant
shall bond against or discharge the same within ten (10) days after the same has
been made or filed, it is understood and agreed between the parties hereto that
the expenses, costs and charges above referred to shall be considered as rent
due and shall be included in any lien for rent.
The Tenant herein shall not have any authority to create any liens for
labor or materials on the Landlord's interest in the Leased Premises and all
persons contracting with the Tenant for the destruction or removal of any
facilities or other improvements or for the erection, installation, alteration
or repair of any facilities or other improvements on or about the Leased
Premises, and all materialmen, contractors, subcontractors, mechanics, and
laborers are hereby charged with notice that they must look only to the Tenant
and to the Tenant's Interest in the Leased Premises to secure the payment of any
bill for work done or material furnished at the request or instruction of
Tenant.
PARKING:
17. Pursuant to all of the terms, provisions, covenants and conditions contained
herein, for the Term of this Lease, Tenant hereby leases from Landlord Two (2)
parking spaces in the Building parking areas at the prevailing monthly contract
parking rate for said Building Parking areas. Such rate is subject to change at
any time on thirty (30) days prior notice, written or oral, to Tenant and it is
payable in advance on the first day of each month throughout the Term of this
Lease. Parking space rental due hereunder shall be deemed additional rent,
payable in the same manner as rent set forth in Paragraph 3 hereof and shall be
subject to all of the terms, provisions, conditions and covenants of this Lease
pertaining to the default in the payment of rental. In the event of an increase
in monthly parking rates, Tenant shall have the right to cancel any or all of
its parking spaces herein leased upon thirty (30) days written notice to
Landlord. Notwithstanding the foregoing, the notice required pursuant to this
paragraph shall be deemed given by the posting of new rates in conspicuous
places in the parking garage.
ESTOPPEL STATEMENT:
18. Tenant agrees that from time to time, upon not less than ten (10) days prior
request by Landlord, Tenant will deliver to Landlord a statement in writing
certifying (a) that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that the Lease as modified is in full force
and effect and stating the modifications); (b) the dates to which the rent and
other charges have been paid; and (c) that Landlord is not in default under any
provisions of this Lease, or, if in default, the nature thereof in detail.
<PAGE>
21
SUBORDINATION:
19. If the Building and/or Leased Premises are at any time subject to a mortgage
and, or deed of trust, and Tenant has received written notice from Mortgagee of
same, then in any instance in which Tenant gives notice to Landlord alleging
default by Landlord hereunder, Tenant will also simultaneously give a copy of
such notice to each Landlord's Mortgagee and each Landlord's Mortgagee shall
have the right (but not the obligation) to cure or remedy such default during
the period that is permitted to Landlord hereunder, plus an additional period of
thirty (30) days, and Tenant will accept such curative or remedial action (if
any) taken by Landlord's Mortgagee with the same effect as if such action had
been taken by Landlord.
This Lease shall at Landlord's option, which option may be exercised at
any time during the Lease Term, be subject and subordinate to any first mortgage
now or hereafter encumbering the Building. This provision shall be
self-operative without the execution of any further instruments. Notwithstanding
the foregoing, however, Tenant hereby agrees to execute any instrument(s) which
Landlord may deem desirable to evidence the subordination of this Lease to any
and all such mortgages.
ATTORNMENT:
20. If the interests of Landlord under this Lease shall be transferred
voluntarily or by reason of foreclosure or other proceedings for enforcement of
any first mortgage on the Leased Premises, Tenant shall be bound to such
transferee (herein sometimes called the "purchaser") for the balance of the Term
hereof remaining, and any extensions or renewals thereof which may be effective
in accordance with the terms and provisions hereof with the same force and
effect as if the Purchaser were the Landlord under this Lease, and Tenant does
hereby agree to attorn to the Purchaser, including the Mortgagee under any such
mortgage if it be the Purchaser, as its Landlord, said attornment to be
effective and self-operative without the execution of any further instruments
upon the Purchaser succeeding to the interest of the Landlord under this Lease.
The respective rights and obligations of Tenant and the Purchaser upon such
attornment to the extent of the then remaining balance of the Term of this Lease
and any such extensions and renewals, shall be and are the same as those set
forth herein. In the event of such transfer of Landlord's interests, Landlord
shall be released and relieved from all liability and responsibility thereafter
accruing to Tenant under Lease or otherwise and Landlord's successor by
acceptance of rent from Tenant hereunder shall become liable and responsible to
Tenant in respect to all obligations of the Landlord under this Lease.
ASSIGNMENT:
21. Without the written consent of Landlord first obtained ine each case, Tenant
shall not assign, transfer, mortgage, pledge, or otherwise encumber or dispose
of this Lease or underlet the Leased Premises or any part thereof or permit the
Leased Premises to be occupied by other persons. In the case of a subletting,
Landlord's consent may be predicated, among other things, upon Landlord becoming
entitled to collect and retain all rentals payable under the sublease. If this
Lease be assigned, or if the Leased Premises or any part thereof be underlet or
occupied by anybody other than Tenant, the Landlord may, after default by the
Tenant, collect or accept rent from the assignee, undertenant, or occupant and
apply the net amount collected or accepted to the rent herein reserved, but no
such collection or acceptance shall be deemed a waiver of this covenant or the
acceptance of the assignee, undertenant, or occupant as Tenant, nor shall it be
construed as or implied to be a release of the Tenant from the further
observance and performance by the Tenant of the terms, provisions, covenants and
conditions herein contained.
In lieu of consenting or not consenting, Landlord may, at its option
(i) in the case of the proposed assignment or subletting of Tenant's entire
leasehold interest, terminate this Lease in its entirety, or (ii) in the case of
the proposed assignment or subletting of a portion of the Premises, terminate
this Lease as to that portion of the Premises which Tenant has proposed to
assign or sublet. In the event Landlord elects to terminate this Lease pursuant
to clause (ii) of this paragraph, Tenant's obligations as to Base Rental and
Additional Rent shall be reduced in the same proportion that the Net Rentable
Area of the portion of the Premises taken by the proposed assignee or subtenant
bears to the total Net Rentable Area of the Premises.
<PAGE>
22
SUCCESSORS AND ASSIGNS:
22. All terms, provisions, covenants and conditions to be observed and performed
by Tenant shall be applicable to and binding upon Tenant's respective heirs,
administrators, executors, successors and assigns, subject, however, to the
restrictions as to assignment or subletting by Tenant as provided herein. All
expressed covenants of this Lease shall be deemed to be covenants running with
the land.
HOLD HARMLESS OF LANDLORD:
23. In consideration of said Premises being leased to Tenant for the above
rental, Tenant agrees that Tenant, at all times, will indemnify and keep
Landlord harmless from all losses, damages, liabilities and expenses, which may
arise or be claimed against Landlord and be in favor of any persons, firms or
corporations, consequent upon or arising from the use or occupancy of said
Premises by Tenant, or consequent upon or arising from any acts, omissions,
neglect or fault of Tenant, his agents, servants, employees, licensees,
visitors, customers, patrons or invitees, or consequent upon or arising from
Tenant's failure to comply with any laws, statutes, ordinances, codes or
regulations as herein provided; that Landlord shall not be liable to Tenant for
any damages, losses or injuries to the persons or property of Tenant which may
be caused by the acts, neglect omissions or faults of any persons, firms or
corporations, except when such injury, loss or damage results from negligence of
Landlord, his agents or employees, and that Tenant will indemnify and keep
harmless Landlord from all damages, liabilities, losses, injuries, or expenses
which may arise or be claimed against Landlord and be in favor of any person,
firms or corporations, for any injuries or damages to the person or property of
any persons, firms or corporations, where said injuries or damages arose about
or upon said Premises, as a result of the negligence of Tenant, his agents,
employees, servants, licensees, visitors, customers, patrons, and invitees. All
personal property placed or moved into the Leased Premises or Building shall be
at the risk of Tenant or the owner thereof, and Landlord shall not be liable to
Tenant for any damage to said personal property. Tenant shall maintain at all
times during the Term of this Lease an insurance policy or policies in an amount
or amounts sufficient in Landlord's opinion, to indemnify Landlord or pay
Landlord's damages, if any, resulting from any matters set forth hereinbefore in
this paragraph 23.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall protect and hold Landlord harmless and shall
pay all costs, expenses and reasonable attorneys' fees incurred or paid by
Landlord in connection with such litigation and any appeal thereof.
ATTORNEYS' FEES:
24. If either party defaults in the performance of any of the terms, provisions,
covenants and conditions of this Lease and by reason thereof the other party
employees the services of an attorney to enforce performance of the covenants,
or to perform any service based upon defaults, then in any of said events the
prevailing party shall be entitled to reasonable attorneys' fees and all
expenses and costs incurred by the prevailing party pertaining thereto
(including costs and fees relating to any appeal) and in enforcement of any
remedy.
DAMAGE OR DESTRUCTION:
25. In the event the Leased Premises shall be destroyed or so damaged or injured
by fire or other casualty, during the Term of this Lease, whereby the same shall
be rendered untenantable, then Landlord shall have the right, but not the
obligation, to render such Leased Premises tenantable by repairs within 180 days
therefrom.
Landlord agrees that, within 60 days following damage or destruction,
it shall notify Tenant with respect to whether or not Landlord intends to
restore the premises. If said Premises are not rendered tenantable within the
aforesaid 180 days it shall be optional with either party hereto to cancel this
Lease, and in the event of such cancellation the rent shall be paid only to the
date of such fire or casualty. The cancellation herein mentioned shall be
<PAGE>
23
evidenced in writing. During any time that the Leased Premises are untenantable
due to causes set forth in this paragraph, the rent or a just and fair
proportion thereof shall be abated. Notwithstanding the foregoing, should
damage, destruction or injury occur by reason of Tenant's negligence, Landlord
shall have the right, but not the obligation, to render the Leased Premises
tenantable within 360 days of the date of damage, destruction or injury and no
abatement of rent shall occur.
Notwithstanding the foregoing, should damage or destruction occur
during the last twelve months of the Lease Term, either Landlord or Tenant shall
have the option to terminate this Lease, effective on the date of damage or
destruction, provided notice to terminate is given within 30 days of the date of
such damage or destruction. Notwithstanding the foregoing, should the damage or
destruction occur by reason of Tenant's negligence, Tenant shall not have such
option to terminate.
EMINENT DOMAIN:
26. If there shall be taken during the Term of this Lease any part of the Leased
Premises, parking facilities or Building, other than a part not interfering with
maintenance, operation or use of the Leased Premises, Landlord may elect to
terminate this Lease or to continue same in effect. If Landlord elects to
continue the Lease, the rental shall be reduced in proportion to the area of the
Leased Premises so taken and Landlord shall repair any damage to the Leased
Premises, parking facilities, or Building resulting from such taking. If any
part of the Leased Premise is taken by condemnation of Eminent Domain which
renders the Premises unsuitable for its intended use, the Tenant may elect to
terminate this Lease, or if any part of the Leased Premises is so taken which
does not render the Premises unsuitable for its intended use, this Lease shall
continue in effect and the rental shall be reduced in proportion to the area of
the Leased Premises so taken and Landlord shall repair any damage to the Leased
Premises resulting from such taking. If all of the Leased Premises is taken by
condemnation or Eminent Domain this Lease shall terminate on the date of the
taking. All sums awarded (or agreed upon between Landlord and the condemning
authority) for the taking of the interest of Landlord and/or Tenant, whether as
damages or as compensation, and whether for partial or total condemnation, will
be the property of Landlord. If this Lease should be terminated under any
provisions of this paragraph, rental shall be payable up to the date that
possession is taken by the authority, and Landlord will refund to Tenant any
prepaid unaccrued rent less any sum or amount then owing by Tenant to Landlord.
ABANDONMENT:
27. If, during the Term of this Lease, Tenant will abandon, vacate or remove
from the Leased Premises the major portion of the goods, wares, equipment or
furnishings usually kept on said Leased Premises, or shall cease doing business
in said Leased Premises, or shall suffer the rent to be in arrears, Landlord
may, at its option cancel this Lease in the manner stated in Paragraph 28
hereof, or Landlord may enter said Leased Premises as the agent of Tenant by
force or otherwise, without being liable in any way therefo and relet the Leased
Premises with or without any furniture that may be therein, as the agent of
Tenant, at such price and upon such terms and for such duration of time as
Landlord may determine, and receive the rent therefore, applying the same to the
payment of the rent due by these presents, and if the full rental herein
provided shall not be realized by Landlord over above the expenses to Landlord
of such reletting, Tenant shall pay any deficiency.
INSOLVENCY:
28. It is agreed between the parties hereto that: if Tenant shall be adjudicated
bankrupt or an insolvent or take the benefit of any federal reorganization or
compositions proceeding or make a general assignment or take the benefit of any
insolvency law; or if Tenant's leasehold interest under this Lease shall be sold
under any execution or process of law; or if a trustee in bankruptcy or a
receiver be appointed or elected or had for Tenant (whether under Federal or
State laws); or if said Premises shall be abandoned or deserted; or if Tenant
shall fail to perform any of the terms, provisions, covenants or conditions of
this Lease on Tenant's part to be performed; or if this Lease or the Term
thereof be transferred or pass to or devolve upon any persons, firms, officers
or corporations other than Tenant by death of the Tenant, operation of law or
otherwise; then and in any such events, at the option of Landlord, the total
remaining unpaid Base Rental for the Term of this Lease shall become due and
payable or this Lease and the Term of this Lease shall expire and end five (5)
days after Landlord has given Tenant written notice (in the manner herinafter
provided) of such act, condition or default and Tenant hereby agrees immediately
then to pay said Base Rental or quit and surrender said Leased Premises to
<PAGE>
24
Landlord; but this shall not impair or affect Landlord's right to maintain
summary proceedings for the recovery of the possession of the Leased Premises in
all cases provided for by law. If the Term of this Lease shall be so terminated,
Landlord may immediately, or at any time thereafter, re-enter or repossess the
Leased Premises and remove all persons and property therfrom without being
liable for trespass or damages.
LIEN FOR PAYMENT OF RENT:
29. Tenant hereby pledges and assigns to Landlord as security for the payment of
any and all rental or other sums or amounts provided for herein, all of the
furniture, fixtures, goods and chattels of Tenant which shall or may be brought
or put on or into said Leased Premises, and Tenant agrees that said lien may be
enforced by distress, foreclosure or otherwise, at the election of the Landlord.
Tenant hereby expressly waives and renounced for himself and family any and all
homestead and exemption rights he may now have or herafter acquire under or by
virtue of the constitution and laws of the State of Florida or of any other
state, or of the United States, as against the payment of said rental or any
other obligation or damage that may accrue under the Terms of this Lease.
WAIVER OF DEFAULT:
30. Failure of Landlord to declare any default immediately upon occurrence
thereof, or delay in taking any action in connection therwith, shall not waive
such default, but Landlord shall have the right to declare any such default at
any time and taken such action as might be lawful or authorized hereunder, in
law and/or in equity. No waiver by Landlord of a default by Tenant shall be
implied, and no express waiver by Landlord shall affect any default other than
the default specified in such waiver and that only for the time and extension
therein stated.
No waiver of any term, provision, condition or covenant of this Lease
by Landlord shall be deemed to imply or constitute, a further waiver by Landlord
of any other term, provision, condition or covenant of this Lease. In addition
to any rights and remedies specifically granted Landlord herein, Landlord shall
be entitled to all rights and remedies available at law and in equity in the
event that Tenant shall fail to perform any of the terms, provisions, covenants
or conditions of this Lease on Tenant's part to be performed or fails to pay
Base Rental, Additional Rental or any other sums due Landlord hereunder when
due. All rights and remedies specifically granted to landlord herein, by law and
in equity shall be cumulative and not mutually exclusive.
RIGHT OF ENTRY:
31. Landlord, or any of his agents, shall have the right to enter the Leased
Premises during all reasonable hours to examine the same or to make such
repairs, additions or alterations as may be deemed necessary for the safety,
comfort, or preservation thereof, or to said Building, or to exhibit said Leased
Premises at any time within one hundred eighty (180) days before the expiration
of this Lease. Said right of entry shall likewise exist for the purpose of
removing placards, signs, fixtures, alterations, or additions which do not
conform to this Lease.
NOTICE:
32. Any notice given Landlord as provided for in this Lease shall be sent to
Landlord by registered mail addressed to Landlord at Landlord's Management
Office in the Building. Any notice to be given Tenant under the terms of this
Lease unless otherwise stated herein, shall be in writing and shall be sent by
certified mail to the office of Tenant in the Building. Either party, from time
to time, by such notice, may specify another address to which subsequent notice
shall be sent.
<PAGE>
25
LANDLORD CONTROLLED AREAS:
33. All automobile parking areas, driveways, entrances and exits thereto, Common
Areas, and other facilities furnished by Landlord, including all parking areas,
truck way or ways, loading areas, pedestrian walkways and ramps, landscaped
areas, stairways, corridors, and other areas and improvements provided by
landlord for the general use, in common, of tenants, their officers, agents,
employees, servants, invitees, licensees, visitors, patrons and customers, shall
be at all times subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to establish, modify and enforce
rules and regulations with respect to all facilities and areas and improvements;
to police same; from time to time to change the area, level and location and
arrangement of parking areas and other facilities hereinabove referred to; to
restrict parking by and enforce parking charges (by operation of meters or
otherwise) to tenants, their officers, agents, invitees, employees, servants,
licensees, visitors, patrons and customers; to close all or any portion of said
areas or facilities to such extent as may in the opinion of Landlord's counsel
be legally sufficient to prevent a dedication thereof or the accrual of any
rights to any person or the public therein; to close temporarily all or any
portion of the public areas, Common Areas or facilities; to discourage
non-tenant parking; to charge a fee for visitor and/or customer parking; and to
do and perform such other acts in and to said areas and improvements as, in the
sole judgment of Landlord, the Landlord shall determine to be advisable with a
view to the improvement of the convenience and use thereof by tenants, their
officers, agents, employees, servants, invitees, visitors, patrons, licensees
and customers. Landlord will operate and maintain the Common Areas and other
facilities referred to in such reasonable manner as Landlord shall determine
from time to time. Without limiting the scope of such discretion, Landlord shall
have the full right and authority to designate a manager of the parking
facilities and/or Common Areas and other facilities who shall have full
authority to make and enforce rules and regulations regarding the use of the
same or to employ all personnel and to make and enforce all rules and
regulations pertaining to and necessary for the proper operation and maintenance
of the parking areas and/or Common Areas and other facilities. Reference in this
paragraph to parking areas and/or facilities shall in no way be construed as
giving Tenant hereunder any rights and or privileges in connection with such
parking areas and/or facilities unless such rights and/or privileges are
expressly set forth in paragraph 17 hereof.
CONDITION OF PREMISES ON TERMINATION OF LEASE AND HOLDING OVER:
34. Tenant agrees to surrender to Landlord, at the end of the Term of this Lease
and/or upon any cancellation of this Lease, said Leased Premises in as good
condition as said Leased Premises were at the beginning of the Term of this
Lease, ordinary wear and tear, and damage by fire or other casualty not caused
by Tenant's negligence excepted. Tenant agrees that if Tenant does not surrender
said Leased Premises to Landlord at the end of the Term of this Lease then
Tenant will pay to Landlord double the amount of the current rental for each
month proportion thereof that Tenant holds over plus all damages that Landlord
may suffer on account of Tenant's failure to so surrender to Landlord possession
of said Leased Premises, and will indemnify and save Landlord harmless from and
against all claims made by any succeeding Tenant of said Leased Premises against
Landlord on account or delay of Landlord in delivering possession of said Leased
Premises to said succeeding Tenant so far as such delay is occasioned by failure
of Tenant to so surrender said Leased Premises in accordance herewith or
otherwise.
No receipt of money by Landlord from Tenant after termination of this
Lease or the service of any notice of commencement of any suit or final judgment
for possession shall reinstate, continue or extend the Term of this Lease or
affect any such notice, demand, suit or judgment.
No act or thing done by Landlord or its agents during the Term hereby
granted shall be deemed an acceptance of a surrender of the Leased Premises, and
no agreement to accept a surrender of the Leased Premises shall be valid unless
it be made in writing and subscribed by a duly authorized officer or agent of
Landlord.
<PAGE>
26
OCCUPANCY TAX:
35. Tenant shall be responsible for and shall pay before delinquency all
municipal, county or state taxes assessed during the Term of this Lease against
any occupancy interest or personal property of any kind, owned by or placed in,
upon or about the Leased Premises by the Tenant.
SIGNS:
36. Landlord shall have the right to install signs on the interior or exterior
of the Building and Leased Premises and or change the building's name or street
address.
TRIAL BY JURY:
37. It is mutually agreed by and between Landlord and Tenant that the respective
parties hereto shall and they hereby do waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties hereto against the
other on any matter arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, and Tenant's use or occupancy of the
Premises. Tenant further agrees that it shall not interpose any counterclaim or
counterclaims in a summary proceeding or in any action based upon non-payment of
rent or any other payment required of Tenant hereunder.
RELOCATION OF TENANT:
Deleted.
CROSS DEFAULT:
39. If the term of any lease, other than this Lease, made by Tenant for any
other space in the Building shall be terminated or terminable after the making
of this Lease because of any default by Tenant under such other lease, such
default shall ipso facto constitute a default hereunder and empower Landlord at
Landlord's sole option, to terminate this Lease as herein provided in the event
of default.
INVALIDITY OF OPTION:
40. If any term, provision, covenant or condition of this Lease or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease or the application of such
term, provision, covenant or condition to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby and each term, provision, covenant or condition of this Lease shall be
valid and be enforceable to the fullest extent permitted by law. This Lease
shall be construed in accordance with the laws of the State of Florida.
TIME OF ESSENCE:
41. It is understood and agreed between parties hereto that time is of
the essence of all the terms, provisions covenants and conditions of this Lease.
<PAGE>
27
MISCELLANEOUS:
42. The terms Landlord and Tenant as herein contained shall include singular
and/or plural, masculine, feminine and/or neuter, heirs, successors, executors,
administrators, personal representatives and/or assigns whenever the context so
requires or admits. The terms, provisions, covenants and conditions of this
Lease are expressed in the total language of this Lease Agreement and the
paragraph headings are solely for the convenience of the reader and are not
intended to be all inclusive. Any formally executed addendum to or modification
of this Lease shall be expressly deemed incorporated by reference herein unless
a contrary intention is clearly stated therein.
EFFECTIVE DATE:
43. Submission of this instrument for examination does not constitute an offer,
right of first refusal, reservation of or option for the Leased Premises or any
other space or premises in, on or about the Building. This instrument becomes
effective as a Lease upon execution and delivery by both Landlord and Tenant.
ENTIRE AGREEMENT:
44. This Lease contains the entire agreement between the parties hereto and all
previous negotiations leading thereto and it may be modified only by an
agreement in writing signed by Landlord and Tenant. No surrender of the Leased
Premises or of the remainder of the terms of this Lease, shall be valid unless
accepted by Landlord in writing. Tenant acknowledges and agrees that Tenant has
not relied upon any statement, representation, prior written or contemporaneous
oral promises, agreements or warranties except such as are expressed herein.
BROKERAGE:
45. Tenant represents and warrants that it has dealt with no broker, agent or
other person in connection with this transaction and that no broker, agent or
other person brought about this transaction, other than Miami Commercial Realty,
Inc. as agent for the Landlord and Esslinger-Wooten-Maxwell Realtors as agent
for the Tenant, and Tenant agrees to indemnify and hold Landlord harmless from
and against any claims by any other broker, agent or other person claiming a
commission or other form of compensation by virtue of having dealt with Tenant
with regard to this leasing transaction. The provisions of this paragraph shall
survive the termination of this Lease.
FORCE MAJEURE:
46. Neither Landlord nor Tenant shall be required to perform any term,
condition, or covenant in this Lease so long as such performance is delayed or
prevented by force majeure, which shall mean acts of God, labor disputes
(whether lawful or not), material or labor shortages, restrictions by any
governmental authority, civil riots, floods, and any other cause not reasonably
within the control of Landlord or Tenant and which by the exercise of due
diligence Landlord or Tenant is unable, wholly or in part, to prevent or
overcome. Lack of money shall not be deemed force majeure.
Addendum attached hereto and made a part hereof.
IF IN WITNESS WHEREOF, the parties hereto have signed, sealed and delivered this
Lease in duplicate at Dade County, Florida, on the date and year first above
written.
<PAGE>
28
LANDLORD: Klute Corporation,
a Florida Corporation
By: Catia L. Manganelli, Vice President
TENANT: PSC S.A., Inc.,
a New York Corporation
WITNESSES:
/s/: Scott D. Deverell /s/ William J. Woodard
William J. Woodard, Vice President (title)
<PAGE>
29
ADDENDUM
ATTACHED TO and made a part of the Lease Agreement dated_________ , 1996, by and
between Klute Corporation, as "Landlord" and PSC S.A., Inc. as "Tenant".
=================================================================
NOW THEREFORE, it is mutually understood and agreed as follows:
47. Tenant hereby agrees to maintain in full force and effect at all times
during the term of the Lease, at its own expense, for the protection of Tenant
and Landlord, as their interest may appear, policies of insurance issued by a
responsible carrier or carriers acceptable to Landlord which afford the
following coverages.
(a) Comprehensive General Liability Insurance not less than $1,000,000
combined single limit for both bodily injury and property damage.
(b) Fire and extended coverage, vandalism and malicious mischief,
sprinkler leakage (where applicable) insurance, to cover, all of Tenant's stock
in trade, fixtures, furniture, furnishings, removable floor coverings, trade
equipment, signs and all other decorations placed by Tenant in or upon the
Leased premises.
(c) Worker's Compensation is required by Florida Statutes.
(d) Employers Liability - Not less than $100,000.
Tenant shall deliver to Landlord at least (30) days prior to the time
such insurance is first required to be carried by Tenant, and thereafter at
least thirty (30) days prior to expiration of such policy, Certificates of
Insurance evidencing the above coverage with limits no less than those specified
above. Such certificates, shall name Landlord, its subsidiaries, directors,
agents and employees as additional insureds and shall expressly provide that the
interest of same therein shall not be affected by any breach by Tenant of any
policy provisions for which such Certificates evidence coverage. Further, all
Certificates shall expressly provide that no less than thirty (30) days prior
written notice shall be given Landlord in the event of material alteration to,
or cancellation of, the coverages evidenced by such Certificates.
A FAILURE TO PROVIDE SUCH INSURANCE COVERAGE SHALL BE DEEMED A DEFAULT IN THIS
LEASE.
48. Radon is a naturally occurring radioactive gas that, when it has accumulated
in a building in sufficient quantities, may present health risks to persons who
are exposed to it over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida. Additional information
regarding radon may be obtained from your County Public Health Unit. Section
404.056 (8), Florida Statutes, (1988).
49. Base rent payments shall be made by Tenant to Landlord in accordance
with the following schedule:
First 15 days (From February 15, 1996 to February 29, 1996) in the sum
of $708.82 and first full month (from March 1, 1996 to March 31, 1996) in the
sum of $1,437.33, plus applicable sales tax, shall be paid upon execution
hereof.
Balance of Year 1 - (From April 1, 1996 to February 28, 1997)
equal monthly installments of $1,437.33 plus applicable sales tax;
Year 2 - (From March 1, 1997 to February 28, 1998) equal monthly
installments of $1,540.00 plus applicable sales tax;
Year 3 - (From March 1, 1998 to February 29, 1999) equal monthly
installments of $1,642.67 plus applicable sales tax.
<PAGE>
30
50. Landlord shall at its own cost and expense provide the following work in the
leased premises: (1) paint all walls using building standard paint (color of
Tenant's choice) and (2) install new carpeting using *building standard
carpeting (color of Tenant's choice). All other aspects of said leased premises
shall remain in `as is' condition which is acknowledged and accepted by the
Tenant.
Except to the extend amended by this addendum, the lease is hereby ratified and
confirmed and shall remain in full force and effect.
* (3) Broken ceiling tiles shall be replaced and all ceiling tiles shall be
painted.
<PAGE>
31
EXHIBIT "A"
Attached to a made a part of Lease dated ______, 1996 between Klute Corporation
as Landlord and PSC S.A., Inc. as Tenant, Suite #505 consisting of approximately
1,232 rentable square feet of office space outlined in red and located in the
building known as 1110 Brickell Building located at 1110 Brickell Avenue, Miami,
Dad County, Florida
{schematic of building}
<PAGE>
32
RULES AND REGULATIONS
The following Rules and Regulations, hereby assumed by Tenant, are prescribed by
Landlord to Landlord to provide, maintain, and operate to the best of Landlord's
ability, orderly, clean and desirable premises, Building and parking facilities
for the Tenants therein at as economical a cost as reasonably possible and in as
efficient a manner as reasonably possible, to assure security for the protection
of Tenants so far as reasonably possible, and to regulate conduct in and use of
said Premises, Building and Parking facilities in such manner as to minimize
Interference by others in the proper use of same by Tenant.
1. Tenant, its officers, agents, servants and employees shall not block or
obstruct any of the entries, passages, doors, elevators, elevator doors,
hallways or stairways of building or garage, or place empty or throw any
rubbish, litter, trash or material of any nature into each area or permit such
areas to be used at any time except for ingress or egress of Tenant, its
officers, agents, servants, employees, patrons, licensees, customers, visitors
or invitees.
2. The movement of furniture, equipment, machines, merchandise or materials
within, into or out of the Leased Premises, Building or parking facilities shall
be restricted to time, method and routing of movement as determined by Landlord
upon request from Tenant and Tenant shall assume all liability and risk to
property, Premises and Building in such movement. Tenant shall not move
furniture, machines, equipment, merchandise or materials within, into or out of
the Building, Leased Premises or garage facilities without having first obtained
a written permit from Landlord twenty-four (24) hours in advance. Safes, large
files, electronic data processing equipment and other heavy equipment or
machines shall be moved into Leased Premises, Building or parking facilities
only with Landlord's written consent and placed where directed by Landlord.
3. No sign, door plaque, advertisement or notice shall be displayed, painted or
affixed by Tenant, its officers, agents, servants, employees, patrons,
licensees, customers, visitors, or invitees in or on any part of the outside or
inside of the Building, garage facilities or Leased Premises without prior
written consent of Landlord and then only of such color, size, character, style
and materials and in such places as shall be approved and designated by
Landlord. Signs on doors and entrances to Leased Premises shall be placed
thereon by a contractor designated by Landlord and paid for by Tenant.
4. Landlord will not be responsible for lost or stolen property, equipment,
money or any article taken from Leased Premises, Building or parking facilities
regardless of how or when loss occurs.
5. No additional locks shall be place don any door or changes made to existing
locks in Building without the prior written consent of Landlord. Landlord will
furnish two keys to each lock on doors in the Leased Premises and Landlord, upon
request of Tenant, shall provide additional duplicate keys at Tenant's expense.
landlord may at all times keep a pass key to the Leased Premises. All keys shall
be returned to Landlord promptly upon termination of this Lease.
6. Tenant, its officers, agents, servants or employees shall do no painting or
decorating in Leased Premises, or mark, paint or cut into, drive nails or screw
into or in any way deface any part of Leased Premises or Building without the
prior written consent of Landlord. If Tenant desires signal, communication,
alarm or other utility or service connection installed or changed, such work
shall be done at expense of Tenant, with the approval and under the direction of
Landlord.
7. Landlord reserves the right to: (i) close the Building at 6:00 P.M., subject,
however, to Tenant's right to admittance under regulations prescribed by
Landlord, and to require the persons entering the Building to identify
themselves and establish their right to enter or to leave the Building; (ii)
close all parking areas between the hours of 9:00 P.M. and 7:00 A.M. during week
days; (iii) close all parking areas on weekends and holidays.
<PAGE>
33
8. Tenant, its officers, agents, servants and employees shall not permit the
operation of any musical or sound producing instruments or device which may be
heard outside Leased Premises, Building or parking facilities, or which may
emanate electrical waves which will impair radio or television broadcasting or
reception from or in Building.
9. Tenant, its officers, agents, servants, and employees shall, before leaving
Leased Premises unattended, close and lock all doors and shut off all utilities;
damage resulting from failure to do so shall be paid by Tenant. Each Tenant
before the closing of the day and leaving the said Leased Premises shall see
that all blinds and/or draperies are pulled and drawn.
10. All plate and other glass now in Leased Premises or Building which is broken
through cause attributable to Tenant, its officers, agents, servants, employees,
patrons, licensees, customers, visitors or invitees shall be replaced by and at
expense of Tenant under the direction of Landlord.
11. Tenant shall give Landlord prompt notice of all accidents to or defects in
air conditioning equipment, plumbing, electric facilities or any part of
appurtenance of Leased Premises.
12. The pumping facilities shall not be used for any other purpose than that for
which they are constructed, and no foreign substance of any kind shall be thrown
therein, and the expense of any breakage, stoppage, or damage resulting from a
violation of this provision shall be borne by Tenant, who shall, or whose
officers, employees, agents, servants, patrons, customers, licensees, visitors
or invitees shall have caused it.
13. All contractors and/or technicians performing work for Tenant within the
Leased Premises, Building or parking facilities shall be referred to Landlord
for approval before performing such work. This shall apply to all work
including, but not limited to, installation of telephone, telegraph equipment,
electrical devices and attachments, and all installations affecting floors,
walls, windows, doors, ceiling, equipment or any other physical feature of the
Building, Leased Premises or parking facilities. None of this work shall be done
by Tenant without Landlord's prior written approval.
14. No showcase or other articles shall be put in front of or affixed to any
part of the exterior of the Building, nor placed in the halls, corridors or
vestibules without the prior written consent of Landlord.
15. Glass panel doors that reflect or admit light into the passageways or into
any place in the Building shall not be covered or obstructed by the Tenant, and
Tenant shall not permit, erect, and/or place drapes, furniture, fixtures,
shelving, display cases or tables, lights or signs and advertising devices in
front of or in proximity of interior and exterior windows, glass panels, or
glass doors providing a view into the interior of the Leased Premises unless
same shall have first been approved in writing by Landlord.
16. Canvassing, soliciting and peddling in the Building or parking facilities is
prohibited and each Tenant shall cooperate to prevent the same. In this respect,
Tenant shall promptly report such activities to the Building Manager's office.
17. There shall not be used in any space, or in the public halls of the
Building, either by any Tenant or by jobbers or others, in the delivery of
receipt of merchandise, any hand trucks, except those equipped with rubber tires
and slide guards.
18. The work of Landlord's janitors or cleaning personnel shall not be hindered
by Tenant after 3:30 P.M. and such work may be done at any time when the offices
are vacant. The windows, doors and fixtures may be cleaned at any time. Tenant
shall provide adequate waste and rubbish receptacles, cabinets, bookcases, map
cases, etc., necessary to prevent unreasonable hardship to Landlord in
discharging its obligation regarding cleaning service. In this regard, Tenant
shall also empty all glasses, cups and other containers holding any type of
liquid whatsoever.
<PAGE>
34
19. In the event Tenant must dispose of crates, boxes, etc., which will not fit
into office wastepaper baskets, it will be the responsibility of Tenant with
Landlord's assistance in dispose of same. In no event shall Tenant set such
items in the public hallways or other areas of Building or parking facilities,
excepting Tenant's own Premises, for disposal.
20. Tenants are cautioned in purchasing furniture and equipment that the size is
limited to such as can be placed on the elevator and will pass through the doors
of the Leased Premises. Large pieces should be made in parts and set up in the
Leased Premises. landlord reserves the right to refuse to allow to be placed in
the Building any furniture or equipment of any description which does not comply
with the above conditions.
21. Tenant will be responsible for any damage to the Leased Premises, including
carpeting and flooring, as a result of rust or corrosion of file cabinets,
roller chairs, metal objects or spills of any type of liquid.
22. If the Premises demised to any Tenant become infested with vermin, such
Tenant, at its sole cost and expense, shall cause its premises to be
exterminated from time to time, to the satisfaction of Landlord, and shall
employ such exterminators therefor as shall be approved by Landlord.
23. Tenant shall not install any antenna or aerial wires or radio or television
equipment, or any other type of equipment, inside or outside of the Building,
without Landlord's prior approval in writing, and upon such terms and conditions
as may be specified by Landlord in each every instance.
24. Tenant shall not advertise the business, profession or activities of Tenant
in any manner which violates the letter or spirit of any code of ethics adopted
by any recognized association or organization pertaining thereto, or use the
name of the Building for any purpose other than that of the business address of
Tenant or use any letterhead, envelopes, circulars, notices, advertisements,
containers or wrapping material, without Landlord's express consent in writing.
25. Tenant, its officers, agents, employees, servants, patrons, customers,
licensees, invitees and visitors shall not solicit business in the Building's
parking facilities or Common Areas, nor shall Tenant distribute any handbills or
other advertising matter in automobiles parked in the Building's parking
facilities.
26. Tenant shall not conduct its business in such manner as to create any
nuisance, or interference with, annoy or disturb any other tenant in the
Building, or Landlord in its operations of the Building or commit waste or
suffer or permit waste to be committed in the Leased Premises, Building or
parking facilities. In addition, Tenant shall not allow its officers, agents,
employees, servants, patrons, customers, licensees and visitors to conduct
themselves in such manner as to create any nuisance or interference with, annoy
or disturb any other tenant in the Building or Landlord in its operation of the
Building or commit waste or suffer or permit waste to be committed in the Leased
Premises, Building or parking facilities.
27. Tenant, its officers, agents, servants and employees shall not install or
operate any refrigerating, heating or air condition apparatus or carry on any
mechanical operation or bring into Leased Premises, Building or garage
facilities any inflammable fluids or explosives without written permission of
Landlord.
28. Tenant, its officers, agents, servants or employees shall not use Leased
Premises, Building or garage facilities for housing, lodging or sleeping
purposes or for the cooking or preparation of food without the prior written
consent of the Landlord.
29. Tenant, its officers, agents, servants, employees, patrons, licensees,
customers, visitors or invitees shall not bring into garage facilities, Building
or Leased Premises or keep on Leased Premises any fish, fowl, reptile, insect,
or animal or any bicycle or other vehicle without the prior written consent of
Landlord, wheel chairs and baby carriages excepted.
<PAGE>
35
30. Neither Tenant nor any officer, agent, employee, servant, patron, customer,
visitor, licensee or invitee of any Tenant shall go upon the roof of the
building without the written consent of the Landlord or the authorization of the
Haliport administration.
31. Tenant's employing laborers or others outside of the Building shall not have
their employees paid in the Building, but shall arrange to pay their payrolls
elsewhere.
MERRILL LYNCH
SPECIAL
PROTOTYPE DEFINED
CONTRIBUTION PLAN
ADOPTION AGREEMENT
------------------------------------------------------------------------------
401(K) PLAN
Letter Serial Number: D359287b
National Office Letter Date: 6/29/93
This Prototype Plan and Adoption Agreement are important legal instruments with
legal and tax implications for which the Sponsor, Merrill Lynch, Pierce, Fenner
& Smith, Incorporated, does not assume responsibility. The Employer is urged to
consult with its own attorney with regard to the adoption of this Plan and its
suitability to its circumstances.
<PAGE>
37
Adoption of Plan
The Employer named below hereby establishes or restates a profit-sharing plan
that includes a 401(k) feature (the "Plan") by adopting the Merrill Lynch
Special Prototype defined Contribution Plan and Trust as modified by the terms
and provisions of this Adoption Agreement.
Employer and Plan Information
Employer Name: PSC Inc.
Business Address: 675 Basket Road
Webster, New York 14580
Telephone Number: (716) 265-1600
Employer Taxpayer ID Number: 16-0969362
Employer Taxable Year ends on: December 31st
Plan Name: PSC Inc. 401(k) Plan
Plan Number: 001
Effective Date of Adoption or Restatement:..01/01/95
Tax Reform Act of 1986 Restatement Date:....01/01/89
Original Effective Date: 07/01/85
If this Plan is a continuation or an amendment of a prior plan, all optional
forms of benefits provided in the prior plan must be provided under this Plan to
any Participant who had an account balance, whether or not vested, in the prior
plan.
<PAGE>
38
ARTICLE I. Definitions
A. "Compensation"
(1) With respect to each Participant, except as provided below,
Compensation shall mean the:
(a) amount reported in the "Wages tips and Other Compensation" Box
on Form W-2 for the applicable period selected in Item 5
below.
(b) compensation for Code Section 415 safe-harbor purposes (as
defined in Section 3.9.1 (H) (i) of basic plan document #03)
for the applicable period selected in Item 5 below.
x (c) amount reported pursuant to Code Section 3401(a) for the
applicable period selected in Item 5 below.
x (d) all amounts received (under either option (a) or (b)
above) for personal services rendered to the Employer but
excluding (select one):
overtime
x bonuses
x commissions
amounts in excess of $
x other (specify) Cash Bonus/Profit Sharing.
(2) Treatment of Elective Contributions (select one):
x (a) For purposes of contributions, Compensation shall include
Elective Deferrals and amounts excludable from the gross
income of the Employee under Code Section 125, Code Section
402(e)(3), Code Section 401(h) or Code Section
403(b)("elective contributions").
(b) For purposes of contributions, Compensation shall not include
(elective contributions)."
(3) CODA Contributions (select one):
x (a) For purposes of the ADP and ACP Tests, Compensation shall include
"elective contributions."
(b) For purposes of the ADP and ACP Tests, Compensation shall not
include "elective contributions."
<PAGE>
39
(4) With respect to Contributions to an Employer Contributions
Account, Compensation shall include all Compensation (select one):
x (a) during the Plan Year in which the Participant enters the Plan.
(b) after the Participant's Entry Date.
(5) The applicable period for determining Compensation shall be
(select one):
x (a) the Plan Year.
(b) the Limitation Year.
(c) the consecutive 12-month period ending on ______.
B. "Disability"
(1) Definition
Disability shall mean a condition which results in the
Participant's (select one)"
(a) inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment that can be expected to result in death or which
has lasted or can be expected to last for a continuous period
of not less than 12 months.
x (b) total and permanent inability to meet the requirements of
the Participant's customary employment which can be expected
to last for a continuous period of not less than 12 months.
(c) qualification for Social Security disability benefits.
(d) qualifications for benefits under the Employer's long-term
disability plan.
(2) Contributions Due to Disability (select one):
x (a) No contributions to an Employer contributions Account will be
made on behalf of a Participant due to his or her Disability.
(b) Contributions to an Employer Contributions Account will be
made on behalf of a Participant due to his or her Disability
provided that: the Employer elected option (a) or (c) above as
the definition of Disability, contributions are not made on
behalf of a Highly Compensated Employee, the contribution is
based on the compensation each such Participant would have
received for the Limitation Year if the Participant had been
paid at the rate of Compensation paid immediately before his
or her Disability, and contributions made on behalf of such
Participant will be nonforfeitable when made.
<PAGE>
40
C. "Early Retirement" is (select one):
x (1) not permitted.
(2) permitted if a Participant terminates Employment before Normal
Retirement Age and has (select one):
(a) attained age _____.
(b) attained age _____ and completed _____Years of Service.
(c) attained age _____ and completed _____ Years of Service as a
Participant.
D. "Eligible Employees" (select one):
(1) All Employees are eligible to participate in the Plan.
x (2) The following Employees are not eligible to participate in the
Plan (select all those
applicable):
x (a) Employees included in a unit of Employees covered by a collective
bargaining agreement between the Employer or a Participating
Affiliate and the Employee representatives (not including any
organization more than half of whose members are Employees who
are owners, officers, or executives of the Employer or Participating
Affiliate) in the negotiation of which retirement benefits were the
subject of good faith bargaining, unless the bargaining agreement
provides for participation in the Plan.
x (b) non-resident aliens who received no earned income from the
Employer or a Participating Affiliate which constitutes income
from sources within the United States.
(c) Employees of an Affiliate.
(d) Employees employed in or by the following specified division,
plant, location, job category or other identifiable individual
or group of Employees ___:
If item (d) above is checked, certain employees who are not
Eligible Employees shall become Participants under the following
circumstances: If, in any calendar quarter, there is no day on
which the percentage test described in Internal Revenue Code
section 410(b) is met, additional Employees shall become
Participants (or, if an Employee previously became a Participant,
shall resume participation) as of the beginning of the Plan Year,
or if later, the date such Employee would have become a
Participant under Article I, Section E, below. Said Employees
shall become Participants in order of decreasing length of service
beginning with such Employees having the longest service as of the
end of such calendar quarter, until the percentage test is met.
<PAGE>
41
E. "Entry Date"
Entry Date shall mean (select as applicable):
(1) If the initial Plan Year is less than twelve months, the _____
day of ________ and thereafter:
(2) the first day of the Plan Year following the date of Employee
meets the eligibility requirements. If the Employer elects
this option (2) establishing only one Entry Date, the
eligibility "age and service" requirements elected in Article
II must be no more than age 20 1/2 and 6 months of service.
(3) the first day of the month following the date the Employee
meets the eligibility requirements.
(4) the first day of the Plan Year and the first day of the
seventh month of the plan Year following the date the Employee
meets the eligibility requirements.
(5) the first day of the Plan Year, the first day of the fourth
months of the Plan Year, the first day of the seventh month of
the Plan Year, and the first day of the tenth month of the
Plan Year following the date the Employee meets the
eligibility requirements.
x (6) other: Immediately following satisfaction of eligibility
requirements provided that the Entry Date or Dates selected
are no later than any of the options above.
F. "Hours of Service"
Hours of Service for the purpose of determining a Participant's Period
of Severance and Year of Service shall be determined on the basis of
the method specified below:
(1) Eligibility Service: For purposes of determining whether a
Participant has satisfied the eligibility requirements, the
following method shall be used (select one):
x (a) elapsed time method
(b) hourly records method
<PAGE>
42
(2) Vesting Service: A Participant's nonforfeitable interest shall be
determined on the basis of the Method specified below (select one):
(a) elapsed time method
x (b) hourly records method
(c) If this item (c) is checked, the Plan only provides for
contributions that are always 100% vested and this item (2) will
not apply.
(3) Hourly Records: For the purpose of determining Hours of Service under
the hourly record method (select one):
x (a) only actual hours for which an Employee is paid or entitled to
payment shall be counted.
(b) an Employee shall be credited with 45 Hours of Service if such
Employee would be credited with at least 1 Hour of Service during
the week.
G. "Integration Level"
x (1) This Plan is not integrated with Social Security.
(2) This Plan is integrated with Social Security.
The Integration Level shall be (select one):
(a) the Taxable Wage Base.
(b) $____(a dollar amount less than the Taxable Wage Base).
(c) _____% of the Taxable Wage Base (not to exceed 100%).
(d) the greater of $10,000 or 20% of the Taxable Wage Base.
H. "Limitation Compensation"
For purposes of Code Section 415, Limitation Compensation shall be compensation
as determined for purposes of (select one):
(1) Code Section 415 Safe-Harbor as defined in Section 3.9.1(H)(i) of
basic plan document #03.
(2) the "Wages, Tips and Other Compensation" Box on Form W-2.
x (3) Code Section 3401(a) Federal Income Tax Withholding
I. "Limitation Year"
For purposes of Code Section 415, the Limitation Year shall be (select one):
x (1) the Plan Year.
(2) the twelve consecutive month period ending on the ___ day of the
month of ____.
<PAGE>
43
J. "Net Profits" are (select one):
x (1) not necessary for any contribution.
(2) necessary for (select all those applicable):
(a) Profit-Sharing Contributions.
(b) Matching 401(k) Contributions.
(c) Matching Thrift Contributions.
K. "Normal Retirement Age"
Normal Retirement Age shall be (select one):
x (1) attainment of age 59 1/2 (not more than 65) by the Participant.
(2) attainment of age _____ (not more than 65) by the Participant or
the _____ anniversary (not more than the 5th) of the first day
the Plan Year in which the Eligible Employee became a
Participant, whichever is later.
(3) attainment of age ____ (not more than 65) by the Participant or
the _____ anniversary (not more than the 5th) of the first day on
which the Eligible Employee performed an Hour of Service,
whichever is later.
L. "Participant Directed Assets" are:
x (1) permitted.
(2) not permitted.
M. "Plan Year"
The Plan Year shall end on the 31st day of December.
N. "Predecessor Service"
Predecessor service will be credited (select one):
x (1) only as required by the Plan.
(2) to include, in addition to the Plan requirements and subject to
the limitations set forth below, service with the following
predecessor employer(s) determined as if such predecessors were
the Employer: _____.
<PAGE>
44
Service with such predecessor employer applies [select either or both
(a) and/or (b); (c) is only available in addition to (a) and/or (b)]:
(a) for purposes of eligibility to participate;
(b) for purposes of vesting;
(c) except for the following service:______.
O. "Valuation Date"
Valuation Date shall mean (select one for each column, as applicable):
(1) the last business day of each month.
x (2) the last business day of each quarter within the Plan Year.
(3) the last business day of each semi-annual period within the Plan
Year.
(4) the last business day of the Plan Year.
(5) other: ______.
ARTICLE II. Participation
Participation Requirements
An Eligible Employee must meet the following requirements to become a
Participant (select one or more for each column, as applicable):
(1) Performance of one Hour of Service.
(2) Attainment of age ___ (maximum 20 1/2) and completion of ____ (not
more than 1/2) Years of Service. If this item is selected, no
Hours of Service shall be counted.
x (3) Attainment of age 21 (maximum 21) and completion of 1/4
Year(s) of Service. If more than one Year of Service is selected,
the immediate 100% vesting schedule must be selected in Article
VII of this Adoption Agreement.
<PAGE>
45
(4) Attainment of age ___ (maximum 21) and completion of ______ Years
of Service. If more than one Year of Service is selected, the
immediate 100% vesting schedule must be selected in Article VII of
this Adoption Agreement.
(5) Each Employee who is an Eligible Employee on ____ will be deemed
to have satisfied the participation requirements on the effective
date without regard to such Eligible Employee's actual age and/or
service.
ARTICLE III. 401(k) Contributions and Account Allocation
A. Elective Deferrals
If selected below, a Participant's Elective Deferrals will be (select all
applicable):
x (1) a dollar amount or a percentage of Compensation, as specified by the
Participant on his or her 401(k) Election form, which may not exceed
20% of his or her Compensation.
(2) with respect to bonuses, such dollar amount or percentage as
specified by the Participant on his or her 401(k) Election form
with respect to such bonus.
B. Matching 401(k) Contributions
If selected below, the Employer may make Matching 401(k) Contributions for each
Plan Year (select one):
x (1) Discretionary Formula:
Discretionary Matching 401(k) Contribution equal to such a dollar
amount or percentage of Elective Deferrals, as determined by the
Employer, which shall be allocated (select one):
(a) based on the ratio of each Participant's Elective Deferral for the
Plan Year to the total Elective Deferrals of all Participants for
the Plan Year. If inserted, Matching 401(k) Contributions shall be
subject to a maximum amount of $____ for each Participant or ___%
of each Participant's Compensation.
<PAGE>
46
(b) in an amount not to exceed 50% of each Participants first 5% of
Compensation contributed as Elective deferrals for the Plan Year.
If any Matching 401(k) Contribution remains, it is allocated to
each such Participant in an amount not to exceed _____% of the
next ____% of each Participant's Compensation contributed as
Elective Deferrals for the Plan Year.
Any remaining Matching 401(k) Contribution shall be allocated to each such
Participant in the ratio that such Participant's Elective Deferral for the Plan
Year bears to the total Elective Deferrals of all such Participants for the Plan
Year. If inserted, Matching 401(k) Contributions shall be subject to a maximum
amount of $____ for each Participants or ____% of each Participant's
Compensation.
(2) Nondiscretionary Formula:
A nondiscretionary Matching 401(k) Contribution for each Plan Year
equal to (select one):
(a) ___% of each Participant's Compensation contributed as
Elective Deferrals. If inserted, Matching 401(k) Contributions
shall be subject to a maximum amount of $___ for each
Participant or ___% of each Participant's Compensation.
(b) ___% of the first ____% of the Participant's Compensation
contributed as Elective Deferrals and ____% of the next ____%
of the Participant's compensation contributed as Elective
Deferrals. If inserted, Matching 401(k) Contributions shall be
subject to a maximum amount of $____ for each Participant or
____% of each Participant's Compensation.
C. Participants Eligible for Matching 401(k) Contribution Allocation
The following Participants shall be eligible for an allocation to their
Matching 401(k) Contributions Account (select all those applicable):
x (1) Any Participant who makes Elective Deferrals.
(2) Any Participant who satisfies those requirements elected by the
Employer for an allocation to his or her Employer contributions
Account as provided in Article IV Section C.
(3) Solely with respect to a Plan in which Matching 401(k)
Contributions are made quarterly (or on any other regular interval
that is more frequent than annually) any Participant whose 401(k)
Election is in effect throughout such entire quarter (or other
interval).
<PAGE>
47
D. Qualified Matching Contributions
If selected below, the Employer may make Qualified Matching
Contributions for each Plan Year (select all those applicable):
(1) In its discretion, the Employer may make Qualified Matching
Contributions on behalf of (select one):
(a) all Participants who make Elective Deferrals in that Plan Year.
(b) only those Participants who are Nonhighly Compensated
Employees and who make Elective Deferrals for that Plan Year.
(2) Qualified Matching contributions will be contributed and allocated
to each Participant in an amount equal to:
(a) ____% of the Participant's Compensation contributed as
Elective Deferrals. If inserted, Qualified Matching
Contributions shall not exceed ____% of the Participant's
Compensation.
x (b) Such an amount, determined by the Employer, which is needed to
meet the ACP Test.
(3) In its discretion, the Employer may elect to designate all or any
part of Matching 401(k) Contributions as Qualified Matching
Contributions that are taken into account as Elective Deferrals --
included in the ADP Test and excluded from the ACP Test -- on
behalf of (select one):
(a) all participants who make Elective Deferrals for that Plan Year.
(b) Only participants who are Nonhighly Compensated Employees who
make Elective Deferrals for that Plan Year.
E. Qualified Nonelective Contributions
If selected below, the Employer may make Qualified Nonelective
Contributions for each Plan Year (select all those applicable):
(1) In its discretion, the Employer may make Qualified Nonelective
Contributions on behalf of (select one):
(a) all Eligible Participants.
(b) only Eligible Participants who are Nonhighly Compensated
Employees.
<PAGE>
48
(2) Qualified Nonelective Contributions will be contributed and
allocated to each Eligible Participant in an amount equal to
(select one):
(a) ___% (no more than 15%) of the compensation of each Eligible
Participant eligible to share in the allocation.
x (b) Such an amount determined by the Employer, which is needed to
meet either the ADP Test or ACP Test.
(3) At the discretion of the Employer, as needed and taken into
account as Elective Deferrals included in the ADP Test on behalf
of (select one):
(a) all Eligible Participants.
x (b) only those Eligible Participants who are Nonhighly Compensated
Employees.
F. Elective Deferrals used in ACP Test (select one):
x (1) At the discretion of the Employer, Elective Deferrals may be used
to satisfy the ACP Test.
(2) Elective Deferrals may not be used to satisfy the ACP Test.
G. Making and modifying a 401(k) Election
An Eligible Employee shall be entitled to increase, decrease or resume
his or her Elective Deferral percentage with the following frequency
during the Plan Year (select one):
(1) annually.
(2) semi-annually.
x (3) quarterly.
(4) monthly.
(5) other (specify): _____.
Any such increase, decrease or resumption shall b effective as of the
first payroll period coincident with or next following the first day of
each period set forth above. A Participant may completely discontinue
making Elective Deferrals at any time effective for the payroll period
after written notice is provided to the Administrator.
<PAGE>
49
ARTICLE IV. Profit-Sharing contributions and Account Allocation
A. Profit-Sharing Contributions
If selected below, the following contributions for each Plan Year will
be made:
Contributions to Employer Contributions Accounts (select one):
(a) Such an amount, if any, as determined by the Employer.
(b) ___% of each Participant's Compensation.
B. Allocation of Contributions to Employer Contributions Accounts
(select one):
(1) Non-Integrated Allocation
The Employer contributions Account of each Participant eligible to
share in the allocation for a Plan Year shall be credited with a
portion of the contribution, plus any forfeitures if forfeitures
are reallocated to Participants, equal to the ratio that the
Participant's Compensation for the Plan Year bears to the
Compensation for that Plan Year of all Participants entitled to
share in the contribution.
(2) Integrated Allocation
Contributions to employer contributions Accounts with respect to a
Plan Year, plus any forfeitures if forfeitures are reallocated to
Participants, shall be allocated to the Employer contributions
Account of each eligible Participant as follows:
(a) First, in the ratio that each such eligible Participant's
Compensation for the Plan Year bears to the Compensation for
that Plan Year of all eligible Participants but not in excess
of 3% of each Participant's Compensation.
(b) Second, any remaining contributions and forfeitures will be
allocated in the ratio that each eligible Participant's
Compensation for the Plan Year in excess of the Integration
Level bears to all such Participants' excess Compensation for
the Plan Year but not in excess of 3%.
<PAGE>
50
(c) Third, any remaining contributions and forfeitures will be
allocated in the ratio that the sum of each Participant's
Compensation and Compensation in excess of the Integration
Level bears to the sum of all Participant's Compensation and
Compensation in excess of the Integration Level, but not in
excess of the Maximum Profit-Sharing Disparity Rate (defined
below).
(d) Fourth, any remaining contributions or forfeitures will be
allocated in the ratio that each Participant's Compensation
for that year bears to all Participant's Compensation for that
year.
The Maximum Profit-Sharing Disparity Rate is equal to the lesser
of:
(a) 2.7% or
(b) The applicable percentage determined in accordance with the
following table:
If the Integration Level is
(as a % of the Taxable Wage
Base ("TWB")). the applicable percentage is:
20% (or $10,000 if greater) 2.7%
or less of the TWB
More than 20% (but not less
than $10,001 but not
more than 80% of the TWB 1.3%
More than 80% but not less
than 100% of the TWB 2.4%
100% of the TWB 2.7%
<PAGE>
51
C. The following Participants shall be eligible for an allocation to their
Employer Contributions Account (select all those applicable):
(1) Any Participant who was employed during the Plan Year.
(2) In the case of a Plan using the hourly record method for
determining Vesting Service, any Participant who was credited with
a Year of Service during the Plan Year.
(3) Any Participant who was employed on the last day of the Plan Year.
(4) Any Participant who was on a leave of absence on the last day of
the Plan Year.
(5) Any participant who during the Plan Year died or became Disabled
while an Employee or terminated employment after attaining Normal
Retirement Age.
(6) Any Participant who was credited with at least 501 Hours of
Service whether or not employed on the last day of the Plan Year.
(7) Any Participant who was credited with at least 1,000 Hours of
Service and was employed on the last day of the Plan Year.
ARTICLE V. Thrift Contributions
THIS ARTICLE IS NOT APPLICABLE
ARTICLE VI. Participant Contributions
Participant Voluntary Nondeductible Contributions
Participant voluntary Nondeductible Contributions are (select one):
x (a) permitted
(b) not permitted
<PAGE>
52
ARTICLE VII. Vesting
A. Employer Contribution Accounts
(1) A Participant shall have a vested percentage in his or her
Profit-Sharing Contributions, Matching 401(k) Contributions and/or
Matching Thrift Contributions, if applicable, in accordance with the
following schedule
(Select one):
(a) 100% vesting immediately upon participation
(b) 100% after ___ (not more than 5) years of Vesting Service
x (c) Graded vesting schedule:
0% after 1 year of Vesting Service;
35% after 2 years of Vesting Service;
100% (not less than 20%) after 3 years of Vesting Service
100% after 7 years of Vesting Service
(2) Top Heavy Plan
Vesting Schedule (Select one):
(a) 100% vesting immediately upon participation
(b) 100% after ___ (not more than 3) years of Vesting Service
x (c) Graded vesting schedule:
0% after 1 year of Vesting Service;
35% (not less than 20%) after 2 years of Vesting Service;
100% (not less than 40%) after 3 years of Vesting Service
100% after 6 years of Vesting Service
B. Allocation of Forfeitures
Forfeitures shall be (select one from each applicable column):
x (1) used to reduce Employer contributions for succeeding Plan Year.
(2) allocated in the succeeding Plan Year in the ratio which the
Compensation of each Participant for the Plan Year bears to the
total Compensation of all Participants entitled to share in the
Contributions. If the Plan is integrated with Social Security,
forfeitures shall be allocated in accordance with the formula
elected by the Employer.
<PAGE>
53
C. Vesting Service
For purposes of determining Years of Service for Vesting Service
[select (1) or (2) and/or (3)]:
x (1) All Years of Service shall be included.
(2) Year of Service before the Participant attained age 18 shall be
excluded.
(3) Service with the Employer prior to the effective date of the Plan
shall be excluded.
ARTICLE VIII. Deferral of Benefit Distributions,
In-Service Withdrawals and Loans
A. Deferral of Benefit Distributions
If this item is checked, a Participant's vested benefit in his or her
Employer Accounts shall be payable as soon as practicable after the
earlier of: (1) the date the Participant terminates Employment due to
Disability or (2) the end of the Plan Year in which a terminated
Participant attains Early Retirement Age, if applicable, or Normal
Retirement Age.
B. In-Service Distributions
x (1) In-service distributions may be made from any of the Participant's
vested Accounts, at any time upon or after the occurrence of the
following events (select all applicable):
x (a) a Participant's attainment of age 59 1/2
x (b) due to hardships as defined in Section 5.9 of the Plan.
(2) In-service distributions are not permitted.
C. Loans are:
x (1) permitted
(2) not permitted.
ARTICLE IX. Group Trust
{Deleted}
<PAGE>
54
ARTICLE X. MISCELLANEOUS
A. Identification of Sponsor
The address and telephone number of the Sponsor's authorized
representative is 800 Scudders Mill Road, Plainsboro, New Jersey 08536;
(609) 282-2272. This authorized representative can answer inquiries
regarding the adoption of the Plan, the intended meaning of any Plan
provisions, and the effect of the opinion letter.
The Sponsor will inform the adopting Employer of any amendments made to
the Plan or the discontinuance or abandonment of the Plan.
B. Plan Registration
1. Initial Registration
This Plan must be registered with the Sponsor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, in order to be considered a
Prototype Plan by the Sponsor. Registration is required so that
the Sponsor is able to provide the Administrator with documents,
forms and announcements relating to the administration of the Plan
and with Plan amendments and other documents, all of which relate
to administering the Plan in accordance with applicable law and
maintaining compliance of the Plan with the law.
The Employer must complete and sign the Adoption Agreement. Upon
receipt of the Adoption Agreement, the Plan will be registered as
a Prototype Plan of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The Adoption Agreement will be countersigned by an
authorized representative and a copy of the countersigned Adoption
Agreement will be returned to the Employer.
2. Registration Renewal
Annual registration renewal is required in order for the Employer
to continue to receive any and all necessary updating documents.
There is an annual registration renewal fee in the amount set
forth with the initial registration material. The adopting
Employer authorizes Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to debit the account established for the Plan for
payment of agreed upon annual fee; provided, however, if the
assets of an account are invested solely in Participant-Directed
Assets, a notice for this annual fee will be sent to the Employer
annually. The sponsor reserves the right to change this fee from
time to time and will provide written notice in advance of any
change.
C. Prototype Replacement Plan
This Adoption Agreement is a replacement prototype plan for the (1) Merrill
Lynch Special Prototype Defined contribution Plan and Trust - 401(k) Plan
#03-004 and (2) Merrill Lynch Asset Management, Inc., Special Prototype
Defined contribution Plan and Trust - 401(k) Plan Adoption Agreement
#03-004.
D. Reliance
The adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan
is qualified under Code Section 401. In order to obtain reliance, the
Employer must apply to the appropriate Key District Director of the
Internal Revenue Service for a determination letter with respect to the
Plan.
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55
EMPLOYER'S SIGNATURE
Name of Employer: PSC Inc.
By: /s/ L. Michael Hone
{Authorized Signature}
L. Michael Hone
{Print Name}
President, Chief Executive Officer and Chairman
{Title}
Dated: December 29, 1995
TO BE COMPLETED BY MERRILL LYNCH:
Sponsor Acceptance:
Subject to the terms and conditions of the Prototype Plan and this Adoption
Agreement, this Adoption Agreement is accepted by Merrill Lynch, Pierce,
Fenner & Smith Incorporated as the Prototype Sponsor.
Authorized Signature: /s/ Anissa Olson
MERRILL LYNCH
SPECIAL
PROTOTYPE DEFINED
CONTRIBUTION PLAN
ADOPTION AGREEMENT
------------------------------------------------------------------------------
401(K) PLAN
Letter Serial Number: D359287b
National Office Letter Date: 6/29/93
This Prototype Plan and Adoption Agreement are important legal instruments with
legal and tax implications for which the Sponsor, Merrill Lynch, Pierce, Fenner
& Smith, Incorporated, does not assume responsibility. The Employer is urged to
consult with its own attorney with regard to the adoption of this Plan and its
suitability to its circumstances.
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57
Adoption of Plan
The Employer named below hereby establishes or restates a profit-sharing plan
that includes a 401(k) feature (the "Plan") by adopting the Merrill Lynch
Special Prototype Defined Contribution Plan and Trust as modified by the terms
and provisions of this Adoption Agreement.
Employer and Plan Information
Employer Name: PSC Inc.
Business Address: 675 Basket Road
Webster, New York 14580
Telephone Number: (716) 265-1600
Employer Taxpayer ID Number: 16-0969362
Employer Taxable Year ends on: December 31st
Plan Name: PSC Inc. 401(k) Plan
Plan Number: 001
Effective Date of Adoption
or Restatement:..10/01/95
Tax Reform Act of 1986
Restatement Date:....
Original Effective Date: 07/01/85
If this Plan is a continuation or an amendment of a prior plan, all optional
forms of benefits provided in the prior plan must be provided under this Plan to
any Participant who had an account balance, whether or not vested, in the prior
plan.
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58
ARTICLE I. Definitions
A. "Compensation"
(1) With respect to each Participant, except as provided below,
Compensation shall mean the (select all those applicable for each
column):
(a) amount reported in the "Wages tips and Other Compensation" Box
on Form W-2 for the applicable period selected in Item 5
below.
(b) compensation for Code Section 415 safe-harbor purposes (as
defined in Section 3.9.1 (H) (i) of basic plan document #03)
for the applicable period selected in Item 5 below.
x (c) amount reported pursuant to Code Section 3401(a) for the
applicable period selected in Item 5 below.
x (d) all amounts received (under either option (a) or (b)
above) for personal services rendered to the Employer but
excluding (select one):
overtime
x bonuses
x commissions
amounts in excess of $
x other (specify) Cash Bonus/Profit Sharing.
(2) Treatment of Elective Contributions (select one):
x (a) For purposes of contributions, Compensation shall include
Elective Deferrals and amounts excludable from the gross
income of the Employee under Code Section 125, Code Section
402(e)(3), Code Section 401(h) or Code Section
403(b)("elective contributions").
(b) For purposes of contributions, Compensation shall not include
("elective contributions").
(3) CODA Contributions (select one):
x (a) For purposes of the ADP and ACP Tests, Compensation shall
include "elective contributions."
(b) For purposes of the ADP and ACP Tests, Compensation shall not
include "elective contributions."
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59
(4) With respect to Contributions to an Employer Contributions
Account, Compensation shall include all Compensation (select one):
x (a) during the Plan Year in which the Participant enters the Plan.
(b) after the Participant's Entry Date.
(5) The applicable period for determining Compensation shall be
(select one):
x (a) the Plan Year.
(b) the Limitation Year.
(c) the consecutive 12-month period ending on ______.
B. "Disability"
(1) Definition
Disability shall mean a condition which results in the
Participant's (select one):
(a) inability to engage in any substantial gainful activity by
reason of any medically determinable physical or mental
impairment that can be expected to result in death or which
has lasted or can be expected to last for a continuous period
of not less than 12 months.
x (b) total and permanent inability to meet the requirements of
the Participant's customary employment which can be expected
to last for a continuous period of not less than 12 months.
(c) qualification for Social Security disability benefits.
(d) qualifications for benefits under the Employer's long-term
disability plan.
(2) Contributions Due to Disability (select one):
x (a) No contributions to an Employer contributions Account will be
made on behalf of a Participant due to his or her Disability.
(b) Contributions to an Employer Contributions Account will be
made on behalf of a Participant due to his or her Disability
provided that: the Employer elected option (a) or (c) above as
the definition of Disability, contributions are not made on
behalf of a Highly Compensated Employee, the contribution is
based on the compensation each such Participant would have
received for the Limitation Year if the Participant had been
paid at the rate of Compensation paid immediately before his
or her Disability, and contributions made on behalf of such
Participant will be nonforfeitable when made.
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60
C. "Early Retirement" is (select one):
x (1) not permitted.
(2) permitted if a Participant terminates Employment before Normal
Retirement Age and has (select one):
(a) attained age _____.
(b) attained age _____ and completed _____Years of Service.
(c) attained age _____ and completed _____ Years of Service as a
Participant.
D. "Eligible Employees" (select one):
(1) All Employees are eligible to participate in the Plan.
x (2) The following Employees are not eligible to participate in the
Plan (select all those applicable):
x (a) Employees included in a unit of Employees covered by a collective
bargaining agreement between the Employer or a Participating
Affiliate and the Employee representatives (not including any
organization more than half of whose members are Employees who
are owners, officers, or executives of the Employer or Participating
Affiliate) in the negotiation of which retirement benefits were the
subject of good faith bargaining, unless the bargaining agreement
provides for participation in the Plan.
x (b) non-resident aliens who received no earned income from the
Employer or a Participating Affiliate which constitutes income
from sources within the United States.
(c) Employees of an Affiliate.
(d) Employees employed in or by the following specified division,
plant, location, job category or other identifiable individual
or group of Employees ___:
If item (d) above is checked, certain employees who are not
Eligible Employees shall become Participants under the following
circumstances: If, in any calendar quarter, there is no day on
which the percentage test described in Internal Revenue Code
section 410(b) is met, additional Employees shall become
Participants (or, if an Employee previously became a Participant,
shall resume participation) as of the beginning of the Plan Year,
or if later, the date such Employee would have become a
Participant under Article I, Section E, below. Said Employees
shall become Participants in order of decreasing length of service
beginning with such Employees having the longest service as of the
end of such calendar quarter, until the percentage test is met.
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61
E. "Entry Date"
Entry Date shall mean (select as applicable):
(1) If the initial Plan Year is less than twelve months, the _____
day of ________ and thereafter:
(2) the first day of the Plan Year following the date of Employee
meets the eligibility requirements. If the Employer elects
this option (2) establishing only one Entry Date, the
eligibility "age and service" requirements elected in Article
II must be no more than age 20 1/2 and 6 months of service.
(3) the first day of the month following the date the Employee
meets the eligibility requirements.
(4) the first day of the Plan Year and the first day of the
seventh month of the plan Year following the date the Employee
meets the eligibility requirements.
x (5) the first day of the Plan Year, the first day of the fourth
months of the Plan Year, the first day of the seventh month of
the Plan Year, and the first day of the tenth month of the
Plan Year following the date the Employee meets the
eligibility requirements.
(6) other: _____.
provided that the Entry Date or Dates selected are no later
than any of the options above.
F. "Hours of Service"
Hours of Service for the purpose of determining a Participant's Period
of Severance and Year of Service shall be determined on the basis of
the method specified below:
(1) Eligibility Service: For purposes of determining whether a
Participant has satisfied the eligibility requirements, the
following method shall be used (select one):
(a) elapsed time method
x x (b) hourly records method
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62
(2) Vesting Service: A Participant's nonforfeitable interest shall be
determined on the basis of the Method specified below (select one):
(a) elapsed time method
x (b) hourly records method
(c) If this item (c) is checked, the Plan only provides for
contributions that are always 100% vested and this item (2) will
not apply.
(3) Hourly Records: For the purpose of determining Hours of Service under
the hourly record method (select one):
x (a) only actual hours for which an Employee is paid or entitled to
payment shall be counted.
(b) an Employee shall be credited with 45 Hours of Service if such
Employee would be credited with at least 1 Hour of Service during
the week.
G. "Integration Level"
x (1) This Plan is not integrated with Social Security.
(2) This Plan is integrated with Social Security.
The Integration Level shall be (select one):
(a) the Taxable Wage Base.
(b) $____(a dollar amount less than the Taxable Wage Base).
(c) _____% of the Taxable Wage Base (not to exceed 100%).
(d) the greater of $10,000 or 20% of the Taxable Wage Base.
H. "Limitation Compensation"
For purposes of Code Section 415, Limitation Compensation shall be compensation
as determined for purposes of (select one):
(1) Code Section 415 Safe-Harbor as defined in Section 3.9.1(H)(i) of
basic plan document #03.
(2) the "Wages, Tips and Other Compensation" Box on Form W-2.
x (3) Code Section 3401(a) Federal Income Tax Withholding
I. "Limitation Year"
For purposes of Code Section 415, the Limitation Year shall be (select one):
x (1) the Plan Year.
(2) the twelve consecutive month period ending on the ___ day of the
month of ____.
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63
J. "Net Profits" are (select one):
x (1) not necessary for any contribution.
(2) necessary for (select all those applicable):
(a) Profit-Sharing Contributions.
(b) Matching 401(k) Contributions.
(c) Matching Thrift Contributions.
K. "Normal Retirement Age"
Normal Retirement Age shall be (select one):
x (1) attainment of age 59 1/2 (not more than 65) by the Participant.
(2) attainment of age _____ (not more than 65) by the Participant or the ____
anniversary (not more than the 5th) of the first day of the Plan
Year in which the Eligible Employee became a Participant,
whichever is later.
(3) attainment of age ____ (not more than 65) by the Participant or
the _____ anniversary (not more than the 5th) of the first day on
which the Eligible Employee performed an Hour of Service,
whichever is later.
L. "Participant Directed Assets" are:
x (1) permitted.
(2) not permitted.
M. "Plan Year"
The Plan Year shall end on the 31st day of December.
N. "Predecessor Service"
Predecessor service will be credited (select one):
x (1) only as required by the Plan.
(2) to include, in addition to the Plan requirements and subject to
the limitations set forth below, service with the following
predecessor employer(s) determined as if such predecessors were
the Employer: _____.
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64
Service with such predecessor employer applies [select either or both
(a) and/or (b); (c) is only available in addition to (a) and/or (b)]:
(a) for purposes of eligibility to participate;
(b) for purposes of vesting;
(c) except for the following service:______.
O. "Valuation Date"
Valuation Date shall mean (select one for each column, as applicable):
(1) the last business day of each month.
x (2) the last business day of each quarter within the Plan Year.
(3) the last business day of each semi-annual period within the Plan
Year.
(4) the last business day of the Plan Year.
(5) other: ______.
ARTICLE II. Participation
Participation Requirements
An Eligible Employee must meet the following requirements to become a
Participant (select one or more for each column, as applicable):
(1) Performance of one Hour of Service.
(2) Attainment of age ___ (maximum 20 1/2) and completion of ____ (not
more than 1/2) Years of Service. If this item is selected, no
Hours of Service shall be counted.
x (3) Attainment of age 21 (maximum 21) and completion of 1 Year of
Service. If more than one Year of Service is selected, the
immediate 100% vesting schedule must be selected in Article VII of
this Adoption Agreement.
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65
(4) Attainment of age ___ (maximum 21) and completion of ______ Years
of Service. If more than one Year of Service is selected, the
immediate 100% vesting schedule must be selected in Article VII of
this Adoption Agreement.
x (5) Each Employee who is an Eligible Employee on 9/30/95 will be
deemed to have satisfied the participation requirements on the
effective date without regard to such Eligible Employee's actual
age and/or service.
ARTICLE III. 401(k) Contributions and Account Allocation
A. Elective Deferrals
If selected below, a Participant's Elective Deferrals will be (select all
applicable):
x (1) a dollar amount or a percentage of Compensation, as specified by the
Participant on his or her 401(k) Election form, which may not exceed
15% of his or her Compensation.
(2) with respect to bonuses, such dollar amount or percentage as
specified by the Participant on his or her 401(k) Election form
with respect to such bonus.
B. Matching 401(k) Contributions
If selected below, the Employer may make Matching 401(k) Contributions for each
Plan Year (select one):
x (1) Discretionary Formula:
Discretionary Matching 401(k) Contribution equal to such a dollar
amount or percentage of Elective Deferrals, as determined by the
Employer, which shall be allocated (select one):
(a) based on the ratio of each Participant's Elective Deferral for the
Plan Year to the total Elective Deferrals of all Participants for
the Plan Year. If inserted, Matching 401(k) Contributions shall be
subject to a maximum amount of $____ for each Participant or ___%
of each Participant's Compensation.
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66
x (b) in an amount not to exceed 50% of each Participants first 5%
of Compensation contributed as Elective deferrals for the Plan
Year. If any Matching 401(k) Contribution remains, it is allocated
to each such Participant in an amount not to exceed _____% of the
next ____% of each Participant's Compensation contributed as
Elective Deferrals for the Plan Year.
Any remaining Matching 401(k) Contribution shall be allocated to each such
Participant in the ratio that such Participant's Elective Deferral for the Plan
Year bears to the total Elective Deferrals of all such Participants for the Plan
Year. If inserted, Matching 401(k) Contributions shall be subject to a maximum
amount of $____ for each Participants or ____% of each Participant's
Compensation.
(2) Nondiscretionary Formula:
A nondiscretionary Matching 401(k) Contribution for each Plan Year
equal to (select one):
(a) ___% of each Participant's Compensation contributed as
Elective Deferrals. If inserted, Matching 401(k) Contributions
shall be subject to a maximum amount of $___ for each
Participant or ___% of each Participant's Compensation.
(b) ___% of the first ____% of the Participant's Compensation
contributed as Elective Deferrals and ____% of the next ____%
of the Participant's compensation contributed as Elective
Deferrals. If inserted, Matching 401(k) Contributions shall be
subject to a maximum amount of $____ for each Participant or
____% of each Participant's Compensation.
C. Participants Eligible for Matching 401(k) Contribution Allocation
The following Participants shall be eligible for an allocation to their
Matching 401(k) Contributions Account (select all those applicable):
x (1) Any Participant who makes Elective Deferrals.
(2) Any Participant who satisfies those requirements elected by the
Employer for an allocation to his or her Employer contributions
Account as provided in Article IV Section C.
(3) Solely with respect to a Plan in which Matching 401(k)
Contributions are made quarterly (or on any other regular interval
that is more frequent than annually) any Participant whose 401(k)
Election is in effect throughout such entire quarter (or other
interval).
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67
D. Qualified Matching Contributions
If selected below, the Employer may make Qualified Matching
Contributions for each Plan Year (select all those applicable):
(1) In its discretion, the Employer may make Qualified Matching
Contributions on behalf of (select one):
(a) all Participants who make Elective Deferrals in that Plan Year.
x (b) only those Participants who are Nonhighly Compensated
Employees and who make Elective Deferrals for that Plan Year.
(2) Qualified Matching contributions will be contributed and allocated
to each Participant in an amount equal to:
(a) ____% of the Participant's Compensation contributed as
Elective Deferrals. If inserted, Qualified Matching
Contributions shall not exceed ____% of the Participant's
Compensation.
x (b) Such an amount, determined by the Employer, which is needed to
meet the ACP Test.
(3) In its discretion, the Employer may elect to designate all or any
part of Matching 401(k) Contributions as Qualified Matching
Contributions that are taken into account as Elective Deferrals --
included in the ADP Test and excluded from the ACP Test -- on
behalf of (select one):
(a) all participants who make Elective Deferrals for that Plan Year.
x (b) Only participants who are Nonhighly Compensated Employees who
make Elective Deferrals for that Plan Year.
E. Qualified Nonelective Contributions
If selected below, the Employer may make Qualified Nonelective
Contributions \ for each Plan Year (select all those applicable):
(1) In its discretion, the Employer may make Qualified Nonelective
Contributions on behalf of (select one):
(a) all Eligible Participants.
x (b) only Eligible Participants who are Nonhighly Compensated
Employees.
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68
(2) Qualified Nonelective Contributions will be contributed and
allocated to each Eligible Participant in an amount equal to
(select one):
(a) ___% (no more than 15%) of the compensation of each Eligible
Participant eligible to share in the allocation.
x (b) Such an amount determined by the Employer, which is needed to
meet either the ADP Test or ACP Test.
(3) At the discretion of the Employer, as needed and taken into
account as Elective Deferrals included in the ADP Test on behalf
of (select one):
(a) all Eligible Participants.
x (b) only those Eligible Participants who are Nonhighly Compensated
Employees.
F. Elective Deferrals used in ACP Test (select one):
x (1) At the discretion of the Employer, Elective Deferrals may be used
to satisfy the ACP Test.
(2) Elective Deferrals may not be used to satisfy the ACP Test.
G. Making and modifying a 401(k) Election
An Eligible Employee shall be entitled to increase, decrease or resume
his or her Elective Deferral percentage with the following frequency
during the Plan Year (select one):
(1) annually.
(2) semi-annually.
x (3) quarterly.
(4) monthly.
(5) other (specify): _____.
Any such increase, decrease or resumption shall b effective as of the
first payroll period coincident with or next following the first day of
each period set forth above. A Participant may completely discontinue
making Elective Deferrals at any time effective for the payroll period
after written notice is provided to the Administrator.
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69
ARTICLE IV. Profit-Sharing Contributions and Account Allocation
A. Profit-Sharing Contributions
If selected below, the following contributions for each Plan Year will
be made:
Contributions to Employer Contributions Accounts (select one):
(a) Such an amount, if any, as determined by the Employer.
(b) ___% of each Participant's Compensation.
B. Allocation of Contributions to Employer Contributions Accounts
(select one):
(1) Non-Integrated Allocation
The Employer contributions Account of each Participant eligible to
share in the allocation for a Plan Year shall be credited with a
portion of the contribution, plus any forfeitures if forfeitures
are reallocated to Participants, equal to the ratio that the
Participant's Compensation for the Plan Year bears to the
Compensation for that Plan Year of all Participants entitled to
share in the contribution.
(2) Integrated Allocation
Contributions to employer contributions Accounts with respect to a
Plan Year, plus any forfeitures if forfeitures are reallocated to
Participants, shall be allocated to the Employer contributions
Account of each eligible Participant as follows:
(a) First, in the ratio that each such eligible Participant's
Compensation for the Plan Year bears to the Compensation for
that Plan Year of all eligible Participants but not in excess
of 3% of each Participant's Compensation.
(b) Second, any remaining contributions and forfeitures will be
allocated in the ratio that each eligible Participant's
Compensation for the Plan Year in excess of the Integration
Level bears to all such Participants' excess Compensation for
the Plan Year but not in excess of 3%.
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70
(c) Third, any remaining contributions and forfeitures will be
allocated in the ratio that the sum of each Participant's
Compensation and Compensation in excess of the Integration
Level bears to the sum of all Participant's Compensation and
Compensation in excess of the Integration Level, but not in
excess of the Maximum Profit-Sharing Disparity Rate (defined
below).
(d) Fourth, any remaining contributions or forfeitures will be
allocated in the ratio that each Participant's Compensation
for that year bears to all Participant's Compensation for that
year.
The Maximum Profit-Sharing Disparity Rate is equal to the lesser
of:
(a) 2.7% or
(b) The applicable percentage determined in accordance with the
following table:
If the Integration Level is
(as a % of the Taxable Wage
Base ("TWB")). the applicable percentage is:
20% (or $10,000 if greater) 2.7%
or less of the TWB
More than 20% (but not less
than $10,001 but not
more than 80% of the TWB 1.3%
More than 80% but not less
than 100% of the TWB 2.4%
100% of the TWB 2.7%
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71
C. The following Participants shall be eligible for an allocation to their
Employer Contributions Account (select all those applicable):
(1) Any Participant who was employed during the Plan Year.
(2) In the case of a Plan using the hourly record method for
determining Vesting Service, any Participant who was credited with
a Year of Service during the Plan Year.
(3) Any Participant who was employed on the last day of the Plan Year.
(4) Any Participant who was on a leave of absence on the last day of
the Plan Year.
(5) Any participant who during the Plan Year died or became Disabled
while an Employee or terminated employment after attaining Normal
Retirement Age.
(6) Any Participant who was credited with at least 501 Hours of
Service whether or not employed on the last day of the Plan Year.
(7) Any Participant who was credited with at least 1,000 Hours of
Service and was employed on the last day of the Plan Year.
ARTICLE V. Thrift Contributions
THIS ARTICLE IS NOT APPLICABLE
ARTICLE VI. Participant Contributions
Participant Voluntary Nondeductible Contributions
Participant Voluntary Nondeductible Contributions are (select one):
x (a) permitted
(b) not permitted
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72
ARTICLE VII. Vesting
A. Employer Contribution Accounts
(1) A Participant shall have a vested percentage in his or her
Profit-Sharing Contributions, Matching 401(k) Contributions and/or
Matching Thrift Contributions, if applicable, in accordance with the
following schedule
(Select one):
(a) 100% vesting immediately upon participation
(b) 100% after ___ (not more than 5) years of Vesting Service
x (c) Graded vesting schedule:
0% after 1 year of Vesting Service;
35% after 2 years of Vesting Service;
100% (not less than 20%) after 3 years of Vesting Service
100% after 7 years of Vesting Service
(2) Top Heavy Plan
Vesting Schedule (Select one):
(a) 100% vesting immediately upon participation
(b) 100% after ___ (not more than 3) years of Vesting Service
x (c) Graded vesting schedule:
0% after 1 year of Vesting Service;
35% (not less than 20%) after 2 years of Vesting Service;
100% (not less than 40%) after 3 years of Vesting Service
100% after 6 years of Vesting Service
B. Allocation of Forfeitures
Forfeitures shall be (select one from each applicable column):
x (1) used to reduce Employer contributions for succeeding Plan Year.
(2) allocated in the succeeding Plan Year in the ratio which the
Compensation of each Participant for the Plan Year bears to the
total Compensation of all Participants entitled to share in the
Contributions. If the Plan is integrated with Social Security,
forfeitures shall be allocated in accordance with the formula
elected by the Employer.
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73
C. Vesting Service
For purposes of determining Years of Service for Vesting Service
[select (1) or (2) and/or (3)]:
x (1) All Years of Service shall be included.
(2) Year of Service before the Participant attained age 18 shall be
excluded.
(3) Service with the Employer prior to the effective date of the Plan
shall be excluded.
ARTICLE VIII. Deferral of Benefit Distributions,
In-Service Withdrawals and Loans
A. Deferral of Benefit Distributions
If this item is checked, a Participant's vested benefit in his or her
Employer Accounts shall be payable as soon as practicable after the
earlier of: (1) the date the Participant terminates Employment due to
Disability or (2) the end of the Plan Year in which a terminated
Participant attains Early Retirement Age, if applicable, or Normal
Retirement Age.
B. In-Service Distributions
x (1) In-service distributions may be made from any of the Participant's
vested Accounts, at any time upon or after the occurrence of the
following events (select all applicable):
x (a) a Participant's attainment of age 59 1/2
x (b) due to hardships as defined in Section 5.9 of the Plan.
(2) In-service distributions are not permitted.
C. Loans are:
x (1) permitted
(2) not permitted.
ARTICLE IX. Group Trust
{Deleted}
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74
ARTICLE X. MISCELLANEOUS
A. Identification of Sponsor
The address and telephone number of the Sponsor's authorized
representative is 800 Scudders Mill Road, Plainsboro, New Jersey 08536;
(609) 282-2272. This authorized representative can answer inquiries
regarding the adoption of the Plan, the intended meaning of any Plan
provisions, and the effect of the opinion letter.
The Sponsor will inform the adopting Employer of any amendments made to
the Plan or the discontinuance or abandonment of the Plan.
B. Plan Registration
1. Initial Registration
This Plan must be registered with the Sponsor, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, in order to be considered a
Prototype Plan by the Sponsor. Registration is required so that
the Sponsor is able to provide the Administrator with documents,
forms and announcements relating to the administration of the Plan
and with Plan amendments and other documents, all of which relate
to administering the Plan in accordance with applicable law and
maintaining compliance of the Plan with the law.
The Employer must complete and sign the Adoption Agreement. Upon
receipt of the Adoption Agreement, the Plan will be registered as
a Prototype Plan of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. The Adoption Agreement will be countersigned by an
authorized representative and a copy of the countersigned Adoption
Agreement will be returned to the Employer.
2. Registration Renewal
Annual registration renewal is required in order for the Employer
to continue to receive any and all necessary updating documents.
There is an annual registration renewal fee in the amount set
forth with the initial registration material. The adopting
Employer authorizes Merrill Lynch, Pierce, Fenner & Smith
Incorporated, to debit the account established for the Plan for
payment of agreed upon annual fee; provided, however, if the
assets of an account are invested solely in Participant-Directed
Assets, a notice for this annual fee will be sent to the Employer
annually. The sponsor reserves the right to change this fee from
time to time and will provide written notice in advance of any
change.
C. Prototype Replacement Plan
This Adoption Agreement is a replacement prototype plan for the (1) Merrill
Lynch Special Prototype Defined contribution Plan and Trust - 401(k) Plan
#03-004 and (2) Merrill Lynch Asset Management, Inc., Special Prototype
Defined contribution Plan and Trust - 401(k) Plan Adoption Agreement
#03-004.
D. Reliance
The adopting Employer may not rely on the opinion letter issued by the
National Office of the Internal Revenue Service as evidence that this Plan
is qualified under Code Section 401. In order to obtain reliance, the
Employer must apply to the appropriate Key District Director of the
Internal Revenue Service for a determination letter with respect to the
Plan.
<PAGE>
75
EMPLOYER'S SIGNATURE
Name of Employer: PSC Inc.
By: /s/ L. Michael Hone
{Authorized Signature}
L. Michael Hone
{Print Name}
President, Chief Executive Officer and Chairman
{Title}
Dated: December 29, 1995
TO BE COMPLETED BY MERRILL LYNCH:
Sponsor Acceptance:
Subject to the terms and conditions of the Prototype Plan and this Adoption
Agreement, this Adoption Agreement is accepted by Merrill Lynch, Pierce,
Fenner & Smith Incorporated as the Prototype Sponsor.
Authorized Signature: /s/ Anissa Olson
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