UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- -----
X EXCHANGE ACT OF 1934 (FEE REQUIRED)
- -----
For the fiscal year ended December 30, 1995
----------------------------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- -----
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
- -----
For the transition period from _______________ to ______________
Commission file number 0-4723
FARR COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-1288401
- ------------------------------------ ---------------------------------------
(State or other jurisdiction of (I.R.S.Employer Identification Number)
incorporation or organization)
2221 Park Place, El Segundo, CA 90245
- ------------------------------------ ---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 536-6300.
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class Name of Exchange on Which Registered
-------------- ------------------------------------
Common Stock, $.10 Par Value NASDAQ
- ------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __x__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
__x__
The aggregate market value of voting common stock held by non-affiliates of
Registrant on March 8, 1996, based on the closing sale price on such date, was
$33,082,907.
The number of shares of common stock outstanding on March 8, 1996 was 3,794,211.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
PART I AND II:
The Annual Report to Stockholders for the fiscal year ended December 30, 1995.
PART I AND III:
The Proxy Statement for the Annual Meeting of Stockholders to be held April 30,
1996.
PART I
Item 1. Business
- ----------------
Farr Company and its subsidiaries (hereinafter collectively referred to as the
"Company" or "Registrant") are engaged in the design, development, manufacture,
sale and service of filters and filtration systems. These products are used for
a wide variety of applications, including heating, ventilation and air
conditioning systems, manufacturing and process cleanrooms, special application
filters for original equipment manufacturers, diesel-powered truck engines,
railroad locomotives, dust collection systems and gas turbines. Air filter
efficiencies range from 20 percent in disposable products to 99.9999+ percent in
cleanroom products. Products are available as standard items or may be custom
engineered. They range in size and complexity from a small throwaway air filter
to large gas turbine systems with a single filter component module weighing in
excess of twenty tons.
All of the Company's filter products incorporate at least one of five basic
methods of filtration. These include strainer type filters which block the
passage of particles through the use of various types of materials such as
paper, non-woven cotton fabric, fiberglass and metal screening; impingement and
diffusion type filters which consist of layers of various types of screening
materials sometimes with an oil coating that traps dust particles; inertial
separators which filter high velocity air by changing its direction; and
activated carbon filters which absorb odors and gases. Paper, fabric, fiberglass
and carbon filters are disposable and the Company sells replacements.
Many products manufactured by the Company are enclosed in hardware ranging from
simple frames to large component modules weighing in excess of twenty tons. The
percentage of the Company's total sales involving the fabrication of large
enclosures used in special filtration and noise abatement systems was
approximately 4 percent in 1995, 6 percent in 1994 and 13 percent in 1993. These
products are sold primarily for use with gas turbine installations in
applications in the electrical generating, oil and gas industries.
The Company also maintains and services air filtration systems and accessory
equipment in buildings and industrial plants in Southern California and Phoenix,
Arizona. This service includes replacing disposable filters.
The Company was organized in California in 1938, and in 1987 the Company
reincorporated in Delaware.
2
<PAGE>
Materials
- ---------
The principal materials used in manufacturing the Company's products are ferrous
and non-ferrous materials, plastisols, urethanes, adhesives and certain finished
and semi-finished filter materials, including screen, activated carbon, cotton
fibers, paper and fiberglass. The Company does not depend on any single source
for a significant portion of its raw materials.
Product Engineering and Development
- -----------------------------------
At December 30, 1995, the Company employed approximately 43 engineers, draftsmen
and technicians in the United States, Canada and England to improve and develop
existing products, to design, develop and test new products and to improve
production equipment and techniques. The Company spent approximately $2,251,000,
$2,221,000 and $2,048,000 for product engineering and development in 1995, 1994,
and 1993, respectively.
The Company owns a number of United States and foreign patents. Although the
Company considers these patents to be of value in its operations, its business
is not dependent on any single patent or group of patents.
Sales and Distribution
- ----------------------
The Company's products are sold throughout the United States and in over 40
foreign countries through salesmen working out of field sales offices and
through various distributors and manufacturers' representatives.
Certain of the Company's products are manufactured and sold under licensing
agreements with manufacturers located in Argentina, Australia, France, Hong
Kong, India, Indonesia, Italy, Japan, Malaysia, Mexico, New Zealand, Singapore,
Taiwan and Venezuela.
During 1995, no customer accounted for more than 10% of net sales.
Backlog
- -------
The Company's backlog at December 30, 1995 was $16,017,000 up from $13,455,000
at December 31, 1994.
Historically, backlog has not been a significant measure of the Company's future
business activities since the majority of orders are shipped within forty-five
to sixty days of receipt. During 1995, approximately 5.1% of the Company's
business was derived from products with lead times longer than sixty days.
These products are primarily heavy fabrication products such as gas turbine
equipment. The backlog of orders relating to heavy fabrication products was
approximately $4,611,000 and $1,903,000 at December 30, 1995 and December 31,
1994, respectively. All of the December 30, 1995 backlog is scheduled for
delivery during 1996.
3
<PAGE>
International Operations
- ------------------------
The Company engages in operations in foreign countries as described above. For
information regarding the geographic distribution, revenue, operating profit
(loss) and identifiable assets of the Company's domestic and international
operations, see Note 12 of Notes to Consolidated Financial Statements, included
in the Company's Annual Report to Stockholders, which is incorporated herein by
reference.
The Company's international operations are subject to the additional risks
inherent in doing business in countries whose governments have policies
different than those of the United States. To date the Company has experienced
no material problems in foreign countries arising from political instability or
currency restrictions or fluctuations.
Competition
- -----------
The fields in which the Company operates are highly competitive with numerous
other companies manufacturing and selling competing products. While information
with respect to the industry ranking of the Company among manufacturers of
similar products is not available, the Company believes that its principal
competitors in most of its major product areas are American Air Filter Company,
Inc., a wholly owned subsidiary of Snyder General Corporation, Donaldson
Company, Inc. and Clarcor, Inc. A number of the Company's competitors have
larger sales and greater financial resources than the Company. The Company
believes the principal competitive factors in the sale of its products are
technical competence, quality and the ability to respond to the unique
individual requirements of its customers.
Employees
- ---------
At March 8, 1996, the Company had approximately 1,299 employees as compared to
approximately 1,244 on February 28, 1995.
The Company's 5 drivers and warehousemen at its El Segundo service office are
covered by a collective bargaining agreement with the Teamsters Union which
expires on February 6, 1997; 32 employees at the Company's Delano plant are
covered by a collective bargaining agreement with the Sheet Metal Workers
International Association which expires June 30, 1998. At March 8, 1996,
approximately 114 employees at the Company's Montreal, Canada plant were covered
by a three year collective bargaining agreement expiring August 31, 1997 and
approximately 28 employees at the Company's Birmingham, England plant were
covered by a collective bargaining agreement that expires on December 31, 1996.
4
<PAGE>
Executive Officers of the Registrant
- ------------------------------------
================================================================================
Position Held and
Business Experience During
Name Age Past Five Years
- ---- --- ---------------
Richard L. Farr 52 Director of the Company (since November
1988), Senior Vice President of the Company
(since January 1995), Vice President of the
Company (from November 1987 to January 1995),
first cousin of David J. Farr; a Director.
Kenneth W. Gerstner 52 Senior Vice President, Secretary and Chief
Financial Officer of the Company (Since
January 1995), Vice President, Secretary and
Chief Financial Officer of the Company (from
June 1993 to January 1995), Controller,
Archive Technology, Inc. (from June 1990 to
May 1993), Assistant Corporate Controller,
Archive Corporation (from March 1989 to June
1990).
John C. Johnston 52 President and Chief Operating Officer (since
February 1996); Senior Vice President of the
Company (from January 1995 to February 1996);
President of Easton Aluminum, Inc. (January
1986 to December 1994).
H. Jack Meany 73 Chairman and Chief Executive Officer of the
Company (since February 1996); Chairman,
President, and Chief Executive Officer (from
April 1994 to February, 1996); Director of
the Company (from June 1976 to March 1994);
Retired; Chairman of the Board and Chief
Executive Officer (from October 1975 to March
1988) of NI Industries, Inc., manufacturer of
building, industrial, and defense products;
Director, APS Corp., Borg Warner Industrial
Products Corp.
Myron G. Rasmussen 58 Vice President of the Company (since March
1990), Director of Engineering of the Company
(from August 1977 to May 1990).
================================================================================
5
<PAGE>
Item 2. Properties
- -------------------
The location and general description of the Company's principal properties at
March 8, 1996 are set forth in the following tables. All such properties are
owned by the Company except as noted:
Floor Area
Location (Square Feet) Principal Uses
-------- ------------- --------------
Jonesboro, AR 220,000 Manufacturing
El Segundo, CA 50,000 Corporate Offices
El Segundo, CA 40,000 Warehouse
Delano, CA 39,000 Manufacturing
Corcoran, CA 80,000 Manufacturing
Eatonton, GA (leased) 76,000 Closed
Crystal Lake, IL 120,000 Manufacturing
Holly Springs, MS 208,000 Manufacturing
Conover, NC 107,000 Manufacturing
Pryor, OK (leased) 80,000 Closed
Montreal, Canada 153,000 Manufacturing
Birmingham, England 82,000 Manufacturing
The Company leases sales office and warehouse space in or near San Diego,
California; Phoenix, Arizona; Toronto, Canada; Tremelo, Belgium; Detroit,
Michigan and Singapore.
The Company believes that its facilities and manufacturing equipment are well
maintained and adequate for current operations. During 1995, the Company
believes that utilization of its various production facilities ranged from 40 to
80 percent, depending upon product mix.
Item 3. Legal Proceedings
- --------------------------
The Company is involved in several claims and suits that arise out of the
ordinary course of business, and has tax returns under review. Management
believes that these matters are either adequately reserved, covered by its
insurance, or would not have a material adverse effect on the financial position
or operations of the Company if disposed of unfavorably.
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable.
Incorporation by Reference
- --------------------------
The following portion of the Company's Annual Report to Stockholders for the
year ended December 30, 1995 ("Annual Report") is hereby incorporated by
reference.
Portion of
Form 10-K Item No. Document Portion of Document
------------------ -------- -------------------
Part I - Item 1 and 2 Annual Report Pages 6 through 17
6
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- -----------------------------------------------------------------------------
The Company's Common Stock trades on the NASDAQ Stock Market under the symbol
FARC. At March 8, 1996, there were approximately 700 stockholders of record of
the Company's Common Stock.
Dividends
- ---------
The Company did not pay any dividends on its Common Stock over the last two
years.
The above Item 5, information should be read in conjunction with information
appearing under the captions "Consolidated Statements of Shareholders'
Investment", "Selected Financial Data" and "Summary of Stock Quotations" on
pages 7, 18 and 21 of the Company's 1995 Annual Report to Stockholders.
Item 6. Selected Financial Data
- -------------------------------
The five year summary under "Selected Financial Data" included on page 18 of the
Company's 1995 Annual Report to Stockholders is incorporated herein by this
reference. The five-year summary should be read in conjunction with the
Company's consolidated financial statements and accompanying notes included
under Item 8, Consolidated Financial Statements and Supplementary Data.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------ of Operations
-------------
"Management's Discussion and Analysis " on pages 19 through 21 of the Company's
1995 Annual Report to Stockholders is incorporated herein by this reference.
Item 8. Consolidated Financial Statements and Supplementary Data
- ----------------------------------------------------------------
Pages 6 through 17 of the Company's 1995 Annual Report to Stockholders, which
include the consolidated financial statements, and the Independent Auditors'
Report as listed in Item 14(a)I, are incorporated herein by this reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------- Financial Disclosure
--------------------
Not applicable.
7
<PAGE>
PART III
Compliance with Section 16(a) of the Exchange Act
- -------------------------------------------------
Information appearing under the caption "Compliance With Section 16(a) of the
Exchange Act" in the Company's 1996 Proxy Statement is incorporated herein by
this reference.
Item 10. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------
Information appearing under the caption "Election of Directors" in the Company's
1995 Proxy Statement is incorporated herein by this reference.
Item 11. Executive Compensation
- -------------------------------
Information appearing under the captions "Executive Compensation" and "Pension
Plans" in the Company's 1995 Proxy Statement is incorporated herein by this
reference. Information appearing under the captions "Report of the Compensation
and Stock Option Committee" and "Stock Performance Graph" in the Company's 1995
Proxy Statement is not incorporated herein by this reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
Information appearing under the caption "Beneficial Ownership of Securities" in
the Company's 1995 Proxy Statement is incorporated herein by this reference.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
Note 1 to the consolidated financial statements, included on page 9 of the
Company's 1995 Annual Report to Stockholders, and the caption "Relationship with
Independent Public Accountants" in the Company's 1995 Proxy Statement contain
information about certain relationships and are incorporated herein by this
reference.
8
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------------------------------------------------------------------------
(a) Financial Statements, Schedules and Exhibits:
(1) Index to Financial Statements and Supplementary Data.
The financial statements listed below are set forth in the
Company's Annual Report to Shareholders for the fiscal year ended
December 30, 1995 and are incorporated herein by this reference.
Annual Report
Page No.
--------
Consolidated Balance Sheets, December 30, 1995 and
December 31, 1994. 6
Consolidated Operations Statements and Consolidated
Statements of Stockholders' Investment, for the three
years ended December 30, 1995, December 31, 1994 and
January 1, 1994. 7
Consolidated Statements of Cash Flows, for the three
years ended December 30, 1995, December 31, 1994 and
January 1, 1994. 8
Notes to the Consolidated Financial Statements. 9-16
Report of Independent Public Accountants. 17
(2) The exhibits filed as part of this report are listed in the Exhibit
Index which follows the Supplemental Schedules referred to above.
Management contracts and compensatory plans and arrangements listed in
the Exhibit Index are denoted with an asterisk (*).
(b) 8-K Reports:
None
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 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.
FARR COMPANY
Dated: March 28, 1996 By: /s/ H. Jack Meany
--------------------------- --------------------------------
H. Jack Meany
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Dated: March 28, 1996 By: /s/ H. Jack Meany
--------------------------- --------------------------------
H. Jack Meany
Chairman and Chief Executive Officer
Dated: March 28, 1996 By: /s/ Robert G. Batinovich
--------------------------- --------------------------------
Robert G. Batinovich
Director
Dated: March 28, 1996 By: /s/ Richard P. Bermingham
--------------------------- --------------------------------
Richard P. Bermingham
Director
Dated: March 28, 1996 By: /s/ Richard L. Farr
--------------------------- --------------------------------
Richard L. Farr
Director
Dated: March 28, 1996 By: /s/ David J. Farr
--------------------------- --------------------------------
David J. Farr
Director
Dated: March 28, 1996 By: /s/ John J. Kimes
--------------------------- --------------------------------
John J. Kimes
Director
Dated: March 28, 1996 By: /s/ Kenneth W. Gerstner
--------------------------- ---------------------------------
Kenneth W. Gerstner
Sr. Vice President, Secretary
and Chief Financial Officer
10
<PAGE>
FARR COMPANY AND SUBSIDIARIES
List of Exhibits
Item Description
---- -----------
3.1 Certificate of Incorporation of Registrant as currently in effect.
3.2 Amended By-Laws of Registrant as currently in effect.
4.31 Rights Agreement, dated as of April 3, 1989, between Farr Company
and Bank of America NT & SA (formerly Security Pacific National
Bank). Filed as Exhibit 1 on Form 8K dated April 18, 1989 and
incorporated herein by this reference.
4.37 Loan Agreement by and between the Mississippi Business Finance
Corporation and Farr Company dated July 1, 1991, in connection
with Holly Springs, Mississippi Industrial Development Revenue
Bond Financing. Filed as Exhibit 4.37 on Form 10-K dated December
28, 1991 and incorporated herein by this reference.
4.39 Letter of Credit No. 910809-IS-284-LA dated August 15, 1991, in
favor of First Tennessee Bank National Association in connection
with Holly Springs, Mississippi Industrial Development Revenue
Bond Financing. Filed as Exhibit 4.39 on Form 10-K dated December
28, 1991 and incorporated herein by this reference.
4.40 Reimbursement Agreement between Farr Company and Bank of America
NT & SA dated as of August 15, 1991, in connection with Holly
Springs, Mississippi Industrial Development Revenue Bond
Financing. Filed as Exhibit 4.40 on Form 10-K dated December 28,
1991 and incorporated herein by this reference.
4.44 First Amendment and Waiver to the Holly Springs Reimbursement
Agreement, dated October 15, 1991, between Bank of America NT & SA
and Farr Company. Filed as Exhibit 4.44 on Form 10-K dated
December 28, 1991 and incorporated herein by this reference.
4.48 Waiver and Agreement dated March 25, 1992 to the Reimbursement
Agreement dated August 15, 1991, between Farr Company and Bank of
America NT & SA in connection with Holly Springs, Mississippi
Industrial Revenue Bond Financing. Filed as Exhibit 4.48 on Form
10-K dated January 1, 1994 and incorporated herein by this
reference.
11
<PAGE>
4.58 Credit Agreement dated as of February 3, 1994 between Farr
Company, as borrower, and 4.58 General Electric Capital
Corporation, as Lender. Filed as Exhibit 1 on Form 8-K dated
February 7, 1994 and incorporated herein by this reference.
4.61 Second Amendment to Reimbursement Agreement, dated as of February
3, 1994, to Reimbursement Agreement dated as of August 15, 1991,
as previously amended, between Farr Company and Bank of America NT
& SA in connection with Holly Springs, Mississippi Industrial
Revenue Bond Financing. Filed as Exhibit 4 on Form 8-K dated
February 7, 1994 and incorporated herein by this reference.
4.63 Amendment, dated July 11, 1995 to Credit Agreement dated February
3, 1994 between Farr 4.63 Company, as borrower, and General
Electric Capital Corporation, as Lender. Filed as Exhibit 4.64 on
Form 10-Q for the quarter ended July 1, 1995 and incorporated
herein by this reference.
4.64 Credit Agreement dated February 15, 1996 between Farr Company, as
borrower, and Bank of America National Trust and Savings
Association, as lender.
Registrant agrees that it will furnish to the Commission upon
request copies of any other instruments with respect to the
long-term debt of Registrant and its subsidiaries; under none of
such other instruments does the total amount of securities
authorized exceed 10 percent of the total assets of Registrant and
its subsidiaries on a consolidated basis.
*10.1 Non-Qualified Deferred Compensation Plan, dated July 31, 1987.
Filed as Exhibit 10.1 to Annual Report on Form 10-K for the year
ended January 2, 1988 and incorporated herein by this reference.
*10.3 Deferred Compensation Plan for Directors dated November 5, 1980.
Filed as Exhibit 10.5 to Annual Report on Form 10-K for the year
ended January 3, 1981 and incorporated herein by this reference.
*10.4 Farr Company Management Incentive Bonus Plan. Filed as Exhibit
10.6 to Annual Report on Form 10-K for the year ended January 3,
1981 and incorporated herein by this reference.
*10.5 Deferred Compensation Plan for Officers dated April 30, 1981.
Filed as Exhibit 10.7 to Annual Report on Form 10-K for the year
ended January 2, 1982 and incorporated herein by this reference.
*10.6 Amendments to Stock Option Plan for Key Employees. Filed as
Exhibit 10.8 to Annual Report on Form 10-K for the year ended
January 2, 1982 and incorporated herein by this reference.
12
<PAGE>
*10.7 1983 Stock Option Plan for Key Employees as amended. Filed as
Exhibit A to registrant's definitive proxy statement for the
annual meeting of stockholders held on May 4, 1988 and
incorporated herein by this reference.
*10.9 Trust Agreement pursuant to the Employee Stock Ownership Plan for
Office Employees of Farr Company and Employee Stock Ownership Plan
for Shop Employees of Farr Company, dated December 1, 1989,
between Farr Company and Bank of America NT & SA (formerly
Security Pacific National Bank) . Filed as Exhibit 10.9 to Annual
Report on Form 10-K for the year ended December 30, 1989 and
incorporated herein by this reference.
*10.10 Employee Stock Ownership Plan for office employees of Farr
Company, dated December 1, 1989. Filed as Exhibit 10.10 to Annual
Report on Form 10-K for the year ended December 30, 1989 and
incorporated herein by this reference.
*10.12 Farr Company Supplemental Executive Benefits Plan dated July 24,
1990. Filed as Exhibit 10.12 on Form 10-K for the year ended
December 29, 1990 and incorporated herein by this reference.
*10.14 Non-Employee Directors Stock Option Plan, filed as Exhibit 10.14
on Form 10-K for the year ended December 29, 1990 and incorporated
herein by this reference.
*10.16 The Office Employees' 401(k) Plan of Farr Company, dated September
10, 1991. Filed as Exhibit 10.16 on Form 10-K for the year ended
December 28, 1991 and incorporated herein by this reference.
*10.17 Twelfth Amendment to the Employees' Profit Sharing Retirement Plan
of Farr Company, dated September 10, 1991. Filed as Exhibit 10.17
on Form 10-K for the year ended December 28, 1991 and incorporated
herein by this reference.
*10.21 The 1993 Stock Option Plan for Key Employees of Farr Company.
Filed as Exhibit 10.21 on Form 10-K for the year ended December
31, 1994 and incorporated herein by this reference.
*10.22 First Amendment to the 1993 Stock Option Plan by key employees of
Farr Company dated September 20, 1994. Filed as Exhibit 10.22 on
Form 10-Q for the quarter ended October 1, 1994 and incorporated
herein by this reference.
13
<PAGE>
*10.23 Amendment to the Company's 1991 Stock Option Plan for Non-Employee
Directors dated September 20, 1994, filed as Exhibit 10.23 on Form
10-Q for the quarter ended October 1, 1994 and incorporated herein
by this reference.
*10.24 The Corporate Plan for Retirement Select Plan, the Profit
Sharing/401(k) Plan, Basic Plan Document dated April 11, 1994.
Filed as Exhibit 10.24 on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference.
*10.25 The Profit Sharing/401(k) Plan for Office Employees of Farr
Company Non-Standardized Adoption Agreement 002, Basic Plan No.
07. dated September 27, 1994. Filed as Exhibit 10.25 on Form 10-K
for the year ended December 31, 1994 and incorporated herein by
reference.
*10.26 The Profit Sharing/401(k) Plan for Shop Employees of Farr Company
Non-Standardized Adoption Agreement 002, Basic Plan dated
September 27, 1994. Filed as Exhibit 10.26 on Form 10-K for the
year ended December 31, 1994 and incorporated herein by reference.
*10.27 First amendment to The Office Employees' 401(k) Plan of Farr
Company, dated December 16, 1994. Filed as Exhibit 10.27 on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference.
*10.28 First amendment to The Shop Employees' 401(k) Plan of Farr
Company, dated December 16, 1994. Filed as Exhibit 10.28 on Form
10-K for the year ended December 31, 1994 and incorporated herein
by reference.
*10.29 Thirteenth Amendment to The Employees' Profit Sharing Retirement
Plan of Farr Company, dated December 16, 1994. Filed as Exhibit
10.29 on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference.
*10.30 Thirteenth Amendment to The Retirement Plan for Production and
Maintenance Employees of Farr Company, dated December 16, 1994.
Filed as Exhibit 10.30 on Form 10-K for the year ended December
31, 1994 and incorporated herein by reference.
*10.31 Second Amendment to The Employee Stock Ownership Plan for Shop
Employees of Farr Company dated December 16, 1994. Filed as
Exhibit 10.31 on Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.
*10.32 First Amendment to The Employee Stock Ownership Plan for Office
Employees of Farr Company dated December 16, 1994. Filed as
Exhibit 10.32 on Form 10-K for the year ended December 31, 1994
and incorporated herein by reference.
14
<PAGE>
*10.33 Second Amendment to the 1991 Stock Option Plan for Non-Employee
Directors dated September 12, 1995.
*10.34 Employee contract agreement between John Johnston and Farr Company
dated Novembers 28, 1994.
*10.35 The Farr Company 401(k)/Retirement Plan dated December 15, 1995.
*10.36 The Farr Company Supplemental Executive Savings Plan Adoption
Agreement, dated November 21, 1995.
*10.37 The Corporate Plan for Retirement Select Plan, Fidelity Basic Plan
Document dated April 11, 1994 (SESP).
*10.38 Trust Agreement for Farr Company 401K/Retirement Plan, dated
December 15, 1995.
*10.39 Trust Agreement for Farr Company Supplemental Executive Savings
Plan between Farr Company as sponsor and Fidelity Management Trust
Company (trustee) dated November 21, 1995.
11 Computation of earnings per common share and common share
equivalents.
13 Annual Report to Stockholders. With the exception of the
information incorporated by reference into Items 1, 2, 5, 6, 7 and
8 of this Form 10-K, the 1995 Annual Report to Stockholders is not
deemed to be filed as a part of this report.
22 A list of all subsidiaries of registrant.
24 Consent of Independent Public Accountants.
27 Financial Data Schedule
* Management contract or compensatory arrangements.
Copies of Exhibits are available, on prepayment of 15 cents per page, by
writing to the Secretary of the Company at the address set forth on the
cover page of this Annual Report and Form 10-K.
15
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
FARR INTERNATIONAL, INC.
The undersigned, Allan B. Foy and M. S. Farr, certify that they are the
President and Secretary, respectively, of Farr International, Inc., a
corporation organized and existing under the laws of the State of Delaware (the
"Corporation"), and do hereby further certify as follows:
1. The name of the Corporation is Farr International, Inc.
2. The original Certificate of Incorporation of the Corporation was
filed in the Office of the Secretary of State of the State of Delaware on
April 7, 1987.
3. This Restated Certificate of Incorporation was duly adopted by
stockholder written consent in accordance with Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation of the Corporation
as amended hereby is restated to read in its entirety, as follows:
ARTICLE I
The name of the Corporation is Farr Company.
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 229 South State Street in the City of Dover, County of Kent. The
name of its registered agent at that address is United States Corporation
Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the General
Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware
Code (the "GCL").
ARTICLE IV
The total number of shares of stock which the Corporation shall have
authority to issue is 5,000,000 shares of common stock, par value $.10 per share
(the "Common Stock").
ARTICLE V
The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors consisting of not less than six
directors nor more than nine directors, the exact number of directors to be
determined from time to time by resolution adopted by the Board of Directors.
The directors shall be divided into three classes, designated Class I, Class II
and Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire Board of
Directors. The term of the initial Class I directors shall terminate on the date
of the 1988 annual meeting of stockholders; the term of the initial Class II
directors shall terminate on the date of the 1989 annual meeting of
stockholders; and the term of the initial Class III directors shall terminate on
the date of the 1990 annual meeting of stockholders. At each annual meeting of
stockholders beginning in 1988, successors to the class of directors whose term
expires at that annual meeting shall be elected for a three-year term. If the
number of directors is changed, any increase or decrease shall be apportioned
among the classes so as to maintain the number of directors in each class as
nearly equal as possible, and any additional directors of any class elected to
fill a vacancy resulting from an increase in such class shall hold office for a
term that shall coincide with the remaining term of that class, but in no case
will a decrease in the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual meeting for the year in
which his term expires and until his
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death, resignation, retirement, disqualification or removal from office. Any
vacancy on the Board of Directors, howsoever resulting, may be filled by a
majority of the directors then in office, even if less than a quorum, or by a
sole remaining director. Any director elected to fill a vacancy shall hold
office for a term that shall coincide with the term of the class to which such
director shall have been elected.
ARTICLE VI
Any or all of the directors of the Corporation may be removed from office
at any time, but only for cause and only by the affirmative vote of the holders
of a majority of the outstanding shares of the Corporation then entitled to vote
generally in the election of directors, considered for purposes of this Article
VI as one class.
ARTICLE VII
Elections of directors at an annual or special meeting of stockholders
shall be by written ballot unless the Bylaws of the Corporation shall otherwise
provide.
ARTICLE VIII
Any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of the stockholders at
an annual or special meeting duly noticed and called, as provided in the Bylaws
of the Corporation, and may not be taken by a written consent of the
stockholders pursuant to the GCL.
ARTICLE IX
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors, the Chairman of
the Board of Directors or the President. Special meetings of the stockholders of
the Corporation may not be called by any other person or persons.
ARTICLE X
The affirmative vote of the holders of not less than 80 percent of the
outstanding shares of "Voting Stock" (as hereinafter defined) of the Corporation
shall be required for the approval or authorization of any "Business
Combination" (as hereinafter defined) of the Corporation with any "Related
Person" (as hereinafter defined); provided, however, that the 80 percent voting
requirement shall not be applicable if:
(1) The Board of Directors of the Corporation by a vote of not less
than 80 percent of the directors then holding office (a) has expressly
approved in advance the acquisition of the outstanding shares of Voting
Stock of the Corporation that caused the Related Person to become a
Related Person or (b) has approved the Business Combination prior to the
Related Person involved in the Business Combination having become a
Related Person;
(2) The Business Combination is solely between the Corporation and
another corporation, one hundred percent of the Voting Stock of which is
owned directly or indirectly by the Corporation; or
(3) The Business Combination is a merger or consolidation and the cash
or fair market value of the property, securities or other consideration to
be received per share by holders of Common Stock of the Corporation in the
Business Combination is not less than the highest per share price (with
appropriate adjustments for recapitalizations and for stock splits, stock
dividends and like distributions) paid by the Related Person in acquiring
any of its holdings of the Corporation's Common Stock.
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For the purposes of this Article:
(i) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a subsidiary with or into a Related
Person, (b) any sale, lease, exchange, transfer or other disposition,
including without limitation a mortgage or any other security device, of
all or any "Substantial Part" (as hereinafter defined) of the assets
either of the Corporation (including without limitation any voting
securities of a subsidiary) or of a subsidiary to a Related Person, (c)
any merger or consolidation of a Related Person with or into the
Corporation or a subsidiary of the Corporation, (d) any sale, lease,
exchange, transfer or other disposition of all or any Substantial Part of
all or any Substantial Part of the assets of a Related Person to the
Corporation or a subsidiary of the Corporation, (e) the issuance of any
securities (other than by way of pro rata distribution to all
shareholders) of the Corporation or a subsidiary of the Corporation to a
Related Person, (f) the acquisition by the Corporation or a subsidiary of
the Corporation of any securities of a Related Person, (g) any
recapitalization that would have the effect of increasing the voting power
of a Related Person and (h) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of
Business Combination.
(ii) The term "Related Person" shall mean and include any individual,
corporation, partnership or other person or entity which, together with
its "Affiliates" and "Associates" (as defined on April 1, 1985 in Rule
12b-2 under the Securities Exchange Act of 1934), "Beneficially Owns" (as
defined on April 1, 1985 in Rule 13d-3 under the Securities Exchange Act
of 1934) in the aggregate 10 percent or more of the outstanding Voting
Stock of the Corporation, and any Affiliate or Associate of any
individual, corporation, partnership or other person or entity.
(iii) The term "Substantial Part" shall mean more than 10 percent of
the book value of the total assets of the company in question as of the
end of its most recent fiscal year ending prior to the time the
determination is being made.
(iv) Without limitation, any shares of Common Stock of the Corporation
that any Related Person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants or options, or
otherwise, shall be deemed beneficially owned by the Related Person.
(v) For the purposes of subparagraph (3) of this Article, the term
"other consideration to be received" shall include, without limitation,
Common Stock of the Corporation retained by its existing public
shareholders in the event of a Business Combination in which the
Corporation is the surviving corporation.
(vi) The term "Voting Stock" shall mean all outstanding shares of
capital stock of the Corporation or another corporation entitled to vote
generally in the election of directors and each reference to a proportion
of shares of Voting Stock shall refer to such proportion of the votes
entitled to be cast by such shares.
ARTICLE XI
The provisions set forth in this Article XI and in Articles VI, VIII, IX,
X and XIV herein may not be repealed or amended in any respect, unless such
action is approved by the affirmative vote of the holders of not less than 80
percent of the outstanding shares of Voting Stock (as defined in Article X) of
the Corporation.
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ARTICLE XII
The officers of the Corporation shall be chosen in such a manner, shall
hold their offices for such terms and shall carry out such duties as are
determined by the Board of Directors, subject to the right of the Board of
Directors to remove any officer or officers at any time with or without cause.
ARTICLE XIII
A. The Corporation shall indemnify to the full extent authorized or
permitted by law (as now or hereafter in effect) any person made, or threatened
to be made, a defendant or witness to any action, suit or proceeding (whether
civil or criminal or otherwise) by reason of the fact that he, his testator or
intestate, is or was a director or officer of the Corporation or by reason of
the fact that such director or officer, at the request of the Corporation, is or
was serving any other corporation, partnership, joint venture, employee benefit
plan or other enterprise, in any capacity. Nothing contained herein shall affect
any rights to indemnification to which employees other than directors or
officers may be entitled by law. No amendment or repeal of this Section A of
Article XIII shall apply to or have any effect on any right to indemnification
provided hereunder with respect to any acts or omissions occurring prior to such
amendment or repeal.
B. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of fiduciary
duty by such a director as a director. Notwithstanding the foregoing sentence, a
director shall be liable to the extent provided by applicable law (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
GCL, or (iv) for any transaction from which such director derived an improper
personal benefit. No amendment to or repeal of this Section B of this Article
XIII shall apply to or have any effect on the liability or alleged liability of
any director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
C. In furtherance and not in limitation of the powers conferred by
statute:
(i) the Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability
under the provisions of law; and
(ii) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to
any or all of the foregoing to ensure the payment of such amounts as may
become necessary to effect indemnification as provided therein, or
elsewhere.
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ARTICLE XIV
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend or
rescind the Bylaws of the Corporation. In addition, the Bylaws of the
Corporation may be adopted, repealed, altered, amended, or rescinded by the
affirmative vote of sixty-six and two-thirds percent (66 2/3 %) of the
outstanding stock of the Corporation entitled to vote thereon.
ARTICLE XV
The Corporation reserves the right to repeal, alter, amend, or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
IN WITNESS WHEREOF, Farr International, Inc. has caused its corporate seal
to be hereunto affixed and this Restated Certificate of Incorporation to be
signed by Allan B. Foy, its President, and attested by M. Spencer Farr, its
Secretary, this 29th day of May, 1987.
FARR INTERNATIONAL, INC.
By /s/ Allan B. Foy
-----------------
Allan B. Foy
President
ATTEST:
By /s/ M. S. Farr
---------------
M. S. Farr
Secretary
5
Exibit 3.2
AS AMENDED
BYLAWS
OF
FARR INTERNATIONAL, INC.
(hereinafter called the "Corporation")
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The Registered office of the Corporation
shall be in the City of Dover, County of Kent, Delaware.
SECTION 2. PRINCIPAL PLACE OF BUSINESS. The principal place of
business of the Corporation is hereby fixed and located at 2221 Park Place, El
Segundo, California 90245.
SECTION 3. OTHER OFFICES. The Corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors (and in the case of a special
meeting, by the Board of Directors or the person calling the special meeting as
authorized by Section 3 of this Article II) and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2. ANNUAL MEETINGS. The Annual Meetings of Stockholders shall
be held on such date and at such time and place as may be fixed by the Board of
Directors and stated in the notice of the meeting, for the purpose of electing
directors and for the transaction of such other
<PAGE>
business as is properly brought before the meeting in accordance with these
Bylaws.
To be properly brought before the Annual Meeting, business must be
either (i) specified in the notice of Annual Meeting (or any supplement or
amendment thereto) given by or at the direction of the Board of Directors, (ii)
otherwise brought before the Annual Meeting by or at the direction of the Board
of Directors, or (iii) otherwise properly brought before the Annual Meeting by a
stockholder. In addition to any other applicable requirements, for business to
be properly brought before an Annual Meeting by a stockholder, the stockholder
must have given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Corporation, not less
than fifty (50) days nor more than seventy-five (75) days prior to the meeting;
provided, however, that in the event that less than sixty-five (65) days' notice
or prior public disclosure of the date of the Annual Meeting is given or made to
stockholders, notice by a stockholder to be timely must be so received not later
than the close of business on the fifteenth (15th) day following the day on
which such notice of the date of the Annual Meeting was mailed or such public
disclosure was made, whichever first occurs. A stockholder's notice to the
Secretary shall set forth (a) as to each matter the stockholder proposes to
bring before the Annual Meeting (i) a brief description of the business desired
to be brought before the Annual Meeting and the reasons for conducting such
business at the Annual Meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class, series and number of
shares of the Corporation which are beneficially owned by the stockholder, and
(iv) any material interest of the stockholder in such business and (b) as to the
stockholder giving the notice (i) the name and record address of the stockholder
and (ii) the class and number of shares of capital stock of the Corporation
which are beneficially owned by the stockholder. Notwithstanding anything in the
Bylaws to the contrary, no business shall be conducted at the Annual Meeting
except in accordance with the procedures set forth in this Article II, Section
2. The officer of the Corporation presiding at an Annual Meeting shall, if the
facts warrant, determine and declare to the Annual Meeting that business was not
properly brought before the Annual Meeting in accordance with the provisions of
this Article II, Section 2, and if he should so determine, he shall so declare
to the Annual Meeting and
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any such business not properly brought before the meeting shall not be
transacted. Written notice of the Annual Meeting stating the place, date and
hour of the Annual Meeting shall be given to each stockholder entitled to vote
atsuch meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board of Directors, or the President. Special meetings of stockholders may
not be called by any other person or persons. Written notice of a special
meeting stating the place, date and hour of the meeting and the purpose or
purposes for which the meeting is called shall be given not less than ten (10)
nor more than sixty (60) days before the date of the meeting to each stockholder
entitled to vote at such meeting, and only such business as is stated in such
notice shall be acted upon thereat.
SECTION 4. QUORUM. Except as may be otherwise provided by law or by
Certificate of Incorporation, the holders of a majority of the capital stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business. The stockholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
If, however, a quorum shall not be present or represented at any
meeting of the stockholders, the stockholders entitled to vote thereat, present
in person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented. any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty (30) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder entitled to vote at the meeting.
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Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
SECTION 5. VOTING. At all meetings of stockholders for the action of
directors a plurality of the votes cast shall be sufficient to elect. Unless
otherwise required by law, the Certificate of Incorporation or these Bylaws, all
other questions brought before any meeting of stockholders shall be decided by
the vote of the holders of a majority of the stock represented and entitled to
vote thereat. Unless otherwise provided in the Certificate of Incorporation,
each stockholder represented at a meeting of stockholders shall be entitled to
cast one (1) vote for each share of the capital stock entitled to vote thereat
held by such stockholder. The Board of Directors, in its discretion, or the
officer of the Corporation presiding at a meeting of stockholders, in his
discretion, may require that any votes cast at such meeting shall be cast by
written ballot.
SECTION 6. PROXIES. Every person entitled to vote shares has the right
to do so either in person or by one or more persons authorized by a written
proxy executed by such stockholder. Any proxy duly executed is not revoked and
continues in full force and effect until revoked by the person executing it
prior to the vote pursuant thereto by a writing delivered to the Corporation
stating that the proxy is revoked or by a subsequent proxy executed by, or by
attendance at the meeting and voting in person by the person executing the
proxy; provided, however, that no proxy shall be valid after the expiration of
three (3) years from the date of its execution unless otherwise provided in the
proxy. A proxy is not revoked by the death or incapacity of the maker unless
before the vote is counted, written notice of such death or incapacity is
received by the Corporation. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if, and only as long as, it is coupled with an
interest sufficient in law to support an irrevocable power.
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SECTION 7. ORGANIZATION. All meetings of the stockholders shall be
presided over by the Chairman of the Board of Directors or, if he is not
present, by the President of the Corporation, and if he is not present, by such
officer as is designated by the Board of Directors. The Secretary of the
Corporation or, if he is not present, any Assistant Secretary or other person
designated by the presiding officer shall act as secretary of the meeting.
SECTION 8. LIST OF STOCKHOLDERS ENTITLED TO VOTE. The officer of the
Corporation who has charge of the stock ledger of the Corporation shall prepare
and make, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder of the Corporation who is
present.
SECTION 9. STOCK LEDGER. The stock ledger of the Corporation shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 8 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
SECTION 10. INSPECTORS OF ELECTION. Before any meeting of
stockholders, the Board of Directors may appoint any person or persons other
than nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the officer of the
Corporation presiding at a meeting of stockholders may, and on the request of
the holders of a majority of the outstanding shares of all classes of stock
entitled to vote shall, appoint inspectors of election at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting on the request of the holders of a majority of the
outstanding shares of all classes entitled to vote, such holders shall determine
whether one (1) or three (3) inspectors are to be appointed. If there are three
(3) inspectors of election, the decision,
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<PAGE>
act or certificate of a majority is effective in all respects as the decision,
act or certificate of all. If any person appointed as inspector fails to appear
or fails or refuses to act, the officer of the Corporation presiding at a
meeting may, and upon the request of the holders of a majority of the
outstanding shares of all classes of stock entitled to vote shall, appoint a
person to fill that vacancy.
The inspectors shall:
(a) determine the number of shares of capital stock outstanding
and the voting power of each, the stock represented at the meeting, the
existence of a quorum, the authenticity, validity, and effect of proxies, and
when the polls shall close;
(b) receive votes and/or ballots;
(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes;
(e) determine and report to the Corporation the results of the
voting; and
(f) do any other acts that may be proper to conduct the election
or vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND ELECTION OF DIRECTORS. Subject to the rights, if
any, of holders or preferred stock of the Corporation to elect directors of the
Corporation, the Board of Directors shall consist of not less than six (6) nor
more than nine (9) members with the exact number of directors to be determined
from time to time by resolution duly adopted by the Board of Directors.
Directors shall be elected a plurality of the votes cast at Annual Meetings of
stockholders, and each director so elected shall hold office as provided by
Article V of the Certificate of Incorporation. Any director may resign at any
time effective upon giving written notice to the Corporation, unless the notice
specifies a later time for the effectiveness of such resignation. Directors need
not be stockholders.
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SECTION 2. NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons or election to the Board of Directors of the
Corporation at the Annual Meeting may be made at such meeting by or at the
direction of the Board of Directors, by any committee or persons appointed by
the Board of Directors or by any stockholder of the Corporation entitled to vote
for the election of directors at the meeting who complies with the notice
procedures set forth in this Article III, Section 2. Such nominations by any
stockholder shall be made pursuant to timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholder's notice shall be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than 50 days nor more than 75 days prior to the meeting; provided, however,
that in the event that less than 65 days notice or prior public disclosure of
the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the fifteenth day following the day on which such notice of the date
of the meeting was mailed or such public disclosure was made, whichever first
occurs. Such stockholder's notice to the Secretary shall set forth (i) as to
each person whom the stockholder proposes to nominate for election or reelection
as a director, (a) the name, age, business address and residence address of the
person, (b) the principal occupation or employment of the person, (c) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the person, and (d) any other information relating to the person that
is required to be disclosed in solicitations for proxies for election of
directors pursuant to the Rules and Regulations of the Securities and Exchange
Commission under Section 14 of the Securities Exchange Act of 1934, as amended;
and (it) as to the stockholder giving the notice (a) the name and record address
of the stockholder and (b) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the stockholder. The Corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The officer of the Corporation
presiding at an Annual fleeting shall, if the facts warrant, determine and
declare to the meeting that a nomination was not made in
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<PAGE>
accordance with the foregoing procedure, and if he should so determine, he shall
so declare to the meeting and the defective nomination shall be disregarded.
SECTION 3. VACANCIES. Any vacancy on the Board of Directors, however
resulting, may be filled by a majority of the directors then in office, even if
less than a quorum, or by a sole remaining director. Any director elected to
fill a vacancy shall hold office for a term that shall coincide with the term of
the class to which such director shall have been elected.
SECTION 4. DUTIES AND POWERS. The business of the Corporation shall be
managed by or under the direction of the Board of Directors which may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
SECTION 5. MEETINGS. The Board of Directors of the Corporation may
hold meetings, both regular and special, either within or without the State of
Delaware. Regular meetings of the Board of Directors may be held without notice
at such time and at such place as may from time to time be determined by the
Board of Directors. Special meetings of the Board of Directors may be called by
the Chairman of the Board of Directors, the President, or by a majority of the
Board of Directors. Notice thereof, stating the place, date and hour of the
meeting, shall be given to each director either by mail not less than four (4)
days before the date of the meeting, or personally or by telephone, telegram,
telex or similar means of communication on twelve (12) hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
SECTION 6. QUORUM; ACTION OF THE BOARD OF DIRECTORS. Except as may be
otherwise specifically provided by law, the Certificate of Incorporation or
these Bylaws, at all meetings of the Board of Directors, a majority of the
entire Board of Directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors. If a quorum
shall not be present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
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SECTION 7. ACTION BY WRITTEN CONSENT. Any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting. if all the members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
SECTION 8. MEETINGS BY MEANS OF CONFERENCE TELEPHONE. Members of the
Board of Directors of the Corporation, or any committee designated by the Board
of Directors, may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other,
and participation in a meeting pursuant to this Section 8 shall constitute
presence in person at such meeting.
SECTION 9. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
committees, each committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a designation by the Board of
Directors of an alternate member to replace the absent or disqualified member,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any absent or disqualified member. Any committee, to the extent allowed by law
and provided in the resolution establishing such committee, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation. The Board of
Directors may appoint a committee designated the Executive Committee and the
Board of Directors shall have the power to appoint the Chairman of the Executive
Committee. The Board of Directors shall have the power to prescribe the manner
in which proceedings of any subcommittee shall be conducted. In the absence of
any such prescription, such committee shall have the power to prescribe the
manner in which its proceedings shall be conducted. Unless the Board of
Directors or such committee shall otherwise provide, regular
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and special meetings and other actions of any such committee shall be governed
the provisions of this Article III applicable to meetings and actions of the
Board of Directors. Each committee shall keep regular minutes and report to the
Board of Directors when required.
SECTION 10. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board of
Directors.
ARTICLE IV
OFFICERS
SECTION 1. GENERAL. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a President and Chief Executive Officer, a
Vice President, a Secretary and a Chief Financial Officer. The Board of
Directors, in its sole discretion, may also choose a Chairman of the Board of
Directors (who must be a director), a Vice Chairman of the Board of Directors
(who must be a director), one or more additional Vice Presidents, one or more
Assistant Secretaries, one or more Assistant Treasurers and such other officers
as may be appointed in accordance with the provisions of Section 8 of this
Article IV. Any number of offices may be held by the same person, unless
otherwise prohibited by law, the Certificate of Incorporation or these Bylaws.
SECTION 2. ELECTION. The Board of Directors at its first meeting held
after each Annual Meeting of stockholders shall elect the officers of the
Corporation who shall hold their offices for such terms and shall exercise such
powers and perform such duties as shall be determined from time to time solely
by the Board of Directors, which determination may be by resolution of the Board
of Directors or in any bylaw provision duly adopted or approved by the Board of
Directors; and all officers of the Corporation shall hold office until their
successors are chosen and qualified, or until their earlier resignation or
removal. Any officer elected by the Board of Directors may be removed at any
time by the Board of Directors with or without cause. Any vacancy occurring in
any office of the Corporation may be filled only by the Board of Directors.
10
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SECTION 3. CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the
Board of Directors, if such an officer be elected, shall, if present, preside at
all meetings of the Board of Directors and exercise and perform such other
powers and duties as may be from time to time assigned to him by the Board of
Directors or prescribed by the Bylaws. If there is no President, the Chairman of
the Board of Directors shall in addition be the Chief Executive Officer of the
Corporation and shall have the powers and duties prescribed in Section 4 of this
Article IV.
SECTION 4. PRESIDENT. Subject to such supervisory powers, if any, as
may be given by the Board of Directors to the Chairman of the Board of
Directors, if there be such an officer, the President shall be the Chief
Executive Officer of the Corporation and shall, subject to the control of the
Board of Directors, have general supervision, direction and control of the
business and the officers of the Corporation. He shall preside at all meetings
of the stockholders and, in the absence of the Chairman of the Board of
Directors, or if there be none, at all meetings of the Board of Directors. He
shall have the general powers and duties of management usually vested in the
office of president of a corporation, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the Bylaws.
SECTION 5. VICE PRESIDENTS. In the absence or disability of the
president, the Vice Presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a Vice President designated by the Board
of Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the Bylaws, the President or the Chairman of the Board of
Directors, if there is no President.
SECTION 6. SECRETARY. The Secretary shall keep or cause to be kept, at
the principal executive office or such other place as the Board of Directors may
order, a book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' and committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
11
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The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent or
registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given. notice of all meetings
of the stockholders and of the Board of Directors required by the Bylaws or by
law to be given, and he shall keep the seal of the Corporation, if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or by the Bylaws.
SECTION 7. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall be open at all reasonable times to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositaries as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and directors, whenever they request it, an account of
all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have other powers and perform such other
duties as may be prescribed by the Board of Directors or the Bylaws.
SECTION 8. OTHER OFFICERS. Such other officers or assistant officers
as the Board of Directors may choose shall perform such duties and have such
powers as from time to time may be assigned to them by the Board of Directors.
The Board of Directors may delegate to any other officer of the Corporation the
power to choose such other officers and to prescribe their respective duties and
powers.
12
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SECTION 9. EXECUTION OF CONTRACTS AND OTHER DOCUMENTS. Each officer of
the Corporation may execute, affix the corporate seal and/or deliver, in the
name and on behalf of the Corporation, deeds, mortgages, notes, bonds,
contracts, agreements, powers of attorney, evidences of indebtedness,
conveyances, or any other document or instrument which is authorized by the
Board of Directors or is required to be executed in the ordinary course of
business, except in cases where the execution, affixation of the corporate seal
and/or delivery thereof shall be expressly and exclusively delegated by the
Board of Directors to some other officer or agent of the Corporation.
ARTICLE V
STOCK
SECTION 1. FORM OF CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate signed, in the name of the
Corporation (i) by the Chairman or Vice Chairman of the Board of Directors, the
President or any Vice President and (ii) by the Chief Financial Officer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the
Corporation, certifying the number of shares owned by him in the Corporation.
SECTION 2. SIGNATURES. Where a certificate is countersigned by (i) a
transfer agent or (ii) a registrar, any other signature on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors may direct a new
certificate to be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate, or his legal
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representative, to advertise the same in such manner as the Board of Directors
shall require and/or to give the Corporation a bond in such sum as it may direct
as indemnity against any claim that may be made against the Corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
SECTION 4. TRANSFERS. Transfers of shares of capital stock of the
Corporation shall be made only on the stock record of the Corporation by the
holder of record thereof or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary of the Corporation or the
transfer agent thereof, and only on surrender of the certificate or certificates
representing such shares, properly endorsed or accompanied by a duly executed
stock transfer power. The Board of Directors may make such additional rules and
regulations as it may deem expedient concerning the issue and transfer of
certificates representing shares of the capital stock of the Corporation.
SECTION 5. RECORD DATE. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock, or for the
purpose of any other lawful action, the Board of Directors may fix, in advance,
a record date, which shall not be more than sixty (6O) days nor less than ten
(10) days before the date of such meeting, nor more than sixty (60) days prior
to any other action. If no record date is fixed: (l) the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; and (2) the record
date for determining stockholders for any other purpose shall be at the close of
business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 6. BENEFICIAL OWNERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to
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receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by law.
ARTICLE VI
NOTICES
SECTION 1. NOTICES. Whenever written notice is required by law, tile
Certificate of Incorporation or these Bylaws, to be given to any director or
stockholder, such notice shall be given, whether personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the stockholder or director at the address of such stockholder or director
appearing on the books of the Corporation or given by the stockholder or
director to the Corporation for the purpose of notice. If no such address
appears on the Corporation's books or has been so given, notice shall be deemed
to have been given if sent by first-class mail or telegraphic or other written
communication to the Corporation's principal executive office or if published at
least once in a newspaper of general circulation in the county where such office
is located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a stockholder or director at the address of
such stockholder or director appearing on the books of the Corporation is
returned to the Corporation by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
to the stockholder or director at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available to the stockholder or director upon written demand of the
stockholder or director at the principal executive office of the Corporation for
a period of one (1) year from the date of the giving of such notice.
SECTION 2. AFFIDAVIT OF NOTICE. An affidavit of the mailing or other
means of giving any notice of any stockholders' meeting shall be executed by the
Secretary, Assistant Secretary or any transfer agent of the Corporation giving
such notice, and shall be filed and maintained in the Minute Book of the
Corporation.
15
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SECTION 3. WAIVERS OF NOTICE. Whenever any notice is required by law,
the Certificate of Incorporation or these Bylaws, to be given to any director or
stockholder, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DISBURSEMENTS. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board of Directors may from time to time designate.
SECTION 2. FISCAL YEAR. The fiscal year of the Corporation shall be
fixed by resolution of the Board of Directors.
SECTION 3. VOTING SECURITIES OWNED BY THE CORPORATION. Powers of
attorney, proxies, waivers of notice of meeting, consents and other instruments
relating to securities owned by the Corporation may be executed in the name of
and on behalf of the Corporation by the Chairman of the Board of Directors or
the President or any other officer or officers authorized by the Board of
Directors. the Chairman of the Board of Directors or the President, and any such
officer may, in the name of and on behalf of the Corporation, vote, represent
and exercise on behalf of the Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of the
Corporation and take all such action as any such officer may deem advisable to
vote in person or by proxy at any meeting of security holders of any corporation
in which the Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and power incident to the ownership
of such securities and which, as the owner thereof, the Corporation might have
exercised and possessed if present. The Board of Directors may, by resolution,
from tine to time confer like powers upon any other person or persons.
16
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ARTICLE VIII
INDEMNIFICATION
SECTION 1. GENERAL
(a) Each director and each officer of the Corporation who was or
is made a party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he is or was a
director, officer or employee of the Corporation or is or was serving at the
request of the Corporation as a director, officer or employee of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director, officer
or employee or in any other capacity while serving as a director, officer or
employee, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment) against
all expenses, liability and loss (including attorneys' fees, judgments, fines,
ERISA excise taxes or penalties, amounts paid or to be paid in settlement and
amounts expended in seeking indemnification granted to such person under
applicable law, this Bylaw or any agreement with the Corporation) reasonably
incurred or suffered by such director or officer in connection therewith and
such indemnification shall continue as to a person who has ceased to be a
director or officer and shall inure to the benefit of his heirs, executors and
administrators; provided, however, that, except as provided in paragraph (b),
the Corporation shall indemnify any person seeking indemnity in connection with
an action, suit or proceeding (or part thereof) initiated by such person only if
such action, suit or proceeding (or part thereof) was authorized by the Board of
Directors of the Corporation. Such right shall be a contract right and shall
include the right to be paid by the Corporation expenses incurred in defending
any such proceeding in advance of its final disposition; provided, however,
that, if the Delaware General Corporation Law then so requires, the payment of
such expenses incurred by a director or officer of the Corporation in his
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a
17
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director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of such proceeding, shall be
made only upon delivery to the Corporation of an undertaking (which undertaking
may be as set forth in an existing indemnification agreement), by or on behalf
of such director or officer, to repay all amounts so advanced if it should be
determined ultimately that such director or officer is not entitled to be
indemnified under this Section or otherwise.
(b) If a claim under paragraph (a) is not paid in full by the
Corporation within twenty (20) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if such suit is not
frivolous or brought in bad faith, the claimant shall be entitled to be paid
also the expense of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any, has been tendered to this Corporation) that the claimant
has not met the standards of conduct which make it permissible under the
Delaware General Corporation Law for the Corporation to indemnify the claimant
for the amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because the claimant has met the
applicable standard of conduct set forth in the Delaware General Corporation
Law, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that claimant has not met the applicable standard of
conduct.
(c) The rights conferred on any director or officer in paragraphs
(a) and (b) shall not be exclusive of any right which such persons may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaw, agreement, vote of stockholders or disinterested Directors
or otherwise.
(d) The Board of Directors is authorized to enter into a contract
with any director or officer of the Corporation, or any director or officer
serving at the
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request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
employee benefit plans, providing for indemnification rights equivalent to or,
if the Board of Directors so determines, greater than, those provided for in
this Article VIII.
(e) The Board of Directors may authorize, by a vote of a majority
of a quorum of the Board of Directors, the Corporation to purchase and maintain
insurance to the extent reasonably available, at its expense, to protect itself
and any such director or officer of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
(f) Any amendment, repeal or modification of any provision of
this Article VIII by the stockholders or the directors of the Corporation shall
not adversely affect any right or protection of a director or officer of the
Corporation existing at the time of such amendment, repeal or modification.
ARTICLE IX
AMENDMENTS
SECTION 1. GENERAL. These Bylaws may be altered, amended or repealed,
in whole or in part, or new Bylaws may be adopted by either the holders of
sixty-six and two-thirds percent (66-2/3%) of the outstanding capital stock
entitled to vote thereon or by the Board of Directors.
19
Exhibit 4.64
Bank of America Business Loan Agreement
National Trust and Savings Association
This Agreement dated as of February 15, 1996, is between Bank of America
National Trust and Savings Association (the "Bank") and Farr Company (the
"Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
- -- -----------------------------------------------
1.1 LINE OF CREDIT AMOUNT.
(a) During the availability period described below, The Bank will provide
a line of credit ( the "Facility No. 1") to the Borrower. The amount
of the line of credit (the "Facility No. 1 Commitment") is Fifteen
Million Dollars ($15,000,000).
(b) This is a revolving line of credit with a within line facility for
letters of credit. During the availability period, the Borrower may
repay principal amounts and reborrow them.
(c) The Borrower agrees not to permit the outstanding principal balance of
the line of credit plus the outstanding amounts of any letters of
credit, including amounts drawn on letters of credit and not yet
reimbursed to exceed the Facility No. 1 Commitment.
1.2 AVAILABILITY PERIOD.
The line of credit is available between the date of this Agreement and June 1,
1998 (the "Facility No. 1 Expiration Date") unless the Borrower is in default.
1.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described
below, the interest rate is the Bank's Reference Rate.
(b) The Reference Rate is the rate of interest publicly announced from
time to time by the Bank in San Francisco, California, as its
Reference Rate The Reference Rate is set by The Bank based on various
factors, including the Bank's costs and desired return, general
economic conditions and other factors, and is used as a reference
point for pricing some loans. The Bank may price loans to its
customers at, above, or below the Reference Rate. Any change in the
Reference Rate shall take effect at the opening of business on the day
specified in the public announcement of a change in the Bank's
Reference Rate.
1.4 REPAYMENT TERMS.
(a) The Borrower will pay interest on the Facility No. 1 on March 1,1996,
and then monthly thereafter until payment in full of any principal
outstanding under this line of credit.
(b) The Borrower will repay in full all principal and any unpaid interest
or other charges outstanding under this line of credit no later than
the Expiration Date.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period,
which shall be no later than the Expiration Date.
1.5 OPTIONAL INTEREST RATES.
Instead of the interest rate based on the Bank's Reference Rate, the Borrower
may elect to have all or portions of the line of credit (during the availability
period) bear interest at the rate(s) described below during an interest period
agreed to by the Bank and the Borrower. Each interest rate is a rate per year.
Interest will be paid on the last day of each interest period, end, if the
interest period is longer than thirty days (30), then on the first day each
month during the interest period. At the end of any interest
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period, the interest rate will revert to the rate based on the Reference Rate,
unless the Borrower has designated another optional interest rate for the
portion.
1.6 OFFSHORE RATE.
The Borrower may elect to have all or portions of the principal balance of the
line of credit bear interest at the Offshore Rate plus one and seven-eighths
(1.875) percentage points.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be no shorter than 30 days and no longer than one year. The last
day of the interest period will be determined by the Bank using the
practices of the offshore dollar inter-bank market;
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,OOO).
(c) The "Offshore Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)
Offshore Rate = GRAND CAYMAN RATE
------------------------
(1.00- Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward
to the nearest 1/16th of one percent) at which the Bank's
Grand Cayman Branch, Grand Cayman, British West Indies,
would offer U.S. dollar deposits for the applicable interest
period to other major banks in the offshore dollar
inter-bank markets.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the line of credit which is
scheduled to be repaid before the last day of the applicable interest
period.
(e) Any portion of the principal balance of the line of credit already
bearing interest at the Offshore Rate will not be converted to a
different rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid, and a prepayment fee equal
to the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of
the interest period, exceeds
(ii) the interest which would have been recoverable by the Bank
by placing the amount prepaid on deposit in the offshore
dollar market for a period starting on the date on which it
was prepaid and ending on the last day or the interest
period of such portion.
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, of an Offshore Rate portion
are not available in the offshore dollar inter-bank markets;
or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
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1.7 LETTERS OF CREDIT.
This line of credit may be used for financing:
(i) standby letters of credit with a maximum maturity not to
extend beyond the Expiration Date.
(ii) The amount of the letters of credit outstanding at any one
time, (including amounts drawn on letters of credit and not
yet reimbursed), and standby letters of credit may not
exceed One Million Dollars ($1,000,000).
The Borrower agrees:
(a) any sum drawn under a letter of credit may, at the option of the Bank,
be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this
Agreement,
(b) if there is a default under this Agreement, to immediately prepay and
make the Bank whole for any outstanding letters of credit.
(c) the issuance of any letter of credit and any amendment to a letter of
credit is subject to the Bank's written approval and must be in form
and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank. Without limiting the foregoing, no letter of
credit may be issued to support any obligation of the Borrower in
connection with worker's compensation laws or that contains a
provision providing that the maturity date will be automatically
extended each year for an additional year unless the Bank gives
written notice to the contrary.
(d) to sign the Bank's form Application and Agreement for Standby Letter
of Credit.
(e) to pay any issuance and/or other fees that the Bank notifies the
Borrower will be charged for issuing and processing letters of credit
for the Borrower.
(f) to allow the Bank to automatically charge its checking account for
applicable fees, discounts, and other charges.
2. FACILITY NO. 2: TERM LOAN AMOUNT AND TERMS
- -- ------------------------------------------
2.1 LOAN AMOUNT.
The Bank agrees to provide a term loan to the Borrower (the "Facility No. 2") in
an amount of up to Two Million Three Hundred Thousand Dollars ($2,300,000) (the
"Facility No. 2 Commitment").
2.2 AVAILABILITY PERIOD.
The loan is available in one disbursement from the Bank between the date of this
Agreement and September 1, 1996, unless the Borrower is in default.
2.3 INTEREST RATE.
(a) Unless the Borrower elects an optional interest rate as described
below, the Facility No. 2 interest rate is the Bank's Reference Rate
plus one quarter (.25%) of a percentage point.
2.4 REPAYMENT TERMS.
(a) The Borrower will pay all accrued but unpaid interest on the earlier
of (i) the first day of the first month following the advance of
proceeds under Facility No. 2, or (ii) October 1,1996, and then
monthly thereafter and upon payment in full of the principal of the
loan.
(b) The Borrower will repay principal of the term loan in fifty-nine (59)
successive monthly installments, each equal to 1/120th of the original
amount of the term loan, starting October 1, 1996. On September 1,
2001, the Borrower will repay the remaining principal balance plus any
interest then due.
(c) Any amount bearing interest at an optional interest rate (as described
below) may be repaid at the end of the applicable interest period,
which shall be no later than the Expiration Date.
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(d) The Borrower may prepay the loan in full or in part at any time. The
prepayment will be applied to the most remote installment of principal
due under this Agreement.
2.5 OPTIONAL INTEREST RATES.
Instead of the interest rate based on the Bank's Reference Rate, the Borrower
may elect to have all or portions of the loan bear interest at the rate(s)
described below during an interest period agreed to by the Bank and the
Borrower. Each interest rate is a rate per year. Interest will be paid on the
last day of each interest period, and, if the interest period is longer than 30
days then on the last day each month during the interest period. At the end of
any interest period, the interest rate will revert to the rate based on the
Reference Rate, unless the Borrower has designated another optional interest
rate for the portion.
2.6 OFFSHORE RATE.
The Borrower may elect to have all or portions of the principal balance of the
loan bear interest at the Offshore Rate plus two and one-quarter (2.25%)
percentage points.
Designation of an Offshore Rate portion is subject to the following
requirements:
(a) The interest period during which the Offshore Rate will be in effect
will be no shorter than 90 days end no longer than one year. The last
day of the interest period will be determined by the Bank using the
practices of the offshore dollar inter-bank market.
(b) Each Offshore Rate portion will be for an amount not less than Five
Hundred Thousand Dollars ($500,000).
(c) The "Offshore Rate" means the interest rate determined by the
following formula, rounded upward to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by the Bank as of
the first day of the interest period.)
Offshore Rate = GRAND CAYMAN RATE
-------------------------
(1.00 - Reserve Percentage)
Where,
(i) "Grand Cayman Rate" means the interest rate (rounded upward
to the nearest 1/16th of one percent) at which the Bank's
Grand Cayman Branch, Grand Cayman, British West Indies,
would offer U.S. dollar deposits for the applicable interest
period to other major banks in the offshore dollar
inter-bank market.
(ii) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by
member banks of the Federal Reserve System for Eurocurrency
Liabilities, as defined in the Federal Reserve Board
Regulation D, rounded upward to the nearest 1/100 of one
percent. The percentage will be expressed as a decimal, and
will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
(d) The Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the loan which is scheduled to be
repaid before the last day of the applicable interest period.
(e) Any portion of the principal balance of the loan already bearing
interest at the Offshore Rate will not be converted to a different
rate during its interest period.
(f) Each prepayment of an Offshore Rate portion, whether voluntary, by
reason of acceleration or otherwise, will be accompanied by the amount
of accrued interest on the amount prepaid; and a prepayment fee equal
to the amount (if any) by which
(i) the additional interest which would have been payable on the
amount prepaid had ft not been paid until the last day of
the interest period, exceeds
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(ii) the interest which would have been recoverable by the Bank
by placing the amount prepaid on deposit in the offshore
dollar market for a period starting on the date on which it
was prepaid and ending on the last day of the interest
period for such portion.
(g) The Bank will have no obligation to accept an election for an Offshore
Rate portion if any of the following described events has occurred and
is continuing:
(i) Dollar deposits in the principal amount, and for periods
equal to the interest period, or an Offshore Rate portion
are not available in the offshore dollar inter-bank markets;
or
(ii) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
3. EXPENSES
- -- --------
3.1 EXPENSES.
(a) The Borrower agrees to reimburse the Bank for any expenses it incurs
in the preparation of this Agreement and any agreement or instrument
required by this Agreement. Expenses include, but are not limited to,
reasonable attorneys' fees, including any allocated costs of the
Bank's in-house counsel.
(b) The Borrower agrees to reimburse the Bank for the cost of periodic
audits and appraisals of the personal property collateral securing
this Agreement, at such intervals as the Bank may reasonably require.
The audits and appraisals may be per formed by employees of the Bank
or by independent appraisers.
4. COLLATERAL
- -- ----------
4.1 PERSONAL PROPERTY.
The Borrower's obligations to the Bank under this Agreement will be scoured by
personal property the Borrower now owns or will own in the future as listed
below. The collateral is further defined in security agreement(s) executed by
the Borrower. In addition, all personal property collateral securing this
Agreement shall also secure all other present and future obligations of The
Borrower to the Bank (excluding any consumer credit covered by the Federal Truth
in Lending law, unless the Borrower has otherwise agreed in writing). All
personal property collateral securing any other present or future obligations of
the Borrower to The Bank shall also secure this Agreement.
(a) Inventory.
(b) Receivables.
5. DISBURSEMENTS, PAYMENTS AND COSTS
- -- ---------------------------------
5.1 REQUESTS FOR CREDIT.
Each request for an extension of credit will be made in writing in a manner
acceptable to the Bank, or by another means acceptable to the Bank.
5.2 DISBURSEMENTS AND PAYMENTS.
Each disbursement by the Bank and each payment by the Borrower will be:
(a) made at the Bank's branch (or other location) selected by the Bank
from time to time;
(b) made for the account of the Bank's branch selected by the Bank from
time to time;
(c) made in immediately available funds, or such other type of funds
selected by the Bank;
(d) evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrower to sign one or more promissory
notes.
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5.3 TELEPHONE AUTHORIZATION.
(a) The Bank may honor telephone instructions for advances or repayments
or for the designation of optional interest rates given by any one of
the individuals authorized to sign loan agreements on behalf of the
Borrower, or any other individual designated by any one of such
authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from
the Borrower's account number 14576-50027, or such other of the
Borrower's accounts with the Bank as designated in writing by the
Borrower.
(c) The Borrower indemnifies and excuses the Bank (including its officers,
employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it
reasonably believes are made by any individual authorized by the
Borrower to give such instructions. This indemnity and excuse will
survive this Agreement.
5.4 DIRECT DEBIT.
(a) The Borrower agrees that interest and principal payments and any fees
will be deducted automatically on the due date from checking account
number 14576-50027.
(b) The Bank will debit the account on the dates the payments become due.
If a due date does not fall on a banking day, the Bank will debit the
account on the first banking day following the due date.
(c) The Borrower will maintain sufficient funds in the account on the
dates the Bank enters debits authorized by this Agreement. If there
are insufficient funds in the account on the date the Bank enters any
debit authorized by this Agreement, the debt will be reversed.
5.5 BANKING DAYS.
Unless otherwise provided in this Agreement, a banking day is a day other than a
Saturday or a Sunday on which the Bank is open for business in California. For
amounts bearing interest at an offshore rate (if any), a banking day is a day
other than a Saturday or a Sunday on which the Bank is open for business in
California and dealing in offshore dollars. All payments and disbursements which
would be due on a day which is not a banking day will be due on the next banking
day. All payments received on a day which is not a banking day will be applied
to the credit on the next banking day.
5.6 TAXES.
The Borrower will not deduct any taxes from any payments it makes to the Bank.
If any government authority imposes any taxes on any payments made by the
Borrower, the Borrower will pay the taxes and will also pay to the Bank, at the
time interest is paid, any additional amount which the Bank specifies as
necessary to preserve the after-tax yield the Bank would have received if such
taxes had not bean imposed. Upon request by the Bank, the Borrower will confirm
that it has paid the taxes by giving the Bank official tax receipts (or
notarized copies) within 30 days after the due date. However, the Borrower will
not pay the Bank's net income taxes.
5.7 INTEREST CALCULATION.
Except as otherwise stated in this Agreement, all interest and fees, if any,
will be computed on the basis of a 360-day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365-day year is
used.
5.8 INTEREST ON LATE PAYMENTS.
At the Bank's sole option in each instance, any amount not paid when due under
this Agreement (including interest) shall bear interest from the due date at the
Bank's Reference Rate plus one (1.0%) percentage point. This may result in
compounding of interest.
5.9 DEFAULT RATE.
Upon the occurrence and during the continuation of any default under this
Agreement, advances under this Agreement will at the option of the Bank bear
interest at a rate per annum which is two (2.0%) percentage points higher than
the rate of interest otherwise provided under this Agreement. This will not
constitute a waiver of any default.
6. CONDITIONS
- -- ----------
6
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The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:
6.1 AUTHORIZATIONS.
Evidence that the execution, delivery and performance by the Borrower (and any
guarantor) of this Agreement and any instrument or agreement required under this
Agreement have been duly authorized.
6.2 SECURITY AGREEMENTS.
Signed original security agreements, assignments, financing statements and
fixture filings, together with collateral in which the Bank requires a
possessory security interest which the Bank requires.
6.3 EVIDENCE OF PRIORITY.
Evidence that security interests and liens in favor of the Bank are valid,
enforceable, and prior to all others' rights and interests, except those the
Bank consents to in writing.
6.4 INSURANCE.
Evidence of insurance coverage, as required in the "Covenants" section of this
Agreement.
6.5 ABL AUDIT.
Satisfactory report on the results of an audit or review scheduled and performed
by the Bank's Asset Based Lending Department.
6.6 OTHER ITEMS.
Any other items that the Bank reasonably requires.
7. REPRESENTATIONS AND WARRANTIES
- -- ------------------------------
When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following9 representations and warranties, Each request
for an extension of credit constitutes a renewed representation,
7.1 ORGANIZATION OF BORROWER.
The Borrower is a corporation duly formed and existing under the laws of the
state where organized.
7.2 AUTHORIZATION.
This Agreement, and any instrument or agreement required hereunder, are within
the Borrower's powers, have been duly authorized, and do not conflict with any
of its organizational papers.
7.3 ENFORCEABLE AGREEMENT.
This Agreement is a legal, valid and binding agreement of the Borrower,
enforceable against the Borrower in accordance with its terms, and any
instrument or agreement required hereunder, when executed and delivered, will be
similarly legal, valid, binding and enforceable.
7.4 GOOD STANDING.
In each state in which the Borrower does business, it is properly licensed, in
good standing, and, where required, in compliance with fictitious name statutes.
7.5 NO CONFLICTS.
This Agreement does not conflict with any law, agreement, or obligation by which
the Borrower is bound.
7.6 FINANCIAL INFORMATION.
All financial and other information that has been or will be supplied to the
Bank, including the Borrower's financial statement dated as of November 30,
1995, is:
(a) sufficiently complete to give the Bank accurate knowledge of
the Borrower's (and any guarantor's) financial condition.
(b) in form and content required by the Bank,
(a) in compliance with all government regulations that apply.
7.7 LAWSUITS.
There is no lawsuit, tax claim or other dispute pending or threatened against
the Borrower, which, if lost, would impair the Borrower's financial condition or
ability to repay the loan, except as have been disclosed in writing to the Bank.
7
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7.8 COLLATERAL.
All collateral required in this Agreement is owned by the grantor of the
security interest free of any title defects or any liens or interests of others.
7.9 PERMITS, FRANCHISES.
The Borrower possesses all permits, memberships, franchises, contracts and
licenses required and all trademark rights, trade name rights, patent rights and
fictitious name rights necessary to enable it to conduct the business in which
it is now engaged.
7.10 OTHER OBLIGATIONS.
The Borrower is not in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract,
instrument or obligation.
7.11 INCOME TAX RETURNS.
The Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year.
7.12 NO EVENT OF DEFAULT.
There is no event which is, or with notice or lapse of time or both would be, a
default under this Agreement.
7.13 ERAS Plans.
(a) The Borrower has fulfilled its obligations, if any, under the minimum
funding standards of ERISA and the Code with respect to each Plan and
is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, and has not incurred any
liability with respect to any Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of ERISA for
which the PBGC requires 30 day notice.
(c) No action by the Borrower to terminate or withdraw from any Plan has
been taken and no notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan under Section
4042 of ERISA, and no event has occurred or condition exists which
might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes of this
Agreement:
(i) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(ii) "ERISA" means the Employee Retirement Income Act of 1974, as
amended from time to time.
(iii) "PBGC" means the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
(iv) "Plan" means any employee pension benefit plan maintained or
contributed to by the Borrower and insured by the Pension
Benefit Guaranty Corporation under Title IV of ERISA.
7.14 LOCATION OF BORROWER.
The Borrower's place of business (or, if the Borrower has more than one place of
business, its chief executive office) is located at the address listed under the
Borrower's signature on this Agreement.
8. COVENANTS
- -- ---------
The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:
8.1 USE OF PROCEEDS.
To use the proceeds of the Facility No. 1 for working capital purposes including
the issuance of stand-by letters of credit; and the proceeds of Facility No. 2
for the refinancing of industrial revenue bonds in Holly Springs, Mississippi.
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<PAGE>
8.2 FINANCIAL INFORMATION.
To provide the following financial information and statements and such
additional information as requested by the Bank from time to time:
(a) Within 120 days of the Borrower's fiscal year end, the Borrower's
annual financial statements. These financial statements must be
audited (with an unqualified opinion) by a Certified Public Accountant
("CPA") acceptable to the Bank. The statements shall be prepared on a
consolidated and consolidating basis.
(b) Within 30 days of the period's end, the borrowers quarterly financial
statements. Those financial statements may be Borrower prepared. The
statements shall be prepared on a consolidated and consolidating
basis.
(c) Copies of the Borrower's Form 10-K Annual Report, Form 10-Q Quarterly
Report and Form 8-K Current Report within 15 days after the date of
filing with the Securities and Exchange Commission.
(d) Within 120 days of the Borrower's fiscal year end, the Borrower's
annual revised three year strategic plan.
8.3 QUICK RATIO.
To maintain on a consolidated basis a ratio of quick assets to current
liabilities of at least .70:1.0, to be measured quarterly.
"Quick assets" means cash, short-term cash investments, net trade receivables,
marketable securities not classified as long-term investments.
8.4 TOTAL LIABILITIES TO TANGIBLE NET WORTH RATIO.
To maintain on a consolidated basis a ratio of total liabilities to tangible net
worth not exceeding the amounts indicated for each period specified below, to be
measured quarterly:
Period RATIO
--------------- --------
From the date hereof through
December 30, 1996 1.50:1.0
From December 31, 1996 and thereafter 1,25:1.0
"Total liabilities" means the sum of current liabilities plus long term
liabilities.
"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles less
total liabilities, including but not limited to accrued and deferred income
taxes, and any reserves against assets.
8.5 FIXED CHARGE COVERAGE RATIO.
To maintain on a consolidated basis a Fixed Charge Coverage Ratio of at least
1,35:1.0, to be measured quarterly.
"Fixed Charge Coverage Ratio" means the ratio of the sum of net income before
taxes, plus interest expense, depreciation and amortization to the sum of
interest expense, taxes paid, the current portion of long-term debt, capital
expenditures and dividends. This ratio will be calculated at the end of each
fiscal quarter, using the results of that quarter and each of the 3 immediately
preceding quarters. The current portion of long term debt will be measured as of
the last day of the preceding fiscal year.
8.6 NET DOMESTIC SHAREHOLDER EQUITY.
To maintain on a consolidated basis a net domestic shareholder equity of at
least Ten Million Five Hundred Thousand Dollars ($10,500,000), to be measured
quarterly.
"Net Domestic Shareholder Equity " means the domestic shareholder equity less
investments in subsidiaries and less accounts receivable from subsidiaries.
8.7 LIMITATION ON LOSSES.
Not incur any net loss before taxes and extraordinary items in any two
consecutive fiscal quarters.
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8.8 OTHER DEBTS.
Not to have outstanding or incur any direct or contingent debts or lease
obligations (other than those to the Bank), or become liable for the debts of
others without the Bank's written consent. This does not prohibit
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Debts and lines of credit in existence on the date of this Agreement
disclosed in writing to the Bank including.
(e) Debts for insurance premiums in an aggregate principal amount at any
one time outstanding not to exceed Eight Hundred Thousand Dollars
($800,000).
(f) Debts to acquire fixed or capital assets in an amount not to exceed
Seven Hundred Fifty Thousand Dollars ($750,000) in any single fiscal
year.
(g) Debts (other than those permitted under subsections (a) through (f)
above) in an aggregate principal amount at any one time outstanding
not to exceed One Hundred Thousand Dollars ($100,000).
8.9 OTHER LIENS.
Not to create, assume, or allow any security interest or lien (including
judicial liens) on property the Borrower now or later owns, except:
(a) Deeds of trust and security agreements in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing
to the Bank.
8.10 NEGATIVE PLEDGE OTHER REAL PROPERTY.
Not to create, assume, or allow any security interest or lien (including
judicial liens) on real property the Borrower now or later owns, including but
not limited to the real properly located at the following addresses:
REAL PROPERTY ADDRESSES
2221 Park Place, El Segundo, California
1815 - 1835 Glenwood. Delano, California
500 Industrial Avenue, Corcoran, California
805 No. West Street, Holly Springs, Mississippi
Old Highway 70, 1-40, Conover, North Carolina
3501 Airport Road, Jonesboro, Arkansas
500 So. Main Street, Crystal Lake, Illinois
8.11 NOTICES TO BANK.
To promptly notify the Bank in writing of:
(a) any lawsuit over One Million Dollars ($1,000,000) against the Borrower
(or any guarantor).
(b) any substantial dispute between the Borrower (or any guarantor) and
any government authority.
(c) any failure to comply with this Agreement.
(d) any material adverse change in the Borrower's (or any guarantor's)
financial condition or operations.
(e) any change in the Borrower's name, legal structure, place of business,
or chief executive office if the Borrower has more than one place of
business.
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8.12 BOOKS AND RECORDS.
To maintain adequate books and records.
8.13 AUDITS.
To allow the Bank and its agents to inspect the Borrower's properties and
examine, audit and make copies of books and records at any reasonable time. If
any of the Borrower's properties, books or records are in the possession of a
third party, the Borrower authorizes that third party to permit the Bank or its
agents to have access to perform inspections or audits and to respond to the
Bank's requests for information concerning such properties, books and records.
8.14 COMPLIANCE WITH LAWS.
To comply with the laws (including any fictitious name statute), regulations,
and orders of any government body with authority over the Borrower's business.
8.15 PRESERVATION OF RIGHTS.
To maintain and preserve all rights, privileges, and franchises the Borrower now
has.
8.16 MAINTENANCE OF PROPERTIES.
To make any repairs, renewals, or replacements to keep the Borrower's properties
in good working condition.
8.17 PERFECTION OF LIENS.
To help the Bank perfect and protect its security interests and liens, and
reimburse it for related costs it incurs to protect its security interests and
liens.
8.18 COOPERATION. To take any action requested by the Bank to carry out
the intent of this Agreement.
8.19 INSURANCE.
(a) Insurance Covering Collateral. To maintain all risk property damage
insurance policies covering the tangible property comprising the
collateral. Each insurance policy must be for the full replacement
cost of the collateral and include a replacement cost endorsement. The
insurance must be issued by an insurance company acceptable to the
Bank end must include a lender's loss payable endorsement in favor of
the Bank in a form acceptable to the Bank.
(b) General Business Insurance. To maintain insurance satisfactory to the
Bank as to amount, nature and carrier covering property damage
(including loss of use and occupancy) to any of the Borrower's
properties, public liability insurance including coverage for
contractual liability, product liability and workers' compensation,
and any other insurance which is usual for the Borrower's business.
(c) Evidence of Insurance. Upon the request of the Bank, to deliver to the
Bank a copy of each insurance policy, or, if permitted by the Bank, a
certificate of insurance listing all insurance in force.
8.20 ADDITIONAL NEGATIVE COVENANTS.
Not to, without the Bank's written consent:
(a) engage in any business activities substantially different from the
Borrower's present business.
(b) liquidate or dissolve the Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture, syndicate,
or other combination.
(d) lease, or dispose of all or a substantial part of the Borrower's
business or the Borrower's assets.
(e) acquire or purchase a business or its assets for a consideration,
including assumption of debt, if the business or the assets to be
acquired are for a business which is not in the same line of business
as the Borrower.
(f)) sell or otherwise dispose of any assets for less than fair market
value, or enter into any sale and leaseback agreement covering any of
its fixed or capital assets.
8.21 ERISA PLANS. To give prompt written notice to the Bank of:
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(a) The occurrence of any reportable event under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(b) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of
ERISA.
(c) Any notice of noncompliance made with respect to a Plan under Section
4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
9. HAZARDOUS WASTE INDEMNIFICATION
- -- -------------------------------
The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
coat of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous" or
'toxic" under any federal, state or local law, This indemnity will survive
repayment of the Borrower's obligations to the Bank.
10. DEFAULT
- --- -------
If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then the
entire debt outstanding under this Agreement will automatically be due
immediately.
10.1 FAILURE TO PAY.
The Borrower fails to make a payment under this Agreement when due.
10.2 LIEN PRIORITY.
The Bank fails to have an enforceable first lien (except for any prior liens to
which the Bank has consented in writing) on or security interest in any property
given as security for this loan.
10.3 FALSE INFORMATION.
The Borrower has given the Bank false or misleading information or
representations.
10.4 BANKRUPTCY.
The Borrower (or any guarantor) files a bankruptcy petition, a bankruptcy
petition is filed against the Borrower (or any guarantor), or the Borrower (or
any guarantor) makes a general assignment for the benefit of creditors.
10.5 RECEIVERS.
A receiver or similar official is appointed for the Borrower's (or any
guarantor's) business, or the business is terminated.
10.6 GOVERNMENT ACTION.
Any government authority takes action that the Bank believes materially
adversely affects the Borrower's (or any guarantor's) financial condition or
ability to repay.
10.7 MATERIAL ADVERSE CHANGE.
A material adverse change occurs in the Borrower's (or any guarantor's)
financial condition, properties or prospects, or ability to repay the loan.
10.8 CROSS-DEFAULT.
Any default occurs under any agreement in connection with any credit the
Borrower (or any guarantor) has obtained from anyone else or which the Borrower
(or any guarantor) has guaranteed.
10.9 DEFAULT UNDER RELATED DOCUMENTS.
Any guaranty, subordination agreement, security agreement, or other document
required by this Agreement is violated of no longer in effect.
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10.10 OTHER BANK AGREEMENTS.
The Borrower (or any guarantor) fails to meet the conditions of, or fails to
perform any obligation under any other agreement the Borrower (or any guarantor)
has with the Bank or any affiliate of the Bank.
10.11 ERISA PLANS.
To give prompt written notice to the Bank of:
(a) The occurrence of any reportable event under Section 4043(b) of ERISA
for which the PBGC requires 30 day notice.
(h) Any action by the Borrower to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of
ERISA.
(c) Any notice of noncompliance made with respect to a Plan under Section
4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan under
Section 4042 of ERISA.
10.12 OTHER BREACH UNDER AGREEMENT.
The Borrower fails to meet the conditions of, or fails to perform any obligation
under, any term of this Agreement not specifically referred to in this Article.
11. ENFORCING THIS AGREEMENT; MISCELLANEOUS
- --- ---------------------------------------
11.1 GAAP.
Except as otherwise stated in this Agreement, all financial information provided
to the Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.
11.2 CALIFORNIA LAW.
This Agreement is governed by California law.
11.3 SUCCESSORS AND ASSIGNS.
This Agreement is binding on the Borrower's and the Bank's successors and
assignees. The Borrower agrees that it may not assign this Agreement without the
Bank's prior consent. The Bank may sell participations in or assign this loan,
and may exchange financial information about the Borrower with actual or
potential participants or assignees; provided that such actual or potential
participants or assignees shall agree to treat all financial information
exchanged as confidential. If a participation is sold or the loan is assigned,
the purchaser will have the right of set-off against tire Borrower.
11.4 ARBITRATION.
(a) This paragraph concerns the resolution of any controversies or claims
between the Borrower and the Bank, including but not limited to those
that arise from:
(i) This Agreement (including any renewals extensions or
modifications of this Agreement);
(ii) Any document, agreement or procedure related to or delivered
in connection with this Agreement;
(iii) Any violation of this Agreement; or
(iv) Any claims for damages resulting from any business conducted
between the Borrower and the Bank, including claims for
injury to parsons, property or business interests (torts).
(b) At the request of the Borrower or the Bank, any such controversies or
claims will be settled by arbitration in accordance with the United
States Arbitration Act. The United States Arbitration Act will apply
even though this Agreement provides that it is governed by California
law.
(c) Arbitration proceedings will be administered by the American
Arbitration Association and will be subject to its commercial rules of
arbitration.
(d) For purposes of the application of the statute of limitations, the
filing of an arbitration pursuant to this paragraph is the equivalent
of the filing of a lawsuit, and any claim or controversy which may be
arbitrated under this paragraph is subject to any applicable statute
of limitations. The arbitrators will
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have the authority to decide whether any such claim or controversy is
barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis.
(e) If there is a dispute as to whether an issue is arbitrable, the
arbitrators will have the authority to resolve any such dispute.
(f) The decision that results from an arbitration proceeding may be
submitted to any authorized court of law to be confirmed and enforced.
(g) The procedure described above will not apply if the controversy or
claim, at the time of the proposed submission to arbitration, arises
from or relates to an obligation to the Bank secured by real property
located in California. In this case, both the Borrower and the Bank
must consent to submission of the claim or controversy to arbitration.
If both parties do not consent to arbitration, the controversy or
claim will be settled as follows:
(i) The Borrower and the Bank will designate a referee (or a
panel of referees) selected under the auspices of the
American Arbitration Association in the same manner as
arbitrators are selected in Association-sponsored
proceedings;
(ii) The designated referee (or the panel of referees) will be
appointed by a court as provided in California Code of Civil
Procedure Section 638 and the following related sections;
(iii) The referee (or the presiding referee of the panel) will be
an active attorney or a retired judge; and
(iv) The award that results from the decision of the referee (or
the panel) will be entered as a judgment in the court that
appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644 and 645.
(h) This provision does not limit the right of the Borrower or the Bank
to:
(i) exercise self-help remedies such as setoff;
(ii) foreclose against or sell any real or personal property
collateral; or
(iii) act in a court of law, before, during or after the
arbitration proceeding to obtain: (A) an interim remedy;
and/or (B) additional or supplementary remedies.
(i) The pursuit of or a successful action for interim, additional or
supplementary remedies, or the filing of a court action, does not
constitute a waiver of the right of the Borrower or the Bank,
including the suing party, to submit the controversy or claim to
arbitration if the other party contests the lawsuit. However, if the
controversy or claim arises from or relates to an obligation to the
Bank which is secured by real property located in California at the
time of the proposed submission to arbitration, this right is limited
according to the provision above requiring the consent of both the
Borrower and the Bank to seek resolution through arbitration.
(j) If the Bank forecloses against any real property securing this
Agreement, the Bank has the option to exercise the power of sale under
the deed of trust or mortgage, or to proceed by judicial foreclosure.
11.5 SEVERABILITY; WAIVERS.
If any part of this Agreement is not enforceable, the rest of the Agreement may
be enforced. The Bank retains all rights, even if it makes a loan after default.
If the Bank waives a default, it may enforce a later default. Any consent or
waiver under this Agreement must be in writing.
11.6 ADMINISTRATION COSTS.
The Borrower shall pay the Bank for all reasonable costs incurred by the Bank in
connection with administering this Agreement.
14
<PAGE>
11.7 ATTORNEYS' FEES.
The Borrower shall reimburse the Bank for any reasonable costs and attorneys'
fees incurred by the Bank in connection with the enforcement or preservation of
any rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and including any amendment, waiver, "workout"
or restructuring under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable
attorneys' fees incurred in connection with the lawsuit or arbitration
proceeding, as determined by the court or arbitrator. As used in this paragraph,
attorneys' fees" includes the allocated costs of in-house counsel.
11.8 ONE AGREEMENT.
This Agreement and any related security or other agreements required by this
Agreement, collectively:
(a) represent the sum of the understandings and agreements between the
Bank and the Borrower concerning this credit; and
(b) replace any prior oral or written agreements between the Bank and the
Borrower concerning this credit; and
(c) are intended by the Bank and the Borrower as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.
11.9 NOTICES.
All notices required under this Agreement shall be personally delivered or sent
by first class mail, postage prepaid, to the addresses on the signature page of
this Agreement, or to such other addresses as the Bank and the Borrower may
specify from time to time in writing.
11.10 HEADINGS.
Article and paragraph headings are for reference only and shall not effect the
interpretation or meaning of any provisions of this Agreement.
11.11 COUNTERPARTS.
This Agreement may be executed in as many counterparts as necessary or
convenient, and by the different parties on separate counterparts each of which,
when so executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.
15
<PAGE>
Bank Of America
National Trust and Savings Association Farr Company
/s/ William R. Cave /s/ Kenneth W. Gerstner
- ------------------- -----------------------
BY: WILLIAM R. CAVE BY: KENNETH W. GERSTNER
TITLE: VICE PRESIDENT TITLE: SENIOR VICE PRESIDENT
and CHIEF FINANCIAL OFFICER
ADDRESS WHERE NOTICES TO THE BANK ADDRESS WHERE NOTICES TO THE
ARE TO BE SENT: BORROWER ARE TO BE SENT:
LONG BEACH REGIONAL COMMERCIAL 2221 PARK PLACE
BANKING OFFICE #1457 EL SEGUNDO CA 90245
150 LONG BEACH BLVD. 3RD FLOOR
LONG BEACH CA 90802
16
Exhibit 10.33
SECOND AMENDMENT TO
THE 1991 STOCK OPTION PLAN FOR
NON-EMPLOYEE DIRECTORS OF FARR COMPANY
This Second Amendment (the "Amendment") to The 1991 Stock Option Plan
for Non-Employee Directors of Farr Company (the "Plan") is hereby adopted as of
the 12th day of September, 1995.
Section 2.1 of the Plan is hereby amended and restated in its entirety
as follows:
"The shares subject to Options shall be shares of the Company's $.10
par value Common Stock. The aggregate number of such shares which may
be issued upon exercise of Options shall not exceed 100,000."
The last sentance of Section 3.1 of the Plan is hereby amended and
restated in its entirety as follows:
"No Director shall, however, be granted Options with respect to more
than 2,000 shares of the Company's Common Stock per calendar year
during the term of this Plan subject to adjustment provided in Section
2.3."
Sections 7.2(a) and 7.2(b) are hereby amended and restated in their
entirety as follows:
"(a) The expiration of ten years from the date the Plan is adopted by
the Board; or
(b) The expiration of ten years from the date the Plan is approved
by the Company's stockholders under Section 7.3."
This Amendment has been authorized and approved as of the date first
above written by the Board of Directors.
Exhibit 10.34
Farr Company
2221 Park Place
El Segundo, California 90245
November 23, 1994
H. Jack Meany
Chairman, President & Chief Executive Officer
Mr. John C. Johnston
25677 Wildwood Drive
Calabasas, California 91302
SUBJECT: Offer of Employment
Dear John:
We offer you the position of Vice President at a salary rate of $170,000
per year starting January 1, 1995.
You will be eligible for company benefits which currently include: profit
sharing, ESOP, 401K. management bonus plan and management stock option plan. You
will receive a car allowance.
A special grant of options for 44,000 shares of common stock will be made.
These options will be at a price of $5.00 pr the price on the day of award,
whichever is lower. Further, they must be confirmed by the shareholders at the
1995 annual meeting in order to remain operative.
It is agreed that, as a condition of your accepting employment, if you are
discharged while reporting to someone other than me, including any new owner,
for reasons other than cause, during the first two years, then you will receive
termination pay of twelve months or for the then remaining period up through two
years, whichever is shorter.
If this is acceptable to you please indicate your agreement by signing and
returning one copy.
I am very enthusiastic about the prospects of your joining Farr and I know
the others here, including the Directors, will feel likewise.
With kind regards,
/s/ Jack Meany
- --------------
Jack Meany
Accepted: /s/ John C. Johnston 11/28/94
-------------------- --------
John C. Johnston Date
Exhibit 10.35
FARR COMPANY 401(k)/RETIREMENT PLAN
(January 1, 1996 Restatement)
Fidelity Management Trust Company, its affiliates and employees may not provide
you with legal or tax advice in connection with the execution of this document.
It should be reviewed by your attorney and/or accountant prior to execution.
CORPORATEplan for RETIREMENT
VOLUME SUBMITTER
PLAN DOCUMENT SYSTEMS
<PAGE>
TABLE OF CONTENTS
PREAMBLE
ARTICLE I
DEFINTTTONS
1.1 Plan Definitions 2
1.2 Interpretation 7
ARTICLE II
SERVICE
2.1 Definitions 8
2.2 Crediting of Hours of Service 9
2.3 Hours of Service Equivalencies 10
2.4 Limitations on Crediting of Hours of Service 11
2.5 Department of Labor Rules 11
2.6 Years of Eligibility Service 11
2.7 Crediting of Continuous Service 12
2.8 Vesting Service 12
2.9 Crediting of Service on Transfer or Amendment 12
ARTICLE III
ELIGIBILITY
3.1 Eligibility 14
3.2 Transfers of Employment 14
3.3 Reemployment 14
3.4 Notification Concerning New Eligible Employees 14
3.5 Effect and Duration 14
ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 Tax-Deferred Contributions 16
4.2 Amount of Tax-Deferred Contributions 16
4.3 Changes in Reduction Authorization 16
4.4 Suspension of Tax-Deferred Contributions 17
4.5 Resumption of Tax-Deferred Contributions 17
4.6 Delivery of Tax-Deferred Contributions 17
4.7 Vesting of Tax-Deferred Contributions 17
(i)
<PAGE>
ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 After-Tax Contributions 18
5.2 Amount of After-Tax Contributions by Payroll Withholding 18
5.3 Changes in Payroll Withholding Authorization 18
5.4 Suspension of After-Tax Contributions byPayroll Withholding 19
5.5 Resumption of After-Tax Contributions by Payroll Withholding 19
5.6 Rollover Contributions 19
5.7 Delivery of After-Tax Contributions 20
5.8 Vesting of After-Tax Contributions and Rollover Contributions 20
5.9 Discontinuation of After-Tax Contributions 20
ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 Contribution Period 21
6.2 Profit-Sharing Contributions 21
6.3 Allocation of Profit-Sharing Contributions 21
6.4 Matching Contributions 21
6.5 Allocation of Matching Contributions 22
6.6 Verification of Amount of Employer Contributions by
the Sponsor 22
6.7 Payment of Employer Contributions 22
6.8 Eligibility to Participate in Allocation 22
6.9 Vesting of Employer Contributions 22
6.10 Election of Former Vesting Schedule 23
6.11 Forfeitures to Reduce Employer Contributions 23
ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 Definitions 24
7.2 Code Section 402(g) Limit 27
7.3 Limitation on Tax-Deferred Contributions of
Highly Compensated Employees 28
7.4 Distribution of Excess Tax-Deferred Contributions 29
7.5 Limitation on Matching Contributions and After-Tax
Contributions of Highly Compensated Employees 30
7.6 Forfeiture or Distribution of Excess Contributions 31
7.7 Multiple Use Limitation 32
7.8 Determination or Income or Loss 33
(ii)
<PAGE>
7.9 Code Section 415 Limitations on Crediting of
Contributions and Forfeitures 33
7.10 Coverage Under Other Qualified Defined Contribution Plan 34
7.11 Coverage Under Qualified Defined Benefit Plan 35
7.12 Scope of Limitations 35
ARTICLE VIII
TRUST FUNDS AND SEPARATE ACCOUNTS
8.1 General Fund 36
8.2 Investment Funds 36
8.3 Loan Investment Fund 36
8.4 Income on Trust 36
8.5 Separate Accounts 36
8.6 Sub-Accounts 37
ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 No Life Insurance Contracts 38
ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 Future Contribution Investment Elections 39
10.2 Deposit of Contributions 39
10.3 Election to Transfer Between Funds 39
ARTICLE XI
CREDITING AND VALUING SEPARATE ACCOUNTS
11.1 Crediting Separate Accounts 40
11.2 Valuing Separate Accounts 40
11.3 Plan Valuation Procedures 40
11.4 Finality of Determinations 41
11.5 Notification 41
ARTICLE XII
LOANS
12.1 Application for Loan 42
12.2 Reduction of Account Upon Distribution 42
12.3 Requirements to Prevent a Taxable Distribution 43
12.4 Administration of Loan Investment Fund 43
12.5 Default 44
12.6 Special Rules Applicable to Loans 44
12.7 Loans Granted Prior to Amendment 45
(iii)
<PAGE>
ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 Withdrawals of After-Tax Contributions 46
13.2 Withdrawals of Rollover Contributions 46
13.3 Withdrawals of Tax-Deferred Contributions 46
13.4 Limitations on Withdrawals Other than Hardship Withdrawals 46
13.5 Conditions and Limitations on Hardship Withdrawals 47
13.6 Order of Withdrawal from a Participant's Sub-Accounts 48
ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 Termination of Employment and Settlement Date 49
14.2 Separate Accounting for Non-Vested Amounts 49
14.3 Disposition of Non-Vested Amounts 49
ARTICLE XV
DISTRIBUTIONS
15.1 Distributions to Participants 51
15.2 Distributions to Beneficiaries 51
15.3 Cash Outs and Participant Consent 52
15.4 Required Commencement of Distribution 52
15.5 Reemployment of a Participant 53
15.6 Restrictions on Alienation 53
15.7 Facility of Payment 53
15.8 Inability to Locate Payee 54
15.9 Distribution Pursuant to Qualified Domestic Relations Orders 54
ARTICLE XVI
FORM OF PAYMENT
16.1 Normal Form of Payment 55
16.2 Optional Form of Payment 55
16.3 Change of Option Election 55
16.4 Direct Rollover 55
16.5 Notice Regarding Forms of Payment 56
16.6 Reemployment 57
16.7 Section 242(b) (2) Elections 57
ARTICLE XVII
BENEFICIARIES
17.1 Designation of Beneficiary 59
17.2 Spousal Consent Requirements 59
(iv)
<PAGE>
ARTICLE XVIII
ADMINISTRATION
18.1 Authority of the Sponsor 60
18.2 Action of the Sponsor 60
18.3 Claims Review Procedure 61
18.4 Qualified Domestic Relations Orders 62
18.5 Indemnification 62
18.6 Actions Binding 62
ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 Amendment 63
19.2 Limitation on Amendment 63
19.3 Termination 63
19.4 Reorganization 65
19.5 Withdrawal of an Employer 65
ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 Adoption by Related Companies 67
20.2 Effective Plan Provisions 67
ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 No Commitment as to Employment 68
21.2 Benefits 68
21.3 No Guarantees 68
21.4 Expenses 68
21.5 Precedent 68
21.6 Duty to Furnish Information 68
21.7 Withholding 69
21.8 Merger, Consolidation, or Transfer of Plan Assets 69
21.9 Back Pay Awards 69
21.10 Condition on Employer Contributions 70
21.11 Return of Contributions to an Employer 70
21.12 Validity of Plan 70
21.13 Trust Agreement 70
21.14 Parties Bound 71
21.15 Application of Certain Plan Provisions 71
21.16 Leased Employees 71
21.17 Transferred Funds 72
(v)
<PAGE>
ARTICLE XXII
TOP-HEAVY PROVISIONS
22.1 Definitions 73
22.2 Applicability 76
22.3 Minimum Employer Contribution 76
22.4 Adjustments to Section 415 Limitations 76
22.5 Accelerated Vesting 77
ARTICLE XXIII
EFFECTIVE DATE
23.1 Effective Date of Amendment and Restatement 78
(vi)
<PAGE>
PREAMBLE
The Farr Company 401(k)/Retirement Plan, originally effective as of July 1,
1958, and previously known as the Profit Sharing/401(k) Plan for Office
Employees of Farr Company, is hereby amended and restated in its entirety.
Effective as of February 1, 1996, the Profit Sharing/401(k) Plan for Shop
Employees of Farr Company is merged into the Plan. The Plan, as amended and
restated hereby, is intended to qualify as a profit-sharing plan under Section
401(a) of the Code, and includes a cash or deferred arrangement that is intended
to qualify under Section 401(k) of the Code. The Plan is maintained for the
exclusive benefit of eligible employees and their beneficiaries.
Notwithstanding any other provision of the Plan to the contrary, a Participant's
vested interest in his Separate Account under the Plan on and after the
effective date of this amendment and restatement shall be not less than his
vested interest in his account on the day immediately preceding the effective
date. In addition, notwithstanding any other provision of the Plan to the
contrary, the forms of payment and other Plan provisions that were available
under the Plan immediately prior to the later of the effective date of this
amendment and restatement or the date this amendment and restatement is adopted
and that may not be eliminated under Section 411(d) (6) of the Code shall
continue to be available to Participants who had an account under the Plan on
the day immediately preceding the later of the effective date or the date this
amendment and restatement is adopted.
1
<PAGE>
ARTICLE I
DEFINITIONS
1.1 PLAN DEFINITIONS
As used herein, the following words and phrases have the meanings hereinafter
set forth, unless a different meaning is plainly required by the context:
The "Administrator" means the Sponsor unless the Sponsor designates another
person or persons to act as such.
An "After-Tax Contribution" means any after-tax employee contribution made by a
Participant as may be permitted under Article V.
The "Beneficiary" of a Participant means the person or persons entitled under
the provisions of the Plan to receive distribution hereunder in the event the
Participant dies before receiving distribution of his entire interest under the
Plan.
The "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Reference to a section of the Code includes such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
The "Compensation" of a Participant for any period means the wages as defined in
Section 3401(a) of the Code, determined without regard to any rules that limit
compensation included in wages based on the nature or location of the employment
or services performed, and all other payments made to him for such period for
services as an Employee for which his Employer is required to furnish the
Participant a written statement under Sections 6041(d), 6051(a) (3), and 6052 of
the Code, and excluding reimbursements or other expense allowances, fringe
benefits, moving expenses, deferred compensation, and welfare benefits, but
determined prior to any exclusions for amounts deferred under Section 125,
402(e) (3), 402(h), 403(b), or 457(b) of the Code or for certain contributions
described in Section 414(h) (2) of the Code.
Notwithstanding the foregoing, Compensation shall not include the value of any
qualified or non-qualified stock option granted to the Participant by his
Employer to the extent such value is includible in the Participant's taxable
income.
In no event, however, shall the Compensation of a Participant taken into account
under the Plan for any Plan Year exceed (1) $200,000 for Plan Years beginning
prior to January 1, 1994, or (2) $150,000 for Plan Years beginning on or after
January 1, 1994 (subject to adjustment annually as provided in Section
2
<PAGE>
401(a) (17) (B) and Section 415(d) of the Code; provided, however, that the
dollar increase in effect on January 1 of any calendar year, if any, is
effective for Plan Years beginning in such calendar year). If the Compensation
of a Participant is determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation described above shall
be adjusted with respect to that Participant by multiplying the annual
compensation limitation in effect for the Plan Year by a fraction the numerator
of which is the number of full months in the period and the denominator of which
is 12; provided, however, that no proration is required for a Participant who is
covered under the Plan for less than one full Plan Year if the formula for
allocations is based on Compensation for a period of at least 12 months. In
determining the Compensation, for purposes of applying the annual compensation
limitation described above, of a Participant who is a five percent owner or
among the ten Highly Compensated Employees receiving the greatest Compensation
for the Plan Year, the Compensation of the Participant's spouse and of his
lineal descendants who have not attained age 19 as of the close of the Plan Year
shall be included as Compensation of the Participant for the Plan Year. If as a
result of applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the limitation
shall be prorated among the affected family members in proportion to each
member's Compensation as determined prior to application of the family
aggregation rules.
A "Contribution Period" means the period specified in Article VI for which
Employer Contributions shall be made.
An "Eligible Employee" means any Employee who has met the eligibility
requirements of Article III to have Tax-Deferred Contributions made to the Plan
on his behalf.
The "Eligibility Service" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his eligibility to participate in the Plan as may be required under Article III
or Article VI.
An "Employee" means any employee of an Employer other than an employee who is
covered by a collective bargaining agreement or who is a nonresident alien who
does not receive United States source income.
An "Employer" means the Sponsor and any entity which has adopted the Plan as may
be provided under Article XX.
An "Employer Contribution" means the amount, if any, that an Employer
contributes to the Plan as may be provided under Article VI or Article XXII.
3
<PAGE>
An "Enrollment Date" means the first day of each calendar month of the Plan
Year.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended
from time to time. Reference to a section of ERISA includes such section and any
comparable section or sections of any future legislation that amends,
supplements, or supersedes such section.
The "General Fund" means a Trust Fund maintained by the Trustee as required to
hold and administer any assets of the Trust that are not allocated among any
separate Investment Funds as may be provided in the Plan or the Trust Agreement.
No General Fund shall be maintained if all assets of the Trust are allocated
among separate Investment Funds.
A "Highly Compensated Employee" means an Employee or former Employee who is a
highly compensated active employee or highly compensated former employee as
defined hereunder.
A "highly compensated active employee" includes any Employee who performs
services for an Employer during the determination year and who (i) was a five
percent owner at any time during the determination year or the look back year,
(ii) received compensation from an Employer during the look back year in excess
of $75,000 (subject to adjustment annually at the same time and in the same
manner as under Section 415(d) of the Code), (iii) was in the top paid group of
employees for the look back year and received compensation from an Employer
during the look back year in excess of $50,000 (subject to adjustment annually
at the same time and in the same manner as under Section 415 (d) of the Code),
(iv) was an officer of an Employer during the look back year and received
compensation during that year in excess of 50 percent of the dollar limitation
in effect for that year under Section 415(b) (1) (A) of the Code or, if no
officer received compensation in excess of that amount for the look back year or
the determination year, received the greatest compensation for the look back
year of any officer, or (v) was one of the 100 employees paid the greatest
compensation by an Employer for the determination year and would be described in
(ii), (iii), or (iv) above if the term "determination year" were substituted for
"look back year".
A "highly compensated former employee" includes any Employee who separated from
service from an Employer and all Related companies (or is deemed to have
separated from service from an Employer and all Related Companies) prior to the
determination year, performed no services for an Employer during the
determination year, and was a highly compensated active employee for either the
separation year or any determination year ending on or after the date the
Employee attains age 55.
4
<PAGE>
The determination of who is a Highly Compensated Employee hereunder, including
determinations as to the number and identity of employees in the top paid group,
the 100 employees receiving the greatest compensation from an Employer, the
number of employees treated as officers, and the compensation considered shall
be made in accordance with the provisions of Section 414(q) of the Code and
regulations issued thereunder. For purposes of this definition, the following
terms have the following meanings:
(a) The "determination year" means the Plan Year or, if the Administrator
makes the election provided in paragraph (b) below, the period of time,
if any, which extends beyond the look back year and ends on the last
day of the Plan year for which testing is being performed (the "lag
period"). If the lag period is less than 12 months long, the dollar
amounts specified in (ii), (iii), and (iv) above shall be prorated
based upon the number of months in the lag period.
(b) The "look back year" means the 12-month period immediately preceding
the determination year; provided, however, that the Administrator may
elect instead to treat the calendar year ending with or within the
determination year as the "look back year".
An "Hour of Service" with respect to a person means each hour, if any, that may
be credited to him in accordance with the provisions of Article II.
An "Investment Fund" means any separate investment Trust Fund maintained by the
Trustee as may be provided in the Plan or the Trust Agreement or any separate
investment fund maintained by the Trustee, to the extent that there are
Participant Sub-Accounts under such funds, to which assets of the Trust may be
allocated and separately invested.
A "Matching Contribution" means any Employer Contribution made to the Plan on
account of a Participant's Tax-Deferred Contributions as provided in Article VI.
The "Normal Retirement Date" of an employee means the date he attains age 65.
A "Participant" means any person who has a Separate Account in the Trust.
The "Plan" means Farr Company 401(k)/Retirement Plan, as from time to time in
effect.
A "Plan Year" means the 12-consecutive-month period ending December 31.
5
<PAGE>
A "Predecessor Employer" means Cambridge Filter Corporation.
A "Profit-Sharing Contribution" means any Employer Contribution made to the Plan
as provided in Article VI, other than Matching Contributions.
A "Related Company" means any corporation or business, other than an Employer,
which would be aggregated with an Employer for a relevant purpose under Section
414 of the Code.
A "Rollover Contribution" means any rollover contribution to the Plan made by a
participant as may be permitted under Article V.
A "Separate Account" means the account maintained by the Trustee in the name of
a Participant that reflects his interest in the Trust and any Sub-Accounts
maintained thereunder, as provided in Article VIII.
The "Settlement Date" of a Participant means the date on which a Participant's
interest under the Plan becomes distributable in accordance with Article XV.
The "Sponsor" means Farr Company, and any successor thereto.
A "Sub-Account" means any of the individual sub-accounts of a Participant's
Separate Account that is maintained as provided in Article VIII.
A "Tax-Deferred Contribution" means the amount contributed to the Plan on a
Participant's behalf by his Employer in accordance with his reduction
authorization executed pursuant to Article IV.
The "Trust" means the trust maintained by the Trustee under the Trust Agreement.
The "Trust Agreement" means the agreement entered into between the Sponsor and
the Trustee relating to the holding, investment, and reinvestment of the assets
of the Plan, together with all amendments thereto.
The "Trustee" means the trustee or any successor trustee which at the time shall
be designated, qualified, and acting under the Trust Agreement. The Sponsor may
designate a person or persons other than the Trustee to perform any
responsibility of the Trustee under the Plan, other than trustee
responsibilities as defined in Section 405(c) (3) of ERISA, and the Trustee
shall not be liable for the performance of such person in carrying out such
responsibility except as otherwise provided by ERISA. The term Trustee shall
include any delegate of the Trustee as may be provided in the Trust Agreement.
6
<PAGE>
A "Trust Fund" means any fund maintained under the Trust by the Trustee.
A "Valuation Date" means the date or dates designated by the Sponsor and
communicated in writing to the Trustee for the purpose of valuing the General
Fund and each Investment Fund and adjusting Separate Accounts and Sub-Accounts
hereunder, which dates need not be uniform with respect to the General Fund,
each Investment Fund, Separate Account, or Sub-Account; provided, however, that
the General Fund and each Investment Fund shall be valued and each Separate
Account and Sub-Account shall be adjusted no less often than once annually.
The "Vesting Service" of an employee means the period or periods of service
credited to him under the provisions of Article II for purposes of determining
his vested interest in his Employer contributions Sub-Account, if Employer
contributions are provided for under either Article VI or Article XXII.
1.2 INTERPRETATION
Where required by the context, the noun, verb, adjective, and adverb forms of
each defined term shall include any of its other forms. Wherever used herein,
the masculine pronoun shall include the feminine, the singular shall include the
plural, and the plural shall include the singular.
7
<PAGE>
ARTICLE II
SERVICE
2.1 DEFINITIONS
For purposes of this Article, the following terms shall have the following
meanings:
(a) A "break in service" means any computation period during which a person
completes less than 501 Hours of Service except that no person shall
incur a break in service solely by reason of temporary absence from
work not exceeding 12 months resulting from illness, layoff, or other
cause if authorized in advance by an Employer or a Related Company
pursuant to its uniform leave policy, if his employment shall not
otherwise be terminated during the period of such absence.
(b) A "computation period" for purposes of determining an employee's years
of Eligibility Service means (i) the 12-consecutive-month period
beginning on the first date he completes an Hour of Service, and (ii)
each 12-consecutive-month period beginning on an anniversary of such
date.
(c) The "continuous service" of an employee means the service credited to
him in accordance with the provisions of Section 2.7 of the Plan.
(d) The "employment commencement date" of an employee means the date he
first completes an Hour of Service.
(e) A "maternity/paternity absence" means a person's absence from
employment with an Employer or a Related Company because of the
person's pregnancy, the birth of the person's child, the placement of a
child with the person in connection with the person's adoption of the
child, or the caring for the person's child immediately following the
child's birth or adoption. A person's absence from employment will not
be considered a maternity/paternity absence unless the person furnishes
the Administrator such timely information as may reasonably be required
to establish that the absence was for one of the purposes enumerated in
this paragraph and to establish the number of days of absence
attributable to such purpose.
(f) The "reemployment commencement date" of an employee means the first
date following a severance date on which he again completes an Hour of
Service.
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(g) The "severance date" of an employee means the earlier of (i) the date
on which he retires, dies, or his employment with an Employer and all
Related Companies is otherwise terminated, or (ii) the first
anniversary of the first date of a period during which he is absent
from work with an Employer and all Related Companies for any other
reason; provided, however, that if he terminates employment with or is
absent from work with an Employer and all Related Companies on account
of service with the armed forces of the United States, he shall not
incur a severance date if he is eligible for reemployment rights under
Federal law and he returns to work with an Employer or a Related
Company within the period during which he retains such reemployment
rights.
2.2 CREDITING OF HOURS OR SERVICE
A person shall be credited with an Hour of Service for:
(a) each hour for which he is paid, or entitled to payment, for the
performance of duties for an Employer, a Predecessor Employer, or a
Related Company during the applicable computation period; provided,
however, that hours compensated at a premium rate shall be treated as
straight-time hours;
(b) subject to the provisions of Section 2.4, each hour for which he is
paid, or entitled to payment, by an Employer, a Predecessor Employer,
or a Related Company on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday, illness,
incapacity (including disability), lay-off, jury duty, military duty,
or leave of absence;
(c) each hour for which he would have been scheduled to work for an
Employer, a Predecessor Employer, or a Related Company during the
period that he is absent from work because of service with the armed
forces of the United States provided he is eligible for reemployment
rights under Federal law and returns to work with an Employer or a
Related Company within the period during which he retains such
reemployment rights; and
(d) each hour for which back pay, irrespective of mitigation of damages, is
either awarded or agreed to by an Employer, a Predecessor Employer, or
a Related Company; provided, however, that the same Hour of Service
shall not be credited both under paragraph (a) or (b) or (c) of this
Section, as the case may be, and under this paragraph (d); and
provided, further, that the crediting of Hours of Service for back pay
awarded or agreed to with respect to
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periods described in such paragraph (b) shall be subject to the
limitations set forth therein and in Section 2.4.
Notwithstanding the foregoing and solely for purposes of determining whether a
person who is on a maternity/paternity absence beginning on or after the first
day of the first Plan Year that commences on or after January 1, 1985, has
incurred a break in service, Hours of Service shall include those hours with
which such person would otherwise have been credited but for such
maternity/paternity absence, or shall include eight Hours of Service for each
day of maternity/paternity absence if the actual hours to be credited cannot be
determined; except that not more than 501 hours are to be credited by reason of
any maternity/paternity absence. Any hours included as Hours of Service pursuant
to the immediately preceding sentence shall be credited to the computation
period in which the absence from employment begins, if such person otherwise
would incur a break in service in such computation period, or, in any other
case, to the immediately following computation period.
2.3 HOURS OF SERVICE EQUIVALENCIES
Notwithstanding any other provision of the Plan to the contrary, an Employer may
elect to credit Hours of Service to its employees in accordance with one of the
following equivalencies, and if an Employer does net maintain records that
accurately reflect actual hours of service, such Employer shall credit Hours of
Service to its employees in accordance with one of the following equivalencies:
(a) If the Employer maintains its records on the basis of days worked, an
employee shall be credited with 10 Hours of Service for each day on
which he performs an Hour of Service.
(b) If the Employer maintains its records on the basis of weeks worked, an
employee shall be credited with 45 Hours of Service for each week in
which he performs an Hour of Service.
(c) If the Employer maintains its records on the basis of semi-monthly
payroll periods, an employee shall be credited with 95 Hours of Service
for each semi-monthly payroll period in which he performs an Hour of
Service.
(d) If the Employer maintains its records on the basis of months worked, an
employee shall be credited with 190 Hours of Service for each month in
which he performs an Hour of Service.
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2.4 LIMITATIONS ON CREDITING OF HOURS OF SERVICE
In the application of the provisions of paragraph (b) of Section 2.2, the
following shall apply;
(a) An hour for which a person is directly or indirectly paid, or entitled
to payment, on account of a period during which no duties are performed
shall not be credited to him if such payment is made or due under a
plan maintained solely for the purpose of complying with applicable
workers' compensation, unemployment compensation, or disability
insurance laws.
(b) Hours of Service shall not be credited with respect to a payment which
solely reimburses a person for medical or medically-related expenses
incurred by him.
(c) For purposes of such paragraph (b), a payment shall be deemed to be
made by or due from an Employer, a predecessor Employer, or a Related
Company (i) regardless of whether such payment is made by or due from
such employer directly or indirectly, through (among others) a trust
fund or insurer to which any such employer contributes or pays
premiums, and (ii) regardless of whether contributions made or due to
such trust fund, insurer, or other entity are for the benefit of
particular persons or are on behalf of a group of persons in the
aggregate.
(d) No more than 501 Hours of Service shall be credited under such
paragraph (b) to a person on account of any single continuous period
during which he performs no duties (whether or not such period occurs
in a single computation period), unless no duties are performed due to
service with the armed forces of the United States for which the person
retains reemployment rights as provided in paragraph (c) of Section
2.2.
2.5 DEPARTMENT OF LABOR RULES
The rules set forth in paragraphs (b) and (c) of Department of Labor Regulations
ss.253O.2OOb-2, which relate to determining Hours of Service attributable to
reasons other than the performance of duties and crediting Hours of Service to
computation periods, are hereby incorporated into the Plan by reference.
2.6 YEARS OF ELIGIBILITY SERVICE
An employee shall be credited with a year of Eligibility Service for each
computation period in which he completes at least 1,000 Hours of Service.
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2.7 CREDITING OF CONTINUOUS SERVICE
A person shall be credited with continuous service for the aggregate of the
periods of time between his employment commencement date or any reemployment
commencement date and the severance date that next follows such employment
commencement date or reemployment commencement date; provided, however, that an
employee who has a reemployment commencement date within the
12-consecutive-month period following the earlier of the first date of his
absence or his severance date shall be credited with continuous service for the
period between such severance date and reemployment commencement date.
2.8 VESTING SERVICE
Years of Vesting Service shall be determined in accordance with the following
provisions:
(a) An employee shall be credited with years of Vesting Service equal to
his period of continuous service.
(b) Notwithstanding the provisions of paragraph (a), continuous service
completed by an employee prior to a severance date shall not be
included in determining the employee's years of Vesting Service unless
the employee had a nonforfeitable right to any portion of his Separate
Account, excluding that portion of his Separate Account that is
attributable to After-Tax or Rollover contributions, as of the
severance date, or the period of time between the severance date and
his reemployment commencement date is less than the greater of five
years or his period of continuous service determined as of the
severance date; provided, however, that solely for purposes of applying
this paragraph, if a person is on a maternity/paternity absence beyond
the first anniversary of the first day of such absence, his severance
date shall be the second anniversary of the first day of such
maternity/paternity absence.
2.9 CREDITING OF SERVICE ON TRANSFER OR AMENDMENT
Notwithstanding any other provision of the Plan to the contrary, if an Employee
is transferred from employment covered under a qualified plan maintained by an
Employer or a Related Company for which eligibility service is credited based on
elapsed time in accordance with Treasury Regulations ss.410(a)-7 to employment
covered under the Plan or, prior to amendment, the Plan provided for crediting
of Eligibility Service on the basis of elapsed time, an affected Employee shall
be credited with Eligibility Service hereunder equal to:
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(a) the number of one year periods of service credited to the Employee
under the elapsed time method before the transfer date or the effective
date of the amendment, plus
(b) his service under the Hours of Service method provided hereunder for
the computation period in which the transfer or the effective date of
the amendment occurs applying one of the equivalencies set forth in
Section 2.3 to any fractional part of a year credited to the Employee
under the elapsed time method as of the transfer date or the effective
date of the amendment; provided, however that the same equivalency
shall be used for all similarly situated Employees, plus
(c) the service credited to such Employee under the Hours of Service method
provided hereunder for computation periods beginning after the
computation period in which the transfer or the effective date of the
amendment occurs.
In addition, notwithstanding any other provision of the Plan to the contrary, if
an Employee is transferred from employment covered under a qualified plan
maintained by an Employer or a Related Company for which vesting service is
credited based on Hours of Service and computation periods in accordance with
Department of Labor Regulations S2530.20O through 2530.203 to employment covered
under the Plan or, prior to amendment, the Plan provided for crediting of
service on the basis of Hours of Service and computation periods, an affected
Employee shall be credited with Vesting Service hereunder equal to;
(a) the Employee's years of service credited to him under the Hours of
Service method before the computation period in which the transfer or
the effective date of the amendment occurs, plus
(b) the greater of (i) the period of service that would be credited to the
Employee under the elapsed time method provided hereunder for his
employment during the entire computation period in which the transfer
or the effective date of the amendment occurs or (ii) the service taken
into account under the Hours of Service method for such computation
period as of the transfer date or the effective date of the amendment,
plus
(c) the service credited to such Employee under the elapsed time method
provided hereunder for the period of time beginning on the day after
the last day of the computation period in which the transfer or the
effective date of the amendment occurs.
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ARTICLE III
ELIGIBILITY
3.1 ELIGIBILITY
Each Employee who was an Eligible Employee immediately prior to the effective
date of this amendment and restatement shall continue to be an Eligible
Employee. Each other Employee shall become an Eligible Employee as of the
Enrollment Date coinciding with or next following the date on which he has both
attained age 18 and completed one year of Eligibility Service.
3.2 TRANSFERS OF EMPLOYMENT
If a person is transferred directly from employment with an Employer or with a
Related Company in a capacity other than as an Employee to employment as an
Employee, he shall become an Eligible Employee as of the date he is so
transferred if prior to an Enrollment Date coinciding with or preceding such
transfer date he has met the eligibility requirements of Section 3.1. Otherwise,
the eligibility of a person who is so transferred to elect to have Tax-Deterred
Contributions made to the Plan on his behalf or to make After-Tax Contributions
to the Plan shall be determined in accordance with Section 3.1.
3.3 REEMPLOYMENT
If a person who terminated employment with an Employer and all Related Companies
is reemployed as an Employee and it he had been an Eligible Employee prior to
his termination of employment, he shall again become an Eligible Employee on the
date he is reemployed. Otherwise, the eligibility of a person who terminated
employment with an Employer and all Related Companies and who is reemployed by
an Employer or a Related Company to elect to have Tax-Deferred Contributions
made to the Plan on his behalf or to make After-Tax Contributions to the Plan
shall be determined in accordance with Section 3.1 or 3.2.
3.4 NOTIFICATION CONCERNING NEW ELIGIBLE EMPLOYEES
Each Employer shall notify the Administrator as soon as practicable of Employees
becoming Eligible Employees as of any date.
3.5 EFFECT AND DURATION
Upon becoming an Eligible Employee, an Employee shall be entitled to elect to
have Tax-Deferred Contributions made to the Plan on his behalf and to make
After-Tax Contributions to the Plan and shall be bound by all the terms and
conditions of the Plan and the Trust Agreement. A person shall continue as an
Eligible
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Employee eligible to have Tax-Deferred Contributions made to the Plan on his
behalf and to make After-Tax Contributions to the Plan only so long as he
continues in employment as an Employee.
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ARTICLE IV
TAX-DEFERRED CONTRIBUTIONS
4.1 TAX-DEFERRED CONTRIBUTIONS
Effective as of the date he becomes an Eligible Employee, or any subsequent
Enrollment Date, each Eligible Employee may elect in writing in accordance with
rules prescribed by the Administrator to have Tax-Deferred Contributions made to
the Plan on his behalf by his Employer as hereinafter provided. An Eligible
Employee's written election shall include his authorization for his Employer to
reduce his Compensation and to make Tax-Deterred Contributions on his behalf and
his election as to the investment of his contributions in accordance with
Article X. Tax-Deferred Contributions on behalf of an Eligible Employee shall
commence with the first payment of Compensation made on or after the date on
which his election is effective.
4.2 AMOUNT OF TAX-DEFERRED CONTRIBUTIONS
The amount of Tax-Deferred Contributions to be made to the Plan on behalf of an
Eligible Employee by his Employer shall be an integral percentage of his
Compensation of not less than one percent nor more than 16 percent. In the event
an Eligible Employee elects to have his Employer make Tax-Deterred Contributions
on his behalf, his Compensation shall be reduced for each payroll period by the
percentage he elects to have contributed on his behalf to the Plan in accordance
with the terms of his currently effective reduction authorization.
4.3 CHANGES IN REDUCTION AUTHORIZATION
An Eligible Employee may change the percentage of his future Compensation that
his Employer contributes on his behalf as Tax-Deferred Contributions at such
time or times during the Plan Year as the Administrator may prescribe by filing
an amended reduction authorization with his Employer such number of days prior
to the date such change is to become effective as the Administrator shall
prescribe. An Eligible Employee who changes his reduction authorization shall be
limited to selecting a percentage of his Compensation that is otherwise
permitted hereunder. Tax-Deterred Contributions shall be made on behalf of such
Eligible Employee by his Employer pursuant to his amended reduction
authorization tiled in accordance with this Section commencing with Compensation
paid to the Eligible Employee on or after the date such filing is effective,
until otherwise altered or terminated in accordance with the Plan.
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4.4 SUSPENSION OF TAX-DEFERRED CONTRIBUTIONS
An Eligible Employee on whose behalf Tax-Deferred Contributions are being made
may have such contributions suspended at any time by giving such number of days
advance written notice to his Employer as the Administrator shall prescribe. Any
such voluntary suspension shall take effect commencing with Compensation paid to
such Eligible Employee on or after the expiration of the required notice period
and shall remain in effect until Tax-Deferred Contributions are resumed as
hereinafter set forth.
4.5 RESUMPTION OF TAX-DEFERRED CONTRIBUTIONS
An Eligible Employee who has voluntarily suspended his Tax-Deferred
Contributions may nave such contributions resumed at such time or times during
the Plan Year as the Administrator may prescribe, by filing a new reduction
authorization with his Employer such number of days prior to the date as of
which such contributions are to be resumed as the Administrator shall prescribe.
4.6 DELIVERY OF TAX-DEFERRED CONTRIBUTIONS
As soon after the date an amount would otherwise be paid to an Employee as it
can reasonably be separated from Employer assets, each Employer shall cause to
be delivered to the Trustee in cash all Tax-Deferred Contributions attributable
to such amounts.
4.7 VESTING OF TAX-DEFERRED CONTRIBUTIONS
A Participant's vested interest in his Tax-Deferred Contributions Sub-Account
shall be at all times 100 percent.
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ARTICLE V
AFTER-TAX AND ROLLOVER CONTRIBUTIONS
5.1 AFTER-TAX CONTRIBUTIONS
An Eligible Employee may elect in writing in accordance with rules prescribed by
the Administrator to make After-Tax Contributions to the Plan. After-Tax
Contributions may be made either by payroll withholding and/or by delivery of a
cash amount to an Eligible Employee's Employer, as determined by the
Administrator. If the Eligible Employee does not already have an investment
election on file with the Administrator, his election to make After-Tax
Contributions to the Plan shall include his election as to the investment of his
contributions in accordance with Article X. An Eligible Employee's election to
make After-Tax Contributions by payroll withholding may be made effective as of
any Enrollment Date occurring on or after the date on which he becomes an
Eligible Employee. After-Tax Contributions by payroll withholding shall commence
with the first payment of Compensation made on or after the Enrollment Date on
which the Eligible Employee's election is effective.
5.2 AMOUNT OF AFTER-TAX CONTRIBUTIONS BY PAYROLL WITHHOLDING
The amount of After-Tax Contributions made by an Eligible Employee by payroll
withholding shall be an integral percentage of his Compensation of not less than
one percent nor more than 10 percent.
5.3 CHANGES IN PAYROLL WITHHOLDING AUTHORIZATION
An Eligible Employee may change the percentage of his future Compensation that
he contributes to the Plan as After-Tax Contributions by payroll withholding at
such time or times during the Plan Year as the Administrator may prescribe by
filing an amended payroll withholding authorization with his Employer such
number of days prior to the date such change is to become effective as the
Administrator shall prescribe. An Eligible Employee who changes his payroll
withholding authorization shall be limited to selecting a percentage of his
Compensation that is otherwise permitted under Section 5.2. After-Tax
Contributions shall be made pursuant to an Eligible Employee's amended payroll
withholding authorization filed in accordance with this Section commencing with
Compensation paid to the Eligible Employee on or after the date such filing is
effective, until otherwise altered or terminated in accordance with the Plan.
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5.4 SUSPENSION OF AFTER-TAX CONTRIBUTIONS BY PAYROLL WITHHOLDING
An Eligible Employee who is making After-Tax Contributions by payroll
withholding may have such contributions suspended at any time by giving such
number of days advance written notice to his Employer as the Administrator shall
prescribe. Any such voluntary suspension shall take effect commencing with
Compensation paid to such Eligible Employee on or after the expiration of the
required notice period and shall remain in effect until After-Tax Contributions
are resumed as hereinafter set forth.
5.5 RESUMPTION OF AFTER-TAX CONTRIBUTIONS BY PAYROLL WITHHOLDING
An Eligible Employee who has voluntarily suspended his After-Tax Contributions
made by payroll withholding in accordance with Section 5.4 may have such
contributions resumed at such time or times during the Plan Year as the
Administrator may prescribe by filing a new payroll withholding authorization
with his Employer such number of days prior to the date as of which such
contributions are to be resumed as the Administrator shall prescribe.
5.6 ROLLOVER CONTRIBUTIONS
An Employee who was a participant in a plan qualified under Section 401 or 403
of the Code and who receives a cash distribution from such plan that he elects
either (i) to roll over immediately to a qualified retirement plan or (ii) to
roll over into a conduit IRA from which he receives a later cash distribution,
may elect to make a Rollover Contribution to the Plan if he is entitled under
Section 402(c) (1), Section 403(a) (4)' or Section 408(d) (3) (A) of the Code to
roll over such distribution to another qualified retirement plan. The
Administrator may require an Employee to provide it with such information as it
deems necessary or desirable to show that he is entitled to roll over such
distribution to another qualified retirement plan. An Employee shall make a
Rollover Contribution to the Plan by delivering, or causing to be delivered, to
the Trustee the cash that constitutes the Rollover Contribution amount within 60
days of receipt of the distribution from the plan or from the conduit IRA in the
manner prescribed by the Administrator. If the Employee does not already have an
investment election on file with the Administrator, the Employee shall also
deliver to the Administrator his election as to the investment of his
contributions in accordance with Article X.
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5.7 DELIVERY OF AFTER-TAX CONTRIBUTIONS
As soon after the date an amount would otherwise be paid to an Employee as it
can reasonably be separated from Employer assets or as soon as reasonably
practicable after an amount has been delivered to an Employer by an Employee,
the Employer shall cause to be delivered to the Trustee in cash the After-Tax
Contributions attributable to such amount.
5.8 VESTING OF AFTER-TAX CONTRIBUTIONS AND ROLLOVER CONTRIBUTIONS
A Participant's vested interest in his After-Tax Contributions Sub-Account and
his Rollover Contributions Sub-Account shall be at all times 100 percent.
5.9 DISCONTINUATION OF AFTER-TAX CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, no further
After-Tax Contributions may be made to the Plan on or after February 1, 1995.
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ARTICLE VI
EMPLOYER CONTRIBUTIONS
6.1 CONTRIBUTION PERIOD
The Contribution Period for Matching Contributions under the Plan shall be each
month. The Contribution Period for Profit-Sharing Contributions under the Plan
shall be each Plan Year.
6.2 PROFIT-SHARING CONTRIBUTIONS
Each Employer shall make a Profit-Sharing Contribution to the Plan for the
Contribution Period in an amount equal to 3 percent of the Compensation paid to
the Employer's Employees during the Contribution Period who are eligible to
participate in the allocation of Profit-Sharing Contributions for the
Contribution Period, as determined under this Article.
6.3 ALLOCATION OF PROFIT-SHARING CONTRIBUTIONS
Any Profit-Sharing Contribution made by an Employer for a Contribution Period
shall be allocated among its Employees during the Contribution Period who are
eligible to Participate in the allocation of Profit-Sharing Contributions for
the Contribution Period, as determined under this Article. The allocable share
of each such Employee shall be in the ratio which his Compensation from the
Employer for the Contribution Period bears to the aggregate of such Compensation
for all such Employees. Notwithstanding any other provision of the Plan to the
contrary, Compensation with respect to any period ending prior to the date on
which an Employee first became eligible to participate in the allocation of
Profit-Sharing Contributions shall be disregarded in determining the amount of
the Employee's allocable share.
6.4 MATCHING CONTRIBUTIONS
Each Employer shall make a Matching Contribution to the Plan for each
Contribution Period in an amount equal to 25 percent of the aggregate "eligible
Tax-Deferred Contributions" for the Contribution Period made on behalf of its
Employees during the Contribution Period who are eligible to participate in the
allocation of Matching Contributions for the Contribution Period, as determined
under this Article. For purposes of this Article, "eligible Tax-Deferred
Contributions" with respect to an Employee mean the Tax-Deferred Contributions
made on his behalf for the Contribution Period in an amount up to, but not
exceeding, the "match level". For purposes of this Article, the "match level"
means 4 percent of an Employee's Compensation for the Contribution Period,
excluding Compensation with respect to any period ending prior to the date on
which the Employee became
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eligible to participate in the allocation of Matching Contributions.
6.5 ALLOCATION OF MATCHING CONTRIBUTIONS
Any Matching Contribution made by an Employer for the Contribution Period shall
be allocated among its Employees during the Contribution Period who are eligible
to participate in the allocation of Matching Contributions for the contribution
Period, as determined under this Article. The allocable share of each such
Employee shall be an amount equal to 25 percent of the "eligible Tax-Deferred
Contributions" made on his behalf for the Contribution Period.
6.6 VERIFICATION OF AMOUNT OF EMPLOYER CONTRIBUTIONS BY THE SPONSOR
The Sponsor shall verify the amount of Employer Contributions to be made by each
Employer in accordance with the provisions of the Plan. Notwithstanding any
other provision of the Plan to the contrary, the Sponsor shall determine the
portion off the Employer Contribution to be made by each Employer with respect
to an Employee who transfers from employment with one Employer as an Employee to
employment with another Employer as an Employee.
6.7 PAYMENT OF EMPLOYER CONTRIBUTIONS
Employer Contributions made for a Contribution Period shall be paid in cash to
the Trustee within the period of time required under the Code in order for the
contribution to be deductible by the Employer in determining its Federal income
taxes for the Plan Year.
6.8 ELIGIBILITY TO PARTICIPATE IN ALLOCATION
Each Employee shall be eligible to participate in the allocation of Employer
Contributions beginning on the date he becomes, or again becomes, an Eligible
Employee in accordance with the provisions of Article III.
6.9 VESTING OF EMPLOYER CONTRIBUTIONS
A Participant's vested interest in his Profit-Sharing and Matching Contributions
Sub-Accounts shall be determined in accordance with the following schedule:
YEARS OF VESTING SERVICE VESTED INTEREST
Less than 3 0%
3 but lees than 4 33%
4 but less than 5 67%
5 or more 100%
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Notwithstanding the foregoing, if a Participant is employed by an Employer or a
Related Company on his Normal Retirement Date, the date he becomes physically or
mentally disabled or the date he dies, his vested interest in his Profit-Sharing
and Matching Contributions Sub-Accounts shall be 100 percent. A Participant
shall be deemed to be physically and mentally disabled if, and only if, he is
physically or mentally disabled such that he (i) can no longer continue in the
service of his Employer and is eligible to receive a disability benefit under
the terms of the Social Security Act (ii) can no longer continue in the service
of his Employer, as determined by the Administrator on the basis of a written
certificate of a physician acceptable to it or (iii) he can no longer continue
in the service of his Employer and is eligible to receive a benefit under his
Employer's long term disability plan.
Further notwithstanding the foregoing, if a Participant was hired by Cambridge
Filter Corporation prior to April 1, 1990, his vested interest in his
Profit-Sharing and Matching Contributions Sub-Accounts shall be 100 percent.
6.10 ELECTION OF FORMER VESTING SCHEDULE
If the Sponsor adopts an amendment to the Plan that directly or indirectly
affects the computation of a Participant's vested interest in his Employer
Contributions Sub-Account, any Participant with three or more years of Vesting
Service shall have a right to have his vested interest in his Employer
Contributions Sub-Account continue to be determined under the vesting provisions
in effect prior to the amendment rather than under the new vesting provisions,
unless the vested interest of the Participant in his Employer Contributions
Sub-Account under the Plan as amended is not at any time less than such vested
interest determined without regard to the amendment. A Participant shall
exercise his right under this Section by giving written notice of his exercise
thereof to the Administrator within 60 days after the latest of (i) the date he
receives notice of the amendment from the Administrator, (ii) the effective date
of the amendment, or (iii) the date the amendment is adopted. Notwithstanding
the foregoing, a Participant's vested interest in his Employer Contributions
Sub-Account on the effective date of such an amendment shall not be less than
his vested interest in his Employer Contributions Sub-Account immediately prior
to the effective date of the amendment.
6.11 FORFEITURES TO REDUCE EMPLOYER CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, the amount of
the Employer Contribution required under this Article for a Plan Year shall be
reduced by the amount of any forfeitures occurring during the Plan Year that are
not used to pay Plan expenses.
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ARTICLE VII
LIMITATIONS ON CONTRIBUTIONS
7.1 DEFINITIONS
For purposes of this Article, the following terms have the following meanings:
(a) The "actual deferral percentage" with respect to an Eligible Employee
for a particular Plan Year means the ratio of the Tax-Deterred
Contributions made on his behalf for the Plan Year to his test
compensation for the Plan Year; provided, however, that contributions
made on a Participant's behalf for a Plan Year shall be included in
determining his actual deferral percentage for such Plan Year only if
the contributions are made to the Plan prior to the end of the 12-month
period immediately following the Plan Year to which the contributions
relate. The determination and treatment of the actual deferral
percentage amounts for any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(b) The "aggregate limit" means the sum of (i) 125 percent of the greater
of the average contribution percentage for eligible participants other
than Highly Compensated Employees or the average actual deferral
percentage for Eligible Employees other than Highly Compensated
Employees and (ii) the lesser of 200 percent or two plus the lesser of
such average contribution percentage or average actual deferral
percentage, or, if it would result in a larger aggregate limit, the sum
of (iii) 125 percent of the lesser of the average contribution
percentage for eligible participants other than Highly Compensated
Employees or the average actual deferral percentage for Eligible
Employees other than Highly Compensated Employees and (iv) the lesser
of 200 percent or two plus the greater of such average contribution
percentage or average actual deferral percentage.
(c) The "annual addition" with respect to a Participant for a limitation
year means the sum of the Tax-Deferred Contributions, Employer
Contributions, and After-Tax Contributions allocated to his Separate
Account for the limitation year (including any excess contributions
that are distributed pursuant to this Article), the employer
contributions, employee contributions, and forfeitures allocated to his
accounts for the limitation year under any other qualified defined
contribution plan (whether or not terminated) maintained by an Employer
or a Related Company concurrently with the Plan, and amounts described
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in Sections 415(1) (2) and 419A(d) (2) of the Code allocated to his
account for the limitation year; provided, however, that the annual
addition for limitation years beginning prior to January 1, 1987 shall
not be recalculated to treat all After-Tax Contributions and employee
contributions as annual additions.
(d) The "Code Section 402(g) limit" means the dollar limit imposed by
Section 402(g) (1) of the Code or established by the Secretary of the
Treasury pursuant to Section 402(g) (5) of the Code in effect on
January 1 of the calendar year in which an Eligible Employee's taxable
year begins.
(e) The "contribution percentage" with respect to an eligible participant
for a particular Plan Year means the ratio of the sum of the matching
contributions made to the Plan on his behalf and the After-Tax
contributions made by him for the Plan Year to his test compensation
for such Plan Year, except that, to the extent permitted by regulations
issued under Section 401(m) of the Code, the Sponsor may elect to take
into account in computing the numerator of each eligible participant's
contribution percentage the Tax-Deferred Contributions made to the Plan
on his behalf for the Plan Year; provided, however, that any
Tax-Deferred Contributions that were taken into account in computing
the numerator of an eligible participant's actual deferral percentage
may not be taken into account in computing the numerator of his
contribution percentage; and provided, further, that contributions made
by or on a Participant's behalf for a Plan Year shall be included in
determining his contribution percentage for such Plan Year only if the
contributions are made to the Plan prior to the end of the 12-month
period immediately following the Plan Year to which the contributions
relate. The determination and treatment of the contribution
percentage amounts for any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of the Treasury.
(f) An "elective contribution" means any employer contribution made to a
plan maintained by an Employer or any Related Company on behalf of a
Participant in lieu of cash compensation pursuant to his written
election to defer under any qualified CODA as defined in Section 401(k)
of the Code, any simplified employee pension cash or deferred
arrangement as described in Section 402(h) (1) (B) of the Code, any
eligible deferred compensation plan under Section 457 of the Code, or
any plan as described in Section 501(c) (18) of the Code, and any
contribution made on behalf of the Participant by an Employer or a
Related Company for the purchase of an annuity contract under
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Section 403(b) of the Code pursuant to a salary reduction agreement.
(g) An "eligible participant" means any Employee who is eligible to make
After-Tax Contributions or to have Tax-Deferred Contributions made on
his behalf (if Tax-Deferred Contributions are taken into account in
computing contribution percentages) or to participate in the allocation
of matching contributions.
(h) A "family member" of an Employee means the Employee's spouse, his
lineal ascendants, his lineal descendants, and the spouses of such
lineal ascendants and descendants.
(i) A "limitation year" means the calendar year.
(j) A "matching contribution" means any employer contribution allocated to
an Eligible Employee's account under the Plan or any other plan of an
Employer or a Related Company solely on account of elective
contributions made on his behalf or employee contributions made by him.
(k) The "test compensation" of an Eligible Employee for a Plan Year means
compensation as defined in Section 414(s) of the Code and regulations
issued thereunder, limited, however, to (1) $200,000 for Plan Years
beginning prior to January 1, 1994, or (2) $150,000 for Plan Years
beginning on or after January 1, 1994 (subject to adjustment annually
as provided in Section 401(a) (17) (B) and Section 415(d) of the Code;
provided, however, that the dollar increase in effect on January 1 of
any calendar year, if any, is effective for Plan Years beginning in
such calendar year). If the test compensation of a Participant is
determined over a period of time that contains fewer than 12 calendar
months, then the annual compensation limitation described above shall
be adjusted with respect to that Participant by multiplying the annual
compensation limitation in effect for the Plan Year by a fraction the
numerator of which is the number of full months in the period and the
denominator of which is 12; provided, however, that no proration is
required for a Participant who is covered under the Plan for less than
one full Plan Year if the formula for allocations is based on
Compensation for a period of at least 12 months. In determining the
test compensation, for purposes of applying the annual compensation
limitation described above, of a Participant who is a five-percent
owner or among the ten Highly Compensated Employees receiving the
greatest test compensation for the limitation year, the test
compensation of the Participant's spouse and of his lineal descendants
who have not attained age 19 as of the close of the limitation year
shall be included as test
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compensation of the Participant for the limitation year. If as a result
of applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the
limitation shall be prorated among the affected family members in
proportion to each member's test compensation as determined prior to
application of the family aggregation rules.
7.2 CODE SECTION 402(G) LIMIT
In no event shall the amount of the Tax-Deferred Contributions made on behalf of
an Eligible Employee for his taxable year, when aggregated with any elective
contributions made on behalf of the Eligible Employee under any other plan of an
Employer or a Related Company for his taxable year, exceed the Code Section
402(g) limit. In the event that the Administrator determines that the reduction
percentage elected by an Eligible Employee will result in his exceeding the Code
Section 402(g) limit, the Administrator may adjust the reduction authorization
of such Eligible Employee by reducing the percentage of his Tax-Deferred
Contributions to such smaller percentage that will result in the Code Section
402(g) limit not being exceeded. If the Administrator determines that the
Tax-Deferred Contributions made on behalf of an Eligible Employee would exceed
the Code Section 402(g) limit for his taxable year, the Tax-Deferred
Contributions for such Participant shall be automatically suspended for the
remainder, if any, of such taxable year.
If an Employer notifies the Administrator that the Code Section 402(g) limit has
nevertheless been exceeded by an Eligible Employee for his taxable year, the
Tax-Deferred Contributions that, when aggregated with elective contributions
made on behalf of the Eligible Employee under any other plan of an Employer or a
Related Company, would exceed the Code Section 402(g) limit, plus any income and
minus any losses attributable thereto, shall be distributed to the Eligible
Employee no later than the April 15 immediately following such taxable year. Any
Tax-Deferred Contributions that are distributed to an Eligible Employee in
accordance with this Section shall NOT be taken into account in computing the
Eligible Employee's actual deferral percentage for the Plan Year in which the
Tax-Deferred Contributions were made, unless the Eligible Employee is a Highly
Compensated Employee. If an amount of Tax-Deferred Contributions is distributed
to a Participant in accordance with this Section, matching contributions that
are attributable solely to the distributed Tax-Deferred Contributions, plus any
income and minus any losses attributable thereto, shall be forfeited by the
Participant. Any such forfeited amounts shall be treated as a forfeiture under
the Plan in accordance with the provisions of Article XIV as of the last day of
the month in which the distribution of Tax-Deferred Contributions pursuant to
this Section occurs.
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7.3 LIMITATION ON TAX-DEFERRED CONTRIBUTIONS OF HIGHLY
COMPENSATED EMPLOYEES
Notwithstanding any other provision of the Plan to the contrary, the
Tax-Deferred Contributions made with respect to a Plan Year on behalf of
Eligible Employees who are Highly Compensated Employees may not result in an
average actual deferral percentage for such Eligible Employees that exceeds the
greater of:
(a) a percentage that is equal to 125 percent of the average actual
deferral percentage for all other Eligible Employees; or
(b) a percentage that is not more than 200 percent of the average actual
deferral percentage for all other Eligible Employees and that is not
more than two percentage points higher than the average actual deferral
percentage for all other Eligible Employees.
In order to assure that the limitation contained herein is not exceeded with
respect to a Plan Year, the Administrator is authorized to suspend completely
further Tax-Deferred Contributions on behalf of Highly Compensated Employees for
any remaining portion of a Plan Year or to adjust the projected actual deferral
percentages of Highly Compensated Employees by reducing their percentage
elections with respect to Tax-Deferred Contributions for any remaining portion
of a Plan Year to such smaller percentages that will result in the limitation
set forth above not being exceeded. In the event of any such suspension or
reduction, Highly Compensated Employees affected thereby shall be notified of
the reduction or suspension as soon as possible and shall be given an
opportunity to make a new Tax-Deferred Contribution election to be effective the
first day of the next following Plan Year. In the absence of such an election,
the election in effect immediately prior to the Suspension or adjustment
described above shall be reinstated as of the first day of the next following
Plan Year.
For purposes of applying the limitation contained in this Section, the
Tax-Deferred Contributions and test compensation of any Eligible Employee who is
a family member of another Eligible Employee who is a five percent owner or
among the ten Highly Compensated Employees receiving the greatest test
compensation for the Plan Year shall be aggregated with the Tax-Deferred
Contributions and test compensation of such other Eligible Employee, and such
family member shall not be considered an Eligible Employee for purposes of
determining the average actual deferral percentage for all other Eligible
Employees.
In determining the actual deferral percentage for any Eligible Employee who is a
Highly Compensated Employee for the Plan Year, elective contributions made to
his accounts under any other plan
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of an Employer or a Related Company shall be treated as if all such
contributions were made to the Plan; provided, however, that if such a plan has
a plan year different from the Plan Year, any such contributions made to the
Highly Compensated Employee's accounts under the plan for the plan year ending
with or within the same calendar year as the Plan Year shall be treated as it
such contributions were made to the Plan. Notwithstanding the foregoing, such
contributions shall not be treated as if they were made to the Plan if
regulations issued under Section 401(k) of the Code do not permit such plan to
be aggregated with the Plan.
If one or more plans of an Employer or Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401 (a) (4) or
410(b) of the Code, then actual deferral percentages under the Plan shall be
calculated as if the Plan and such one or more other plane were a single plan.
For Plan Years beginning after December 31, 1991, plans may be aggregated to
satisfy Section 401(k) or the Code only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year.
7.4 DISTRIBUTION OF EXCESS TAX-DEFERRED CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.3 is exceeded in any Plan Year, the
Tax-Deferred Contributions made with respect to a Highly Compensated Employee
that exceed the maximum amount permitted to be contributed to the Plan on his
behalf under Section 7.3, plus any income and minus any losses attributable
thereto, shall be distributed to the Highly Compensated Employee prior to the
end of the next succeeding Plan Year. If excess amounts are attributable to
Participants aggregated under the family aggregation rules described in Section
7.3, the excess shall be allocated among family members in proportion to the
Tax-Deferred Contributions made with respect to each family member. If such
excess amounts are distributed more than 2 1/2 months after the last day of the
Plan Year for which the excess occurred, an excise tax may be imposed under
Section 4979 of the Code on the Employer maintaining the Plan with respect to
such amounts.
The maximum amount permitted to be contributed to the Plan on a Highly
Compensated Employee's behalf under Section 7.3 shall be determined by reducing
Tax-Deferred Contributions made on behalf of Highly Compensated Employees in
order of their actual deferral percentages beginning with the highest of such
percentages.
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If an amount of Tax-Deferred Contributions is distributed to a Participant in
accordance with this Section, matching contributions that are attributable
solely to the distributed Tax-Deferred Contributions, plus any income and minus
any losses attributable thereto, shall be forfeited by the Participant. Any such
forfeited amounts shall be treated as a forfeiture under the Plan in accordance
with the provisions of Article XIV as of the last day of the month in which the
distribution of Tax-Deferred Contributions pursuant to this Section occurs.
7.5 LIMITATION ON MATCHING CONTRIBUTIONS AND AFTER-TAX CONTRIBUTIONS
OF HIGHLY COMPENSATED EMPLOYEES
Notwithstanding any other provision of the Plan to the contrary, the matching
contributions and After-Tax Contributions made with respect to a Plan Year by or
on behalf of eligible participants who are Highly Compensated Employees may not
result in an average contribution percentage for such eligible participants that
exceeds the greater of:
(a) a percentage that is equal to 125 percent of the average contribution
percentage for all other eligible participants; or
(b) a percentage that is not more than 200 percent of the average
contribution percentage for all other eligible participants and that is
not more than two percentage points higher than the average
contribution percentage for all other eligible participants.
For purposes of applying the limitation contained in this Section, the matching
contributions, After-Tax Contributions, Tax-Deferred Contributions (to the
extent that such Tax-Deferred Contributions are taken into account in computing
contribution percentages), and test compensation of any eligible participant who
is a family member of another eligible participant who is a five percent owner
or among the ten Highly Compensated Employees receiving the greatest test
compensation for the Plan Year shall be aggregated with the matching
contributions, After-Tax Contributions, Tax-Deferred Contributions, and test
compensation of such other eligible participant:, and such family member shall
not be considered an eligible participant for purposes of determining the
average contribution percentage for all other eligible participants.
In determining the contribution percentage for any eligible participant who is a
Highly Compensated Employee for the Plan Year, matching contributions, employee
contributions, and elective contributions (to the extent that elective
contributions are taken into account in computing contribution percentages) made
to his accounts under any other plan of an Employer or a Related Company shall
be treated as if all such contributions
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were made to the Plan; provided, however, that if such a plan has a plan year
different from the Plan Year, any such contributions made to the Highly
Compensated Employee's accounts under the plan for the plan year ending with or
within the same calendar year as the Plan Year shall be treated as if such
contributions were made to the Plan. Notwithstanding the foregoing, such
contributions shall not be treated as if they were made to the Plan if
regulations issued under Section 401(m) of the Code do not permit such plan to
be aggregated with the Plan.
If one or more plans of an Employer or a Related Company are aggregated with the
Plan for purposes of satisfying the requirements of Section 401(a) (4) or 410(b)
of the Code, the contribution percentages under the Plan shall be calculated as
if the Plan and such one or more other plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated to satisfy Section
401(m) of the Code only if they have the same plan year.
The Administrator shall maintain records sufficient to show that the limitation
contained in this Section was not exceeded with respect to any Plan Year and the
amount of the elective contributions taken into account in computing
contribution percentages for any Plan Year.
7.6 FORFEITURE OR DISTRIBUTION OF EXCESS CONTRIBUTIONS
Notwithstanding any other provision of the Plan to the contrary, in the event
that the limitation contained in Section 7.5 is exceeded in any Plan Year, the
matching contributions and After-Tax Contributions made by or on behalf of a
Highly Compensated Employee that exceed the maximum amount permitted to be
contributed to the Plan by or on behalf of such Highly Compensated Employee
under Section 7.5, plus any income and minus any losses attributable thereto,
shall be forfeited, to the extent forfeitable, or distributed to the Participant
prior to the end of the next succeeding Plan Year as hereinafter provided. If
excess amounts are attributable to Participants aggregated under the family
aggregation rules described in Section 7.5, the excess shall be allocated among
family members in proportion to the matching contributions and After-Tax
Contributions made with respect to each family member. If such excess amounts
are distributed more than 2 1/2 months after the last day of the Plan Year for
which the excess occurred, an excise tax may be imposed under Section 4979 of
the Code on the Employer maintaining the Plan with respect to such amounts.
The maximum amount permitted to be contributed to the Plan by or on behalf of a
Highly Compensated Employee under Section 7.5 shall be determined by reducing
matching contributions and After-Tax Contributions made by or on behalf of
Highly Compensated Employees in order of their contribution percentages
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beginning with the highest of such percentages. The distribution or forfeiture
requirement of this Section shall be satisfied by reducing contributions made by
or on behalf of the Highly Compensated Employee to the extent necessary in the
following order:
After-Tax Contributions made by the Highly Compensated Employee, if
any, shall be distributed.
Matching contributions attributable to Tax-Deferred Contributions shall
be distributed or forfeited, as appropriate.
Any amounts forfeited with respect to a Participant pursuant to this Section
shall be treated as a forfeiture under the Plan in accordance with the
provisions of Article XIV as of the last day of the month in which the
distribution of contributions pursuant to this Section occurs. The amount of
excess After-Tax Contributions of a Participant shall in all cases be
distributable; the excess matching contributions shall be distributable to the
extent the Participant has a vested interest in his Employer Contributions
Sub-Account that is attributable to matching contributions. The determination of
the amount of excess matching contributions and After-Tax Contributions shall be
made after application of Section 7.4, if applicable.
7.7 MULTIPLE USE LIMITATION
Notwithstanding any other provision of the Plan to the contrary, the following
multiple use limitation as required under Section 401(m) of the Code shall
apply: the sum of the average actual deferral percentage for Eligible Employees
who are Highly Compensated Employees and the average contribution percentage for
eligible participants who are Highly Compensated Employees may not exceed the
aggregate limit. In the event that, after satisfaction of Section 7.4 and
Section 7.6, it is determined that contributions under the Plan fail to satisfy
the multiple use limitation contained herein, the multiple use limitation shall
be satisfied by further reducing the actual deferral percentages of Eligible
Employees who are Highly Compensated Employees (beginning with the highest such
percentage) to the extent necessary to eliminate the excess, with such further
reductions to be treated as excess Tax-Deferred Contributions and disposed of as
provided in Section 7.4, or in an alternative manner, consistently applied, that
may be permitted by regulations issued under Section 401(m) of the Code.
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7.8 DETERMINATION OF INCOME OR LOSS
The income or loss attributable to excess contributions that are distributed
pursuant to this Article shall be determined for the preceding Plan Year under
the method otherwise used for allocating income or loss to Participant's
Separate Accounts.
7.9 CODE SECTION 415 LIMITATIONS ON CREDITING OF CONTRIBUTIONS
AND FORFEITURES
Notwithstanding any other provision of the Plan to the contrary, the annual
addition with respect to a Participant for a limitation year shall in no event
exceed the lesser of (i) $30,000 (adjusted as provided in Section 415(d) of the
Code) or (ii) 25 percent of the Participant's compensation, as defined in
Section 415(c) (3) of the Code and regulations issued thereunder, for the
limitation year. If the annual addition to the Separate Account of a Participant
in any limitation year would otherwise exceed the amount that may be applied for
his benefit under the limitation contained in this Section, the limitation shall
be satisfied by reducing contributions made by or on behalf or the Participant
to the extent necessary in the following order:
After-Tax Contributions made by the Participant for the limitation
year, if any, shall be reduced.
Tax-Deferred Contributions made on the Participant's behalf for the
limitation year that have not been matched, if any, shall be reduced.
Tax-Deferred Contributions made on the Participant's behalf for the
limitation year that have been matched and the matching contributions
attributable thereto, if any, shall be reduced pro rata.
Employer Contributions (other than matching contributions) otherwise
allocable to the Participant's Separate Account for the limitation year
shall be reduced.
The amount of any reduction of Tax-Deferred Contributions or After-Tax
Contributions (plus any income attributable thereto) shall be returned to the
Participant. The amount of any reduction of Employer Contributions shall be
deemed a forfeiture for the limitation year. Amounts deemed to be forfeitures
under this Section shall be held unallocated in a suspense account established
for the limitation year and shall be applied against the Employer's contribution
obligation for the next following limitation year (and succeeding limitation
years, as necessary) If a suspense account is in existence at any time during a
limitation year, all amounts in the suspense account must be allocated to
Participants' Separate Accounts (subject to the limitations contained herein)
before any further Tax-Deferred
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Contributions, Employer Contributions, or After-Tax Contributions may be made to
the Plan by or on behalf of Participants. No suspense account established
hereunder shall share in any increase or decrease in the net worth of the Trust.
For purposes of this Article, excesses shall result only from the allocation of
forfeitures, a reasonable error in estimating a Participant's annual
compensation (as defined in Section 415(c) (3) of the Code and regulations
issued thereunder), a reasonable error in determining the amount of Tax-Deferred
Contributions that may be made with respect to any Participant under the limits
of Section 415 of the Code, or other limited facts and circumstances that
justify the availability of the provisions set forth above.
7.10 COVERAGE UNDER OTHER QUALIFIED DEFINED CONTRIBUTION PLAN
If a Participant is covered by any other qualified defined contribution plan
(whether or not terminated) maintained by an Employer or a Related Company
concurrently with the Plan, and if the annual addition for the limitation year
would otherwise exceed the amount that may be applied for the Participant's
benefit under the limitation contained in Section 7.9, such excess shall be
reduced first by returning the employee contributions made by the Participant
for the limitation year under all of the defined contribution plans other than
the Plan and the income attributable thereto to the extent necessary. If the
limitation contained in Section 7.9 is still not satisfied after returning all
of the employee contributions made by the Participant under all such other
plans, the excess shall be reduced by returning the elective contributions made
on the Participant's behalf for the limitation year under all such other plans
and the income attributable thereto to the extent necessary on a pro rata basis
among all of such plans. If the limitation contained in Section 7.9 is still not
satisfied after returning all of the elective contributions made on the
Participant's behalf under all such other plans, the procedure set forth in
Section 7.9 shall be invoked to eliminate any such excess. It the limitation
contained in Section 7.9 is still not satisfied after invocation of the
procedure set forth in Section 7.9, the portion of the employer contributions
and of forfeitures for the limitation year under all such other plans that has
been allocated to the Participant thereunder, but which exceeds the limitation
set forth in Section 7.9, shall be deemed a forfeiture for the limitation year
and shall be disposed of as provided in such other plans; provided, however,
that if the Participant is covered by a money purchase pension plan, the
forfeiture shall be effected first under any other defined contribution plan
that is not a money purchase pension plan and, if the limitation is still not
satisfied, then under such money purchase pension plan.
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7.11 COVERAGE UNDER QUALIFIED DEFINED BENEFIT PLAN
If a Participant in the Plan is also covered by a qualified defined benefit plan
(whether or not terminated) maintained by an Employer or a Related Company, in
no event shall the sum of the defined benefit plan fraction (as defined in
Section 415(e) (2) of the Code) and the defined contribution plan fraction (as
defined in Section 415(e) (3) of the Code) exceed 1.0 in any limitation year.
If, before October 3, 1973, the Participant was an active participant in a
qualified defined benefit plan maintained by an Employer or a Related Company
and otherwise satisfies the requirements of Section 2004(d) (2) of ERISA, then
for purposes of applying this Section, the defined benefit plan fraction shall
not exceed 1.0. If the Plan satisfied the applicable requirements of Section 415
of the Code as in effect for all limitation years beginning before January 1,
1987, an amount shall be subtracted from the numerator of the defined
contribution plan traction (not exceeding such numerator) as prescribed by the
Secretary of the Treasury so that the sum of the defined benefit plan fraction
and the defined contribution plan fraction computed under Section 415(e) (1) of
the Code, as revised by the Tax Reform Act of 1986, does not exceed 1.0 for such
limitation year. In the event the special limitation contained in this Section
is exceeded, the benefits otherwise payable to the Participant under any such
qualified defined benefit plan shall be reduced to the extent necessary to meet
such limitation.
7.12 SCOPE OF LIMITATIONS
The limitations contained in Sections 7.9, 7.10, and 7.11 shall be applicable
only with respect to benefits provided pursuant to defined contribution plans
and defined benefit plans described in Section 415(k) of the Code.
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ARTICLE VIII
TRUST FUNDS AND SEPARATE ACCOUNTS
8.1 GENERAL FUND
The Trustee shall maintain a General Fund as required to hold and administer any
assets of the Trust that are not allocated among the Investment Funds as
provided in the Plan or the Trust Agreement. The General Fund shall be held and
administered as a separate common trust fund. The interest of each Participant
or Beneficiary under the Plan in the General Fund shall be an undivided
interest.
8.2 INVESTMENT FUNDS
The Sponsor shall determine the number and type of Investment Funds and select
the investments for such Investment Funds. The Sponsor shall communicate the
same and any changes therein in writing to the Administrator and the Trustee.
Each Investment Fund shall be held and administered as a separate common trust
fund. The interest of each Participant or Beneficiary under the Plan in any
Investment Fund shall be an undivided interest.
8.3 LOAN INVESTMENT FUND
If a loan from the Plan to a Participant is approved in accordance with the
provisions of Article XII, the Sponsor shall direct the establishment and
maintenance of a loan Investment Fund in the Participant's name. The assets of
the loan Investment Fund shall be held as a separate trust fund. A Participant's
loan Investment Fund shall be invested in the note reflecting the loan that is
executed by the Participant in accordance with the provisions of Article XII.
Notwithstanding any other provision of the Plan to the contrary, income received
with respect to a Participant's loan Investment Fund shall be allocated and the
loan Investment Fund shall be administered as provided in Article XII.
8.4 INCOME ON TRUST
Any dividends, interest, distributions, or other income received by the Trustee
with respect to any Trust Fund maintained hereunder shall be allocated by the
Trustee to the Trust Fund for which the income was received.
8.5 SEPARATE ACCOUNTS
As of the first date a contribution is made by or on behalf of an Employee,
there shall be established a Separate Account in his name reflecting his
interest in the Trust. Each Separate Account shall be maintained and
administered for each Participant and
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Beneficiary in accordance with the provisions of the Plan. The balance of each
Separate Account shall be the balance of the account after all credits and
charges thereto, for and as of such date, have been made as provided herein.
8.6 SUB-ACCOUNTS
A Participant's Separate Account shall be divided into individual Sub-Accounts
reflecting the portion of the Participant's Separate Account that is derived
from Tax-Deferred Contributions, After-Tax Contributions, Rollover
Contributions, or Employer Contributions. Each Sub-Account shall reflect
separately contributions allocated to each Trust Fund maintained hereunder and
the earnings and losses attributable thereto. Such other Sub-Accounts may be
established as are necessary or appropriate to reflect a Participant's interest
in the Trust.
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ARTICLE IX
LIFE INSURANCE CONTRACTS
9.1 NO LIFE INSURANCE CONTRACTS
There shall be no life insurance contracts purchased under the Plan.
38
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ARTICLE X
DEPOSIT AND INVESTMENT OF CONTRIBUTIONS
10.1 FUTURE CONTRIBUTION INVESTMENT ELECTIONS
Each Eligible Employee shall make an investment election in the manner and form
prescribed by the Administrator directing the manner in which his Tax-Deferred
Contributions, After-Tax Contributions, Rollover Contributions, and Employer
Contributions shall be invested. An Eligible Employee's investment election
shall specify the percentage, in the percentage increments prescribed by the
Administrator, of such contributions that shall be allocated to one or more of
the Investment Funds with the sum or such percentages equaling 100 percent. The
investment election by a Participant shall remain in effect until his entire
interest under the Plan is distributed or forfeited in accordance with the
provisions of the Plan or until he files a change of investment election with
the Administrator, in such form as the Administrator shall prescribe. A
Participant's change of investment election may be made effective as of the date
or dates prescribed by the Administrator.
10.2 DEPOSIT OF CONTRIBUTIONS
All Tax-Deferred Contributions, After-Tax Contributions, Rollover Contributions,
and Employer Contributions shall be deposited in the Trust and allocated among
the Investment Funds in accordance with the Participant's currently effective
investment election. If no investment election is on file with the Administrator
at the time contributions are to be deposited to a Participant's Separate
Account, the Participant shall be notified and an investment election form shall
be provided to him. Until such Participant shall make an effective election
under this Section, his contributions shall be allocated among the Investment
Funds as directed by the Administrator.
10.3 ELECTION TO TRANSFER BETWEEN FUNDS
A Participant may elect to transfer investments from any Investment Fund to any
other Investment Fund. The Participant's transfer election shall specify either
(i) a percentage, in the percentage increments prescribed by the Administrator,
of the amount eligible for transfer, which percentage may not exceed 100
percent, or (ii) a dollar amount that is to be transferred. Subject to any
restrictions pertaining to a particular Investment Fund, a Participant's
transfer election may be made effective as of the date or dates prescribed by
the Administrator.
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ARTICLE XI
CREDITING AND VALUING SEPARATE ACCOUNTS
11.1 CREDITING SEPARATE ACCOUNTS
All contributions made under the provisions of the Plan shall be credited to
Separate Accounts in the Trust Funds by the Trustee, in accordance with
procedures established in writing by the Administrator, either when received or
on the succeeding Valuation Date after valuation of the Trust Fund has been
completed for such Valuation Date as provided in Section 11.2, as shall be
determined by the Administrator.
11.2 VALUING SEPARATE ACCOUNTS
Separate Accounts in the Trust Funds shall be valued by the Trustee on the
Valuation Date, in accordance with procedures established in writing by the
Administrator, either in the manner adopted by the Trustee and approved by the
Administrator or in the manner set forth in Section 11.3 as Plan valuation
procedures, as determined by the Administrator.
11.3 PLAN VALUATION PROCEDURES
With respect to the Trust Funds, the Administrator may determine that the
following valuation procedures shall be applied. As of each Valuation Date
hereunder, the portion of any Separate Accounts in a Trust Fund shall be
adjusted to reflect any increase or decrease in the value of the Trust Fund for
the period of time occurring since the immediately preceding Valuation Date for
the Trust Fund (the "valuation period") in the following manner:
(a) First, the value of the Trust Fund shall be determined by valuing all
of the assets of the Trust Fund at fair market value.
(b) Next, the net increase or decrease in the value of the Trust Fund
attributable to net income and all profits and losses, realized and
unrealized, during the valuation period shall be determined on the
basis of the valuation under paragraph (a) taking into account
appropriate adjustments for contributions, loan payments, and transfers
to and distributions, withdrawals, loans, and transfers from such Trust
Fund during the valuation period.
(c) Finally, the net increase or decrease in the value of the Trust Fund
shall be allocated among Separate Accounts in the Trust Fund in the
ratio of the balance of the portion of such Separate Account in the
Trust Fund as of the
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preceding Valuation Date less any distributions, withdrawals, loans.
and transfers from such Separate Account balance in the Trust Fund
since the Valuation Date to the aggregate balances of the portions of
all Separate Accounts in the Trust Fund similarly adjusted, and each
Separate Account in the Trust Fund shall be credited or charged with
the amount of its allocated share. Notwithstanding the foregoing, the
Administrator may adopt such accounting procedures as it considers
appropriate and equitable to establish a proportionate crediting of net
increase or decrease in the value of the Trust Fund for contributions,
loan payments, and transfers to and distributions, withdrawals, loans,
and transfers from such Trust Fund made by or on behalf of a
Participant during the valuation period.
11.4 FINALITY OF DETERMINATIONS
The Trustee shall have exclusive responsibility for determining the balance of
each Separate Account maintained hereunder. The Trustee's determinations thereof
shall be conclusive upon all interested parties.
11.5 NOTIFICATION
Within a reasonable period of time after the end of each Plan Year, the
Administrator shall notify each Participant and Beneficiary of the balances of
his Separate Account and Sub-Accounts as of a Valuation Date during the Plan
Year.
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ARTICLE XII
LOANS
12.1 APPLICATION FOR LOAN
A Participant who is a party in interest may make written application to the
Administrator for a loan from his Separate Account. A loan shall not be made
hereunder unless the Participant applying for the loan has incurred an immediate
and heavy financial need as defined in Article XIII.
As collateral for any loan granted hereunder, the Participant shall grant to the
Plan a security interest in his vested interest under the Plan equal to the
amount of the loan; provided, however, that in no event may the Security
interest exceed 50 percent of the Participant's vested interest under the Plan
determined as of the date as of which the loan is originated in accordance with
Plan provisions. In the case of a Participant who is an active employee, the
Participant also shall enter into an agreement to repay the loan by payroll
withholding. No loan in excess of 50 percent of the Participant's vested
interest under the Plan shall be made from the Plan. Loans shall not be made
available to Highly Compensated Employees in an amount greater than the amount
made available to other employees.
A loan shall not be granted unless the Participant consents in writing to the
charging of his Separate Account for unpaid principal and interest amounts in
the event the loan is declared to be in default.
12.2 REDUCTION OF ACCOUNT UPON DISTRIBUTION
Notwithstanding any other provision of the Plan, the amount of a Participant's
Separate Account that is distributable to the Participant or his Beneficiary
under Article XIII or XV shall he reduced by the portion of his vested interest
that is held by the Plan as security for any loan outstanding to the
Participant, provided that the reduction is used to repay the loan. If
distribution is made because of the Participant's death prior to the
commencement of distribution of his Separate Account and less than 100 percent
of the Participant's vested interest in his Separate Account (determined without
regard to the preceding sentence) is payable to his surviving spouse, then the
balance of the Participant's vested interest in his Separate Account shall be
adjusted by reducing the vested account balance by the amount of the security
used to repay the loan, as provided in the preceding sentence, prior to
determining the amount of the benefit payable to the surviving spouse.
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12.3 REQUIREMENTS TO PREVENT A TAXABLE DISTRIBUTION
Notwithstanding any other provision of the Plan to the contrary, the following
terms and conditions shall apply to any loan made to a Participant under this
Article:
(a) The interest rate on any loan to a Participant shall be a reasonable
interest rate commensurate with current interest rates charged for
loans made under similar circumstances by persons in the business of
lending money.
(b) The amount of any loan to a Participant (when added to the outstanding
balance of all other loans to the Participant from the Plan or any
other plan maintained by an Employer or a Related Company) shall not
exceed the lesser of:
(i) $50,000, reduced by the excess, if any, of the highest
outstanding balance of any other loan to the Participant from
the Plan or any other plan maintained by an Employer or a
Related Company during the preceding 12-month period over the
outstanding balance of such loans on the date a loan is made
hereunder; or
(ii) 50 percent of the vested portions of the Participant's
Separate Account and his vested interest under all other plans
maintained by an Employer or a Related Company.
(c) The term of any loan to a Participant shall be no greater than five
years, except in the case of a loan used to acquire any dwelling unit
which within a reasonable period of time is to be used (determined at
the time the loan is made) as a principal residence of the Participant.
(d) Except as otherwise permitted under Treasury regulations, substantially
level amortization shall be required over the term of the loan with
payments made not less frequently than quarterly.
12.4 ADMINISTRATION OF LOAN INVESTMENT FUND
Upon approval or a loan to a Participant, the Administrator shall direct the
Trustee to transfer an amount equal to the loan amount from the Investment Funds
in which it is invested, as directed by the Administrator, to the loan
Investment Fund established in the Participant's name. Any loan approved by the
Administrator shall be made to the Participant out of the Participant's loan
Investment Fund. All principal and interest paid by the Participant on a loan
made under this Article shall be deposited to his Separate Account and shall be
allocated upon receipt among the Investment Funds in accordance with the
Participant's
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currently effective investment election. The balance of the Participant's loan
Investment Fund shall be decreased by the amount of principal payments and the
loan Investment Fund shall be terminated when the loan has been repaid in full.
12.5 DEFAULT
If a Participant fails to make or cause to be made, any payment required under
the terms of the loan within 90 days following the date on which such payment
shall become due or there is an outstanding principal balance existing on a loan
after the last scheduled repayment date, the Administrator may direct the
Trustee to declare the loan to be in default, and the entire unpaid balance of
such loan, together with accrued interest, shall be immediately due and payable.
In any such event, if such balance and interest thereon is not then paid, the
Trustee shall charge the Separate Account of the borrower with the amount of
such balance and interest as of the earliest date a distribution may be made
from the Plan to the borrower without adversely affecting the tax qualification
of the Plan or of the cash or deferred arrangement.
12.6 SPECIAL RULES APPLICABLE TO LOANS
Any loan made hereunder shall be subject to the following rules:
(a) Loans Limited to Eligible Employees: No loans shall be made to an
Employee who makes a Rollover Contribution in accordance with
Article IV, but who is not an Eligible Employee as provided in Article
III.
(b) Minimum Loan Amount: A Participant may not request a loan for less
than $1,000.
(c) Maximum Number of Outstanding Loans: A Participant with an outstanding
loan may not apply for another loan until the existing loan is paid in
full and may not refinance an existing loan or attain a second loan for
the purpose of paying off the existing loan. A Participant may not
apply for more than one loan during the Plan Year. The provisions of
this paragraph shall not apply to any loans made prior to the effective
date of this amendment and restatement; provided, however, that a
Participant may not apply for a new loan hereunder.
(d) Maximum Period for Real Estate Loans: The term of any loan to a
Participant that is used to acquire any dwelling unit which within a
reasonable period of time is to be used (determined at the time the
loan is made) as a principal residence of the Participant shall be no
greater than ten years.
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(e) Pre-Payment Without Penalty: A Participant may pre-pay the balance of
any loan hereunder prior to the date it is due without penalty.
(f) Affect of Termination of Employment: Upon a Participant's termination
of employment, the balance of any outstanding loan hereunder shall
immediately become due and owing.
12.7 LOANS GRANTED PRIOR TO AMENDMENT
Notwithstanding any other provision of this Article to the contrary, any loan
made under the provisions of the Plan as in effect prior to this amendment and
restatement shall remain outstanding until repaid in accordance with its terms
or the otherwise applicable Plan provisions.
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ARTICLE XIII
WITHDRAWALS WHILE EMPLOYED
13.1 WITHDRAWALS OF AFTER-TAX CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company may elect in
writing, subject to the limitations and conditions prescribed in this Article,
to make a cash withdrawal from his After-Tax Contributions Sub-Account.
13.2 WITHDRAWALS OF ROLLOVER CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company and is
determined by the Administrator to have incurred a hardship as defined in this
Article may elect in writing, subject to the limitations and conditions
prescribed in this Article, to make a cash withdrawal from his Rollover
Contributions Sub-Account.
13.3 WITHDRAWALS OF TAX-DEFERRED CONTRIBUTIONS
A Participant who is employed by an Employer or a Related Company and who is
determined by the Administrator to have incurred a hardship as defined in this
Article may elect in writing, subject to the limitations and conditions
prescribed in this Article, to make a cash withdrawal from his Tax-Deferred
Contributions Sub-Account. The maximum amount that a Participant may withdraw
pursuant to this Section because of a hardship is the balance of his
Tax-Deferred Contributions Sub-Account, exclusive of any earnings credited to
such Sub-Account as of a date that is after December 31, 1988.
13.4 LIMITATIONS ON WITHDRAWALS OTHER THAN HARDSHIP WITHDRAWALS
Withdrawals made pursuant to this Article, other than hardship withdrawals,
shall be subject to the following conditions and limitations:
A Participant must file a written withdrawal application with the
Administrator such number of days prior to the date as of which it is
to be effective as the Administrator shall prescribe.
Withdrawals may be made effective as soon as reasonably practicable
following the Administrator's receipt of the Participant's directions.
A Participant who makes a withdrawal from his After-Tax Contributions
Sub-Account may not make a further withdrawal of After-Tax
Contributions under this Article
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during the remainder of the Plan Year in which the withdrawal is
effective.
13.5 CONDITIONS AND LIMITATIONS ON HARDSHIP WITHDRAWALS
A Participant must file a written application for a hardship withdrawal with the
Administrator such number of days prior to the date as of which it is to be
effective as the Administrator may prescribe. Hardship withdrawals may be made
effective as soon as reasonably practicable following the Administrator's
receipt of the Participant's directions. The Administrator shall grant a
hardship withdrawal only if it determines that the withdrawal is necessary to
meet an immediate and heavy financial need of the Participant. An immediate and
heavy financial need of the Participant means a financial need on account of:
(a) expenses previously incurred by or necessary to obtain for the
Participant, the Participant's spouse, or any dependent of the
Participant (as defined in Section 152 of the Code) medical care
described in section 213(d) of the Code;
(b) costs directly related to the purchase (excluding mortgage payments)
of a principal residence for the Participant;
(c) payment of tuition, related educational fees, and room and board
expenses for the next 12 months of post-secondary education for the
Participant, the Participant's spouse, or any dependent of the
Participant; or
(d) the need to prevent the eviction of the Participant front his principal
residence or foreclosure on the mortgage of the Participant's
principal residence.
A withdrawal shall be deemed to be necessary to satisfy an immediate and heavy
financial need of a Participant only if all of the following requirements are
satisfied:
The withdrawal is not in excess of the amount of the immediate and
heavy financial need of the Participant.
The Participant has obtained all distributions, other than hardship
distributions, and all non-taxable loans currently available under all
plans maintained by an Employer or any Related Company.
The Participant's Tax-Deferred Contributions and After-Tax
Contributions and the Participant's elective tax-deferred contributions
and employee After-Tax contributions under all other tax-qualified
plans maintained by an Employer or any Related Company shall be
suspended for at least twelve months after his receipt of the
withdrawal.
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The Participant shall not make Tax-Deferred Contributions or elective
tax-deferred contributions under any other tax-qualified plan
maintained by an Employer or any Related Company for the Participant's
taxable year immediately following the taxable year of the withdrawal
in excess of the applicable limit under Section 402(g) of the Code for
such next taxable year less the amount of the Participant's
Tax-Deferred contributions and elective tax-deferred contributions
under any other plan maintained by an Employer or any Related Company
for the taxable year of the withdrawal.
The minimum hardship withdrawal that a Participant may make is $1,000. The
amount of hardship withdrawal may include any amounts necessary to pay any
Federal, state, or local income taxes or penalties reasonably anticipated to
result from the distribution. A Participant shall not fail to be treated as an
Eligible Employee for purposes of applying the limitations contained in Article
VII of the Plan merely because his Tax-Deferred Contributions are suspended in
accordance with this Section.
13.6 ORDER OF WITHDRAWAL FROM A PARTICIPANT'S SUB-ACCOUNTS
Distribution of a withdrawal amount shall be made from a Participant's
Sub-Accounts, to the extent necessary, in the order prescribed by the
Administrator. If the Sub-Account from which a Participant is receiving a
withdrawal is invested in more than one Investment Fund, the withdrawal shall be
charged against the Investment Funds as directed by the Administrator.
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ARTICLE XIV
TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
14.1 TERMINATION OF EMPLOYMENT AND SETTLEMENT DATE
A Participant's Settlement Date shall occur on the date he terminates employment
with an Employer and all Related Companies because or death, disability,
retirement, or other termination of employment. Written notice or a
Participant's Settlement Date shall be given by the Administrator to the
Trustee.
14.2 SEPARATE ACCOUNTING FOR NON-VESTED AMOUNTS
If as of a Participant's Settlement Date the Participant's vested interest in
his Employer Contributions Sub-Account is less than 100 percent, that portion of
his Employer Contributions Sub-Account that is not vested shall be accounted for
separately from the vested portion and shall be disposed of as provided in the
following Section.
14.3 DISPOSITION OF NON-VESTED AMOUNTS
That portion of a Participant's Employer Contributions Sub-Account that is not
vested upon the occurrence of his Settlement Date shall be disposed of as
follows:
(a) If the Participant has no vested interest in his Separate Account upon
the occurrence or his Settlement Date or his vested interest in his
Separate Account as of the date of distribution does not exceed $3,500
resulting in the Participant's receipt of a single sum payment of such
vested interest, the non-vested balance remaining in the Participant's
Employer Contributions Sub-Account will be forfeited and his Separate
Account closed as of (i) the Participant's Settlement Date, if the
Participant has no vested interest in his Separate Account, or (ii) the
date the single sum payment occurs.
(b) If the Participant's vested interest in his Separate Account exceeds
$3,500 and the Participant is eligible for and consents in writing to a
single sum payment of his vested interest in his Separate Account, the
non-vested balance remaining in the Participant's Employer
Contributions Sub-Account will be forfeited and his Separate Account
closed as of the date the single sum payment occurs, provided that such
distribution occurs prior to the end of the second Plan Year beginning
on or after the Participant's Settlement Date.
(c) If neither paragraph (a) nor paragraph (b) is applicable, the
non-vested portion of the Participant's Employer
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Contributions Sub-Account will continue to be held in such Sub-Account
and will not be forfeited until the end of the five-year period
beginning on his Settlement Date.
Whenever the non-vested portion of a Participant's Employer Contributions
Sub-Account is forfeited under the provisions of the Plan with respect to a Plan
Year, the amount of such forfeiture, as of the last day of the Plan Year, shall
be applied first against Plan expenses for the Plan Year and then against the
Employer Contribution obligations for the Plan Year of the Employer for which
the Participant last performed services as an Employee. Notwithstanding the
foregoing, however, should the amount of all such forfeitures for any Plan Year
with respect to any Employer exceed the amount of such Employer's Employer
Contribution obligation for the Plan Year, the excess amount of such forfeitures
shall be held unallocated in a suspense account established with respect to the
Employer and shall for all Plan purposes be applied against the Employer's
Employer Contribution obligations for the following Plan Year.
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ARTICLE XV
DISTRIBUTIONS
15.1 DISTRIBUTIONS TO PARTICIPANTS
A Participant whose Settlement Date occurs shall receive distribution of his
vested interest in his Separate Account in the form provided under Article XVI
beginning as soon as reasonably practicable following his Settlement Date or the
date his application for distribution is filed with the Administrator, if later.
In addition, a Participant who continues in employment with an Employer or a
Related Company after his Normal Retirement Date may elect to receive
distribution of all or any portion of his Separate Account in the form provided
under Article XVI at any time following his Normal Retirement Date.
15.2 DISTRIBUTIONS TO BENEFICIARIES
If a Participant dies prior to the date distribution of his vested interest in
his Separate Account begins under this Article, his Beneficiary shall receive
distribution of the Participant's vested interest in his Separate Account in the
form provided under Article XVI beginning as soon as reasonably practicable
following the date the Beneficiary's application for distribution is filed with
the Administrator. Unless distribution is to be made over the life or over a
period certain not greater than the life expectancy of the Beneficiary,
distribution of the Participant's entire vested interest shall be made to the
Beneficiary no later than the end of the fifth calendar year beginning after the
Participant's death. If distribution is to be made over the life or over a
period certain no greater than the life expectancy of the Beneficiary,
distribution shall commence no later than:
(a) If the Beneficiary is not the Participant's spouse, the end of the
first calendar year beginning after the Participant's death; or
(b) If the Beneficiary is the Participant's spouse, the later of (i) the
end of the first calendar year beginning after the Participant's death
or (ii) the end of the calendar year in which the Participant would
have attained age 70 1/2.
If distribution is to be made to a Participant's spouse, it shall be made
available within a reasonable period of time after the Participant's death that
is no less favorable than the period of time applicable to other distributions.
If a Participant dies after the date distribution of his vested interest in his
Separate Account begins under this Article, but before his entire vested
interest in his Separate Account is distributed, his
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Beneficiary shall receive distribution of the remainder of the Participant's
vested interest in his Separate Account beginning as soon as reasonably
practicable following the Participant's date of death in a form that provides
for distribution at least as rapidly as under the form in which the Participant
was receiving distribution. Notwithstanding the provisions of this Section,
distribution may also be made to a Participant's Beneficiary in accordance with
a valid election made by the Participant pursuant to Section 242(b) (2) of the
Tax Equity and Fiscal Responsibility Act of 1982.
15.3 CASH OUTS AND PARTICIPANT CONSENT
Notwithstanding any other provision or the Plan to the contrary, if a
Participant's vested interest in his Separate Account does not exceed $3,500,
distribution of such vested interest shall be made to the Participant in a
single sum payment as soon as reasonably practicable following his Settlement
Date. If a Participant's vested interest in his Separate Account is $0, he shall
be deemed to have received distribution of such vested interest as of his
Settlement Date. If a Participant's vested interest in his Separate Account
exceeds $3,500, distribution shall not commence to such Participant prior to his
Normal Retirement Date without the Participant's written consent. If a
Participant made a withdrawal in accordance with the provisions or Article XIII
or was in default on a loan for which a portion of his Separate Account was
pledged as security as provided in Article XII and his vested interest in his
Separate Account on the date immediately preceding the withdrawal or default
exceeded $3,500, then for purposes of this Section, his vested interest in his
Separate Account shall be deemed to exceed $3,500.
15.4 REQUIRED COMMENCEMENT OF DISTRIBUTION
Notwithstanding any other provision or the Plan to the contrary, distribution of
a Participant's vested interest in his Separate Account shall commence to the
Participant no later than the earlier of:
(a) 60 days after the close of the Plan Year in which (i) the Participant's
Normal Retirement Date occurs, (ii) the 10th anniversary of the year in
which he commenced participation in the Plan occurs, or (iii) his
Settlement Date occurs, whichever is latest; or
(b) the April 1 following the close of the calendar year in which he
attains age 70 1/2, whether or not his Settlement Date has occurred,
except that if a Participant attained age 70 1/2 prior to January 1,
1988, and was not a five-percent owner (as defined in Section 416 of
the Code) at any time during the five-Plan-Year period ending within
the calendar year in which he attained age 70 1/2,
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distribution of such Participant's vested interest in his Separate
Account shall commence no later than the April 1 following the
close of the calendar year in which he attains age 70 1/2 or
retires, whichever is later.
Distributions required to commence under this Section shall be made in the form
provided under Article XVI and in accordance with Section 401(a) (9) of the Code
and regulations issued thereunder, including the minimum distribution incidental
benefit requirements. Notwithstanding the provisions of this Section,
distribution may also be made to a Participant in accordance with a valid
election made by the Participant pursuant to Section 242(b) (2) of the Tax
Equity and Fiscal Responsibility Act of 1982.
15.5 REEMPLOYMENT OF A PARTICIPANT
If a Participant whose Settlement Date has occurred is reemployed by an Employer
or a Related Company, he shall lose his right to any distribution or further
distributions from the Trust arising from his prior Settlement Date and his
interest in the Trust shall thereafter be treated in the same manner as that of
any other Participant whose Settlement Date has not occurred.
15.6 RESTRICTIONS ON ALIENATION
Except as provided in Section 401(a) (13) of the Code relating to qualified
domestic relations orders and Section l.401(a)-13(b) (2) of Treasury regulations
relating to Federal tax levies and judgments, no benefit under the Plan at any
time shall be subject in any manner to anticipation, alienation, assignment
(either at law or in equity) , encumbrance, garnishment, levy, execution, or
other legal or equitable process; and no person shall have power in any manner
to anticipate, transfer, assign (either at law or in equity), alienate or
subject to attachment1 garnishment, levy, execution, or other legal or equitable
process, or in any way encumber his benefits under the Plan, or any part
thereof, and any attempt to do so shall be void.
15.7 FACILITY OF PAYMENT
If the Administrator finds that any individual to whom an amount is payable
hereunder is incapable of attending to his financial affairs because of any
mental or physical condition, including the infirmities of advanced age, such
amount (unless prior claim therefor shall have been made by a duly qualified
guardian or other legal representative) may, in the discretion of the
Administrator, be paid to another person for the use or benefit of the
individual found incapable of attending to his financial affairs or in
satisfaction of legal obligations incurred by or on behalf of such individual.
The Trustee shall make such payment only upon receipt of written instructions to
such effect from the
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Administrator. Any such payment shall be charged to the Separate Account from
which any such payment would otherwise have been paid to the individual found
incapable of attending to his financial affairs and shall be a complete
discharge of any liability therefor under the Plan.
15.8 INABILITY TO LOCATE PAYEE
If any benefit becomes payable to any person, or to the executor or
administrator of any deceased person, and if that person or his executor or
administrator does not present himself to the Administrator within a reasonable
period after the Administrator mails written notice of his eligibility to
receive a distribution hereunder to his last known address and makes such other
diligent effort to locate the person as the Administrator determines, that
benefit will be forfeited. However, if the payee later files a claim for that
benefit, the benefit will be restored.
15.9 DISTRIBUTION PURSUANT TO QUALIFIED DOMESTIC RELATIONS ORDERS
Notwithstanding any other provision of the Plan to the contrary, if a qualified
domestic relations order so provides, distribution may be made to an alternate
payee pursuant to a qualified domestic relations order, as defined in Section
414(p) of the Code, regardless of whether the Participant's Settlement Date has
occurred or whether the Participant is otherwise entitled to receive a
distribution under the Plan.
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ARTICLE XVI
FORM OF PAYMENT
16.1 NORMAL FORM OF PAYMENT
Unless the Participant, or his Beneficiary, if the Participant had died, elects
the optional form of payment, distribution shall be made to the Participant, or
his Beneficiary, as the case may be, in a single sum payment. Distribution under
either the normal or optional forms of payment shall be made in cash or in kind,
as elected by the Participant.
16.2 OPTIONAL FORM OF PAYMENT
A Participant, or his Beneficiary, as the case may be, may elect to receive
distribution in a series of installments over a period not exceeding the life
expectancy of the Participant, or the Participant's Beneficiary, if the
Participant has died, or a period not exceeding the joint life and last survivor
expectancy of the Participant and his Beneficiary. Each installment shall be
equal in amount except as necessary to adjust for any changes in the value of
the Participant's Separate Account. The determination of life expectancies shall
be made on the basis of the expected return multiples in Table V and VI of
Section l.72-9 of the Treasury regulations and shall be calculated either once
at the time installment payments begin or annually for the Participant and/or
his Beneficiary, if his Beneficiary is his spouse, as determined by the
Participant at the time installment payments begin.
16.3 CHANGE OF OPTION ELECTION
A Participant or Beneficiary who has elected the optional form of payment may
revoke or change his election at any time prior to the date as of which his
benefit commences by filing with the Administrator a written election in the
form prescribed by the Administrator.
16.4 DIRECT ROLLOVER
Notwithstanding any other provision of the Plan to the contrary, in lieu of
receiving distribution in the form of payment provided under this Article, a
"qualified distributee" may elect in writing, in accordance with rules
prescribed by the Administrator, to have any portion or all of a distribution
made on or after January 1, 1993, that is an "eligible rollover distribution"
paid directly by the Plan to the "eligible retirement plan" designated by the
"qualified distributee"; provided, however, that this provision shall not apply
if the total distribution is less than $200 and that a "qualified distributee"
may not elect this provision with respect to a
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portion of a distribution that is less than $500. Any such payment by the Plan
to another "eligible retirement plan" shall be a direct rollover. For purposes
of this Section, the following terms have the following meanings:
(a) An :eligible retirement plan" means an individual retirement account
described in Section 408(a) of the Code, an individual retirement
annuity described in Section 408(b) of the Code, an annuity plan
described in Section 403(a) of the Code, or a qualified trust described
in Section 401(a) of the Code that accepts rollovers; provided,
however, that, in the case of a direct rollover by a surviving spouse,
an eligible retirement plan does not include a qualified trust
described in Section 401(a) of the Code.
(b) An "eligible rollover distribution" means any distribution of all or
any portion of the balance of a Participant's Separate Account;
provided, however, that an eligible rollover distribution does not
include: any distribution that is one of a series of substantially
equal periodic payments made not less frequently than annually for the
life or life expectancy of the qualified distributee or the joint
lives or joint life expectancies of the qualified distributee and the
qualified distributee's designated beneficiary, or for a specified
period of ten years or more; any distribution to the extent such
distribution is required under Section 401(a) (9) of the Code; and the
portion of any distribution that consists of the Participant's
After-Tax Contributions.
(c) A "qualified distributee" means a Participant, his surviving spouse, or
his spouse or former spouse who is an alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the Code.
16.5 NOTICE REGARDING FORMS OF PAYMENT
Within the 60 day period ending 30 days before the date as of which distribution
of a Participant's Separate Account commences, the Administrator shall provide
the Participant with a written explanation of his right to defer distribution
until his Normal Retirement Date, or such later date as may be provided in the
Plan, his right to make a direct rollover, and the forms of payment available
under the Plan. Distribution of the Participant's Separate Account may commence
less than 30 days after such notice is provided to the Participant if (i) the
Administrator clearly informs the Participant of his right to consider his
election of whether or not to make a direct rollover or to receive a
distribution prior to his Normal Retirement Date and his election of a form of
payment for a period of at least 30 days following his receipt of the notice and
(ii) the
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Participant, after receiving the notice, affirmatively elects an early
distribution.
16.6 REEMPLOYMENT
If a Participant is reemployed by an Employer or a Related Company prior to
receiving distribution of the entire balance of his vested interest in his
Separate Account, his prior election of a form of payment hereunder shall become
ineffective.
16.7 SECTION 242(B) (2) ELECTIONS
Notwithstanding any other provisions of this Article, distribution on behalf of
a Participant, including a five-percent owner, may be made pursuant to an
election under Section 242(b) (2) of the Tax Equity and Fiscal Responsibility
Act of 1982 and in accordance with all of the following requirements:
(a) The distribution is one which would not have disqualified the Trust
under Section 401(a) (9) of the Code as in effect prior to amendment by
the Deficit Reduction Act of 1984.
(b) The distribution is in accordance with a method of distribution elected
by the Participant whose interest in the Trust is being distributed or,
if the Participant is deceased, by a Beneficiary of such Participant.
(c) Such election was in writing, was signed by the Participant or the
Beneficiary, and was made before January 1, 1984.
(d) The Participant had accrued a benefit under the Plan as of
December 31, 1983.
(e) The method of distribution elected by the Participant or the
Beneficiary specifies the time at which distribution will commence, the
period over which distribution will be made, and in the case of any
distribution upon the Participant's death, the Beneficiaries of the
Participant listed in order of priority.
A distribution upon death shall not be made under this Section unless the
information in the election contains the required information described above
with respect to the distributions to be made upon the death of the Participant.
For any distribution which commences before January 1, 1984, but continues after
December 31, 1983, the Participant or the Beneficiary to whom such distribution
is being made will be presumed to have designated the method of distribution
under which the distribution is being made, if this method of distribution was
specified in writing and the distribution satisfies the requirements in
paragraphs (a) and (e) of this Section. If an
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election is revoked, any subsequent distribution will be in accordance with the
other provisions of the Plan. Any changes in the election will be considered to
be a revocation of the election. However, the mere substitution or addition of
another Beneficiary (one not designated as a Beneficiary in the election), under
the election will be not considered to be a revocation of the election, so long
as such substitution or addition does not alter the period over which
distributions are to be made under the election directly, or indirectly (for
example, by altering the relevant measuring life).
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ARTICLE XVII
BENEFICIARIES
17.1 DESIGNATION OF BENEFICIARY
A married Participant's Beneficiary shall be his spouse, unless the Participant
designates a person or persons other than his spouse as Beneficiary with his
spouse's written consent. A Participant may designate a Beneficiary on the form
prescribed by the Administrator. If no Beneficiary has been designated pursuant
to the provisions of this Section, or if no Beneficiary survives the Participant
and he has no surviving spouse, then the Beneficiary under the Plan shall be the
Participant's estate. If a Beneficiary dies after becoming entitled to receive a
distribution under the Plan but before distribution is made to him in full, and
if no other Beneficiary has been designated to receive the balance of the
distribution in that event, the estate of the deceased Beneficiary shall be the
Beneficiary as to the balance of the distribution.
17.2 SPOUSAL CONSENT REQUIREMENTS
Any written spousal consent given pursuant to this Article must acknowledge the
effect of the action taken and must be witnessed by a Plan representative or a
notary public. The spouse's written consent may be a general consent that
permits the Participant to change the designated Beneficiary without the
spouse's further consent. A Participant's spouse will be deemed to have given
written consent to the Participant's designation of Beneficiary if the
Participant establishes to the satisfaction of a Plan representative that such
consent cannot be obtained because the spouse cannot be located or because of
other circumstances set forth in Section 401(a) (11) of the Code and regulations
issued thereunder. Any written Consent given or deemed to have been given by a
Participant's spouse hereunder shall be valid only with respect to the spouse
who signs the consent.
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ARTICLE XVIII
ADMINISTRATION
18.1 AUTHORITY OF THE SPONSOR
The Sponsor, which shall be the administrator for purposes of ERISA and the plan
administrator for purposes of the Code, shall be responsible for the
administration of the Plan and, in addition to the powers and authorities
expressly conferred upon it in the Plan, shall have all such powers and
authorities as may be necessary to carry out the provisions of the Plan,
including the power and authority to interpret and construe the provisions of
the Plan, to make benefit determinations, and to resolve any disputes which
arise under the Plan. The Sponsor may employ such attorneys, agents, and
accountants as it may deem necessary or advisable to assist in carrying out its
duties hereunder. The Sponsor shall be a "named fiduciary" as that term is
defined in Section 402(a) (2) of ERISA. The Sponsor may;
(a) allocate any of the powers, authority, or responsibilities for the
operation and administration of the Plan (other than trustee
responsibilities as defined in Section 405(c) (3) of ERISA) among named
fiduciaries; and
(b) designate a person or persons other than a named fiduciary to carry ou
any of such powers, authority, or responsibilities;
except that no allocation by the Sponsor of, or designation by the Sponsor with
respect to, any of such powers, authority, or responsibilities to another named
fiduciary or a person other than a named fiduciary shall become effective unless
such allocation or designation shall first be accepted by such named fiduciary
or other person in a writing signed by it and delivered to the Sponsor.
18.2 ACTION OF THE SPONSOR
Any act authorized, permitted, or required to be taken under the Plan by the
Sponsor and which has not been delegated in accordance with Section 18.1, may be
taken by a majority of the members of the board of directors of the Sponsor,
either by vote at a meeting, or in writing without a meeting, or by the employee
or employees of the Sponsor designated by the board of directors to carry out
such acts on behalf of the Sponsor. All notices, advice, directions,
certifications, approvals, and instructions required or authorized to be given
by the Sponsor as under the Plan shall be in writing and signed by either (i) a
majority of the members of the board of directors of the Sponsor or by such
member or members as may be designated by an instrument in writing, signed by
all the members thereof, as having authority
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to execute such documents on its behalf, or (ii) the employee or employees
authorized to act for the Sponsor in accordance with the provisions of this
Section.
18.3 CLAIMS REVIEW PROCEDURE
Whenever a claim for benefits under the Plan filed by any person (herein
referred to as the "Claimant") is denied, whether in whole or in part, the
Sponsor shall transmit a written notice of such decision to the Claimant within
90 days of the date the claim was filed or, if special circumstances require an
extension, within 180 days of such date, which notice shall be written in a
manner calculated to be understood by the Claimant and shall contain a statement
of (i) the specific reasons for the denial of the claim, (ii) specific reference
to pertinent Plan provisions on which the denial is based, and (iii) a
description of any additional material or information necessary for the Claimant
to perfect the claim and an explanation of why such information is necessary.
The notice shall also include a statement advising the Claimant that, within 60
days of the date on which he receives such notice, he may obtain review of such
decision in accordance with the procedures hereinafter set forth. Within such
60-day period, the Claimant or his authorized representative may request that
the claim denial be reviewed by filing with the Sponsor a written request
therefore, which request shall contain the following information:
(a) the date on which the Claimant's request was filed with the Sponsor;
provided, however, that the date on which the Claimant's request for
review was in fact filed with the Sponsor shall control in the event
that the date of the actual filing is later than the date stated by the
Claimant pursuant to this paragraph;
(b) the specific portions of the denial of his claim which the Claimant
requests the Sponsor to review;
(c) a statement by the Claimant setting forth the basis upon which he
believes the Sponsor should reverse the previous denial of his claim for
benefits and accept his claim as made; and
(d) any written material (offered as exhibits) which the Claimant desires
the Sponsor to examine in its consideration of his position as stated
pursuant to paragraph (a) of this Section.
Within 60 days of the date determined pursuant to paragraph (a) of this Section
or, if special circumstances require an extension, within 120 days of such date,
the Sponsor shall conduct a full and fair review of the decision denying the
Claimant's claim for benefits and shall render its written
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decision on review to the Claimant. The Sponsor's decision on review shall be
written in a manner calculated to be understood by the Claimant and shall
specify the reasons and Plan provisions upon which the Sponsor's decision was
based.
18.4 QUALIFIED DOMESTIC RELATIONS ORDERS
The Sponsor shall establish reasonable procedures to determine the status of
domestic relations orders and to administer distributions under domestic
relations orders which are deemed to be qualified orders. Such procedures shall
be in writing and shall comply with the provisions of Section 414(p) of the Code
and regulations issued thereunder.
18.5 INDEMNIFICATION
In addition to whatever rights of indemnification the Trustee or the members of
the board of directors of the Sponsor or any employee or employees of the
Sponsor to whom any power, authority, or responsibility is delegated pursuant to
Section 18.2, may be entitled under the articles of incorporation or regulations
of the Sponsor, under any provision of law, or under any other agreement, the
Sponsor shall satisfy any liability actually and reasonably incurred by any such
person or persons, including expenses, attorneys' fees, judgments, fines, and
amounts paid in settlement (other than amounts paid in settlement not approved
by the Sponsor), in connection with any threatened, pending or completed action,
suit, or proceeding which is related to the exercising or failure to exercise by
such person or persons of any of the powers, authority, responsibilities, or
discretion as provided under the Plan, or reasonably believed by such person or
persons to be provided hereunder, and any action taken by such person or persons
in connection therewith, unless the same is judicially determined to be the
result of such person's or persons' gross negligence or willful misconduct.
18.6 ACTIONS BINDING
Subject to the provisions of Section 18.3, any action taken by the Sponsor which
is authorized, permitted, or required under the Plan shall be final and binding
upon the Employers, the Trustee, all persons who have or who claim an interest
under the Plan, and all third parties dealing with the Employers or the Trustee.
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ARTICLE XIX
AMENDMENT AND TERMINATION
19.1 AMENDMENT
Subject to the provisions of Section 19.2, the Sponsor may at any time and from
time to time, by action of its board of directors, or such officers of the
Sponsor as are authorized by its board of directors, amend the Plan, either
prospectively or retroactively. Any such amendment shall be by written
instrument executed by the Sponsor.
19.2 LIMITATION ON AMENDMENT
The Sponsor shall make no amendment to the Plan which shall decrease the accrued
benefit of any Participant or Beneficiary, except that nothing contained herein
shall restrict the right to amend the provisions of the Plan relating to the
administration of the Plan and Trust. Moreover, no such amendment shall be made
hereunder which shall permit any part of the Trust to revert to an Employer or
any Related Company or be used or be diverted to purposes other than the
exclusive benefit of Participants and Beneficiaries.
19.3 TERMINATION
The Sponsor reserves the right, by action of its board of directors, to
terminate the Plan as to all Employers at any time (the effective date of such
termination being hereinafter referred to as the "termination date"). Upon any
such termination of the Plan, the following actions shall be taken for the
benefit of Participants and Beneficiaries:
(a) As of the termination date, each Investment Fund shall be valued and
all Separate Accounts and Sub-Accounts shall be adjusted in the manner
provided in Article XI, with any unallocated contributions or
forfeitures being allocated as of the termination date in the manner
otherwise provided in the Plan. The termination date shall become a
Valuation Date for purposes of Article XI. In determining the net
worth of the Trust, there shall be included as a liability such amounts
as shall be necessary to pay all expenses in connection with the
termination of the Trust and the liquidation and distribution of the
property of the Trust, as well as other expenses, whether or not
accrued, and shall include as an asset all accrued income.
(b) All Separate Accounts shall then be disposed of to or for the benefit
of each Participant or Beneficiary in accordance with the provisions of
Article XV as if the termination date were his Settlement Date;
provided,
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however, that notwithstanding the provisions of Article XV, if the Plan
does not offer an annuity option and if neither his Employer nor a
Related Company establishes or maintains another defined contribution
plan (other than an employee stock ownership plan as defined in Section
4975(e) (7) of the Code), the Participant's written consent to the
commencement of distribution shall not be required regardless of the
value of the vested portions of his Separate Account.
(c) Notwithstanding the provisions of paragraph (b) of this Section, no
distribution shall be made to a Participant of any portion of the
balance of his Tax-Deferred Contributions Sub-Account prior to his
separation from service (other than a distribution made in accordance
with Article XIII or required in accordance with Section 401(a) (9) of
the Code) unless (i) neither his Employer nor a Related Company
establishes or maintains another defined contribution plan (other than
an employee stock ownership plan as defined in Section 4975(e) (7) of
the Code, a tax credit employee stock ownership plan as defined in
Section 409 of the Code, or a simplified employee pension as defined in
Section 408(k) of the Code) either at the time the Plan is terminated
or at any time during the period ending 12 months after distribution of
all assets from the Plan; provided, however, that this provision shall
not apply if fewer than two percent of the Eligible Employees under the
Plan were eligible to participate at any time in such other defined
contribution plan during the 24-month period beginning 12 months before
the Plan termination, and (ii) the distribution the Participant
receives is a "lump sum distribution" as defined in Section 402(e) (4)
or the Code, without regard to clauses (i) , (ii) , (iii) , and (iv) of
sub-paragraph (A), sub-paragraph (B), or sub-paragraph (H) thereof.
Notwithstanding anything to the contrary contained in the Plan, upon any such
Plan termination, the vested interest of each Participant and Beneficiary in his
Employer Contributions Sub-Account shall be 100 percent; and, if there is a
partial termination of the Plan, the vested interest of each Participant and
Beneficiary who is affected by the partial termination in his Employer
Contributions Sub-Account shall be 100 percent. For purposes of the preceding
sentence only, the Plan shall be deemed to terminate automatically if there
shall be a complete discontinuance of contributions hereunder by all Employers.
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19.4 REORGANIZATION
The merger, consolidation, or liquidation of any Employer with or into any other
Employer or a Related Company shall not constitute a termination of the Plan as
to such Employer. If an Employer disposes of substantially all of the assets
used by the Employer in a trade or business or disposes of a subsidiary and in
connection therewith one or more Participants terminates employment but
continues in employment with the purchaser of the assets or with such
subsidiary, no distribution from the Plan shall be made to any such Participant
prior to his separation from service (other than a distribution made in
accordance with Article XIII or required in accordance with Section 401(a) (9)
of the Code), except that a distribution shall be permitted to be made in such a
case, subject to the Participant's consent (to the extent required by law), if
(i) the distribution would constitute a "lump sum distribution" as defined in
section 402(e) (4) of the Code, without regard to clauses (i), (ii), (iii), or
(iv) of sub-paragraph (A), sub-paragraph (B), or sub-paragraph (H) thereof, (ii)
the Employer continues to maintain the Plan after the disposition, (iii) the
purchaser does not maintain the Plan after the disposition, and (iv) the
distribution is made by the end of the second calendar year after the calendar
year in which the disposition occurred.
19.5 WITHDRAWAL OF AN EMPLOYER
An Employer other than the Sponsor may withdraw from the Plan at any time upon
notice in writing to the Administrator (the effective date of such withdrawal
being hereinafter referred to as the "withdrawal date"), and shall thereupon
cease to be an Employer for all purposes of the Plan. An Employer shall be
deemed automatically to withdraw from the Plan in the event of its complete
discontinuance of contributions, or, subject to Section 19.4 and unless the
Sponsor otherwise directs, it ceases to be a Related Company of the Sponsor or
any other Employer. Upon the withdrawal of an Employer, the withdrawing Employer
shall determine whether a partial termination has occurred with respect to its
Employees. In the event that the withdrawing Employer determines a partial
termination has occurred, the action specified in Section 19.3 shall be taken as
of the withdrawal date, as on a termination of the Plan, but with respect only
to Participants who are employed solely by the withdrawing Employer, and who,
upon such withdrawal, are neither transferred to nor continued in employment
with any other Employer or a Related Company. The interest of any Participant
employed by the withdrawing Employer who is transferred to or continues in
employment with any other Employer or a Related Company, and the interest of any
Participant employed solely by an Employer or a Related Company other than the
withdrawing Employer, shall remain unaffected by such withdrawal; no adjustment
to his Separate Accounts shall be made by reason of
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the withdrawal; and he shall continue as a Participant hereunder subject to the
remaining provisions of the Plan.
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ARTICLE XX
ADOPTION BY OTHER ENTITIES
20.1 ADOPTION BY RELATED COMPANIES
A Related Company that is not an Employer may, with the consent of the Sponsor,
adopt the Plan and become an Employer hereunder by causing an appropriate
written instrument evidencing such adoption to be executed in accordance with
the requirements of its organizational authority. Any such instrument shall
specify the effective date of the adoption.
20.2 EFFECTIVE PLAN PROVISIONS
An Employer who adopts the Plan shall be bound by the provisions of the Plan in
effect at the time of the adoption and as subsequently in effect because of any
amendment to the Plan.
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ARTICLE XXI
MISCELLANEOUS PROVISIONS
21.1 NO COMMITMENT AS TO EMPLOYMENT
Nothing contained herein shall be construed as a commitment or agreement upon
the part of any person to continue his employment with an Employer or Related
Company, or as a commitment on the part of any Employer or Related Company to
continue the employment, compensation, or benefits of any person for any period.
21.2 BENEFITS
Nothing in the Plan nor the Trust Agreement shall be construed to confer any
right or claim upon any person, firm, or corporation other than the Employers,
the Trustee, Participants, and Beneficiaries.
21.3 NO GUARANTEES
The Employers, the Administrator, and the Trustee do not guarantee the Trust
from loss or depreciation, nor do they guarantee the payment of any amount which
may become due to any person hereunder.
21.4 EXPENSES
The expenses of administration of the Plan, including the expenses of the
Administrator and fees of the Trustee, shall be paid from the Trust as a general
charge thereon, unless the Sponsor elects to make payment. Notwithstanding the
foregoing, the Sponsor may direct that administrative expenses that are
allocable to the Separate Account of a specific Participant shall be paid from
that Separate Account and the costs incident to the management of the assets of
an Investment Fund or to the purchase or sale of securities held in an
Investment Fund shall be paid by the Trustee from such Investment Fund.
21.5 PRECEDENT
Except as otherwise specifically provided, no action taken in accordance with
the Plan shall be construed or relied upon as a precedent for similar action
under similar Circumstances.
21.6 DUTY TO FURNISH INFORMATION
The Employers, the Administrator, and the Trustee shall furnish to any of the
others any documents, reports, returns, statements, or other information that
the other reasonably deems necessary to perform its duties hereunder or
otherwise imposed by law.
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21.7 WITHHOLDING
The Trustee shall withhold any tax which by any present or future law is
required to be withheld, and which the Administrator notifies the Trustee in
writing is to be so withheld, from any payment to any Participant or Beneficiary
hereunder.
21.8 MERGER, CONSOLIDATION, OR TRANSFER OF PLAN ASSETS
The Plan shall not be merged or consolidated with any other plan, nor shall any
of its assets or liabilities be transferred to another plan, unless, immediately
after such merger, consolidation, or transfer of assets or liabilities, each
Participant in the Plan would receive a benefit under the Plan which is at least
equal to the benefit he would have received immediately prior to such merger,
consolidation, or transfer of assets or liabilities (assuming in each instance
that the Plan had then terminated).
21.9 BACK PAY AWARDS
The provisions of this Section shall apply only to an Employee or former
Employee who becomes entitled to back pay by an award or agreement of an
Employer without regard to mitigation of damages. If a person to whom this
Section applies was or would have become an Eligible Employee after such back
pay award or agreement has been effected, and if any such person who had not
previously elected to make Tax-Deferred Contributions pursuant to Section 4.1
shall within 30 days of the date he receives notice of the provisions of this
Section make an election to make Tax-Deferred Contributions in accordance with
such Section 4.1 (retroactive to any Enrollment Date as of which he was or has
become eligible to do so), then such Participant may elect that any Tax-Deferred
Contributions not previously made on his behalf but which, after application of
the foregoing provisions of this Section, would have been made under the
provisions of Article IV and any After-Tax Contributions which he had not
previously made but which, after application of the foregoing provisions of this
Section, he would have made under the provisions of Article V, shall be made out
of the proceeds of such back pay award or agreement. In addition, if any such
Employee or former Employee would have been eligible to participate in the
allocation of Employer Contributions under the provisions of Article VI for any
prior Plan Year after such back pay award or agreement has been effected, his
Employer shall make an Employer Contribution equal to the amount of the Employer
Contribution which would have been allocated to such Participant under the
provisions of Article VI as in effect during each such Plan Year. The amounts of
such additional contributions shall be credited to the Separate Account of such
Participant. Any additional contributions made by such Participant and by an
Employer pursuant to this Section
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shall be made in accordance with, and subject to the limitations of the
applicable provisions of Articles IV, V, VI, and VII.
21.10 CONDITION ON EMPLOYER CONTRIBUTIONS
Notwithstanding anything to the contrary contained in the Plan or the Trust
Agreement, any contribution of an Employer hereunder is conditioned upon the
continued qualification of the Plan under Section 401(a) of the Code, the exempt
status of the Trust under Section 501(a) of the Code, and the deductibility of
the contribution under Section 404 of the Code. Except as otherwise provided in
this Section and Section 21.11, however, in no event shall any portion of the
property 0(pound) the Trust ever revert to or otherwise inure to the benefit of
an Employer or any Related Company.
21.11 RETURN OF CONTRIBUTIONS TO AN EMPLOYER
Notwithstanding any other provision of the Plan or the Trust Agreement to the
contrary, in the event any contribution of an Employer made hereunder;
(a) is made under a mistake of fact, or
(b) is disallowed as a deduction under Section 404 of the Code,
such contribution may be returned to the Employer within one year after the
payment of the contribution or the disallowance of the deduction to the extent
disallowed, whichever is applicable. In the event the Plan does not initially
qualify under Section 401(a) of the Code, any contribution of an Employer made
hereunder may be returned to the Employer within one year or the date of denial
of the initial qualification of the Plan, but only if an application for
determination was made within the period of time prescribed under Section 403(c)
(2) (B) of ERISA.
21.12 VALIDITY OF PLAN
The validity of the Plan shall be determined and the Plan shall be construed and
interpreted in accordance with the laws of the State or Commonwealth in which
the Sponsor has its principal place of business, except as preempted by
applicable Federal law. The invalidity or illegality of any provision of the
Plan shall not affect the legality or validity of any other part thereof.
21.13 TRUST AGREEMENT
The Trust Agreement and the Trust maintained thereunder shall be deemed to be a
part of the Plan as if fully set forth herein and the provisions of the Trust
Agreement are hereby incorporated by reference into the Plan.
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21.14 PARTIES BOUND
The Plan shall be binding upon the Employers, all Participants and Beneficiaries
hereunder, and, as the case may be, the heirs, executors, administrators,
successors, and assigns of each of them.
21.15 APPLICATION OF CERTAIN PLAN PROVISIONS
A Participant's Beneficiary, if the Participant has died, or alternate payee
under a qualified domestic relations order shall be treated as a Participant for
purposes of directing investments as provided in Article X. For purposes of the
general administrative provisions and limitations of the Plan, a Participant's
Beneficiary or alternate payee under a qualified domestic relations order shall
be treated as any other person entitled to receive benefits under the Plan. Upon
any termination of the Plan, any such Beneficiary or alternate payee under a
qualified domestic relations order who has an interest under the Plan at the
time of such termination, which does not cease by reason thereof, shall be
deemed to be a Participant for all purposes of the Plan.
21.16 LEASED EMPLOYEES
Any leased employee, other than an excludable leased employee, shall be treated
as an employee of the Employer for which he performs services for all purposes
of the Plan with respect to the provisions of Sections 401(a) (3), (4), (7), and
(16), and 408(k), 410, 411, 415, and 416 of the Code; provided, however, that no
leased employee shall accrue a benefit hereunder based on service as a leased
employee except as otherwise specifically provided in the Plan. A "leased
employee" means any person who performs services for an Employer or a Related
Company (the "recipient") (other than an employee of the recipient) pursuant to
an agreement between the recipient and any other person (the "leasing
organization") on a substantially full-time basis for a period of at least one
year, provided that such services are of a type historically performed, in the
business field of the recipient, by employees. An "excludable leased employee"
means any leased employee of the recipient who is covered by a money purchase
pension plan maintained by the leasing organization which provides for (i) a
nonintegrated employer contribution on behalf of each participant in the plan
equal to at least ten percent of compensation, (ii) full and immediate vesting,
and (iii) immediate participation by employees of the leasing organization
(other than employees who perform substantially all of their services for the
leasing organization or whose compensation from the leasing organization in each
plan year during the four-year period ending with the plan year is less than
$1,000); provided, however, that leased employees do not constitute more than 20
percent of the recipient's nonhighly
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compensated work force. For purposes of this Section, contributions or benefits
provided to a leased employee by the leasing organization that are attributable
to services performed for the recipient shall be treated as provided by the
recipient.
21.17 TRANSFERRED FUNDS
If funds from another qualified plan are transferred or merged into the Plan,
such funds shall be held and administered in accordance with any restrictions
applicable to them under such other plan to the extent required by law and shall
be accounted for separately to the extent necessary to accomplish the foregoing.
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ARTICLE XXII
TOP HEAVY PROVISIONS
22.1 DEFINITIONS
For purposes of this Article, the following terms shall have the following
meanings:
(a) The "compensation" of an employee means compensation as defined in
Section 415 of the Code and regulations issued thereunder. In no
event, however, shall the compensation of a Participant taken into
account under the Plan for any Plan Year exceed (1) $200,000 for Plan
Years beginning prior to January 1, 1994, or (2) $150,000 for Plan
Years beginning on or after January 1, 1994 (subject to adjustment
annually as provided in Section 401(a) (17) (B) and Section 415(d) of
the Code; provided, however, that the dollar increase in effect on
January 1 of any calendar year, if any, is effective for Plan Years
beginning in such calendar year). If the compensation of a Participant
is determined over a period of time that contains fewer than 12
calendar months, then the annual compensation limitation described
above shall be adjusted with respect to that Participant by multiplying
the annual compensation limitation in effect for the Plan Year by a
fraction the numerator of which is the number of full months in the
period and the denominator of which is 12; provided, however, that no
proration is required for a Participant who is covered under the Plan
for less than one full Plan Year if the formula for allocations is
based on Compensation for a period of at least 12 months. In
determining the compensation, for purposes of applying the annual
compensation limitation described above, of a Participant who is a
five-percent owner or one of the ten Highly Compensated Employees
receiving the greatest compensation for the Plan Year, the compensation
of the Participant's spouse and of his lineal descendants who have not
attained age 19 as of the close of the Plan Year shall be included as
compensation of the Participant for the Plan Year. If as a result of
applying the family aggregation rule described in the preceding
sentence the annual compensation limitation would be exceeded, the
limitation shall be prorated among the affected family members in
proportion to each member's compensation as determined prior to
application of the family aggregation rules.
(b) The "determination date" with respect to any Plan Year means the last
day of the preceding Plan Year, except that the determination date with
respect to the first Plan Year of the Plan, shall mean the last day of
such Plan Year.
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(c) A "key employee" means any Employee or former Employee who is a key
employee pursuant to the provisions of Section 416(i) (1) of the Code
and any Beneficiary of such Employee or former Employee.
(d) A "non-key employee" means any Employee who is not a key employee.
(e) A "permissive aggregation group" means those plans included in each
Employer's required aggregation group together with any other plan or
plans of the Employer, so long as the entire group of plans would
continue to meet the requirements of Sections 401(a) (4) and 410 of the
Code.
(f) A "required aggregation group" means the group of tax-qualified plans
maintained by an Employer or a Related Company consisting of each plan
in which a key employee participates and each other plan that enables a
plan in which a key employee participates to meet the requirements of
Section 401(a) (4) or Section 410 of the code, including any plan that
terminated within the five-year period ending on the relevant
determination date.
(g) A "super top-heavy group" with respect to a particular Plan Year means
a required or permissive aggregation group that, as of the
determination date, would qualify as a top-heavy group under the
definition in paragraph (i) of this Section with "90 percent"
substituted for "60 percent" each place where "60 percent" appears in
the definition.
(h) A "super top-heavy plan" with respect to a particular Plan Year means a
plan that, as of the determination date, would qualify as a top-heavy
plan under the definition in paragraph (j) of this Section with "90
percent" substituted for "60 percent" each place where "60 percent"
appears in the definition. A plan is also a "super top-heavy plan" if
it is part of a super top-heavy group.
(i) A "top-heavy group" with respect to a particular Plan Year means a
required or permissive aggregation group if the sum, as of the
determination date, of the present value of the cumulative accrued
benefits for key employees under all defined benefit plans included in
such group and the aggregate of the account balances of key employees
under all defined contribution plans included in such group exceeds 60
percent of a similar sum determined for all employees covered by the
plans included in such group.
(j) A "top-heavy plan" with respect to a particular Plan Year means (i),
in the case of a defined contribution plan
74
<PAGE>
(including any simplified employee pension plan), a plan for which, as
of the determination date, the aggregate of the accounts (within the
meaning of Section 416(g) of the Code and the regulations and rulings
thereunder) of key employees exceeds 60 percent of the aggregate of the
accounts of all participants under the plan, with the accounts valued
as of the relevant valuation date and increased for any distribution of
an account balance made in the five-year period ending on the
determination date, (ii), in the case of a defined benefit plan, a plan
for which, as of the determination date, the present value of the
cumulative accrued benefits payable under the plan (within the meaning
of Section 416(g) of the Code and the regulations and rulings
thereunder) to key employees exceeds 60 percent of the present value of
the cumulative accrued benefits under the plan for all employees, with
the present value of accrued benefits to be determined under the
accrual method uniformly used under all plans maintained by an Employer
or, if no such method exists, under the slowest accrual method
permitted under the fractional accrual rate of Section 411(b) (1) (C)
of the Code and including the present value of any part of any accrued
benefits distributed in the five-year period ending on the
determination date, and (iii) any plan (including any simplified
employee pension plan) included in a required aggregation group that is
a top-heavy group. For purposes of this paragraph, the accounts and
accrued benefits of any employee who has not performed services for an
Employer or a Related Company during the five-year period ending on the
determination date shall be disregarded. For purposes of this
paragraph, the present value of cumulative accrued benefits under a
defined benefit plan for purposes of top-heavy determinations shall be
calculated using the actuarial assumptions otherwise employed under
such plan, except that the same actuarial assumptions shall be used for
all plans within a required or permissive aggregation group. A
Participant's interest in the Plan attributable to any Rollover
Contributions, except Rollover Contributions made from a plan
maintained by an Employer or a Related Company, shall not be considered
in determining whether the Plan is top-heavy. Notwithstanding the
foregoing, if a plan is included in a required or permissive
aggregation group that is not a top-heavy group, such plan shall not be
a top-heavy plan.
(k) The "valuation date" with respect to any determination date means the
most recent Valuation Date occurring within the 12-month period ending
on the determination date.
75
<PAGE>
22.2 APPLICABILITY
Notwithstanding any other provision of the Plan to the contrary, the provisions
of this Article shall be applicable during any Plan Year in which the Plan is
determined to be a top-heavy plan as hereinafter defined. If the Plan is
determined to be a top-heavy plan and upon a subsequent determination date is
determined no longer to be a top-heavy plan, the vesting provisions of Article
VI shall again become applicable as of such subsequent determination date;
provided, however, that if the prior vesting provisions do again become
applicable, any Employee with three or more years of Vesting Service may elect
in accordance with the provisions of Article VI, to continue to have his vested
interest in his Employer Contributions Sub-Account determined in accordance with
the vesting schedule specified in Section 22.5.
22.3 MINIMUM EMPLOYER CONTRIBUTION
If the Plan is determined to be a top-heavy plan, the Employer Contributions
allocated to the Separate Account of each non-key employee who is an Eligible
Employee and who is employed by an Employer or a Related Company on the last day
of such top-heavy Plan Year shall be no less than the lesser or (i) three
percent of his compensation or (ii) the largest percentage of compensation that
is allocated as an Employer Contribution and/or Tax-Deferred Contribution for
such Plan Year to the Separate Account of any key employee; except that, in the
event the Plan is part of a required aggregation group, and the Plan enables a
defined benefit plan included in such group to meet the requirements of Section
401(a) (4) or 410 of the Code, the minimum allocation of Employer Contributions
to each such non-key employee shall be three percent of the compensation of such
non-key employee. Any minimum allocation to a non-key employee required by this
Section shall be made without regard to any social security contribution made on
behalf of the non-key employee, his number of hours of service, his level of
compensation, or whether he declined to make elective or mandatory
contributions. Notwithstanding the minimum top-heavy allocation requirements of
this Section, if the Plan is a top-heavy plan, each non-key employee who is an
Eligible Employee and who is employed by an Employer or a Related Company on the
last day of a top-heavy Plan Year and who is also covered under any other
top-heavy plan or plans of an Employer will receive the top-heavy benefits
provided under such other plan in lieu of the minimum top-heavy allocation under
the Plan.
22.4 ADJUSTMENTS TO SECTION 415 LIMITATIONS
If the Plan is determined to be a top-heavy plan and an Employer maintains a
defined benefit plan covering some or all of the Employees that are covered by
the Plan, the defined benefit plan fraction and the defined contribution plan
fraction, described in
76
<PAGE>
Article VII, shall be determined as provided in Section 415 of the Code by
substituting "1.0" for "1.25" each place where "1.25" appears, except that such
substitutions shall not be applied to the Plan if (i) the Plan is not a super
top-heavy plan, (ii) the Employer Contribution for such top-heavy Plan Year for
each non-key employee who is to receive a minimum top-heavy benefit hereunder is
not less than four percent of such non-key employee's compensation, and (iii)
the minimum annual retirement benefit accrued by a non-key employee who
participates under one or more defined benefit plans of an Employer or a Related
Company for such top-heavy Plan Year is not less than the lesser of three
percent times years of service with an Employer or a Related Company or thirty
percent.
22.5 ACCELERATED VESTING
If the Plan is determined to be a top-heavy plan, a Participant's vested
interest in his Employer Contributions Sub-Account shall be determined no less
rapidly than in accordance with the following vesting schedule:
YEARS OF VESTING VESTED INTEREST
less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 or more 100%
77
<PAGE>
ARTICLE XXIII
EFFECTIVE DATE
23.1 EFFECTIVE DATE OF AMENDMENT AND RESTATEMENT
This amendment and restatement is effective as of January 1, 1996.
* *
EXECUTED AT FARR COMPANY, EL SEGUNDO, CALIFORNIA, this 15 day of
DECEMBER, 1995.
FARR COMPANY
By: /s/ Kenneth W. Gerstner
-----------------------
Kenneth W. Gerstner
Title: SVP & CFO
78
Exhibit 10.36
CPR SELECT
THE CORPORATEPLAN FOR RETIREMENT
SELECT PLAN
Adoption Agreement
IMPORTANT NOTE
This document is NOT an IRS approved Prototype Plan. An Adopting Employer may
not rely solely on this Plan to ensure that the Plan is "unfunded and maintained
primarily for the purpose of providing deferred compensation to a select group
of management or highly compensated employees" and exempt from Parts 2 through 4
of Title I of the Employee Retirement Income Security Act of 1974 with respect
to the Employer's particular situation. Fidelity Management Trust Company, its
affiliates and employees may not provide you with legal advice in connection
with the execution of this document This document should be reviewed by your
attorney and/or accountant prior to execution.
4/11/94
<PAGE>
ADOPTION AGREEMENT
ARTICLE I
1.01 PLAN INFORMATION
(a) Name of Plan:
This is the FARR COMPANY SUPPLEMENTARY EXECUTIVE SAVINGS Plan
(the "Plan").
(b) Name of Plan Administrator, if not the Employer:
Address: _________________________________________
Phone Number: _________________________________________
The Plan Administrator is the agent for service of legal
process for the Plan.
(c) Three Digit Plan Number: 010
(d) Plan Year End (month/day): 12/31
(e) Plan Status (check one):
(1) /X/ Effective Date of new Plan: 1/1/96
--
(2) / / Amendment Effective Date: ________
--
The original effective date of the Plan: __________
4/11/94
<PAGE>
1.02 EMPLOYER
(a) The Employer is: FARR COMPANY
Address: 2221 PARK PLACE
EL SEGUNDO, CA 90245
Contact's Name: RICHARD BROUSSEAU
Telephone Number: (310) 536-6375
(1) Employer's Tax Identification Number: 95-1288401
(2) Business form of Employer (check one):
(A) /X/ Corporation
--
(B) / / Sole proprietor or partnership
--
(C) / / Subchapter S Corporation
--
(3) Employer's fiscal year end: NEAREST SATURDAY TO 12/31
(b) The term "Employer" includes the following Related Employer(s)
(as defined in Section 2.0l(a)(21)):
________________________________________________________________
________________________________________________________________
________________________________________________________________
4/11/94 2
<PAGE>
1.03 COVERAGE
(a) Only those Employees listed in Attachment A will be eligible to
participate in the Plan.
(b) The Entry Date(s) shall be (check one):
(1) /X/ the first day of each Plan Year.
--
(2) / / the first day of each Plan Year and the date six months
--
later.
(3) / / the first day of each Plan Year and the first day of the
--
fourth, seventh, and tenth months.
(4) / / the first day of each month.
--
1.04 COMPENSATION
For purposes of determining Contributions under the Plan, Compensation
shall be as defined in Section 2.01(a)(6), but excluding (check the
appropriate box(es)):
(a) / / Overtime Pay.
--
(b) / / Bonuses.
--
(c) / / Commissions.
--
(d) /X/ The value of a qualified or a non-qualified stock option
--
granted to an Employee by the Employer to the extent such
value is includable in the Employee's taxable income.
(e) / / No exclusions.
--
1.05 CONTRIBUTIONS
(a) Deferral Contributions The Employer shall make a Deferral
Contribution in accordance with Section 4.01 on behalf of
each Participant who has an executed salary reduction
agreement in effect with the Employer for the Plan Year (or
portion of the Plan Year) in question, not to exceed 50% of
Compensation for that Plan Year.
4/11/94 3
<PAGE>
(b) / / Matching Contributions
--
(1) The Employer shall make a Matching Contribution on
behalf of each Participant in an amount equal to
the following percentage of a Participant's Deferral
Contributions during the Plan Year (check one):
(A) / / 5O%
--
(B) /X/ 100%
--
(C) / / ___%
--
(D) / / (Tiered Match) ____% of the first ____% of the
--
Participant's Compensation contributed to the
Plan,
_____% of the next ____% of the Participant's
Compensation contributed to the Plan,
_____% of the next _____% of the Participant's
Compensation contributed to the Plan.
(E) / / The percentage declared for the year, if any, by
--
a Board of Directors' resolution.
(F) / / Other: ________________________________________
--
(2) /X/ Matching Contribution Limits (check the
--
appropriate box(es));
(A) /X/ Deferral Contributions in excess of 2% of the
--
Participant's Compensation for the period in
question shall not be considered for Matching
Contributions.
Note: If the Employer elects a percentage limit in (A)
above and requests the Trustee to account
separately for matched and unmatched Deferral
Contributions, the Matching Contributions
allocated to each Participant must be computed,
and the percentage limit applied, based upon
each period.
(B) / / Matching Contributions for each Participant for
--
each Plan Year shall be limited to $__________.
4/11/94 4
<PAGE>
(3) Eligibility Requirement(s) for Matching Contributions
A Participant who makes Deferral Contributions
during the Plan Year under Section 1.05(a) shall be
entitled to Matching Contributions for that Plan
Year if the Participant satisfies the following
requirement(s) (Check the appropriate box(es).
Options (B) and (C) may not be elected together):
(A) / / Is employed by the Employer on the last day of
--
the Plan Year.
(B) / / Earns at least 500 Hours of Service during
--
the Plan Year.
(C) / / Earns at least 1,000 Hours of Service during the
--
Plan Year.
(D) /X/ No requirements.
--
Note: If option (A), (B) or (C) above is selected then
Matching Contributions can only be made by the
Employer after the Plan Year ends. Any Matching
Contribution made before Plan Year end shall not
be subject to the eligibility requirements of
this Section 1.05(b)(3)).
1.06 DISTRIBUTION DATES
A Participant may elect to receive a distribution or commence
distributions from his Account pursuant to Section 8.02 upon
the following date(s) (check the appropriate box(es). If
Option (c) is elected, then options (a) and (b) may not be
elected):
(a) / / Attainment of Normal Retirement Age. Normal Retirement
--
Age under the Plan is (check one):
(1) / / age 65.
--
(2) / / age ____ (specify from 55 through 64).
--
(3) / / later of the age ____ (can not exceed 65) or the
--
fifth anniversary of the Participant's
Commencement Date.
(b) / / Attainment of Early Retirement Age. Early Retirement Age
--
is the first day of the month after the Participant
attains age ____ (specify 55 or greater) and completes
____ Years of Service for Vesting.
4/11/94 5
<PAGE>
(c) /X/ Termination of employment with the Employer.
--
1.07 VESTING SCHEDULE
(a) The Participant's vested percentage in Matching Contributions
elected in Section 1.05(b) shall be based upon the schedule(s)
selected below.
(1) / / N/A - No Matching Contributions
--
(2) /X/ 100% Vesting immediately
--
(3) / / 3 year cliff (see C below)
--
(4) / / 5 year cliff (see D below)
--
(5) / / 6 year graduated (see E below)
--
(6) / / 7 year graduated (see F below)
--
(7) / / G below
--
(8) / / Other (Attachment "B")
--
Years of VESTING SCHEDULE
Service for
VESTING C D E F G
0 0% 0% 0% 0% --
1 0% 0% 0% 0% --
2 0% 0% 20% 0% --
3 100% 0% 40% 20% --
4 100% 0% 60% 40% --
5 100% 100% 80% 60% --
6 100% 100% 100% 80% --
7 100% 100% 100% 100% 100%
(b) / / Years of Service for Vesting shall exclude (check one):
--
(1) / / for new plans, service prior to the Effective Date
--
as defined in Section 1.01(e)(l).
(2) / / for existing plans converting from another plan
--
document, service prior to the original Effective
Date as defined in Section l.01(e)(2).
(c) / / A Participant will forfeit his Matching Contributions upon
--
the occurrence of the following event(s): ________________
__________________________________________________________
__________________________________________________________
4/11/94 6
<PAGE>
(d) A Participant will be 100% vested in his Matching
Contributions upon (check the appropriate box(es), if any):
(1) / / Normal Retirement Age (as defined in
--
Section 1.06(a)).
(2) / / Early Retirement Age (as defined in
--
Section 1.06(b)).
(3) / / Death
--
1.08 PREDECESSOR EMPLOYER SERVICE
Service for purposes of vesting in Section 1.07(a) shall
include service with the following employer(s):
(a) ___________________________________________________
(b) ___________________________________________________
(c) ___________________________________________________
(d) ___________________________________________________
1.09 HARDSHIP WITHDRAWALS
Participant withdrawals for hardship prior to termination of
employment (check one):
(a) / / will be allowed in accordance with Section 707, subject to
--
a $_________ minimum amount. (Must be at least $1,000)
(b) /X/ will NOT be allowed.
--
1.10 DISTRIBUTIONS
Subject to Articles 7 and 8, distributions under the Plan will be
paid (check the appropriate box(es)):
(a) /X/ as a lump sum.
--
(b) /X/ under a systematic withdrawal plan (installment) not to
--
exceed l0 years.
4/11/94 7
<PAGE>
1.11 INVESTMENT DECISIONS
(a) Investment Directions
Investments in which the Accounts of Participants shall be
treated as invested and reinvested shall be directed (check one):
(1) / / by the Employer among the options listed in (b) below.
--
(2) /X/ by each PARTICIPANT among the options listed in
--
(b) below.
(3) / / by each Participant with respect to Deferral
--
Contributions and by the Employer with respect to
Employer Matching Contributions. The Employer must
direct the Employer Matching Contributions among
the same investment options made available for
Participant directed sources listed in (b) below.
(b) Plan Investment Options
Participant Accounts will be treated as invested among the
Fidelity Funds listed below pursuant to Participant and/or
Employer directions.
FUND NAME FUND NUMBER
--------- -----------
(1) Retirement Money Market 0630
(2) Intermediate Bond 0032
(3) Balanced Fund 0304
(4) Growth Fund 0027
(5) Magellan 0021
(6) ________________________ ________
(7) ________________________ ________
(8) ________________________ ________
(9) ________________________ ________
(10) ________________________ ________
Note: An additional annual recordkeeping fee will be charged
for each fund in excess of five funds.
4/11/94 8
<PAGE>
EXECUTION PAGE
(Fidelity's Copy)
IN WITNESS WHEREOF, the Employer has caused this Adoption Agreement to be
executed this 21st day of November, 1995.
Employer FARR Company
By John Vissers
Title Controller, Assist. Secretary
Employer _____________________________
By _____________________________
Title _____________________________
4/11/94 10
<PAGE>
Attachment A
Pursuant to Section 1.03(a), the following are the Employees who are eligible
to participate in the Plan:
FARR COMPANY
Summary Listing of Eligible Employees - SESP 1996
# ref. Name
------ --------------------
1 JOHNSTON, JOHN
2 GERSTNER, KENNETH W.
3 FARR, RICHARD L.
4 RASMUSSEN, MYRON G.
5 GOULDING, CECIL H.
6 SEMONZA JR., NICK
7 VISSERS, JOHN
8 VU, HOA
9 RABER JR, ROBERT
10 MCKINNEY, TODD
11 MARTIN, JOHN W.
12 GIDLEY, DAVID
13 VIDMAR, THOMAS
14 BENSON JR., GEORGE
15 HLADIK, STEVE
16 DEAN, DARRELL
17 KARPENSKI, EDWARD
18 MEANY, JACK
Above list based on following criteria: Position, earnings, sustained period
of earnings and performance.
Farr Company
John Vissers
Controller, Assistant Secretary
November 21, 1995
Note: The Employer must revise Attachment A to add employees as they become
eligible or delete employees who are no longer eligible.
4/11/94 12
Exhibit 10.37
4/11/94
The CORPORATEplan for Retirement Select Plan
BASIC PLAN DOCUMENT
IMPORTANT NOTE
This document is NOT an IRS approved Prototype Plan. An Adopting Employer may
not rely solely on this Plan to ensure that the Plan is "unfunded and maintained
primarily for the purpose of providing deferred compensation to a select group
of management or highly compensated employees" and exempt from parts 2 through 4
of Title I of the Employee Retirement Income Security Act of 1974 with respect
to the Employer's particular situation. Fidelity Management Trust Company, its
affiliates and employees may not provide you with legal advice in connection
with the execution of this document. This document should be reviewed by your
attorney and/or accountant prior to execution.
<PAGE>
4/11/94
CPR SELECT
BASIC PLAN DOCUMENT
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Re employment
3.03 - Cessation or Resumption of Participation Following a Change in Status
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Matching Contributions
4.03 - Time of Making Employer Contributions
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Death
7.03 - Other Termination Of Employment
7.04 - Separate Account
7.05 - Forfeitures
7.06 - Adjustment for Investment Experience
7.07 - Hardship Withdrawals
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Determination of Method of Distribution
8.03 - Notice to Trustee
8.04 - Time of Distribution
ARTICLE 9
AMENDMENT AND TERMINATION
9.01 - Amendment by Employer
9.02 - Retroactive Amendments
9.03 - Termination
9.04 - Distribution Upon Termination of the Plan
2
<PAGE>
4/11/94
ARTICLE 10
MISCELLANEOUS
10.01 - Communication to Participants
10.02 - Limitation of Rights
10.03 - Nonalienability of Benefits
10.04 - Facility of Payment
10.05 - Information between Employer and Trustee
10.06 - Notices
10.07 - Governing Law
ARTICLE 11
PLAN ADMINISTRATION
11.01 - Powers and Responsibilities of the Administrator
11.02 - Nondiscriminatory Exercise of Authority
11.03 - Claims and Review Procedures
11.04 - Cost of Administration
3
<PAGE>
4/11/94
PREAMBLE
It is the intention of the Employer to establish herein an unfunded plan
maintained solely for the purpose of providing deferred compensation for a
select group of management or highly compensated employees for purposes of Title
I of ERISA.
Article 1. ADOPTION AGREEMENT.
Article 2. DEFINITIONS.
2.01. DEFINITIONS.
(a) Wherever used herein, the following terms have the meanings set
forth below, unless a different meaning is clearly required by the
context:
(1) "Account" means an account established on the books of the
Employer for the purpose of recording amounts credited on behalf
of a Participant and any income, expenses, gains or losses
included thereon.
(2) "Administrator" means the Employer adopting this Plan, or
other person designated by the Employer in Section 1.01(b).
(3) "Adoption Agreement" means Article 1 under which the Employer
establishes and adopts or amends the Plan and designates the
optional provisions selected by the Employer. The provisions of
the Adoption Agreement shall be an integral part of the Plan.
(4) "Beneficiary" means the person or persons entitled under
Section 7.02 to receive benefits under the Plan upon the death of
a Participant.
(5) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(6) "Compensation" shall mean for purposes of Article 4
(Contributions) wages as defined in Section 3401(a) of the Code
and all other payments of compensation to an employee by the
employer (in the course of the employers trade or business) for
which the employer is required to finish the employee a written
statement under Section 6041(d) and 6051(a)(3) of the Code,
excluding any items elected by the Employer in Section 1.04,
reimbursements or other expense allowances, fringe benefits (cash
and non-cash), moving expenses, deferred compensation and welfare
benefits, but including amounts that are not includable in the
gross income of the participant under a salary reduction agreement
by reason of the application of Sections 125, 402(a)(8), 402(h),
or 403(b) of the Code. Compensation must be determined without
regard to any rules under Section 3401(a) of the Code that limit
the remuneration included in wages based on the nature or location
of the employment or the services performed (such as the exception
for agricultural labor in Section 3401(a)(2) of the Code).
Compensation shall generally be based on the amount that would
have been actually paid to the Participant during the Plan year
but for an election under Section 4.01.
<PAGE>
4/11/94
In the case of any Self-Employed Individual or an
Owner-Employee Compensation shall mean the Individual's Earned
Income.
(7) "Earned Income" means the net earnings of a Self-Employed
Individual derived from the trade or business with respect to
which the Plan is established and for which the personal services
of such individual are a material income-providing factor,
excluding any items not included in gross income and the
deductions allocated to such items, except that for taxable years
beginning after December 31, 1989 net earnings shall be determined
with regard to the deduction allowed under Section 164(f) of the
Code, to the extent applicable to the Employer. Net earnings shall
be reduced by contributions of the Employer to any qualified plan,
to the extent a deduction is allowed to the Employer for such
contributions under Section 404 of the Code.
(8) "Employee" means any employee of the Employer, Self-Employed
Individual or Owner-Employee.
(9) "Employer" means the employer named in Section 1.02(a) and
any Related Employers designated in Section 1.02(b).
(10) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(11) "ERISA" means the Employee Retirement Income Security Act
of 1974, as from time to time amended.
(12) "Fidelity Fund" means any Registered Investment Company
which is made available to plans utilizing the CORPORATEplan for
Retirement Select Plan.
(13) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(14) "Hour of Service" means, with respect to any Employee,
(A) Each hour for which the Employee is directly or
indirectly paid, or entitled to payment, for the performance
of duties for the Employer or a Related Employer, each such
hour to be credited to the Employee for the computation period
in which the duties were performed;
(B) Each hour for which the Employee is directly or
indirectly paid, or entitled to payment, by the Employer or
Related Employer (including payments made or due from a trust
fund or insurer to which the Employer contributes or pays
premiums) on account of a period of time during which no
duties are performed (irrespective of whether the employment
relationship has terminated) due to vacation, holiday,
illness, incapacity, disability, layoff, jury duty, military
duty, or leave of absence, each such hour to be credited to
the Employee for the Eligibility Computation Period in which
such period of time occurs, subject to the following rules:
(i) No more than 501 Hours of Service shall be credited
under this paragraph (B) on account of any single
continuous period during which the Employee performs no
duties;
2
<PAGE>
4/11/94
(ii) Hours of Service shall not be credited under this
paragraph (B) for a payment which solely reimburses the
Employee for medically-related expenses, or which is made
or due under a plan maintained solely for the purpose of
complying with applicable workmen's compensation,
unemployment compensation or disability insurance laws;
and
(iii) If the period during which the Employee performs no
duties falls within two or more computation periods and if
the payment made on account of such period is not
calculated on the basis of units of time, the Hours of
Service credited with respect to such period shall be
allocated between not more than the first two such
computation periods on any reasonable basis consistently
applied with respect to similarly situated Employees; and
(C) Each hour not counted under paragraph (A) or (B) for
which back pay, irrespective of mitigation of damages, has
been either awarded or agreed to be paid by the Employer or a
Related Employer, each such hour to be credited to the
Employee for the computation period to which the award or
agreement pertains rather than the computation period in which
the award agreement or payment is made.
For purposes of determining Hours of Service, Employees of
the Employer and of all Related Employers will be treated as
employed by a single employer. For purposes of paragraphs (B)
and (C) above, Hours of Service will be calculated in
accordance with the provisions of Section 2530.200b-2(b) of
the Department of Labor regulations which are incorporated
herein by reference.
Solely for purposes of determining whether a break in
service for participation purposes has occurred in a
computation period, an individual who is absent from work for
maternity or paternity reasons shall receive credit for the
hours of service which would otherwise have been credited to
such individual but for such absence, or in any case in which
such hours cannot be determined, 8 hours of service per day of
such absence. For purposes of this paragraph, an absence from
work for maternity reasons means an absence (1) by reason of
the pregnancy of the individual, (2) by reason of a birth of a
child of the individual, (3) by reason of the placement of a
child with the individual in connection with the adoption of
such child by such individual, or (4) for purposes of caring
for such child for a period beginning immediately following
such birth or placement. The hours of service credited under
this paragraph shall be credited (1) in the computation period
in which the absence begins if the crediting is necessary to
prevent a break in service in that period, or (2) in all other
cases, in the following computation period.
(15) "Normal Retirement Age" means the normal retirement age
specified in Section 1.06(a) of the Adoption Agreement.
(16) "Owner-Employee" means, if the Employer is a sole
proprietorship, the individual who is the sole proprietor, or if
the Employer is a partnership, a partner who owns more than 10
percent of either the capital interest or the profits interest of
the partnership.
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(17) "Participant" means any Employee who participates in the
Plan in accordance with Article 3 hereof.
(18) "Plan" means the plan established by the Employer as set
forth herein as a new plan or as an amendment to an existing plan,
by executing the Adoption Agreement, together with any and all
amendments hereto.
(19) "Plan Year" means the 12-consecutive month period designated
by the Employer in Section 1.01(d).
(20) "Registered Investment Company" means any one or more
corporations, partnerships or trusts registered under the
Investment Company Act of 1940 for which Fidelity Management and
Research Company serves as investment advisor.
(21) "Related Employer" means any employer other than the
Employer named in Section 1.02(a), if the Employer and such other
employer are members of a controlled group of corporations (as
defined in Section 414(b) of the Code) or an affiliated service
group (as defined in Section 414(m)), or are trades or businesses
(whether or not incorporated) which are under common control (as
defined in Section 414(c)), or such other employer is required to
be aggregated with the Employer pursuant to regulations issued
under Section 414(o).
(22) "Self-Employed Individual" means an individual who has
Earned Income for the taxable year from the Employer or who would
have Earned Income but for the fact that the trade or business had
no net profits for the taxable year.
(23) "Trust" means the trust created by the Employer.
(24) "Trust Agreement" means the agreement between the Employer
and the Trustee, as set forth in a separate agreement, under which
assets are held, administered, and managed subject to the claims
of the Employer's creditors in the event of the Employer's
insolvency, until paid to plan Participants and their
Beneficiaries as specified in the Plan.
(25) "Trust Fund" means the property held in the Trust by the
Trustee.
(26) "Trustee" means the corporation or individuals appointed by
the Employer to administer the Trust in accordance with the Trust
Agreement.
(27) "Years of Service for Vesting" means, with respect to any
Employee, the number of whole years of his periods of service with
the Employer or a Related Employer (the elapsed time method to
compute vesting service), subject to any exclusions elected by the
Employer in Section 1.07(b). An Employee will receive credit for
the aggregate of all time period(s) commencing with the Employee's
Employment Commencement Date and ending on the date a break in
service begins, unless any such years are excluded by Section
1.07(b). An Employee will also receive credit for any period of
severance of less than 12 consecutive months. Fractional periods
of a year will be expressed in terms of days.
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In the case of a Participant who has 5 consecutive 1-year
breaks in service, all years of service after such breaks in
service will be disregarded for the purpose of vesting the
employer-derived account balance that accrued before such breaks,
but both pre-break and post-break service will count for the
purposes of vesting the Employer-derived account balance that
accrues after such breaks. Both accounts will share in the
earnings and losses of the fund.
In the case of a participant who does not have 5 consecutive
l-year breaks in service, both the pre-break and post-break
service will count in vesting both the pre-break and post-break
employer-derived account balance.
A break in service is a period of severance of at least 12
consecutive months. Period of severance is a continuous period of
time during which the Employee is not employed by the Employer.
Such period begins on the date the Employee retires, quits or is
discharged, or if earlier, the 12 month anniversary of the date on
which the Employee was otherwise first absent from service.
In the case of an individual who is absent from work for
maternity or paternity reasons, the 12-consecutive month period
beginning on the first anniversary of the first date of such
absence shall not constitute a break in service. For purposes of
this paragraph, an absence from work for maternity or paternity
reasons means an absence (1) by reason of the pregnancy of the
individual, (2) by reason of the birth of a child of the
individual, (3) by reason of the placement of a child with the
individual in connection with the adoption of such child by such
individual, or (4) for purposes of caring for such child for a
period beginning immediately following such birth or placement.
If the plan maintained by the Employer is the plan of a
predecessor employer, an Employee's Years of Service for Vesting
shall include years of service with such predecessor employer. In
any case in which the Plan maintained by the Employer is not the
plan maintained by a predecessor employer, service for such
predecessor shall be treated as service for the Employer to the
extent provided in Section 1.08.
(b) Pronouns used in the Plan are in the masculine gender but include
the feminine gender unless the context clearly indicates otherwise.
Article 3. PARTICIPATION.
3.01. DATE OF PARTICIPATION. An eligible Employee (as set forth in Section
1.03(a)) will become a Participant in the Plan on the first Entry Date after
which he becomes an eligible Employee if he has filed an election pursuant to
Section 4.01. If the eligible Employee does not file an election pursuant to
Section 4.01 prior to his first Entry Date, then the eligible Employee will
become a Participant in the Plan as of the first day of a Plan Year for which he
has filed an election.
3.02. RESUMPTION OF PARTICIPATION FOLLOWING RE EMPLOYMENT. If a Participant
ceases to he an Employee and thereafter returns to the employ of the Employer he
will again become a Participant as of an Entry Date following the date on which
he completes an Hour of Service for the Employer following his re employment, if
he is an eligible Employee as defined in Section 1.03(a), and has filed an
election pursuant to Section 4.01.
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3.03. CESSATION OR RESUMPTION OF PARTICIPATION FOLLOWING A CHANGE IN STATUS. If
any Participant continues in the employ of the Employer or Related Employer but
ceases to be an eligible Employee as defined in Section 1.03(a), the individual
shall continue to be a Participant until the entire amount of his benefit is
distributed; however, the individual shall not be entitled to make Deferral
Contributions or receive an allocation of Matching contributions during the
period that he is not an eligible Employee. Such Participant shall continue to
receive credit for service completed during the period for purposes of
determining his vested interest in his Accounts. In the event that the
individual subsequently again becomes an eligible Employee, the individual shall
resume full participation in accordance with Section 3.01.
Article 4. CONTRIBUTIONS.
4.01. DEFERRAL CONTRIBUTIONS. Each Participant may elect to execute a salary
reduction agreement with the Employer to reduce his Compensation by a specified
percentage not exceeding the percentage set forth in Section 1.05(a) and equal
to a whole number multiple of one (1) percent. Such agreement shall become
effective on the first day of the period as set forth in the Participant's
election. The election will be effective to defer Compensation relating to all
services performed in a Plan Year subsequent to the filing of such an election.
An election once made will remain in effect until a new election is made. A new
election will be effective as of the first day of the following Plan Year and
will apply only to Compensation payable with respect to services rendered after
such date. Amounts credited to a Participant's account prior to the effective
date of any new election will not be affected and will be paid in accordance
with that prior election. The Employer shall credit an amount to the account
maintained on behalf of the Participant corresponding to the amount of said
reduction. Under no circumstances may a salary reduction agreement be adopted
retroactively. A Participant may not revoke a salary reduction agreement for a
Plan year during that year.
4.02. MATCHING CONTRIBUTIONS. If so provided by the Employer in Section
1.05(b),the Employer shall make a Matching Contribution to be credited to the
account maintained on behalf of each Participant who had Deferral Contributions
made on his behalf during the year and who meets the requirement, if any, of
Section 1.05(b)(3). The amount of the Matching Contribution shall be determined
in accordance with Section l.05(b).
4.03. TIME OF MAKING EMPLOYER CONTRIBUTIONS. The Employer will from time to
time make a transfer of assets to the Trustee for each Plan Year. The Employer
shall provide the Trustee with information on the amount to be credited to the
separate account of each Participant maintained under the Trust.
Article 5. PARTICIPANTS' ACCOUNTS.
5.01. INDIVIDUAL ACCOUNTS. The Administrator will establish and maintain an
Account for each Participant which will reflect Matching and Deferral
Contributions credited to the Account on behalf of the Participant and earnings,
expenses, gains and losses credited thereto, and deemed investments made with
amounts in the Participant's Account. The Administrator will establish and
maintain such other accounts and records as it decides in its discretion to be
reasonably required or appropriate in order to discharge its duties under the
Plan. Participants will be furnished statements of their Account values at least
once each Plan Year.
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Article 6. INVESTMENT OF CONTRIBUTIONS.
6.01. MANNER OF INVESTMENT. All amounts credited to the Accounts of
Participants shall be treated as though invested and reinvested only in eligible
investments selected by the Employer in Section 1.11(b).
6.02. INVESTMENT DECISIONS. Investments in which the Accounts of
Participants shall be treated as invested and reinvested shall be directed by
the Employer or by each Participant, or both, in accordance with the Employer's
election in Section 1.11(a).
(a) All dividends, interest, gains and distributions of any nature
earned in respect of Fund Shares in which the Account is treated
as investing shall be credited to the Account as though reinvested
in additional shares of that Fidelity Fund.
(b) Expenses attributable to the acquisition of investments shall
be charged to the Account of the Participant for which such
investment is made.
Article 7. RIGHT TO BENEFITS.
7.01. NORMAL OR EARLY RETIREMENT. If provided by the Employer in Section
1.07(d), each Participant who attains his Normal Retirement Age or Early
Retirement Age will have a nonforfeitable interest in his Account in accordance
with the vesting schedule elected in Section l.07. If a Participant retires on
or after attainment of Normal or Early Retirement Age, such retirement is
referred to as a normal retirement. On or after his normal retirement, the
balance of the Participant's Account, plus any amounts thereafter credits to his
Account, subject to the provisions of Section 7.06, will be distributed to him
in accordance with Article 8.
If provided by the Employer in Section 1.06, a Participant who separates
from service before satisfying the age requirements for early retirement, but
has satisfied the service requirement will be entitled to the distribution of
his Account, subject to the provisions of Section 7.06, in accordance with
Article 8, upon satisfaction of such age requirement.
7.02. DEATH. If a Participant dies before the distribution of his Account
has commenced, or before such distribution has been completed, his Account shall
become vested in accordance with the vesting schedule elected in Section 1.07
and his designated Beneficiary or Beneficiaries will be entitled to receive the
balance or remaining balance of his Account, plus any amounts thereafter
credited to his Account, subject to the provisions of Section 7.06. Distribution
to the Beneficiary or Beneficiaries will be made in accordance with Article 8.
A Participant may designate a Beneficiary or Beneficiaries, or change any
prior designation of Beneficiary or Beneficiaries by giving notice to the
Administrator on a form designated by the Administrator. If more than one person
is designated as the Beneficiary, their respective interests shall he as
indicated on the designation form.
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A copy of the death notice or other sufficient documentation must be filed
with and approved by the Administrator. If upon the death of the Participant
there is, in the opinion of the Administrator, no designated Beneficiary for
part or all of the Participant's Account, such amount will be paid to his
surviving spouse or, if none, to his estate (such spouse or estate shall be
deemed to be the Beneficiary for purposes of the Plan). If a Beneficiary dies
after benefits to such Beneficiary have commenced, but before they have been
completed, and, in the opinion of the Administrator, no person has been
designated to receive such remaining benefits, then such benefits shall be paid
to the deceased Beneficiary's estate.
7.03. OTHER TERMINATION OF EMPLOYMENT. If provided by the Employer in
Section 1.06, if a Participant terminates his employment for any reason other
than death or normal retirement, he will be entitled to a termination benefit
equal to (i) the vested percentage(s) of the value of the Matching Contributions
to his Account, as adjusted for income, expense, gain, or loss, such
percentage(s) determined in accordance with the vesting schedule(s) selected by
the Employer in Section 1.07, and (ii) the value of the Deferral Contributions
to his Account as adjusted for income, expense, gain or loss. The amount payable
under this Section 7.03 will be subject to the provisions of Section 7.06 and
will be distributed in accordance with Article 8.
7.04. SEPARATE ACCOUNT. If a distribution from a Participant's Account has
been made to him at a time when he has a nonforfeitable right to less than 100
percent of his Account, the vesting schedule in Section 1.07 will thereafter
apply only to amounts in his Account attributable to Matching Contributions
allocated after such distribution. The balance of his Account immediately after
such distribution will be transferred to a separate account which will be
maintained for the purpose of determining his interest therein according to the
following provisions.
At any relevant time prior to a forfeiture of any portion thereof under
Section 7.05, a Participant's nonforfeitable interest in his Account held in a
separate account described in the preceding paragraph will be equal to P(AB +
(RxD))-(RxD), where P is the nonforfeitable percentage at the relevant time
determined under Section 7.O5; AB is the account balance of the separate account
at the relevant time; D is the amount of the distribution; and R is the ratio of
the account balance at the relevant time to the account balance after
distribution. Following a forfeiture of any portion of such separate account
under Section 7.05 below, any balance in the Participant's separate account will
remain fully vested and nonforfeitable.
7.05. FORFEITURES. If a Participant terminates his employment, any portion
of his Account (including any amounts credited after his termination of
employment) not payable to him under Section 7.03 will be forfeited by him. For
purposes of this paragraph, if the value of a Participant's vested account
balance is zero, the Participant shall be deemed to have received a distribution
of his vested interest immediately following termination of employment. Such
forfeitures will be applied to reduce the contributions of the Employer under
the Plan (or administrative expenses of the Plan).
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7.06. ADJUSTMENT FOR INVESTMENT EXPERIENCE. If any distribution under this
Article 7 is not made in a single payment, the amount remaining in the Account
after the distribution will be subject to adjustment until distributed to
reflect the income and gain or loss on the investments in which such amount is
treated as invested and any expenses properly charged under the Plan and Trust
to such amounts.
7.07. HARDSHIP WITHDRAWALS. Subject to the provisions of Article 8, a
Participant shall not be permitted to withdraw his Account (and earnings
thereon) prior to retirement or termination of employment, except if permitted
under Section 1.09, a Participant may apply to the Administrator to withdraw
some or all of his Account if such withdrawal is made on account of a hardship
as determined by the Employer.
Article 8. DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE.
8.01. DISTRIBUTION OF BENEFITS TO PARTICIPANTS AND BENEFICIARIES.
(a) Distributions under the Plan to a Participant or to the
Beneficiary of the Participant shall be made in a lump sum in cash or,
if elected by the Employer in Section 1.10 and specified in the
Participant's deferral election, under a systematic withdrawal plan
(installment(s)) not exceeding 10 years upon retirement, death or
other termination of employment.
(b) Distributions under a systematic withdrawal plan must be made in
substantially equal annual, or more frequent, installments, in cash,
over a period certain which does not extend 10 years. The period
certain specified in a Participant's first deferral election specifying
distribution under a systematic withdrawal plan shall apply to all
subsequent elections of distributions under a systematic withdrawal
plan made by the Participant.
8.02. DETERMINATION OF METHOD OF DISTRIBUTION. The Participant will
determine the method of distribution of benefit's to himself and the method of
distribution to his Beneficiary. Such determination will be made at the time the
Participant makes a deferral election. If the Participant does not determine the
method of distribution to him or his Beneficiary, the method shall be a lump
sum.
8.03. NOTICE TO TRUSTEE. The Administrator will notify the Trustee in
writing whenever any Participant or Beneficiary is entitled to receive benefits
under the plan. The administrator's notice shall indicate the form, amount and
frequency of benefits that such Participant or Beneficiary shall receive.
8.04. TIME OF DISTRIBUTION. In no event will distribution to a Participant be
made later than the date specified by the Participant in his salary reduction
agreement.
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Article 9. AMENDMENT AND TERMINATION.
9.01. AMENDMENT BY EMPLOYER. The Employer reserves the authority to amend
the Plan by filing with the Trustee an amended Adoption Agreement, executed by
the Employer only, on which said Employer has indicated a change or changes in
provisions previously elected by it. Such changes are to be effective on the
effective date of such amended Adoption Agreement. Any such change
notwithstanding, no Participant's Account shall be reduced by such change below
the amount to which the Participant would have been entitled if he had
voluntarily left the employ of the Employer immediately prior to the date of the
change. The Employer may from time to time make any amendment to the Plan that
may he necessary to satisfy the Code or ERISA. The Employer's board of directors
or other individual specified in the resolution adopting this Plan shall act on
behalf of the Employer for purposes of this Section 9.01.
9.02. RETROACTIVE AMENDMENTS. An amendment made by the Employer in
accordance with Section 9.01 may be made effective on a date prior to the first
day of the Plan Year in which it is adopted if such amendment is necessary or
appropriate to enable the Plan and Trust to satisfy the applicable requirements
of the Code or ERISA or to conform the Plan to any change in federal law or to
any regulations or ruling thereunder. Any retroactive amendment by the Employer
shall be subject to the provisions of Section 9.01.
9.03. TERMINATION. The Employer has adopted the Plan with the intention and
expectation that contributions will be continued indefinitely. However, said
Employer has no obligation or liability whatsoever to maintain the Plan for any
length of time and may discontinue contributions under the Plan or terminate the
Plan at any time by written notice delivered to the Trustee without any
liability hereunder for any such discontinuance or termination.
9.04. DISTRIBUTION UPON TERMINATION OF THE PLAN. Upon termination of the Plan,
no further Deferral Contributions or Matching Contributions shall be made under
the Plan, but Accounts of Participants maintained under the Plan at the time of
termination shall continue to be governed by the terms of the Plan until paid
out in accordance with the terms of the Plan.
Article 10. MISCELLANEOUS.
10.01. COMMUNICATION TO PARTICIPANTS. The Plan will be communicated to all
Participants by the Employer promptly after the Plan is adopted.
10.02. LIMITATION OF RIGHTS. Neither the establishment of the Plan and the
Trust, nor any amendment thereof, nor the creation of any fund or account, nor
the payment of any benefits, will be construed as giving to any Participant or
other person any legal or equitable right against the Employer, Administrator or
Trustee, except as provided herein; and in no event will the terms of employment
or service of any Participant be modified or in any way affected hereby.
10.03. NONALIENABILITY OF BENEFITS. The benefits provided hereunder will
not he subject to alienation, assignment, garnishment, attachment, execution or
levy of any kind, either voluntarily or involuntarily, and any attempt to cause
such benefits to be so subjected will not be recognized, except to such extent
as may be required by law.
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10.04. FACILITY OF PAYMENT. In the event the Administrator determines, on
the basis of medical reports or other evidence satisfactory to the
Administrator, that the recipient of any benefit payments under the Plan is
incapable of handling his affairs by reason of minority, illness, infirmity or
other incapacity, the Administrator may direct the Trustee to disburse such
payments to a person or institution designated by a court which has jurisdiction
over such recipient or a person or institution otherwise having the legal
authority under state law for the care and control of such recipient. The
receipt by such person or institution of any such payments shall be complete
acquittance therefore, and any such payment to the extent thereof, shall
discharge the liability of the Trust for the payment of benefits hereunder to
such recipient.
10.05. INFORMATION BETWEEN EMPLOYER AND TRUSTEE. The Employer agrees to
furnish the Trustee, and the Trustee agrees to furnish the Employer with such
information relating to the Plan and Trust as may be required by the other in
order to carry out their respective duties hereunder, including without
limitation information required under the Code or ERISA and any regulations
issued or forms adopted thereunder.
10.06. NOTICES. Any notice or other communication in connection with this Plan
shall be deemed delivered in writing if addressed as provided below and if
either actually delivered at said address or, in the case of a letter, three
business days shall have elapsed after the same shall have been deposited in the
United States mails, first-class postage prepaid and registered or certified:
(a) If to the Employer or Administrator, to it at the address set
forth in the Adoption Agreement, to the attention of the person
specified to receive notice in the Adoption Agreement;
(b) If to the Trustee, to it at the address set forth in the Trust
Agreement;
or, in each case at such other address as the addressee shall have specified by
written notice delivered in accordance with the foregoing to the addressor's
then effective notice address.
10.07. GOVERNING LAW. The Plan and the accompanying Adoption Agreement will
be construed, administered and enforced according to ERISA, and to the extent
not preempted thereby, the laws of the Commonwealth of Massachusetts.
Article 11. PLAN ADMINISTRATION.
11.01. POWERS AND RESPONSIBILITIES OF THE ADMINISTRATOR. The Administrator
has the full power and the full responsibility to administer the Plan in all of
its details, subject, however, to the applicable requirements of ERISA. The
Administrator's powers and responsibilities include, but are not limited to, the
following:
(a) To make and enforce such rules and regulations as it deems
necessary or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good
faith to be final and conclusive on all persons claiming benefits
under the Plan;
(c) To decide all questions concerning the Plan and the eligibility
of any person to participate in the Plan;
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(d) To administer the claims and review procedures specified in
Section 11.03;
(e) To compute the amount of benefits which will be payable to any
Participant, former Participant or Beneficiary in accordance with
the provisions of the Plan;
(f) To determine the person or persons to whom such benefits will be
paid;
(g) To authorize the payment of benefits;
(h) To comply with the reporting and disclosure requirements of
Part 1 of Subtitle B of Title I of ERISA;
(i) To appoint such agents, counsel, accountants, and consultants as
may be required to assist in administering the Plan;
(j) By written instrument, to allocate and delegate its
responsibilities including the formation of an Administrative
Committee to administer the Plan.
11.02. NONDISCRIMINATORY EXERCISE OF AUTHORITY. Whenever, in the
administration of the Plan, any discretionary action by the Administrator is
required, the Administrator shall exercise its authority in a nondiscriminatory
manner so that all persons similarly situated will receive substantially the
same treatment.
11.03. CLAIMS AND REVIEW PROCEDURES
(a) CLAIMS PROCEDURE. If any person believes he is being denied
any rights or benefits under the Plan, such person may file a
claim in writing with the Administrator. If any such claim is
wholly or partially denied, the Administrator will notify such
person of its decision in writing. Such notification will contain
(i) specific reasons for the denial, (ii) specific reference to
pertinent Plan provisions, (iii) a description of any additional
material or information necessary for such person to perfect such
claim and an explanation of why such material or information is
necessary, and (iv) information as to the steps to be taken if the
person wishes to submit a request for review. Such notification
will be given within 90 days after the claim is received by the
Administrator (or within 180 days, if special circumstances
require an extension of time for processing the claim, and if
written notice of such extension and circumstances is given to
such person within the initial 90-day period). If such
notification is not given within such period, the claim will be
considered denied as of the last day of such period and such
person may request a review of his claim.
(b) REVIEW PROCEDURE. Within 60 days after the date on which a
person receives a written notice of a denied claim (or, if
applicable, within 60 days after the date on which such denial is
considered to have occurred), such person (or his duly authorized
representative) may (i) file a written request with the
Administrator for a review of his denied claim and of pertinent
documents and (ii) submit written issues and comments to the
Administrator. The Administrator will notify such person of its
decision in writing. Such notification will be written in a manner
calculated to be understood by such person and will contain
specific reasons for the decision as well as specific references
to pertinent Plan provisions. The decision on review will be made
within 6O days after the request for review is received by the
Administrator (or within 120 days, if special circumstances
require an extension of time for processing the request, such
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as an election by the Administrator to hold a hearing. and if
written notice of such extension and circumstances is given to
such person within the initial 60-day period). If the decision on
review is not made within such period, the claim will be
considered denied.
11.04. COSTS OF ADMINISTRATION. Unless some or all costs and expenses are
paid by the Employer, all reasonable costs and expenses (including legal,
accounting, and employee communication fees) incurred by the Administrator and
the Trustee in administering the Plan and Trust will be paid first from the
forfeitures (if any) resulting under Section 7.05, then from the remaining Trust
Fund. All such costs and expenses paid from the Trust Fund will, unless
allocable to the Accounts of particular Participants, be charged against the
Accounts of all participants on a prorata basis or in such other reasonable
manner as may be directed by the Employer.
13
Exhibit 10.38
TRUST AGREEMENT
FOR
FARR COMPANY 401K/RETIREMENT PLAN
Fidelity Management Trust Company, its affiliates and employees may not provide
you with legal or tax advice in connection with the execution of this document.
It should be reviewed by your attorney and/or accountant prior to execution.
CORPORATEplan for RETIREMENT
VOLUME SUBMITTER
PLAN DOCUMENT SYSTEMS
<PAGE>
TABLE OF CONTENTS
PREAMBLE
ARTICLE I
DEFINITIONS; PURPOSE: RIGHTS OF ELIGIBLE
EMPLOYEES AND BENEFICIARIES
1.1 Definitions 2
1.2 Purpose 2
1.3 Rights of Eligible Employees and Beneficiaries 2
ARTICLE II
POWERS AND DUTIES OF THE TRUSTEE
2.1 Powers and Duties of Trustee 3
2.2 Selection of Investment Funds 4
2.3 Available Investment Funds 5
2.4 Participant Direction 5
2.5 Adjustment of Claims 6
2.6 Voting Rights 6
2.7 Participant Loans 6
2.8 Registration of Securities; Nominees 6
2.9 Agents, Attorneys, Actuaries, and Accountants 7
2.10 Deposit of Funds 7
2.11 Payment of Taxes; Indemnity 7
2.12 Records and Statements 7
2.13 Authority 8
2.14 Court Action Not Required 8
2.15 Reliance on Written Directions 8
2.16 Trustee's Performance 9
2.17 Counsel 9
2.18 Annuity Contracts 9
2.19 Sponsor Stock 9
ARTICLE III
PAYMENTS OUT OF THE TRUST
3.1 Payments 10
3.2 Compensation and Expenses 10
3.3 Return of Contributions to the Sponsor 10
ARTICLE IV
SUCCESSION TO THE TRUSTEESHIP
4.1 Resignation of the Trustee 11
4.2 Removal of the Trustee 11
4.3 Appointment of a Successor Trustee 11
<PAGE>
ARTICLE V
AMENDMENT
5.1 Right of Amendment 12
5.2 Limitation on Amendment 12
ARTICLE VI
MISCELLANEOUS
6.1 Validity of Trust Agreement 13
6.2 No Guarantees 13
6.3 Duty to Furnish Information 13
6.4 Federal Income Tax Withholding 13
6.5 Parties Bound 14
6.6 Indemnification by Sponsor 14
6.7 Bonding Requirements 14
6.8 Separate Trust or Fund for Existing Plan Assets 14
<PAGE>
PREAMBLE
THIS Trust Agreement is entered into by and between Farr Company (the "Sponsor")
and Fidelity Management Trust Company, a corporation organized and operating
under the laws of the Commonwealth of Massachusetts, and authorized to carry on
a trust business (the "Trustee");
WHEREAS, the Sponsor has adopted the Farr Company 401K/Retirement Plan (the
"Plan") for the benefit of eligible employees and their beneficiaries; and
WHEREAS, the Sponsor desires to establish a trust for the exclusive benefit of
eligible employees and their beneficiaries to hold assets of the Plan; and
WHEREAS, the Trustee agrees to act as trustee of said trust; and
WHEREAS, the Sponsor and any person designated by the Sponsor pursuant to
Article XVIII of the Plan, serves as a named fiduciary of the Plan for purposes
of Section 402(a) (2) of ERISA (the "Named Fiduciary");
NOW, THEREFORE, the parties agree that effective as of January 1, 1996, the
Trustee shall hold all funds and other property from time to time contributed or
transferred to it pursuant to the provisions of the Plan, together with all the
increments, proceeds, investments and reinvestments thereof, in trust, for the
uses and purposes and upon the terms and conditions hereinafter set forth.
<PAGE>
ARTICLE I
DEFINITIONS; PURPOSE; RIGHTS OF ELIGIBLE
EMPLOYEES AND BENEFICIARIES
1.1 DEFINITIONS
For all purposes of this Trust Agreement, the terms defined in the Plan shall
have the meanings therein set forth, unless, as the case may be, a different
meaning is clearly required by the context hereof.
1.2 PURPOSE
The Trust is established to provide retirement and other benefits for eligible
employees and their beneficiaries. Except as provided in Section 3.3, prior to
the satisfaction of all liabilities under the Plan, no part of the Trust assets
may be applied to any purpose other than providing benefits under the Plan and
for defraying expenses of administering the Plan and the Trust.
1.3 RIGHTS OF ELIGIBLE EMPLOYEES AND BENEFICIARIES
The rights of eligible employees and their beneficiaries shall be determined
solely under the Plan.
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ARTICLE II
POWERS AND DUTIES OF THE TRUSTEE
2.1 POWERS AND DUTIES OF TRUSTEE
In the administration of the Trust, the Trustee shall have the powers and duties
set forth in this Article II, in addition to all powers and duties otherwise
expressly set forth in this Trust Agreement. Subject to the other provisions of
this Agreement, the Trustee is empowered;
(a) To invest and reinvest all or any part of trust units or the trust,
including both principal and income, in securities pursuant to this
agreement;
(b) to purchase annuities and hold and retain such contract or contracts as
part of the Trust;
(c) to invest and reinvest all or any part of the Trust under an insurance
contract or contracts that contain provisions relating to a specified rate
of return on such investment;
(d) to sell, lease, exchange, or otherwise dispose of all or any part of the
Trust at such prices, upon such terms and conditions, and in such manner as
it shall determine, including the right to surrender an annuity contract or
contracts at any time held in the Trust;
(e) to exercise, buy, or sell rights of conversion or subscription;
(f) to enter into or oppose any plan of consolidation, merger, reorganization,
capital readjustment, or liquidation of any corporation or other issuer of
securities held hereunder (including any plan for the sale, lease, or
mortgage of any of its property or the adjustment or liquidation of any of
its indebtedness) and, in connection with any such plan, to enter into any
security holders' trust agreement, to deposit securities under such
agreement, and to pay assessments or subscriptions from the other assets
held hereunder;
(g) to retain in cash or in forms of investment otherwise unproductive of
income such portion of the Trust as determined by the Sponsor is
necessitated by the cash requirements of the Trust; provided, however,
that, to the maximum extent feasible, such amounts shall be held which are
productive of income but are sufficiently liquid to meet such cash
requirements;
(h) to deposit securities held hereunder in any depository;
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(i) to transfer to and invest all or any part of the Trust in any collective
investment trust which constitutes an exempt trust within the meaning of
the code and which is then maintained by a bank or trust company, or any of
its affiliates, when such bank or trust company is acting as Trustee or
agent for the Trustee; provided that the instrument establishing such
collective investment trust, as amended from time to time, shall govern any
investment therein, and is hereby made a part of this Trust Agreement as if
fully set forth herein; provided further, that, to the extent that the
Named Fiduciary selects as an investment option the Managed Income
Portfolio of the Fidelity Group Trust for Employee Benefit Plans (the
"Group Trust"), the Sponsor hereby agrees to the terms of the Group Trust
and adopts said terms as a part of this Trust Agreement and acknowledges
that it has received from the Trustee a copy of the Group Trust, the
Declaration of Separate Fund for the Managed Income Portfolio of the Group
Trust, and the Circular for the Managed Income Portfolio;
(j) pursuant to the direction of the Administrator, to purchase and sell
interests in a registered investment company registered under the
Investment Company Act of 1940, for which the Trustee or an affiliate of
the Trustee serves as investment advisor or sub-advisor and receives
compensation from the registered investment company for its services as
investment advisor or sub-advisor, provided that the applicable conditions
of Department of Labor Transaction Exemption 77-4 are satisfied; and
(k) to transfer to and invest all or any part of the Trust in any trust which
forms a part of a pension or profit-sharing plan of an Employer or a
Related Company qualified under the Code and which constitutes an exempt
trust within the meaning of the Code; provided that the instrument
establishing such trust, as amended from time to time, shall govern any
investment therein, and is hereby made a part of this Trust Agreement as if
fully set forth herein.
The term "securities", wherever used in this Trust Agreement, shall include
common and preferred stocks, contractual obligations of every kind, whether
secured or unsecured, equitable interests in real or personal property, and
intangible property of every description and howsoever evidenced.
2.2 SELECTION OF INVESTMENT FUNDS
The Trustee shall have no responsibility for the selection of Investment Funds
under the Trust and shall not render investment
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advice to any person in connection with the selection of such options.
2.3 AVAILABLE INVESTMENT FUNDS
The Named Fiduciary shall direct the Trustee as to (i) the Investment Funds the
Trust shall be invested in during the Participant recordkeeping reconciliation
period, and (ii) the Investment Funds in which Plan Participants and/or the
Sponsor may invest in, subject to the following limitations. The Named Fiduciary
may determine to offer as Investment Funds only (i) securities issued by the
investment companies advised by Fidelity Management and Research Company
("Mutual Funds"), (ii) notes evidencing loans to Plan Participants in accordance
with the terms of the Plan, and (iii) collective investment funds maintained by
the Trustee for qualified plans; provided, however, that the Trustee shall be
considered a fiduciary with investment discretion only with respect to Plan
assets that are invested in collective investment funds maintained by the
Trustee for qualified plans. The Investment Funds initially selected by the
Named Fiduciary are identified in Schedule A attached hereto. The Named
Fiduciary may add additional Investment Funds with the consent of the Trustee
and upon mutual amendment of Schedule A of this Trust Agreement. The Sponsor
hereby acknowledges that it has received from the Trustee a copy of the
prospectus for each Mutual Fund selected by the Named Fiduciary as a Plan
Investment Fund.
2.4 PARTICIPANT DIRECTION
Each Plan Participant shall direct the Trustee in which Investment Fund(s) to
invest the assets in the Participant's Separate Account as provided in the Plan.
Such directions may be made by Plan Participants by use of the telephone
exchange system maintained for such purposes by the Trustee or its agent, in
accordance with written telephone exchange guidelines set forth in the service
agreement between the Sponsor and Fidelity Management and Research Company (the
"Service Agreement"). In the event that the Trustee fails to receive a proper
direction, the assets shall be invested in the securities of the Mutual Fund set
forth for such purpose in the Service Agreement, until the Trustee receives a
proper direction. Additionally, in the event any assets in the Participant's
Separate Account are not subject to the Participant's investment direction, such
assets shall be invested as directed by the Sponsor in accordance with the
Service Agreement.
2.5 ADJUSTMENT OF CLAIMS
Subject to the consent of the Sponsor, the Trustee is empowered to compromise
and adjust any and all claims, debts, or obligations in favor of or against the
Trust, whether such claims
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be in litigation or not, upon such terms and conditions as it shall determine,
and to reduce the rate of interest on, to extend or otherwise modify, to
foreclose upon default, or otherwise to enforce any such claim, debt, or
obligation.
2.6 VOTING RIGHTS
At the time of mailing of notice of each annual or special stockholders' meeting
of any Mutual Fund, the Trustee shall send a copy of the notice and all proxy
solicitation materials to each Participant who has shares of the Mutual Fund
credited to the Participant's Separate Account, together with a voting direction
form for return to the Trustee or designee. The Participant shall have the right
to direct the Trustee as to the manner in which the Trustee is to vote the
shares credited to the Participant's Separate Account (both vested and
unvested), except as otherwise provided in this Section 2.6. The Trustee shall
vote the shares as directed by the Participant. The Sponsor shall have the right
to direct the Trustee as to the manner in which the Trustee is to vote the
shares of the Mutual Funds in the Trust during the Participant recordkeeping
reconciliation period and any shares credited to the Participant's Separate
Account which are not subject to Participant direction. With respect to all
rights other than the right to vote, the Trustee shall follow the directions of
the Named Fiduciary. The Trustee shall have no duty to solicit directions from
Participants or the Sponsor.
2.7 PARTICIPANT LOANS
If provided under the terms of the Plan, the Sponsor may direct the Trustee in
writing to establish a separate loan Investment Fund with respect to a
Participant and to transfer assets from any of the other Trust Funds to the
separate loan Investment Fund for the purpose of making loans to the Participant
as provided in the Plan. The Trustee shall be required to follow the directions
so given to it; provided, however, that the Trustee shall not be required to
follow any directions which would result in a breach of the Trustee's fiduciary
duties.
2.8 REGISTRATION OF SECURITIES; NOMINEES
The Trustee is empowered to register securities in its own name, or in the name
of its nominee, without disclosing the trust, or to hold the same in bearer
form, and to take title to other property in its own name or in the name of its
nominee without disclosing the trust; provided, however, that the Trustee shall
be responsible for the acts of its nominees.
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2.9 AGENTS, ATTORNEYS, ACTUARIES, AND ACCOUNTANTS
The Trustee is empowered to employ such agents, attorneys (including attorneys
who may be of counsel for the Sponsor), actuaries, and accountants as it may
deem necessary or proper in connection with its duties hereunder, and to
determine and pay the reasonable compensation and expenses of such agents,
attorneys, actuaries, and accountants.
2.10 DEPOSIT OF FUNDS
The Trustee is empowered to deposit funds, pending investment or distribution
thereof, in the commercial or, savings department of any bank, savings and loan
association or trust company supervised by the United States or a state or
agency thereof; and it is authorized to accept such regulations covering the
withdrawal of funds so deposited as it shall deem proper. The Trustee may
deposit all or any part of the Trust, including both principal and interest, in
the banking department of the Trustee (and any of its affiliates) and of any
other fiduciary or party-in-interest with respect to the Trust; provided,
however, that the deposits bear a reasonable rate of interest and are authorized
pursuant to the provisions of Section 408 of ERISA.
2.11 PAYMENT OF TAXES; INDEMNITY
The Trustee is empowered to pay out of the Trust, as a general charge thereon,
any and all taxes of whatsoever nature assessed on or in respect to the Trust;
provided, however, that, if the Sponsor shall notify the Trustee in writing that
in the opinion of its counsel any such tax is not lawfully assessed, the
Trustee, if so requested by the Sponsor, shall contest the validity of such tax
in any manner deemed appropriate by the Sponsor or its counsel. The word
"taxes", as used herein, shall be deemed to include any interest or penalties
assessed in respect to such taxes. Unless the Trustee first shall have been
indemnified to its satisfaction by the Sponsor, the Trustee shall not be
required to contest the validity of any tax, to institute, maintain, or defend
against any other action or proceeding, or to incur any other expense in
connection with the Trust, except to the extent that the Trust is sufficient
therefor.
2.12 RECORDS AND STATEMENTS
The Trustee shall keep accurate records of all receipts, disbursements, and
other transactions affecting the Trust which, together with the assets
comprising the Trust and all evidences thereof, shall be available for
inspection or for the purpose of making copies or reproductions thereof by the
Sponsor or any of its duly authorized representatives. The Trustee shall render
to the Sponsor at intervals agreed to by the Sponsor and the Trustee statements
of receipts and disbursements and of all transactions
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during the preceding interval affecting the Trust and a statement of all assets
held in the Trust and the investment performance or the Investment Funds.
2.13 AUTHORITY
The Trustee is authorized to execute and deliver any and all instruments and to
perform any and all acts which may be necessary or proper to enable it to
discharge its duties under this Trust Agreement and to carry out the powers and
authority conferred upon it. The Sponsor specifically acknowledges and
authorizes that affiliates of the Trustee may act as its agent in the
performance of ministerial, non-fiduciary duties under the Trust. The expenses
and compensation of such agent shall be paid by the Trustee.
2.14 COURT ACTION NOT REQUIRED
All the powers and authority herein conferred upon the Trustee shall be
exercised by it without the necessity of applying to any court for leave or
confirmation. No person, firm, or corporation dealing with the Trustee shall be
required to ascertain whether the Trustee shall have obtained the approval of
any court or of any person with respect to any action which it may propose to
take hereunder, but every such person, firm, or corporation shall be protected
in relying solely upon the deed, transfer, or assurance of the Trustee.
2.15 RELIANCE ON WRITTEN DIRECTIONS
Any written direction, request, approval, or other document signed in the name
of the Sponsor or the Administrator by a duly authorized individual shall be
conclusively deemed to constitute the written direction, request, approval, or
other document of the Sponsor or the Administrator and the Trustee shall not be
liable for any loss, or by reason of any breach, arising from the direction
unless it is clear on the direction's face that the actions to be taken under
the direction would be prohibited by the fiduciary duty rules of Section 404(a)
of ERISA or would be contrary to the terms of the Plan or this Trust Agreement.
The Trustee will be entitled to rely on the latest certificate it has received
from the Sponsor or Administrator as to any person or persons authorized to act
for the Sponsor or Administrator hereunder and to sign on behalf of the Sponsor
or Administrator any directions or instructions, until it receives from the
Sponsor or Administrator written notice that such authority has been revoked.
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2.16 TRUSTEE'S PERFORMANCE
In the exercise of any of the powers and authority herein conferred upon it, the
Trustee shall adhere at all times to the fiduciary standards established by
ERISA.
2.17 COUNSEL
The Trustee may consult with counsel selected by it, who may be of counsel for
the Sponsor, as to any matters or questions arising hereunder, and the opinion
of such counsel shall be full and complete authority and protection in respect
to any action taken, suffered, or omitted by the Trustee in good faith and in
accordance with the opinion of such counsel.
2.18 ANNUITY CONTRACTS
Notwithstanding any other provision of this Trust Agreement or the Plan to the
contrary, the Administrator shall retain all discretionary power relating to any
annuity contract acquired by or delivered to the Trustee. As directed by the
Administrator, the Trustee will acquire, hold and dispose of annuity contracts,
deliver the purchase price, and exercise any and all rights, privileges,
options, and elections under those policies. The Trustee will be fully
discharged with respect to any policy when it is delivered to the Administrator.
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ARTICLE III
PAYMENTS OUT OF THE TRUST
3.1 PAYMENTS
The Trustee shall make payments from the Trust to such persons in such amounts
and at such times as the Sponsor or the Administrator from time to time shall
direct in writing to be payable under the Plan.
3.2 COMPENSATION AND EXPENSES
The Trustee shall be entitled to such reasonable compensation for its services
as the Sponsor and the Trustee from time to time shall agree, and shall be
entitled to reimbursement for all reasonable expenses incurred by the Trustee in
the administration of the Trust. All compensation, if applicable, and expenses
of administering the Plan or Trust, including fees assessed against the Plan,
the Trust, the Sponsor, or the Administrator, shall be paid out of the Trust as
a general charge thereon, unless the Sponsor elects to make payment thereof.
3.3 RETURN OF CONTRIBUTIONS TO THE SPONSOR
Upon written notice of the Sponsor, the Trustee shall pay over to the Sponsor
the amount of any contribution (i) made under a mistake of fact, or (ii)
disallowed as a deduction contribution under Section 404 of the Code, or (iii)
with respect to which the Plan does not qualify initially under Section 401(a)
of the Code or the Trust is not exempt under Section 501(a) of the Code. In no
event shall the Trustee make such payment later than one year after (i) the
payment of the contribution, or (it) the disallowance of the deduction to the
extent disallowed, or (iii) the date of denial of the initial qualification of
the Plan.
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ARTICLE IV
SUCCESSION TO THE TRUSTEESHIP
4.1 RESIGNATION OF THE TRUSTEE
Any Trustee acting hereunder may resign at any time by giving notice in writing
to the Sponsor at least 60 days before such resignation is to become effective,
unless the Sponsor shall accept as adequate a shorter notice.
4.2 REMOVAL OF THE TRUSTEE
The Sponsor may, with or without cause, remove any Trustee acting hereunder by
giving notice in writing to the Trustee at least 60 days before such removal is
to become effective, unless the Trustee shall accept as adequate a shorter
notice.
4.3 APPOINTMENT OF A SUCCESSOR TRUSTEE
If for any reason a vacancy should occur in the trusteeship, a successor Trustee
shall forthwith be appointed by the Sponsor. Any successor Trustee appointed
hereunder shall execute, acknowledge, and deliver to the Sponsor an instrument
in writing accepting such appointment hereunder. Such successor Trustee
thereupon shall become vested with the same title to the property comprising the
Trust, and shall have the same powers and duties with respect thereto, as are
hereby vested in the original Trustee. The predecessor Trustee shall execute all
such instruments and perform all such other acts as the successor Trustee or
Sponsor shall reasonably request to effectuate the provisions hereof. The
successor Trustee shall have no duty to inquire into the administration of the
Trust for any period prior to its succession.
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ARTICLE V
AMENDMENT
5.1 RIGHT OF AMENDMENT
The Sponsor reserves the right, at its sole discretion, from time to time to
amend the provisions of this Trust Agreement in any manner; provided, however,
that the powers, duties, and immunities of the Trustee under this Trust
Agreement shall not be substantively changed without its written approval. Any
such amendment shall be by written instrument executed by the Sponsor and
delivered to the Trustee, and may be made retroactively if in the opinion of the
Sponsor such amendment is necessary to enable the Plan and the Trust to meet the
requirements of the Code (including the regulations and rulings issued
thereunder) or the requirements of any governmental authority.
5.2 LIMITATION ON AMENDMENT
The Sponsor shall make no amendment to this Trust Agreement that results in the
forfeiture or reduction of the accrued benefit of any Participant or
Beneficiary. Notwithstanding the preceding sentence, nothing herein contained
shall restrict the right to amend the provisions of this Trust Agreement
relating to the administration of the Plan and the Trust. Moreover, no such
amendment shall be made under this Article which shall permit any part of the
Trust to revert to the Sponsor or any Related Company or to be used for or be
diverted to purposes other than for the exclusive benefit of Participants and
Beneficiaries.
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ARTICLE VI
MISCELLANEOUS
6.1 VALIDITY OF TRUST AGREEMENT
The validity of this Trust Agreement shall be determined and this Trust
Agreement shall be construed in accordance with the laws of the Commonwealth of
Massachusetts, except to the extent that they are superseded by Section 514 of
ERISA. The invalidity or illegality of any provision of this Trust Agreement
shall not affect the validity or legality of any other part hereof.
6.2 NO GUARANTEES
Neither the Sponsor nor the Trustee guarantees the Trust from loss or
depreciation.
6.3 DUTY TO FURNISH INFORMATION
The Administrator, the Employers, and the Trustee shall furnish to any of the
others any documents, reports, returns, statements, or other information that
such other reasonably deems necessary to perform its duties imposed under the
Plan or this Trust Agreement or otherwise imposed by law.
6.4 FEDERAL INCOME TAX WITHHOLDING
The Trustee shall not be responsible for withholding federal and state income
tax from distributions unless the Administrator provides the Trustee with the
following information concerning each distribution:
(a) The name, address, and social security number of the Participant (and the
Participant's spouse or other Beneficiary if applicable). By forwarding
such information, the Administrator shall be deemed hereby to have
certified the accuracy of such information.
(b) A statement of the reason for the payment or distribution and directions as
to the type of distribution (i.e. total qualified, periodic or non-periodic
distribution) requested.
If the Administrator does not provide the Trustee with the above information,
the responsibility for withholding federal and state income taxes and the
reporting thereof shall remain with the Administrator.
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6.5 PARTIES BOUND
This Trust Agreement shall be binding upon the parties hereto, all Participants,
and persons claiming under or through them pursuant to the Plan, and, as the
case may be, the heirs, executors, administrators, successors, and assigns of
each of them.
6.6 INDEMNIFICATION BY SPONSOR
The Sponsor shall indemnify and save harmless from and against any and all
liability to which the Trustee may be subjected by reason of any act or conduct
in its capacity as Trustee, including all expenses reasonably incurred in its
defense, except for losses or expenses resulting from the negligence or willful
misconduct of the Trustee or its affiliates.
6.7 BONDING REQUIREMENTS
Every fiduciary, except a bank or an insurance company, unless exempted by ERISA
and the regulations thereunder, shall be bonded in an amount not less than ten
percent of the funds such fiduciary handles; provided, however, that the minimum
bond shall be $1,000 and the maximum bond shall be $500,000. The amount of funds
handled shall be determined at the beginning of each Plan Year by the amount of
funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current Plan Year. The bond shall provide protection to the Plan against
any loss by reason of acts of fraud or dishonesty by the fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Section 412(a) (2) of ERISA), and the bond shall be in a form
approved by the Secretary of Labor. Notwithstanding anything to the contrary
contained in the Plan or this Trust Agreement, the cost of such bonds shall be
an expense of and may, at the election of the Sponsor, be paid from the Trust or
by the Sponsor.
6.8 SEPARATE TRUST OR FUND FOR EXISTING PLAN ASSETS
With the consent of the Trustee, an Employer may maintain a trust or fund
(including a group annuity contract) under the Plan separate from the Trust Fund
to hold Plan assets acquired prior to the effective date of this Trust Agreement
which are not among the available Investment Funds provided under Section 2.3.
The duties and responsibilities of the trustee of the separate trust
(hereinafter referred to as the "trustee") shall be provided by a separate trust
agreement between the Employer and the trustee.
Notwithstanding the preceding paragraph, the Trustee or an affiliate of the
Trustee may agree in writing to provide
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ministerial recordkeeping service for guaranteed investment contracts held in
the separate trust or fund. Any such guaranteed investment contract shall be
valued as directed by the Employer or the trustee.
The trustee shall be the owner of any insurance contract purchased prior to the
effective date of this Trust Agreement. Any such insurance contract must provide
that the proceeds will be payable to the trustee; provided, however, that the
trustee shall be required to pay over all proceeds of the contract to the
Participant's Beneficiary in accordance with the distribution provisions of the
Plan. Under no circumstances will the Trust Fund retain any part of the
proceeds. In the event of any conflict between the terms of the Plan and the
terms of any insurance contract held hereunder, the Plan provisions shall
control.
Any life insurance contracts held in the Trust Fund or in the separate trust
shall be subject to the provisions of Article IX of the Plan.
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EXECUTED AT Farr Company, El Sugundo, this 15 day of December, 1995.
FARR COMPANY
By Kenneth W. Gerstner
(Signature)
Title: Senior Vice President & CFO
FIDELITY MANAGEMENT TRUST COMPANY
By Wayne A. Isaacs
(Signature)
Title: Senior Legal Counsel/
Authorized Signatory
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SCHEDULE A
INVESTMENT FUNDS
Participant accounts under the Trust shall be invested among the Mutual Funds or
collective investment funds listed below pursuant to Participant and/or Sponsor
directions.
Fund Name Fund Number
--------- -----------
(1) Retirement Money Market 630
(2) Intermediate Bond Fund 032
(3) Balanced Fund 304
(4) Growth & Income Portfolio 027
(5) Magellan 021
17
Exhibit 10.39
TRUST AGREEMENT
Between
FARR COMPANY
[Sponsor]
and
FIDELITY MANAGEMENT TRUST COMPANY
[Trustee]
Dated as of November 21, 1995
IMPORTANT NOTE
This Trust Agreement may only be used in conjunction with the CORPORATEplan for
Retirement Select Plan Adoption Agreement and Basic Plan Document. An Employer
may not rely solely on said documents to ensure that the Plan is "unfunded and
maintained primarily for the purpose of providing deferred compensation to a
select group of management or highly compensated employees" and exempt from
parts 2 through 4 of Title I of the Employee Retirement Income Security Act of
1974 with respect to the Employer's particular situation. Fidelity Management
Trust Company, its affiliates and employees may not provide you with legal
advice in connection with the execution of this document. This document should
be reviewed by your attorney and/or accountant prior to execution.
4/11/94
<PAGE>
TABLE OF CONTENTS
Section Page
1. Trust 1
(a) Establishment 1
(b) Grantor Trust 1
(c) Trust Assets 1
(d) Non-Assignment 1
2. Payments to Sponsor 2
3. Disbursements 2
(a) Directions from Administrator 2
(b) Limitations 2
4. Investment of Trust 2
(a) Selection of Investment Options 2
(b) Available Investment Options 2
(c) Investment Direction 3
(d) Mutual Funds 3
(e) Trustee Powers 4
5. Recordkeeping and Administrative Services to be Performed 5
(a) General 5
(b) Accounts 5
(c) Inspection and Audit 5
(d) Effect of Plan Amendment 5
(e) Returns, Reports and Information 6
6. Compensation and Expenses 6
7. Directions and Indemnification 6
(a) Identity of Administrator 6
(b) Directions from Administrator 6
(c) Directions from Sponsor 6
(d) Indemnification 7
(e) Survival 7
8. Resignation or Removal of Trustee 7
(a) Resignation 7
(b) Removal 7
9. Successor Trustee 7
(a) Appointment 7
(b) Acceptance 7
(c) Corporate Action 8
10. Termination 8
11. Resignation, Removal, and Termination Notices 8
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<PAGE>
12. Duration 8
13. Insolvency of Sponsor 8
14. Amendment or Modification 9
15. General 10
(a) Performance by Trustee, its Agents or Affiliates 10
(b) Entire Agreement 10
(c) Waiver 10
(d) Successors and Assigns 10
(e) Partial Invalidity 10
(d) Section Headings 10
16. Governing Law 11
(a) Massachusetts Law Controls 11
(b) Trust Agreement Controls 11
4/11/94
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TRUST AGREEMENT, dated as of the 21 day of November, 1995 , between
FARR COMPANY, a Delaware corporation, having an office at 2221 Park Place, El
Segundo, CA 90245 (the "Sponsor"), and FIDELITY MANAGEMENT TRUST COMPANY, a
Massachusetts trust company, having an office at 82 Devonshire Street, Boston,
Massachusetts 02109 (the "Trustee").
WITNESSETH:
WHEREAS, the Sponsor is the sponsor of the Farr Company Supplementary
Savings Plan (the "Plan"); and
WHEREAS, the Sponsor wishes to establish an irrevocable trust and to
contribute to the trust assets that shall be held therein, subject to the claims
of Sponsor's creditors in the event of Sponsor's Insolvency, as herein defined,
until paid to Plan participants and their beneficiaries in such manner and at
such times as specified in the Plan; and
WHEREAS, it is the intention of the Sponsor that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974
("ERISA"); and
WHEREAS, it is the intention of the Sponsor to make contributions to
the trust to provide itself with a source of funds to assist it in the meeting
of its liabilities under the Plan; and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan
assets in trust among several investment options selected by the Sponsor; and
WHEREAS, the Sponsor wishes to have the Trustee perform certain
ministerial recordkeeplng and administrative functions under the Plan; and
WHEREAS, the Employer or such other individual named in the Plan is
the Administrator of the Plan; and
WHEREAS, the Trustee is willing to perform recordkeeping and
administrative services for the Plan if the services are purely ministerial in
nature and are provided within a framework of plan provisions, guidelines and
interpretations conveyed in writing to the Trustee by the Administrator.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and agreements set forth below, the Sponsor and the Trustee
agree as follows:
4/11/94
<PAGE>
SECTION 1.
- ---------
1. TRUST.
(a) ESTABLISHMENT.
The Sponsor hereby establishes a trust (hereinafter the "Trust"), with
the Trustee. The Trust shall consist of an initial contribution of
money or other property acceptable to the Trustee in its sole
discretion, made by the Sponsor or transferred from a previous trustee
under the Plan, such additional sums of money as shall from time to
time be delivered to the Trustee under the Plan, all investments made
therewith and proceeds thereof, and all earnings and profits thereon,
less the payments that are made by the Trustee as provided herein,
without distinction between principal and income. The Trustee hereby
accepts the Trust on the terms and conditions set forth in this
Agreement. In accepting this Trust, the Trustee shall be accountable
for the assets received by it, subject to the terms and conditions of
this Agreement
(b) GRANTOR TRUST.
The Trust is intended to be a grantor trust, of which the Sponsor is
the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended,
and shall be construed accordingly.
(c) TRUST ASSETS.
The principal of the Trust, and any earnings thereon shall be held
separate and apart from other funds of the Sponsor and shall be used
exclusively for the uses and purposes of Plan participants and general
creditors as herein set forth. Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial
ownership interest in, any assets of the Trust. Any rights created
under the Plan and this Trust Agreement shall he mere unsecured
contractual rights of Plan participants and their beneficiaries against
the Sponsor. Any assets held by the Trust will be subject to the claims
of the Sponsor's general creditors under federal and state law in the
event of Insolvency, as defined in Section 13(a).
(d) NON-ASSIGNMENT.
Benefit payments to Plan participants and their beneficiaries funded
under this Trust may not be anticipated, assigned (either at law or in
equity), alienated, pledged, encumbered, or subjected to attachment,
garnishment, levy, execution, or other legal or equitable process.
4/11/94
<PAGE>
SECTION 2.
- ---------
2. PAYMENTS TO SPONSOR.
Except as provided under Section 13, the Sponsor shall have no right
to retain or divert to others any of the Trust assets before all
payment of benefits have been made to the participants and their
beneficiaries pursuant to the terms of the Plan.
SECTION 3.
- ---------
3. DISBURSEMENTS.
(a) DIRECTIONS FROM ADMINISTRATOR.
The Trustee shall disburse monies to the Sponsor for benefit payments
in the amounts that the Administrator directs from time to time in
writing. The Trustee shall have no responsibility to ascertain any
direction's compliance with the terms of the Plan or of any applicable
law. The Trustee shall not be responsible for making benefit payments
to participants under the Plan, nor shall the Trustee be responsible
for any Social Security or Federal, State or local income tax
reporting or withholding with respect to such Plan benefits.
(b) LIMITATIONS.
The Trustee shall not be required to make any disbursement in excess
of the net realizable value of the assets of the Trust at the time of
the disbursement. The Trustee shall not be required to make any
disbursement in cash unless the Administrator has provided a written
direction as to the assets to be converted to cash for the purpose of
making the disbursement.
SECTION 4.
- ---------
4. INVESTMENT OF TRUST.
(a) SELECTION OF INVESTMENT OPTIONS.
The Trustee shall have no responsibility for the selection of
investment options under the Trust and shall not render investment
advice to any person in connection with the selection of such options.
(b) AVAILABLE INVESTMENT OPTIONS.
In accordance with Section 1.14 of the Plan, the Sponsor shall direct
the Trustee as to the investment options available under the Trust
provided, however, that the Trustee shall not be considered a
fiduciary with investment discretion. The Sponsor may add additional
investment options with the consent of the Trustee and upon amendment
of the Plan.
4/11/94 2
<PAGE>
(c) INVESTMENT DIRECTION.
In order to provide for an accumulation of assets comparable to the
contractual liabilities accruing under the Plan, the Sponsor may direct
the Trustee in writing to invest the assets held in the Trust to
correspond to the hypothetical investments made for Participants under
the P1an. Such directions may be made by Plan participants by use of
the telephone exchange system maintained for such purposes by the
Trustee or its agent. In the event that the Trustee fails to receive a
proper direction from the Sponsor or from Participants, the assets in
question shall be invested in Fidelity Retirement Money Market Fund, or
such other fund designated by the Sponsor for this purpose, until the
Trustee receives a proper direction.
(d) MUTUAL FUNDS.
The Sponsor hereby acknowledges that it has received from the Trustee a
copy of the prospectus for each Mutual Fund selected by the Sponsor as
a Plan investment option. Trust investment in Mutual Funds shall be
subject to the following limitations:
(i) EXECUTION OF PURCHASES AND SALES.
Purchase and sales of Mutual Funds (other than for Exchanges) shall be
made on the date on which the Trustee receives from the Sponsor in good
order all information and documentation necessary to accurately effect
such purchases and sales (or in the case of a purchase, the subsequent
date on which the Trustee has received a wire transfer of funds
necessary to make such purchase). Exchanges of Mutual Funds shall be
made on the same business day that the Trustee receives a proper
direction if received before 4:00 p.m. eastern time; if the direction
is received after 4:00 p.m. eastern time, the exchange shall be made
the following day.
(ii) VOTING.
At the time of mailing of notice of each annual or special stockholders
meeting of any Mutual Fund, the Trustee shall send a copy of the notice
and all proxy solicitation materials to each Plan participant who has
shares of the Mutual Fund credited to the participant's account,
together with a voting direction form for return to the Trustee or its
designee. The participant shall have the right to direct the Trustee as
to the manner in which the Trustee is to vote the shares credited to
the participant's account (both vested and unvested). The Trustee shall
vote the shares as directed by the participant. The Trustee shall not
vote shares for which it has received no directions from the
participant. During the participant recordkeeping reconciliation
("transition") period; the Sponsor shall have the right to direct the
Trustee as to the manner in which the Trustee is to vote the shares of
the Mutual funds in the Trust. With respect to all rights other than
the right to vote, the Trustee shall follow the directions of the
participant and if no such directions are received, the directions of
the Sponsor. The Trustee shall have no duty to solicit directions from
participants or the Sponsor.
4/11/94 3
<PAGE>
(e)TRUSTEE POWERS.
The Trustee shall have the following powers and authority:
(i) Subject to paragraphs (b),(c) and (d) of this
Section 4, to sell, exchange, convey, transfer, or otherwise dispose of
any property held in the Trust, by private contract or at public
auction. No person dealing with the Trustee shall be bound to see to
the application of the purchase money or other property delivered to
the Trustee or to inquire into the validity, expediency, or propriety
of any such sale or other disposition.
(ii) To cause any securities or other property held as
part of the Trust to be registered in the Trustee's own name, in the
name of one or more of its nominees, or in the Trustee's account with
the Depository Trust Company of New York and to hold any investments in
bearer form, but the books and records of the Trustee shall at all times
show that all such investments are part of the Trust.
(iii) To keep that portion of the Trust in cash or
cash balances as the Sponsor or Administrator may, from time to time,
deem to be in the best interest of the Trust.
(iv) To make, execute, acknowledge, and deliver any
and all documents of transfer or conveyance and to carry out the powers
herein granted.
(v) To settle, compromise, or submit to arbitration
any claims, debts, or damages due to or arising from the Trust; to
commence or defend suits or legal or administrative proceedings; to
represent the Trust in all suits and legal and administrative hearings;
and to pay all reasonable expenses arising from any such action, from
the Trust if not paid by the Sponsor.
(vi) To employ legal, accounting, clerical, and other
assistance as may be required in carrying out the provisions of this
Agreement and to pay their reasonable expenses and compensation from
the Trust if not paid by the Sponsor.
(vii) To do all other acts although not specifically
mentioned herein, as the Trustee may deem necessary to carry out any of
the foregoing powers and the purposes of the Trust.
Notwithstanding any powers granted to Trustee pursuant to this
Trust Agreement or to applicable law, Trustee shall not have any power
that could give this trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of Section 301.7701-2
of the Procedure and Administrative Regulations promulgated pursuant to
the Internal Revenue Code.
4/11/94 4
<PAGE>
SECTION 5.
- ---------
5. RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED.
(a) GENERAL.
The Trustee shall perform those recordkeeping and administrative
functions described in the CORPORATEplan for Retirement Select Plan
Service Agreement between the Trustee and the Sponsor ("Service
Agreement").
(b) ACCOUNTS.
The Trustee shall keep accurate accounts of all investments, receipts,
disbursements, and other transactions hereunder and shall report the
value of the assets held in the Trust as of the last day of each fiscal
quarter of the Plan and, if not on the last day of a fiscal quarter,
the date on which the Trustee resigns or is removed as provided in
Section 8 of this Agreement or is terminated as provided in Section 10
(the "Reporting Date"). Within thirty(30) days following each Reporting
Date or within sixty (60) days in the case of a Reporting date caused
by the resignation or removal of the Trustee, or the termination of
this Agreement, the Trustee shall file with the Administrator a written
account setting forth all investments, receipts, disbursements, and
other transactions effected by the Trustee between the Reporting Date
and the prior Reporting Date, and setting forth the value of the trust
as of the Reporting Date. Except as otherwise required under applicable
law, upon the expiration of six(6) months from the date of filing such
account with the Administrator, the Trustee shall have no liability or
further accountability to anyone with respect to the propriety of its
acts or transactions shown in such account, except with respect to such
acts or transactions as to which the Sponsor shall within such six(6)
month period file with the Trustee written objections.
(c) INSPECTION AND AUDIT.
All records generated by the Trustee in accordance with paragraphs (a)
and (b) shall be open to inspection and audit, during the Trustee's
regular business hours prior to the termination of this Agreement, by
the Administrator or any person designated by the Administrator. Upon
the resignation or removal of the Trustee or the termination of this
Agreement, the Trustee shall provide to the Administrator, at no
expense to the Sponsor, in the format regularly provided to the
Administrator, a statement of each participant's accounts as of the
resignation, removal, or termination, and the Trustee shall provide to
the Administrator or the Plan's new recordkeeper such further records
as are reasonable, at the Sponsor's expense.
(d) EFFECT OF PLAN AMENDMENT.
The Trustee's provision of the recordkeeping and administrative
services set forth in this Section 5 shall be conditioned on the
Sponsor delivering to the Trustee a copy of any amendment to the Plan
as soon as administratively feasible following the amendment's
adoption, and on the Administrator providing the Trustee on a timely
basis with all the information the Administrator deems necessary for
the Trustee to perform the recordkeeping and administrative services
and such other information as the Trustee may reasonably request.
4/11/94 5
<PAGE>
(e) RETURNS, REPORTS AND INFORMATION.
The Administrator shall be responsible for the preparation and filing
of all returns, reports, and information required of the Trust or Plan
by law including but not limited to any annual fiduciary tax return.
The Trustee shall provide the Administrator with such information as
the Administrator may reasonably request to make these filings. The
Administrator shall also be responsible for making any disclosures to
participants required by law.
SECTION 6.
- ---------
6. COMPENSATION AND EXPENSES.
As consideration for its services, the Trustee shall be entitled to
the fees computed and billed in accordance with the Service Agreement.
All expenses of the Trustee relating directly to the acquisition and
disposition of investments constituting part of the Trust, and all
taxes of any kind whatsoever that may be levied or assessed under
existing or future laws upon or in respect of the Trust or the income
thereof, shall be a charge against and paid from the appropriate Plan
participants' accounts.
SECTION 7.
- ---------
7. DIRECTIONS AND INDEMNIFICATION.
(a) IDENTITY OF ADMINISTRATOR.
The Trustee shall be fully protected in relying on the fact that the
Administrator under the Plan is the individual or persons named as such
above or such other individuals or persons as the Sponsor may notify
the Trustee in writing.
(b) DIRECTIONS FROM ADMINISTRATOR.
Whenever the Administrator provides a direction to the Trustee, the
Trustee shall not be liable for any loss, or by reason of any breach,
arising from the direction if the direction is contained in a writing
(or is oral and immediately confirmed in written) signed by any
individual whose name and signature have been submitted (and not
withdrawn) in writing to the Trustee in the Service Agreement provided
the Trustee reasonably believes the signature of the individual to be
genuine. Such direction may be made via EDT in accordance with
procedures agreed to by the Administrator and the Trustee; provided,
however, that the Trustee shall be fully protected in relying on such
direction as if it were a direction made in writing by the
Administrator. The Trustee shall have no responsibility to ascertain
any direction's (i) accuracy, (ii) compliance with the terms of the
Plan or any applicable law, or (iii) effect for tax purposes or
otherwise.
(c) DIRECTIONS FROM SPONSOR.
The Trustee shall not be liable for any loss which arises from the
Sponsor's exercise or non-exercise of rights under Section 4 over the
assets in a participant's account.
4/11/94 6
<PAGE>
(d) INDEMNIFICATION.
The Sponsor shall indemnify the Trustee against, and hold the Trustee
harmless from, any and all loss, damage, penalty, liability, cost, and
expense, including without limitation, reasonable attorneys' fees and
disbursements, that may be incurred by, imposed upon, or asserted
against the Trustee by reason of any claim, regulatory proceeding or
litigation arising from any act done or omitted to be done by any
individual or person with respect to the Plan or Trust, excepting only
any and all loss, etc., arising solely from the Trustee's negligence
or bad faith.
(e) SURVIVAL.
The provisions of this Section 7 shall survive the termination of this
Agreement.
SECTION 8.
- ---------
8. RESIGNATION OR REMOVAL OF TRUSTEE.
(a) RESIGNATION.
The Trustee may resign at any time upon sixty(60) days' notice in
writing to the Sponsor, unless a shorter period of notice is agreed
upon by the Sponsor.
(b) REMOVAL.
The Sponsor may remove the Trustee at any time upon sixty(60) days'
notice in writing to the Trustee, unless a shorter period of notice is
agreed upon by the Trustee.
SECTION 9.
- ---------
9. SUCCESSOR TRUSTEE.
(a) APPOINTMENT.
If the office of Trustee becomes vacant for any reason, the Sponsor
may in writing appoint a successor trustee under this Agreement. The
successor trustee shall have all of the rights, powers, privileges,
obligations, duties, liabilities, and immunities granted to the
Trustee under this Agreement. The successor trustee and predecessor
trustee shall not be liable for the acts or omissions of the other
with respect to the Trust.
(b) ACCEPTANCE.
When the successor trustee accepts its appointment under this
Agreement, title to and possession of the Trust assets shall
immediately vest in the successor trustee without any further action
on the part of the predecessor trustee. The predecessor trustee shall
execute all instruments and do all acts that reasonably may be
necessary or reasonably may be requested in writing by the Sponsor or
the successor trustee to vest title to all Trust assets in the
successor trustee or to deliver all Trust assets to the successor
trustee.
4/11/94 7
<PAGE>
(c) CORPORATE ACTION.
Any successor of the Trustee or successor trustee, through sale or
transfer of the business or trust department of the Trustee or
successor trustee, or through reorganization, consolidation, or merger,
or any similar transaction, shall, upon consummation of the
transaction, become the successor trustee under the Agreement.
SECTION 10.
- ----------
10. TERMINATION.
This Agreement may be terminated at any time by the Sponsor upon sixty
(60) days' notice in writing to the Trustee. On the date of the
termination of this Agreement, the Trustee shall forthwith transfer and
deliver to such individual or entity as the Sponsor shall designate,
all cash and assets then constituting the Trust. If, by the termination
date, the Sponsor has not notified the Trustee in writing as to whom
the assets and cash are to be transferred and delivered, the Trustee
may bring an appropriate action or proceeding for leave to deposit the
assets and cash in a court of competent jurisdiction. The Trustee shall
be reimbursed by the Sponsor for all costs and expenses of the action
or proceeding including, without limitation, reasonable attorneys' fees
and disbursements.
SECTION 11.
- ----------
11. RESIGNATION, REMOVAL, AND TERMINATION NOTICES.
All notices of resignation, removal or termination under this Agreement
must be in writing and mailed to the party to which the notice is being
given by certified or registered mail, return receipt requested, to the
Sponsor at the address designated in the Service Agreement, and to the
Trustee at the afore-mentioned address or to such other addresses as
the parties have notified each other of in the foregoing manner.
SECTION 12.
- ----------
12. DURATION.
This Trust shall continue in effect without limit as to time, subject,
however, to the provisions of this Agreement relating to amendment,
modification, and termination thereof.
SECTION 13.
- ----------
13. INSOLVENCY OF SPONSOR.
(a) Trustee shall cease disbursement of funds for payment of
benefits to Plan participants and their beneficiaries if the Sponsor is
Insolvent. Sponsor shall be considered "Insolvent" for purposes of this
Trust Agreement if (i) Sponsor is unable to pay its debts as they
become due or (ii) Sponsor is subject to a pending proceeding as a
debtor under the United States Bankruptcy Code.
4/11/94 8
<PAGE>
(b) All times during the continuance of this Trust, the principal
and income of the Trust shall be subject to claims of general
creditors of the Sponsor under federal and state Law as set forth
below:
(i) The Board of Directors and the Chief Executive
Officer of the Sponsor shall have the duty to inform Trustee in
writing of Sponsor's Insolvency. If a person claiming to be a creditor
of the Sponsor alleges in writing to trustee that Sponsor has become
Insolvent, Trustee shall determine whether Sponsor is Insolvent and
pending such determination, Trustee shall discontinue disbursements
for payment of benefits to Plan participants or their beneficiaries.
(ii) Unless Trustee has actual knowledge of
Sponsor's Insolvency, or has received notice from Sponsor or a person
claiming to be a creditor alleging that Company is Insolvent, Trustee
shall have no duty to inquire whether Sponsor is Insolvent. Trustee
may in all events rely on such evidence concerning Sponsor's solvency
as may be furnished to Trustee and that provides Trustee with a
reasonable basis for making a determination concerning Sponsor's
solvency.
(iii) If any time Trustee has determined that
Sponsor is Insolvent, Trustee shall discontinue disbursements for
payments to Plan participants or their beneficiaries and shall hold the
assets of the Trust for the benefit of Sponsor's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Plan participants or their beneficiaries to pursue their rights as
general creditors of Sponsor with respect to benefits due under the
Plan or otherwise.
(iv) Trustee shall resume disbursement for the
payment of benefits to Plan participants or their beneficiaries in
accordance with Section 2 of this Trust Agreement only after Trustee
has determined that Sponsor is not Insolvent (or is no longer
Insolvent).
(c) Provided that there are sufficient assets, if Trustee
discontinues the payment of benefits from the Trust pursuant to (a)
hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of
all payments due to Plan participants or their beneficiaries under the
terms of the Plan for the period of such discontinuance, less the
aggregate amount of any payments made to Plan participants or their
beneficiaries by Sponsor in lieu of the payments provided for
hereunder during any such period of discontinuance.
SECTION 14.
- ----------
14. AMENDMENT OR MODIFICATION.
This agreement may be amended or modified at any time and from time to
time only by an instrument executed by both the Sponsor and the
Trustee.
4/11/94 9
<PAGE>
SECTION 15.
- ----------
15. GENERAL.
(a) PERFORMANCE BY TRUSTEE, ITS AGENTS OR AFFILIATES.
The sponsor acknowledges and authorizes that the services to be
provided under this Agreement shall be provided by the Trustee, its
agents or affiliates, including Fidelity Investments Institutional
Operations Company or its successor, and that certain of such services
may be provided pursuant to one or more other contractual agreements or
relationships.
(b) ENTIRE AGREEMENT.
This Agreement contains all of the terms agreed upon between the
parties with respect to the subject matter hereof.
(c) WAIVER.
No waiver by either party of any failure or refusal to comply with an
obligation hereunder shall be deemed a waiver of any other or
subsequent failure or refusal to so comply.
(d) SUCCESSORS AND ASSIGNS.
The stipulations in this Agreement shall inure to the benefit of, and
shall bind, the successors and assigns of the respective parties.
(e) PARTIAL INVALIDITY.
If any term or provision of this Agreement or the application thereof
to any person or circumstances shall to any extent be invalid or
unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected
thereby, and each term and provision of this Agreement shall be valid
and enforceable to the fullest extent permitted by law.
(f) SECTION HEADINGS.
The heading of the various sections and subsections of this Agreement
have been inserted only for the purposes of convenience and are not
part of this Agreement and shall not be deemed in any manner to modify,
explain, expand or restrict any of the provision of this Agreement.
4/11/94 10
<PAGE>
SECTION 16.
- ----------
16. GOVERNING LAW.
(a) MASSACHUSETTS LAW CONTROLS.
This Agreement is being made in the Commonwealth of Massachusetts, and
the Trust shall be administered as a Massachusetts trust. The validity,
construction, effect and administration of this Agreement shall be
governed by and interpreted in accordance with the laws of the
Commonwealth of Massachusetts, except to the extent those laws are
superseded under Section 514 of ERISA.
(b) TRUST AGREEMENT CONTROLS.
The Trustee is not a party to the Plan, and in the event of any
conflict between the provisions of the Plan and the provisions of this
Agreement, the provisions of this Agreement shall control.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized officers as of the day and year first above written.
[SPONSOR]
By: /s/ John Vissers
John Vissers
Controller, Assistant Secretary
Attest: /s/ Richard Brousseau
Richard Brousseau
Assistant Controller
FIDELITY MANAGEMENT TRUST COMPANY
[TRUSTEE]
By: /s/ Wayne A. Isaacs
Wayne A. Isaacs
Senior Legal Counsel
Authorized Signatory
4/11/94 11
<TABLE>
Exhibit 11
Earnings Per Share Calculation
<CAPTION>
December 30, 1995 December 31, 1994 January 1, 1994
----------------- ----------------- ---------------
Earnings:
- ---------
<S> <C> <C> <C>
Income (loss) before extraordinary item $3,124,000 ($355,000) $1,433,000
Extraordinary item ( 149,000)
---------- --------- ----------
Net Income (Loss) $3,124,000 ($355,000) $1,284,000
========== ========= ==========
Shares:
- -------
Weighted average number of common
shares outstanding 3,683,582 3,678,218 3,669,297
========= ========= =========
Income (loss) before extraordinary item
per common share $ 0.85 ($ 0.10) $ 0.39
Extraordinary item per common share ( 0.04)
---------- --------- ----------
Net Income (Loss) Per Common Share $ 0.85 ($ 0.10) $ 0.35
Earnings Assuming Full Dilution:
- --------------------------------
Income (loss) before extraordinary item $3,124,000 ($355,000) $1,433,000
Extraordinary item ( 149,000)
---------- --------- ----------
Net (loss) income $3,124,000 ($355,000) $1,284,000
========== ========= ==========
Shares:
- -------
Weighted average number of common
shares and dilutive common share
equivalents outstanding 3,691,509 3,678,218 3,674,706
========= ========= =========
Income (loss) before extraordinary item
per common share $ 0.85 ($ 0.10) $ 0.39
Extraordinary item per common share ( 0.04)
---------- --------- ----------
Net Income (Loss) Per Common Share $ 0.85 ($ 0.10) $ 0.35
========== ========= ==========
</TABLE>
Exhibit 13
FARR COMPANY
A PERIOD OF CHANGE
(bar graph showing 1994 and 1995
quarterly net profits appears here)
<TABLE>
<CAPTION>
Measurement
Period Net Profits
(Quarter) (thousands)
--------- -----------
<S> <C>
1994 - Q1 $ (415)
- Q2 $ (625)
- Q3 $ 275
- Q4 $ 410
1995 - Q1 $ 633
- Q2 $ 675
- Q3 $ 726
- Q4 $1,090
</TABLE>
1995 ANNUAL REPORT
-1-
<PAGE>
EVIDENCE OF CHANGE
SALES NET PROFIT
(bar graph showing 1994 and 1995 (bar graph showing 1994 and 1995
quarterly sales, in millions) quarterly net profits, in thousands)
LONG TERM DEBT MARKET CAPITALIZATION
(bar graph showing 1994 and 1995 (bar graph showing 1994 and 1995
end of quarter long term debt, quarterly market capitalization,
in millions) in millions)
<TABLE>
<CAPTION>
Measurement Long Market
Period Sales Net Profits Term Debt Capitalization
(quarter) (millions) (thousands) (millions) (millions)
- --------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
1994 - Q1 $25.2 $ (415) $22.9 $23.4
- Q2 $26.5 $ (625) $22.5 $17.9
- Q3 $27.5 $ 275 $22.0 $25.7
- Q4 $27.8 $ 410 $20.9 $22.5
1995 - Q1 $27.3 $ 633 $17.7 $24.4
- Q2 $28.7 $ 675 $17.5 $27.6
- Q3 $28.4 $ 726 $16.5 $31.3
- Q4 $28.9 $1,090 $10.1 $29.5
</TABLE>
-2-
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
(In thousands, except per share items) 1995 1994 1993
===========================================================================
<S> <C> <C> <C>
Net sales $113,275 $106,989 $112,363
Income (loss) before income taxes 5,163 ( 642) 2,161
Income tax provision (benefit) 2,039 ( 287) 728
Net Income (loss) 3,124 ( 355) 1,284
Net Income (loss) per common share .85 ( .10) .35
Current assets 38,928 40,075 37,653
Current liabilities 18,745 18,293 16,800
Working capital 20,183 21,782 20,853
Long-term debt, net of current portion 9,412 18,957 21,913
Property, plant, and equipment, net 16,406 17,930 21,914
Stockholders' Investment 24,785 21,172 21,605
===========================================================================
</TABLE>
ABOUT THE COMPANY
Farr Company's basic business is the control of particulate and vapor
contaminants in air and liquids. The Company is engaged in the design,
development, manufacture, sale and service of filters and filtration
systems. These products are used for a wide variety of applications
including heating, ventilation and air conditioning systems,
manufacturing and process cleanrooms, special filters for original
equipment manufacturers, natural gas, gasoline and diesel-powered
engines, railroad locomotives, dust collection systems and gas
turbines. Air filter efficiencies range from 20 percent (on outdoor
air) in disposable products to 99.9999+ percent (@ .12 microns
particulate) in cleanroom products. Products are available as standard
items or may be custom engineered. They range in size and complexity
from a small throwaway air filter to a large gas turbine system with a
single filter component module weighing in excess of twenty tons.
Products are sold throughout the world. Sales are made through direct
Company salesmen, manufacturer's representatives, distributors and
foreign licensees.
-3-
<PAGE>
To Our Shareholders:
As predicted a year ago, 1995 was a period during which our major efforts were
shifted from being principally that of problem solving and damage control to
pursuing opportunities and developing new ideas. The problem solving was high
priority and the results are strongly evident in every facet of the Company.
For the year of 1995, net profit was $3,124,000 or 85 cents per share, up from a
loss of $355,000 or 10 cents per share in 1994.
Sales for 1995 advanced to a record $113,275,000 or a 6 percent increase from
$106,989,000 in 1994. The increase in sales during 1995 was spread across all of
the Company's markets.
Sales for 1995 were up due to improved quality and delivery times coupled with
the renewed confidence and effort of the sales organization. Costs are down due
to improved manufacturing procedures, lower waste, better expense control and
improved efficiency in almost everything we do.
The charts on the inside cover graphically show the cumulative effects of the
many improvements made throughout the Company.
In 1995, the Company reduced its long-term debt by over $10 million. This debt
reduction was primarily accomplished through increased profits, net loss tax
credit carryforward, the sale of our Rialto facility, capital spending
conservation and controls aimed at minimizing our working capital requirements.
In addition to debt reduction in 1995, we leveraged our improved financial
position and performance to negotiate reductions in the cost of borrowed capital
from our lenders. The decreases in both our borrowing amounts and interest rates
will significantly decrease 1996 interest expense and will contribute towards
improving profit performance. The new borrowing arrangements also relieve us of
some peripheral charges and onerous terms and conditions.
While the numerical results are important, more encouraging are the cultural
changes that are taking place and the effects of these changes on the future
growth and success of the business. Higher levels of accomplishment are being
displayed by all of our managers as they fine-tune the Farr business machine.
During the year, the Company's various U. S. retirement benefit programs were
replaced with a single 401(K) retirement plan. The new plan provides employees
with a basic retirement benefit which is 100% Company funded. It also affords
employees the opportunity for additional investment with matching participation
by the Company up to certain levels. The former retirement plans were difficult
to understand and administrate and did not provide adequate retirement benefits
for all employees. This has been well received and it is felt that this improved
benefit will be an important factor in attracting and retaining good employees
needed for further growth and success.
Obviously we are pleased with the results to date, but more importantly, there
still remain many opportunities for improvements and these are being identified
and undertaken on an ongoing vigorous basis. One of these operating improvements
is the reorganization of our manufacturing and distribution operations in North
America in which, taking advantage of NAFTA, we will be able to supply the
northeast United States from our Canadian facility. This and other improvements
should manifest themselves in continued performance improvement.
-4-
<PAGE>
The business pace at Farr has quickened and morale and enthusiasm have developed
to higher levels as we see previous failures converted to successes and new
programs implemented with goals being realized.
In addressing the matter of what the future holds for your Company, it is
worthwhile to restate some significant parameters. Farr is:
o In a growing industry.
o A recognized leader in several areas of filtration.
o The possessor of considerable technology in product development,
product application and manufacturing.
o Well structured for growth in several markets.
We believe that our long term growth in revenue and profit will come from new
and higher performing products which meet the growing needs for a cleaner
environment.
Many projects are underway for such product enhancements as well as new
products. Several of these have come to fruition and are just now beginning to
enter the market. Others will be ready during 1996 while longer range ideas are
being formulated.
All of this creates an aura of excitement and enthusiasm at Farr as we see the
potential for these new ideas in the marketplace. The die is cast, the
management team is committed and we believe in what we are doing and where we
are heading.
Admittedly, this is a slow process but we are exerting much effort to move
things along at the fastest pace -- in the end the market will make its own
determination of our success.
While we are happy to recognize 1995 as a turnaround year for Farr Company, we
are also saddened by the passing in January 1996 of its remaining founder,
Chairman Emeritus Morrill Spencer Farr who had devoted almost 60 years to the
endeavor bearing his name.
We believe the future remains bright for Farr Company and its dedicated
employees without whom there would be no enterprise at all. Your management team
also joins us in appreciation of the support shown by our shareholders -- we are
dedicated to achievement and continuous improvement.
H. Jack Meany John C. Johnston
Chairman and Chief Executive Officer President and Chief Operating Officer
John C. Johnston, a former Farr manager, returned to the Company as Vice
President in January 1995 from J. D. Easton, Inc. where he was President of
Easton Aluminum, Van Nuys Division. He was elected President and Chief Operating
Officer of Farr Company on February 27, 1996.
-5-
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
FARR COMPANY AND SUBSIDIARIES
<CAPTION>
December 30, 1995 December 31, 1994
----------------- -----------------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 812,000 $ 127,000
Accounts receivable, less allowances of
$214,000 in 1995 and $266,000 in 1994 20,077,000 21,011,000
Inventories 15,437,000 14,655,000
Prepaid expenses 622,000 597,000
Asset held for sale 2,083,000
Deferred income tax benefit 1,980,000 1,602,000
---------- ----------
Total current assets 38,928,000 40,075,000
---------- ----------
Property, plant and equipment at cost
Land 2,094,000 2,092,000
Buildings and improvements 15,231,000 14,879,000
Machinery and equipment 33,829,000 33,766,000
----------- -----------
51,154,000 50,737,000
Less accumulated depreciation and amortization 34,748,000 32,807,000
----------- -----------
16,406,000 17,930,000
Investments and other 236,000 1,264,000
----------- -----------
$55,570,000 $59,269,000
=========== ===========
Liabilities & Stockholders' Investment
Current Liabilities:
Notes payable to banks $ 432,000 $
Current portion of long-term debt 664,000 2,012,000
Accounts payable 8,875,000 8,326,000
Accrued liabilities 8,248,000 7,692,000
Income taxes payable and current deferred
income taxes 526,000 263,000
----------- ------------
Total current liabilities 18,745,000 18,293,000
----------- ------------
Long-term debt, net of current portion 9,412,000 18,957,000
Deferred income taxes 2,628,000 847,000
Commitments and contingencies
Stockholders' investment
Common stock, $.10 par value -
Authorized - 10,000,000 shares
Outstanding 3,794,336 shares at
December 30, 1995 and 3,782,806 shares
at December 31, 1994 362,000 368,000
Additional paid-in capital 11,668,000 12,005,000
Cumulative translation adjustments (1,624,000) (1,847,000)
Retained earnings 14,379,000 11,281,000
Loans to ESOPs (635,000)
----------- -----------
Total stockholders' investment 24,785,000 21,172,000
----------- -----------
$55,570,000 $59,269,000
=========== ===========
<FN>
The accompanying notes are an integral part of these balance sheets.
</FN>
</TABLE>
-6-
<PAGE>
<TABLE>
CONSOLIDATED OPERATIONS STATEMENTS
FARR COMPANY AND SUBSIDIARIES
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- -------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Net Sales $113,275,000 $106,989,000 $112,363,000
Costs and Expenses:
Cost of sales 85,496,000 84,437,000 87,489,000
Selling, general and administrative expenses 20,956,000 20,065,000 20,268,000
Interest expense 1,796,000 2,129,000 2,445,000
Restructuring costs 540,000 1,000,000
Gain on sale of assets (676,000)
------------ ------------- -------------
Total Costs and Expenses 108,112,000 107,631,000 110,202,000
------------ ------------- -------------
Income (Loss) Before Income Taxes 5,163,000 ( 642,000) 2,161,000
Income Tax (Benefit) Provision 2,039,000 ( 287,000) 728,000
------------ ------------- -------------
Income (Loss) Before Extraordinary Item 3,124,000 ( 355,000) 1,433,000
Extraordinary Item (149,000)
------------ ------------- -------------
Net Income (Loss) $ 3,124,000 ($ 355,000) $ 1,284,000
============ ============= =============
Income (Loss) Before Extraordinary
Item per common share $ .85 ($ .10) $ .39
Extraordinary Item per common share ( .04)
----------- ------------ -------------
Net Income (Loss) per common share $ .85 ($ .10) $ .35
=========== ============ =============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FARR COMPANY AND SUBSIDIARIES
<CAPTION>
Cumulative
For the Years Ended December 30, 1995, Common Additional Retained Translation Loans to
December 31, 1994 and January 1, 1994 Stock Paid-in Capital Earnings Adjustments ESOPs
- ---------------------------------------- --------- --------------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance-- January 2, 1993 $367,000 $11,909,000 $10,377,000 ($1,188,000) ($876,000)
Exercise of Stock Options 2,000 112,000
Cumulative Translation Adjustment ( 451,000)
Treasury Stock Acquired-- 8,235 shares ( 1,000) ( 26,000) ( 25,000)
Principal Loan Payments from ESOPs 121,000
Net Income 1,284,000
--------- ------------ ------------ ----------- ---------
Balance-- January 1, 1994 368,000 11,995,000 11,636,000 ( 1,639,000) ( 755,000)
Exercise of Stock Options 10,000
Cumulative Translation Adjustment ( 208,000)
Principal Loan Payments from ESOPs 120,000
Net Loss ( 355,000)
--------- ------------ ------------ ----------- ---------
Balance-- December 31, 1994 368,000 12,005,000 11,281,000 ( 1,847,000) ( 635,000)
Exercised and Granted Stock Options 1,000 174,000
Cumulative Translation Adjustment 223,000
Principal Loan Payments from ESOP's ( 26,000) 635,000
Treasury Stock Acquired - 66,033 shares ( 7,000) ( 511,000)
Net Income 3,124,000
--------- ------------ ------------ ----------- ---------
Balance -- December 30, 1995 $362,000 $11,668,000 $14,379,000 ($1,624,000) $ 0
========= ============ ============ =========== =========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
-7-
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FARR COMPANY AND SUBSIDIARIES
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- ------------------- ----------------- ----------------- ---------------
Operating Activities:
<S> <C> <C> <C>
Net Income (Loss) $ 3,124,000 ($ 355,000) $1,284,000
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Depreciation and amortization 3,299,000 3,308,000 3,482,000
Provision for loss on accounts receivable 151,000 202,000 330,000
Change in deferred income taxes 1,501,000 ( 466,000) 177,000
Extraordinary item 149,000
Exchange loss (gain) 14,000 ( 128,000) 304,000
Net (gain) loss on sale/retirement of
property, plant and equipment ( 701,000) 33,000 94,000
Provision for (gain) loss on investments ( 115,000) 170,000
Change in assets and liabilities
Inventories ( 734,000) 815,000 2,251,000
Receivables and prepaid expenses 1,186,000 ( 1,393,000) ( 594,000)
Accounts payable and accrued expenses 1,104,000 1,695,000 ( 1,669,000)
Income taxes payable ( 100,000) ( 103,000) 1,340,000
------------ ------------ -----------
Net cash provided by operating activities 8,729,000 3,778,000 7,148,000
------------ ------------ -----------
Investing Activities:
Purchases of property, plant and equipment ( 1,163,000) ( 987,000) ( 674,000)
Proceeds from sale of property, plant and
equipment 2,945,000 44,000
Proceeds from sale of investments 567,000
------------ ------------ -----------
Net cash provided by (used in) investing activities 2,349,000 ( 987,000) ( 630,000)
------------ ------------ -----------
Financing Activities:
Proceeds from revolving line of credit and
long-term debt 432,000 18,939,000
Principal payments on revolving line of credit
and long-term debt ( 10,893,000) ( 21,843,000) ( 6,765,000)
Principal payments received on ESOP loans 635,000 120,000 121,000
Deferred financing costs ( 552,000) ( 26,000)
Proceeds from sale of stock, stock option plans 175,000 10,000 114,000
Treasury stock acquired (66,033 and 8,235
shares in 1995 and 1993, respectively) ( 518,000) ( 52,000)
Other ( 167,000)
----------- ------------ -----------
Net cash used in financing activities ( 10,336,000) ( 3,326,000) ( 6,608,000)
----------- ------------ -----------
Effect of Exchange Rate Changes on Cash ( 57,000) ( 9,000) ( 33,000)
Increase (decrease) in cash and cash equivalents 685,000 ( 544,000) ( 123,000)
Cash and Cash Equivalents at Beginning of Period 127,000 671,000 794,000
------------ ------------ -----------
Cash and Cash Equivalents at End of Period $ 812,000 $ 127,000 $ 671,000
============ ============ ===========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
-8-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FARR COMPANY AND SUBSIDIARIES
1. SIGNIFICANT ACCOUNTING POLICIES
Farr Company and its wholly-owned subsidiaries (the "Company") has
prepared its financial statements in accordance with generally accepted
accounting principles. The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that effect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Following are the
Company's significant accounting policies:
Basis of Presentation -- Farr Company is a multinational company engaged
principally in the design, development, manufacture, sale and service
of air and liquid filters. The principal market for the Company's
products and services are North American based commercial wholesale
distributors, HVAC OEMs and contractors and transportation businesses.
The accompanying consolidated financial statements include the accounts
of Farr Company and its wholly-owned subsidiaries. A functional
currency has been determined for each foreign entity of the Company,
and the exchange gain or loss from translating the foreign currency
statements to their U. S. dollar equivalents at the rates of exchange
in effect at the end of each period is charged or credited to
cumulative translation adjustments within stockholders' investment.
Differences from converting nonfunctional to functional currencies and
transaction gains and losses are included in income. During 1995, 1994
and 1993, $14,000 was charged, $128,000 was credited and $304,000 was
charged to income, respectively.
Accounting Period -- The Company's fiscal year ends on the Saturday closest
to December 31. The fiscal year ended December 30, 1995, December 31,
1994 and January 1, 1994, were all comprised of fifty-two weeks.
Cash and Cash Equivalents -- Cash includes currency on hand, demand deposits
with financial institutions and investments with original maturities of
three months or less.
Inventories -- Inventories include material, labor and factory overhead.
Domestic inventories are stated at cost, determined by the last-in,
first-out method. All other inventories are stated at the lower of
cost, using the first-in, first-out method, or market.
Property, Plant and Equipment -- The cost of property, plant and equipment is
depreciated over the estimated useful lives of the respective assets,
using declining-balance and straight-line methods, based upon the
following lives.
Building and improvements 10 - 40 years
Machinery and equipment 3 - 12 years
Maintenance and repairs are charged to expense as incurred and the cost
of additions and betterments are capitalized. When assets are retired
or otherwise disposed of, the assets and the related accumulated
depreciation accounts are relieved, and any resulting gains or losses
from sales or retirements, are reflected in income.
Investments and Other -- Investments and other include intangible assets that
are amortized on a straight-line basis over various periods of time
ranging from 3 to 5 years. The accumulated amount of amortization at
December 30, 1995 and December 31, 1994 was $950,000, and $1,228,000,
respectively. In 1992, pursuant to an employment contract, the Company
invested $350,000 in a private residence of the Company's former
Chairman, President and Chief Executive Officer. This residence was
sold in 1994 and in February 1995, the Company settled this investment.
Product Engineering and Development -- Engineering and development costs
aggregating $2,251,000, $2,221,000 and $2,048,000 in 1995, 1994, and
1993, respectively, for new products or improvements of existing
products, were expensed as incurred.
Revenue Recognition -- Revenue is recognized at the time the product is
shipped to the customer.
Income Taxes -- The Company accounts for income taxes in accordance with the
Statement of Financial Accounting Standards No. 109, "Accounting for
Incomes Taxes," which requires the use of the liability method of
accounting for deferred income taxes. The provision for income taxes
includes Federal, foreign, state and local income taxes currently
payable and those deferred because of temporary differences between the
financial statement and tax bases of assets and liabilities.
In 1995, the Financial Accounting Standards Board (FASB) issued Statement No.
121 - "Accounting for the Impairment of Long Lived Assets to Be Disposed Of"
(FASB No. 121), effective for 1996. The Company is completing an analysis of
FASB No. 121 which is not expected to have a material impact on the Company's
results of operations or financial position.
Certain reclassifications have been made to the prior years' financial
statements to conform with current year presentation.
-9-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FARR COMPANY AND SUBSIDIARIES
2. INVENTORIES
Domestic inventories totaling $11,140,000 and $10,908,000 at December
30, 1995 and December 31, 1994, respectively, are stated at cost
determined by the last-in, first-out method. If the first-in, first-out
method of inventory valuation had been used, inventories would have
been $6,857,000 and $6,713,000 higher than reported at December 30,
1995 and December 31, 1994, respectively.
3. RESTRUCTURING COSTS
In the fourth quarter of 1995, the Company recorded a restructuring
charge of $360,000 related to the costs associated with the
reorganization of its manufacturing and distribution operations in
North America. This reorganization is being implemented as part of the
Company's effort to consolidate manufacturing and distribution
operations and increase production efficiency, asset utilization and
profitability. The charge was comprised of $230,000 of work force
related costs (approximately 40 people) and $130,000 for facility
related costs. The majority of the costs associated with this
restructuring are planned to be incurred during the first quarter of
1996. At December 30, 1995, the balance of this restructuring charge
was approximately $308,000 and was included as a component of accrued
liabilities in the accompanying Consolidated Balance Sheets.
In the second quarter of 1994, the Company recorded a
restructuring charge of $1,000,000 related to the costs associated with
closing its manufacturing facility located in Rialto, California. This
plant was closed as part of the Company's effort to consolidate
manufacturing operations and increase production efficiency, asset
utilization and profitability. This facility was sold during the fourth
quarter of 1995. As of December 31, 1994 this facility's net book value
was classified in current assets.
The Company recorded a restructuring charge of $1,500,000 in
the fourth quarter of 1992 related to anticipated costs associated with
the closures of two manufacturing plants. The two United States plants
located in Pryor, Oklahoma and Eatonton, Georgia were closed in 1993 as
part of the Company's efforts to consolidate manufacturing operations
and increase production efficiency, asset utilization and
profitability. During the fourth quarter of 1995, the Company recorded
and increased its restructuring costs by $180,000 for facility related
costs associated with these two facilities. The remaining $418,000
balance of this restructuring charge is included as a component of
accrued liabilities in the accompanying Consolidated Balance Sheet as
of December 30, 1995. If the present weak real estate market in
Eatonton, Georgia continues beyond 1998, the Company may need to record
an additional provision to cover the costs of leasing and maintaining
the facility beyond the estimated disposition date.
4. GAIN ON SALE OF U.S. PLANT
In November 1995, the Company sold its plant located in Rialto,
California for $3,050,000 which resulted in a gain of $676,000. The
entire amount of the net proceeds were received in cash and were
primarily used to retire secured debt on the subject property.
5. COMMON STOCK
On April 3, 1989, the Company's Board of Directors declared a dividend
distribution of one common share purchase right for each share of
common stock outstanding on April 18, 1989. An exercisable right will,
under certain conditions, entitle its holder to purchase from the
Company one-half of one share of common stock at the exercise price,
subject to adjustment, at a price of $40 per whole share, subject to
adjustment. The exercise price as of March 31, 1996 is $32 per whole
share of common stock. The rights will become exercisable ten days
after any person acquires 20 percent or more of the Company's
outstanding common stock, or announces an offer which would result in
such person acquiring 30 percent or more of the Company's common stock.
The rights will expire on April 3, 1999, and may be redeemed by the
Company for $.01 per right at any time until ten business days after a
person acquires 20 percent or more of the Company's common stock. Under
certain circumstances after a person acquires 20 percent or more of the
Company's common stock, or after a merger or other business combination
involving the Company, an exercisable right will entitle its holder to
purchase shares of common stock (or shares of an acquiring company)
having a market value of twice the exercise price of one right.
In 1995 the Company received 66,033 shares from the Employee
Stock Ownership Plans as payment against the Company's outstanding
loans to the Plans. As of December 30, 1995 and December 31, 1994 the
Company held in treasury 168,687 and 102,654 shares of its common stock
at a cost of $1,417,000 and $899,000, respectively. Treasury shares are
reflected net of outstanding amounts in the Consolidated Statements of
Stockholder's Investment.
-10-
<PAGE>
6. NOTES PAYABLE AND LONG-TERM DEBT
The Company's foreign subsidiaries utilize overdraft facilities that
amounted to approximately $2,309,000 of which $432,000 was utilized as
of December 30, 1995. As of December 31, 1994, total foreign overdraft
facilities amounted to approximately $2,268,000 of which none were
utilized.
In February 1996, the Company completed the restructure of its
long term credit facilities financing. The new secured long term
revolving credit facility retired and replaced the Company's
$22,000,000 revolving credit facility and $4,000,000 term credit
facility. In addition, a new $2,155,000 term credit facility will be
used to retire and replace the Company's $2,500,000 Holly Springs
Mississippi Industrial Revenue Bonds. Long-term debt as of December 30,
1995 and December 31, 1994 (as revised to reflect the maturity terms
under the replacement credit facilities) were as follows:
<TABLE>
<CAPTION>
December 30, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Revolving credit facility $4,603,000 $11,348,000
Term loan 106,000
Notes secured by deeds of trust on real property -
Term loans 2,753,000 6,361,000
Jonesboro, Arkansas Industrial Revenue
Bonds at 5.6 percent 385,000 885,000
Holly Springs, Mississippi Industrial Revenue
Bonds at 7.4 percent 2,230,000 2,375,000
---------- -----------
10,076,000 20,969,000
Less current portion (664,000) (2,012,000)
---------- -----------
Net long-term debt $9,412,000 $18,957,000
========== ===========
</TABLE>
At December 30, 1995, real, personal and intangible property of
$44,641,000 were pledged as security for long-term debt. At December
30, 1995, the Company's domestic operations had the following long-term
credit facilities:
o A $22,000,000 revolving credit facility obtained in February 1994, was
secured by liens on accounts receivables and inventories. The facility
also contained certain restrictive covenants, including limitations on
the Company's ability to incur debt, grant liens, make investments,
sell assets, make capital expenditures, pay dividends or merge or
consolidate with another entity. Available borrowings under the
revolving credit facility were limited under a formula percentage
calculation of combined domestic inventories and accounts receivables
up to $22,000,000. As of December 30, 1995, the Company had borrowed
$4,603,000 under this agreement. Interest was payable on the loan at a
floating rate equal to the latest published rate for 30-day dealer
placed commercial paper plus 2.5 percent. The applicable interest rate
on December 30, 1995 was 8.3 percent. This facility was retired in
February 1996, as part of the Company's new long-term debt financing
restructure.
o A $4,000,000 term credit facility obtained in February 1994, was
secured by liens on substantially all of the unencumbered personal
property at various locations and real property located in El Segundo,
California. The facility also contained certain restrictive covenants
similar to the Company's $22,000,000 revolving credit facility. Under
the terms of the agreement, the principal was required to be repaid
monthly in installments of $55,556. As of December 30, 1995, the
Company had borrowed $2,753,000 under this agreement. Interest was
payable on the loan at a floating rate equal to the latest published
rate for 30-day dealer placed commercial paper plus 2.75 percent. The
applicable interest rate on December 30, 1995 was 8.55 percent. This
facility was retired in February 1996, as part of the Company's new
long-term debt financing restructure.
o Industrial Revenue Bond financing of $8,000,000 was obtained in
December 1985, to finance the Company's facility in Jonesboro,
Arkansas. Terms of the sixteen year bonds required annual principal
payments of $500,000 commencing December 1, 1986. The interest rate was
the lesser of 12.5 percent or a rate adjusted weekly and which, based
upon prevailing market conditions, was the rate necessary to keep the
price of the bonds at 100 percent of their face value. The credit
rating and liquidity of the bonds were guaranteed by an irrevocable
letter of credit issued by a bank at an annual cost to the Company of
1.5 percent of the principal amount of the bonds outstanding as of
December 15, each year. These bonds were retired in January 1996.
o Industrial Revenue Bond financing of $2,500,000 was obtained in August
1991, to finance the Company's facility in Holly Springs, Mississippi.
Terms of the twenty year bonds require principal payments commencing on
August 1, 1994. The interest rates on scheduled principal payments
through August 2002, covering $1,100,000 are fixed and vary from 6.5
percent to 7.625 percent. The interest rate on the remaining principal
is fixed at 7.625 percent. The credit rating and liquidity of the bonds
are guaranteed by an irrevocable letter of credit issued by a bank at
an annual cost to the Company of 1.5 percent of the principal amount of
the bonds outstanding as of August 15, each year. These bonds will be
retired in August 1996 as part of the Company's long-term debt
financing restructure.
-11-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FARR COMPANY AND SUBSIDIARIES
The principal sources of the Company's domestic long-term debt
financing restructure completed in February 1996 includes a $15,000,000
revolving credit facility and a $2,155,000 term credit facility. The
new facilities consists of:
A $15,000,000 revolving credit facility obtained in February
1996, is secured by liens on accounts receivable and inventories. The
facility also contains certain restrictive covenants, including the
Company's ability to incur additional debt, sell assets or merge or
consolidate with another entity. This loan will mature on June 1, 1998
when the then outstanding loan balance will be due. Interest is payable
on the loan at a floating rate equal to the Prime rate or the bank's
Offshore rate plus 1.75 percent.
A $2,155,000 term credit facility to be funded in August 1996
to replace the Company's existing Holly Springs Mississippi Industrial
Revenue Bonds. Under terms of the lending commitment, principal will be
repaid monthly in approximate installments of $17,958 through August
2001 when the remaining principal balance of $1,078,000 will become
due. Interest will be payable on the loan at a floating rate equal to
the Prime rate plus .25 percent or the bank's Offshore rate plus 2.25
percent.
Under the Company's new domestic credit agreements effective
February 1996, the Company is required to maintain among other things,
a minimum net domestic tangible net worth less foreign intercompany
receivables balance of $10,500,000, a minimum fixed charge coverage
ratio of not less than 1.35, a quick ratio of not less than .7 to 1.0
and a minimum consolidated liabilities to tangible net worth ratio of
not more than 1.5 to 1.0 through December 31, 1996 and not more than
1.25 to 1.0 thereafter.
Interest paid on outstanding debt and obligations net of
amounts capitalized were $1,839,000, $1,964,000, and $2,643,000 in
1995, 1994, and 1993, respectively.
Principal payments, as revised to reflect the maturity terms of the
Company's new long-term credit facilities, are as follows:
Year Ending Long-term Debt
----------- --------------
1996 $ 664,000
1997 237,000
1998 7,482,000
1999 237,000
2000 237,000
Thereafter 1,219,000
-----------
$10,076,000
===========
7. INCOME TAXES
As of December 30, 1995, the Company has net loss carryforwards of
approximately $600,000 which are available to offset future taxable
income. These carryforwards, which are expected to be fully utilized,
expire in the years 2006 through 2009. Accordingly, the Company has
recognized a deferred tax asset relating to these carryforwards.
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- ------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Current -- Federal $ 81,000 $ $
State 171,000 48,000 22,000
Foreign 286,000 69,000 529,000
---------- --------- ---------
538,000 117,000 551,000
---------- --------- ---------
Deferred-- Federal 1,230,000 ( 489,000) 324,000
State 173,000
Foreign 98,000 85,000 ( 147,000)
---------- --------- ---------
1,501,000 ( 404,000) 177,000
---------- --------- ---------
$2,039,000 ($287,000) $728,000
========== ========= =========
</TABLE>
-12-
<PAGE>
The following is a reconciliation of income taxes at the Federal
statutory rate with income taxes recorded by the Company:
<TABLE>
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- --------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Computed income taxes at statutory rate $1,755,000 ($218,000) $735,000
State income taxes, net Federal Income Tax benefit 113,000 31,000 15,000
Taxes on foreign subsidiaries' net income in excess
of (less than) income taxes at statutory rates 46,000 ( 86,000) ( 8,000)
Other items, net 125,000 ( 14,000) ( 14,000)
---------- --------- ---------
Provision (benefit) for income taxes $2,039,000 ($287,000) $728,000
========== ========== =========
</TABLE>
Deferred taxes are recorded based upon differences between the
financial statement and tax basis of assets and liabilities and
available tax credit carryforwards. Temporary differences and
carryforwards which give rise to a significant portion of deferred tax
assets and liabilities were as follows:
<TABLE>
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- --------------------------------------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Net operating loss $ 231,000 $1,873,000 $2,060,000
Depreciation ( 622,000) ( 671,000) ( 813,000)
Employee compensation accruals 753,000 633,000 651,000
Plant relocation and restructuring 230,000 385,000 191,000
DISC commission accrual ( 1,782,000) ( 1,974,000) ( 1,834,000)
Acquisition reserves ( 735,000) ( 832,000) ( 928,000)
Inventory 788,000 908,000 683,000
Other items, net 290,000 332,000 178,000
----------- ----------- -----------
($ 847,000) $ 654,000 $ 188,000
=========== ========== ===========
</TABLE>
Included in income taxes payable and current deferred income
taxes at December 30, 1995 and December 31, 1994 were $199,000 and
$101,000, respectively, of foreign deferred income taxes.
The consolidated income (loss) before income tax, by domestic and
foreign sources is as follows:
<TABLE>
<CAPTION>
For the Years Ended December 30, 1995 December 31, 1994 January 1, 1994
- ------------------- ----------------- ----------------- ---------------
<S> <C> <C> <C>
Domestic $4,170,000 ($1,350,000) $1,060,000
Foreign 993,000 708,000 1,101,000
---------- ----------- ----------
$5,163,000 ($ 642,000) $2,161,000
========== =========== ==========
</TABLE>
Net income taxes paid (refunded) were $466,000, $613,000 and ($748,000)
in 1995, 1994 and 1993, respectively.
8. EMPLOYEE BENEFIT PLANS
The Company has defined contribution retirement plans and 401(K)
deferred salary plans covering domestic employees who meet eligibility
requirements. Company contributions are based on a formula as specified
in the respective plan agreements. Contributions, which aggregated
$916,000 in 1995, $352,000 in 1994, and $347,000 in 1993, were charged
to expense in accordance with the approved plan formulas. In 1995, the
Company approved a new 401(K) retirement plan to be effective January
1996, that will replace the previously effective defined contribution
plans.
The Company has two employee stock ownership plans (ESOPs)
that operated in conjunction with the Company's former defined
contribution plans. The ESOPs previously purchased outstanding shares
on a leveraged basis, with the Company making sufficient contributions
to cover the interest and principal payments resulting from the
borrowings. The Company contributed $133,000, $180,000 and $169,000 to
cover interest and principal payments on outstanding borrowings in
1995, 1994, and 1993, respectively. The Company recognizes expense for
the ESOPs using the cash payments method, which is subject to certain
minimum amounts. In 1995, the Company discontinued its contributions to
the ESOPs and plans to terminate the plans subject to IRS approval.
-13-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FARR COMPANY AND SUBSIDIARIES
Pension costs for the Company's defined benefit plans,
covering eligible employees in foreign operations, are determined by
independent actuarial valuations.
Pension expense under the provisions of Statement of Financial
Accounting Standards (SFAS) No. 87, "Employers' Accounting for
Pensions", was ($17,000) in 1995, $56,000 in 1994, and $92,000 in 1993.
The components of the 1995, 1994 and 1993 net periodic pension cost
were as follows:
For the Years Ended 1995 1994 1993
- -------------------------------------------- --------- --------- ---------
Service cost $165,000 $216,000 $176,000
Interest cost on projected benefit obligation 302,000 288,000 244,000
Actual loss (return) on plan assets ( 696,000) 115,000 ( 798,000)
Net amortization and deferral 212,000 ( 563,000) 470,000
--------- --------- ---------
($ 17,000) $ 56,000 $ 92,000
========= ========= =========
The assumptions used were:
Discount rate 8.0%-- 9.0% 9.0% 6.5%-- 8.5%
Rate of compensation increase 5.0%-- 6.0% 5.0%-- 6.5% 5.5%-- 8.0%
Long-term rate of return on assets 9.0%--10.0% 9.0%--10.0% 8.5%--10.0%
The following table sets forth the funded status of the
defined benefit plans and amounts recognized in the Company's
consolidated balance sheets as of December 30, 1995 and December 31,
1994:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Actuarial present value of benefit obligations --
Vested benefit obligation $3,947,000 $3,255,000
Accumulated benefit obligation 3,947,000 3,257,000
=========== ===========
Projected benefit obligation 4,219,000 3,402,000
Plan assets at fair value 5,112,000 4,324,000
----------- -----------
Plan assets in excess of projected benefit obligation 893,000 922,000
Unrecognized net (gain) loss ( 1,003,000) ( 806,000)
----------- -----------
Prior service cost not yet recognized in
net periodic pension cost 142,000 102,000
Unrecognized net transition asset ( 119,000) ( 147,000)
----------- -----------
Prepaid (accrued) pension cost obligation
recognized in the consolidated balance sheets ($ 87,000) $ 71,000
=========== ===========
</TABLE>
The Company provides no post-retirement health care and life
insurance benefits or other post-employment benefits to its employees.
9. STOCK OPTIONS
Under the 1983 and 1993 stock option plans, the Company may grant
non-qualified and incentive stock options to officers and employees.
Options are contingent upon continued employment, and become
exercisable from at least one year after date of grant at such times
and installments as the Compensation Committee of the Board shall
provide. All options outstanding at December 30, 1995 had an exercise
price equal to 100 percent of the fair market value on the date the
option was granted except for 79,000 shares that were granted in 1995.
Compensation expense recorded under the plan was $27,000 in 1995.
Options expire ten years from the date of grant, subject to earlier
expiration under the terms of the plan. The 1983 plan covered a total
of 312,500 shares of the Company's common stock of which at December
30, 1995, 80,822 shares were subject to presently outstanding options.
At December 30, 1995, 350,000 shares of common stock were reserved for
distribution under the 1993 plan, of which 160,875 shares were subject
to outstanding options.
In October 1995, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 123, "Accounting
for Stock Based Compensation" (SFAS 123). SFAS 123 encourages, but does
not require, companies to adopt a fair value based method for
determining expenses related to stock based compensation. Companies who
do not adopt the provisions of SFAS 123 for recognition purposes must
disclose pro forma effects as if the fair value based method of
accounting had been applied. The Company does not intend to adopt the
new recognition aspects of SFAS 123 but will provide required
disclosure of pro forma information beginning in 1996. The pro forma
impact has not yet been determined.
-14-
<PAGE>
Activity under both plans is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
Shares Option Price Shares Option Price Shares Option Price
------------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 166,745 $ 5.25 - $11.25 149,648 $ 5.25 - $11.63 185,475 $ 5.52 - $11.63
Granted 99,000 $ 5.00 - $ 7.25 110,500 $ 6.38 31,000 $ 5.25 - $ 7.25
Exercised 6,530 $ 6.16 - $ 6.38 20,605 $ 5.52 - $ 6.16
Cancelled and expired 17,518 $ 5.25 - $11.25 93,403 $ 5.25 - $11.63 46,222 $ 5.52 - $11.25
------- --------------- ------- --------------- ------- ---------------
Options outstanding
end of year 241,697 $ 5.00 - $11.25 166,745 $ 5.25 - $11.25 149,648 $ 5.25 - $11.63
======= =============== ======= =============== ======= ===============
End of year shares exercisable 98,172 84,970 81,745
====== ====== ======
</TABLE>
On January 22, 1991, the Company's Board of Directors adopted and
approved the 1991 Stock Option Plan for Non-Employee Directors. Under
the 1991 Stock Option Plan, the Company is authorized to issue up to
48,000 shares of common stock to the Company's non-employee directors
of which 28,000 shares are subject to presently outstanding options. In
1995 the Company amended this plan, subject to stockholder approval, to
increase the number of shares issuable under the plan to 100,000
shares. Activity for fiscal years 1995, 1994 and 1993 under the 1991
Plan are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
Shares Option Price Shares Option Price Shares Option Price
------------------------ ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year 34,000 $ 5.00 - $ 9.25 24,000 $ 5.00 - $ 9.25 16,000 $ 9.13 - $ 9.25
Granted 8,000 $ 6.88 - $ 9.13 12,000 $ 5.38 - $ 6.38 8,000 $ 5.00
Exercised 4,000 $ 5.00 - $ 6.38 2,000 $ 5.00
Cancelled 10,000 $ 6.38 - $ 9.25
------ --------------- ------ --------------- ------ ---------------
Options outstanding at
end of year 28,000 $ 5.00 - $ 9.25 34,000 $ 5.00 - $ 9.25 24,000 $ 5.00 - $ 9.25
====== =============== ====== =============== ====== ===============
End of year shares exercisable 20,000 22,000 16,000
====== ====== ======
</TABLE>
10. PER SHARE AMOUNTS
The weighted average number of common shares outstanding for 1995,
1994, and 1993 were 3,683,582, 3,678,218, and 3,669,297, respectively.
These share amounts approximated the number of shares outstanding for
fully diluted earnings per share calculations.
11. COMMITMENTS AND CONTINGENCIES
The Company leases certain facilities and equipment under agreements,
the majority of which expire at various dates through 2004. The
majority of the Company's leases provide for the payment of real estate
taxes and insurance. Net rental expense was $1,120,000 for the year
ended December 30, 1995, $1,083,000 for the year ended December 31,
1994 and $1,448,000 for the year ended January 1, 1994. As of December
30, 1995, approximate minimum rental commitments under noncancelable
leases which have not been capitalized were as follows:
Year Ending Amount
----------- ----------
1996 $1,024,000
1997 773,000
1998 543,000
1999 205,000
2000 187,000
Thereafter 472,000
----------
Total $3,204,000
==========
The Company is involved in several claims and suits that arise
out of the ordinary course of business, and has tax returns under
review. Management believes that these matters are either adequately
reserved, covered by insurance, or would not have a material adverse
effect on the financial position or operations of the Company if
disposed of unfavorably.
-15-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FARR COMPANY AND SUBSIDIARIES
12. SEGMENT INFORMATION
Industry Segments: The Company is engaged in one line of business -
filtration. The Company's basic business is manufacturing filters for
the control of particulate and vapor containments in air and liquids.
Geographic Segments: Information about the Company's operations in
different geographic areas for the three years ended December 30, 1995,
are presented as follows:
<TABLE>
<CAPTION>
Transfers
Net Sales Sales to Unaffiliated Customers Between Geographic Areas Total Net Sales
(In thousands) 1995 1994 1993 1995 1994 1993 1995 1994 1993
- ------------------ -------------------------------- --------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $ 93,189 $ 88,831 $ 95,165 $3,540 $ 2,809 $2,540 $ 96,729 $ 91,640 $ 97,705
Canada 11,002 9,165 8,639 4,251 2,412 3,990 15,253 11,577 12,629
Europe 9,084 8,993 8,559 268 23 79 9,352 9,016 8,638
--------- --------- --------- ------- ------- ------- -------- -------- --------
Total Segments 113,275 106,989 112,363 8,059 5,244 6,609 121,334 112,233 118,972
Adjustments &
Eliminations ( 8,059) ( 5,244) ( 6,609) ( 8,059) ( 5,244) ( 6,609)
--------- --------- --------- ------- ------- ------- -------- -------- --------
Consolidated Totals $113,275 $106,989 $112,363 $ $ $ $113,275 $106,989 $112,363
========= ========= ========= ======= ======= ======= ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Operating Profit (Loss)
Before Income Taxes Identifiable Assets
(In thousands) 1995 1994 1993 1995 1994 1993
- ------------------------------------------------------ --------------------------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States $5,239 ($ 58) $2,639 $43,286 $48,788 $51,274
Canada 867 669 1,101 11,055 10,001 10,525
Europe 909 829 815 6,078 6,033 5,669
------- ------- ------- -------- -------- -------
Total Segments 7,015 1,440 4,555 60,419 64,822 67,468
Adjustments & Eliminations ( 56) 47 51 ( 4,849) ( 5,935) ( 7,115)
Interest Expense ( 1,796) ( 2,129) ( 2,445)
Corporate Assets 382 552
------- ------- ------- -------- -------- -------
Consolidated Totals $5,163 ($ 642) $2,161 $55,570 $59,269 $60,905
======= ======= ======= ======== ======== =======
</TABLE>
Transfers between geographic areas are accounted for on an
"arms-length" basis. Operating profit is total net sales less costs and
expenses excluding interest. Identifiable assets are those of the
Company that are identified with the operations in each geographic
area. Corporate assets consist principally of real estate. To reconcile
geographic information with consolidated totals, the following
eliminations have been made: $8,059,000 in 1995, $5,244,000 in 1994,
and $6,609,000 in 1993 of intercompany sales; a loss of $56,000 in
1995, a gain of $47,000 in 1994, and a gain of $51,000 in 1993 relating
to the net change in unrealized operating profit in beginning and
ending inventories; $4,849,000 in 1995, $5,935,000 in 1994 and
$7,115,000 in 1993 of intercompany accounts receivable and unrealized
operating profit in inventory at the end of each year.
-16-
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of Farr Company:
We have audited the accompanying consolidated balance sheets of
Farr Company (a Delaware corporation) and subsidiaries as of December 30, 1995
and December 31, 1994, and the related consolidated statements of operations,
stockholders' investment and cash flows for each of the three years in the
period ended December 30, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Farr Company and
subsidiaries as of December 30, 1995 and December 31, 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 30, 1995, in conformity with generally accepted accounting
principles.
Los Angeles, California Arthur Andersen LLP
February 7, 1996
-17-
<PAGE>
<TABLE>
SELECTED FINANCIAL DATA
FARR COMPANY AND SUBSIDIARIES
<CAPTION>
Years Ended
(In thousands, except share and per share data) Dec. 30, 1995 Dec. 31, 1994 Jan. 1, 1994 Jan. 2, 1993 Dec. 28, 1991
- ----------------------------------------------- ------------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 113,275 $ 106,989 $ 112,363 $ 112,094 $ 112,410
Net Income (Loss)
(Notes D, E, F, G & I) 3,124 ( 355) 1,284 ( 4,590) ( 2,996)
Net Income (Loss) per share .85 ( .10) .35 ( 1.26) ( .83)
Total Assets (Notes A, B & C) 55,570 59,269 60,905 67,383 83,531
Long-term Debt, net of current portion
(Notes A, B, C, H & I) 9,412 18,957 21,913 27,001 32,747
Cash Dividends per share .06 .24
Weighted average number of shares 3,683,582 3,678,218 3,669,297 3,653,151 3,611,386
Capital expenditures 1,163 987 674 715 5,139
Net property, plant and equipment 16,406 17,930 21,914 24,595 27,903
Working Capital (Notes A & B) 20,183 21,782 20,853 21,289 32,206
==========================================================================================================================
</TABLE>
Note A. In December 1985, the Company negotiated an agreement for
$8,000,000 in Industrial Revenue Bonds to finance the Company's
facility in Jonesboro, Arkansas. In December 1993 and February
1994, the Company redeemed a total of $2,615,000 of the bonds with
surplus cash held in trust. In January 1996 the Company fully
retired these bonds.
Note B. In August 1991, the Company negotiated an agreement for
$2,500,000 in Industrial Revenue Bonds to finance the Company's
facility in Holly Springs, Mississippi.
Note C. In April 1991, the Company negotiated an agreement to purchase
substantially all of the assets and assume certain liabilities of
Cambridge Filter Corporation. The purchase was financed with
$15,000,000 in term loan borrowings and available cash flows.
Note D. In 1991, pretax loss included a provision of $5,733,000 for the
estimated restructuring cost relative to the Cambridge Filter
Corporation asset acquisition.
Note E. In 1995, 1994, and 1992, pretax income (loss) included
provisions of $540,000, $1,000,000 and $1,500,000 respectively for
the estimated cost of closing U.S. manufacturing facilities.
Note F. In 1992, the Company changed its method of accounting for
income taxes, to comply with the provisions of Statement of the
Financial Accounting Standards Board (SFAS) No. 109, "Accounting
for Income Taxes", and the cumulative effect of this change
($500,000) is included in 1992 results.
Note G. In 1993, the Company recorded a $149,000 extraordinary charge
relating to the write off of unamortized deferred financing costs
as a result of refinancing its long-term debt with new lending
institutions.
Note H. In 1994, the Company completed refinancing of its long-term
debt with new lending institutions including a $22,000,000
revolving credit facility and $7,500,000 of term loan credit
facilities.
Note I. In November 1995, the Company sold its plant located in Rialto,
California for $3,050,000 which resulted in a gain of $676,000.
The entire amount of the net proceeds were received in cash and
were primarily used to retire secured debt on the subject
property.
-18-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
- ---------------------
Sales -- Sales for 1995 were a record $113,275,000, up 6.0 percent from
$106,989,000. The 1995 increase in sales was spread across all of the
Company's market segments.
Sales were $106,989,000 in 1994, representing a decrease of
$5,374,000 from the $112,363,000 level achieved in 1993. The decrease
in sales from the prior year was primarily attributable to a decline
from 1993's record level Engineered Systems volume experienced in the
first half of 1993 that resulted from delayed 1992 shipments carried
over into 1993.
Costand Expenses -- During 1995, selling, general and administrative
expenses increased primarily as a result of performance based incentive
plans and loan fee amortization.
Interest expense decreased in 1995 as a result of lower debt
levels and interest rates. As a result of lower interest rates
negotiated with new lenders effective February 1996 and lower debt
levels, interest expense will significantly decrease in 1996.
A gain of $676,000 was recognized during the fourth quarter of
1995 from the sale of the Company's Rialto California plant.
Profit -- For the year of 1995 net profit was $3,124,000, up from a loss of
$355,000 in 1994.
More progress in the area of operating efficiencies will be
realized in 1996 as a result of the operating improvements made during
1995 coupled with the added reductions in overhead from reorganizing
the manufacturing and distribution operations in North America.
During 1995 manufacturing efficiencies at the Company's Holly
Springs, Mississippi plant improved substantially over 1994's levels
and are anticipated to improve more during 1996. In the fourth quarter
of 1995, the Company recorded a restructuring charge of $360,000
related to the costs associated with the reorganization of its
manufacturing and distribution operations in North America. The charge
was comprised of $230,000 of work force related costs (approximately 40
people) and $130,000 for facilities. As of December 30, 1995 the
Company had incurred approximately $52,000 of the $360,000 provision.
By the end of July 1996, the Company anticipates that all costs
associated with this reorganization will have been incurred.
1994 results yielded a loss of $355,000 compared to a profit
of $1,284,000 in 1993. Operating results continued to be unfavorably
impacted during most of 1994 by manufacturing inefficiencies at the
Holly Springs, Mississippi plant.
In the second quarter of 1994, the Company recorded a
restructuring charge of $1,000,000 related to the costs associated with
closing its manufacturing facility located in Rialto, California. This
plant was closed as part of the Company's effort to consolidate
manufacturing operations and increase production efficiency, asset
utilization and profitability.
The two United States plants located in Pryor, Oklahoma and
Eatonton, Georgia were closed in 1993 as part of the Company's efforts
to consolidate manufacturing operations and increase production
efficiency, asset utilization and profitability. During the fourth
quarter of 1995, the Company recorded and increased its restructuring
costs by $180,000 for facility related cost associated with these two
facilities. If the present weak real estate market in Eatonton, Georgia
continues beyond 1998, the Company may need to record an additional
provision to cover the costs of leasing and maintaining that facility
beyond the estimated disposition date.
Liquidity and Capital Resources
- -------------------------------
During 1995, the Company significantly improved its cash flow
from operating activities. As a result of 1995 operating improvements,
cash flows provided by operating activities totaled $8,729,000, a 131
percent increase over cash flows of $3,778,000 from operating
activities in 1994. The 1995 increase in cash flow was attributable to
an increase in net income, a decrease in working capital requirements
and a net decrease in deferred taxes relating to the utilization of net
operating loss carryforward credits.
-19-
<PAGE>
As a result of completing the sale of the Company's previously
closed manufacturing plant located in Rialto, California, cash proceeds
of $2,890,000 were received during the fourth quarter of 1995. As a
result, cash flows generated from 1995 investing activities totaled
$2,349,000. 1995 capital expenditures increased to $1,163,000 from
$987,000 in 1994. Although capital expenditures increased modestly in
1995, overall capital spending remained relatively low to conserve
capital resources. Capital expenditures in 1996 are expected to
increase moderately to support operating requirements.
During the first quarter of 1995, the Company settled the sale
transactions of two investment properties that generated $567,000 in
proceeds. One investment was formerly held pursuant to an employment
contract with the Company's former Chairman, President and Chief
Executive Officer and the other investment was an unimproved parcel of
land.
Working capital decreased $1,599,000 in 1995. The 1995
decrease in working capital was primarily accounted for by decreases in
asset held for sale of $2,083,000 and accounts receivable of $934,000
and increases in accounts payable and accrued liabilities of $1,105,000
partially offset by increases in inventories of $782,000 and cash of
$685,000 and a decrease in notes payable to banks and the current
portion of long term debt of $916,000. The increase in accounts payable
and accrued liabilities is primarily related to accrued restructuring
costs, accrued employee benefit plan liabilities and deferred
compensation liabilities.
As a result of the decrease in working capital requirements
coupled with the Company's improvement in operating income and limited
capital expenditures, long term debt was decreased by $10,893,000 or 52
percent compared to the balance at December 31, 1994.
The Company's cash flows from operating activities and surplus
borrowing availability under its revolving credit facility are
anticipated to generate adequate cash flow to meet planned operating
needs, provide for capital spending, and to meet current debt service
requirements.
The Company's foreign subsidiaries utilize overdraft
facilities that amounted to approximately $2,309,000 of which $432,000
was utilized as of December 30, 1995. As of December 31, 1994, total
foreign overdraft facilities amounted to approximately $2,268,000 of
which none was utilized.
During 1995, the Company's domestic operations were financed
through a combination of long-term credit facilities and Industrial
Revenue Bonds which were utilized for major capital projects. In
December 1995, the Company completed and committed to the terms of
restructuring its long term debt credit facilities with a new lender.
The new long term credit facilities will provide $17,155,000 of long
term revolving and term loan credit that will be secured by inventories
and accounts receivable and are anticipated to meet the Company's
general working capital and capital expenditure requirements over the
next two years. As of December 30, 1995, $4,603,000 was outstanding
under the Company's existing $22,000,000 revolving credit facility.
Unused borrowing availability under the existing credit facility was
$10,917,000 as of December 30, 1995. As of December 30, 1995, the
Company had $2,615,000 of Industrial Revenue Bonds outstanding related
to the financing of its Jonesboro, Arkansas and Holly Springs,
Mississippi plants.
As of December 30, 1995, the Company has net loss
carryforwards of approximately $600,000 which are available to offset
future taxable income. These carryforwards, which are expected to be
fully utilized, expire in the years 2006 through 2009. Accordingly, the
Company has recognized a deferred tax asset relating to these
carryforwards.
In December 1995, the Company recorded a $540,000
restructuring charge related to the reorganization of its North
American distribution and manufacturing operations and additional
reserves for the previous closure of its Eatonton, Georgia facility.
Financing of the restructuring costs are anticipated to be provided by
operating cash flows and borrowing availability under its revolving
credit facility.
-20-
<PAGE>
The primary component of 1995's restructuring includes the
closure of the Company's Hazleton, Pennsylvania plant which is
anticipated to provide better service to our customers and improve
asset utilization.
As of December 30, 1995, the Company's 1992 restructuring
reserve balance was $418,000. This reserve is related to the
anticipated costs associated with the closures of two manufacturing
plants and is included as a component under accrued liabilities in the
Company's Consolidated Balance Sheets. During 1995, $149,000 in
facility related costs were charged against this reserve and $180,000
of additional reserves were provided to dispose of these lease
commitments.
# # #
<TABLE>
SUMMARIZED QUARTERLY FINANCIAL DATA
(Unaudited)
FARR COMPANY AND SUBSIDIARIES
(In thousands, except per share data)
<CAPTION>
1995 1994 1993
Net Gross Net Per Net Gross Net Per Net Gross Net Per
Quarter Sales Profit Income Share Sales Profit Income Share Sales Profit Income Share
- --------- -------------------------------- -------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First $ 27,253 $ 6,396 $ 633 $ .17 $ 25,171 $ 4,876 ($415) ($ .11) $ 30,631 $ 7,097 $ 578 $ .16
Second 28,682 6,956 675 .18 26,525 5,181 ( 625) ( .17) 29,652 7,047 505 .14
Third 28,444 6,752 726 .20 27,462 5,775 275 .07 26,704 5,519 168 .04
Fourth 28,896 7,675 1,090 .30 27,831 6,720 410 .11 25,376 5,211 33 .01
-------- ------- ------ ----- -------- ------- ----- ------ -------- ------- ------ -----
Year $113,275 $27,779 $3,124 $ .85 $106,989 $22,552 ($355) ($ .10) $112,363 $24,874 $1,284 $ .35
======== ======= ====== ===== ======== ======= ===== ====== ======== ======= ====== =====
</TABLE>
SUMMARY OF STOCK QUOTATIONS
1995 1994 1993
Quarter High Low High Low High Low
- ------------ -------------- -------------- --------------
First $8 $5 7/8 $6 5/8 $5 3/4 $7 5/8 $4 5/8
Second 7 1/2 6 3/8 6 3/8 4 1/2 8 1/4 5 1/8
Third 9 1/2 6 5/8 7 1/4 4 5/8 8 3/8 6
Fourth 8 1/4 6 7/8 7 1/4 5 3/4 7 3/8 6
------ ------ ------ ------ ------ ------
Year $9 1/2 $5 7/8 $7 1/4 $4 1/2 $8 3/8 $4 5/8
====== ====== ====== ====== ====== ======
The above information was obtained from the National Association of Securities
Dealers, Inc. (NASD) Monthly Statistical Report. The Company's stock is traded
in the over-the-counter National Market System.
No cash dividends were declared on the Company's common stock in 1995, 1994 or
1993.
-21-
<PAGE>
CORPORATE INFORMATION
FARR COMPANY AND SUBSIDIARIES
Directors
FARR COMPANY
H. Jack Meany
Chairman and
Chief Executive Officer
Robert Batinovich
President, Glenborough Realty Trust Incorporated
Management of Commercial Real Estate
Richard P. Bermingham
Vice Chairman of the Board
American Golf Corporation
David J. Farr
President, David J. Farr Insurance Services
Provider of Financial Planning Services
Richard L. Farr
Senior Vice President, Farr Company
John J. Kimes
President and CEO
Computerized Security Systems Inc.
Manufacturer of Electronic and Mechanical Lock Hardware and Systems
Officers
FARR COMPANY
H. Jack Meany
Chairman and
Chief Executive Officer
John C. Johnston
President and
Chief Operating Officer
Richard L. Farr
Senior Vice President
Kenneth W. Gerstner
Senior Vice President,
Chief Financial Officer and Secretary
Myron G. Rasmussen
Vice President
FARR FILTRATION, LTD. (UNITED KINGDOM)
Donald A. Parker
Managing Director
FARR INC. (CANADA)
Dominique Mignacco
Vice President and
General Manager
-22-
<PAGE>
Corporate Offices
2221 Park Place
El Segundo, California 90245
310-536-6300
Subsidiaries
Farr, Inc., Montreal, Canada
Farr Filtration, Ltd., Birmingham, England
Manufacturing and Distribution Facilities
Jonesboro, Arkansas
Corcoran, California
Delano, California
Crystal Lake, Illinois
Holly Springs, Mississippi
Conover, North Carolina
Montreal, Canada
Birmingham, England
Singapore
Manufacturing Licensees
Anfilco Ltd., Curgaon, India
Antung Trading Corp., Taipei, Taiwan
Boart MSA (PTY) Ltd., South Africa
Casiba S. A., Buenos Aires, Argentina
Clyde-Apac Ltd., Woodville, Australia
Genmech Engineering, Singapore
Industries Filvac S.A. de C.V., Mexico
Nihon Spindle Mfg., Co., Ltd., Osaka, Japan
Quest Technology, SND. BHD, Malaysia
Taylor's Ltd., Christchurch, New Zealand
Turbiparts, C.A., Caracas, Venezuela
Vibran Engineering (M) SDN. BHD., Petaling Jaya, Malaysia
Wilectec Co., Ltd., Kwai Chung, N.T., Hong Kong
Yamashita Iron Works Ltd., Osaka, Japan
Manufacturing Distributors
Genmech Engineering, Singapore
FEI (France Equipement Industriels), Florange, France
Registrar and Transfer Agent
Chemical Mellon Shareholder Services
Los Angeles, California
Legal Counsel
Latham & Watkins
Los Angeles, California
Auditors
Arthur Andersen LLP
Los Angeles, California
Form 10-K
Shareholders of record as of March 8, 1996 may obtain copies of the
Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission by writing to:
Kenneth Gerstner
Farr Company
2221 Park Place
El Segundo, California 90245-4900
-23-
<PAGE>
FARR
1995 ANNUAL REPORT
-24-
Exhibit 22
List of Subsidiaries
FARR COMPANY AND SUBSIDIARIES
Name of Subsidiary Jurisdiction of Incorporation
------------------ -----------------------------
Farr Filtration Limited England
Farr Company International California
Farr Incorporated Canada
Exhibit 24
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the incorporation of our
report incorporated by reference in this Form 10-K, into Farr Company's
previously filed Registration Statements on File Numbers 2-83890, 33-18897,
33-47836, 33-71400 and 33-64387.
Los Angeles, California Arthur Andersen LLP
March 28, 1996
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