UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended May 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission File No. 0-12906
RICHARDSON ELECTRONICS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 36-2096643
(State of incorporation or organization) (I.R.S. Employer ID No.)
40W267 Keslinger Road, LaFox, Illinois 60147
(Address of principal executive offices)
Registrant's telephone number including area code: (630) 208-2200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
$.05 par value
Indicate by check mark whether the registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
As of August 20, 1996, there were outstanding 8,651,478 shares of Common
Stock,$.05 par value, and 3,243,100 shares of Class B Common Stock, $.05 par
value, which are convertible into Common Stock on a share for share basis, of
the registrant and the aggregate market value of such shares, held by non-
affiliates of the registrant was approximately $53,700,000.
Portions of the 1996 Annual Report to Stockholders of Registrant for fiscal
year ended May 31, 1996 are incorporated in Parts I, II, and IV of this Report.
Portions of the Registrant's Proxy Statement dated September 3, 1996 for the
Annual Meeting of Stockholders scheduled to be held October 1, 1996 are incor-
porated in Part III of this Report. Except as specifically incorporated herein
by reference, the above mentioned Annual report to Stockholders and Proxy
Statement are not deemed filed as part of this report.
An exhibit index is located at pages 14 through 21.
PART I
Item 1. Business
The registrant (herein with its subsidiaries referred to as the "Company"
or "Richardson") operates in one industry as a specialized international value-
added distributor of electronic components, including vacuum tubes, power
semiconductors, related electronic components and security systems. These
devices are primarily used to control, switch or amplify electrical power or
signals, or as display devices in a variety of industrial, communication,
scientific and other applications. The Company offers a wide range of value-
added services, including among others, labeling, testing, kitting and repack-
aging. The Company manufactures certain of the electron tubes and other compo-
nents it distributes.
Consolidated sales in 1996 set a new record at $239.7 million, up 15% over
the prior year. The Company believes that much of its growth is attributable to
its concentration on specialized areas of the electronics market. Historically,
the Company's primary business was the distribution of electron tubes and it
continues to be a major distributor of these products. In recent years, the
Company has followed the migration of its customers to newer technologies,
capitalizing on its expertise as a value-added distributor. A milestone was
reached in 1996 as electron tubes contributed less than 50% of consolidated
sales. Due to the significant increase in new product offerings, including
solid state components and cathode ray tubes, these product lines represented
54% of sales compared to 35% five years ago. The addition of new product lines
is primarily based upon compatibility with the Company's existing customer
base. The Company also seeks new applications and customers (including, without
limitation, through new and expanded distribution franchises) for its existing
product lines.
A significant portion of the Company's sales are of replacement parts.
Specialized areas of the original equipment industry and research and develop-
ment applications are also served by the Company. The marketing and sales
organization of the Company is divided into four strategic business units
(SBUs): Electron Device Group (EDG), Solid State and Components (SSC), Display
Products Group (DPG), and Security Systems Division (SSD). EDG distributes
power grid tubes and continuous wave magnetrons for industrial heating applica-
tions and also thyratrons, ignitrons, receiving tubes and special purpose tubes
which are sold to many industries, including automotive, steel, plastics and
textiles companies. EDG also distributes high voltage switch tubes and x-ray
tubes used in x-ray imaging equipment and specialty tubes for analytical
equipment, as well as camera tubes, photomultipliers, switch tubes, magnetrons,
hydrogen thyratrons and imaging equipment to the medical industry. Power grid
tube and camera tube product lines are sold by EDG to the radio and television
broadcast industry. In addition, EDG assists other SBU's to market cathode ray
tubes (CRTs), power semiconductors and related components to the broadcast
industry. EDG also serves the avionics, marine, microwave and communications
industries with product lines including traveling wave tubes, klystrons, planar
triodes, hydrogen thyratrons, magnetrons and display storage tubes.
SSC distributes RF transistors and amplifiers, communications modules,
passive components, silicon controlled rectifiers, integrated circuits, semi-
conductors, high voltage capacitors, resistors, broadcast amplifiers, and other
RF and microwave semiconductors for avionics, broadcast, communications, data
display and industrial applications.
DPG markets data display and instrumentation CRTs that are used in data
display, marine, medical, radar, and avionic applications. It also distributes
flyback transformers and various components for monitor and terminal repair.
SSD distributes closed-circuit television (CCTV) equipment, as well as
burglar, fire, intercommunication, access control and other security related
products, equipment and accessories, for both initial installation and replace-
ment. In addition, SSD is an approved repair service organization. SSD has made
the strategic decision to enter the machine vision market, which uses cameras
to view and monitor processes, typically in industrial applications. The camera
converts the CCTV signal into a computer frame-grabbed image and compares the
image to the acceptable tolerances on file.
Sales trends for each SBU are summarized and analyzed in Management's
Discussion and Analysis on pages 11-13 of the Annual Report to Stockholders for
the Year Ended May 31, 1996 (Annual Report).
The global market for electron tubes served by EDG, is estimated by the
Company to be more than $2 billion. SSC participates in specialized segments of
the semiconductor market, distributing power semiconductors and RF and micro-
wave semiconductors. According to industry estimates, European, United States
and Japan-based factory sales for power semiconductors approximate $5 billion.
Richardson estimates the portion of this market it serves at $1 billion. DPG
estimates factory sales of CRTs in the global market approximate $8.8 billion.
The Company estimates that annual wholesale sales for CCTV and related security
equipment served by SSD, approximate $360 million.
Sales of solid state components, primarily RF semiconductors, have grown
rapidly in recent years. Semiconductors have been replacing electron tubes in
many applications, such as low power television and radio transmitters. How-
ever, in other applications, including higher power broadcasting and certain
industrial equipment, electron tubes are more suitable than semiconductors due
to the higher power capabilities of tubes and their ability to withstand severe
environmental and other conditions which often damage semiconductors. Semicon-
ductors, however, continue to expand the range of their applications. Conse-
quently, many parts of the electron tube market in which the Company partici-
pates, are declining. The Company countered the trend in the electron tube
market through several initiatives employed by EDG, including greater emphasis
on international sales and expansion of the sales force serving the medical
diagnostic imaging replacement market. As a result, EDG sales increased in the
last two years, reversing the previous trend. (see Management `s Analysis of
Results of Operations and Financial Condition - Sales and Gross Margin Analy-
sis, EDG" in the Annual Report).
The Company has found that a replacement market for power semiconductors
exists and that many of its electron tube customers have semiconductor require-
ments as well. In addition SSC's sales to original equipment manufacturers
continue to grow, accounting for approximately 68% of the SBU's 1996 sales.
SSC's sales increased 30% in 1996, 24% in 1995 and 34% in 1994. (see
"Management's Discussion and Analysis of Results of Operations and Financial
Condition - Sales Analysis, SSC" in the Annual Report.)
The Company's sales of CRT's and other display products were flat in 1996
as product shortages and reduced demand of one major customer were only par-
tially mitigated by a 57% increase in European sales. Sales increased 34% in
1995, and 42% in 1994. (see "Management's Discussion and Analysis of Results of
Operations and Financial Condition - Sales Analysis, DPG" in the Annual Re-
port.)
SSD's sales increased 86% in 1996, 26% in 1995, and 2% in 1994. New
management and investment and redirection of SSD's field sales force generated
these significant sales gains. (see "Management's Discussion and Analysis of
Results of Operations and Financial Condition - Sales Analysis, SSD" in the
Annual Report.)
Significant Developments
In May, 1995, the Company reached an agreement with the U.S. Department of
Justice (DOJ) regarding a claim that the Company was civilly liable for damages
and penalties under the False Claims Act and the Lanham Act in connection with
a 1989 Department of Defense contract for night-vision tubes. The Company paid
$4.7 million to the Government in return for a release of monetary claims in
connection with the contract. See Note B of the "Notes to Consolidated Finan-
cial Statements" of the Annual Report.
In 1995, the Company transferred ownership of its former Brive, France
manufacturing operations to local management and ownership of the associated
land and building to the mortgagor in exchange for the release of the related
mortgage obligation. See Other Charges in Note B of the "Notes to Consolidated
Financial Statements" of the Annual Report.
In 1993, the Company developed a plan to reorganize its sales staff on a
specialty basis by SBU. This plan was implemented throughout North America in
1994 and expanded globally during 1995 and 1996. The Company also made a major
commitment to the rapidly expanding CCTV market in 1995. A new general manager
was hired for SSD, and the sales force was doubled in size.
The Company believes the increased emphasis on containment of medical
costs offers significant opportunities to supply the diagnostic medical imaging
market, estimated at $900 million. The Company's product line of replacement x-
ray tubes has been expanded to include image intensifiers, camera tubes and
related components. During 1996, the Company acquired a North American value
added facility to supply the industry with reloaded x-ray tubes. Expansion of
the specialty sales force, begun in 1995, continued in 1996. A European reload-
ing station and further expansion of the sales force are planned for 1997.
Products
The following is a description of some of the Company's products:
Power Amplifier / Oscillator Tubes are vacuum or gas filled tubes used in
applications where current or voltage amplification and/or oscillation is
required. Some areas of use are: induction heating, diathermy equipment, sonic
generators, communications and radar systems and power supplies for voltage
regulation or amplification.
RF Power Transistors are solid-state high-frequency power amplifiers used
in land mobile, aircraft and satellite communications and in many types of
electronic instrumentation.
Cathode Ray Tubes ("CRTs") are vacuum tubes which convert an electrical
signal into a visual image to display information on computer terminals or
televisions. CRTs are used in various environments, including hospitals,
financial institutions, airports and numerous other applications wherever
electronic data is shared by large user groups. The product line includes both
monochrome and color monitors.
Closed-circuit Television ("CCTV") products include cameras, lenses,
monitors, scanners, time lapse recorders and associated accessories. CCTV
products are used in surveillance applications and monitoring hazardous envi-
ronments in the workplace.
Magnetrons are high vacuum oscillator tubes which are used to generate
energy at microwave frequencies. The pulsed magnetron is predominantly used to
generate high energy microwave signals for radar applications. Magnetrons are
also used in heating applications such as microwave ovens and by the medical
industry for sterilization.
High Voltage and Power Capacitors are used in industrial, avionics,
medical and broadcast applications for filtering, high-current by-pass, feed-
through capacitance for harmonic attenuation, pulse shaping, grid and plate
blocking, tuning of tank circuits, antenna coupling, and energy discharge.
Planar Triodes are high frequency triodes manufactured using a special
process to enable them to operate at several thousand megahertz (MHz). Aircraft
instrumentation and television translators use planar triodes.
X-ray Tubes are glass and glass/metal vacuum tubes which generate high-
frequency radiation for use in industrial, analytical and medical equipment.
Stationary anode x-ray tubes are used primarily for inspection and non-
destructive testing of solid materials and in crystallography. Rotating anode
x-ray tubes are primarily used in medical applications, including fluoroscopy
and computer-aided tomography (CAT-scan).
Silicon Controlled Rectifiers (SCR's) and Power Semiconductor Modules are
used in many industrial control applications because of their ability to switch
large amounts of power at high speeds. These silicon power devices are capable
of operating at up to 4,000 volts at 2,000 amperes.
Microwave Diodes are specialized diodes intended for use at microwave and
RF frequencies for oscillator, mixer, switching, and power control, and ampli-
fier applications in broadcast, avionic, telecommunication, medical and indus-
trial equipment.
Computer Terminal Components are electronic components used in repair of
computer terminals and monitors, including flyback transformers, semiconduc-
tors, power supplies, controls and switches.
Hydrogen Thyratrons are electron tubes capable of high speed and high
voltage switching. They are used in switching of power to radar magnetrons and
lasers.
Thyratrons and Rectifiers are vacuum or gas filled tubes used to control
the flow of electrical current. Thyratrons are used to control ignitrons,
electric motor speed controls, theatrical lighting and machinery such as
printing presses and various types of medical equipment. Rectifiers are used to
restrict electric current flow to one direction in power supply applications.
Camera Tubes are vacuum tubes used to change a visible light image to an
electronic signal which are then transmitted to a monitor for conversion back
to a visible image. Camera tubes are used in broadcast, security and medical
applications.
Industrial Receiving Tubes are vacuum tubes used to regulate or amplify
small amounts of power in a wide variety of electrical and electronic equip-
ment. Communications, medical instrumentation, consumer electronics, and
industrial controls are typical applications for this product.
Ignitrons are mercury pool tubes used to control the flow of large amounts
of electrical current. Their primary applications are in welding equipment,
power conversion and power rectification equipment.
Distribution and Marketing
The Company buys, warehouses and distributes more than 69,000 types of
tubes and semiconductors ranging in price from $1 to $35,000 for tubes and $.10
to $2,500 for semiconductors and related components. The Company processes
approximately 650 orders per day averaging $1,480 each (for an average total of
$960,000 per day). The Company distributes electron tubes it manufactures as
well as electron tubes, power, RF and microwave semiconductors and related
products purchased from other sources, including Communication and Power
Industries, Inc. (CPI), Clinton Electronics Corp., Panasonic Industrial Com-
pany, Microwave Associates, Philips, Burle Industries, Inc., Covimag S.A., SGS
THOMSON, Triton Services, Inc., Powerex, Varian Associates, UTI Technology,
Inc., Pelco, Sony Corp., RF Products, M/A-COM, Litton Electron Devices, Hi
Sharp Electric Co., Joslyn Jennings, New Japan Radio Corp., General Electric,
Teletube, Semtech, MPD Inc., Ericsson Components AB and CEIEC. No single
outside supplier currently accounts for more than 10% of the Company's pur-
chases in any year, other than CPI, which accounted for approximately 13%, 18%
and 17% of purchases in fiscal 1996, 1995 and 1994, respectively. The Company
believes that the loss of any one supplier would not cause a material adverse
impact on its earnings and revenues.
CPI was formerly a business unit of Varian Associates, Inc. (Varian). On
August 14, 1995 Varian sold the assets and technology related to its electron
device business to the newly formed entity, CPI. CPI retained the same manage-
ment and operating personnel as formerly employed by Varian. The Company
believes it has broadened its vendor relationships with the formation of CPI,
as the Company is establishing new distribution agreements with other Varian
divisions.
Covimag is the entity formed to acquire the Company's former Brive, France
manufacturing operation. Formal transfer of ownership occurred in January,
1995. Covimag is managed by the same individuals previously employed by the
Company at this facility. The Company has a three year purchase commitment to
acquire various electron tube types at a cost of approximately $11 million per
year, expiring on December 31, 1997. Covimag is highly dependent on the Com-
pany, which is its primary customer. Settlement of purchases under the contract
are at standard terms. Except for the supply contract, the Company has no other
financial commitment to or from Covimag. Relationships under the supply con-
tract are believed by the Company to be satisfactory.
In addition to the agreement with Covimag, the Company has marketing
distribution agreements with various manufacturers in the tube, semiconductor,
and CCTV industries. The most significant distributor agreement is with CPI
under which the Company is the exclusive distributor of power grid tubes
throughout the world, with the exception of the United States and certain
Eastern European countries where the Company is one of CPI's stocking distribu-
tors.
Customer orders are taken by the regional sales offices and directed to
the Company's headquarters and distribution facility in LaFox, Illinois or to
one of its international distribution centers. The Company utilizes a sophisti-
cated data processing network which provides on-line, real-time interconnection
of all sales offices and central distribution operations. Information on stock
availability, customers, and competitive market analyses are instantly obtain-
able throughout the entire distribution network. Many of the products distrib-
uted by the Company are critical to the function of the equipment in which they
are used, therefore, the Company utilizes this system to achieve same-day
shipment on over 90% of its customer orders.
The Company markets its products to manufacturers and end-users in major
industries, including communications, industrial heating, marine, medical care
and avionics. The Company also sells to customers who purchase for resale,
including electronics distributors and service companies. The Company has
supply contracts, generally for a one-year term, with certain customers, and is
committed pursuant to these contracts to maintain minimum inventories so as to
provide product without significant delay. Management believes that for the
past two fiscal years approximately 20% of the Company's sales were made under
such supply contracts. During the past five years, no single customer repre-
sented more than 10% of the Company's sales.
The Company emphasizes sales to replacement markets. Some of these markets
may expand as new equipment utilizing electron tubes continues to be sold. For
example: equipment such as video monitors and computer display terminals which
use cathode ray tubes also present expanding market opportunities for replace-
ment purposes; new communications equipment using microwave devices such as
traveling wave tubes and klystrons and RF transistors continue to be developed
for applications with high power or high-frequency requirements that tube
technology alone can provide.
The Company's backlog of firm orders scheduled for future delivery within
12 months was $43,400,000, $46,300,000, and $29,700,000 as of May 31, 1996,
1995 and 1994, respectively. The Company's backlog primarily consists of
commercial contracts that require future shipping dates, and the 1996 decline
reflects lower contract levels for DPG, while the 1995 increase reflects higher
contract levels for SSC and DPG. Because backlog is not significant to annual
sales, the Company does not believe it provides a reliable indicator of future
sales levels.
International
International sales, including export sales, represented approximately 48%
of the Company's fiscal 1996 sales. These sales were $115,136,000, $96,644,000,
and $79,123,000 in fiscal years 1996, 1995 and 1994, respectively. Export sales
from the United States were $37,913,000, $38,653,000 and $29,667,000 in
1996,1995 and 1994. On May 31, 1996, the Company had 60 locations throughout
the world. See Note J of the "Notes to Consolidated Financial Statements" of
the Annual Report for details of the Company's international operations,
including sales, operating income and identifiable assets.
Manufacturing
The Company distributes its manufactured products principally under the
trade names "National", "Cetron" and "Amperex". Located principally in LaFox,
Illinois, the Company's manufacturing operations, including value-added serv-
ices, accounted for approximately 5% of its product distribution requirements
in fiscal 1996. Such manufacturing operations contributed sales of approxi-
mately $12 million in 1996 and 1995 and $30 million in 1994. The decrease in
sales of manufactured products in 1995 is a result of the transfer of ownership
of the Brive, France manufacturing facility and the phase-down of manufacturing
activity in LaFox, Illinois. (See Note B of the "Notes to Consolidated Finan-
cial Statements" of the Annual Report.)
The products currently manufactured by the Company include thyratrons and
rectifiers, power tubes, ignitrons, electronic display tubes, phototubes, SCR
assemblies and spark gap tubes. The Company also reloads and refurbishes
medical x-ray tube housings. The materials used in the manufacturing process
consist of glass bulbs and tubing, nickel, stainless steel and other metals,
plastic and metal bases, ceramics, and a wide variety of fabricated metal
components.
Research and Development
The objective of the Company's research and development is to increase the
number of applications for its products and to develop existing technology with
respect to advanced products. The Company emphasizes product development rather
than basic research. The ability of the Company to compete is, in part, depend-
ent upon its ability to anticipate changing market needs and to provide the
required products.
At present, a staff of 5 persons are involved, on a full- or part-time
basis, in various phases of product development. The Company's expenditures in
this area were $166,000, $229,000 and $358,000 in 1996, 1995 and 1994.
Employees
As of May 31, 1996, the Company employed 429 individuals on a full time
basis at U.S. locations. Of these, 62 are employed in administrative and
clerical positions, 278 are employed in sales and distribution, and 89 are
employed in value-added and product manufacturing. The Company's foreign
subsidiaries employ an additional 153 individuals engaged in administration,
sales and distribution. All of the Company's employees are non-union.
Competition
Although the Company believes it is a significant distributor of electron
tubes and semiconductors in the United States, it competes worldwide with other
general line distributors and manufacturers and other distributors of elec-
tronic components (including original equipment manufacturers), many of which
are substantially larger and have greater resources than the Company. The
Company also competes against manufacturers of semiconductors, which have
replaced electron tubes in many applications.
Patents and Trademarks
The Company acquired certain manufacturing patents and trademark rights in
connection with acquisitions, including the trademarks "National", "Cetron,"
and "Amperex." The Company believes that although the patents and trademarks
obtained have value, they will not be determinative of the Company's success,
which depends principally upon its marketing technical support, product deliv-
ery and the quality and economic value of its products.
Item 2. Properties
The Company owns facilities on approximately 300 acres in LaFox, Illinois,
consisting of a modern, single and two-story concrete, brick and steel con-
structed building containing approximately 255,000 square feet of manufactur-
ing, warehouse and office space. The Company also owns a four-story building
containing approximately 45,000 square feet of warehouse space on 1.5 acres in
Geneva, Illinois. The Company's United Kingdom subsidiary owns a 12,000 square
foot single story brick building in Lincoln, England which it utilizes as a
sales office and warehouse hub for European sales distribution. The Company's
Spanish subsidiary owns 3,510 square feet of office and warehouse space in a
55,000 square foot industrial concrete building constructed in 1988 in Madrid,
Spain. The Company's Italian subsidiary owns an office and warehouse facility
located in Florence, Italy of approximately 6,400 square feet in a brick and
concrete industrial condominium complex.
The Company also maintains branch sales offices in or near major cities
throughout the world, including 38 locations in North America, 12 in Europe, 5
in the Far East / Pacific Rim and 3 in Latin America. Additional warehouse
space in Geneva, Illinois is also rented on a short-term basis. The company
leases a production facility in Grand Prairie, Texas for its medical tube
reloading operation. The Company also leases a facility from a trust, of which
Edward J. Richardson, Chairman of the Board of the Company, is the principal
beneficiary. Such facility is used by SSD as its sales office and warehouse.
Under the terms of this lease, the Company is obligated to make rental payments
of $68,705 per year, expiring in 1996. In the opinion of management, the lease
is on terms no less favorable to the Company than similar leases which would be
available from unrelated third parties.
Item 3. Legal Proceedings
No material developments have occurred in the matter of "Panache Broad-
casting of Pennsylvania, Inc. v. Richardson Electronics, Ltd. and Varian
Associates, Inc.," pending in the United States District Court for the Northern
District of Illinois, Eastern Division, docket no. 90 C 6400. The complaint
alleges violations of Sections 1 and 2 of the Sherman Act and Section 7 of the
Clayton Act. As previously reported the matter remains primarily in the
discovery stage and the Court has not determined whether the matter may be
maintained as a class action.
See Part I, Item 1, Business, Significant Developments, regarding the
settlement of monetary claims of the United States in connection with a 1989
contract with the Department of Justice for night-vision tubes. The Government
has not sought any administrative remedies in connection with such matter and
the Company cannot predict whether or not further action will be taken or the
financial impact, if any, of any such action.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of stockholders, through the solicita-
tion of proxies or otherwise, during the fourth quarter of the fiscal year
ended May 31, 1996.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Incorporated herein by reference to pages 15 (for dividend payments), 19
(for dividend restriction) and 23 (for market data) of the Annual Report.
Item 6. Selected Financial Data
Incorporated herein by reference to page 10 of the Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Incorporated herein by reference to pages 11 to 13 of the Annual Report
Item 8. Financial Statements and Supplementary Data
Incorporated herein by reference to pages 14 through 23 of the Annual
Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
No event has occurred within the 24 month period prior to the date of the
Company's most recent financial statements, which would require disclosure
under Item 9 of this Report.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning Directors and Executive Officers of the Company is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 1, 1996, under the
captions "ELECTION OF DIRECTORS - Information Relating to Directors, Nominees
and Executive Officers," "ELECTION OF DIRECTORS - Affiliations" and "SECTION 16
FILINGS," which information is incorporated herein by reference.
Item 11. Executive Compensation
Incorporated herein by reference is information concerning executive
compensation contained in the Company's Proxy Statement to be used in connec-
tion with its Annual Meeting of Stockholders scheduled to be held October 1,
1996, under the captions "ELECTION OF DIRECTORS - Directors Compensation" and
"EXECUTIVE COMPENSATION," except for captions "REPORT ON EXECUTIVE
COMPENSATION" and "PERFORMANCE GRAPH."
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners and
management is contained in the Company's Proxy Statement to be used in connec-
tion with its Annual Meeting of Stockholders scheduled to be held October 1,
1996, under the caption "ELECTION OF DIRECTORS - Information Relating to
Directors, Nominees and Executive Officers" and "PRINCIPAL STOCKHOLDERS," which
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions is
contained in the Company's Proxy Statement to be used in connection with its
Annual Meeting of Stockholders scheduled to be held October 1, 1996, under the
caption "EXECUTIVE COMPENSATION - Compensation Committee Interlocks and Insider
Participation," which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) The following consolidated financial statements of the registrant and
its subsidiaries included on pages 14 through 23 of the Annual Report are
incorporated herein by reference:
Filing Method
Report of Independent Accountants E
1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - May 31, 1996 and 1995 E
Consolidated Statements of Operations - Years ended
May 31, 1996, 1995 and 1994 E
Consolidated Statements of Cash Flows - Years ended
May 31, 1996, 1995 and 1994 E
Consolidated Statements of Stockholders' Equity -
Years ended May 31, 1996, 1995 and 1994 E
Notes to Consolidated Financial Statements E
The following consolidated financial information for the fiscal years
1996, 1995 and 1994 is submitted herewith:
2. FINANCIAL STATEMENT SCHEDULES:
II. Valuation and Qualifying Accounts E
All other schedules for which provision is made in the applicable account-
ing regulations of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and therefore, have been
omitted.
(b) REPORTS ON FORM 8-K.
None.
(c) EXHIBITS
Filing Method
3(a) Restated Certificate of Incorporation of the Company,
incorporated by reference to Appendix B to the Proxy
Statement/ Prospectus dated November 13, 1986, incor-
porated by reference to the Company's Registration
Statement on Form S-4 Commission File No. 33-8696. NA
3(b) By-laws of the Company, as amended. E
4(a) Specimen forms of Common Stock and Class B Common Stock
certificates of the Company incorporated by reference to
Exhibit 4(a) to the Company's Registration Statement on
Form S-1, Commission File No. 33-10834. NA
4(b) Indenture between the Company and Continental Illinois
National Bank and Trust Company of Chicago (including
form of 7-1/4% Convertible Subordinated Debentures due
December 15, 2006) incorporated by reference to Exhibit 4(b)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1990. NA
10(a) $30,000,000 Amended and Restated Senior Revolving Credit
Note Facility Agreement dated June 14, 1996 with American
National Bank. E
10(b) Industrial Building Lease, dated April 10, 1996 between
the Company and the American National Bank & Trust, as
trustee under Trust No. 56120 dated 2-23-83. E
10(c) The Company's Employees Profit Sharing Plan and Trust
Agreement, (as amended and restated effective June 1, 1989)
dated July 14, 1994, incorporated by reference to Exhibit
10(c) to the Company's Annual Report on Form 10-K for the
fiscal year ended May 31, 1994. NA
10(c)(1) First Amendment to the Company's Employees Profit Sharing
Plan and Trust Agreement, (as amended and restated
effective June 1, 1989) dated April 10, 1996. E
10(d) The Corporate Plan for Retirement
The Profit Sharing / 401(k) Plan
Fidelity Basic Plan Document No. 07 dated June 1, 1996. E
10(e) The Company's Amended and Restated Incentive Stock Option
Plan effective April 8, 1987 incorporated by reference to
Exhibit 10(m) to the Company's Annual Report on Form 10-K
for the fiscal year ended May 31, 1987. NA
10(e)(1) First Amendment to the Company's Amended and Restated
Incentive Stock Option Plan effective April 11, 1989
incorporated by reference to Exhibit 10(l)(1) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1989. NA
10(e)(2) Second Amendment to the Company's Amended and Restated
Incentive Stock Option Plan effective April 11, 1989
incorporated by reference to Exhibit 10(l)(2) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1991. NA
10(e)(3) Third Amendment to the Company's Amended and Restated
Incentive Stock Option Plan effective April 11, 1989
dated August 15, 1996. E
10(f) The Company's Amended and Restated Employees Stock
Purchase Plan, incorporated by reference to the Company's
Proxy Statement used in connection with its Annual
Meeting of Stockholders held October 2, 1985. NA
10(f)(1) First Amendment to Amended and Restated Employees Stock
Purchase Plan, incorporated by reference to Appendix D
to the Company's Proxy Statement/Prospectus dated
November 13, 1986 included in its Registration Statement
on Form S-4, Commission File No. 33-8696. NA
10(f)(2) Second Amendment to Amended and Restated Employees Stock
Purchase Plan, incorporated by reference to Appendix E
to the Company's Proxy Statement/Prospectus dated
November 13, 1986 included in its Registration Statement
on Form S-4, Commission File No. 33-8696. NA
10(f)(3) Third Amendment to Amended and Restated Employees Stock
Purchase Plan incorporated by reference to Exhibit 10(m)(3)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1990. NA
10(f)(4) Fourth Amendment to Amended and Restated Employees Stock
Purchase Plan incorporated by reference to Exhibit 10(m)(4)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1991. NA
10(f)(5) Fifth Amendment to Amended and Restated Employees Stock
Purchase Plan incorporated by reference to Exhibit 10(m)(5)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1991. NA
10(f)(6) Sixth Amendment to Amended and Restated Employees Stock
Purchase Plan dated August 15, 1996. E
10(g) Richardson Electronics, Ltd. Employees 1996 Stock Purchase
Plan incorporated by reference to Appendix A of the Company's
Proxy Statement dated September 3, 1996 for its Annual
Meeting of Stockholders held on October 1, 1996 NA
10(h) Employees Stock Ownership Plan and Trust Agreement,
effective as of June 1, 1987, dated July 14, 1994,
incorporated by reference to Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1994. NA
10(h)(1) First Amendment to Employees Stock Ownership Plan and
Trust Agreement, dated July 12, 1995, incorporated by
reference to Exhibit 10(g)(1) to the Company's Annual
Report on Form 10-K for the fiscal year ended May 31, 1995. NA
10(h)(2) Second Amendment to Employees Stock Ownership Plan and
Trust Agreement, dated July 12, 1995, dated April 10, 1996 E
10(i) Stock Option Plan for Non-Employee Directors incorporated
by reference to Appendix A to the Company's Proxy Statement
dated August 30, 1989 for its Annual Meeting of
Stockholders held on October 18, 1989. NA
10(j) Richardson Electronics, Ltd. 1996 Stock Option Plan for
Non-Employee Directors, incorporated by reference to
Appendix C of the Company's Proxy Statement dated
September 3, 1996 for its Annual Meeting of Stockholders
held on October 1, 1996 NA
10(k) The Company's Employees' Incentive Compensation Plan
incorporated by reference to Appendix A to the Company's
Proxy Statement dated August 31, 1990 for its Annual
Meeting of Stockholders held on October 9, 1990. NA
10(k)(1) First Amendment to Employees Incentive Compensation Plan
incorporated by reference to Exhibit 10(p)(1) to the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1991. NA
10(k)(2) Second Amendment to Employees Incentive Compensation
Plan dated August 15, 1996. E
10(l) Richardson Electronics, Ltd. Employees' 1994 Incentive
Compensation Plan incorporated by reference to Exhibit A
to the Company's Proxy Statement dated August 31, 1994
for its Annual Meeting of Stockholders held on
October 11, 1994. NA
10(l)(1) First Amendment to the Richardson Electronics, Ltd.
Employees' 1994 Incentive Compensation Plan dated
August 15, 1996. E
10(m) Richardson Electronics, Ltd. 1996 Incentive Compensation
Plan incorporated by reference to Appendix B of the
Company's Proxy Statement dated September 3, 1996 for
its Annual Meeting of Stockholders held on October 1, 1996 NA
10(n) Correspondence outlining Agreement between the Company
and Arnold R. Allen with respect to Mr. Allen's employment
by the Company, incorporated by reference to Exhibit 10(v)
to the Company's Annual Re-port on Form 10-K, for the
fiscal year ended May 31, 1985. NA
10(n)(1) Letter dated February 3, 1992 between the Company and
Arnold R. Allen outlining Mr. Allen's engagement as a
consultant by the Company, incorporated by reference to
Exhibit 10 (r)(1) to the Company's Annual Report on
Form 10-K, for the fiscal year ended May 31, 1992. NA
10(n)(2) Letter dated April 1, 1993 between the Company and
Arnold R. Allen regarding Mr. Allen's engagement as
consultant by the Company, incorporated by reference to
Exhibit 10(i)(2) to the Company's Annual Report on
Form 10-K for the fiscal year ended May 31, 1994. NA
10(o) Letter dated January 14, 1992 between the Company and
Jacques Bouyer setting forth the terms of Mr. Bouyer's
engagement as a management consultant by the Company for
Europe, incorporated by reference to Exhibit 10(t)(1) to
the Company's Annual Report on Form 10-K for the fiscal
year ended on May 31, 1992. NA
10(o)(1) Letter dated January 15, 1992 between the Company and
Jacques Bouyer setting forth the terms of Mr. Bouyer's
engagement as a management consultant by the Company for
the United States, incorporated by reference to
Exhibit 10(t)(1) to the Company's Annual Report on
Form 10-K for the fiscal year ended on May 31, 1992. NA
10(p) Letter dated January 13, 1994 between the Company and
Samuel Rubinovitz setting forth the terms of Mr. Rubinovitz'
engagement as management consultant by the Company
incorporated by reference to Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the fiscal year
ended on May 31, 1994. NA
10(q) Letter dated April 4, 1994 between the Company and
Bart F. Petrini setting forth the terms of Mr. Petrini's
employment by the Company, incorporated by reference to
Exhibit 10(o) to the Company's Annual Report on Form 10-K
for the fiscal year ended on May 31, 1994. NA
10(r) Letter dated May 20, 1994 between the Company and
William J. Garry setting forth the terms of Mr. Garry's
employment by the Company, incorporated by reference to
Exhibit 10(p) to the Company's Annual Report on
Form 10-K for the fiscal year ended on May 31, 1994. NA
10(s) Letter dated October 17, 1994 between the Company and Flint
Cooper setting forth the terms of Mr. Cooper's employment
by the Company, incorporated by reference to Exhibit 10
to the Company's Quarterly Report on Form 10-Q for the
quarter ended November 30, 1994. NA
10(t) The Company's Directors and Officers Liability Insurance
Policy issued by Chubb Group of Insurance Companies Policy
Number 8125-64-60A incorporated by reference to Exhibit 10(u)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1991. NA
10(t)(1) The Company's Directors and Officers Liability Insurance
Policy renewal issued by Chubb Group of Insurance Companies
Policy Number 8125-64-60E. E
10(t)(2) The Company's Excess Directors and Officers Liability
and Corporate Indemnification Policy issued St. Paul
Mercury Insurance Company Policy Number 900DX0216. E
10(t)(3) The Company's Directors and Officers Liability
Insurance Policy issued by CNA Insurance Companies
Policy Number DOX600028634. E
10(u) Distributor Agreement, executed August 8, 1991, between
Registrant and Varian Associates, Inc., incorporated by
reference to Exhibit 10(d) of the Company's Current
Report on Form 8-K for September 30, 1991. NA
10(u)(1) Amendment, dated as of September 30, 1991, between
Registrant and Varian Associates, Inc., incorporated
by reference to Exhibit 10(e) of the Company's Current
Report on Form 8-K for September 30, 1991. NA
10(u)(2) First Amendment to Distributor Agreement between Varian
Associates, Inc. and the Company as of April 10, 1992,
incorporated by reference to Exhibit 10(v)(5) of the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1992. NA
10(u)(3) Consent to Assignment and Assignment dated August 4, 1995
between Registrant and Varian Associates Inc.,
incorporated by reference to Exhibit 10(s)(4) of the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1995. NA
10(u)(4) Final Judgment, dated April 1, 1992, in the matter of
United States of America v. Richardson Electronics, Ltd.,
filed in the United States District Court for the Northern
District of Illinois, Eastern Division, as Docket
No. 91 C 6211 incorporated by reference to Exhibit 10(v)(7)
to the Company's Annual Report on Form 10-K for the fiscal
year ended May 31, 1992. NA
10(v) Trade Mark License Agreement dated as of May 1, 1991
between North American Philips Corporation and the Company
incorporated by reference to Exhibit 10(w)(3) of the
Company's Annual Report on Form 10-K for the fiscal year
ended May 31, 1991. NA
10(w) Agreement among the City of Brive, Richardson Electronics,
Ltd., Richardson Electronique S.A., Covelec S.A. (now known
as Covimag S.A.), and Messrs. Denis Dumont and Patrick
Pertzborn, delivered February 23, 1995, translated from
French, incorporated by reference to Exhibit 10(a) to the
Company's Report on Form 8-K dated February 23, 1995. NA
10(x) Agreement among Richardson Electronics, Ltd., Richardson
Electronique S.A., Covelec S.A. (now known as Covimag S.A.),
and Messrs. Denis Dumont and Patrick Pertzborn, delivered
February 23, 1995, translated from French, incorporated by
reference to Exhibit 10(b) to the Company's Report on
Form 8-K dated February 23, 1995. NA
10(y) Settlement Agreement by and between the United States of
America and Richardson Electronics, Ltd. dated May 31, 1995
incorporated by reference to Exhibit 10(a) to the Company's
Report on From 8-K dated May 31, 1995. NA
11 Statement re computation of net income per share. E
13 Annual Report to Stockholders for fiscal year ending
May 31, 1996 (except for the pages and information thereof
expressly incorporated by reference in this Form 10-K, the
Annual Report to Stockholders is provided solely for the
information of the Securities and Exchange Commission and
is not deemed "filed" as part of this Form 10-K). E
21 Subsidiaries of the Company. E
23 Consent of Independent Auditors. E
27 Financial Data Schedule. E
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
RICHARDSON ELECTRONICS, LTD.
By: /s/
Edward J. Richardson,
Chairman of the Board and
President
By: /s/
William J. Garry
Vice President and
Date: August 26, 1996 Chief Financial 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 regis-
trant and in the capacities and on the dates indicated.
/s/ /s/
Edward J. Richardson, Chairman Dennis R. Gandy, Director
of the Board (principal executive August 26, 1996
officer), President and Director
August 26, 1996
/s/ /s/
Joel Levine, Director William J. Garry, Vice President
August 26, 1996 and Chief Financial Officer
(principal financial and accounting
officer) and Director
August 26, 1996
/s/ /s/
Scott Hodes, Director Samuel Rubinovitz, Director
August 26, 1996 August 26, 1996
/s/ /s/
Arnold R. Allen, Director Kenneth J. Douglas, Director
August 26, 1996 August 26, 1996
/s/ /s/
Jacques Bouyer, Director Harold L. Purkey
August 26, 1996 August 26, 1996
/s/
Ad Ketelaars, Director
August 26, 1996
<TABLE>
Richardson Electronics, Ltd. and Subsidiaries
Schedule VIII - Valuation and Qualifying Accounts
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
ADDITIONS
--------------------------
Balance at (1) Charged (2) Charged Balance at
DESCRIPTION Beginning to Costs to Other Deductions End of
of Period and Expenses Accounts - Describe Period
---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended May 31, 1996:
Allowance for sales returns and
doubtful accounts $ 1,385 $ (42) $ - $ (118) <F1> $ 1,225
Accrual for phase-down of domestic
manufacturing $ 1,726 $ 400 (2) $ - $ 589 <F2> $ 2,717
Year ended May 31, 1995:
Allowance for sales returns and
doubtful accounts $ 1,405 $ 199 $ - $ 219 <F1> $ 1,823
Assets held for disposition $15,832 $ - $ - $15,832 <F3> $31,664
Liabilities related to disposition $ 5,568 $ - $ - $ 5,568 <F4> $11,136
Accrual for phase-down of domestic
manufacturing $ 2,598 $ - $ - $ 870 <F5> $ 3,468
Year ended May 31, 1994:
Allowance for sales returns and
doubtful accounts $ 1,456 $ 199 $ - $ 250 <F1> $ 1,905
Assets held for disposition $ - $15,832 $ - $ - $15,832
Liabilities related to disposition $ - $ 5,568 $ - $ - $ 5,568
Accrual for phase-down of domestic
manufacturing $ 2,954 $ 5,100 $ - $ 5,456 <F5> $13,510
<FN>
<F1> Uncollectible amounts written off, net of recoveries and foreign currency
translation.
<F2> Provision to increase EPA groundwater remediation reserve to estimated
net present value of $670,000.
<F3> Costs incurred for EPA groundwater remediation, Panache litigation and
severance payments.
<F4> Asset write offs and costs incurred for the divestiture of the Company's
Brive, France, manufacturing operations.
<F5> Costs incurred for the phase-down of domestic manufacturing and the
disposition of manufactured inventory.
</FN>
</TABLE>
Exhibit 3(b)
BY-LAWS
OF
RICHARDSON ELECTRONICS, LTD.
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE.--The registered office shall be
established and maintained at the Office of the United States
Corporation Company, in the City of Dover, in the County of Kent,
in the State of Delaware, and said corporation shall be the
registered agent of this corporation in charge thereof.
SECTION 2. OTHER OFFICES.--The corporation may have other
offices, either within or without the State of Delaware, at such
place or places as the Board of Directors may from time to time
appoint or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. ANNUAL MEETINGS.--Annual meetings of stockholders
for the election of directors and for such other business as may be
stated in the notice of the meeting, shall be held at such place,
either within or without the State of Delaware, and at such time
and date as the Board of Directors, by resolution, shall determine
and as set forth in the notice of the meeting. In the event the
Board of Directors fails to so determine the time, date and place
of meeting, the annual meeting of stockholders shall be held at the
registered office of the corporation in Delaware on the first
Thursday in October of each year.
If the date of the annual meeting shall fall upon a legal
holiday, the meeting shall be held on the next succeeding business
day. At each annual meeting, the stockholders entitled to vote
shall elect a Board of Directors and they may transact such other
corporate business as shall be stated in the notice of the meeting.
SECTION 2. OTHER MEETINGS.--Meetings of stockholders for any
purpose other than the election of directors may be held at such
time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting.
SECTION 3. VOTING.--Each stockholder entitled to vote in
accordance with the terms of the Certificate of Incorporation and
in accordance with the provisions of these By-Laws shall be
entitled to such number of votes, in person or by proxy, for each
share of stock entitled to vote held by such stockholder as
provided in the Certificate of Incorporation or the resolution or
resolutions of the directors establishing the voting rights, if
any, of Preferred Stock or any series thereof, but no proxy shall
be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote
for directors and the vote upon any question before the meeting,
shall be by ballot. All elections for directors shall be decided
by plurality vote; all other questions shall be elected by majority
vote except as otherwise provided by the Certificate of
Incorporation or the laws of the State of Delaware.
A complete list of the stockholders entitled to vote at the
ensuing election, arranged in alphabetical order, with the address
of each, and the number of shares held by each, 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 who is present.
SECTION 4. QUORUM.--Except as otherwise required by Law, by
the Certificate of Incorporation or by these By-Laws, the presence,
in person or by proxy, of stockholders holding stock of the
corporation entitled to vote having a majority of voting power
shall constitute a quorum at all meetings of the stockholders. In
case a quorum shall not be present at any meeting, a majority in
voting interest of the stockholders entitled to vote thereat,
present in person or by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement
at the meeting, until the requisite amount of stock entitled to
vote shall be present. At any such adjourned meeting at which the
requisite amount of stock entitled to vote shall be represented,
any business may be transacted which might have been transacted at
the meeting as originally noticed; but only those stockholders
entitled to vote at the meeting as originally noticed shall be
entitled to vote at any adjournment or adjournments thereof.
SECTION 5. SPECIAL PURPOSES.--Special meetings of the
stockholders for any purpose or purposes may be called by the
Chairman of the Board, President or Secretary, or by resolution of
the directors.
SECTION 6. NOTICE OF MEETINGS.--Written notice, stating the
place, date and time of the meeting, and the general nature of the
business to be considered, shall be given to each stockholder
entitled to vote thereat at his address as it appears on the
records of the corporation, not less than ten nor more than sixty
days before the date of the meeting.
SECTION 7. ACTION WITHOUT MEETING.--Unless otherwise provided
by the Certificate of Incorporation, any action required to be
taken at any annual or special meeting of stockholders, or any
action which may be taken at any annual or special meeting, may be
taken without a meeting without prior notice and without a vote, if
a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote
thereon were present and voted. Prompt notice of the taking of the
corporate action without a meeting by less than unanimous written
consent shall be given to those stockholders who have not consented
in writing.
ARTICLE III
DIRECTORS
SECTION 1. NUMBER AND TERM.--The number of directors shall be
eleven (11). The directors shall be elected at the annual meeting
of the stockholders and each director shall be elected to serve
until his successor shall be elected and shall qualify.
SECTION 2. RESIGNATIONS.--Any director, member of a committee
or other officer may resign at any time. Such resignation shall be
made in writing, and shall take effect at the time specified
therein, and if no time be specified, at the time of its receipt by
the Chairman of the Board, President or Secretary. The acceptance
of a resignation shall not be necessary to make it effective.
SECTION 3. VACANCIES.--If the office of any director, member
of a committee or other officer becomes vacant, the remaining
directors in office, though less than a quorum by a majority vote,
may appoint any qualified person to fill such vacancy, who shall
hold office for the unexpired term and until his successor shall be
duly chosen.
SECTION 4. REMOVAL.--Except as hereinafter provided, any
director or directors may be removed either for or without cause at
any time by the affirmative vote of the holders of the shares of
stock outstanding and entitled to vote having a majority of the
voting power, at a special meeting of the stockholders called for
the purpose and the vacancies thus created may be filled, at the
meeting held for the purpose of removal, by the affirmative vote of
a majority in voting interest of the stockholders entitled to vote.
Unless the Certificate of Incorporation otherwise provides,
stockholders may effect removal of a director who is a member of a
classified Board of Directors only for cause. If the Certificate
of Incorporation provides for cumulative voting and if less than
the entire board is to be removed, no director may be removed
without cause if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election
of the entire board of directors, or, if there be classes of
directors, at an election of the class of directors of which he is
a part.
If the holders of any class or series are entitled to elect
one or more directors by the provisions of the Certificate of
Incorporation, these provisions shall apply, in respect to the
removal without cause of a director or directors so elected, to the
vote of the holders of the outstanding shares of that class or
series and not to the vote of the outstanding shares as a whole.
SECTION 5. INCREASE OF NUMBER.--The number of directors may be
increased by amendment of these By-Laws by the affirmative vote of
a majority of the directors, though less than a quorum, or, by the
affirmative vote of a majority in voting interest of the
stockholders, at the annual meeting or at a special meeting called
for that purpose, and by like vote the additional directors may be
chosen at such meeting to hold office until the next annual
election and until their successors are elected and qualify.
SECTION 6. POWERS.--The Board of Directors shall exercise all
of the powers of the corporation except such as are by law, or by
the Certificate of Incorporation of the corporation or by these
By-Laws conferred upon or reserved to the stockholders.
SECTION 7. COMMITTEES.--The Board of Directors may, by
resolution or resolutions passed by a majority of the whole board,
designate one or more committees, each committee to consist of two
or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of
any member of such committee or committees, 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 such absent or disqualified member.
Any such committee, to the extent provided in the resolution
of the Board of Directors, or in these By-Laws, 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, and
may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation
or a revocation of a dissolution, or amending the By-Laws of the
corporation; and, unless the resolution, these By-Laws, or the
Certificate of Incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend
or to authorize the issuance of stock.
SECTION 8. MEETINGS.--The newly elected directors may hold
their first meeting for the purpose or organization and the
transaction of business, if a quorum be present, immediately after
the annual meeting of the stockholders; or the time and place of
such meeting may be fixed by consent in writing of all the
directors.
Regular meetings of the directors may be held without notice
at such places and times as shall be determined from time to time
by resolution of the directors.
Special meetings of the board may be called by the Chairman of
the Board or by the Secretary on the written request of any two
directors on at least two day's notice to each director and shall
be held at such place or places as may be determined by the
directors, or as shall be stated in the call of the meeting.
Unless otherwise restricted by the Certificate of
Incorporation or these By-Laws, members of the Board of Directors,
or any committee designated by the Board of Directors, may
participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at
the meeting.
SECTION 9. QUORUM.--A majority of the directors shall
constitute a quorum for the transaction of business. If at any
meeting of the board there shall be less than a quorum present, a
majority of those present may adjourn the meeting from time to time
until a quorum is obtained, and no further notice thereof need be
given other than by announcement at the meeting which shall be so
adjourned.
SECTION 10. COMPENSATION.--By resolution of the Board,
Directors may be compensated for their services as directors or as
members of committees, and receive a fixed fee and expenses of
attendance at each meeting. Nothing herein contained shall be
construed to preclude any director from serving the corporation in
any other capacity as an officer, agent or otherwise, and receiving
compensation therefor.
SECTION 11. ACTION WITHOUT MEETING.--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 prior
to such action a written consent thereto is signed by all members
of the board, or of such committee as the case may be, and such
written consent is filed with the minutes of proceedings of the
board or committee.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS.--The officers of the corporation shall be
a Chairman of the Board, a President, a Chief Financial Officer, a
Treasurer, and a Secretary, all of whom shall be elected by the
Board of Directors and who shall hold office until their successors
are elected and qualified. In addition, the Board of Directors may
elect one or more Vice-Presidents and such Assistant Secretaries
and Assistant Treasurers as they may deem proper. None of the
officers of the corporation need be directors. The officers shall
be elected at the first meeting of the Board of Directors after
each annual meeting. More than two offices may be held by the same
person.
SECTION 2. OTHER OFFICERS AND AGENTS.--The Board of Directors
may appoint such other officers and agents as it may deem
advisable, 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 by the Board of Directors.
SECTION 3. CHAIRMAN.--The Chairman of the Board of Directors
shall be the chief executive officer of the corporation. He or she
shall preside at all meetings of the stockholders and of the Board
of Directors; and, subject to the direction and control of the
Board of Directors, he or she shall be in charge of the business of
the corporation and shall direct the policy and management of the
corporation. In general he or she shall discharge all the duties
incident to the position of chief executive officer and such other
duties as may be prescribed by the Board of Directors from time to
time. He or she may sign certificates for shares of the
corporation, any deeds, mortgages, bonds, contracts, or other
instruments which the Board of Directors have authorized to be
executed, except in cases where the signing and execution thereof
shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the corporation, or shall
be required by law to be otherwise signed or executed, and he or
she may accomplish such execution either under or without the seal
of the corporation and either individually or with the Secretary,
any Assistant Secretary, or any other officer thereunto authorized
by the Board of Directors or these By-Laws, according to the
requirements of the form of the instrument. He or she may vote or
execute consents or proxies with respect to all securities which
the corporation is entitled to vote except as and to the extent
such authority shall be vested in a different officer or agent of
the corporation by the Board of Directors.
SECTION 4. PRESIDENT.--The President shall be the chief
operating officer of the corporation and, subject to the direction
and control of the Board of Directors and Chairman of the Board,
shall in general supervise, manage and control all of the
operations, business and affairs of the corporation. In the
absence of the Chairman of the Board, he or she shall preside at
all meetings of the stockholders and of the Board of Directors. He
or she may sign certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts or other instruments which the
Board of Directors have authorized to be executed, except in cases
where the signing and execution thereof shall be expressly
delegated by the Board of Directors or by these By-Laws to some
other officer or agent of the corporation, or shall be required by
law to be otherwise signed or executed, and he or she may
accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any
Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors or these By-Laws, according to the
requirements of the form of the instrument. In general he or she
shall perform all duties incident to the office of President and
such other duties as may be prescribed by the Chairman of the Board
or by the Board of Directors from time to time.
SECTION 5. VICE-PRESIDENT.--The Vice President (or in the
event there be more than one Vice President, each of the Vice
Presidents) shall assist the Chairman of the Board and President in
the discharge of their duties as the Chairman of the Board and
President may direct and shall perform such other duties as from
time to time may be assigned to him or her by the Chairman of the
Board or President or by the Board of Directors. In the absence of
the President or in the event of his or her inability or refusal to
act, the Vice President (or in the event there be more than one
Vice President, the Vice Presidents in the order designated by the
Board of Directors, or by the Chairman of the Board if the Board of
Directors has not made such a designation, or by the President if
neither the Chairman of the Board nor the Board of Directors has
made such a designation, or in the absence of any designation, then
in the order of seniority of tenure as Vice President) shall
perform 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. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the
corporation or a different mode of execution is expressly
prescribed by the Board of Directors or these By-Laws, the Vice
President (or each of them if there are more than one) may execute
for the corporation certificates for its shares and any contracts,
deeds, mortgages, bonds or other instruments which the Board of
Directors has authorized to be executed, and he or she may
accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any
Assistant Secretary, or any other officer thereunto authorized by
the Board of Directors, according to the requirements of the form
of the instrument.
SECTION 6. CHIEF FINANCIAL OFFICER.--The Chief Financial
Officer shall be the chief financial officer and principal
accounting officer of the corporation having the duties,
responsibility and authority incident to such position for all
financial and accounting matters involving the corporation. He or
she shall have such other duties, responsibilities and authority as
may be determined by and be responsible to, the Board of Directors,
the Audit Committee, the Chairman of the Board, and the President.
SECTION 7. TREASURER.--The Treasurer shall have the custody of
the corporate funds and securities and shall keep full and accurate
account of receipts and disbursements in books belonging to the
corporation. He or she shall deposit all moneys and other
valuables in the name and to the credit of the corporation in such
depositaries as may be designated by the Board of Directors or
pursuant to their authorization.
The Treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, or the Chairman of the
Board or the President, or the Chief Financial Officer, taking
proper vouchers for such disbursements. He or she shall render to
the Chairman of the Board, the President, the Chief Financial
Officer and Board of Directors at the regular meetings of the Board
of Directors, or whenever they may request it, an account of all
his or her transactions as Treasurer and of the financial condition
of the corporation. If required by the Board of Directors, he or
she shall give the corporation a bond for the faithful discharge of
his or her duties in such amount and with such surety as the board
shall prescribe. He or she shall be responsible to the Chief
Financial Officer.
SECTION 8. SECRETARY.--The Secretary shall give, or cause to
be given, notice of all meetings of stockholders and directors, and
all other notices required by law or by these By-Laws, and in case
of his or her absence or refusal or neglect so to do, any such
notice may be given by any person thereunto directed by the
Chairman of the Board or the President, or by the directors, or
stockholders, upon whose requisition the meeting is called as
provided in these By-Laws. He or she shall record all the
proceedings of the corporation and of the directors in a book to be
kept for that purpose, and shall perform such other duties as may
be assigned to him or her by the directors or Chairman of the Board
or the President. He or she shall have the custody of the seal of
the corporation and shall affix the same to all instruments
requiring it, when authorized by the directors or the Chairman of
the Board or the President, and attest the same.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES.
- --Assistant Treasurers and Assistant Secretaries, if any, shall be
elected and shall have such powers and shall perform such duties as
shall be assigned to them, respectively, by the directors.
ARTICLE V
MISCELLANEOUS
SECTION 1. CERTIFICATES OF STOCK.--Certificates of stock,
signed by the Chairman of the Board, President or Vice-President,
and the Treasurer or an Assistant Treasurer, or Secretary or an
Assistant Secretary, shall be issued to each stockholder certifying
the number of shares owned by him in the corporation. Any of or
all the signatures may be facsimiles.
SECTION 2. LOST CERTIFICATES.--A new certificate of stock may
be issued in the place of any certificate theretofore issued by the
corporation, alleged to have been lost or destroyed, and the
directors may, in their discretion, require the owner of the lost
or destroyed certificate, or his legal representatives, to give the
corporation a bond, in such sum as they may direct, not exceeding
double the value of the stock, to indemnify the corporation against
any claim that may be made against it on account of the alleged
loss of any such certificate, or the issuance of any such new
certificate.
SECTION 3. TRANSFER OF SHARES.--The shares of stock of the
corporation shall be transferable only upon its books by the
holders thereof in person or by their duly authorized attorneys or
legal representatives, and upon such transfer the old certificates
shall be surrendered to the corporation by the delivery thereof to
the person in charge of the stock and transfer books and ledgers,
or to such other person as the directors may designate, by whom
they shall be cancelled, and new certificates shall thereupon be
issued. A record shall be made of each transfer and whenever a
transfer shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of the transfer.
SECTION 4. STOCKHOLDERS 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 to express consent to corporate action in writing without a
meeting, 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 nor less than ten days before the date of such
meeting, nor more than sixty days prior to any other action. 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 5. DIVIDENDS.--Subject to the provisions of the
Certificate of Incorporation, the Board of Directors may, out of
funds legally available therefor at any regular or special meeting,
declare dividends upon the capital stock of the corporation as and
when they deem expedient. Before declaring any dividend there may
be set apart out of any funds of the corporation available for
dividends, such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve
fund to meet contingencies or for equalizing dividends or for such
other purposes as the directors shall deem conducive to the
interests of the corporation.
SECTION 6. SEAL.--The corporate seal shall be circular in form
and shall contain the name of the corporation, the year of its
creation and the words "CORPORATE SEAL DELAWARE." Said seal may be
used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
SECTION 7. FISCAL YEAR.--The fiscal year of the corporation
shall be determined by resolution of the Board of Directors.
SECTION 8. CHECKS.--All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued
in the name of the corporation shall be signed by such officer or
officers, agent or agents of the corporation, and in such manner as
shall be determined from time to time by resolution of the Board of
Directors.
SECTION 9. NOTICE AND WAIVER OF NOTICE.--Whenever any notice
is required by these By-Laws to be given, personal notice is not
meant unless expressly so stated, and any notice so required shall
be deemed to be sufficient if given by depositing the same in the
United States mail, postage prepaid, addressed to the person
entitled thereto at his address as it appears on the records of the
corporation, and such notice shall be deemed to have been given on
the day of such mailing. Stockholders not entitled to vote shall
not be entitled to receive notice of any meetings except as
otherwise provided by Statute.
Whenever any notice whatever is required to be given under the
provisions of any law, or under the provisions of the Certificate
of Incorporation of the corporation or these By-Laws, 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 VI
AMENDMENTS
These By-Laws may be altered or repealed and By-Laws may be
made at any annual meeting of the stockholders or at any special
meeting thereof if notice of the proposed alteration or repeal or
By-Law or By-Laws to be made be contained in the notice of such
special meeting, by the affirmative vote of the stock issued and
outstanding and entitled to vote thereat having a majority of the
voting power, or by the affirmative vote of a majority of the Board
of Directors, at any regular meeting of the Board of Directors, or
at any special meeting of the Board of Directors, if notice of the
proposed alteration or repeal, or By-Law or By-Laws to be made, be
contained in the notice of such special meeting.
ARTICLE VII
INDEMNIFICATION
SECTION 1. GENERAL.--The corporation shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (as
hereinafter defined) as provided in this Article and to the fullest
extent permitted by applicable law, as the same exists or may
hereafter be amended.
SECTION 2. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE
RIGHT OF THE CORPORATION.--Indemnitee shall be entitled to the
rights of indemnification provided in this Section 2 if, by reason
of his Corporate Status (as hereinafter defined), he is, or is
threatened to be made, a party to any Proceeding (as hereinafter
defined), other than a Proceeding by or in the right of the
corporation. Pursuant to this Section 2, Indemnitee shall be
indemnified against Expenses, judgments, penalties, fines
(including, without limitation, excise taxes assessed on an
Indemnitee with respect to an employee benefit plan) and amounts
paid in settlement actually and reasonably incurred by him or on
his behalf in connection with such Proceeding or any claim, issue
or matter therein, if he acted in Good Faith.
SECTION 3. PROCEEDINGS BY OR IN THE RIGHT OF THE
CORPORATION.--Indemnitee shall be entitled to the rights of
indemnification provided in this Section 3 if, by reason of his
Corporate Status, he is, or is threatened to be made, a party to
any Proceeding brought by or in the right of the corporation to
procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against Expenses, judgments,
penalties and amounts paid in settlement actually and reasonably
incurred by him or on his behalf in connection with such Proceeding
if he acted in Good Faith. Notwithstanding the foregoing, no
indemnification against such Expenses, judgments, penalties and
amounts paid in settlement shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall
have been adjudged to be liable to the corporation if applicable
law prohibits such indemnification; provided, however, that, if
applicable law so permits, indemnification against Expenses,
judgments, penalties and amounts paid in settlement shall
nevertheless be made by the corporation in such event if and only
to the extent that the Court of Chancery of the State of Delaware,
or the court in which such Proceeding shall have been brought or is
pending, shall determine.
SECTION 4. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS
WHOLLY OR PARTLY SUCCESSFUL.--Notwithstanding any other provision
of this Article, to the extent that Indemnitee is, by reason of his
Corporate Status, a party to and is successful, on the merits or
otherwise, in any Proceeding, he shall be indemnified to the
maximum extent permitted by law against all Expenses, judgments,
penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in such
Proceeding but is successful, on the merits or otherwise, as to one
or more but less than all claims, issues or matters in such
Proceeding, the corporation shall indemnify Indemnitee to the
maximum extent permitted by law against all Expenses, judgments,
penalties, fines, and amounts paid in settlement actually and
reasonably incurred by him or on his behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this
Section and without limitation, the termination of any claim, issue
or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such
claim, issue or matter.
SECTION 5. INDEMNIFICATION FOR EXPENSES OF A
WITNESS.--Notwithstanding any other provision of this Article, to
the extent that Indemnitee is, by reason of his Corporate Status,
a witness in any Proceeding, he shall be indemnified against all
Expenses actually and reasonably incurred by him or on his behalf
in connection therewith.
SECTION 6. ADVANCEMENT OF EXPENSES.--Notwithstanding any
provisions to the contrary in Section 7, the corporation shall
advance all reasonable Expenses incurred by or on behalf of
Indemnitee in connection with any Proceeding within twenty days
after the receipt by the corporation of a statement or statements
from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence
the Expenses incurred by Indemnitee and shall include or be
preceded or accompanied by an undertaking by or on behalf of
Indemnitee to repay any Expenses advanced if it shall ultimately be
determined that Indemnitee is not entitled to be indemnified
against such Expenses. Any advance and undertaking to repay
pursuant to this Section 6 shall be unsecured and interest free.
SECTION 7. PROCEDURE FOR DETERMINATION OF ENTITLEMENT TO
INDEMNIFICATION.--
(a) To obtain indemnification under this Article, Indemnitee
shall submit to the corporation a written request, including
therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to
determine whether and to what extent Indemnitee is entitled to
indemnification. The Secretary of the corporation shall, promptly
upon receipt of such a request for indemnification, advise the
Board of Directors in writing that Indemnitee has requested
indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to the first sentence of Section 7(a) hereof, a
determination, if required by applicable law, with respect to
Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change in Control (as hereinafter defined) shall
have occurred, by Independent Counsel (as hereinafter defined)
(unless Indemnitee shall request that such determination be made by
the Board of Directors or the stockholders, in which case by the
person or persons or in the manner provided for in clauses (ii) or
(iii) of this Section 7(b)) in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; (ii)
if a Change of Control shall not have occurred, (A) by the Board of
Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (B) if a
quorum of the Board of Directors consisting of Disinterested
Directors is not obtainable or, even if obtainable, such quorum of
Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be
delivered to Indemnitee or (C) by the stockholders of the
corporation; or (iii) as provided in Section 8(b) of this Article;
and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate
with the person, persons or entity making such determination with
respect to Indemnitee's entitlement to indemnification, including
providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such
determination. Any costs or expenses (including attorneys' fees
and disbursements) incurred by Indemnitee in so cooperating with
the person, persons or entity making such determination shall be
borne by the corporation (irrespective of the determination as to
Indemnitee's entitlement to indemnification) and the corporation
hereby indemnifies and agrees to hold Indemnitee harmless
therefrom.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to
Section 7(b) of this Article, the Independent Counsel shall be
selected as provided in this Section 7(c). If a Change of Control
shall not have occurred, the Independent Counsel shall be selected
by the Board of Directors, and the corporation shall give written
notice to Indemnitee advising him of the identity of the
Independent Counsel so selected. If a Change of Control shall have
occurred, the Independent Counsel shall be selected by Indemnitee
(unless Indemnitee shall request that such selection be made by the
Board of Directors, in which event the preceding sentence shall
apply), and Indemnitee shall give written notice to the corporation
advising it of the identity of the Independent Counsel so selected.
In either event, Indemnitee or the corporation, as the case may be,
may, within 7 days after such written notice of selection shall
have been given, deliver to the corporation or to Indemnitee, as
the case may be, a written objection to such selection. Such
objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent
Counsel" as defined in Section 13 of this Article, and the
objection shall set forth with particularity the factual basis of
such assertion. If such written objection is made, the Independent
Counsel so selected may not serve as Independent Counsel unless and
until a court has determined that such objection is without merit.
If, within 20 days after submission by Indemnitee of a written
request for indemnification pursuant to Section 7(a) hereof, no
Independent Counsel shall have been selected and not objected to,
either the corporation or Indemnitee may petition the Court of
Chancery of the State of Delaware or other court of competent
jurisdiction for resolution of any objection which shall have been
made by the corporation or Indemnitee to the other's selection of
Independent Counsel and/or for the appointment as Independent
Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom
an objection is so resolved or the person so appointed shall act as
Independent Counsel under Section 7(b) hereof. The corporation
shall pay any and all reasonable fees and expenses of Independent
Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 7(b) hereof, and the corporation shall
pay all reasonable fees and expenses incident to the procedures of
this Section 7(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due
commencement of any judicial proceeding or arbitration pursuant to
Section 9(a)(iii) of this Article, Independent Counsel shall be
discharged and relieved of any further responsibility in such
capacity (subject to the applicable standards of professional
conduct then prevailing).
SECTION 8. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.--
(a) In making a determination with respect to entitlement to
indemnification hereunder, the person, persons or entity making
such determination shall presume that Indemnitee is entitled to
indemnification under this Article if Indemnitee has submitted a
request for indemnification in accordance with Section 7(a) of this
Article, and the corporation shall have the burden of proof to
overcome that presumption in connection with the making by any
person, persons or entity of any determination contrary to that
presumption.
(b) If the person, persons or entity empowered or selected
under Section 7 of this Article to determine whether Indemnitee is
entitled to indemnification shall not have made such determination
within 60 days after receipt by the corporation of the request
therefor, the requisite determination of entitlement to
indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law; provided, however, that such 60-day period
may be extended for a reasonable time, not to exceed an additional
30 days, if the person, persons or entity making the determination
with respect to entitlement to indemnification in good faith
requires such additional time for the obtaining or evaluating of
documentation and/or information relating thereto; and provided,
further, that the foregoing provisions of this Section 8(b) shall
not apply (i) if the determination of entitlement to
indemnification is to be made by the stockholders pursuant to
Section 7(b) of this Article and if (A) within 15 days after
receipt by the corporation of the request for such determination
the Board of Directors has resolved to submit such determination to
the stockholders for their consideration at an annual meeting
thereof to be held within 75 days after such receipt and such
determination is made thereat, or (B) a special meeting of
stockholders is called within 15 days after such receipt for the
purpose of making such determination, such meeting is held for such
purpose within 60 days after having been so called and such
determination is made thereat, or (ii) if the determination of
entitlement to indemnification is to be made by Independent Counsel
pursuant to Section 7(b) of this Article.
(c) The termination of any Proceeding or of any claim, issue
or matter therein by judgment, order, settlement or conviction, or
upon a plea of nolo contendere or its equivalent, shall not (except
as otherwise expressly provided in this Article) of itself
adversely affect the right of Indemnitee to indemnification or
create a presumption that Indemnitee did not act in Good Faith.
(d) For purposes of any determination of Good Faith,
Indemnitee shall be deemed to have acted in Good Faith if
Indemnitee's action is based on the records or books of account of
the Enterprise, including financial statements, or on information
supplied to Indemnitee by the officers of the Enterprise in the
course of their duties, or on the advice of legal counsel for the
Enterprise or on information or records given or reports made to
the Enterprise by an independent certified public accountant or by
an appraiser or other expert selected with reasonable care by the
Enterprise. The provisions of this Section 7(d) shall not be
deemed to be exclusive or to limit in any way the other
circumstances in which the Indemnitee may be deemed to have met the
applicable standard of conduct set forth in this Article.
(e) The knowledge and/or actions, or failure to act, of any
director, officer, agent or employee of the Enterprise shall not be
imputed to Indemnitee for purposes of determining the right to
indemnification under this Article.
SECTION 9. REMEDIES OF INDEMNITEE.-
(a) In the event that (i) a determination is made pursuant to
Section 7 of this Article that Indemnitee is not entitled to
indemnification under this Article, (ii) advancement of Expenses is
not timely made pursuant to Section 6 of this Article, (iii) the
determination of entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 7(b) of this Article and
such determination shall not have been made and delivered in a
written opinion within 90 days after receipt by the corporation of
the request for indemnification, (iv) payment of indemnification is
not made pursuant to Section 5 of this Article within ten (10) days
after receipt by the corporation of a written request therefor, or
(v) payment of indemnification is not made within ten (10) days
after a determination has been made that Indemnitee is entitled to
indemnification or such determination is deemed to have been made
pursuant to Section 8 of this Article, Indemnitee shall be entitled
to an adjudication in an appropriate court of the State of
Delaware, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advancement of Expenses.
Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the
rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in
arbitration within 180 days following the date on which Indemnitee
first has the right to commence such proceeding pursuant to this
Section 9(a). The corporation shall not oppose Indemnitee's right
to seek any such adjudication or award in arbitration.
(b) In the event that a determination shall have been made
pursuant to Section 7 of this Article that Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration
commenced pursuant to this Section 9 shall be conducted in all
respects as a de novo trial, or arbitration, on the merits and
Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced
pursuant to this Section 9 the corporation shall have the burden of
proving that Indemnitee is not entitled to indemnification or
advancement of Expenses, as the case may be.
(c) If a determination shall have been made or deemed to have
been made pursuant to Section 7 or 8 of this Article that
Indemnitee is entitled to indemnification, the corporation shall be
bound by such determination in any judicial proceeding or
arbitration commenced pursuant to this Section 9, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a
material fact necessary to make Indemnitee's statement not
materially misleading, in connection with the request for
indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) The corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this
Section 9 that the procedures and presumptions of this Article are
not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the corporation is bound
by all the provisions of this Article.
(e) In the event that Indemnitee, pursuant to this Section 9,
seeks a judicial adjudication of or an award in arbitration to
enforce his rights under, or to recover damages for breach of, this
Article, Indemnitee shall be entitled to recover from the
corporation, and shall be indemnified by the corporation against,
any and all expenses (of the types described in the definition of
Expenses in Section 13 of this Article) actually and reasonably
incurred by him in such judicial adjudication or arbitration, but
only if he prevails therein. If it shall be determined in said
judicial adjudication or arbitration that Indemnitee is entitled to
receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by Indemnitee in connection
with such judicial adjudication or arbitration shall be
appropriately prorated.
SECTION 10. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE;
SUBROGATION.--
(a) The rights of indemnification and to receive advancement
of Expenses as provided by this Article shall not be deemed
exclusive of any other rights to which Indemnitee may at any time
be entitled under applicable law, the Certificate of Incorporation,
the By-Laws, any agreement, a vote of stockholders or a resolution
of directors, or otherwise. The rights conferred by this Article
shall be deemed contract rights and no amendment, alteration or
repeal of this Article or of any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or
omitted by such Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal. The provisions of this Article
shall continue as to an Indemnitee whose Corporate Status has
ceased and shall inure to the benefit of his heirs, executors and
administrators.
(b) To the extent that the corporation maintains an insurance
policy or policies providing liability insurance for directors,
officers, employees, agents or fiduciaries of the corporation or of
any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person serves at the
request of the corporation, Indemnitee shall be covered by such
policy or policies in accordance with its or their terms to the
maximum extent of the coverage available for any such director,
officer, employee or agent under such policy or policies.
(c) In the event of any payment under this Article, the
corporation shall be subrogated to the extent of such payment to
all of the rights of recovery of Indemnitee, who shall execute all
papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to
enable the corporation to bring suit to enforce such rights.
(d) The corporation shall not be liable under this Article to
make any payment of amounts otherwise indemnifiable hereunder if
and to the extent that Indemnitee has otherwise actually received
such payment under any insurance policy, contract, agreement or
otherwise.
(e) The corporation shall have the express authority to enter
into such agreements as the Board of Directors deems appropriate
for the indemnification of present or future directors, officers,
employees or agents of the corporation in connection with their
service to, or status with, any Enterprise.
SECTION 11. SEVERABILITY.--If any provision or provisions of
this Article shall be held to be invalid, illegal or unenforceable
for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Article
(including without limitation, each portion of any Section of this
Article containing any such provision held to be invalid, illegal
or unenforceable, that is not itself invalid, illegal or
unenforceable) shall not in any way be affected or impaired
thereby; and (b) to the fullest extent possible, the provisions of
this Article (including, without limitation, each portion of any
Section of this Article containing any such provision held to be
invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 12. CERTAIN PERSONS NOT ENTITLED TO INDEMNIFICATION OR
ADVANCEMENT OF EXPENSES.--Notwithstanding any other provision of
this Article, no person shall be entitled to indemnification or
advancement of Expenses under this Article with respect to any
Proceeding, or any claim therein other than to enforce
indemnification rights under this Article, brought or made by him
against the corporation.
SECTION 13. DEFINITIONS.--For purposes of this Article:
(a) "Change in Control" means a change in control of the
corporation occurring after the Effective Date of a nature that
would be required to be reported in response to Item 5(f) of
Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities
Exchange Act of 1934 (the "Act"), whether or not the corporation is
then subject to such reporting requirement; provided, however,
that, without limitation, such a Change in Control shall be deemed
to have occurred if after the Effective Date (i) any "person" (as
such term is used in Sections 1 3(d) and 1 4(d) of the Act) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the corporation
representing 50% or more of the combined voting power of the
corporation's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board of
Directors in office immediately prior to such person attaining such
percentage interest; (ii) the corporation is a party to a merger,
consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of
Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors
thereafter; or (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the
Board of Directors (including for this purpose any new director
whose election or nomination for election by the corporation's
stockholders was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the beginning
of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
(b) "Corporate Status" describes the status of a person who
is or was a director, officer, employee, agent or fiduciary of the
corporation or of any other corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise which
such person is or was serving at the request of the corporation.
(c) "Disinterested Director" means a director of the
corporation who is not and was not a party to the Proceeding in
respect of which indemnification is sought by Indemnitee.
(d) "Effective Date" means September 11, 1986.
(e) "Enterprise" shall mean the corporation and any other
corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise of which Indemnitee is or was serving at
the request of the corporation as a director, officer, employee,
agent or fiduciary.
(f) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs transcript costs, fees of experts, witness
fees, travel expenses, duplicating costs, printing and binding
costs, telephone charges, postage, delivery service fees, and all
other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute
or defend, investigating, or being or preparing to be a witness in
a Proceeding.
(g) "Good Faith" shall mean Indemnitee having acted in good
faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal Proceeding, having had no reasonable cause
to believe Indemnitee's conduct was unlawful.
(h) "Indemnitee" includes any person who is, or is threatened
to be made, a witness in or a party to any Proceeding as described
in Sections 2, 3, 4 or 5 of this Article by reason of his Corporate
Status.
(i) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and
neither presently is, nor in the past five years has been, retained
to represent (i) the corporation or Indemnitee in any matter
material to either such party, or (ii) any other party to the
Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of
interest in representing either the corporation or Indemnitee in an
action to determine Indemnitee's rights under this Article.
(j) "Proceeding" includes any threatened, pending or
completed action, suit, arbitration, alternate dispute resolution
mechanism, investigation, administrative hearing or any other
threatened, pending or completed proceeding whether civil,
criminal, administrative or investigative, except one initiated by
an Indemnitee. For purposes of the foregoing sentence, a
"Proceeding" shall not be deemed to have been initiated by
Indemnitee where Indemnitee seeks pursuant to Section 9 of this
Article to enforce his rights under this Article.
SECTION 14. NOTICES.--Any notice, request or other
communication required or permitted to be given to the corporation
under this Article shall be in writing and either delivered in
person or sent by telex, telegram or certified or registered mail,
postage prepaid, return receipt requested, to the Secretary of the
corporation and shall be effective only upon receipt by the
Secretary.
SECTION 15. MISCELLANEOUS.--Use of the masculine pronoun shall
be deemed to include usage of the feminine pronoun where
appropriate.
Exhibit 10(a)
RICHARDSON ELECTRONICS, LTD.
AMENDED AND RESTATED SENIOR REVOLVING NOTE
$30,000,000.00 Chicago, Illinois June 14, 1996
FOR VALUE RECEIVED, THE UNDERSIGNED, RICHARDSON ELECTRONICS,
LTD., a Delaware corporation ("Borrower") promises to pay to the
order of AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO
("Bank"), at such place as Bank may from time to time designate
in writing, the principal sum of Thirty Million Dollars
($30,000,000.00) or so much thereof as may from time to time be
advanced hereunder, with interest on the principal balance
outstanding from time to time, all as hereinafter set forth. The
principal balance hereof may be borrowed, repaid and borrowed
again, all in accordance with the terms and conditions stated
herein.
The entire principal balance of this Note then outstanding,
plus any accrued and unpaid interest thereon shall be due and
payable on November 30, 1998, or such earlier date on which said
amount shall become due and payable on account of acceleration by
Bank (the "Maturity Date"). Borrower promises to pay to Bank
interest in the amounts and at the times provided below.
Borrower agrees that, on the Maturity Date, Borrower will pay to
Bank the entire principal balance of this Note then outstanding,
together with all accrued and unpaid interest, all penalties,
late payment fees and any other sums due hereunder.
Except as hereinafter provided, Borrower's obligations and
liabilities to Bank under this Note ("Borrower's Liabilities")
unpaid from time to time (except for principal outstanding
comprising a Foreign Denominated Funding) shall bear interest
from the date of disbursement until paid, at a daily rate equal
to the daily rate equivalent, computed on a basis of actual days
elapsed, of interest announced or published publicly from time to
time by Bank as its prime, base or equivalent rate of interest
(such publicly announced or published rate of interest referred
to herein as the "Prime Rate"). The foregoing rate of interest
to be charged hereunder shall fluctuate hereafter from time to
time concurrently with and in an amount equal to each increase or
decrease in the Prime Rate.
Notwithstanding the foregoing, at Borrower's option ("Libor
Option"), exercisable upon two Business Days prior oral or
written notice by an Authorized Officer of Borrower to Bank, all
or any portion of the principal balance outstanding under this
Note (not comprising a Foreign Denominated Funding as described
below) shall bear interest at Borrower's Libor Option Rate (as
defined below) in effect as of the date of such notification.
Borrower's Libor Option may be exercised for periods (the "Libor
Option Period") of not less than thirty (30) days and not greater
than ninety (90) days, and may be exercised (whether for
consecutive periods or otherwise) throughout the term of this
Note. In the event Borrower fails to elect as provided above a
successive Libor Option Period prior to the expiration of a Libor
Option Period then in effect, the funds subject to the Libor
Option shall, after such expiration, bear interest at the Prime
Rate provided in the preceding paragraph.
Notwithstanding the foregoing, at Borrower's option
("Foreign Funding Option"), exercisable upon two Business Days
prior oral or written notice by an Authorized Officer of Borrower
to Bank, all or any portion of funds to be advanced under this
Note, in amounts equal to or exceeding one million dollars
($1,000,000) for each advance and less than or equal to
twenty-five million dollars ($25,000,000) in the aggregate for
all advances at any time outstanding, may be advanced as a
Foreign Denominated Funding. The principal balance outstanding
under this Note comprising a Foreign Denominated Funding shall
bear interest at the Foreign Denominated Funding Rate (as defined
below) in effect as of the date of such notification. Borrower's
Foreign Funding Option may be exercised for periods (the "Foreign
Funding Option Period") of not less than ninety (90) days and not
greater than five hundred forty (540) days, and may be exercised
(whether for consecutive periods or otherwise) throughout the
term of this Note. In the event Borrower fails to elect as
provided above a successive Foreign Funding Option Period prior
to two Business Days prior to the last day of a Foreign Funding
Option Period then in effect, the funds subject to the Foreign
Funding Option shall, after such expiration, bear interest at the
Prime Rate provided in the second preceding paragraph.
Borrowers Liabilities for principal upon this Note arising
from a Foreign Denominated Funding shall bear interest at
Borrower's Foreign Denominated Funding Rate (as defined below)
from the date of advance until repayment.
Interest hereunder shall be due and payable quarterly in
arrears, on each April 30, July 31, October 31, and January 31,
during the term of this Note, at such place as Bank may from time
to time designate in writing, on the average daily balance of the
principal amount outstanding during the quarterly period then
ending, and shall be calculated on the basis of the actual number
of days in such quarterly period. All interest payable under
this Note shall be calculated for actual days based upon a 360
day year (except for interest at the Foreign Denominated Funding
Rate upon British Pounds Sterling which shall be calculated for
actual days based upon a 365 day year). If any payment of
principal and interest hereunder is due on a day which is not a
Business Day, such payment will be due on the next following
Business Day.
Both the Bank's Prime Rate and its Libor shall not
necessarily be the lowest rate of interest which the Bank
charges its customers.
If an Event of Default shall occur, interest, in lieu of the
interest hereinabove provided, shall accrue hereunder from the
date of the same until cured, if cure is allowed, at the rate of
two percent (2%) per annum, computed on a basis of actual days
elapsed, in excess of the Prime Rate in effect on the date of the
Event of Default, which rate shall change when and as said Prime
Rate changes. The Bank shall not, however, incur any additional
costs as a result of the change from the Libor Option to such
Prime Rate in the middle of a Libor Option Period. Such amounts
shall be part of Borrower's Liabilities immediately due and
payable by Borrower to Bank without notice by Bank to or demand
by Bank of Borrower.
Borrower may prepay all or any portion of outstanding
principal or interest or both under this Note at any time without
notice, premium or penalty, provided that Borrower may not make a
prepayment upon any portion of the balance outstanding upon this
Note bearing interest at the Libor option Rate until the
expiration of the applicable Libor Option Period.
Throughout the term of this Note, the Borrower agrees to
utilize the Bank as its primary depository and remittance point.
The Borrower acknowledges that the Bank will charge the
Borrower monthly service charges for various services performed
by the Bank in connection with any aspect of the relationship
between the Borrower and the Bank, and the Borrower hereby agrees
that if such service charges arising in any month exceed the
credit to the Borrower in that month arising from earnings
attributable to funds on deposit with the Bank in demand deposit
accounts, such service charge deficiency shall be deducted by the
Bank from the Borrower's operating account. All of the Bank's
charges to the Borrower pursuant to this paragraph shall be its
usual and customary charges to companies of a similar size for
services of a similar nature.
All payments of principal of, or interest on, this Note and
of any fees shall be made in immediately available funds by the
Borrower to the Bank. All such payments shall be made to the
Bank at its principal office in Chicago, Illinois not later
than 2:00 p.m., Chicago time, on the date due; and funds received
after that hour shall be deemed to have been received by the Bank
on the next following Business Day.
If, with respect to any Libor Option Period or Foreign
Funding Option Period, the Bank shall determine that, by reason
of circumstances affecting the foreign exchange and interbank
markets generally, deposits in eurodollars in the applicable
amounts are not being offered to the Bank for such Libor Option
Period or Foreign Funding Option Period, then the Bank shall
forthwith give notice thereof to the Borrower. Thereafter, until
the Bank notifies the Borrower that such circumstances no longer
exist, the obligation of the Bank to provide the Libor Option or
Foreign Funding Option, and the right of the Borrower to elect
the Libor Option or Foreign Funding Option, shall be suspended.
If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or compliance by (or any of its lending
offices) with any request or directive (whether or not having the
force of law) of any such governmental authority, central bank or
comparable agency, shall make it unlawful or impossible for the
Bank to honor its obligations to maintain the Libor Option or
Foreign Funding Option, the Bank shall forthwith give notice
thereof to the Borrower. Thereafter, until the Bank notifies the
Borrower that such circumstances no longer exist, (i) the
obligations of the Bank to provide the Libor Option or Foreign
Funding Option and the right of the Borrower to elect or maintain
a principal balance with interest at the Libor Option Rate or the
Foreign Denominated Funding Rate shall be suspended, and (ii) if
the Bank may not lawfully continue to maintain the Libor Option
or Foreign Funding Option to the end of the then current Libor
Option Period or Foreign Funding Option Period, the applicable
principal shall immediately accrue interest at the Prime Rate for
the remainder of such Libor Option Period or Foreign Funding
Option Period.
If, after the date hereof, the introduction of, or any
change in, any applicable law or in the interpretation or
administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any
request or directive (whether or not having the force of law) of
such governmental authority, central bank or comparable agency:
(i) shall subject the Bank to any tax, duty or other charge
with respect to this Note or shall change the basis of taxation
of payments to the Bank (or any of its lending offices) or the
principal of or interest on this Note (except for changes in the
rate of tax on the overall net income of the Bank); or
(ii) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of
Governors of the Federal Reserve System), special deposit or
similar requirements against assets of, deposits with or for the
account of, or credit extended by the Bank or shall impose on the
Bank or the foreign exchange and interbank markets any other
condition affecting this Note;
and the result of any of the foregoing is to increase the cost to
the Bank of maintaining this Note or to reduce the amount of any
sum received or receivable by the Bank under this Note, then the
Bank shall promptly notify the Borrower of such fact and demand
compensation therefor and, within fifteen (15) days after such
notice by the Bank, the Borrower agrees to pay to the Bank such
additional amount or amounts as will compensate the Bank for such
increased cost or reduction. The Bank will promptly notify the
Borrower of any event of which it has knowledge which will
entitle the Bank to compensation pursuant to this paragraph. A
certificate of the Bank setting forth the basis for determining
such additional amount or amounts necessary to compensate the
Bank shall be conclusively presumed to be correct save for
manifest error.
The Borrower hereby indemnifies the Bank against any loss or
expense which may arise or be attributable to the Bank's
obtaining, liquidating or employing deposits or other funds
acquired to effect, fund or maintain this Note, (a) as a
consequence of any failure by the Borrower to make any payment
when due or any amount due hereunder in connection with any
election of a Libor Option Period or a Foreign Funding Option
Period, (b) due to any failure of the Borrower to borrow a Libor
Option Loan advance or a Foreign Funding Option Loan on the date
specified in an oral or written notice to the Bank by an
Authorized Officer of Borrower, (c) due to any payment,
prepayment or conversion of any Libor Option or Foreign Funding
Option on a date other than the last day of the Libor Option
Period or two Business Days prior to the last day of the Foreign
Funding Option Period therefor or (d) due to any acceleration of
the maturity of a Libor Option Loan or a Foreign Funding Option
Loan as a result of the occurrence of any Event of Default. The
Bank's calculations of any such loss or expense shall be
furnished to the Borrower and shall be conclusive absent manifest
error.
Definitions
When used in this Note, the following terms shall have the
following respective meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person. A
Person shall be deemed to control another Person if such first
Person possesses, directly or indirectly, the power to direct or
cause the direction of the management and policies of such other
Person, whether through ownership of voting securities, by
contract or otherwise.
"Applicable Laws" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of all
governmental authorities and all orders and decrees of all courts
and arbitrators.
"Authorized Officer" means any officer of the Borrower
designated in writing by Borrower to Bank as an "Authorized
Officer".
"Business Day" means any day of the year on which the Bank
is open for business in Chicago, Illinois.
"Capitalized Lease Obligations" means any amount payable
with respect to any lease of any tangible or intangible property
(whether real, personal or mixed), however denoted, which is
required by GAAP to be reflected as a liability on the face of
the balance sheet of the lessee thereunder.
"Current Assets" means current assets determined in
accordance with GAAP on a consolidated basis (unless otherwise
agreed between Borrower and Bank) for the Borrower and its
Subsidiaries.
"Current Liabilities" means current liabilities determined
in accordance with GAAP on a consolidated basis (unless otherwise
agreed between Borrower and Bank) for the Borrower and its
Subsidiaries.
"Debentures" means the Borrower's 7-1/4% convertible
subordinated debentures due December 15, 2006.
"Domestic Accounts" means accounts owing by a Person (i)
residing, located or having its principal activities or place of
business in the United States of America, and (ii) subject to
service of process within the continental United States of
America.
"Domestic Inventory" means inventory located within the
continental United States of America.
"Environmental Laws" means any and all federal, state or
local environmental or health and safety-related laws,
regulations, rules, ordinances, orders or directives.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and any successor statute of similar import,
together with the regulations thereunder and under the Internal
Revenue Code of 1986, as amended, in each case as in effect from
time to time. References to sections of ERISA shall be construed
to also refer to any successor sections.
"ERISA Affiliate" means any corporation, trade or business
that is, along with the Borrower, a member of a controlled group
of corporations or a controlled group of trades or businesses, as
described in Sections 414(b) and 414(c), respectively, of the
Internal Revenue Code of 1986, as amended, or Section 4001 of
ERISA.
"Foreign Denominated Funding" means any advance which is
funded in non--United States currency at the request of Borrower
provided that in no event shall Foreign Denominated Funding
exceed Twenty-Five Million Dollars ($25,000,000) in the aggregate
at any time outstanding.
"Foreign Funding Option Loan" means any funds advanced by
Bank to the Borrower bearing interest at the Foreign Funding
Option Rate.
"Foreign Funding Option Period" has the meaning stated on
page 2 of this Note.
"Foreign Denominated Funding Rate" means (i) one hundred
fifty (150) basis points plus (ii) the actual adjusted Libor rate
of interest (adjusted for costs and reserves) which the Bank
determines in its reasonable discretion it could earn from time
to time upon deposits of non-United States currency corresponding
to the non-United States currency outstanding from time to time
as a Foreign Denominated Funding for the Foreign Funding Option
Period designated by Borrower.
"GAAP" means the generally accepted accounting principles
applied in the preparation of the audited consolidated financial
statements of the Borrower with such changes thereto as (i) shall
be consistent with the then-effective principles promulgated or
adopted by the Financial Accounting Standards Board and its
predecessors and successors and (ii) shall be concurred in by the
independent certified public accountants of recognized standing
certifying any financial statements of the Borrower and its
Subsidiaries.
"Governmental Authority" means any nation, province, state
or other political subdivision thereof, and any government or any
Person exercising executive, legislative, regulatory or
administrative functions of or pertaining to government, and any
corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Indebtedness" with respect to any Person, means total
current, long term (including debt) and other liabilities, and
all liabilities which are components thereof, as calculated
according to GAAP.
"Intangible Assets" means goodwill, patents, copyrights,
leases, licenses, franchises, service marks, logos and similar
nonphysical assets.
"Libor" means at any time and from time to time the Bank's
adjusted London Interbank Offering Rate (adjusted by the Bank to
account for the Eurodollar Reserve Percentage which is the
maximum reserve Percentage calculated from time to time under
regulations issued by the Federal Reserve Board for determining
the maximum reserve requirement with respect to Eurocurrency
funding) for a designated Libor Option Period which the Bank most
recently announces or publishes publicly as its adjusted Libor
rate.
"Libor Option" has the meaning stated on page 1 of this
Note.
"Libor Option Loan" means any funds advanced by Bank to the
Borrower bearing interest at the Libor Option Rate.
"Libor Option Period" has the meaning stated on page 1 of
this Note.
"Libor Option Rate" means one hundred fifty (150) basis
points over Libor; provided that commencing November 30, 1995 and
every six months thereafter, if Borrower has achieved Net Income
before extraordinary items and one time charges or credits
reasonably agreed to by Bank and Borrower during the four
previous fiscal quarters of the following amounts, then the Libor
Option Rate will be as follows:
Net Income Libor Option Rate
Below 0 Prime Rate
0 - $ 2,000,000 175 basis points over Libor
$2,000,001 - $ 5,000,000 150 basis points over Libor
$5,000,001 - $ 7,000,000 125 basis points over Libor
$7,000,001 - $11,000,000 100 basis points over Libor
Greater than $11,000,000 75 basis points over Libor
"Lien" means any mortgage, pledge, lien, security interest
or other charge, encumbrance or preferential arrangement,
including the retained security title of a conditional vendor or
lessor.
"Margin Stock" has the meaning given to such term in
Regulation U.
"Material Adverse Effect" or "materially and adversely
affect" means a material adverse effect upon the condition
(financial or otherwise), operations, performance or properties
of Borrower or upon the Borrower's ability to perform or
otherwise comply with its obligations set forth in this Note.
The phrase "has a Material Adverse Effect" or "will result in a
Material Adverse Effect" or words substantially similar thereto
shall in all cases be intended to mean "has or will or could
reasonably be anticipated to result in a Material Adverse
Effect," and the phrase "has no (or does not have a) Material
Adverse Effect" or "will not result in a Material Adverse Effect"
or words substantially similar thereto shall in all cases be
intended to mean "does not or will not or could not reasonably be
anticipated to result in a Material Adverse Effect."
"Net Income" means for any period the net income and net
losses of the Borrower and its Subsidiaries during such period
determined in accordance with GAAP.
"Net Worth" means total assets determined in accordance with
GAAP minus Indebtedness.
"Person" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or any agency or political
subdivision thereof) or other entity of any kind.
"Plan" means a "pension plan", as such term is defined in
ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan) and to which the Borrower or any ERISA
Affiliate may have any liability, including any liability by
reason of having been a substantial employer within the meaning
of Section 4063 of ERISA at any time during the preceding five
years, or by reason of being deemed to be a contributing sponsor
under Section 4069 of ERISA.
"Redeemable Stock" means any equity security (or option or
warrant related thereto) that by its terms or otherwise is
required to be purchased or redeemed at any time prior to the
date which falls 60 days after November 30, 1998, or is
redeemable at the option of the holder thereof at any time prior
to the date which falls 60 days after November 30, 1998. An
equity security shall not constitute "Redeemable Stock" if the
sole requirement for redemption is the occurrence of the death of
the shareholder holding such equity security.
"Regulation U" means Regulation U of the Board of Governors
of the Federal Reserve System and any successor rule or
regulation of similar import as in effect from time to time.
"Senior Indebtedness" means all of the Borrower's
Indebtedness to the Bank (i) for borrowed money, capitalized
lease obligations or purchase money obligations, including, but
not limited to, the face amount of all outstanding Letters of
Credit and all obligations under this Note, or (ii) evidenced by
a note, debenture, letter of credit or similar instrument given
in connection with the acquisition, other than in the ordinary
course of business, of any property or assets.
"Subordinated Debt" means all of the Borrower's Indebtedness
which is fully subordinate to the Senior Indebtedness including
but not limited to all Indebtedness for the payment of principal
of, premium, if any, and interest under the Debentures.
"Subsidiaries" means a corporation of which the Borrower
and/or its other Subsidiaries own, directly or indirectly, such
number of outstanding shares as have more than 50% of the
ordinary voting power for the election of such corporation's
directors.
"Tangible Net Worth" means at any time the Borrower's
consolidated Net Worth after subtracting therefrom the aggregate
amount of any Intangible Assets of the Borrower and the
Subsidiaries, including, without limitation, covenants not to
compete, prepayments, deferred charges, goodwill, franchises,
licenses, patents, trademarks, trade names, copyrights, service
marks and brand names; plus the aggregate principal amount of
Borrower's Subordinated Debt.
"Unmatured Event of Default" means any event which, with
lapse of time or notice or lapse of time and notice, will
constitute an Event of Default if it continues uncured.
"Value" means with respect to any inventory, the lesser of
the Borrower's cost or market value thereof calculated on a
first-in, first-out basis, and with respect to accounts
receivable, the principal balance outstanding on all such
accounts which are not delinquent in payments past sixty (60)
days.
"Welfare Plan" has the meaning given to such term in ERISA.
Unless otherwise provided herein, financial terms shall have
the meaning generally ascribed to such terms under GAAP and
"inventory" and "accounts" shall have the meaning provided for
such terms under the Uniform Commercial Code.
Revolving Credit Commitment and L/C Facility;
Revolving Credit Borrowing Procedures
Revolving Loans. The Bank shall make revolving loans
("Revolving Loans") to the Borrower for the Borrower's working
capital and issue Letters of Credit, with an expiration no later
than November 30, 1998, for the account of the Borrower, from
time to time before the "Revolving Credit Termination Date" which
is the earlier of (i) the occurrence of an Event of Default
hereunder, or (ii) November 30, 1998, in such aggregate amounts
as the Borrower may from time to time request. The Revolving
Loans shall not exceed at any one time outstanding Thirty Million
Dollars ($30,000,000) minus the face amount of all outstanding
Letters of Credit. The Borrower shall have the right to repay
and reborrow any of the Revolving Loans; provided, however, that
it shall be a condition precedent to any reborrowing that as of
the date of any reborrowing (any such date herein called a
"Reborrowing Date") all of the conditions to borrowing set forth
in this Agreement shall be satisfied and all representations and
warranties made herein shall be true and correct in all material
respects as of such Reborrowing Date. The Bank's commitment to
make the Revolving Loans and issue Letters of Credit up to a
maximum aggregate face amount not exceeding Three Million Dollars
($3,000,000) is herein called the "Revolving Credit Commitment".
Revolving Loan Borrowing Procedures. Subject to the
notification requirements stated herein for a Libor Option or
Foreign Funding Option advance, the Borrower shall give the Bank
irrevocable telephonic notice of each proposed Revolving Loan
borrowing no later than 12:00 noon, Chicago time, on the same
Business Day as the proposed date of such borrowing. Each such
notice shall be effective upon receipt by the Bank and shall
specify the date and the amount of the borrowing. Each request
for a Revolving Loan shall automatically constitute a
representation and warranty by the Borrower that, as of the date
of such requested Revolving Loan, no Event of Default or
Unmatured Event of Default has occurred and is continuing.
L/C Facility. From time to time upon the Borrower's
request, Bank shall issue or cause to be issued one or more
letters of credit (each such letter of credit, as from time to
time amended or modified with the consent of Borrower, being
hereinafter referred to as a "Letter of Credit"). The aggregate
amount of Letters of Credit outstanding at any point in time
shall not exceed $3,000,000.
Reimbursement. The Borrower shall reimburse Bank, on
demand, for any amounts paid by Bank pursuant to any sight draft,
receipt or cable or written demand for payment presented to Bank
in connection with a Letter of Credit; such amounts shall be
evidenced by the Revolving Note. Upon the termination of this
Agreement, the Borrower shall cause all outstanding Letters of
Credit to be cancelled as of the Credit Termination Date or shall
pay to Bank an amount equal to the amount of all Letters of
Credit which are outstanding on the Credit Termination Date. Any
amounts so paid which are not used to liquidate obligations of
Bank in connection with said outstanding Letters of Credit shall,
after the expiration of all Letters of Credit be returned to the
Borrower. Bank shall have no obligation to invest such amounts
paid to it by the Borrower pursuant to the preceding sentence in
an interest-bearing account and the interest and earnings
thereon, if any, shall be the property of Bank. With respect to
any such payment which becomes due under the terms of this
paragraph, Borrower authorizes and directs Bank, at its option,
to cause such payment to be made when due by charging such
payment as a Revolving Loan advance pursuant to this Note.
Letter of Credit Term. Each Letter of Credit shall not have
an expiration after November 30, 1998.
Form. Each Letter of Credit shall be payable in United
States dollars, shall conform to the general requirements of the
Bank for the issuance of letters of credit as to form.
Applications. At the time of each request by Borrower that
a Letter of Credit be issued, Bank will require Borrower to
execute and deliver to Bank an application for such Letter of
Credit in the form customarily prescribed by Bank to issue
Letters of Credit (collectively the "Applications"). This
Agreement supersedes any terms of the Applications which are
irreconcilably inconsistent with the terms hereof.
Letter of Credit Fees. Borrower agrees to pay to Bank (i) a
per annum fee, payable monthly, in arrears on the first Business
Day of each succeeding month, equal to the Bank's customary fee
for letters of credit multiplied by the amount of the Letters of
Credit issued or caused to be issued by Bank, plus (ii) any
direct out-of-pocket expenses incurred by Bank in connection with
issuing or causing such Letter of Credit to be issued. With
respect to the payment of any fees or expenses that become due
thereunder, the Borrower authorizes and directs Bank, at its
option, to cause such payment to be paid when due by charging
such payment as a Revolving Loan advance against the Revolving
Credit Commitment.
Release of Bank's Liability. Neither Bank nor its
correspondents or agent, or any bank(s) or financial
institutions(s) used by Bank in connection with the issuance of
Letters of Credit ("Correspondent"), shall be responsible for (i)
the use which may be made of the Letters of Credit or for any
acts or omissions of the user(s) of the Letters of Credit; (ii)
the existence, character, quality, quantity, condition, packing
or value of the property purporting to be represented by the
documents required by the terms of any Letters of Credit or
presented in connection therewith ("Documents"); (iii) the time,
place, manner or order in which shipment is made; (iv) the
validity, sufficiency, or genuineness of Documents, or of any
endorsement thereon, even if such Documents were in fact proved
to be in any or all respects invalid, insufficient, fraudulent,
or forged; (v) partial or incomplete shipment, or failure or
omission to ship any or all of the property referred to in the
Letters of Credit or the Documents; (vi) the character, adequacy,
validity or genuineness of any insurance or solvency or
responsibility of any insurer or any other risk connected with
insurance; (vii) any deviation from instructions, delay, default
or fraud by the shipper or anyone else in connection with the
property referred to in the Letters of Credit or the Documents or
the shipping thereof; (viii) the insolvency, responsibility or
relationship to the property of any party issuing any documents
in connection with the property referred to in the Letters of
Credit; (ix) delay in arrival or failure to arrive of either the
property referred to in the Letters of Credit or the Documents;
(x) delay in giving or failure to give notice of arrival or any
other notice; (xi) any breach of contract between the shipper(s)
or vendor(s) and the consignee(s) or buyer(s); (xii) failure of
any instrument to bear any reference or adequate reference to the
Letters of Credit or failure of Documents to accompany any
instrument at negotiation, or failure of any person to note the
amount of any instrument on the reverse of the Letter of Credit
or to send forward Documents apart from instruments as required
by the terms of the Letter of Credit or to send forward Document
apart from instruments as required by the terms of the Letter of
Credit each of which provisions, if contained in the Letter of
Credit itself, it is agreed may be waived by Bank or
Correspondent; or (xiii) errors, omissions, interruptions or
delays in transmission or delivery of any messages by mail,
cable, telegraph, wireless or otherwise. Further, Bank shall not
be responsible for any act, error, neglect or default, omission,
insolvency or failure in business of any of its Correspondents.
The occurrence of any one or more of the contingencies referred
to in the preceding sentences of this paragraph shall not affect,
impair or prevent the vesting of any of Bank's rights or powers
hereunder or Borrower's obligation to make reimbursement.
Borrower shall promptly examine (i) the copy of the Letter of
Credit (and of any amendments thereof) sent to it by Bank or
Correspondent and (ii) all documents and instruments delivered to
it from time to time by Bank or Correspondent, and, in the event
of any claim of noncompliance with Borrower's instruction or
other irregularity, will immediately notify Bank and
Correspondent thereof in writing. Borrower being conclusively
deemed to have waived any such claim against Bank and
Correspondent unless such notice is given as aforesaid.
Indemnification. Upon any transfer, sale, delivery,
surrender or endorsement of any bill of lading, warehouse receipt
or other Document at any time(s) held by Bank, or held for its
account by any of its correspondents or agents, or any bank or
financial institution used by Bank in connection with the
issuance of Letters of Credit, relative to the Letter of Credit,
Borrower will indemnify and hold Bank and any such
correspondent(s), agent(s), bank(s) and financial institution(s),
harmless from and against each and every claim, demand, action
or suit which may arise against Bank or any correspondent(s),
agent(s) bank(s) and financial institution(s), by reason thereof.
Use. Proceeds of the Revolving Loans and the Letters of
Credit will be used solely for the purpose of providing working
capital for the Borrower in the Borrower's ordinary course of
business.
Annual Fee. On the first Business day of December, 1996,
Borrower agrees to pay to the Bank a non-refundable fee equal to
$34,375.00, and each December thereafter while this Note remains
outstanding, the Borrower agrees to pay to the Bank a
nonrefundable annual fee equal to $37,500.00 per year. Each such
annual fee shall be deemed fully earned by the Bank upon such
date when payment is due.
Mandatory Prepayment. The Borrower agrees that if at any
time the aggregate unpaid principal amount of the outstanding
Revolving Loans plus the face amount unexpired of all Letters of
Credit shall exceed the amount of Thirty Million Dollars
($30,000,000) or the face amount of all unexpired Letters of
Credit exceeds Three Million Dollars ($3,000,000) or the
aggregate amount of outstanding Foreign Denominated Fundings
exceeds Twenty Five Million Dollars ($25,000,000), it will
forthwith make a mandatory prepayment of principal on such
Revolving Loan(s) in an amount equal to such excess. Each such
mandatory prepayment shall be without premium or penalty (except
indemnification for loss as provided herein in the event such
prepayment occurs upon a Revolving Loan bearing interest under
the Libor Option or Foreign Funding Option during a Libor Option
Period or a Foreign Funding Option Period).
Representations and Warranties
To induce the Bank to fund the loan evidenced by this Note,
the Borrower represents and warrants to the Bank that:
a. The Borrower is a corporation duly existing and in good
standing under the laws of the State of Delaware, and each
Subsidiary is a corporation duly existing and in good standing
under the laws of its respective state of incorporation; and each
of the Borrower and the Subsidiaries is duly qualified and in
good standing as a foreign corporation authorized to do business
in each jurisdiction where such qualification is required because
of the nature of its activities or properties and where the
failure to maintain such qualification would cause a Material
Adverse Effect.
b. The Borrower's execution, delivery and performance of
this Note and the consummation of the transactions contemplated
by this Note are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, require
no governmental, regulatory or other approval, and do not and
will not contravene or conflict with any provision of (i) law,
(ii) any judgment, decree or order to which the Borrower is a
party, or (iii) the Borrower's articles of incorporation or
by-laws, and do not and will not contravene or conflict with, or
cause any Lien to arise under, any provision of any agreement or
instrument binding upon the Borrower or any Subsidiary or upon
any property of the Borrower or any Subsidiary.
c. This Note is the legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with
its terms except as enforceability may be limited by bankruptcy,
insolvency or other similar laws of general application, or
general principles of equity relating to remedies, affecting or
relating to the enforcement of creditors' rights.
d. All balance sheets, statements of operations and other
financial data which have been or shall hereafter be furnished to
the Bank for the purposes of or in connection with this Note do
and will present fairly the financial condition of the Persons
involved as of the dates thereof and the results of their
operations for the period(s) covered thereby.
e. To Borrower's knowledge, no material litigation
(including, without limitation, derivative actions), arbitration
proceedings, governmental proceedings or investigations or
regulatory proceedings are pending or threatened against the
Borrower or any Subsidiary (except as previously disclosed by
notice to the Bank), which, if adversely determined, would have a
Material Adverse Effect upon the Borrower, nor does the Borrower
or any Subsidiary know of any basis for any of the foregoing. In
addition, there are no inquiries, formal or informal, which might
give rise to such actions, proceedings or investigations.
f. To Borrower's knowledge, each of the Borrower and each
of its Subsidiaries has obtained all licenses, permits,
franchises and other governmental authorizations necessary to the
ownership of its properties or to the conduct of its businesses,
including all permits required under applicable Environmental
Laws, a failure to obtain or violation of which might materially
and adversely affect the Borrower's or such Subsidiary's
business, credit, operations, financial condition or prospects.
g. Neither the Borrower nor any Subsidiary has any
material contingent liabilities not provided for or disclosed to
the Bank.
h. None of the Borrower's accounts or inventory is subject
to any Lien, except (i) Liens for current taxes not delinquent or
taxes which the Borrower is contesting in good faith and by
appropriate proceedings and with respect to which the Borrower
has provided for and is maintaining adequate reserves in
accordance with GAAP, (ii) Liens which arise in the ordinary
course of business for sums not due or sums that the Borrower is
contesting in good faith and by appropriate proceedings and with
respect to which the Borrower has provided for and is maintaining
adequate reserves in accordance with GAAP, but which do not
involve any deposits or advances or borrowed money, and (iii)
Permitted Liens.
i. Each Plan maintained by Borrower and its Subsidiaries
subject to United States jurisdiction complies in all material
respects with all applicable statutes and governmental rules and
regulations and during the 12--consecutive-month period prior to
the date of the execution and delivery of this Agreement, (i) no
Reportable Event has occurred and is continuing with respect to
any Plan, (ii) neither the Borrower nor any ERISA Affiliate has
withdrawn from any Plan or instituted steps to do so, (iii) no
steps have been instituted to terminate any Plan, (iv) every
employee benefit plan within the meaning of Section 3(3) of ERISA
which is sponsored, or to which contributions are made by the
Borrower or any ERISA Affiliate has been maintained in compliance
with all applicable laws and regulations, including, without
limitation ERISA and the Internal Revenue Code of 1986, as
amended, and (v) no contribution failure has occurred with
respect to any Plan sufficient to give rise to a lien under
Section 302(f) of ERISA. No condition exists or event or
transaction has occurred in connection with any Plan which could
result in the incurrence by the Borrower or any ERISA Affiliate
of any material liability, fine or penalty. Neither the Borrower
nor any ERISA Affiliate is a member of or contributes to any
Multiemployer Plan. Neither the Borrower nor any ERISA Affiliate
has any contingent liability with respect to any postretirement
benefit under a Welfare Plan other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
j. Neither the Borrower nor any Subsidiary is an
"investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Borrower Act of
1940, as amended.
k. Neither the Borrower nor any Subsidiary is a "holding
company", or a "subsidiary company" of a "holding company", or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility
Holding Borrower Act of 1935, as amended.
l. Neither the Borrower nor any Subsidiary is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying Margin Stock.
m. All factual information heretofore or contemporaneously
furnished by or on behalf of the Borrower to the Bank for
purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all other factual
information hereafter furnished by or on behalf of the Borrower
to the sank will be, true and accurate in every material respect
on the date as of which such information is dated or certified,
and the Borrower has not omitted and will not omit any material
fact necessary to prevent such information from being false or
misleading. The Borrower has disclosed to the Bank all facts
which might materially and adversely affect the business, credit,
operations, financial condition or prospects of the Borrower or
any Subsidiary or which might materially and adversely affect any
material portion of the Borrower's properties, or the Borrower's
ability to perform its obligations under this Agreement or the
Related Documents.
n. The Borrower is not insolvent, nor will its incurrence
of obligations, direct or contingent, to repay the Note render it
insolvent.
o. There are no labor controversies pending or threatened
against the Borrower or any Subsidiary which, if adversely
determined, would materially and adversely affect the Borrower's
or such Subsidiary's business, credit, operations, financial
condition or prospects.
p. The Borrower has made or filed all income and other tax
returns, reports and declarations required by any jurisdiction to
which it is subject, has paid all taxes, assessments and other
charges shown or determined to be due on such returns, reports
and declarations (other than those being diligently contested in
good faith by appropriate proceedings), except for failures to
file or pay which would not have a Material Adverse Effect and
has set aside adequate reserves against liability for taxes,
assessments and charges applicable to periods subsequent to those
covered by such returns, reports and declarations.
q. No event has occurred and no condition exists which,
upon the execution and delivery of, or consummation of any
transaction contemplated by this Note, will constitute an Event
of Default or Unmatured Event of Default.
r. The Borrower and each of its Subsidiaries is in
compliance with the requirements of all applicable laws, rules,
regulations, and orders of all governmental authorities (Federal,
state, local or foreign, and including, without limitation,
applicable Environmental Laws, rules, regulations and orders),
except for failures to comply which would not have a Material
Adverse Effect on the Borrower's or such Subsidiary's business,
credit, operations, financial condition or prospects.
Covenants
Until all of Borrower's Liabilities are paid in full, the
Borrower agrees that, unless at any time the Bank shall otherwise
expressly consent in writing, it and its Subsidiaries will:
a. Reports, Certificates and Other Information. Furnish
to the Bank:
(1) Audit Report. On or before the 90th day after each of
the Borrower's fiscal years, a copy of an annual audit report of
the Borrower and its Subsidiaries prepared in conformity with
GAAP, duly certified by independent certified public accountants
of recognized standing selected by the Borrower with the Bank's
consent, together with a certificate from such accountants
containing a computation of, and showing compliance with, each of
the financial ratios and restrictions contained in this Note.
(2) Interim Reports. On or before the 45th day after the
end of each of the Borrower's fiscal quarters, a copy of
unaudited financial statements of the Borrower prepared in a
manner consistent with the financial statements referred to
above, signed by an Authorized Officer and consisting of, at
least, balance sheets as at the close of such month and
statements of earnings for such quarter and for the period from
the beginning of such fiscal quarter to the close of such
quarter.
(3) Notice of Default. Litigation and ERISA Matters.
Forthwith upon learning of the occurrence of any of the
following, written notice thereof which describes the same and
the steps being taken by the Borrower with respect thereto: (i)
the occurrence of an Event of Default or an Unmatured Event of
Default, (ii) the institution of, or any adverse determination
in, any litigation, arbitration proceeding or governmental
proceeding in which any injunctive relief is sought or in which
money damages in excess of $1,000,000 are sought, (iii) the
occurrence of a Reportable Event with respect to any Plan, (iv)
the institution of any steps by the Borrower, the PBGC or any
other Person to terminate any Plan, (v) the institution of any
steps by the Borrower or any ERISA Affiliate to withdraw from any
Plan or Multiemployer Plan which could result in material
liability to the Borrower, (vi) the failure to make a required
contribution to any Plan if such failure is sufficient to give
rise to a lien under Section 302(f) of ERISA, (vii) the taking of
any action with respect to a Plan which could result in the
requirement that the Borrower furnish a bond or other security to
the PBGC or such Plan or Multiemployer Plan, or (viii) the
occurrence of any event with respect to any Plan or Multiemployer
Plan which could result in the incurrence by the Borrower of any
material liability, fine or penalty; and, promptly after the
incurrence thereof, notice of any material increase in the
contingent liability of the Borrower with respect to any
postretirement Welfare Plan benefits.
(4) Other Information. Such other information concerning
the Borrower as the Bank may reasonably request from time to
time.
b. Corporate Existence and Franchises. Except as
otherwise expressly permitted in this Agreement, maintain and
cause each Subsidiary to maintain in full force and effect its
separate existence and all rights, licenses, leases and
franchises reasonably necessary to the conduct of its business.
c. Books, Records and Inspections. Maintain, and cause
each Subsidiary to maintain, complete and accurate books and
records, permit the Bank to have reasonable access to the
Borrower's books and records, and permit, and cause each
Subsidiary to permit, the Bank to inspect the Borrower's
properties and operations at reasonable times.
d. Insurance. Maintain, and cause each Subsidiary to
maintain, insurance to such extent and against such hazards and
liabilities as may be required by law and as is commonly
maintained by companies similarly situated or as the Bank may
reasonably request from time to time.
e. Taxes and Liabilities. Promptly pay, and cause each
Subsidiary to pay, when due all taxes, duties, assessments and
other liabilities, except such taxes, duties, assessments and
other liabilities as the Borrower is diligently contesting in
good faith and by appropriate proceedings or where the failure to
pay would not have a Material Adverse Effect; provided that the
Borrower or such Subsidiary has provided for and is maintaining
adequate reserves with respect thereto in accordance with GAAP.
f. Tangible Net Worth. Not permit the Borrower's Tangible
Net Worth to be at any time less than the following amounts
during the Borrower's respective fiscal years:
Tangible Net Worth Borrower's Fiscal Year
$123,000,000 1995-1996
$125,000,000 1996-1997
$127,500,000 1997-1998
$130,000,000 1998-1999
g. Indebtedness to Tangible Net Worth. Not permit the
ratio of (x) the Borrower's consolidated Indebtedness minus all
of Borrower's Indebtedness under the Debentures to (y) the
Borrower's Tangible Net Worth to be at any time greater than 0.70
to 1.
h. Liens. Not create or permit to exist any Lien with
respect to any accounts or inventory now owned or hereafter
acquired, except the following Liens (herein collectively called
the "Permitted Liens"): (a) Liens which arise in the ordinary
course of business for sums not due or sums which the Borrower is
contesting in good faith and by appropriate proceedings and with
respect to which the Borrower has provided for and is maintaining
adequate reserves in accordance with GAAP, but which do not
involve any deposits or advances or borrowed money or the
deferred purchase price of property or services, (b) Liens
granted by any Subsidiary to secure such Subsidiary's
Indebtedness to the Borrower, and (c) Liens in an amount such
that at all times eighty percent (80%) of the value of
unencumbered Domestic Accounts plus fifty percent (50%) of the
value of unencumbered Domestic Inventory shall exceed all
outstanding Senior Indebtedness.
i. Debt Service Coverage. Commencing November 30, 1995
and thereafter, maintain quarterly, semi-annual and annual Debt
Service Coverage as of each November 30, February 28, May 31 and
August 31 of 1.20 to 1. Debt Service Coverage for a fiscal
period is (a) Net Income before interest expense and taxes,
plus depreciation, amortization and one-time charges and/or
credits reasonably agreed to by Bank and Borrower, less capital
expenditures funded by Borrower internally; divided by (b) the
sum of all scheduled principal payments and related interest
expense upon all Indebtedness (including without limitation,
payments of Capitalized Lease Obligations and permitted payments
of principal upon Subordinated Debt and preferred stock) and
taxes. For purposes of tax calculations, the effective tax rates
will not vary more than five percent from the maximum United
States federal corporate tax rate plus the Illinois effective
corporate tax rate. For the purpose of computing Debt Service
Coverage, Borrower's principal payments upon this Note shall not
include the final payment of principal upon maturity of this Note
and shall be the sum of any two quarterly principal installments
(if the computation is made as of November 30 of any fiscal year)
and, if the computation is made as of May 31 of any fiscal year,
any four quarterly principal installments (excluding principal
prepayments during the year the principal prepayment is made).
j. Employee Benefit Plans. Not permit, and not permit any
ERISA Affiliate to permit, any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to
institute proceedings to have such Plan terminated or a trustee
appointed to administer such Plan; and not engage in, or permit
to exist or occur, or permit any ERISA Affiliate to engage in, or
permit to exist or occur, any other condition, event or
transaction with respect to any Plan or Multiemployer Plan which
could result in the incurrence by the Borrower or any ERISA
Affiliate of any material liability, fine or penalty.
k. Use of Proceeds. Not use or permit the direct or
indirect use of any proceeds of or with respect to the Loans for
the purpose, whether immediate, incidental or ultimate, of
"purchasing or carrying" (within the meaning of Regulation U)
Margin Stock.
l. Other Agreements. Not enter into any agreement
containing any provision which would be violated or breached by
the performance of its obligations hereunder or under any
instrument or document delivered or to be delivered by it
hereunder or in connection herewith or which would violate or
breach any provision hereof or of any such instrument or
document.
m. Compliance with Applicable Laws. Comply, and cause
each Subsidiary to comply, with the requirements of all
Applicable Laws, rules, regulations, and orders of all
Governmental Authorities (Federal, state, local or foreign, and
including, without limitation, environmental laws, rules,
regulations and orders), except for failures to comply with such
statutes, rules and regulations which in the aggregate would not
materially and adversely affect the Borrower's or such
Subsidiary's business, credit, operations, financial condition or
prospects, except where the Borrower is contesting an alleged
breach in good faith and by proper proceedings and for which the
Borrower or such Subsidiary is maintaining adequate reserves in
accordance with GAAP.
n. Subordinated Debt. At all times cause Indebtedness for
the payment of principal of, premium, if any, and interest under
the Debentures to be Subordinated Debt.
Events of Default and Remedies
The occurrence of any one of the following events shall
constitute a default by Borrower ("Event of Default") under this
Note:
a. Nonpayment of Loans. Default in the payment when due
of the principal of or interest on this Note or any other sum due
under this Note, or the payment when due of any fees or any other
amounts payable by the Borrower hereunder, and such default
continues for ten days after the Borrower receives notice
thereof.
b. Nonpayment of Other Indebtedness. The Borrower or any
Subsidiary shall default in the payment when due (subject to any
applicable grace period), whether by acceleration or otherwise,
of any other Indebtedness of, or guaranteed by, the Borrower or
any Subsidiary (except any such Indebtedness of any Subsidiary to
the Borrower or to any other Subsidiary) or default in the
performance or observance of any obligation or condition with
respect to any such other Indebtedness if the effect of such
default is to accelerate the maturity of any such Indebtedness or
to permit the holder or holders thereof, or any trustee or agent
for such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity, and continuation thereof
after the Bank gives notice to the Borrower that such default is
an Event of Default; provided. however, that no default under
this section shall occur or result from a default in payment of
any such other Indebtedness which, when added to the amount of
all such other Indebtedness in default does not exceed
$1,000,000.
c. Bankruptcy or Insolvency. The Borrower becomes
insolvent or generally fails to pay, or admits in writing its
inability to pay, debts as they become due; or the Borrower
applies for, consents to, or acquiesces in the appointment of, a
trustee, receiver or other custodian for the Borrower, or any
property thereof, or makes a general assignment for the benefit
of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver or other custodian is appointed
for the Borrower, or for a substantial part of the property
thereof and is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of the Borrower,
and if such case or proceeding is not commenced by the Borrower,
it is consented to or acquiesced in by the Borrower or remains
for 45 days undismissed; or the Borrower, takes any corporate
action to authorize, or in furtherance of, any of the foregoing.
d. Specified Noncompliance with this Agreement. Failure
by the Borrower to comply with any financial covenant hereunder.
e. Other Noncompliance with this Agreement. Failure by
the Borrower to comply with or to perform any provision of this
Agreement (and not constituting an Event of Default under any of
the other provisions hereof) and continuance of such failure for
thirty days after notice thereof to the Borrower from the Bank or
the holder of this Note.
f. Representations and Warranties. Any representation or
warranty made by the Borrower herein is breached or is false or
misleading in any material respect, or any schedule, certificate,
financial statement, report, notice, or other writing furnished
by the Borrower to the Bank is false or misleading in any
material respect on the date as of which the facts therein set
forth are stated or certified.
g. Employee Benefit Plans. (i) Institution by the PBGC,
the Borrower or any ERISA Affiliate of steps to terminate a Plan
or to organize, withdraw from or terminate a Multiemployer Plan
if as a result of such reorganization, withdrawal or
termination, the Borrower or any ERISA Affiliate could be
required to make a contribution to such Plan a Multiemployer
Plan, or could incur a liability or obligation to such Plan or
Multiemployer Plan, in excess of $10,000, or (ii) a contribution
failure occurs with respect to any Plan sufficient to give rise
to a lien under Section 302(f) of ERISA.
h. Judgments. There shall be entered against the Borrower
one or more judgments or decrees in excess of $1,000,000 in the
aggregate at any one time outstanding for the Borrower, excluding
those judgments or decrees (i) that shall have been stayed,
vacated or bonded, (ii) that shall have been outstanding less
than 30 days from the entry thereof, (iii) for and to the extent
to which the Borrower is insured and with respect to which the
insurer specifically has assumed responsibility in writing, (iv)
for and to the extent to which the Borrower is otherwise
indemnified if the terms of such indemnification are satisfactory
to the Bank, or (v) for and to the extent to which Borrower has
accrued reserves in a sum satisfactory to the Bank which reserves
are sufficient to discharge such judgment.
i. Default under the Debentures. A default as defined in
the Debentures shall occur and be continuing.
Upon an Event of Default under the preceding subparagraph c
hereunder, without notice by Bank to or demand by Bank of
Borrower, the Bank's obligations to loan funds to Borrower shall
immediately terminate and all payments upon this Note shall be
immediately accelerated and all of Borrower's Liabilities shall
be immediately due and payable. Upon any other Event of Default,
the Bank's obligations to loan funds to Borrower shall
immediately terminate and upon demand from Bank to Borrower, all
payments upon this Note shall be immediately accelerated and all
of Borrower's Liabilities shall be immediately due and payable.
The acceptance by Bank of any partial payment made hereunder
after the time when any obligation under this Note becomes due
and payable will not establish a custom, or waive any rights of
Bank to enforce prompt payment hereof. Borrower and every
endorser hereof waive presentment, demand and protest and notice
of presentment, protest, default, non-payment, maturity, release,
compromise, settlement, extension or renewal of this Note.
This Note and Borrower's Liabilities hereunder are secured
by all security interests, liens and encumbrances (if any)
heretofore, now or hereafter granted to Bank by Borrower and/or
every guarantor (if any) of Borrower's Liabilities. Regardless
of the adequacy of any collateral securing Borrower's
Liabilities hereunder, any deposits or other sums at any time
created by or payable or due from Bank to Borrower, or any
monies, cash, cash equivalents, securities, instruments,
documents or other assets of Borrower in possession or control of
Bank and its bailee for any purpose may at any time be reduced to
cash and applied by Bank to or set-off by Bank against Borrower's
Liabilities hereunder.
Reimbursement of Costs, Indemnification
and Miscellaneous Provisions
The Borrower agrees to pay on demand all of the Bank's out-of-pocket
costs and expenses (including the reasonable fees and
out-of-pocket expenses of the Bank's counsel) in connection with
the preparation, execution and delivery of this Note and all
other instruments or documents provided for herein or delivered
or to be delivered hereunder or in connection herewith
(including, without limitation, all supplements and waivers
executed and delivered pursuant hereto or in connection
herewith).
The reasonable out of pocket costs and expenses which the
Bank incurs in any manner or way with respect to the following
shall be part of the Liabilities, payable by the Borrower on
demand if at any time after the date of this Note, the Bank:
a. Employs counsel for advice or other representation (i)
with respect to the amendment or enforcement of this Note, (ii)
to represent the Bank in any litigation, contest, dispute, suit
or proceeding or to commence, defend or intervene or to take any
other action in or with respect to any litigation, contest,
dispute, suit or proceeding (whether instituted by the Bank, the
Borrower, or any other Person) in any way or respect relating to
this Note or the Borrower's affairs, or (iii) to enforce any of
the Bank's rights with respect to the Borrower;
b. Takes any action to protect, collect, sell, liquidate
or otherwise dispose of any collateral (if any) securing
Borrower's Liabilities hereunder; and or
c. Seeks to enforce or enforces any of the Bank's rights
and remedies with respect to the Borrower or any guarantor of the
Borrower's Liabilities. Without limiting the generality of the
foregoing, such reasonable expenses, costs, charges and fees
include: reasonable fees, costs and expenses of attorneys,
accountants and consultants; court costs and expenses; court
reporter fees, costs and expenses; long distance telephone
charges; telegram and telecopier charges; and reasonable expenses
for travel, lodging and food.
The Borrower further agrees to pay, and to save the Bank
harmless from all liability for, any stamp or other taxes which
may be payable in connection with the execution or delivery of
this Note, the borrowings hereunder, or the issuance of the Note
or of any other instruments or documents provided for herein or
delivered or to be delivered hereunder or in connection herewith.
All of the Borrower's obligations to pay fees and costs
provided for herein shall be Borrower's Liabilities, and shall
survive repayment and cancellation of this Note.
Subject to the restrictions of applicable law, the Borrower
hereby agrees to indemnify, exonerate and hold the Bank and each
of its officers, directors, employees and agents (herein
collectively called the "Bank Parties" and individually called a
"Bank Party") free and harmless from and against any and all
actions, causes of action, suits, losses, costs (including,
without limitation, all documentary or other stamp taxes or
duties), liabilities and damages, and expenses in connection
therewith (irrespective of whether such Bank Party is a party to
the action for which indemnification hereunder is sought) (the
"Indemnified Liabilities"), including, without limitation,
reasonable attorneys' fees and disbursements, incurred by the
Bank Parties or any of them as a result of, or arising out of, or
relating to:
a. Any transaction financed or to be financed in whole or
in part, directly or indirectly, with the proceeds from this
Note;
b. The execution, delivery, performance, administration or
enforcement of this Note in accordance with their respective
terms by any of the Bank Parties;
c. Any misrepresentation or breach of any warranty or
covenant herein.
If any provision of this Note or the application thereof to
any party or circumstance is held invalid or unenforceable, the
remainder of this Note and the application of such provision to
other parties or circumstances will not be affected thereby and
the provisions of this Note shall be severable in any such
instance.
The provisions of this paragraph shall govern and control
over any irreconcilably inconsistent provision contained in this
Note or in any other document evidencing or securing the
indebtedness evidenced hereby. Bank shall never be entitled to
receive, collect, or apply as interest hereon (for purposes of
this paragraph, the word "interest" shall be deemed to include
any sums treated as interest under applicable law governing
matters of usury and unlawful interest), any amount in excess of
the Highest Lawful Rate (hereinafter defined) and, in the event
Bank ever receives, collects, or applies as interest any such
excess, such amount which would be excessive interest shall be
deemed a partial prepayment of principal and shall be treated
hereunder as such; and, if the principal of this Note is paid in
full, any remaining excess shall forthwith be paid to Borrower.
In determining whether or not the interest paid or payable, under
any specific contingency, exceeds the Highest Lawful Rate,
Borrower and Bank shall, to the maximum extent permitted under
applicable law, (i) characterize any nonprincipal payment as an
expense, fee or premium rather than as interest, (ii) exclude
voluntary prepayments and the effects thereof, and (iii) spread
the total amount of interest throughout the entire contemplated
term of this Note, provided, that if this Note is paid and
performed in full prior to the end of the full contemplated term
hereof, and if the interest received for the actual period of
existence hereof exceeds the Highest Lawful Rate, Bank shall
refund to Borrower the amount of such excess or credit the amount
of such excess against the principal of this Note, and, in such
event, Bank shall not be subject to any penalties provided by any
laws for contracting for, charging or receiving interest in
excess of the Highest Lawful Rate. "Highest Lawful Rate" shall
mean the maximum rate of interest which Bank is allowed to
contract for, charge, take, reserve or receive under applicable
law after taking into account, to the extent required by
applicable law, any and all relevant payments or charges
hereunder.
This Note is submitted by Borrower to Bank at Bank's
principal place of business and shall be deemed to have been made
thereat. This Note shall be governed and controlled by the
internal laws of the state of Illinois.
This Note is a renewal and replacement of the Senior
Revolving Note in the original principal sum of $25,000,000 made
and delivered by Borrower to Bank as of November 30, 1995 and
nothing contained herein shall be construed (a) to deem paid or
forgiven the unpaid principal balance of, or unpaid accrued
interest on, said Senior Revolving Note outstanding at the time
of its renewal and replacement by this Note.
TO INDUCE BANK TO ACCEPT THIS NOTE, BORROWER, IRREVOCABLY,
AGREES THAT, SUBJECT TO BANK'S SOLE AND ABSOLUTE ELECTION, ALL
ACTIONS OR PROCEEDINGS IN ANY WAY, MANNER OR RESPECT, ARISING OUT
OF OR FROM OR RELATED TO THIS NOTE, SHALL BE LITIGATED IN COURTS
HAVING SITUS WITHIN THE CITY OF CHICAGO, STATE OF ILLINOIS.
BORROWER HEREBY CONSENTS AND SUBMITS TO THE JURISDICTION OF ANY
LOCAL, STATE OR FEDERAL COURT LOCATED WITHIN SAID CITY AND STATE.
BORROWER HEREBY WAIVES ANY RIGHT BORROWER MAY HAVE TO TRANSFER
OR
CHANGE THE VENUE OF ANY LITIGATION BROUGHT AGAINST BORROWER BY
BANK IN ACCORDANCE WITH THIS PARAGRAPH.
BORROWER AND BANK HEREBY IRREVOCABLY WAIVE THE RIGHT TO
TRIAL BY JURY WITH RESPECT TO ANY ACTION IN WHICH BORROWER AND
BANK ARE PARTIES.
No delay on the part of the Bank or the holder of this Note
in the exercise of any right, power or remedy shall operate as a
waiver thereof, nor shall any single or partial exercise by any
of them of any right, power or remedy preclude other or further
exercise thereof, or the exercise of any other right, power or
remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Note shall in any event be
effective unless the same shall be in writing and signed and
delivered by the Bank, and then any such amendment, modification,
waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
All notices hereunder shall be in writing. Notices given by
mail shall be deemed to have been given three days after the date
sent if sent by registered or certified mail, postage prepaid,
and:
(a) if to the Borrower, addressed to the Borrower as
follows: Richardson Electronics, Ltd., 40 W 267 Keslinger Road,
La Fox, Illinois 60147;
(b) if to the Bank, addressed to the Bank, at American
National Bank and Trust Company of Chicago, 33 North LaSalle
Street, Chicago, Illinois 60690, Attention: Division 501, with a
copy to Neal, Gerber & Eisenberg, Two North LaSalle Street, Suite
2200, Chicago, Illinois 60602, Attention: Joel M. Hurwitz; or in
the case of either party, such other address as such party, by
written notice received by the other party, may have designated
as its address for notices. Notices given by telex or telegram
shall be deemed to have been given when sent. Notices given by
personal delivery shall be deemed to have been given when
delivered. The Bank shall be entitled to rely upon all
telephonic notices and the Borrower shall hold the Bank harmless
from any loss, cost or expense ensuing from any such reliance.
If any changes in accounting principles from those used in
the preparation of the annual audit report of Borrower and its
Subsidiaries for its fiscal year 1995 are hereafter required or
permitted by the rules, regulations, pronouncements and opinions
of the Financial Accounting Standards Board of American Institute
of Certified Public Accountants (or successors thereto or
agencies with similar functions) are adopted by the Borrower with
the agreement of its independent certified public accountants and
such changes result in a change in the method of calculation of
any of the financial covenants set forth in this Note, the
Borrower agrees to enter into negotiations with the Bank in order
to amend such provisions so as to equitably reflect such changes
with the desired result that the criteria for evaluating the
Borrower's financial condition shall be the same after such
changes as if such changes had not been made, provided, however,
that no change in GAAP that would affect the method of
calculation of any of the financial covenants shall be given
effect in such calculations until such provisions are amended in
a manner satisfactory to the Bank.
The section captions used in portions of this Note are for
convenience only, and shall not affect the construction of this
Note.
This Note shall be binding upon the Borrower and its
respective successors and shall inure to the benefit of the Bank
and the Bank's successors and assigns.
ATTEST: RICHARDSON ELECTRONICS, LTD.
By: /s/ William G. Seils By: /s/ William J. Garry
Secretary Its: Vice President
Exhibit 10(b)
INDUSTRIAL BUILDING LEASE
DATE OF LEASE April 10, 1996
TERM OF LEASE
BEGINNING June 1, 1996
ENDING May 31, 1999
MONTHLY RENT $68,705.04 per year
Payable $5,725.42 Per month
Location of Premises
3030 North River Road, River Grove, Illinois
Purposes:
Manufacturing, remodeling and repairing of goods, wares and
merchandise of all kinds and buying and selling of such
merchandise at wholesale and retail.
LESSEE
NAME Richardson Electronics, Ltd.
ADDRESS 40W267 Keslinger Road
LaFox, IL 60147
LESSOR
NAME AND BUSINESS ADDRESS
American National Bank and Trust Company of Chicago Trustee of
Trust #56120 dated 2/23/83
In consideration of the mutual covenants and agreements
herein stated, Lessor hereby leases to Lessee and Lessee hereby
leases from Lessor solely for the above purpose the premises
designated above (the "Premises"), together with the
appurtenances thereto, for the above Term.
RENT
1. Lessee shall pay Lessor or Lessor's agent as rent for the
Premises the sum stated above. monthly in advance, until
termination of this lease, at Lessor's address stated above or
such other address as Lessor may designate in writing.
CONDITION AND UPKEEP OF PREMISES
2. Lessee has examined and knows the condition of the Premises
and has received the same in good order and repair, and
acknowledges that no representations as to the condition and
repair thereof have been made by Lessor, or his agent, prior to
or at the execution of this lease that are not herein expressed;
Lessee will keep the Premises including all appurtenances, in
good repair, replacing all broken glass with glass of the same
size and quality as that broken, and will replace all damaged
plumbing fixtures with others of equal quality, and will keep the
Premises, including adjoining alleys, in a clean and healthful
condition according to the applicable municipal ordinances and
the direction of the proper public officers during the term of
this lease at Lessee's expense, and will without injury to the
roof, remove all snow and ice from the same when necessary, and
will remove the snow and ice from the sidewalk abutting the
Premises; and upon the termination of this lease, in any way,
will yield up the Premises to Lessor, in good condition and
repair, loss by fire and ordinary wear excepted, and will deliver
the keys therefor at the place of payment of said rent.
LESSEE NOT TO MISUSE; SUBLET; ASSIGNMENT
3. Lessee will not allow the Premises to be used for any
purpose that will increase the rate of insurance thereon, nor for
any purpose other than that hereinbefore specified, and will not
load floors with machinery or goods beyond the floor load rating
prescribed by applicable municipal ordinances, and will not allow
the Premises to be occupied in whole, or in part, by any other
person, and will not sublet the same or any part thereof, nor
assign this lease without in each case the written consent of the
Lessor first had, and Lessee will not permit any transfer by
operation of law of the interest in the Premises acquired through
this lease, and will not permit the Premises to be used for any
unlawful purpose, or for any purpose that will injure the
reputation of the building or increase the fire hazard of the
building, or disturb the tenants or the neighborhood, and will
not permit the same to remain vacant or unoccupied for more than
ten consecutive days; and will not allow any signs, cards or
placards to be posted, or placed thereon, nor permit any
alteration of or addition to any part of the Premises, except by
written consent of Lessor; all alterations and additions to the
Premises shall remain for the benefit of Lessor unless otherwise
provided in the consent aforesaid.
MECHANIC'S LIEN
4. Lessee will not permit any mechanic's lien or liens to be
placed upon the Premises or any building or improvement thereon
during the term hereof, and in case of the filing of such lien
Lessee will promptly pay same. If default in payment thereof
shall continue for thirty (30) days after written notice thereof
from Lessor to the Lessee, the Lessor shall have the right and
privilege at Lessor's option of paying the same or any portion
thereof without inquiry as to the validity thereof, and any
amounts so paid, including expenses and interest, shall be so
much additional indebtedness hereunder due from Lessee to Lessor
and shall be repaid to Lessor immediately on rendition of bill
therefor.
INDEMNITY FOR ACCIDENTS
5. Lessee covenants and agrees that he will protect and save
and keep the Lessor forever harmless and indemnified against and
from any penalty or damages or charges imposed for any violation
of any laws or ordinances whether occasioned by the neglect of
Lessee or those holding under Lessee, and that Lessee will at all
times protect, indemnify and save and keep harmless the Lessor
against and from any and all loss, cost, damage or expense,
arising out of or from any accident or other occurrence on or
about the Premises, causing injury to any person or property
whomsoever or whatsoever and will protect, indemnify and save and
keep harmless the Lessor against and from any and all claims and
against and from any and all loss, cost, damage or expense
arising out of any failure of Lessee in any respect to comply
with and perform all the requirements and provisions hereof.
NON-LIABILITY OF LESSOR
6. Except as provided by Illinois statute, Lessor shall not be
liable for any damage occasioned by failure to keep the Premises
in repair, nor for any damage done or occasioned by or from
plumbing, gas, water, sprinkler, steam or other pipes or sewerage
or the bursting, leaking or running of any pipes, tank or
plumbing fixtures, in, above, upon or about Premises or any
building or improvement thereon nor for any damage occasioned by
water, snow or ice being upon or coming through the roof,
skylights, trap door or otherwise, nor for any damages arising
from acts or neglect of any owners or occupants of adjacent or
contiguous property.
WATER, GAS AND ELECTRIC CHARGES
7. Lessee will pay, in addition to the rent above specified,
all water rents, gas and electric light and power bills taxed,
levied or charged on the Premises, for and during the time for
which this lease is granted, and in case said water rents and
bills for gas, electric light and power shall not be paid when
due, Lessor shall have the right to pay the same, which amounts
so paid, together with any sums paid by Lessor to keep the
Premises in a clean and healthy condition, as above specified,
are declared to be so much additional rent and payable with the
installment of rent next due thereafter.
KEEP PREMISES IN REPAIR
8. Lessor shall not be obliged to incur any expense for
repairing any improvements upon said demised premises or
connected therewith and the Lessee at his own expense will keep
all improvements in good repair (injury by fire, or other causes
beyond Lessee's control excepted) as well as in a good tenantable
and wholesome condition, and will comply with all local or
general regulations, laws and ordinances applicable thereto, as
well as lawful requirements of all competent authorities in that
behalf. Lessee will, as far as possible, keep said improvements
from deterioration due to ordinary wear and from falling
temporarily out of repair. If Lessee does not make repairs as
required hereunder promptly and adequately, Lessor may but need
not make such repairs and pay the costs thereof, and such costs
shall be so much additional rent immediately due from and payable
by Lessee to Lessor.
ACCESS TO PREMISES
9. Lessee will allow Lessor free access to the Premises for the
purpose of examining or exhibiting the same, or to make any
needful repairs, or alterations thereof which Lessor may see fit
to make and will allow to have placed upon the Premises at all
times notice of "For Sale" and "To Rent ", and will not interfere
with the same.
ABANDONMENT AND RELETTING
10. If Lessee shall abandon or vacate the Premises, or if
Lessee's right to occupy the Premises be terminated by Lessor by
reason of Lessee's breach of any of the covenants herein, the
same may be re-let by Lessor for such rent and upon such terms as
Lessor may deem fit, subject to Illinois statute; and if a
sufficient sum shall not thus be realized monthly, after paying
the expenses of such re-letting and collecting to satisfy the
rent hereby reserved, Lessee agrees to satisfy and pay all
deficiency monthly during the remaining period of this lease.
HOLDING OVER
11. Lessee will, at the termination of this lease by lapse of
time or otherwise, yield up immediate possession to Lessor, and
failing so to do, will pay as liquidated damages, for the whole
time such possession is withheld, the sum of _____________
Dollars ($____) per day; but the provisions of this clause shall
not be held as a waiver by Lessor of any right of re-entry as
hereinafter set forth; nor shall the receipt of said rent or any
part thereof, or any other act in apparent affirmance of tenancy,
operate as a waiver of the right to forfeit this lease and the
term hereby granted for the period still unexpired, for a breach
of any of the covenants herein.
EXTRA FIRE HAZARD
12. There shall not be allowed, kept, or used on the Premises
any inflammable or explosive liquids or materials save such as
may be necessary for use in the business of the Lessee, and in
such case, any such substances shall be delivered and stored in
amount, and used, in accordance with the rules of the applicable
Board of Underwriters and statutes and ordinances now or
hereafter in force.
DEFAULT BY LESSEE
13. If default be made in the payment of the above rent, or any
part thereof, or in any of the covenants herein contained to be
kept by the Lessee, Lessor may at any time thereafter at his
election declare said term ended and reenter the Premises or any
part thereof, with or (to the extent permitted by law) without
notice or process of law, and remove Lessee or any persons
occupying the same, without prejudice to any remedies which might
otherwise be used for arrears of rent, and Lessor shall have at
all times the right to distrain for rent due, and shall have a
valid and first lien upon all personal property which Lessee now
owns, or may hereafter acquire or have an interest in, which is
by law subject to such distraint, as security for payment of the
rent herein reserved.
NO RENT DEDUCTION OR SET OFF
14. Lessee's covenant to pay rent is and shall be independent of
each and every other covenant of this lease. Lessee agrees that
any claim by Lessee against Lessor shall not be deducted from
rent nor set off against any claim for rent in any action.
RENT AFTER NOTICE OR SUIT
15. It is further agreed, by the parties hereto, that after the
service of notice, or the commencement of a suit or after final
judgment for possession of the Premises, Lessor may receive and
collect any rent due, and the payment of said rent shall not
waive or affect said notice, said suit, or said judgment.
PAYMENT OF COSTS
16. Lessee will pay and discharge all reasonable costs,
attorney's fees and expenses that shall be made and incurred by
Lessor in enforcing the covenants and agreements of this lease.
RIGHTS CUMULATIVE
17. The rights and remedies of Lessor under this lease are
cumulative. The exercise or use of any one or more thereof shall
not bar Lessor from exercise or use of any other right or remedy
provided herein or otherwise provided by law, nor shall exercise
nor use of any right or remedy by Lessor waive any other right or
remedy.
FIRE AND CASUALTY
18. In case the Premises shall be rendered untenantable during
the term of this lease by fire or other casualty, Lessor at his
option may terminate the lease or repair the Premises within 60
days thereafter. If Lessor elects to repair, this lease shall
remain in effect provided such repairs are completed within said
time. If Lessor shall not have repaired the Premises within said
time, then at the end of such time the term hereby created shall
terminate. If this lease is terminated by reason of fire or
casualty as herein specified, rent shall be apportioned and paid
to the day of such fire or other casualty.
SUBORDINATION
19. This lease is subordinate to all mortgages which may now or
hereafter affect the Premises.
PLURALS; SUCCESSORS
20. The words "Lessor" and "Lessee" wherever herein occurring
and used shall be construed to mean "Lessors" and "Lessees" in
case more than one person constitutes either party to this lease;
and all the covenants and agreements contained shall be binding
upon, and inure to, their respective successors, heirs,
executors, administrators and assigns and may be exercised by his
or their attorney or agent.
SEVERABILITY
21. Wherever possible each provision of this lease shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this lease shall be
prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision
or the remaining provisions of this lease.
22. This Lease is executed by the AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, not personally or individually but
solely as Trustee as aforesaid and it is expressly understood and
agreed by and between the parties hereto, anything in this Lease
to the contrary notwithstanding, that each and all of the
covenants, undertakings and agreements in this Lease contained
are made and intended not as personal covenants, undertakings and
agreements of the AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, or any of its officers, agents or employees, but this
Lease is executed and delivered by the undersigned Lessor solely
as Trustee as aforesaid and no personal liability or personal
responsibility is assumed by, or shall at any time be asserted or
enforced against, the AMERICAN NATIONAL BANK AND TRUST COMPANY OF
CHICAGO, its officers, agents, or employees, on account of any
covenants, representations, undertakings or agreements in this
Lease contained, or otherwise, either express or implied, all
such personal liability, if any, being hereby expressly waived
and released, it being understood that the Lessee or anyone
claiming by, through or under the Lessee shall look solely to the
trust property for the enforcement or collection of any such
liability. By way of illustration only and without limitation of
the foregoing, it is further understood and agreed that the said
AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO individually
shall have no duty whatsoever with reference to the upkeep,
maintenance or repair of said premises and makes no
representations with reference to the condition of, or to the
title to, said premises. It is further expressly understood and
agreed that this Lease is signed by the undersigned Lessor solely
for the purpose of subjecting the title to the trust property to
the terms of this Lease and for no other purpose whatsoever. Any
conveyance of the demised premises by the undersigned Lessee
shall operate to release the AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO in every capacity from any and all
obligations, if any, under this Lease. It is further expressly
understood and agreed that no duty shall rest upon the AMERICAN
NATIONAL BANK AND TRUST COMPANY OF CHICAGO to sequester the trust
property or the rents, issues and profits arising therefrom, or
the profits arising from any sale or other disposition thereof.
23. It is hereby expressly agreed by and between Lessor and
Lessee that:
(a) Lessee shall pay the real estate taxes and any special
assessments.
(b) Lessee shall pay for all upkeep on the said building, and
for all repairs and remodeling, both interior and exterior and
shall provide all heating and any and all insurance.
24. Lessee has deposited with beneficiaries of the Lessor the
sum of TWENTY FOUR THOUSAND DOLLARS ($24,000.00), which said
deposit is hereby acknowledged, which shall be held by
beneficiaries of the Lessor as and for security on said Lease.
When said Lease shall expire, if the Lessee shall not be in
default under the terms and conditions thereof, then said deposit
of $24,000.00 shall be returned to Lessee by the beneficiaries of
the Lessor. If, at the time of the expiration of this Lease,
Lessee shall be indebted to the Lessor, beneficiaries of the
Lessor shall deduct such indebtedness from the security deposit
moneys and return the balance to Lessee.
If this instrument is executed by a corporation, such
execution has been authorized by a duly adopted resolution of the
Board of Directors of such corporation.
This lease consists of ___ pages numbered 1 to __, including
a rider consisting of __ pages, identified by Lessor and Lessee.
IN WITNESS WHEREOF, the parties hereto have executed this
instrument as of the Date of Lease stated above.
LESSEE: LESSOR:
RICHARDSON ELECTRONICS, LTD. AMERICAN NATIONAL BANK AND
TRUST COMPANY
OF CHICAGO AS TRUSTEE OF TRUST
#56120
DTD 2/23/83
By: /s/ Edward J. Richardson By: /s/ authorized signature
ATTEST:
/s/ William G. Seils
Secretary
Exhibit 10(c)(1)
AMENDMENT NO. 1 TO RESTATED
RICHARDSON ELECTRONICS, LTD.
EMPLOYEES PROFIT-SHARING PLAN
RICHARDSON ELECTRONICS, LTD., a Delaware corporation, hereby
amends the Richardson Electronics, Ltd. Employees Profit-Sharing
Plan, as amended and restated on July 14, 1994, effective June 1,
1989, as follows effective March 6, 1996, to-wit:
1. Section 2.19(c) of the Plan is deleted in its entirety
and the following is substituted in its place:
(c) Service by an individual on behalf of any of the
following entities before he became an Employee shall be
considered service on behalf of the Employer for purposes of this
Section 2.19, to-wit: Amperex Division of North American Philips
Corp.; B-Scan, Inc.; Calvert Electronics, Inc.; Calvert Holding
Co., Inc.; Calvert Semi-Conductor, Inc.; Ceco Communications,
Inc.; Cetron Electronic Corporation; National Electronics
Division of Varian Associates, Inc,; and TubeMaster, Inc. (prior
to March 6, 1996).
2. Section 6.1(f) is added to the Plan to read as follows:
(f) For purposes of this Section 6.1, as well as Section
6.2, with respect to the Plan Year ending in 1996, remuneration
paid during such Plan Year to a Participant while employed by
TubeMaster, Inc. prior to March 6, 1996 shall not be taken into
account as compensation.
Exhibit 10(d)
The CORPORATE Plan for Retirement
THE PROFIT SHARING/401(k) PLAN
FIDELITY BASIC PLAN DOCUMENT NO. 07
Effective June 1, 1996
ARTICLE 1
ADOPTION AGREEMENT
ARTICLE 2
DEFINITIONS
2.01 - Definitions
ARTICLE 3
PARTICIPATION
3.01 - Date of Participation
3.02 - Resumption of Participation Following Reemployment
3.03 - Cessation or Resumption of Participation Following a
Change in Status
3.04 - Participation by Owner-Employee; Controlled Businesses
3.05 - Omission of Eligible Employee
ARTICLE 4
CONTRIBUTIONS
4.01 - Deferral Contributions
4.02 - Additional Limit on Deferral Contributions
4.03 - Matching Contributions
4.04 - Limit on Matching Contributions and Employee Contributions
4.05 - Special Rules
4.06 - Fixed/Discretionary Employer Contributions
4.07 - Time of Making Employer Contributions
4.08 - Return of Employer Contributions
4.09 - Employee Contributions
4.10 - Rollover Contributions
4.11 - Deductible Voluntary Employee Contributions
4.12 - Additional Rules for Paired Plans
ARTICLE 5
PARTICIPANTS' ACCOUNTS
5.01 - Individual Accounts
5.02 - Valuation of Accounts
5.03 - Code Section 415 Limitations
ARTICLE 6
INVESTMENT OF CONTRIBUTIONS
6.01 - Manner of Investment
6.02 - Investment Decisions
6.03 - Participant Directions to Trustee
ARTICLE 7
RIGHT TO BENEFITS
7.01 - Normal or Early Retirement
7.02 - Late Retirement
7.03 - Disability Retirement
7.04 - Death
7.05 - Other Termination of Employment
7.06 - Separate Account
7.07 - Forfeitures
7.08 - Adjustment for Investment Experience
7.09 - Participant Loans
7.10 - In-Service Withdrawals
7.11 - Prior Plan In-Service Distribution Rules
ARTICLE 8
DISTRIBUTION OF BENEFITS PAYABLE AFTER TERMINATION OF SERVICE
8.01 - Distribution of Benefits to Participants and Beneficiaries
8.02 - Annuity Distributions
8.03 - Joint and Survivor Annuities/Preretirement Survivor
Annuities
8.04 - Installment Distributions
8.05 - Immediate Distributions
8.06 - Determination of Method of Distribution
8.07 - Notice to Trustee
8.08 - Time of Distribution
8.09 - Whereabouts of Participants and Beneficiaries
ARTICLE 9
TOP-HEAVY PROVISIONS
9.01 - Application
9.02 - Definitions
9.03 - Minimum Contribution
9.04 - Adjustment to the Limitation on Contributions and Benefits
9.05 - Minimum Vesting
ARTICLE 10
AMENDMENT AND TERMINATION
10.01 - Amendment by Employer
10.02 - Amendment by Prototype Sponsor
10.03 - Amendments Affecting Vested and/or Accrued Benefits
10.04 - Retroactive Amendments
10.05 - Termination
10.06 - Distribution Upon Termination of the Plan
10.07 - Merger or Consolidation of Plan; Transfer of Plan Assets
ARTICLE 11
AMENDMENT AND CONTINUATION OF PREDECESSOR PLAN; TRANSFER OF
FUNDS
TO OR FROM OTHER QUALIFIED PLANS
11.01 - Amendment and Continuation of Predecessor Plan
11.02 - Transfer of Funds from an Existing Plan
11.03 - Acceptance of Assets by Trustee
11.04 - Transfer of Assets from Trust
ARTICLE 12
MISCELLANEOUS
12.01 - Communication to Participants
12.02 - Limitation of Rights
12.03 - Nonalienability of Benefits and Qualified Domestic
Relations Orders
12.04 - Facility of Payment
12.05 - Information Between Employer and Trustee
12.06 - Effect of Failure to Qualify Under Code
12.07 - Notices
12.08 - Governing Law
ARTICLE 13
PLAN ADMINISTRATION
13.01 - Powers and Responsibilities of the Administrator
13.02 - Nondiscriminatory Exercise of Authority
13.03 - Claims and Review Procedures
13.04 - Named Fiduciary
13.05 - Costs of Administration
ARTICLE 14
TRUST AGREEMENT
14.01 - Acceptance of Trust Responsibilities
14.02 - Establishment of Trust Fund
14.03 - Exclusive Benefit
14.04 - Powers of Trustee
14.05 - Accounts
14.06 - Approving of Accounts
14.07 - Distribution from Trust Fund
14.08 - Transfer of Amounts from Qualified Plan
14.09 - Transfer of Assets from Trust
14.10 - Separate Trust or Fund for Existing Plan Assets
14.11 - Voting; Delivery of Information
14.12 - Compensation and Expenses of Trustee
14.13 - Reliance by Trustee on other Persons
14.14 - Indemnification by Employer
14.15 - Consultation by Trustee with Counsel
14.16 - Persons Dealing with the Trustee
14.17 - Resignation or Removal of Trustee
14.18 - Fiscal Year of the Trust
14.19 - Discharge of Duties by Fiduciaries
14.20 - Amendment
14.21 - Plan Termination
14.22 - Permitted Reversion of Funds to Employer
14 23 - Governing Law
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
Trust for the purpose of recording contributions made on behalf
of a Participant and any income, expenses, gains or losses
incurred thereon
(2) "Administrator" means the Employer adopting this Plan, or
other person designated by the Employer in Section 1.01(c).
(3) "Adoption Agreement" means Article 1 under which the
Employer establishes and adopts, or amends, the Plan and Trust
and designates the optional provisions selected by the Employer,
and the Trustee accepts its responsibilities under Article 14.
The provisions of the Adoption Agreement shall be an integral
part of the Plan.
(4) "Annuity Starting Date" means the first day of the first
period for which an amount is payable as an annuity or in any
other form.
(5) "Beneficiary" means the person or persons entitled under
Section 7.04 to receive benefits under the Plan upon the death of
a Participant, provided that for purposes of Section 7.04 such
term shall be applied in accordance with Section 401(a)(9) of the
Code and the regulations thereunder.
(6) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(7) "Compensation" shall mean:
(A) for purposes of Article 4 (Contributions), compensation as
defined in Section 5.03(e)(2) excluding any items elected by the
Employer in Section 1.04(a), 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; and
(B) for purposes of Section 2.01(a)(16) (Highly Compensated
Employees), Section 5.03 (Code Section 415 Limitations), and
Section 9.03 (Top Heavy Plan Minimum Contributions), compensation
as defined in Section 5.03(e)(2).
Compensation shall generally be based on the amount actually
paid to the Participant during the Plan Year or, for purposes of
Article 4 if so elected by the Employer in Section 1.04(b),
during that portion of the Plan Year during which the Employee is
eligible to participate. Notwithstanding the preceding sentence,
compensation for purposes of Section 5.03 (Code Section 415
Limitations) shall be based on the amount actually paid or made
available to the Participant during the Limitation Year.
Compensation for the initial Plan Year for a new plan shall be
based upon eligible Participant Compensation, subject to Section
1.04(b), from the Effective Date listed in Section 1.01(g)(1)
through the end of the first Plan Year.
In the case of any Self-Employed Individual, Compensation
shall mean the Individual's Earned Income.
For years beginning after December 31, 1988, the annual
Compensation of each Participant taken into account for
determining all benefits provided under the plan for any
determination period shall not exceed $200,000. This limitation
shall be adjusted by the Secretary at the same time and in the
same manner as under Section 415(d) of the Code, except that the
dollar increase in effect on January 1 of any calendar year is
effective for years beginning in such calendar year and the first
adjustment to the $200,000 limitation is effected on January 1,
1990. If a plan determines Compensation on a period of time that
contains fewer than 12 calendar months, then annual Compensation
limit is amount equal to the annual Compensation limit for the
calendar year in which the Compensation period begins multiplied
by the ratio obtained by dividing the number of full months in
the period by 12.
If Compensation for any prior determination period is taken
into account in determining an Employee's allocations or benefits
for the current determination period, the Compensation for such
prior year is subject to the applicable annual compensation limit
in effect for that prior year. For this purpose, for years
beginning before January 1, 1990, the applicable annual
compensation limit is $200,000.
In determining the Compensation of a Participant for
purposes of this limitation, the rules of Section 414(q)(6) of
the Code shall apply, except that in applying such rules, the
term "family" shall include only the spouse of the Participant
and any lineal descendants of the Participant who have not
attained age 19 before the close of the year. If the $200,000
limitation is exceeded as a result of the application of these
rules, then the limitation shall be prorated among the affected
individuals in proportion to each such individual's Compensation
as determined under this Section prior to the application of this
limitation.
(8) "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.
(9) "Eligibility Computation Period" means each 12-consecutive
month period beginning with the Employment Commencement Date and
each anniversary thereof or, in the case of an Employee who
before completing the eligibility requirements set forth in
Section 1.03(a)(1) incurs a break in service for participation
purposes and thereafter returns to the employ of the Employer or
Related Employer, each 12-consecutive month period beginning with
the first day of reemployment and each anniversary thereof.
A "break in service for participation purposes" shall mean an
Eligibility Computation Period during which the participant does
not complete more than 500 Hours of Service with the Employer.
(10) "Employee" means any employee of the Employer, any Self-Employed
Individual or Owner-Employee. The Employer must specify
in Section 1.03 (a) (3) any Employee, or class of Employees, not
eligible to participate in the Plan. If the Employer elects to
exclude collective bargaining employees, the exclusion applies to
any employee of the Employer included in a unit of employees
covered by an agreement which the Secretary of Labor finds to be
a collective bargaining agreement between employee
representatives and one or more employers unless the collective
bargaining agreement requires the employee to be included within
the Plan. The term "employee representatives" does not include
any organization more than half the members of which are owners,
officers, or executives of the Employer.
For purposes of the Plan, an individual shall be considered
to become an Employee on the date on which he first completes an
Hour of Service and he shall be considered to have ceased to be
an Employee on the date on which he last completes an Hour of
Service. The term also includes a Leased Employee, such that
contributions or benefits provided by the leasing organization
which are attributable to services performed for the Employer
shall be treated as provided by the Employer. Notwithstanding
the above, a Leased Employee shall not be considered an Employee
if Leased Employees do not constitute more than 20 percent of the
Employer's non-highly compensated work force (taking into account
all Related Employers) and the Leased Employee is covered by a
money purchase pension plan maintained by the leasing
organization which plan provides (i) a nonintegrated employer
contribution rate of at least 10 percent of compensation, as
defined for purposes of Section 415(c) (3) of the Code, but
including amounts contributed pursuant to a salary reduction
agreement which are excludable from gross income under Section
125, Section 402 (a) (8), Section 402(h) or Section 403 (b) of
the Code, (ii) full and immediate vesting, and (iii) immediate
participation by each employee of the leasing organization .
(11) "Employer" means the employer named in Section 1.02(a) and
any Related Employers required by this Section 2.01(a)(11). If
Article 1 of the Employer's Plan is the Standardized Adoption
Agreement, the term "Employer" includes all Related Employers.
If Article 1 of the Employer's Plan is the Non-standardized
Adoption Agreement, the term "Employer" includes those Related
Employers designated in Section 1.02 (b).
(12) "Employment Commencement Date" means the date on which the
Employee first performs an Hour of Service.
(13) "ERISA" means the Employee Retirement Income Security Act
of 1974, as from time to time amended.
(14) "Fidelity Fund" means any Registered Investment Company or
Managed Income Portfolio of the Fidelity Group Trust for Employee
Benefit Plans which is made available to plans utilizing the
CORPORATEplan for Retirement.
(15) "Fund Share" means the share, unit, or other evidence of
ownership in a Fidelity Fund.
(16) "Highly Compensated Employee" means both highly compensated
active Employees and highly compensated former Employees.
A highly compensated active Employee includes any Employee
who performs service for the Employer during the determination
year and who, during the look-back year: (i) received
compensation from the Employer in excess of $75,000 (as adjusted
pursuant to Section 415(d) of the Code); (ii) received
compensation from the Employer in excess of $50,000 (as adjusted
pursuant to Section 415(d) of the Code) and was a member of the
top-paid group for such year; or (iii) was an officer of the
Employer and received compensation during such year that is
greater than 50 percent of the dollar limitation in effect under
Section 415(b)(1)(A) of the Code. The term highly compensated
Employee also includes: (i) Employees who are both described in
the preceding sentence if the term "determination year" is
substituted for the term "look-back year" and the Employee is one
of the 100 Employees who received the most compensation from the
Employer during the determination year; and (ii) Employees who
are 5 percent owners at any time during the look-back year or
determination year.
If no officer has satisfied the compensation requirement of
(iii) above during either a determination year or look-back year,
the highest paid officer for such year shall be treated as a
highly compensated Employee.
For this purpose, the determination year shall be the Plan
Year. The look-back year shall be the twelve-month period
immediately preceding the determination year. The Employer may
elect to make the look-back year calculation for a determination
on the basis of the calendar year ending with or within the
applicable determination year, as prescribed by Section 414(q) of
the Code and the regulations issued thereunder.
A highly compensated former Employee includes any Employee
who separated from service (or was deemed to have separated)
prior to the determination year, performs no service for the
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 Employee's 55th
birthday.
If an Employee is, during a determination year or look-back
year, a family member of either a 5 percent owner who is an
active or former Employee or a highly compensated Employee who is
one of the 10 most highly compensated Employees ranked on the
basis of compensation paid by the Employer during such year, then
the family member and the 5 percent owner or top-ten highly
compensated Employee shall be aggregated. In such case, the
family member and 5 percent owner or top-ten highly compensated
Employee shall be treated as a single Employee receiving
compensation and plan contributions or benefits equal to the sum
of such compensation and contributions or benefits of the family
member and 5 percent owner or top-ten highly compensated
Employee. For purposes of this Section, family member includes
the spouse, lineal ascendants and descendants of the Employee or
former Employee and the spouses of such lineal ascendants and
descendants.
The determination of who is a highly compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the compensation that
is considered, will be made in accordance with Section 414(q) of
the Code and the regulations thereunder.
(17) "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 Eligibility 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;
(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 Eligibility 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 Eligibility 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
Eligibility Computation Period to which the award or agreement
pertains rather than the Eligibility 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 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.
(18) "Leased Employee" means any individual who provides
services to the Employer or a Related Employer (the "recipient")
but is not otherwise an employee of the recipient if (i) such
services are provided pursuant to an agreement between the
recipient and any other person (the "leasing organization"), (ii)
such individual has performed services for the recipient (or for
the recipient and any related persons within the meaning of
Section 414 (n) (6) of the Code) on a substantially full-time
basis for at least one year, and (iii) such services are of a
type historically performed by employees in the business field of
the recipient.
(19) "Normal Retirement Age" means the normal retirement age
specified in Section 1.06 (a) of the Adoption Agreement. If the
Employer enforces a mandatory retirement age, the Normal
Retirement Age is the lesser of that mandatory age or the age
specified in Section 1.06 (a).
(20) "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.
(21) "Participant" means any Employee who participates in the
Plan in accordance with Article 3 hereof.
(22) "Plan" means the plan established by the Employer in the
form of the prototype plan 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.
(23) "Plan Year" means the 12-consecutive month period designated
by the Employer in Section 1.01(f).
(24) "Prototype Sponsor" means Fidelity Management and Research
Company, or its successor.
(25) "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.
(26) "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).
(27) "Self-Employed Individual" means an individual who has
Earned Income for the taxable year from the Employer or who would
have had Earned Income but for the fact that the trade or
business had no net profits for the taxable year.
(28) "Trust" means the trust created by the Employer in
accordance with the provisions of Section 14.01.
(29) "Trust Agreement" means the agreement between the Employer
and the Trustee, as set forth in Article 14, under which the
assets of the Plan are held, administered, and managed.
(30) "Trust Fund" means the property held in Trust by the
Trustee for the Accounts of the Participants and their
Beneficiaries.
(31) "Trustee" means the Fidelity Management Trust Company, or
its successor.
(32) "Year of Service for Participation" means, with respect to
any Employee, an Eligibility Computation Period during which the
Employee has been credited with at least 1,000 Hours of Service.
If the Plan maintained by the Employer is the plan of a
predecessor employer, an Employee's Years of Service for
Participation 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.
(33) "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.
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
1-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 ln 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. All Employees in the eligible
class (as defined in Section 1.03(a)(3)) who are in the service
of the Employer on the Effective Date will become Participants on
the date elected by the Employer in Section 1.03(c). Any other
Employee will become a Participant in the Plan as of the first
Entry Date on which he first satisfies the eligibility
requirements set forth in Section 1.03(a). In the event that an
Employee who is not a member of an eligible class (as defined in
Section 1.03(a)(3)) becomes a member of an eligible class, the
individual shall participate immediately if such individual had
already satisfied the eligibility requirements and would have
otherwise previously become a Participant.
If an eligibility requirement other than one Year of Service is
elected in 1.03(a)(1), an Employee may not be required to
complete a minimum number of Hours of Service before becoming a
Participant. An otherwise eligible Employee subject to a minimum
months of service requirement shall become a Participant on the
first Entry Date following his completion of the required number
of consecutive months of employment measured from his Employment
Commencement Date to the coinciding date in the applicable
following month. For purposes of determining consecutive months
of service, the Related Employer and predecessor employer rules
contained in Sections 2.01(a)(17) and 2.01(a)(32) shall apply.
3.02. Resumption of Participation Following Reemployment. If a
Participant ceases to be an Employee and thereafter returns to
the employ of the Employer he will be treated as follows:
(a) he will again become a Participant on the first date on
which he completes an Hour of Service for the Employer following
his reemployment and is in the eligible class of Employees as
defined in Section 1.03(a)(3), and
(b) any distribution which he is receiving under the Plan will
cease except as otherwise required under Section 8.08.
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 a member of an
eligible class as defined in Section 1.03(a)(3), the individual
shall continue to be a Participant for most purposes until the
entire amount of his benefit is distributed; however, the
individual shall not be entitled to receive an allocation of
contributions or forfeitures during the period that he is not a
member of the eligible class. 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 a member
of an eligible class of Employees, the individual shall resume
full participation immediately upon the date of such change in
status.
3.04. Participation by Owner-Employee: Controlled Businesses.
If the Plan provides contributions or benefits for one or more
Owner-Employees who control both the trade or business with
respect to which the Plan is established and one or more other
trades or businesses, the Plan and any plan established with
respect to such other trades or businesses must, when looked at
as a single plan, satisfy Sections 401(a) and 401(d) of the Code
with respect to the employees of this and all such other trades
or businesses. If the Plan provides contributions or benefits
for one or more Owner-Employees who control one or more other
trades or businesses, the Employees of each such other trade or
business must be included in a plan which satisfies Sections
401(a) and 401(d) of the Code and which provides contributions
and benefits not less favorable than provided for Owner-Employees
under the Plan.
If an individual is covered as an Owner-Employee under the
plans of two or more trades or businesses which are not
controlled and the individual controls a trade or business, then
the contributions or benefits of the Employees under the plan of
the trades or businesses which are controlled must be as
favorable as those provided for him under the most favorable plan
of the trade or business which is not controlled.
For purposes of this Section, an Owner-Employee, or two or
more Owner-Employees, shall be considered to control a trade or
business if such Owner-Employee, or such Owner-Employees
together, (i) own the entire interest in an unincorporated trade
or business, or (ii) in the case of a partnership, own more than
50 percent of either the capital interest or the profits interest
in such partnership. For this purpose, an Owner-Employee, or two
or more Owner-Employees, shall be treated as owning any interest
in a partnership which is owned, directly or indirectly, by a
partnership controlled by such Owner-Employee or such Owner-Employees.
3.05. Omission of Eligible Employee. If any Employee who should
be included as a Participant in the Plan is erroneously omitted
and discovery of such omission is not made until after a
contribution by his Employer for the year has been made, the
Employer shall make a subsequent contribution, if necessary, so
that the omitted Employee receives the total amount which the
said Employee would have received had he not been omitted. For
purposes of this Section 3.05, the term "contribution" shall not
include Deferral Contributions and Matching Contributions made
pursuant to Sections 4.01 and 4.03, respectively.
Article 4. Contributions.
4.01. Deferral Contributions.
(a) 4.01. Deferral Contributions. If so provided by the
Employer in Section 1.05(b), each Participant may elect to
execute a salary reduction agreement with the Employer to reduce
his Compensation by a specified percentage not exceeding 15% per
payroll period, subject to any exceptions elected by the Employer
in Section 1.05(b)(2) and 1.05(b)(3) and equal to a whole number
multiple of one (1) percent. Such agreement shall become
effective on the first day of the first payroll period for which
the Employer can reasonably process the request. The Employer
shall make a Deferral Contribution on behalf of the Participant
corresponding to the amount of said reduction, subject to the
restrictions set forth below. Under no circumstances may a
salary reduction agreement be adopted retroactively.
(b) A Participant may elect to change or discontinue the
percentage by which his Compensation is reduced by notice to the
Employer as provided in Section 1.05(b)(1).
(c) No Participant shall be permitted to have Deferral
Contributions made under the Plan, or any other qualified plan
maintained by the Employer, during the taxable year, in excess of
the dollar limitation contained in Section 402(g) of the Code in
effect at the beginning of such taxable Year.
A Participant may assign to the Plan any Excess Deferrals
made during the taxable year of the Participant by notifying the
Plan Administrator on or before March 15 following the taxable
year of the amount of the Excess Deferrals to be assigned to the
Plan. A Participant is deemed to notify the Administrator of any
Excess Deferrals that arise by taking into account only those
Deferral Contributions made to the Plan and any other plan of the
Employer. Notwithstanding any other provision of the Plan,
Excess Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose account Excess Deferrals were so assigned
for the preceding year and who claims Excess Deferrals for such
taxable year.
"Excess Deferrals" shall mean those Deferral Contributions
that are includable in a participant's gross income under Section
402(g) of the Code to the extent such Participant's Deferral
Contributions for a taxable year exceed the dollar limitation
under such Code section. For purposes of determining Excess
Deferrals, the term "Deferral Contributions" shall include the
sum of all Employer Contributions made on behalf of such
Participant pursuant to an election to defer under any qualified
CODA as described 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, any plan as described under
Section 501(c)(18) of the Code, and any Employer Contributions
made on the behalf of a Participant for the purchase of an
annuity contract under Section 403(b) of the Code pursuant to a
salary reduction agreement. Deferral Contributions shall not
include any deferrals properly distributed as excess annual
additions. Excess Deferrals shall be treated as annual additions
under the Plan, unless such amounts are distributed no later than
the first April 15 following the close of the Participant's
taxable year.
Excess Deferrals shall be adjusted for any income or loss up
to the date of distribution. The income or loss allocable to
Excess Deferrals is (1) income or loss allocable to the
Participant's Deferral Contributions account for the taxable year
multiplied by a fraction, the numerator of which is such
Participant's Excess Deferrals for the year and the denominator
is the Participant's account balance attributable to Deferral
Contributions without regard to any income or loss occurring
during such taxable year, or (2) such other amount determined
under any reasonable method, provided that such method is used
consistently for all Participants in calculating the
distributions required under this Section 4.01(c) and Sections
4.02(d) and 4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to Participants' accounts. Income or
loss allocable to the period between the end of the Plan Year and
the date of distribution shall be disregarded in determining
income or loss.
(d) In order for the Plan to comply with the requirements of
Sections 401(k), 402(g) and 415 of the Code and the regulations
promulgated thereunder, at any time in a Plan Year the
Administrator may reduce the rate of Deferral Contributions to be
made on behalf of any Participant, or class of Participants, for
the remainder of that Plan Year, or the Administrator may require
that all Deferral Contributions to be made on behalf of a
Participant be discontinued for the remainder of that Plan Year.
Upon the close of the Plan Year or such earlier date as the
Administrator may determine, any reduction or discontinuance in
Deferral Contributions shall automatically cease until the
Administrator again determines that such a reduction or
discontinuance of Deferral Contributions is required.
4.02. Additional Limit on Deferral Contributions.
(a) The Actual Deferral Percentage (hereinafter "ADP") for
Participants who are Highly Compensated Employees for each Plan
Year and the ADP for participants who are Non-highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(1) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(2) The ADP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ADP for
Participants who are Non-highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
participants who are Highly Compensated Employees does not exceed
the ADP for Participants who are Non-highly Compensated Employees
by more than two (2) percentage points.
(b) The following special rules apply for the purposes of this
Section:
(1) The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Deferral
Contributions (and Qualified Discretionary Contributions if
treated as Deferral Contributions for purposes of the ADP test)
allocated to his or her accounts under two or more arrangements
described in Section 401(k) of the Code, that are maintained by
the Employer, shall be determined as if such Deferral
Contributions (and, if applicable, such Qualified Discretionary
Contributions) were made under a single arrangement. If a Highly
Compensated Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or deferred
arrangements ending with or within the same calendar year shall
be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Section 401(k)
of the Code.
(2) In the event that this Plan satisfies the requirements of
Sections 401(k), 401(a)(4), or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of such Sections of the Code only
if aggregated with this plan, then this Section shall be applied
by determining the ADP of Employees as if all such plans were a
single plan. For Plan Years beginning after December 31, 1989,
plans may be aggregated in order to satisfy section 401(k) of the
Code only if they have the same Plan Year.
(3) For purposes of determining the ADP of a Participant who is
a 5-percent owner or one of the ten most highly-paid Highly
Compensated Employees, the Deferral Contributions (and Qualified
Discretionary Contributions if treated as Deferral Contributions
for purposes of the ADP test) and Compensation of such
Participant shall include the Deferral Contributions (and, if
applicable, Qualified Discretionary Contributions) and
Compensation for the Plan Year of Family Members (as defined in
Section 414(q)(6) of the Code). Family Members, with respect to
such Highly Compensated Employees, shall be disregarded as
separate employees in determining the ADP both for Participants
who are Non-highly Compensated Employees and for Participants who
are Highly Compensated Employees.
(4) For purposes of determining the ADP test, Deferral
Contributions and Qualified Discretionary Contributions must be
made before the last day of the twelve-month period immediately
following the Plan Year to which contributions relate.
(5) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Discretionary Contributions used in such test.
(6) The determination and treatment of the ADP amounts of any
Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
(c) The following definitions shall apply for purposes of this
Section:
(l) "Actual Deferral Percentage" shall mean, for a specified
group of Participants for a Plan Year, the average of the ratios
(calculated separately for each Participant in such group) of (1)
the amount of Employer contributions actually paid over to the
trust on behalf of such Participant for the Plan Year to (2) the
Participant's Compensation for such Plan Year. Employer
contributions on behalf of any Participant shall include: (l)
any Deferral Contributions made pursuant to the Participant's
deferral election, including Excess Deferrals of Highly
Compensated Employees, but excluding (a) Excess Deferrals of
Non-Highly Compensated Employees that arise solely from Deferral
Contributions made under the Plan or plans of the Employer and
(b) Deferral Contributions that are taken into account in the
Contribution Percentage test (provided the ADP test is satisfied
both with and without exclusion of these Deferral Contributions);
and (2) at the election of the Employer, Qualified Discretionary
Contributions. Matching Contributions, whether or not
non-forfeitable when made, shall not be considered as Employer
Contributions for purposes of this paragraph. For purposes of
computing Actual Deferral Percentages, an Employee who would be a
Participant but for the failure to make Deferral Contributions
shall be treated as a Participant on whose behalf no Deferral
Contributions are made.
(2) "Excess Contributions" shall mean, with respect to any Plan
Year. the excess of:
(a) The aggregate amount of Employer contributions actually
taken into account in computing the ADP of Highly Compensated
Employees for such Plan Year. over
(b) The maximum amount of such contributions permitted by the
ADP test (determined by reducing contributions made on behalf of
Highly Compensated Employees in order of the ADPs, beginning with
the highest of such percentages).
(3) "Qualified Discretionary Contributions" shall mean
contributions made by the Employer as elected in Section 1.05(g)
and allocated to Participant accounts of Non-highly Compensated
Employees that such Participants may not elect to receive in cash
until distributed from the plan; that are nonforfeitable when
made; and that are distributable only in accordance with the
distribution provisions that are applicable to Deferral
Contributions. Participants shall not be required to satisfy any
hours of service or employment requirement in order to receive an
allocation of such contributions.
(d) Notwithstanding any other provision of this plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to participants to whose accounts such Excess
Contributions were allocated for the preceding Plan Year. If
such excess amounts are distributed more than 2-1/2 months after
the last day of the Plan Year in which such excess amounts arose,
a ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to such amounts. Such
distributions shall be made to Highly Compensated Employees on
the basis of the respective portions of the Excess Contributions
attributable to each of such employees. Excess Contributions of
Participants who are subject to the family member aggregation
rules of Section 414(q)(6) of the Code shall be allocated among
the family members in proportion to the Deferral Contributions
(and amounts treated as Deferral Contributions) of each family
member that is combined to determine the combined ADP.
Excess Contributions shall be treated as annual additions
under the plan.
Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss
allocable to Excess Contributions is (1) income or loss allocable
to the Participant's Deferral Contribution account (and if
applicable, the Qualified Discretionary Contribution account) for
the Plan Year multiplied by a fraction, the numerator of which is
such Participant's Excess Contributions for the year and the
denominator is the Participant's account balance attributable to
Deferral Contributions without regard to any income or loss
occurring during such Plan Year, or (2) an amount determined
under any reasonable method, provided that such method is used
consistently for all Participants in calculating any
distributions required under Section 4.02(d) and Sections 4.01(c)
and 4.04(d) for the Plan Year, and is used by the Plan in
allocating income or loss to the Participants' accounts. Income
or loss allocable to the period between the end of the Plan Year
and the date of distribution shall be disregarded in determining
income or loss.
Excess Contributions shall be distributed from the
Participant's Qualified Discretionary Contribution account only
to the extent that such Excess Contributions exceed the balance
in the Participant's Deferral Contributions account.
4.03. Matching Contributions. If so provided by the Employer in
Section 1.05(c), the Employer shall make a Matching Contribution
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(c)(4). The amount of the Matching
Contribution shall be determined in accordance with Section
1.05(c), subject to the limitations set forth in Section 4.04 and
Section 404 of the Code. Matching Contributions will not be
allowed to be made by the Employer on any voluntary non-deductible Employee
Contributions.
4.04. Limit on Matching Contributions and Employee
Contributions.
(a) The Average Contribution Percentage (hereinafter "ACP") for
Participants who are Highly Compensated Employees for each Plan
Year and the ACP for Participants who are Non-highly Compensated
Employees for the same Plan Year must satisfy one of the
following tests:
(1) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
participants who are Non-highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
(2) The ACP for Participants who are Highly Compensated
Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-highly Compensated Employees for the
same Plan Year multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees does not exceed
the ACP for Participants who are Non-highly Compensated Employees
by more than two (2) percentage points.
(b) The following special rules apply for purposes of this
section:
(1) If one or more Highly Compensated Employees participate in
both a qualified cash or deferred arrangement described in
Section 401(k) of the Code (hereafter "CODA") and a plan subject
to the ACP test maintained by the Employer and the sum of the ADP
and ACP of those Highly Compensated Employees subject to either
or both tests exceeds the Aggregate Limit, then the ACP of those
Highly Compensated Employees who also participate in CODA will be
reduced (beginning with such Highly Compensated Employee whose
ACP is the highest) so that the limit is not exceeded. The
amount by which each Highly Compensated Employee's Contribution
Percentage Amounts is reduced shall be treated as an Excess
Aggregate Contribution. The ADP and ACP of the Highly
Compensated Employees are determined after any corrections
required to meet the ADP and ACP tests. Multiple use does not
occur if either the ADP or ACP of the Highly Compensated
Employees does not exceed 1.25 multiplied by the ADP and ACP of
the Non-highly Compensated Employees.
(2) For purposes of this section, the Contribution Percentage
for any Participant who is a Highly Compensated Employee and who
is eligible to have Contribution Percentage Amounts allocated to
his or her account under two or more plans described in section
401(a) of the Code, or arrangements described in section 401(k)
of the Code that are maintained by the Employer, shall be
determined as if the total of such Contribution Percentage
Amounts was made under each plan. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred
arrangements ending with or within the same calendar year shall
be treated as a single arrangement. Notwithstanding the
foregoing, certain plans shall be treated as separate if
mandatorily disaggregated under regulations under Section 401(m)
of the Code.
(3) In the event that this plan satisfies the requirements of
Sections 401(m), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of such sections of the Code only
if aggregated with this plan, then this section shall be applied
by determining the Contribution Percentage of Employees as if all
such plans were a single plan. For plan years beginning after
December 31, 1989, plans may be aggregated in order to satisfy
Section 401(m) of the Code only if they have the same Plan Year.
(4) For purposes of determining the Contribution percentage of
a Participant who is a five-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Contribution
Percentage Amounts and Compensation of such Participant shall
include the Contribution Percentage Amounts and Compensation for
the Plan Year of Family Members (as defined in Section 414(q)(6)
of the Code). Family Members, with respect to Highly Compensated
Employees, shall be disregarded as separate Employees in
determining the Contribution Percentage both for Participants who
are Non-highly Compensated Employees and for Participants who are
Highly Compensated Employees.
(5) For purposes of determining the Contribution Percentage
test, Employee Contributions made pursuant to Section 1.05(d)(1)
are considered to have been made in the Plan Year in which
contributed to the Trust. Matching Contributions and Qualified
Discretionary Contributions will be considered made for a Plan
Year if made no later than the end of the twelve-month period
beginning on the day after the close of the Plan Year.
(6) The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Discretionary Contributions used in such test.
(7) The determination and treatment of the Contribution
Percentage of any Participant shall satisfy such other
requirements as may be prescribed by the Secretary of Treasury.
(c) The following definitions shall apply for purposes of this
Section:
(1) "Aggregate Limit" shall mean the greater of (A) or (B)
where (A) is the sum of (i) 125 percent of the greater of the ADP
of the Non-highly Compensated Employees for the Plan Year or the
ACP of Non-highly Compensated Employees under the plan subject to
Section 401(m) of the Code for the Plan Year beginning with or
within the Plan Year of the CODA and (ii) the lesser of 200% or
two plus the lesser of such ADP or ACP and where (B) is the sum
of (i) 125 percent of the lesser of the ADP of the Non-highly
Compensated Employees for the Plan Year or the ACP of Non-highly
Compensated Employees under the Plan subject to Section 401(m) of
the Code for the Plan Year beginning with or within the Plan Year
of the CODA and (ii) the lesser of 200 or two plus the greater of
such ADP or ACP.
(2) "Average Contribution Percentage" or "ACP" shall mean the
average of the Contribution Percentages of the Eligible
Participants in a group.
(3) "Contribution Percentage" shall mean the ratio (expressed
as a percentage) of the Participant's Contribution Percentage
Amounts to the Participant's Compensation for the Plan Year.
(4) "Contribution Percentage Amounts" shall mean the sum of
the Employee Contributions and Matching Contributions made under
the plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include Matching
Contributions that are forfeited either to correct Excess
Aggregate Contributions or because the contributions to which
they relate are Excess Deferrals, Excess Contributions or Excess
Aggregate Contributions. If so elected by the Employer in
Section 1.05(b)(4), the Employer may include Qualified
Discretionary Contributions in the Contribution Percentage
Amounts. The Employer also may elect to use Deferral
Contributions in the Contribution Percentage Amounts so long as
the ADP test is met before the Deferral Contributions are used in
the ACP test and continues to be met following the exclusion of
those Deferral Contributions that are used to meet the ACP test.
(5) "Deferral Contribution" shall mean any contribution made
at the election of the Participant pursuant to a salary reduction
agreement in accordance with Section 4.01(a).
(6) "Eligible Participant" shall mean any Employee who is
eligible to make an Employee Contribution, or a Deferral
Contribution (if the employer takes such contributions into
account in the calculation of the Contribution Percentage), or to
receive a Matching Contribution.
(7) "Employee Contribution" shall mean any voluntary
nondeductible contribution made to the plan by or on behalf of a
Participant that is included in the Participant's gross income in
the year in which made and that is maintained in a separate
account to which earnings and losses are allocated.
(8) "Matching Contribution" shall mean an Employer Contribution
made to this or any other defined contribution plan on behalf of
a Participant on account of a Participant's Deferral
Contribution.
(9) "Excess Aggregate Contributions" shall mean, with respect
to any Plan Year, the excess of:
(A) The aggregate Contribution Percentage Amounts taken into
account in computing the numerator of the Contribution Percentage
actually made on behalf of Highly Compensated Employees for such
Plan Year, over
(B) The maximum Contribution Percentage Amounts permitted by
the ACP test (determined by reducing contributions made on behalf
of Highly Compensated Employees in order of their Contribution
Percentages beginning with the highest of such percentages).
Such determination shall be made after first determining
Excess Deferrals pursuant to Section 4.01 and then determining
Excess Contributions pursuant to Section 4.02.
(d) Notwithstanding any other provision of the-Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if forfeitable, or if not
forfeitable, distributed no later than the last day of each Plan
Year to Participants to whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions of Participants who are subject to the
family member aggregation rules of Section 414(q)(6) of the Code
shall be allocated among the family members in proportion to the
Employee and Matching Contributions of each family member that is
combined to determine the combined ACP. If such Excess Aggregate
Contributions are distributed more than 2 l/2 months after the
last day of the Plan Year in which such excess amounts arose, a
ten (10) percent excise tax will be imposed on the employer
maintaining the plan with respect to those amounts. Excess
Aggregate Contributions shall be treated as annual additions
under the Plan.
Excess Aggregate Contributions shall be adjusted for any income
or loss up to the date of distribution. The income or loss
allocable to Excess Aggregate Contributions is (1) income or loss
allocable to the Participant's Employee Contribution account
Matching Contribution account (if any, and if all amounts therein
are not used in the ADP test) and if applicable, Qualified
Nonelective Contribution account for the Plan Year multiplied by
a fraction, the numerator of which is such Participant's Excess
Aggregate Contributions for the year and the denominator is the
Participant's account balance(s) attributable to Contribution
Percentage Amounts without regard to income or loss occurring
during such Plan Year, or (2) such other amount determined under
any reasonable method, provided that such method is used
consistently for all Participants in calculating any
distributions required under Section 4.04(d) and Sections 4.01(c)
and 4.02(d) for the Plan Year, and is used by the Plan in
allocating income or loss to the Participants' accounts. Income
or loss allocable to the period between the end of the Plan Year
and the date of distribution shall be disregarded in determining
income or loss.
Forfeitures of Excess Aggregate Contributions shall be
applied to reduce Employer contributions; the forfeitures shall
be held in the money market fund, if any, listed in Section
1.14(b) pending such application.
Excess Aggregate Contributions shall be forfeited, if
forfeitable, or distributed on a prorata basis from the
Participant's Employee Contribution Account, Matching
Contribution Account and if applicable, the Participant's
Deferral Contributions Account or Qualified Discretionary
Contribution Account or both.
4.05. Special Rules. Deferral Contributions and Qualified
Discretionary Contributions and income allocable to each are not
distributable to a Participant or his or her beneficiary or
beneficiaries, in accordance with such Participant's or
beneficiary or beneficiaries election, earlier than upon
separation from service, death, or disability, except as
otherwise provided in Section 7.10, 7.11 or 10.06. Such amounts
may also be distributed, but after March 31, 1988 in the form of
a lump sum only, upon:
(a) Termination of the Plan without establishment of
another defined contribution plan, other than an employee stock
ownership plan (as defined in Section 4975(e) or Section 409 of
the Code) or a simplified employee pension plan as defined in
Section 408(k) of the Code.
(b) The disposition by a corporation to an unrelated
corporation of substantially all of the assets (within the
meaning of Section 409(d)(2) of the Code) used in a trade or
business of such corporation if such corporation continues to
maintain this Plan after the disposition, but only with respect
to employees who continue employment with the corporation
acquiring such assets.
(c) The disposition by a corporation to an unrelated
entity of such corporation's interest in a subsidiary (within the
meaning of Section 409(d)(2) of the Code) if such corporation
continues to maintain this Plan, but only with respect to
employees who continue employment with such subsidiary.
The Participant's accrued benefit derived from Deferral
Contributions, Qualified Discretionary Contributions and Employee
Contributions (as defined in Section 4.09) is nonforfeitable.
Separate accounts for Deferral Contributions, Qualified
Discretionary Contributions, Employee Contributions and Matching
Contributions will be maintained for each Participant. Each
account will be credited with the applicable contributions and
earnings thereon.
4.06. Fixed/Discretionary Employer Contributions. If so
provided by the Employer in Sections 1.05(a)(1) or 1.05(a)(2),
for the Plan Year in which the Plan is adopted and for each Plan
Year thereafter, the Employer will make Fixed or Discretionary
Employer Contributions to the Trust in accordance with Section
1.05 to be allocated as follows:
(a) Fixed Employer Contributions shall be allocated among
eligible Participants (as determined in accordance with Section
1.05(a)(3)) in the manner specified in Section 1.05(a).
(b) Discretionary Employer Contributions shall be
allocated among eligible Participants, as determined in
accordance with Section 1.05(a)(3), as follows:
(l) If the Non-Integrated Formula is elected in Section
1.05(a)(2)(A), such contributions shall be allocated to eligible
Participants in the ratio that each Participant's Compensation
bears to the total Compensation paid to all eligible Participants
for the Plan Year; and
(2) If the Integrated Formula is elected in Section
1.05(a)(2)(B), such contributions shall be allocated in the
following steps:
(A) First, to each eligible Participant in the same ratio
that the sum of the Participant's Compensation plus Excess
Compensation for the Plan Year bears to the sum of the
Compensation plus Excess Compensation of all Participants for the
Plan Year. This allocation as a percentage of the sum of each
Participant's Compensation plus Excess Compensation shall not
exceed 5.7%.
(B) Any remaining Discretionary Employer Contribution shall
be allocated to each eligible Participant in the same ratio that
each Participant's Compensation for the Plan Year bears to the
total Compensation of all Participants for the Plan Year.
For purposes of this Section, "Excess Compensation" means
Compensation in excess of the taxable wage base, as determined
under Section 230 of the Social Security Act, in effect on the
first day of the Plan Year. Further, this Section 4.06(b)(2)
shall be modified as provided in Section 9.03 for years in which
the Plan is top heavy under Article 9.
4.07. Time of Making Employer Contributions. The Employer will
pay its contribution for each Plan Year not later than the time
prescribed by law for filing the Employer's Federal income tax
return for the fiscal (or taxable) year with or within which such
Plan Year ends (including extensions thereof). The Trustee will
have no authority to inquire into the correctness of the amounts
contributed and paid over to the Trustee, to determine whether
any contribution is payable under this Article 4, or to enforce,
by suit or otherwise, the Employer's obligation, if any, to make
a contribution to the Trustee.
4.08. Return of Employer Contributions. The Trustee shall, upon
request by the Employer, return to the Employer the amount (if
any) determined under Section 14.22. Such amount shall be
reduced by amounts attributable thereto which have been credited
to the Accounts of Participants who have since received
distributions from the Trust, except to the extent such amounts
continue to be credited to such Participants' Accounts at the
time the amount is returned to the Employer. Such amount shall
also be reduced by the losses of the Trust attributable thereto,
if and to the extent such losses exceed the gains and income
attributable thereto, but will not be increased by the gains and
income of the Trust attributable thereto, if and to the extent
such gains and income exceed the losses attributable thereto. In
no event
will the return of a contribution hereunder cause the balance of
the individual Account of any Participant to be reduced to less
than the balance which would have been credited to the Account
had the mistaken amount not been contributed.
4.09. Employee Contributions. If the Employer elected to permit
Deferral Contributions in Section 1.05(b) and if so provided by
the Employer in Section 1.05(d), each Participant may elect to
make Employee Contributions to the Plan in accordance with the
rules and procedures established by the Employer and in an amount
not less than one percent (1%) and not greater than ten percent
(10%) of such Participant's Compensation for the Plan Year. Such
contributions and all Employee Contributions for Plan Years
beginning after December 31, 1986 shall be subject to the
nondiscrimination requirements of Section 401(m) of the Code as
set forth in Section 4.04.
For purposes of this Plan, "Employee Contributions" shall
mean any voluntary non-deductible contribution made to a plan by
or on behalf of a Participant that is or was included in the
Participant's gross income in the year in which made and that is
maintained under a separate account to which applicable earnings
and losses are allocated. Excess Contributions may not be
recharacterized as Employee Contributions.
Employee Contributions shall be paid over to the Trustee not
later than thirty (30) days following the end of the month in
which the Participant makes the contribution. A Participant
shall have a fully vested 100% nonforfeitable right to his
Employee Contributions and the earnings or losses allocated
thereon. Distributions of Employee contributions shall be made
in accordance with section 7.10.
4.10. Rollover Contributions.
(a) Rollover of Eligible Rollover Distributions
(1) An Employee who is or was a distributee of an "eligible
rollover distribution" (as defined in Section 402(c)(4) of the
Code and the regulations issued thereunder) from a qualified plan
or Section 403(b) annuity may directly transfer all or any
portion of such distribution to the Trust or transfer all or any
portion of such distribution to the Trust within sixty (60) days
of payment. The transfer shall be made in the form of cash or
allowable Fund Shares only.
(2) The Employer may refuse to accept rollover contributions or
instruct the Trustee not to accept rollover contributions under
the Plan.
(b) Treatment of Rollover Amount.
(1) An account will be established for the transferring
Employee under Article 5, the rollover amount will be credited to
the account and such amount will be subject to the terms of the
Plan, including Section 8.01, except as otherwise provided in
this Section 4.10.
(2) The rollover account will at all times be fully vested in
and nonforfeitable by the Employee.
(c) Entry into Plan by Transferring Employee. Although an
amount may be transferred to the Trust Fund under this Section
4.10 by an Employee who has not yet become a Participant in
accordance with Article 4, and such amount is subject to the
terms of the Plan as described in paragraph (b) above, the
Employee will not become a Participant entitled to share in
Employer contributions until he has satisfied such requirements.
(d) Monitoring of Rollovers.
(1) The Administrator shall develop such procedures and require
such information from transferring Employees as it deems
necessary to insure that amounts transferred under this Section
4.10 meet the requirements for tax-free rollovers established by
such Section and by Section 402(c) of the Code. No such amount
may be transferred until approved by the Administrator.
(2) If a transfer made under this Section 4.10 is later
determined by the Administrator not to have met the requirements
of this Section or of the Code or Treasury regulations, the
Trustee shall, within a reasonable time after such determination
is made, and on instructions from the Administrator, distribute
to the Employee the amounts then held in the Trust attributable
to the transferred amount.
4.11. Deductible Voluntary Employee Contributions. The
Administrator will not accept deductible employee contributions
which are made for a taxable year beginning after December 31,
1986. Contributions made prior to that date will be maintained
in a separate account which will be nonforfeitable at all times
and which will share in the gains and losses of the trust in the
same manner as described in Section 5.02. No part of the
deductible voluntary contribution account will be used to
purchase life insurance. Subject to Article VIII, the
Participant may withdraw any part of the deductible voluntary
contribution account upon request.
4.12. Additional Rules for Paired Plans. If the Employer has
adopted a qualified plan under Fidelity Basic Plan Document No.
09 which is to be considered as a paired plan with this Plan, the
elections in Section 1.03 must be identical to the Employer's
corresponding elections for the other plan. When the paired
plans are top-heavy or are deemed to be top-heavy as provided in
Section 9.01, the Plan paired with this Plan will provide a
minimum contribution to each non-key Employee which is equal to 3
percent (or such other percent elected by the Employer in Section
1.12(c)) of such Employee's Compensation. Notwithstanding the
preceding sentence, the minimum contribution shall be provided by
this Plan if contributions under the other Plan paired with this
Plan are frozen.
Article 5. Participants' Accounts.
5.01. Individual Accounts. The Administrator will establish and
maintain an Account for each Participant which will reflect
Employer and Employee Contributions made on behalf of the
Participant and earnings, expenses, gains and losses attributable
thereto, and 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.
5.02. Valuation of Accounts. Participant Accounts will be
valued at their fair market value at least annually as of a date
specified by the Administrator in accordance with a method
consistently followed and uniformly applied, and on such date
earnings, expenses, gains and losses on investments made with
amounts in each Participant's Account will be allocated to such
Account. Participants will be furnished statements of their
Account values at least once each Plan Year.
5.03. Code Section 415 Limitations. Notwithstanding any other
provisions of the Plan:
Subsections (a)(1) through (a)(4)--(These subsections apply
to Employers who do not maintain any qualified plan including a
Welfare Benefit Fund, an Individual Medical Account, or a
simplified emplovee pension in addition to this Plan.)
(a)(1) If the Participant does not participate in, and has never
participated in any other qualified plan, Welfare Benefit Fund,
Individual Medical Account, or a simplified employee pension, as
defined in section 408(k) of the Code, maintained by the
Employer, which provides an annual addition as defined in Section
5.03(e)(1), the amount of Annual Additions to a Participant's
Account for a Limitation Year shall not exceed the lesser of the
Maximum Permissible Amount or any other limitation contained in
this Plan. If the Employer contribution that would otherwise be
contributed or allocated to the Participant's account would cause
the annual additions for the limitation year to exceed the
maximum permissible amount, the amount contributed or allocated
will be reduced so that the annual additions fox the limitation
year will equal the maximum permissible amount.
(a)(2) Prior to the determination of the Participant's actual
Compensation for a Limitation Year, the Maximum Permissible
Amount may be determined on the basis of a reasonable estimation
of the Participant's compensation for such Limitation Year,
uniformly determined for all Participants similarly situated.
Any Employer contributions based on estimated annual compensation
shall be reduced by any Excess Amounts carried over from prior
years.
(a)(3) As soon as is administratively feasible after the end of
the Limitation Year, the Maximum Permissible Amount for such
Limitation Year shall be determined on the basis of the
Participant's actual Compensation for such Limitation Year.
(a)(4) If, pursuant to subsection (a)(3) or as a result of the
allocation of forfeitures, or a reasonable error in determining
the total Elective Deferrals there is an Excess Amount with
respect to a Participant for a Limitation Year, such Excess
Amount shall be disposed of as follows:
(A) Any nondeductible voluntary employee contributions
("employee contributions") or Elective Deferrals, to the extent
they would reduce the Excess Amount, will be returned to the
Participant. Any gains attributable to returned employee
contributions will also be returned or will be treated as
additional employee contributions for the Limitation Year in
which the employee contributions were made.
(B) If after the application of paragraph (A) an Excess
amount still exists and the Participant is in the service of the
Employer which is covered by the Plan at the end of the
Limitation Year, then such Excess Amount shall be reapplied to
reduce future Employer contributions under this Plan for the next
Limitation Year (and for each succeeding year, as necessary) for
such Participant, so that in each such Year the sum of actual
Employer contributions plus the reapplied amount shall equal the
amount of Employer contributions which would otherwise be made to
such Participant Account.
(C) If after the application of paragraph (A) an Excess
Amount still exists and the Participant is not in the service of
the Employer which is covered by the Plan at the end of a
Limitation Year, then such Excess Amount will be held unallocated
in a suspense account. The suspense account will be applied to
reduce future Employer contributions for all remaining
Participants in the next Limitation Year and each succeeding
Limitation Year if necessary.
(D) If a suspense account is in existence at any time
during the Limitation Year pursuant to this subsection, it will
not participate in the allocation of the Trust Fund's investment
gains and losses. All amount's in the suspense account must be
allocated to the Accounts of Participants before any Employer
contribution may be made for the Limitation Year. Except as
provided in paragraph (A), Excess Amounts may not be distributed
to Participants or former Participants.
Subsections (b)(1) through (b)(6)--(These subsections apply
to Employers who, in addition to this Plan, maintain one or more
plans, all of which are qualified Master or Prototype defined
contribution Plans, any Welfare Benefit Fund, any Individual
Medical Account, or any simplified employee pension.)
(b)(l) If, in addition to this Plan, the Participant is covered
under any other qualified defined contribution plans (all of
which are qualified Master or Prototype Plans), Welfare Benefit
Funds, Individual Medical Accounts, or simplified employee
pension Plans, maintained by the Employer, that provide an annual
addition as defined in Section 5.03(e)(1), the amount of Annual
Additions to a Participant's Account for a Limitation Year, shall
not exceed the lesser of
(A) the Maximum Permissible Amount, reduced by the sum of
any Annual Additions to the Participant's accounts for the same
Limitation Year under such other qualified Master or Prototype
defined contribution plans, and Welfare Benefit Funds, Individual
Medical Accounts, and simplified employee pensions, or
(B) any other limitation contained in this Plan.
If the annual additions with respect to the Participant under
other qualified Master or Prototype defined contribution plans
Welfare Benefit Funds, Individual Medical Accounts and simplified
employee pensions maintained by the Employer are less than the
maximum permissible amount and the Employer contribution that
would otherwise be contributed or allocated to the Participant's
Account under this plan would cause the annual additions for the
limitation year to exceed this limitation, the amount contributed
or allocated will be reduced so that the annual additions under
all such plans and funds for the limitation year will equal the
maximum permissible amount. If the annual additions with respect
to the Participant under such other qualified Master or Prototype
defined contribution plans, Welfare Benefit Funds, Individual
Medical Accounts and simplified employee pensions in the
aggregate are equal to or greater than the maximum permissible
amount, no amount will be contributed or allocated to the
Participant's Account under this plan for the limitation year.
(b)(2) Prior to the determination of the Participant's actual
Compensation for the Limitation Year, the amounts referred to in
(b)(l)(A) above may be determined on the basis of a reasonable
estimation of the Participant's Compensation for such Limitation
Year, uniformly determined for all Participants similarly
situated. Any Employer contribution based on estimated annual
Compensation shall be reduced by any Excess Amounts carried over
from prior years.
(b)(3) As soon as is administratively feasible after the end of
the Limitation Year, the amounts referred to in (b)(1)(A) shall
be determined on the basis of the Participant's actual
Compensation for such Limitation Year.
(b)(4) If a Participant's Annual Additions under this Plan and
all such other plans result in an Excess Amount, such Excess
Amount shall be deemed to consist of the Annual Additions last
allocated, except that Annual Additions attributable to a
simplified employee pension will be deemed to have been allocated
first, followed by Annual Additions to a Welfare Benefit Fund or
Individual Medical Account regardless of the actual allocation
date.
(b)(5) If an Excess Amount was allocated to a Participant on an
allocation date of this Plan which coincides with an allocation
date of another plan, the Excess Amount attributed to this Plan
will be the product of:
(A) the total Excess Amount allocated as of such date (including
any amount which would have been allocated but for the
limitations of Section 415 of the Code), times
(B) the ratio of (i) the Annual Additions allocated to the
Participant as of such date under this Plan, divided by (ii) the
Annual Additions allocated as of such date under all qualified
defined contribution plans (determined without regard to the
limitations of Section 415 of the Code).
(b)(6) Any Excess Amounts attributed to this Plan shall be
disposed of as provided in subsection (a)(4).
Subsection (c)--(This subsection applies only to Employers
who, in addition to this Plan, maintain one or more qualified
plans which are qualified defined contribution plans other than
Master or Prototype Plans.)
(c) If the Employer also maintains another plan which is
qualified defined contribution plan other than a Master or
Prototype Plan, Annual Additions allocated under this Plan on
behalf of any Participant shall be limited in accordance with the
provisions of (b)(l) through (b)(6), as though the other plan
were a Master or Prototype Plan, unless the Employer provides
other limitations in the Adoption Agreement.
Subsection (d)--(This subsection applies only to Employers
who, in addition to this Plan, maintain or at any time maintained
a qualified defined benefit plan.)
(d) If the Employer maintains, or at any time maintained, a
qualified defined benefit plan, the sum of any Participant's
Defined Benefit Fraction and Defined Contribution Fraction shall
not exceed the combined plan limitation of 1.0 in any Limitation
Year. The combined plan limitation will be met as provided by
the Employer in the Adoption Agreement.
Subsections (e)(l) through (e)(9)--(Definitions.)
(e)(1) "Annual Additions" means the sum of the following amounts
credited to a Participant for a Limitation Year:
(A) all Employer contributions,
(B) all Employee contributions,
(C) all forfeitures,
(D) Amounts allocated, after March 31, 1984, to an
Individual Medical Account which is part of a pension or annuity
plan maintained by the Employer are treated as Annual Additions
to a defined contribution plan. Also, amounts derived from
contributions paid or accrued after December 31, 1985, in taxable
years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate
account of a key employee, as defined in Section 419A(d)(3) of
the Code, under a Welfare Benefit Fund maintained by the Employer
are treated as Annual Additions to a defined contribution plan,
and
(E) Allocations under a simplified employee pension.
For purposes of this Section 5.03, amounts reapplied to
reduce Employer contributions under subsection (a)(4) shall also
be included as Annual Additions.
(e)(2) "Compensation" means 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 employer's trade or
business) for which the employer is required to furnish the
employee a written statement under Sections 6041(d) and
6051(a)(3) of the Code. Compensation must be determined without
regard to any rules under Section 3401(a) 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.)
For any Self-Employed Individual compensation will mean Earned
Income.
For limitation years beginning after December 31, 1991, for
purposes of applying the limitations of this article,
compensation for a limitation year is the compensation actually
paid or made available during such limitation year.
(e)(3) "Defined Benefit Fraction" means a fraction, the
numerator of which is the sum of the Participant's annual
benefits (adjusted to an actuarially equivalent straight life
annuity if such benefit is expressed in a form other than a
straight life annuity or qualified joint and survivor annuity)
under all the defined benefit plans (whether or not terminated)
maintained by the Employer, each such annual benefit computed on
the assumptions that the Participant will remain in employment
until the normal retirement age under each such plan (or the
Participant's current age, if later) and that all other factors
used to determine benefits under such plan will remain constant
for all future Limitation Years, and the denominator of which is
the lesser of 125 percent of the dollar limitation determined for
the Limitation Year under Sections 415(b)(1)(A) and 415(d) of the
Code or 140 percent of the Participant's average Compensation for
the 3 highest consecutive calendar years of service during which
the Participant was active in each such plan, including any
adjustments under Section 415(b) of the Code. However, if the
Participant was a participant as of the first day of the first
Limitation Year beginning after December 31, 1986 in one or more
defined benefit plans maintained by the Employer which were in
existence on May 6, 1986 then the denominator of the Defined
Benefit Fraction shall not be less than 125 percent of the
Participant's total accrued benefit as of the close of the last
Limitation Year beginning before January 1, 1987, disregarding
any changes in the terms and conditions of the plan after May 5,
1986, under all such defined benefit plans as met individually
and in the aggregate, the requirements of Section 415 of the Code
for all Limitation Years beginning before January 1, 1987.
(e)(4) "Defined Contribution Fraction" means a fraction, the
numerator of which is the sum for the current and all prior
Limitation Years of (A) all Annual Additions (if any) to the
Participant's accounts under each defined contribution plan
(whether or not terminated) maintained by the Employer, and (B)
all Annual Additions attributable to the Participant's
nondeductible employee contributions to all defined benefit plans
(whether or not terminated) maintained by the Employer, and the
Participant's Annual Additions attributable to all Welfare
Benefit Funds, Individual Medical Accounts, and simplified
employee pensions, maintained by the Employer, and the
denominator of which is the sum of the maximum aggregate amounts
for the current and all prior Limitation Years during which the
Participant was an Employee (regardless of whether the Employer
maintained a defined contribution plan in any such year).
The maximum aggregate amount in any Limitation Year is the
lesser of 125 percent of the dollar limitation in effect under
Section 415(c)(1)(A) of the Code for each such year or 35 percent
of the Participant's Compensation for each such year.
If the Participant was a participant as of the first day of
the first Limitation Year beginning after December 31, 1986 in
one or more defined contribution plans maintained by the Employer
which were in existence on May 6, 1986 then the numerator of the
Defined Contribution Fraction shall be adjusted if the sum of
this fraction and the Defined Benefit Fraction would otherwise
exceed 1.0 under the terms of this Plan. Under the adjustment an
amount equal to the product of (i) the excess of the sum of the
fractions over 1.0 times (ii) the denominator of this fraction
will be permanently subtracted from the numerator of this
fraction. The adjustment is calculated using the fractions as
they would be computed as of the end of the last Limitation Year
beginning before January 1, 1987, and disregarding any changes in
the terms and conditions of the plan made after May 6, 1986, but
using the Section 415 limitation applicable to the first
Limitation Year beginning on or after January 1, 1987.
The annual addition for any limitation year beginning before
January 1, 1987 shall not be recomputed to treat all employee
contributions as annual additions.
(e)(5) "Employer" means the Employer and any Related Employer
that adopts this Plan. In the case of a group of employers which
constitutes a controlled group of corporations (as defined in
Section 414(b) of the Code as modified by Section 415(h)) or
which constitutes trades or businesses (whether or not
incorporated) which are under common control (as defined in
Section 414(c) of the Code as modified by Section 415(h) of the
Code) or which constitutes an affiliated service group (as
defined in Section 414(m) of the Code) and any other entity
required to be aggregated with the Employer pursuant to
regulations issued under Section 414(o) of the Code, all such
employers shall be considered a single employer for purposes of
applying the limitations of this Section 5.03.
(e)(6) "Excess Amount" means the excess of the Participant's
Annual Additions for the Limitation Year over the Maximum
Permissible Amount.
(e)(7) "Individual Medical Account" means an individual medical
account as defined in Section 415(1)(2) of the Code.
(e)(8) "Limitation Year" means the Plan Year. All qualified
plans of the Employer must use the same Limitation Year. If the
Limitation Year is amended to a different 12-consecutive month
period, the new Limitation Year must begin on a date within the
Limitation Year in which the amendment is made.
(e)(9) "Master or Prototype Plan" means a plan the form of which
is the subject of a favorable opinion letter from the Internal
Revenue Service.
(e)(10) "Maximum Permissible Amount" means for a Limitation Year
with respect to any Participant the lesser of (i) $30,000 or, if
greater, 25 percent of the dollar limitation set forth in Section
415(b)(1) of the Code, as in effect for the Limitation Year, or
(ii) 25 percent of the Participant's Compensation for the
Limitation Year. If a short Limitation Year is created because
of an amendment changing the Limitation Year to a different 12-consecutive
month period, the Maximum Permissible Amount will not
exceed the limitation in (e)(10)(i) multiplied by a fraction
whose numerator is the number of months in the short Limitation
Year and whose denominator is 12.
The compensation limitation referred to in subsection
(e)(10)(ii) shall not apply to any contribution for medical
benefits within the meaning of Section 401(h) or Section
419A(f)(2) of the Code after separation from service which is
otherwise treated as an Annual Addition under Section 419A(d)(2)
or Section 415(1)(1) of the Code.
(e)(11) "Welfare Benefit Fund" means a welfare benefit fund as
defined in Section 419(e) of the Code.
Article 6. Investment of Contributions.
6.01. Manner of Investment. All contributions made to the
Accounts of Participants shall be held for investment by the
Trustee. The Accounts of Participants shall be invested and
reinvested only in eligible investments selected by the Employer
in Section 1.14(b), subject to Section 14.10.
6.02. Investment Decisions. Investments shall be directed by
the Employer or by each Participant or both, in accordance with
the Employer's election in Section 1.14(a). Pursuant to Section
14.04, the Trustee shall have no discretion or authority with
respect to the investment of the Trust Fund.
(a) With respect to those Participant Accounts for which
Employer investment direction is elected, the Employer has the
right to direct the Trustee in writing with respect to the
investment and reinvestment of assets comprising the Trust Fund
in the Fidelity Fund(s) designated in Section 1.14(b) and as
allowed by the Trustee.
(b) If Participant investment direction is elected, each
Participant shall direct the investment of his Account among the
Fidelity Funds listed in Section 1.14(b). The Participant shall
file initial investment instructions with the Administrator, on
such form as the Administrator may provide, selecting the Funds
in which amounts credited to his Account will be invested.
(1) Except as provided in this Section 6.02, only authorized
Plan contacts and the Participant shall have access to a
Participant's account. While any balance remains in the Account
of a Participant after his death, the Beneficiary of the
Participant shall make decisions as to the investment of the
Account as though the Beneficiary were the Participant. To the
extent required by a qualified domestic relations order as
defined in Section 414(p) of the Code, an alternate payee shall
make investment decisions with respect to a Participant's Account
as though such alternate payee were the Participant.
(2) If the Trustee receives any contribution under the Plan as
to which investment instructions have not been provided, the
Trustee shall promptly notify the Administrator and the
Administrator shall take steps to elicit instructions from the
Participant. The Trustee shall credit any such contribution to
the Participant's Account and such amount shall be invested in
the Fidelity Fund selected by the Employer for such purposes or,
absent Employer selection, in the most conservative Fidelity Fund
listed in Section 1.14(b), until investment instructions have
been received by the Trustee.
(c) All dividends, interest, gains and distributions of any
nature received in respect of Fund Shares shall be reinvested in
additional shares of that Fidelity Fund.
(d) Expenses attributable to the acquisition of investments
shall be charged to the Account of the Participant for which such
investment is made.
6.03. Participant Directions to Trustee. All Participant
initial investment instructions filed with the Administrator
pursuant to the provisions of Section 6.02 shall be promptly
transmitted by the Administrator to the Trustee. A Participant
shall transmit subsequent investment instructions directly to the
Trustee by means of the telephone exchange system maintained by
the Trustee for such purposes. The method and frequency for
change of investments will be determined under the (1) rules
applicable to the investments selected by the Employer in Section
1.14(b) and (2) the additional rules of the Employer, if any,
limiting the frequency of investment changes, which are included
in a separate written administrative procedure adopted by the
Employer and accepted by the Trustee. The Trustee shall have no
duty to inquire into the investment decisions of a Participant or
to advise him regarding the purchase, retention or sale of assets
credited to his Account.
Article 7. Right to Benefits.
7.01. Normal or Early Retirement. Each Participant who attains
his Normal Retirement Age or, if so provided by the Employer in
Section 1.06(b), Early Retirement Age will have a 100 percent
nonforfeitable interest in his Account regardless of any vesting
schedule elected in Section 1.07. If a Participant retires upon
the attainment of Normal or Early Retirement Age, such retirement
is referred to as a normal retirement. Upon his normal
retirement the balance of the Participant's Account, plus any
amounts thereafter credited to his Account, subject to the
provisions of Section 7.08, will be distributed to him in
accordance with Article 8.
If a Participant separates from service before satisfying
the age requirements for early retirement, but has satisfied the
service requirement, the Participant will be entitled to elect an
early retirement distribution upon satisfaction of such age
requirement.
7.02. Late Retirement. If a Participant continues in the
service of the Employer after attainment of Normal Retirement
Age, he will continue to have a 100 percent nonforfeitable
interest in his Account and will continue to participate in the
Plan until the date he establishes with the Employer for his late
retirement. Until he retires, he has a continuing election to
receive all or any portion of his Account. Upon the earlier of
his late retirement or the distribution date required under
Section 8.08, the balance of his Account, plus any amounts
thereafter credited to his Account, subject to the provisions of
Section 7.08, will be distributed to him in accordance with
Article 8 below.
7.03. Disability Retirement. If so provided by the Employer in
Section 1.06(c), a Participant who becomes disabled will have a
100 percent nonforfeitable interest in his Account, the balance
of which Account, plus any amounts thereafter credited to his
Account, subject to the provisions of Section 7.08, will be
distributed to him in accordance with Article 8 below. A
Participant is considered disabled if he cannot engage in any
substantial, gainful activity because of a medically determinable
physical or mental impairment likely to result in death or to be
of a continuous period of not less than 12 months, and terminates
his employment with the employer. Such termination of employment
is referred to as a disability retirement. Determinations with
respect to disability shall be made by the Administrator who may
rely on the criteria set forth in Section 1.06(c) as evidence
that the Participant is disabled.
7.04. Death. Subject, if applicable, to Section 8.04, if a
Participant dies before the distribution of his Account has
commenced, or before such distribution has been completed, his
Account shall become 100 percent vested 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 7.08. 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 be as indicated on
the designation form. In the case of a married Participant the
Participant's spouse shall be deemed to be the designated
Beneficiary unless the Participant's spouse has consented to
another designation in the manner described in Section 8.03(d).
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
in lump sum to the deceased Beneficiary's estate.
7.05. Other Termination of Employment. If a Participant
terminates his employment for any reason other than death or
normal, late, or disability retirement, he will be entitled to a
termination benefit equal to (i) the vested percentage(s) of the
value of the Matching and/or Fixed/Discretionary 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, Employee, Qualified Discretionary and
Rollover Contributions to his Account as adjusted for income,
expense, gain or loss. The amount payable under this Section
7.05 will be subject to the provisions of Section 7.08 and will
be distributed in accordance with Article 8 below.
7.06. 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 Employer 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 7.07 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 7.05; 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 7.07 below, any balance in the Participant's
separate account will remain fully vested and nonforfeitable.
7.07. 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
7.05 will be forfeited by him upon the complete distribution to
him of the vested portion of his Account, if any, subject to the
possibility of reinstatement as described in the following
paragraph. For purposes of this paragraph, if the value of an
Employee's vested account balance is zero, the Employee 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 next payable under the Plan (or administrative expenses
of the Plan); the forfeitures shall be held in a money market
fund pending such application.
If a Participant forfeits any portion of his Account under
the preceding paragraph but does again become an Employee after
such date, then the amount so forfeited, without any adjustment
for the earnings, expenses, or losses or gains of the assets
credited to his Account since the date forfeited, will be
recredited to his Account (or to a separate account as described
in Section 7.06, if applicable) but only if he repays to the Plan
before the earlier of five years after the date of his
reemployment or the date he incurs 5 consecutive 1-year breaks in
service following the date of the distribution the amount
previously distributed to him, without interest, under Section
7.05. If an Employee is deemed to receive a distribution
pursuant to this Section 7.07, and the Employee resumes
employment before 5 consecutive l-year breaks in service, the
Employee shall be deemed to have repaid such distribution on the
date of his reemployment. Upon such an actual or deemed
repayment, the provisions of the Plan (including Section 7.06)
will thereafter apply as if no forfeiture had occurred. The
amount to be recredited pursuant to this paragraph will be
derived first from the forfeitures, if any, which as of the date
of recrediting have yet to be applied as provided in the
preceding paragraph and, to the extent such forfeitures are
insufficient, from a special Employer contribution to be made by
the Employer.
If a Participant elects not to receive the nonforfeitable
portion of his Account following his termination of employment,
the non-vested portion of his Account shall be forfeited after
the Participant has incurred five consecutive 1-year breaks in
service as defined in Section 2.01(a)(33).
No forfeitures will occur solely as a result of a
Participant's withdrawal of Employee contributions.
7.08. Adjustment for Investment Experience. If any distribution
under this Article 7 is not made in a single payment, the amount
retained by the Trustee 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 invested and any
expenses properly charged under the Plan and Trust to such
amounts.
7.09. Participant Loans. If permitted under Section 1.09, the
Administrator shall allow Participants to apply for a loan from
the Plan, subject to the following:
(a) Loan Application. All Plan loans shall be administered by
the Administrator. Applications for loans shall be made to the
Administrator on forms available from the Administrator. Loans
shall be made available to all Participants on a reasonably
equivalent basis. For this purpose, the term "Participant" means
any Participant or Beneficiary, including an alternate payee
under a qualified domestic relations order, as defined in Section
414(p) of the Code, who is a party-in-interest (as determined
under ERISA Section 3(14)) with respect to the Plan except no
loans will be made to: (i) an Employee who makes a rollover
contribution in accordance with Section 4.10 who has not
satisfied the requirements of Section 3.01, or (ii) a
shareholder-employee or Owner-Employee. For purposes of this
requirement, a shareholder-employee means an employee or officer
of an electing small business (Subchapter S) corporation who owns
(or is considered as owning within the meaning of Section
318(a)(1) of the Code), on any day during the taxable year of
such corporation, more than 5% of the outstanding stock of the
corporation.
A Participant with an existing 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 each Plan Year.
(b) Limitation of Loan Amount/Purpose of Loan. Loans shall not
be made available to Highly Compensated Employees in an amount
greater than the amount made available to other Employees. No
loan to any Participant or Beneficiary can be made to the extent
that such loan when added to the outstanding balance of all other
loans to the Participant or Beneficiary would exceed the lesser
of (a) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans during the one year period ending on
the day before the loan is made over the outstanding balance of
loans from the plan on the date the loan is made, or (b) one-half
the present value of the nonforfeitable Account of the
Participant. For the purpose of the above limitation, all loans
from all plans of the Employer and Related Employers are
aggregated. A Participant may not request a loan for Less than
$1,000. The Employer may provide that loans only be made from
certain contribution sources within Participant Account(s) by
notifying the Trustee in writing of the restricted source.
Loans may be made for any purpose or if elected by the
Employer in Section 1.09(a), on account of hardship only. A loan
will be considered to be made on account of hardship only if made
on account of an immediate and heavy financial need described in
Section 7.10(b)(1).
(c) Terms of Loan. All loans shall bear a reasonable rate of
interest as determined by the Administrator based on the
prevailing interest rates charged by persons in the business of
lending money for loans which would be made under similar
circumstances. The determination of a reasonable rate of
interest must be based on appropriate regional factors unless the
Plan is administered on national basis in which case the
Administrator may establish a uniform reasonable rate of interest
applicable to all regions.
All loans shall by their terms require that repayment
(principal and interest) be amortized in level payments, not less
than quarterly, over a period not extending beyond five years
from the date of the loan unless such loan is for the purchase of
a Participant's primary residence, in which case the repayment
period may not extend beyond ten years from the date of the loan.
A Participant may prepay the outstanding loan balance prior to
maturity without penalty.
(d) Security. Loans must be secured by the Participant's
Accounts not to exceed 50 percent of the Participant's vested
Account. A Participant must obtain the consent of his or her
spouse, if any, to use a Participant Account as security for the
loan, if the provisions of Section 8.03 apply to the Participant.
Spousal consent shall be obtained no earlier than the beginning
of the 90-day period that ends on the date on which the loan is
to be so secured. The consent must be in writing, must
acknowledge the effect of the loan, and must be witnessed by a
Plan representative or notary public. Such consent shall
thereafter be binding with respect to the consenting spouse or
any subsequent spouse with respect to that loan.
(e) Default. The Administrator shall treat a loan in default
if:
(1) any scheduled repayment remains unpaid more than 90 days;
(2) there is an outstanding principal balance existing on a loan
after the last scheduled repayment date.
Upon default or termination of employment, the entire
outstanding principal and accrued interest shall be immediately
due and payable. If a distributable event (as defined by the
Code) has occurred, the Administrator shall direct the Trustee to
foreclose on the promissory note and offset the Participant's
vested Account by the outstanding balance of the loan. If a
distributable event has not occurred, the Administrator shall
direct the Trustee to foreclose on the promissory note and offset
the Participant's vested Account as soon as a distributable event
occurs.
(f) Pre-existing loans. The provision in paragraph (a) of this
Section 7.09 limiting a Participant to one outstanding loan shall
not apply to loans made before the Employer adopted this
prototype plan document. A Participant may not apply for a new
loan until all outstanding loans made before the Employer adopted
this prototype plan have been paid in full. The Trustee may
accept any loans made before the Employer adopted this prototype
plan document except such loans which require the Trustee to hold
as security for the loan property other than the Participant's
vested Account.
As of the effective date of amendment of this Plan in
Section 1.01(g)(2), the Trustee shall have the right to
reamortize the outstanding principal balance of any Participant
loan that is delinquent. Such reamortization shall be based upon
the remaining life of the loan and the original maturity date may
not be extended.
Notwithstanding any other provision of this Plan, the
portion of the Participant's vested Account used as a security
interest held by the plan by reason of a loan outstanding to the
Participant shall be taken into account for purposes of
determining the amount of the Account payable at the time of
death or distribution, but only if the reduction is used as
repayment of the loan. If less than 100% of the Participant's
vested Account (determined without regard to the preceding
sentence) is payable to the surviving spouse, then the Account
shall be adjusted by first reducing the vested Account by the
amount of the security used as repayment of the loan, and then
determining the benefit payable to the surviving spouse.
No loan to any Participant or Beneficiary can be made to the
extent that such loan when added to the outstanding balance of
all other loans to the Participant or Beneficiary would exceed
the lesser of (a) $50,000 reduced by the excess (if any) of the
highest outstanding balance of loans during the one year period
ending on the day before the loan is made over the outstanding
balance of loans from the plan on the date the loan is made, or
(b) one-half the present value of the nonforfeitable Account of
the Participant. For the purpose of the above limitation, all
loans from all plans of the Employer and Related Employers are
aggregated.
7.10. In-Service/Hardship Withdrawals. Subject to the
provisions of Article 8, a Participant shall not be permitted to
withdraw any Employer or Employee Contributions (and earnings
thereon) prior to retirement or termination of employment, except
as follows:
(a) Age 59 1/2. If permitted under Section 1.11(b), a
Participant who has attained. the age of 59 1/2 is permitted to
withdraw upon request all or any portion the Accounts specified
by the Employer in 1.11(b).
(b) Hardship. If permitted under Section 1.10, a
Participant may apply to the Administrator to withdraw some or
all of his Deferral Contributions (and earnings thereon accrued
as of December 31, 1988) and, if applicable, Rollover
Contributions and such other amounts allowed by a predecessor
plan, if such withdrawal is made on account of a hardship. For
purposes of this Section, a distribution is made on account of
hardship if made on account of an immediate and heavy financial
need of the Employee where such Employee lacks other available
resources. Determinations with respect to hardship shall be made
by the Administrator and shall be conclusive for purposes of the
Plan, and shall be based on the following special rules:
(1) The following are the only financial needs considered
immediate and heavy: expenses incurred or necessary for medical
care (within the meaning of Section 213(d) of the Code) of the
Employee, the Employee's spouse, children, or dependents; the
purchase (excluding mortgage payments) of a principal residence
for the Employee; payment of tuition and related educational fees
for the next twelve (12) months of post-secondary education for
the Employee, the Employee's spouse, children or dependents; or
the need to prevent the eviction of the Employee from, or a
foreclosure on the mortgage of, the Employee's principal
residence.
(2) A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if:
(i) The Employee has obtained all distributions, other than the
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(ii) The Employee suspends Deferral Contributions and Employee
Contributions to the Plan for the 12-month period following the
date of his hardship distribution. The suspension must also
apply to all elective contributions and employee contributions to
all other qualified plans and non-qualified plans maintained by
the Employer, other than any mandatory employer contribution
portion of a defined benefit plan, including stock option, stock
purchase and other similar plans, but not including health and
welfare benefit plans (other than the cash or deferred
arrangement portion of a cafeteria plan),
(iii) The distribution is not in excess of the amount of an
immediate and heavy financial need (including amounts necessary
to pay any Federal, state or local income taxes or penalties
reasonably anticipated to result from the distribution); and
(iv) The Employee agrees to limit Deferral Contributions
(elective contributions)to the Plan and any other qualified plan
maintained by the Employer for the Employee's taxable year
immediately following the taxable year of the hardship
distribution to the applicable limit under Section 402(g) of the
Code for such taxable year less the amount of such Employee's
Deferral Contributions for the taxable year of the hardship
distribution.
(3) A Participant must obtain the consent of his or her spouse,
if any, to obtain a hardship withdrawal, if the provisions of
Section 8.03 apply to the Participant.
(c) Employee Contributions. A Participant may elect to
withdraw, in cash, up to one hundred percent of the amount then
credited to his Employee Contribution Account. Such withdrawals
shall be limited to one (1) per Plan Year unless this prototype
plan document is an amendment of a prior plan document, in which
case the rules and restrictions governing employee contribution
withdrawals, if any, are incorporated herein by reference.
7.11. Prior Plan In-Service Distribution Rules. If designated
by the Employer in Section 1.11(b), a Participant shall be
entitled to withdraw at anytime prior to his termination of
employment, subject to the provisions of Article 8 and the prior
plan, any vested Employer Contributions maintained in a
Participant's Account for the specified period of time.
Article 8. Distribution of Benefits Payable after Termination of
Service .
8.01. Distribution of Benefits to Participants and
Beneficiaries.
(a) Distributions from the Trust 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 1.11, under a
systematic withdrawal plan (installment(s)) upon retirement,
death, disability, or other termination of employment, unless
another form of distribution is required or permitted in
accordance with paragraph (d) of this Section 8.01 or Sections
1.11(c), 8.02, 8.03, 8.04 or 11.02. A distribution may be made
in Fund Shares, at the election of the Participant, pursuant to
the qualifying rollover of such distribution to a Fidelity
Investments individual retirement account.
(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 beyond the life expectancy of the Participant or the joint
life expectancies of the Participant and his Beneficiary, or, if
the Participant dies prior to the commencement of his benefits
the life expectancy of the Participant's Beneficiary, as further
described in Section 8.04.
(c) Notwithstanding the provisions of Section 8.01(b) above, if
a Participant's Account is, and at the time of any prior
distribution(s) was, $3,500 or less, the balance of such Account
shall be distributed in a lump sum as soon as practicable
following retirement, disability, death or other termination of
employment.
(d) This paragraph (d) applies to distributions made on or
after January 1, 1993. Notwithstanding any provision of the Plan
to the contrary that would otherwise limit a distributee's
election under this Article 8, a distributee may elect, at the
time and in the manner prescribed by the Administrator, to have
any portion of an eligible rollover distribution paid directly to
an eligible retirement plan specified by the distributee in a
direct rollover. The following definitions shall apply for
purposes of this paragraph (d):
(1) Eligible rollover distribution: An eligible rollover
distribution is any distribution of all or any portion of the
balance to the credit of the distributee, except that an eligible
rollover distribution does not include: any distribution that is
one of a series of substantially equal periodic payments (not
less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's 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 is not includable in gross income (determined
without regard to the exclusion for net unrealized appreciation
with respect to employer securities).
(2) Eligible retirement plan: An eligible retirement plan is
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 the distributee's eligible rollover
distribution. However, in the case of an eligible rollover
distribution to a surviving spouse, an eligible retirement plan
is an individual retirement account or individual retirement
annuity.
(3) Distributee: A distributee includes an Employee or former
Employee. In addition, the Employee's or former Employee's
surviving spouse and the Employee's or former Employee's spouse
or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in Section 414(p) of the
Code, are distributees with regard to the interest of the spouse
or former spouse.
(4) Direct rollover: A direct rollover is a payment by the
plan to the eligible retirement plan specified by the
distributee.
8.02. Annuity Distributions. If so provided in Section
1.11(C), a Participant may elect distributions made in whole or
in part in the form of an annuity contract subject to the
provisions of Section 8.03.
(a) An annuity contract distributed under the Plan must be
purchased from an insurance company and must be nontransferable.
The terms of an annuity contract shall comply with the
requirements of the Plan and distributions under such contract
shall be made in accordance with Section 401(a)(9) of the Code
and the regulations thereunder.
(b) The payment period of an annuity contract distributed to
the Participant pursuant to this Section may be as long as the
Participant lives. If the annuity is payable to the Participant
and his spouse or designated Beneficiary, the payment period of
an annuity contract may be for as long as either the Participant
or his spouse or designated Beneficiary lives. Such an annuity
may provide for an annuity certain feature for a period not
exceeding the life expectancy of the Participant. If the annuity
is payable to the Participant and his spouse such period may not
exceed the joint life and last survivor expectancy of the
Participant and his spouse, or, if the annuity is payable to the
Participant and a designated Beneficiary, the joint life and last
survivor expectancy of the Participant and such Beneficiary. If
the Participant dies prior to the commencement of his benefits,
the payment period of an annuity contract distributed to the
Beneficiary of the Participant may be as long as the
Participant's Beneficiary lives, and may provide for an annuity
certain feature for a period not exceeding the life expectancy of
the Beneficiary. Any annuity contract distributed under the Plan
must provide for nonincreasing payments.
8.03. Joint and Survivor Annuities/Preretirement Survivor
Annuities.
(a) Application. The provisions of this Section supersede any
conflicting provisions of the Plan; provided, however, that
paragraph (b) of this Section shall not apply if the
Participant's Account does not exceed or at the time of any prior
distribution did not exceed $3,500. A Participant is described
in this Section only if (i) the Participant has elected
distribution of his Account in the form of an Annuity Contract in
accordance with Section 8.02, or (ii) the Trustee has directly or
indirectly received a transfer of assets from another plan
(including a predecessor plan) to which Section 401(a)(11) of the
Code applies with respect to such Participant.
(b) Retirement Annuity. Unless the Participant elects to waive
the application of this subsection in a manner satisfying the
requirements of subsection (d) below, to the extent applicable to
the Participant, within the 90-day period preceding his Annuity
Starting Date (which election may be revoked, and if revoked,
remade, at any time in such period), the vested Account due any
Participant to whom this subsection (b) applies will be paid to
him by the purchase and delivery to him of an annuity contract
described in Section 8.02 providing a life annuity only form of
benefit or, if the Participant is married as of his Annuity
Starting Date, providing an immediate annuity for the life of the
Participant with a survivor annuity for the life of the
Participant's spouse (determined as of the date of distribution
of the contract) which is 50 percent of the amount of the annuity
which is payable during the joint lives of the Participant and
such spouse. The Participant may elect to receive distribution
of his benefits in the form of such annuity as of the earliest
date on which he could elect to receive retirement benefits under
the Plan. Within the period beginning 90 days prior to the
Participant's Annuity Starting Date and ending 30 days prior to
such Date, the Administrator will provide such Participant with a
written explanation of (i) the terms and conditions of the
annuity contract described herein, (ii) the Participant's right
to make and the effect of an election to waive application of
this subsection, (iii) the rights of the Participant's spouse
under subsection (d), and (iv) the right to revoke and the period
of time effect of a revocation of the election to waive
application of this subsection.
(c) Annuity Death Benefit. Unless the Participant elects to
waive the application of this subsection in a manner satisfying
the requirements of subsection (d) below at any time within the
applicable election period (which election may be revoked, and if
revoked, remade, at any time in such period), if a married
Participant to whom this Section applies dies before his Annuity
Starting Date, then notwithstanding any designation of a
Beneficiary to the contrary, 50 percent of his vested Account
will be applied to purchase an annuity contract described in
Section 8.02 providing an annuity for the life of the
Participants surviving spouse, which contract will then be
promptly distributed to such spouse. In lieu of the purchase of
such an annuity contract, the spouse may elect in writing to
receive distributions under the Plan as if he or she had been
designated by the Participant as his beneficiary with respect to
50 percent of his Account. For purposes of this subsection, the
applicable election period will commence on the first day of the
Plan Year in which the Participant attains age 35 and will end on
the date of the Participant's death, provided that in the case of
a Participant who terminates his employment the applicable
election period with respect to benefits accrued prior to the
date of such termination will in no event commence later than the
date of his termination of employment. A Participant may elect
to waive the application of this subsection prior to the Plan
Year in which he attains age 35, provided that any such waiver
will cease to be effective as of the first day of the Plan Year
in which the Participant attains age 35.
The Administrator will provide a Participant to whom this
subsection applies with a written explanation with respect to the
annuity death benefit described in this subsection (c) comparable
to that required under subsection (b) above. Such explanation
shall be furnished within whichever of the following periods ends
last: (i) the period beginning with the first day of the Plan
Year in which the Participant reaches age 32 and ending with the
end of the Plan Year preceding the Plan Year in which he reaches
age 35, (ii) a reasonable period ending after the Employee
becomes a Participant, (iii) a reasonable period ending after
this Section 8.04 first becomes applicable to the Participant in
accordance with Section 8.04(a), (iv) in the case of a
Participant who separates from service before age 35, a
reasonable period of time ending after separation from service.
For purposes of the preceding sentence, the two-year period
beginning one year prior to the date of the event described in
clause (ii), (iii) or (iv), whichever is applicable, and ending
one year after such date shall be considered reasonable,
provided, that in the case of a Participant who separates from
service under (iv) above and subsequently recommences employment
with the Employer, the applicable period for such Participant
shall be redetermined in accordance with this subsection.
(d) Requirements of Elections. This subsection will be
satisfied with respect to a waiver or designation which is
required to satisfy this subsection if such waiver or designation
is in writing and either
(1) the Participant's spouse consents thereto in writing, which
consent must acknowledge the effect of such waiver or designation
and be witnessed by a notary public or Plan representative, or
(2) the Participant establishes to the satisfaction of the
Administrator that the consent of the Participant's spouse cannot
be obtained because there is no spouse, because the spouse cannot
be located or because of such other circumstances as the
Secretary of Treasury may prescribe.
Any consent by a spouse, or establishment that the consent
of a spouse may not be obtained, will be effective only with
respect to a specific Beneficiary (including any class of
beneficiaries or any contingent beneficiaries) or form of
benefits identified in the Participant's waiver or designation,
unless the consent of the spouse expressly permits designations
by the Participant without any requirement of further consent by
the spouse. A consent which permits such designations by the
Participant shall acknowledge that the spouse has the right to
limit consent to a specific Beneficiary and form of benefits and
that the spouse voluntarily elects to relinquish both such
rights. A consent by a spouse shall be irrevocable once made.
Any such consent, or establishment that such consent may not be
obtained, will be effective only with respect to such spouse.
For purposes of subsections (b) and (c) above, no consent of a
spouse shall be valid unless the notice required by such
subsection, whichever is applicable, has been provided to the
Participant.
(e) Former Spouse. For purposes of this Section 8.03, a
former spouse of a Participant will be treated as the spouse or
surviving spouse of the Participant, and a current spouse will
not be so treated, to the extent required under a qualified
domestic relations order, as defined in Section 414 (D) of the
Code.
(f) Vested Account Balance. For purposes of this Section,
vested Account shall the aggregate value of the Participant's
vested Account derived from Employer and Employee contributions
(including rollovers), whether vested before or upon death. The
provisions of this Section shall apply to a Participant who is
vested in amounts attributable to Employer contributions,
Employee contributions, or both, upon death or at the time of
distribution.
8.04 Installment Distributions. This Section shall be
interpreted and applied in accordance with the regulations under
Section 401 (a)(9) of the Code, including the minimum
distribution incidental benefit requirement of section
1.401(a)(9)-2 of the regulations.
(a) In General. If a Participant's benefit may be distributed
in accordance with Section 8.01(b), the amount to be distributed
for each calendar year for which a minimum distribution is
required shall be at least an amount equal to the quotient
obtained by dividing the Participant's interest in his Account by
the life expectancy of the Participant or beneficiary or the
joint life and last survivor expectancy of the Participant and
his Beneficiary, whichever is applicable. For calendar years
beginning before January 1, 1989, if a Participant's Beneficiary
is not his spouse, the method of distribution selected must
insure that at least 50 percent of the present value of the
amount available for distribution is paid within the life
expectancy of the Participant. For calendar years beginning
after December 31, 1988 the amount to be distributed for each
calendar year shall not be less than an amount equal to the
quotient obtained by dividing the Participant's interest in his
Account by the lesser of (i) the applicable life expectancy under
Section 8.01(b), or (ii) if a Participant's beneficiary is not
his spouse, the applicable divisor determined under Section
1.401(a)(9)-2, Q&A 4 of the Proposed Treasury Regulations, or any
successor regulations of similar import.
Distributions after the death of the Participant shall be made
using the applicable life expectancy under (i) above, without
regard to Section 1.401(a)(9)-2 of such regulations.
The minimum distribution required under this subsection (a)
for the calendar year immediately preceding the calendar year in
which the Participant's required beginning date, as determined
under Section 8.08(b), occurs shall be made on or before the
Participant's required beginning date, as so determined. Minimum
distributions for other calendar years shall be made on or before
the close of such calendar year.
(b) Additional Requirements for Distributions After Death of
Participant.
(1) Distribution beginning before Death. If the Participant
dies before distribution of his benefits has begun, distributions
shall be made in accordance with the provisions of this
paragraph. Distributions under Section 8.01(a) shall be
completed by the close of the calendar year in which the fifth
anniversary of the death of the Participant occurs.
Distributions under Section 8.01(b) shall commence, if the
beneficiary is not the Participant's spouse, not later than the
close of the calendar year immediately following the calendar
year in which the death of the Participant occurs. Distributions
under Section 8.01(b) to a Beneficiary who is the Participant's
surviving spouse shall commence not later than the close of the
calendar year in which the Participant would have attained age 70
1/2 or, if later, the close of the calendar year immediately
following the calendar year in which the death of the Participant
occurs. In the event such spouse dies prior to the date
distribution to him or her commences, he or she will be treated
for purposes of this subsection (other than the preceding
sentence) as if he or she were the Participant. If the
Participant has not designated a Beneficiary, or the Participant
or Beneficiary has not effectively selected a method of
distribution, distribution of the Participant's benefit shall be
completed by the close of the calendar year in which the fifth
anniversary of the death of the Participant occurs.
Any amount paid to a child of the Participant will be treated as
if it had been paid to the surviving spouse if the amount becomes
payable to the surviving spouse when the child reaches the age of
majority.
For purposes of this subsection (b)(1), the life expectancy of a
Beneficiary who is the Participant's surviving spouse shall be
recalculated annually unless the Participant's spouse irrevocably
elects otherwise prior to the time distributions are required to
begin. Life expectancy shall be computed in accordance with the
provisions of subsection (a) above.
(2) Distribution beginning after Death. If the Participant
dies after distribution of his benefits has begun, distributions
to the Participant's Beneficiary will be made at least as rapidly
as under the method of distribution being used as of the date of
the Participant's death.
For purposes of this Section 8.04(b), distribution of a
Participant's interest in his Account will be considered to begin
as of the Participant's required beginning date, as determined
under Section 8.08(b). If distribution in the form of an annuity
irrevocably commences prior to such date, distribution will be
considered to begin as of the actual date distribution commences.
(c) Life Expectancy. For purposes of this Section, life
expectancy shall be recalculated annually in the case of the
Participant or a Beneficiary who is the Participant's spouse
unless the Participant or Beneficiary irrevocably elects
otherwise prior to the time distributions are required to begin.
If not recalculated in accordance with the foregoing, life
expectancy shall be calculated using the attained age of the
Participant or beneficiary, whichever is applicable, as of such
individual's birth date in the first year for which a minimum
distribution is required reduced by one for each elapsed calendar
year since the date life expectancy was first calculated. For
purposes of this Section, life expectancy and joint life and last
survivor expectancy shall be computed by use of the expected
return multiples in Table V and VI of section 1.72-9 of. the
income tax Regulations.
A Participant's interest in his Account for purposes of this
Section 8.04 shall be determined as of the last valuation date in
the calendar year immediately preceding the calendar year for
which a minimum distribution is required, increased by the amount
of any contributions allocated to, and decreased by any
distributions from, such Account after the valuation date. Any
distribution for the first year for which a minimum distribution
is required made after the close of such year shall be treated as
if made prior to the close of such year.
8.05. Immediate Distributions. If the Account distributable to
a Participant exceeds, or at the time of any prior distribution
exceeded $3,500, no distribution will be made to the Participant
before he reaches his Normal Retirement Age (or age 62, if
later), unless the written consent of the Participant has been
obtained. Such consent shall be made in writing within the
90-day period ending on the Participant's Annuity Starting Date.
Within the period beginning 90 days before the Participant's
Annuity Starting Date and ending 30 days before such Date, the
Administrator will provide such Participant with written notice
comparable to the notice described in Section 8.03(b) containing
a general description of the material features and an explanation
of the relative values of the optional forms of benefit available
under the Plan and informing the Participant of his right to
defer receipt of the distribution until his Normal Retirement Age
(or age 62, if later).
The consent of the Participant's spouse must also be
obtained if the Participant is subject to the provisions of
Section 8.03(a), unless the distribution will be made in the form
of the applicable retirement annuity contract described in
Section 8.03(b). A spouse's consent to early distribution, if
required, must satisfy the requirements of Section 8.03(d).
Neither the consent of the Participant nor the Participant's
spouse shall be required to the extent that a distribution is
required to satisfy Section 401(a)(9) or Section 415 of the Code.
In addition, upon termination of the Plan if it does not offer an
annuity option (purchased from a commercial provider) and if the
Employer or any Related Employer does not maintain another
defined contribution plan (other than an employee stock ownership
plan as defined in Code Section 4975(e)(7)) the Participant's
Account will, without the Participant's consent, be distributed
to the Participant. However, if any Related Employer maintains
another defined contribution plan (other than an employee stock
ownership plan as defined in Section 4975(e)(7) of the Code) then
the Participant's Account will be transferred, without the
Participant's consent, to the other plan if the Participant does
not consent to an immediate distribution.
8.06. Determination of Method of Distribution. The Participant
will determine the method of distribution of benefits to himself
and may determine the method of distribution to his Beneficiary.
Such determination will be made prior to the time benefits become
payable under the Plan. If the Participant does not determine
the method of distribution to his Beneficiary or if the
Participant permits his Beneficiary to override his
determination, the Beneficiary, in the event of the Participant's
death, will determine the method of distribution of benefits to
himself as if he were the Participant. A determination by the
Beneficiary must be made no later than the close of the calendar
year in which distribution would be required to begin under
Section 8.04(b) or, if earlier, the close of the calendar year in
which the fifth anniversary of the death of the Participant
occurs.
8.07. 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 of benefits that such Participant
or Beneficiary shall receive and (in the case of distributions to
a Participant) the name of any designated Beneficiary or
Beneficiaries.
8.08. Time of Distribution. In no event will distribution to a
Participant be made later than the earlier of the dates described
in (a) and (b) below:
(a) Absent the consent of the Participant (and his spouse, if
appropriate), the 60th day after the close of the Plan Year in
which occurs the later of the date on which the Participant
attains age 65, the date on which the Participant ceases to be
employed by the Employer; or the 10th anniversary of the year in
which the Participant commenced participation in the Plan and
(b) April l of the calendar year first following the calendar
year in which the Participant attains age 70 1/2 or, in the case
of a Participant who had attained age 70 1/2 before January 1,
1988, the required beginning date determined in accordance with
(1) or (2) below
(1) The required beginning date of a Participant who is not a
5-percent owner is the first day of April of the calendar year
following the calendar year in which the later of retirement or
attainment of age 70-1/2 occurs.
(2) The required beginning date of a Participant who is a 5
percent owner during any year beginning after December 31, 1979,
is the first day of April following the later of:
(i) the calendar year in which the participant attains age
70-1/2, or
(ii) the earlier of the calendar year with or within which ends
the plan year in which the participant becomes a 5 percent owner,
or the calendar year in which the participant retires.
Notwithstanding the foregoing, in the case of a Participant
who attained age 70 1/2 during 1988 and who had not retired prior
to January 1, 1989, the required beginning date described in this
paragraph shall be April 1, 1990.
Notwithstanding (a) above, the failure of a Participant (and
spouse) to consent to a distribution while a benefit is
immediately distributable, within the meaning of Section 8.05,
shall be deemed to be an election to defer commencement of
payment of any benefit sufficient to satisfy (a) above.
Once distributions have begun to a 5 percent owner under (b)
above, they must continue to be distributed, even if the
Participant ceases to be a 5 percent owner in a subsequent year.
For purposes of (b) above, a Participant is treated as a 5
percent owner if such participant is a 5 percent owner as defined
in Section 416(i) of the Code (determined in accordance with
Section 416 but without regard to whether the plan is top-heavy)
at any time during the plan year ending with or within the
calendar year in which such owner attains age 66-1/2 or any
subsequent plan year.
The Administrator shall notify the Trustee in writing
whenever a distribution is necessary in order to comply with the
minimum distribution rules set forth in this Section.
8.09. Whereabouts of Participants and Beneficiaries. The
Administrator will at all times be responsible for determining
the whereabouts of each Participant or Beneficiary who may be
entitled to benefits under the Plan and will at all times be
responsible for instructing the Trustee in writing as to the
current address of each such Participant or Beneficiary. The
Trustee will be entitled to rely on the latest written statement
received from the Administrator as to such addresses. The
Trustee will be under no duty to make any distributions under the
Plan unless and until it has received written instructions from
the Administrator satisfactory to the Trustee containing the name
and address of the distributee, the time when the distribution is
to occur, and the form which the distribution will take.
Notwithstanding the foregoing, if the Trustee attempts to make a
distribution in accordance with the Administrator's instructions
but is unable to make such distribution because the whereabouts
of the distributee is unknown, the Trustee will notify the
Administrator of such situation and thereafter the Trustee will
be under no duty to make any further distributions to such
distributee until it receives further written instructions from
the Administrator. If a benefit is forfeited because the
Administrator determines that the Participant or beneficiary
cannot be found, such benefit will be reinstated by the Sponsor
if a claim is filed by the Participant or Beneficiary with the
Administrator and the Administrator confirms the claim to the
Sponsor.
Article 9. Top-Heavy Provisions.
9.01 Application. If the Plan is or becomes a Top-Heavy Plan in
any Plan Year or is automatically deemed to be Top-Heavy in
accordance with the Employer's election in Section 1.12(a)(1) of
the Adoption Agreement, the provisions of this Article 9 shall
supersede any conflicting provision in the Plan.
9.02 Definitions. For purposes of this Article 9, the following
terms have the meanings set forth below:
(a) Key Employee. Any Employee or former Employee (and the
beneficiary of any such Employee) who at any time during the
determination period was (i) an officer of the Employer whose
annual compensation exceeds 50 percent of the dollar limitation
under Section 415(b)(1)(A) of the Code, (ii) an owner (or
considered an owner under Section 318 of the Code) of one of the
ten largest interests in the Employer if such individual's annual
compensation exceeds the dollar limitation under Section
415(c)(1)(A) of the Code, (iii) a 5-percent owner of the
Employer, or (iv) a 1-percent owner of the Employer who has
annual compensation of more than $150,000. For purposes of this
paragraph, the determination period is the Plan Year containing
the Determination Date and the four preceding Plan Years. The
determination of who is a Key Employee shall be made in
accordance with Section 416(i)(1) of the Code and the regulations
thereunder. Annual compensation means compensation as defined in
Section 5.03(e)(2), but including amounts contributed by the
Employer pursuant to a salary reduction agreement which are
excludable from the employee's gross income under Section 125,
Section 402(a)(8), and Section 403(b) of the Code.
(b) Top-Heavy Plan. The Plan is a Top-Heavy Plan if any of the
following conditions exists:
(1) the Top-Heavy Ratio for the Plan exceeds 60 percent and the
Plan is not part of any Required Aggregation Group or Permissive
Aggregation Group;
(2) the Plan is a part of a Required Aggregation Group but not
part of a Permissive Aggregation Group and the Top-Heavy Ratio
for the Required Aggregation Group exceeds 60 percent; or
(3) the Plan is a part of a Required Aggregation Group and a
Permissive Aggregation Group and the Top-Heavy Ratio for both
Groups exceeds 60 percent.
(c) Top-Heavy Ratio.
(l) With respect to this Plan, or with respect to any Required
Aggregation Group or Permissive Aggregation Group that consists
solely of defined contribution plans (including any simplified
employee pension plans) and the Employer has not maintained any
defined benefit plan which during the 5-year period ending on the
determination date(s) has or has had accrued benefits, the
Top-Heavy Ratio is a fraction, the numerator of which is the sum
of the account balances of all Key Employees under the plans as
of the Determination Date (including any part of any account
balance distributed in the 5-year period ending on the
Determination Date), and the denominator of which is the sum of
all account balances (including any part of any account balance
distributed in the 5-year period ending on the Determination
Date) of all participants under the plans as of the Determination
Date. Both the numerator and denominator of the Top-Heavy Ratio
shall be increased, to the extent required by Section 416 of the
Code, to reflect any contribution which is due but unpaid as of
the Determination Date.
(2) With respect to any Required Aggregation Group or
Permissive Aggregation Group that includes one or more defined
benefit plans which, during the 5-year period ending on the
Determination Date, has covered or could cover a Participant in
this Plan, the Top-Heavy Ratio is a fraction, the numerator of
which is the sum of the account balances under the defined
contribution plans for all Key Employees and the present value
of accrued benefits under the defined benefit plans for all Key
Employees, and the denominator of which is the sum of the account
balances under the defined contribution plans for all
participants and the present value of accrued benefits under the
defined benefit plans for all participants. Both the numerator
and denominator of the Top-Heavy Ratio shall be increased for any
distribution of an account balance or an accrued benefit made in
the 5-year period ending on the Determination Date and any
contribution due but unpaid as of the Determination Date.
(3) For purposes of (1) and (2) above, the value of Accounts
and the present value of accrued benefits will be determined as
of the most recent Valuation Date that falls within or ends with
the 12-month period ending on the Determination Date, except as
provided in Section 416 of the Code and the regulations
thereunder for the first and second plan years of a defined
benefit plan. The Account and accrued benefits of a Participant
(i) who is not a Key Employee but who was a Key Employee in a
prior year, or (ii) who has not been credited with at least one
Hour of Service with the Employer at any time during the 5-year
period ending on the Determination Date, will be disregarded.
The calculation of the Top-Heavy Ratio, and the extent to which
distributions, rollovers, and transfers are taken into account,
shall be made in accordance with Section 416 of the Code and the
regulations thereunder. Deductible employee contributions shall
not be taken into account for purposes of computing the Top-Heavy
Ratio. When aggregating plans, the value of Accounts and accrued
benefits shall be calculated with reference to the Determination
Dates that fall within the same calendar year.
For purposes of determining if the Plan, or any other plan
included in a Required Aggregation Group of which this Plan is
part, is a Top-Heavy Plan, the accrued benefit in a defined
benefit plan of an Employee other than a Key Employee shall be
determined under (a) the method, if any, that uniformly applies
for accrual purposes under all plans maintained by the Employer,
or (b) if there is no such method, as if such benefit accrued not
more rapidly than the slowest accrual rate permitted under the
fractional accrual rate of Section 411(b)(1)(C) of the Code.
(d) Permissive Aggregation Group. The Required Aggregation
Group plus any other qualified plans of the Employer or a Related
Employer which, when considered as a group with the Required
Aggregation Group, would continue to satisfy the requirements of
Sections 401(a)(4) and 410 of the Code.
(e) Required Aggregation Group.
(1) Each qualified plan of the Employer or Related Employer in
which at least one Key Employee participates, or has participated
at any time during the determination period (regardless of
whether the plan has terminated), and
(2) any other qualified plan of the Employer or Related
Employer which enables a plan described in (1) above to meet the
requirements of Sections 401(a)(4) or 410 of the Code.
(f) Determination Date. For any Plan Year of the Plan
subsequent to the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the last day of
that Plan Year.
(g) Valuation Date. The Determination Date.
(h) Present Value. Present value shall be based only on the
interest rate and mortality table specified in the Adoption
Agreement.
9.03. Minimum Contribution.
(a) Except as otherwise provided in (b) and (c) below, the
Fixed/Discretionary Contributions made on behalf of any
Participant who is not a Key Employee shall not be less than the
lesser of 3 percent (or such other percent elected by the
Employer in Section 1.12(c)) of such Participant's Compensation
or, in the case where the Employer has no defined benefit plan
which designates this Plan to satisfy Section 401 of the Code,
the largest percentage of Employer contributions, as a percentage
of the first $200,000 of the Key Employee's Compensation, made on
behalf of any Key Employee for that year. If the Employer
selected the Integrated Formula in Section 1.05(a)(2), the
minimum contribution shall be determined under paragraph (e) of
this Section 9.03. Further, the minimum contribution under this
Section 9.03 shall be made even though, under other Plan
provisions, the Participant would not otherwise be entitled to
receive a contribution, or would have received a lesser
contribution for the year, because (i) the Participant failed to
complete 1,000 Hours of Service or any equivalent service
requirement provided in the Adoption Agreement; or (ii) the
Participant's Compensation was less than a stated amount.
(b) The provisions of (a) above shall not apply to any
Participant who was not employed by the Employer on the last day
of the Plan Year.
(c) The Employer contributions for the Plan Year made on behalf
of each Participant who is not a Key Employee and who is a
participant in a defined benefit plan maintained by the Employer
shall not be less than 5 percent of such Participant's
Compensation, unless the Employer has provided in Section 1.12(c)
that the minimum contribution requirement will be met in the
other plan or plans of the Employer.
(d) The minimum contribution required under (a) above (to the
extent required to be nonforfeitable under Section 416(b) of the
Code) may not be forfeited under Section 411(a)(3)(B) or
411(a)(3)(D) of the Code.
(e) If the Employer elected an Integrated Formula in Section
1.05(a)(2), the allocation steps in Section 4.06(b)(2) shall be
preceded by the following steps:
(1) The Discretionary Employer Contributions will be
allocated to each eligible Participant (as determined under this
Section 9.03) in the ratio that the Participant's Compensation
bears to all Participants' Compensation, but not in excess of 3%
(or such other percent elected by the Employer in Section
1.12(c).
(2) Any Discretionary Employer Contributions remaining
after (e)(1) above will be allocated to each eligible Participant
in the ratio that the Participant's Excess Compensation for the
Plan Year bears to the Excess Compensation of all eligible
Participants, but not in excess of 3% (or such other percent
elected by the Employer in Section 1.12(c)).
9.04. Adjustment to the Limitation on Contributions and
Benefits. If this Plan is in Top-Heavy status, the number 100
shall be substituted for the number 125 in subsections (e)(3) and
(e)(4) of Section 5.03. However, this substitution shall not
take effect with respect to this Plan in any Plan Year in which
the following requirements are satisfied:
(a) The Employer contributions for such Plan Year made on
behalf of each Participant who is not a Key Employee and who is a
participant in a defined benefit plan maintained by the Employer
is not less than 7 1/2 percent of such Participant's
Compensation.
(b) The sum of the present value as of the Determination Date
of (i) the aggregate accounts of all Key Employees under all
defined contribution plans of the Employer and (ii) the
cumulative accrued benefits of all Key Employees under all
defined benefit plans of the Employer does not exceed 90 percent
of the same amounts determined for all Participants under all
plans of the Employer that are Top-Heavy Plans, excluding
Accounts and accrued benefits for Employees who formerly were but
are no longer Key Employees.
The substitutions of the number 100 for 125 shall not take
effect in any limitation Year with respect to any Participant for
whom no benefits are accrued or contributions made for such Year.
9.05. Minimum Vesting. For any Plan Year in which the Plan is a
Top-Heavy Plan and all Plan Years thereafter, the Top-Heavy
vesting schedule elected in Section 1.12(d) will automatically
apply to the Plan. The Top-Heavy vesting schedule applies to all
benefits within the meaning of Section 411(a)(7) of the Code
except those attributable to Employee Contributions or those
already subject to a vesting schedule which vests at least as
rapidly in all cases as the schedule elected in Section 1.12(d),
including benefits accrued before the Plan becomes a Top-Heavy
Plan. Further, no decrease in a Participant's nonforfeitable
percentage may occur in the event the Plan's status as a
Top-Heavy Plan changes for any Plan Year. However, this Section
9.05 does not apply to the Account of any Employee who does not
have an Hour of Service after the Plan has initially become a
Top-Heavy Plan and such Employee's Account attributable to
Employer Contributions will be determined without regard to this
Section 9.05.
Article 10. Amendment and Termination.
10.01 Amendment by Employer. The Employer reserves the
authority, subject to the provisions of Article 1 and Section
10.03, to amend the Plan:
(a) Changing Elections Contained in the Adoption Agreement. 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 except that retroactive changes to a previous
election or elections pursuant to the regulations issued under
Section 401(a)(4) of the Code shall be permitted. 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 be necessary to satisfy Sections 415 or 416 of the Code
because of the required aggregation of multiple plans by
completing overriding Plan language in the Adoption Agreement.
The Employer may also add certain model amendments published by
the Internal Revenue Service which specifically provide that
their adoption will not cause the Plan to be treated as an
individually designed plan; or
(b) Other Changes. By amending any provision of the Plan for
any reason other than those specified in (a) above. However,
upon making such amendment, including a waiver of the minimum
funding requirement under Section 412(d) of the Code, the
Employer may no longer participate in this prototype plan
arrangement and will be deemed to have an individually designed
plan. Following such amendment, the Trustee may transfer the
assets of the Trust to the trust forming part of such newly
adopted plan upon receipt of sufficient evidence (such as a
determination letter or opinion letter from the Internal Revenue
Service or an opinion of counsel satisfactory to the Trustee)
that such trust will be a qualified trust under the Code.
10.02. Amendment by Prototype Sponsor. The Prototype Sponsor
may in its discretion amend the Plan or the Adoption Agreement at
any time, subject to the provisions of Article 1 and Section
10.03, and provided that the Prototype Sponsor mails a copy of
such amendment to the Employer at its last known address as shown
on the books of the Prototype Sponsor.
10.03. Amendments Affecting Vested and/or Accrued Benefits.
(a) Except as permitted by Section 10.04, no amendment to the
Plan shall be effective to the extent that it has the effect of
decreasing a Participant's Account or eliminating an optional
form of benefit with respect to benefits attributable to service
before the amendment. Furthermore, if the vesting schedule of
the Plan is amended, the nonforfeitable interest of a Participant
in his Account, determined as of the later of the date the
amendment is adopted or the date it becomes effective, will not
be less than the Participant's nonforfeitable interest in his
Account determined without regard to such amendment.
(b) If the Plan's vesting schedule is amended, including any
amendment resulting from a change to or from Top-Heavy Plan
status, or the Plan is amended in any way that directly or
indirectly affects the computation of a Participant's
nonforfeitable interest in his Account, each Participant with at
least three (3) Years of Service for Vesting with the Employer
may elect, within a reasonable period after the adoption of the
amendment, to have the nonforfeitable percentage of his Account
computed under the Plan without regard to such amendment. The
Participant's election may be made within 60 days from the latest
of (i) the date the amendment is adopted; (ii) the date the
amendment becomes effective; or (iii) the date the Participant
is issued written notice of the amendment by the Employer or the
Administrator.
10.04. Retroactive Amendments. An amendment made by the sponsor
in accordance with Section 10.02 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 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 10.01.
10.05. 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.
10.06. Distribution upon Termination of the Plan. Upon
termination or partial termination of the Plan or complete
discontinuance of contributions thereunder, each Participant
(including a terminated Participant with respect to amounts not
previously forfeited by him) who is affected by such termination
or partial termination or discontinuance will have a fully vested
interest in his Account, and, subject to Section 4.05 and Article
8, the Trustee will distribute to each Participant or other
person entitled to distribution the balance of the Participant's
Account in a single lump sum payment. In the absence of such
instructions, the Trustee will notify the Administrator of such
situation and the Trustee will be under no duty to make any
distributions under the Plan until it receives written
instructions from the Administrator. Upon the completion of such
distributions, the Trust will terminate, the Trustee will be
relieved from all liability under the Trust, and no Participant
or other person will have any claims thereunder, except as
required by applicable law.
10.07. Merger or Consolidation of Plan; Transfer of Plan Assets.
In case of any merger or consolidation of the Plan with, or
transfer of assets and liabilities of the Plan to, any other
plan, provision must be made so that each Participant would, if
the Plan then terminated, receive a benefit immediately after the
merger, consolidation or transfer which is equal to or greater
than the benefit he would have been entitled to receive
immediately before the merger, consolidation or transfer if the
Plan had then terminated.
Article 11. Amendment and Continuation of Predecessor Plan:
Transfer of Funds to or from Other Qualified Plans.
11.01. Amendment and Continuation of Predecessor Plan. In the
event the Employer has previously established a plan (the
"predecessor plan") which is a defined contribution plan under
the Code and which on the date of adoption of the Plan meets the
applicable requirements of section 401(a) of the Code, the
Employer may, in accordance with the provisions of the
predecessor plan, amend and continue the predecessor plan in the
form of the Plan and become the Employer hereunder, subject to
the following:
(a) Subject to the provisions of the Plan, each individual who
was a Participant or former Participant in the predecessor plan
immediately prior to the effective date of such amendment and
continuation will become a Participant or former Participant in
the Plan;
(b) No election may be made under the vesting provisions of the
Adoption Agreement if such election would reduce the benefits of
a Participant under the P].an to less than the benefits to which
he would have been entitled if he voluntarily separated from the
service of the Employer immediately prior to such amendment and
continuation;
(c) No amendment to the Plan shall decrease a Participant's
accrued benefit or eliminate an optional form of benefit and if
the amendment of the predecessor plan in the form of the Plan
results in a change in the method of crediting service for
vesting purposes between the general method set forth in Section
2530.200b-2 of the Department of Labor Regulations and the
elapsed time method in Section 2.01(a)(33) of the Plan, each
Participant with respect to whom the method of crediting vesting
service is changed shall be treated in the manner set forth by
the provisions of Section 1.410(a)-7(f)(1) of the Treasury
Regulations which are incorporated herein by reference.
(d) The amounts standing to the credit of a Participant's
Account immediately prior to such amendment and continuation
which represent the amounts properly attributable to (i)
contributions by the Participant and (ii) contributions by the
Employer and forfeitures will constitute the opening balance of
his Account or Accounts under the Plan:
(e) Amounts being paid to a former Participant or to a
Beneficiary in accordance with the provisions of the predecessor
plan will continue to be paid in accordance with such provisions;
(f) Any election and waiver of the qualified pre-retirement
annuity in effect after August 23, 1984, under the predecessor
plan immediately before such amendment and continuation will be
deemed a valid election and waiver of Beneficiary under Section
8.04 if such designation satisfies the requirements of Section
8.04(d), unless and until the Participant revokes such election
and waiver under the Plan; and
(g) Unless the Employer and the Trustee agree otherwise, all
assets of the predecessor trust will be deemed to be assets of
the Trust as of the effective date of such amendment. Such
assets will be invested by the Trustee as soon as reasonably
practicable pursuant to Article 6. The Employer agrees to assist
the Trustee in any way requested by the Trustee in order to
facilitate the transfer of assets from the predecessor trust to
the Trust Fund.
11.02. Transfer of Funds from an Existing Plan. The Employer
may from time to time direct the Trustee, in accordance with such
rules as the Trustee may establish, to accept cash, allowable
Fund Shares or participant loan promissory notes transferred for
the benefit of Participants from a trust forming part of another
qualified plan under the Code, provided such plan is a defined
contribution plan. Such transferred assets will become assets of
the Trust as of the date they are received by the Trustee. Such
transferred assets will be credited to Participants' Account in
accordance with their respective interests immediately upon
receipt by the Trustee. A Participant's interest under the Plan
in transferred assets which were fully vested and nonforfeitable
under the transferring plan will be fully vested and
nonforfeitable at all times. Such transferred assets will be
invested by the Trustee in accordance with the provisions of
paragraph (g) of Section 11.01 as if such assets were transferred
from a predecessor plan. No transfer of assets in accordance
with this Section may cause loss of an accrued or optional form
of benefit protected by Section 411(d)(6) of the Code.
11.03. Acceptance of Assets by Trustee. The Trustee will not
accept assets which are not either in a medium proper for
investment under the Plan, as set forth in Section 1.14(b), or in
cash. Such assets shall be accompanied by written instructions
showing separately the respective contributions by the prior
employer and by the Employee, and identifying the assets
attributable to such contributions. The Trustee shall establish
such accounts as may be necessary or appropriate to reflect such
contributions under the Plan. The Trustee shall hold such assets
for investment in accordance with the provisions of Article 6,
and shall in accordance with the written instructions of the
Employer make appropriate credits to the Accounts of the
Participants for whose benefit assets have been transferred.
11.04. Transfer of Assets from Trust. The Employer may direct
the Trustee to transfer all or a specified portion of the Trust
assets to any other plan or plans maintained by the Employer or
the employer or employers of a former Participant or
Participants, provided that the Trustee has received evidence
satisfactory to it that such other plan meets all applicable
requirements of the Code. The assets so transferred shall be
accompanied by written instructions from the Employer naming the
persons for whose benefit such assets have been transferred,
showing separately the respective contributions by the Employer
and by each Participant, if any, and identifying the assets
attributable to the various contributions. The Trustee shall
have no further liabilities with respect to assets so
transferred.
Article 12. Miscellaneous.
12.01. Communication to Participants. The Plan will be
communicated to all Participants by the Employer promptly after
the Plan is adopted.
12.02. 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. It is a condition of the Plan, and
each Participant expressly agrees by his participation herein,
that each Participant will look solely to the assets held in the
Trust for the payment of any benefit to which he is entitled
under the Plan.
12.03. Nonalienability of Benefits and Qualified Domestic
Relations Orders. The benefits provided hereunder will not be
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. The preceding sentence shall also apply to the
creation, assignment, or recognition of a right to any benefit
payable with respect to a Participant pursuant to a domestic
relations order, unless such order is determined by the Plan
Administrator to be a qualified domestic relations order, as
defined in Section 414(p) of the Code, or any domestic relations
order entered before January 1, 1985. The Administrator must
establish reasonable procedures to determine the qualified status
of a domestic relations order. Upon receiving a domestic
relations order, the Administrator will promptly notify the
Participant and any alternate payee named in the order, in
writing, of the receipt of the order and the Plan's procedures
for determining the qualified status of the order. Within a
reasonable period of time after receiving the domestic relations
order, the Administrator must determine the qualified status of
the order and must notify the Participant and each alternate
payee, in writing, of its determination. The Administrator must
provide notice under this paragraph by mailing to the
individual's address specified in the domestic relations order,
or in a manner consistent with the Department of Labor
regulations.
If any portion of the Participant's Account is payable
during the period the Administrator is making its determination
of the qualified status of the domestic relations order, the
Administrator must make a separate accounting of the amounts
payable. If the Administrator determines the order is a
qualified domestic relations order within 18 months of the date
amounts first are payable following receipt of the order, the
Administrator will direct the Trustee to distribute the payable
amounts in accordance with the order. If the Administrator does
not make his determination of the qualified status of the order
within the 18 month determination period, the Administrator will
direct the Trustee to distribute the payable amounts in the
manner the Plan would distribute if the order did not exist and
will apply the order prospectively if the Administrator later
determines the order is a qualified domestic relations order.
A domestic relations order will not fail to be deemed a
qualified domestic relations order merely because it requires the
distribution or segregation of all or part of a Participant's
Account with respect to an alternate payee prior to the
Participant's earliest retirement age (as defined in Section
414(p) of the Code) under the Plan. A distribution to an
alternate payee prior to the Participant's attainment of the
earliest retirement age is available only if: (1) the order
specifies distribution at that time; and (2) if the present value
of the alternate payee's benefits under the Plan exceeds $3,500,
and the order requires, the alternate payee consents to any
distribution occurring prior to the Participant's attainment of
earliest retirement age.
12.04. 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.
12.05. 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 and any regulations issued or
forms adopted by the Treasury Department thereunder or under the
provisions of ERISA and any regulations issued or forms adopted
by the Labor Department thereunder.
12.06. Effect of Failure to Qualify under Code. Notwithstanding
any other provision contained herein, if the Employer fails to
obtain or retain approval of the Plan by the Internal Revenue
Service as a qualified Plan under the Code, the Employer may no
longer participate in this prototype Plan arrangement and will be
deemed to have an individually designed plan.
12.07. 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
Adoption 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.
12.08. 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 13. Plan Administration.
13.01. 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 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;
(d) To administer the claims and review procedures specified in
Section 13.03;
(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 and provide for the
distribution of Code Section 402(f) notices;
(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
fiduciary responsibilities in accordance with Section 405 of
ERISA including the formation of an Administrative Committee to
administer the Plan;
(k) To provide bonding coverage as required under Section 412
of ERISA.
13.02. 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.
13.03. 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 60 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 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.
13.04. Named Fiduciary. The Administrator is a "named
fiduciary" for purposes of Section 402(a)(1) of ERISA and has the
powers and responsibilities with respect to the management and
operation of the Plan described herein.
13.05. Costs of Administration. Unless some or all 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 7.07, 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.
ARTICLE 14. Trust Agreement.
14.01. Acceptance of Trust Responsibilities. By executing the
Adoption Agreement, the Employer establishes a trust to hold the
assets of the plan. By executing the Adoption Agreement, the
Trustee agrees to accept the rights, duties and responsibilities
set forth in this Article 14.
14.02. Establishment of Trust Fund. A trust is hereby
established under the Plan and the Trustee will open and maintain
a Trust account for the Plan and, as part thereof, Participants'
Accounts for such individuals as the Employer shall from time to
time give written notice to the Trustee are Participants in the
Plan. The Trustee will accept and hold in the Trust Fund such
contributions on behalf of Participants as it may receive from
time to time from the Employer. The Trust Fund shall be fully
invested and reinvested in accordance with the applicable
provisions of the Plan in Fund Shares or as otherwise provided in
Section 14.10.
14.03. Exclusive Benefit. The Trustee shall hold the assets of
the Trust Fund for the exclusive purpose of providing benefits to
Participants and Beneficiaries and defraying the reasonable
expenses of administering the Plan. No assets of the Plan shall
revert to the Employer except as specifically permitted by the
terms of the Plan.
14.04. Powers of Trustee. The Trustee shall have no discretion
or authority with respect to the investment of the Trust Fund but
shall act solely as a directed trustee of the funds contributed
to it. In addition to and not in limitation of such powers as
the Trustee has by law or under any other provisions of the Plan,
the Trustee will have the following powers, each of which the
Trustee exercises solely as directed Trustee in accordance with
the written direction of the Employer except to the extent a Plan
asset is subject to Participant direction of investment and
provided that no such power shall be exercised in any manner
inconsistent with the provisions of ERISA:
(a) to deal with all or any part of the Trust Fund and to
invest all or a part of the Trust Fund in investments available
under the Plan, without regard to the law of any state regarding
proper investment;
(b) to retain uninvested such cash as it may deem
necessary or advisable, without liability for interest thereon,
for the administration of the Trust;
(c) to sell, convert, redeem, exchange, or otherwise
dispose of all or any part of the assets constituting the Trust
Fund;
(d) to enforce by suit or otherwise, or to waive, its
rights on behalf of the Trust, and to, defend claims asserted
against it or the Trust, provided that the Trustee is indemnified
to its satisfaction against liability and expenses;
(e) to employ such agents and counsel as may be reasonably
necessary in collecting, managing, administering, investing,
distributing and protecting the Trust Fund or the assets thereof
and to pay them reasonable compensation;
(f) to compromise, adjust and settle any and all claims
against or in favor of it or the Trust;
(g) to oppose, or participate in and consent to the
reorganization, merger, consolidation, or readjustment of the
finances of any enterprise, to pay assessments and expenses in
connection therewith, and to deposit securities under deposit
agreements;
(h) to apply for or purchase annuity contracts in
accordance with Section 8.02:
(i) to hold securities unregistered, or to register them
in its own name or in the name of nominees;
(j) to appoint custodians to hold investments within the
jurisdiction of the district courts of the United States and to
deposit securities with stock clearing corporations or
depositories or similar organizations;
(k) to make, execute, acknowledge and deliver any and all
instruments that it deems necessary or appropriate to carry out
the powers herein granted; and
(l) generally to exercise any of the powers of an owner
with respect to all or any part of the Trust Fund.
The Employer specifically acknowledges and authorizes that
affiliates of the Trustee may act as its agent in the performance
of ministerial, nonfiduciary duties under the Trust. The
expenses and compensation of such agent shall be paid by the
Trustee.
The Trustee shall provide the Employer with reasonable
notice of any claim filed against the Plan or Trust or with
regard to any related matter, or of any claim filed by the
Trustee on behalf of the Plan or Trust or with regard to any
related matter.
14.05. Accounts. The Trustee will keep full accounts of all
receipts and disbursements and other transactions hereunder.
Within 60 days after the close of each Plan Year, within 60 days
after termination of the Trust, and at such other times as may be
appropriate, the Trustee will determine the then net Fair market
value of the Trust Fund as of the close of the Plan Year, as of
the termination of the Trust, or as of such other time, whichever
is applicable, and will render to the Employer and Administrator
an account of its administration of the Trust during the period
since the last such accounting, including all allocations made by
it during such period.
14.06. Approving of Accounts. To the extent permitted by law,
the written approval of any account by the Employer or
Administrator will be final and binding, as to all matters and
transactions stated or shown therein, upon the Employer,
Administrator, Participants and all persons who then are or
thereafter become interested in the Trust. The failure of the
Employer or Administrator to notify the Trustee within six (6)
months after the receipt of any account of its objection to the
account will, to the extent permitted by law, be the equivalent
of written approval. If the Employer or Administrator files any
objections within such six (6) month period with respect to any
matters or transactions stated or shown in the account, and the
Employer or Administrator and the Trustee cannot amicably settle
the question raised by such objections, the Trustee will have the
right to have such questions settled by judicial proceedings.
Nothing herein contained will be construed so as to deprive the
Trustee of the right to have judicial settlement of its accounts.
In any proceeding for a judicial settlement of any account or for
instructions, the only necessary parties will be the Trustee, the
Employer and the Administrator.
14.07. Distribution from Trust Fund. The Trustee shall make
such distribution from the Trust Fund as the Employer or
Administrator may in writing direct, as provided by the terms of
the Plan, upon certification by the Employer or Administrator
that the same is for the exclusive benefit of Participants or
their Beneficiaries, or for the payment of expenses of
administering the Plan.
14.08. Transfer of Amounts from Qualified Plan. If the Plan
provides that amounts may be transferred to the Plan from another
qualified plan or trust under Section 401(a) of the Code, such
transfer shall be made in accordance with the provisions of the
Plan and with such rules as may be established by the Trustee.
The Trustee will only accept assets which are in a medium proper
for investment under this Agreement or in cash. Such amounts
shall be accompanied by written instructions showing separately
the respective contributions by the prior employer and the
transferring Employee, and identifying the assets attributable to
such contributions. The Trustee shall hold such assets for
investment in accordance with the provisions of this Agreement.
14.09. Transfer of Assets from Trust. Subject to the provisions
of the Plan, the Employer may direct the Trustee to transfer all
or a specified portion of the Trust assets to any other plan or
plans maintained by the Employer or the employer or employers of
a former Participant or Participants, provided that the Trustee
has received evidence satisfactory to it that such other plan
meets all applicable requirements of the Code. The assets so
transferred shall be accompanied by written instructions from the
Employer naming the persons for whose benefit such assets have
been transferred, showing separately the respective contributions
by the Employer and by each Participant, if any, and identifying
the assets attributable to the various contributions. The
Trustee shall have no further liabilities with respect to assets
so transferred.
14.10. Separate Trust or Fund for Existing Plan Assets. With
the consent of the Trustee, the Employer may maintain a trust or
fund (including a group annuity contract) under this prototype
plan document separate from the Trust Fund for Plan assets
purchased prior to the adoption of this prototype plan document
which are not Fidelity Funds listed in Section 1.14(b). The
Trustee shall have no authority and no responsibility for the
Plan assets held in such separate trust or fund. The duties and
responsibilities of the trustee of a separate trust 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
ministerial recordkeeping services for guaranteed investment
contracts held in the separate trust or fund. The guaranteed
investment contract(s) shall be valued as directed by the
Employer or the Trustee of the separate trust.
The trustee of the separate trust (hereafter referred to as
"trustee") will be the owner of any insurance contract purchased
prior to the adoption of this prototype plan document. The
insurance contract(s) must provide that proceeds will be payable
to the trustee, however the trustee shall be required to pay over
all proceeds of the contract(s) to the Participant's designated
Beneficiary in accordance with the distribution provisions of
this plan. A Participant's spouse will be the designated
Beneficiary of the proceeds in all circumstances unless a
qualified election has been made in accordance with Article 8.
Under no circumstances shall the trust retain any part of the
proceeds. In the event of any conflict between the terms of this
plan and the terms of any insurance contract purchased hereunder,
the plan provisions shall control.
Any life insurance contracts held in the Trust Fund or in
the separate trust are subject to the following limits:
(a) Ordinary life - For purposes of these incidental insurance
provisions, ordinary life insurance contracts are contracts with
both nondecreasing death benefits and nonincreasing premiums. If
such contracts are held, less than 1/2 of the aggregate employer
contributions allocated to any Participant will be used to pay
the premiums attributable to them.
(b) Term and universal life - No more than 1/4 of the aggregate
employer contributions allocated to any participant will be used
to pay the premiums on term life insurance contracts, universal
life insurance contracts, and all other life insurance contracts
which are not ordinary life.
(c) Combination - The sum of 1/2 of the ordinary life insurance
premiums and all other life insurance premiums will not exceed
1/4 of the aggregate employer contributions allocated to any
Participant.
14.11. Voting; Delivery of Information. The Trustee shall
deliver, or cause to be executed and delivered, to the Employer
or Plan Administrator all notices, prospectuses, financial
statements, proxies and proxy soliciting materials received by
the Trustee relating to securities held by the Trust or, if
applicable, deliver these materials to the appropriate
Participant or the Beneficiary of a deceased Participant. The
Trustee shall not vote any securities held by the Trust except in
accordance with the written instructions of the Employer,
Participant or the Beneficiary of the Participant, if the
Participant is deceased; provided, however, that the Trustee may,
in the absence of instructions, vote "present" for the sole
purpose of allowing such shares to be counted for establishment
of a quorum at a shareholders' meeting. The Trustee shall have
no duty to solicit instructions from Participants, the
Beneficiary or the Employer.
14.12. Compensation and Expenses of Trustee. The Trustee's fee
for performing its duties hereunder will be such reasonable
amounts as the Trustee may from time to time specify by written
agreement with the Employer. Such fee, any taxes of any kind
which may be levied or assessed upon or in respect of the Trust
Fund and any and all expenses, including without limitation legal
fees and expenses of administrative and judicial proceedings,
reasonably incurred by the Trustee in connection with its duties
and responsibilities hereunder will, unless some or all have been
paid by said Employer, be paid first from forfeitures resulting
under Section 7.07, then from the remaining Trust Fund and will,
unless allocable to the Accounts of particular Participants, be
charged against the respective Accounts of all Participants, in
such reasonable manner as the Trustee may determine.
14.13. Reliance by Trustee on Other Persons. The Trustee may
rely upon and act upon any writing from any person authorized by
the Employer or Administrator to give instructions concerning the
Plan and may conclusively rely upon and be protected in acting
upon any written order from the Employer or Administrator or upon
any other notice, request, consent, certificate, or other
instructions or paper reasonably believed by it to have been
executed by a duly authorized person, so long as it acts in good
faith in taking or omitting to take any such action. The Trustee
need not inquire as to the basis in fact of any statement in
writing received from the Employer or Administrator.
The Trustee will be entitled to rely on the latest
certificate it has received from the Employer or Administrator as
to any person or persons authorized to act for the Employer or
Administrator hereunder and to sign on behalf of the Employer or
Administrator any directions or instructions, until it receives
from the Employer or Administrator written notice that such
authority has been revoked.
Notwithstanding any provision contained herein, the Trustee
will be under no duty to take any action with respect to any
Participant's Account (other than as specified herein) unless and
until the Employer or Administrator furnishes the Trustee with
written instructions on a form acceptable to the Trustee, and the
Trustee agrees thereto in writing. The Trustee will not be
liable for any action taken pursuant to the Employer's or
Administrator's written instructions (nor for the collection of
contributions under the Plan, nor the purpose or propriety of any
distribution made thereunder).
14.14. Indemnification by Employer. The Employer shall
indemnify and save harmless the Trustee from and against any and
all liability to which the Trustee may be subjected by reason of
any act or conduct (except willful misconduct or negligence) in
its capacity as Trustee, including all expenses reasonably
incurred in its defense.
14.15. Consultation by Trustee with Counsel. The Trustee may
consult with legal counsel (who may be but need not be counsel
for the Employer or the Administrator) concerning any question
which may arise with respect to its rights and duties under the
Plan and Trust, and the opinion of such counsel will, to the
extent permitted by law, be full and complete protection in
respect of any action taken or omitted by the Trustee hereunder
in good faith and in accordance with the opinion of such counsel.
14.16. Persons Dealing with the Trustee. No person dealing with
the Trustee will be bound to see to the application of any money
or property paid or delivered to the Trustee or to inquire into
the validity or propriety of any transactions.
14.17. Resignation or Removal of Trustee. The Trustee may
resign at any time by written notice to the Employer, which
resignation shall be effective 60 days after delivery to the
Employer. The Trustee may be removed by the Employer by written
notice to the Trustee, which removal shall be effective 60 days
after delivery to the Trustee.
Upon resignation or removal of the Trustee, the Employer may
appoint a successor trustee. Any such successor trustee will,
upon written acceptance of his appointment, become vested with
the estate, rights, powers, discretion, duties and obligations of
the Trustee hereunder as if he had been originally named as
Trustee in this Agreement.
Upon resignation or removal of the Trustee, the Employer
will no longer participate in this prototype plan and will be
deemed to have adopted an individually designed plan. In such
event, the Employer shall appoint a successor trustee within said
60-day period and the Trustee will transfer the assets of the
Trust to the successor trustee upon receipt of sufficient
evidence (such as a determination letter or opinion letter from
the Internal Revenue Service or an opinion of counsel
satisfactory to the Trustee) that such trust will be a qualified
trust under the Code.
The appointment of a successor trustee shall be accomplished
by delivery to the Trustee of written notice that the Employer
has appointed such successor trustee, and written acceptance of
such appointment by the successor trustee. The Trustee may, upon
transfer and delivery of the Trust Fund to a successor trustee,
reserve such reasonable amount as it shall deem necessary to
provide for its fees, compensation, costs and expenses, or for
the payment of any other liabilities chargeable against the Trust
Fund for which it may be liable. The Trustee shall not be liable
for the acts or omissions of any successor trustee.
14.18. Fiscal Year of the Trust. The fiscal year of the Trust
will coincide with the Plan Year.
14.19. Discharge of Duties by Fiduciaries. The Trustee and the
Employer and any other fiduciary shall discharge their duties
under the Plan and this Trust Agreement solely in the interests
of Participants and their Beneficiaries in accordance with the
requirements of ERISA.
14.20. Amendment. In accordance with provisions of the Plan,
and subject to the limitations set forth therein, this Trust
Agreement may be amended by an instrument in writing signed by
the Employer and the Trustee. No amendment to this Trust
Agreement shall divert any part of the Trust Fund to any purpose
other than as provided in Section 2 hereof.
14.21. Plan Termination. Upon termination or partial
termination of the Plan or complete discontinuance of
contributions thereunder, the Trustee will make distributions to
the Participants or other persons entitled to distributions as
the Employer or Administrator directs in accordance with the
provisions of the Plan. In the absence of such instructions and
unless the Plan otherwise provides, the Trustee will notify the
Employer or Administrator of such situation and the Trustee will
be under no duty to make any distributions under the Plan until
it receives written instructions from the Employer or
Administrator. Upon the completion of such distributions, the
Trust will terminate, the Trustee will be relieved from all
liability under the Trust, and no Participant or other person
will have any claims thereunder, except as required by applicable
law.
14.22. Permitted Reversion of Funds to Employer. If it is
determined by the Internal Revenue Service that the Plan does not
initially qualify under Section 401 of the Code, all assets then
held under the Plan will be returned by the Trustee, as directed
by the Administrator, to the Employer, but only if the
application for determination is made by the time prescribed by
law for filing the Employer's return for the taxable year in
which the Plan was adopted or such later date as may be
prescribed by regulations. Such distribution will be made within
one year after the date the initial qualification is denied.
Upon such distribution the Plan will be considered to be
rescinded and to be of no force or effect.
Contributions under Plan are conditioned upon their
deductibility under Section 404 of the Code. In the event the
deduction of a contribution made by the Employer is disallowed
under Section 404 of the Code, such contribution (to the extent
disallowed) must be returned to the Employer within one year of
the disallowance of the deduction.
Any contribution made by the Employer because of a mistake
of fact must be returned to the Employer within one year of the
contribution.
14.23. Governing Law. This Trust Agreement will be construed,
administered and enforced according to ERISA and, to the extent
not preempted thereby, the laws of the Commonwealth of
Massachusetts.
Exhibit 10(e)(3)
Third Amendment to Amended and Restated
Richardson Electronics, Ltd.
Employees' Incentive Stock Option Plan
Dated August 15, 1996
Article IV, Administration shall be amended by deleting the first sentence of
paragraph 4.1 and replacing it with the following:
"4.1 The Committee to administer the plan shall be appointed by the board and
shall consist of no fewer than two members of the board. All members of the
Committee shall be persons who are "Non-Employee Directors" as that term is
defined by rule 16b-3 of the Securities and
Exchange Commission as in effect and interpreted from time to time.
Exhibit 10(f)(6)
Sixth Amendment to
Amended and Restated
Richardson Electronics, Ltd.
Employees' Stock Purchase Plan
Dated August 15, 1996
Article IV, Administration shall be amended by deleting the first
sentence of paragraph 4.2 and replacing it with the following:
"4.2 The Committee to administer the plan shall be appointed by
the board and shall consist of no fewer than two members of the
board. All members of the Committee shall be persons who are
"Non-Employee Directors" as that term is defined by rule 16b-3 of
the Securities and Exchange Commission as in effect and
interpreted from time to time.
Exhibit 10(h)(2)
AMENDMENT NO. 2 TO RESTATED
RICHARDSON ELECTRONICS, LTD.
EMPLOYEES STOCK OWNERSHIP PLAN
RICHARDSON ELECTRONICS, LTD., a Delaware corporation, hereby
amends the Richardson Electronics, Ltd. Employees Stock Ownership
Plan, as amended and restated on July 14, 1994, effective June 1,
1989, and as further amended (the "Plan'), as follows effective
March 6, 1996, to-wit:
1. Section 2.18(c) of the Plan is deleted in its entirety
and the following is substituted in its place:
(c) Service by an individual on behalf of any of the
following entities before he became an Employee shall be
considered service on behalf of the Employer for purposes of this
Section 2.18, to-wit: Amperex Division of North American Philips
Corp.; B-Scan, Inc.; Calvert Electronics, Inc.; Calvert Holding
Co., Inc.; Calvert Semi-Conductor, Inc.; Ceco Communications,
Inc.; Cetron Electronic Corporation; National Electronics
Division of Varian Associates, Inc,; and TubeMaster, Inc. (prior
to March 6, 1996).
2. Section 6.1(f) is added to the Plan to read as follows:
(f) For purposes of this Section 6.1, as well as Section
6.2, with respect to the Plan Year ending in 1996, remuneration
paid during such Plan Year to a Participant while employed by
TubeMaster, Inc. prior to March 6, 1996 shall not be taken into
account as compensation.
Exhibit 10(k)(2)
Second Amendment to
Richardson Electronics, Ltd.
Employees' Incentive Compensation Plan
Dated August 15, 1996
Article IV, Administration shall be amended by deleting the first
two sentences of paragraph 4.1 and replacing it with the
following:
"4.1 The Committee to administer the plan shall be appointed by
the board and shall consist of no fewer than two members of the
board. All members of the Committee shall be persons who are
"Non-Employee Directors" as that term is defined by rule 16b-3 of
the Securities and Exchange Commission as in effect and
interpreted from time to time.
Exhibit 10(l)(1)
First Amendment to
Richardson Electronics, Ltd.
Employees' 1994 Incentive Compensation Plan
Dated August 15, 1996
Article IV, Administration shall be amended by deleting the first
sentence of paragraph 4.1 and replacing it with the following:
"4.1 The Committee to administer the plan shall be appointed by
the board and shall consist of no fewer than two members of the
board. All members of the Committee shall be persons who are
"Non-Employee Directors" as that term is defined by rule 16b-3 of
the Securities and Exchange Commission as in effect and
interpreted from time to time.
EXHIBIT 10(t)(1)
CHUBB Executive Protection Policy
DECLARATIONS
EXECUTIVE PROTECTION POLICY
Policy Number 8125-64-60E
Federal Insurance Company, a stock
insurance company, incorporated under
the laws of Indiana, herein called the
Company.
Item 1. Parent Organization:
RICHARDSON ELECTRONICS, LTD.
40W267 KESLINGER ROAD
LA FOX, ILLINOIS
60147
Item 2. Policy Period: From 12:01 A.M. on MAY 31, 1996
To 12:01 A.M. MAY 31, 1997
Local time at the address shown in
Item 1.
Item 3. Coverage Summary
Description
GENERAL TERMS AND CONDITIONS
EXECUTIVE LIABILITY AND INDEMNIFICATION
FIDUCIARY LIABILITY
KIDNAP/RANSOM AND EXTORTION
Item 4. Termination of
Prior Policies: 8125-64-60D
THE EXECUTIVE LIABILITY AND INDEMNIFICATION, FIDUCIARY LIABILITY,
OUTSIDE DIRECTORSHIP LIABILITY AND EMPLOYMENT PRACTICES LIABILITY
COVERAGE SECTIONS (WHICHEVER ARE APPLICABLE) ARE ALL WRITTEN ON A
CLAIMS MADE BASIS. EXCEPT AS OTHERWISE PROVIDED, THESE COVERAGE
SECTIONS COVER ONLY CLAIMS FIRST MADE AGAINST THE INSURED DURING
THE POLICY PERIOD. PLEASE READ CAREFULLY.
In witness whereof, the Company issuing this policy has caused
this policy to be signed by its authorized officers, but it shall
not be valid unless also signed by a duly authorized
representative of the Company.
FEDERAL INSURANCE COMPANY
Henry G. Gulick Dean R. O'Hare
Secretary President
June 12, 1996 John S. Bain
Date Authorized
Representative
CHUBB Executive Protection Policy
General Terms and Conditions
Territory 1. Coverage shall extend anywhere in the world.
Terms and Conditions
2. Except for the General Terms and Conditions or
unless stated to the contrary in any coverage
section, the terms and conditions of each coverage
section of this policy apply only to that section
and shall not be construed to apply to any other
coverage section of this policy.
Limits of Liability and Deductible Amounts
3. Unless stated to the contrary in any coverage
section, the limits of liability and deductible
amounts shown for each coverage section of this
policy are separate limits of liability and
separate deductible amounts pertaining to the
coverage section for which they are shown; the
application of a deductible amount to a loss under
one coverage section of this policy shall not
reduce the deductible amount under any other
coverage section of this policy.
Notice 4. Notice to the Company under this policy shall be
given in writing addressed to:
Notice of Claim:
National Claims Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
All Other Notices:
Executive Protection Department
Chubb Group of Insurance Companies
15 Mountain View Road
Warren, New Jersey 07059
Such notice shall be effective on the date of
receipt by the Company at such address.
Investigation and Settlement
5. The Company may make any investigation it deems
necessary and may, with the written consent of the
Insured, make any settlement of a claim it deems
expedient. If the Insured withholds consent to
such settlement, the Company's liability for all
loss on account of such claim shall not exceed the
amount for which the Company could have settled
such claim plus costs, charges and expenses
accrued as of the date such settlement was proposed in
writing by the Company to the Insured.
Valuation and Foreign Currency
6. All premiums, limits, retentions, loss and other
amounts under this policy are expressed and
payable in the currency of the United States of America.
Except as otherwise provided in any coverage
section, if judgment is rendered, settlement is
denominated or another element of loss under this
policy is stated in a currency other than United
States of America dollars, payment under this
policy shall be made in United States dollars at
the rate of exchange published in the Wall Street
Journal on the date the final judgment is reached,
the amount of the settlement is agreed upon or the
other element of loss is due, respectively.
Subrogation
7. In the event of any payment under this policy, the
Company shall be subrogated to the extent of such
payment to all the Insured's rights of recovery,
and the Insured shall execute all papers required
and shall do everything necessary to secure and
preserve such rights, including the execution of
such documents necessary to enable the Company
effectively to bring suit in the name of the
Insured.
Action Against the Company
8. No action shall lie against the Company unless, as
a condition precedent thereto, there shall have
been full compliance with all the terms of this
policy. No person or organization shall have any
right under this policy to join the Company as a
party to any action against the Insured to
determine the Insured's liability nor shall the
Company be impleaded by the Insured or his legal
representatives. Bankruptcy or insolvency of an
Insured or of the estate of an Insured shall not
relieve the Company of its obligations nor deprive
the Company of its rights under this policy.
Authorization Clause
9. By acceptance of this policy, the Parent
Organization agrees to act on behalf of all
Insureds with respect to the giving and receiving
of notice of claim or termination, the payment of
premiums and the receiving of any return premiums
that may become due under this policy, the
negotiation, agreement to and acceptance of
endorsements, and the giving or receiving of any
notice provided for in this policy (except the
giving of notice to apply for the Extended
Reporting Period), and the Insureds agree that the
Parent Organization shall act on their behalf.
Alteration and Assignment
10. No change in, modification of, or assignment of
interest under this policy shall be effective
except when made by a written endorsement to this
policy which is signed by an authorized employee
of Chubb & Son Inc.
Termination of Policy or Coverage Section
11. This policy or any coverage section shall
terminate at the earliest of the following times:
(A) sixty days after the receipt by the Parent
Organization of a written notice of
termination from the Company,
(B) upon the receipt by the Company of written
notice of termination from the Parent
Organization,
(C) upon expiration of the Policy Period as set
forth in Item 2 of the Declarations of this
policy, or
(D) at such other time as may be agreed upon by
the Company and the Parent Organization.
The Company shall refund the unearned premium
computed at customary short rates if the policy or
any coverage section is terminated by the Parent
Organization. Under any other circumstances the
refund shall be computed pro rata.
Termination of Prior Bonds or Policies
12. Any bonds or policies issued by the Company or its
affiliates and specified in Item 4 of the
Declarations of this policy shall terminate, if
not already terminated, as of the inception date
of this policy. Such prior bonds or policies
shall not cover any loss under the Crime or
Kidnap/Ransom & Extortion coverage sections not
discovered and notified to the Company prior to
the inception date of this policy.
Definitions
13. When used in this policy:
Parent Organization means the organization
designated in Item 1 of the Declarations of this
policy.
Policy Period means the period of time specified
in Item 2 of the Declarations of this policy,
subject to prior termination in accordance with
Subsection 11 above. If this period is less than
or greater than one year, then the Limits of
Liability specified in the Declarations for each
coverage section shall be the Company's maximum
limit of liability under such coverage section for
the entire period.
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: GENERAL TERMS
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 1
Effective date of
this endorsement: MAY 31, 1996
To be attached to and form part of Policy No. 8125-64-60E
Issued to: RICHARDSON ELECTRONICS, LTD.
ILLINOIS AMENDATORY ENDORSEMENT
It is agreed that:
Subsection 11, "Termination of Policy or Coverage Section", of
the General Terms and Conditions is amended by the following:
CANCELLATION
All notices of cancellation of insurance must be mailed at least
30 days prior to the effective date of cancellation during the
first 60 days of coverage. After the policy or coverage section
has been effective for 61 days or more, all notices must be
mailed at least 60 days prior to the effective date of
cancellation. All such notices shall include a specific
explanation of the reason or reasons for cancellation and shall
be mailed to the Parent Organization and mortgagee or lien
holder, if known, at the last mailing address known to the
company. However, where cancellation is for nonpayment of
premium, at least 10 days notice of cancellation shall be given.
No policy or coverage section which has been in effect for 60
days may be cancelled except for one of the following reasons:
(a) Nonpayment of premium;
(b) The policy or coverage section was obtained through a
material misrepresentation;
(c) Any insured violated any of the terms and conditions of
the policy or coverage section;
(d) The risk originally accepted has measurably increased;
(e) Certification to the Director of the loss of
reinsurance by the insurer which provided coverage to
the insurer for all or a substantial part of the
underlying risk insured; or,
(f) A determination by the Director that the continuation
of the policy or coverage section could place the
insurer in violation of the insurance laws of this
state.
NONRENEWAL AND EXTENDED REPORTING PERIOD
No company shall fail to renew any policy or coverage section of
insurance unless it shall send by mail to the Parent Organization
at least 60 days advance notice of its intention not to renew.
The company shall maintain proof of the mailing of such notice on
one of the following forms: a recognized U.S. Post Office form or
a form acceptable to the U.S. Post Office or other commercial
mail delivery service. An exact and unaltered copy of such
notice shall also be sent to the Parent Organization's broker, if
known, or the agent of record and to the mortgagee or lien holder
at the last mailing address known by the company. However, where
cancellation is for nonpayment of premium, at least 10 days
notice of cancellation shall be given.
Should a company fail to comply with the notice requirements, the
policy or coverage section shall terminate only as provided in
this Subsection. In the event notice is provided at least 31
days, but less than 60 days prior to expiration of the policy or
coverage section, the policy or coverage section shall be
extended for a period of 60 days or until the effective date of
any similar insurance procured by the Insured, whichever is less,
on the same terms and conditions as the policy or coverage
section sought to be terminated. In the event notice is provided
less than 31 days prior to the expiration of the policy or
coverage section, the policy or coverage section shall be
extended for a period of one year or until the effective date of
any similar insurance procured by the insured, whichever is less,
on the same terms and conditions as the policy or coverage
section sought to be terminated unless the insurer has manifested
its willingness to renew at a premium which represents an
increase not exceeding 30%. The premium for coverage shall be
prorated in accordance with the amount of the last year's
premium, and the company shall be entitled to this premium for
the extension of coverage and such extension may be contingent
upon the payment of such premium.
Renewal of a policy or coverage section does not constitute a
waiver or estoppel with respect to grounds for cancellation which
existed before the effective date of such renewal.
In all notices of intention not to renew any policy or coverage
section for insurance, the company shall provide a specific
explanation of the reasons for nonrenewal.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
CHUBB Executive Protection Policy
DECLARATIONS
EXECUTIVE LIABILITY AND
INDEMNIFICATION COVERAGE SECTION
Item 1. Parent Organization:
RICHARDSON ELECTRONICS, LTD.
Item 2. Limits of Liability:
(A) Each Loss $15,000,000.
(B) Each Policy Period $15,000,000.
Note that the limits of liability and any deductible or
retention are reduced or exhausted by Defense Costs.
Item 3. Coinsurance Percent: NONE
Item 4. Deductible Amount:
Insuring Clause 2 $ 500,000.
Item 5. Insured Organization:
Richardson Electronics, Ltd.
and its Subsidiaries.
Item 6. Insured Persons:
Any person who has been, now is, or shall become a duly
elected director or a duly elected or appointed officer
of the Insured Organization.
Item 7. Extended Reporting Period:
(A) Additional Premium: 75% of the annual premium
(B) Additional Period: one year
Item 8. Pending or Prior Date: October 12, 1983
Item 9. Continuity Date: October 12, 1983
CHUBB Executive Protection Policy
Executive Liability
and Indemnification
Coverage Section
In consideration of payment of the premium and subject
to the Declarations, General Terms and Conditions, and
the limitations, conditions, provisions and other terms
of this coverage section, the Company agrees as
follows:
Insuring Clauses
Executive Liability Coverage
Insuring Clause 1
1. The Company shall pay on behalf of each of the
Insured Persons all Loss for which the Insured
Person is not indemnified by the Insured
Organization and which the Insured Person becomes
legally obligated to pay on account of any Claim
first made against him, individually or otherwise,
during the Policy Period or, if exercised, during
the Extended Reporting Period, for a Wrongful Act
committed, attempted, or allegedly committed or
attempted by such Insured Person before or during
the Policy Period.
Executive Indemnification Coverage
Insuring Clause 2
2. The Company shall pay on behalf of the Insured
Organization all Loss for which the Insured
Organization grants indemnification to each
Insured Person, as permitted or required by law,
which the Insured Person has become legally
obligated to pay on account of any Claim first
made against him, individually or otherwise,
during the Policy Period or, if exercised, during
the Extended Reporting Period, for a Wrongful Act
committed, attempted, or allegedly committed or
attempted by such Insured Person before or during
the Policy Period.
Estates and Legal Representatives
3. Subject otherwise to the General Terms and
Conditions and the limitations, conditions,
provisions and other terms of this coverage
section, coverage shall extend to Claims for the
Wrongful Acts of Insured Persons made against the
estates, heirs, legal representatives or assigns
of Insured Persons who are deceased or against the
legal representatives or assigns of Insured
Persons who are incompetent, insolvent or
bankrupt.
Extended Reporting Period
4. If the Company terminates or refuses to renew this
coverage section other than for nonpayment of
premium, the Parent Organization and the Insured
Persons shall have the right, upon payment of the
additional premium set forth in Item 7(A) of the
Declarations for this coverage section, to an
extension of the coverage granted by this coverage
section for the period set forth in Item 7(B) of
the Declarations for this coverage section
(Extended Reporting Period) following the
effective date of termination or nonrenewal, but
only for any Wrongful Act committed, attempted, or
allegedly committed or attempted, prior to the
effective date of termination or nonrenewal. This
right of extension shall lapse unless written
notice of such election, together with payment of
the additional premium due, is received by the
Company within 30 days following the effective
date of termination or nonrenewal. Any Claim made
during the Extended Reporting Period shall be
deemed to have been made during the immediately
preceding Policy Period.
If the Parent Organization terminates or declines
to accept renewal, the Company may, if requested,
at its sole option, grant an Extended Reporting
Period. The offer of renewal terms and conditions
or premiums different from those in effect prior
to renewal shall not constitute refusal to renew.
Exclusions
Exclusions Applicable to Insuring Clauses 1 and 2
5. The Company shall not be liable for Loss on
account of any Claim made against any Insured
Person:
(a) based upon, arising from, or in consequence
of any circumstance if written notice of such
circumstance has been given under any policy
or coverage section of which this coverage
section is a renewal or replacement and if
such prior policy or coverage section affords
coverage (or would afford such coverage
except for the exhaustion of its limits of
liability) for such Loss, in whole or in
part, as a result of such notice;
(b) based upon, arising from, or in consequence
of any demand, suit or other proceeding
pending, or order, decree or judgement
entered against any Insured on or prior to
the Pending or Prior Date set forth in Item 8
of the Declarations for this coverage
section, or the same or any substantially
similar fact, circumstance or situation
underlying or alleged therein;
(c) brought or maintained by or on behalf of any
Insured except:
(i) a Claim that is a derivative action
brought or maintained on behalf of an
Insured Organization by one or more
persons who are not Insured Persons and
who bring and maintain the Claim without
the solicitation, assistance or
participation of any Insured,
(ii) a Claim brought or maintained by an
Insured Person for the actual or alleged
wrongful termination of the Insured
Person, or
(iii) a Claim brought or maintained by an
Insured Person for contribution or
indemnity, if the Claim directly results
from another Claim covered under this
coverage section;
(d) for an actual or alleged violation of the
responsibilities, obligations or duties
imposed by the Employee Retirement Income
Security Act of 1974 and amendments thereto
or similar provisions of any federal, state
or local statutory law or common law upon
fiduciaries of any pension, profit sharing,
health and welfare or other employee benefit
plan or trust established or maintained for
the purpose of providing benefits to
employees of an Insured Organization;
(e) for bodily injury, mental or emotional
distress, sickness, disease or death of any
person or damage to or destruction of any
tangible property including loss of use
thereof; or
(f) based upon, arising from, or in consequence
of (i) the actual, alleged or threatened
discharge, release, escape or disposal of
Pollutants into or on real or personal
property, water or the atmosphere; or (ii)
any direction or request that the Insured
test for, monitor, clean up, remove, contain,
treat, detoxify or neutralize Pollutants, or
any voluntary decision to do so; including
but not limited to any Claim for financial
loss to the Insured Organization, its
security holders or its creditors based upon,
arising from, or in consequence of the
matters described in (i) or (ii) of this
exclusion.
Exclusions Applicable to Insuring Clause 1 Only
6. The Company shall not be liable under Insuring
Clause 1 for Loss on account of any Claim made
against any Insured Person:
(a) for an accounting of profits made from the
purchase or sale by such Insured Person of
securities of the Insured Organization within
the meaning of Section 16 (b) of the
Securities Exchange Act of 1934 and
amendments thereto or similar provisions of
any federal, state or local statutory law or
common law;
(b) based upon, arising from, or in consequence
of any deliberately fraudulent act or
omission or any willful violation of any
statute or regulation by such Insured Person,
if a judgement or other final adjudication
adverse to the Insured Person establishes
such a deliberately fraudulent act or
omission or willful violation; or
(c) based upon, arising from, or in consequence
of such Insured Person having gained in fact
any personal profit, remuneration or
advantage to which such Insured Person was
not legally entitled.
Severability of Exclusions
7. With respect to the Exclusions in Subsections 5
and 6 of this coverage section, no fact pertaining
to or knowledge possessed by any Insured Person
shall be imputed to any other Insured Person to
determine if coverage is available.
Limit of Liability, Deductible and Coinsurance
8. For the purposes of this coverage section, all
Loss arising out of the same Wrongful Act and all
Interrelated Wrongful Acts of any Insured Person
shall be deemed one Loss, and such Loss shall be
deemed to have originated in the earliest Policy
Period in which a Claim is first made against any
Insured Person alleging any such Wrongful Act or
Interrelated Wrongful Acts.
The Company's maximum liability for each Loss,
whether covered under Insuring Clause 1 or
Insuring Clause 2 or both, shall be the Limit of
Liability for each Loss set forth in Item 2(A) of
the Declarations for this coverage section. The
Company's maximum aggregate liability for all Loss
on account of all Claims first made during the
same Policy Period, whether covered under Insuring
Clause 1 or Insuring Clause 2 or both, shall be
the Limit of Liability for each Policy Period set
forth in Item 2(B) of the Declarations for this
coverage section.
The Company's liability under Insuring Clause 2
shall apply only to that part of each Loss which
is excess of the Deductible Amount set forth in
Item 4 of the Declarations for this coverage
section and such Deductible Amount shall be borne
by the Insureds uninsured and at their own risk.
If a single Loss is covered in part under Insuring
Clause 1 and in part under Insuring Clause 2, the
Deductible Amount applicable to the Loss shall be
the Insuring Clause 2 deductible set forth in Item
4 of the Declarations for this coverage section.
With respect to all Loss (excess of the applicable
Deductible Amount) originating in any one Policy
Period, the Insureds shall bear uninsured and at
their own risk that percent of all such Loss
specified as the Coinsurance Percent in Item 3 of
the Declarations for this coverage section, and
the Company's liability hereunder shall apply only
to yhe remaining percent of all such Loss.
Any Loss covered in whole or in part by this
coverage section and the Employment Practices
Liability coverage section of this policy (if
purchased) shall be subject to the limits of
liability, deductible and coinsurance percent
applicable to such other coverage section;
provided, however, if any limit of liability
applicable to such other coverage section is
exhausted with respect to such Loss, any remaining
portion of such Loss otherwise covered by this
coverage section shall be subject to the Limits of
Liability and Coinsurance Percent applicable to
this coverage section, as reduced by the amount of
such Loss otherwise covered by this coverage
section which is paid by the Company pursuant to
such other coverage section.
For purposes of this Subsection 8 only, the
Extended Reporting Period, if exercised, shall be
part of and not in addition to the immediately
preceding Policy Period.
Presumptive Indemnification
9. If the Insured Organization.
(a) fails or refuses, other than for reason of
Financial Impairment, to indemnify the
Insured Person for Loss; and
(b) is permitted or required to indemnify the
Insured Person for such Loss pursuant to:
(i) the by-laws or certificate of
incorporation of the Insured
Organization in effect at the inception
of this coverage section, or
(ii) any subsequently amended or superseding
by-laws or certificate of incorporation
of the Insured Organization provided,
however, that such amended or
superseding by-laws or certificate of
incorporation expand or broaden, and do
not restrict or in any way limit, the
Insured Organization's ability to
indemnify the Insured Person;
then, notwithstanding any other conditions,
provisions or terms of this coverage section
to the contrary, any payment by the Company
of such Loss shall be subject to (i) the
Insuring Clause 2 Deductible Amount set forth
in Item 4 of the Declarations for this
coverage section, and (ii) all of the
Exclusions set forth in Subsections 5 and 6
of this coverage section.
For purposes of this Subsection 9, the
shareholder and board of director resolutions
of the Insured Organization shall be deemed
to provide indemnification for such Loss to
the fullest extent permitted by such by-laws
or certificate of incorporation.
Reporting and Notice
10. The Insureds shall, as a condition precedent to
exercising their rights under this coverage
section, give to the Company written notice as
soon as practicable of any Claim made against any
of them for a Wrongful Act.
If during the Policy Period or Extended Reporting
Period (if exercised) an Insured becomes aware of
circumstances which could give rise to a Claim and
gives written notice of such circumstance(s) to
the Company, then any Claims subsequently arising
from such circumstances shall be considered to
have been made during the Policy Period or the
Extended Reporting Period in which the
circumstances were first reported to the Company.
The Insureds shall, as a condition precedent to
exercising their rights under this coverage
section, give to the Company such information and
cooperation as it may reasonably require,
including but not limited to a description of the
Claim or circumstances, the nature of the alleged
Wrongful Act, the nature of the alleged or
potential damage, the names of actual or potential
claimants, and the manner in which the Insured
first became aware of the Claim or circumstances.
Defense and Settlement
11. Subject to this Subsection, it shall be the duty
of the Insured Persons and not the duty of the
Company to defend Claims made against the Insured
Persons.
The Insureds agree not to settle any Claim, incur
any Defense Costs or otherwise assume any
contractual obligation or admit any liability with
respect to any Claim without the Company's written
consent, which shall not be unreasonably withheld.
The Company shall not be liable for any
settlement, Defense Costs, assumed obligation or
admission to which it has not consented.
The Company shall have the right and shall be
given the opportunity to effectively associate
with the Insureds in the investigation, defense
and settlement, including but not limited to the
negotiation of a settlement, of any Claim that
appears reasonably likely to be covered in whole
or in part by this coverage section.
The Insureds agree to provide the Company with all
information, assistance and cooperation which the
Company reasonably requests and agree that in the
event of a Claim the Insureds will do nothing that
may prejudice the Company's position or its
potential or actual rights of recovery.
Defense Costs are part of and not in addition to
the Limits of Liability set forth in Item 2 of the
Declarations for this coverage section, and the
payment by the Company of Defense Costs reduces
such Limits of Liability.
Allocation
12. If both Loss covered by this coverage section and
loss not covered by this coverage section are
incurred, either because a Claim against the
Insured Persons includes both covered and
uncovered matters or because a Claim is made
against both an Insured Person and others,
including the Insured Organization, the Insureds
and the Company shall use their best efforts to
agree upon a fair and proper allocation of such
amount between covered Loss and uncovered loss.
If the Insureds and the Company agree on an
allocation of Defense Costs, the Company shall
advance on a current basis Defense Costs allocated
to the covered Loss. If the Insureds and the
Company cannot agree on an allocation:
(a) no presumption as to allocation shall exist
in any arbitration, suit or other proceeding;
(b) the Company shall advance on a current basis
Defense Costs which the Company believes to
be covered under this coverage section until
a different allocation is negotiated,
arbitrated or judicially determined; and
(c) the Company, if requested by the Insureds,
shall submit the dispute to binding
arbitration. The rules of the American
Arbitration Association shall apply except
with respect to the selection of the
arbitration panel, which shall consist of one
arbitrator selected by the Insureds, one
arbitrator selected by the Company, and a
third independent arbitrator selected by the
first two arbitrators.
Any negotiated, arbitrated or judicially
determined allocation of Defense Costs on account
of a Claim shall be applied retroactively to all
Defense Costs on account of such Claim,
notwithstanding any prior advancement to the
contrary. Any allocation or advancement of
Defense Costs on account of a Claim
shall not apply to or create any presumption with
respect to the allocation of other Loss on account
of such Claim.
Other Insurance
13. If any Loss arising from any Claim made against
any Insured Persons is insured under any other
valid policy(ies), prior or current, then this
coverage section shall cover such Loss, subject to
its limitations, conditions, provisions and other
terms, only to the extent that the amount of such
Loss is in excess of the amount of payment from
such other insurance whether such other insurance
is stated to be primary, contributory, excess,
contingent or otherwise, unless such other
insurance is written only as specific excess
insurance over the Limits of Liability provided in
this coverage section.
Changes in Exposure Acquisition or Creation of Another
Organization
14. If the Insured Organization (i) acquires
securities or voting rights in another
organization or creates another organization,
which as a result of such acquisition or creation
becomes a Subsidiary, or (ii) acquires any
organization by merger into or consolidation with
an Insured Organization, such organization and its
Insured Persons shall be Insureds under this
coverage section but only with respect to Wrongful
Acts committed, attempted, or allegedly committed
or attempted, after such acquisition or creation
unless the Company agrees, after presentation of a
complete application and all appropriate
information, to provide coverage by
endorsement for Wrongful Acts committed,
attempted, or allegedly committed or attempted, by
such Insured Persons prior to such acquisition or
creation.
If the fair value of all cash, securities, assumed
indebtedness and other consideration paid by the
Insured Organization for any such acquisition or
creation exceeds 10% of the total assets of the
Parent Organization as reflected in the Parent
Organization's most recent audited consolidated
financial statements, the Parent Organization
shall give written notice of such acquisition or
creation to the Company as soon as practicable
together with such information as the Company may
require and shall pay any reasonable additional
premium required by the Company.
Acquisition of Parent Organization by Another Organization
15. If (i) the Parent Organization merges into or
consolidates with another organization, or (ii)
another organization or person or group of
organizations and/or persons acting in concert
acquires securities or voting rights which result
in ownership or voting control by the other
organization(s) or person(s) of more than 50% of
the outstanding securities representing the
present right to vote for the election of
directors of the Parent Organization, coverage
under this coverage section shall continue until
termination of this coverage section, but only
with respect to Claims for Wrongful Acts
committed, attempted, or allegedly committed or
attempted, by Insured Persons prior to such
merger, consolidation or acquisition. The Parent
Organization shall give written notice of such
merger, consolidation or acquisition to the
Company as soon as practicable together with such
information as the Company may require.
Cessation of Subsidiaries
16. In the event an organization ceases to be a
Subsidiary before or after the Inception Date of
this coverage section, coverage with respect to
such Subsidiary and its Insured Persons shall
continue until termination of this coverage
section but only with respect to Claims for
Wrongful Acts committed, attempted or allegedly
committed or attempted prior to the date such
organization ceased to be a Subsidiary.
Representations and Severability
17. In granting coverage to any one of the Insureds,
the Company has relied upon the declarations and
statements in the written application for this
coverage section and upon any declarations and
statements in the original written application
submitted to another insurer in respect of the
prior coverage incepting as of the Continuity Date
set forth in Item 9 of the Declarations for this
coverage section. All such declarations and
statements are the basis of such coverage and
shall be considered as incorporated in and
constituting part of this coverage section.
Such written application(s) for coverage shall be
construed as a separate application for coverage
by each of the Insured Persons. With respect to
the declarations and statements contained in such
written application(s) for coverage, no statement
in the application or knowledge possessed by any
Insured Person shall be imputed to any other
Insured Person for the purpose of determining if
coverage is available.
Definitions
18. When used in this coverage section:
Claim means:
(i) a written demand for monetary damages,
(ii) a civil proceeding commenced by the service
of a complaint or similar pleading,
(iii) a criminal proceeding commenced by a return
of an indictment, or
(iv) a formal administrative or regulatory
proceeding commenced by the filing of a
notice of charges, formal investigative order
or similar document, against any Insured
Person for a Wrongful Act, including any
appeal therefrom.
Defense Costs means that part of Loss consisting
of reasonable costs, charges, fees (including but
not limited to attorneys' fees and experts' fees)
and expenses (other than regular or overtime
wages, salaries or fees of the directors, officers
or employees of the Insured Organization) incurred
in defending or investigating Claims and the
premium for appeal, attachment or similar bonds.
Financial Impairment means the status of the
Insured Organization resulting from (i) the
appointment by any state or federal official,
agency or court of any receiver, conservator,
liquidator, trustee, rehabilitator or similar
official to take control of, supervise, manage or
liquidate the Insured Organization, or (ii) the
Insured Organization becoming a debtor in
possession.
Insured, either in the singular or plural, means
the Insured Organization and any Insured Person.
Insured Capacity means the position or capacity
designated in Item 6 of the Declarations for this
coverage section held by any Insured Person but
shall not include any position or capacity in any
organization other than the Insured Organization,
even if the Insured Organization directed or
requested the Insured Person to serve in such
other position or capacity.
Insured Organization means, collectively, those
organizations designated in Item 5 of the
Declarations for this coverage section.
Insured Person, either in the singular or plural,
means any one or more of those persons designated
in Item 6 of the Declarations for this coverage
section.
Interrelated Wrongful Acts means all causally
connected Wrongful Acts.
Loss means the total amount which any Insured
Person becomes legally obligated to pay on account
of each Claim and for all Claims in each Policy
Period and the Extended Reporting Period, if
exercised, made against them for Wrongful Acts for
which coverage applies, including, but not limited
to, damages, judgements, settlements, costs and
Defense Costs. Loss does not include (i) any
amount not indemnified by the Insured Organization
for which the Insured Person is absolved from
payment by reason of any covenant, agreement or
court order, (ii) any amount incurred by the
Insured Organization (including its board of
directors or any committee of the board of
directors) in connection with the investigation or
evaluation of any Claim or potential Claim by or
on behalf of the Insured Organization, (iii) fines
or penalties imposed by law or the multiple
portion of any multiplied damage award, or (iv)
matters uninsurable under the law pursuant to
which this coverage section is construed.
Pollutants means any substance located anywhere in
the world exhibiting any hazardous characteristics
as defined by, or identified on a list of
hazardous substances issued by, the United States
Environmental Protection Agency or a state,
county, municipality or locality counterpart
thereof. Such substances shall include, without
limitation, solids, liquids, gaseous or thermal
irritants, contaminants or smoke, vapor, soot,
fumes, acids, alkalis, chemicals or waste
materials. Pollutants shall also mean any other
air emission, odor, waste water, oil or oil
products, infectious or medical waste, asbestos or
asbestos products and any noise.
Subsidiary, either in the singular or plural,
means any organization in which more than 50% of
the outstanding securities or voting rights
representing the present right to vote for
election of directors is owned or controlled,
directly or indirectly, in any combination, by one
or more Insured Organizations.
Wrongful Act means any error, misstatement,
misleading statement, act, omission, neglect, or
breach of duty committed, attempted, or allegedly
committed or attempted, by an Insured Person,
individually or otherwise, in his Insured
Capacity, or any matter claimed against him solely
by reason of his serving in such Insured Capacity.
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 1
Effective date of this endorsement: MAY 31, 1996
Issued to: RICHARDSON ELECTRONICS, LTD.
To be attached to and form part of Policy No. 8125-64-60E
ILLINOIS AMENDATORY ENDORSEMENT
It is agreed that:
Subsection 4, "Extended Reporting Period", shall be deleted and
replaced by the following:
EXTENDED REPORTING PERIOD
4. If the Company or the Insured terminates or refuses to renew
this coverage section, the Parent Organization and the
Insured Persons shall have the right, upon payment of the
additional premium set forth in Item 7(A) of the
Declarations for this coverage section, to an extension of
the coverage granted by the coverage section for a period of
one year as set forth in Item 7(B) of the Declarations for
this coverage section (Extended Reporting Period) following
the effective date of termination or nonrenewal, but only
for any Wrongful Act committed, attempted, or allegedly
committed or attempted, prior to the effective date of
termination or nonrenewal. This right of extension shall
lapse unless written notice of such election, together with
payment of the additional premium due, is received by the
Company within 30 days following the effective date of
termination or nonrenewal. Any Claim made during the
Extended Reporting Period shall be deemed to have
been made during the immediately preceding Policy Period.
It is further agreed that Subsection 18, "Definitions", shall be
amended by deleting Defense Costs and replacing it with the
following:
Defense Costs means that part of Loss consisting of
reasonable costs, charges, fees (including but not limited to
attorneys' fees and experts' fees) and expenses (other than
regular or overtime wages, salaries or fees of the directors,
officers or employees of the Insured Organization or the salaries
of the employees, officers or staff attorneys of the Company)
incurred in defending or investigating Claims and the premium
for appeal, attachment or similar bonds.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 2
Effective date of this endorsement: MAY 31, 1996
Issued to: RICHARDSON ELECTRONICS, LTD.
To be attached to and form part of Policy No. 8125-64-60E
It is agreed that Item 6 of the Declarations page, Insured
Persons, is amended to include the following:
Microwave Business Unit Manager
Broadcast Business Unit Manager
U.S. Export/Israel Regional Sales Manager
Regional Product Marketing Manager ROW
Regional Sales Manager Germany
Regional Sales Manager Italy
Industrial Business Unit Manager
Display Products Group Business Unit Manager
Solid State Components Business Unit Manager
Regional Sales Manager RDM
REEL Operations Manager
Western Region Sales Manager
Director General - REISA
Manager, Marketing Operations Europe
Regional Sales Manager France
Canada Region Sales Manager
Medical Business Unit Manager
Eastern Region Sales Manager
PL 240 RF Business Unit Manager
Singapore/Japan/Far East Regional Sales Manager
Regional Sales Manager REEL
Sales Administration Manager ROW
Regional Product Marketing Manager
Industrial
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 3
Effective date of this endorsement: MAY 31, 1996
Issued to: RICHARDSON ELECTRONICS, LTD.
To be attached to and form part of Policy No. 8125-64-60E
It is agreed that:
1. This coverage section is amended by adding the following:
Insured Organization Coverage
Insuring Clause 3
The Company shall pay on behalf of any Insured Organization
all Loss for which it becomes legally obligated to pay on
account of any Claim first made against it during the Policy
Period or, if exercised, during the Extended Reporting
Period, for a Wrongful Act committed, attempted, or
allegedly committed or attempted, by any Insured before or
during the Policy Period.
2. Subsection 18, Definitions, is amended as follows.
a. The definitions of Claim and Wrongful Act are deleted
in their entirety and the following is inserted:
Claim means:
(a) For purposes of coverage under Insuring Clauses 1
or 2:
(i) a written demand for monetary or non-monetary
damages;
(ii) a civil proceeding commenced by the service
of a complaint or similar pleading;
(iii) a criminal proceeding commenced by the
return of an indictment; or
(iv) a formal administrative or regulatory
proceeding commenced by the filing of a
notice of charges, formal investigative order
or similar document.
against any Insured Person for a Wrongful Act,
including any appeal therefrom;
(b) For purposes of coverage under Insuring Clause 3:
(i) a written demand for monetary or non-monetary
damages;
(ii) a civil proceeding commenced by the service
of a complaint or similar pleading; or
(iii) a criminal proceeding commenced by the
return of an indictment;
against any Insured Organization for a Wrongful
Act, including any appeal therefrom.
Wrongful Act means:
(a) For purposes of coverage under Insuring Clauses 1
or 2, any error, misstatement, misleading
statement, act, omission, neglect, or breach of
duty committed, attempted, or allegedly committed
or attempted, by any Insured Person, individually
or otherwise, in his Insured Capacity, or any
matter claimed against him solely by reason of
serving in such Insured Capacity;
(b) For purposes of coverage under Insuring Clause 3,
any error, misstatement, misleading statement,
act, omission, neglect, or breach of duty
committed, attempted, or allegedly committed or
attempted, by any Insured based upon, arising
from, or in consequence of a Securities
Transaction.
b. The following definition is added:
Securities Transaction means the purchase or sale of,
or offer to purchase or sell, any securities issued by
any Insured Organization.
c. The definitions of Insured Person and Loss are amended
by adding the following:
Insured Person also means:
(i) For purposes of coverage under Insuring Clause 1
or 2, any past, present or future employee of the
Insured Organization, but only for Wrongful acts
based upon, arising from or in consequence of any
Securities Transaction; and
(ii) For purposes of coverage under Insuring Clause 3,
the Insured Organization.
Loss does not include any amount allocated to uncovered
loss pursuant to subsection 12, Allocation. For
purposes of coverage under Insuring Clause 3, Loss
includes punitive or exemplary damages which any
Insured Organization becomes legally obligated to pay,
provided the punitive or exemplary damages are
otherwise covered under Insuring Clause 3 and are
insurable under the law pursuant to which this coverage
section is construed.
3. The heading for subsection 5 is deleted din its entirety and
the following is inserted:
Exclusions Applicable to all Insuring Clauses
4. Subsection 5, Exclusions: Exclusions Applicable to all
Insuring Clauses, is amended by adding the following to
paragraph (c):
(iv) a Claim that is brought by any Insured Person
identified in section 2c(i) of this endorsement for any
Wrongful Act based upon, arising from or in consequence
of any Securities Transaction.
5. Exclusions is amended by adding the following subsections:
Exclusions Applicable to Insuring Clause 3 Only
6A. The Company shall not be liable under Insuring Clause 3
for Loss on account of any Claim made against any
Insured Organization:
(a) based upon, arising from, or in consequence of any
deliberately fraudulent act or omission or any
willful violation of any statute or regulation by
any past, present or future chief financial
officer, President or Chairman if a judgment or
other final adjudication adverse to the Insured
Organization establishes such a deliberately
fraudulent act or omission or willful violation.
6B. The Company shall not be liable under Insuring Clause 3
for that part of Loss, other than Defense Costs:
(a) which is based upon, arises from, or is in
consequence of the actual or proposed payment by
any Insured Organization of allegedly inadequate
or excessive consideration in connection with its
purchase of securities issued by any Insured
Organization; or
(b) which is based upon, arises from, or is in
consequence of any Insured Organization having
gained in fact any profit or advantage to which it
was not legally entitled.
6. The second, third and fourth paragraphs of subsection 8,
Limit of Liability, Deductible and Coinsurance, are deleted
in their entirety and the following is inserted:
The Company's maximum liability for each Loss, whether
covered under one or more Insuring Clauses, shall be the
Limit of Liability for each Loss set forth in Item 2(a) of
the Declarations for this coverage section. The Company's
maximum aggregate liability for all Loss on account of all
Claims first made during the same Policy Period, whether
covered under one or more Insuring Clauses, shall be the
Limit of Liability for each Policy Period set forth in Item
2(B) of the Declarations for this coverage section.
The Company's liability under Insuring Clause 2 or Insuring
Clause 3 shall apply only to that part of each Loss which is
excess of the Deductible Amount set forth in Item 4 of the
Declarations for this coverage section, and such Deductible
Amount shall be borne by the Insureds uninsured and at their
own risk. However, the Deductible Amount applicable to each
Loss on account of any Claim for any Wrongful Acts based
upon, arising from or in consequence of any Securities
Transaction shall:
(a) apply only to that part of Loss which constitutes
Defense Costs; and
(b) not apply if:
(i) a final adjudication with prejudice pursuant
to a trial, motion to dismiss or motion for
summary judgment in such Claim, or
(ii) a complete and final settlement of such Claim
with prejudice,
establishes that no Insured in such claim is
liable for any Loss, other than Defense Costs.
The Company shall reimburse any Insured which has funded a
Deductible Amount if such amount subsequently becomes
inapplicable based upon (i) or (ii) above.
The maximum Deductible Amount applicable to a single Loss
which is covered under more than one Insuring Clause shall
be the amount set forth in Item 4 of the Declarations for
this coverage section.
7. The first paragraph of subsection 12, Allocation, is deleted
in its entirety and the following is inserted:
(a) If a Claim based on, arising from or in consequence of
a Securities Transaction covered, in whole or in part,
under Insuring Clauses 2 or 3 results in both Loss
covered by this coverage section and loss not covered
by this coverage section, because such Claim includes
both covered and uncovered matters or is made against
both covered and uncovered parties, the Insureds and
the Company shall allocate such amount to Loss as
follows:
(i) 100% of such amount constituting defense costs
shall be allocated to covered Loss; and
(ii) 75% of such amount other than defense costs shall
be allocated to covered Loss.
(b) If any other Claim results in both Loss covered by this
coverage section and loss not covered by this coverage
section, because such Claim includes both covered and
uncovered matters or is made against both covered and
uncovered parties, the Insureds and the Company shall
allocate such amount between covered Loss and uncovered
loss based upon the relative legal exposures of the
parties to such matters.
8. For purposes of coverage under Insuring Clause 3 only, the
second paragraph of subsection 17, Representations and
Severability, is deleted in its entirety and the following
is inserted:
With respect to the declarations and statements contained in
the written application(s) for coverage, all declarations
and statements contained in such application and knowledge
possessed by any Insured Person identified in Item 6 of the
Declarations shall be imputed to any Insured Organization
for the purpose of determining if coverage is available.
9. For purposes of coverage under Insuring Clause 3 only,
subsection 7, Severability of Exclusions, is deleted in its
entirety and the following is inserted:
With respect to the exclusions in subsections 5, 6A and 6B,
only facts pertaining to and knowledge possessed by any
past, present or future chief financial officer, President
or Chairman of any Insured Organization shall be imputed to
any Insured Organization to determine if coverage is
available for such Insured Organization.
10. For purposes of coverage for employees who are Insured
Persons pursuant to paragraph 2c(i) of this endorsement,
subsection 9, Presumptive Indemnification, is amended as
follows:
a. Paragraph (b) is deleted in its entirey and the
following is inserted:
(b) is permitted or required to indemnify the Insured
Person for such Loss to the fullest extent
permitted or required by law.
b. The final paragraph in the subection is deleted in its
entirey and the following is inserted:
For purposes of this subection 9, the shareholder and
board of director resolutions of the Insured
Organziation shall be deemed to provide indemnification
for such Loss to the fullest extent permitted by common
or statutory law.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 4
Effective date of this endorsement: MAY 31, 1996
Issued to: RICHARDSON ELECTRONICS, LTD.
To be attached to and form part of Policy No. 8125-64-60E
It is agreed that:
1. Item 6 of the Declarations, Insured Persons, is amended by
adding the following:
... and any elected or appointed officer of the Insured
Organization in an Outside Directorship.
2. Subsection 18, "Definitions", is amended by adding the
following:
Outside Directorship means the position of director,
officer, trustee, governor, or equivalent executive position
with an Outside Entity if service by an Insured Person in
such position was at the specific request of the Insured
Organization or was part of the duties regularly assigned to
the Insured Person by the Insured Organization.
Outside Entity means any non-profit corporation, community
chest, fund organization or foundation exempt from federal
income tax as an organization described in Section
501(c)(3), Internal Revenue Code of 1986, as amended.
3. The following subsection is added to this coverage section:
OUTSIDE DIRECTORSHIPS
19. Coverage provided to any Insured person in an Outside
Directorship shall:
(a) not extend to the Outside Entity or to any
director, officer, trustee, governor or any other
equivalent executive or employee of the Outside
Entity, other than the Insured Person serving in
the Outside Directorship;
(b) be specifically excess of any indemnity (other
than any indemnity provided by the Insured
Organization) or insurance available to such
Insured Person by reason of serving in the Outside
Directorship, including any indemnity or insurance
available from or provided by the Outside Entity;
(c) not extend to Loss on account of any Claim made
against any Insured Person for a Wrongful Act
committed, attempted, or allegedly committed or
attempted by such Insured Person while serving in
the Outside Directorship if such Wrongful Act is
committed, attempted, or allegedly committed or
attempted, after the date (i) such Insured Person
ceases to be an officer of the Insured
Organization, or (ii) service by such Insured
Person in the Outside Directorship ceases to be at
the specific request of the Insured Organization
or a part of the duties regularly assigned to the
Insured Person by the Insured Organization;
(d) not extend to Loss on account of any Claim made
against any Insured Person for a Wrongful Act
committed, attempted or allegedly committed or
attempted by such Insured Person while serving in
the Outside Directorship where such Claim is (i)
by the Outside Entity, or (ii) on behalf of the
Outside Entity and a director, officer, trustee,
governor or equivalent executive of the Outside
Entity instigates such Claim, or (iii) by any
director, officer, trustee, governor or equivalent
executive of the Outside Entity.
4. The Company maximum liability to pay Loss under this
coverage section, including this endorsement, shall not
exceed the amount set forth in Item 2 of the Declarations.
This endorsement does not increase the Company's maximum
liability beyond the Limits of Liability set forth in Item 2
of the Declarations.
5. Payment by the Company or any of its subsidiaries or
affiliated companies under another policy on account of a
Claim also covered pursuant to this endorsement shall reduce
by the amount of the payment the Company's Limits of
Liability under this coverage section with respect to such
Claim.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
CHUBB Executive Protection Policy
ENDORSEMENT
Coverage Section: EXECUTIVE LIABILITY
Company: FEDERAL INSURANCE COMPANY
Endorsement No: 5
Effective date of this endorsement: MAY 31, 1996
Issued to: RICHARDSON ELECTRONICS, LTD.
To be attached to and form part of Policy No. 8125-64-60E
It is agreed that if a Claim against an Insured Person includes a
claim against the Insured Person's lawful spouse solely by reason
of (i) such spouse's status as a spouse of the Insured Person, or
(ii) such spouse's ownership interest in property which the
claimant seeks as recovery for alleged Wrongful Acts of the
Insured Person, all loss which such spouse becomes legally
obligated to pay on account of such Claim shall be treated for
purposes of this coverage section as Loss which the Insured
Person becomes legally obligated to pay on account of the Claim
made against the Insured Person. All limitations, conditions,
provisions and other terms of coverage (including the deductible)
applicable to the Insured Person's Loss shall also be applicable
to such spousal loss.
The coverage extension afforded by this Endorsement does not
apply to any Claim alleging any wrongful act or omission by the
Insured Person's spouse.
ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED.
John S. Bain
Authorized Representative
June 12, 1996
Date
EXHIBIT 10(t)(2)
IMPORTANT NOTE: THIS IS CLAIMS MADE COVERAGE. PLEASE READ THIS
POLICY CAREFULLY.
THIS POLICY, SUBJECT TO THE DECLARATIONS, INSURING AGREEMENTS,
TERMS, CONDITIONS, LIMITATIONS AND AMENDMENTS, APPLIES ONLY TO
CLAIM OR CLAIMS THAT ARE FIRST MADE AGAINST THE INSURED(S) AND
REPORTED TO THE INSURER DURING THE POLICY PERIOD OR DISCOVERY
PERIOD (IF APPLICABLE).
THE LIMIT OF LIABILITY AVAILABLE TO PAY JUDGMENTS OR SETTLEMENTS
SHALL BE REDUCED AND MAY BE EXHAUSTED BY AMOUNTS INCURRED FOR
DEFENSE COSTS, CHARGES AND EXPENSES. THE RETENTION(S) APPLY(IES)
TO DEFENSE COSTS, CHARGES AND EXPENSES.
ST. PAUL MERCURY
INSURANCE COMPANY
St. Paul, Minnesota 55102
A Capital Stock Company
Herein Called the Insurer
EXCESS DIRECTORS AND OFFICERS LIABILITY AND CORPORATE
INDEMNIFICATION POLICY
DECLARATIONS
Item 1. Named Insured: The Directors and Officers of
Richardson Electronics, Ltd.
Item 2. Address (No., Street, City, State and Zip Code)
40W267 Keslinger Road
LaFox, IL 60147
Item 3. Policy Period
From 5/31/96 To 05-31-97 (12:01 A.M. Standard Time at
the address stated in Item 2.)
Item 4. Limit of Liability $15,000,000. each Policy Period in
excess of Item 7(E). The limit of liability available to pay
judgments or settlements shall be reduced and may be exhausted by
amounts incurred for legal defense costs, charges and expense.
Item 5. Retentions (Applicable to Section 2(B)(2))
$500,000. Corporate Indemnification Each Loss
$ 0 Each Insured Each Loss
$ 0 Aggregate All Insureds Each Loss
Item 6. Premium $ 81,375
Item 7. Schedule of Underlying Insurer(s)
(A) 1. Underlying Insurer: Federal Insurance Company
2. Policy Number: 8125-64-60D
3. Policy Period: From: 05-31-96 To: 05-31-97
4. Limit of Liability: $15,000,000.
5. Retentions:
$500,000 Corporate Indemnification Each Loss
$ 0 Each Insured Each Loss
$ 0 Aggregate All Insureds Each Loss
(B) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(C) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(D) 1. Underlying Insurer: Not Applicable
2. Policy Number:
3. Policy Period: From: To:
4. Limit of Liability: $
(E) Total amount of Underlying Limit of Liability
$15,000,000 and any retentions or deductibles as
applicable under the policy(ies) as stated in this
Item 7.
Item 8. Subject to the Terms, Conditions and Limitations of
this policy as hereinafter provided, this policy follows the form
of:
Insurer's Name: Federal Insurance Company
Policy Number: 8125-64-60D
Item 9. Forms Attached
1) St. Paul Mercury Insurance Company Policy, Form #50408.
2) Endorsements one through four.
3) St.Paul Mercury Insurance Company Application, Form #
50264, and its attachments.
James C. Styer
Authorized Representative
8/5/96
Countersignature Date
Highland Park, IL
Countersigned At
INSURING CLAUSE
In consideration of the payment of the premium, in reliance upon
the statements made to the Insurer by application including its
attachments, a copy of which is attached to and forms a part of
this policy, and any material submitted therewith (which shall be
retained on file by the Insurer and be deemed attached hereto),
and except as hereinafter otherwise provided or amended, this
policy is subject to the same Insuring Agreement(s), Terms,
Conditions and Limitations as provided by the policy stated in
Item 8 of the Declarations and any amendments thereto, provided:
A. 1. the Insurer has received prior written notice from the
Insured(s) of any amendments to the policy stated in Item 8 of
the Declarations, and
2. the Insurer has given to the Insured(s) its written
consent to any amendments to the policy stated in Item 8 of the
Declarations. and
3. the Insured has paid any required additional premium.
B. This policy is not subject to the same premium or the amount
and Limit of Liability of the policy stated in Item 8 of the
Declarations.
TERMS, CONDITIONS AND LIMITATIONS
Section 1. UNDERLYING INSURANCE
A. It is a condition precedent to the Insured(s) rights under
this policy that the Insured(s) notify the Insurer, as soon
as practicable in writing, of a failure to maintain in full
force and effect, except as provided for under Section 2(B),
and without alteration of any Terms, Conditions, Limit of
Liability or Retentions, any of the underlying insurance
policies as stated in Item 7 of the Declarations.
B. Failure to maintain, as set forth above, any of the
underlying insurance policies as stated in Item 7 of the
Declarations, except as provided for under Section 2(B),
shall not invalidate this policy, but the liability of the
Insurer for loss under this policy shall apply only to the
same extent it would have been liable had the underlying
insurance policies been maintained as set forth above. In
no event shall the Insurer be liable to pay loss under this
policy until the total amount of the Underlying Limit of
Liability, as stated in Item 7(E) of the Declarations, has
been paid solely by reason of the payment of loss.
Section 2. LIMIT OF LIABILITY
A. The Insurer shall only be liable to make payment under this
policy after the total amount of the Underlying Limit of
Liability as stated in Item 7(E) of the Declarations has
been paid solely by reason of the payment of loss.
B. In the event of the reduction or exhaustion of the total
amount of the Underlying Limit of Liability as stated in
Item 7(E) of the Declarations solely by reason of the
payment of loss, this policy shall:
1. in the event of such reduction pay excess of the
reduced amount of the Underlying Limit of Liability but
not to exceed the amount stated in Item 4 of the
Declarations, or
2. in the event of exhaustion continue in force provided
always that this policy shall only pay the excess over
the Retention amount stated in Item 5 of the
Declarations as respects each and every loss hereunder,
but not to exceed the amount stated in Item 4 of the
Declarations.
C. The Insurers' liability for loss subject to paragraphs (A)
and (B) above shall be the amount stated in Item 4 of the
Declarations which shall be the maximum liability of the
Insurer in the Policy Period stated in Item 3 of the
Declarations. The Limit of Liability of the Insurer for the
Discovery Period, if elected, shall be part of, and not in
addition to, the Limit of Liability as stated in Item 4 of
the Declarations.
Section 3. LOSS PROVISIONS
The Insured(s) shall as a condition precedent to the right to be
indemnified under this policy give to the Insurer notice in
writing, as soon as practicable and during the Policy Period or
during the Discovery Period, if effective, of any claim made
against the Insured(s).
Section 4. NOTICE
Notice hereunder shall be given to St. Paul Mercury Insurance
Company, 385 Washington Street, St. Paul, MN 55102.
Section 5. CANCELLATION
This policy may be cancelled by the Corporation at any time by
mailing written notice to the Insurer at the address shown in
Section 4 stating when thereafter such cancellation shall be
effective or by surrender of this policy to the Insurer or its
authorized agent. This policy may also be cancelled by or on
behalf of the Insurer by delivering to the Corporation or by
mailing to the Corporation by registered, certified, or other
first class mail, at the Corporation's address as shown in Item 2
of the Declarations, written notice stating when, not less than
sixty (60) days thereafter, the cancellation shall be effective.
The mailing of such notice as aforesaid shall be sufficient proof
of notice. The Policy Period terminates at the date and hour
specified in such notice, or at the date and time of surrender.
If the period of limitation relating to the giving of notice is
prohibited or made void by any law controlling the construction
thereof, such period shall be deemed to be amended so as to be
equal to the minimum period of limitation permitted by such law.
Section 6. DISCOVERY PERIOD
If the Insurer shall cancel or refuse to renew (refusal to renew
is hereafter referred to as non-renewal) this policy, the
Corporation or the Insureds shall have the right, upon payment of
the additional premium of 75% of the premium hereunder, to an
extension of the cover granted by this policy to report any claim
or claims in accordance with Section 3, which claim or claims are
made against the Insureds during the period of twelve (12) months
after the effective date of cancellation or non-renewal, herein
called the Discovery Period, but only for any Wrongful Act
committed before the effective date of such cancellation or
non-renewal and otherwise covered by this policy.
This right shall terminate, however, unless the Corporation or
the Insureds provide written notice of such election together
with the payment of the additional premium due and this is
received by the Insurer at the address shown in Section 4 within
ten (10) days after the effective date of cancellation or
non-renewal.
Discovery Period wherever used in this policy shall also mean
optional extension period or extended reporting period as defined
by the policy stated in Item 8 of the Declarations.
The offer by the Insurer of renewal terms, conditions, limits of
liability and/or premiums different from those of the expiring
policy shall not constitute non-renewal.
The provisions of this Section 6 and the rights granted herein to
the Corporation or the Insureds shall not apply to any
cancellation resulting from non-payment of premium.
Section 7. NUCLEAR ENERGY LIABILITY EXCLUSION
It is agreed that:
A. This policy does not apply:
1. Under any Liability Coverage, to bodily injury or
property damage
a. with respect to which an Insured under this policy
is also an Insured under a nuclear energy
liability policy issued by Nuclear Energy
Liability Insurance Association, Mutual Atomic
Energy Liability Underwriters or Nuclear Insurance
Association of Canada, or would be an Insured
under any such policy but for its termination upon
exhaustion of its limit of liability; or
b. resulting from the hazardous properties of nuclear
material and with respect to which (1) any person
or organization is required to maintain financial
protection pursuant to the Atomic Energy Act of
1954, or any law amendatory thereof, or (2) the
Insured is, or had this policy not been issued
would be, entitled to indemnity from the United
States of America, or an agency thereof, under any
agreement entered into by the United States of
America, or any agency thereof with any person or
organization.
2. Under any Medical Payments coverage, or under any
Supplementary Payments provision relating to first aid,
to expenses incurred with respects to bodily injury
resulting from the hazardous properties of nuclear
material and arising out of the operation of a nuclear
facility by any person or organization.
3. Under any Liability Coverage, to bodily injury or
property damage resulting from the hazardous properties
of nuclear material, if
a. the nuclear material (1) is at any nuclear
facility owned by, or operated by or on behalf of
an Insured or (2) has been discharged or dispersed
therefrom;
b. the nuclear material is contained in spent fuel or
waste at any time possessed, handled, used,
processed, stored, transported or disposed of by
or on behalf of an Insured, or
c. the bodily injury or property damage arises out of
the furnishing by an Insured of services,
materials, parts or equipment in connection with
the planning, construction, maintenance, operation
or use of any nuclear facility, but if such
facility is located within the United States of
America, its territories or possessions or Canada,
this exclusion (c) applies only to property damage
to such nuclear facility and any property thereat.
B. As used in this exclusion:
"hazardous properties" include radioactive, toxic or
explosive properties;
"nuclear material" means source material, special nuclear
material or by-product material;
"source material," "special nuclear material," and
by-product material have the meanings given them in the
Atomic Energy Act of 1954 or in any law amendatory thereof;
"spent fuel" means any fuel element or fuel component, solid
or liquid, which has been used or exposed to radiation in a
nuclear reactor;
"waste" means any waste material (1) containing by-product
material and (2) resulting from the operation by any person
or organization of any nuclear facility included within the
definition of nuclear facility under paragraph (1) or (2)
thereof;
"nuclear facility" means
(1) any nuclear reactor,
(2) any equipment or device designed or used for (1)
separating the isotopes of uranium or plutonium, (2)
processing or utilizing spent fuel, or (3) handling,
processing or packaging waste,
(3) any equipment or device used for the processing,
fabricating or alloying of special nuclear material if at
any time the total amount of such material in the custody of
the Insured and the premises where such equipment or device
is located consists of or contains more than 25 grams of
plutonium or uranium 233 or any combination thereof, or more
than 250 grams of uranium 235,
(4) any structure, basin, excavation, premises or place
prepared or used for the storage or disposal of waste,
and includes the site on which any of the foregoing is
located, and operations conducted on such site and all
premises used for such operations;
"nuclear reactor" means any apparatus designed or used to
sustain nuclear fission in a self-supporting chain reaction
or to contain critical mass of fissionable material,
"property damage" includes all forms of radioactive
contamination of property.
Section 8. ACTION AGAINST THE INSURER
No action shall lie against the Insurer unless, as a condition
precedent thereto, there shall have been full compliance with all
of the terms of this policy, nor until the amount of the
Corporation's obligation to pay and/or the Insureds' obligation
to pay have been finally determined either by judgment against
the Insureds after actual trial or by written agreement of the
Corporation and/or the Insureds, the claimant and the Insurer.
Any person or organization or the legal representative thereof
who has secured such judgment or written agreement shall
thereafter be entitled to recover under this policy to the extent
of the insurance afforded by this policy. No person or
organization shall have any right under this policy to join the
Insurer as a party to any action against the Corporation and/or
Insureds to determine the Insureds' liability, nor shall the
Insurer be impleaded by the Corporation and/or Insureds or their
legal representatives. Bankruptcy or insolvency of the
Corporation or the Corporation's estate, or bankruptcy or
insolvency of the Insureds or the Insureds' estate shall not
relieve the Insurer of any of its obligations hereunder.
IN WITNESS WHEREOF, the Insurer designated on the Declarations
page has caused this policy to be signed by its President and
Secretary and countersigned on the Declarations page by a duly
authorized representative of the Insurer.
Secretary President
ENDORSEMENT #1
The following spaces preceded by an asterisk (*) need not be
completed if this endorsement and the policy have the same
inception date.
ATTACHED TO AND FORMING
PART OF POLICY NO.
900DX0216
ILLINOIS AMENDATORY ENDORSEMENT
M1137 Ed. 6-90
In Consideration of the premium charged, it is hereby understood
and agreed that:
1. The first paragraph under Section 5. CANCELLATION is hereby
deleted in its entirety and substituted with the following:
This policy may be cancelled by the Corporation at any time by
mailing written notice to the Insurer at the address shown in
Section 4 stating when thereafter such cancellation shall be
effective or by surrender of this policy to the Insurer or its
authorized agent. This policy may also be cancelled by or on
behalf of the Insurer by mailing to the Corporation, by
registered, certified or other first class mail, at the last
mailing address known to the Insurer, written notice stating
when, not less than sixty (60) days thereafter, the cancellation
shall be effective. All such notices shall contain the specific
reason(s) for cancellation. If this policy has been in effect
for more than sixty (60) days, the cancellation must be for one
of the following reasons:
A. Nonpayment of premium;
B. Misrepresentation or fraud made by or with the
knowledge of the Corporation or the Insureds in
obtaining the policy or in pursuing a claim under the
policy;
C. A violation by any Insured of any of the terms and
conditions of the policy;
D. A substantial increase in the risk originally assumed;
E. Loss of reinsurance by the Insurer which provided
coverage to the Insurer for a significant amount of the
underlying risk insured. Certification of the loss of
reinsurance must be given to the Director of Insurance.
F. A determination by the Director of Insurance that the
continuation of the policy would place the Insurer in
violation of the insurance laws of the State of
Illinois.
It is further agreed that this policy may be non renewed by
or on behalf of the Insurer by mailing written notice to the
Corporation, by registered, certified, or other first class
mail, at the last mailing address known to the Insurer. All
such notices shall contain the specific reason(s) for non
renewal. It is further agreed that non renewal of this
policy will be effective sixty (60) days after receipt of
the Insured of written notice from the Insurer of its desire
to non renew this policy, or at the time and date set forth
in the notice of non renewal, provided sixty (60) days
notice has been given the Corporation prior to said date.
2. It is further understood and agreed that Section 6.
DISCOVERY PERIOD is hereby deleted in its entirety and
replaced with the following:
If the Insurer or the Insured(s) shall cancel or refuse to
renew (refusal to renew is hereafter referred to as
non-renewal) this policy, the Corporation or the Insured(s)
shall have the right, upon payment of the additional premium
of seventy five percent (75%) of the expiring annual premium
hereunder, to report any claim or claims in accordance with
Section 3, which claim or claims are made against the
Insured(s) during the period of twelve (12) months after the
effective date of cancellation or non-renewal, herein called
the Discovery Period, but only for any Wrongful Act
committed before the effective date of such cancellation or
non-renewal and otherwise covered by this policy.
This right shall terminate, however, unless the Corporation
or the Insured(s) provide written notice of such election
together with the payment of the additional premium due and
this is received by the Insurer at the address shown in
Section 4 within thirty (30) days after the effective date
of cancellation or non-renewal.
The additional premium for the Discovery Period shall be
fully earned at the inception of the Discovery Period. The
Discovery Period is not cancelable.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned policy, other than as above
stated.
In Witness Whereof, the Company has caused this endorsement to be
signed by a duly authorized representative of the Company.
Authorized Representative
ENDORSEMENT #2
The following spaces preceded by an asterisk (*) need not be
completed if this endorsement and the policy have the same
inception date.
ATTACHED TO AND FORMING
PART OF POLICY NO.
900DX0216
PRIOR AND PENDING LITIGATION EXCLUSION
M1150 Ed. 3-90
In consideration of the premium charged, it is hereby understood
and agreed that the Insurer shall not be liable to make any
payment for loss in connection with any claim or claims made
against the Insured(s) arising from any prior or pending
litigation as of 05-31-90, as well as all future claims or
litigation based upon the pending or prior litigation or derived
from the same or essentially the same facts (actual or alleged)
that gave rise to the prior or pending litigation.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned policy, other than as above
stated.
In Witness Whereof,the Company has caused this endorsement to be
signed by a duly authorized representative of the Company.
Authorized Representative
ENDORSEMENT #3
The following spaces preceded by an asterisk (*) need not be
completed if this endorsement and the policy have the same
inception date.
ATTACHED TO AND FORMING
PART OF POLICY NO.
900DX0216
In consideration of the premium charged, it is understood and
agreed that the Insurer shall not be liable to make any payment
for Loss in connection with any claim or claims made against the
Insureds, based upon, arising out of, attributable to or in any
way involving the following:
1. Panache Broadcasting of Pennsylvania, Inc. v.
Richardson Electronics, Ltd.; Varian Associates, Inc.;
and Varian Supply Company (Case No. 90 C 6400); or
2. A contract to supply tubes to the United States
Government which was completed in 1989 as described in
Note K - Litigation on page 23 of the Richardson
Electronics, Ltd. 1994 Annual Report; or
3. Arius, Inc. v. Richardson Electronics, Ltd., Flint
Cooper, William Alexander, Kevin Dutton (case number
CI. 95-202 in the Circuit Court of the Ninth Judicial
Circuit in and for Orange County, Florida)
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned policy, other than as above
stated.
In Witness Whereof,the Company has caused this endorsement to be
signed by a duly authorized representative of the Company.
Authorized Representative
ENDORSEMENT #4
The following spaces preceded by an asterisk (*) need not be
completed if this endorsement and the policy have the same
inception date.
ATTACHED TO AND FORMING
PART OF POLICY NO.
900DX0216
REPORTED INCIDENTS EXCLUSION
M1117 Ed. 3-90
In consideration of the premium charged, it is hereby understood
and agreed that under this policy the Insurer shall not be liable
to make any payment for Loss in connection with any claim or
claims made against the Insured(s) arising from any circumstances
of which notice has been given under any insurance in force prior
to the inception date of this policy including any applicable
discovery period.
Nothing herein contained shall be held to vary, alter, waive or
extend any of the terms, conditions, provisions, agreements or
limitations of the above mentioned policy, other than as above
stated.
In Witness Whereof,the Company has caused this endorsement to be
signed by a duly authorized representative of the Company.
Authorized Representative
EXHIBIT 10(t)(3)
CNA INSURANCE COMPANIES
CNA Plaza.
Chicago, IL 60685
DECLARATIONS EXCESS INSURANCE POLICY
NOTICE
THIS IS A "CLAIMS-MADE" POLICY AND, SUBJECT TO ITS PROVISIONS,
APPLIES ONLY TO ANY CLAIM FIRST MADE AGAINST THE INSUREDS DURING
THE POLICY PERIOD. NO COVERAGE EXISTS FOR ANY CLAIM FIRST MADE
AFTER THE END OF THE POLICY PERIOD UNLESS, AND TO THE EXTENT, THE
EXTENDED REPORTING PERIOD APPLIES. THE LIMIT OF LIABILITY SHALL BE
REDUCED BY AMOUNTS INCURRED AS DEFENSE COSTS.
ACCOUNT NUMBER 45386
COVERAGE PROVIDED BY CONTINENTAL CASUALTY COMPANY
POLICY NUMBER DOX 600028634
AGENCY 910 701862
NAMED ENTITY AND PRINCIPAL ADDRESS
Item 1.
RICHARDSON ELECTRONICS, LTD.
40W267 KESLINGER RD.
LAFOX, IL 60147
Attn: William J. Garry
AGENT
Mesirow Insurance Services, Inc.
Ms. Robina K. Fisher
600 Central Ave., ste. #390
Highland Park, IL 60035
Item 2. Policy Period:
May 31, 1996 to May 31, 1997
12:01 a.m. Standard Time at the Principal Address stated in Item 1.
Item 3. Limit of Liability (Inclusive of Defense Costs):
$5,000,000 Maximum aggregate Limit of Liability for the Policy
Period.
Item 4. Schedule of Underlying Insurance:
A. Primary Policy:
Name of Carrier Federal Insurance Company
Policy No. 8125-64-60E
Limits $15,000,000
Deductible/Retention Amount 0/0/$500,000
B. Underlying Excess Policy(ies):
Name of Carrier St. Paul Fire and Marine Insurance
Policy No. 900DX0216
Limits $15,000,000
Deductible/Retention Amount N/A
Item 5. Policy Premium:
$21,000
Item 6. Forms and Endorsements forming a part of this policy at
inception: G-11713-A12, FIG-1005-A, FIG-1006-A
These Declarations along with the completed and signed Application
and the Excess Insurance Policy, shall constitute the contract
between the Insureds, the Named Entity, and the Insurer.
Authorized Representative James C. Styer
Date: 8-5-96
Excess Insurance Policy
In consideration of the payment of the premium and in reliance on
all statements made and information furnished to Continental
Casualty Company (hereinafter called the "Insurer"), and/or to the
insurers of the Underlying Insurance, including the statements made
in the Application made a part hereof and subject to all of the
provisions of this Policy, the Insurer and the Insured agree as
follows:
I. INSURING AGREEMENT
The Insurer shall provide the Insureds with excess coverage over
the Underlying Insurance as set forth in Item 4 of the Declarations
during the Policy Period set forth in Item 2 of the Declarations.
Coverage hereunder shall attach only after all such Underlying
Insurance has been exhausted by payments for losses and shall then
apply in conformance with the same provisions of the Primary Policy
at its inception, except for premium, limit of liability and as
otherwise specifically set forth in the provisions of this Policy.
II. POLICY DEFINITIONS
Application shall mean the written application for this Policy,
including any materials submitted therewith, which together shall
be on file with the Insurer and deemed a part of and attached
hereto as if physically attached to this Policy.
Named Entity means the organization named in Item 1 of the
Declarations.
Insureds means those persons or organization(s) insured under the
Primary Policy, at its inception.
Policy Period means the period from the effective date and hour of
this Policy as set forth in Item 2. of the Declarations, to the
Policy expiration date and hour set forth in Item 2. of the
Declarations, or its earlier cancellation date or termination date,
if any.
Primary Policy means the Policy scheduled in Item 4(a) of the
Declarations.
Underlying Insurance means all those Policies scheduled in Item 4
of the Declarations and any Policies replacing them.
III. MAINTENANCE OF UNDERLYING INSURANCE
All of the Underlying Insurance scheduled in Item 4 of the
Declarations shall be maintained during the Policy Period in full
effect, except for any reduction of the aggregate limit(s) of
liability available under the Underlying Insurance solely by reason
of payment of losses thereunder. Failure to comply with the
foregoing shall not invalidate this Policy but the Insurer shall
not be liable to a greater extent than if this condition had been
complied with. To the extent that any Underlying Insurance is not
maintained in full effect during the currency of this Policy
Period, then the Insureds shall be deemed to have retained any loss
for the amount of the limit of liability of any Underlying
Insurance which is not maintained as set forth above.
In the event of any actual or alleged (a) failure by the Insureds
to give notice or to exercise any extensions under any Underlying
Insurance or (b) misrepresentation or breach of warranties by any
of the Insureds with respect to any Underlying Insurance, the
Insurer shall not be liable hereunder to a greater extent than it
would have been in the absence of such actual or alleged failure,
misrepresentation or breach.
It is further a condition of this Policy that the Insurer shall be
notified in writing, as soon as practicable of cancellation and/or
alteration of any provisions of any of the policies of Underlying
Insurance.
IV. LIMIT OF LIABILITY
The amount set forth in Item 3 of the Declarations shall be the
maximum aggregate Limit of Liability of the Insurer for the Policy
Period.
Costs of defense shall be part of and not in addition to the Limit
of Liability in Item 3 of the Declarations, and such costs of
defense shall reduce the Limit of Liability stated in Item 3 of the
Declarations.
V. DEPLETION OF UNDERLYING LIMIT(S)
In the event of the depletion of the limit(s) of liability of the
Underlying Insurance solely as the result of actual payment of
losses thereunder by the applicable insurers, this Policy shall,
subject to the Insurer's Limit of Liability and to the other terms
of this Policy, continue to apply to losses as Excess Insurance
over the amount of insurance remaining under such Underlying
Insurance. In the event of the exhaustion of all of the limit(s)
of liability of such Underlying Insurance solely as a result of
payment of losses thereunder, the remaining limits available under
this Policy shall, subject to the Insurer's Limit of Liability and
to the other provisions of this Policy, continue for subsequent
losses as primary insurance and any retention specified in the
Primary Policy shall be imposed under this Policy as to each claim
made; otherwise no retention shall be imposed under this Policy.
This Policy only provides coverage excess of the Underlying
Insurance. This Policy does not provide coverage for any loss not
covered by the Underlying Insurance except and to the extent that
such loss is not paid under the Underlying Insurance solely by
reason of the reduction or exhaustion of the available Underlying
Insurance through payments of loss thereunder. In the event the
insurer of one or more of the Underlying Insurance policies fails
to pay loss in connection with any claim covered under the
Underlying Insurance as a result of the insolvency, bankruptcy, or
liquidation of said insurer, then the Insureds hereunder shall be
deemed to have retained any loss for the amount of the limit of
liability of said insurer which is not paid as a result of such
insolvency, bankruptcy or liquidation.
If any Underlying Insurance bears an effective date which is prior
to the effective date of this Policy and if any such insurance
becomes exhausted or impaired by payment of loss with respect to
any claim which, shall be deemed to be made prior to the effective
date of this Policy, then with respect to any claim made after the
effective date of this Policy, the Insureds shall be deemed to have
retained any loss for the amount of any such Underlying Insurance
which is exhausted or impaired by payment of loss with respect to
such claim made prior to the effective date of this Policy.
VI. CLAIM PARTICIPATION
The Insured shall not admit liability, consent to any judgment
against them, or agree to any settlement which is reasonably likely
to involve the Limit of Liability of this Policy without the
Insurer's consent, such consent not to be unreasonably withheld.
The Insurer may, at its sole discretion, elect to participate in
the investigation, settlement or defense of any claim against any
of the Insureds for matters covered by this Policy even if the
Underlying Insurance has not been exhausted.
All provisions of the Underlying Insurance are considered as part
of this Policy except that it shall be the duty of the Insureds and
not the duty of the Insurer to defend any claims against any of the
Insureds.
VII. SUBROGATION - RECOVERIES
In that this Policy is "Excess Coverage", the Insureds and the
Insurer's right of recovery against any person or other entity may
not be exclusively subrogated. Despite the foregoing, in the event
of any payment under this Policy, the Insurer shall be subrogated
to all the Insured's rights of recovery against any person or
organization, and the Insureds shall execute and deliver
instruments and papers and do whatever else is necessary to secure
such rights.
Any amounts recovered after payment of loss hereunder shall be
apportioned in the inverse order of payment to the extent of actual
payment. The expenses of all such recovery proceedings shall be
apportioned in the ratio of respective recoveries.
VIII. NOTICE
The Insurer shall be given notice in writing as soon as is
practicable in the event of (a) the cancellation of any Underlying
Insurance and (b) any additional or return premiums charged or
allowed in connection with any Underlying Insurance. Notice
regarding (a) and (b) above shall be given to Manager, Directors
and Officers Liability Underwriting, CNA Insurance Companies, CNA
Plaza, Chicago, Illinois 60685.
The Insurer shall be given notice as soon as practicable of any
notice of claim or any situation that could give rise to a claim
under any Underlying Insurance. Notice of any claim to the Insurer
shall be given in writing to Manager, Professional Liability
Claims, CNA Insurance Companies, CNA Plaza, Chicago, Illinois
60685.
IX. COMPANY AUTHORIZATION CLAUSE
By acceptance of this Policy, the Named Entity named in Item 1 of
the Declarations agrees to act on behalf of all the Insureds with
respect to the giving and receiving of notice of claim or
cancellations, the payment of premiums and the receiving of any
return premiums that may become due under this Policy and the
Insureds agree that the Named Entity shall in all cases be
authorized to act on their behalf.
X. ALTERATION
No change in or modification of this Policy shall be effective
except when made by endorsement signed by an authorized employee of
the Insurer or any of its agents relating to this Policy.
XI. POLICY CANCELLATION
This Policy may be cancelled by the Named Entity at any time by
written notice or by surrender of this Policy to the Insurer. This
Policy may also be cancelled by or on behalf of the Insurer by
delivery to the Named Entity or by mailing to the Named Entity, by
registered, certified or other first class mail, at the address
shown in Item 1 of the Declarations, written notice stating when,
not less than thirty (30) days thereafter, the cancellation shall
become effective. The mailing of such notice as aforesaid shall be
sufficient proof of notice and this Policy shall cancel at the date
and hour specified in such notice.
If the period of limitation relating to the giving of notice is
prohibited or made void by any law controlling the construction
thereof, such period shall be deemed to be amended so as to be
equal to the minimum period of limitation permitted by such law.
The Insurer shall refund the unearned premium computed at less than
pro-rata if the Policy is cancelled in its entirety by the Named
Entity. Under any other circumstances the refund shall be computed
pro rata.
XII. EXCLUSIONS
Notwithstanding any provisions of the Underlying Insurance, the
Insurer shall not be liable to make payment for loss in connection
with any claim based upon, arising out of, relating to, directly or
indirectly resulting from, or in consequence of, or in any way
involving:
1. nuclear reaction, radiation or contamination regardless of
causes;
2. pollutants, including but not limited to loss arising out of
any:
a. request, demand or order that any of the Insureds or
others test for, monitor, clean up, remove, contain,
treat, detoxify or neutralize, or in any way respond to,
or assess the effects of pollutants, or
b. claim by or on behalf of a governmental authority for
damages because of testing for, monitoring, cleaning up,
removing, containing, treating, detoxifying or
neutralizing or in any way responding to or assessing the
effects of pollutants;
Pollutants means any solid, liquid, gaseous or thermal irritant or
contaminant, including smoke, vapor, soot, fumes, acids, alkalis,
chemicals and waste. Waste includes materials to be recycled,
reconditioned or reclaimed .
XIII. CONDITIONS
No action shall be taken against the Insurer unless, as a condition
precedent, there shall have been full compliance with all the
provisions of this Policy, nor until the amount of the Insureds
obligation to pay shall have been finally determined either by
final and nonappealable judgement against the Insureds after trial,
or by written agreement of the Insureds, the claimant and the
Insurer.
D.W. Lowry, Secretary D.H. Chookasigian, Chairman of the Board
State Provisions - Illinois
Any cancellation or non-renewal provisions contained in the policy
to which this endorsement is attached are deleted and replaced by
the following:
1. Cancellation
A. This policy can be cancelled by either the first named insured
or the insurer.
1. The named insured can cancel this policy at any time by
mailing advance written notice to the insurer stating when the
cancellation is to be effective.
2. The insurer can cancel this policy by giving written
notice to the named insured at least:
a. 10 days, if cancellation is for non-payment of
premium. However, the named insured may continue the coverage by
payment in full at any time prior to the effective date of
cancellation;
b. 30 days, if cancellation is for any other reason
provided that the policy has been in effect for 60 days or less; or
c. 60 days, if the policy has been in effect for more
than 60 days and cancellation is for any other reason as set forth
below;
before the effective date of cancellation.
B. The insurer will mail notice to the named insured at the
last mailing address known to the insurer, and a copy shall also be
mailed to the named insured's agent.
C. Notice of cancellation will state the effective date of
cancellation. The policy will end on that date. The specific
reason for such cancellation shall also be stated.
D. Proof of mailing will be sufficient proof of notice.
E. If this policy is cancelled, the insurer will send the
first named insured any premium refund due. If the insurer
cancels, the refund will be pro-rata. If the named insured
cancels, the refund may be less than pro-rata.
The cancellation will be effective even if the insurer has not
made or offered a refund.
If this policy has been in effect for more than 60 days, the
insurer shall not terminate this policy except for one or more of
the following conditions:
1. Non-payment of premium;
2. Material misrepresentation;
3. A material increase in the hazard insured against;
4. Violation of any terms or conditions of the policy by the
named insured;
5. Substantial loss of reinsurance by the insurer affecting
this particular type of insurance, certified to the insurance
regulatory authority;
6. A determination by the insurance regulatory authority
that continuation of the policy will place the insurer in violation
of the insurance laws of the state.
II. Non-Renewal
If the insurer decides not to renew this policy, 60 days advance
written notice shall be mailed to the named insured as the last
known address.
The notice shall include the specific reason for such non-renewal.
If the insurer offers to renew this policy at terms which involve
an increase in premium of 30% or more or changes in deductibles or
coverage that materially alter the policy, such terms will take
effect on the renewal date if the insurer has notified the named
insured of the terms at least 60 days prior to the expiration date
of this policy.
This notice is to advice the named insured that should any
complaints arise regarding this insurance, the named insured may
contact the following:
CNA Insurance Companies
Attn: Consumer Affairs Department - 13S
CNA Plaza
Chicago, IL 60685
and/or
Illinois Department of Insurance
Consumer Division or Public Service Section
Springfield, IL 62767
This endorsement, which forms a part of and is for attachment to
the following described Policy issued by the designated Insurers
takes effect on the effective date of said Policy, unless another
effective date is shown below, at the hour stated in said Policy
and expires concurrently with said Policy.
Endt. No. 01
Policy No. 600028634
CNA Authorized Representative
Prior Notice Exclusion
In consideration of the premium paid for this policy, it is agreed
that Section XII, Exclusions, is amended with the addition of the
following:
Any fact, circumstance, situation, transaction or event which
constitutes the basis of notice of claim to the Insurer or any
insurance carriers designated in Item 4 of the Declarations, prior
to the inception date of this policy.
All other provisions of the policy remain unchanged.
This endorsement, which forms a part of and is for attachment to
the following described Policy issued by the designated Insurers
takes effect on the effective date of said Policy, unless another
effective date is shown below, at the hour stated in said Policy
and expires concurrently with said Policy.
Endt. No. 02
Policy No. 600028634
CNA Authorized Representative
Prior or Pending Litigation Exclusion
In consideration of the premium paid for this policy, it is agreed
that Section XII, is amended with the addition of the following:
3. Any fact, circumstance, situation, transaction or event
underlying or alleged in any prior and/or pending litigation as of
5/31/91, regardless of the legal theory upon which such litigation
is predicated.
All other provisions of the policy remain unchanged.
This endorsement, which forms a part of and is for attachment to
the following described Policy issued by the designated Insurers
takes effect on the effective date of said Policy, unless another
effective date is shown below, at the hour stated in said Policy
and expires concurrently with said Policy.
Endt. No. 03
Policy No. 600028634
CNA Authorized Representative
Exhibit 11
Richardson Electronics, Ltd. And Subsidiaries
Computation of Net Income per Share
Net income (loss) per share for 1996, 1995 and 1994 was computed by dividing
net income (loss) by the weighted average number of common and common share
equivalents outstanding. The treasury stock method was applied to those stock
options that would have a dilutive effect on net income per share. The average
market price of the Company's stock was used in determining primary income per
share, while the year-end market price (if greater than the average market
price) was used in determining fully diluted net income per share.
The Company's 7 1/4% convertible debentures have not been included in the
calculation of net income per share because their effect would be anti-
dilutive. Fully diluted net income per share has not been presented on the face
of the income statement because it does not differ significantly from primary
income per share for each year.
(Shares and Amounts in Thousands)
1996 1995 1994
--------- --------- ---------
Primary net income (loss) per share:
Weighted average shares outstanding 11,659 11,425 11,285
Effect of dilutive stock options 343 141 14
--------- --------- ---------
Total 12,002 11,566 11,299
========= ========= =========
Net income (loss) before extra-
ordinary item $ 8,111 $ 2,481 $(19,809)
Extraordinary gain, net of tax - 527 -
--------- --------- ---------
Net income (loss) $ 8,111 $ 3,008 $(19,809)
========= ========= =========
Per share amounts:
Net income (loss) before extra-
ordinary item $ .68 $ .21 $ (1.75)
Extraordinary gain, net of tax - .05 -
--------- --------- ---------
Net income (loss) per share $ .68 $ .26 $ (1.75)
========= ========= =========
Fully diluted net income per share:
Weighted average shares outstanding 11,659 11,425 11,285
Effect of dilutive stock options 363 174 14
--------- --------- ---------
Total 12,022 11,599 11,299
========= ========= =========
Net income (loss) before extra-
ordinary item $ 8,111 $ 2,481 $(19,809)
Extraordinary gain, net of tax - 527 -
--------- --------- ---------
Net income (loss) $ 8,111 $ 3,008 $(19,809)
========= ========= =========
Per share amounts:
Net income (loss) before extra-
ordinary item $ .67 $ .21 $ (1.75)
Extraordinary gain, net of tax - .05 -
--------- --------- ---------
Net income (loss) per share $ .67 $ .26 $ (1.75)
========= ========= =========
The following portions of the Company's Annual Report to Stockholders for
the Year Ended May 31, 1996 are incorporated by reference. The page numbers as
indicated are the same as the printed copy which was distributed to the
shareholders.
<TABLE>
Five-Year Financial Review
<CAPTION>
Statement of Operations Data Year Ended May 31
(in thousands, except per share amounts) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net sales $239,667 $208,118 $172,094 $159,215 $158,789
Cost of products sold 169,123 148,085 124,703 111,620 109,600
Other charges <F1> -- 4,700 26,500 -- --
Selling, general and administrative expenses 52,974 48,674 41,226 38,070 40,947
Other expense, net 5,559 4,028 5,874 5,023 5,385
-------- -------- -------- -------- --------
Income (loss) before income taxes
and extraordinary item 12,011 2,631 (26,209) 4,502 2,857
Income tax provision (benefit) 3,900 150 (6,400) 1,700 1,150
-------- -------- -------- -------- --------
Income (loss) before extraordinary item 8,111 2,481 (19,809) 2,802 1,707
Extraordinary gain, net of tax -- 527 -- -- --
-------- -------- -------- -------- --------
Net income (loss) $ 8,111 $ 3,008 $(19,809) $ 2,802 $ 1,707
======== ======== ======== ======== ========
Net income (loss) per share:
Before extraordinary item $ .68 $ .21 $ (1.75) $ .25 $ .15
Extraordinary gain, net of tax -- .05 -- -- --
-------- -------- -------- -------- --------
Net income (loss) per share $ .68 $ .26 $ (1.75) $ .25 $ .15
======== ======== ======== ======== ========
Dividends per common share $ .16 $ .16 $ .16 $ .16 $ .16
======== ======== ======== ======== ========
Balance Sheet and Other Data May 31
(dollars in thousands) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Receivables $48,232 $42,768 $34,901 $30,267 $27,488
Inventories 94,327 81,267 73,863 86,955 84,427
Working capital, net 133,151 106,235 96,494 103,987 103,165
Investments 2,190 7,070 17,836 29,080 28,785
Property, plant and equipment, net 16,054 16,388 16,932 36,242 39,328
Total assets 180,158 173,514 179,467 205,043 205,837
Long-term debt 92,025 79,647 86,421 98,855 101,456
Stockholders' equity 62,792 56,154 52,573 75,417 76,009
Employees at May 31 582 540 654 683 655
Stockholders 740 758 785 778 819
<FN>
<F1> In 1995, the Company recorded a charge of $4,700,000 for the
settlement of a claim related to a 1989 contract. In 1994, the
Company established a $26,500,000 provision, including $21,400,000
to dispose of its manufacturing operations in Brive, France, and
$5,100,000 for incremental costs related to a provision established
in 1991.
</FN>
</TABLE>
Page 10
Management's Discussion and Analysis
Results of Operations
Sales and Gross Margin
The Company is a value-added distributor and manufacturer, operating in
one industry segment, electronic components. The marketing and sales structure
of the Company is organized in four strategic business units (SBUs): Electron
Device Group (EDG), Solid State and Components (SSC), Display Products Group
(DPG) and Security Systems Division (SSD). Consolidated sales in fiscal 1996
were a record $239.7 million. Sales and gross margin by SBU are presented in
the following table. Gross margin for each SBU reflects the distribution
product margin less overstock and other inventory provisions. Manufacturing
variances and miscellaneous costs are included under the caption "other".
Sales
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
EDG $109,925 45.8 $105,454 50.7 $ 91,736 53.2
SSC 67,976 28.4 52,409 25.2 42,274 24.6
DPG 36,154 15.1 36,502 17.5 27,150 15.8
SSD 25,612 10.7 13,753 6.6 10,934 6.4
-------- ----- -------- ----- -------- -----
Consolidated $239,667 100.0 $208,118 100.0 $172,094 100.0
======== ===== ======== ===== ======== =====
Gross Margins
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
EDG $ 33,416 30.4 $ 30,884 29.3 $ 27,897 30.4
SSC 20,840 30.7 16,416 31.3 14,117 33.4
DPG 13,156 36.4 12,463 34.1 9,090 33.5
SSD 5,425 21.2 3,037 22.1 2,468 22.6
-------- ----- -------- ----- -------- -----
Total 72,837 30.4 62,800 30.2 53,572 31.1
Other (2,293) (2,767) (6,181)
-------- ----- -------- ----- -------- -----
Consolidated $ 70,544 29.4 $ 60,033 28.8 $ 47,391 27.5
======== ===== ======== ===== ======== =====
On a geographic basis, the Company categorizes its sales by destination:
North America, Europe and Rest of World. Sales and gross margin by geographic
area were as follows:
Sales
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
North America $139,743 58.3 $123,508 59.4 $102,870 59.8
Europe 57,219 23.9 46,071 22.1 37,699 21.9
Rest of World 42,705 17.8 38,539 18.5 31,525 18.3
-------- ----- -------- ----- -------- -----
Consolidated $239,667 100.0 $208,118 100.0 $172,094 100.0
======== ===== ======== ===== ======== =====
Gross Margins
(in thousands) 1996 % 1995 % 1994 %
-------- ----- -------- ----- -------- -----
North America $ 41,257 29.5 $ 37,100 30.0 $ 32,054 31.2
Europe 19,186 33.5 14,753 32.0 12,012 31.9
Rest of World 12,394 29.0 10,947 28.4 9,506 30.2
-------- ----- -------- ----- -------- -----
Total 72,837 30.4 62,800 30.2 53,572 31.1
Other (2,293) (2,767) (6,181)
-------- ----- -------- ----- -------- -----
Consolidated $ 70,544 29.4 $ 60,033 28.8 $ 47,391 27.5
======== ===== ======== ===== ======== =====
Double-digit sales growth was achieved by each geographic area in 1996.
Sales growth was particularly strong in Europe in 1996 and 1995, at 24% and
22%, respectively, reflecting the Company's expansion of its specialty sales
force concept to Europe and the improvement in European economic conditions
since 1994. Sales denominated in currencies other than U. S. dollars were 42%,
39% and 37% of total sales in 1996, 1995 and 1994, respectively. Foreign
exchange rate changes increased sales by an average of 1% in 1996 and 5% in
1995.
Sales and gross margin trends are analyzed for each strategic business
unit in the following sections.
Electron Device Group
The vacuum tube industry in which EDG operates is characterized by mature
products, the emergence of tube rebuilders, and vigorous price competition.
Overall industry sales are declining at approximately a 7% annual rate. EDG's
sales gains of 4% in 1996 and 15% in 1995 result from a significant increase in
market share.
The medical electronics replacement market is a growth segment of the
vacuum tube industry. Demand in the replacement market for x-ray, computed
tomography (CT), medical resonance imaging (MRI) and radiation therapy
components is expected to continue its growth in response to the emphasis on
controlling rising medical costs. The Company expanded its medical sales force
in 1996, with further expansion planned for 1997. In addition, the Company
acquired an x-ray tube and image intensifier reloading facility in March, 1996.
Medical sales increased 110% to $11 million in 1996, following a 64% increase
in 1995.
The primary factor in EDG's 1995 sales growth was a greater emphasis on
overseas markets, as international sales increased 19%, reflecting sales force
expansion and improved economic conditions in Europe.
Gross margins as a percent of sales increased to 30.4% in 1996, compared
to 29.3% in 1995 and 30.4% in 1994. Gross margin improvement in 1996 resulted
from additional focus on pricing policies and emphasis on proprietary product
lines. The margin decline in 1995 resulted from higher costs for products
previously manufactured by the Company and now purchased.
Solid State and Components
SSC operates in several markets, including the rapidly growing wireless
and telecommunications industries. Sales increased 30% in 1996 to $68.0
million, following a 24% increase in 1995. International sales represented 36%,
36% and 37% of SSC's sales in 1996, 1995 and 1994, respectively.
Gross margins were 30.7%, 31.3% and 33.4% of sales in 1996, 1995 and 1994.
New vendor relationships established during 1996 are expected to have a
positive influence on future margins.
Display Products Group
DPG sales were flat in 1996 at $36.2 million, following a 34% increase in
1995. Sales growth has been hampered by product shortages, as CRT manufacturers
were unable to meet demand. Sales declines in North America were offset by
European sales gains of 57% to $15.5 million.
Page 11
Staff additions and product line expansion contributed to the European sales
gains. DPG's product mix is shifting from monochrome CRTs to higher-priced
color CRTs, which have increased from 11% of units sold in 1994 to 16% in 1995
and 18% in 1996. International sales represented 51%, 35% and 33% of DPG's
sales in 1996, 1995 and 1994, respectively.
Gross margins as a percent of sales increased to 36.4% in 1996, from 34.1%
in 1995 and 33.5% in 1994. The improving trend reflects a larger contribution
from European sales at better margins, a shift in product mix from monochrome
to higher margin color CRT's and industry shortages.
Security Systems Division
SSD operates in the rapidly expanding closed-circuit television market.
The Company made a substantial investment in SSD in 1995, doubling the size of
its sales staff. This strategy contributed to the 86% growth in sales in 1996
and the 26% sales growth in 1995. International sales represented 39% of SSD's
sales in 1996 and 1995, and 40% in 1994.
Gross margins were 21.2%, 22.1% and 22.6% of sales in 1996, 1995 and 1994.
Inventory turnover rates achieved by SSD are significantly higher that the
Company's other SBU's, which mitigates the effect of lower gross margin rates.
Cost of Sales and Gross Margins
The following table reconciles product margins on distribution activities
to gross margins reported in the Statements of Operations:
(% of sales) 1996 1995 1994
-------- -------- --------
Distribution product margin 31.0 % 30.7 % 32.1 %
Customer returns and scrap (0.7) (0.6) (0.6)
Manufacturing and warranty costs (0.3) (0.5) (2.9)
Overstock provisions (0.1) (0.5) (0.9)
Other costs (0.5) (0.3) (0.2)
-------- -------- --------
Gross margin 29.4 % 28.8 % 27.5 %
======== ======== ========
Fluctuations in distribution margins reflect the effects of product costs,
foreign exchange rate variations, and changes in product mix. Gross margins
have improved steadily, from 27.5% of sales in 1994 to 28.8% in 1995 and 29.4%
in 1996. The 1996 improvement reflects higher distribution margins and lower
overstock provisions, while the 1995 improvement was primarily due to the
elimination of manufacturing inefficiencies. Average selling prices, excluding
the effects of foreign currency changes, increased 2.4% in 1996 and declined
1.1% in 1995.
Other Charges
In May 1995, the Company paid $4.7 million in return for the release of
monetary claims related to a 1989 contract for certain night-vision tubes. The
original claim was in excess of $11.0 million.
In 1994, the Company recorded a charge of $26.5 million to provide for the
phase-down of manufacturing activity, including $21.4 million for asset write-
downs and costs related to the transfer of the Company's Brive, France,
operations to local management. The balance, $5.1 million, was for the phase-
down of domestic manufacturing operations. See Note B for details.
Selling, General and Administrative Expenses
Selling, general and administrative expenses represented 22.1% of sales in
1996, 23.4% in 1995 and 24.0% in 1994. At $53.0 million, 1996 expenses
increased $4.3 million over 1995, reflecting the expansion of the SSC, SSD and
international sales forces, and incentive payments on higher gross margins.
Other (Income) Expense
Interest expense increased 2.3% in 1996 due to higher borrowing levels.
Interest expense declined 15% in 1995 due to the elimination of the debt on the
Company's facility in Brive, France. Title to this facility was transferred to
the mortgage holder in exchange for cancellation of the debt. Investment income
was $1.2 million in 1996, $1.9 million in 1995 and $2.4 million in 1994.
Investment income declined in 1996 and 1995, as the result of lower investment
levels and lower realized capital gains.
Income Tax Provision
The effective tax rates were 32% in fiscal 1996, 6% in 1995 and 24% in
1994. The 1996 rate differs from the statutory rate of 34% due to the
utilization of foreign operating losses where no tax benefit was recorded in
prior years and the Company's Foreign Sales Corporation benefit on export
sales, partially offset by state income taxes. The 1995 rate differs from the
U. S. statutory rate of 34% as a result of the carryback of the $4.7 million
contract settlement to prior years at a 46% statutory rate. The 1994 rate
differs from the 34% U. S. statutory rate primarily as a result of the
provision for the disposition of the Company's French manufacturing operations,
which for financial reporting purposes resulted in a U. S. tax benefit at a
lower rate (See Note F to the accompanying consolidated financial statements).
Net Income (Loss) and per Share Data
The comparability of net income and net income per share for 1996, 1995
and 1994 is affected by two unusual charges described above, the 1995 contract
settlement and the 1994 phase-down provision for manufacturing operations. In
addition, 1995 net income included an extraordinary gain on the repurchase of
bonds. The following table presents the net income (loss) trend on a comparable
basis and reconciles to net income (loss) as reported in the Consolidated
Statement of Operations:
Page 12
(in thousands) 1996 1995 1994
-------- -------- --------
Net income (loss), comparable
basis $ 8,111 $ 4,781 $ (309)
Contract settlement, net of tax - (2,300) -
Extraordinary gain, net of tax - 527 -
Phase-down provision, net of tax - - (19,500)
-------- -------- --------
Net income (loss), as reported $ 8,111 $ 3,008 $(19,809)
======== ======== ========
Net income (loss) per share,
comparable basis $ .68 $ .41 $ (.03)
Contract settlement, net of tax - (.25) -
Extraordinary gain, net of tax - .05 -
Phase-down provision, net of tax - - (1.72)
-------- -------- --------
Net income (loss) per share,
as reported $ .68 $ .21 $ (1.75)
======== ======== ========
Financial Condition
Liquidity
Liquidity is provided by the operating activities of the Company, adjusted
for non-cash items, and is reduced by working capital requirements, debt
service, dividends and capital acquisitions. Cash provided by operations,
exclusive of working capital requirements, was $14.0 million in fiscal 1996,
$7.9 million in 1995 and $5.8 million in 1994. Increased investments in working
capital of $22.0 million in 1996, $14.6 million in 1995 and $8.1 million in
1994 and debt service and dividend payments were met from cash generated by
operations, liquidation of investments and additional borrowings.
Working capital requirements included higher receivable and inventory
balances to support sales growth. The Company's market niche as a distributor
of electron tubes and semiconductors for replacement results in relatively high
levels of inventory due to the nature of the product carried and the markets
served. Many of these products represent trailing-edge technology which may not
be available from other sources, and may not be currently manufactured. Also,
in many cases, the products are components of production equipment for which
immediate availability is critical to the customer. Other working capital
requirements in 1995 included $6.3 million for severance and other payments
related to the phase-down of manufacturing operations.
The Company has federal and state net operating loss carryforwards of $6.0
million on a tax basis which are available to reduce future tax liabilities.
Current earnings levels are sufficient to realize these carryforwards before
they expire.
The Company has proposed a plan to the Illinois Environmental Protection
Agency to monitor and process soil and groundwater at the LaFox facility.
Contamination is believed to have resulted from practices previously employed
at the site. The present value of the estimated future remediation costs is $.7
million, and is included in accrued liabilities.
Financing
In November 1995, the Company obtained a $25 million senior revolving
credit note agreement due November 1998, consolidating a $9.8 million long-term
loan and an $8.0 million short-term loan and providing an additional
availability of $7.2 million. In June 1996, the agreement was amended to $30
million, of which $5.8 million was available for future working capital or
other corporate requirements.
In connection with the Company's outstanding 7 1/4% convertible
debentures, certain restrictions relate to the purchase of treasury stock and
the payment of cash dividends. At May 31, 1996, $ 11.2 million was free of such
restrictions. Annual dividend payments approximate $1.8 million. The policy
regarding payment of dividends is reviewed periodically by the Board of
Directors in light of the Company's operating needs and capital structure.
Investments
At May 31, 1996, the market value of the Company's non-current investment
portfolio was $ 2.2 million. Included in the portfolio are high-yield
investments for which management periodically evaluates the associated market
risk. The investments are being maintained for corporate purposes which may
include short-term operating needs and strategic acquisitions of product lines
or businesses. Cash reserves, investments, funds from operations and credit
lines are expected to be adequate to meet the operational needs and future
dividends of the Company.
Investing activities in 1996 included the acquisition of a medical x-ray
tube reloading facility for $1.45 million.
Currency Fluctuations
The Company's foreign denominated assets and liabilities are cash,
accounts receivable and accounts payable, primarily in member countries of the
European community, and, to a lesser extent, in Canada, Singapore and Japan.
The Company monitors its foreign exchange exposures and may enter into forward
contracts to hedge significant transactions. A portion of the $25 million
senior revolving credit note agreement may be denominated in foreign
currencies, at the Company's discretion. Other tools which may be used to
manage foreign exchange exposures include the use of currency clauses in sales
contracts and the use of local debt to offset asset exposures.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995
Except for the historical information contained herein, the matters
discussed in this Annual Report (including the Annual Report on Form 10-K) are
forward-looking statements relating to future events which involve certain
risks and uncertainties, including those identified herein and in the Annual
Report on Form 10-K.
Page 13
Consolidated Balance Sheets
May 31
------------------
(in thousands) 1996 1995
-------- --------
Assets
Current assets
Cash and equivalents $ 6,784 $ 11,151
Receivables, less allowance of $1,461 and $1,385 48,232 42,768
Inventories 94,327 81,267
Other 8,062 8,762
-------- --------
Total current assets 157,405 143,948
Investments 2,190 7,070
Property, plant and equipment, net 16,054 16,388
Other assets 4,509 6,108
-------- --------
Total assets $180,158 $173,514
======== ========
Liabilities and stockholders' equity
Current liabilities
Accounts payable $ 14,503 $ 16,695
Accrued liabilities 9,751 11,161
Short-term debt and current maturities of
long-term debt -- 9,857
-------- --------
Total current liabilities 24,254 37,713
Long-term debt, less current portion 92,025 79,647
Deferred income taxes 1,087 --
-------- --------
Total liabilities 117,366 117,360
Stockholders' equity
Common Stock, $.05 par value 428 411
Class B Common Stock, convertible, $.05 par value 162 162
Preferred Stock, $1.00 par value -- --
Additional paid-in capital 52,185 49,989
Retained earnings 12,430 6,141
Foreign currency translation adjustment (2,478) (686)
Market appreciation on investments, net of tax 65 137
-------- --------
Total stockholders' equity 62,792 56,154
-------- --------
Total liabilities and stockholders' equity $180,158 $173,514
======== ========
See notes to consolidated financial statements.
Page 14
Consolidated Statements of Operations
Year Ended May 31
----------------------------
(in thousands, except per share amounts) 1996 1995 1994
-------- -------- --------
Net sales $239,667 $208,118 $172,094
Costs and expenses:
Cost of products sold 169,123 148,085 124,703
Other charges -- 4,700 26,500
Selling, general and administrative
expenses 52,974 48,674 41,226
-------- -------- --------
222,097 201,459 192,429
-------- -------- --------
Operating income (loss) 17,570 6,659 (20,335)
Other (income) expense:
Interest expense 6,624 6,473 7,631
Investment income (1,238) (1,863) (2,442)
Other 173 (582) 685
-------- -------- --------
5,559 4,028 5,874
-------- -------- --------
Income (loss) before income taxes
and extraordinary item 12,011 2,631 (26,209)
Income tax provision (benefit) 3,900 150 (6,400)
-------- -------- --------
Income (loss) before extraordinary item 8,111 2,481 (19,809)
Extraordinary gain on bond repurchase,
net of income taxes of $337 -- 527 --
-------- -------- --------
Net income (loss) $ 8,111 $ 3,008 $(19,809)
======== ======== ========
Net income (loss) per share before
extraordinary item $ .68 $ .21 $ (1.75)
Extraordinary gain, net of tax -- .05 --
-------- -------- --------
Net income (loss) per share $ .68 $ .26 $ (1.75)
======== ======== ========
Average shares outstanding 12,002 11,566 11,299
======== ======== ========
Dividends per common share $ .16 $ .16 $ .16
======== ======== ========
See notes to consolidated financial statements.
Page 15
Consolidated Statements of Cash Flows
Year Ended May 31
----------------------------
(in thousands) 1996 1995 1994
-------- -------- --------
Operating Activities:
Net income (loss) $ 8,111 $ 3,008 $(19,809)
Adjustments to reconcile net income
(loss) to cash used in
operating activities:
Depreciation 2,709 2,669 4,753
Amortization of intangibles and
financing costs 360 427 964
Deferred income taxes 2,338 1,310 (6,717)
Stock contribution to employee
ownership plan 500 500 125
Phase-down of manufacturing operations -- -- 26,500
-------- -------- --------
Net adjustments 5,907 4,906 25,625
-------- -------- --------
Net income (loss) adjusted for
non-cash items 14,018 7,914 5,816
-------- -------- --------
Changes in working capital, net of
currency translation effects and
business acquisition:
Receivables (5,310) (7,215) (5,132)
Inventories (12,920) (5,600) 1,197
Other current assets 1,567 (429) (928)
Accounts payable (3,448) 5,079 (770)
Accrued liabilities (1,843) (6,437) (2,485)
-------- -------- --------
Net changes in working capital (21,954) (14,602) (8,118)
-------- -------- --------
Net cash used in operating activities (7,936) (6,688) (2,302)
-------- -------- --------
Financing Activities:
Proceeds from borrowings 22,200 8,000 13,770
Payments on debt (19,679) (6,784) (16,641)
Proceeds from sale of common stock 1,713 145 71
Cash dividends (1,822) (1,779) (1,754)
-------- -------- --------
Net cash provided by (used in) financing
activities 2,412 (418) (4,554)
-------- -------- --------
Investing Activities:
Sales of investments 11,425 22,118 29,796
Purchases of investments (6,660) (11,335) (18,343)
Capital expenditures (2,352) (2,703) (2,164)
Business acquisition (1,450) -- --
Other 194 438 208
-------- -------- --------
Net cash provided by investing activities 1,157 8,518 9,497
-------- -------- --------
Increase (decrease) in cash and
equivalents (4,367) 1,412 2,641
Cash and equivalents at beginning
of year 11,151 9,739 7,098
-------- -------- --------
Cash and equivalents at end of year $ 6,784 $ 11,151 $ 9,739
======== ======== ========
See notes to consolidated financial statements.
Page 16
<TABLE>
Consolidated Statements of Stockholders' Equity
<CAPTION>
Shares Issued
--------------- Additional Market
(shares and dollars Class B Par Paid-in Retained Foreign Appre-
in thousands) Common Common Value Capital Earnings Currency ciation
Total
------ ------ ------ ------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 1, 1993 8,019 3,248 $ 563 $49,158 $26,475 $ (779) $ -- $75,417
Shares contributed to ESOP 20 -- 1 124 -- -- -- 125
Shares issued under ESPP
and stock option plan 17 -- 1 70 -- -- -- 71
Dividends -- -- -- -- (1,754) -- -- (1,754)
Currency translation -- -- -- -- -- (1,604) -- (1,604)
Cumulative effect of adoption
of FASB Statement 115 -- -- -- -- -- -- 127 127
Net loss -- -- -- -- (19,809) -- -- (19,809)
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1994 8,056 3,248 565 49,352 4,912 (2,383) 127 52,573
Shares contributed to ESOP 133 -- 7 493 -- -- -- 500
Shares issued under ESPP
and stock option plan 35 -- 1 144 -- -- -- 145
Conversion of Class B shares
to common shares 1 (1) -- -- -- -- -- --
Dividends -- -- -- -- (1,779) -- -- (1,779)
Currency translation -- -- -- -- -- 1,697 -- 1,697
Market appreciation -- -- -- -- -- -- 10 10
Net income -- -- -- -- 3,008 -- -- 3,008
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1995 8,225 3,247 573 49,989 6,141 (686) 137 56,154
Shares contributed to ESOP 69 -- 3 497 -- -- -- 500
Shares issued under ESPP
and stock option plan 273 -- 14 1,699 -- -- -- 1,713
Conversion of Class B shares
to common shares 3 (3) -- -- -- -- -- --
Dividends -- -- -- -- (1,822) -- -- (1,822)
Currency translation -- -- -- -- -- (1,792) -- (1,792)
Market appreciation -- -- -- -- -- -- (72) (72)
Net income -- -- -- -- 8,111 -- -- 8,111
------ ------ ------ ------- ------- ------- ------ -------
Balance May 31, 1996 8,570 3,244 $ 590 $52,185 $12,430 $(2,478) $ 65
$62,792
====== ====== ====== ======= ======= ======= ======
=======
</TABLE>
See notes to consolidated financial statements.
Page 17
Notes to Consolidated Financial Statements
Note A -- Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the
accounts and operations of the Company and its subsidiaries. All significant
intercompany transactions are eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires the Company's management to
make estimates and assumptions that affect 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.
Cash Equivalents: The Company considers short-term investments that have a
maturity of three months or less, when purchased, to be cash equivalents. The
carrying amounts reported in the balance sheet for cash and equivalents
approximate the fair market value of these assets.
Inventories: Inventories are stated at the lower of cost or market. Domestic
inventory costs are determined using the last-in, first-out (LIFO) method and
represent 84% of total inventories at May 31, 1996 and 1995. The remaining
inventories are costed on the first-in, first-out (FIFO) method. If the FIFO
method, which approximates current costs, had been used for all inventories,
the total amount of inventories would have been increased by $5,707,000 and
$5,742,000 at May 31, 1996 and 1995, respectively. Substantially all
inventories represent finished goods held for sale.
Property, Plant and Equipment: Property, plant and equipment are stated at
cost. Provisions for depreciation are computed principally using the straight-
line method for financial reporting purposes and accelerated methods for income
tax purposes. Property, plant and equipment consist of the following:
May 31
-------------------
(in thousands) 1996 1995
-------- --------
Land and improvements $ 2,624 $ 2,741
Buildings and improvements 18,052 18,068
Machinery and equipment 22,020 20,039
-------- --------
Property at cost 42,696 40,848
Accumulated depreciation (26,642) (24,460)
-------- --------
Property, net $ 16,054 $ 16,388
======== ========
Foreign Currency Translation: Foreign currency transactions and financial
statements are translated into U. S. dollars at current rates, except that
revenues, costs and expenses are translated at average rates during each
reporting period. Gains and losses resulting from foreign currency
transactions are included in income currently. Foreign currency transaction
gains (losses) reflected in operations were $(228,000), $316,000, and
$(607,000) in 1996, 1995, and 1994, respectively. Gains and losses resulting
from translation of foreign financial statements are credited or charged
directly to a separate component of shareholders' equity.
Revenue Recognition: Revenues are recorded upon shipment.
Income Taxes: Deferred tax assets and liabilities are established for
differences between financial reporting and tax accounting of assets and
liabilities and are measured using the enacted marginal tax rates.
Stock-Based Compensation: The Company accounts for stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25 and generally
recognizes no compensation expense when options are issued. The Financial
Accounting Standards Board has issued Statement No. 123 "Accounting for Stock-
Based Compensation", which requires estimation of the fair value of options
granted to employees and will be effective for the Company in fiscal 1997.
Because the Company plans to elect supplemental foot-note disclosure of this
information rather than including the estimated cost as an expense in arriving
at net income, adoption of this Statement will not affect future earnings
presented in the Statement of Operations.
Earnings per Share: Earnings per share are based on the weighted average number
of Common and Class B Common shares outstanding and share equivalents that
would arise from the exercise of stock options. The Company's outstanding
7 1/4% Convertible Subordinated Debentures were not included as share
equivalents because the effect of conversion would be anti-dilutive.
Reclassifications: Certain amounts in the 1994 and 1995 financial statements
have been reclassified to conform to the 1996 presentation.
Note B -- Other Charges
In 1995, the Company paid $4.7 million to the Government in return for a
release of monetary claims in connection with a contract completed in 1989.
In 1994, the Company recorded a charge of $26,500,000 to provide for the
costs and asset write-downs from the phase-down of its manufacturing
operations. Of the charge, $21,400,000 provided for the disposition of the
Company's Brive, France facility, which was transferred to local management in
1995. The costs incurred were consistent with the provision made in 1994, and
no further charges were recorded in 1995 or 1996.
The balance of the charge, $5,100,000, related to the phase-down of
domestic manufacturing operations, which was substantially completed in 1995.
An element of the charge was for estimated clean-up costs and environmental
monitoring related to handling practices previously employed for certain
solvents at the Company's LaFox, Illinois facility. The Company has proposed a
plan to the Illinois Environmental Protection Agency to monitor and process
soil and groundwater at the facility. The costs incurred for the phase-down
Page 18
were consistent with the 1994 provision, and no further charges were recorded,
except for a $450,000 charge to cost of sales in 1996 to increase the reserve
for environmental remediation costs. The present value of costs of remediation
are estimated to be $700,000 and are included in accrued liabilities. The
estimated cost of certain litigation also included in the provision is
discussed further in Note K.
Note C -- Marketing Agreements
The Company is party to several marketing distribution agreements with
various manufacturers in the electron tube and semiconductor businesses. The
most significant is a distribution agreement with Communications and Power
Industries, Inc., formerly the Electron Device Group of Varian Associates, Inc.
Product sales under this distribution agreement accounted for 15%, 17%, and
18%, of net sales in fiscal 1996, 1995, and 1994, respectively.
As part of the divestiture of the Company's Brive manufacturing
operations, the Company entered into a supply agreement with Covimag, SA, the
corporation created by the local management group to continue operating the
Brive facility. Under this agreement, the Company has agreed to purchase
electron tubes valued at approximately $11.0 million per year through calendar
1997.
Note D -- Investments
Financial Accounting Standards Board Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" requires investments to be
classified as trading, available-for-sale or held-to-maturity. Management has
determined these investments are properly classified as available-for-sale. The
investment portfolio at May 31, 1996 and 1995 is stated at fair value based on
quoted market prices or dealers' quotes and consists of securities available-
for-sale, as follows:
Gross Gross Estimated
Unrealized Unrealized Fair
(in thousands) Cost Gains Losses Value
-------- -------- -------- --------
At May 31, 1996:
Equity securities $ 1,571 $ 174 $ (29) $ 1,716
Bonds 510 - (36) 474
-------- -------- -------- --------
Total investments $ 2,081 $ 174 $ (65) $ 2,190
======== ======== ======== ========
At May 31, 1995:
Equity securities $ 3,929 $ 567 $ (333) $ 4,163
Bonds 2,916 140 (149) 2,907
-------- -------- -------- --------
Total investments $ 6,845 $ 707 $ (482) $ 7,070
======== ======== ======== ========
The maturity schedule for securities available-for-sale at May 31, 1996 is
as follows:
Estimated
Fair
(in thousands) Cost Value
-------- --------
Due in one year or less $ 324 $ 324
Due after one year through five years 186 150
-------- --------
Total bonds 510 474
Equity securities 1,571 1,716
-------- --------
Total investments $ 2,081 $ 2,190
======== ========
Interest and dividend income are accrued as earned. Gains and losses are
recognized in income on the investment portfolio when securities are sold or to
reflect a decline in market value considered by management to be of a permanent
nature. Investment income includes capital gains of $1,121,000 in 1996,
$1,205,000 in 1995 and $1,292,000 in 1994. Of these amounts, sales of equity
securities generated gains of $1,079,000, $1,044,000 and $739,000,
respectively.
Note E -- Debt Financing
Long-term debt consists of the following:
May 31
-------------------
(in thousands) 1996 1995
-------- --------
7 1/4% Convertible subordinated debentures
due 2006 $ 70,825 $ 70,825
Floating-rate bank term loan due
November, 1998 (6.6% at May 31, 1996) 21,200 10,679
-------- --------
Total debt 92,025 81,504
Less current maturities - 1,857
-------- --------
Long-term debt, net $ 92,025 $ 79,647
======== ========
The 7 1/4% convertible subordinated debentures are unsecured and
subordinated to other long-term debt. Each $1,000 debenture is convertible into
the Company's Common Stock at any time prior to maturity at $21.14 per share
and is redeemable by the Company at a premium through December 15, 1996 and
thereafter at par. The Company is required to make sinking fund payments on
December 15 annually to 2005 in order to retire 75% of the original $83,000,000
issue prior to maturity. Debentures with a face amount of $12,175,000 were
repurchased and will be used to satisfy a portion of the sinking fund
requirement. Remaining sinking fund requirements for the next five years are
$275,000 in fiscal 1998 and $6,225,000 in fiscal 1999, 2000 and 2001. The
debenture agreement restricts the use of retained earnings for the payment of
dividends or purchase of treasury stock. As of May 31, 1996, $11,219,000 was
free of such restrictions.
During fiscal 1995, the Company repurchased $4,910,000 at face value of
its 7 1/4% convertible debentures for $3,956,000. Net of unamortized deferred
financing costs of $90,000, and income taxes of $337,000, an extraordinary gain
of $527,000 was recorded.
In November 1995, the Company entered into a $25,000,000 senior revolving
credit note agreement due November 1998 consolidating a then outstanding
$9,800,000 long-term loan and an $8,000,000 short-term loan. Financial
covenants under the agreement set benchmark levels for tangible net worth, debt
to tangible net worth ratio and annual debt service coverage. The loan bears
interest at 125 basis points over LIBOR, which at May 31, 1996 resulted in a
rate of 6.6%. In June 1996, the senior revolving credit agreement was increased
to $30,000,000, of which $5,800,000 was available for future working capital or
other corporate requirements.
Page 19
Aggregate maturities of debt during the next five years are: $275,000 in
1998, $27,424,900 in 1999, $6,225,000 in 2000 and 2001. Cash payments for
interest were $6,445,000, $6,506,000, and $7,710,000 in 1996, 1995, and 1994,
respectively.
In the following table, the fair value of the Company's 7 1/4% convertible
debentures is based on quoted market prices. The fair value of floating-rate
bank term loans is based on carrying value.
(in thousands) 1996 1995
------------------- -------------------
Carrying Fair Carrying Fair
Value Value Value Value
-------- -------- -------- --------
7 1/4% Convertible
debentures $ 70,825 $ 59,847 $ 70,825 $ 56,306
Bank term loans 21,200 21,200 18,679 18,679
-------- -------- -------- --------
Total $ 92,025 $ 81,047 $ 89,504 $ 74,985
======== ======== ======== ========
Note F -- Income Taxes
The components of income (loss) before income taxes and extraordinary item
are:
(in thousands) 1996 1995 1994
--------- --------- ---------
United States $ 9,954 $ 781 $ (2,284)
Foreign 2,057 1,850 (23,925)
--------- --------- ---------
Income (loss) before taxes $ 12,011 $ 2,631 $(26,209)
========= ========= =========
The differences between the provision (credit) for income taxes and
income taxes computed at the federal statutory tax rate of 34% are as follows:
(in thousands) 1996 1995 1994
--------- --------- ---------
Federal income tax at statutory rate $ 4,084 $ 895 $ (8,911)
Effect of:
State income taxes, net of
federal tax benefit 421 (38) (1,203)
FSC benefit on export sales (386) (273) (258)
Realization of tax benefit on prior
years' foreign losses (298) - -
Non-deductible foreign losses - 180 9,036
U.S. tax benefit on disposition
of French manufacturing - - (5,000)
Claim settlement taxed at 46%
carry back year statutory rate - (600) -
Other 79 (14) (64)
--------- --------- ---------
Income tax provision (benefit) $ 3,900 $ 150 $ (6,400)
========= ========= =========
In 1995, due to the timing and nature of the claim settlement (see Note
B), the Company utilized a ten year carryback provision permitted by the
Internal Revenue Service.
Tax benefits of $8,000,000 will be realized if the disposition of the
Company's French operations is treated as an ordinary loss for federal tax
purposes (see Note B). A tax benefit of $5,000,000 was recorded in 1994 based
upon alternative tax strategies.
The provisions (credits) for income taxes before extraordinary item
consist of the following:
(in thousands) 1996 1995 1994
--------- --------- ---------
Currently payable:
Federal $ 1,158 $ (1,930) $ 137
State 139 (150) -
Foreign 274 1,250 196
--------- --------- ---------
Total currently payable 1,571 (830) 333
--------- --------- ---------
Deferred:
Federal 1,806 1,386 (4,455)
State 498 93 (1,822)
Foreign 25 (499) (456)
--------- --------- ---------
Total deferred 2,329 980 (6,733)
--------- --------- ---------
Income tax provision (benefit) $ 3,900 $ 150 $ (6,400)
========= ========= =========
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Non-current deferred tax
assets and liabilities are offset on the balance sheet within tax
jurisdictions. Significant components of the Company's deferred tax assets and
liabilities as of May 31, 1996 and 1995 are as follows:
Non- Non-
Current current current
(in thousands) Asset (1) Asset (2) Liability
--------- --------- ---------
At May 31, 1996:
Deferred tax assets:
Operating loss carryforward $ - $ - $ 1,440
Intercompany profit in inventory 1,611 - -
Inventory valuation 3,462 - -
Environmental and other reserves - - 600
Other, net 17 - 271
--------- --------- ---------
Deferred tax assets 5,090 - 2,311
Deferred tax liabilities:
Accelerated depreciation - - (3,398)
--------- --------- ---------
Net deferred tax $ 5,090 $ - $ (1,087)
========= ========= =========
At May 31, 1995:
Deferred tax assets:
Operating loss carryforward $ - $ 4,933 $ -
Intercompany profit in inventory 1,619 - -
Inventory valuation 2,557 - -
Other, net 19 480 -
--------- --------- ---------
Deferred tax assets 4,195 5,413 -
Deferred tax liabilities:
Accelerated depreciation - (3,276) -
--------- --------- ---------
Net deferred tax $ 4,195 $ 2,137 $ -
========= ========= =========
(1) Included in other current assets on the balance sheet
(2) Included in other assets on the balance sheet
Available operating loss carryforwards for domestic losses expire in 2010.
Net income taxes paid (refunds received) were $(1,112,000), $(361,000), and
$3,053,000 in 1996, 1995, and 1994, respectively. The Company's United States
federal tax returns have been audited through 1992.
Page 20
Note G -- Accrued Liabilities
Accrued liabilities consist of the following:
May 31
---------------------
(in thousands) 1996 1995
--------- ---------
Compensation and payroll taxes $ 3,558 $ 4,592
Interest 2,690 2,511
Income taxes 314 530
Other accrued expenses 3,189 3,528
--------- ---------
Accrued liabilities $ 9,751 $ 11,161
========= =========
Note H -- Stockholders' Equity
The Company has authorized 30,000,000 shares of Common Stock, 10,000,000
shares of Class B Common Stock, and 5,000,000 shares of Preferred Stock. The
Class B Common Stock has ten votes per share and generally votes together with
the Common Stock. The Class B Common Stock has transferability restrictions;
however, it may be converted into Common Stock on a share-for-share basis at
any time. With respect to dividends and distributions, shares of Common Stock
and Class B Common Stock rank equally and have the same rights, except that
Class B Common Stock is limited to 90% of the amount of Common Stock cash
dividends.
Total Common Stock issued at May 31, 1996 was 8,569,895 shares. An
additional 9,125,085 shares of Common Stock have been reserved for future
issuance under the Employee Stock Purchase and Option Plans and potential
conversion of the 7 1/4% Debentures and Class B Common Stock.
The Employee Stock Purchase Plan (ESPP) provides substantially all
employees an opportunity to purchase Common Stock of the Company at 85% of its
fair market value. The plan has reserved 150,000 shares for future issuance.
On July 10, 1996, the Board of Directors approved the Employees 1996
Incentive Compensation Plan, the 1996 Stock Option Plan for Non-Employee
Directors and Employees 1996 Stock Purchase Plan. The plans are subject to
shareholders' approval, which will be voted at the annual meeting on October 1,
1996. The following information assumes shareholders' approval.
The Employees' 1996 Incentive Compensation Plan authorizes the issuance of
up to 800,000 shares as incentive stock options, non-qualified stock options,
or stock awards. Under this plan and predecessor plans, 1,484,856 shares are
reserved for future issuance. The Plan authorizes the granting of incentive
stock options at the fair market value at the date of grant. Generally, these
options become exercisable over staggered periods and expire up to ten years
from the date of grant.
Under the 1996 Stock Option Plan for Non-Employee Directors and a
predecessor plan, 400,000 shares have been reserved for future issuance
relating to qualified stock options exercisable based on the passage of time.
Additionally, 490,739 shares have been reserved for future issuance to
employees as Non-Qualified Stock Options. Each option is exercisable over a
period from its date of grant at the market value on the date of grant and
expires ten years from the date of grant.
The following table contains further information on the stock option
plans:
Incentive Stock Options 1996 1995 1994
--------- --------- ---------
Outstanding, June 1 620,750 434,221 444,813
Granted 243,450 246,100 40,150
Exercised (162,014) (9,000) -
Canceled (36,780) (50,571) (50,742)
--------- --------- ---------
Outstanding, May 31 665,406 620,750 434,221
========= ========= =========
Price range at May 31 $3.75 to $3.75 to $6.00 to
$8.125 $8.125 $8.125
Exercisable at May 31 366,466 478,270 199,111
Available for grant at May 31 819,450 254,900 -
========= ========= =========
Non-Qualified Stock
Options 1996 1995 1994
--------- --------- ---------
Outstanding, June 1 712,543 669,890 493,532
Granted 20,000 50,000 208,100
Exercised (83,127) - -
Canceled (62,978) (7,347) (31,742)
--------- --------- ---------
Outstanding, May 31 586,438 712,543 669,890
========= ========= =========
Price range at May 31 $3.75 to $3.75 to $5.25 to
$12.95 $12.95 $12.95
Exercisable at May 31 488,938 577,229 345,026
Available for grant at May 31 304,301 161,324 204,477
========= ========= =========
Note I -- Employee Retirement Plans
The Company's domestic employee retirement plans consist of a profit
sharing plan and a stock ownership plan (ESOP). Annual contributions in cash or
Company stock are made at the discretion of the Board of Directors. In
addition, the profit sharing plan has a 401(k) provision whereby the Company
matches 50% of employee contributions up to 3% of base pay. Effective 1997, the
Company will increase this matching limit to 4% of base pay. Charges to expense
for discretionary and matching contributions to these plans were $1,075,000 in
1996, $745,000 in 1995 and $740,000 in 1994. Stock contributions to the ESOP
were $500,000 , $500,000 and $125,000 in 1996, 1995 and 1994, respectively,
based on the stock price at the date contributed. Shares are included in the
calculation of earnings per share, and dividends are paid to the ESOP from the
date the shares are contributed. Foreign employees are covered by a variety of
primarily government mandated programs.
Note J -- Industry and Market Information
The Company operates in one industry as a distributor of electronic
components, including vacuum tubes and semiconductors. The Company invoices its
customers and makes shipments from two primary geographic locations: North
America (which services the U. S., Canada, Latin America, and the Far East) and
Europe.
Page 21
(in thousands) 1996 1995 1994
--------- --------- ---------
Sales:
North America $211,912 $186,103 $154,205
Less intersegment transfers 21,778 15,316 13,691
--------- --------- ---------
To unaffiliated customers 190,134 170,787 140,514
--------- --------- ---------
Europe 51,987 49,244 40,367
Less intersegment transfers 2,454 11,913 8,787
--------- --------- ---------
To unaffiliated customers 49,533 37,331 31,580
--------- --------- ---------
Consolidated $239,667 $208,118 $172,094
========= ========= =========
Operating income (loss):
North America $ 13,040 $ 6,187 $ 6,235
Europe 6,263 1,984 (25,054)
Corporate expenses (1,733) (1,512) (1,516)
--------- --------- ---------
Consolidated $ 17,570 $ 6,659 $(20,335)
========= ========= =========
Identifiable assets:
North America $143,536 $142,031 $119,033
Europe 32,794 21,653 35,310
Corporate assets 3,828 9,830 25,124
--------- --------- ---------
Consolidated $180,158 $173,514 $179,467
========= ========= =========
Intersegment transfers originate mainly from the United States or Europe
and are accounted for on an "arm's length" basis with profits eliminated in
consolidation. Export sales shipped directly from the United States were
$37,913,000 in 1996, $38,653,000 in 1995, and $29,667,000 in 1994.
Operating income was reduced by $4,700,000 in North America in 1995 for
the payment of a claim settlement, and by $5,100,000 in North America and
$21,400,000 in Europe in 1994 for the provision for phase-down of manufacturing
operations, as described in Note B. Corporate assets consist primarily of cash
and investments.
The Company sells its products to companies in diversified industries and
performs periodic credit evaluations of its customers' financial condition.
Terms are generally on open account, payable net 30 days in North America and
vary elsewhere based on local customary practices. Estimates of credit losses
are recorded in the financial statements based on periodic reviews of
outstanding accounts and actual losses consistently have been within
management's estimates.
Sales by product line and by geographic destination are summarized in
Management's Discussion and Analysis.
Note K -- Litigation
On September 30, 1991, the Company reached a settlement with the U. S.
Department of Justice (DOJ) which prohibits the Company from collecting tube
carcasses otherwise available to tube rebuilders, provides certain restrictions
on its dealings with Varian Associates, Inc. with respect to power grid tubes
and re-quires the Company to obtain DOJ approval for the acquisition of any
company (or its power grid tube assets) engaged in the rebuilding, manufacture,
or distribution of power grid tubes, except under limited circumstances.
On June 19, 1990, the Company was served with a complaint in Panache
Broadcasting of Pennsylvania, Inc. v. Richardson Electronics, Ltd.; Varian
Associates, Inc.; and Varian Supply Company (VASCO - a joint venture between
the Company and Varian Associates, Inc.), in U. S. District Court for the
Eastern Division of Pennsylvania alleging violations of Sections 1 and 2 of the
Sherman Act and Section 7 of the Clayton Act. This action purports to be a
class action on behalf of all persons and businesses in the U. S. "who
purchased electron power tubes from one or more of the defendant corporations
at any time" since the formation of VASCO. The suit seeks treble damages
alleged to be in excess of $100,000, injunctive relief, and attorneys' fees.
The litigation has been transferred to the U. S. District Court for the
Northern District of Illinois, Eastern Division as cause No. 90C6400, and is in
the discovery stage. The Court has not determined whether the action may be
maintained on behalf of a class. The Company is vigorously defending itself and
the VASCO joint venture against this action.
While it is not possible at this time to predict the outcome of this legal
action, in the opinion of management, the disposition of the lawsuit and other
matters mentioned above will not have a material effect on financial position.
Note L -- Selected Quarterly Financial Data
(Unaudited)
Summarized quarterly financial data for 1996 and 1995 follow. There were
no material fourth quarter adjustments in 1996 or 1995. See Note B regarding
the 1995 claim settlement.
(in thousands, except per
share amounts) First Second Third Fourth
--------- --------- --------- ---------
1996:
Net sales $57,201 $61,669 $56,367 $64,430
Gross margin 17,138 17,934 16,816 18,656
Net income 1,730 2,240 1,821 2,320
Net income per share $ .15 $ .19 $ .15 $ .19
1995:
Net sales $46,407 $51,008 $51,255 $59,448
Gross margin 13,503 14,570 14,673 17,287
Claim settlement - - - (4,700)
Net income (loss) before
extraordinary item 784 1,128 972 (403)
Extraordinary gain,
net of tax - - - 527
Net income 784 1,128 972 124
Net income (loss) per share
before extraordinary gain $ .07 $ .10 $ .08 $ (.04)
Net income per share $ .07 $ .10 $ .08 $ .01
Page 22
Report of Independent Auditors
Stockholders and Directors
Richardson Electronics, Ltd.
LaFox, Illinois
We have audited the accompanying consolidated balance sheets of Richardson
Electronics, Ltd. and subsidiaries as of May 31, 1996 and 1995, and the related
consolidated statements of operations, cash flows and stockholders' equity for
each of the three years in the period ended May 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Richardson
Electronics, Ltd. and subsidiaries at May 31, 1996 and 1995, and the
consolidated results of their operations and cash flows for each of the three
years in the period ended May 31, 1996, in conformity with generally accepted
accounting principles.
Ernst & Young LLP
Chicago, Illinois,
July 10, 1996
Stockholder Information
Corporate Offices
Richardson Electronics, Ltd.
40W267 Keslinger Road
LaFox, Illinois 60147
(630) 208-2200
Annual Meeting
We encourage all stockholders to attend the annual meeting scheduled
for Tuesday, October 1, 1995 at 3:15 p.m. at the Company's corporate
offices. Further details are available in your proxy materials.
Transfer Agent and Registrar
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Auditors
Ernst & Young LLP
233 S. Wacker Drive
Chicago, Illinois 60606
Form 10K
A copy of the Company's Annual Report on Form 10K, filed with the
Securities and Exchange Commission is available without charge upon
request. All inquiries should be addressed to the Investor Relations
Department, Richardson Electronics, Ltd., 40W267 Keslinger Road, LaFox,
Illinois 60147.
Market Price of Common Stock
The common stock is traded on the NASDAQ National Market System under the
symbol "RELL". Press releases and other information can be found on the
Internet at the Company's home page at http://www.rell.com. The number of
stockholders of Common Stock and Class B Common Stock at May 31, 1996 was
707 and 37, respectively. The quarterly market price ranges of the
Company's common stock were as follows:
1996 1995
---------------- ----------------
Fiscal Quarters High Low High Low
------ ------ ------ ------
First 8 1/8 7 5 1/2 3 3/4
Second 11 3/4 6 7/8 9 4 1/2
Third 11 1/4 9 8 1/2 6 5/8
Fourth 11 7/8 9 3/4 8 1/8 6 3/4
Page 23
Corporate Officers
Edward J. Richardson
Chairman of the Board, President & Chief Executive Officer
Charles J. Acurio
Vice President, Display Products Group
Page Y. Chiang
Vice President & Operations Manager, Security Systems Division
Flint Cooper
Executive Vice President & General Manager, Security Systems Division
Dennis R. Gandy
Executive Vice President, Corporate Development & Assistant Secretary
William J. Garry
Vice President, Finance & Chief Financial Officer
David Gilden
Vice President, Latin American Sales
Joseph C. Grill
Vice President, Human Resources
Joel Levine
Senior Vice President & General Manager, Solid State and Components
Kathleen M. McNally
Vice President, Marketing Operations
James R. Patterson
Vice President of Sales, Solid State and Components
Bart Petrini
Vice President & General Manager, Electron Device Group
Robert L. Prince
Vice President, Worldwide Sales Administration
Kevin F. Reilly
Vice President & Chief Information Officer
William G. Seils
Senior Vice President, General Counsel & Corporate Secretary
Ronald G. Ware
Treasurer
Board of Directors
Edward J. Richardson (1)
Arnold R. Allen
Consultant
Jacques Bouyer (5)
Consultant
Kenneth J. Douglas (2,3)
Chairman of the Board, West Suburban Hospital Medical Center
Dennis R. Gandy (1)
William J. Garry
Scott Hodes (2,3,4)
Partner, Law Firm of Ross & Hardies
Ad Ketelaars
Chief Executive Officer, Enertel
Joel Levine
Harold L. Purkey (2)
Senior Managing Director,
Forum Capital Markets
Samuel Rubinovitz (1,3,4,5)
Consultant
(1) Executive Committee
(2) Audit Committee
(3) Compensation / Stock Option Committee
(4) Executive Oversight Committee
(5) Strategic Planning Committee
Page 24
Exhibit 21
SUBSIDIARIES
OF
RICHARDSON ELECTRONICS, LTD.
Richardson Electronics Canada, Ltd. Canada
Richardson Electronics (Europe) Ltd. United Kingdom
RESA, SNC France
Richardson France SNC France
Richardson Electronics Italy SRL Italy
Richardson Electronics Iberica, S.A. Spain
Richardson Electronics GmbH Germany
Richardson Electronics Japan K.K. Japan
Richardson Electronics Pte Ltd. Singapore
Richardson Electronics S.A. de C.V. Mexico
Richardson Electronics Benelux B.V. The Netherlands
Richardson Electronics do Brasil Ltda. Brasil
Richardson Electronics Pty Limited Australia
Tubemaster, Inc. United States
Richardson Electronics Korea Limited Korea
EXHIBIT 23
Consent of Independent Auditors
We consent to the incorporation by reference in Post Effective
Amendment Number 1 to Registration Statement Number 2-89888 on
Form S-8, Registration Statement Number 33-36475 on Form S-8 and
Registration Statement Number 33-54745 on Form S-8, Registration
Statement Number 333-02865 on Form S-8, Registration Statement
number 333-03965 on form S-8, Registration Statement Number 333-04071
on Form S-8, Registration Statement Number 333-04457 on
form S-8 and Registration Statement Number 333-04767 of our
report dated July 10, 1996, with respect to the consolidated
financial statements and schedules of Richardson Electronics,
Ltd. included in the Annual Report on Form 10-K for the year
ended May 31, 1996.
Ernst & Young LLP
Chicago, Illinois
August 26, 1996
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