August 14, 1998
U.S. Securities and Exchange Commission
6432 General Green Way
Alexandria, VA 22312
Attn: File Support
Re: Holobeam, Inc. File No. 0-3385
Gentlemen:
Enclosed you will find one (1) paper format copy of Form 10Q
for the Quarter ended June 30, 1998, which has been previously
filed via the Edgar system.
Kindly acknowledge receipt by signing the enclosed copy of
this letter and returning it to us in the accompanying stamped,
self-addressed envelope.
Very truly yours,
William M. Hackett
Treasurer
mjb
Encs.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED: June 30, 1998
COMMISSION FILE NUMBER: 0-3385
HOLOBEAM, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-1840647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. Number
217 First Street, P.O. Box 287, Ho-Ho-Kus, New Jersey 07423-0287
(Address of principal executive offices) (Zip Code)
201-445-2420
(Registrant's telephone no., including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Sections 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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
302,213 Common Shares at August 5, 1998
<PAGE>
HOLOBEAM, INC.
INDEX
PART I PAGE NO.
Financial Statements
Condensed Balance Sheets 1
Condensed Statements of Income 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Management's Discussion and Analysis of
the Financial Condition and Results of
Operations 5 - 6
PART II
Signatures 7
Computation of Earnings Per Common Share Exhibit 11
Summary Plan Description-Defined Benefit Plan Exhibit 10
Financial Data Schedule Exhibit 27
<PAGE>
PART I
HOLOBEAM, INC.
Condensed Balance Sheets
ASSETS
June 30,1998 Sept. 30,1997
Current Assets
Cash and Cash Equivalents $ 281,620 $ 365,308
Short Term Investments 400,000 400,000
Other Current Assets 90,664 13,699
---------- ---------
Total Current Assets 772,284 779,007
Investments in Real Estate, Net 5,937,341 6,087,370
Machinery & Equipment, Net 44,143 51,262
Deferred Tax Asset -0- -0-
Other Non-Current Assets 598,208 635,028
---------- ----------
Total Assets $ 7,351,976 $ 7,552,667
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 107,976 $ 116,172
Accrued Expenses 79,668 110,632
Income Taxes Payable 8,556 -0-
Current Portion of Long Term Debt 285,894 267,783
---------- -----------
Total Current Liabilities 482,094 494,587
Mortgage Payable, Net of Current
Portion 6,047,322 6,264,065
Real Estate Commissions Payable 45,995 45,995
---------- ----------
Total Liabilities 6,575,411 6,804,647
Shareholders' Equity
Common Stock 105,260 105,260
Paid-In-Capital 12,399,699 12,399,699
Accumulated Deficit ( 9,027,637) ( 9,114,557)
Treasury Stock, At Cost ( 2,700,757) ( 2,642,382)
---------- ----------
Shareholders' Equity 776,565 748,020
---------- ----------
Total Liabilities and
Shareholders Equity $ 7,351,976 $ 7,552,667
========== ==========
1
<PAGE>
HOLOBEAM, INC.
Condensed Statement of Income
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenue
Rental Income $472,480 $450,605 $1,417,438 $1,351,813
Interest Income 12,918 6,877 32,723 18,361
Other -0- -0- 50 -0-
------- ------- ---------- ---------
Total Revenue 485,398 457,482 1,450,211 1,370,174
Costs and Expenses
Rental Expenses 56,101 54,618 166,090 174,014
General & Admin. Expenses 390,991 86,360 552,629 236,560
Research & Development 45,227 32,577 159,451 99,468
Interest 140,925 146,115 427,121 442,378
Other -0- -0- -0- -0-
------- ------- --------- ---------
Total Costs & Expenses 633,244 319,670 1,305,291 952,420
------- ------- --------- ---------
Income (Loss) Before Income
Taxes (147,846) 137,812 144,920 417,754
Income Tax Expense ( 67,889) 46,875 58,000 167,250
------- ------- --------- ---------
Net Income, (Loss) $( 79,957) $ 90,937 $ 86,920 $ 250,504
======= ======= ========= =========
Weighted Average Number of
Shares Outstanding 303,325 309,393 304,930 311,437
Net Income (Loss) Per Share $(0.26) $0.29 $0.29 $0.81
====== ==== ==== ====
2
<PAGE>
HOLOBEAM, INC.
Condensed Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
6 Months 9 Months 12 Months
Ended Ended Ended
3/31/98 6/30/98 9/30/97
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income, (Loss) $ 166,877 $ 86,920 $ 303,882
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation 108,874 163,041 212,487
Amortization 27,700 41,550 54,895
Decrease, (Increase) In:
Deferred Tax Asset -0- -0- 91,800
Patent and Patent
Application Costs ( 2,849) ( 4,729) ( 9,447)
Accounts Receivable -0- -0- -0-
Real Estate Brokers
Commissions -0- -0- ( 89,455)
Increase, (Decrease) In
Accounts Payable and
Accrued Expenses ( 65,462) ( 30,604) ( 45,637)
Other ( 8,351) ( 76,966) 51,835
---------- --------- ----------
Total Adjustments ( 59,912) 92,292 266,478
---------- --------- ----------
Net Cash Provided (Used) by
Operating Activities 226,789 179,212 570,360
---------- --------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital Expenditures ( 3,537) ( 5,893) ( 51,587)
Proceeds from Sale of Assets -0- -0- 7,500
Purchase of Short Term
Investments -0- -0- ( 400,000)
---------- --------- ----------
Net Cash Flows from Investing
Activities ( 3,537) ( 5,893) ( 444,087)
---------- -------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Principal Payments on First
Mortgage ( 130,973) ( 198,632) ( 245,412)
Principal Payments on Loan
Payable - Tandy -0- -0- -0-
Purchase of Treasury Stock ( 15,655) ( 58,375) ( 114,325)
Other -0- -0- -0-
---------- --------- --------
Net Cash Flows Provided (Used)
by Financing Activities ( 146,628) ( 257,007) ( 359,737)
---------- -------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 76,624 ( 83,688) ( 233,464)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 365,308 365,308 598,772
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 441,932 $ 281,620 $ 365,308
========== ======== ========
3
<PAGE>
HOLOBEAM, INC.
Notes to Condensed Financial Statements
Form 10Q
June 30, 1998
In the opinion of the Registrant, the accompanying unaudited,
condensed financial statements contain all adjustments, consisting
of routine, recurring accruals, necessary to present fairly its
financial position as of June 30, 1998 and 1997 and the results of
operations for the three months and nine months then ended and the
statement of cash flows for the nine months ended June 30, 1998 and
for the six months ended March 31, 1998.
For purposes of reporting cash flows, all liquid investments
with maturities of three months or less are considered temporary
cash investments.
The results of operations for the three months and nine months
ended June 30, 1998 are not necessarily indicative of the results
of operations to be expected for a full year.
4
<PAGE>
HOLOBEAM, INC.
Form 10Q
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1998
(1) Material Changes in Financial Condition
During the nine months ended June 30, 1998, the
Registrant's working capital ratio improved to 1.60:1 from
1.58:1 at September 30, 1997. This improvement has continued
through fiscal 1998 and has resulted from the cash flows
associated with the Registrant's Real Estate rental
activities. The Registrant expects the improvement trend to
continue while the properties owned by the Registrant are 100%
occupied.
The Registrant's development of its medical staple
technology continued during the three months and nine months
ended June 30, 1998. Expenditures for engineering and
development in connection with the medical staple technology
were $45,227.00 and $159,451.00, respectively. The Registrant
expects to continue funding this project while animal testing
continues to yield some positive results. Although testing
has been moderately successful, there has not been significant
data to provide definitive direction for the project. The
Registrant intends to continue funding of the project for the
5
<PAGE>
HOLOBEAM, INC.
Form 10Q
Management's Discussion and Analysis of Financial Condition
and Results of Operations
June 30, 1998
balance of the current fiscal year. Such funding is anticipated
to approximate $250,000.00 for the year.
(2) Material Changes in the Results of Operations
The results of operations for the three months and six
months ended June 30, 1998 indicate after income tax loss of
$79,957.00 and after tax earnings of $86,920.00, respectively,
as compared to income of $90,937.00 and $250,504.00 for the
corresponding periods of 1997.
Revenues associated with the Real Estate rental
activities increased slightly during the three months and nine
months ended June 30, 1998 as a result of cost of living
escalations allowed in the operating leases.
General and Administrative costs increased by $304,631.00
and $316,069.00 for the three months and nine months ended
June 30, 1998. This increase is directly attributable to the
Registrant's funding of the Pension Plan authorized by the
Board of Directors during the quarter. The Plan was funded
in the amount of $307,773.00, is a Defined Benefit plan and
has been qualified by the Internal Revenue Service. A copy
of the Summary Plan Description has been attached as Exhibit
B to this report.
All other expenses remained relatively stable during the three
months and nine months covered by this report.
6
<PAGE>
PART II
HOLOBEAM, INC.
Signatures
Form 10Q
June 30, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: August 10, 1998
Holobeam, Inc.
Registrant
William M. Hackett
Treasurer and Director
7
<PAGE>
Exhibit 11
HOLOBEAM, INC.
Computation of Earnings Per Common Share
Form 10Q
June 30, 1998
Nine Months Ended
June 30
1998 1997
PRIMARY
Net Income (Loss) $ 86,920 $250,504
SHARES
Weighted Average Number of Common
Shares of Outstanding 304,930 311,437
Primary Earnings Per Share $0.29 $0.81
<PAGE>
EXHIBIT 10
HOLOBEAM, INC.
PENSION PLAN
SUMMARY PLAN DESCRIPTION
<PAGE>
TABLE OF CONTENTS
I
INTRODUCTION TO YOUR PLAN
II
GENERAL INFORMATION ABOUT YOUR PLAN
1. General Plan Information...............................2
2. Employer Information...................................2
3. Plan Administrator Information.........................2
4. Plan Trustee Information...............................3
5. Service of Legal Process...............................3
III
PARTICIPATION IN YOUR PLAN
1. Eligibility Requirements ..............................3
2. Participation Requirements ............................3
IV
FUNDING YOUR PLAN
1. Funding of Benefits ...................................4
V
CALCULATION OF BENEFITS UNDER YOUR PLAN
1. Compensation ..........................................4
2. Average Monthly Compensation...........................4
3. Retirement Benefit Formula.............................5
4. Adjustments to Your Normal Retirement Benefit...........5
5. Accrued Benefits........................................5
6. Transfers from Qualified Plan (Rollovers)...............6
<PAGE>
VI
BENEFITS UNDER YOUR PLAN
1. Normal Retirement......................................6
2. Early Retirement.......................................6
3. Late Retirement........................................7
4. Death..................................................8
5. Disability..............................................9
6. Termination of Employment..............................9
7. Vesting in Your Plan...................................10
8. Benefit Payment Options................................10
9. Pre-Retirement Distribution of Benefits................11
10. Treatment of Distributions from Your Plan..............12
11. Domestic Relations Order...............................13
VII
SERVICE RULES
1. Period of Service......................................13
2. Hour of Service........................................13
3. 1-Year Break in Service................................14
4. Uniformed Services Employment and Reemployment
Rights Act.............................................14
VIII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"........................14
<PAGE>
HOLOBEAM, INC.
PENSION PLAN
SUMMARY PLAN DESCRIPTION
I
INTRODUCTION TO YOUR PLAN
Holobeam, Inc. wishes to recognize the efforts its employees
have made to its success and to reward them by adopting a Defined
Benefit Plan and Trust. This Defined Benefit Plan will be for
the exclusive benefit of eligible employees and their
beneficiaries.
The purpose of this Plan is to reward eligible employees for
long and loyal service by providing them with retirement
benefits.
Between now and your retirement, your Employer will
contribute to a trust fund amounts necessary to fund your pension
and the pensions of all other eligible employees.
Your Employer has the right to submit this Plan to the
Internal Revenue Service for approval. The Internal Revenue
Service will issue a "determination letter" to your Employer
approving this Plan as a "qualified" retirement plan, if this
Plan meets specific legal requirements.
This Summary Plan Description is a brief description of your
Plan and your rights, obligations, and benefits under that Plan.
Some of the statements made in this Summary Plan Description are
dependent upon this Plan being "qualified" under the provisions
of the Internal Revenue Code. This Summary Plan Description is
not meant to interpret, extend, or change the provisions of your
Plan in any way. The provisions of your Plan may only be
determined accurately by reading the actual Plan document.
A copy of your Plan is on file at your Employer's office and
may be read by you, your beneficiaries, or your legal
representatives at any reasonable time. If you have any
questions regarding either your Plan or this Summary Plan
Description, you should ask your Plan's Administrator. In the
event of any discrepancy between this summary Plan Description
and the actual provisions of the Plan, the Plan will govern.
II
GENERAL INFORMATION ABOUT YOUR PLAN
There is certain general information which you may need to
know about your Plan. This information has been summarized for
you in this section.
<PAGE>
1. General Plan Information
Holobeam, Inc. Pension Plan is the name of your Plan.
Your Employer has assigned Plan Number 001 to your Plan.
The provisions of your Plan become effective on October 1,
1997, which is called the Effective Date of the Plan.
Your Plan's records are maintained on a twelve-month period
of time. This is known as the Plan Year. The Plan Year begins
on October 1st and ends on September 30th.
Certain valuations and distributions are made on the
Anniversary Date of your Plan. This date is October 1st.
The contributions made to your Plan will be held and
invested by the Trustee of your Plan.
Your Plan and Trust will be governed by the laws of the
State of New Jersey.
2. Employer Information
Your Employer's name, address and identification number are:
Holobeam, Inc.
P.O. Box 825
Ridgewood, New Jersey 07451-0825
22-1840647
3. Plan Administrator Information
The name, address and business telephone number of your
Plan's Administrator are:
Holobeam, Inc.
P.O. Box 825
Ridgewood, New Jersey 07451-0825
(201) 445-2420
Your Plan's Administrator keeps the records for the Plan and
is responsible for the administration of the Plan. The
Administrator has discretionary authority to construe the terms
of the Plan and make determinations on questions which may affect
your eligibility for benefits. Your Plan's Administrator will
also answer any questions you may have about your plan.
<PAGE>
4. Plan Trustee Information
The names of Your Plan's Trustees are:
Melvin S. Cook
Beverly Cook
The Trustees shall collectively be referred to as Trustee
throughout this Summary Plan Description.
The principal place of business of your Plan's Trustee is:
P.O. Box 825
Ridgewood, New Jersey 07451-0825
Your Plan's Trustee has been designated to hold and invest
Plan assets for the benefit of you and other Plan participants.
The trust fund established by the Plan's Trustee will be the
funding medium
used for the accumulation of assets from which benefits will be
distributed.
5. Service of Legal Process
The name and address of your Plan's agent for service of
legal process are:
Plan Administrator of Holobeam, Inc. Pension Plan
P.O. Box 825
Ridgewood, New Jersey 07451-0825
Service of legal process may also be made upon the Trustee.
III
PARTICIPATION IN YOUR PLAN
Before you become a member or a "participant" in the Plan,
there are certain eligibility and participation rules which you
must meet. These rules are explained in this section.
1. Eligibility Requirements
You will be eligible to participate in the Plan if you have
completed a one (1) year Period of Service and have attained age
21.
You should review the Article in this Summary entitled
"SERVICE RULES" for a further explanation of these eligibility
requirements.
2. Participation Requirements
Once you have satisfied your Plan's eligibility
requirements, your next step will be to actually become a member
or a "participant" in the Plan. You will become a participant on
a specified day of the Plan Year. This day is called the
Effective Date of Participation.
You will become a participant on the earlier of the first day of
<PAGE>
the Plan Year or the first day of the seventh month of the
Plan Year coinciding with or next following the date you satisfy
your Plan's eligibility requirements.
IV
FUNDING YOUR PLAN
1. Funding of Benefits
Each year your Employer will be required to contribute an
amount to the Plan which is actuarially determined. The amount
of the contribution may vary from year to year, depending on, for
example, participant turnover, benefit payments, and investment
gains or losses of the trust fund. The law requires that an
independent professional, called an "enrolled actuary," certify
that the Employer is meeting minimum funding requirements. If an
Employer fails to meet minimum funding requirements, it can be
subject to penalties.
V
CALCULATION OF BENEFITS UNDER YOUR PLAN
1. Compensation
For the purposes of your Plan, compensation has a special
meaning. Compensation is defined as your total compensation
during a Plan Year that is subject to income tax and is reflected
on your W-2 Form.
The Plan, by law, cannot recognize compensation in excess of
$160,000. This amount will be adjusted in future years for cost
of living increases. It will also be applied to certain highly
compensated employees and their family members as if they were a
single participant. If you or a member of your family may be
affected by this rule, ask your Administrator for further
details. For any short Plan Year, the adjusted limit will be
prorated based upon the number of full months in the short Plan
Year.
2. Average Monthly Compensation
Your Normal Retirement Benefit is based on average monthly
compensation.
"Average Monthly Compensation" means your compensation
converted to a monthly amount and then averaged over the 3
consecutive Plan Years from your date of participation to your
date of termination which produce the highest monthly average.
If you have less than 3 consecutive Plan Years of service from
your date of participation to your date of termination, your
Average Monthly Compensation will be based on your monthly
compensation from your date of participation to your date of
termination.
3. Retirement Benefit Formula
At your Normal Retirement Date, you will be entitled to a
monthly benefit which is called your "Normal Retirement Benefit."
This benefit will be equal to your Accrued Benefit which is
explained in the Section
<PAGE>
of this Article entitled "ACCRUED
BENEFITS." Your Accrued Benefit will be determined based on a
retirement benefit formula equal to 100% of your Average Monthly
Compensation, computed to the nearest dollar.
4. Adjustments to Your Normal Retirement Benefit
You should be aware that the law imposes certain limits on
the amount of the benefit that can be provided for you. These
limits are extremely complex but generally the benefit paid to
you at retirement may not exceed the lesser of 100% of your
average monthly compensation or $7,500 per month. The
Administrator will inform you if these limits affect your
benefit.
5. Accrued Benefits
Your Accrued Benefit is that portion of the retirement
benefit formula you have earned as a particular date. It equals
the retirement benefit formula multiplied by your accrual
fraction.
Your accrual fraction (which may not be greater than (1))
equals your Periods of Service completed as of the date of
computation divided by your Periods of Service you would have if
you remain employed until your Normal Retirement Age.
In addition to the calculations set forth above, your
Accrued Benefit will be subject to the following rules and
limitations:
(a) If you are still employed after reaching your
Normal Retirement Age, you will continue to accrue benefits
based upon your service and Average Monthly Compensation
determined at the close of any Plan Year coinciding with or
following your Normal Retirement Age.
(b) If you return to employment following a separation
from service and a distribution of your Accrued Benefit has
been made, you may restore your Accrued Benefit provided you
repay such distribution with interest prior to the earlier
of five (5) periods after your date of reemployment or the
close of your first period of five (5) consecutive 1-year
Breaks in Service commencing after the distribution.
Otherwise, your Accrued Benefit will be reduced by the
actuarial equivalent of your Accrued benefit distributed to
you. Your Administrator will advise you of the amount to be
repaid, including interest.
(c) Your Accrued Benefit will not be less than the
minimum Accrued Benefit, if any, provided in the Article in
this Summary entitled "Your Plan's Top Heavy Rules."
6. Transfers from Qualified Plans (Rollovers)
At the discretion of the Administrator, you may be permitted
to deposit into your Plan distributions you have received from
other plans. Such a deposit is called a "rollover" and may
result in tax savings to you. You should consult qualified
counsel to determine if a rollover is in your best interest.
<PAGE>
Your rollover will be placed in a separate account called a
"participant's rollover account." The Administrator may
establish rules for investment.
You will always be 100% vested in your "rollover account."
This means that you will always be entitled to all of your
rollover contributions. Rollover contributions will be affected
by any investment gains or losses. If the Trustee invested this
money and there was a gain, the balance in your account would
increase. Of course, if there were a loss from an investment,
the balance in your account would decrease.
VI
BENEFITS UNDER YOUR PLAN
1. Normal Retirement
Your Normal Retirement Date is the first day of the month
coinciding with or next following your Normal Retirement Age.
You will attain your Normal Retirement Age when you reach
your 65th birthday, or your 5th anniversary of joining the Plan,
if later.
At your Normal Retirement Age, you will be entitled to
receive your Normal Retirement Benefit. Payment of your benefits
will, at your election, begin as soon as practicable following
your Normal Retirement Date. If you continue working after your
Normal Retirement Age, you may defer receipt of your benefits
until your Late Retirement Date or, if earlier, the April 1st
following the end of the year in which you attain age 70-1/2.
(See the Section in this Article entitled "Benefit Payment
Options.")
2. Early Retirement
No early retirement provision is provided by the Plan. If
you retire prior to your Normal Retirement Age, you will be
treated as if you terminated employment.
<PAGE>
3. Late Retirement
You may remain employed past your Plan's Normal Retirement
Date and retire instead on your Late Retirement Date. Your Late
Retirement Date is the first day of the month coinciding with or
next following the date you choose to actually retire after first
reaching your Normal Retirement Date. If you remain employed
past your Normal Retirement Date, you may elect one of the
following:
(a) To postpone receiving your retirement benefits
under the Plan until your Late Retirement Date when you will
be entitled to 100% of your Accrued Benefit. Actual benefit
payments will begin as soon as practicable following your
Late Retirement Date.
(b) To commence receiving your retirement benefits
under the Plan as soon as practicable after your Normal
Retirement Date, as if you had actually retired. The
benefit you will receive at your Normal Retirement Date will
be equal to the benefits you have earned or "accrued"
through your Normal Retirement Date. However, certain
increases to this benefit may be made at the end of each
Plan Year following your Normal Retirement Age. This
increase is based upon complex requirements provided for in
IRS Regulations, and would apply if the monthly retirement
benefit paid to you in the prior year is less than a
recalculated benefit you would be entitled to based upon
service you have performed and compensation you were paid
through the current Plan Year (offset, however, by the value
of distributions you have already received).
If you elect to postpone receiving your retirement benefits
under the Plan, the benefit you will receive at your Late
Retirement Date generally takes into account the requirement that
you continue to earn or "accrue" benefits past your Normal
Retirement Age. The calculation of your Late Retirement Benefit
is based on IRS Regulations which would generally provide, for
each Plan Year past Normal Retirement Age, a Late Retirement
Benefit equal to the greater of the following:
(a) the retirement benefit you have actually earned or
"accrued" as of the end of the Plan Year in which you
actually retire, or
(b) the actuarial equivalent of the benefit you were
entitled to as of the close of the Plan Year immediately
preceding your actual retirement date.
There are other laws that may require the Plan to begin
distributions to you while you are still employed. If
distributions are made to you before you actually retire, your
Late Retirement Benefit will be adjusted for these distributions.
<PAGE>
4. Death
Your beneficiary will receive benefits payable upon your
death which are subject to certain limitations imposed by law.
Death benefits will be equal to the actuarial equivalent of your
Accrued
Benefit.
If you are married at the time of your death, your spouse
will be the beneficiary of the death benefit, unless you
otherwise elect in writing on a form to be furnished to you by
the Administrator. IF YOU WISH TO DESIGNATE A BENEFICIARY OTHER
THAN YOUR SPOUSE, HOWEVER, YOUR SPOUSE MUST IRREVOCABLY CONSENT
TO WAIVE ANY RIGHT TO THE DEATH BENEFIT. YOUR SPOUSE'S CONSENT
MUST BE IN WRITING, BE WITNESSED BY A NOTARY OR A PLAN
REPRESENTATIVE AND ACKNOWLEDGE THE SPECIFIC NONSPOUSE
BENEFICIARY.
If no valid waiver is in effect, the death benefit payable
to
your spouse will be in the form of a survivor annuity, that is,
periodic payments over the life of your spouse. Your spouse may
direct that payments begin immediately after your death. The size
of the monthly payments will depend on the value of your death
benefit at the time of your death. Your death benefit may be
distributed in an alternative method, such as a single lump sum
or in installments, provided your spouse consents in writing to
this alternative form.
Generally, the period during which you and your spouse may
waive this survivor annuity begins as of the first day of the
Plan Year in which you reach age 35 and ends when you die. The
Administrator must provide you with a detailed explanation of the
survivor annuity. This explanation must be given to you during
the period of time beginning on the First day of the Plan Year in
which you will reach age 32 and ending on the first day of the
Plan Year in which you reach age 35.
It is, therefore, important that you inform the
Administrator when you reach age 32 so that you may receive this
information.
If, however,
(a) your spouse has validly waived any right to the
death benefit in the manner outlined above,
(b) your spouse cannot be located; or
(c) you are not married at the time of your death,
then your death benefit will be paid to the beneficiary of your
own choosing in an alternative method, such as a single lump sum
or in installments. You may designate the beneficiary on a form
to be supplied to you by the Administrator. If you change your
designation, your spouse must again consent to the change.
[NAME]
Under a special rule, you and your spouse may waive the
survivor annuity form of payment any time before you turn age 35.
However, any waiver will become invalid at the beginning of the
Plan Year in which you turn age 35, and you and your spouse will
be required to make another waiver.
Regardless of the method of distribution selected, your
entire death benefit must be paid to your beneficiaries within
five years after your death. However, if your spouse is your
designated beneficiary, then payment of your death benefit may be
delayed until the year in which you would have attained age 70-
1/2. Minimum distributions must then be made over a period which
does not exceed your spouse's life expectancy.
Since your spouse participates in these elections and has
certain rights in the death benefit, you should immediately
report any change in your marital status to the Administrator.
5. Disability
Under your Plan, disability is defined as a physical or
mental condition resulting from bodily injury, disease, or mental
disorder which renders you incapable of continuing your usual and
customary employment with your Employer. Your disability will be
determined by a licensed physician chosen by the Administrator.
If you become totally and permanently disabled in accordance
with the terms of the Plan while you are a participant in the
Plan and your condition continues for a period of six months, you
will receive a disability benefit equal to an actuarial
equivalent of your Accrued Benefit.
Payment of your disability benefits will be made to you as
if you had retired. (See the Section in the Article entitled
"Benefit Payment Options.")
6. Termination of Employment
Your Plan is designed to encourage you to stay with your
Employer until retirement. Payment of your Accrued Benefit under
your Plan is available upon your death, disability or retirement.
If your employment terminates for reasons other than those
listed above, you will be entitled to receive only your "vested
percentage" of your Accrued Benefit and the remainder of your
Accrued Benefit will be forfeited.
If you so elect, the Administrator will direct the Trustee
after your termination to distribute the present value of your
vested Accrued Benefit to you before the date it would normally
be distributed, but not until after you incur a 1-Year Break in
Service. If your Accrued Benefit under the Plan at the time of
any prior distribution exceeded $3,500 or currently exceeds
$3,500, you (and your spouse, if you are married) must give
written consent before the distribution may be made. Also, if
you want the distribution to be in a form other than a joint and
100% survivor annuity payment, you and your spouse must first waive
<PAGE>
the joint and 100% survivor annuity form of payment. (See
the Section in this Article entitled "Benefit Payment Options"
for a further explanation of how benefits are paid from the
Plan.)
However, if the present value of your vested Accrued Benefit
under the Plan at the time of any prior distribution did not
exceed $3,500 and currently does not exceed $3,500, the
Administrator will direct the Trustee to distribute it to you
within a reasonable period of time after your termination of
employment.
7. Vesting in Your Plan
Your "vested percentage" in your Accrued Benefit is
determined under the following schedule and is based on vesting
Periods of Service. You will always, however, be 100% vested
upon your Normal Retirement Age. (See the Section in this
Article entitled "Normal Retirement.")
Vesting Schedule
Periods of Service Percentage
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 100%
Periods of Service prior to the time you reached age 18 will
not be counted for vesting purposes.
8. Benefit Payment Options
There are various methods by which benefits may be
distributed to you from your Plan. The method depends on your
marital status, as well as the elections you and your spouse
make. All methods of distribution, however, have equivalent
values. The rules under this Section apply to all distributions
you will receive from the Plan, whether by reason of retirement,
termination, or any other event which may result in a
distribution of benefits.
If you are married on the date your benefits are to begin,
your benefits are normally payable in the form of a joint and
100% survivor annuity. This means that if you die and are
survived by a spouse, your spouse will receive a monthly benefit
for the remainder of his life equal to 100% of the monthly
benefit you were receiving at the time of your death.
If you are not married on the date your benefits are to
begin, you will automatically receive a life annuity, which means
you will receive payments for as long as you live.
You may, however, elect to waive these forms of payment,
subject to the following rules.
When you are about to receive any distribution, the Administrator
will explain the joint and survivor annuity or the life annuity to you
<PAGE>
in greater detail. You will be given the
option of waiving the joint and survivor annuity or the life
annuity form of payment during the 90 day period before the
annuity is to begin. IF YOU ARE MARRIED, YOUR SPOUSE MUST
IRREVOCABLY CONSENT IN WRITING TO THE WAIVER IN THE PRESENCE OF A
NOTARY OR A PLAN REPRESENTATIVE. You may revoke any waiver. The
Administrator will provide you with forms to make these
elections. Since your spouse participates in these elections,
you must immediately inform the Administrator of any change in
your marital status.
If you and your spouse elect not to take a joint and
survivor annuity or if you are not married when your benefits are
scheduled to begin and have elected not to take a life annuity,
you may elect to receive your benefits in one of the following
methods:
(a) a single lump-sum payment in cash or in property.
(b) the purchase of a different form of annuity.
(c) installments over a period of not more than your
assumed life expectancy (or your and your beneficiary's
assumed life expectancies) determined at the time of
distribution.
If you elect to delay the receipt of benefits, there are
other rules which generally require minimum payments to begin no
later than the April 1st following the year in which you reach
age 70-1/2. You should see the Administrator if you feel you may
be affected by this rule.
9. Pre-Retirement Distribution of Benefits
You are entitled to receive a pre-retirement distribution of
your "participant's rollover account" at any time. This
distribution is made at your election.
If you wish to receive a pre-retirement distribution from
the Plan in one payment, you (and your spouse, if you are
married) must first waive the annuity form of payment. (See the
Section in this Article entitled "Benefit Payment Options" for a
further explanation of how benefits are paid from the Plan.)
<PAGE>
10. Treatment of Distributions From Your Plan
Whenever you receive a distribution from your Plan, it will
normally be subject to income taxes. You may, however, reduce, or
defer entirely, the tax due on your distribution through use of
one of the following methods:
(a) The rollover of all or a portion of the
distribution to an Individual Retirement Account (IRA) or
another qualified employer plan. This will result in no tax
being due until you begin with-drawing funds from the IRA or
other qualified employer plan. The rollover of the
distribution, however, MUST he made within strict time
frames (normally, within 60 days after you receive your
distribution). Under certain circumstances all or a portion
of a distribution may not qualify for this rollover
treatment. In addition, most distributions will be subject
to mandatory federal income tax withholding at a rate of
20%. This will reduce the amount you actually receive. For
this reason, if you wish to rollover all or a portion of
your distribution amount, the direct transfer option
described in paragraph (b) below would be the better choice.
(b) You may request for most distributions that a
direct transfer of all or a portion of your distribution
amount be made to either an individual Retirement Account
(IRA) or another qualified employer plan willing to accept
the transfer. A direct transfer will result in no tax being
due until you withdraw Funds from the IRA or other qualified
employer plan. Like the rollover, under certain
circumstances all or a portion of the amount to be
distributed may not qualify for this direct transfer, e.g.,
a distribution of less than $500 will not be eligible for a
direct transfer. If you elect to actually receive the
distribution rather than request a direct transfer, then in
most cases 20% of the distribution amount will be withheld
for federal income tax purposes. If you decide to directly
transfer all or a portion of your distribution amount, you
(and your spouse, if you are married) must first waive the
annuity form of payment. (See the Section in this Article
entitled "Benefit Payment Options" for a further explanation
of this waiver requirement.)
(c) The election of favorable income tax treatment
under "10-year forward averaging," "5-year forward
averaging" or, if you qualify, "capital gains" method of
taxation.
WHENEVER YOU RECEIVE A DISTRIBUTION, THE ADMINISTRATOR WILL
DELIVER TO YOU A MORE DETAILED EXPLANATION OF THESE OPTIONS.
HOWEVER, THE RULES WHICH DETERMINE WHETHER YOU QUALIFY FOR
FAVORABLE TAX TREATMENT ARE VERY COMPLEX. YOU SHOULD CONSULT
WITH QUALIFIED TAX COUNSEL BEFORE MAKING A CHOICE.
<PAGE>
11. Domestic Relations Order
As a general rule, your interest in your Accrued Benefit,
including your "vested interest," may not be alienated. This
means that your interest may not be sold, used as collateral for
a loan, given away or otherwise transferred. In addition, your
creditors may not attach, garnish or otherwise interfere with
your Accrued Benefit.
There is an exception, however, to this general rule. The
Administrator may be required by law to recognize obligations you
incur as a result of court ordered child support or alimony
payments. The Administrator must honor a "qualified domestic
relations order." A "qualified domestic relations order" is
defined as a decree or order issued by a court that obligates you
to pay child support or alimony, or otherwise allocates a portion
of your assets in the Plan to your spouse, former spouse, child
or other dependent. If a qualified domestic relations order is
received by the Administrator, all or a portion of your benefits
may be used to satisfy the obligation. The Administrator will
determine the validity of any domestic relations order received.
VII
SERVICE RULES
1. Period of Service
The term "Period of Service" is used in this Summary Plan
Description and in your Plan.
Your Period of Service is the aggregate of all your periods
commencing with the first day of your employment or reemployment
with your Employer and ending on the date a 1-Year Break in Service
begins. Your first day of employment or reemployment is the first
day you perform an Hour of Service. You will also receive credit
for any Period of Severance of less than twelve consecutive months.
Fractional periods of a year will be expressed in terms of days.
You will incur a Period of Severance for any continuous period
of time during which you are not employed by your Employer. Such
period will begin on the date you retire, quit or are discharged,
or if earlier, the twelve consecutive month anniversary of the date
on which you were otherwise first absent from service.
2. Hour of Service
You will be credited with an Hour of Service for each hour for
which you are paid or entitled to payment for the performance of
duties for your Employer.
<PAGE>
3. 1-Year Break in Service
A 1-year Break in Service is a Period of Severance of at least
twelve consecutive months. However, if you are absent from work
for maternity or paternity reasons, the twelve consecutive month
period beginning on the first anniversary of your first day of such
absence will not constitute a 1-Year Break in Service.
4. Uniformed Services Employment and Reemployment Rights Act
If you are a veteran and are reemployed under the Uniformed
Services Employment and Reemployment Rights Act of 1994, your
qualified military service may be considered service with the
Employer. If you may be affected by this law, ask your
Administrator for further details.
VIII
YOUR PLAN'S "TOP HEAVY RULES"
1. Explanation of "Top Heavy Rules"
A Defined Benefit Plan that primarily benefits "key
employees" is called a "top heavy plan." Key employees are
certain owners or officers of your Employer. A plan is a "top
heavy plan" if the sum of the present value of Accrued Benefits
for key employees is more than 50% of the sum of the present
value of Accrued Benefits for all employees.
Each year, the Administrator is responsible for determining
whether your Plan is a "top heavy plan."
If your Plan becomes top heavy in any Plan Year, then non-
key and key employees will be entitled to certain "top heavy
minimum benefits," and other special rules will apply. Among
these top heavy rules are the following:
(a) If your Accrued Benefit is less than the "top
heavy minimum benefits," you may be entitled to at least the
"top heavy minimum benefits."
(b) If you are a participant in more than one Plan,
you may not be entitled to "top heavy minimum benefits"
under both Plans.
IX
CLAIMS BY PARTICIPANTS AND BENEFICIARIES
Benefits will be paid to participants and their
beneficiaries without the necessity of formal claims. You or
your beneficiaries, however, may make a request for any Plan
benefits to which you may be entitled. Any such request must be
made in writing, and it should be made to the Administrator.
(See the Article in this Summary entitled "GENERAL INFORMATION
ABOUT YOUR PLAN.")
Your request for Plan benefits shall be considered a claim
for Plan benefits, and it will be subject to a full and fair
review. If your claim is wholly or partially denied, the
Administrator will furnish you with a written notice of this
denial. This written notice must be
<PAGE>
provided to you within a
reasonable period of time (generally 90 days) of your claim by
the Administrator, The written notice must contain the following
information:
(a) the specific reason or reasons for the denial;
(b) specific reference to those Plan provisions on
which the denial is based;
(c) a description of any additional information or
material necessary to correct your claim and an explanation
of why such material is necessary; and
(d) appropriate information as to the steps to be
taken if you or your beneficiary wishes to submit your claim
for review.
If notice of the denial of a claim is not furnished to you
in accordance with the above within a reasonable period of time,
your claim will be deemed denied. You will then be permitted to
proceed to the review stage described in the following
paragraphs.
If your claim has been denied, and you wish to submit your
claim for review, you must follow the Claims Review Procedure.
1. The Claims Review Procedure
(a) Upon the denial of your claim for benefits, you
may file your claim for review, in writing, with the
Administrator.
(b) YOU MUST FILE THE CLAIM FOR REVIEW NO LATER THAN
60 DAYS AFTER YOU HAVE RECEIVED WRITTEN NOTIFICATION OF THE
DENIAL OF YOUR CLAIM FOR BENEFITS, OR IF NO WRITTEN DENIAL
OF YOUR CLAIM WAS PROVIDED, NO LATER THAN 60 DAYS AFTER THE
DEEMED DENIAL OF YOUR CLAIM.
(c) You may review all pertinent documents relating to
the denial of your claim and submit any issues and comments,
in writing, to the Administrator.
(d) Your claim for review must be given a full and
fair review. If your claim is denied, the Administrator must
provide you with written notice of this denial within 60
days after the Administrator's receipt of your written claim
for review. There may be times when this 60 day period may
be extended. This extension may only be made, however,
where there are special circumstances which are communicated
to you in writing within the 60 day period. If there is an
extension, a decision shall be made as soon as possible, but
not later than 120 days after receipt by the Administrator
of your claim for review.
(e) The Administrator's decision on your claim for
review will be communicated to you in writing and will
include specific references to the pertinent Plan provisions
on which the decision was based.
<PAGE>
(f) If the Administrator's decision on review is not
furnished to you within the time limitations described
above, your claim will be deemed denied on review.
(g) If benefits are provided or administered by an
insurance company, insurance service, or other similar
organization which is subject to regulation under the
insurance laws, the claims procedure relating to these
benefits may provide for review. If so, that company,
service, or organization will be the entity to which claims
are addressed. If you have any questions regarding the
proper person or entity to address claims, you should ask
the Administrator.
X
STATEMENT OF ERISA RIGHTS
1. Explanation of Your ERISA Rights
As a participant in this Plan, you are entitled to certain
rights and protections under the Employee Retirement Income
Security Act of 1974, also called ERISA. ERISA provides that all
Plan participants are entitled to:
(a) examine, without charge, all Plan documents,
including:
(1) insurance contracts;
(2) collective bargaining agreements; and
(3) copies of all documents filed by the Plan with the
U.S. Department of Labor, such as detailed annual
reports and Plan descriptions.
This examination may take place at the Administrator's
office and at other specified employment locations of the
Employer. (See the Article in this Summary entitled "GENERAL
INFORMATION ABOUT YOUR PLAN");
(b) obtain copies of all Plan documents and other Plan
information upon written request to the Plan Administrator.
The Administrator may make a reasonable charge for the
copies;
<PAGE>
(c) receive a summary of the Plan's annual financial
report. The Administrator is required by law to furnish
each participant with a copy of this summary annual report;
(d) obtain a statement telling you whether you have a
right to receive a retirement benefit at Normal Retirement
Age and, if so, what your benefits would be at Normal
Retirement Age if you stop working under the Plan now. If
you do not have a right to a retirement benefit, the
statement will tell you how many years you have to work to
get a right to a retirement benefit. THIS STATEMENT MUST BE
REQUESTED IN WRITING AND IS NOT REQUIRED TO BE GIVEN MORE
THAN ONCE A YEAR. The Plan must provide the statement free
of charge.
In addition to creating rights for Plan participants, ERISA
imposes duties upon the people who are responsible for the
operation of the Plan. The people who operate your Plan, called
"fiduciaries" of the Plan, have a duty to do so prudently and in
the interest of you and other Plan participants and
beneficiaries. No one, including your employer or any other
person, may fire you or otherwise discriminate against you in any
way to prevent you from obtaining a pension benefit or exercising
your rights under ERISA.
If your claim for a retirement benefit is denied in whole or
in part, you must receive a written explanation of the reason for
the denial. You have the right to have the Administrator review
and reconsider your claim. (See the Article in this Summary
entitled "CLAIMS BY PARTICIPANTS AND BENEFICIARIES.")
Under ERISA, there are steps you can take to enforce the
above rights. For instance, if you request materials from the
Plan and do not receive them within 30 days, you may file suit in
a federal court. In such a case, the court may require the
Administrator to provide the materials and pay you up to $100.00
a day until you receive the materials, unless the materials were
not sent because of reasons beyond the control of the
Administrator.
If you have a claim for benefits which is denied or ignored,
in whole or in part, you may file suit in a state or federal
court.
If the Plan's fiduciaries misuse the Plan's money, or if you
are discriminated against for asserting your rights, you may seek
assistance from the U.S. Department of Labor, or you may file
suit in a federal court. The court will decide who should pay
court costs and legal fees. If you are successful, the court may
order the person you have sued to pay these costs and fees. If
you lose, the court may order you to pay these costs and fees if,
for example, it finds your claim is frivolous.
If you have any questions about this statement, or about
your rights under ERISA, you should contact the nearest Regional
Office of the U.S. Department of Labor's Pension and Welfare
Benefits Administration.
XI
AMENDMENT AND TERMINATION OF YOUR PLAN
<PAGE>
1. Amendment
Your Employer has the right to amend your Plan at any time.
In no event, however, will any amendment:
(a) authorize or permit any part of the Plan assets to
be used for purposes other than the exclusive benefit of
participants or their beneficiaries; or
(b) cause any reduction in your Accrued Benefit.
2. Termination
Your Employer has the right to terminate the Plan. Upon
termination, you will become 100% vested in your Accrued Benefit
(to the extent funded as of such date of termination). Your
Employer may direct that either:
(a) benefits be distributed to you in any manner
permitted by the Plan as soon as practicable; or
(b) the Trust created by the Plan be continued and
benefits be distributed to you or your beneficiaries as if
the Plan had not been terminated. (See the Article in this
Summary entitled "BENEFITS UNDER YOUR PLAN.")
3. Priorities Upon Termination
Upon termination of the Plan, the assets of the trust shall
be "allocated" or divided among participants and beneficiaries in
accordance with the following priorities:
(a) to provide benefits to former participants who
have retired under the Plan prior to its termination.
(b) to provide benefits to participants who have
reached the Plan's Normal Retirement Date but have not
retired on the date of termination.
(c) to provide benefits to participants who have not
reached Normal Retirement Date, in the order that each
participant will attain his Normal Retirement Date. The
benefit will be based on your Accrued Benefit at the time of
termination.
Any excess funds will be reallocated to all participants as
specified in the Plan.
<PAGE>
XII
BENEFITS INSURED BY PBGC
1. Explanation of PBGC Insurance
Benefits provided under this Plan are not insured by the
Pension Benefit Guaranty Corporation (PBGC) because the insurance
provisions of ERISA are not applicable to this Plan.
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